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HomeMy WebLinkAboutOrdinance - 2001-O0002 - Issuance Of Tax & Solid Waste System Surplus Revenue Certificates Of Obligation - 02/08/2001First Reading January 11, 2001 Item No. 12 ORDINANCE NO. 2001-00002 Second Reading February 8, 2001 Item No. 34 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001"; 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 Solid Waste Disposal 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 Purchase Contract and the approval and distribution of an Official Statement; and providing an effective date. WHEREAS, notice of the City Council's intention to issue certificates of obligation in the maximum principal amount of $2,770,000 for the purpose of paying all or part of the City's obligations incurred for (i) the construction of public works, to wit: the closure of a municipal landfill, 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 December 24, 2000 and December 31, 2000, 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 second reading and finzp= 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 such notice should be issued and sold at this time in the amount and manner 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 $2,770,000 to be designated and bear the title "CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001" (the "Certificates"), for the purpose of paying all or part of the City's obligations incurred for (i) the construction of public works, to wit: the closure of a municipal landfill, and (ii) professional services rendered in connection with such project 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. SECTION 2: Fully Registered Obligations - Authorized Denominations -Stated Maturities -Date. The Certificates are issuable in fully registered form only; shall be dated February 1, 2001 (the "Certificate Date") and, other than the Initial Certificates referenced in Section 8 hereof) 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 888217.1 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 2002 140,000 5.00% 2003 140,000 5.00% 2004 140,000 5.00% 2005 140,000 5.00% 2006 140,000 4.375% 2007 140,000 4.00% 2008 140,000 4.00% 2009 140,000 4.15% 2010 140,000 4.25% 2011 140,000 4.35% 2012 140,000 4.40% 2013 140,000 4.625% 2014 140,000 4.70% 2015 140,000 4.80% 2016 135,000 4.875% 2017 135,000 5.00% 2018 135,000 5.00% 2019 135,000 5.00% 2020 135,000 5.00% 2021 135,000 5.00% 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, 2002. 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 U. S. Trust Company of Texas, N.A., Dallas, Texas to serve as Paying Agent/Registrar for the Certificates is hereby approved and confirmed. Books and 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 asExhibit 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 888217.1 -2- 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 New York, New York (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 an#_ 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, 2011, shall be subject to redemption prior to 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, 2010 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 Agent/Registrar), 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 888217.1 -3- 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 Payment/Transfer Office of the Paying Agent/Registrar only upon presentation and surrendet . 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 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 Certificates 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 Certificates 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 888217.1 _4- 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 Certificate= . 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 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. 888217.1 -5- 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, Section 1201.026. No Certificate shall be entitled to any right or benefit under this Ordinance, or be valid off_ 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 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 $2,770,000 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. 888217.1 -6- 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. B. Form of Certificates. REGISTERED REGISTERED NO. $ _ - UNITED STATES OF AMERICA STATE OF TEXAS CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATE OF OBLIGATION, SERIES 2001 Certificate Date: Interest Rate: Stated Maturity: CUSIP NO: February 1, 2001 % 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, 2002. 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 888217.1 -7- "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 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. This Certificate is one of the series specified in its title issued in the aggregate principal amount of $2,770,000 (herein referred to as the "Certificates") for the purpose of paying all or part of the City's obligations incurred for (i) the construction of public works, to wit: the closure of a municipal landfill, and (ii) professional services rendered in connection with such project 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, 2011, may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in principal amounts 4f $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2010, 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. 888217.1 -8- The Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and 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 Solid Waste 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). 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 limited 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 ant_ 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. 88821 7.1 -9- 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 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. 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) 888217.1 -10- C. *Form of r on Initial Cei istration Certificate of Comptroller of Public Accounts to REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER § OF PUBLIC ACCOUNTS § § REGISTER NO. THE STATE OF TEXAS § I 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 New York, New York, is the "Designated Payment/Transfer Office" for this Certificate. Registration Date: U. S. TRUST COMPANY OF TEXAS, N .A., Dallas, Texas, as Paying Agent/Registrar By: Authorized Signature 888217.1 -11- 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:) (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: Signature guaranteed: F. The Initial Ce Section, except that th modified as follows: NOTICE: The signature on this assignment must correspond with the name of the registered owner as it appears on the face of the within Certificate in every particular. s) shall be in the form set forth in Initial (i) immediately under the name of the certificate the headings "Interest Rate" and "Stated Maturity" shall both be omitted; (ii) paragraph one shall read as follows: Registered Owner: B of thpb- 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: YEAR PRINCIPAL INTEREST INSTALLMENTS RATE (Information to be inserted from schedule in Section 2 hereof). (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-dayyear of twelve 30-day months; 888217.1 -� 2- such interest being payable on February 15 and August 15 of each year, commencing February 15, 2002. Principal installments of this Certificate are payable in the year of maturity or on a prepayment date to the registered owner hereof by U. S. Trust Company of Texas, N.A., Dallas, Texas (the "Paying Agent/Registrar'), upon presentation and surrender, at its designated offices in New York, New York (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 r_< .- 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 Certificates. (b) The term "Certificates" shall mean $2,770,000 "CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001" 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 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 888217.1 -13- 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 (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 "Prior Lien Obligations" shall mean (i) the outstanding "City of Lubbock, Texas , Tax and Solid Waste Disposal System Revenue Certificates of Obligation, Series 1991 ", dated May 15, 1991, issued in the original principal amount of $1,145,000 and (ii) 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 888217.1 -14- dignity to the lien and pledge of the Net Revenues securing the payment of the Certificates. (1) The term "System" or "Solid Waste System" shall mean the City's Solid Waste Disposal System, being all plants, collection vehicles, incinerators, sanitary landfills, or other works, facilities and equipment of the City acquired, installed and operated for the purpose of collecting, handling, storing, treating, neutralizing, stabilizing, or disposing of solid wastes, garbage and rubbish, including sites therefor; provided, however, the City, by ordinance adopted by the City Council, may identify and designate one or more incinerators hereafter acquired or constructed, together with all property incident and necessary to its operation, to be removed and not a part of the System as defined herein, and such facilities so identified and designated, together with the revenues received and expenses incurred in connection with the operation and maintenance thereof, shall not constitute a part of the System or be encumbered in any respect by the provisions of this Ordinance. 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 2001 CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE 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) relating to the investment of "bond proceeds"; provided that all 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. SECTION 12: Tax Levy. 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 redemption at maturity or a sinking fund of 2% (whichever amount shall be the greater), there shall be and there is hereby levied a sufficient tax on each one hundred dollars' valuation of taxable property in said City to pay such Debt Service Requirements while the Certificates are Outstanding, full allowance being made for delinquencies and costs of collection, and 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 888217.1 -15- 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 amount 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 V - 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. (b) The amount of taxes 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 and pledge of the Net Revenues of the System for the payment 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 Certificates and Additional Certificates, if issued, as herein provided, and the pledge of the Net Revenues of the System herein made for the payment of 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 without further action by the City and without any filing or recording except for the filing of this Ordinance in the records of the City. SECTION 14: System Fund. The City hereby reaffirms its covenant and agreement made in connection with the issuance of the outstanding Prior Lien Obligations that all Gross. 888217.1 -i s- 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, Solid Waste Disposal 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 Certificates and Additional Certificates, if issued. Any Net Revenues remaining in the System Fund after satisfying the foregoini= 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 888217.1 -17- 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 1502.052, et seq. and V.T.C.A., Local Government Code, Subchapter C of Chapter 271. (b) Other than for the payment of the outstanding Prior Lien 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 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 888217.1 -18- 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 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 three (3) 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 888217.1 -19- 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 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. 888217.1 -20- "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. "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 h Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, r 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 1.148-4 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: 888217.1 -21- (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 (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 de*: - 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 888217.1 -22- 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 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 percei f . (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 Kof 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 directs and authorizes the Mayor, City Secretary, City Manager, Managing Director of Finance, and First Assistant City Manager, individually or jointly, to make elections permitted or required pursuant to the provisions of the Code or the 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. 888217.1 -23- SECTION 25: Sale of Certificates - Official Statement Approval. The Certificates authorized by this Ordinance are hereby sold by the City to Morgan Keegan & Company, Inc. and Samco Capital Markets (herein collectively referred to as the "Purchasers") in accordance with the Purchase Contract, dated February 8, 2001, 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 City and 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. Furthermore, the use of the Official Statement by the Purchasers in connection with the public offering and sale of the Certificates is hereby ratified, confirmed and approved in all respects. The final Official Statement, which reflects the terms of sale, attached as Exhibit A to the Purchase Contract (together with such changes approved by the Mayor, City Manager, First Assistant to City Manager, Managing Director of Finance or City Secretary, 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 February 8, 2001, 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 final Official Statement in the 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 26: 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 and supply of definitive Certificates, and shall take and have charge and control of the Initial Certificate(s) 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, City Secretary, City Manager, Managing Director of Finance and Assistant City Manager, any one or more of said officials, are hereby authorized and directed to furnish and execute such documents relating to the City and its financial affairs as may be necessary for the issuance of the Certificates, the approval of the Attorney General and the registration by the Comptroller of Public Accounts 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 and the initial exchange thereof for definitive Certificates. 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 in accordance with the provisions of V.T.C.A., Government Code, Chapter 2256, including guaranteed investment contracts permitted by V.T.C.A., Section 2256.015 et seq., and the City's investment policies and guidelines, and any investment earnings realized shall be expended for such authorized projects and purposes or deposited in the Interest and Sinking 888217.1 -24- 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 Interest and Sinking Fund. SECTION 28: 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 29: 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 30: 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 b€_ 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 31: 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 32: 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 33: Severability. 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 34: Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 35: 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 36: Continuing Disclosure Undertaking. (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: WSRB" means the Municipal Securities Rulemaking Board. 888217.1 -25- "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, 2001) financial information and operating data with respect to the City of the general type included in the final Official Statement approved by Section 25 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 CitYr_ ..- 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: 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; 888217.1 -26- 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 �;:- _1 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 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. 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 888217.1 -27- 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 37: 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 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 38: Effective Date. This Ordinance shall take effect and be in force immediately from and after its passage on second and final reading, and IT IS SO ORDAINED. PASSED AND ADOPTED ON FIRST READING, January 11, 2001. PASSED AND ADOPTED ON SECOND AND FINAL READING, this the 8th day of February, 2001. ATTEST: ; R JX-r,� City Secretary (City Sea[) r APPROVED AS TO CONTENT: Interim Managi�o4Sirector of Finance APPROVED AS TO FORM: A. City Attorney CITY OF LUBBOCK, T S Mayor -28- Ordinance No. 2001-00002 EXHIU1 PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of February 8, 2001 (this "Agreement"), by and between the City of Lubbock, Texas (the "Issuer"), and U. S. Trust Company of Texas, N.A., Dallas, Texas, a banking association duly organized and existing under the laws of the United States of America (the "Bank"). RECITALS WHEREAS, the Issuer has duly authorized and provided for the issuance of its "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001" (the "Securities") in the aggregate principal amount of $2,770,000, which Securities are scheduled to be delivered to the initial purchasers on or about March 15, 2001; and WHEREAS, the Issuer has selected and the Bank has agreed 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; and WHEREAS, the Bank represents it 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. 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 889066.1 _ 1 j 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: 889066.1 "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 principal office of the Bank as indicated 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, City Manager, Managing Director of Finance, Assistant City 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). "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, -2- WANA 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 offices: By Hand: U. S. Trust Company of Texas, N.A. 30 Broad Street B-Level New York, New York 10006-1906 By Mail: U. S. Trust Company of Texas, N.A. P. O. Box 84 Bowling Green Station New York, New York 10274-0084 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 fiduciary 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. 889066.1 - 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. The Bank represents and warrants its office in Dallas, Texas will at all times have immediate access to the Security Register by electronic or other means and will be capable at all times of producing a hard copy of the Security Register at its Dallas office for use by the Issuer. 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 889066.1 - 4, - a1 b1 l A 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. 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 exchangefor 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. 889066.1 - 55 - (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 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 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 - Fiduciary Account/Collateralization. A fiduciary account shall at all times be kept and maintained by the Bank for the receipt, safekeeping and disbursement of moneys received from the Issuer hereunder for the payment of the Securities, and money deposited to the credit of such account until paid to the Holders of the Securities shall be continuously collateralized by securities or obligations which qualify and are eligible under both the laws of the State of Texas and the laws of the United States of America to secure and be pledged as collateral for fiduciary accounts to the extent such money is not insured by the Federal Deposit Insurance Corporation. Payments made from such fiduciary account shall be made by check drawn on such fiduciary account unless the owner of such Securities shall, at its own expense and risk, request such other medium of payment. The Bank shall be under no liability for interest on any money received by it hereunder. Subject to the applicable unclaimed property laws of the State of Texas, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any 889066.1 SM awbil X Security and remaining unclaimed for three years after final maturity of the Security has become due and payable will be paid by the Bank to the Issuer, and the Holder of such Security shall thereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such moneys shall thereupon cease. 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 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. 889066.1 —7— A A __� n 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. 889066.1 1 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. [SEAL] Attest: Title: (CITY SEAL) Attest: City Secretary U.S. TRUST COMPANY OF TEXAS, N.A. BY _ Title: Address: 2001 Ross Ave., Suite 2700 Dallas, Texas 75201 CITY OF LUBBOCK, TEXAS BY Mayor Address: P. O. Box 2000 Lubbock,Texas 79457 889066.1 Ordinance No. 2001-00002 $2,770,000 CITY OF LUBBOM TEXAS Tag and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 PURCHASE CONTRACT February 8, 2001 The Honorable Mayor and Members of the City Council City of Lubbock 1625 13th St. Lubbock, Texas 79401 Dear Mayor and Members of the City Council: Morgan Keegan & Co., Inc. (the "Authorized Representative") and SAMCO Capital Markets (collectively, the "Underwriters"), offer 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 before 9:00 p.m. Central Time on February 8, 2001. 1. Purchase and Sale of the Certificates. Upon the terms and conditions and upon the basis of the representations set forth herein, the Underwriters jointly and severally hereby agree to purchase from the City, and the City hereby agrees to sell and deliver to the Underwriters an aggregate of $2,770,000 principal amount of City of Lubbock, Texas Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (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 $2,760,943.05, representing the principal amount of the Certificates of M $2,770,000.00, less an Underwriters' discount on the Certificates of $22,846.60, less an aggregate original issue discount on the Certificates of $2,030.95, and plus accrued interest in the amount of $15,820.60. Morgan Keegan & Co., Inc. represents that it has been duly authorized to executethis Purchase Contract and has been duly authorized to act hereunder as the Authorized Representative. All actions that may be taken by the Underwriters may be taken by the Authorized Representative alone. 2. Ordinance. The Certificates shall be as described in and shall be issued and secured under the provisions of the Ordinance authorizing the issuance and sale ofthe Certificates adopted by the City on February 8, 2001 (the "Ordinance"). The Certificates shall be secured and payable as provided in the Ordinance. 3. Public Offering. It shall be a condition of the obligations of the City to sell and deliver the Certificates to the Underwriters, and of the obligations of the Underwriters to purchase and accept delivery of the Certificates, that the entire principal amount ofthe Certificates authorized by the Ordinance shall be sold and delivered by the City and accepted and paid for by the Underwriters at the Closing. The Underwriters agree to make a bona fide public offering of all of the Certificates, at not in excess of the initial public offering prices, as set forth in the Official Statement; provided however at least ten percent (10%) ofthe principal amount ofthe 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 Official 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 $27,700. The City agrees to hold such check uncashed until the Closing to ensure the performance by the Underwriters of their obligation to purchase, accept delivery of and pay for the Certificates at the Closing. Concurrently with the payment by the Underwriters of the purchase price of the Certificates, the City shall return such check to the Authorized Representative as provided in Paragraphs 7 and 8 hereof. Should the City fail to deliver the Certificates at the Closing, or should the City be unable to satisfy the conditions of the obligations of the Underwriters to purchase, accept delivery of and pay for the Certificates, as set forth in this Purchase Contract (unless waived by the Authorized Representative), or should such obligations of the Underwriters be terminated for any reason pennitted by this Purchase Contract, such check shall immediately be returned to the Authorized Representative. In the event the Underwriters fail (other than for a reason permitted hereunder) to purchase, accept delivery of and pay for the Certificates at the Closing as herein provided, such check shall be retained by the City as and for full liquidated damages for such failure of the Underwriters and for any defaults hereunder on the part of the Underwriters. The Authorized Representative 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 February 8, 2001, 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 2 Ordinance and the Official Statement and the information therein contained to be used by the Underwriters in connection with the public offering and sale of the Certificates. The City confirms its consent to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement, relative to the Certificates, dated January 15, 2001 (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 federal Securities and Exchange Act of 1934 (the "Rule"). The City agrees to cooperate with the Underwriters to provide a supply of final Official Statements within seven business days of the date hereof in sufficient quantities to comply with the Underwriters' obligations under the Rule and the applicable rules of the Municipal Securities Rulemaking Board. The Underwriters will use their 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 date of this Purchase Contract but before the first to occur of (i) the date upon which the Underwriters notify the City that the period of the initial public offering of the Certificates has expired or (ii) the date that is 90 days after the date hereof, any event shall occur that might or would cause the Official Statement to contain any untrue statement of a material fact or to 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, the City shall notify, the Authorized Representative, and if, in the opinion of the Authorized Representative, 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 Underwriters a reasonable number of copies requested by the Authorized Representative in order to enable the Underwriters 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 Underwriters 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 3 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 materialand 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; (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 materialfact 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; (fl Between the date of this Purchase Contract and the Closing, the City will not, without the prior written consent of the Underwriters, 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 $9,100,000 General Obligation Bonds, Series 2001 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 Solid Waste 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 M way the completeness, accuracy or fairness of the Preliminary Official Statement or the Official Statement; (h) The City will cooperate withthe Underwriters in arranging for the qualification of the Certificates for sale and the detennination of their eligibility for investment under the laws of such jurisdictions as the Authorized Representative 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 of the 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 Underwriters as provided herein, will be validly issued and outstanding obligations of the City entitled to the benefits of, and subject to the limitations contained in, the Ordinance; 0) If prior to the Closing an event occurs affecting the Citythat 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 Authorized Representative, and if in the opinion of the City and the Authorized Representative such event requires a supplement or amendment to the Official Statement, the City will supplement or amend the Official Statement in a form and in a manner approved by the Authorized Representative; (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; (� Any certificate signed by any official of the City and delivered to the Underwriters shall be deemed a representation and warranty by the City to the Underwriters 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. 61 7. Closing. At 10:00 A.M., Central Time, on March 15, 2001 (the "Closing"), the City will deliver the initial Certificates (as defined in the Ordinance) to the Underwriters 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 Underwriters with the other documents hereinafter mentioned. On or prior to the date of Closing, the Underwriters shall make arrangements with The Depository Trust Company ("DTC") for the Certificates to be immobilized and thereaftertraded as book -entry only securities and on the date of Closing the Underwriters 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 Underwriters, 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 beenmutually agreed upon by the City and the Authorized Representative. 8. Conditions. The Underwriters have 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 Underwriters' 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: (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 Authorized Representative; 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 full 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 obligations for borrowed money; (e) At or prior to the Closing, the Underwriters shall have received each of the following documents: 0 �m (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 of the City as having been duly adopted by the City and as being in effect, with such changes or amendments as may have been agreed to by the Underwriters, the Ordinance shall contain the agreement of the City, in form satisfactory to the Underwriters, that is described under the caption "Continuing Disclosure of Information" 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 Underwriters, which provides that the Underwriters may rely upon the opinion of Bond Counsel delivered in accordance with the provisions of paragraph 8(f)(3) hereof, and opining to the effect that (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) in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions subcaptions "Plan of Financing," "The Obligations" (exclusive of the information under the subcaptions "Book -Entry Only System" and "Holders' Remedies"), "Tax Matters," "Continuing Disclosure of Information" (exclusive of the information under the subcaption "Compliance with Prior Undertakings"), "Legal Opinions"(exclusive of the last two sentences thereof) and "Legal Investments and Eligibility to Secure Public Funds in Texas" and such firm is ofthe 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 Ordinance; 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) An opinion of McCall, Parkhurst & Horton L.L.P., Underwriters' Counsel addressed to the Underwriters, and dated the date of Closing to the effect that: (i) the Certificates are exempt securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended, and it is not necessary in connection with the sale of the 7 Certificates to the public to register the Certificates under the Securities Act of 1933, as amended, or to qualify the Ordinance under the Trust Indenture Act of 1939, as amended; and (ii) in their participation in the preparation ofthe Official Statement, nothing has come to the attention of said firm that would lead them to believe that the Official Statement (excluding the financial and statistical data and forecasts included therein, all as to which no view need be expressed) contains any untrue statement of a material fact or omits to state a material fact necessaryto make the statements therein, in light of the circumstances under which they were made, not misleading;" (7) A certificate, dated the date of Closing, signed by the Mayor and City Manager of 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, or 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 of the 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 of the Official Statement (but in lieu of or in conjunction with such certificate, the Underwriters may, in their 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 of the 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, 2000, the latest date as to which audited financial information is available; (8) An opinion of the City Attorney addressed to the Underwriters and dated the date of Closing 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 effect 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 "Aa2" or better by Moody's Investors Service, Inc. ("Moody's"), "AA" or better by Standard and Poor's Corporation, a division of the McGraw-Hill Companies, Inc. ("S&P"), and "AA" or better by Fitch IBCA, Inc., shall be delivered in a form acceptable to the Underwriters; and (11) Such additional legal opinions, certificates, instruments and other documents as Bond Counsel or the Underwriters may reasonably request to evidence the truth, accuracy and completeness, as of the date hereof and as of the date of Closing, of the City's representations and warranties contained herein and of the statements and information 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. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to bein compliance with the provisions hereof if, but only if, they are satisfactory to the Underwriters. If the City shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Certificates as set forth in this Purchase Contract, or if the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Certificates shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate, the security deposit referred to in Paragraph 4 of this Purchase Contract shall be returned to the Authorized Representative and neither the Underwriters nor the City shall be under further obligation hereunder, except that the respective obligations of the City and the Underwriters set forth in Paragraphs 10 and 12 hereof shall continue in full force and effect. 9. Termination The Underwriters may terminate their obligation to purchase at any time before the Closing if any of the following should occur: (a) (i) Legislation shall have been enacted by the Congress of the United States, or recommended to the 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 decision shall 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 release 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 of which, 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 general character of the Certificates or upon income of the general character to be derived by the City, other than any imposition of federal income taxes upon interest received on obligations of the general character as the E Certificates on the date hereof and other than as disclosed 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 1933, as amended, or qualification of any indenture underthe Trust Indenture Act of 1939, as amended, in connection with the public offering of the Certificates, or any action shall have been taken by any court or by any governmental authority suspending the use of the Preliminary Official Statement or the Official Statement or any amendment or supplement thereto, or any proceeding for that purpose shall have been initiated or threatened in any such court or by any such authority. (c) (i) The Constitution 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 of 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 oftrading in securities shall have occurred on the New York Stock Exchange; or (ii) the United States shall have become engaged in hostilities (including the escalation of any hostilities existing on the date hereof, whether foreseeable), the effect of which, in either case described in clause (i) and (ii), that, in the judgment of the Authorized Representative, would materially affect the market price of the Certificates. (e) An event described in Paragraph 60) hereof occurs that, in the opinion of the Authorized Representative, requires a supplement or amendment to the Official Statement that is deemed by them, in their discretion, to adversely affect the market for the Certificates. (f) A general banking moratorium shall have been declared by authorities of the United States, the State of New York or the State of Texas. (g) A lowering of the ratings of "Aa2," "AA" and "AA", initially assigned to the Certificates by Moody's, S&P and Fitch, respectively, shall occur prior to the Closing. 10. Expenses. (a) The City shall pay all expenses incident to the issuance of the Certificates, including but not limited to: (i) the cost of the preparation, printing and distribution of the Preliminary Official Statement and the Official Statement, (ii) the cost of the preparation and printing of the Certificates; (iii) the fees and expenses of Bond Counselto the City; (iv) the fees and disbursements of the City's accountants, 10 advisors, and of any other experts or consultants retained by the City; and (v) the fees for the bond ratings and any travel or other expenses incurred incident thereto. (b) The Underwriters shall pay (i) all advertising expenses in connection with the offering of the Certificates; (ii) the cost of the preparation and printing of all the underwriting documents; and (iii) the fee of McCall, Parkhurst & Horton L.L.P. for suchfirm's opinion required by Paragraph 8(e)(6) hereof. 11. Notices. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing at the address for the City set forth above, and any notice or other communication to be given to the Underwriters under this Purchase Contract may be given by delivering the same in writing to Morgan Keegan & Co., Inc., 5956 Sherry Lane, Suite 1900, Dallas, TX 75225, Attention: Tom Oppenheim. 12. Parties in Interest This Purchase Contract is made solely for the benefit of the City and the Underwriters (including the successors or assigns of any 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 circumstance 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 Underwriters, 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 termination of this Purchase Contract. 13. Severability. If any provision of this Purchase Contract shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any constitution, statute, rule ofpublic policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstances, or of rendering any other provision inoperative or unenforceable to any extent whatever. 14. Choice of Law. This Purchase Contract shall be governed by and construed in accordance with the laws of the State of Texas. 15. Execution in Counterparts. This Purchase Contract may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Purchase Contract by signing any such counterpart. 16. Section Headings. Section headings have been inserted in this Contract as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Contract and will not be used in the interpretation of any provisions of this Contract. 11 M 17. Status of the Underwriters. It is understood and agreed that for all purposes of this Contract and the transactions contemplated hereby the Underwriters have, in their role as underwriters, acted solely as independent contractors and have not acted as financial or investment advisors, fiduciaries or agents to or for the City, whether directly or indirectly through any person. The City recognizes that the Underwriters expect to profit from the acquisition and potential distribution of the Certificates. 12 18. Effective Date. This 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. Accepted: This 8th day of February, 2001 Mayor City of Lubbock, Texas Attest: City Secretary City of Lubbock, Texas Very truly yours, Morgan Keegan & Co., Inc. SAMCO Capital Markets By: Morgan Keegan & Co., Inc. Authorized Representative By: Title: Managing Director 13 umk 1 EXIMIT A Schedule of Maturities, Interest Rates, Yields and Redemption Provisions City of Lubbock, Texas Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 Maturity Principal Interest Rate Yield (2/15) Amount (%) (%) 2002 $140,000 5.000% 3.35% 2003 140,000 5.000 3.62 2004 140,000 5.000 3.73 2005 140,000 5.000 3.83 2006 140,000 4.375 3.93 2007 140,000 4.000 4.03 2008 140,000 4.000 4.14 2009 140,000 4.150 4.22 2010 140,000 4.250 4.32 2011 140,000 4.350 4.43 2012 140,000 4.400 4.53 2013 140,000 4.625 4.68 2014 140,000 4.700 4.78 2015 140,000 4.800 4.88 2016 135,000 4.875 4.98 2017 135,000 5.000 5.03 2018 135,000 5.000 5.11 2019 135,000 5.000 5.16 2020 135,000 5.000 5.19 2021 135,000 5.000 5.23 The Certificates maturing on and after February 15, 2011 are subject to redemption prior to maturity at the option of the City on February 15, 2010 or any date thereafter at a price of par plus accrued interest to the date of redemption. A-1 OPINION OF THE CITY ATTORNEY March 15, 2001 Morgan Keegan & Co., Inc. SAMCO Capital Markets % Morgan Keegan & Co., Inc. 5956 Sherry Lane Suite 1900 Dallas, TX 75225 Ladies and Gentlemen: 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 Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001," in the aggregate principal amount of $2,770,000 (the "Certificates"), pursuant to the provisions of an ordinance duly adopted by the City Council of the City on February 8, 2001 (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: 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 agreement, bond, note, resolution, ordinance, agreement or RN 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, ordinance, agreement or other instrument to which the City is a party or is otherwise subject; and 2. Except as disclosed in the Official 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 Solid Waste System of the City. This opinion is famished 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, Ordinance No. 2001-00002 Exhibit C to Ordinance DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 36 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 contained in Tables 1 through 6 and 8A through 17 of the Official Statement. 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. 888217.1 Ordinance No. 2001-00002 $2,770,000 CITY OF LUBBOCK, TEXAS Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 PURCHASE CONTRACT February 8, 2001 The Honorable Mayor and Members of the City Council City of Lubbock 1625 13th St. Lubbock, Texas 79401 Dear Mayor and Members of the City Council: Morgan Keegan & Co., Inc. (the "Authorized Representative") and SAMCO Capital Markets (collectively, the "Underwriters"), offer 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 before 9:00 p.m. Central Time on February 8, 2001. 1. Purchase and Sale of the Certificates. Upon the terms and conditions and upon the basis of the representations set forth herein, the Underwriters jointly and severally hereby agree to purchase from the City, and the City hereby agrees to sell and deliver to the Underwriters an aggregate of $2,770,000 principal amount of City of Lubbock, Texas Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (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 $2,760,943.05, representing the principal amount of the Certificates of $2,770,000.00, less an Underwriters' discount on the Certificates of $22,846.60, less an aggregate original issue discount on the Certificates of $2,030.95, and plus accrued interest in the amount of $15,820.60. Morgan Keegan & Co., Inc. represents that it has been duly authorized to executethis Purchase Contract and has been duly authorized to act hereunder as the Authorized Representative. All actions that may be taken by the Underwriters may be taken by the Authorized Representative alone. 2. Ordinance. The Certificates shall be as described in and shall be issued and secured under the provisions of the Ordinance authorizing the issuance and sale ofthe Certificates adopted by the City on February 8, 2001 (the "Ordinance"). The Certificates shall be secured and payable as provided in the Ordinance. 3. Public Offering. It shall be a condition of the obligations of the City to sell and deliver the Certificates to the Underwriters, and of the obligations of the Underwriters to purchase and accept delivery of the Certificates, that the entire principal amount ofthe Certificates authorized by the Ordinance shall be sold and delivered by the City and accepted and paid for by the Underwriters at the Closing. The Underwriters agree to make a bona fide public offering of all of the Certificates, at not in excess of the initial public offering prices, as set forth in the Official Statement; provided however at least ten percent (10%) ofthe 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 Official 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 $27,700. The City agrees to hold such check uncashed until the Closing to ensure the performance by the Underwriters of their obligation to purchase, accept delivery of and pay for the Certificates at the Closing. Concurrently with the payment by the Underwriters of the purchase price of the Certificates, the City shall return such check to the Authorized Representative as provided in Paragraphs 7 and 8 hereof. Should the City fail to deliver the Certificates at the Closing, or should the City be unable to satisfy the conditions of the obligations of the Underwriters to purchase, accept delivery of and pay for the Certificates, as set forth in this Purchase Contract (unless waived by the Authorized Representative), or should such obligations of the Underwriters be terminated for any reason permitted by this Purchase Contract, such check shall immediately be returned to the Authorized Representative. In the event the Underwriters fail (other than for a reason permitted hereunder) to purchase, accept delivery of and pay for the Certificates at the Closing as herein provided, such check shall be retained by the City as and for full liquidated damages for such failure of the Underwriters and for any defaults hereunder on the part of the Underwriters. The Authorized Representative 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 February 8, 2001, 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 7 Ordinance and the Official Statement and the information therein contained to be used by the Underwriters in connection with the public offering and sale of the Certificates. The City confirms its consent to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement, relative to the Certificates, dated January 15, 2001 (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 federal Securities and Exchange Act of 1934 (the "Rule"). The City agrees to cooperate with the Underwriters to provide a supply of final Official Statements within seven business days of the date hereof in sufficient quantities to comply with the Underwriters' obligations under the Rule and the applicable rules of the Municipal Securities Rulemaking Board. The Underwriters will use their 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 date of this Purchase Contract but before the first to occur of (i) the date upon which the Underwriters notify the City that the period of the initial public offering of the Certificates has expired or (ii) the date that is 90 days after the date hereof, any event shall occur that might or would cause the Official Statement to contain any untrue statement of a material fact or to 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, the City shall notify the Authorized Representative, and if, in the opinion of the Authorized Representative, 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 Underwriters a reasonable number of copies requested by the Authorized Representative in order to enable the Underwriters 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 Underwriters 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 Q 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 materialand 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; (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 materialfact 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; (0 Between the date of this Purchase Contract and the Closing, the City will not, without the prior written consent of the Underwriters, 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 $9,100,000 General Obligation Bonds, Series 2001 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 Solid Waste 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 2 way the completeness, accuracy or fairness of the Preliminary Official Statement or the Official Statement; (h) The City will cooperate with the Underwriters 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 Authorized Representative 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 of the 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 Underwriters as provided herein, will be validly issued and outstanding obligations of the City entitled to the benefits of, and subject to the limitations contained in, the Ordinance; 0) If prior to the Closing an event occurs affecting the Citythat 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 Authorized Representative, and if in the opinion of the City and the Authorized Representative such event requires a supplement or amendment to the Official Statement, the City will supplement or amend the Official Statement in a form and in a manner approved by the Authorized Representative; (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; (6 Any certificate signed by any official of the City and delivered to the Underwriters shall be deemed a representation and warranty by the City to the Underwriters 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. 5 7. Closing. At 10:00 A.M., Central Time, on March 15, 2001 (the "Closing"), the City will deliver the initial Certificates (as defined in the Ordinance) to the Underwriters 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 Underwriters with the other documents hereinafter mentioned. On or prior to the date of Closing, the Underwriters shall make arrangements with The Depository Trust Company ("DTC") for the Certificates to be immobilized and thereaftertraded as book -entry only securities and on the date of Closing the Underwriters 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 Underwriters, 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 beenmutually agreed upon by the City and the Authorized Representative. 8. Conditions. The Underwriters have 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 Underwriters' 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: (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 Authorized Representative; 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 ofthe Closing, all official action of the City related to the Ordinance shall be m full 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 obligations for borrowed money; (e) At or prior to the Closing, the Underwriters 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 of the City as having been duly adopted by the City and as being in effect, with such changes or amendments as may have been agreed to by the Underwriters, the Ordinance shall contain the agreement of the City, in form satisfactory to the Underwriters, that is described under the caption "Continuing Disclosure of Information" 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 Underwriters, which provides that the Underwriters may rely upon the opinion of Bond Counsel delivered in accordance with the provisions of paragraph 8(f)(3) hereof, and opining to the effect that (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) in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions subcaptions "Plan of Financing," "The Obligations" (exclusive of the information under the subcaptions "Book -Entry Only System" and "Holders' Remedies"), "Tax Matters," "Continuing Disclosure of Information" (exclusive of the information under the subcaption "Compliance with Prior Undertakings"), "Legal Opinions"(exclusive of the last two sentences thereof) and "Legal Investments and Eligibility to Secure Public Funds in Texas" and such firm is ofthe 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 Ordinance; 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) An opinion ofMcCall, Parkhurst & Horton L.L.P., Underwriters' Counsel addressed to the Underwriters, and dated the date of Closing to the effect that: (i) the Certificates are exempt securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended, and it is not necessary in connection with the sale of the 7 Certificates to the public to register the Certificates under the Securities Act of 1933, as amended, or to qualify the Ordinance under the Trust Indenture Act of 1939, as amended; and (ii) in their participation in the preparation ofthe Official Statement, nothing has come to the attention of said firm that would lead them to believe that the Official Statement (excluding the financial and statistical data and forecasts included therein, all as to which no view need be expressed) contains any untrue statement of a material fact or omits to state a material fact necessaryto make the statements therein, in light of the circumstances under which they were made, not misleading; (7) A certificate, dated the date of Closing, signed by the Mayor and City Manager of 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, or 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 of the 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 of the Official Statement (but in lieu of or in conjunction with such certificate, the Underwriters may, in their 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 of the 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, 2000, the latest date as to which audited financial information is available; (8) An_opinionof the City Attorney addressed to the Underwriters and dated the date of Closing 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 effect 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; �V (10) Evidence of the rating on the Certificates, which shall be "Aa2" or better by Moody's Investors Service, Inc. ("Moody's"), "AA" or better by Standard and Poor's Corporation, a division of the McGraw-Hill Companies, Inc. ("S&P"), and "AA" or better by Fitch IBCA, Inc., shall be delivered in a form acceptable to the Underwriters; and (11) Such additional legal opinions, certificates, instruments and other documents as Bond Counsel orthe Underwriters may reasonably request to evidence the truth, accuracy and completeness, as of the date hereof and as of the date of Closing, of the City's representations and warranties contained herein and of the statements and information 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. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are satisfactory to the Underwriters. If the City shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Certificates as set forth in this Purchase Contract, or if the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Certificates shall } be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate, the security deposit referred to in Paragraph 4 of this Purchase Contract shall be returned to the Authorized Representative and neither the Underwriters nor the City shall be under further obligation hereunder, except that the respective obligations of the City and the Underwriters set forth in Paragraphs 10 and 12 hereof shall continue in full force and effect. 9. Termination The Underwriters may terminate their obligation to purchase at any time before the Closing if any of the following should occur: (a) (i) Legislation shall have been enacted by the Congress of the United States, or recommended to the 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 decision shall 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 release 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 of which, 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 general character of the Certificates or upon income of the general character to be derived by the City, other than any imposition of federal income taxes upon interest received on obligations of the general character as the 6 Certificates on the date hereof and other than as disclosed 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 1933, as amended, or qualification of any indenture under the Trust Indenture Act of 1939, as amended, in connection with the public offering of the Certificates, or any action shall have been taken by any court or by any governmental authority suspending the use of the Preliminary Official Statement or the Official Statement or any amendment or supplement thereto, or any proceeding for that purpose shall have been initiated or threatened in any such court or by any such authority. (c) (i) The Constitution 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 of 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 Authorizer) Representative would materially affect the market price of the Certificates. (d) (i) A general suspension oftrading in securities shall have occurred on the New York Stock Exchange; or (ii) the United States shall have become engaged in hostilities (including the escalation of any hostilities existing on the date hereof, whether foreseeable), the effect of which, in either case described in clause (i) and (ii), that, in the judgment of the Authorized Representative, would materially affect the market price of the Certificates. (e) An event described in Paragraph 60) hereof occurs that, in the opinion of the Authorized Representative, requires a supplement or amendment to the Official Statement that is deemed by them, in their discretion, to adversely affect the market for the Certificates. (fl A general banking moratorium shall have been declared by authorities of the United States, the State of New York or the State of Texas. (g) A lowering of the ratings of "Aa2," "AA" and "AA", initially assigned to the Certificates by Moody's, S&P and Fitch, respectively, shall occur prior to the Closing. 10. Expenses. (a) The City shall pay all expenses incident to the issuance of the Certificates, including but not limited to: (i) the cost of the preparation, printing and distribution of the Preliminary Official Statement and the Official Statement; (ii) the cost of the preparation and printing of the Certificates; (iii) the fees and expenses of Bond Counselto the City; (iv) the fees and disbursements of the City's accountants, 10 advisors, and of any other experts or consultants retained by the City; and (v) the fees for the bond ratings and any travel or other expenses incurred incident thereto. (b) The Underwriters shall pay (i) all advertising expenses in connection with the offering of the Certificates; (ii) the cost of the preparation and printing of all the underwriting documents; and (iii) the fee of McCall, Parkhurst & Horton L.L.P. for suchfirm's opinion required by Paragraph 8(e)(6) hereof. 11. Notices. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing at the address for the City set forth above, and any notice or other communication to be given to the Underwriters under this Purchase Contract may be given by delivering the same in writing to Morgan Keegan & Co., Inc., 5956 Sherry Lane, Suite 1900, Dallas, TX 75225, Attention: Tom Oppenheim. 12. Parties in Interest This Purchase Contract is made solely for the benefit of the City and the Underwriters (including the successors or assigns of any 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 circumstance 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 Underwriters, 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 termination of this Purchase Contract. 13. Severability. If any provision of this Purchase Contract shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any constitution, statute, rule ofpublic policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstances, or of rendering any other provision inoperative or unenforceable to any extent whatever. 14. Choice of Law. This Purchase Contract shall be governed by and construed in accordance with the laws of the State of Texas. 15. Execution in Counterparts. This Purchase Contract may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Purchase Contract by signing any such counterpart. 16. Section Headings. Section headings have been inserted in this Contract as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Contract and will not be used in the interpretation of any provisions of this Contract. 11 17. Status of the Underwriters. It is understood and agreed that for all purposes of this Contract and the transactions contemplated hereby the Underwriters have, in their role as underwriters, acted solely as independent contractors and have not acted as financial or investment advisors, fiduciaries or agents to or for the City, whether directly or indirectly through any person. The City recognizes that the Underwriters expect to profit from the acquisition and potential distribution of the Certificates. 12 18. Effective Date. This 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. Accepted: This 8th day of February, 2001 City of Lubbock, Texas Attest: City Secretary City of Lubbock, Texas Very truly yours, Morgan Keegan & Co., Inc. SAMCO Capital Markets By: Morgan Keegan & Co., Inc. Authorized Representative By. y Title: Managing Directo 13 Ordinance No. 2001-00002 EDIT A Schedule of Maturities, Interest Rates, Yields and Redemption Provisions City of Lubbock, Texas Tag and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 Maturity Principal Interest Rate Yield (2/15) Amount (%) (%) 2002 $140,000 5.000% 3.3 5% 2003 140,000 5.000 3.62 2004 140,000 5.000 3.73 2005 140,000 5.000 3.83 2006 140,000 4.375 3.93 2007 140,000 4.000 4.03 2008 140,000 4.000 4.14 2009 140,000 4.150 4.22 2010 140,000 4.250 4.32 2011 140,000 4.350 4.43 ., . _ 2012 140,000 4.400 4.53 2013 140,000 4.625 4.68 2014 140,000 4.700 4.78 2015 140,000 4.800 4.88 2016 135,000 4.875 4.98 2017 135,000 5.000 5.03 2018 135,000 5.000 5.11 2019 135,000 5.000 5.16 2020 135,000 5.000 5.19 2021 135,000 5.000 5.23 The Certificates maturing on and after February 15, 2011 are subject to redemption prior to maturity at the option of the City on February 15, 2010 or any date thereafter at a price of par plus accrued interest to the date of redemption. A-1 Ordinance No. 2001-00002 OPINION OF THE CITY ATTORNEY March 15, 2001 Morgan Keegan & Co., Inc. SAMCO Capital Markets % Morgan Keegan & Co., Inc. 5956 Sherry Lane Suite 1900 Dallas, TX 75225 Ladies and Gentlemen: 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 Solid Waste System Surplus Revenue Certificates of s Obligation, Series 2001," in the aggregate principal amount of $2,770,000 (the "Certificates"), pursuant to the provisions of an ordinance duly adopted by the City Council of the City on February 8, 2001 (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: 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 agreement, bond, note, resolution, ordinance, agreement or 1:131 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, ordinance, agreement or other instrument to which the City is a party or is otherwise subject; and 2. Except as disclosed in the Official 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 Solid Waste System of the City. s = 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, MW Ordinance No. 2001-00002 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 11th day of January, 2001, 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: WINDY SITTON ALEX "TY" COOKE VICTOR HERNANDEZ T. J. PATTERSON DAVID NELSON FRANK MORRISON MARC McDOUGAL all of said persons were present at said Victor Hernandez. Among other business (the "Ordinance") entitled: .imeftj MAYOR PRO TEM COUNCILMEMBERS } meeting, except the following: Alex "Ty" Cooke and considered at said meeting, the attached ordinance "AN ORDINANCE authorizing the issuance of 'CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001'; 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 Solid Waste Disposal 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 Purchase Contract and the approval and distribution of an Official Statement; and providing an effective date." was introduced and submitted to the Council for first reading. After presentation and due consideration of the Ordinance, and upon a motion being made by Marc McDougal and seconded by David Nelson, the Ordinance was approved on first reading by the Council by the following vote: 5 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. 889012.1 2. On the 8`r' day of February, 2001, 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: WINDY SITTON ALEX "TY" COOKE ) VICTOR HERNANDEZ ) T. J. PATTERSON ) DAVID NELSON ) FRANK MORRISON ) MARC McDOUGAL ) MAYOR MAYOR PRO TEM COUNCILMEMBERS all of said persons were present at said meeting, except the following: Alex "Ty" Cooke Among other business considered at said meeting, the Ordinance was submitted to the Council for second reading and final passage and adoption. After presentation and due consideration of the Ordinance, and upon a motion being made by TJ Patterson and seconded by Frank Marrison , the Ordinance was duly passed and adopted on second reading to be effective immediately by the following vote: 6 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. S 3. 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 meetings are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of each meeting was given to each member of the Council; and that said meetings and the deliberation of the aforesaid public business were open to the public and written notice of said meetings, 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. 889012.1 _ 2 _ IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 8th day of February, 2001. --- 'a City Secretary y City of Lubbock, Texas (City Seal) 889012.1 - 3 - Document Number 1 2 3 4 5 6 7 10 11 12 13 14 15 16 17 18 19 TRANSCRIPT OF PROCEEDINGS RELATING TO $2,770,000 CITY OF LUBBOCK, TEXAS TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2001 DATED FEBRUARY 1, 2001 Description of Document Resolution Approving and Authorizing Publication of Notice of Intention to Issue Certificates of Obligation/Notice of Sale Affidavits of Publication Ordinance Authorizing the Issuance of the Certificates Executed Paying Agent/Registrar Agreement Purchase Contract Preliminary Official Statement Final Official Statement General Certificate Signature and No -Litigation Certificate Attorney General's Opinion and Comptroller's Registration Certificate Closing Instructions Certificate as to Tax Exemption Closing Certificate Receipt for Payment Opinion of Bond Counsel Supplemental Opinion of Bond Counsel Opinion of City Attorney Opinion of Underwriter Certificate of Underwriter WAO 20 Rating Letter '"° 21 Filed Information Report 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 14t' day of December, 2000, 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: WINDY SITTON MAYOR ALEX "TY" COOKE ) MAYOR PRO TEM FRANK MORRISON ) VICTOR HERNANDEZ ) T. J. PATTERSON } DAVID NELSON ) COUNCILMEMBERS " MARC McDOUGAL ) and all of said persons were present at said meeting, except the following: T. J. Patterson 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 Marc McDougal and seconded by David Nelson , the resolution was finally passed and adopted by the Council to be effective immediately by the following vote: 6 voted "For' voted "Against" U 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 877762.1 1W 211111111111111 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. IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 14�h day of December, 2000. (City Seal) 877762.1 -2- d RESOLUTION NO. 2000-RO440 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, forthe purpose of paying contractual obligations to be incurred for (i) the construction of public works, to wit: the closure of a municipal landfill, and (ii) professional services rendered in connection with such project and the financing thereof; and WHEREAS, 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 deems it appropriate to publish a notice of sale with respect to such certificates of obligation; 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 $2,770,000 for the purpose of paying contractual obligations to be incurred for (i) the construction of public works, to wit: the closure of a municipal landfill, and (ii) professional services rendered in connection with such project and the financing thereof, such certificates to be payable from ad valorem taxes and a lien on and pledge of net revenues of the City's Solid Waste Disposal 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 of sale 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. PASSED AND APPROVED, this December 14, 2000. (City Seal) 8'77441.1 • :• Wo 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 81 day of February, 2001, at the City Council Chambers, Municipal Complex, 1625 13th Street, Lubbock, Texas, and, during such meeting, the City Council will consider the second reading and final adoption of an ordinance authorizing the issuance of certificates of obligation in an amount not to exceed $2,770,000 for the purpose of paying contractual obligations to be incurred for (i) the construction of public works, to wit: the closure of a municipal landfill and (ii) professional services rendered in connection with such project 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 Solid Waste Disposal 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. Kaythie Darnell City Secretary City of Lubbock, Texas Exhibit B NOTICE OF SALE $2,770,000 City of Lubbock, Texas, Tax and Solid Waste System Surplus elk Revenue Certificates of Obligation, Series 2001 On the 81 day of February, 2001, 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 offered for sale, together with the terms of sale, security for their payment and financial information and operating data about the City appear in an Official Notice of Sale, Bidding Instructions and an Official Statement, which can 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. Kaythie Darnell City Secretary City of Lubbock, Texas 877441.1 AFFIDAVIT OF PUBLICATION THE STATE OF TEXAS § COUNTY OF LUBBOCK § BEFORE ME, the undersigned authority on this day personally appeared C-- (_ of the Lubbock Avalanche -Journal, a newspaper published in the County of Lubbock, exas, who, being by me duly sworn, upon oath deposes and says: That said newspaper is of general circulation in the City of Lubbock, Texas, and that the "NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, CERTIFICATES OF OBLIGATION", hereto attached, was published in said newspaper in its issues of 2000; and 2000; 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". 2001. SWORN TO AND SUBSCRIBED BEFORE ME, this the \L- day of �ko . , 0 Notary PNb tate of Texas TAKE NOTICE that he Ci y Conc��l of (Notary Seal) 8th day of February, 200,, at the City Council Chambers, Municipal Complex, 1625 13th Street, Lubbock, Texos, and, during such meeting, the City Council will consider the second reading and ao6 y r # rs 31 r� y y� l8 x� Pil�S 3�( ar' authorizing he issuance of certificates o obligation m an amount not to e ceed $2,770,000 for the ni+ ilk purpose of ying. contractual obligations ro be incurred for (i( the construction �d •,v,.,,... moo, �s¢f CSkTiS!'F$Sf:'OiY of public .works to wit: the closure of a municipal p1A+�'� MHO r land fi�l and (ii) professional services in rendered connection with such pro(ect and the financing thereof, such cenficates to be payable from ad e77459.1 'valorem taxes and a lien on and pledge of the net revenues of the. Ciy's Solid are to be issued, and this notice is �;iven,under and pursuantto the rovlswns of V.T.0 A L«al i GChovernment Code, Subchapjer C of _ A ,. tap}er 271. Kaythie Darnell Ciy Secretary City of Lubbock, Texas R1176 AFFIDAVIT OF PUBLICATION THE STATE OF TEXAS COUNTY OF LUBBOCK BEFORE ME, the undersigned authority on this day personally C- of the Lubbock Avalanche -Journal, a i in the County of Lu-b-15ock Texas, who, being by me duly sworn, upon oath That said newspaper is of general circulation in the City of Lubboc "NOTICE OF SALE", hereto attached, was published in said newspaper in 't�,E'c Q"4c� , 20W ; t'e-c . �S- , 2000; 2001; 2001; 2001; NOTICE OF SALE $2 770,000 Z oriubbock, Texas, Tax and Solid - Waste System Surpplus `Revenue Certificates of ligation, Series 2001 On the 8th daY-oFFebruorX, 2001,, the )egm at I U.3U o C1ac k_complete description offhe _ert ficotes being offered for sale, ogether with the terms of sale, securiy ;or their payment and financial information and operatin data about i f Sale, Bice idding Instructions ahe Ci aleor in an Icialtnd on official Statement, which can be obtained from the Division of Finance, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457; or horn FirstSoufhweslGomppaany, 1700Pacific Avenue, Suite 500, Dallas, Texas 75201, Financial Consultants to the ;city. Kaythie-Darnell _ - ,- City Secretary Ciy of Lubbock, Texas R-6177 _------------ 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 SALE". AtC Title: SWORN TO AND SUBSCRIBED BEFORE ME, this the <4 day of , 2001. r WEN, V014 i (Notary Seal) '�.aYYYy MOM 877459.1 os-�ra�os W 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 111h day of January, 2001, 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: WINDY SITTON MAYOR ALEX "TY" COOKE ) MAYOR PRO TEM elk VICTOR HERNANDEZ ) T. J. PATTERSON ) COUNCILMEMBERS DAVID NELSON ) FRANK MORRISON ) } MARC McDOUGAL ) all of said persons were present at said meeting, except the following: Alex "Ty" Cooke and Victor Hernandez. Among other business considered at said meeting, the attached ordinance (the "Ordinance") entitled: "AN ORDINANCE authorizing the issuance of 'CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001 % 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 Solid Waste Disposal 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 Purchase Contract and the approval and distribution of an Official Statement; and providing an effective date." was introduced and submitted to the Council for first reading. After presentation and due consideration of the Ordinance, and upon a motion being made by Marc McDougal and seconded by David Nelson, the Ordinance was approved on first reading by the Council by the following vote: 5 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. 889012.1 2. On the 81" day of February, 2001, 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: WINDY SITTON MAYOR ALEX "TY" COOKE VICTOR HERNANDEZ T. J. PATTERSON DAVID NELSON FRANK MORRISON MARC McDOUGAL MAYOR PRO TEM COUNCILMEMBERS all of said persons were present at said meeting, except the following: ALEX "TY" COOK. Among other business considered at said meeting, the Ordinance was submitted to the Council for second reading and 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 FRANK MORRISON, the Ordinance was duly passed and adopted on second reading to be effective immediately by the following vote: 6 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. 3. 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 meetings are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of each meeting was given to each member of the Council; and that said meetings and the deliberation of the aforesaid public business were open to the public and written notice of said meetings, 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. 889012.1 -2- 'A r IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the $h day of February, 2001. City Secretary City of Lubbock, Texas (City Seal) 889012.1 -3- Gig ORDINANCE NO. 2001-00002 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001"; 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 Solid Waste Disposal 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 Purchase Contract and the approval and distribution of an Official Statement; and providing an effective date. WHEREAS, notice of the City Council's intention to issue certificates of obligation in the maximum principal amount of $2,770,000 for the purpose of paying all or part of the City's obligations incurred for (i) the construction of public works, to wit: the closure of a municipal landfill, 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 December 24, 2000 and December 31, 2000, 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 second reading and final 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 such notice should be issued and sold at this time in the amount and manner 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 $2,770,000 to be designated and bear the title "CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001" (the "Certificates"), for the purpose of paying all or part of the City's obligations incurred for (i) the construction of public works, to wit: the closure of a municipal landfill, and (ii) professional services rendered in connection with such project 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. SECTION 2: Fully Reaistered Obliaations - Authorized Denominations -Stated Maturities -Date. The Certificates are issuable in fully registered form only; shall be dated February 1, 2001 (the "Certificate Date") and, other than the Initial Certificates referenced in Section 8 hereof) 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 3188217.2 •%, 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 2002 140,000 5.00% 2003 140,000 5.00% 2004 140,000 5.00% 2005 140,000 5.00% 2006 140,000 4.375% 2007 140,000 4.00% 2008 140,000 4.00% 2009 140,000 4.15% 2010 140,000 4.25% 2011 140,000 4.35% 2012 140,000 4.40% 2013 140,000 4.625% 2014 140,000 4.70% 2015 140,000 4.80% 2016 135,000 4.875% 2017 135,000 5.00% 2018 135,000 5.00% 2019 135,000 5.00% 2020 135,000 5.00% 2021 135,000 5.00% 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, 2002. 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 U. S. Trust Company of Texas, N.A., Dallas, Texas to �. serve as Paying Agent/Registrar for the Certificates is hereby approved and confirmed. Books and 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 asExhibit 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 888217.1 -2- Q 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 New York, New York (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, 2011, shall be subject to redemption prior to 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, 2010 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 00. redemption date for the Certificates (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), 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 888217.1 -3- La 2 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 Payment/Transfer 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: Reaistration - Transfer - Exchange of Certificates -Predecessor eft� 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 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 Certificates 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 Certificates 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 888217.1 -4- 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 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. 888217.1 -5- G: 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 001transactions 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, Section 1201.026. 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 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 $2,770,000 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 Certificate(s)") 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. 888217.1 -6- o 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. REGISTERED NO. B. Form of Certificates. UNITED STATES OF AMERICA STATE OF TEXAS CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATE OF OBLIGATION, SERIES 2001 Certificate Date: Interest Rate: February 1, 2001 % Registered Owner: Principal Amount: REGISTERED Stated Maturity: CUSIP NO: 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 annurn rate of interest specified above; such interest being payable on February 15 and August 15 of each year, commencing February 15, 2002. 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 888217.1 -7- "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 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. This Certificate is one of the series specified in its title issued in the aggregate principal amount of $2,770,000 (herein referred to as the "Certificates") for the purpose of paying all or part of the City's obligations incurred for (i) the construction of public works, to wit: the closure of a municipal landfill, and (ii) professional services rendered in connection with such project 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, 2011, 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, 2010, 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. 888217.1 -8- The Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and 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 Solid Waste 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). 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 limited 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 r, 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. 888217.1 -9- 0 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 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. 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) 888217.1 -10- niz 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 § t § REGISTER NO. THE STATE OF TEXAS § I 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 New York, New York, is the "Designated Payment/Transfer Office" for this Certificate. U. S. TRUST COMPANY OF TEXAS, N .A., Dallas, Texas, as Paying Agent/Registrar Registration Date: By: Authorized Signature 888217.1 -11- C3 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:) (Social Security or other identifying number: the witrnn uertiticate 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: Signature guaranteed: NOTICE: The signature on this assignment must correspond with the 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" shall both be omitted; (ii) 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: YEAR PRINCIPAL INSTALLMENTS INTEREST RATE (Information to be inserted from schedule in Section 2 hereof). (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-dayyear of twelve 30-day months; 888217.1 -12- such interest being payable on February 15 and August 15 of each year, commencing February 15, 2002. Principal installments of this Certificate are payable in the year of maturity or on a prepayment date to the registered owner hereof by U. S. Trust Company of Texas, N.A., Dallas, Texas (the "Paying Agent/Registrar"), upon presentation and surrender, at its designated offices in New York, New York (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 Certificates. (b) The term "Certificates" shall mean $2,770,000 "CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001" 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 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 888217.1 -13- 2 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. 888217.1 (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 (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 "Prior Lien Obligations" shall mean (i) the outstanding "City of Lubbock, Texas , Tax and Solid Waste Disposal System Revenue Certificates of Obligation, Series 1991 ", dated May 15, 1991, issued in the original principal amount of $1,145,000 and (ii) 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 -14- dignity to the lien and pledge of the Net Revenues securing the payment of the Certificates. (1) The term "System" or "Solid Waste System" shall mean the City's Solid Waste Disposal System, being all plants, collection vehicles, incinerators, sanitary landfills, or other works, facilities and equipment of the City acquired, installed and operated for the purpose of collecting, handling, storing, treating, neutralizing, stabilizing, or disposing of solid wastes, garbage and rubbish, including sites therefor; provided, however, the City, by ordinance adopted by the City Council, may identify and designate one or more incinerators hereafter acquired or constructed, together with all property incident and necessary to its operation, to be removed and not a part of the System as defined herein, and such facilities so identified and designated, together with the revenues received and expenses incurred in connection with the operation and maintenance thereof, shall not constitute a part of the System or be encumbered in any respect by the provisions of this Ordinance. 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 2001 CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE 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) relating to the investment of "bond proceeds"; provided that all 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. SECTION 12: Tax Levy. 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 redemption at maturity or a sinking fund of 2% (whichever amount shall be the greater), there shall be and there is hereby levied a sufficient tax on each one hundred dollars' valuation of taxable property in said City to pay such Debt Service Requirements while the Certificates are Outstanding, full allowance being made for delinquencies and costs of collection, and 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 888217.1 -15- 62 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 amount 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. (b) The amount of taxes 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. n SECTION 13: Pledge of Revenues. The City hereby covenants and agrees that, subject only to a prior lien on and pledge of the Net Revenues of the System for the payment 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 Certificates and Additional Certificates, if issued, as herein provided, and the pledge of the Net Revenues of the System herein made for the payment of 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 without further action by the City and without any filing or recording except for the filing of this Ordinance in the records of the City. SECTION 14: System Fund. The City hereby reaffirms its covenant and agreement made in connection with the issuance of the outstanding Prior Lien Obligations that all Gross 888217.1 -16- U Q 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, Solid Waste Disposal 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 Certificates and Additional Certificates, if issued. 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 888217.1 -17- ZZ 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 1502.052, et seq. and V.T.C.A., Local Government Code, Subchapter C of Chapter 271. (b) Other than for the payment of the outstanding Prior Lien 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 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. „W 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 888217.1 -18- 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 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 three (3) 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 888217.1 -19- 10*1 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 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: 888217.1 "Closing Date" means the date on which the Certificates are first authenticated and delivered to the initial purchasers against payment therefor. -20- "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. "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 1.148-4 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: 888217.1 -21- 69 (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 (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 888217.1 -22- 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 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 directs and authorizes the Mayor, City Secretary, City Manager, Managing Director of Finance, and First Assistant City Manager, individually or jointly, to make elections permitted or required pursuant to the provisions of the Code or the 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. 888217.1 -23- SECTION 25: Sale of Certificates - Official Statement Approval. The Certificates authorized by this Ordinance are hereby sold by the City to Morgan Keegan & Company, Inc. and Samco Capital Markets (herein collectively referred to as the "Purchasers") in accordance with the Purchase Contract, dated February 8, 2001, 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 City and 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. Furthermore, the use of the Official Statement by the Purchasers in connection with the public offering and sale of the Certificates is hereby ratified, confirmed and approved in all respects. The final Official Statement, which reflects the terms of sale, attached as Exhibit A to the Purchase Contract (together with such changes approved by the Mayor, City Manager, First Assistant to City Manager, Managing Director of Finance or City Secretary, 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 February 8, 2001, 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 final Official Statement in the 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 26: 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 and supply of definitive Certificates, and shall take and have charge and control of the Initial Certificate(s) 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, City Secretary, City Manager, Managing Director of Finance and Assistant City Manager, any one or more of said officials, are hereby authorized and directed to furnish and execute such documents relating to the City and its financial affairs as may be necessary for the issuance of the Certificates, the approval of the Attorney General and the registration by the Comptroller of Public Accounts 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 and the initial exchange thereof for definitive Certificates. 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 in accordance with the provisions of V.T.C.A., Government Code, Chapter 2256, including guaranteed investment contracts permitted by V.T.C.A., Section 2256.015 et seq., and the City's investment policies and guidelines, and any investment earnings realized shall be expended for such authorized projects and purposes or deposited in the Interest and Sinking 888217.1 -24- Aft 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, 01� including investment earnings, remaining after completion of all authorized projects or purposes shall be deposited to the credit of the Interest and Sinking Fund. SECTION 28: 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 29: 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 30: 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 31: 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 32: 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 33: Severability. 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 34: Effect of Headings The Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 35: 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 36: 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. 888217.1 -25- iW "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. "SIC" 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, 2001) financial information and operating data with respect to the City of the general type included in the final Official Statement approved by Section 25 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. n 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: 888217.1 1. 2. 3. difficulties; 4. difficulties; 5. 6. Certificates; 7. Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on debt service reserves reflecting financial Unscheduled draws on credit enhancements reflecting financial Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Modifications to rights of holders of the Certificates; -26- Crn' 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 ri 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. 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 888217.1 -27- 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 37: 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 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 38: Effective Date. This Ordinance shall take effect and be in force immediately from and after its passage on second and final reading, and IT IS SO ORDAINED. PASSED AND ADOPTED ON FIRST READING, January 11, 2001. PASSED AND ADOPTED ON SECOND AND FINAL READING, this the 8th day of February, 2001. ivi ATTEST: City Secretary (City Seal) APPROVED AS TO CONTENT: Intefim Manadinb Director of Finance APPROVEWAS TO FORM: t CI C City Attorney. F LUBBOCK, TEXAS EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT See Document Number 4 45009485.1110026532 EXHIBIT B n PURCHASE CONTRACT "' See Document Number 5 W Exhibit C to Ordinance DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 36 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 contained in Tables 1 through 6 and 8A through 17 of the Official Statement. 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. 888217.1 PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of February 8, 2001 (this "Agreement"), by and between the City of Lubbock, Texas (the "Issuer"), and U. S. Trust Company of Texas, N.A., Dallas, Texas, a banking association duly organized and existing under the laws of the United States of America (the "Bank"). RECITALS WHEREAS, the Issuer has duly authorized and provided for the issuance of its "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001" (the "Securities") in the aggregate principal amount of $2,770,000, which Securities are scheduled to be delivered to the initial purchasers on or about March 15, 2001; and WHEREAS, the Issuer has selected and the Bank has agreed 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; and WHEREAS, the Bank represents it has full power and authority to perform and serve a 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. 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 889066.1 1 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 principal office of the Bank as indicated in Section 3.01 hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. 889066.1 "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, City Manager, Managing Director of Finance, Assistant City 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). "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, -2- ILO 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 offices: By Hand: By Mail: U. S. Trust Company of Texas, N.A. U. S. Trust Company of Texas, N.A. 30 Broad Street P. O. Box 84 B-Level Bowling Green Station New York, New York 10006-1906 New York, New York 10274-0084 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 fiduciary 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. 889066.1 -3- WAO 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. The Bank represents and warrants its office in Dallas, Texas will at all times have immediate access to the Security Register by electronic or other means and will be capable at all times of producing a hard copy of the Security Register at its Dallas office for use by the Issuer. 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_ 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 889066.1 - 4 - Q 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. 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 an&_ 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 exchangefor 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. 889066.1 -5- (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 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 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 - Fiduciary Account/Collateralization. A fiduciary °^ account shall at all times be kept and maintained by the Bank for the receipt, safekeeping and disbursement of moneys received from the Issuer hereunder for the payment of the Securities, and money deposited to the credit of such account until paid to the Holders of the Securities shall be continuously collateralized by securities or obligations which qualify and are eligible under both the laws of the State of Texas and the laws of the United States of America to secure and be pledged as collateral for fiduciary accounts to the extent such money is notinsured by the Federal Deposit Insurance Corporation. Payments made from such fiduciary account shall be made by check drawn on such fiduciary account unless the owner of such Securities shall, at its own expense and risk, request such other medium of payment. The Bank shall be under no liability for interest on any money received by it hereunder. Subject to the applicable unclaimed property laws of the State of Texas, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any 889066.1 -6- Security and remaining unclaimed for three years after final maturity of the Security has become due and payable will be paid by the Bank to the Issuer, and the Holder of such Security shall thereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such moneys shall thereupon cease. 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 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. 889066.1 -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. 889066.1 IN WITNESS WHEREOF,, the parties hereto hav xecuted this greement',as of the day and year first above written. Assistant Vice President U.S. T T MANY F TEXAS, N.A. J Title: [SEAL] Attest: Address: 2001 Ross Ave., Suite 2700 Dallas, Texas 75201 Title: VIC-E PRESIDENT CITY OF LUBBOCK, TEXAS BY Mayor (CITY SEAL) Address: P. O. Box 2000 Attest: Lubbock, Texas 79457 s- -City Secretary, 889066.1 _ 9 _ r U.S. TRUST CORPORATE TRUST and AGENCY FEES Annex A Fee Schedule $2,770,000 City of Lubbock, Texas Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 Annual Paying Agent Registrar Fee $550.00 Due at Closing $550.00 Dated: February 12, 2001 r� Em $2,770,000 �* CITY OF LUBBOCK, TEXAS Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 PURCHASE CONTRACT February 8, 2001 The Honorable Mayor and Members of the City Council City of Lubbock 1625 13th St. Lubbock, Texas 79401 Dear Mayor and Members of the City Council: Morgan Keegan & Co., Inc. (the "Authorized Representative") and SAMCO Capital Markets (collectively, the "Underwriters"), offer 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 before 9:00 p.m. Central Time on February 8, 2001. 1. Purchase and Sale of the Certificates. Upon the terms and conditions and upon'the basis of the representations set forth herein, the Underwriters jointly and severally hereby agree to purchase from the City, and the City hereby agrees to sell and deliver to the Underwriters an aggregate of $2,770,000 principal amount of City of Lubbock, Texas Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (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 $2,760,943.05, representing the principal amount of the Certificates of rZ $2,770,000.00, less an Underwriters' discount on the Certificates of $22,846.60, less an aggregate original issue discount on the Certificates of $2,030.95, and plus accrued interest in the amount of $15,820.60. Morgan Keegan & Co., Inc. represents that it has been duly authorized to executethis Purchase Contract and has been duly authorized to act hereunder as the Authorized Representative. All actions that may be taken by the Underwriters may be taken by the Authorized Representative alone. 2. Ordinance. The Certificates shall be as described in and shall be issued and secured under the provisions of the Ordinance authorizing the issuance and sale ofthe Certificates adopted by the City on February 8, 2001 (the "Ordinance"). The Certificates shall be secured and payable as provided in the Ordinance. 3. Public Offering. It shall be a condition of the obligations of the City to sell and deliver the Certificates to the Underwriters, and of the obligations of the Underwriters to purchase and accept delivery of the Certificates, that the entire principal amount ofthe Certificates authorized by the Ordinance shall be sold and delivered by the City and accepted and paid for by the Underwriters at the Closing. The Underwriters agree to make a bona fide public offering of all of the Certificates, at not in excess of the initial public offering prices, as set forth in the Official Statement; provided however at least ten percent (10%) ofthe 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 Official 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 $27,700. The City agrees to hold such check uncashed until the Closing to ensure the performance by the Underwriters of their obligation to purchase, accept delivery of and pay for the Certificates at the Closing. Concurrently with the payment by the Underwriters of the purchase price of the Certificates, the City shall return such check to the Authorized Representative as provided in Paragraphs 7 and 8 hereof. Should the City fail to deliver the Certificates at the Closing, or should the City be unable to satisfy the conditions of the obligations of the Underwriters to purchase, accept delivery of and pay for the Certificates, as set forth in this Purchase Contract (unless waived by the Authorized Representative), or should such obligations of the Underwriters be terminated for any reason permitted by this Purchase Contract, such check shall immediately be returned to the Authorized Representative. In the event the Underwriters fail (other than for a reason permitted hereunder) to purchase, accept delivery of and pay for the Certificates at the Closing as herein provided, such check shall be retained by the City as and for full liquidated damages for such failure of the Underwriters and for any defaults hereunder on the part of the Underwriters. The Authorized Representative 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 February 8, 2001, 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 2 Ordinance and the Official Statement and the information therein contained to be used by the Underwriters in connection with the public offering and sale of the Certificates. The City confirms its consent to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement, relative to the Certificates, dated January 15, 2001 (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 federal " Securities and Exchange Act of 1934 (the "Rule"). The City agrees to cooperate with the Underwriters to provide a supply of final Official Statements within seven business days of the date hereof in sufficient quantities to comply with the Underwriters' obligations under the Rule and the applicable rules of the Municipal Securities Rulemaking Board. The Underwriters will use their 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 date of this Purchase Contract but before the first to occur of (i) the date upon which the Underwriters notify the City that the period of the initial public offering of the Certificates has expired or (ii) the date that is 90 days after the date hereof, any event shall occur that might or would cause the Official Statement to contain any untrue statement of a material fact or to 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, the City shall notify the Authorized Representative, and if, in the opinion of the Authorized Representative, 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 Underwriters a reasonable number of copies requested by the Authorized Representative in order to enable the Underwriters 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 Underwriters 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 3 No 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 parry or to the knowledge of the City it is otherwise subject, that would have a materialand 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; (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 materialfact 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 Underwriters, 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 $9,100,000 General Obligation Bonds, Series 2001 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 Solid Waste 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 4 EQ way the completeness, accuracy or fairness of the Preliminary Official Statement or the Official Statement; (h) The City will cooperate with the Underwriters 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 Authorized Representative 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 of the Certificates and the Ordinance contained in the Official n 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 Underwriters as provided herein, will be validly issued and outstanding obligations of the City entitled to the benefits of, and subject to the limitations contained in, the Ordinance; .�, 0) If prior to the Closing an event occurs affecting the Citythat 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 Authorized Representative, and if in the opinion of the City and the Authorized Representative such event requires a supplement or amendment to the Official Statement, the City will supplement or amend the Official Statement in a form and in a manner approved by the Authorized Representative; (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; (lj Any certificate signed by any official of the City and delivered to the Underwriters shall be deemed a representation and warranty by the City to the Underwriters 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. W 0 7. Closing. At 10:00 A.M., Central Time, on March 15, 2001 (the "Closing"), the City will deliver the initial Certificates (as defined in the Ordinance) to the Underwriters 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 Underwriters with the other documents hereinafter mentioned. On or prior to the date of Closing, the Underwriters shall make arrangements with The Depository Trust Company ("DTC") for the Certificates to be immobilized and thereaftertraded as book -entry only securities and on the date of Closing the Underwriters 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 Underwriters, 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 Authorized Representative. 8. Conditions. The Underwriters have 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 Underwriters' 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 T instruments at or prior to the Closing, and shall also be subject to the following conditions: (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 Authorized Representative; 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 full 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 obligations for borrowed money; (e) At or prior to the Closing, the Underwriters shall have received each of the following documents: 6 (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 of the City as having been duly adopted by the City and as being in effect, with such changes or amendments as may have been agreed to by the Underwriters, the Ordinance shall contain the agreement of the City, in form satisfactory to the Underwriters, that is described under the caption "Continuing Disclosure of Information" 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 Underwriters, which provides that the Underwriters may rely upon the opinion of Bond Counsel delivered in accordance with the provisions of paragraph 8(f)(3) hereof, and opining to the effect that (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) in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions subcaptions "Plan of Financing," "The Obligations" (exclusive of the information under the subcaptions "Book -Entry Only System" and "Holders' Remedies"), "Tax Matters," "Continuing Disclosure of Information" (exclusive of the information under the subcaption "Compliance with Prior Undertakings"), "Legal Opinions"(exclusive of the last two sentences thereof j and "Legal Investments and Eligibility to Secure Public Funds in Texas" and such firm is ofthe 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 Ordinance; 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) An opinion of McCall, Parkhurst & Horton L.L.P., Underwriters' Counsel addressed to the Underwriters, and dated the date of Closing to the effect that: (i) the Certificates are exempt securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended, and it is not necessary in connection with the sale of the 7 E2 52 Certificates to the public to register the Certificates under the Securities Act of 1933, as amended, or to qualify the Ordinance under the Trust Indenture Act of 1939, as amended; and (ii) in their participation in the preparation ofthe Official Statement, nothing has come to the attention of said firm that would lead them to believe that the Official Statement (excluding the financial and statistical data and forecasts included therein, all as to which no view need be expressed) contains any untrue statement of a material fact or omits to "^ state a material fact necessaryto make the statements therein, in light of the circumstances under which they were made, not misleading; (7) A certificate, dated the date of Closing, signed by the Mayor and City Manager of 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, or 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 of the 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 of the Official Statement (but in lieu of or in conjunction with such certificate, the Underwriters may, in their 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 of the 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, 2000, the latest date as to which audited financial information is available; (8) An -opinion ofthe City Attorney addressed to the Underwriters and dated the date of Closing substantially in the form and substance of Exhibit B hereto; (9) A certificate, dated the date of the Closing, of an appropriate officer of AW the City to the effect 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; 0 0 (10) Evidence of the rating on the Certificates, which shall be "Aa2" or better by Moody's Investors Service, Inc. ("Moody's"), "AA" or better by Standard and Poor's Corporation, a division of the McGraw-Hill Companies, Inc. ("S&P"), and "AA" or better by Fitch IBCA, Inc., shall be delivered in a form acceptable to the Underwriters; and (11) Such additional legal opinions, certificates, instruments and other '* documents as Bond Counsel or the Underwriters may reasonably request to evidence the truth, accuracy and completeness, as of the date hereof and as of the date of Closing, of the City's representations and warranties contained herein and of the statements and information 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. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to bein compliance with the provisions hereof if, but only if, they are satisfactory to the Underwriters. If the City shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Certificates as set forth in this Purchase Contract, or if ;.. the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Certificates shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate, the security deposit referred to in Paragraph 4 of this Purchase Contract shall be returned to the Authorized Representative and neither the Underwriters nor the City shall be under further obligation hereunder, except that the respective obligations of the City and the Underwriters set forth in Paragraphs 10 and 12 hereof shall continue in full force and effect. 9. Termination The Underwriters may terminate their obligation to purchase at any time before the Closing if any of the following should occur: (a) (i) Legislation shall have been enacted by the Congress of the United States, or recommended to the 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 decision shall 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 release 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 of which, 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 general character of the Certificates or upon income of the general character to be derived by the City, other than any imposition of federal income taxes upon interest received on obligations of the general character as the E 0 M Certificates on the date hereof and other than as disclosed 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 1933, as amended, or qualification of any indenture underthe Trust Indenture Act of 1939, as amended, in connection with the public offering of the Certificates, or any action shall have been taken by any court or by any governmental authority suspending the use of the Preliminary Official Statement or the Official Statement or any amendment or supplement thereto, or any proceeding for that purpose shall have been initiated or threatened in any such court or by any such authority. (c) (i) The Constitution 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 of 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 oftrading in securities shall have occurred on the New York Stock Exchange; or (ii) the United States shall have become engaged in hostilities (including the escalation of any hostilities existing on the date hereof, whether foreseeable), the effect of which, in either case described in clause (i) and (ii), that, in the judgment of the Authorized Representative, would materially affect the market price of the Certificates. (e) An event described in Paragraph 60) hereof occurs that, in the opinion of the Authorized Representative, requires a supplement or amendment to the Official Statement that is deemed by them, in their discretion, to adversely affect the market for the Certificates. (f) A general banking moratorium shall have been declared by authorities of the United States, the State of New York or the State of Texas. (g) A lowering of the ratings of "Aa2," "AA" and "AA", initially assigned to the Certificates by Moody's, S&P and Fitch, respectively, shall occur prior to the Closing. 10. Expenses. (a) The City shall pay all expenses incident to the issuance of the Certificates, including but not limited to: (i) the cost of the preparation, printing and distribution of the Preliminary Official Statement and the Official Statement; (ii) the cost of the preparation and printing of the Certificates; (iii) the fees and expenses of Bond Counselto the City; (iv) the fees and disbursements of the City's accountants, 10 0 no advisors, and of any other experts or consultants retained by the City; and (v) the fees for the bond ratings and any travel or other expenses incurred incident thereto. (b) The Underwriters shall pay (i) all advertising expenses in connection with the offering of the Certificates; (ii) the cost of the preparation and printing of all the underwriting documents; and (iii) the fee of McCall, Parkhurst & Horton L.L.P. for suchfirm's opinion required by Paragraph 8(e)(6) hereof. 11. Notices. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing at the address for the City set forth above, and any notice or other communication to be given to the Underwriters under this Purchase Contract may be given by delivering the same in writing to Morgan Keegan & Co., Inc., 5956 Sherry Lane, Suite 1900, Dallas, TX 75225, Attention: Tom Oppenheim. 12. Parties in Interest This Purchase Contract is made solely for the benefit of the City and the Underwriters (including the successors or assigns of any 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 circumstance 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 Underwriters, 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 termination of this Purchase Contract. 13. Severability. If any provision of this Purchase Contract shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any constitution, statute, rule ofpublic policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstances, or of rendering any other provision inoperative or unenforceable to any extent whatever. 14. Choice of Law. This Purchase Contract shall be governed by and construed in accordance with the laws of the State of Texas. 15. Execution in Counterparts. This Purchase Contract may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Purchase Contract by signing any such counterpart. 16. Section Headings. Section headings have been inserted in this Contract as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Contract and will not be used in the interpretation of any provisions of this Contract. 11 M MM 17. Status of the Underwriters. It is understood and agreed that for all purposes of this Contract and the transactions contemplated hereby the Underwriters have, in their role as underwriters. acted solely as independent contractors and have not acted as financial or investment advisors, fiduciaries or agents to or for the City, whether directly or indirectly through any person. The City recognizes that the Underwriters expect to profit from the acquisition and potential distribution of the Certificates. 12 0 18. Effective Date. This 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, Morgan Keegan & Co., Inc. SAMCO Capital Markets By: Morgan Keegan & Co., Inc. Authorized Representative By: Title: Managing Directo Accepted: This 8th day of February, 2001 By: Mayor City of Lubbock, Texas Attest: City Secretary City of Lubbock, Texas 13 EXIIIBIT A Schedule of Maturities, Interest Rates, Yields and Redemption Provisions City of Lubbock, Texas Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 Maturity Principal Interest Rate Yield a-, (2/15) Amount (%) (%) 2002 $140,000 5.000% 3.35% 2003 140,000 5.000 3.62 2004 140,000 5.000 3.73 2005 140,000 5.000 3.83 2006 140,000 4.375 3.93 2007 140,000 4.000 4.03 2008 140,000 4.000 4.14 2009 140,000 4.150 4.22 2010 140,000 4.250 4.32 2011 140,000 4.350 4.43 2012 140,000 4.400 4.53 2013 140,000 4.625 4.68 2014 140,000 4.700 4.78 2015 140,000 4.800 4.88 2016 135,000 4.875 4.98 2017 135,000 5.000 5.03 2018 135,000 5.000 5.11 2019 135,000 5.000 5.16 2020 135,000 5.000 5.19 2021 135,000 5.000 5.23 The Certificates maturing on and after February 15, 2011 are subject to redemption prior to maturity at the option of the City on February 15, 2010 or any date thereafter at a price of par plus accrued interest to the date of redemption. A-1 SIC OPINION OF THE CITY ATTORNEY March 15, 2001 Morgan Keegan & Co., Inc. SAMCO Capital Markets % Morgan Keegan & Co., Inc. 5956 Sherry Lane Suite 1900 Dallas, TX 75225 Ladies and Gentlemen: 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 Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001," in the aggregate principal amount of $2,770,000 (the "Certificates"), pursuant to the provisions of an ordinance duly adopted by the City Council of the City on February 8, 2001 (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 confomuty 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 agreement, bond, note, resolution, ordinance, agreement or B-1 PIN 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, ordinance, agreement or other instrument to which the City is a party or is otherwise subject; and 2. Except as disclosed in the Official 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 Solid Waste 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 percussion is given in writing by me. Very truly yours, W.0. 60 PRELIMINARY OFFICIAL STATEMENT Ratings: Moody's: "Aa2" Dated January 15, 2001 S&P: "AA+" Fitch: "AA+" See ("Other Information NEW ISSUE - Book -Entry -Only Ratings" herein) In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Exemption" herein, including the alternative minimum tax on corporations. THE BONDS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $9,100,000 CITY OF LUBBOCK, TEXAS (Lubbock County) GENERAL OBLIGATION BONDS, SERIES 2001 Dated Date: February 1, 2001 Due: February 15, as shown on inside cover PAYMENT TERMS ... Interest on the $9,100,000 City of Lubbock, Texas, General Obligation Bonds, Series 2001 (the "Bonds") will accrue from February 1, 2001 (the "Dated Date"), and will be payable February 15 and August 15 of each year, commencing February 15, 2002, and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "The Obligations - Book -Entry -Only System" herein. The initial Paying Agent/Registrar is U.S. Trust Company of Texas, N.A., Dallas, Texas (see "The Obligations - Paying Agent/Registrar"). AUTHORITY FOR ISSUANCE ... The Bonds are issued pursuant to the Constitution and general laws of the State of Texas (the "State"), including particularly V.T.C.A., Government Code, Chapter 1331, as amended, and are direct voted obligations of the City of Lubbock, Texas (the "City"), payable from a continuing ad valorem tax levied on all taxable property within the City, within the limit prescribed by law, as provided in the ordinance authorizing the Bonds (the "Bond Ordinance") (see "The Obligations - Authority for Issuance"). PURPOSE ... Proceeds from the sale of the Bonds will be used for (i) park construction and improvements; (ii) street construction and improvements; and (iii) traffic control improvements. SEE MATURITY SCHEDULE AND REDEMPTION PROVISIONS ON THE REVERSE OF THIS PAGE SEPARATE ISSUES ... The Bonds are being offered by the City concurrently with, and under a common Official Statement for, the City's Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (collectively, the "Obligations"). The Obligations are separate and distinct securities offerings and investors should note that, while the Obligations share certain attributes, the rights of the holders of each series of the Obligations and the remedies relating to each series are to be given effect as a series. Each issue of the Obligations is being underwritten by separate underwriting syndicates (see "Other Information — Underwriting"). LEGALITY ... The Bonds are offered for delivery when, as and if issued and received by the Underwriters and subject to the approving opinion of the Attorney General of Texas and the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond Counsel's Opinions"). Certain legal matters will be passed upon for the Underwriters by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Counsel for the Underwriters. DELIVERY ... It is expected that the Bonds will be available for delivery through The Depository Trust Company on or about March 15, 2001. ESTRADA HINOJOSA & COMPANY, INC. BANC OF AMERICA SECURITIES LLC SIEBERT BRANDFORD SHANK & CO., LLC W MATURITY SCHEDULE Maturity Price or Maturity Price or Amount (February 15) Rate Yield Amount (February 15) _ Rate Yield $ 30,000 2002 $ 455,000 2012 295,000 2003 480,000 2013 310,000 2004 505,000 2014 320,000 2005 530,000 2015 340,000 2006 560,000 2016 355,000 2007 595,000 2017 370,000 2008 625,000 2018 390,000 2009 660,000 2019 410.000 2010 700,000 2020 430,000 2011 740,000 2021 (Accrued Interest from February 1, 2001 to be added) OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2011, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2010, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations - Optional Redemption"). 2 W 4) o 0 3 co fn m c c � m o 0) o rn n Co Oc cC �v E 5 3 n- m y E L � c o c c6 O o �•U L O U j c U i U i � t � 3 � c `o c o c -o w � i a c .N fq N m v E ai i N d ca to t 0 a� ON � L T �ca E W PRELIMINARY OFFICIAL STATEMENT Ratings: Moody's: "Aa2" Dated January 15, 2001 S&P: "AA+" Fitch: "AA+" See ("Other Information NEW ISSUE - Book -Entry -Only Ratings" herein) In the opinion of Bond Counsel, interest on the Certificates will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Exemption" herein, including the alternative minimum tax on corporations. THE CERTIFICATES WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS Dated Date: February 1, 2001 $2,770,000 CITY OF LUBBOCK, TEXAS (Lubbock County) TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001 Due: February 15, as shown on inside cover PAYMENT TERMS ... Interest on the $2,770,000 City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (the "Certificates") will accrue from February 1, 2001 (the "Dated Date"), and will be payable February 15 and August 15 of each year, commencing February 15, 2002, and will be calculated on the basis of a 360- day year consisting of twelve 30-day months. The definitive Certificates will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the owners thereof. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Certificates. See "The Obligations - Book -Entry -Only System" herein. The initial Paying Agent/Registrar is U.S. Trust Company of Texas, N.A., Dallas, Texas (see "The Obligations - Paying Agent/Registrar"). 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 continuing ad valorem tax, within the limit prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus net revenues of the City's Solid Waste System, as provided in the ordinance authorizing the Certificates (the "Certificate Ordinance") (see "The Obligations - Authority for Issuance"). PURPOSE ... Proceeds from the sale of the Certificates will be used for the construction and implementation of the closure plan a portion of the City's old landfill in accordance with permit conditions, state and federal regulations and to pay costs associated with the issuance of the Certificates. SEE MATURITY SCHEDULE AND REDEMPTION PROVISIONS ON THE REVERSE OF THIS PAGE SEPARATE ISSUES ... The Certificates are being offered by the City concurrently with, and under a common Official Statement for, the City's General Obligation Bonds, Series 2001. The Obligations are separate and distinct securities offerings and investors should note that, while the Obligations share certain attributes, the rights of the holders of each series of the Obligations and the remedies relating to each series are to be given effect as a series. Each issue of the Obligations is being underwritten by separate underwriting syndicates (see "Other Information — Underwriting"). LEGALITY ... The Certificates are offered for delivery when, as and if issued and received by the Underwriters and subject to the approving opinion of the Attorney General of Texas and the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond Counsel's Opinions"). Certain legal matters will be passed upon for the Underwriters by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Counsel for the Underwriters. DELIVERY ... It is expected that the Certificates will be available for delivery through The Depository Trust Company on or about March 15, 2001. MORGAN KEEGAN & COMPANY, INC. SAMCO CAPITAL MARKETS 69 MATURITY SCHEDULE Maturity Price or Maturity Price or Amount (February 15) Rate Yield Amount (February 15) Rate Yield 140,000 2002 $ 140,000 2012 140,000 2003 140,000 2013 140,000 2004 140,000 2014 140,000 2005 140,000 2015 140,000 2006 135,000 2016 140,000 2007 135,000 2017 140,000 2008 135,000 2018 140,000 2009 135,000 2019 140,000 2010 135,000 2020 140,000 2011 135,000 2021 (Accrued Interest from February 1, 2001 to be added) OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Certificates having stated maturities on and after February 15, 2011, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2010, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations - Optional Redemption"). 4 This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Official Statement, and; if given or made, such other information or representations must not be relied upon. A °^ Certain information set forth herein has been provided by sources other than the City that the City believes is reliable, but the City makes no representation as to the accuracy of such information. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. See "CONTINUING DISCLOSURE OF INFORMATION"for a description of the City's undertaking to provide certain information on a continuing basis. THE OBLIGATIONS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE OBLIGATIONS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE SECURITIES HAVE BEEN REGISTERED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THE CITY NOR THE UNDERWRITERS MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK-ENTRKONLY SYSTEM, AS SUCH INFORMATION HAS BEEN FURNISHED BY THE DEPOSITORY TRUST COMPANY. TABLE OF CONTENTS TABLE 15 - CURRENT INVESTMENTS ........................ 33 OFFICIAL STATEMENT SUMMARY .........................6 CITY OFFICIALS, STAFF AND CONSULTANTS ..... 9 ELECTED OFFICIALS.........................................I.........9 SELECTED ADMINISTRATIVE STAFF ............................ 9 CONSULTANTS AND ADVISORS .................................... 9 INTRODUCTION..........................................................10 THE OBLIGATIONS.....................................................10 TAXINFORMATION...................................................16 TABLE I - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT .......................................... 19 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY...................................................... 20 TABLE 3A - VALUATION AND GENERAL OBLIGATION DEBTHISTORY ................................................ 21 TABLE 313 - DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT ......................................... 21 TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY......................................................... 21 TABLE 5 - TEN LARGEST TAXPAYERS ..................... 22 TABLE 6 - TAX ADEQUACY .................................... 22 TABLE 7 - ESTIMATED OVERLAPPING DEBT ............23 DEBT INFORMATION ................................................. 24 TABLE HA - PRO -FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS ....................... 24 TABLE gB - DIVISION OF DEBT SERVICE REQUIREMENTS ............................................... 25 TABLE 9 - INTEREST AND SINKING FUND BUDGET oft, PROJECTION.................................................... 26 TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT.............................................................. 27 TABLE I I - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS ........................................ 27 TABLE 12 - OTHER OBLIGATIONS ............................. 28 FINANCIAL INFORMATION.....................................29 TABLE 13 - GENERAL FUND REVENUES AND EXPENDITURE HISTORY ................................... 29 TABLE 14 - MUNICIPAL SALES TAX HISTORY ......... 30 CAPITAL IMPROVEMENT PROGRAM ........................... 30 THE SOLID WASTE SYSTEM ................................... 34 SOLID WASTE SYSTEM ............................................. 34 TABLE 16 - MONTHLY SOLID WASTE RATES ........... 34 TABLE 17 — SOLID WASTE SYSTEM CONDENSED STATEMENT OF OPERATIONS .......................... 34 TAXMATTERS............................................................ 35 OTHER INFORMATION ............................................. 37 RATINGS.................................................................. 37 LITIGATION.............................................................. 37 REGISTRATION AND QUALIFICATION OF OBLIGATIONS FORSALE ....................................................... 37 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS ................................ 37 LEGAL OPINIONS AND No -LITIGATION CERTIFICATE 37 AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION................................................. 38 CONTINUING DISCLOSURE OF INFORMATION ............. 38 FINANCIAL ADVISOR ................................................ 39 UNDERWRITING....................................................... 40 CERTIFICATION OF THE OFFICIAL STATEMENT .......... 40 APPENDICES GENERAL INFORMATION REGARDING THE CITY ........ A EXCERPTS FROM THE ANNUAL FINANCIAL REPORT . B FORM OF BOND COUNSEL'S OPINIONS ...................... C The cover page hereof, this page, the appendices included herein and any addenda, supplement or amendment hereto, are part of the Official Statement. W .' OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Obligations to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. THE CITY ............................... The City of Lubbock is a political subdivision and municipal corporation of the State, located in Lubbock County, Texas. The City covers approximately 115 square miles and has an estimated 2000 population of 199,445 (see "Introduction - Description of City"). THE BONDS .................................. The Bonds are issued as $9,100,000 General Obligation Bonds, Series 2001. The Bonds are issued as serial bonds maturing February 15, 2002 through February 15, 2021 (see "The Obligations - Description of the Obligations"). THE CERTIFICATES ..................... The Certificates are issued as $2,770,000 Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001. The Certificates are issued as serial certificates maturing February 15, 2002 through February 15, 2021 (see "The Obligations -Description of the Obligations"). PAYMENT OF INTEREST .............. Interest on the Obligations accrues from February 1, 2001, and is payable February 15, 2002, and each August 15 and February 15 thereafter until maturity or prior redemption (see "The Obligations - Description of the Obligations" and "The Obligations -.Optional Redemption"). AUTHORITY FOR ISSUANCE ......... The Bonds are issued pursuant to the general laws of the State, including particularly V.T.C.A. Government Code, Chapter 1331, as amended, an election held in the City on September 18, 1999 and a Bond Ordinance passed by the City Council of the City (see "The Obligations - Authority for Issuance"). The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and a Certificate Ordinance passed by the City Council of the City (see "The Obligations - Authority for Issuance"). SECURITY FOR THE OBLIGATIONS ............................... The Bonds constitute direct and voted obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limit prescribed by law, on all taxable property located within the City (see "The Obligations - Security and Source of Payment"). The Certificates constitute direct obligations of the City, payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limit prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus Net Revenues of the City's Solid Waste System as provided in the Certificate Ordinance (see "The Obligations - Security and Source of Payment"). REDEMPTION ............................... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after February 15, 2011, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2010, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations - Optional Redemption"). TAX EXEMPTION ......................... In the opinion of Bond Counsel, the interest on the Obligations will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under the caption "Tax Matters" herein, including the alternative minimum tax on corporations. USE OF PROCEEDS ....................... Proceeds from the sale of the Bonds will be used for (i) park construction and improvements; (ii) street construction and improvements; and (iii) traffic control improvements. 0 Proceeds from the sale of the Certificates will be used for the construction and implementation of closure plan for a portion of the old City landfill in accordance with permit conditions, state and federal regulations and to pay costs associated with issuance of the Certificates. s*� RATINGS ..................................... The Obligations have been rated "Aa2" by Moody's Investors Service, Inc. ("Moody's"), "AA+" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P") and "AA+" by Fitch IBCA, Inc. ("Fitch"). The City also has one issue outstanding that is rated "Aaa" by Moody's and "AAA" by S&P through insurance by a commercial insurance company (see "Other Information - Ratings"). +� BOOK -ENTRY -ONLY SYSTEM ...................................... The definitive Obligations 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 Obligations may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable n by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "The Obligations - Book -Entry -Only System"). PAYMENT RECORD ...................... The City has never defaulted on the payment of its bonded indebtedness. SELECTED FINANCIAL INFORMATION Ratio General Purpose Per Capita Funded Fiscal Per Capita General General Tax Debt Year Taxable Taxable Purpose Purpose to Taxable % of Ended Estimated Assessed Assessed Funded Funded Assessed Total Tax 9/30 Population Valuation Valuation Tax Debt (z) Tax Debt Valuation Collections 1996 193,064 $ 5,399,356,462 $ 27,967 $ 67,438,562 $ 349 1.25°/,, 100.03% 1997 195,367 5,567,072,641 28,495 61,728,036 316 1.11% 99.78% 1998 196,679 5,830,249,173 29,643 57,156,101 291 0.98% 99.55% 1999 197,117 6,019,588,349 30,538 51,222,980 260 0.85% 99.24% 2000 199,445 6,176,963,982 30,971 53,455,346 268 0.87% 98.89% 2001 199,445 6,638,779,668 33,286 58,122,809 (31 291 (3) 0.88% (3) N.A. (1) Source: The City of Lubbock, Texas. (2) Does not include self-supporting debt (see "Table 3B — Derivation of General Purpose Funded Tax Debt"). (3) Projected; includes the Obligations. GENERAL FUND CONSOLIDATED STATEMENT SUMMARY Fiscal Year Ended September 30, 2000 1999 1998 1997 1996 Fund Balance at Beginning of Year $ 17,248,025 $ 18,990,299 $ 18,472,903 $ 17,672,385 $ 17,655,263 Total Revenues and Transfers 85,518,102 81,929,016 83,556,685 79,790,477 75,697,081 Total Expenditures and Transfers 86,145,475 83,671,290 83,039,289 78,989,959 75,679,959 Fund Balance at End of Year $ 16,620,652 $ 17,248,025 $ 18,990,299 $ 18,472,903 $ 17,672,385 Less: Reserves and Designations (2,857,096) (4,432,834) (5,442,847) (4,997,379) (4,974,060) Undesignated Fund Balance $ 13,763,556 $ 12,815,191 $ 13,547,452 $ 13,475,524 $ 12,698,325 7 For additional information regarding the City, please contact Mr. Andy Burcham Mr. Vince Viaille Mr. Joe W. Smith Cash & Debt Manager First Southwest Company First Southwest Company City of Lubbock or 1001 Main Street or 402 Cypress, Suite 707 P.O. Box 2000 Suite 802 P.O. Box 2754 Lubbock, Texas 79457 Lubbock, Texas 79401 Abilene, Texas 79604-2754 Phone (806) 775-2149 Phone (806) 749-3792 Phone (915) 672-8432 Fax (806)775-2033 Fax (806)749-3793 Fax (915)675-6218 1-1 8 CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS Date of Term ' City Council Installation to Office Expires Occupation Windy Sitton May, 1994 May, 2002 Business Owner Mayor ,,., Alex "Ty" Cooke May, 1992 May, 2004 Investments Mayor Pro Tern and Councilmember, District 6 Victor Hernandez June, 1994 May, 2002 Attorney -at -Law Councilmember, District 1 T. J. Patterson April, 1984 May, 2004 Co -Publisher Councilmember, District 2 David Nelson January, 1997 May, 2002 Attorney -at -Law Councilmember, District 3 Frank Morrison May, 2000 May, 2004 Business Owner, Commodities Councilmember, District 4 Marc McDougal May, 1998 May, 2002 Business Owner, Real Estate '., Councilmember, District 5 SELECTED ADMINISTRATIVE STAFF Date of Employment Date of Employment Total Government Name Position in Current Position with City of Lubbock Service Bob Cass City Manager September, 1992 April, 1976 24 Years Anita Burgess City Attorney December, 1995 December, 1995 5 Years Becky Garza Interim City Secretary January, 2001 August, 1996 6 Years Debra Forte Deputy City Manager January, 1995 January, 1995 22 Years Quincy White Asst. City Manager September, 2000 September, 2000 10 Years Cynthia Alexander Managing Director of Finance February, 2001 February, 2001 14 Years Andy Burcham Cash & Debt Manager November, 1998 November, 1998 2 Years CONSULTANTS AND ADVISORS Auditors.........................................................................................................Robinson Burdette Martin Seright & Burrows, L.L.P. Lubbock, Texas BondCounsel........................................................................................................................................ Fulbright & Jaworski L.L.P. Dallas, Texas ,. Financial .Advisor...................................................................................................................................... First Southwest Company R] Lubbock and Dallas, Texas E.1 PRELIMINARY OFFICIAL STATEMENT RELATING TO $9,100,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION BONDS, SERIES 2001 AND $2,770,000 CITY OF LUBBOCK, TEXAS TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001 INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $9,100,000 City of Lubbock, Texas, General Obligation Bonds, Series 2001 and $2,770,000 City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (collectively, the "Obligations"). Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Bond Ordinance or the Certificate Ordinance, as the case may be, to be adopted on the date of sale of the Obligations which will authorize the issuance of the Obligations, except as otherwise indicated herein. There follows in this Official Statement descriptions of the Obligations 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 a political subdivision and municipal corporation of the State, duly organized and existing under the laws of the State, including the City's Home Rule Charter. The City was incorporated in 1909, and first adopted its Home Rule Charter in 1917. The City operates under a Council/Manager form of government with a City Council comprised of the Mayor and six Councilmembers. The Mayor is elected at -large for a two-year term ending in an even - numbered year. Each of the six members of the City Council is elected from a single -member district for a four-year term of office. The terms of three members of the City Council expire in each even -numbered year. The City Manager is the chief administrative officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, electric, water and sanitary sewer utilities, airport, sanitation and solid waste disposal, health and social services, culture -recreation, public transportation, public improvements, planning and zoning, and general administrative services. The 1990 Census population for the City was 186,206; the estimated 2000 population was 199,445. The City covers approximately 115 square miles. THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS ... The Obligations are dated February 1, 2001, and mature on February 15 in each of the years and in the amounts shown on the cover page hereof. Interest will be computed on the basis of a 360-day year of twelve 30- day months, and will be payable on February 15 and August 15 of each year, commencing February 15, 2002. The definitive Obligations will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. No physical delivery of the Obligations will be made to the owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "Book -Entry -Only System" herein. AUTHORITY FOR ISSUANCE ... The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, particularly V.T.C.A., Government Code, Chapter 1331, as amended; an election held September 18, 1999 and passed by a majority of the participating voters; and the Bond Ordinance. The Bonds are the second installment from a voted authorization of $37,385,000 in principal amount of bonds approved at an election held in the City on September 18, 1999. See Table 11 herein for a description of the authorized purpose for the bonds approved at said election. The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and the Certificate Ordinance. 10 E-> r--I SOURCE AND SECURITY OF PAYMENT — THE BONDS ... All taxable property within the City is subject to a continuing direct annual ad valorem tax levied by the City, within the limit prescribed by law, to provide for the payment of principal of and interest on all Bonds. SOURCE AND SECURITY OF PAYMENT — THE CERTIFICATES ... The Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and are additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Certificate Ordinance) of the City's Solid Waste 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 Certificate Ordinance) now outstanding and hereafter issued. In the Certificate 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 tax and revenue obligations 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 Certificates. The City currently has outstanding one series of "Prior Lien Obligations" designated "City of Lubbock, Texas , Tax and Solid Waste Disposal System Revenue Certificates of Obligation, Series 1991", dated May 15, 1991, with unpaid principal of $l 10,000 and with a final maturity on February 15, 2001. POSSIBLE AVOIDANCE OF PLEDGED PAYMENT SOURCES IN BANKRUPTCY... Texas has adopted the 1998 revisions to Article 9 of the Uniform Commercial Code (the "UCC"), to become effective July 1, 2001. The revisions would for the first time provide means to perfect pledges by government entities and, in addition, would make unperfected pledges subject to the interests of a bankruptcy trustee, whether or not the pledged collateral is exempt from judicial liens. Security interests arising before July 1, 2001 that are not perfected by July 1, 2002 will be considered unperfected pledges. For a number of reasons, it will be impractical and perhaps impossible to perfect the City's pledge of ad valorem taxes (with respect to the Bonds and the Certificates) and the pledge of the surplus net revenues of the Solid Waste System (with respect to the Certificates) under the revised Article 9. In proceedings for the adjustments of their debts under the Bankruptcy Code, municipalities are generally authorized to exercise the powers of a bankruptcy trustee. Accordingly, after July 1, 2002, it is likely that the City could avoid its pledges made in the Ordinances to secure payments of the Obligations, unless the Texas UCC is further amended, or other statutes are enacted, to avoid this result. Since the pledges may be legally unenforceable in the circumstances in which it would be most valuable, no person should rely upon the pledge as providing asset security or a preference right in the event that the City should become insolvent. Even under the 1998 UCC revisions, the rights of holders with respect to the pledged payment sources under the Ordinances, and other covenants of the City made in the Ordinance are valid and enforceable except in the event of bankruptcy. Thus, for example, outside of the occurrence of municipal bankruptcy, bondholders may enforce the obligation of the City to apply the !^ pledged sources to pay holders of the Obligations, as described above (see "The Obligations — Security and Source of Payment -- The Bonds" and "The Obligations — Security and Source of Payment -- The Certificates"). Moreover, the City is aware that proposed legislation has been introduced for consideration by the Texas Legislature in the legislative session that begin January 9, 2001 to amend Texas law to avoid the results of the adoption of the 1998 UCC revisions mentioned above. No assurance can be given, however, that any such legislation will be adopted by the Texas Legislature. TAx RATE LIMITATION ... All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax to provide funds for the operation of the City and for the payment of principal of and interest on all ad valorem tax debt within the limit prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after February 15, 2011, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2010, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Obligations are to be redeemed, the City may select the maturities of Obligations to be redeemed. If less than all the Obligations of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Obligations are in Book -Entry -Only form) shall determine by lot the Obligations, or portions thereof, within such maturity to be redeemed. If an Obligation (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such (or "+ the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. 11 Lo NOTICE OF REDEMPTION ... Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY OBLIGATION OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH OBLIGATION OR PORTION THEREOF SHALL CEASE TO ACCRUE. DEFEASANCE ... The respective Ordinances provide for the defeasance of the Bond or Certificates, as the case may be, when the payment of the principal of and premium, if any, on the Bonds or Certificates, as the case may be, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing with a paying agent, in trust (1) money sufficient to make such payment or (2) Defeasance Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent for the Bonds or Certificates, as the case may be. The respective Ordinances provide that "Government Obligations" means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. Upon making such deposit in the manner described, the Obligations shall no longer be outstanding obligations secured by the Bond Ordinance or Certificate Ordinance, as the case may be, and will not be considered debt of the City for purposes of taxation or applying any limitation on the City's ability to issue debt or for any purpose other than to receive payment from the funds and Government Securities deposited in escrow. AMENDMENTS ... The City may amend the respective Ordinances 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 ambiguity, 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 respective issue of the Obligations then outstanding affected thereby, amend, add to, or rescind any of the provisions of the Ordinances; except that, without the consent of the registered owners of all of the Obligations affected, no such amendment, addition or rescission may (1) change the date specified as the date on which the principal of any installment of interest on any Obligation is due payable, reduce the principal amount or maturity value thereof or the rate of interest thereon, change the place or places at or the coin or currency in which any Obligation or interest thereon is payable, or in any other way modify the terms of the payment of the principal of or interest on the Obligations, (2) give any preference to any Obligation over any other Obligation or (3) reduce the aggregate principal amount or maturity value of Obligations required for consent to any amendment, addition or waiver. BOOK -ENTRY -ONLY SYSTEM ... This section describes how ownership of the Obligations are to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by The Depository Trust Company ("DTC'), New York, New York, while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Obligations. The Obligations will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully -registered certificate will be issued for each maturity of the Obligations in the aggregate principal amount of each such maturity and will be deposited with DTC. DTC is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities 12 r-. through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of Obligations under the DTC system must be made by or through DTC Participants, which will receive a credit for such purchases on DTC's records. The ownership interest of each actual purchaser of each Obligation ("Beneficial Owner") is in turn to be recorded on the Direct or Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the Obligations are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Obligations, except in the event that use of the book -entry system described herein is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co. The deposit of Obligations with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC's records reflect only the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Obligations within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Obligations. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the Record Date (hereinafter defined). The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Obligations are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Obligations will be made to DTC. DTC's practice is to credit Direct Participants' accounts on each payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on such payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent/Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Obligations at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Obligations are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Obligations will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood that while the Obligations are in the Book -Entry Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book -Entry Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. Information concerning DTC and the Book -Entry Only System has been obtained 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 Underwriters. 13 Effect of Termination of Book -Entry Only System. In the event that the Book -Entry Only System is discontinued by DTC or following provisions will be applicable to the Obligations. The Obligations may be exchanged for an equal the use of the Book -Entry Only System is discontinued by the City, printed Obligations will be issued to the holders and the aggregate amount of the Obligations in authorized denominations and of the same maturity upon surrender thereof at the prprincipal incipal office for payment of the Paying Agent/Registrar. The transfer of any Obligation may be registered on the books maintained by the Paying Agent/Registrar for such purpose only upon the surrender of such Obligation to the Paying Agent/Registrar with a du executed assignment in form satisfactory to the Paying Agent/Registrar. For every exchange or transfer of registration ly of Obligations, the Paying Agent/Registrar and the City may make a charge sufficient to reimburse them for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer. The City shall pay the fee, if any, charged by the Paying Agent/Registrar for the transfer or exchange. The Paying Agent/Registrar will not be required to transfer or exchange any Obligation after its selection for redemption. The City and the Paying Agent/Registrar may treat the person in whose name a Obligation is registered as the absolute owner thereof for all purposes, whether such Obligation is overdue or not, including for the purpose of receiving payment of, or on account of, the principal of, premium, if any, and interest on, such Obligation. RECORD DATE FOR INTEREST PAYMENT ... The record date ("Record Date") for the interest payable on the Obligations on any interest payment date means the close of business on the last business day of the preceding month. In the event of a non-payment of interest on a scheduled payment date, and for 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 ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of a Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. HOLDERS' REMEDIES ... The respective Ordinances do not establish specific events of default with respect to the Bonds or the Certificates, as the case may be. Under State law there is no right to the acceleration of maturity of the Bonds or the Certificates, as the case may be, upon the failure of the City to observe any covenant under the respective Ordinances. Although a registered owner of Bonds or Certificates, as the case may be, could presumably obtain a judgment against the City if a default occurred in the payment of principal of or interest on any such Bonds or Certificates, as the case may be, such judgment could not be satisfied by execution against any property of the City. Such registered owner's only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Bonds or Certificates, as the case may be, as it becomes due and, with respect to the Certificates, to apply the surplus net revenues of the Solid Waste System to pay the Certificates. The enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The respective Ordinances do not provide for the appointment of a trustee to represent the interests of the holders upon any failure of the City to perform in accordance with the terms of the applicable Ordinance, or upon any other condition. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code. Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9, Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. (See "The Obligations — Possible Avoidance of Pledged Payment Sources in Bankruptcy".) The opinions of Bond Counsel will note that all opinions relative to the enforceability of the respective Ordinances and the Bonds and Certificates are qualified with respect to the customary rights of debtors relative to their creditors. 14 0 SOURCES AND USES OF BOND PROCEEDS ... Proceeds from the sale of the Bonds are expected to be applied approximately as follows: Sources of Funds Par Amount of the Bonds $ Accrued Interest Total Sources of Funds $ Uses of Funds Deposit to Construction Fund $ Underwriter's Discount and Other Rounding Amount Total Uses of Funds $ ra SOURCES AND USES OF CERTIFICATE PROCEEDS ... Proceeds from the sale of the Certificates are expected to be applied approximately as follows: Sources of Funds Par Amount of the Certificates $ �** Accrued Interest Total Sources of Funds $ Uses of Funds Deposit to Construction Fund $ Underwriter's Discount and Other a^, Costs of Issuance Rounding Amount Total Uses of Funds $ No ca 15 r+ TAX INFORMATION An VALOREM TAx LAW ... The appraisal of property within the City is the responsibility of the Lubbock Central Appraisal District (the "Appraisal District"). Excluding agricultural 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 applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the less of (1) the market value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year 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 property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and 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 Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") 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 market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied 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 exempted 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 an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open -space land (Section 1-d-1), including open -space land devoted to farm or ranch purposes or open -space land devoted to timber production, may elect to have such property 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-L Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section l j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. The City and the other taxing bodies within its 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 encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. 16 EFFECTIVE TAX RATE AND ROLLBACK TAX RATE ... By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The City Council will be required to adopt the annual tax rate for the City before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the City. If the City Council does not adopt a tax rate by such required date the tax rate for that tax year is the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the City for the preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (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'. Effective January 1, 2000, a tax rate cannot be adopted by the City Council that exceeds the 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 rate following a notice of such public hearing (including the requirement that notice be posted on the City's website if the City owns, operates or controls an internet website and public notice be given by television if the City has free assess to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine 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 (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year'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 operation 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 submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. P"* PROPERTY ASSESSMENT AND TAX PAYMENT ... Property within the City is generally 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. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. '11' PENALTIES AND INTEREST ... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Cumulative Month Penalty Interest Total February 6% 1 % 7% March 7 2 9 !�April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post -petition taxes from attaching to property and ** obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post -petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. 17 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 disabled are also granted an exemption of $10,000. The City has not granted an additional exemption 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 exemptions described above. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property; and the Lubbock County Appraisal District collects taxes for the City. The City does not permit split payments of taxes, and discounts for early payment of taxes are not allowed by the City, although permitted on a local -option basis by the Property Code. In the past, the City has taxed freeport property, although beginning with the 1999 tax year the City has exempted freeport property from taxation. n The City collects an additional one -eighth cent sales tax for reduction of ad valorem taxes. The City has adopted a tax abatement policy, as described below. TAX ABATEMENT POLICY ... The City has established a tax abatement program to encourage economic development. In order to be considered for tax abatement, a project must be located in a reinvestment zone or enterprise zone (a commercial project must be in an enterprise zone) and must meet several criteria pertaining to job creation and property value enhancement. The City has established three enterprise zones, the north zone, of approximately 18.6 square miles, the south zone, of approximately 15.7 square miles, and the international airport zone, of approximately 10.3 square miles. At present, the City has initiated 20 enterprise projects and tax abatements, principally in the northeast and southeast sections of the City. The amount and term of abatement shall be determined on a case by case basis; however, in no event shall taxes be abated for a term in excess of ten (10) years. �- TAX INCREMENT FINANCING ZONE ... Together with other taxing units, the City participates in a Tax Increment District ("TID") pursuant to Chapter 311, Texas Tax Code, VTCA. The TID covers an approximately 0.71 square -mile area which includes part of the central business district and adjacent areas of the City known as the Overton Addition and the Broadway Corridor. The base taxable values of the TID are frozen at the level of taxable values for 1986, the year of creation. Any ad valorem taxes relating to growth of the TID's tax base above the frozen base may be used only to finance improvements within the TID. The tax base for the TID for 1986 was $98,180,307; the 2000 taxable assessed value of property in the TID is less than the tax base and there is no current tax increment. 18 2 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2000 Market Valuation Established by Lubbock Central Appraisal District $ 7,076,107,051 Less Exemptions/Reductions at 100% Market Value: Residential Homestead Exemptions p $ 195,702,020 Homestead Cap Adjustment 66,690,016 Disabled Veterans 13,142,728 Agricultural/Open-Space Land Use Reductions 49,035,210 Pollution Exemptions 2,659,298 Freeport Exemptions 39,339,520 House Bill 366 109,304 Tax Abatement Reductions 70,649,287 437,327,383 2000 Taxable Assessed Valuation $ 6,638,779,668 City Funded Debt Payable from Ad Valorem Taxes General Debt Obligation as of 12-31-00 (2) g ( ) $ 176,847,763 The Bonds 9,100,000 The Certificates 2,770,000 Total Funded Debt Payable from Ad Valorem Taxes $ 188,717,763 Less: Self Supporting Debt (3) Waterworks System General Obligation Debt $ 64,370,436 Sewer System General Obligation Debt 54,663,056 Solid Waste Disposal System General Obligation Debt 6,743,924 Hotel Occupancy Tax Certificates of Obligation 385,000 126,162,416 General Purpose Funded Debt Payable from Ad Valorem Taxes (4) rP Y $ 62,555,347 General Obligation Interest and Sinking Fund as of 12-31-00 $ 1,260,449 Ratio Total Funded Debt to Taxable Assessed Valuation 2.84% Ratio General Purpose Funded Debt to Taxable Assessed Valuation 0.94% 2000 Estimated Population - 199,445 (5) Per Capita Taxable Assessed Valuation - $33,286 Per Capita Total Funded Debt Payable from Ad Valorem Taxes - $946 Per Capita General Purpose Funded Debt Payable from Ad Valorem Taxes - $314 (1) See above, "Tax Information - Tax Abatement Policy". (2) The statement of indebtedness does not include outstanding $33,230,000 Electric Light and Power System Revenue Bonds, as these Bonds are payable solely from the Net Revenues of the Electric Light and Power System. (3) As a matter of policy, the City provides for debt service on general obligation debt issued to fund Waterworks System improvements, Sewer System improvements and Solid Waste Disposal System improvements from surplus revenues of these Systems; debt service on the Hotel Occupancy Tax Certificates of Obligation is provided from Hotel Occupancy Tax revenues (see "Table 8A — Pro -Forma 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 SeIf- Supporting Debt"). "Waterworks System General Obligation Debt" includes $64,370,436 principal amount of outstanding general obligation bonds and certificates of obligation that were issued to finance Waterworks System improvements, and that are being paid from or are expected to be paid from Waterworks System revenues. The City has no outstanding Waterworks System Revenue Bonds but has obligated revenues of the Waterworks System under water supply contracts. See "The Waterworks System". 19 "Sewer System General Obligation Debt" includes $54,663,056 principal amount of outstanding general obligation bonds and certificates of obligation that were issued to finance sewer system improvements, and that are being paid from sewer system revenues. The City has no outstanding Sewer System Revenue Bonds. "Solid Waste Disposal System General Obligation Debt" consist of $6,743,924 principal amount of outstanding general obligation debt that was issued for solid waste disposal improvements, and that is being paid from revenues derived from solid waste service fees. The City has no outstanding Solid Waste Disposal System Revenue Bonds. "Hotel Occupancy Tax Certificates of Obligation" consists of $385,000 principal amount of outstanding general obligation debt. (4) General Purpose Funded Debt Payable from Ad Valorem Taxes" includes the Bonds and $2,545,000 principal amount of outstanding Tax and Airport Surplus Revenue Certificates of Obligation on which debt service is provided from Passenger Facility Charge ("PFC") revenues (see Footnote (2), "Table 9 - Interest and Sinking Fund Budget Projection"). (5) Source: City of Lubbock, Texas. TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY Taxable Appraised Value for Fiscal Year Ended September 30, 2001 2000 1999 % of % of % of Category Amount Total Amount Total Amount Total Real, Residential, Single -Family $ 3,786,979,722 53.52% $ 3,417,179,021 51.99% $ 3,219,691,355 50.90% Real, Residential, Multi -Family 455,378,395 6.44% 411,487,582 6.26% 396,277,540 6.26% Real, VacantLots/Tracts 88,612,192 1.25% 87,184,492 1.33% 93,912,543 1.48% Real, Acreage (Land Only) 60,125,617 0.85% 46,378,532 0.71 % 45,494,120 0.72% Real, Farm and Ranch Improvements 11,000,161 0.16% 7,166,908 0.11% 6,778,453 0.11% Real, Commercial and Industrial 1,364,333,220 19.28% 1,322,413,335 20.12% 1,272,262,327 20.11% Real, Oil, Gas and Other Mineral Reserves 7,000,000 0.10% 4,540,780 0.07% 7,862,650 0.12% Real and Tangible Personal, Utilities 181,228,303 2.56% 180,418,060 2.74% 178,399,714 2.82% Tangible Personal, Commercial and Industrial 1,032,704,200 14.59% 1,072,361,347 16.31% 1,081,053,583 17.09% Tangible Personal, Other 14,786,889 0.21 % 14,283,024 0.22% 12,807,717 0.20% Real Property, Inventory 13,320,136 0.19% 9,845,906 0.15% 11,256,034 0.18% Special Inventory 60,786,210 0.86% - 0.00% - 0.00% Total Appraised Value Before Exemptions $ 7,076,255,045 100.00% $ 6,573,258,987 100.00% $ 6,325,796,036 100.00% Less: Total Exemptions/Reductions (437,475,377) (396,296,005) (306,207,687) Taxable Assessed Value $ 6,638,779,668 $ 6,176,962,982 $ 6,019,588,349 Taxable Appraised Value for Fiscal Year Ended September 30, 1998 1997 %of %of Category Amount Total Amount Total Real, Residential, Single -Family $ 3,112,040,906 51.06% $ 3,019,393,785 51.89% Real, Residential, Multi -Family 382,170,749 6.27% 348,118,848 5.98% Real, Vacant Lots/Tracts 96,312,775 1.58% 100,053,738 1.72% Real, Acreage (Land Only) 46,128,990 0.76% 45,572,096 0.78% Real, Farm and Ranch Improvements 6,671,096 0.11% 6,933,323 0.12% Real, Commercial and Industrial 1,180,704,813 19.37% 1,121,128,529 19.27% Real, Oil, Gas and Other Mineral Reserves 10,638,260 0.17% 9,263,830 0.16% Real and Tangible Personal, Utilities 171,889,877 2.82% 167,598,757 2.88% Tangible Personal, Commercial and Industrial 1,065,115,428 17.48% 974,209,635 16.74% Tangible Personal, Other 12,087,601 0.20% 11,028,1 13 0.19% Real Property, Inventory 11,040,883 0.18% 15,225,881 0.26% Total Appraised Value Before Exemptions $ 6,094,801,378 100.00% $ 5,818,526,535 100.00% Less: Total Exemptions/Reductions (264,552,205) (251,453,894) Taxable Assessed Value $ 5,830,249,173 $ 5,567,072,641 NOTE: Valuations shown are certified taxable assessed values reported by the Lubbock Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. pi, 0 TABLE 3A - VALUATION AND GENERAL OBLIGATION DEBT HISTORY General Purpose Ratio Fiscal Taxable Funded Tax Debt Tax Debt Funded Year Taxable Assessed Outstanding to Taxable Debt Ended Estimated Assessed Valuation at End Assessed Per 9/30 Population (1) Valuation (2) Per Capita of Year (3) Valuation Capita 1996 193,064 $ 5,399,356,462 $ 27,967 $ 67,438,562 1.25% $ 349 1997 195,367 5,567,072,641 28,495 61,728,036 1.11% 316 1998 196,679 5,830,249,173 29,643 57,156,101 0.98% 291 r�+ 1999 197,117 6,019,588,349 30,538 51,222,980 0.85% 260 2000 199,445 6,176,963,982 30,971 53,455,346 0.87% 268 2001 199,445 6,638,779,668 33,286 58,122,809 (4) 0.88% (4) 291 (4) (1) Source: The City of Lubbock, Texas. (2) As reported by the Lubbock Central Appraisal District on City's annual State Property Tax Reports; subject to change during the ensuing year. (3) Does not include self-supporting debt. (4) Projected; includes the Obligations. TABLE 3B - DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT The following table sets forth certain information with respect to the City's general purpose and self-supporting general AN obligation debt. The City received voter approval for authority to issue additional general obligation tax -supported debt on September 18, 1999, and the City has adopted a capital improvement plan which is expected to result in the issuance of additional self-supporting general obligation debt. See "Debt Information —Anticipated Issuance of General Obligation Debt." Fiscal Funded Tax Debt Less: General Purpose Year Outstanding Self -Supporting Funded Tax Debt Ended at End Funded Tax Outstanding 9/30 of Year Debt at End of Year (1) 1996 $ 151,763,752 $ 84,325,190 $ 67,438,562 1997 138,914,318 77,186,282 61,728,036 1998 137,104,242 79,948,141 57,156,101 1999 158,117,749 106,894,769 51,222,980 2000 176,847,762 123,392,416 53,455,346 2001 175,408,321 (2) 117,285,512 58,122,809 (2) (1) After the issuance of the Bonds, the City will have $25,027,000 general obligation bond authorization that has been authorized by the voters, but which has not yet been issued See discussion under Table 11. (2) Projected; includes the Obligations. TABLE 4 - TAx RATE, LEVY AND COLLECTION HISTORY Fiscal %of Current %of Total Year Distribution Tax Tax Ended Tax General Economic Interest and Collections Collections 9/30 Rate Fund Development Sinking Fund Tax Levy to Tax Levy to Tax Levy 1996 $ 0.5859 $ 0.39650 $ 0.03000 $ 0.15940 $ 31,634,830 98.19% 100.03% 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 N.A. N.A. 21 r.� TABLE 5 - TEN LARGEST TAXPAYERS . 2000/01 % of Total Taxable Taxable Assessed Assessed Name of Taxpayer Nature of Property Valuation Valuation Macerich Lubbock LTD Partnership Regional Shopping Mall $ 102,480,853 1.54% Southwestern Bell Telephone Company Telephone Utility 69,081,840 1.04% Southwestern Public Service Electric Utility 54,457,638 0.82% Plains Co -Op Oil Mills Inc. Agricultural Processing 28,090,510 0.42% X-Fab Texas, Inc. Electronics Manufacturer 27,023,881 0.41% Covenant Health System Hospital and Medical Office Building 23,661,703 0.36% Wal-Mart Stores Inc. Discount Retail Stores 21,162,386 0.32% Fleming Companies, Inc. Wholesale Grocers 20,651,136 0.31% Southern Cotton Oil Company Agricultural Processing 19,071,943 0.29% Energas Natural Gas Utility 18,060,408 0.27% 383,742,298 5.78% GENERAL OBLIGATION DEBT LIMITATION ... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "Tax Rate Limitation"). TABLE 6 - TAX ADEQUACY(1) Maximum Principal and Interest Requirements, All General Obligation Debt, 2001(z).......................................................................................................................... $23,361,135 $0.3591 Tax Rate at 98% Collection Produces.................................................................................................................. $23,363,061 Maximum Principal and Interest Requirements, General Purpose General Obligation Debt, 20020)................................................................................................... $ 8,032,080 $0.1235 Tax Rate at 98% Collection Produces.................................................................................................................. $ 8,034,915 (1) Based on 2000-2001 taxable assessed valuation. (2) See Table 8A. (3) See Table 8B. 22 TABLE 7 - ESTIMATED OVERLAPPING DEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt") was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas and the Lubbock Central Appraisal District. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Further- more, certain of the entities listed may have issued additional bonds since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional bonds, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. .�, 2000/01 Total Funded City's Authorized Taxable Debt Estimated Overlapping But Unissued Assessed Tax As Of % G.O. Debt Debt As Of Taxing Jurisdiction Value Rate 9-30-00 Applicable As of 9-30-00 9-30-01><21 City of Lubbock $ 6,638,779,668 $ 0.57000 $ 62,555,347 �' ]00.00% $ 62,555,347 $ 25,027,000 Lubbock Independent School District 5,564,927,878 1.58930 70,744,957 98.91% 69,973,837 3,400,275 Lubbock County 7,784,487,133 0.19170 1,005,000 82.94% 833,547 500,000 "^ Lubbock County Hospital District 7,784,625,799 0.09798 -0- 82.94% -0- -0- High Plains Underground Water Conservation District No. 1 7,783,791,520 0.00840 -0- 82.94% 0 0- Frenship Independent School District 810,386,094 1.58930 38,978,395 64.44% 25,117,678 -0- Idalou Independent School District 109,301,647 1.50000 1,860,000 1.10% 20,460 -0- Lubbock-Cooper Independent School District 277,492,758 1.45200 6,929,555 15.30% 1,060,222 -0- New Deal Independent School District 81,782,693 1.50000 -0- 0.03% -0- -0- O's Roosevelt Independent School District 97,505,044 1.50000 -0- 4,72% -0- -0- Total Direct and Overlapping G.O. Debt $ 159,561,091 Ratio of Direct and Overlapping G.O. Debt to Taxable Assessed Valuation ............................................... 2.40% Per Capita Direct and Overlapping G.O. Debt ...........................................................................$ 800 (1) General Purpose Funded Tax Debt; excludes self-supporting General Obligation Debt (see "Table 1- Valuation, Exemptions and General Obligation Debt"). (2) Amount shown for the City reflects the remaining unissued general obligation debt after the issuance of the Bonds. t W 23 12 c� iO w U F .n A (Ftl o O o e w O O� O ^ V R nl Q\ .. Q• M .-. 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LA G2 W so IQ 0 10 TABLE, 8B - DIVISION OF DEBT SERVICE REQUIREMENTS Less: Less: Less: Less: Solid Waste Hotel Waterworks Sewer Disposal Occupancy General Fiscal System System System Tax Purpose Year General General General General General Ended Combined Requirements Obligation Obligation Obligation Obligation Obligation 9/30 Principal Interest Total Requirements Requirements Requirements(') Requirements Requirements(') 2001 $ 13,309,442 $ 10,051,693 $ 23,361,135 $ 7,587,496 $ 6,678,816 $ 757,556 $ 393,663 $ 7,943,604 2002 12,883,639 9,499,777 22,383,416 7,034,507 6,347,280 969,549 8,032,080 2003 12,679,682 8,068,754 20,748,436 6,599,085 6,074,411 591,668 7,483,272 2004 11,685,000 6,982,215 18,667,215 5,966,722 5,762,819 571,916 6,365,758 2005 11,720,000 6,399,955 18,119,955 5,982,290 5,453,726 554,065 6,129,874 2006 11,755,000 5,829,181 17,584,181 5,809,129 5,267,680 537,936 5,969,436 2007 11,780,000 5,270,141 17,050,141 5,674,033 5,075,515 525,122 5,775,471 2008 11,190,000 4,728,999 15,918,999 5,251,614 4,748,347 510,316 5,408,722 2009 10,815,000 4,214,349 15,029,349 5,087,658 4,462,548 495,302 4,983,841 2010 10,375,000 3,718,137 14,093,137 4,914,028 4,180,852 480,033 4,518,224 2011 10,440,000 3,232,218 13,672,218 4,800,300 4,012,579 464,556 4,394,783 2012 9,310,000 2,770,278 12,080,278 3,911,942 3,781,678 448,917 3,937,741 2013 9,380,000 2,329,956 11,709,956 3,842,729 3,590,722 433,116 3,843,389 2014 9,485,000 1,881,508 11,366,508 3,778,395 3,429,374 417,117 3,741,622 2015 6,595,000 1,490,639 8,085,639 3,632,819 1,561,461 400,932 2,490,427 2016 5,775,000 1,180,229 6,955,229 3,571,512 787,694 380,238 2,215,785 2017 5,100,000 903,072 6,003,072 3,510,185 754,751 365,072 1,373,064 2018 5,255,000 634,665 5,889,665 3,447,372 721,381 349,839 1,371,073 2019 4,910,000 370,092 5,280,092 3,063,701 687,829 153,934 1,374,628 2020 3,400,000 145,921 3,545,921 2,021,003 146,408 1,378,510 2021 875,000 24,719 899,719 138,814 760,905 S 188,717,763 $ 79,726,498 $ 268,444,261 $ 95,486,520 $ 73,379,463 $ 9,692,4 66 $ 393,663 $ 89,492,209 (1) Includes debt service on the Obligations. Preliminary, subject to change. 25 /-, TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION General Obligation Debt Service Requirements, Fiscal Year Ending 9-30-01 Fiscal Agent, Tax Collection and Other Uses Total Requirements Sources of Funds Interest and Sinking Fund, 9-30-00 Budgeted Ad Valorem Tar Receipts Budgeted Transfers From: Water Fund Sewer Fund Solid Waste Fund Hotel Occupancy Tax Fund Airport Fund - from Passenger Facility Charges ("PFCs") (2) Budgeted Interest Earned Total Sources of Funds $ 23,361,135 16,000 $ 23,377,135 $ 1,260,450 7,490,019 7,587,496 6,678,816 757,556 393,663 301,745 67,950 $ 24,537,695 Projected Balance,9-30-01 $ 1,160,560 (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 "Airport Certificates") in 1993 and 1995. The outstanding principal balance of the Airport Certificates on 9-30-00 was $2,545,000; debt service on the Airport Certificates is provided from PFC revenues. PFC revenues in fiscal year ending 9-30-00 were $1,552,654. Debt service on other airport general obligation debt (having an outstanding principal balance at 9-30-00 of $3,980,513) is provided from ad valorem taxes. 26 n TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT THE WATERWORKS SYSTEM (1) $ 14,296,533 Net System Revenue Available, Fiscal Year Ended 9-30-00 -0- .� Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-01 $ 14,296,533 Balance Available for Other Purposes $ 7,587,496 Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-01 100.00% Percentage of System General Obligation Debt Self -Supporting 0 ell M 0 (1) Each Fiscal Year the City transfers Net Revenues 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) $ 9,217,149 Net System Revenue Available, Fiscal Year Ended 9-30-00 0 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-01 $ 9,217,149 Balance Available for Other Purposes $ 6,678,816 Requirements for System General Obligation Debt, Fiscal Year Ending 9 30-01 100.00% Percentage of System General Obligation Debt Self -Supporting (1) Each Fiscal Year the City transfers Net Revenues 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) $ 8,205,700 Net System Revenue Available, Fiscal Year Ended 9-30-0 -0- Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-01 $ 8,205,700 Balance Available for Other Purposes $ 757,556 Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-01 100,00% Percentage of System General Obligation Debt Self -Supporting (1) Each Fiscal Year the City transfers Net Revenues of the Solid Waste Enterprise Fund to the General Obligation Interest an Sinking Fund in an amount equal to debt service requirements on Solid Waste System general obligation debt. THE HOTEL OCCUPANCY TAX (1) Revenue Available, Fiscal Year Ended 9-30-00 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-01 Balance Available for Other Purposes Requirements for Hotel Ocupancy Tax Debt, Fiscal Year Ending 9-30-01 Percentage of Hotel Occupancy General Obligation Debt Self -Supporting $ 2,568,957 -0- $ 2,568,957 $ 393,663 100.00% ues of the Hotel/Motel Special Revenue Fund to the General Obligation Interest (1) Each Fiscal Year the City transfers reven al to debt service requirements on Hotel Occupancy Tax obligations. and Sinking Fund in an amount that is equ TABLE 11 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS Date Amount Purpose Authorized Authorized Waterworks System 10-17-87 $ 2,810,000 Sewer System 5-21-77 3,303,000 Street Improvements 5-1-93 10,170,000 Street Improvements 9-18-99 17,165,000 Drainage 9-18-99 2,160,000 Traffic Signals 9-18-99 3,295,000 Parks 9-18-99 14,765,000 $ 53,668,000 27 Amount Previously issued $ 200,000 2,175,000 10,166,000 2,390,000 1,025,000 340,000 3,245,000 $ 19,541,000 Amount Being Issued 5,335,000 740,000 3,025,000 $ 9,100,000 Unissued Balance $ 2,610,000 1,128,000 4,000 9,440,000 1,135,000 2,215,000 8,495,000 $ 25,027,000 EGO ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ... As described below, the City has identified certain capital projects in its capital improvement plan that may be financed through the issuance of tax -supported debt over the next three years. In 2000, the City commissioned a feasibility study regarding various storm water drainage improvements to be made throughout the City, and it is currently anticipated that the City will issue Combination Tax and Stormwater Revenue Certificates of Obligation in the Spring of 2001 for the first phase of this project. It is estimated that the Certificates will be in the range of $25 to $35 million in principal amount. Phase two of the project, which could be issued in 2002 or 2003, would be funded by the issuance of approximately $30 million of Combination Tax and Stormwater Revenue Certificates of Obligation. The debt for the storm water drainage project is expected to be self-supporting from storm water fees collected by the City. In addition, the City expects to issue approximately $6 million of Certificates of Obligation in the 2001-02 fiscal year to fund the City's share of right of way acquisition costs for a freeway that will traverse the City from east to west. The City's current debt issuance plan also includes an additional $8.125 million of Combination Tax and Solid Waste System Revenue Certificates of Obligation during the 2001-02 and 2002-03 fiscal years to fund additional landfill closure costs, which the City expects to be self sufficient from revenues provided by the Solid Waste System. The issuance plan includes approximately $7.9 million of Combination Tax and Water and Sewer System Revenue Certificates of Obligation during the 2001-02 and 2002-03 fiscal years, which the City expects to be self sufficient from revenues of the Water and Sewer System. Finally, the plan calls for the City to issue additional General Obligation Bonds in the approximate amount of $19.8 million during the 2001-02 and 2002-03 fiscal years to fund a Portion of the projects for which the City has received authorization from the voters. See "Table 1 l — Authorized but Unissued General Obligation Bonds." TABLE 12 — OTHER OBLIGATIONS The City has no unfunded debt outstanding as of 9-30-00. PENSION FUND ... TEXAS MUNICIPAL RETIR MENT SYSTEM (1)(2) . . . All permanent, full-time City employees who are not firefighters are covered by the Texas Municipal Retirement System ("TMRS"). TMRS is an agent, multiple -employer, public - employee retirement system which is covered by a State statute and is administered by six trustees appointed by the Governor of Texas. TMRS operates independently of its member cities. The City of Lubbock joined TMRS in 1950 to supplement Social Security. All City employees except firefighters are covered by Social Security. Options offered under TMRS, and adopted by the City, include current, prior and antecedent service credits, ten year vesting, updated service credit, occupational disability benefits and survivor benefits for the spouse of a vested employee. An employee who retires receives an annuity based on the amount of the employees contributions over -matched two for one by the City. Employee contribution rate is 6% of gross salary. Beginning October 11, 1997, employee contribution rate is 7% of gross salary. The City's contribution rate is calculated each year using actuarial techniques applied to experience. The 1999 contribution rate was 14.27%. The 2000 contribution rate is 13.6%. Enabling statutes prohibit any member city from adopting options which impose liabilities that cannot be amortized over 25 years within a specified statutory rate. On December 31, 1999, assets held by TMRS (not including those of the Supplemental Disability Fund, which is "pooled"), for the City of Lubbock were $147,042,049. Unfunded accrued liabilities on December 31, 1999 were $34,397,608, which is being amortized over a 25-year period beginning January, 1997. Total contributions by the City to the System for Calendar Year 1999 were $7,146,029. FIREMEN'S RELIEF AND RETIREMENT FUND (1)... City of Lubbock firefighters are members of the locally administered Lubbock Firemen's Relief and Retirement Fund (the "FUND"), operating under an act passed in 1937 by the State Legislature and adopted by City firefighters, by vote of the department, in 1941. Firefighters are not covered by Social Security, The Fund is governed by seven trustees, three firefighters, two outside trustees (appointed by the other trustees), the Mayor or ra his representative and the chief financial officer or his representative. Execution of the act is monitored by the Firemen's Pension Commissioner, who is appointed by the Governor. Benefits of retired firemen are determined on a "formula' or a "final salary" plan. Actuarial reviews are performed every two years, and the fund is audited annually. Firefighters contribute 11% of full salary into the fund and the City must contribute a like amount; however, the city contributes on a basis of the percentage of salary which is a ratio adjusted annually that bears the same relationship to the firefighter's contribution rate that the City's rate paid into the TMRS and FICA bears to the rate other employees pay into the TMRS and FICA. The City's contribution rate for 2000 was 16.02%. As of December 31, 1998, unfunded pension benefit obligations were $7,168,633 which is being amortized over a 13 year period beginning January 1, 1997. (1) For historical information concerning the retirement plans, see Appendix B, "Excerpts from the City's Annual Financial Report" — Note #II1, Subsection E, "Retirement Plans".) (2) Source: Texas Municipal Retirement System, Comprehensive Annual Financial Report for Year Ended December 31, 1999, "City of Lubbock, Texas". 28 W Q W PV%: 0 la FINANCIAL INFORMATION TABLE 13 - GENERAL FUND REVENUES AND EXPENDITURE HISTORY 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 Development Services Public Safety & Service Non -departmental Health & Community Services Strategic Planning Culture/Leisure Services Police Fire Transportation Services Electric Utilities Human Resources Operating Transfers Total Expenditures Excess of Revenues and Transfers (in) Over Expenditures (out) Fund Balance at Beginning of Year Fund Balance at End of Year Less: Reserves and Designations (3) Undesignated Fund Balance Fiscal Year Ended September 30, 2000 1999 1998 1997(`) 1996 $ 26,595,709 $ 25,338,127 $ 23,271,939 $ 22,440,626 $ 21,776,739 27,121,078 25,196,203 24,914,523 24,251,491 22,827,516 6,619,755 6,235,099 7,128,034 5,438,688 5,180,874 743,771 721,907 675,694 687,574 171,555 1,138,924 976,091 1,037,458 1,077,878 1,125,809 365,671 576,136 917,572 884,834 1,417,496 4,210,334 4,032,665 4,016,475 3,522,397 2,725,584 2,834,208 3,335,340 3,313,233 3,460,453 3,144,431 1,143,226 947,636 1,011,559 1,118,578 1,677,201 1,108,662 1,118,016 1,239,562 1,623,818 104,037 13,636,764 13,451,796 16,030,636 15,284,140 13,765,839 $ 85,518,102 $ 81,929,016 $ 83,556,685 $ 79,790,477 $ 75,697,081 $ 6,193,124 $ 6,143,076 $ 5,762,283 $ 5,003,806 $ 3,462,253 1,458,232 1,366,006 1,196,779 1,067,281 1,834,463 461,067 396,216 389,583 1,170,948 2,526,119 - - - - 7,041,640 - - - - 50,891,276 606,843 926,203 1,125,310 1,040,419 894,426 4,744,830 4,522,041 4,519,880 4,398,348 - 823,399 839,814 774,878 727,448 - 13,454,832 12,630,738 12,667,406 12,347,987 - 25,561,261 23,478,729 22,013,906 20,519,946 - 17,080,371 15,616,543 14,468,027 13,897,682 - 5,439,855 5,195,459 5,007,496 4,993,564 - 1,923,584 1,759,509 1,848,283 1,778,824 - 871,596 870,172 810,997 831,758 - 7,526,481 9,926,784 12,454,461 11,211,948 9,029,782 $ 86,145,475 $ 83,671,290 $ 83,039,289 $ 78,989,959 $ 75,679,959 $ (627,373) $ (1,742,274) $ 517,396 $ 800,518 $ 17,122 17,248,025 18, 990,299 18,472,903 17,672,385 17,655,263 $ 16,620,652 $ 17,248,025 $ 18,990,299 $ 18,472,903 $ 17,672,385 (2,857,096) (4,432,834) (5,442,847) (4,997,379) (4,974,060) $ 13,763,556 $ 12,815,191 $ 13,547,452 $ 13,475,524 $ 12,698,325 (1) The presentation of the City's General Fund income statements in its audited financial statements was changed in 1997, resulting in different categorizations of expenditure items. (2) The City's financial policies provide for transfers to the General Fund from the City's enterprise funds. The policies provide that the water, waste water and solid waste funds transfer an amount sufficient to cover the pro rata share of the City's general and administrative expenses, an amount representing a franchise payment equal to 3% of gross receipts and an amount representing a payment in lieu of ad valorem taxes. The Electric System makes transfers for the foregoing purposes, and, in addition, makes a transfer reflecting the System's share of street lighting expense. The City's policies with respect to enterprise fund transfers are subject to change. Among the factors that could affect the transfers to the General Fund is the effect of increased competition on the City's electric utility that could occur due to the implementation of Senate Bill 7, which mandates open competition in the provision of retail electric service in the State commencing January 1, 2002. (3) The City's financial policies target a General Fund undesignated balance of at least two months of General Fund expenditures. Amounts representing fund balances 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, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Obligations or other debt of the City. In addition, in January, 1995, the voters of the City approved the imposition of an additional sales and use tax of one -eighth of a cent as authorized by VTCA, Tax Code, Chapter 323, as amended. Collection for the additional tax commenced in October, 1995 with the proceeds from the one -eighth cent sales tax designated for the use and benefit of the City to replace property tax revenues lost as a result of the adoption of the tax. Collections and enforcements of the City's sales tax are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. Revenue from the City's Local Sales and Use Tax, for the years shown, has been: Fiscal Year % of Equivalent of Ended Total Ad Valorem Ad Valorem Per 9/30 Collected') Tax Levy Tax Rate Capita(2) 1996 $ 22,983,167 72.65% $ 0.4257 $ 119.04 1997 24,391,081 74.78% 0.4381 124.85 1998 25,002,693 73.94% 0.4288 127.12 1999 25,196,203 72.04% 0.4186 127.82 2000 27,121,078 71.67% 0.4085 135.98 (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 1.0000 Property Tax Relief 0.125¢ County Sales & Use Tax 0.5000 State Sales & Use Tax 6.2500 Total 7.8750 CAPITAL IMPROVEMENT PROGRAM 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 that 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 date basis. For fiscal year ending 9-30-01, the City Council has approved $48,877,329 in total expenditures for capital projects for all general purpose projects, as well as projects for the City's Electric System Waterworks System, Sewer System, Solid Waste System, Storm Water System and Airport. The Capital Projects Fund budget for 2000-2001 also identifies an additional $132,292,054 in future improvements, for all City departments over the four succeeding fiscal years, including $36,385,000 to be financed through the issuance of tax -supported debt in these years. The balance of the capital expenditures are anticipated to be funded from reserves or current year revenue sources. FINANCIAL POLICIES Basis of Accounting . . . The accounting policies of the City conform to generally accepted accounting principles of the Governmental Accounting Standards Board and program standards adopted by the Government Finance Officer's Association of the United States and Canada ("GFOA"). The GFOA has awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for each of the fiscal years ended September 30, 1984 through September 30, 1999. The City's 2000 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 Governmental Accounting Standards Board issued Statement No. 34, "Basic Financial Statements -- Management's Discussion and Analysis -- for State and Local Governments". The objective of this Statement is to enhance the clarity and usefulness of the general-purpose external financial reports of state and local governments to the citizenry, legislative and oversight bodies, and investors and creditors. The City must implement GASB 34 for its fiscal year ending September 30, 2002. While adoption of this Statement will alter the presentation of some 1 30 Go 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 objective is to achieve and maintain a General Fund balance equivalent to two months operating costs of the General Fund Budget. The City believes that such a reserve will be sufficient to provide financing for necessary projects, unanticipated contingencies, and fluctuations in anticipated revenues. 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 for unforeseen contingencies. The City's financial policy provides that such retained earnings shall be accumulated over a ten year period, which commenced in 1996. Resources are also retained in the System's rate stabilization fund to meet shortfalls in revenues or fluctuating rate environments, to fund capital improvements and r•� 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. Such self sufficiency is to be obtained through the rates, fees and charges of each enterprise fund. For purposes of determining self sufficiency, cost recovery for each enterprise fund includes direct operating and maintenance expense, as well as indirect cost recovery, in -lieu of transfers to the General Fund for property and franchise tax payments, capital expenditures and debt service payments, where appropriate. Debt Service Fund Balance ... A reasonable debt service fund balance is maintained in order to compensate for unexpected contingencies. Budgetary Procedures ... The City follows these procedures in establishing operating budgets: 4ON 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 1. The operating budget includes proposed expenditures and the means of financing them. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to October 1 the budget is legally enacted through passage of an ordinance. 4) The City Manager is authorized to transfer budgeted amounts between departments and funds. Expenditures may not legally exceed budgeted appropriations 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, and Capital Projects Funds. Budgets are adopted on an annual basis. Formal budgetary integration is not employed for Debt Service funds because effective budgetary control is alternatively achieved through general obligation bond 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 �- continue as authority for subsequent period expenditures. 8) Budgetary comparison is presented for 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 1990-99. The City will submit the current budget to the GFOA to determine its eligibility for another award. Insurance ... The City is self -insured for general 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 insurers. The City's Insurance policies are maintained with large deductibles for fire and extended coverage and boiler coverage. An Insurance Fund has been established in the Internal Service Fund to account for insurance programs and budgeted transfers are made to this fund based upon estimated payments for claim losses. At 9-30-00 the total Fund Equity of these insurance funds are as follows: Self-insurance — health $ 6,858,161 Self-insurance — risk management $ 10,496,729 31 INVESTMENTS The City of Lubbock invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council of the City of Lubbock. Both state law and the City's investment policies are subject to change. LEGAL, INVESTMENTS ... Under Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) certificates of deposit that are guaranteed or insured by the Federal Deposit Insurance Corporation or are secured as to principal by obligations described in the preceding clauses or in any other manner and amount provided by law for City deposits, (7) certificates of deposit and share certificates issued by a state or federal credit union domiciled in the State of Texas that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in the clauses (1) through (5) or in any other manner and amount provided by law for City deposits, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9) bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper that is rated at least A-i or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (11) no-load money market mutual funds regulated by the Securities and Exchange Commission that have a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, (12) no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two years; invests exclusively in obligations described in the preceding clauses; and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent, (13) bonds issued, assumed, or guaranteed by the State of Israel, and (14) guaranteed investment contracts secured by obligations of the United States of America or its agencies and instrumentalities, other than the prohibited obligations described in the next succeeding paragraph. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage -backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage -backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. r� INVESTMENT POLICIES ... Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar -weighted maturity allowed for pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City Council. ADDITIONAL PROVISIONS ... Under Texas law the City is additionally required to: (1) annually review its adopted policies and strategies; (2) require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments 32 E2 0 1a W Um and adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse se repurchase agreement; (7) repurchase agreement fundno moo ict its investment in mutual tthangreater15 percent of its monthly than the rm of the raverage fund balance, excludngrbond proceeds and reserves funds in the aggregate to for debt service, and to invest no portion of bond proceeds, reserves and funds held for debt service, in and other funds heldgovernment investment pools to conform to the new disclosure, rating, net asset value, yield mutual funds; and require local calculation, and advisory board requirements. TABLE 15 — CURRENT INVESTMENTS As of 12-31-00, the City's investable funds were invested in the following categories: Type United States Treasury Obligations United States Agency Obligations Bank Certificates of Deposit Commercial Paper Local government investment pools (2) Estimated Fair Book Value Market Value(l) Weighted % of Total % of Total Average Value Book Value Value Book Value Maturity (Days) Par Value $ 9,000,000 - 5.99% $ o 5.07% 0 312 77,300,000 76,318,804 50.03% 76,465,639 50.07 /o- 0.19% 194 283,600 283,600 0.19% 20.84% 283,600 31,787,509 0 20.82 0 75 32,195,000 31,783,490 23.05% 35,168,849 o 23.03/0 j 35,168,849 $ 1539 35,168,849 $49 152,544,655 100.00% $ 152,707,160 _ 10.00°/u 184 =_ (1) As determined by Patterson &Associates, the City's investment adviser. As of such date, the market value of such investments approximately 100.00% o was f their book value. No funds of the City are invested in mortgage -backed securities. The City holds all investments to maturity which minimizes the risk of market price volatility. (2) Local government investment pools consist of entities with investment objectives that include achieving a stable net asset value of $1.00 per share, including TexPool, a local government investment pool under the control of the Texas Comptroller of Public Accounts. The Comptroller has engaged Chase Bank of Texas, and its affiliates, to provide investment management and fund accounting services for TexPool. First Southwest Asset Management, Inc., an affiliate of First Southwest Company, the City's Financial Adviser, provides customer service and marketing for TexPool. 33 U THE SOLID WASTE SYSTEM The information set forth below relates to the City's Solid Waste System. The Certificates are secured by a pledge of the ad valorem taxes levied by the City, within the Iimit prescribed by law, and are further secured by a pledge of the surplus net revenues of the Solid Waste System. SOLID WASTE SYSTEM The Solid Waste Disposal System, operated by the Solid Waste Management Department provides refuse collection, recycling and disposal services to the City. The Collection Services collects refuse twice weekly (once weekly in the winter) from the City's residential households and some local businesses which can be served with side -loading containers. Residential Collection manages several programs to reduce illegally dumped items: 1) Dial-A-Dumpster— allows customers to request a dumpster, at no cost, for the disposal of large items. 2) Quarterly Buy Back program — the large item "Buy Back" program provides for the payment of a small stipend to residents who transport bulky items to the City's landfill. This program has produced savings for the City due, as the resident, and not the City, collects and transports the bulky items that are covered by the program. 3) Large item and yard waste disposal at recycling drop-off centers — citizens can drop off large items or yard waste at these drop sites. The Solid Waste Disposal division operates the City of Lubbock's two landfills and anticipates disposing and processing approximately 314,300 tons of refuse in Fiscal Year 2000-2001. The new landfill located near Abernathy, Texas was opened in October 1999. The new landfill was located near the City of Abernathy, Texas, approximately 12 miles north of the old landfill. The new landfill is licensed for 1,231 acres. The old landfill consists of eight licensed "cells," two of which are planned to be continued to be used by the City for disposal of construction and demolition materials and inert material. Two of the cells, including cell four, the closure of which is being funded with the proceeds of the Certificates, have a thirty year monitoring requirement under State law. Several of the old landfill cells were closed in 1993 and have only a seven year monitoring requirement under State law. The City , intends to fund the closure costs of certain of the cells with proceeds of certificates of obligation, however, post closure costs of the old landfill have been funded through designated balances in the Solid Waste Enterprise Fund. TABLE 16 - MONTHLY SOLID WASTE RATES Summarized below are the current solid waste rates of the City. The City has not increased solid waste rates since October 1, 1995. The City decreased the residential and commercial garbage rates by 100 in 1998. Residential Garbage Rate (Effective 10-1-98) Monthly Rate $ 11.18 Commercial Garbage Rate (Effective 10-1-98) Container Size Monthly Rate 2 cubic yards $ 33.58 3 cubic yards $ 50.87 4 cubic yards $ 68.16 6 cubic yards $ 99.74 8 cubic yards $ 131.32 Landfill Fees (Effective 10-1-95) Waste Generated Inside the City Limits $ 25.00 Waste Generated Outside the City Limits S 27.00 TABLE 17 - SOLID WASTE SYSTEM CONDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 30, Operating Revenues Non -Operating Revenues 2000 1999 1998 $ 16� 034 659 $ 16,3 77,587 $ 16�g 1997 $$ 17,393,861 96 $ 1795,883 Gross Revenues 1,042,585 669,574 629,222 $ 17,077,244 $ 17,027,161 $ 17p 222.336 ,2 317,608 Operating Expense $ 17, $ 17— 613,491 (excluding depreciation) Net Revenues $ 9,068,928 $ 9,348,841 — $ 9,576,950 $ 9,647,842 $ 9,787,492 $ 8,008,316 $ 7,678,320 $ 7,989,180$ — ---- 7,968,355 $ 7,825,999 34 2 TAX MATTERS TAX EXEMPTION ... The delivery of the Obligations is subject to the opinions of Bond Counsel to the effect that interest on the Bonds or Certificates, as the case may be, for federal income tax purposes (1) will be excludable from gross income, as defined e*� in section 61 of the Internal Revenue Code of 1986, as amended to the date of such opinion (the "Code"), pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. A form of Bond Counsel's opinions 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, including the Obligations, owned by a corporation will be included in such corporation's adjusted current earnings for tax years beginning after 1989, for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust, a real estate mortgage investment conduit , or a financial asset securitization investment trust (FASIT). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the City made in a certificate dated the date of delivery of the Obligations pertaining to the use, expenditure, and investment of the proceeds of the Obligations and will assume continuing compliance by the City with the provisions of the respective Ordinances subsequent to the issuance of the Obligations. The respective Ordinances contain covenants by the City with respect to, among other matters, the use of the proceeds of the Obligations and the facilities financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the Obligations are to be invested, the periodic calculation and payment to the United States Treasury of arbitrage "profits" from the investment of the proceeds, and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants would cause interest on the Obligations to be includable in the r+ gross income of the owners thereof from date of the issuance of the Obligations. 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 Obligations. Prospective purchasers of the Bonds or Certificates, as the case may be, should be aware that the ownership of tax-exempt obligations such as the Bonds or Certificates, as the case may be, may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, 011 certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the 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. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances. .�, TAX ACCOUNTING TREATMENT OF DISCOUNT AND PREMIUM ON CERTAIN OBLIGATIONS ... The initial public offering price of certain Bonds or Certificates, as the case may be (the "Discount Obligations") may be less than the amount payable on such Obligations at maturity. An amount equal to the difference between the initial public offering price of a Discount Obligation (assuming that a substantial amount of the Bonds or Certificates, as the case may be, of that maturity 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 Obligation. A portion of such original issue discount allocable to the holding period of such Discount Obligation by the initial purchaser will, upon the disposition of such Discount Obligation (including by reason of its payment at maturity), be treated as era interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Obligations described above under -"Tax Exemption." Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Obligation, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Obligation and generally will be allocated to an original purchaser in a different amount from the amount of the payment denominated as interest actually received by the original purchaser during the tax year. However, such interest may be required to be taken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corporation's alternative minimum tax imposed by Section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with "subchapter C" earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for 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. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Obligation by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Obligation in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Obligation was held) is includable in gross income. 35 Owners of Discount Obligations should consult with their own tax advisors with respect to the determination of accrued original issue discount on Discount Obligations for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Discount Obligations. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on Discount Obligations may be deemed 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 Bonds or Certificates, as the case may be, (the "Premium Obligations") may be greater than the amount payable on such Obligations at maturity. An amount equal to the difference between the initial public offering price of a Premium Obligation (assuming that a substantial amount of the Bonds or Certificates, as the case may be, 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 Obligations. The basis for federal income tax purposes of a Premium Obligation in the hands of such initial purchaser 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 gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Obligation. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity. Purchasers of the Premium Obligations should consult with their own tax advisors with respect to the determination of amortizable bond premium on Premium Obligations for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Obligations. 36 OTHER INFORMATION RATINGS The Obligations have been rated "Aa2" by Moody's, "AA+" by S&P and "AA+" by Fitch. The City also has one issue outstanding that is rated "Aaa" by Moody's and "AAA" by S&P through insurance by a commercial insurance company. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such organizations and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such rating companies, if in the judgment of said companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Obligations. e^ LITIGATION 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 operations. REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE The sale of the Obligations have not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS The Certificates. Section 251.051, Texas Local Government Code, provides that the Certificates are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, savings and loan associations, insurance e; companies, fiduciaries, trustees and guardians, and for the sinking funds of municipalities, school districts, and other political subdivisions or public agencies of the State of Texas. The Certificates are eligible to secure deposits of any public funds of the state, municipalities, school districts, and other political subdivisions of the state, and are legal security for those deposits to the extent of their market value. The Bonds. Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized �^ investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. In addition, various provisions of the Texas Finance Code provide that, subject to a prudence standard, the Bonds are legal investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings and loan associations. General Considerations. For political subdivisions in Texas that have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (V.T.C.A., Government Code, Chapter 2256), the Obligations may have to be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public funds. The City has made no investigation of other laws, rules, regulations or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Obligations for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Obligations for such purposes. The City has made no review of laws in other states to determine whether the Obligations are legal investments for various institutions in those states. LEGAL OPINIONS AND NO -LITIGATION CERTIFICATE The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Bond or Certificate, as the case may be, and to the effect that the Bonds or Certificates, as the case may be, are valid and legally binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of Bond Counsel, to like effect and to the effect that the interest on the Bonds or Certificates, as the case may be, will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Obligations, or which would affect the provision made for their payment or security, or in any manner questioning the validity of said Obligations will 37 110 I, - also be furnished. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information under captions "The Obligations" (exclusive of subcaptions "Book -Entry -Only System"), "Tax Matters" and "Continuing Disclosure of Information" and the subcaptions "Legal Opinions" and "Legal Investments and Eligibility to Secure Public Funds in Texas" in the Official Statement and such firm is of the opinion that the information relating to the Obligations and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Obligations, such information conforms to the respective Ordinances. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Obligations is contingent on the sale and delivery of the Obligations. The legal opinions will accompany the Obligations deposited with DTC or will be printed on the Bonds or the Certificates, as the case may be, in the event of the discontinuance of the Book -Entry -Only System. Certain matters will be passed upon for the Underwriters by McCall, Parkhurst & Horton L.L.P., Dallas, Texas. The fee of such firm is contingent upon the sale and delivery of the Obligations. In connection with the transactions described in this Official Statement McCall, Parkhurst & Horton L.L.P. represents only the Underwriters. The various legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the 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. AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION The financial data and other information contained herein have been obtained from City 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 contained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. These 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. CONTINUING DISCLOSURE OF INFORMATION In the respective Ordinances, the City has made the following agreement for the benefit of the holders and beneficial owners of a the Bonds or Certificates, as the case may be. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds or Certificates, as the case may be. 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 vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. ANNUAL REPORTS ... The City will provide certain updated financial information and operating data to certain information vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement under Tables numbered 1 through 6 and 8A through 17 and in Appendix B. The City will update and provide this information within six months after the end of each fiscal year ending in or after 2001. The City will provide the updated information to each nationally recognized municipal securities information repository ("NRMSIR") and to any state information depository ("SID") that is designated by the State of Texas and approved by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC"). The City may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12. The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial statements by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the City may 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 updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC staff as a qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P. O. Box 2177, Austin, Texas 78768- 2177, and its telephone number is 512/476-6947. MATERIAL EVENT NOTICES ... The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Bonds or Certificates, as the case may be, if such event is material to a decision to purchase or sell the Bonds or Certificates, as the case may be: (1) principal and interest payment 38 GR 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 Bonds or Certificates, as the case may be; (7) modifications to rights of holders of the Bonds or Certificates, as the case may be; (8) Bond or Certificate calls, �. as the case may be; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds or Certificates, as the case may be; and (11) rating changes. (Neither the Bonds or Certificates, as the case may be, nor the respective Ordinances make any provision for debt service reserves, credit enhancement or liquidity enhancement.) In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"). ^ AVAILABILITY OF INFORMATION FROM NRMSIRS AND SID ... The City has agreed to provide the foregoing information only to NRMSIRs and the SID. The information will be available to holders of Bonds or Certificates, as the case may be, only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. LIMITATIONS AND AMENDMENTS ... The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may 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 concerning such information or concerning its usefulness to a decision to invest in or sell Bonds or Certificates, as the case may be, at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds or Certificates, as the case may be, may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise 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, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds or Certificates, as the case may be, in the offering described herein 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 (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds or Certificates, as the case may be, consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bond or Certificates, as the case may be. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2-12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds or Certificates, as the case may be in the primary offering of the Obligations. If the City so amends the agreement, it has agreed 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 the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS ... The City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company, in its capacity as Financial Advisor, has relied on the opinion of Bond Counsel and has not verified and 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 Obligations, 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 provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. 39 UNDERWRITING Estrada Hinojosa & Company, Inc., Banc of America Securities LLC and Siebert Brandford Shank & Co., LLC have agreed, subject to certain conditions, to purchase the Bonds from the City, at an underwriting discount of $_ . Such Underwriters will be obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds to be offered to the public may be offered and sold to certain dealers (including the Underwriters of the Bonds and other dealers depositing Bonds into investment trusts) at prices lower than the public offering prices of such Bonds, and such public offering prices may be changed, from time to time, by the Underwriters of the Bonds. Morgan Keegan & Company, Inc. and SAMCO Capital Markets have agreed, subject to certain conditions, to purchase the Certificates from the City, at an underwriting discount of $ . Such Underwriters will be obligated to purchase all of the Certificates if any Certificates are purchased. The Certificates to be offered to the public may be offered and sold to certain dealers (including the Underwriters of the Certificates and other dealers depositing Certificates into investment trusts) at prices lower than the public offering prices of such Certificates, and such public offering prices may be changed, from time to time, by the Underwriters of the Certificates. FORWARD -LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward -looking statements, including statements regarding the City' expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward -looking statements. All forward -looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward -looking statements. The City' actual results could differ materially from those discussed in such forward -looking statements. The forward -looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgements with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are 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 accurate. CERTIFICATION OF THE OFFICIAL STATEMENT At the time of payment for and delivery of the Bonds or Certificates, as the case may be, the City will furnish a certificate, executed by proper officers, acting in their official capacity, substantially to the effect that to the best of their knowledge and belief: (a) the descriptions and statements of or pertaining to the City contained in its Official Statement, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of sale of said Bonds or Certificates, as the case may be, and the acceptance of the best bid therefor, and on the date of the delivery, were and are true and correct in all material respects; (b) insofar as the City and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an 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; (c) insofar as the descriptions and statements, including financial data, of or pertaining to entities, other than the City, and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the City believes to be reliable and the City has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the City since the date of the last audited financial statements of the City. The respective Ordinances authorizing the issuance of the Bonds and Certificates, as the case may be, will also approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds or Certificates, as the case may be, by the respective Underwriters. ATTEST: BECKY GARZA Interim City Secretary City of Lubbock, Texas WINDY SITTON Mayor City of Lubbock, Texas 40 r� APPENDIX A GENERAL INFORMATION REGARDING THE CITY THIS PAGE INTENTIONALLY LEFT BLANK THE CITY LOCATION The City of Lubbock, which is the County Seat of Lubbock County, Texas, is located on the South Plains of West Texas. Lubbock is the economic, educational, cultural and medical services center of the area. POPULATION Lubbock is the ninth largest City in Texas: City of Lubbock ., (Corporate Limits) 1910 Census 1,938 1920 Census 4,051 1930 Census 20,520 1940 Census 31,853 1950 Census 71,747 1960 Census 128,691 1970 Census 149,701 1980 Census 173,979 1990 Census 186,206 1997 (Estimated) (1) 195,367 1998 (Estimated) (1) 196,679 1999 (Estimated) (1) 197,117 2000 (Estimated) (1) 199,445 ,,,,, Metropolitan Statistical Area ("MSA") (Lubbock Coun 1970 Census 179,295 1980 Census 211,651 1990 Census 222,636 1997 (Estimated) (1) 232,454 1998 (Estimated) (1) 234,011 1999 (Estimated) (1) 234,479 2000 (Estimated) (1) 236,807 Source: City of Lubbock, Texas AGRICULTURE; BUSINESS AND INDUSTRY Lubbock is the center of a highly mechanized agricultural area with a majority of the crops irrigated with water from underground sources. Principal crops are cotton and grain sorghums with livestock a major additional source of agricultural income. In 1999, approximately 3.008 million bales of cotton were produced in Lubbock and the 25-counties surrounding Lubbock. This was more than the 2.6 million bales produced in 1998 and is 107.43% of the 10-year average of 2.8 million bales. Projections for the 2000 cotton crop are about 2.78 million bales.0) Two 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 produce such products as semiconductors, vegetable oils, heavy earth -moving machinery, irrigation equipment and pipe, farm equipment, paperboard boxes, foodstuffs, mobile and prefabricated homes, poultry and livestock feeds, boilers and pressure vessels, automatic sprinkler system heads, structural steel fabrication and soft drinks. (1) Source: Plains Cotton Growers, Inc., Lubbock, Texas. LUBBOCK MSA LABOR FORCE ESTIMATES (1) Annual Averages December 2000�Z� 1999 1998 1997 1996 1995 Civilian Labor Force 128,501 123,318 123,409 124,225 122,183 117,360 120,709 115,826 Total Employment 126,184 119,763 119,269 119,358 4,842 4,823 4,883 Unemployment 2,317 1.80% 3,555 2.90% 4,140 3.40% 3.90% 3.90% 4.00% Percent Unemployment TO Source: Texas Workforce Commission. (2) Subject to revision. A-1 12 Estimated non-agricultural wage and salaried jobs in various categories as of October, 2000 were: Manufacturing 7,200 Construction 4,500 Transportation & Public Utilities 7,000 Trade 34,100 Finance, Insurance and Real Estate 6,200 Services 38,000 Mining 100 Government 27,200 Total 124,300 MAJOR EMPLOYERS (300 EMPLOYEES OR MORE Estimated Company Type of Business Employees April, 2000(" Texas Tech University Covenant Health System State University Hospital 8,535 Lubbock Independent School District Public Schools 5,900 TTU Health Sciences Center Medical and Allied Health School 3,442 City of Lubbock City Government 2,259 Caprock Home Health Services Home Health Care Service 2,164 Convergys Call Center 1,650 United Supermarkets Supermarkets 1,500 University Medical Center Hospital 1,345 Wal-Mart Lubbock County Discount Retailer 999 900 Lubbock State School County Government School for Mentally Retarded 8 Texas Dept. of Criminal Justice Psychiatric Hospital Psychiatric Hospital 87676 ' SBC State Department of Human Services Wireless Communications 870 750 U.S. Postal Service Social Services Post Office 585 American State Bank Bank 561 West TeleServices Call Center 559 Southwestern Bell Telephone Company Telephone Utility 559 Industrial Molding Corporation M22 anufacturing/Plastic Products 558 Texas Department of Transportation State Highway and Street Maintenance 505 487 Eagle Picher Lubbock Regional MHMR Center Heavy Equipment Manufacturing 482 McLane High Plains Social Services Wholesale Food Distributor 450 Operator Service Company Telecommunications 416 Tyco Fire Protection Manufacturing 409 Dillard's Department Stores Department Stores 400 Aramark Energas company/Atmos Energy Corp. Food Broker Naturual 400 391 Jim Burns Automotive Group Gas Transmission & Distribution 366 K-Mart Automobile Dealerships 365 Lubbock Avalanche -Journal Discount Retailer Newspaper 365 McDonald's Restaurants 341 331 Plains National Bank Bank Marriott School Services H25 otel/Housekeeping and Hotel 331 322 Wells Fargo Bank Bank 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" following for more detailed information. A - 2 EDUCATION - TEXAS TECH UNIVERSITY Established in Lubbock in 1923, Texas Tech University is the fifth largest State-owned University in Texas and had a Fall, 1999, enrollment of 22,040. Accredited by the Southern Association of Colleges and Schools, the University is a co-educational, State - supported institution offering a bachelor's degree in 158 major fields, the master's degree in 107 major fields, the doctorate degree in 64 major fields, and a professional degree in 2 major fields (law and medicine). The University proper is situated on 451 acres of the 1,829 acre campus, and has over 160 permanent buildings with additional construction in progress. Fall, 1999, total employment was 6,119. The medical school had an enrollment of 1,390 for Fall, 1999, not including residents; there were 60 graduate students. The School of Nursing had a Fall, 1999, enrollment of 321 including the Permian Basin Program, located in Midland/Odessa; there were 75 graduate students. The Allied Health School had a Fall, 1999, enrollment of 444. Source: Texas Tech University. OTHER EDUCATION INFORMATION The Lubbock Independent School District, with an area of 87.5 square miles, includes over 90% of the City of Lubbock. There are approximately 3,495 total employees. The District operates four senior high schools, ten junior high schools, 38 elementary schools and other educational programs. Scholastic Membership History (1) 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 Independent School District. (2) Estimated. Lubbock Christian University, a privately owned, co-educational senior college located in Lubbock, had an enrollment of 1,620 for the Fall Semester, 2000. South Plains College, Levelland, Texas (South Plains Junior College District) operates a major off -campus learning center in a downtown Lubbock, 7-story building owned by the College. College offerings cover technical/vocational subjects; Fall Semester, 1999, enrollment was 2,811. r, The State of Texas School for the Mentally Retarded, located on a 226-acre site in Lubbock, consists of 40 buildings with bed - capacity for 436 students; 400 students were in residence. There are approximately 850 professional and other employees. Wayland Baptist College, Plainview Texas, operates a Lubbock Campus which had a fall enrollment of 380 students. TRANSPORTATION A^"q Scheduled airline transportation at Lubbock International Airport is furnished by Southwest Airlines, Atlantic Southeast, Continental Airlines and American Eagle; non-stop service is provided to Dallas -Fort Worth International Airport, Dallas Love Field, Bush Intercontinental Airport (Houston), Houston Hobby, El Paso, Austin, Amarillo and Albuquerque. Passenger boardings for 1999 totaled 574,780 and 585,000 for 2000. Extensive private aviation services are located at the airport. Rail transportation is furnished by the Burlington Northern Santa Fe Railroad with through service to Dallas, Houston, Kansas City, Chicago, Los Angeles and San Francisco. Short -haul rail service is also furnished by the Seagraves, Whiteface and Lubbock Railroad. Texas, New Mexico and Oklahoma Bus Lines, a subsidiary of Greyhound Corporation, provides bus service. Several motor freight common carriers provide service. A - 3 Lubbock has a well -developed highway network including Interstate 27 (Lubbock -Amarillo), 4 U.S. Highways, 1 State Highway, a controlled -access outer loop and a county -wide system of paved farm -to -market roads. GOVERNMENT AND MILITARY (1) On March 1, 1995, the Secretary of the Air Force announced that Reese Air Force Base ("Reese"), a pilot training base located adjacent to the City, was included in the list of bases recommended for closure submitted to the Base Closure and Realignment Commission ("BRAC"). BRAC reevaluated Reese along with all other undergraduate pilot training bases, however, Reese was included in the final list of bases recommended for closure. Final recommendations were submitted to the President in July, 1995. The President and Congress approved the BRAC recommendations and Reese closed on October 1, 1997. As a result, the City has developed a re -use plan for the facilities. Prior to closure Reese represented approximately 2.6% of the local work force. While closure of the base did not have a positive impact on the Lubbock economy, the current growth in other economic sectors has minimized or neutralized closure of the base. In addition, there could be a positive economic impact from the re -use of the base. In 1997, the Texas Legislature enacted Chapter 2300 of the Texas Government Code. That act provided for the creation of the Lubbock Reese Redevelopment Authority (the "Authority") upon an affirmative vote by the governing body of the City and the Commissioners Court of Lubbock County. The Authority is a political subdivision of the State of Texas and is authorized to accept title from the United States to all or any portion of the real, personal, and mixed property situated within Reese Air Force Base. The Authority is empowered to manage, lease, sale and develop its property. The former air base, now known as "Reese Center" is the home of the prized Institute of Environmental and Human Health (TIEHH). TIEHH is a joint venture between Texas Tech University and Texas Tech Health Science Center. TIEHH researches the exposure and effects toxic chemicals have on human health and the environment. The Institute is comprised of five divisions: Environmental Health and Toxicology, Environmental Law and Policy, Communications and Outreach, Research and Quality Management, and Human Health Sciences. Each of these five Divisions facilitates TIEHH's educational and research goals. TIEHH will help stimulate the Lubbock economy by creating jobs. Eventually, TIEHH is expected to create many new jobs for Lubbock and the South Plains region. And, TIEHH's tenancy at Reese Center began the process of converting the former military installation into an active and thriving facility for the Lubbock community and surrounding area. State of Texas ... More than 25 State of Texas boards, departments, agencies and commissions have offices in Lubbock; several of these offices have multiple units or offices. Federal Government ... Several Federal departments and various other administrations and agencies have offices in Lubbock; a Federal District Court is located in the City. (1) Source: City of Lubbock, Texas TEXAS DEPARTMENT OF CRIMINAL .JUSTICE ("TDCJ") PRISON PSYCHIATRIC HOSPITAL 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 whom work at the hospital. Employment for all facilities is approximately 870 with an annual estimated payroll of $17 million and an estimated remaining annual operating budget of $27 million. HOSPITALS AND MEDICAL CARE There are five hospitals in the City with over 1,800 beds. Covenant Medical Center is the largest and also operates an accredited nursing school. Lubbock County Hospital District, with boundaries contiguous with Lubbock County, owns the University Medical Center which it operates as a teaching hospital for the Texas Tech Health Sciences Center. There are 82 clinics and over 780 practicing physicians, surgeons, and dentists. Lubbock's Health Care Sector employs over 14,000 people with a total payroll of $428.8 million and draws patients from 77 counties in West Texas and Eastern New Mexico. A radiology center for the treatment of malignant diseases is located in the City. r A - 4 n r� RECREATION AND ENTERTAINMENT Lubbock's Mackenzie Regional Park and over 115 City parks and playgrounds provide recreation centers, shelter buildings, a garden Aft and art center, swimming pools, a golf course, tennis and volley ball courts, baseball diamonds and picnic areas, including the Yellowhouse Canyon Lakes system of six lakes and 750 acres of adjacent parkland extending from northwest to southeast Lubbock along the Yellowhouse Canyon. There are several privately -owned public swimming pools, golf courses, and country clubs. The City of Lubbock has developed a 36 square block area of approximately 100 acres adjacent to downtown Lubbock under the Lubbock Memorial Civic Center program. Approximately 50 acres contain the 300,000 square foot Lubbock Memorial Civic Center, the main City library building and State Department 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 University programs and events, Texas Tech University Museum, Planetarium and Ranching Heritage Center exhibits and programs, Lubbock Memorial Civic Center and its events, Lubbock Symphony Orchestra programs, Lubbock Theatre Center, Lubbock Civic Ballet, Municipal Auditorium and coliseum programs and events, the library and its branches, the annual Panhandle -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 representing more than 25 denominations. UTILITY SERVICES .+ Water and Sewer - City of Lubbock. Gas - Energas Company. Electric - City of Lubbock (Lubbock Power & Light) and Southwestern Public Service Company; and, in a small area, South Plains Electric Co-operative. ECONOMIC INDICES CI) Utility Connections Building Electric Year Permits Water Gas (LP&L Only)(2) 1996 $163,076,593 66,443 63,171 51,305 1997 237,995,359 67,373 63,380 54,085 1998 181,716,532 68,228 62,472 56,435 1999 181,285,089 68,449 63,210 57,411 2000 200,427,650 70,111 65,000 58,724 (1) All data as of 12-31, except where noted; Source: 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 South Plains Electric Cooperative. LP&L provides service to approximately 66.72% of the electric customers in the City. BUILDING PERMITS BY CLASSIFICATION (1) Residential Permits Commercial, Single Family Multi -Family Total Residential Public Total Calendar No. No. Dwelling No. Dwelling and Other Building Year Units Value Units (2) Value Units (2) Value Permits Permits 1996 571 $ 59,028,397 1 331 $ 14,u%783 771 $ 73,168,186 $ 89,908,413 $ 163,076,593 1997 542 57,767,458 736 32,837,680 1,278 90,605,138 147,390,221 237,995,359 1998 664 64,304,918 242 9,186,999 906 73,491,917 108,224,615 181,716,532 1999 747 80,496,444 222 22,134,000 969 102,630,444 78,654,645 181,285,089 2000 819 87,501,009 281 11,548,809 1,100 99,049,818 101,377,832 200,427,650 (1) Source: City of Lubbock, Texas. en (2) Data shown under "No. Dwelling Units" is for each individual dwelling unit, and is not for separate buildings; includes duplex, triplex, quadruplex and apartment permits. A - 5 ECO THIS PAGE INTENTIONALLY LEFT BLANK r. Q Go 52 a APPENDIX B EXCERPTS FROM THE CITY OF LUBBOCK, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2000 The information contained in this Appendix consists of excerpts from the City of Lubbock, Texas Annual Financial Report for the Year Ended September 30, 2000, and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for further information. THIS PAGE INTENTIONALLY LEFT BLANK W W Robinson cep public a accountants of Burdette Martin Seright & Burrows, L. L. P. 1500 Broadway Suite 1300 Lubbock, Texas 79401-3107 INDEPENDENT AUDITOR'S REPORT Honorable Mayor Windy Sitton Members of City Council City of Lubbock, Texas teie hone (806) 744-3333 fax �806) 747-2106 www.rbmsb.com We have audited the accompanying general-purpose financial statements of the City of Lubbock, Texas, as of and for the year ended September 30, 2000, as listed in the Table of Contents. These general-purpose financial statements are the responsibility of the management of the City of Lubbock, Texas. Our responsibility is to express an opinion on these general-purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general-purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general-purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general-purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general-purpose financial statements referred to above present fairly, in all *- material respects, the financial position of the City of Lubbock, Texas, as of September 30, 2000, and the results of its operations and the cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated January 12, 2001, on our consideration of the City of Lubbock, Texas internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. MR Our audit was performed for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The combining and individual fund and account group financial statements and schedules listed in the Table of Contents are presented for purposes of additional analysis, and are not a required part of the general purpose financial statements of the City of Lubbock, Texas. Such information has been subjected to the auditing procedures applied in the material respects, in relation to the general purpose financial statements taken as a whole. The information listed as Statistical Section and Supplementary Section in the Table of Contents has not been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, accordingly, we express no opinion on such data January 12, 2001 Lubbock, Texas 4 C2 .ram 59 General Purpose Financial Statements A 0 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 2000 With Comparative Totals for September 30, 1999 Governmental Fund Types Special Debt Capital General Revenue Service Projects Assets .-w ; Pooled cash and cash equivalents $ 514,428 $ 997,599 $ 157,969 $ 4,555,282 Investments 3,442,714 6,676,230 1,057,182 30,485,355 Receivables (net, where applicable, of allowance for uncollectibles): Taxes, including interest, penalities, and liens 5,216,116 24,205 213,437 - Accounts, notes, and mortgages 388,750 - - - Interest 138,820 13,038 - 124,547 Due from other funds 9,045,859 - - - Due from other governments 153,701 - - - Due from other agencies 396,070 770,520 - 145,203 Prepaid items 79,281 - - - Advances to other funds 1,781,800 - - - Inventory, at average cost 45,397 - - - Restricted assets: Pooled cash and cash equivalents - - - - Investments - - - - Accounts receivable - - - - Interest receivable - - - - Deferred charges - - - - Fixed assets (net of accumulated depreciation) - - - - 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 $ 21,202,936 $ 8,481,592 $ 1,428,588 $ 35,310,387 6 � - !o 59 (continued) Proprietary Fiduciary Totals Fund Types Fund Type Account Groups Government General (Memorandum Internal Trust and General Long-term Only) Enterprise Service Agency Fixed Assets Debt 2000 $ 2,390.507 $ 290,558 $ 220,462 $ - $ - $ 15,965,355 1,944,501 15,546,836 - 9,126,805 - 75,118,173 - _ - 5,453,758 17,661,603 2,647 5,945,239 - - 23,998,239 64,244 146,913 - - - 487,562 - - - 9,045,859 31,577 - 1,593,166 - - 1,778,444 - 91,552 - - - 1,403,345 - - 79,281 2,142,414 _ _ ' - 3,924,214 377,365 1,974,125 - - - 2,396,887 36,266,069 2,988,461 - - - 39,254,530 51,017,748 17,212,607 - - - 68,230,355 4,071 125,797 - - - 129,868 420,888 _ " - 420,888 11,717,554 - - - - 11,717,554 483.740.056 7,941.616 279,355 261,784,379 - 753,745,406 20,517,773 _ ' - - 20,517,773 - 1,260,450 1,260,450 - - 58,501,212 58,501,212 $ 642,317,224 $ 32,718,777 $ 23,585,058 $ 261,784,379 $ 59,761,662 $ 1,086,590,603 See accompanying notes to financial statements 7 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - PRIMARY �GS ERNMENT FUNDN ED COMPONENT UNITS ACCOUNT GROUPS AND DISCRETELY -. September 30, 2000 With Comparative Totals for September 30, 1999 Proprietary Fiduciary Governmental Fund Type Fund Types Fund Types Civic Market Market Lubbock Lubbock, Lubbock, Inc. Inc. Citibus Inc. Amm and cash equivalents $ 496,113 $ 358,359 $ 389,712 $ 28,284 . Pooled cash 4,252,056 " investments Receivables (net, where applicable, of allowance for uncollectibles): Taxes, including interest, _ penalities, and liens 23699 1,436,372 43,879 _ Accounts, notes, and mortgages , - - Interest 60,000 _ _ 100,259 Due from other funds _ - Due from other governments Due from other agencies _ Prepaid items - - - Advances to other funds 31,801 315,820 71,902 Inventory. at average cost Restricted -assets: - 118,615 " Pooled cash and cash equivalents - - _ Investments _ _ - Accounts receivable _ - Interest receivable - - - - Deferred charges Fixed assets (net of accumulated _ 14,524,313 47,283 " depreciation) Other assets (net of accumulated - 382,483 ' amortization) _ - Amount available in debt service funds - Amount to be provided for retirement of general long-term debt $ 4,863,669 $ 16,634,864 $ 1.053,8?4 $ 128,543 _----- Total assets 8 0 (continued) Component Units Account Groups General General Fixed Assets Long-term Debt Totals Totals Market Market Component Reporting Entity Lubbock, Lubbock, Units (Memorandum Only) Inc. Inc. 2000 2000 1999 $ - $ - $ 1,272,468 $ 10,399,273 $ 9,439,460 4,252,056 79,370,229 75,192,633 ' - - 5,453,758 4,926,245 - - 1,503,950 25,502,189 20,063,509 - - - 487,562 586,397 - - 160,259 9,206,118 13,558,497 - - - 1,778,444 1,645,356 " - - 1,403,345 2,172,502 - - - 79,281 255,303 - - - 3,924,214 5.174,377 - - 419,523 2,816,410 2,727,870 - - 118,615 39,373,145 41,551,458 " - - 68,230,355 70,603,181 " - - 129,868 719,782 " - - 420,888 460,544 - - - 11.717,554 9,229,205 520,542 - 15,092,138 768,837,544 732,533,789 - - 382,483 20,900,256 21,336,824 " - - 1,260,450 1,151,270 - 3,562,668 3,562,668 62,063,880 57,944,662 $ 520,542 $ 3,562,668 $ 26,764,160 $ 1,113,354,763 $ 1,071,272.864 See accompanying notes to financial statements 9 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 2000 With Comparative Totals for September 30,1999 Liabilities Accounts and vouchers payable Contracts payable Due to other funds Due to other agencies and governments Accrued general obligation interest Other accrued liabilities 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 Advances from other funds Advances from other agencies 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 Governmental Fund Types Special Debt Capital General Revenue Service Projects $ 2,786,942 $ 142,183 $ 5,608 $ 440,505 - 1,812,863 650,000 - - 1,174,497 - - 222,331 16,993 - 398,514 - 162,530 - 2,916,239 809,176 $ 168,138 $ 5,169,607 10 Go (continued) Totals g" 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 2000 es. $ 13,676,299 $ 1,131,114 $ 2,419,171 $ - $ - $ 20,601,822 1,694,461 - - - - 3,507,324 6,637,046 331,475 1,427,338 - - 9,045,859 - - - - - 1,174,497 1,303,592 - - - - 1,303,592 451,746 89,426 65,190 - 301,269 1,146,955 8,659,609 - - - - 8,659,609 1,810,515 492,580 - - - 2,303,095 736,309 - - - - 736,309 - 4,892 - - - 4,892 - 4,372,861 - - - 4,372,861 3,599,316 - - - - 3,599,316 433,832 - - - - 433,832 28,160 - 1,663,039 - - 2,252,243 50,000 957,975 - - - 3,924,214 - 2,803,358 - - - 2,803,358 126,868,492 - - - 48,380,346 175,248,838 73,847,298 - - - - 73,847,298 3,230,736 500,168 - - 11,080,047 14,810,951 5,918,343 - - - - 5,918,343 $ 248,945,754 $ 10,683,849 $ 5,574,738 $ - $ 59,761,662 $ 335,695,208 See accompanying notes to financial statements CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 2000 With Comparative Totals for September 30,1999 Governmental Proprietary Fiduciary Fund Types Fund Types Fund Type Market Civic Market Lubbock. Lubbock Lubbock, Inc. Citibus Inc. Inc. bitities Accounts and vouchers payable $ 377.593 $ 1,567,763 $ 40,074 $ 31,469 Contracts payable - Due to other funds 160,259 - - " Due to other agencies and governments - - 184,800 97,074 Accrued general obligation interest - - Other accrued liabilities 2,754,469 314,357 17,955 - Current portion of general obligation bonds and construction obligation payable - - 90,764 - Payable from restricted assets: - - Accounts payable - - _ Accrued interest - Other accrued liabilities - 158,431 Accrued insurance claims " Revenue bonds payable (current portion) Customer deposits - - Deferred revenue 23,256 - 12,815 - Advances from other funds - - Advances from other agencies - 70,000 Accrued insurance claims - - General obligation bonds (net of current portion) - - 7,474 - Revenue bonds payable (net of current portion) " Accrued vacation and sick leave " Anticipated landfill closure and postclosure - " Total liabilities $ 3,315,577 $ 2,110,551 $ 353,882 $ 128,543 12 Go (continued) Component Units Account Groups General General Fixed Assets Long-term Debt Totals Totals Market Market Component Reporting Entity Lubbock, Lubbock, Units (Memorandum Only) Inc. Inc. 2000 2000 1999 $ 2,016,899 $ 22,618,721 $ 16,716,881 - 3,507,324 2,752,610 _ - 160,259 9,206,118 13,558,497 - - 281,874 1,456,371 1,453,721 - 1,303,592 1,072,548 _ - 3,086,781 4,233,736 4,123,559 _ - 90,764 8.750,373 8,686,310 _ - - 2,303,095 1,857,806 _ - - 736,309 804,205 - 3,562,668 3.721,099 3,725,991 6,778 _ - - 4,372,861 3,754,250 _ - - 3,599,316 3,038,341 - 433,832 330,649 - - 36,071 2,288,314 2,746,330 - - - 3,924,214 5,174,377 - - 70,000 70,000 70,000 - - - 2,803,358 2,803,358 - - 7,474 175,256,312 157,419,339 - - - 73,847,298 78,578,552 - - - 14,810,951 14,643,673 - - - 5,918,343 6,326,385 $ - $ 3,562,668 $ 9,471,221 $ 345,166,429 $ 325,918,169 See accompanying notes to financial statements 'Aft, 13 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 2000 With Comparative Totals for September 30, 1999 Governmental Fund Types Special Debt Capital r;anPral Revenue Service Projects � and tihand Other Credits Contributed capital $ $ - $ $ - Investment in general fixed assets Retained earnings: _ Reserved for capital projects " 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 Reserved for radio capital project - Unreserved Fund balances: Reserved for prepaid items 79,281 _ - Reserved for advances to other funds 1,781,800 Reserved for debt service - - 1,260,450 - _ - 30,140,780 Reserved for capital projects _ Reserved for Federal housing programs Reserved for plan participants - " Unreserved: Designated for perpetual care 22,767 - Designated for subsequent years expenditures 973,248 227,383 Undesignated 13,763,556 7,445,033 - - Total retained eamings/fund balances 16,620,652 7,672,416 1,260,450 30,140,780 Total fund equity and other credits 16,620,652 7,672,416 1,260,450 30,140,780 Total liabilities and fund equity and other credits $ 21,202,936 $ 8,481,592 $ 1,428,588 $ 35,310,387 14 (continued) 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 2000 $ 132,984,984 $ 6,846,827 $ - $ - $ - $ 139,831,811 _ - - 261,784,379 - 261,784,379 53,937,015 2.974,336 - - - 56,911,351 9,434,170 13,138 - - - 9,447,308 720,771 - - - - 720,771 13,073,972 - - - - 13,073,972 35,550 - - - - 35,550 302,444 - - - - 302,444 - 3,204,358 - - - 3,204,358 - 9,264,699 - - - 9,264,699 182.882,564 (268,430) - - - 182,614,134 - _ _ - - 79,281 - - 1,781,800 _ - 1,260,450 _ - - 30,140,780 _ - 6,208,235 - - 6,208,235 _ - 14,084,187 - - 14,084,187 _ _ - 22,767 - 1,200,631 - - (2,282,102) - - 18,926,487 260,386,486 15,188,101 18,010,320 - - 349,279,205 393.371,470 22,034,928 18,010,320 261,784,379 - 750,895,395 $ 642,317,224 $ 32,718,777 $ 23,585,058 $ 261,784,379 $ 59,761,662 $ 1,086,590,603 See accompanying notes to financial statements CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 2000 With Comparative Totals for September 30, 1999 Governmental Proprietary Fiduciary Fund Types Fund Types Fund Type Market Civic Market Lubbock, Lubbock Lubbock, Inc. Citibus Inc. Inc. Fund Eq ui y and Other Credits Contributed capital $ - $ 14,524,313 $ - $ - Investment in general fixed assets - - - - Retained earnings: Reserved for capital projects - - 118,615 - 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 Designated for radio capital project - - - - Unreserved - - 581,377 - Fund balances: Reserved for prepaid items - - - ' Reserved for advances to other funds - - - - Reserved for debt service - - - - Reserved for capital projects - - - - Reserved for Federal housing program - - - - Reserved for plan participants - - - - Unreserved: Designated for perpetual care - - - ' Designated for subsequent year's expenditures 1,548,092 - - - Undesignated - - - ' Total retained eamingstfund balance 1,548,092 - 699,992 - Total fund equity and other credits 1.548,092 14,524,313 699,992 - Total liabilities and fund equity and other credits $ 4,863,669 $ 16,634,864 $ 1,053.874 $ 128,543 16 Component Units Account Groups .. General General Lubbock, Lubbock, Inc. Inc. Totals Totals Component Reporting Entity Units (Memorandum Only) 2000 2000 1999 $ _ $ - $ 14,524,313 $ 154,356,124 $ 148,325,473 520,542 - 520,542 262,304,921 253,256,904 _ _ 118,615 57,029,966 48,492,484 - 9,447,308 24,081,382 - 720,771 1,037,136 - 13,073,972 14,562,567 - 35,550 380,750 - 302,444 3,488,617 - 3,204,358 2,524,966 - 9,264,699 5,413,783 - - 821,582 _ - 581,377 183,195,511 170,552,055 - 79,281 136,629 - 1,781,800 1,963,439 - 1,260.450 1,151,270 - 30,140,780 29,509,469 - 6,208,235 5,449,766 - 14,084,187 11,630,187 - 22,767 22,767 _ - 1,548,092 2,748,723 6,552,670 - 18,926,487 16,000,799 _ - 2,248,084 351,527,289 343,772,318 520,542 - 17,292,939 768,188,334 745,354,695 $ 520,542 $ 3,562,668 $ 26,764,160 $ 1,113,354,763 $ 1,071,272,864 See accompanying notes to financial statements ,ro, 17. CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES — PRIMARY GOVERNMENT FUND TYPES, EXPENDABLE TRUST FUNDS AND DISCRETELY PRESENTED COMPONENT UNITS For Year Ended September 30, 2000 With Comparative Totals for Year Ended September 30, 1999 Totals Fiduciary Primary Governmental Fund Types Fund Type Government (Memorandum Special Debt Capital Expendable Only) General Revenue Service Projects Trust 2000 Revenues: Taxes and special assessments $ 61,080,313 $ 4,677,868 $ 7,511,685 $ - $ - $ 73,269,866 Licenses and permits 1,138,924 - - - - - 9,271,735 1,138,924 9,637,406 Intergovernmental 365,671 4,210,334 - - - - 87,5B3 4,297,917 Charges for services 2,834,208 - - 2,834,208 Fines and forfeits - 67,600 - 67,600 Contributions 2,251,888 846,594 70,869 1,873,654 4,806,598 9,849,603 Miscellaneous 71,881,338 5,524,462 7,582,554 2,028,837 14,078,333 101,095,524 Total revenues Expenditures: Current Communications/Legislation 937,889 - ' - - 937,889 16,963,231 Community Services 16,963,231 - 5,439,855 Development Services 5,439,855 - - - - 1,923,584 Electric 1,923,584 - - - - 1,458,232 Financial Services 1,458,232 - - - - 17,080,372 Fire 17,080,372 5,255,236 - 4,436,646 - - - 10,518,355 20,210,237 General Government 871,596 - - - - 871,596 Human Resources 1,022,720 _ 1,022,720 Management Services - _ 25,561,261 Police 25,561,261 - - - - 1,498,176 Strategic Planning 1,498,176 606,842 - - - ' 741,881 - 1,348,723 Non -departmental - 92,592 - 14,296,636 1,038,422 15,427,650 Capita! outlay Debt service: - - - - 4,622,633 Principal retirement - ,, 3,11616,151 51 24,935 3,141,086 Interest and fiscal charges _� Total expenditures 78,618,994 4,529,238 7,733,784 15,063,452 11,556,777 117,507,245 Excess (deficiency) of revenues over(under)expenditures (6,737,656) 995,224 5156,230) (13,034,615) 2,521,556 (16,411,721) Other financing sources (uses): - 7,000,000 - 7,000,000 Proceeds of refunding bonds Operating transfers in - 13,636,764 4,477,055 16,245,165 7,157,634 1,532 41,518,150 Payment to refunded bond escrow agent Operating transfers out - (7,526,481) ' (2,769,384) (15,979,755) (491,708) (1,532) (26,711,860) Total other financing sources (uses) 6,110,283 1,707,671 265,410 13,665,926 21 749,290 Excess (deficiency) of revenues and other financing sources over (under) expenditures 2,702,695 109,180 631,311 2,521,556 5,337,569 and other uses (627,373) Fund batances at beginning of year 17,248,025 4,969,521 1,151,270 29,509,469 15,488,764 68,367,049 Residual equity transfer in (out) - - Change in accounting principle (See Note III. F.) - Fund ba?ances at end of year $ 16,620.652 $ 7,672,416 $ 1,260,450 $ 30,140,780 $ 18,010,320 $ 73,704,618 18 Component Unit Governmental Type Totals Market Reporting Entity Lubbock, (Memorandum Only) Inc. 2000 1999 $ 3,138,921 $ 76,408,787 $ 72,651,740 - 1,138,924 976,091 - 9,637,406 10,864,066 - 4,297,917 4,412,161 - 2,834,208 3,335,340 325,600 393,200 796,665 345,672 10,195,275 10,062,271 3,810,193 104,905,717 103,098,334 - 937,889 12,630,738 - 16.963,231 1,759,509 - 5,439,855 15,616,543 - 1,923,584 25,687,857 - 1.458,232 4,522,041 - 17,080,372 870,172 6,293,234 26,503,471 23,478,729 - 871,596 839,814 - 1,022,720 396,216 - 25,561,261 1,366,006 - 1,498,176 5,195,459 - 1,348,723 1,419,711 18,814 15,446,464 20,524,855 m^*. - 4,622,633 5,723,124 - 3,141,086 3,040,461 6,312,048 123,819,293 123,071,235 (2,501,855) (18,913,576) (19,972,901) - 7,000,000 963,584 - 41,518,150 41,936,702 - (966,270) (26,768,860) (27,947,698) - 21,749,290 13,986,318 (2,501,855) 2,835,714 (5,986,583) 4,049,947 72,416,996 68,906,615 - - (75,584) - 9,572,548 $ 1,548,092 $ 75,252,710 $ 72,416,996 See accompanying notes to financial statements 19 20 CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES — BUDGET (GAAP BASIS) AND ACTUAL P., GENERAL FUND Year Ended September 30, 2000 General Fund Variance - favorable Budget Actual (unfavorable) Revenues: Taxes and fees $ 59,892,286 $ 61,080,313 $ 1,188,027 Licenses and permits 1,123,982 1,138,924 14,942 intergovernmental 390,821 365,671 (25,150) Charges for services 4,371,442 4,210,334 (161,108) Fines 3,130,300 2,834,208 (296,092) Miscellaneous 2,306,088 2,251,888 (54,200) 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 expenditures Other financing sources (uses): Operating transfers in Operating transfers out Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources (uses) over (under) expenditures Fund balance at beginning of year Fund balance at end of year 71,214,919 71,881,338 666,419 973,998 16,876,773 5,576,366 1,788, 334 1,450,139 16,844,163 5,094,807 831,470 1,024,233 25,575,192 1,519,142 879,200 937,889 16, 963,231 5,439,855 1,923,584 1,458,232 17,080,372 5,255,236 871,596 1,022,720 25,561,261 1,498,176 606,842 36,109 (86,458) 136,511 (135,250) (8,093) (236,209) (160,429) (40,126) 1,513 13,931 20,966 272,358 78,433,817 78,618,994 (185,177) (7,218,898) (6,737,656) 481,242 14,162,205 13,636,764 (525,441) (7,615.059) (7,526,481) 88,578 6,547,146 6,110,283 (436,863) (671,752) (627,373) 44,379 17,248,025 17,248,025 - $ 16,576,273 $ 16,620,652 $ 44,379 See accompanying notes to financial statements M 21 r CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN EQUITY ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESENTED COMPONENT UNITS Year Ended September 30, 2000 With Comparative Totals for Year Ended September 30, 1999 Proprietary Fund Types Internal Enterprise Service Totals Primary Government (Memorandum Only) 2000 Operating revenues: Charges for services $ 135,018,266 $ 33,880.956 $ 168,899,222 Newtaps and reconnects 103,280 - 103,280 Effluent water sales 560,626 - 560,626 Commodity sales 720,499 - 720,499 Landing fees 740,882 - 740,882 pang 1,168,628 - 1,168,628 Greenfees and memberships 40,262 - 40,262 Rentals 1,347,914 - 1,347,914 Concessions 1,065.423 - 1,065,423 Administrative charges - 186,500 186,500 Total operating revenues 140,765,780 34,067.456 174,833,236 Operating expenses: Personal services 20.789.681 6,089,665 26,879,346 Insurance 13,727,204 13,727,204 Supplies 2.755,639 188,585 2,944,224 Materials - 7,012,499 7,012,499 Maintenance 6,052,573 1.451,533 7,504,106 Uncollectible accounts 1,186,657 - 1,186,657 Purchase of fuei and power 49,299,758 - 49,299,758 Collection expense 2.210,385 - 2,210,385 Other services and charges 18,584,187 3,525.298 22,109,485 Depreciation and amortization 19,302,697 1,755,094 21,057.791 Total operating expenses 120,181,577 33,749,878 153,931,455 Operating income (loss) 20,584,203 317,578 20,901,781 Nonoperating revenues (expenses): Interest 6,742,188 1,411.535 8,153,723 Passenger facility charges 1,552,654 - 1,552,654 Disposition of properties 19,527 7,876 27,403 Miscellaneous 1.155,483 33,875 1,189,358 Interest and fiscal charges (13,376.202) - (13,376,202) Cash grants and reimbursements - Total nonoperating revenues (expenses) (3,906,350) 1,453,286 (2,453,064) Income (loss) before operating transfers 16,677,853 1,770,864 18,448,717 Transfers: Operating transfers in 16,510,235 735,094 17,245,329 Operating transfers out (31,446,500) (548,119) (31,994,619) Total transfers in (out) (14,936,265) 186.975 (14,749,290) Net income (loss) 1,741,588 1,957,839 3.699,427 Depredation on fixed assets acquired by contributions 1,052,499 - 1,052,499 Retained earnings at beginning of year 257,592,399 13.230,262 270,822,661 Retained earnings at end of year 260,386.486 15,188,101 275,574,587 Contributed capital at beginning of year 131,735,154 4,190,033 135,925,187 Capital contributions/Residual equity transfer in 2,302,329 2,656.794 4,959,123 Depredation onidisbursements of capital contributions (1,052,499) - (1,052,499) Contributed capital at end of year 132,984,984 6,846,827 139,831.811 Total equity at end of year $ 393.371,470 $ 22,034,928 $ 415,406.398 22 0 w GO U CO Component Units Totals Totals Component Reporting Entity Proprietary Types Units (Memorandum Only) Civic Lubbock, Inc. Citibus 2000 2000 1999 $ 1.403.300 $ 2,022,626 $ 3,425,926 $ 172,325,148 $ 157,143,089 - 103280 143,615 _ - 560,626 553.624 - _ _ 720,499 490,254 _ 740,882 725,300 _ 1,168,628 1,365.740 _ _ 40,262 49,638 _ _ 1,347,914 1,366,537 _ 1,065.423 908,880 _ 186,500 142,043 1,403,300 2,022,626 3,425,926 178.259,162 162,888.720 360.525 3,029,704 3,390,229 30,269.575 28,124.375 _ 458.253 458,253 14,185,457 13,547,151 _ _ 2,944,224 2,690,080 _ 7,012.499 5,557,773 _ 868,987 868,987 8,373,093 8,196,682 _ 1,186,657 1,003,189 _ 49.299,758 35,310,419 2.210.385 1.765,459 869,345 1,326,865 2.196,210 24,305,695 21,986,330 9,442 1,696,182 1,705,624 22,763,415 20,747,156 1,239,312 7,379,991 8.619,303 162,550,758 138,928,614 163,988 (5,357,365) (5,193,377) 15,708,404 23,960,106 16,779 - 16,779 8,170,502 6,697,078 _ _ 1,552,654 1,587,267 _ 27,403 (396,840) 1,189,358 702,308 (13,436) (3,905) (17,341) (13,393,543) (10,513,983) _ 3,665,088 3,665,088 3,665,088 3,198,776 3,343 3,661,183 3,664,526 1,211,462 1.274,606 167,331 (1,696,182) (1,528,851) 16,919,866 25,234,712 _ 17,245,329 13,699,058 _ (31,994,619) (27,688,062) (14,749.290) (13,989.004) 167,331 (1,696,182) (1,528,851) 2,170,576 11,245,708 _ 1,696,182 1,696.182 2,748,681 2,118,579 532.661 532,661 271,355,322 257.991,035 699,992 699,992 276,274,579 271,355.322 - 12.400,286 12,400,286 148,325,473 147,919,276 3,820,209 3,820,209 8,779,332 2,600,360 (1,696,182) (1,696,182) (2,748,681) (2,194,163) 14,524,313 14,524,313 154,356.124 148,325,473 $ 699,992 $ 14,524,313 $ 15,224,305 $ 430,630.703 $ 419,680.795 See accompanying notes to financial statements 23 CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF CASH FLOWS - ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESENTED COMPONENT UNITS Years Ended September 30, 2000 With Comparative Totals for Year Ended September 30, 1999 Totals Primary Government Proprietary Fund Types (Memorandum Internal Only) Enterprise Service 2000 Cash flows from operating activities: Operating income (loss) $ 20,584.203 $ 317,578 $ 20,901.781 Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation and amortization 19,302,697 1,755,094 21,057,791 Increase (decrease) in long -tern assets/liabilities not requiring cash flow 1,724,626 574.955 2,299.581 Other income 1,175.010 24,366 1,199,376 Receipts from building rent - 12,764 12,764 Change in current assets and liabilities: Aa:ountsreceivable (3,844,331) 508.390 (3,335,941) Inventory 108,522 (152,464) (43.942) Due totfrom other governments (3,416) (3,416) Prepaid expenses - - - Accounts payable 8,499,664 123,939 8,623,603 Due to/from others - (13.902) (13.902) Other accrued expenses (229,724) (67,640) (297,364) Customer deposits 103,183 103,183 Accrued liabilities - - Deferred revenue - - - Long-term assets Net cash provided by (used for) operating activities 47,420,434 3,083,080 50,503,514 Cash flows from capital and related financing activities: Payments for gas reserves and other deferred charges (4,193,412) - (4,193,412) Purchases of property, plant and equipment (43,642,463) (1,265,349) (44,907,812) Sale of property, plant and equipment 316,598 125,628 442,226 Receipts (payments) on leases - - - Principal paid on revenue bonds (4,519,025) (4,519,025) tnterest paid on revenue bonds (5,229,781) (5,229,781) Principal paid on general obligation bonds and other debt (8,469,729) (8,469,729) Interest paid on general obligation bonds (7,983,273) (7,983,273) Issuance of revenue, G.O. and C.O. bonds 24,055,000 - 24,055,000 Refunds of pro-rata contracts (71,052) - (71,052) Deposits on pro-rata contracts 42,789 - 42,789 Passenger facility charges 1,552,654 - 1.552,654 Interest paid on long-term debt - Contributed capital 1,376,481 3.000,002 4,376,483 Net cash used for capital and related financing activities (46,765,213) 1,860,281 (44,904,932) Casa flows from noncapital and related financing activities: Operating transfers in from other funds 16,510.235 735,094 17,245,329 Operating transfers out to other funds (31,446,500) (548,119) (31,994,619) Short-term interfund borrowings (3,600,054) (1,460,325) (5,060,379) Advances from other funds (424,374) - (424,374) Payments received (made) on advances to (from) other funds 1,369,223 (857,901) 511.322 Cash grants and reimbursements - Beok Overdrafts Net cash provided by (used for) noncapital and related financing activities (17,591,470) (2,131,251) (19,722,721) Cash flows from investing activities: Proceeds from sales and maturities of investments 71,006,832 16,064,474 87,071,306 Purchase of investments (64,983,708) (18,593,644) (83.577,352) ln',erest earnings on cash and investments 6,838.645 1,370,961 8,209,606 Net cash provided by (used for) investing activities 12,861,769 (1,158,209) 11,703,560 Net increase (decrease) in pooled cash and cash equivalents (4,074,480) 1,653,901 (2,420,579) Pooled cash and cash equivalents at beginning of year 42,731,056 1.625,118 44,356,174 Pooled cash and cash equivalents at end of year $ 38,656.576 $ 3,279.019 $ 41,935,595 Supplemental cash flow information: Noncash capital improvements and other charges for the Enterprise Funds during fiscal year 1999-00 was $1,724,546. Noncash capital improvements and other charges for the Internal Service Funds during fiscal year 1999-00 was $507,226. 24 1< rwz a' , 50 .rr1 n 52 Component Units Totals Totals Component Reporting Entity Proprietary Types Units (Memorandum Only) Civic Lubbock, 2000 2000 1999 Inc. Citibus (5,357.365) $ (5,193�377) S 15.708,404 $ 23,960.106 $ 163,988 $ 1,696.181 1,705,623 22.763.414 20,747,157 9,442 103.790 2,403.371 666,764 103.790 1,199,376 297,127 - _ 12.764 10,878 (22,876)) (63,831) (92,234) (3,428,175) (57,565) (4,090,447) (422,055) 9,253 (13,623) (520,689) (524,105) 102,940 96,505 (617.194) 106,974 106,974 (64,504) (11, 118.673 759,946 9.383,549 (24,030) 19,508 08 740,438 (13.902) 2,401 203,588 203,588 (93,776) 30,966 17,955 17,955 12,473 17,955 - - (263) - (42,650) (42,650) (253,473) (42,6501 (3,270.257) 4697) (2,96, 47,538.817 40,965,091 305,560 ----�-' (4,193,412) (1,375,573) (49,339) (44,957,151) (39,527,597) (49,33- - 442,226 360,631 - _ (577,139) _ (4,519,025) (4,286,999) - (5,229,781) (5,785,019) (82,861) (8,552.590) (39,262,396) (82,861) - (13.436) (7,996,709) (4,613,778) (82,861) 24,055,000 63,223,769 - - _ (71,052) (70,673) 42,789 95,671 _ 1,552,654 1,587,267 - _ (3,904) (3,904) (3,904) 4,376,483 (18.298) 1,768,399 (145.636) 31904 (149,540) (45,054,472) (2� ) 17,245,329 13,699,058 - (31,994,619) (27,688,062) (5,060,379) 9,888,400 (424,374) (1,485,850) 511,322 - - 3,665,088(32,568) 3,665,088 3,665,088 3,198,776 32,568 (32,568) (32,568) 3,632,520 - 3,632.520 (16,090.201) (2,355,110) 87,071,306 54.260,739 - (83,577,352) (106,863,960) 16,779 8,226.385 6,500,819 16,779 - 16,779 11,720.339 (46,102,402) 16,779 358,359 535,062 _._ (1,885,517) (35,974,156) 176,703 331,062 44,687,798 80,661.954 331,624 - $ 358,359 $ 866,686 $ 42,802,281 $ 44,687,798 508,327 See accompanying notes to financial statements 25 CITY OF LUBBOCK Notes to Financial Statements September 30, 2000 Note Page L Summary of Significant Accounting Policies ......................................... 29 A. Reporting Entity ......................................... ... 29 ................................. B. Basis of Presentation - Fund Accounting .............................. C. Basis of Accounting ............. D. Budgetary Accounting..................................................................... 33 E. Encumbrances................................................................................. 34 F. Assets, Liabilities and Fund Equity ................................................. 34 G. Risk Management............................................................................ 35 H. Revenues, Expenses and Expenditures ............................................ 36 L Totals (Memorandum Only)........................................................... 37 J. Reclassification................................................................................38 II. Stewardship, Compliance and Accountability ....................................... 38 A. Retained Earnings/Fund Balance Deficits ..................... III. Detail Notes on all Funds and Account Groups .................................... 39 A. Pooled Cash and Investments.......................................................... 39 B. Interfund Transactions.................................................................... 42 C. Deferred Charges............................................................................. 42 D. Property, Plant and Equipment...................................................... 43 E. Retirement Plans............................................................................. 44 F. Deferred Compensation.................................................................. 50 G. Surface Water Supply...................................................................... 50 H. Other Enterprise Fund Activities.................................................... 50 26 <-1 0 W r r_1 CITY OF LUBBOCK Notes to Financial Statements September 30, 2000 Note Page I. Segment Information - Enterprise Funds ......................................... 50 J. Long -Term Debt............................................................................. 52 K. Advanced Defeasement................................................................... 56 L. Accrued Insurance Claims............................................................... 57 M. Landfill Closure and Postclosure Care Cost .................................... 57 IV. Contingent Liabilities............................................................................ 58 A. Federal Grants................................................................................. 58 B. Litigation.........................................................................................58 C. Site Remediation................................................................. 59 D. West Texas Municipal Power Authority ......................................... 59 V. Recently Issued Pronouncements.......................................................... 59 27 28 F CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Lubbock, Lubbock County, Texas (City) have been prepared in conformity with Generally Accepted Accounting Principles (GAAP) as applicable to governmental �^ units. The Government Accounting Standards Board (GASB) is the acknowledged standard -setting body for establishing governmental accounting and financial reporting principles. With respect to proprietary activities, including component units, the City has adopted GASB Statement No. 20, "Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting." The City has elected to apply all applicable GASB pronouncements as well as Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) Opinions, issued on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements. The more significant accounting policies are described below. A. REPORTING ENTITY In June, 1991, the GASB issued Statement No. 14, "The Financial Reporting Entity". In n accordance with this statement, the City has presented those entities, which comprise the primary government along with its discretely presented Component Units in the fiscal year 2000 genera - purpose financial statements. The City is a municipal corporation governed by a Mayor -Council form of government. As required by GAAP, the general purpose financial statements present the reporting entity which consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion could cause the City's general purpose financial statements to be misleading or incomplete. BLENDED COMPONENT UNITS The following Component Unit has been presented as a blended Component Unit because although it is legally separate, the Component Unit is so intertwined with the primary government that it is, in substance, a part of the primary government. The Urban Renewal Agency (URA) was formed to provide Urban Renewal Services for the City of Lubbock, that include rehabilitation of housing, acquisition of housing, and disposition of land. The Urban Renewal Agency Board is composed of nine members appointed by the Mayor, with the consent of City Council, and acts only in an advisory capacity to the City Council. All powers t^ to govern the component unit are held by the City Council such that, the City Council is essentially the governing body for the Urban Renewal Agency. Financial activity of the Component Unit is reported in the Community Development Expendable Trust Fund. DISCRETELY PRESENTED COMPONENT UNITS The Component Unit columns in the combined financial statements include the financial data of the City's other Component Units. They are reported in a separate column to emphasize that they are legally separate from the City. The following Component Units are included in the reporting entity because the primary government is financially accountable and is able to impose its will on the organization. A primary government has the ability to impose its will if it can significantly influence operations and/or activities of an organization. City Transit Management Co., Inc. dba Citibus (Citibus) In 1998, the City renewed a five year management agreement with McDonald Transit Associates, Inc. to manage and operate a city owned transportation system (Citibus). Citibus is a legally separate entity. The City Council appoints the seven -member Lubbock Public Transit Advisory Board, and approves the annual budget. The City is responsible for funding deficits. Citibus is reported as a proprietary type component unit. 29 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUT IlV Y OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY (CONTINUED) Civic Lubbock, Inc. promotes the cultural and educational usage of the Lubbock Memorial Civic Center and Lubbock Municipal Coliseum. The 7 member board is appointed 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 Market Lubbock, Inc. (Market Lubbock Inc.) On October 10, 1995, the Lubbock City Council created Market Lubbock, Inc., a non-profit corporation responsible for creating, managing, operating and supervising programs and activities for the purpose of promoting, assisting and enhancing economic development within and around the City of Lubbock. Market Lubbock, Inc. is a legally separate entity. The City Council appoints the seven -member board. The operation is funded mostly by the equivalent of three cents of the property tax rate. Market Lubbock, Inc. is reported as a governmental type component unit. The combined financial statements present financial statements for each of the three discretely presented component units. Copies of financial statements of the individual component units may be obtained from their respective administrative offices listed below: Administrative Offices Citibus Civic Lubbock, Inc Market Lubbock, Inc 801 Texas 1501 Ch Street 1301 Broadway Lubbock, Texas Lubbock, Texas Suite 200 Lubbock, Texas RELATED ORGANIZATIONS The City's officials are also responsible for appointing the members of the boards of other organizations but the City's accountability for these organizations does not extend beyond making the appointments. The following are related organizations, which have not been included in 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 the Authority is independent of the City of Lubbock. The Authority is not fiscally dependent on the City of Lubbock and City Council is not able to impose its will on the entity. The City of Lubbock has no responsibility for debt issued by the Authority. Lubbock Firemen's Retirement and Relief Fund (LFRRF) operates under provisions of the Firemen's Relief and Retirement Laws of the State of Texas for purposes of providing retirement benefits for the City's firefighters. Its affairs are governed by the Mayor's designee, the Finance Manager, three firefighters elected by members of the LFRRF, and two at -large members elected by the Board. It is funded by contributions by the firefighters and matched by contributions from the City. As provided by enabling legislation, the City's responsibility to the LFRRF is limited to marching monthly contributions made by the members. Title to assets is vested in the LFRRF and 30 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A REPORTING ENTITY (CONTINUED) not in the City. The State Firemen's Pension Commission is the governing body over the LFRRF; thus, the City of Lubbock does not significantly influence operations. Lubbock Arts Alliance, Inc. (Alliance) is dedicated to the promotion and improvement of the arts and sponsoring the annual 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 Facilities 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 Finance 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 seven -member board. It is the opinion of the City Attorney that LHFC is independent of the City. Indebtedness 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, along with three other cities in the West Texas area, entered into an agreement with the West Texas Municipal Power Authority ("WTMPA") to purchase power generated by a co -generation facility to be constructed with the proceeds obtained from the issuance of $28,910,000 of revenue bonds issued by WTMPA. The contractual arrangement with WTMPA calls for each participating city to guarantee payments of the WTMPA bond debt service in the event the net revenues of the power sales contracts with the participating cities is not adequate to cover the debt service. The City's percentage of the debt service guaranteed is 85.21%. The City has an ongoing financial interest in WTMPA through the contractual arrangement to purchase generated power 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 venture by purchasing the power generated by WTMPA which will benefit the citizens of Lubbock. Financial information for WTMPA can be obtained from the City of Lubbock, P.O. Box 2000, Lubbock, Texas 79401, (Attention Managing Director of Financial Services). During the year ended September 30, 2000, the City paid $663,038 to WTMPA for purchased power and was not required to subsidize any debt service payments. B. BASIS OF PRESENTATION - FUND ACCOUNTING The financial transactions of the City are recorded in individual funds and account groups. Each fund is accounted for by providing a separate set of self -balancing accounts that comprise its assets, liabilities, reserves, fund equity, revenues, and expenditures/expenses. The various funds are classified into three categories: governmental, proprietary and fiduciary. The following fund types and account groups are used by the City: 31 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B. BASIS OF PRESENTATION - FUND ACCOUNTING (CONTINUED) GOVERNMENTAL FUND TYPES General Fund is the general operating fund of the City. It is used 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 specific revenue sources (other than special assessments, expendable trusts, or major capital projects) that are legally restricted to expenditures for specified purposes. The Debt Service Fund is used to account for the accumulation of financial resources for the payment of interest and principal on the general long-term debt of the City. Capital Project Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Proprietary Funds or Trust Funds). PROPRIETARY FUND TYPES Enterprise Funds are used to account for operations of the City (a) that are financed and operated in a manner similar to private business enterprises, where the intent is to provide goods or services to the general public on a continuing basis, the cost of which is to be recovered in whole or pan through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Internal Service Fund is used to account for the financing of goods and services provided by one department or agency to other departments or agencies of the City, or to other 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 accounted for in fiduciary fund types. Fiduciary fund types are comprised of. Expendable Trust Funds account for assets received and expended 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 a custodial trustee. They are accounted for on the modified accrual basis of accounting with respect to asset and liability recognition, but do not have a measurement focus since agency funds do not account for operations. ACCOUNT GROUPS General Fixed Assets Account Group represents a summary of the fixed assets of the City, other than those fixed assets reported in the Proprietary Funds. Capital expenditures of the Capital Projects Fund are the primary source from which the detailed records of the general fixed assets account group are developed. Capital expenditures are carried in this account group as construction in progress until the projects are completed and are then capitalized by function and classification. 32 Ea CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B. BASIS OF PRESENTATION - FUND ACCOUNTING (CONTINUED) Infrastructure fixed assets such as streets, highways, bridges, sidewalks, street lighting, traffic poles and signals, and storm sewers, are accounted for in the General Fixed Assets Account Group and reported in the Schedule of General Fixed Assets. General fixed assets are not depreciated and are recorded at historical cost at the time of acquisition. Donated assets are recorded at their fair market value on the date donated. General Long -Term Debt 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 benefits, insurance claims and rebatable arbitrage, other than those reported in the Proprietary Funds. C. BASIS OF ACCOUNTING 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, other than interest on long-term debt in the Debt Service Fund, which is recorded when due, are recorded when the liability is incurred. Revenues are recorded when received in cash unless susceptible 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 under the modified accrual basis are property tax, sales tax, franchise tax, hotel/motel tax, certain grant 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 balance sheet. Net current assets or fund balance is considered a measure of available spendable resources. The flow of financial resources measurement focus is concerned primarily with the measure of interperiod equity (e.g. whether current year revenues were sufficient to pay for current year services). Enterprise funds and internal service funds are accounted for using an economic resource measurement focus. All assets and liabilities including fixed assets and long-term debt are included on the balance sheet. Fund equity is segregated into its contributed capital and retained earnings components. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. D. BUDGETARY ACCOUNTING Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds except for special revenue funds, debt service funds, and capital project funds, which adopt project -length budgets. All annual appropriations lapse at fiscal year end. Annually, the City Manager submits to City Council a proposed operating budget for the upcoming fiscal year. Public hearings are conducted to obtain taxpayer comments, and the budget is legally enacted through passage of an ordinance by the City Council. Budgetary control is maintained by department and by the following category of expenditures: personnel services, supplies, maintenance, other charges, and capital outlay. All budget supplements must be approved by the City Council. Administrative transfers and increases or decreases in accounts within categories may be made by management as long as expenditures do 33 CITY OF LUBBOCK., TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. BUDGETARY ACCOUNTING (CONTINUED) not exceed budgeted appropriations at the fund level. Budgeted amounts shown are from the revised budget, adopted by resolution on June 8, 2000. During the year, the budget was revised to reflect a 2.6% increase in General Fund operating revenues and a .18% decrease for the General Fund operating expenditures from the original budget. Each year, in accordance with State law, the City Council sets an ad valorem tax levy for a sinking fund (General Obligation Debt Service) which, with cash and investments in the fund, would be sufficient to pay all the bonded indebtedness and interest due in the following fiscal year. E. ENCUMBRANCES At the end of the year, encumbrances for which goods and/or services have not been received are canceled. At the beginning of the next year, management reviews all open encumbrances. During the revised budget process, budgets may be re-established. On October 1, 2000, 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 resources of the various funds in order to facilitate the management of cash and enhance investment earnings. Records are maintained that reflect each fund's equity in the pooled account. GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools became effective for the year September 30, 1998. This statement requires certain investments to be carried at fair value with the change in fair value included in the determination of investment income shown in the operating statement. At September 30, 2000, the difference between amortized cost and market value was not significant such that the carrying value of the portfolio is considered to approximate fair market value. Cash and Cash Equivalents - Cash equivalents are defined as short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less when purchased which present an insignificant risk of changes in value because of changes in interest rates. Property Tax Receivable - Property taxes are assessed and liens attach on valuations as of January 1, levied on October 1 of each year, and become delinquent February 1 of the following year. Uncollected taxes, net of the estimated uncollectible amount, are recorded as receivable in the General, Special Revenue and Debt Service Funds. Deferred revenue is recorded in an amount equal to net delinquent taxes receivable, less taxes collected within 60 days after the end of the fiscal year. Enterprise Fund Receivable - Within the Electric, Water, Sewer and Solid Waste Enterprise Funds, services rendered but not billed as of the close of the fiscal year, are not considered significant. Amounts billed are reflected as accounts receivable net of an allowance for uncollectibles. Inventories - Inventories consist of expendable supplies held for consumption. Inventories are valued at cost using the 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 items are accounted for under the consumption method. 34 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F. ASSETS, LIABILITIES AND FUND EQUITY (CONTINUED) Restricted Assets - Certain enterprise fund assets are restricted for construction which has been funded through long-term debt, therefore, retained earnings have not been reserved for these amounts. The excess of other restricted assets over related liabilities are included as retained earnings reserved for capital projects, rate stabilization, economic development and bond indentures. Fixed Assets and Depreciation - General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, 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 assets are recorded at cost. Donated assets are recorded at the fair value on the date of donation. Assets in the General Fixed Assets Account Group are not depreciated. Property, plant and equipment of the Proprietary Funds are stated at con or estimated market value for donated assets. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Improvements 10-50 years Buildings 15-50 years Equipment 3-15 years Interest Capitalization - The City capitalizes interest cost in its Enterprise Funds on bonds used for fixed asset construction, net of interest income earned on the temporary investment of the tax- exempt bond proceeds. Interest costs incurred during the year were approximately $16,800,000. No interest was capitalized during the year ended September 30, 2000. Advances to Other Funds - 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, which indicates they do not constitute available spendable resources. G. RISK MANAGEMENT The City is primarily self -insured for medical and dental coverage. The liability for incurred claims represents estimates for medical and dental claims incurred as of September 30, 2000. Some of these claims were reported at September 30, 2000, and others which are incurred but not reported (IBNR), may not be reported until a later date. IBNR is actuarially determined by the City's independent insurance administrator. In order to mitigate the risk associated with the City's medical coverage, the City purchased individual stop loss coverage of $150,000. In April 1999, the City purchased worker's compensation coverage from a third party. Prior to April 1999, the City was self insured for worker's compensation claims. Any claims outstanding in April 1999 are the responsibility of the City. The insurance purchased from the third party insurer covers worker's compensation claims from the initial dollar. The City's self -insured general liability program is on a cash flow basis, which means that the service contractor processes, adjusts and pays claims from a deposit provided by the City. The City accounts for the general liability program in the Risk Management Fund (an Internal Service Fund) 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. For self -insured coverage, the Risk Management Fund established claim liabilities based on estimates of the ultimate cost of claims (including future claim adjustment expenses) that have been 35 eR, CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES G. RISK MANAGEMENT (CONTINUED) reported but not settled, and of claims that have been incurred but not reported. The length of time for which such costs must be estimated varies depending on the coverage involved. Estimated amounts of salvage and subrogation and reinsurance recoverable on unpaid claims are deducted from the liability for unpaid claims. Because actual claim costs depend on such complex factors as inflation, changes in doctrines of legal liability, and damage awards, the process used in computing claim liabilities does not necessarily result in an exact amount, particularly for general liability coverage. Claim liabilities are recomputed periodically using a variety of actuarial and statistical techniques to produce current estimates that reflect recent settlements, claim frequency, and other economic and social factors. Adjustments to claim liabilities are charged or credited to expense in the period in which they are incurred. Additionally, property and boiler coverage is accounted for in the Risk Management Fund. The property insurance policy was purchased from an outside insurance carrier. The policy has a $250,000 deductible per occurrence, and the boiler coverage insurance deductible is up to $100,000 dependent upon the unit. Premiums are charged to funds based upon policy premiums and reserve payments. Other small insurance policies, such as surety bond coverage and miscellaneous floaters, are accounted for in the Risk Management Fund. Funds are charged expenditures based on premium amounts and administrative charges. The City has had no significant reductions in insurance coverage during the year. Settlements in the current year and preceding two years have not exceeded insurance coverage. H. REVENUES EXPENSES AND EXPENDITURES Interest Income on pooled cash and investments is allocated monthly based on the percentage of a fund's average daily equity in pooled cash and investments to the total average daily pooled equity in pooled cash and investments, except for certain Trust and Agency Funds, certain Special Revenue Funds, Governmental Capital Project Funds, and certain Internal Service Funds. The interest income on pooled cash and investments of these fonds is reported in the General Fund or the Debt Service Fund. Sales Tax Revenue for the City results from an allocation of 1.125% of the total sales tax levy of 7.875%, which is collected by the State of Texas and remitted to the City monthly. The tax is collected by the vendor and required to be remitted to the State by the 20th of the month following collection. The tax is then paid to the City by the loth of the next month. On January 21, 1995, voters approved a 1/8 cent increase in sales tax to reduce the property tax rate which went into effect October 1, 1995. Grant Revenue from federal and state grants is recognized to the extent that the related expenditure has been incurred and reimbursement requested. Interfund Transactions or quasi -external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from that fund that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transactions except quasi -external transactions, reimbursements, temporary receivables and payables, and residual equity transfers are reported as operating transfers. 36 W CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H. REVENUES EXPENSES AND EXPENDITURES (CONTINUED) Compensated Absences consists of vacation leave and sick leave. Vacation leave of 10-20 days is granted to all regular employees dependent upon the date employed, years of service, and civil service status. Currently, up to 40 hours of vacation leave may be "carried over" to the next calendar year. The City is obligated to make payment upon retirement or termination for any available, unused vacation leave. Sick leave for employees is accrued at 1 '/a days per month with a maximum accrual status of 200 days. After 15 years of continuous full time services for non -civil service personnel, vested sick leave is paid on retirement or termination 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 retirement or termination. The Texas Civil Service laws dictate certain benefits and personnel policies above and beyond those policies of the City. The liability for the accumulated vacation and sick leave is recorded in the general long-term debt account group for governmental fund employees and as a noncurrent liability in the proprietary funds for proprietary fund employees. Management has determined that the current portion of this liability is not significant to the overall financial position of the City. Post Employment Benefits for retirees of the City of Lubbock include the option to purchase health and life insurance benefits at their own expense. Amounts to cover premiums and administrative costs, with an incremental charge for reserve funding, are determined by the City's health care administrator. Employer contributions are funded on a pay-as-you-go basis. Financial activity is reported in the Health Insurance Internal Service Fund. The following schedule reflects participation in the City's health care program: 2000 Participants Active 1790 Retired 445 Cobra 10 2000 Active Claims $6,334,252 Retired Claims 2,181,916 Cobra Claims 20,359 Total Claims $8,536,527 % of Employee Groups to total claims Active 74.20% Retired 25.56% Cobra .24% Total % 100.00% I TOTALS (MEMORANDUM ONLY) The Totals (Memorandum Only) columns represent an aggregation of the combined financial statements and do not represent consolidated financial information. Data in those columns do not 37 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Y TOTALS (MEMORANDUM ONLY) (CONTINUED) represent financial position and results of operations, in conformity with GAAP and are presented only to facilitate analysis. T. RECLASSIFICATION Certain 1999 amounts have been reclassified to conform to 2000 presentation. NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. RETAINED EARNINGS/FUND BALANCE DEFICITS The deficit of $70,757 in the Library Expendable Trust Fund is the result of a timing difference between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not measurable at September 30, 2000, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $41,908 in the Community Services Expendable Trust Fund is the result of a timing difference between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not considered measurable at September 30, 2000, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $449,474 in the Police Expenditures is the result of a timing difference between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not considered measurable at September 30, 2000, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $392,886 in Other Grant is the result of timing differences arising between the incurrence of expenditures and the related filing of requests for reimbursement of those expenditures. These funds have not been accrued, as certain reimbursement amounts are not considered measurable at September 30, 2000, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit in the Golf Enterprise Fund of $1,812,264 is the result of placing itself in a more competitive position through non -capital course equipment improvements. On October 13, 1994, the City contracted with Fore Star Golf, Inc. for management services to be provided for the City's operations. The management agreement is effective through December 31, 2014. Over the term of the contract, Fore Star Golf, Inc. will receive a portion of the golf course revenues based on a sliding scale. The deficit of $1,098,454 in the Internal Service Management Information Fund results from the practice of not recovering depreciation through user charges. Management is evaluating user charges in order to recover depreciation, financing and capital costs, and the retained earnings deficit. The deficit of $339,751 in the Internal Service Communications Fund results from the practice of not recovering depreciation through user charges. Management is evaluating user charges in order to recover depreciation and recover the retained earnings deficit. 38 no CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A RETAINED EARNINGS/FUND BALANCE DEFICITS (CONTINUED) 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 A. POOLED CASH AND INVESTMENTS The City's investment polices are governed by State statute and City ordinances. Permissible investments include direct obligations of the United States or its agencies and instrumentalities, certificates of deposit, prime domestic banker's acceptances, commercial paper, repurchase agreements, and deposits in a qualifying investment pool. Collateral is required for demand deposits, certificates of obligation, and repurchase agreements at 102% of all amounts not covered by Federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the state and its subdivisions. The City's deposits and investments are categorized below to indicate the level of risk assumed by the City at September 30, 2000. INVESTMENT CATEGORY OF CREDIT RISK (1) Insured, registered or in securities held by the entity or its agent in the entity's name. (2) Uninsured and unregistered, with securities held by the counter party's trust department or its agent in the entity's name. (3) Uninsured and unregistered, with securities held by the counter party or by the trust department or agent but not in the entity's name. r. DEPOSIT CATEGORY OF CREDIT RISK (A) Insured or collateralized with securities held by the entity or by its agent in the entity's name. (B) Collateralized with securities held by the pledging financial institution's trust department or agent in the entity's name. (C) Uncollateralized. Pooled Cash and Investments The City's pooled cash and investments consist of deposits with financial institutions, certificates of deposit, U.S. government and agency securities, commercial paper, and deposits in qualifying non -regulated money market investment pools (Logic and TexPool). These investments have varying maturities ranging from one day to three years. The weighted average maturity of the total portfolio is kept to under two years. The following is a schedule of the City's pooled cash �., and investments at September 30, 2000: M 39 W CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. POOLED CASH AND INVESTMENTS (CONTINUED) Category Carrying Investments (1) U. S. Treasury and Agency Obligations - Primary Government $95,484,978 $ Commercial Paper - Primary Government 31,604,280 Mutual Funds - Primary Government - Total Investments - Primary Government U.S. Treasury and Agency Obligations/Other- Component Units 4,041,711 Mutual Funds - Component Units - Total Investments - Component Units Total Investments - Reporting Entity $ $95,484,978 31,604,280 63,314,846 190,404,104 4,041,711 238,629 4,280,340 $194,684,444 40 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS A POOLED CASH AND INVESTMENTS (CONTINUED) Cash and Category Carrying Bank I Bank Deposits (A) (B) (C) Amount Balance Cash and Bank Deposits -Primary Government $2,720,779 S - $ - $1,475,758 $2,720,779 Cash and Bank Deposits -Component Units 660,992 371,847 696,264 1,362,799 1,729,103 Cash and Bank Deposits - Reporting Entity $3,381,771 $ 371,847 $ 6��264 $2 $4,449,882 Cash and Investments are reported in the financial Statements as: Primary Component Reporting Government Units Entity Cash and Cash Equivalents - Non- - Restricted $9,146,305 $1,272,468 $ 10,418,773 Cash and Cash Equivalents - Restricted 39,254,530 118,615 39,373,145 Total Cash and Cash Equivalents 48,400,835 1,391,083 49,791,918 Investments - Non Restricted 75,248,673 4,252,056 79,500,729 Investments - Restricted 68,230,355 - 68,230,355 Total Investments 143,479,028 4,252,056 147,731,084 Total Cash and Investments $191,879,863 $5,643,139 $197,523,002 E2 Mo a Go CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS B. INTERFUND TRANSACTIONS Interfund receivables and payables consisting of due to/from and advances to/from other funds at September 30, 2000 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 Sewer Enterprises Solid Waste Enterprise Airport Enterprise Golf Enterprise Stormwater Enterprise Internal Service: Fleet Maintenance Central Warehouse Print Shop & Office Store Radio Shop Management Information Investment Pool Communications Expendable Trust Funds: Community Development Community Services Police Library Total Primary Government C. DEFERRED CHARGE Interfund Interfund Receivables Pavables $10,827,659 $ 650,000 1,337,265 1,578,974 4,500,000 232,190 120,000 1,910,224 2,017,046 50,000 30,400 12,000 254,482 748,608 3,075 240,885 1,119,717 36,272 150,000 121,349 $12,970,073 S 12,970,073 The total deferred charges of $11,717,554 includes $3,877,778 which represents an advertising contract with the United Spirit Arena. The advertising will begin with the opening of the sports arena and will continue for 30 years. Amortization of this amount began in fiscal 2000 with the opening of the arena. The deferred charges also include an amount of $1,941,194 at September 30, 2000, which represents prepayments for two separate contracts for future delivery of natural gas as contracted for by the City. In 1988, a contract was entered into for the purchase of proven and unproven reserves, totaling 2,000,000 MMBTU at $1.56 per MMBTU with an option, which the City has exercised, to purchase an additional 2,000,000 MMBTU at the same price. The remaining amount of prepayment relative to this contract at September 30, 2000 is $1,643,133. Quantities in excess of the first 4,000,000 MMBTU can then be purchased at market value. During 1988, proven reserves of 338,000 MMBTU were purchased at the $1.56 rate. The remaining reserves are being purchased as proven. One-half the rate, or SJ8 per MMBTU, is paid upon proven determination of the reserves and the balance is to be paid upon delivery. The prepayments are to be expensed as the gas is taken until the prepaid units of gas have been consumed. At September 30, 2000 and 1999, 1,317,934 42 0 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS C. DEFERRED CHARGE (CONTINUED) ell, MMBTU had been delivered, and remaining proven reserves at September 30, 2000 and 1999 were 2,104,273 MMBTU. On August 25, 1994, the City contracted for the purchase of natural gas to be delivered in future years. An amount of $298,061 is included in the $1,941,194 which represents a deposit on future gas deliveries. In November 2000, the City received a refund of this deposit. During fiscal 2000, $3,000,000 was transferred to the Management Information Internal Service Fund from the Electric Enterprise Fund to cover costs of implementing a new utility billing system. This amount will be amortized over 7 seven years once the new billing system has been placed in service. The remaining deferred charges of $2,898,582 represent infrastructure and other economic development costs being amortized over 5 years. D. PROPERTY PLANT AND EQUIPMENT General fixed assets of the City for the year ended September 30, 2000, are as follows: �. Balance Balance 10-1-99 Additions* Deletions* 9-30-00 Land S 7,966,428 $ . $ 33,200 S 7,933,228 Buildings and improvements 39,230,338 2,970,755 1,140,314 41,060,779 Other Improvements 132,964,711 3,855,433 1,145,384 135,674,760 Equipment 32,105,140 9,720,133 5,100,122 36,725,151 Construction in Progress 40,488,559 14,296,636 14,394,734 40,390,461 ell, Total $252,755,176 $30,842,957 $21,813,754 $261,784,379 * Includes transfers Construction in progress is composed of the following: Project Expended Unexpended Authorization 9-30-00 Balance Fire Station S 10,222,047 $ 7,458,817 S 2,763,230 Park Improvements 6,358,896 863,368 5,495,528 Street Improvements 35,942,202 13,519,996 22,422,206 Permanent Street Maintenance 1,700,000 1,637,865 62,135 General Permanent Capital Projects 7,299,813 6,206,911 1,092,902 General Permanent Capital Maintenance & Other 18,833,174 10,703,504 8,129,670 oftTotal Life -to -Date Activity S 80,356,132 $ 40,390,461 S 39,965,671 43 E0 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL. NOTES ON ALL FUNDS AND ACCOUNT GROUPS D. PROPERTY PLANT AND EQUIPMENT (CONTINUED) General fixed asset account group for component units for the year ended September 30, 2000, are follows: Balance Balance 10-01-99 Additions Deletions 9-30-00 Equipment $ 501,728 $ 18,814 $ . $ 520,542 Property, plant, and equipment recorded in the City's various proprietary funds (including component units) as of September 30, 2000, is as follows: Total Reporting Internal Total Entity Enterprise Service Proprietary Component Proprietary Fund Fund Fund Type Units Fund Type Land $ 30,837,648 $ 71,182 $ 30,908,830 $ 520,403 $ 31,429,233 Buildings 82,752,391 1,624,312 84,376,703 4,026,735 88,403,438 Other Improvements 435,255,438 197,471 435,452,909 1,179,543 436,632,452 Equipment 51,538,373 14,903,623 66,441,996 16,971,776 83,413,772 Construction in Progress 87,327,433 21950,748 90,278,181 - 90,278,181 Total 687,711,284 19,747,336 707,458,620 22,698,457 730,157,077 Less: Accumulated Depreciation (203 971,227) (11,805,720) (215,776,947) (8,126,861) (223,903,808) Net $483,740,056 $ 7,941,616 $491,681,672 $14,571,596 $ 506,253,268 E. RETIREMENT PLANS Each qualified employee is included in one of two retirement plans in which the City of Lubbock participates. These are the Texas Municipal Retirement System (TMRS) and the Lubbock Firemen's Relief and Retirement Fund (LFRRF). The City does not maintain the accounting records, hold the investments or administer either fund. 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 (with the exception of firefighters) through a non-traditional, joint contributory, hybrid defined benefit plan in the state- wide TMRS, one of 731 administered by TMRS, an agent multiple -employer public employee retirement system. Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City -financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100%, 150%, or 200%) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits no CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) for the 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 and if the employee's salary had always been the average of his salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer -financed monetary credits with interest 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. A member is vested after 10 years. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Contributions The contribution rate for the employees is 7% and the City matching ratio is currently 2 to 1, both as adopted by the governing body of the City. Under the state law governing TMRS, the actuary annually determines the City contribution rate. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his/her retirement becomes effective. The prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 25-year amortization period. The unit credit actuarial cost method is used for determining the City contribution rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that is the basis for the rate and the calendar year when the rate goes into effect. (i.e. December 31, 1999 valuation is effective for rates beginning January 2001). Actuarial Assumptions The actuarial assumptions for the 1999 valuations are as follows: Acturial cost method: Unit credit Amortization method: Level percent of payroll Remaining amortization period 25 years- open period Asset valuation method: Amortized cost Investment rate of return: g% Projected salary increases: None Includes inflation at: None Cost of Living adjustments: None 45 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) TEXAS MUNICIPAL RETIREMENT SYSTEM REQUIRED SUPPLEMENTAL DISLOSURE 3 YEAR HISTORICAL SCHEDULE OF ACTUARIAL LIABILITIES AND FUNDING PROGRESS Unfunded Actuarial As of Actuarial Accrued December 31 Actuarial Value Accrued Percentage Liability ofAssets Liability Funded (UAAL) 1997 $119,895,026 $153,396,020 78.2% $33,500,994 1998 132,735,475 162,668,614 81.6% 29,933,139 1999 147,042,049 181,439,657 81.0% 34,397,608 UALL as a %, Annual Required As of Annual Covered Of Covered Contribution Contribution December 31 Payroll Payroll (ARC) 1997 $45,015,150 74.4% $7,037,656 $7,037,656 199E 46,619,677 64.2% 7,149,029 7,149,029 1999 51,627,837 66.6% 7,794,560 7,794,560 The City of Lubbock is one of 731 municipalities having the benefit plan administered by TMRS. Each of the municipalities have an annual, individual actuarial valuation performed. All Assumptions for the December 31, 1999, valuations are contained in the 1999 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153. LUBBOCK FIREMEN'S RELIEF AND RETIREMENT FUND (LFRRF) Plan Description The Board of Trustees of the LFRRF is the administrator of a single -employer defined benefit pension plan. This pension fund is a trust fund. It is reported by the City of Lubbock as a related organization and is not considered to be a part of the City financial reporting entity. Firefighters in the Lubbock Fire Department are covered by the LFRRF. The LFRRF provides service retirement, death, disability and withdrawal benefits. These benefits vest after 20 years of credited service. Employees may retire at age 50 with 20 years of service. A reduced early service retirement benefit is provided for employees who terminate employment with 20 or more years of service. A partially vested benefit is provided for firefighters who terminate employment with at least 10 but less than 20 years of service. A partially vested benefit is provided for firefighters who terminate employment with at least 10 but less than 20 years of service. The Plan Effective November 1, 1999 provides a monthly normal service retirement 46 Ea CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) benefit, payable in a Joint and Two -Thirds to Spouse form of annuity, equal to 70.02% of Final 48- Month Average Salary Plus $283.50 per month for each year of service in excess of 20 years. A partially vested benefit is provided for firefighters who terminate employment with at least 10 but less than 20 years of service. The Plan Effective November 1, 1999 provides a monthly normal service retirement benefit, payable in a Joint and Two -Thirds to Spouse form of annuity, equal to 70.02% of Final 48-Month Average Salary Plus $283.50 per month for each year of service in excess of 20 years. There is no provision for automatic postretirement benefit increases. The fund has the authority to provide, and has periodically 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 provides the authority and procedure to amend benefit provisions. Contributions Required and Contributions Made 1. The contribution provisions of this plan are authorized by TLFFRA. TLFFRA provides the authority and procedure to change the amount of contributions determined as a percentage of pay by each firefighter and a percentage of payroll by the City. 2. While the contribution requirements are not actuarially determined, state law requires that each plan of benefits adopted by the fund must be approved by an eligible actuary. The actuary certifies that the contribution commitment by the firefighters and the City provides an adequate financing arrangement. Using the entry age actuarial cost method the plan's normal cost contribution rate is determined as a percentage of payroll. The excess of the total contribution rate over the normal cost contribution rate is used to amortize the plan's unfunded actuarial accrued liability, and the number of years needed to amortize the plan's unfunded actuarial liability is determined using a level percentage of payroll method. The costs of administering the plan are financed from the trust. 3. The funding policy of the Lubbock Firefighter's Relief and Retirement Fund requires contributions equal to 11% of pay by the firefighters and contributions by the City based on a formula which causes the City's contribution rate to fluctuate from year to year. The December 31, 1998 actuarial valuation (most recent) assumes that the City's contributions will average 15% of payroll in the future. Annual Pension Cost For the fiscal year ending September 30, 2000, the City of Lubbock's annual pension cost of S1,852,835 for the Lubbock Firefighter's Relief and Retirement Fund was equal to the City's required and actual contributions during the year. While the required contributions were not actuarially determined, the plan of benefits has been approved by the Board's actuary as having an adequate financing arrangement based on the level of the firefighter and City of Lubbock contribution rates. The funding policy of the fund requires the firefighters to contribute 11% of pay and the City to contribute based on a formula which causes the City contribution rate to fluctuate from year to year. These required contributions were reflected in the the December 31, 1998, (most recent) actuarial valuation, which satsified the parameters of the Governmental Accounting Standards Board (GASB) Statement No. 27. 47 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) 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 a five-year smoothed fair -market value of assets. The actuarial assumptions included an investment return assumption of 8.5 % per year (net of administrative expenses), projected salary increases including promotion and longevity averaging 6% per year over a 25 year career, and no postretirement cost -of -living adjustments. An inflation assumption of 4% per year is included in the investment return and salary increase assumptions. The unfunded actuarial accrued liability (UAAL) is amortized with the excess of the assumed total contribution rate over the normal cost rate. The number of years needed to amortize the UAAL is determined using an open, level percentage of payroll method, assuming that the payroll will increase 4% per year, and was 30 years as of the December 31, 1998 (most recent) actuarial valuation based on the plan provisions effective November 1, 1999. Further details concerning the financial position of the LFRRF and the latest actuarial valuation are available by contacting the Board of Trustees, LFRRF, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457. Trend Information Annual Pension Percentage of APC Net Pension Fiscal Year Ending Cost (APC) Contributed Obligation 9/30/98 $1,586,233 100 9/30/99 1,745,357 100 - 9/30/00 1,852,835 100 LUBBOCK FIREMEN'S RELIEF AND RETIREMENT FUND ANALYIS OF FUNDING PROGRESS Entry Age UAAL as a Actuarial Unfunded Percentage of Actuarial Actuarial Accrued AAL Funded Annual Covered Valuation Value of Liability Date (UAAL) Ratio Covered Payroll Assets 1 (AAL) (2) (1-2) (1/2) Payroll 3 2 1 /3 12/31/94 $57,532,897 $64,634,282 $7,101,385 89.0% $8,958,331 79.3% 12/31/961,2 73,626,537 80,105,898 6,479,361 91.9 9,223,974 70.2 12/31/981,3 90,364,681 97,533,314 7,168,633 92.7 10,290,190 69.7 1 Economic and demographic assumptions were revised. 2 Changes in plan benefit provisions were effective December 20, 1995, March 3C, 1996 and November 1, 1997. 3 Reflects changes in plan benefit provisions effective November 1, 1999 4 The covered payroll is based on estimated annualized salaries used in the valuation. (a) The City has adopted the option of the biennial actuarial valuation provision of GASB 27. The information shown is the most recent available. The next actuarial valuation will be as of December 31, 2000. 48 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS F. DEFERRED COMPENSATION All" The City offers its employees three deferred compensation plans created in accordance with Internal Revenue Code ('IRC") Section 457. The plans, available to all City employees, permit them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. Effective August 20, 1996, the laws governing IRC Section 457 deferred compensation plans were changed to state that new IRC Section 457 plans will not be considered eligible plans unless all assets and income of the plan are held in trust for the exclusive benefit of the participants and their beneficiaries. Existing plans are required to comply with the new requirement by January 1, 1999. In response to the law changes, the GASB issued Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. This statement requires that the City's deferred compensation plans be reported in the financial statements as an expendable trust fund. In management's opinion, the level of administrative services provided by City staff warrants inclusion of the plans in the financial statements as such. The provisions of this statement were implemented in fiscal 1999 and resulted in a transfer from the Deferred Compensation agency fund to the Deferred Compensation expendable trust fund of $9,572,548. The amount transferred is reported as an adjustment to beginning fund balance of the Deferred Compensation expendable trust fund. G. SURFACE WATER SUPPLY Canadian River Municipal Water Authority The Canadian River Municipal 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 supplying water to surrounding cities. The District was created in 1953 and comprises eleven cities, including the City. The budget, financing and operations of the District are governed by a Board of Directors selected by the governing bodies of each of the member cities, each city being entitled to one or two members dependent upon population. At September 30, 2000, the Board was comprised of 18 members, two of which represented the City of Lubbock. The City contracted with the CRMWA to reimburse it for a portion of the cost of the Canadian e. River Dam and aqueduct system in exchange for surface water. Accordingly, prior to fiscal 1999, such payments were made solely out of water system revenues and are not general obligations of the City. The City's pro rats share of annual fixed and variable operating and reserve assessments is recorded as an expense of obtaining surface water. Prior to fiscal 1999, the long-term debt was owed to the U.S. Bureau of Reclamation for the cost of Construction of the facility, which was completed in 1969. The City's allocation of project cost r+ was $32,905,862. During the year ended September 30, 1999, bonds in the principal amount of $12,300,000 were issued to payoff the construction obligation owed to the U.S. Bureau of Reclamation via CRMWA in the amount of $20,809,067. The difference of $8,509,067 was a discount in the remaining principal provided by the U.S. Bureau of Reclamation to the member cities. This discount has been recorded as a deferred gain on refunding and is being amortized over the life of the refunding bonds. The annual principal and interest payments are included in the disclosures for other City related long-term debt. The above cost for the rights are recorded as "^ other assets and are being amortized over 85 years. The cost and debt are recorded in the Water Enterprise Fund. 49 0 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS G. SURFACE WATER SUPPLY (CONTINUED) Brazos River Authority - Lake Alan Henry During 1989, the City entered into an agreement with the Brazos River 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 conservation 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 amounts sufficient to cover all maintenance and operating costs, management fees to the authority, as well as funds sufficient to pay all capital costs associated with construction. The City will receive surface water for the payments to BRA. Approximately $293,000 was paid to the BRA for maintenance and operating costs in fiscal year 2000. The BRA issued $16,970,000 in revenue bonds in 1989 and $39,685,000 in revenue bonds in 1991. These bonds were refunded July 1995. Disclosure of the refunding can be found in Note III. K. Construction of the dam and lake facilities began in 1989. The City is obligated to provide sufficient funds over the remaining life of the bonds to service the debt requirement. The financial activity, along with the related obligation, is accounted for in the Water Enterprise Fund. At September 30, 2000, certain mineral rights associated with land located in the Lake Alan Henry site owned by individuals had not been acquired by the City. The additional 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, and Sewer Enterprise Funds, in the opinion of management, exceed the amount that would have been paid to the City if these funds were private sector companies engaged in the same enterprises. In addition to the amount transferred in excess of private sector taxes, there is also an amount transferred to compensate the General Fund for shared services and indirect costs. I. SEGMENT INFORMATION - ENTERPRISE FUNDS The City maintains seven enterprise funds which include electric, water, sewer, solid waste, airport, golf, and stormwater drainage. 50 no 5a M CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS I SEGMENT INFORMATION -ENTERPRISE FUNDS (CONTINUED) Segment information for the year ended September 30, 2000, was as follows: solid Storntwater Total Electric Water Sewer Waste Airport Golf Drainage Enterprise Fund Fund Fund Fund Fund Fund Fund Funds Operating Revenues S 72,932,146 S 29,037,723 S 16,447.324 S 16,034,659 S 4,322,847 5 40,262 S 1,95C,S19 S 142,765,78: Depreciation Expense 5,498,153 5,327,091 4,073,836 1.362,225 2,868,516 66,947 105,929 19,3C2,697 Operating income (loss) 1,332,953 9,783,407 4,268,629 5,549,423 (1,597,833) (26,713) 1,265,338 20,584,104 Operating Transfers In (out) (7,140,319) (2,650,692) (1,746,119) (2,114,512) (987,165) (40,262) (257,197) (14,936,266) Net Income (Ioss) (6,835,220) 3,242,877 56,664 4,476,496 (481,340) (66,975) 1,349,086 1,741,588 Current capital 64,408 790,532 894,205 (37,982) 591.166 23C2.329 contributions Property, plant, and equipment: 10,055,225 37,C23,010 2,590,293 1,561,028 7,797,606 33,070 59,06C,172 Additions: 1,352,871 2,636,652 150,509 3,187,429 25,624 53,701 7,406,786 Deletions: Net Working Capital (4,036,427) 5,219,355 3,078,190 2,976,591 20C,741 (2,035,272) 359,181 5,762359 Allowance for doubtful (1,099,973) (334,639) (135,622) (126,302) (8,328) (1,7C4,864) accounts Total Assets 145,937,099 254,499,398 12C,665,134 46,635,125 63,151,850 227,887 11,200,741 642,317,224 Bonds and other long- term liabilities payable 34,446,472 114,442.734 51,431,763 9,532,457 5,324 ^37 - 59,343 215,236,8W from operating revenues Total Equity 592,7C5,842 S133,375,965 S64,987,973 $36,346,853 S56,929,661 (S1,812,264) $10,837,440 $393,371,470 51 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS 1. LONG-TERM DEBT GENERAL OBLIGATION BONDS AND CERTIFICATES OF OBLIGATION: Final Interest Issue Maturity Rate Date Date 7.86% 11-15-85 2-15-03 6.64 5-15-91 2-15-11 6.67 5-15-91 2-15-11 6.29 5-15-91 2-15-01 9.01 5-15-91 2-15-11 6.69 5-15-91 2-15-11 5.50 1-14-92 2-15-12 5.50 5-15-92 2-15-14 5.37 8-15-92 2-15-12 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 4.78 5-15-95 2-15-01 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 Total Balance Amount Outstanding Issued 9-30-00 $ 60,614,070 $ 1,042,762 16,120,000 805,000 4,030,000 200,000 1,145,000 110,000 1,085,000 590,000 2,000,000 100,000 1,655,000 165,000 34,520,000 8,625,000 7,565,000 550,000 14,425,000 10, 820,000 3,625,000 2,545,000 2,550,000 1,800,000 1,470,000 1,050,000 19,215,000 13,455,000 9,865,000 6,300,000 4,690,000 3,525,000 2,000,000 385,000 6,505,000 5,205,000 10,000,000 8,000,000 17,530,000 16,565,000 1,330,000 1,115,000 10,260,000 9,240,000 20,835,000 20,695,000 15,355,000 14,585,000 6,100,000 5,795,000 12, 300,000 11,780,000 24,800,000 24,800,000 7,000,000 7,000,000 $ 318,589,070 $ 176,847,762 (A) (.A) Excludes net deferred gains and losses on advance refundings, bond issuance costs and discounts of $5,870,944. Additionally, this amount includes $128,467,416 of bonds used to finance enterprise fund activities. 52 n2 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS T LONG-TERM DEBT (CONTINUED) ELECTRIC REVENUE BONDS: Balance Final Amount Outstanding Interest Rate(%) Issue Date Maturity Date Issued 9-30-00 6.25 to 9.20 5-15-91 4-15-11 S 7,500,000 $ 375,000 5.00 to 6.50 7-15-91 4-15-02 4,424,976 835,000 3.80 to 5.50 6-15-95 4-15-08 13,560,000 9,465,000 '* 4.25 to 6.25 1-1-98 4-15-18 9,170,000 8,260,000 3.10 to 5.00 1-15-99 4-15-19 14,975,000 14,295,000 AlIN Total S 49,629,976 $ 33,230,000 Refunding bonds issued for a partial refunding of the bonds issued May 15, 1983. * Refunding bonds issued for a partial refunding of the bonds issued April 15, 1976, April 15, 1987, and May 15, 1988. Balance outstanding includes $133,718 discount on bonds sold, bond issuance costs and deferred amounts on refunded bonds. "n Refunding bonds issued for a partial refunding of the bonds issued April 25,1991 and July 15, 1991. Balance outstanding includes $520,234 of discount on bonds sold, bond issuance costs and deferred amounts on bonds refunded. WATER REVENUE BONDS: Balance Final Amount Outstanding Interest Rate Issue Date Maturity Date Issued 09-30-00 3.80 to 5.50% 6-1-95 8-15-21 $ 58.170.000 $51,855,000 •• Balance outstanding includes $5,794,693 discount, bond issuance costs and deferred losses on bonds sold or refunded. Gra w 53 ELO CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS 1. LONG-TERM DEBT (CONTINUED) The annual requirements to amortize all outstanding debt of the City as of September 30, 2000, including interest payments of $118,563,000 are as follows: Revenue Fiscal General (Electric, Year Obligation BRA) Total 2000-01 $ 23,361,135 $ 9,485,948 $ 32,847,083 2001-02 21,269,343 9,185,073 30,454,416 2002-03 19,715,018 8,562,329 28,277,347 2003-04 17,639,157 8,352,548 25,991,705 2004-05 17,103,169 7,693,423 24,796,592 2005-06 16,569,725 7,517,168 24,086,893 2006-07 16,044,209 7,373,833 23,418,042 2007-08 14,922,566 6,903,455 21,826,021 2008-09 14,038,527 5,998,220 20,036,747 2009-10 13,109,184 5,932,245 19,041,429 2010-11 12,696,406 5,882,728 18,579,134 2011-12 11,109,032 5,484,955 16,593,987 2012-13 10,744,847 5,457,010 16,201,857 2013-14 10,409,296 5,435,100 15,844,396 2014-15 7,138,281 5,413,400 12,551,681 2015-16 6,019,558 5,386,360 11,405,918 2016-17 5,071,059 5,366,225 10,437,284 2017-18 4,968,444 5,339,650 10,308,094 2018-19 4,366,833 4,866,800 9,233,633 2019-20 2,638,103 2,960,850 5,598,953 2020-21 - 2,964,550 2,964,550 Total $248,933,892 $131,561,870 $ 380,495,762 This schedule does not include the effect of premiums or discounts. The City has complied in all material respects with the bond covenants as outlined in each issue's indenture. 54 U CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE IIL DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS L LONGTERM DEBT (CONTINUEDI Long-term debt transactions for governmental and proprietary funds for the year ended September 30, 2000 are as follows: Debt Payable Debt Payable Governmental: 10-1-99 Additions Deletions 9-30-00 Tax -Supported Obligation Bonds S 45,842,977 S 7,000,000 S 4,462,631 $ 48,380,346 Rebatable arbitrage 301,269 - 301,269 Compensated Absences 11,091,685 - 11,638 11,080,047 Total Governmental 57,235,931 7,000,000 4,474,269 59,761,662 Proprietary: Self -Supported Obligation Bonds 118,947,070 24,800,000 8,218,969 135,528,101 ®„ Revenue Bonds 82,751,396 - 5,304,782 77,446,614 Compensated Absences 3,551,988 234,050 59,943 3,726,095 Total Proprietary 205,250,454 25,034,050 13,583,694 216,700,810 Total City -Wide: Obligation Bonds 164,790,047 31,800,000 12,681,600 183,908,447 Revenue Bonds 82,751,396 - 5,304,782 77,446,614 Rebatable arbitrage 301,269 - - 301,269 Compensated Absences 14,643,673 234,050 71,581 14,806,142 Total City -Wide $$ 262,4�86,385 S 32,0� S 18,053,153 $ 276,462,472 The total long-term debt is reconciled to the total annual requirements to amortize long-term debt as follows: Long -Term Debt $276,462,472 Interest 118,563,000 Total amount of debt $395,025,472 Add: Discounts and deferred losses 577,701 Rebatable arbitrage (301,269) Less: Compensated Absences (14,806,142) (14,529,710) Total future debt requirements $380,495,762 The City Council called an election for September 18,1999 to seek voter approval to issue general purpose tax -supported bonds in the amount of $37,385,000, which represents the City's current five year general purpose debt plan. The following four propositions were approved by the voters: parks, $14,765,000; city-wide drainage projects, $2,160,000; city-wide street projects, $17,165,000; and traffic signal systems, $3,295,000. The City has not submitted a capital improvement plan to voters since 1993, when voters in the City approved a $28,690,000 capital improvement plan. In March 2000, the City issued S7,000,000 General Obligation Bonds, Series 2000. This issuance was the first installment of the capital improvement debt issuance approved by the voters in 1999. The proceeds from the sale of the Obligations will be used to fund projects in the following areas: Parks ($3,245,000), Streets ($2,390,000), Drainage ($1,025,000) and Traffic Control ($340,000). 55 0 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. ADVANCED DEFEASEMENT In fiscal year 1994, the City defeased $3,600,000 of the 1992 Tax and Waterworks Certificates of Obligation. Available funds were used to purchase United States Treasury Securities, which were placed in an irrevocable trust to be used solely to defease the above indicated bond issue. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $2,400,000 of bonds outstanding are considered defeased. In fiscal year 1995, the City defeased $385,000 General Obligation Refunding Bonds, Series 1993. The $385,000 Series 1993 bonds were the portion of $9,865,000 General Obligation Refunding Bonds allocated to the Municipal Golf Course. Available funds were used to purchase United States Treasury Securities, which were placed in a sinking fund for the Series 1993 Bonds to defease these obligations. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $260,000 of bonds outstanding are considered defeased. In fiscal year 1995, the Brazos River Authority defeased certain revenue bonds, on behalf of the city of Lubbock. A portion of the proceeds of the Series 1995 refunding Bonds was used to purchase United States Treasury Securities -State and Local Government Series which were placed in an irrevocable trust to be used solely to refund Series 1989 Brazos River Authority Revenue Bond payments due August 15, 1995 through August 15, 2019 and the Series 1991 Brazos River Authority Revenue Bond payments due August 15, 1996 through August 15, 2021. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $34,620,000 of bonds outstanding are considered defeased. In fiscal year 1997, the City defeased certain General Obligation Bonds. A portion of the proceeds of the Series 1997 Refunding Bonds was used to purchase United States Treasury Securities - State and local Government Series which were placed in an irrevocable trust to be used solely to partially refund the portion of the Series 1987 General Obligation Bonds payments due February 15, 2005 through February 15, 2007, which were called on February 15, 1997 and paid off, the portion of the Series 1989 General Obligation Bonds payments due February 15, 2000 through February 15, 2009, which were called on February 15, 1999 and paid off, the portion of the Series 1989 Certificates of Obligation Bonds payments due February 15, 2000 through February 15, 2009, which were called on February 15, 1999, the portion of the Series 1991 General Obligation Bond payments due February 15, 2003 through February 15, 2009, the portion of the Series 1991 Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation payments due February 15, 2003 through February 15, 2009, the portion of the Series 1991 Combination Tax and Exhibition HaII/Auditorium (Limited Pledge) Revenue Certificates of Obligation payments due February 15, 2003 through 2009 and the portion of the Series 1992 General Obligation Refunding Bonds payments due February 15, 2001 through February 15, 2003, which were called on February 15, 1999 and paid off. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $7,765,000 of bonds outstanding are considered defeased. In fiscal year 1999, the City defeased certain General Obligation Bonds. A portion of the proceeds of the Series 1999 General Obligation Refunding Bonds were used to purchase United States Treasury Securities -State and Local Government Series, which were placed in an irrevocable trust to be used solely to partially refund the portion of the Series 1991 Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue Certificates of Obligation payments due February 15, 2002, 2010 and 2011; the Series 1991 Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation payments due February 15, 2002, 2010 and 2011; the Series 1991 General Obligation Bond payments due February 15, 2002, 2010 and 2011; the Series 1991 56 CITY OF LUBBOCK., TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. ADVANCED DEFEASEMENT (CONTINUED Combination Tax and Sewer System Subordinate Lien Revenue Certificate of Obligation payments due February 15, 2003 through 2012; and the Series 1992 Combination Tax and Sewer Subordinate Lien Revenue Certificates of Obligation payments due February 15, 2006 through 2014. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $19,730,000 of bonds outstanding are considered defeased. In fiscal year 1999, the City defeased certain revenue bonds. A portion of the proceeds of the Series 1999 Electric Light and Power System Revenue Refunding and Improvement Bonds were used to purchase United States Treasury Securities, which were placed in an irrevocable trust to be used solely to partially refund the portion of the Series 1991 Electric Light and Power System Revenue Bond payments due April 15, 2002 through 2011; and the Series 1991-B Electric Light and Power System Revenue Refunding Bond payments due April 15, 2001 through 2004 which were called on April 15, 2000 and paid off. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $3,750,000 of bonds outstanding are considered defeased. L. ACCRUED INSURANCE CLAIMS As discussed in Note I.G., the Risk Management Fund establishes a liability for self-insurance for both reported and unreported insured events, which includes estimates of both future payments of losses and related claim adjustment expenses. The following represents changes in those aggregate liabilities for the Insurance Funds during the past two years ended September 30: 2000 1999 Worker's Compensation and Liability Reserves at beginning of fiscal year $ 3,734,341 $ 3,734,341 Claims expenses 2,763,142 3,872,919 Claims payments (2,763,143) (3,872,919) Worker's Compensation and liability reserves at end of fiscal year 3,734,340 3,734,341 Medical and Dental Claims Liability at end of fiscal year * 3,441,879 2,823,267 Total Self -Insurance Liability at end of fiscal year $ 7,176,219 $ 6,557,608 Total Assets to pay claims at end of fiscal year $ 16,841,919 $ 14,514,232 Accrued insurance claims payable from restricted assets -current $ 4,372,861 $ 3,754,250 Accrued insurance claims -non -current 2,803,358 2,803,358 Total accrued insurance claims $ 7,176,219 $ 6,557,608 The information necessary to prepare the separate disclosures for medical and dental claims liabilities is unavailable. M. LANDFILL CLOSURE AND POSTCLOSURE CARE COST State and federal laws and regulations require the City to place a final cover on its landfill sites when it stops accepting waste to perform certain maintenance and monitoring functions at the 57 C0 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS M. LANDFILL CLOSURE AND POSTCLOSURE CARE COST (CONTINUED) sites for thirty years after closure. Although closure and postclosure care costs will be paid only near or after the date that the landfill stops accepting 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 $5,918,343 reported as landfill closure and postclosure care liability at September 30, 2000, represents the cumulative amount expensed by the City to date of $8,521,170 less amount paid for closure of certain cells based on the use of over 90 percent of the estimated capacity of the landfill registered under TNRCC permit number 69. This amount includes a reduction of cumulative expense of $464,816 due to a change in estimate of cumulative capacity used at September 30, 2000. The City will recognize the remaining estimated cost of closure and postclosure care of $799,904 as the remaining estimated capacity is filled. These amounts are based on what it would cost to perform all closure and postclosure care in 2000. The City expects to close the landfill in the year 2001. Actual cost may be higher due to inflation, changes in technology, or changes in regulations. The City has a second landfill {TNRCC 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 $21,800,000, of which approximately $57,000 was recognized in fiscal 2000. The City expects this landfill to have a life in excess of 80 years based on current estimates of use. Actual cost may be higher due to inflation, changes in technology, or changes in regulations. �j. The City is required by state and federal laws and regulations to provide assurance that financial resources will be available to provide for closure, postclosure care, and remediation or containment of environmental hazards at its landfill. The City is in compliance with these requirements and has chosen the Local Government Financial Test mechanism for providing this assurance. The City expects to finance cons through normal operations. NOTE IV. CONTINGENT LIABILITIES A. FEDERAL GRANTS In the normal course of operations, the City receives grant funds from various Federal and state agencies. The grant programs are subject to audits by agents of the granting authority to ensure compliance with conditions precedent to the granting of funds. Any liability for reimbursement which may arise as the result of audits of grants is not believed to be material. B. LITIGATION The City is involved in lawsuits arising in the normal course of business, including claims for property damage, personal injury and personnel practices, disputes over contract awards and property condemnation proceedings, suits contesting the legality of certain taxes and public safety practices. In the opinion of management, the ultimate outcome of these lawsuits will not have a materially adverse effect on the City's financial position as of September 30, 2000. 58 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE IV. CONTINGENT LIABILITIES C. SITE REMEDIATION The City has identified specific locations requiring site retnediation relative to underground fuel Storage tanks. The potential exposure is not readily determinable as of September 30, 2000. In the opinion of management, the ultimate liability will not have a materially adverse effect on the City's financial position. D. WEST TEXAS MUNICIPAL POWER AUTHORITY In fiscal 1998, the West Texas Municipal Power Authority ("WTMPA") issued $28,910,000 of WTMPA Revenue Bonds, Series 1998 maturing in February of 2018. These bonds are secured by the net revenues of certain power sales contracts with participating cities of which the City of Lubbock is one. In the event the net revenues of the power sales contracts are not sufficient to cover the debt service of the bonds, the participating cities are required under a debt service guarantee provision of the agreement, to provide funds sufficient to cover any debt service deficit to the extent of their respective participation percentages. The City's percentage share in this agreement is 85.21%. During the year ended September 30, 2000, the City was not required to pay amounts under this provision. At September 30, 2000, the City had accounts receivable of approximately $3.1 million from WTMPA. NOTE V. RECENTLY ISSUED PRONOUNCEMENTS At September 30, 2000, the GASB had issued several statements that have not required implementation by the City of Lubbock. The statement that may impact the City is as follows: GASB Statement No. 36, "Recipient Reporting for Certain Shared Non -exchange Revenues — an amendment of GASB Statement No. 33", issued April 2000, will be effective simultaneously with Statement No. 33. Statement No. 36 eliminates a timing difference by requiring recipient governments to account for the sharing of revenues in the same manner as provider governments. Management does not anticipate any significant adverse effects on the City's financial position or results of operations as a result of the implementation of this Statement. no 59 Cz zu APPENDIX C FORM OF BOND COUNSEL'S OPINIONS w 59 @2 THIS PAGE INTENTIONALLY LEFT BLANK FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 ROSS AVENUE, SUITE 2800 DALLAS, TEXAS 75201-2784 TELEPHONE: 214/855-8000 FACSIMILE: 214/855-8200 HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES M I NN EAPOLIS LONDON HONG KONG IN REGARD to the authorization and issuance of the "City of Lubbock, Texas, General Obligation Bonds, Series 2001" (the "Bonds"), dated February 1, 2001 (the "Bond Date"), in the principal amount of $9,100,000, we have examined into the legality and validity of the issuance thereof by the City of Lubbock, Texas (the "City"), which Bonds are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a maturity) and have stated maturities of February 15 in each of the years 2002 through 2021, unless redeemed prior to maturity in accordance with applicable redemption provisions. The Bonds bear interest on the unpaid principal amount from the Bond Date at the rates per annum stated in the ordinance authorizing their issuance (the "Ordinance"), and such interest is payable on February 15 and August 15 in each year, commencing February 15, 2002, to the registered owners shown on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Bonds). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Bonds under the Constitution and laws of the State of Texas, and with respect to the exclusion of the interest on the Bonds from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City. Our examinations into the legality and validity of the Bonds included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the City relating to the authorization and issuance of the Bonds, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Bond executed and delivered initially by the City, which we found to be in due form and properly executed. 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 Bonds have been duly authorized by the City, and the Bonds issued in compliance with the provisions of the Ordinance are valid, legally binding and enforceable obligations of the City, payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City; except to the extent that 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. Assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and certifications 792031 Page 2 of legal opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, General Obligation Bonds, Series 2001 ", dated February 1, 2001 of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Bonds, interest on the Bonds for federal income tax purposes (a) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), of the owners thereof pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions thereunder, and (b) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Bonds, owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust or a financial asset securitization investment trust. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the section 55 of the Code will be computed. WE EXPRESS NO 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 Bonds. Ownership of tax-exempt obligations such as the Bonds 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, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a financial asset securitization investment trust 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. EHE:dfc 792031 0 FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 ROSS AVENUE, SUITE 2800 DALLAS, TEXAS 75201-2784 TELEPHONE: 214/855-8000 FACSIMILE: 2 14/855-8200 HOUSTON WASHINGTON, D.C. AUSTI N SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG IN REGARD to the authorization and issuance of the "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001" (the "Certificates"), dated February 1, 2001 (the "Certificate Date"), in the principal amount of $2,770,000, we have examined into the legality and validity of the issuance thereof by the City of Lubbock, Texas (the "City"), which Certificates are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a maturity), mature annually on February 15 in each of the years 2002 through 2021, unless redeemed prior to maturity in accordance with the redemption provisions stated on the Certificates, and bear interest on the unpaid principal amountfrom the Certificate Date at the rates per annum stated in the ordinance authorizing the issuance of the Certificates (the "Ordinance"), such interest being payable on February 15 and August 15 in each year, commencing February 15, 2002, to the registered owners shown on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Certificates). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Certificates under the Constitution and laws of the State of Texas, and with respect to the exclusion of the interest on the Certificates from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City. Our examinations into the legality and validity of the Certificates included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the City relating to the authorization and issuance of the Certificates, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Certificate executed and delivered initially by the City, which we found to be in due form and properly executed. W 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: W 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 Solid Waste System in the manner and to the extent provided in the Ordinance; except to the extent that 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. 887490.1 EiR Page 2 of legal opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 ", dated February 1, 2001 2. Assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and certifications of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Certificates, interest on the Certificates for federal income tax purposes (a) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), of the owners thereof pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions thereunder, and (b) will not be included in computing the alternative minimum taxable income of ' individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporations, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust, or a financial asset securitization investment trust (FASIT). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. WE EXPRESS NO 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 interest in a FASIT, 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. EHE:dfc 887490.1 pa w IR Financial Advisory Services Provided By FIRST SOUTHWEST COMPANY INVESTMENT BANKERS 0 OFFICIAL STATEMENT Ratings: Moody's: "Aa2" Dated February 8, 2001 S&P: "AA+" Fitch: "AA+" NEW ISSUE - Book -Entry -Only See ("Other Information Ratings" herein) In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Exemption" herein, including the alternative minimum tax on corporations. THE BONDS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $9,100,000 CITY OF LUBBOCK, TEXAS (Lubbock County) GENERAL OBLIGATION BONDS, SERIES 2001 Dated Date: February 1, 2001 Due: February 15, as shown on inside cover PAYMENT TERMS ... Interest on the $9,100,000 City of Lubbock, Texas, General Obligation Bonds, Series 2001 (the "Bonds") will accrue from February 1, 2001 (the "Dated Date"), and will be payable February 15 and August 15 of each year, commencing February 15, 2002, and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "The Obligations - Book -Entry -Only System" herein. The initial Paying Agent/Registrar is U.S. Trust Company of Texas, N.A., Dallas, Texas (see "The Obligations - Paying Agent/Registrar"). AUTHORITY FOR ISSUANCE ... The Bonds are issued pursuant to the Constitution and general laws of the State of Texas (the "State"), including particularly V.T.C.A., Government Code, Chapter 1331, as amended, and are direct voted obligations of the City of Lubbock, Texas (the "City"), payable from a continuing ad valorem tax levied on all taxable property within the City, within the limit prescribed by law, as provided in the ordinance authorizing the Bonds (the "Bond Ordinance") (see "The Obligations - Authority for Issuance"). PURPOSE ... Proceeds from the sale of the Bonds will be used for (i) park construction and improvements; (ii) street construction and improvements; and (iii) traffic control improvements. SEE MATURITY SCHEDULE AND REDEMPTION PROVISIONS ON THE REVERSE OF THIS PAGE SEPARATE ISSUES ... The Bonds are being offered by the City concurrently with, and under a common Official Statement for, the City's Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (collectively, the "Obligations"). The Obligations are separate and distinct securities offerings and investors should note that, while the Obligations share certain attributes, the rights of the holders of each series of the Obligations and the remedies relating to each series are to be given effect as a series. Each issue of the Obligations is being underwritten by separate underwriting syndicates (see "Other Information — Underwriting" ). LEGALITY ... The Bonds are offered for delivery when, as and if issued and received by the Underwriters and subject to the approving opinion of the Attorney General of Texas and the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond Counsel's Opinions"). Certain legal matters will.be passed upon for the Underwriters by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Counsel for the Underwriters. DELIVERY ... It is expected that the Bonds will be available for delivery through The Depository Trust Company on or about March 15, 2001. ESTRADA HINOJOSA & COMPANY, INC. BANC OF AMERICA SECURITIES LLC SIEBERT BRANDFORD SHANK & CO., LLC 50 MATURITY SCHEDULE Maturity Price or Maturity Price or Amount (February 15) Rate Yield Amount (February 15) Rate Yield $ 65,000 2002 5.000% 3.350% $ 455,000 2012 4.600% 4.530% 305,000 2003 4.700% 3.620% 480,000 2013 4.625% 4.680% 320,000 2004 4.400% 3.730% 500,000 2014 4.700% 4.780% 335,000 2005 4.350% 3.830% 525,000 2015 4.850% 4.880% 350,000 2006 4.350% 3.930% 555,000 2016 4.950% 4.980% 365,000 2007 4.400% 4.030% 580,000 2017 5.000% 5.030% 380,000 2008 4.450% 4.140% 610,000 2018 5.050% 5.110% 400,000 2009 4.500% 4.220% 640,000 2019 5.000% 5.160% 415,000 2010 4.500% 4.320% 675,000 2020, 5.000% 5.190% 435,000 2011 4.600% 4.430% 710,000 2021 5.000% 5.230% (Accrued Interest from February 1, 2001 to be added) OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2011, in whole or.in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2010, or date thereafter, at the value thereof plus accrued interest to the date of redemption (see "The Obligations - Optional any par Redemption"). h 2 E2 NEW ISSUE - Book -Entry -Only OFFICIAL STATEMENT Dated February S, 2001 Ratings: Moody's: "Aa2" S&P: "AA+" Fitch: "AA+" See ("Other Information Ratings" herein) In the opinion of Bond Counsel, interest on the Certificates will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Exemption" herein, including the alternative minimum tax on corporations. �- THE CERTIFICATES WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATION'S" FOR FINANCIAL INSTITUTIONS $2,770,000 CITY OF LUBBOCK, TEXAS (Lubbock County) TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001 Dated Date: February 1, 2001 Due: February 15, as shown on inside cover PAYMENT TERMS ... Interest on the $2,770,000 City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (the "Certificates") will accrue from February 1, 2001 (the "Dated Date"), and will be payable February 15 and August 15 of each year, commencing February 15, 2002, and will be calculated on the basis of a 360- A. day year consisting of twelve 30-day months. The definitive Certificates will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the owners thereof. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Certificates. See "The Obligations - Book -Entry -Only System" herein. The initial Paying Agent/Registrar is U.S. Trust Company of Texas, N.A., Dallas, Texas (see "The Obligations - Paying Agent/Registrar"). 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 continuing ad valorem tax, within the limit prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus net revenues of the City's Solid Waste System, as provided in the ordinance authorizing the Certificates (the "Certificate Ordinance") (see "The Obligations - Authority for Issuance"). PURPOSE ... Proceeds from the sale of the Certificates will be used for the construction and implementation of the closure plan a portion of the City's old landfill in accordance with permit conditions, state and federal regulations and to pay costs associated with the issuance of the Certificates. SEE MATURITY SCHEDULE AND REDEMPTION PROVISIONS ON THE REVERSE OF THIS PAGE SEPARATE ISSUES ... The Certificates are being offered by the City concurrently with, and under a common Official Statement for, the City's General Obligation Bonds, Series 2001. The Obligations are separate and distinct securities offerings and investors should note that, while the Obligations share certain attributes, the rights of the holders of each series of the Obligations and the remedies relating to each series are to be given effect as a series. Each issue of the Obligations is being underwritten by separate underwriting syndicates (see "Other Information — Underwriting"). LEGALITY ... The Certificates are offered for delivery when, as and if issued and received by the Underwriters and subject to the approving opinion of the Attorney General of Texas and the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond Counsel's Opinions"). Certain legal matters will be passed upon for the Underwriters by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Counsel for the Underwriters. DELIVERY ... It is expected that the Certificates will be available for delivery through The Depository Trust Company on or about March 15, 2001. MORGAN KEEGAN & COMPANY, INC. SAMCO CAPITAL MARKETS lO MATURITY SCHEDULE Maturity Price or Amount (February 15) Rate Yield $ 140,000 2002 5.000% 3.350% 140,000 2003 5.000% 3.620% 140,000 2004 5.000% 3.730% 140,000 2005 5.000% 3.830% 140,000 2006 4.375% 3.930% 140,000 2007 4.000% 4.030% 140,000 2008 4.000% 4.140% 140,000 2009 4.150% 4.220% 140,000 2010 4.250% 4.320% 140,000 2011 4.350% 4.430% Maturity Price or Amount (February 15) Rate Yield $ 140,000 2012 4.400% 4.530% 140,000 2013 4.625% 4.680% 140,000 2014 4.700% 4.780% 140,000 2015 4.800% 4.880% 135,000 2016 4.875% 4.980% 135,000 2017 5.000% 5.030% 135,000 2018 5.000% 5.110% 135,000 2019 5.000% 5.160% 135,000 2020 5.000% 5.190% 135,000 2021 5.000% 5.230% (Accrued Interest from February 1, 2001 to be added) OPTIONAL REDEMPTION ... The City reserves the right, at is option, to redeem Certificates having stated maturities on and after February 15, 2011, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2010, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations - Optional Redemption"). �1. r% lQ ro This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Official Statement, and, ifgiven or made, such other information or representations must not be relied upon. Certain information set forth herein has been provided by sources other than the City that the City believes is reliable, but the City makes no representation as to the accuracy of such information. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. See "CONTINUING DISCLOSURE OF INFORMATION "for a description of the City's undertaking to provide certain information on a continuing basis. THE OBLIGATIONS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH THE REGISTRATION, QUALIFICATIO, OR EXE OBLIGATIONS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVNMPTION OF THE ISIONS OF THE JURISDICTION IN WHICH THESE SECURITIES HAVE BEEN REGISTERED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THE CITY NOR THE UNDERWRITERS MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARD BOOK-ENTRY-ONLYSYSTEING THE DEPOSITORY TRUST CO,fIPANY OR ITS M, AS SUCHINFORMATION HAS BEEN FURNISHED BY THE DEPOSITORY TRUST COMPANY. TABLE OF CONTENTS OFFICIAL STATEMENT SUMMARY .........................6 CITY OFFICIALS, STAFF AND CONSULTANTS ..... 9 ELECTED OFFICIALS ................................................... 9 SELECTED ADMINISTRATIVE STAFF ............................ 9 CONSULTANTS AND ADVISORS .................................... 9 INTRODUCTION..........................................................10 THE OBLIGATIONS.....................................................10 TAX INFORMATION...................................................16 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT .......................................... 19 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY...................................................... 20 TABLE 3A - VALUATION AND GENERAL OBLIGATION DEBT HISTORY ................................................ 21 TABLE 3B - DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT ......................................... 21 TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY......................................................... 21 TABLE 5 - TEN LARGEST TAXPAYERS ..................... 22 TABLE 6 - TAX ADEQUACY .................................... 22 TABLE 7 - ESTIMATED OVERLAPPING DEBT ............ 23 DEBT INFORMATION.................................................24 TABLE 8A - GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS ............................................... 24 TABLE 813 - DIVISION OF DEBT SERVICE REQUIREMENTS ............................................... 25 TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION.................................................... 26 TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT.............................................................. 27 TABLE 11 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS ........................................ 27 TABLE 12 - OTHER OBLIGATIONS .............................28 FINANCIAL INFORMATION.....................................29 TABLE 13 - GENERAL FUND REVENUES AND EXPENDITURE HISTORY ................................... 29 TABLE 14 - MUNICIPAL SALES TAX HISTORY ......... 30 CAPITAL IMPROVEMENT PROGRAM ...........................30 TABLE 15 - CURRENT INVESTMENTS ........................ 33 THE SOLID WASTE SYSTEM ................................... 34 SOLID WASTE SYSTEM ............................................. 34 TABLE 16 - MONTHLY SOLID WASTE RATES 34 TABLE 17 — SOLID WASTE SYSTEM CONDENSED STATEMENT OF OPERATIONS .......................... 34 TAXMATTERS............................................................ 35 OTHER INFORMATION ............................................. 37 RATINGS.................................................................. 37 LITIGATION.............................................................. 37 REGISTRATION AND QUALIFICATION OF OBLIGATIONS FORSALE ....................................................... 37 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS ................................ 37 LEGAL OPINIONS AND NO -LITIGATION CERTIFICATE 37 AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION ................................................. 38 CONTINUING DISCLOSURE OF INFORMATION........ 38 FINANCIAL ADVISOR ................................................ 39 UNDERWRITING....................................................... 40 CERTIFICATION OF THE OFFICIAL STATEMENT .......... 40 APPENDICES GENERAL INFORMATION REGARDING THE CITY ........ A EXCERPTS FROM THE ANNUAL FINANCIAL REPORT . B FORM OF BOND COUNSEL'S OPINIONS ...................... C The cover page hereof, this page, the appendices included herein and any addenda, supplement or amendment hereto, are part of the Official Statement. E0 OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Obligations to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. THE CITY ..................................... The City of Lubbock is a political subdivision and municipal corporation of the State, located in Lubbock County, Texas. The City covers approximately 115 square miles and has an estimated 2000 population of 199,445 (see "Introduction - Description of City"). THE BONDS .................................. The Bonds are issued as $9,100,000 General Obligation Bonds, Series 2001. The Bonds are issued as serial bonds maturing February 15, 2002 through February 15, 2021 (see "The Obligations - Description of the Obligations"). THE CERTIFICATES ..................... The Certificates are issued as $2,770,000 Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001. The Certificates are issued as serial certificates maturing February 15, 2002 through February 15, 2021 (see "The Obligations -Description of the Obligations"). PAYMENT OF INTEREST .............. Interest on the Obligations accrues from February 1, 2001, and is payable February 15, 2002, and each August 15 and February 15 thereafter until maturity or prior redemption (see "The Obligations - Description of the Obligations" and "The Obligations -, Optional Redemption"). AUTHORITY FOR ISSUANCE ......... The Bonds are issued pursuant to the general laws of the State, including particularly V.T.C.A. Government Code, Chapter 1331, as amended, an election held in the City on September 18, 1999 and a Bond Ordinance passed by the City Council of the City (see "The Obligations - Authority for Issuance"). The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and a Certificate Ordinance passed by the City Council of the City (see "The Obligations - Authority for Issuance"). SECURITY FOR THE OBLIGATIONS ................................The Bonds constitute direct and voted obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limit prescribed by law, on all taxable property located within the City (see "The Obligations - Security and Source of Payment"). The Certificates constitute direct obligations of the City, payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limit prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus Net Revenues of the City's Solid Waste System as provided in the Certificate Ordinance (see "The Obligations - Security and Source of Payment"). REDEMPTION .................... I.......... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after February 15, 2011, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2010, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations - Optional Redemption"). TAX EXEMPTION ......................... In the opinion of Bond Counsel, the interest on the Obligations will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under the caption "Tax Matters" herein, including the alternative minimum tax on corporations. USE of PROCEEDS ....................... Proceeds from the sale of the Bonds will be used for (i) park construction and improvements; (ii) street construction and improvements; and (iii) traffic control improvements. Proceeds from the sale of the Certificates will be used for the construction and implementation of closure plan for a portion of the old City landfill in accordance with permit conditions, state and federal regulations and to pay costs associated with issuance Certificates. of the RATINGS ......•••••••••••••••••-••.••. .... The Obligations have been rated "Aa2" by Moody's Investors Service, Inc. ("Moody's"), "AA+" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P") and "AA+" by Fitch IBCA, Inc. ("Fitch"). The City also has one issue outstanding that is rated "Aaa" by Moody's and "AAA" by S&P through insurance by a commercial insurance company (see "Other Information - Ratings"). BOOK -ENTRY -ONLY SYSTEM ...................................... The definitive Obligations 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 Obligations may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable n by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "The Obligations - Book -Entry -Only System"). PAYMENT RECORD ...................... The City has never defaulted on the payment of its bonded indebtedness. SELECTED FINANCIAL INFORMATION Ratio General Purpose Fiscal Year Per Capita Funded Per Capita General General Tax Debt Ended Estimated Taxable Taxable Purpose Purpose to Taxable % of Assessed Assessed Funded 9/30 Population (1) Funded Assessed Total Tax Valuation Valuation Tax Debt I) Tax Debt Valuation 1996 193,064 Collections $ 5,399,356,462 $ 27,967 $ 67,438,562 $ 349 1.25% 1997 195,367 1998 100.03% 5,567,072,641 28,495 61,728,036 316 1.11% 99.78% 196,679 1999 197,117 5,830,249,173 29,643 57,156,101 291 0.98% % 6,019,588,349 99.24% 2000 199,445 30,538 51,222,980 260 0.85% 9 6,176,963,982 30,971 53,455,346 268 2001 199,445 0 87% 8.89 9 6,638,779,668 33,286 58,122,809 (3) 291 (3) 0.88% (3) N.A. N.A. (1) Source: The City of Lubbock, Texas. (2) Does not include self-supporting debt (see "Table 3B — Derivation of General Purpose Funded Tax Debt"). (3) Projected; includes the Obligations. GENERAL FUND CONSOLIDATED STATEMENT SUMMARY Fiscal Year Ended September 30, Fund Balance at Beginning of Year 2000 $ 17,248,025 1999 $ 18,990,299 1998 $ 18,472,903 1997 $ 17,672,385 1996 263 $ 15,697,081 Total Revenues and Transfers Total Expenditures and Transfers 85,518,102 81,929,016 83,556,685 79,790,477 75,697,081 Fund Balance at End of Year 86,145,475 $ 16,620,652 83,671,290 $ 17,248,025 83,039,289 $ 18,990,299 78,989,959 $ 18,472,903 75,679,959 Less: Reserves and Designations Undesignated Fund Balance (2,857,096) $ 13,763,556 4,432,834 ( ) (5,442,847) (4,997,379) 2385 $ 1,7, (4,974,06060) $ 12,815,191 $ 13,547,452 $ 13,475,524 $ 12,698,325 7 For additional information regarding the City, please contact: Mr. Andy Burcham Mr. Vince Viaille Mr. Joe W. Smith Cash & Debt Manager First Southwest Company First Southwest Company City of Lubbock or 1001 Main Street or 402 Cypress, Suite 707 P.O. Box 2000 Suite 802 Lubbock, Texas 79401 P.O. Box 2754 Abilene, Texas 79604-2754 Lubbock, Texas 79457 Phone 806) 749-3792 ( Phone (915) 672-8432 Phone (806) 775-2149 Fax (806)775-2033 Fax (806)749-3793 Fax (915)675-6218 1-- CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS Date of Term City Council Installation to Office Expires Occupation Windy Sitton May, 1994 May, 2002 Business Owner Mayor Alex "Ty" Cooke May, 1992 May, 2004 Investments Mayor Pro Tern and Councilmember, District 6 Victor Hernandez June, 1994 May, 2002 Attorney -at -Law Councilmember, District 1 T. J. Patterson April, 1984 May, 2004 Co -Publisher Councilmember, District 2 David Nelson January, 1997 May, 2002 Attorney -at -Law Councilmember, District 3 Frank Morrison May, 2000 May, 2004 Business Owner, Commodities Councilmember, District 4 Marc McDougal May, 1998 May, 2002 Business Owner, Real Estate Councilmember, District 5 SELECTED ADMINISTRATIVE STAFF Date of Employment Date of Employment Total Government Name Position in Current Position with City of Lubbock Service Bob Cass City Manager September, 1992 April, 1976 24 Years Anita Burgess City Attorney December, 1995 December, 1995 5 Years 6 Years Becky Garza Interim City Secretary January, 2001 January, 1995 August, 1996 January, 1995 22 Yew Debra Forte Deputy City Manager September, 2000 September, 2000 10 Years Quincy White Asst. City Manager Perry Stout Interim Managing Director of Finance November, 1998 November, 1998 5 Years Andy Burcham Cash & Debt Manager November, 1998 November, 1998 2 Years CONSULTANTS AND ADVISORS Burdette Martin Seright & Burrows, Auditors.........................................................................................................Robinson Lubbock, Texas Fulbright & Ja orski, Bond Counsel........................................................................................................................................ DallasTexas First Southwest Company Financial Advisor......................................................................... ............................................................. Lubbock and Dallas, Texas r'7 OFFICIAL STATEMENT RELATING TO $9,100,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION BONDS, SERIES 2001 AND $2,770,000 CITY OF LUBBOCK, TEXAS TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001 INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $9,100,000 City of Lubbock, Texas, General Obligation Bonds, Series 2001 and $2,770,000 City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (collectively, the "Obligations"). Capitalized terms ^ used in this Official Statement have the same meanings assigned to such terms in the Bond Ordinance or the Certificate Ordinance, as the case may be, to be adopted on the date of sale of the Obligations which will authorize the issuance of the Obligations, except as otherwise indicated herein. There follows in this Official Statement descriptions of the Obligations 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 a political subdivision and municipal corporation of the State, duly organized and existing under the laws of the State, including the City's Home Rule Charter. The City was incorporated in 1909, and first adopted its Home Rule Charter in 1917. The City operates under a Coun ci ]/Manager form of government with a City Council comprised of the Mayor and six Councilmembers. The Mayor is elected at -large for a two-year term ending in an even - numbered year. Each of the six members of the City Council is elected from a single -member district for a four-year term of office. The terms of three members of the City Council expire in each even -numbered year. The City Manager is the chief administrative officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, electric, water and sanitary sewer utilities, airport, sanitation and solid waste disposal, health and social services, culture -recreation, public transportation, public improvements, planning and zoning, and general administrative services. The 1990 Census population for the City was 186,206; the estimated 2000 population was 199,445. The City covers approximately 115 square miles. THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS .'The Obligations are dated February 1, 2001, and mature on February 15 in each of the years and in the amounts shown on the cover page hereof. Interest will be computed on the basis of a 360-day year of twelve 30- day months, and will be payable on February 15 and August 15 of each year, commencing February 15, 2002. The definitive Obligations will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. No physical delivery of the Obligations will be made to the owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "Book -Entry -Only System" herein. AUTHORITY FOR ISSUANCE ... The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, particularly V.T.C.A., Government Code, Chapter 1331, as amended; and the Bond Ordinance. The Bonds are the second installment from a voted authorization of $37,385,000 in principal amount of bonds approved at an election held in the City on September 18, 1999. See Table l I herein for a description of the authorized purpose for the bonds approved at said election. The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and the Certificate Ordinance. 10 SOURCE AND SECURITY OF PAYMENT — THE BONDS ... All taxable property within the City is subject to a continuing direct annual ad valorem tax levied by the City, within the limit prescribed by law, to provide for the payment of principal of and interest on all Bonds. SOURCE AND SECURITY OF PAYMENT — THE CERTIFICATES ... The Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and are additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Certificate Ordinance) of the City's Solid Waste 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 Certificate Ordinance) now outstanding and hereafter issued. In the Certificate 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 tax and revenue obligations 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 Certificates. The City currently has outstanding one series of "Prior Lien Obligations" designated "City of Lubbock, Texas , Tax and Solid �. Waste Disposal System Revenue Certificates of Obligation, Series 1991", dated May 15, 1991, with unpaid principal of $110,000 and with a final maturity on February 15, 2001. POSSIBLE AVOIDANCE OF PLEDGED PAYMENT SOURCES IN BANKRUPTCY... Texas has adopted the 1998 revisions to Article 9 of the Uniform Commercial Code (the "UCC"), to become effective July 1, 2001. The revisions would for the first time provide means to perfect pledges by government entities and, in addition, would make unperfected pledges subject to the interests of a bankruptcy trustee, whether or not the pledged collateral is exempt from judicial liens. Security interests arising before July 1, "+ 2001 that are not perfected by July 1, 2002 will be considered unperfected pledges. For a number of reasons, it will be impractical and perhaps impossible to perfect the City's pledge of ad valorem taxes (with respect to the Bonds and the Certificates) and the pledge of the surplus net revenues of the Solid Waste System (with respect to the Certificates) under the revised Article 9. In proceedings for the adjustments of their debts under the Bankruptcy Code, municipalities are generally authorized to exercise the powers of a bankruptcy trustee. Accordingly, after July 1, 2002, it is likely that the City could avoid its pledges made in the Ordinances to secure payments of the Obligations, unless the Texas UCC is further amended, or other statutes are enacted, to avoid this result. Since the pledges may be legally unenforceable in the circumstances in which it would ' be most valuable, no person should rely upon the pledge as providing asset security or a preference right in the event that the City should become insolvent. Even under the 1998 UCC revisions, the rights of holders with respect to the pledged payment sources under the Ordinances, and other covenants of the City made in the Ordinance are valid and enforceable except in the event of bankruptcy. Thus, for example, outside of the occurrence of municipal bankruptcy, bondholders may enforce the obligation of the City to apply the pledged sources to pay holders of the Obligations, as described above (see "The Obligations — Security and Source of Payment -- The Bonds" and "The Obligations — Security and Source of Payment -- The Certificates"). Moreover, the City is aware that proposed legislation has been introduced for consideration by the Texas Legislature in the legislative session that begin January 9, 2001 to amend Texas law to avoid the results of the adoption of the 1998 UCC revisions mentioned above. No assurance can be given, however, that any such legislation will be adopted by the Texas Legislature. TAx RATE LIMITATION ... All taxable property within the City is subject to the assessment, levy and collection by the City of a J continuing, direct annual ad valorem tax to provide funds for the operation of the City and for the payment of principal of and interest on all ad valorem tax debt within the limit prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Obligations having stated maturities on and or�' after February 15, 2011, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2010, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Obligations are to be redeemed, the City may select the maturities of Obligations to be redeemed. If less than all the Obligations of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Obligations are in Book -Entry -Only form) shall determine by lot the Obligations, or portions thereof, within such maturity to be redeemed. If an Obligation (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. 11 AW NOTICE OF REDEMPTION... Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY OBLIGATION OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH OBLIGATION OR PORTION THEREOF SHALL CEASE TO ACCRUE. DEFEASANCE ... The respective Ordinances provide for the defeasance of the Bond or Certificates, as the case may be, when the payment of the principal of and premium, if any, on the Bonds or Certificates, as the case may be, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing with a paying agent, in trust (1) money sufficient to make such payment or (2) Defeasance Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent for the Bonds or Certificates, as the case may be. The respective Ordinances provide that "Government Obligations" means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an " agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. Upon making such deposit in the manner described, the Obligations shall no longer be outstanding obligations secured by the Bond Ordinance or Certificate Ordinance, as the case may be, and will not be considered debt of the City for purposes of taxation or applying any limitation on the City's ability to issue debt or for any purpose other than to receive payment from the funds and Government Securities deposited in escrow. AMENDMENTS ... The City may amend the respective Ordinances 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 ambiguity, 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 respective issue of the Obligations then outstanding affected thereby, amend, add to, or rescind any of the provisions of the Ordinances; except that, without the consent of the registered owners of all of the Obligations affected, no such amendment, addition or rescission may (1) change the date specified as the date on which the principal of any installment of interest on any Obligation is due payable, reduce the principal amount or maturity value thereof or the rate of interest thereon, change the place or places at or the coin or currency in which any Obligation or interest thereon is payable, or in any other way modify the terms of the payment of the principal of or interest on the Obligations, (2) give any preference to any Obligation over any other Obligation or (3) reduce the aggregate principal amount or maturity value of Obligations required for consent to any amendment, addition or waiver. " Boob -ENTRY -ONLY SYSTEM ... This section describes how ownership of the Obligations are to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by The Depository Trust Company ('DTC'), New York, New York, while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC DTC will act as securities depository for the Obligations. The Obligations will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully -registered certificate will be issued for each maturity of the Obligations in the aggregate principal amount of each such maturity and will be deposited with DTC. DTC is a limited -purpose trust company organized under the New York Banking Law, a "banking organization' within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities 12 Go through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of Obligations under the DTC system must be made by or through DTC Participants, which will receive a credit for such purchases on DTC's records. The ownership interest of each actual purchaser of each Obligation ("Beneficial Owner") is in turn to be recorded on the Direct or Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the Obligations are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Obligations, except in the event that use of the book -entry system described herein is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Obligations with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC's records reflect only the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Obligations within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Obligations. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the Record Date (hereinafter defined). The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Obligations are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Obligations will be made to DTC. DTC's practice is to credit Direct Participants' accounts on each payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on such payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent(Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Obligations at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Obligations are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Obligations will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood that while the Obligations are in the Book -Entry Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book -Entry Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. ,n Information concerning DTC and the Book -Entry Only System has been obtained 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 Underwriters. 13 Effect of Termination of Book -Entry Only System. In the event that the Book -Entry Only System is discontinued by DTC or the use of the Book -Entry Only System is discontinued by the City, printed Obligations will be issued to the holders and the following provisions will be applicable to the Obligations. The Obligations may be exchanged for an equal aggregate principal amount of the Obligations in authorized denominations and of the same maturity upon surrender thereof at the principal office for payment of the Paying Agent/Registrar. The transfer of any Obligation may be registered on the books maintained by the Paying Agent/Registrar for such purpose only upon the surrender of such Obligation to the Paying Agent/Registrar with a duly executed assignment in form satisfactory to the Paying Agent/Registrar. For every exchange or transfer of registration of Obligations, the Paying Agent/Registrar and the City may make a charge sufficient to reimburse them for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer. The City shall pay the fee, if any, charged by the Paying Agent/Registrar for the transfer or exchange. The Paying Agent/Registrar will not be required to transfer or exchange any Obligation after its selection for redemption. The City and the Paying Agent/Registrar may treat the person in whose name a Obligation is registered as the absolute owner thereof for all purposes, whether such Obligation is overdue or not, including for the purpose of receiving payment of, or on account of, the principal of, premium, if any, and interest on, such Obligation. RECORD DATE FOR INTEREST PAYMENT ... The record date ("Record Date") for the interest payable on the Obligations on any interest payment date means the close of business on the last business day of the preceding month. In the event of a non-payment of interest on a scheduled payment date, and for 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 ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of a Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. HOLDERS' REMEDIES ... The respective Ordinances do not establish specific events of default with respect to the Bonds or the Certificates, as the case may be. Under State law there is no right to the acceleration of maturity of the Bonds or the Certificates, as the case may be, upon the failure of the City to observe any covenant under the respective Ordinances. Although a registered owner of Bonds or Certificates, as the case may be, could presumably obtain a judgment against the City if a default occurred in the payment of principal of or interest on any such Bonds or Certificates, as the case maybe, such judgment could not be satisfied by execution against any property of the City. Such registered owner's only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Bonds or Certificates, as the case may be, as it becomes due and, with respect to the Certificates, to apply the surplus net revenues of the Solid Waste System to pay the Certificates. The enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The respective Ordinances do not provide for the appointment of a trustee to represent the interests of the holders upon any failure of the City to perform in accordance with the terms of the applicable Ordinance, or upon any other condition. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S: Bankruptcy Code. Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. (See "The Obligations — Possible Avoidance of Pledged Payment Sources in Bankruptcy".) The opinions of Bond Counsel will note that all opinions relative to the enforceability of the respective Ordinances and the Bonds and Certificates are qualified with respect to the customary rights of debtors relative to their creditors. 14 ia SOURCES AND USES OF BOND PROCEEDS ... Proceeds from the sale of the Bonds are expected to be applied approximately as follows: Sources of Funds �•, Par Amount of the Bonds Reoffering Premium Accrued Interest from 2/1/01 to 3/15/01 50 ca W W Total Sources of Funds Uses of Funds Deposit to Project Construction Fund Deposit to Debt Service Fund Original Issue Discount Underwriter's Discount Costs of Issuance Total Uses of Funds $ 9,100,000.00 60,268.30 52,767.92 155,245.75 $ 9,368,281.97 $ 9,100,000.00 52,767.92 63,055.60 63,708.45 88,750.00 $ 9,368,281.97 SOURCES AND USES OF CERTIFICATE PROCEEDS ... Proceeds from the sale of the Certificates are expected to be applied approximately as follows: Sources of Funds Par Amount of the Certificates Reoffering Premium Accrued Interest from 2/1/01 to 3/15/01 Total Sources of Funds Uses of Funds Deposit to Project Construction Fund Deposit to Debt Service Fund Original Issue Discount Total Underwriter's Discount Costs of Issuance Rounding Amount Total Uses of Funds 15 $ 2,770,000.00 19,126.80 15,820.60 $ 2,804,947.40 $ 2,690,000.00 15,820.60 21,157.75 22,846.60 50,500.00 4,622.45 $ 2,804,947.40 2 TAX INFORMATION An VALOREM TAx LAW ... The appraisal of property within the City is the responsibility of the Lubbock Central Appraisal District (the "Appraisal District"). Excluding agricultural 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 applying any assessment ratios. In determining market value ofproperty, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the less of(l) the market value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year 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 property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and 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 Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIIP) 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 market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied 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 exempted 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 an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open -space land (Section 1-d-1), including open -space land devoted to farm or ranch purposes or open -space land devoted to timber production, may elect to have such property 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 automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1 j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. The City and the other taxing bodies within its 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 encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. 16 EFFECTIVE TAX RATE AND ROLLBACK TAX RATE ... By each September I or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The City Council will be required to adopt the annual tax rate for the City before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the City. If the City Council does not adopt a tax rate by such required date the tax rate for that tax year is the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the City for the preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (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". Effective January 1, 2000, a tax rate cannot be adopted by the City Council that exceeds the 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 rate following a notice of such public hearing (including the requirement that notice be posted on the City's website if the City owns, operates or controls an internet website and public notice be given by television if the City has free assess to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine 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 (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year'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 operation 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 submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAX PAYMENT ... Property within the City is generally assessed as of January I 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. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. .11, PENALTIES AND INTEREST ... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: E" 1a rlz Cumulative Cumulative Month Penalty Interest Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that ar automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post -petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post -petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. 17 Ga 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 disabled are also granted an exemption of $10,000. The City has not granted an additional exemption of 20% of the market value of residence homesteads; the minimum exemption that may be granted under this provision being $5,000. s See Table 1 for a listing of the amounts of the exemptions described above Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property; and the Lubbock County Appraisal District collects taxes for the City. The City does not permit split payments of taxes, and discounts for early payment of taxes are not allowed by the City, although permitted on a local -option basis by the Property Code. In the past, the City has taxed freeport property, although beginning with the 1999 tax year the City has exempted freeport property from taxation. The City collects an additional one -eighth cent sales tax for reduction of ad valorem taxes. The City has adopted a tax abatement policy, as described below. TAX ABATEMENT POLICY ... The City has established a tax abatement program to encourage economic development. In order to be considered for tax abatement, a project must be located in a reinvestment zone or enterprise zone (a commercial project must be in an enterprise zone) and must meet several criteria pertaining to job creation and property value enhancement. The City has established three enterprise zones, the north zone, of approximately 18.6 square miles, the south zone, of approximately 15.7 square miles, and the international airport zone, of approximately 10.3 square miles. At present, the City has initiated 20 enterprise projects and tax abatements, principally in the northeast and southeast sections of the City. The amount and term of abatement shall be determined on a case by case basis; however, in no event shall taxes be abated for a term in excess of ten (10) years. TAX INCREMENT FINANCING ZONE ... Together with other taxing units, the City participates in a Tax Increment District ("TID") pursuant to Chapter 311, Texas Tax Code, VTCA. The TID covers an approximately 0.71 square -mile area which includes part of the central business district and adjacent areas of the City known as the Overton Addition and the Broadway Corridor. The base taxable values of the TID are frozen at the level of taxable values for 1986, the year of creation. Any ad valorem taxes relating to growth of the TID's tax base above the frozen base may be used only to finance improvements within n the TID. The tax base for the TID for 1986 was $98,180,307; the 2000 taxable assessed value of property in the TID is less than the tax base and there is no current tax increment. 18 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2000 Market Valuation Established by Lubbock Central Appraisal District $ 7,076,107,051 Less Exemptions/Reductions at 100% Market Value: Residential Homestead Exemptions $ 195,702,020 Homestead Cap Adjustment 66,690,016 Disabled Veterans 13,142,728 Agricultural/Open-Space Land Use Reductions 49,035,210 Pollution Exemptions 2,659,298 Freeport Exemptions 39,339,520 House Bill 366 109,304 Tax Abatement Reductions (1) 70,649,287 437,327,383 2000 Taxable Assessed Valuation $ 6,638,779,668 City Funded Debt Payable from Ad Valorem Taxes General Obligation Debt (as of 12-31-00) (2) $ 176,847,763 The Bonds 9,100,000 The Certificates 2,770,000 Total Funded Debt Payable from Ad Valorem Taxes $ 188,717,763 "^ Less: Self Supporting Debt (3) Waterworks System General Obligation Debt $ 64,370,436 Sewer System General Obligation Debt 54,663,056 Solid Waste Disposal System General Obligation Debt 6,743,924 Hotel Occupancy Tax Certificates of Obligation 385,000 126,162,416 General Purpose Funded Debt Payable from Ad Valorem Taxes (4) $ 62,555,347 General Obligation Interest and Sinking Fund as of 12-31-00 $ 1,260,449 Ratio Total Funded Debt to Taxable Assessed Valuation 2 84% Ratio General Purpose Funded Debt to Taxable Assessed Valuation 0.94% 2000 Estimated Population - 199,445 (5) Per Capita Taxable Assessed Valuation - $33,286 Per Capita Total Funded Debt Payable from Ad Valorem Taxes - $946 Per Capita General Purpose Funded Debt Payable from Ad Valorem Taxes - $314 (1) See above, "Tax Information - Tax Abatement Policy". (2) The statement of indebtedness does not include outstanding $33,230,000 Electric Light and Power System Revenue Bonds, as these Bonds are payable solely from the Net Revenues of the Electric Light and Power System. (3) As a matter of policy, the City provides for debt service on general obligation debt issued to fund Waterworks System ems+ improvements, Sewer System improvements and Solid Waste Disposal System improvements from surplus revenues of these Systems; debt service on the Hotel Occupancy Tax Certificates of Obligation is provided from Hotel Occupancy Tax revenues (see "Table 8A — Pro -Forma 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 $64,370,436 principal amount of outstanding general obligation bonds and certificates of obligation that were issued to finance Waterworks System improvements, and that are being paid from or are expected to be paid from Waterworks System revenues. The City has no outstanding Waterworks System Revenue Bonds but has obligated revenues of the Waterworks System under water supply contracts. See "The Waterworks System". 19 "Sewer System General Obligation Debt" includes $54,663,056 principal amount of outstanding general obligation bonds and certificates of obligation that were issued to finance sewer system improvements, and that are being paid from sewer system revenues. The City has no outstanding Sewer System Revenue Bonds. "Solid Waste Disposal System General Obligation Debt" consist of $6,743,924 principal amount of outstanding general obligation debt that was issued for solid waste disposal improvements, and that is being paid from revenues derived from solid waste service fees. The City has no outstanding Solid Waste Disposal System Revenue Bonds. "Hotel Occupancy Tax Certificates of Obligation" consists of $385,000 principal amount of outstanding general obligation debt. (4) General Purpose Funded Debt Payable from Ad Valorem Taxes" includes the Bonds and $2,545,000 principal amount of outstanding Tax and Airport Surplus Revenue Certificates of Obligation on which debt service is provided from Passenger Facility Charge ("PFC") revenues (see Footnote (2), "Table 9 - Interest and Sinking Fund Budget Projection"). (5) Source: City of Lubbock, Texas. 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 Orly) 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 for Fiscal Year Ended September 30 2001 2000 1999 % of % of % of Amount Total Amount Total Amount Total $ 3,786,979,722 53.52% $ 3,417,179,021 51.99% $ 3,219,691,355 50.90% 455,378,395 6.44% 411,487,582 6.26% 396,277,540 6.26% 88,612,192 1.25% 87,184,492 1.33% 93,912,543 1.48% 60,125,617 0.85% 46,378,532 0.71% 45,494,120 0.72% 11,000,161 0.16% 7,166,908 0.11 % 6,778,453 0.11 % 1,364,333,220 19.28% 1,322,413,335 20.12% 1,272,262,327 20.11% 7,000,000 0A0% 4,540,780 0.07% 7,862,650 0.12% 181,228,303 2.56% 180,418,060 2.740/. 178,399,714 2.82% 1,032,704,200 14.59% 1,072,361,347 16.31% 1,081,053,583 17.09% 14,786,889 0.21% 14,283,024 0.22% 12,807,717 0.20% 13,320,136 0.19% 9,845,906 0.15% 11,256,034 0.18% 60,786,210 0.86% - 0.00% - 0.00% S 7,076,255,045 100.00% $ 6,573,258987 100.00% $ 6,325,796,036 100.00% (437,475,377) (396,296,005) (306,207,687) $ 6,638,779,668 $ 6,176,962,982 S 6,0197588,349 Taxable Appraised Value for Fiscal Year Ended September 30 1998 - 1997 %of %of Amount Total Amount Total $ 3,112,040,906 51.06% $ 3,019,393,785 51.89% 382170,749 6.27% 349,118,848 5.98% 96;312,775 1.58% 1007053,739 1.72% 46,128,990 0.76% 45,572,096 0.78% 6,671,096 0.11% 6,933,323 0.12% 1,180,704,813 19.37% 1,121,128,529 19.27% 10,638,260 0.17% 9;263,830 0. i 6° c 171,889,877 2.82% 167,598,757 2.88% 1,065;115,428 17.48% 974,209,635 16.74% 12,087,601 0.20% 11.028;113 0.19% 11,040,883 0.18% 15,225,881 026% $ 6,094,801,378 100.00%' '' 5,818.526,535 100-00% (264;552,205) �_' (25L453,894) $ 5,830,249,173 $ 5,567,072641 NOTE: Valuations shown are certified taxable assessed values reported by the Lubbock Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. 20 TABLE 3A - VALUATION AND GENERAL OBLIGATION DEBT HISTORY General Purpose Ratio Fiscal Taxable Funded Tax Debt Tax Debt Funded Year Taxable Assessed Outstanding to Taxable Debt Ended Estimated Assessed Valuation at End Assessed Per 9/30 Population (1) Valuation (2) Per Capita of Year (3) Valuation Capita 1996 193,064 $ 5,399,356,462 $ 27,967 $ 67,438,562 1.25% $ 349 1997 195,367 5,567,072,641 28,495 61,728,036 1.11% 316 1998 196,679 5,830,249,173 29,643 57,156,101 0.98%0 291 1999 197,117 6,019,588,349 30,538 51,222,980 0.85% 260 2000 199,445 6,176,963,982 30,971 53,455,346 0.87% 268 2001 199,445 6,638,779,668 33,286 58,122,809 (4) 0.88% (4) 291 (4) (1) Source: The City of Lubbock, Texas. (2) As reported by the Lubbock Central Appraisal District on City's annual State Property Tax Reports; subject to change during the ensuing year. (3) Does not include self-supporting debt. (4) Projected; includes the Obligations. TABLE 3B - DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT The following table sets forth certain information with respect to the City's general purpose and self-supporting general eft% obligation debt. The City received voter approval for authority to issue additional general obligation tax -supported debt on September 18, 1999, and the City has adopted a capital improvement plan which is expected to result in the issuance of additional self-supporting general obligation debt. See "Debt Information —Anticipated Issuance of General Obligation Debt." Fiscal Funded Tax Debt Less: General Purpose Year Outstanding Self -Supporting Funded Tax Debt Ended at End Funded Tax Outstanding 9/30 of Year Debt at End of Year (t) 1996 $ 151,763,752 $ 84,325,190 $ 67,438,562 1997 138,914,318 77,186,282 61,728,036 1998 137,104,242 79,948,141 57,156,101 1999 158,117,749 106,894,769 51,222,980 011 2000 176,847,762 123,392,416 53,455,346 2001 175,408,321 (2) 117,285,512 58,122,809 (2) (1) After the issuance of the Bonds, the City will have $25,027,000 general obligation bond authorization that has been authorized by the voters, but which has not yet been issued See discussion under Table 11. (2) Projected; includes the Obligations. All TABLE 4 - TAx RATE, LEVY AND COLLECTION HISTORY Fiscal % of Current % of Total Year Distribution Tax Tax Ended Tax General Economic Interest and Collections Collections 9/30 Rate Fund Development Sinking Fund Tax Levy to Tax Levy to Tax Levy '^s 1996 $ 0.5859 $ 0.39650 $ 0.03000 $ 0.15940 $ 31,634,830 98.19% 100.03% 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 N.A. N.A. 21 W TABLE 5 - TEN LARGEST TAXPAYERS Name of Taxpayer Macerich Lubbock LTD Partnership Southwestern Bell Telephone Company Southwestern Public Service Plains Co -Op Oil Mills Inc. X-Fab Texas, Inc. Covenant Health System Wal-Mart Stores Inc. Fleming Companies, Inc. Southern Cotton Oil Company Energas 2000/01 % of Total Taxable Taxable Assessed Assessed Nature of Property Valuation Valuation Regional Shopping Mall $ 102,480,853 1.54% Telephone Utility 69,081,840 1.04% Electric Utility 54,457,638 0.82% Agricultural Processing 28,090,510 0.42% Electronics Manufacturer 27,023,881 0.41% Hospital and Medical Office Building 23,661,703 0.36% Discount Retail Stores 21,162,386 0.32% Wholesale Grocers 20,651,136 0.31% Agricultural Processing 19,071,943 0.29% Natural Gas Utility 18,060,408 0.27% $ 383,742,298 5.78% GENERAL OBLIGATION DEBT LIMITATION ... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "Tax Rate Limitation"). TABLE 6 - TAX ADEQUACY(1) Maximum Principal and Interest Requirements AllGeneral Obligation Debt, 2001M................................................................................... ....................................... $23,361,135 $0.3591 Tax Rate at 98% Collection Produces.................................................................................................................. $23,363,061 Maximum Principal and Interest Requirements, General Purpose General Obligation Debt, 2002(3) ........................................................... ........................................ $ 7,999,723 $0.1230 Tax Rate at 98% Collection Produces.................................................................................................................. $ 8,002,385 (1) Based on 2000-2001 taxable assessed valuation. (2) See Table 8A (3) See Table 8B. 22 La TABLE 7 - ESTIMATED OVERLAPPING DEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures, contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas and the Lubbock This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt") was developed from information Central Appraisal District. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. racy o- more, certain of the entities listed may have issued additional bonds since the date hereof, and such entities may have programs Further - requiring the issuance of substantial amounts of additional bonds, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. 2000/01 Taxable Total Funded Ci s h'� Authorized Assessed Tax Debt Estimated Overlapping But Unissued Taxing jurisdiction City of Lubbock Value Rate As Of 9-30-00 ° /° Applicable G.O. Debt As of 9-30-00 Debt As Of 9-30-00(2) Lubbock Independent School District 37 6,638,779,668 5,564,927,878 TO 0000 1.58930 $ 62, 555,3471» 1o0.00% $ 62, 555,347 $ 25, 227,000 Lubbock County 7,784,487,133 0.19170 70,744,957 1,005,000 98.91 % 82.94% 69,973,837 3,400,275 Lubbock County Hospital District 7,784,625,799 0.09798 -0- 82.94% 833,547 50Q000 High Plains Underground Water Conservation 0 0- District No. 1 Frenship Independent School District 7,783,791,520 0.00840 -0- 82.94% -08 0- Idalou Independent School District 810,386,094 109,301,647 1.58930 1.50000 38,978,395 64.44% 25,117,678 -0_ Lubbock -Cooper Independent School District 277,492,758 1.45200 1,860,000 6,929,555 1.10% 15.30% 20,460 0 New New Deal Independent School District 1.50000 -0- 0.03% 1,060,222 -0- Roosevelt Independent School District 97,505,044 1.50000 -0- -0- 4.72% Total Direct and Overlapping G.O. Debt $ 159,561,091 Ratio of Direct and Overlapping G.O. Debt to Taxable Assessed Valuation ............................................... 2.40% Per Capita Direct and Overlapping G.O. Debt...........................................................................$ 800 (1) General Purpose Funded Tax Debt; excludes self-supporting General Obligation Debt (see "Table 1- Valuation, Exemptions and General Obligation Debt'). (2) Amount shown for the City reflects the remaining unissued general obligation debt after the issuance of the Bonds. 23 C o O o O vl O O N M h o0 ^ ^ M Q co N N OHO � c, c') � ^ N c � � O Vi O o7 Or O �D O lO O M N O .�. -Q-. .�. .N. CD Vi Vi M N N N N ^ ^ 69 69 C � a M M m � M c, N 'ct C W N v1 ID N l� N Da O, an O, cr ~ ^ O N d0'M. - N Vl M V1 D\ Vi •� 69 p M V M ONO O O O O O ID o O O O O O O O O O O O O r �p 'O O O O o o O O O OIN iC O o0 Q• vi vi vi O O Vl W QOi OMO 7 r t (� M O r 2� r `O M 7 M M 7 l� O N o0 M o0 .N-^ O O O O� a,ID U �D �n Vl vi 7 M o0 C 0.+ ^ 69 b &O CT ^ v1 v1 V1 Vi �n o0 lO O m O` 01 Ol O 00 M N N O O W .�. O In IN N N N N N N N 7 F 69 Obi O^ O' m - 01 N I, M w M lO O � O^ O tp 1p U v9 v sH H 0 o 0 o 0 0 0 0 0 o 0 0 0 0 0 o 0 0 0 0 o c ' c op 0 0 0 o 0 o c o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O O O O O O O O 'p N 69 00 W In v- - O- t- CEO r O ^ � m N � OM � ENO � r N � V1 vl Da Vi c� b 'o IN IN r r r r F g c) va v o rn W V1 O v� 00 Vt v1 O� 7 ^, v� M O cD 'O O �O N Vi O� Vt U1 M t� f� M o �c •-• V1 I� � r h N r G N l� N t� N - c* O� Q OC, O r q p C M M M M NNt N N N N N ' O O O O O O O C O O O O O O O O C o O o O 0 0 0 0 0 o 0 0 0 0 o c o 0 C 0 0 0 0 0 ¢ p M to W O m vi o00 O �O 'O IO O O_ � r � O� :4 69 oD T 7 M M OHO O M d' O� W v1 7 M O O` r O W N N � O V GD •--� 00 0 O M M �p VM• O Obi M \c IN N F N N s5 69 ^ _ M O oo N N v� O 7 00 ^• T CD N V1 l� O 7 U Vl 7 vl oo INO� :p q F ttl Eli 7 V3 Q M W O o o O O O O O O O O O O O o o O O O O O O O O o O O O O O ^ M '7 vi O vt Vi O vi Vi O �_ c) o N o00 O� vl V W a. ^ 4H b9 N cE b O IO O o O O O o O ^ ^ m ^ O O O O O c,o o O O O o 0 N ON N N � N ID N N N N N N N N N N N N N 24 C lH rdo Em W TABLE gB - DIVISION OF DEBT SERVICE REQUIREMENTS Less: Less: Less: Less: Solid Waste Hotel Waterworks Sewer Disposal Occupancy General Fiscal System System System Tax Purpose Year General General General General General Ended Combined Requirements cD Obligation Obligation Obligation Obligation Obligation 9130 Principal Interest Total Requirements Requirements Requirements(l) Requirements Requirements(l) 2001 $ 13,309,442 $ 10,051,693 $ 23,361,135 $ 7,587,496 $ 6,678,816 $ 757,556 $ 393,663 $ 7,943,604 2002 12,918,639 9,414,171 22,332,810 7,034,507 6,347,280 951,300 7,999723 2003 12,689,682 8,010,598 20,700,280 6,599,085 6,074,411 579,021 7,447,763 2004 11,695,000 6,923,211 18,618,211 5,966,722 5,762,819 558,709 6,329,961 2005 11,735,000 6,340,896 18,075,896 5,982,290 5,453,726 540,403 6,099,477 2006 11,765,000 5,770,992 17,535,992 5,809,129 5,267,680 524,362 5,934,821 2007 11,790,000 5,213,970 17,003,970 5,674,033 5,075,515 512,440 5,741,982 2008 11,200,000 4,675,242 15,875,242 5,251,614 4,748,347 498,859 5,376,422 2009 10,825,000 4,163,044 14,988,044 5,087,658 4,462,548 485,035 4,952,803 2010 10,380,000 3,669,483 14,049,483 4,914,028 4,180,852 470,851 4,493,752 2011 10,445,000 3,186,343 13,631,343 4,800,300 4,012,579 456,389 4,362,075 2012 9,310,000 2,727,373 12,037,373 3,911,942 3,781,678 441,730 3,902,023 2013 9,380,000 2,290,307 11,670,307 3,842,729 3,590,722 426,787 3,810,069 2014 9,480,000 1,845,377 11,325,377 3,778,395 3,429,374 411,540 3,706,068 2015 6,590,000 1,458,231 8,048,231 3,632,819 1,561,461 396,125 2,457,826 2016 5,770,000 1,151,390 6,921,390 3,571,512 787,694 376,171 2,186,013 2017 5,085,000 877,989 5,962,989 3,510,185 754,751 361,663 1,336,390 2018 5,240,000 613,722 5,853,722 3,447,372 721,381 347,071 1,337,898 2019 4,890,000 353,958 5,243,958 3,063,701 687,829 151,875 1,340,553 2020 3,375,000 135,603 3,510,603 2,021,003 145,125 1,344,475 2021 845,000 21,125 866,125 138,375 727,750 $ 188,717,763 $ 78,894,718 $ 267,612,481 $ 95,486,520 $ 73,379,463 $ 9,531,387 $ 393,663 $ 88,821,448 (1) Includes debt service on the Obligations. 25 TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION $ General Obligation Debt Service Requirements, Fiscal Year Ending 9-30-01 1135 23,361, 77 Fiscal Agent, Tax Collection and Other Uses $ 23,36,135 , 00 35 Total Requirements Sources of Funds $ 1,260,450 Interest and Sinking Fund, 9-30-00 7,490,019 Budgeted Ad Valorem Tax Receipts Budgeted Transfers From: Water Fund Sewer Fund Solid Waste Fund Hotel Occupancy Tax Fund ��� Airport Fund - from Passenger Facility Charges ("PFCs") Budgeted Interest Earned Total Sources of Funds Projected Balance, 9-30-01 7,587,496 6,678,816 757,556 393,663 301,745 67,950 $ 24,537,695 $ 1,160,560 (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 "Airport Certificates") in 1993 and 1995. The outstanding principal balance of the Airport Certificates on 9-30-00 was $2,545,000; debt service on the Airport Certificates is provided from PFC revenues. PFC revenues in fiscal year ending 9-30-00 were $1,552,654. Debt service on other airport general obligation debt (having an outstanding principal balance at 9-30-00 of $3,980,513) is provided from ad valorem taxes. 26 r TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT THE WATERWORKS SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-00 $ 14,296,533 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-01 Balance Available for Other Purposes $ 14,296,533 Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-01 $ 7,587,496 Percentage of System General Obligation Debt Self -Supporting 100.00% (1) Each Fiscal Year the City transfers Net Revenues 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 9-30-00 $ 9,217,149 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-01 -0_ Balance Available for Other Purposes $ 9,2 77,149 Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-01 $ 6,678,816 n Percentage of System General Obligation Debt Self -Supporting 100.00% (1) Each Fiscal Year the City transfers Net Revenues 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 9-30-00 $ 8,205,700 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-01 -0- Balance Available for Other Purposes $ 8,205,700 Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-01 $ 757,556 Percentage of System General Obligation Debt Self -Supporting 100.00% (1) Each Fiscal Year the City transfers Net Revenues of the Solid Waste Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt service requirements on Solid Waste System general obligation debt. THE HOTEL OCCUPANCY TAX (1) Revenue Available, Fiscal Year Ended 9-30-00 $ 2,568,957 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-01 Balance Available for Other Purposes -0- $ 2,5 Requirements for Hotel Ocupancy Tax Debt, Fiscal Year Ending 9-30-01 88,957 $ Percentage of Hotel Occupancy General Obligation Debt Self -Supporting 393,663 100.00% (1) Each Fiscal Year the City transfers revenues of the Hotel/Motel Special Revenue Fund to the General Obligation Interest and Sinking Fund in an amount that is equal to debt service requirements on Hotel Occupancy Tax obligations. TABLE 11 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS Amount Amount Date Amount Previously Being Unissued Purpose Authorized Authorized Issued Issued Balance Waterworks System 10-17-87 $ 2,810,000 $ 200,000 $ $ 2,610,000 Sewer System 5-21-77 3,303,000 2,175,000 1,128,000 Street Improvements 5-1-93 10,170,000 10,166,000 4,000 Street Improvements 9-18-99 17,165,000 2,390,000 5,335,000 9,440,000 .+ Drainage 9-18-99 2,160,000 1,025,000 - 1,135,000 Traffic Signals 9-18-99 3,295,000 340,000 740,000 2,215,000 Parks 9-18-99 14,765,000 3,245,000 3,025,000 8,495,000 $ 53,668,000 $ 19,541,000 $ 9,105,0 00 $ 25,027,000 ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ... As described below, the City has identified certain capital projects in its capital improvement plan that may be financed through the issuance of tax -supported debt over the next three years. In 2000, the City commissioned a feasibility study regarding various storm water drainage improvements to be made throughout the City, and it is currently anticipated that the City will issue Combination Tax and Stormwater Revenue Certificates of Obligation in the Spring of 2001 for the first phase of this project. It is estimated that the Certificates will be in the range of $25 to $35 million in principal amount. Phase two of the project, which could be issued in 2002 or 2003, would be funded by the 27 issuance of approximately $30 million of Combination Tax and Stormwater Revenue Certificates of Obligation. The debt for the storm water drainage project is expected to be self-supporting from storm water fees collected by the City. In addition, the City expects to issue approximately $6 million of Certificates of Obligation in the 2001-02 fiscal year to fund the City's share of right of way acquisition costs for a freeway that will traverse the City from east to west. The City's current debt issuance plan also includes an additional $8.125 million of Combination Tax and Solid Waste System Revenue Certificates of Obligation during the 2001-02 and 2002-03 fiscal years to fund additional landfill closure costs, which the City expects to be self sufficient from revenues provided by the Solid Waste System. The issuance plan includes approximately $7.9 million of Combination Tax and Water and Sewer System Revenue Certificates of Obligation during the 2001-02 and 2002-03 fiscal years, which the City expects to be self sufficient from revenues of the Water and Sewer System. Finally, the plan calls for the City to issue additional General Obligation Bonds in the approximate amount of $19.8 million during the 2001-02 and 2002-03 fiscal years to fund a portion of the projects for which the City has received authorization from the voters. See "Table 11 — Authorized but Unissued General Obligation Bonds." TABLE 12 — OTHER OBLIGATIONSM The City has entered into lease agreements for the purpose of acquiring certain properties and equipment. As of 9-30-00 capital leases were as follows: Balance Asset Classification 2001 2002 2003 2004 Outstanding Motor Vehicles $ 7,621 $ 7,621 $ 7,621 $ 4,383 $ 27,247 Heavy Equipment 191,170 163,552 106,201 48,326 509,249 Heavy Moveable Equipment 207,888 207,888 35,359 18,327 469,462 (1) All amounts include interest. PENSION FUND ... TEXAS MUNICIPAL RETIREMENT SYSTEM (')(Z) . . . All permanent, full-time City employees who are not firefighters are covered by the Texas Municipal Retirement System ("TMRS"). TMRS is an agent, multiple -employer, public - employee retirement system which is covered by a State statute and is administered by six trustees appointed by the Governor of Texas. TMRS operates independently of its member cities. The City of Lubbock joined TMRS in 1950 to supplement Social Security. All City employees except firefighters are covered by Social Security. Options offered under TMRS, and adopted by the City, include current, prior and antecedent service credits, ten year vesting, updated service credit, occupational disability benefits and survivor benefits for the spouse of a vested employee. An employee who retires receives an annuity based on the amount of the employees contributions over -matched two for one by the City. Employee contribution rate is 6% of gross salary. Beginning October 11, 1997, employee contribution rate is 7% of gross salary. The City's contribution rate is calculated each year using actuarial techniques applied to experience. The 1999 contribution rate was 14.27%. The 2000 contribution rate is 13.6%. Enabling statutes prohibit any member city from adopting options which impose liabilities that cannot be amortized over 25 years within a specified statutory rate. On December 31, 1999, assets held by TMRS (not including those of the Supplemental Disability Fund, which is "pooled"), for the City of Lubbock were $147,042,049. Unfunded accrued liabilities on December 31, 1999 were $34,397,608, which is being amortized over a 25-year period beginning January, 1997. Total contributions by the City to the System for Calendar Year 1999 were $7,146,029. FIREMEN'S RELIEF AND RETIREMENT FUND(')... City of Lubbock firefighters are members of the locally administered Lubbock Firemen's Relief and Retirement Fund (the "FUND"), operating under an act passed in 1937 by the State Legislature and adopted by City firefighters, by vote of the department, in 1941. Firefighters are not covered by Social_ Security. The Fund is governed by seven trustees, three firefighters, two outside trustees (appointed by the other trustees), the Mayor or his representative and the chief financial officer or his representative. Execution of the act is monitored by the Firemen's Pension Commissioner, who is appointed by the Governor. Benefits of retired firemen are determined on a `formula" or a "final salary" plan. Actuarial reviews are performed every two years, and the fund is audited annually. Firefighters contribute 11% of full salary into the fund and the City must contribute a like amount; however, the city contributes on a basis of the percentage of salary which is a ratio adjusted annually that bears the same relationship to the firefighter's contribution rate that the City's rate paid into the TMRS and FICA bears to the rate other employees pay into the TMRS and FICA. The City's contribution rate for 2000 was 16.02%. As of December 31, 1998, unfunded pension benefit obligations were $7,168,633 which is being amortized over a 13 year period beginning January 1, 1997. (1) For historical information concerning the retirement plans, see Appendix B, "Excerpts from the City's Annual Financial Report" — Note #III, Subsection E, "Retirement Plans".) (2) Source: Texas Municipal Retirement System, Comprehensive Annual Financial Report for Year Ended December 31, 1999, "City of Lubbock, Texas". 28 0 FINANCIAL INFORMATION TABLE 13 - GENERAL FUND REVENUES AND EXPENDITURE HISTORY Fiscal Year Ended September 30, Revenues 2000 1999 1998 1997(`) 1996 Ad Valorem Taxes $ 26,595,709 $ 25,338,127 $ 23,271,939 $ 22,440,626 $ 21,776,739 Sales Taxes 27,121,078 25,196,203 24,914,523 24,251,491 22,827,516 Franchise Fees 6,619,755 6,235,099 7,128,034 5,438,688 5,180,874 Miscellaneous Taxes 743,771 721,907 675,694 687,574 171,555 Licenses and Permits 1,138,924 976,091 1,037,458 1,077,878 1,125,809 Intergovernmental 365,671 576,136 917,572 884,834 1,417,496 Charges for Services 4,210,334 4,032,665 4,016,475 3,522,397 2,725,584 Fines 2,834,208 3,335,340 3,313,233 3,460,453 3,144,431 Miscellaneous Taxes 1,143,226 947,636 1,011,559 1,118,578 1,677,201 Interest 1,108,662 1,118,016 1,239,562 1,623,818 1,884,037 Operating Transfers (2) 13,636,764 13,451,796 16,030,636 15,284,140 13,765,839 Total Revenues and Transfers $ 85,518,102 $ 81,929,016 $ 83,556,685 $ 79,790,477 $ 75,697,081 Expenditures General Government $ 6,193,124 $ 6,143,076 $ 5,762,283 $ 5,003,806 $ 3,462,253 Financial Services 1,458,232 1,366,006 1,196,779 1,067,281 1,834,463 Management Services 461,067 396,216 389,583 1,170,948 2,526,119 Development Services - - - - 7,041,640 Public Safety & Service - - - - 50,891,276 Non -departmental 606,843 926,203 1,125,310 1,040,419 894,426 Health & Community Services 4,744,830 4,522,041 4,519,880 4,398,348 - Strategic Planning 823,399 839,814 774,878 727,448 - Culture/Leisure Services 13,454,832 12,630,738 12,667,406 12,347,987 - Police 25,561,261 23,478,729 22,013,906 20,519,946 - Fire 17,080,371 15,616,543 14,468,027 13,897,682 - Transportation Services 5,439,855 5,195,459 5,007,496 4,993,564 - Electric Utilities 1,923,584 1,759,509 1,848,283 1,778,824 - Human Resources 871,596 870,172 810,997 831,758 - Operating Transfers 7,526,481 9,926,784 12,454,461 11,211,948 9,029,782 Total Expenditures $ 86,145,475 $ 83,671,290 $ 83,039,289 $ 78,989,959 $ 75,679,959 Excess of Revenues and Transfers (in) Over Expenditures (out) $ (627,373) $ (1,742,274) $ 517,396 $ 800,518 $ 17,122 Fund Balance at Beginning of Year 17,248,025 18,990,299 18,472,903 17,672,385 17,655,263 Fund Balance at End of Year $ 16,620,652 $ 17,248,025 $ 18,990,299 $ 18,472,903 $ 17,672,385 Less: Reserves and Designations (3) (2,857,096) (4,432,834) (5,442,847) (4,997,379) (4,974,060) Undesignated Fund Balance $ 13,763,556 $ 12,815,191 $ 13,547,452 $ 13,475,524 $ 12,698,325 (1) The presentation of the City's General Fund income statements in its audited financial statements was changed in 1997, resulting in different categorizations of expenditure items. (2) The City's financial policies provide for transfers to the General Fund from the City's enterprise funds. The policies provide that the water, waste water and solid waste funds transfer an amount sufficient to cover the pro rata share of the City's general and administrative expenses, an amount representing a franchise payment equal to 3% of gross receipts and an amount representing a payment in lieu of ad valorem taxes. The Electric System makes transfers for the foregoing purposes, and, in addition, makes a transfer reflecting the System's share of street lighting expense. The City's policies with respect to enterprise fund transfers are subject to change. Among the factors that could affect the transfers to the General Fund is the effect of increased competition on the City's electric utility that could occur due to the implementation of Senate Bill 7, which mandates open competition in the provision of retail electric service in the State commencing January 1, 2002. (3) The City's financial policies target a General Fund undesignated balance of at least two months of General Fund expenditures. Amounts representing fund balances 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, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Obligations or other debt of the City. In addition, in January, 1995, the voters of the City approved the imposition of an additional sales and use tax of one -eighth of a cent as authorized by VTCA, Tax Code, Chapter 323, as amended. Collection for the additional tax commenced in October, 1995 with the proceeds from the one -eighth cent sales tax designated for the use and benefit of the City to replace property tax revenues lost as a result of the adoption of the tax. Collections and enforcements of the City's sales tax are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. Revenue from the City's Local Sales and Use Tax, for the years shown, has been: Fiscal Year Ended Total 9/30 Collected"' 1996 $ 22,983,167 1997 24,391,081 1998 25,002,693 1999 25,196,203 2000 27,121,078 (1) Excludes bingo tax receipts. (2) Based on population estimates of the City. The sales tax breakdown for the City is as follows: City % of Equivalent of Ad Valorem Ad Valorem Per Tax Levy Tax Rate Capita (2) 72.65% $ 0.4257 $ 119.04 74.78% 0.4381 124.85 73.94% 0.4288 127.12 72.04% 0.4186 127.82 71.67% 0.4085 135.98 City Sales & Use Tax 1.0000 Property Tax Relief 0.1250 County Sales & Use Tax 0.5000 State Sales & Use Tax 6.2500 Total 7.8750 CAPITAL IMPROVEMENT PROGRAM 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 that 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 date basis. For fiscal year ending 9-30-01, the City Council has approved $48,877,329 in total expenditures for capital projects for all general purpose projects, as well as projects for the City's Electric System Waterworks System, Sewer System, Solid Waste System, Storm Water System and Airport. The Capital Projects Fund budget for 2000-2001 also identifies an additional $132,292,054 in future improvements, for all City departments over the four succeeding fiscal years, including $36,385,000 to be financed through the issuance of tax -supported debt in these years. The balance of the capital expenditures are anticipated to be funded from reserves or current year revenue sources. FINANCIAL POLICIES Basis oJ' Accounting . . . The accounting policies of the City conform to generally accepted accounting principles of the Governmental Accounting Standards Board and program standards adopted by the Government Finance Officer's Association of the United States and Canada ("GFOA"). The GFOA has awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for each of the fiscal years ended September 30, 1984 through September 30, 1999. The City's 2000 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 Governmental Accounting Standards Board issued Statement No. 34, "Basic Financial Statements -- Management's Discussion and Analysis - for State and Local Governments". The objective of this Statement is to enhance the clarity and usefulness of the general-purpose external financial reports of state and local governments to the citizenry, legislative and oversight bodies, and investors and creditors. The City must implement GASB 34 for its fiscal year ending September 30, 2002. While adoption of this Statement will alter the presentation of some r� ,-s 30 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 objective is to achieve and maintain a General Fund balance equivalent to two months operating costs of the General Fund Budget. The City believes that such a reserve will be sufficient to provide financing for necessary projects, unanticipated contingencies, and fluctuations in anticipated revenues. 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 for unforeseen contingencies. The City's financial policy provides that such retained earnings shall be accumulated over a ten year period, which commenced in 1996. Resources are also retained in the System's rate stabilization fund to meet shortfalls 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. Such self sufficiency is to be obtained through the rates, fees and charges of each enterprise fund. For purposes of determining self sufficiency, cost recovery for each enterprise fund includes direct operating and maintenance expense, as well as indirect cost recovery, in -lieu of transfers to the General Fund for property and franchise tax payments, capital expenditures and debt service payments, where appropriate. Debt Service Fund Balance ... A reasonable debt service fund balance is maintained in order to compensate for unexpected contingencies. Budgetary Procedures ... The City follows these 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 1. The operating budget includes proposed expenditures and the means of financing them. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to October 1 the budget is legally enacted through passage of an ordinance. 4) The City Manager is authorized to transfer budgeted amounts between departments and funds. Expenditures may not legally exceed budgeted appropriations 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, and Capital Projects Funds. Budgets are adopted on an annual basis. Formal budgetary integration is not employed for Debt Service funds because effective budgetary control is alternatively achieved through general obligation bond 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 continue as authority for subsequent period expenditures. 8) Budgetary comparison is presented for 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 1990-99. The City will submit the current budget to the GFOA to determine its eligibility for another award. Insurance ... The City is self -insured for general 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 insurers. The City's Insurance policies are maintained with large deductibles for fire and extended coverage and boiler coverage. An Insurance Fund has been established in the Internal Service Fund to account for insurance programs and budgeted transfers are made to this fund based upon estimated payments for claim losses. At 9-30-00 the total Fund Equity of these insurance funds are as follows: Self-insurance — health $ 6,858,161 Self-insurance — risk management $ 10,496,729 31 W INVESTMENTS The City of Lubbock invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council of the City of Lubbock. Both state law and the City's investment policies are subject to change. LEGAL INVESTMENTS ... Under Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) certificates of deposit that are guaranteed or insured by the Federal Deposit Insurance Corporation or are secured as to principal by obligations described in the preceding clauses or in any other manner and amount provided by law for City deposits, (7) certificates of deposit and share certificates issued by a state or federal credit union domiciled in the State of Texas that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in the clauses (1) through (5) or in any other manner and amount provided by law for City deposits, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9) bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (11) no-load money market mutual funds regulated by the Securities and Exchange Commission that have a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, (12) no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two years; invests exclusively in obligations described in the preceding clauses; and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent, (13) bonds issued, assumed, or guaranteed by the State of Israel, and (14) guaranteed investment contracts secured by obligations of the United States of America or its agencies and instrumentalities, other than the prohibited obligations described in the next succeeding paragraph. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations - provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage -backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage -backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. INVESTMENT POLICIES ... Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar -weighted maturity allowed for pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City Council. ADDITIONAL PROVISIONS ... Under Texas law the City is additionally required to: (1) annually review its adopted policies and strategies; (2) require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (e) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments 32 1-1 E0 n and adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict its investment in mutual funds in the aggregate to no more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, and to invest no portion of bond proceeds, reserves and funds held for debt service, in mutual funds; and (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. TABLE 15 — CURRENT INVESTMENTS As of 12-31-00, the City's investable funds were invested in the following categories: Estimated Fair Book Value Market Value"' Weighted Type Par Value Value % of Total Book Value Value % of Total Average United States Treasury Obligations $ 9,000,000 $ 8,989,912 5.89% $ Book Value Maturity (Days) United States Agency Obligations Bank 77,300,000 76,318,804 50.03% 9,001,563 76,465,639 5.89% 196 Certificates of Deposit 283,600 283,600 0.19% 50.0M 312 Commercial Paper P 32,195,000 31,783,490 20.84% 31,787,509 787,509 0.19% 194 Local government investment pools�Z� 35,168,849 35,168,849 23.05% 35,168,849 20.82% 75 $ 153,947,449 $ 152,544,655 100° .00% $ 152,707,160 .03% 10000.00% j 184 (1) As determined by Patterson & Associates, the City's investment adviser. As of such date, the market value of such investments was approximately 100.00% of their book value. No funds of the City are invested in mortgage -backed securities. The City holds all investments to maturity which minimizes the risk of market price volatility. (2) Local government investment pools consist of entities with investment objectives that include achieving a stable net asset value of $1.00 per share, including TexPool, a local government investment pool under the control of the Texas Comptroller of Public Accounts. The Comptroller has engaged Chase Bank of Texas, and its affiliates, to provide investment management and fund accounting services for TexPool. First Southwest Asset Management, Inc., an affiliate of First Southwest Company, the City's Financial Adviser, provides customer service and marketing for TexPool. 33 G r THE SOLID WASTE SYSTEM cates are red by a the ad lorem The information set forth below relates '� thby law, and are further securedte System. The by a pledgeofthe surplusgn t of evenuesaof the taxes levied by the City, within the limit prescribed Solid Waste System. SOLID WASTE SYSTEM The Solid Waste Disposal System, operated by ServS clad Waste ects refuse twice Department wek y (onceprovides weekly in the winter) from the Cityollection, recycling and disposal services to the City. The Collect residential households and some local businesses which can be served with side -loading containers. Residential Collection manages several programs to reduce illegally dumped items: 1) Dial-A-Dumpster — allows customers to request a dumpster, at no cost, ordte e disposafor the l of large ent of a small stipend to residents 2) Quarterly Buy Back program — the large item "Buy Back" program p items to the City's landfill. This program has produced savings for the City due, as the resident, and not who transport bulky the City, collects and transports the bulky items that are covered by the program. 3) Large item and yard waste disposal at recycling drop-off centers — citizens can drop off large items or yard waste at these 't drop sI es. ls ticipates disposing and The Solid Waste Disposal divisio e n Flscal Year 00 200tes the City of 1.bThe new landfillock's two lllocat d near Abernathy, Texas wasopenedin approximately 314,300 tons of refuse approximately 12 miles north of the old landfill. The October 1999. The new landfill was located near the City of Abernathy, Texas, app Y to be new landfill is licensed for 1,237 acres. The old landfill and'ldemolition mat rials and inert ht licensed mater al. Two of the cel," two of which ar ls lnclud including elllfourd to be used by the City for disposal of construction year the closure of which is beinState law. g funded with closed in 1993 proceeds nd have only of the Certificates, a seven year monitoring g requirement under State lawrequirement s. The City Several of the old landfill cells were the cells wiancesth thoceeds of e Solid WastelEnterpose Fend ion, however, post closure costs oft e intends to fund the closure costs of certain of pr old landfill have been funded through designated TABLE 16 - MONTHLY SOLID WASTE RATES Summarized below are the current solid waste rates the City. ra es The City in 1998. has t increased solid waste rates since October 1, 1995. The City decreased the residential and commercialgarbage Residential Garbage Rate (Effective 10-1-98) Monthly Rate 11.18 Commercial Garbage Rate (Effective 10-1-98) Container Size Monthly Rate 2 cubic yards $ 33. 3 cubic yards $ 50.87 4 cubic yards $ 68.16 6 cubic yards $ 99.74 8 cubic yards $ 131.32 Landfill Fees (Effective 10-1-95) Waste Generated Inside the City Limits $ 25.00 27.00 Waste Generated Outside the City Limits $ TABLE 17 — SOLID WASTE SYSTEM CONDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 301997 1996 2000 1999 1998-------- $ 16� $ 16,936,908 $ 17,���,86� $ 17'317,608 Operating Revenues $ 16� 1,042,585 669,574 629,222 17,613,491 Non -Operating Revenues _�_ -- ----- $ 17,077,244 $ 17,027,161 $ 176,130 $ 17,616,197$ Gross Revenues Operating Expense 348,841 $ 9,576,950 $ 9,647,842__ $-- 9___ $ 9>787,492 (excluding depreciation) $ . 9,68>928 __--- —'--------,825,999 $ 7-=� $ 7,989,180 $ 7' $ 7 Net Revenues $ 8,008,316 — �— . 34 W TAX MATTERS TAX EXEMPTION ... The delivery of the Obligations is subject to the opinions of Bond Counsel to the effect that interest on the Bonds or Certificates, as the case may be, for federal income tax purposes (1) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of such opinion (the "Code"), pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. A form of Bond Counsel's opinions 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, including the Obligations, owned by a corporation will be included in such corporation's adjusted current earnings for tax years beginning after 1989, for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust, a real estate mortgage investment conduit , or a financial asset securitization investment trust (FASIT). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the City made in a certificate dated the date of delivery of the Obligations pertaining to the use, expenditure, and investment of the proceeds of the Obligations and will assume continuing compliance by the City with the provisions of the respective Ordinances subsequent to the issuance of the Obligations. The respective Ordinances contain covenants by the City with respect to, among other matters, the use of the proceeds of the Obligations and the facilities financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the Obligations are to be invested, the periodic calculation and payment to the United States Treasury of arbitrage "profits" from the investment of the proceeds, and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants would cause interest on the Obligations to be includable in the gross income of the owners thereof from date of the issuance of the Obligations. 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 Obligations. Prospective purchasers of the Bonds or Certificates, as the case may be, should be aware that the ownership of tax-exempt obligations such as the Bonds or Certificates, as the case may be, 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, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the 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. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances. TAX ACCOUNTING TREATMENT OF DISCOUNT AND PREMIUM ON CERTAIN OBLIGATIONS ... The initial public offering price of P^• certain Bonds or Certificates, as the case may be (the "Discount Obligations") may be less than the amount payable on such Obligations at maturity. An amount equal to the difference between the initial public offering price of a Discount Obligation (assuming that a substantial amount of the Bonds or Certificates, as the case may be, of that maturity 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 Obligation. A portion of such original issue discount allocable to the holding period of such Discount Obligation by the initial purchaser will, upon the disposition of such Discount Obligation (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and ' conditions as those for other interest on the Obligations described above under "Tax Exemption." Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Obligation, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Obligation and generally will be allocated to an original purchaser in a different amount from the amount of the payment denominated as interest actually received by the original purchaser during the tax year. However, such interest may be required to be taken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corporation's alternative minimum tax imposed by Section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with "subchapter C" earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for 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. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Obligation by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Obligation in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Obligation was held) is includable in gross income. 35 Owners of Discount Obligations should consult with their own tax advisors with respect to the determination of accrued original issue discount on Discount Obligations for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Discount Obligations. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on Discount Obligations may be deemed 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 Bonds or Certificates, as the case may be, (the"Premium Obligations") may be greater than the amount payable on such Obligations at maturity. An amount equal to the difference between the initial public offering price of a Premium Obligation (assuming that a substantial amount of the Bonds or Certificates, as the case may be, 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 Obligations. The basis for federal income tax purposes of a Premium Obligation in the hands of such initial purchaser 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 gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Obligation. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity. Purchasers of the Premium Obligations should consult with their own tax advisors with respect to the determination of amortizable bond premium on Premium Obligations for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Obligations. 36 EQ OTHER INFORMATION RATINGS �, The Obligations have been rated "Aa2" by Moody's, "AA+" by S&P and "AA+" by Fitch. The City also has one issue outstanding that is rated "Aaa" by Moody's and "AAA" by S&P through insurance by a commercial insurance company. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such organizations and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such rating companies, if in the judgment of said companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Obligations. LITIGATION 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 operations. REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE The sale of the Obligations have not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS The Certificates. Section 251.051, Texas Local Government Code, provides that the Certificates are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, savings and loan associations, insurance companies, fiduciaries, trustees and guardians, and for the sinking funds of municipalities, school districts, and other political subdivisions or public agencies of the State of Texas. The Certificates are eligible to secure deposits of any public funds of the state, municipalities, school districts, and other political subdivisions of the state, and are legal security for those deposits to the extent of their market value. The Bonds. Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. In addition, various provisions of the Texas Finance Code provide that, subject to a prudence standard, the Bonds are legal investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings and loan associations. General Considerations. For political subdivisions in Texas that have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (V.T.C.A., Government Code, Chapter 2256), the Obligations may have to be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public funds. The City has made no investigation of other laws, rules, regulations or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Obligations for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Obligations for such purposes. The City has made no review of laws in other states to determine whether the Obligations are legal investments for various institutions in those states. LEGAL OPINIONS AND NO -LITIGATION CERTIFICATE The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Bond or Certificate, as the case may be, and to the effect that the Bonds or Certificates, as the case may be, are valid and legally binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of Bond Counsel, to like effect and to the effect that the interest on the Bonds or Certificates, as the case may be, will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Obligations, or which would affect the provision made for their payment or security, or in any manner questioning the validity of said Obligations will 37 G. also be furnished. Bond Counsel was not requested to participate, and did not take part; in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information under captions "The Obligations" (exclusive of subcaptions "Book -Entry -Only System"), "Tax Matters" and "Continuing Disclosure of Information" and the subcaptions "Legal Opinions" and "Legal Investments and Eligibility to Secure Public Funds in Texas" in the Official Statement and such firm is of the opinion that the information relating to the Obligations and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Obligations, such information conforms to the respective Ordinances. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Obligations is contingent on the sale and delivery of the Obligations. The legal opinions will accompany the Obligations deposited with DTC or will be printed on the Bonds or the Certificates, as the case may be, in the event of the discontinuance of the Book -Entry -Only System. Certain matters will be passed upon for the Underwriters by McCall, Parkhurst & Horton L.L.P., Dallas, Texas. The fee of such firm is contingent upon the sale and delivery of the Obligations. In connection with the transactions described in this Official Statement McCall, Parkhurst & Horton L.L.P. represents only the Underwriters. The various legal opinions to be delivered concurrently with the delivery of the Obligations express the professionals judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the 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. AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION The financial data and other information contained herein have been obtained from City 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 contained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. These 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. CONTINUING DISCLOSURE OF INFORMATION In the respective Ordinances, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds or Certificates, as the case may be. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds or Certificates, as the case may be. 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 vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. ANNUAL REPORTS ... The City will provide certain updated financial information and operating data to certain information vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official .Statement under Tables numbered I through 6 and 8A through 17 and in Appendix B. The City will update and provide this information within six months after the end of each fiscal year ending in or after 2001. The City will provide the updated information to each nationally recognized municipal securities information repository ("NRMSIR") and to any state information depository ("SID") that is designated by the State of Texas and approved by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC"). The City may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12. The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City'wll provide unaudited financialstatements by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the City may 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 updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC staff as a qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P. O. Box 2177, Austin, Texas 78768- 2177, and its telephone number is 512!476-6947. MATERIAL EVENT NOTICES ... The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Bonds or Certificates, as the case may be, if such event is material to a decision to purchase or sell the Bonds or Certificates, as the case may be: (1) principal and interest payment 38 l., C 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 Bonds or Certificates, as the case may be; (7) modifications to rights of holders of the Bonds or Certificates, as the case may be; (8) Bond or Certificate calls, as the case may be; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds or Certificates, as the case may be; and (11) rating changes. (Neither the Bonds or Certificates, as the case may be, nor the respective Ordinances make any provision for debt service reserves, credit enhancement or liquidity enhancement.) In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"). A"! AVAILABILITY OF INFORMATION FROM NRMSIRS AND SID ... The City has agreed to provide the foregoing information only to NRMSIRs and the SID. The information will be available to holders of Bonds or Certificates, as the case may be, only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. LIMITATIONS AND AMENDMENTS ... The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may 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 concerning such information or concerning its usefulness to a decision to invest in or sell Bonds or Certificates, as the case may be, at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds or Certificates, as the case may be, may seek a writ of mandamus to compel the City to comply with its agreement. A+, The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise 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, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds or Certificates, as the case may be, in the offering described herein 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 (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds or Certificates, as the case may be, consent to the amendment or (b) any person e► unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bond or Certificates, as the case may be. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2-12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds or Certificates, as the case may be in the primary offering of the Obligations. If the City so amends the agreement, it has agreed 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 the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS ... The City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. e� FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company, in its capacity as Financial Advisor,_ has relied on the opinion of Bond Counsel and has not verified and 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 Obligations, 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 provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. 39 W UNDERWRITING Estrada Hinojosa & Company, Inc., Banc of America Securities LLC and Siebert Brandford Shank & Co., LLC have agreed, subject to certain conditions, to purchase the Bonds from the City, at an underwriting discount of $63,708.45. Such Underwriters will be obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds to be offered to the public may be offered and sold to certain dealers (including the Underwriters of the Bonds and other dealers depositing Bonds into investment trusts) at prices lower than the public offering prices of such Bonds, and such public offering prices may be changed, from time to time, by the Underwriters of the Bonds. Morgan Keegan & Company, Inc. and SAMCO Capital Markets have agreed, subject to certain conditions, to purchase the Certificates from the City, at an underwriting discount of $22,846.60. Such Underwriters will be obligated to purchase all of the Certificates if any Certificates are purchased. The Certificates to be offered to the public may be offered and sold to certain dealers (including the Underwriters of the Certificates and other dealers depositing Certificates into investment trusts) at prices lower than the public offering prices of such Certificates, and such public offering prices may be changed, from time to time, by the Underwriters of the Certificates. FORWARD -LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward -looking statements, including statements regarding the City' expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward -looking statements. All forward -looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward -looking statements. The City' actual results could differ materially from those discussed in such forward -looking statements. The forward -looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgements with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are 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 accurate. CERTIFICATION OF THE OFFICIAL STATEMENT At the time of payment for and delivery of the Bonds or Certificates, as the case may be, the City will furnish a certificate, executed by proper officers, acting in their official capacity, substantially to the effect that to the best of their knowledge and belief: (a) the descriptions and statements of or pertaining to the City contained in its Official Statement, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of sale of said Bonds or Certificates, as the case may be, and the acceptance of the best bid therefor, and on the date of the delivery, were and are true and correct in all material respects; (b) insofar as the City and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an 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; (c) insofar as the descriptions and statements, including financial data, of or pertaining to entities, other than the City, and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the City believ s to be reliable and the City has no reason to believe that they are untrue in any material respect; and (d) there has been no a i adverse-c ge in th financ' 1 condition of the City since the date of the last audited financial statements of the City. The respective Ordinanc uthorizing the issuance of the Bonds and Certificates, as the case may be, will also approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds or Certificates, as the case may be, by the respective Underwriters. WINDY SITTON Mayor City of Lubbock, Texas ATTEST: BECKY GARZA Interim City Secretary City of Lubbock, Texas 40 n I1 1-1 AR APPENDIX A GENERAL INFORMATION REGARDING THE CITY .r. 0 w THIS PAGE INTENTIONALLY LEFT BLANK f'a THE CITY LOCATION The City of Lubbock, which is the County Seat of Lubbock County, Texas, is located on the South Plains of West Texas. Lubbock is the economic, educational, cultural and medical services center of the area. POPULATION Lubbock is the ninth largest City in Texas: City of Lubbock (Corporate Limits) 1910 Census 1,938 1920 Census 4,051 1930 Census 20,520 1940 Census 31,853 1950 Census 71,747 1960 Census 128,691 1970 Census 149,701 1980 Census 173,979 1990 Census 186,206 1997 (Estimated) (1) 195,367 1998 (Estimated) (1) 196,679 1999 (Estimated) (1) 197,117 2000 (Estimated) (1) 199,445 Metropolitan Statistical Area ("MSA") (Lubbock Court 1970 Census 179,295 1980 Census 211,651 1990 Census 222,636 1997 (Estimated) (1) 232,454 1998 (Estimated) (1) 234,011 1999 (Estimated) (1) 234,479 2000 (Estimated) (1) 236,807 (1) Source: City of Lubbock, Texas AGRICULTURE; BUSINESS AND INDUSTRY Lubbock is the center of a highly mechanized agricultural area with a majority of the crops irrigated with water from underground sources. Principal crops are cotton and grain sorghums with livestock a major additional source of agricultural income. In 1999, approximately 3.008 million bales of cotton were produced in Lubbock and the 25-counties surrounding Lubbock. This was more than the 2.6 million bales produced in 1998 and is 107.43% of the 10-year average of 2.8 million bales. Projections for the 2000 cotton crop are about 2.78 million bales.0) Two 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 produce such products as semiconductors, vegetable oils, heavy earth -moving machinery, irrigation equipment and pipe, farm equipment, paperboard boxes, foodstuffs, mobile and prefabricated homes, poultry and livestock feeds, boilers and pressure vessels, automatic sprinkler system heads, structural steel fabrication and soft drinks. (1) Source: Plains Cotton Growers, Inc., Lubbock, Texas. LUBBOCK VISA LABOR FORCE ESTIMATES () Annual Averages December 200012) 1999 1998 1997 1996 1995 Civilian Labor Force 128,501 123,318 123,409 124,225 122,183 120,709 Total Employment 126,184 119,763 119,269 119,358 117,360 115,826 Unemployment 2,317 3,555 4,140 4,842 4,823 4,883 Percent Unemployment 1.80% 2.90% 3.40% 3.90% 3.90% 4.00% (1) Source: Texas Workforce Commission. (2) Subject to revision. A-1 69 Estimated non-agricultural wage and salaried jobs in various categories as of October, 2000 were: Manufacturing 7,200 Construction 4,500 Transportation & Public Utilities 7,000 Trade 34,100 Finance, Insurance and Real Estate 6,200 Services 38,000 Mining 100 Government 27,200 Total 124,300 MAJOR EMPLOYERS (300 EMPLOYEES OR MORE) Estimated Employees Company Type of Business April, 2000") Texas Tech University State University 8,535 Covenant Health System Hospital 5,900 Lubbock Independent School District Public Schools 3,442 TTU Health Sciences Center Medical and Allied Health School 2,259 City of Lubbock City Government 2,164 Caprock Home Health Services Home Health Care Service 1,650 Convergys Call Center 1,500 United Supermarkets Supermarkets 1,345 University Medical Center Hospital 999 Wal-Mart Discount Retailer 900 Lubbock County County Government 897 Lubbock State School School for Mentally Retarded 876 Texas Dept. of Criminal Justice Psychiatric Hospital Psychiatric Hospital 870 ' SBC Wireless Communications 750 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 Products 505 Texas Department of Transportation State Highway and Street Maintenance 487 Eagle Picher Heavy Equipment Manufacturing 482 Lubbock Regional MHMR Center, Social Services 450 McLane High Plains Wholesale Food Distributor 416 Operator Service Company Telecommunications 409 Tyco Fire Protection Manufacturing 400 Dillard's Department Stores Department Stores 400 Aram ark Food Broker 391 Energas company/Atmos Energy Corp. Naturual Gas Transmission & Distribution 366 Jim Burns Automotive Group Automobile Dealcrsh:ps 365 K-Mart Discount Retailer 345 Lubbock Avalanche -Journal Newspaper 341 McDonald's Restaurants 331 Plains National Bank Bank 325 Marriott School Services HoteilHousekeeping and Hotel 322 Wells Fargo Bank Bank 3,20 (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" following for more detailed information. �� A - 2 E2 EDUCATION - TEXAS TECH UNIVERSITY Established in Lubbock in 1923, Texas Tech University is the fifth largest State-owned University in Texas and had a Fall, 1999, enrollment of 22,040. Accredited by the Southern Association of Colleges and Schools, the University is a co-educational, State - supported institution offering a bachelor's degree in 158 major fields, the master's degree in 107 major fields, the doctorate degree in 64 major fields, and a professional degree in 2 major fields (law and medicine). The University proper is situated on 451 acres of the 1,829 acre campus, and has over 160 permanent buildings with additional construction in progress. Fall, 1999, total employment was 6,119. The medical school had an enrollment of 1,390 for Fall, 1999, not including residents; there were 60 graduate students. The School of Nursing had a Fall, 1999, enrollment of 321 including the Permian Basin Program, located in Midland/Odessa; there were 75 graduate students. The Allied Health School had a Fall, 1999, enrollment of 444. Source: Texas Tech University. OTHER EDUCATION INFORMATION The Lubbock Independent School District, with an area of 87.5 square miles, includes over 90% of the City of Lubbock. There are approximately 3,495 total employees. The District operates four senior high schools, ten junior high schools, 38 elementary schools and other educational programs. Scholastic Membership History (1) r^ 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, Lubbodc Independent School District. (2) Estimated. Lubbock Christian University, a privately owned, co-educational senior college located in Lubbock, had an enrollment of 1,620 for the Fall Semester, 2000. South Plains College, Levelland, Texas (South Plains Junior College District) operates a major off -campus learning center in a downtown Lubbock, 7-story building owned by the College. College offerings cover technical/vocational subjects; Fall Semester, 1999, enrollment was 2,811. The State of Texas School for the Mentally Retarded, located on a 226-acre site in Lubbock, consists of 40 buildings with bed - capacity for 436 students; 400 students were in residence. There are approximately 850 professional and other employees. Wayland Baptist College, Plainview Texas, operates a Lubbock Campus which had a fall enrollment of 380 students. TRANSPORTATION Scheduled airline transportation at Lubbock International Airport is furnished by Southwest Airlines, Atlantic Southeast, Continental Airlines and American Eagle; non-stop service is provided to Dallas -Fort Worth International Airport, Dallas Love Field, Bush Intercontinental Airport (Houston), Houston Hobby, El Paso, Austin, Amarillo and Albuquerque. Passenger boardings for 1999 totaled 574,780 and 585,000 for 2000. Extensive private aviation services are located at the airport. Rail transportation is furnished by the Burlington Northern Santa Fe Railroad with through service to Dallas, Houston, Kansas City, Chicago, Los Angeles and San Francisco. Short -haul rail service is also furnished by the Seagraves, Whiteface and Lubbock Railroad. Texas, New Mexico and Oklahoma Bus Lines, a subsidiary of Greyhound Corporation, provides bus service. Several motor freight common carriers provide service. A - 3 Lubbock has a well -developed highway network including Interstate 27 (Lubbock -Amarillo), 4 U.S. Highways, I State Highway, a controlled -access outer loop and a county -wide system of paved farm -to -market roads. GOVERNMENT AND MILITARY (1) On March 1, 1995, the Secretary of the Air Force announced that Reese Air Force Base ("Reese"), a pilot training base located adjacent to the City, was included in the list of bases recommended for closure submitted to the Base Closure and Realignment Commission ("BRAC"). BRAC reevaluated Reese along with all other undergraduate pilot training bases, however, Reese was included in the final list of bases recommended for closure. Final recommendations were submitted to the President in July, 1995. The President and Congress approved the BRAC recommendations and Reese closed on October 1, 1997. As a result, the City has developed a re -use plan for the facilities. Prior to closure Reese represented approximately 2.6% of the local work force. While closure of the base did not have a positive impact on the Lubbock economy, the current growth in other economic sectors has minimized or neutralized closure of the base. In addition, there could be a positive economic impact from the re -use of the base. In 1997, the Texas Legislature enacted Chapter 2300 of the Texas Government Code. That act provided for the creation of the Lubbock Reese Redevelopment Authority (the "Authority") upon an affirmative vote by the governing body of the City and the Commissioners Court of Lubbock County. The Authority is a political subdivision of the State of Texas and is authorized to accept title from the United States to all or any portion of the real, personal, and mixed property situated within Reese Air Force Base. The Authority is empowered to manage, lease, sale and develop its property. The former air base, now known as "Reese Center" is the home of the prized Institute of Environmental and Human Health (TIEHH). TIEHH is a joint venture between Texas Tech University and Texas Tech Health Science Center. TIEHH researches the exposure and effects toxic chemicals have on human health and the environment. The Institute is comprised of five divisions: Environmental Health and Toxicology, Environmental Law and Policy, Communications and Outreach, Research and Quality Management, and Human Health Sciences. Each of these five Divisions facilitates TIEHH's educational and research goals. TIEHH will help stimulate the Lubbock economy by creating jobs. Eventually, TIEHH is expected to create many new jobs for Lubbock and the South Plains region. And, TIEHH's tenancy at Reese Center began the process of converting the former military installation into an active and thriving facility for the Lubbock community and surrounding area. State 9L Texas ... More than 25 State of Texas boards, departments, agencies and commissions have offices in Lubbock; several of these offices have multiple units or offices. Federal Government ... Several Federal departments and various other administrations and agencies have offices in Lubbock; a Federal District Court is located in the City. (1) Source: City of Lubbock, Texas. TExAs DEPARTMENT OF CRIMINAL JUSTICE ("TDCJ") PRISON PSYCHIATRIC HOSPITAL 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 whom work at the hospital. Employment for all facilities is approximately 870 with an annual estimated payroll of $17 million and an estimated remaining annual operating budget of $27 million. HOSPITALS AND MEDICAL CARE There are five hospitals in the City with over 1,800 beds. Covenant Medical Center is the largest and also operates an accredited nursing school. Lubbock County Hospital District, with boundaries contiguous with Lubbock County, owns the University Medical Center which it operates as a teaching hospital for the Texas Tech Health Sciences Center. There are 82 clinics and over 780 practicing physicians, surgeons, and dentists. Lubbock's Health Care Sector employs over 14,000 people with a total payroll of $428.8 million and draws patients from 77 counties in West Texas and Eastern New Mexico. A radiology center for the treatment of malignant diseases is located in the City. A - 4 RECREATION AND ENTERTAINMENT Lubbock's Mackenzie Regional Park and over 115 City parks and playgrounds provide recreation centers, shelter buildings, a garden and art center, swimming pools, a golf course, tennis and volley ball courts, baseball diamonds and picnic areas, including the .� Yellowhouse Canyon Lakes system of six lakes and 750 acres of adjacent parkland extending from northwest to southeast Lubbock along the Yellowhouse Canyon. There are several privately -owned public swimming pools, golf courses, and country clubs. The City of Lubbock has developed a 36 square block area of approximately 100 acres adjacent to downtown Lubbock under the Lubbock Memorial Civic Center program. Approximately 50 acres contain the 300,000 square foot Lubbock Memorial Civic Center, the main City library building and State Department 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 University programs and events, Texas Tech University Museum, Planetarium and Ranching Heritage Center exhibits and programs, Lubbock Memorial Civic Center and its events, Lubbock Symphony Orchestra programs, Lubbock Theatre Center, Lubbock Civic Ballet, Municipal Auditorium and coliseum programs and events, the library and its branches, the annual Panhandle -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 representing more than 25 denominations. UTILITY SERVICES Water and Sewer - City of Lubbock. Gas - Energas Company. Electric - City of Lubbock (Lubbock Power & Light) and Southwestern Public Service Company; and, in a small area, South Plains Electric Co-operative. ECONOMIC INDICES (I) Utility Connections Building Electric Year Permits Water Gas (LP&L Only)(2) 1996 $163,076,593 66,443 63,171 51,305 1997 237,995,359 67,373 63,380 54,085 1998 181,716,532 68,228 62,472 56,435 1999 181,285,089 68,449 63,210 57,411 2000 200,427,650 70,111 65,000 58,724 (1) All data as of 12-31, except where noted; Source: 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 South Plains Electric Cooperative. LP&L provides service to approximately 66.72% of the electric customers in the City. BUILDING PERMITS BY CLASSIFICATION (I) Residential Permits Commercial, Single Family Multi -Family Total Residential Public Total Calendar No. No. Dwelling No. Dwelling and Other Building Year Units Value Units (z> Value Units es) Value Permits Permits 1996 571 $ 59,0 88,397 131 $ 14,1 99,783 671 $ 73,168,180 $ 89,908,413 $ 163,076,593 1997 542 57,767,458 736 32,837,680 1,278 90,605,138 147,390,221 237,995,359 1998 664 64,304,918 242 9,186,999 906 73,491,917 108,224,615 181,716,532 1999 747 80,496,444 222 22,134,000 969 102,630,444 78,654,645 181,285,089 2000 819 87,501,009 281 11,548,809 1,100 99,049,818 101,377,832 200,427,650 (1) Source: City of Lubbock, Texas. (2) Data shown under "No. Dwelling Units" is for each individual dwelling unit, and is not for separate buildings; includes duplex, triplex, quadruplex and apartment permits. A - 5 W THIS PAGE INTENTIONALLY LEFT BLANK APPENDIX B EXCERPTS FROM THE CITY OF LUBBOCK, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2000 The information contained in this Appendix consists of excerpts from the City of Lubbock, Texas Annual Financial Report for the Year Ended September 30, 2000, and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for further information. 0 Ma so THIS PAGE INTENTIONALLY LEFT BLANK ,� a professional services firm of 15M Broadway Robinson certified public accountants Suite130Texas 79401-3107 �3urdette Martin Seright & Burrows, L. L. P. INDEPENDENT AUDITOR'S REPORT Honorable Mayor Windy Sitton Members of City Council City of Lubbock, Texas tele hone (806) 744-3333 fax �806) 747-2106 www.rbmsb.com We have audited the accompanying general-purpose financial statements of the City of Lubbock, Texas, as of and for the year ended September 30, 2000, as listed in the Table of Contents. These general-purpose financial statements are the responsibility of the management of the City of Lubbock, Texas. Our responsibility is to express an opinion on these general-purpose financial statements based on our audit. r, We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general-purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general-purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general-purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general-purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Lubbock, Texas, as of September 30, 2000, and the results of its operations and the cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated January 12, 2001, on our consideration of the City of Lubbock, Texas internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. Go Our audit was performed for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The combining and individual fund and account group financial statements and schedules listed in the Table of Contents are presented for purposes of additional analysis, and are not a required part of the general purpose financial statements of the City of Lubbock, Texas. Such information has been subjected to the auditing procedures applied in the material respects, in relation to the general purpose financial statements taken as a whole. The information Iisted as Statistical Section and Supplementary Section in the Table of Contents has not been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, accordingly, we express no opinion on such data. January 12, 2001 Lubbock, Texas 4 /,/, � " " 1-1 4 w General Purpose Financial Statements el, CO CITY OF LUBBOCK., TEXAS COMBINED BALANCE SHEET - PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 2000 With Comparative Totals for September 30, 1999 Governmental fund Types Special Debt Capital General Revenue Service Projects B,ssets Pooled cash and cash equivalents $ 514,428 $ 997,599 $ 157,969 $ 4,555,282 Investments 3,442,714 6,676,230 1,057,182 30,485,355 Receivables (net, where applicable, of allowance for uncoflectibles): Taxes, including interest, penalities, and liens 5,216,116 24,205 213,437 - Accounts, notes, and mortgages 388,750 - _ - Interest 138,820 13,038 - 124,547 Due from other funds 9,045,859 - _ - Due from other governments 153,701 - _ _ Due from other agencies 396,070 770,520 - 145,203 Prepaid items 79,281 - Advances to other funds 1,781,800 Inventory, at average cost 45,397 Restricted assets: Pooled cash and cash equivalents - - - - Investments - - - - Accounts receivable - - - _ Interest receivable - - - _ Deferred charges - - - _ Fixed assets (net of accumulated depreciation) - - - - 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 $ 21,202,936 $ 8,481,592 $ 1,428,588 $ 35,310,387 6 (continued) 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 2000 $ 2,390,507 $ 290,558 $ 220,462 _ _ $ $ $ 9,126,805 15,965,355 1,944,501 15,546,836 - _ 75,118,173 _ - 5,453,758 ON_ 17,661,603 2,647 - 5,945,239 - - 23,998,239 - - 487,562 64,244 146,913 - _ _ 9,045,859 ' 1,593,166 - - 1,778,444 31,577 - - 1,403,345 e"* _ 91,552 - _ 79,281 _ - 3,924,214 2,142,414 _ _ 2,396,887 377,365 1,974,125 " _ 39,254,530 36,266,069 2,988,461 - _ _ 68,230,355 51,017,748 17,212,607 - _ _ 129,868 4,071 125,797 - ' _ _ 420,888 420,888 - _ - 11,717,554 11,717,554 - " 483,740,056 7,941,616 _ 279,355 261,784,379 753,745,406 _ _ 20,517,773 20,517,773 " 1,260,450 1,260,450 _ _ 58,501,212 58,501,212 $ 642,317,224 $ 32,718,777 $ 23,585,058 $ 261,784,379 $ 59,761,662 $ 1,086,590,603 See notes to financial statements accompanying 7 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 2000 With Comparative Totals for September 30, 1999 Governmental Proprietary Fiduciary Fund Types Fund Types Fund Type Market Civic Market Lubbock, Lubbock Lubbock, Inc. Citibus Inc. Inc. Assets Pooled cash and cash equivalents $ - 496,113 $ 358,359 $ 389,712 $ 28,284 Investments 4,252,056 - _ _ Receivables (net, where applicable, of allowance for uncollectibles): Taxes, including interest, penalities, and liens _ _ _ Accounts, notes, and mortgages 23,699 1,436,372 43,879 _ Interest _ Due from other funds 60,000 - - 100,259 Due from other governments - Due from other agencies - Prepaid items _ Advances to other funds _ Inventory, at average cost 31,801 315,820 71,902 _ Restricted assets: Pooled cash and cash equivalents - - 118,615 _ Investments - Accounts receivable _ Interest receivable - Deferred charges _ _ _ _ Fixed assets (net of accumulated depreciation) - 14,524,313 47,283 - Other assets (net of accumulated amortization) - - 382,483 - Amount available in debt service funds - Amount to be provided for retirement of general long-term debt _ _ _ _ Total assets $ 4,863,669 $ 16,634,864 $ 1,053,874 $ 128,543 8 (continued) Component Units Account Groups 0"N General General Fixed Assets Long-term Debt Totals Totals Market Market Component Reporting Entity Lubbock, Lubbock, Units (Memorandum Only) Inc. Inc. 2000 2000 1999 $ _ $ _ $ 1,272,468 $ 10,399,273 $ 9,439,460 4,252,056 79.370,229 75.192,633 _ 5,453,758 4,926,245 1,503,950 25,502,189 20,063,509 _ 487,562 586,397 _ 160,259 9,206,118 13,558,497 _ _ 1,778,444 1,645,356 _ 1,403,345 2,172,502 _ 79,281 255,303 _ _ 3,924,214 5,174,377 _ 419,523 2,816,410 2,727,870 118,615 39,373,145 41,551,458 _ 68,230,355 70,603,181 _ 129,868 719,782 _ 420,888 460,544 _ 11,717,554 9,229,205 520,542 - 15,092,138 768,837,544 732,533,789 382,483 20,900,256 21,336,824 _ _ _ 1,260,450 1,151,270 - 3,562,668 3,562,668 62,063,880 57,944,662 $ 520,542 $ 3,562,668 $ 26,764,160 $ 1,113,354,763 $ 1,071,272,864 See accompanying notes to financial statements 9 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 2000 With Comparative Totals for September 30, 1999 Governmental Fund Types Special Debt Capital General Revenue Service Projects l.iabililie.� Accounts and vouchers payable $ 2,786,942 $ 142,183 $ 5,608 $ 440,505 Contracts payable - Due to other funds - - 650,000 - 1,812,863 Due to other agencies and governments 1,174,497 _ Accrued general obligation interest _ _ Other accrued liabilities 222,331 16,993 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 398,514 - 162,530 _ Advances from other funds Advances from other agencies - - - 2,916,239 Accrued insurance claims General obligation bonds (net of - - current portion) �r Revenue bonds payable (net of current portion) Accrued vacation and sick leave _ Anticipated landfall closure and postclosure - Total liabilities $ 4,582,284 $ 809,176 $ 168,138 $ 5,169,607 10 w 0 Ca Go FOR Ca (continued) Totals Primary proprietary Fiduciary Account Groups Government Fund Types Fund Type General (Memorandum Internal Trust and General Long-term Only) 2000 Service Agency Fixed Assets Debt Enterprise $ _ $ _ $ 20,601,822 $ 13,676,299 $ 1.131,114 $ 2,419,171 _ - 3,507,324 1,694,461 _ 9,045,859 6,637,046 331,475 1,427,338 _ _ _ 1,174,497 - _ _ 1,303,592 1,303,592 - 301,269 1,146,955 451,746 89,426 65,190 " _ _ 8,659,609 8,659,609 _ _ 2,303,095 1,810,515 492,580 - _ 736,309 736,309 _ 4,892 _ 4,892 _ _ 4,372,861 - 4,372,861 - _ _ 3,599,316 3,599,316 _ 433,832 433,832 _ - 2,252,243 28,160 - 1,663,039 _ _ 3,924,214 50,000 957,975 - _ - _ _ 2,803,358 _ 2,803,358 " _ _ 48,380,346 175,248,838 126,868,492 " 73,847,298 73,847,298 11,080,047 14,810,951 3,230,736 500,168 _ _ 5,918,343 5,918,343 - - $ 59761662 $ 335,695,208 $ 248,945,754 $ 10,683,849 $ 5,574,738 $ " ,, See accompanying notes to financial statements 69 it WSM ACCOUNT GROUP AND DISCRETELY PRESENTED COMPONENT UNITS I September 30, 2000 With Comparative Totals for September 30, 1999 Governmental Proprietary Fiduciary Fund Types Fund Types Fund Type Market Civic Market Lubbock, Lubbock Lubbock, Inc. Citibus Inc. Inc. Liabilities Accounts and vouchers payable $ 377,593 $ 1,567,763 $ 40,074 $ 31,469 Contracts payable - _ Due to other funds 160,259 _ _ Due to other agencies and governments - - 184,800 97,074 Accrued general obligation interest _ _ _ Other accrued liabilities 2,754,469 314,357 17,955 _ Current portion of general obligation bonds and construction obligation payable - - 90,764 _ Payable from restricted assets: Accounts payable - Accrued interest _ Other accrued liabilities _ 158,431 Accrued insurance claims _ Revenue bonds payable (current portion) _ Customer deposits _ Deferred revenue 23,256 - 12,815 _ Advances from other funds _ Advances from other agencies - 70,000 Accrued insurance claims _ _ General obligation bonds (net of current portion) - - 7,474 Revenue bonds payable (net of current portion) Accrued vacation and sick leave Anticipated landfill closure and postclosure Total liabilities $ 3,315,577 $ 2,110,551 $ 353,882 $ 128,543 12 (continued) Component Units Account Groups General General Totals Fixed Assets Long-term Debt Totals Reporting Entity Market Market Component Units (Memorandum Only) Lubbock. Lubbock, 2000 2000 1999 Inc. Inc. 2,016,899 $ 2-2,618,721 $ 16,716,881 _ _ 3,507.324 2,752,610 160,259 9,206,118 13,558,497 281,874 1,456,371 1,453,721 _ _ 1,303,592 1,072,548 _ 3,086,781 4,233,736 4,123,559 _ 90,764 8,750,373 8,686.310 _ 2,303,095 1,857,806 _ 736,309 804,205 s 3,562,668 3,721,099 3,725,991 6,778 _ _ 4,372,861 3,754,250 3,599,316 3.038,341 _ 433,832 330,649 36,071 2,288,314 2,746,330 _ 3,924,214 5,174,377 70,000 70,000 70,000 _ _ 2,803,358 2,803,358 7,474 175,256,312 157,419,339 - 73,847,298 78,578,552 _ - 14,810,951 14,643,673 _ 5,918,343 6,326,385 $ _ $ 3,562,668 $ 9,471,221 $ 345,166,429 $ 325,918,169 See accompanying notes to financial statements 13 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SKEET - PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 2000 With Comparative Totals for September 30, 1999 Governmental Fund Types Special Debt Capital General Revenue Service Projects Fund Equity and Other Credits Contributed capital $ - $ _ $ _ $ _ Investment in general fixed assets - - _ _ Retained earnings: Reserved for capital projects - _ _ _ 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 - - - _ Reserved for radio capital project _ - _ _ Unreserved - - - _ Fund balances: Reserved for prepaid items 79,281 - _ _ Reserved for advances to other funds 1,781,800 - _ _ Reserved for debt service - - 1,260,450 - Reserved for capital projects - - - 30,140,780 Reserved for Federal housing programs - - _ - Reserved for plan participants - - _ _ Unreserved: Designated for perpetual care 22,767 - - _ Designated for subsequent year's expenditures 973,248 227,383 - - Undesignated 13,763,556 7,445,033 - - Total retained eamings/fund balances 16,620,652 7,672,416 1,260,450 30,140,780 Total fund equity and other credits 16,620,652 7,672,416 1,260,450 30,140,780 Total liabilities and fund equity and other credits $ 21,202,936 $ 8,481,592 $ 1,428,588 $ 35,310,387 r-� 14 !!o (continued) Totals Primary , Proprietary Fiduciary Fund Type Account Groups Government Fund Types General (Memorandum Internal Trust and General Long-term Only) 2000 Enterprise Service Agency Fixed AssetsPN Debt - $ _ $ _ $ 139,831,811 $ 132,984,984 $ 6,846,827 $ _ 261,784,379 - 261,784,379 _ _ 56,911,351 53,937,015 2,974,336 _ 9,447,308 9,434,170 13,138 - _ 720,771 720,771 - 13,073,972 13,073,972 _ 35,550 35,550 _ 302,444 302,444 3,204,358 _ 3,204,358 9,264,699 _ 9,264,699 _ - - _ _ 182,614,134 182,882,564 (268,430) " 79,281, 1,781,800 1,260,450 - - _ 30,140,780 - 6,208,235 - _ 6,208,235 - _ 14,084,187 _ 14,084,187 _ _ 22,767 1,200,631 18,926,487 - _ (2,282,102) _ 349,279,205 260,386,486 15,188,101 18,010,320 _ 750,695,395 393,371,470 22,034,928 18,010,320 261,784,379 $ 32,718,777 $ 23,585,056 $ 261,784,379 $ 59,761,662 $ 1,086,590,60 $ 642,317,224 See accompanying notes to financial statements 15 COMBINEDBALANCE SHEETPRIMARY AND DISCRETELY J COMPONENT September 30, 2000 With Comparative Totals for September 30. 1999 Governmental Proprietary Fiduciary Fund Types Fund Types Fund Type Market Civic Market Lubbock, Lubbock Lubbock, Inc. Citibus Inc. Inc. Fun_ d Eo�ity and Other Credits Contributed capital $ - $ 14,524,313 $ _ $ _ Investment in general fixed assets Retained earnings: Reserved for capital projects - - 118,615 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 _ a Reserved for self insurance - risk management Designated for radio capital project _ Unreserved - - 581,377 Fund balances: Reserved for prepaid items Reserved for advances to other funds Reserved for debt service Reserved for capital projects - Reserved for Federal housing program _- Reserved for plan participants - _ _ Unreserved: Designated for perpetual care - _ Designated for subsequent _ year's expenditures 1,548,092 Undesignated _ Total retained eamings/fund balance 1,548,092 - 699,992 Total fund equity and other credits 1.548,092 14,524,313 699,992 i— _ Total liabilities and fund equity and other credits $ 4,863,669 $ 16,634,864 $ 1,053,874 $ 128,543 16 Component Units Account Groups General General Fixed Assets Long-term Debt Totals Totals Market Market Component Reporting Entity Lubbock, Lubbock, Units (Memorandum Only) Inc. Inc. 2000 2000 1999 14,524,313 $ 154,356,124 $ 148,325,473 520,542 - 520,542 262,304,921 253,256,904 118,615 57,029,966 48,492,484 - 9,447,308 24,081,382 _ 720,771 1,037,136 _ 13,073,972 14,562,567 _ 35,550 380,750 - 302,444 3,488,617 _ - 3,204,358 2,524,966 - 9,264,699 5,413,783 _ - 821,582 581,377 183,195,511 170,552,055 _ 79,281 136,629 1,781,800 1,963,439 1,260,450 1,151,270 - 30,140,780 29,509,469 - 6,208,235 5,449,766 _ - 14,084,187 11,630,187 _ - 22,767 22,767 1,548,092 2,748,723 6,552,670 - 18,926,487 16,000,799 _ - 2,248,084 351,527,289 343,772,318 520,542 - 17,292,939 768,188,334 745,354,695 $ 520,542 $ 3,562,668 $ 26,764,160 $ 1,113,354,763 $ 1,071,272,864 See accompanying notes to financial statements 17 CITY OF UBBOCA� TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES — PRIMARY GOVERNMENT FUND TYPES, EXPENDABLE TRUST FUNDS AND DISCRETELY PRESENTED COMPONENT UNITS For Year Ended September 30, 2000 With Comparative Totals for Year Ended September 30, 1999 Totals Fiduciary Primary Governmental Fund Types Fund Type Government (Memorandum Special Debt Capital Expendable Only) General Revenue Service Projects Trust 2000 Revenues: Taxes and special assessments $ 61,080,313 $ 4,677,868 $ 7,511,685 $ - $ - $ 73,269,866 Licenses and permits 1,138,924 - - - - 1,138,924 intergovernmental 365,671 - - - 9,271,735 9,637,406 Charges for services 4,210,334 - - 87,583 - 4.297,917 Fines and forfeits 2,834,208 - - - 2,834,208 Contributions - - - 67,600 - 67,600 Miscellaneous 2,251,888 846,594 70,869 1,873,654 4,806,598 9,849,603 Total revenues 71,881,338 5,524,462 7,582,554 2,028,837 14,078,333 101,095,524 Expenditures: Current: Communications/Legislation 937,889 - - - - 937,889 Community Services 16,963,231 - - - - 16,963,231 Development Services 5,439,855 - - - - 5,439,855 Electric 1,923,584 - - - - 1,923,584 Financial Services 1,458,232 - - - - 1,458,232 Fire 17,080,372 - - - - 17,080,372 General Government 5,255,236 4,436,646 - - 10,518,355 20,210,237 Human Resources 871,596 - - - - 871,596 Management Services 1,022,720 - - - - 1,022,720 Police 25,561,261 - - - - 25,561,261 Strategic Planning 1,498,176 - - - - 1,498,176 Non -departmental 606,842 - - 741,881 - 1,348,723 Capital outlay - 92,592 - 14,296,636 1,038,422 15,427,650 Debt service: Principal retirement - - 4,622,633 - - 4,622,633 Jnterest and fiscal charges - - 3,116,151 24,935 3,141,086 Total expenditures 78,618,994 4,529,238 7,738,784 15,063,452 11,556,777 117,507,245 Excess (deficiency) of revenues over(under)expenditures (6,737,656) 995,224 15�6,230) (13,034,615) 2,521,556 (16,411,721) Other financing sources (uses): Proceeds of refunding bonds Operating transfers in Payment to refunded bond escrow agent Operating transfers out Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other uses - - - 7,000,000 - 7,000,000 13,636,764 4,477,055 16,245,165 7,157,634 1,532 41,518,150 (7,526,481) i2,769,3841 (15,979,755) (491,708) 1.5321 (26,768,860) 6,110,283 1,707,671 265,410 13,665,926 21,749,290 (627.373) 2,702,895 109,180 631,311 2,521,556 5,337,569 Fund balances at beginning of year 17,248,025 4,969,521 1,151,270 29,509,469 15,488,764 68,367,049 Residual equity transfer in (out) - - - - - Change in accounting principle (See Note III. F.) - - - Fund balances at end of year $ 16,620.652 $ 7,672,416 $ 1,260,450 $ 30,140,780 $ 18,010,320 $ 73,704,618 r 18 Component Unit Governmental Type Totals Market Reporting Entity Lubbock, (Memorandum Only) Inc. 2000 1999 $ 3,138,921 $ 76,408,787 $ 72,651,740 - 1,138,924 976,091 - 9,637,406 10,864,066 - 4,297,917 4,412,161 _ 2,834,208 3,335,340 325,600 393,200 796,665 345,672 10,195,275 10,062,271 3,810,193 104,905,717 103,098,334 - 937,889 12,630,738 - 16,963,231 1,759,509 - 5,439,855 15,616,543 1,923,584 25,687,857 - 1,458,232 4,522,041 - 17,080,372 870,172 6,293,234 26,503,471 23,478,729 - 871,596 839,814 - 1,022,720 396,216 - 25,561,261 1,366,006 _ 1,498,176 5,195,459 - 1,348,723 1,419,711 18,814 15,446,464 20,524,855 n - 4,622,633 5,723,124 - 3,141,086 3,040,461 6,312,048 123,819,293 123,071,235 EQ 0 (2,501,855) (18,913,576) (19,972,901) - 7,000,000 963,584 - 41,518,150 41,936,702 (966,270) (26,768,860) {27,947,698) - 21,749,290 13,986,318 (2,501,855) 2,835,714 (5,986,583) 4,049,947 72,416,996 68,906,615 - - (75,584) - - 9,572,548 $ 1,548,092 $ 75,252,710 $ 72,416,996 s+ See accompanying notes to financial statements 19 20 rAz GI co CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES — BUDGET (GAAP BASIS) AND ACTUAL GENERAL FUND Year Ended September 30, 2000 General Fund Variance - favorable Budget Actual (unfavorable) Revenues: Taxes and fees $ 59,892,286 $ 61,080.313 $ 1,188,027 Licenses and permits 1,123,982 1,138,924 14,942 intergovernmental 390,821 365,671 (25,150) Charges for services 4,371,442 4,210,334 (161,108) Fines 3,130,300 2,834,208 (296,092) Miscellaneous 2,306,088 2,251,888 (54,200) Total revenues Expenditures: �^* Current: Communications/Legislation Community Services Development Services Electric Financial Services ate, Fire General Government Human Resources Management Services Police Strategic Planning Non -departmental 59 Total expenditures Deficiency of revenues under expenditures Other financing sources (uses): Operating transfers in Operating transfers out Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources (uses) over (under) expenditures 71,214,919 71,881,338 666,419 973,998 937,889 36,109 16,876,773 16,963,231 (86,458) 5,576,366 5,439,855 136,511 1,788,334 1,923,584 (135,250) 1,450,139 1,458,232 (8,093) 16,844,163 17,080,372 (236,209) 5,094,807 5,255,236 (160,429) 831,470 871,596 (40,126) 1,024,233 1,022,720 1,513 25,575,192 25,561,261 13,931 1,519,142 1,498,176 20,966 879,200 606,842 272,358 78,433,817 78,618,994 (185,177) (7,218,898) (6,737,656) 481,242 14,162,205 13,636,764 (525,441) (7,615,059) (7,526,481) 88,578 6,547,146 6,110,283 (436,863) (671,752) (627,373) n Fund balance at beginning of year 17,248,025 17,248,025 Fund balance at end of year $ 16,576,273 $ 16,620,652 44,379 $ 44,379 �► See accompanying notes to financial statements 21 COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN EQUITY ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESENTED COMPONENT UNITS Year Ended September 30, 2000 With Comparative Totals for Year Ended September 30, 1999 Proprietary Fund Types Internal Enterprise Service Totals Primary Govemment (Memorandum Only) 2000 Operating revenues: Charges for services $ 135,018,266 $ 33,880.956 $ 168,899,222 Newtaps and reconnects 103.280 - 103,280 Effluent water sales 560,626 - 560,626 Commodity sales 720,499 - 720.499 Landing fees 740,882 - 740,882 Paridng 1,168,628 - 1,168,628 Greenfees and memberships 40,262 - 40,262 Rentals 1,347,914 - 1,347,914 Concessions 1,065.423 - 1,065,423 Administrative charges - 186,500 186,500 Total operating revenues 140.765,780 34.067,456 174,833,236 Operating expenses: Personal services 20,789,681 6,089.665 26,879,346 Insurance - 13,727,204 13,727,204 Supplies 2,755,639 188,585 2,944,224 Materials - 7,012,499 7,012,499 Maintenance 6,052,573 1.451,533 7,504,106 Uncollectibleaccounts 1,186,657 - 1,186,657 Purchase of fuel and power 49,299,758 49,299,758 Collection expense 2,210,385 - 2,210,385 Other services and charges 18,584,187 3,525,298 22,109,485 Depreciation and amortization 19,302,697 1,755,094 21,057,791 Total operating expenses 120,181,577 33,749,878 153,931,455 Operating income (loss) 20,584.203 317,578 20,901,781 Nonoperating revenues (expenses): Interest 6,742,188 1.411,535 8,153,723 Passenger facility charges 1.552,654 - 1,552,654 Disposition of properties 19,527 7,876 27,403 Miscellaneous 1,155,483 33,875 1,189,358 Interest and fiscal charges (13,376,202) - (13,376,202) Cash grants and reimbursements - - - Total nonoperating revenues (expenses) (3.906,350) 1,453,286 (2,453,064) Income (loss) before operating transfers 16,677,853 1,770.864 18,448,717 Transfers: Operating transfers in 16.510,235 735,094 17,245,329 Operating transfers out (31.446,500) (548,119) (31,994,619) Total transfers in (out) (14,936,265) 186,975 (14,749,290) Net income (loss) 1.741,588 1,957,839 3,699,427 Depreciation on fixed assets acquired by contributions 1.052,499 - 1,052,499 Retained earnings at beginning of year 257.592,399 13,230,262 270.822,661 Retained earnings at end of year 260,386,486 15,188,101 275.574,587 Contributed capital at beginning of year 131,735,154 4,190,033 135,925,187 Capital contributions/Residual equity transfer in 2,302,329 2,656,794 4,959,123 Depredation on/disbursements of capital contributions (1,052,499) (1,052,499) Contributed capital at end of year 132.984,984 6,846,827 139,831,811 Total equity at end of year $ 393.371, 770 $ 22,034,928 $ 415,406,398 22 K to IQ 0 Ez Go 9a Component Units Totals Totals Component Reporting Enemy Proprietary Types Units (Memorandum Only) Civic Lubbock, Inc. Citibus 2000 2000 1999 $ 1.403,300 $ 2,022,626 $ 3,425,926 $ 172,325,148 $ 157.143,089 103.280 143.615 _ 560,626 553,624 _ _ 720,499 490,254 _ 740,882 725,300 _ - 1,168,628 1,365,740 _ _ 40,262 49,638 _ 1,347,914 1,366,537 1.065,423 908,880 _ 186,500 142,043 1,403,300 2,022,626 3.425,926 178,259,162 162,888,720 360.525 3,029,704 3,390,229 30,269,575 28,124,375 _ 458,253 458,253 14.185,457 13,547,151 _ _ 2,944,224 2,690,080 _ 7,012,499 5,557.773 _ 868.987 868,987 8,373,093 8,196,682 _ _ 1,186,657 1,003.189 _ 49.299,758 35,310.419 2.210,385 1,765,459 869,345 1,326,865 2,196,210 24,305,695 21,986,330 9,442 1,696,182 1,705,624 22,763,415 20,747,156 1,239,312 7,379.991 8.619,303 162,550,758 138,928,614 163,988 (5,357,365) (5,193,377) 15,708,404 23,960,106 16,779 16,779 8,170,502 6,697,078 _ 1,552,654 1,587,267 27,403 (396,840) 1,189.358 702,308 (13.436) (3,905) (17,341) (13,393,543) (10,513,983) _ 3,665,088 3,665.088 3,665,088 3,198,776 3,343 3,661,183 3,664,526 1,211,462 1,274,606 167,331 (1,696.182) (1,528,851) 16.919.866 25,234,712 17,245,329 13,699,058 (31,994,619) (27,688,062) _ (14,749,290) (13,989,004) 167,331 (1,696,182) (1,528,851) 2,170,576 11,245.708 _ 1,696,182 1,696,182 2,748,681 2,118,579 532,661 532,661 271,355,322 257,991,035 699,992 699,992 276.274,579 271,355,322 _ 12,400.286 12.400,286 148.325,473 147,919,276 3,820,209 3,820,209 8,779,332 2,600.360 (1,696,182) (1,696,182) (2,748,681) (2,194,163) _ 14.524,313 14.524,313 154,356,124 148,325,473 S 699,992 $ 14,524,313 $ 15,224,305 $ 430,630.703 . $ 419,680.795 See accompanying notes to financial statements 23 COMBINED STATEMENT OF CASH FLOWS - ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESENTED COMPONENT UNITS Years Ended September 30, 2000 With Comparative Totals for Year Ended September 30, 1999 Totals Primary Government Proprietary Fund Types (Memorandum Intemal Only) Enterprise Service 2000 Cash flows from operating activities: Operating income (loss) $ 20,584.203 $ 317,578 $ 20,901,781 Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation and amortization 19,302,697 1,755,094 21,057,791 Increase (decrease) in long-term assets/liabilities not requiring cash flow 1,724,626 574,955 2,299,581 Other income 1,175.010 24,366 1,199,376 Receipts from building rent - 12,764 12.764 Change in current assets and liabilities: Accounts receivable (3,844.331) 508,390 (3,335,941) Inventory 108,522 (152,464) (43,942) Due to/from other governments (3,416) (3,416) Prepaid expenses - _ _ Accounts payable 8,499,664 123,939 8,623.603 Due to/from others - (13,902) (13,902) Other accrued expenses (229,724) (67,640) (297,364) Customer deposits 103.183 103,183 Accrued liabilities - - _ Deferred revenue Long-term assets Net cash provided by (used for) operating activities 47,420,434 37083, 880 50,503,514 Cash flows from capital and related financing activities: Payments for gas reserves and other deferred charges (4,193,412) - (4,193,412) Purchases of property, plant and equipment (43,642,463) (1,265,349) (44,907,812) Sale of property, plant and equipment 316,598 125,628 442,226 Receipts (payments) on leases - - Principal paid on revenue bonds (4,519,025) (4,519,025) Interest paid on revenue bonds (5,229,781) (5,229,781) Principal paid on general obligation bonds and other debt (8,469,729) (8,469,729) interest paid on general obligation bonds (7,983,273) (7,983,273) Issuance of revenue, G.O. and C.O. bonds 24,055,000 - 24,055,000 Refunds of pro-rata contracts (71.052) - (71,052) Deposits on pro-rata contracts 42,789 - 42,789 Passenger facility charges 1,552,654 - 1,552,654 Interest paid on long-term debt - Contributed capital 1®®376.481 3000,002 4,376,483 Net cash used for capital and related financing activities (46765,213) 1,860,281 (44,904,932) Cash flows from noncapital and related financing activities: Operating transfers in from other funds 16,510,235 735,094 17,245,329 Operating transfers out to other funds (31,446,500) (548,119) (31,994,619) Short-term interfund borrowings (3,600,054) (1,460,325) (5,060,379) Advances from other funds (424,374) (424,374) Payments received (made) on advances to (from) other funds 1,369,223 (857,901) 511,322 Cash grants and reimbursements _ Book Overdraft Net cash provided by (used for) noncapital and related financing activities (17,591,470) (2,131,251) (19,722,721) Cash flows from investing activities: Proceeds from sales and maturities of investments 71,006,832 16,064,474 87,071.306 Purchase of investments (64.983,708) (18,593.644) (83,577,352) Interest earnings on cash and investments 6,838,645 1,370,961 8,209,606 Net cash provided by (used for) investing activities 12,861,769 (1,158,209) 11,703,560 Net increase (decrease) in pooled cash and cash equivalents (4,074,480) 1,653,901 (2,420,579) Pooled cash and cash equivalents at beginning of year 42,731,056 1.625,118 44,356,174 Pooled cash and cash equivalents at end of year . $ 38,656,576 $ 3,279,019 $ 41,935,595 Supplemental cash flow information: Noncash capital improvements and other charges for the Enterprise Funds during fiscal year 1999-00 was $1,724,546. Noncash capital improvements and other charges for the Internal Service Funds during fiscal year 1999-00 was $507,226. 24 A M2 EQ 0 Component Units Totals Totals Proprietary Types Component Reporting Entity Units (Memorandum Only) Civic Lubbock, 20W 1999 Inc. Citibus 2000 $ 163,988 $ (5,357,365) $ (5,193,377) $ 15,708.404 $ 23,960.106 9,442 1.696,181 1,705,623 22,763,414 20.747,157 103,790 2.403,371 666,764 103,790 - _ 1,199,376 297,127 12,764 10,878 (28.403) (63.831) (92.234) (3,428,175) (4,090,447) (22,876) 9,253 (13,623) (57,565) (422,055) 96,505 (617,194) (520,689) (524.105) 102,940 (11,699) 118,673 106.974 106,974 9.383,549 (64,504) (24.030) 19,508 740,438 759.946 _ (13.902) 2,401 203,588 203,588 (93,776) 30,966 _ 103,183 (10,949) 17,955 17,955 12,473 17,955 _ (263) - (42,650) (42,650) (253,473) (42,650) 305,560 (3,270,257) (2.964,697) 47,538,817 40,965,091 (4,193,412) (1,375,573) - (49,339) (44,957,151) (39,527,597) (49,339) _ 442,226 360,631 " (577,139) _ (4,519,025) (4,286,999) (5,229,781) (5,785,019) (82,861) (82,861) (8,552.590) (39,262,396) (13,436) (13,436) (7,996,709) (4,613,778) 24,055,000 63,223,769 - (71,052) (70,673) _ 42.789 95,671 _ 1,552,654 1.587,267 (3,904) (3,904) (3,904) (18.298) 4,376,483 1,768.399 (145,636) (3,904) (149,540) (4� 5,054,472) (28,481,735) 17,245,329 13,699,058 (31,994,619) (27,688,062) (5,060.379) 9,888,400 (424,374) (1,485,850) 511,322 3,665,088 3,665,088 3,665,088 3.198,776 (32,568) (32,568) (32,568) 32,568 3.632,520 3,632,520 (16,090,201) (2,355,110} _ _ 87,071,306 54,260,739 - _ (83,577,352) (106,863,960) 16,779 16,779 8.226,385 6,500,819 16,779 16,779 11,720,339 (46,102,402) 176,703 358,359 535.062 (1,885,517) (35,974,156) 331,624 - 331,624 4,687,798 80,661,954 $ 508,327 $ 358,359 $ 866,686 $ 42,802,281 $ 44.687,798 Gig See accompanying notes to financial statements 25 CITY OF LUBBOCK Notes to Financial Statements September 30, 2000 Note Page L 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, Liabilities and Fund Equity ................................................. 34 G. Risk Management............................................................................ 35 H. Revenues, Expenses and Expenditures ............................................ 36 L Totals (Memorandum Only)........................................................... 37 J. Reclassification................................................................................38 IL 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.................................................................... 42 C. Deferred Charges............................................................................. 42 D. Property, Plant and Equipment...................................................... 43 E. Retirement Plans............................................................................. 44 F. Deferred Compensation.................................................................. 50 G. Surface Water Supply...................................................................... 50 H. Other Enterprise Fund Activities.................................................... 50 26 W CITY OF LUBBOCK Notes to Financial Statements September 30, 2000 Note Page I. Segment Information - Enterprise Funds ......................................... 50 J. Long -Term Debt................................................................. 52 K. Advanced Defeasement................................................................... 56 L. Accrued Insurance Claims............................................................... 57 M. Landfill Closure and Postclosure Care Cost .................................... 57 IV. Contingent Liabilities ............................................................................ 58 A. Federal Grants................................................................................. 58 B. Litigation......................................................................................... — C. Site Remediation 59 ...................................................... D. West Texas Municipal Power Authority ......................................... 59 V. Recently Issued Pronouncements.......................................................... 59 W 0, EA K2 27 Ma no KA 28 W CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Lubbock, Lubbock County, Texas (City) have been prepared in conformity with Generally Accepted Accounting Principles (GAAP) as applicable to governmental units. The Government Accounting Standards Board (GASB) is the acknowledged standard -setting body for establishing governmental accounting and financial reporting principles. With respect to proprietary activities, including component units, the City has adopted GASB Statement No. 20, "Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting." The City has elected to apply all applicable GASB pronouncements as well as Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) Opinions, issued on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements. The more significant accounting policies are described below. A. REPORTING ENTITY In June, 1991, the GASB issued Statement No. 14, `The Financial Reporting Entity". In accordance with this statement, the City has presented those entities, which comprise the primary government along with its discretely presented Component Units in the fiscal year 2000 general- purpose financial statements. The City is a municipal corporation governed by a Mayor -Council form of government. As required by GAAP, the general purpose financial statements present the reporting entity which consists of the primary government, organizations for which the primary government is r* financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion could cause the City's general purpose financial statements to be misleading or incomplete. BLENDED COMPONENT UNITS The following Component Unit has been presented as a blended Component Unit because although it is legally separate, the Component Unit is so intertwined with the primary government that it is, in substance, a part of the primary government. The Urban Renewal Agency (URA) was formed to provide Urban Renewal Services for the City of Lubbock, that include rehabilitation of housing, acquisition of housing, and disposition of land. The Urban Renewal Agency Board is composed of nine members appointed by the Mayor, with the consent of City Council, and acts only in an advisory capacity to the City Council. All powers to govern the component unit are held by the City Council such that, the City Council is essentially the governing body for the Urban Renewal Agency. Financial activity of the Component Unit is reported in the Community Development Expendable Trust Fund. DISCRETELY PRESENTED COMPONENT UNITS The Component Unit columns in the combined financial statements include the financial data of the City's other Component Units. They are reported in a separate column to emphasize that they are legally separate from the City. The following Component Units are included in the reporting entity because the primary government is financially accountable and is able to impose its will on the organization. A primary government has the ability to impose its will if it can significantly influence operations and/or activities of an organization. City Transit Management Co., Inc. dba Citibus (Citibus) In 1998, the City renewed a five year management agreement with McDonald Transit Associates, Inc. to manage and operate a city owned transportation system (Citibus). Citibus is a legally separate entity. The City Council appoints the seven -member Lubbock Public Transit Advisory Board, and approves the annual budget. The City is responsible for funding deficits. Citibus is reported as a proprietary type component unit. 29 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September- 30, 2000 NOTE I. SUIMMARY OF SIGNIFICANT ACCOUNTING POLICIES A REPORTING ENTITY (CONTINUEDI Civic Lubbock, Inc. promotes the cultural and educational usage of the Lubbock Memorial Civic Center and Lubbock Municipal Coliseum. The 7 member board is appointed 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 Market Lubbock, Inc. (Market Lubbock Inc.) On October 10, 1995, the Lubbock City Council created Market Lubbock, Inc., a non-profit corporation responsible for creating, managing, operating and supervising programs and activities for the purpose of promoting, assisting and enhancing economic development within and around the City of Lubbock. Market Lubbock, Inc. is a legally separate entity. The City Council appoints the seven -member board. The operation is funded mostly by the equivalent of three cents of the property tax rate. Market Lubbock, Inc. is reported as a governmental type component unit. The combined financial statements present financial statements for each of the three discretely presented component units. Copies of financial statements of the individual component units may be obtained from their respective administrative offices listed below: Administrative Offices Citibus Civic Lubbock, Inc. Market Lubbock, Inc 801 Texas 1501 6`h Street 1301 Broadway Lubbock, Texas Lubbock, Texas Suite 200 Lubbock, Texas RELATED ORGANIZATIONS The City's officials are also responsible for appointing the members of the boards of other organizations but the City's accountability for these organizations does not extend beyond making the appointments. The following are related organizations, which have not been included in 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 the Authority is independent of the City of Lubbock. The Authority is not fiscally dependent on the City of Lubbock and City Council is not able to impose its will on the entity. The City of Lubbock has no responsibility for debt issued by the Authority. Lubbock Firemen's Retirement and Relief Fund (LFRRF) operates under provisions of the Firemen's Relief and Retirement Laws of the State of Texas for purposes of providing retirement benefits for the City's firefighters. Its affairs are governed by the Mayor's designee, the Finance Manager, three firefighters elected by members of the LFRRF, and two at -large members elected by the Board. It is funded by contributions by the firefighters and matched by contributions from the City. 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 W ca CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY (CONTINUED) not in the City. The State Firemen's Pension Commission is the governing body over the LFRRF; thus, the City of Lubbock does not significantly influence operations. Lubbock Arts Alliance, Inc. (Alliance) is dedicated to the promotion and improvement of the arts and sponsoring the annual 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 Facilities 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 Finance 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 seven -member board. It is the opinion of the City Attorney that LHFC is independent of the City. Indebtedness 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, along with three other cities in the West Texas area, entered into an agreement with the West Texas Municipal Power Authority ("WTMPA") to purchase power generated by a co -generation facility to be constructed with the proceeds obtained from the issuance of $28,910,000 of revenue bonds issued by WTMPA. The contractual arrangement with WTMPA calls for each participating city to guarantee payments of the WTMPA bond debt service in the event the net revenues of the power sales contracts with the participating cities is not adequate to cover the debt service. The City's percentage of the debt service guaranteed is 85.21%. The City has an ongoing financial interest in WTMPA through the contractual arrangement to purchase generated power 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 venture by purchasing the power generated by WTMPA which will benefit the citizens of Lubbock. Financial information for WTMPA can be obtained from the City of Lubbock, P.O. Box 2000, �n Lubbock, Texas 79401, (Attention Managing Director of Financial Services). During the year ended September 30, 2000, the City paid $663,038 to WTMPA for purchased power and was not required to subsidize any debt service payments. B. BASIS OF PRESENTATION - FUND ACCOUNTING The financial transactions of the City are recorded in individual funds and account groups. Each fund is accounted for by providing a separate set of self -balancing accounts that comprise its assets, liabilities, reserves, fund equity, revenues, and expenditures/expenses. The various funds are classified into three categories: governmental, proprietary and fiduciary. The following fund types and account groups are used by the City: sue, 31 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B. BASIS OF PRESENTATION - FUND ACCOUNTING (CONTINUED) GOVERNMENTAL FUND TYPES General Fund is the general operating fund of the City. It is used 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 specific revenue sources (other than special assessments, expendable trusts, or major capital projects) that are legally restricted to expenditures for specified purposes. The Debt Service Fund is used to account for the accumulation of financial resources for the payment of interest and principal on the general long-term debt of the City. Capital Project Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Proprietary Funds or Trust Funds). PROPRIETARY FUND TYPES Enterprise Funds are used to account for operations of the City (a) that are financed and operated in a manner similar to private business enterprises, where the intent is to provide goods or services to the general public on a continuing basis, the cost of which is to be recovered in whole or pan through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Internal Service Fund is used to account for the financing of goods and services provided by one department or agency to other departments or agencies of the City, or to other 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 accounted for in fiduciary fund types. Fiduciary fund types are comprised of: Expendable Trust Funds account for assets received and expended 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 a custodial trustee. They are accounted for on the modified accrual basis of accounting with respect to asset and liability recognition, but do not have a measurement focus since agency funds do not account for operations. ACCOUNT GROUPS General Fixed Assets Account Group represents a summary of the fixed assets of the City, other than those fixed assets reported in the Proprietary Funds. Capital expenditures of the Capital Projects Fund are the primary source from which the detailed records of the general fixed assets account group are developed. Capital expenditures are carried in this account group as construction in progress until the projects are completed and are then capitalized by function and classification. 32 W CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B BASIS OF PRESENTATION FUND ACCOLJNTiNG (CONTINUED Infrastructure fixed assets such as streets, highways, bridges, sidewalks, street lighting, traffic poles and signals, and storm sewers, are accounted for in the General Fixed Assets Account Group and reported in the Schedule of General Fixed Assets. General fixed assets are not depreciated and are recorded at historical con at the time of acquisition. Donated assets are recorded at their fair market value on the date donated. General Long -Terra Debt 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 benefits, insurance claims and rebatabie arbitrage, other than those reported in the Proprietary Funds. C. BASIS OF ACCOUNTING 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, other than interest on long-term debt in the Debt Service Fund, which is recorded when due, are recorded when the liability is incurred. Revenues are recorded when received in cash unless susceptible 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 under the modified accrual basis are property tax, sales tax, franchise tax, hotel/motel tax, certain grant 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 el" are included on the balance sheet. Net current assets or fund balance is considered a measure of available spendable resources. The flow of financial resources measurement focus is concerned primarily with the measure of interperiod equity (e.g. whether current year revenues were sufficient to pay for current year services). Enterprise funds and internal service funds are accounted for using an economic resource measurement focus. All assets and liabilities including fixed assets and long-term debt are included on the balance sheet. Fund equity is segregated into its contributed capital and retained earnings components. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. D. BUDGETARY ACC012 TING .. Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds except for special revenue funds, debt service funds, and capital project funds, which adopt project -length budgets. All annual appropriations lapse at fiscal year end. Annually, the City Manager submits to City Council a proposed operating budget for the upcoming fiscal year. Public hearings are conducted to obtain taxpayer comments, and the budget is legally enacted through passage of an ordinance by the City Council. Budgetary control is maintained by department and by the following category of expenditures: personnel services, supplies, maintenance, other charges, and capital outlay. All budget supplements must be approved by the City Council. Administrative transfers and increases or decreases in accounts within categories may be made by management as long as expenditures do 33 G@ CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES D. BUDGETARY ACCOUNTING (CONTINUED) not exceed budgeted appropriations at the fund level. Budgeted amounts shown are from the revised budget, adopted by resolution on June 8, 2000. During the year, the budget was revised to reflect a 2.6% increase in General Fund operating revenues and a .18% decrease for the General Fund operating expenditures from the original budget. Each year, in accordance with State law, the City Council sets an ad valorem tax levy for a sinking fund (General Obligation Debt Service) which, with cash and investments in the fund, would be sufficient to pay all the bonded indebtedness and interest due in the following fiscal year. E. ENCUMBRANCES At the end of the year, encumbrances for which goods and/or services have not been received are canceled. At the beginning of the next year, management reviews all open encumbrances. During the revised budget process, budgets may be re-established. On October 1, 2000, 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 resources of the various funds in order to facilitate the management of cash and enhance investment earnings. Records are maintained that reflect each fund's equity in the pooled account. GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools became effective for the year September 30, 1998. This statement requires certain investments to be carried at fair value with the change in fair value included in the determination of investment income shown in the operating statement. At September 30, 2000, the difference between amortized cost and market value was not significant such that the carrying value of the portfolio is considered to approximate fair market value. Cash and Cash Equivalents - Cash equivalents are defined as short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less when purchased which present an insignificant risk of changes in value because of changes in interest rates. Property Tax Receivable - Property taxes are assessed and liens attach on valuations as of January 1, levied on October i of each year, and become delinquent February i of the following year. Uncollected taxes, net of the estimated uncollectible amount, are recorded as receivable in the General, Special Revenue and Debt Service Funds. Deferred revenue is recorded in an amount equal to net delinquent taxes receivable, less taxes collected within 60 days after the end of the fiscal year. Enterprise Fund Receivable - Within the Electric, Water, Sewer and Solid Waste Enterprise Funds, services rendered but not billed as of the close of the fiscal year, are not considered significant. Amounts billed are reflected as accounts receivable net of an allowance for uncollectibles. Inventories - Inventories consist of expendable supplies held for consumption. Inventories are valued at cost using the 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 items are accounted for under the consumption method. 34 W ram, W CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F ASSETS LIABILITIES AND FUND EQUITY (CONTINUED Restricted Assets - Certain enterprise fund assets are restricted for t�beenl� reserved forn which his Cheese funded through long-term debt, therefore, retained earnings have no amounts. The excess of other restricted assets over related liabilities are included as retained earnings reserved for capital projects, rate stabilization, economic development and bond indentures. Fixed Assets and Depreciation - General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, 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 assets are recorded at cost. Donated assets are recorded at the fair value on the date of donation. Assets in the General Fixed Assets Account Group are not depreciated. Property, plant and equipment of the Proprietary Funds are stated at cost or estimated market value for donated assets. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Improvements 10-50 years Buildings 15-50 years Equipment 3-15 years Interest Capitalization - The City capitalizes interest cost in its Enterprise Funds on bonds used for fixed asset construction, net of interest income earned on the temporary investment of the tax- exempt bond proceeds. Interest costs incurred during the year were approximately $16,800,000. No interest was capitalized during the year ended September 30, 2000. Advances to Other Funds - 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, which indicates they do not constitute available spendable resources. G. RISK MANAGEMENT The City is primarily self -insured for medical and dental coverage. The liability for incurred claims represents estimates for medical and dental claims incurred as of September 30, 2000. Some of these claims were reported at September 30, 2000, and others which are incurred but not. reported (IBNR), may not be reported until a later date. IBNR is actuarially determined by the City's independent insurance administrator. In order to mitigate the risk associated with the City's medical coverage, the City purchased individual stop loss coverage of $150,000. In April 1999, the City purchased worker's compensation coverage from a third party. Prior to April 1999, the City was self insured for worker's compensation claims. Any claims outstanding in April 1999 are the responsibility of the City. The insurance purchased from the third party insurer covers worker's compensation claims from the initial dollar. The City's self -insured general liability program is on a cash flow basis, which means that the service contractor processes, adjusts and pays claims from a deposit provided by the City. The City accounts for the general liability program in the Risk Management Fund (an Internal Service Fund) 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. For self -insured coverage, ost of claims (including future claim adjuliabilities estimates of the ultimate stment expenses) es)that have been 35 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES G. RISK MANAGEMENT (CONTINUED) reported but not settled, and of claims that have been incurred but not reported. The length of time for which such costs must be estimated varies depending on the coverage involved. Estimated amounts of salvage and subrogation and reinsurance recoverable on unpaid claims are deducted from the liability for unpaid claims. Because actual claim costs depend on such complex factors as inflation, changes in doctrines of legal liability, and damage awards, the process used in computing claim liabilities does not necessarily result in an exact amount, particularly for general liability coverage. Claim liabilities are recomputed periodically using a variety of actuarial and statistical techniques to produce current estimates that reflect recent settlements, claim frequency, and other economic and social factors. Adjustments to claim liabilities are charged or credited to expense in the period in which they are incurred. Additionally, property and boiler coverage is accounted for in the Risk Management Fund. The property insurance polity was purchased from an outside insurance carrier. The . policy has a $250,000 deductible per occurrence, and the boiler coverage insurance deductible is up to $100,000 dependent upon the unit. Premiums are charged to funds based upon policy premiums and reserve payments. Other small insurance policies, such as surety bond coverage and miscellaneous floaters, are accounted for in the Risk Management Fund. Funds are charged expenditures based on premium amounts and administrative charges. The City has had no significant reductions in insurance coverage during the year. Settlements in the current year and preceding two years have not exceeded insurance coverage. H. REVENUES EXPENSES AND EXPENDITURES Interest Income on pooled cash and investments is allocated monthly based on the percentage of a fund's average daily equity in pooled cash and investments to the total average daily, pooled equity in pooled cash and investments, except for certain Trust and Agency, Funds, certain Special Revenue Funds, Governmental Capital 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 1.125% of the total sales tax levy of 7.875%, which is collected by the State of Texas and remitted to the City monthly. The tax is collected by the vendor and required to be remitted to the State by the 20th of the month following collection. The tax is then paid to the City by the loth of the next month. On January 21, 1995, voters approved a 1/8 cent increase in sales tax to reduce the property tax rate which went into effect October 1, 1995. Grant Revenue from federal and state grants is recognized to the extent that the related expenditure has been incurred and reimbursement requested. Interfund Transactions or quasi -external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from that fund that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transactions except quasi -external transactions, reimbursements, temporary receivables and payables, and residual equity transfers are reported as operating transfers. 36 W CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H. REVENUES EXPENSES AND EXPENDITURES (CONTINUED) Compensated Absences consists of vacation leave and sick leave. Vacation leave of 10-20 days is granted to all regular employees dependent upon the date employed, years of service, and civil service status. Currently, up to 40 hours of vacation leave may be "carried over" to the next calendar year. The City is obligated to make payment upon retirement or termination for any available, unused vacation leave. Sick leave for employees is accrued at 1 1/ days per month with a maximum accrual status of 200 days. After 15 years of continuous full time services for non -civil service personnel, vested sick leave is paid on retirement or termination 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 retirement or termination. The Texas Civil Service laws dictate e^. certain benefits and personnel policies above and beyond those policies of the City. The liability for the accumulated vacation and sick leave is recorded in the general long-term debt account group for governmental fund employees and as a noncurrent liability in the proprietary funds for proprietary fund employees. Management has determined that the current portion of this liability is not significant to the overall financial position of the City. Post Employment Benefits for retirees of the City of Lubbock include the option to purchase health and life insurance benefits at their own expense. Amounts to cover premiums and administrative costs, with an incremental charge for reserve funding, are determined by the City's health care administrator. Employer contributions are funded on a pay-as-you-go basis. Financial activity is reported in the Health Insurance Internal Service Fund. The following schedule reflects participation in the City's health care program: 2000 Participants Active 1790 Retired 445 Cobra 10 2000 Active Claims $6,334,252 Retired Claims 2,181,916 Cobra Claims 20,359 Total Claims $8,536,527 % of Employee Groups to total claims Active 74.20% Retired 25.56% Cobra .24% Total % 100.00% '^ I. TOTALS (MEMORANDUM ONLY) The Totals (Memorandum Only) columns represent an aggregation of the combined financial statements and do not represent consolidated financial information. Data in those columns do not 37 0.&I CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I TOTALS (MEMORANDUM ONLY) (CONTINUED) represent financial position and results of operations, in conformity with GAAP and are presented only to facilitate analysis. T. RECLASSIFICATION Certain 1999 amounts have been reclassified to conform to 2000 presentation. NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. RETAINED EARNINGS/FUND BALANCE DEFICITS The deficit of $70,757 in the Library Expendable Trust Fund is the result of a timing difference between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not measurable at September 30, 2000, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $41,908 in the Community Services Expendable Trust Fund is the result of a timing difference between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not considered measurable at September 30, 2000, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $449,474 in the Police Expenditures is the result of a timing difference between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not considered measurable at September 30, 2000, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $392,886 in Other Grant is the result of timing differences arising between the incurrence of expenditures and the related filing of requests for reimbursement of those expenditures. These funds have not been accrued, as certain reimbursement amounts are not considered measurable at September 30, 2000, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit in the Golf Enterprise Fund of $1,812,264 is the result of placing itself in a more competitive position through non -capital course equipment improvements. On October 13, 1994, the City contracted with Fore Star Golf, Inc. for management services to be provided for the City's operations. The management agreement is effective through December 31, 2014. Over the term of the contract, Fore Star Golf, Inc. will receive a portion of the golf course revenues based on a sliding scale. The deficit of $1,098,454 in the Internal Service Management Information Fund results from the practice of not recovering depreciation through user charges. Management is evaluating user charges in order to recover depreciation, financing and capital costs, and the retained earnings deficit. The deficit of $339,751 in the Internal Service Communications Fund results from the practice of not recovering depreciation through user charges. Management is evaluating user charges in order to recover depreciation and recover the retained earnings deficit. 38 5 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE H. STEWARDSHII', COMPLIANCE AND ACCOUNTABILITY A RETAINED EARNI ;S/FUND BALANCE DEFICITS (CONTINUED) 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 A. POOLED CASH AND INVESTMENTS The City's investment polices are governed by State statute and City ordinances. Permissible investments include direct obligations of the United States or its agencies and instrumentalities, certificates of deposit, prime domestic banker's acceptances, commercial paper, repurchase agreements, and deposits in a qualifying investment pool. Collateral is required for demand deposits, certificates of obligation, and repurchase agreements at 102% of all amounts not covered by Federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the state and its subdivisions. The City's deposits and investments are categorized below to indicate the level of risk assumed by the City at September 30, 2000. INVESTMENT CATEGORY OF CREDIT RISK A ' (1) Insured, registered or in securities held by the entity or its agent in the entity's name. (2) Uninsured and unregistered, with securities held by the counter party's trust department or its agent in the entity's name. (3) Uninsured and unregistered, with securities held by the counter party or by the trust department or agent but not in the entity's name. DEPOSIT CATEGORY OF CREDIT RISK (A) Insured or collateralized with securities held by the entity or by its agent in the entity's name. (B) Collateralized with securities held by the pledging financial institution's trust department or agent in the entity's name. (C) Uncoilateralized. Pooled Cash and Investments The City's pooled cash and investments consist of deposits with financial institutions, certificates of deposit, U.S. government and agency securities, commercial paper, and deposits in qualifying non -regulated money market investment pools (Logic and TexPool). These investments have varying maturities ranging from one day to three years. The weighted average maturity of the total portfolio is kept to under two years. The following is a schedule of the City's pooled cash t11111 and investments at September 30, 2000: Gl W 39 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. POOLED CASH AND INVESTMENTS (CONTINUED) Category Carrying Investments (1) U. S. Treasury and Agency Obligations - Primary Government $95,484,978 $ Commercial Paper - Primary Government 31,604,280 Mutual Funds - Primary Government - Total Investments - Primary Government U.S. Treasury and Agency Obligations/Other- Component Units 4,041,711 Mutual Funds - Component Units - Total Investments - Component Units Total Investments - Reporting Entity $ $95,484,978 31,604,280 • - 63,314,846 190,404,104 4,041,711 238,629 4,280,340 $194,684,444 40 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL, NOTES ON ALL FUNDS AND ACCOUNT GROUPS A POOLED CASH AND INVESTMENTS (CONTINUED) Cash and Category Carrying Bank l Bank Deposits (A) (B) (C) Amount Balance Cash and Bank Deposits -Primary Government $2,720,779 $ - $ - $1,475,758 $2,720,779 Cash and Bank Deposits -Component Units 660,992 371,847 696,264 1,362,799 1,729,103 Cash and Bank Deposits - Reporting Entity $3,381,771 $ 371,847 $ 696,264 $2�8,557 $4,449,882 Cash and Investments are reported in the financial statements as: Primary Component Reporting Government Units Entity Cash and Cash Equivalents - Non Restricted $9,146,305 $1,272,468 $ 10,418,773 Cash and Cash Equivalents - Restricted 39,254,530 118,615 39,373,145 Total Cash and Cash Equivalents 48,400,835 1,391,083 49,791,918 Investments - Non Restricted 75,248,673 4,252,056 79,500,729 Investments - Restricted 68,230,355 - 68,230,355 Total Investments 143,479,028 4,252,056 147,731,084 Total Cash and Investments $191,879,863 $5,643,139 $197,523,002 w 41 w CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS B. INTERFUND TRANSACTIONS Interfund receivables and payables consisting of due to/from and advances to/from other funds at September 30, 2000 were as follows: Funds General Fund Special Revenue Funds: Hote1/Motel Tax Capital Project Funds Public Safety General Capital Projects Enterprise Funds: Electric Enterprise Water Enterprise Sewer Enterprises Solid Waste Enterprise Airport Enterprise Golf Enterprise Stormwater Enterprise Internal Service: Fleet Maintenance Central Warehouse Print Shop & Office Store Radio Shop Management Information Investment Pool Communications Expendable Trust Funds: Community Development Community Services Police Library Total Primary Government C. DEFERRED CHARGE Interfund Interfund Receivables Pavables S10,827,659 $ - 650,000 1,337,265 1,578,974 - 4,500,000 232,190 120,000 1,910,224 2,017,046 50,000 30,400 12,000 254,482 748,608 3,075 240,885 1,119,717 36,272 150,000 121,349 $12,970,073 $12,970,073 The total deferred charges of S11,717,554 includes $3,877,778 which represents an advertising contract with the United Spirit Arena. The advertising will begin with the opening of the sports arena and will continue for 30 years. Amortization of this amount began in fiscal 2000 with the opening of the arena. The deferred charges also include an amount of $1,941,194 at September 30, 2000, which represents prepayments for two separate contracts for future delivery of natural gas as contracted for by the City. In 1988, a contract was entered into for the purchase of proven and unproven reserves, totaling 2,000,000 MMBTU at S 1.56 per MMBTU with an option, which the City has exercised, to purchase an additional 2,000,000 MMBTU at the same price. The remaining amount of prepayment relative to this contract at September 30, 2000 is $1,643,133. Quantities in excess of the first 4,000,000 MMBTU can then be purchased at market value. During 1988, proven reserves of 338,000 MMBTU were purchased at the $1.56 rate. The remaining reserves are being purchased as proven. One-half the rate, or $.78 per MMBTU, is paid upon proven determination of the reserves and the balance is to be paid upon delivery. The prepayments are to be expensed as the gas is taken until the prepaid units of gas have been consumed. At September 30, 2000 and 1999, 1,317,934 42 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS C. DEFERRED CHARGE (CONTINUED) MMBTU had been delivered, and remaining proven reserves at September 30, 2000 and 1999 were 2,104,273 MMBTU. On August 25, 1994, the City contracted for the purchase of natural gas to be delivered in future years. An amount of S298,061 is included in the $1,941,194 which represents a deposit on future gas deliveries. In November 2000, the City received a refund of this deposit. During fiscal 2000, S3,000,000 was transferred to the Management Information Internal Service Fund from the Electric Enterprise Fund to cover costs of implementing a new utility billing system. This amount will be amortized over 7 seven years once the new billing system has been placed in service. The remaining deferred charges of $2,898,582 represent infrastructure and other economic development costs being amortized over 5 years. D. PROPERTY PLANT AND EQUIPMENT General fixed assets of the City for the year ended September 30, 2000, are as follows: Balance Balance 10-1-99 Additions* Deletions* 9-30-00 Land S 7,966,428 S - $ 33,200 S 7,933,228 Buildings and improvements 39,230,338 2,970,755 1,140,314 41,060,779 Other Improvements 132,964,711 3,855,433 1,145,384 135,674,760 Equipment 32,105,140 9,720,133 5,100,122 36,725,151 Construction in Progress 40,488,559 14,296,636 14,394,734 40,390,461 Total $252,7 530,8 $21,8 $261,7 * Includes transfers Construction in progress is composed of the following: Project Expended Unexpended Authorization 9-30-00 Balance Fire Station S 10,222,047 S 7,458,817 S 2,763,230 Park Improvements 6,358,896 863,368 5,495,528 Street Improvements 35,942,202 13,519,996 22,422,206 Permanent Street Maintenance 1,700,000 1,637,865 62,135 General Permanent Capital Projects 7,299,813 6,206,911 1,092,902 General Permanent Capital Maintenance & Other 18,833,174 10,703,504 8,129,670 0111Total Life -to -Date Activity $ 80,356,132 S 40,390,461 $ 31,965,671 id 43 no CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS D. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) General fixed asset account group for component units for the year ended September 30, 2000, are follows: Balance Balance 10-01-99 Additions Deletions 9-30-00 Equipment $ 501,728 $ 18,814 $ . $ 520,542 Property, plant, and equipment recorded in the City's various proprietary funds (including component units) as of September 30, 2000, is as follows: Total Reporting Internal Total Entity Enterprise Service Proprietary Component Proprietary Fund Fund Fund Type Units Fund Type Land S 30,837,648 $ 71,182 $ 30,908,830 S 520,403 $ 31,429,233 Buildings 82,752,391 1,624,312 84,376,703 4,026,735 88,403,438 Other Improvements 435,255,438 197,471 435,452,909 1,179,543 436,632,452 Equipment 51,538,373 14,903,623 66,441,996 16,971,776 83,413,772 Construction in Progress 87,327,433 2,950,748 90,278,181 - 90,278,181 Total 687,711,284 19,747,336 707,458,620 22,698,457 730,157,077 Less: Accumulated Depreciation (203,971,22n (11,805,720) (215,7769947) (8,126,861) (223,903,808) Net $483,740,056 $ 7,941,616 $491,681,672 $14,571,596 $ 506,253,268 E. RETIREMENT PLANS Each qualified employee is included in one of two retirement plans in which the City of Lubbock participates. These are the Texas Municipal Retirement System (TMRS) and the Lubbock Firemen's Relief and Retirement Fund (LFRRF). The City does not maintain the accounting records, hold the investments or administer either fund. 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 (with the exception of firefighters) through a non-traditional, joint contributory, hybrid defined benefit plan in the state- wide TMRS, one of 731 administered by TMRS, an agent multiple -employer public employee retirement system. Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City -financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100%, 150%, or 200%) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits 44 r CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E RETIREMENT PLANS (CONTINLTEDi A" for the 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 and if the employee's salary had always been the average of his salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer -financed monetary credits with interest 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. A member is vested after 10 years. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Contributions The contribution rate for the employees is 7% and the City matching ratio is currently 2 to 1, both as adopted by the governing body of the City. Under the state law governing TMRS, the actuary annually determines the City contribution rate. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing �. monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his/her retirement becomes effective. The prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 25-year amortization period. The unit credit actuarial cost method is used for determining the City contribution rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that is the basis for the rate and the calendar year when the rate goes into effect. (i.e. December 31, 1999 valuation is effective for rates beginning January 2001). Actuarial Assumptions �» The actuarial assumptions for the 1999 valuations are as follows: Acturial cost method: Amortization method: Unit credit Level percent of payroll Remaining amortization period 25 years- open period Asset valuation method: Amortized cost Investment rate of return: 8% ^+, Projected salary increases: None Includes inflation at: None Cost of Living adjustments: None EW 45 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) TEXAS MUNICIPAL RETIREMENT SYSTEM REQUIRED SUPPLEMENTAL DISLOSURE 3 YEAR HISTORICAL SCHEDULE OF ACTUARIAL LIABILITIES AND FUNDING PROGRESS Unfunded Actuarial As of Actuarial Accrued December 31 Actuarial Value Accrued Percentage Liability ofAssets Liability Funded (UAAL) 1997 $119,895,026 $153,396,020 78.2% $33,500,994 1998 132,735,475 162,668,614 81.6% 29,933,139 1999 147,042,049 181,439,657 81.0% 34,397,608 UALL as a % Annual Required As of Annual Covered Of Covered Contribution Contribution December 31 Payroll Payroll (ARC) Made 1997 $45,015,150 74.4% $7,037,656 $7,037,656 1998 46,619,677 64.2% 7,149,029 7,149,029 1999 51,627,837 66.6% 7,794,560 7,794,560 The City of Lubbock is one of 731 municipalities having the benefit plan administered by TMRS. Each of the municipalities have an annual, individual actuarial valuation performed. All Assumptions for the December 31, 1999, valuations are contained in the 1999 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153. LUBBOCK FIREMEN'S RELIEF AND RETIREMENT FUND (LFRRF) Plan Description The Board of Trustees of the LFRRF is the administrator of a single -employer defined benefit pension plan. This pension fund is a trust fund. It is reported by the City of Lubbock as a related organization and is not considered to be a part of the City financial reporting entity. Firefighters in the Lubbock Fire Department are covered by the LFRRF. The LFRRF provides service retirement, death, disability and withdrawal benefits. These benefits vest after 20 years of credited service. Employees may retire at age 50 with 20 years of service. A reduced early service retirement benefit is provided for employees who terminate employment With 20 or more years of service. A partially vested benefit is provided for firefighters who terminate employment with at least 10 but less than 20 years of service. A partially vested benefit is provided for firefighters who terminate employment with at least 10 but less than 20 years of service. The Plan Effective November 1, 1999 provides a monthly normal service retirement 46 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E io-YiREI41FN'T PLANS (CONTINUEDi f annuity, to of bpayable in a joint and Two -Thirds to Spouse form enefit, Salary Plus $283 50 per month for enach yearof service n exces of 020/years. Fina148- MonthAver A partially vested benefit is provided for firefighters who terminate employment with at least 10 but less than 20 years of service. The Plan Effective November 1, 1999 provides a monthly normal service retirement benefit, payable in a Joint and Two -Thirds to Spouse form of annuity, equal to 70.02% of Final 48-Month Average Salary Plus S283.50 per month for each year of service in excess of 20 years. There is no provision for automatic postretirement benefit increases. The fund has the authority to provide, and has periodically 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 provides the authority and procedure to amend benefit provisions. r� Contributions Required and Contributions Made 1. The contribution provisions of this plan are authorized by TLFFRA. TLFFRA provides the authority and procedure to change the amount of contributions determined as a percentage of pay by each firefighter and a percentage of payroll by the City. ^, 2. While the contribution requirements are not actuarially determined, state law requires that each plan of benefits adopted by the fund must be approved by an eligible actuary. The actuary certifies that the contribution commitment by the firefighters and the City provides an adequate financing arrangement. Using the entry age actuarial cost method the plan's normal cost contribution rate is determined as a percentage of payroll. The excess of the total contribution rate over the normal cost contribution rate is used to amortize the plan's unfunded actuarial accrued liability, and the number of years needed to amortize the plan's unfunded actuarial liability is determined using a level percentage of payroll method. The costs of administering the plan are financed from the trust. f the Lubbock Firefighter's Relief and Retirement Fund requires 3. The funding policy o contributions equal to 11% of pay by the firefighters and contributions by the City based on a December formula which causes the City's contribution rate to fluctuate from year to year. The 31, 1998 actuarial valuation (most recent) assumes that the City's contributions will average I5% of payroll in the future. Annual Pension Cost For the fiscal year ending September 30, 2000, the City of Lubbock's annual pension cost of $1,852,835 for the Lubbock Firefighter's Relief and Retirement Fund was equal to the City's required and actual contributions during the year. While the required contributions were not actuarially determined, the plan of benefits has been approved by the Board's actuary as having an adequate financing arrangement based on the level of the firefighter and City of Lubbock contribution rates. The funding policy of the fund requires the firefighters to contribute 11% of pay and the City to contribute based on a formula which causes the City contribution rate to fluctuate from year to year. These required contributions were reflected in the the December 31, 1998, (most recent) actuarial valuation, which satsified the parameters of the Governmental Accounting Standards Board (GASB) Statement No. 27. 47 owe CITY OF LUBBOCK, TEXAS Notes.to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) 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 a five-year smoothed fair -market value of assets. The actuarial assumptions included an investment return assumption of 8.5 % per year (net of administrative expenses), projected salary increases including promotion and longevity averaging 6% per year over a 25 year career, and no postretirement coat -of -living adjustments. An inflation assumption of 4% per year is included in the investment return and salary increase assumptions. The unfunded actuarial accrued liability (UAAL) is amortized with the excess of the assumed total contribution rate over the normal cost rate. The number of years needed to amortize the UAAL is determined using an open, level percentage of payroll method, assuming that the payroll will increase 4% per year, and was 30 years as of Elie December 31, 1998 (most recent) actuarial valuation based on the plan provisions effective November 1, 1999. Further details concerning the financial position of the LFRRF and the latest actuarial valuation are available by contacting the Board of Trustees, LFRRF, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457. Trend Information Annual Pension Percentage of APC Net Pension Fiscal Year Ending Cost (APC) Contributed Obligation _ 9/30/98 $1,586,233 100 _ 9/30/99 1,745,357 100 _ 9/30/00 1,852,835 100 LUBBOCK FIREMEN'S RELIEF AND RETIREMENT FUND ANALYIS OF FUNDING PROGRESS Entry Age UAAL as a Actuarial Actuarial Unfunded Percentage of Valuation Actuarial Accrued AAL Funded Annual Covered Date Value of Liability (UAAL) Ratio Covered Payroll (a) Assets (1) (AAL) (2) (1-2) (1/2) Payroll (3) ((2-1)/3) 12/31/94 $57,532,897 $64,634,292 $7,101,385 89.0% $8,958,331 79.3% 12/31/961,2 73,626,537 80,105,898 6,479,361 91.9 9,223,974 70.2 12/31/981,3 90,364,681 97,533,314 7,168,633 92.7 10,290,190 69.7 1 Economic and demographic assumptions were revised. 2 Changes in plan benefit provisions were effective December 20, 1995, March 30, 1996 and November 1, 1997. 3 Reflects changes in plan benefit provisions effective November 1, 1999 4 The covered payroll is based on estimated annualized salaries used in the valuation. (a) The City has adopted the option of the biennial actuarial valuation provision of GASB 27. The information shown is the most recent available. The next actuarial valuation will be as of December 31, 2000. 48 OWN CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS F. DEFERRED COMPENSATION The City offers its employees three deferred compensation piano all City employees, created in accordancewith Internal Revenue Code CIRC") Section 457. The plans, available it them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. Effective August 20, 1996, the laws governing IRC Section 457 deferred compensation plans were changed to state that new IRC Section 457 plans will not be considered eligible plans unless all assets and income of the plan are held in trust for the exclusive benefit of the participants and their beneficiaries. Existing plans are required to comply with the new requirement by January 1, 1999. In response to the law changes, the GASB issued Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. This statement requires that the City's deferred compensation plans be reported in the financial statements as an expendable trust fund. In management's opinion, the level of administrative services provided by City staff warrants inclusion of the plans in the financial statements as such. The provisions of this statement were implemented in fiscal 1999 and resulted in a transfer from the Deferred Compensation agency fund to the Deferred Compensation expendable trust fund of $9,572,548. The amount transferred is reported as an adjustment to beginning fund balance of the Deferred Compensation expendable trust fund. G. SURFACE WATER SUPPLY Canadian River Municipal Water Authority The Canadian River Municipal 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 supplying water to surrounding cities. The District was created in 1953 and comprises eleven cities, including the City. The budget, financing and operations of the District are governed by a Board of Directors selected by the governing bodies of each of the rs Septemberir cit30, 2000, the Board was comprised of 18 membeies, each city being entitled to one or two rs, two ofnwhich dent represented on tthe City of Lubbock. The City contracted with the CRMWA to reimburse it for a portion of the cost of the Canadian River Dam and aqueduct system in exchange for surface water. Accordingly, prior to fiscal 1999, such payments were made solely out of water system revenues and are not general obligations of the City. The City's pro rasa share of annual fixed and variable operating and reserve assessments is recorded as an expense of obtaining surface water. Prior to fiscal 1999, the long -tern: debt was owed to the U.S. Bureau of Reclamation for the cost of Construction of the facility, which was completed in 1969. The City's allocation of project cost was $32,905,862. During the year ended September 30, 1999, bonds in the principal amount of S12,300,000 were issued to payoff the construction obligation owed to the U.S. Bureau of Reclamation via CRMWA in the amount of $20,809,067. The difference of $8,509,067 was a discount in the remaining principal provided by the U.S. Bureau of Reclamation to the member cities. This discount has been recorded as a deferred gain on refunding and is being amortized over Elie life of the refunding bonds. The annual principal and interest payments are included in the discl sures or othe City related long-term t. he a cost for the rights are recorded as e Other ssetsfand arrerbeing amortized over 85dyears.TThe costeand debt re recorded in the Water Enterprise Fund. 49 52 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS G. SURFACE WATER SUPPLY (CONTINUED) Brazos River Authority - Lake Alan Henry During 1989, the City entered into an agreement with the Brazos River 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 conservation 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 S120 million. The agreement obligates the City to provide revenues to BRA in amounts sufficient to cover all maintenance and operating costs, management fees to the authority, as well as funds sufficient to pay all capital costs associated with construction. The City will receive surface water for the payments to BRA. Approximately $293,000 was paid to the BRA for maintenance and operating costs in fiscal year 2000. The BRA issued $16,970,000 in revenue bonds in 1989 and $39,685,000 in revenue bonds in 1991. These bonds were refunded July 1995. Disclosure of the refunding can be found in Note III. K. Construction of the dam and lake facilities began in 1989. The City is obligated to provide sufficient funds over the remaining life of the bonds to service the debt requirement. The financial activity, along with the related obligation, is accounted for in the Water Enterprise Fund. At September 30, 2000, certain mineral rights associated with land located in the Lake Alan Henry site owned by individuals had not been acquired by the City. The additional 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, and Sewer Enterprise Funds, in the opinion of management, exceed the amount that would have been paid to the City if these funds were private sector companies engaged in the same enterprises. In addition to the amount transferred in excess of private sector taxes, there is also an amount transferred to compensate the General Fund for shared services and indirect costs. I. SEGMENT INFORMATION - ENTERPRISE FUNDS The City maintains seven enterprise funds which include electric, water, sewer, solid waste, airport, golf, and stormwater drainage. 50 EQ A Gi 90 0 A-, EA GR CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS I SEGMENT INFORMATION - ENTERPRISE FUNDS (CONTINUED) Segment information for the year ended September 30, 2000, was as follows: Solid Storniwatcr Total Electric Water Sewer Waste Airport Golf Drainage Enterprise Fund Fund Fund Fund Fund Fund Fund Funds Operating Revenues S 72,932,146 S 29,037,723 S 16,447.324 S 16,034,659 S 4,322,847 S 40,262 S 1,950,819 S 14C,765,780 Depreciation Expense 5,498,153 5,327,091 4,073,836 1,362,225 2,868,516 66,947 105,929 19,302,697 Operating income (loss) 1,332,953 9,783,407 4,268,629 5,548,423 (1,597,833) (26,713) 1,265,338 20,584,204 Operating Transfers In (out) (7,140,319) (2,650,692) (1,746,119) (2,114,512) (987,165) (40,262) (257,197) (14,936,266) Net Income (loss) (6,835,220) 3,242,877 56.664 4,476,496 (48040) (66,975) 1,349,086 1,741,588 Current capital contributions 64,408 790,532 $94,205 (37,982) 591.166 2,302,329 Property, plant, and equipment: Additions: 10,055,225 37,013.010 2,590,293 1,561,028 7,797,606 33,010 59,060,172 Deletions: 1,352,871 2,636,652 150,509 3,187,429 25,624 53,701 7,406,786 Net Working Capital (4,036,427) 5,219,355 3,078,190 2,976,591 20C,741 (2,035,272) 359,181 5,762,359 Allowance for doubtful accounts (1,099,973) (334,639) (135,622) (126,302) (8,328) - (1,704,864) Total Assets 145,937,089 254,499,398 120,665,134 46,635,125 63,151,850 227,887 11,200,741 642,317,214 Bonds and other long- term liabilities payable from o1wrating revenues 34,446,472 114,442.734 51,431,763 9,532,457 5,324,037 59,343 215,236,806 Total Equity $92,7C5,842 S133,375,965 S64,987,973 $36,346,853 556,929,661 (S1,812,264) $10,837,440 S393,371,470 51 !"S CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS 1. LONG-TERM DEBT GENERAL OBLIGATION BONDS AND CERTIFICATES OF OBLIGATION: Final Balance Interest Issue Maturity Amount Outstanding Rate Date Date Issued 9-30-00 7.86% 11.15-85 2-15-03 $ 60,614,070 $ 1,042,762 6.64 5-15-91 2-15-11 16,120,000 805,000 6.67 5-15-91 2-15-11 4,030,000 200,000 6.29 5-15-91 2-15-01 1,145,000 110,000 9.01 5-15-91 2-15-11 1,085,000 590,000 6.69 5-15-91 2-15-11 2,000,000 100,000 5.50 1-14-92 2-15-12 1,655,000 165,000 5.50 5-15-92 2-15-14 34,520,000 8,625,000 5.37 8-15-92 2-15-12 7,565,000 550,000 3.97 5-1-93 2-15-15 14,425,000 10,820,000 5.39 10-1-93 2-15-14 3,625,000 2,545,000 5.39 10-1-93 2-15-14 2,550,000 1,800,000 5.20 10-1-93 2-15-14 1,470,000 1,050,000 5.14 10.1-93 2-15-14 19,215,000 13,455,000 4.30 12-1-93 2-15-08 9,865,000 6,300,000 5.50 5-15-95 2-15-15 4,690,000 3,525,000 4.78 5-15-95 2-15-01 2,000,000 385,000 5.07 12-15-95 2-15-16 6,505,000 5,205,000 5.07 12-15-95 2-15-16 10,000,000 8,000,000 4.91 1-15-97 2-15-09 17,530,000 16,565,000 4.61 1-1-98 2-15-08 1,330,000 1,115,000 4.71 1-1-98 2-15-18 10,260,000 9,240,000 4.36 1-15-99 2-15-14 20,835,000 20,695,000 4.58 1-15-99 2-15-19 15,355,000 14,585,000 4.77 4-1-99 2-15-19 6,100,000 5,795,000 4.71 4-1-99 2-15-19 12,300,000 11,780,000 5.37 9-15-99 2-15-20 24,800,000 24,800,000 5.54 3-15-00 2-15-20 7,000,000 7,000,000 Total $ 318,589,070 $ 176,847,762 (A) (A) Excludes net deferred gains and losses on advance refundings, bond issuance costs and discounts of $5,870,944. Additionally, this amount includes $128,467,416 of bonds used to finance enterprise fund activities. 52 w CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS j LONG TERM DEBT (CONTINUED) ELECTRIC REVENUE BONDS: Balance Final Amount Outstanding Interest Rat e(%) Issue Date Maturity Date Issued 9-30-00 6.25 to 9.20 5-15-91 4-15-11 S 7,500,000 S 375,000 5.00 to 6.50 7-15-91 4-15-02 4,424,976 835,000 6.15-95 4-15-08 13,560,000 9,465,000 4.25 to 6.25 1-1-98 4-15-18 9,170,000 8,260,000 *" 3.80to 5. 3.10 to 5.00 1-15-99 4-15 19 14,975,000 14,295,000 $ 496629,976 $$ 33 �. Total Refunding bonds issued for a partial refunding of the bonds issued May 15,1983. Refunding bonds issued for a partial refunding of the bonds issued April 15, 1976, April 15, 1987, and May 15, 1988. Balance outstanding includes $133,718 discount on bonds sold, bond issuance costs and deferred amounts on refunded bonds. Refunding bonds issued for a partial refunding of the bonds issued April 25,1991 and July 15, 1991. Balance outstanding includes $520,234 of discount on bonds sold, bond issuance costs and deferred amounts on bonds refunded. WATER REVENUE BONDS: Balance Final Amount Outstanding Interest Rate Issue Date Maturity Date _ Issued 09-3C-00 3.80 to 5.50% 6-1-95 8-15-21 $ 58,170,_00 S5118552000 •• Balance outstanding includes $5,794,693 discount, bond issuance costs and deferred losses on bonds sold or refunded. GO 53 EQ CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS i• LONG-TERM DEBT (CONTINUED) The annual requirements to amortize all outstanding debt of the City as of September 30, 2000, including interest payments of $118,563,000 are as follows. Revenue Fiscal General (Electric, Year Obligation BRA) Total 2000-01 $ 23,361,135 $ 9,485,948 $ 32,847,083 2001-02 21,269,343 9,185,073 30,454,416 2002-03 . 19,715,018 8,562,329 28,277,347 2003-04 17,639,157 8,352,548 25,991,705 2004-05 17,103,169 7,693,423 24,796,592 2005-06 16,569,725 7,517,168 24,086,893 2006-07 16,044,209 7,373,833 23,418,042 2007-08 14,922,566 6,903,455 21,826,021 2008-09 14,038,527 5,998,220 20,036,747 2009-10 13,109,184 5,932,245 19,041,429 2010-11 12,696,406 5,882,728 18,579,134 2011-12 11,109,032 5,484,955 16,593,987 2012-13 10,744,847 5,457,010 16,201,857 2013-14 10,409,296 59435,100 15,844,396 2014-15 7,138,281 5,413,400 12,551,681 2015-16 6,019,558 5,386,360 11,405,918 2016-17 5,071,059 5,366,225 10,437,284 2017-18 4,968,444 5,339,650 10,308,094 2018-19 4,366,833 4,866,800 9,233,633 2019-20 2,638,103 2,960,850 5,598,953 2020-21 - 2,964,550 2,9649550 Total $248,933,892 $131,561,870 $ 380,495,762 " This schedule does not include the effect of premiums or discounts. The City has complied in all material respects with the bond covenants as outlined in each issue's indenture. 54 CITY OF LUBBOCIZ, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS T. LONG-TERM DEBT (CONTITNUU :D e*1 Long-term debt transactions for governmental and proprietary funds for the year ended September 30, 2000 are as follows: Debt Payable Debt Payable Governmental: 10-1-99 Additions Deletions 9-30-00 Tax -Supported Obligation Bonds $ 45,842,977 S 7,000,000 $ 4,462,631 $ 48,380,346 Rebatable arbitrage 301,269 301,269 Compensated Absences 11,091,685 - 11,638 11,080,047 Total Governmental 57,235,931 7,000,000 4,474,269 59,761,662 Proprietary: Self -Supported Obligation Bonds 118,947,070 24,800,000 8,218,969 135,528,101 Revenue Bonds 82,751,396 - 5,304,782 77,446,614 Compensated Absences 3,551,988 234,050 59,943 3,726,095 Total Proprietary 205,250,454 25,034,050 13,583,694 216,700,810 Total City -Wide: Obligation Bonds 164,790,047 31,800,000 12,681,6D0 183,908,447 *"* Revenue Bonds 82,751,396 - 5,304,782 77,446,614 Rebatable arbitrage 301,269 - - 301,269 Compensated Absences 14,643,673 234,050 71,581 14,806,142 Total City -Wide $$ 262,4�86,385 $ 32,0� $ 18,053,153 $ 276,462,472 The total long-term debt is reconciled to the total annual requirements to amortize long-term debt as follows: Long -Term Debt $276,462,472 Interest 118,563,000 Total amount of debt $395,025,472 Add: Discounts and deferred losses 577,701 Rebatable arbitrage (301,269) Less: Compensated Absences (14,806,142) (14,529,710) Total future debt requirements $380� 495,762 The City Council called an election for September 18,1999 to seek voter approval to issue general purpose sax -supported bonds in the amount of $37,385,000, which represents the City's current five year general purpose debt plan. The following four propositions were approved by the voters: parks, $14,765,000; city-wide drainage projects, $2,160,000; city-wide street projects, $17,165,000; and traffic signal systems, $3,295,000. The City has not submitted a capital improvement plan to voters since 1993, when voters in the City approved a $28,690,000 capital improvement plan. In March 2000, the City issued $7,000,000 General Obligation Bonds, Series 2000.. This issuance was the first installment of the capital improvement debt issuance approved by the voters in 1999. The proceeds from the sale of the Obligations will be used to fund projects in the following areas: Parks ($3,245,000), Streets ($2,390,000), Drainage ($1,025,000) and Traffic Control ($340,000). 55 ki CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. ADVANCED DEFEASEMENT In fiscal year 1994, the City defeased $3,600,000 of the 1992 Tax and Waterworks Certificates of Obligation. Available funds were used to purchase United States Treasury Securities, which were placed in an irrevocable trust to be used solely to defease the above indicated bond issue. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $2,400,000 of bonds outstanding are considered defeased. In fiscal year 1995, the City defeased $385,000 General Obligation Refunding Bonds, Series 1993. The $385,000 Series 1993 bonds were the portion of $9,865,000 General Obligation Refunding Bonds allocated to the Municipal Golf Course. Available funds were used to purchase United States Treasury Securities, which were placed in a sinking fund for the Series 1993 Bonds to defease these obligations. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $260,000 of bonds outstanding are considered defeased. In fiscal year 1995, the Brazos River Authority defeased certain revenue bonds, on behalf of the city of Lubbock. A portion of the proceeds of the Series 1995 refunding Bonds was used to purchase United States Treasury Securities -State and Local Government Series which were placed in an irrevocable trust to be used solely to refund Series 1989 Brazos River Authority Revenue Bond payments due August 15, 1995 through August 15, 2019 and the Series 1991 Brazos River Authority Revenue Bond payments due August 15, 1996 through August 15, 2021. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $34,620,000 of bonds outstanding are considered defeased. In fiscal year 1997, the City defeased certain General Obligation Bonds. A portion of the proceeds of the Series 1997 Refunding Bonds was used to purchase United States Treasury Securities - State and local Government Series which were placed in an irrevocable trust to be used solely to partially refund the portion of the. Series 1987 General Obligation Bonds payments due February 15, 2005 �- through February 15, 2007, which were called on February 15, 1997 and paid off, the portion of the Series 1989 General Obligation Bonds payments due February 15, 2000 through February 15, 2009, which were called on February 15, 1999 and paid off, the portion of the Series 1989 Certificates of Obligation Bonds payments due February 15, 2000 through February 15, 2009, which were called on February 15, 1999, the portion of the Series 1991 General Obligation Bond payments due February 15, 2003 through February 15, 2009, the portion of the Series 1991 Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation payments due February 15, 2003 through February 15, 2009, the portion of the Series 1991 Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue Certificates of Obligation payments due February 15, 2003 through 2009 and the portion of the Series 1992 General Obligation Refunding Bonds payments due February 15, 2001 through February 15, 2003, which were called on February 15, 1999 and paid off. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $7,765,000 of bonds outstanding are considered defeased. In fiscal year 1999, the City defeased certain General Obligation Bonds. A portion of the proceeds of the Series 1999 General Obligation Refunding Bonds were used to purchase United States Treasury Securities -State and Local Government Series, which were placed in an irrevocable trust to be used solely to partially refund the portion of the Series 1991 Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue Certificates of Obligation payments due February 15, 2002, 2010 and 2011; the Series 1991 Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation payments due February 15, 2002, 2010 and 2011; the Series 1991 General Obligation Bond payments due February 15, 2002, 2010 and 2011; the Series 1991 56 no CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. ADVANCED DEFEASEMENT (CONTINUED Combination Tax and Sewer System Subordinate Lien Revenue Certificate of Obligation payments due February 15, 2003 through 2012; and the Series 1992 Combination Tax and Sewer Subordinate Lien Revenue Certificates of Obligation payments due February 15, 2006 through 2014. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $19,730,000 of bonds outstanding are considered defeased. In fiscal year 1999, the City defeased certain revenue bonds. A portion of the proceeds of the Series 1999 Electric Light and Power System Revenue Refunding and Improvement Bonds were used to purchase United States Treasury Securities, which were placed in an irrevocable trust to be used solely to partially refund the portion of the Series 1991 Electric Light and Power System Revenue Bond payments due April 15, 2002 through 2011; and the Series 1991-B Electric Light and Power System Revenue Refunding Bond payments due April 15, 2001 through 2004 which were called on April 15, 2000 and paid off. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 2000, $3,750,000 of bonds outstanding are considered defeased. L. ACCRUED INSURANCE CLAIMS As discussed in Note I.G., the Risk Management Fund establishes a liability for self-insurance for both reported and unreported insured events, which includes estimates of both future payments of losses and related claim adjustment expenses. The following represents changes in those aggregate liabilities for the Insurance Funds during the past two years ended September 30: 2000 1999 Worker's Compensation and Liability Reserves at beginning of fiscal year $ 3,734,341 $ 3,734,341 Claims expenses 2,763,142 3,872,919 Claims payments (2,763,143) (3,872,919) Worker's Compensation and liability reserves at end of fiscal year 3,734,340 3,734,341 Medical and Dental Claims Liability at end of fiscal year * 3,441,879 2,823,267 Total Self -Insurance Liability at end of fiscal year $ 7,176,219 $ 6,557,608 Total Assets to pay claims at end of fiscal year $ 16,841,919 $ 14,514,232 Accrued 'insurance claims payable from restricted assets -current $ 4,372,861 $ 3,754,250 Accrued insurance claims -non -current 2,803,358 2,803,358 Total accrued insurance claims $ 7,176,219 $ 6,557,608 * The information necessary to prepare the separate disclosures for medical and dental claims liabilities is unavailable. M. LANDFILL CLOSURE AND POSTCLOSURE CARE COST State and federal laws and regulations require the City to place a final cover on its landfill sites when it stops accepting waste to perform certain maintenance and monitoring functions at the 57 ria CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS M. LANDFILL CLOSURE AND POSTCLOSURE CARE COST (CONTINUED) sites for thirty years after closure. Although closure and postclosure care costs will be paid only near or after the date that the landfill stops accepting 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 $5,918,343 reported as landfill closure and postclosure care liability at September 30, 2000, represents the cumulative amount expensed by the City to date of $8,521,170 less amount paid for closure of certain cells based on the use of over 90 percent of the estimated capacity of the landfill registered under TNRCC permit number 69. This amount includes a reduction of cumulative expense of $464,816 due to a change in estimate of cumulative capacity used at September 30, 2000. The City will.recognize the remaining estimated cost of closure and postclosure care of $799,904 as the remaining estimated capacity is filled. These amounts are based on what it would cost to perform all closure and postclosure care in 2000. The City expects to close the landfill in the year 2001. Actual cost may be higher due to inflation, changes in technology, or changes in regulations. The City has a second landfill (TNRCC 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 $21,800,000, of which approximately $57,000 was recognized in fiscal 2000. The City expects this landfill to have a life in excess of 80 years based on current estimates of use. Actual cost may be higher due to inflation, changes in technology, or changes in regulations. The City is required by state and federal laws and regulations to provide assurance that financial resources will be available to provide for closure, postclosure care, and remediation or containment of environmental hazards at its landfill. The City is in compliance with these requirements and has chosen the Local Government Financial Test mechanism for providing this assurance. The City expects to finance costs through normal operations. NOTE IV. CONTINGENT LIABILITIES A. FEDERAL GRANTS In the normal course of operations, the City receives grant funds from various Federal and state agencies. The grant programs are subject to audits by agents of the granting authority to ensure compliance with conditions precedent to the granting of funds. Any liability for reimbursement which may arise as the result of audits of grants is not believed to be material. B. LITIGATION The City is involved in lawsuits arising in the normal course of business, including claims for property damage, personal injury and personnel practices, disputes over contract awards and property condemnation proceedings, suits contesting the legality of certain taxes and public safety practices. In the opinion of management, the ultimate outcome of these lawsuits will not have a materially adverse effect on the City's financial position as of September 30, 2000. 58 FWQ CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2000 NOTE IV. CONTINGENT LIABILITIES C. SITE REMEDIATION �., The City has identified specific locations requiring site remediation relative to underground fuel Storage tanks. The potential exposure is not readily determinable as of September 30, 2000. In the opinion of management, the ultimate liability will not have a materially adverse effect on the City's financial position. D. WEST TEXAS MUNICIPAL POWER AUTHORITY In fiscal 1998, the West Texas Municipal Power Authority CWTMPA") issued $28,910,000 of WTMPA Revenue Bonds, Series 1998 maturing in February of 2018. These bonds are secured by the net revenues of certain power sales contracts with participating cities of which the City of Lubbock is one. In the event the net revenues of the power sales contracts are not sufficient to cover the debt service of the bonds, the participating cities are required under a debt service guarantee provision of the agreement, to provide funds sufficient to cover any debt service deficit to the extent of their respective participation percentages. The City's percentage share in this agreement is 85.21%. During the year ended September 30, 2000, the City was not required to pay amounts under this provision. At September 30, 2000, the City had accounts receivable of approximately $3.1 million from WTMPA. NOTE V. RECENTLY ISSUED PRONOUNCEMENTS v1 At September 30, 2000, the GASB had issued several statements that have not require implementation by the City of Lubbock. The statement that may impact the City is as follows: GASB Statement No. 36, "Recipient Reporting for Certain Shared Non -exchange Revenues — an amendment of GASB Statement No. 33", issued April 2000, will be effective simultaneously with Statement No. 33. Statement No. 36 eliminates a timing difference by requiring recipient �,. governments to account for the sharing of revenues in the same manner as provider governments. Management does not anticipate any significant adverse effects on the City's financial position or results of operations as a result of the implementation of this Statement. 0 0 59 l t Y G �y \ A �� 11 60 Ga A-, APPENDIX C FORM OF BOND COUNSEL'S OPINIONS Go W sue, Go Ea TEAS PAGE INTENTIONALLY LEFT BLANK Io 5a FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 ROSS AVENUE, SUITE 2800 DALLAS, TEXAS 75201-2784 TELEPHONE: 214/855-8000 FACSIMILE: 214/855-8200 HOUSTON WASHINGTON, D.C. AUSTI N SAN ANTONIO DALLAS NEW YORK LOS ANGELES M I N N EAPOLIS LONDON HONG KONG IN REGARD to the authorization and issuance of the "City of Lubbock, Texas, General Obligation Bonds, Series 2001" (the "Bonds"), dated February 1, 2001 (the "Bond Date"), in the principal amount of $9,100,000, we have examined into the legality and validity of the issuance thereof by the City of Lubbock, Texas (the "City"), which Bonds are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a maturity) and have stated maturities of February 15 in each of the years 2002 through 2021, unless redeemed prior to maturity in accordance with applicable redemption provisions. The Bonds bear interest on the unpaid principal amount from the Bond Date at the rates per annum stated in the ordinance authorizing their issuance (the "Ordinance"), and such interest is payable on February 15 and August 15 in each year, commencing February 15, 2002, to the registered owners shown on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Bonds). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Bonds under the Constitution and laws of the State of Texas, and with respect to the exclusion of the interest on the Bonds from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City. Our examinations into the legality and validity of the Bonds included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the City relating to the authorization and issuance of the Bonds, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Bond executed and delivered initially by the City, which we found to be in due form and properly executed. 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 Bonds have been duly authorized by the City, and the Bonds issued in compliance with the provisions of the Ordinance are valid, legally binding and enforceable obligations of the City, payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City; except to the extent that 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. Assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and certifications 792031 w+e Page 2 of legal opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, General Obligation Bonds, Series 2001 ", dated February 1, 2001 of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Bonds, interest on the Bonds for federal income tax purposes (a) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), of the owners thereof pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions thereunder, and (b) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Bonds, owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust or a financial asset securitization investment trust. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the section 55 of the Code will be computed. WE EXPRESS NO 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 Bonds. Ownership of tax-exempt obligations such as the Bonds 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, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a financial asset securitization investment trust 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. EHE:dfc 792031 F" GO Q2 W rJ FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 ROBS AVENUE, SUITE 2800 DALLAS, TEXAS 75201-2784 TELEPHONE: 214/855-8000 FACSIMILE: 2 14/855-8200 HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG IN REGARD to the authorization and issuance of the "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001" (the "Certificates"), dated February 1, 2001 (the "Certificate Date"), in the principal amount of $2,770,000, we have examined into the legality and validity of the issuance thereof by the City of Lubbock, Texas (the "City"), which Certificates are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a maturity), mature annually on February 15 in each of the years 2002 through 2021, unless redeemed prior to maturity in accordance with the redemption provisions stated on the Certificates, and bear interest on the unpaid principal amount from the Certificate Date at the rates per annum stated in the ordinance authorizing the issuance of the Certificates (the "Ordinance"), such interest being payable on February 15 and August 15 in each year, commencing February 15, 2002, to the registered owners shown on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Certificates). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Certificates under the Constitution and laws of the State of Texas, and with respect to the exclusion of the interest on the Certificates from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City. Our examinations into the legality and validity of the Certificates included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the City relating to the authorization and issuance of the Certificates, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Certificate executed and delivered initially by the City, which we found to be it due form and properly executed. 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 Solid Waste System in the manner and to the extent provided in the Ordinance; except to the extent that 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. 887490A Page 2 of legal opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001", dated February 1, 2001 2. Assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and certifications of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Certificates, interest on the Certificates for federal income tax purposes (a) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), of the owners thereof pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions thereunder, and (b) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporations, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust, or a financial asset securitization investment trust (FASIT). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax Imposed by Section 55 of the Code will be computed. WE EXPRESS NO 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 interest in a FASIT, 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. EHE:dfc 887490.1 IR rmo No w wid Financial Advisory Services Provided By FIRST I SOUTHWEST COMPANY INVESTMENT BANKERS ECA,0i:117_1_#Z i1W THE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § WE, the undersigned, Managing Director of Finance and City Secretary, respectively, of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. Relative to Nonencumbrance. Save and except for the pledge of the income and revenues of the City's Solid Waste Disposal System (the "System") to the payment of the principal of and interest to become due with respect to the outstanding "City of Lubbock, Texas, Tax and Solid Waste Disposal System Revenue Certificates of Obligation, Series 1991", dated May 15, 1991, now outstanding in the principal amount of $110,000 (the"Outstanding Obligations") and the proposed $2,770,000 "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 ", dated February 1, 2001 (the "Certificates")," said income and revenues of said System have not been pledged or hypothecated in any other manner or for any other purpose; and that the Outstanding Obligations and the Certificates evidence the only liens, encumbrances or indebtedness of said System or against the income and revenues of such System. 2. Relative to No -Default. The City is not now in default as to any covenant, condition or obligation contained in the ordinance authorizing the issuance of the Outstanding Obligations; and there is currently on deposit in the special fund created for the payment of the Outstanding Obligations in the amount now required to be deposited therein. 3. Relative to Income and Revenues. A schedule of the gross receipts, operating expenses and net revenues of the System is as follows: Fiscal Year Gross Operating Net Ending 9/30 Receipts Expenses Revenues 1996 $17,613,491 $9,787,492 $7,825,999 1997 $17,616,197 $9,647,842 $7,968,355 1998 $17,566,130 $9,576,950 $7,989,180 1999 $17,027,161 $9,348,841 $7,678,320 2000 $17,077,244 $9,068,928 $8,008,316 889172.1 ro 4. Relative to Utility Properties. The City currently collects, or provides for the collection of, solid wastes from approximately 58,888 residential customers and 3,183 commercial customers. The City currently owns and operates its own solid waste equipment and landfill and as of the date hereof, no question is pending and no proceedings of any nature have been instituted in any manner challenging the City's authority to regulate, collect and dispose of solid wastes, and in connection with the collection and disposal of such solid wastes and to the extent required by law, the City is duly licensed and permitted by the appropriate state regulatory agencies. 5. Relative to Rates and Charges. The current monthly rates and charges for services provided by the System are as shown in Exhibit A attached hereto and incorporated herein by reference as a part hereof for all purposes. 6. Relative to Tax Supported Indebtedness. The total principal amount of indebtedness of the City, including the proposed "City of Lubbock, Texas, General Obligation Bonds, Series 2001," dated February 1, 2001 (the "Bonds'_ and the Certificates, payable from ad valorem taxes levied and collected by the City is as follows: OUTSTANDING INDEBTEDNESS -------- —_--------_______ $ 176,847,762 THE BONDS_______9,100,000 THE CERTIFICATES 2,770,000 TOTAL INDEBTEDNESS ----------- ---- --- ------ __------------ __------ $ 188,717,762 7. Relative to Debt Service Schedule. A debt service requirement schedule for all outstanding tax debt of the City, including the Bonds and Certificates, is attached hereto as Exhibit B and made a part of this certificate for all purposes. 889172 8. Relative to City Officials. Certain duly qualified and acting officers of said City are as follows: -2- WINDY SITTON ALEX "TY" COOKE BOB CASS DEBRA B. FORTE PERRY STOUT REBECCA GARZA ANITA BURGESS *effective February 12, 2001. 9. Relative to Taxable Values MAYOR MAYOR PRO TEM CITY MANAGER DEPUTY CITY MANAGER INTERIM MANAGING DIRECTOR OF FINANCE CITY SECRETARY CITY ATTORNEY The assessed value of all taxable property (net of exemptions) in the City, as shown by the tax rolls for the year 2000, 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 AND PERSONAL PROPERTY --------------------------------------------------- $ 6,638,779,668 10. Relative to Incorporation. 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 amended 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, signed by at least 5% of the qualified electors of the City, has been filed with or presented to the Mayor, City Secretary or any other official of the City protesting the issuance of the Certificates. 12. Relative to No Free Services. 00� No free services of the System shall be allowed, and should the City or any of its agents or instrumentalities make use of the services and facilities of the System, payment of the reasonable value thereof shall be made by the City out of funds from sources other than the revenues and income of the System. 889172 -3- WITNESS OUR HANDS AND THE SEAL OF THE CITY OF LUBBOCK, TEXAS, this the 81h day of February, 2001. CITY OF LUBBOCK, TEXAS Perry Stout Interim Mana �iig Director of Finance Rebecca Garza City Secretary (City Seal) 1 _. 889172 or_- Exhibit A TABLE 16 - NIO`THLY SOLID WASTE RATES Summarized below are the current solid haste rates of the City The Cin has not increased Solid .paste rates The Cin. decreased the residential and commercial garbage rates b% lOc in 1998. Residential Garbage Rate (Effective 10-1-98 ) Monthly Rate S 11.18 Commercial Garbage Rate i Effective 10-1-98) Container Size !Monthly Rate 2 cubic yards S 33.58 3 cubic vards S 50.87 ; - - 4 cubic yards S 68.16 6 cubic yards S 99.74 8 cubic yards S 131.32 Landfill Fees (Effective 10-1-95) Waste Generated Inside the City Limits S 25.00 Waste Generated Outside the City Limits S 27.00 �O Yt Q .O m O: O �O O �O M � 0, P m N � m C H L E P - h V - - O T N O r Q N Q T M M h r p P N m M Y O N 00 P. P N O Q M M M N T rl h P � - � — � — E � � O m M Q M M Q h h O N H � �O P P "Qf tn�1 Vt T N rM+t M 000 M �D � M `O ar0 ry M H Fes. (J U LF H QQ 0 0 0 0 0 0 0 0 0 � 0 0 0 0 P1 Q � Q Q Q Q M M M M M E � m F N r N r N r N r N r i; N r N r N r N r N r it N r N r N r N n N r N r N N n r pCCC Ls. � H 7 N Q m m m M M e+1 N N N N C a H m O eV Vl vNl e O e$ N v+ O Qopo ONE ay a O M N N O O N oQo O M Q OT m h Q M M ao It N r O v oo O A � - — j H S g 8 g g g g g S S 8 S g g g g H1 r N N N N N �O N m m r r po P O M Q — "i Q C6 M pH p p yp p Epp p pp, O O N N N O N O N O N O N O N O N O N O N O N O N N N 71 fA r. ail L :J V: O :J — N In Elm .•a M 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 SOLID WASTE SYSTEM ^* SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001", dated February 1, 2001 (the "Certificate Date"), in the aggregate principal amount of $2,770,000 (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 Solid Waste Disposal 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. 889074.1 E2 .Ohl m DELIVERED this OFFICIAL TITLE Mayor, City of Lubbock, Texas City Secretary, City of Lubbock, Texas (Issuer's Seal) THE STATE OF TEXAS § COUNTY OF LUBBOCK § The undersigned, a Notary Public, hereby represents and certifies each of the signatures of Windy Sitton and Rebecca Garza, Mayor and City Secretary, respectively, of the City qf: Lubbock, Texas, appearing above is genuine. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ji! day of , 2001. e#1F,T AY PUSL1C �' , +„ 3 nary * FJFE OFT. y r i rxn 889074 Z ZZ /ZZ: � 6X - Notary Public, Stat f Texas 2 Q OFFICE OF THE ATTORNEY GENERAL STATE OF TEXAS JOHN CORNYN March 9, 2001 THIS IS TO CERTIFY that the City of Lubbock, Texas (the "Issuer"), has submitted to me City of Lubbock Texas Tax and Solid Waste System Surplus Revenue Certificate of Obligation Series 2001 (the "Certificate") in the principal amount of $2,770,000 for approval. The Certificate is dated February 1, 2001, numbered T-1, and was authorized by Ordinance No. 2001-00002 of the Issuer passed on February 8, 2001 (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 annual ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the Issuer, and is additionally payable from and secured by a lien on and pledge of the Net Revenues of the Issuer's Solid Waste 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. Therefore, the Certificate is approved. Attorney General of the State of exas `No. 36136 B6ok No. 2001-A spc POST OFFICE BOX 12548, AUSTIN, TEXAS 78711-2548 TEL: (512)463-2100 WEB: WWW. OAG. STATE. 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 Solid Waste System Surplus Revenue Certificate of Obligation, Series 2001 numbered T-1, of the denomination of $ 2,770.000, dated February 1, 2001, 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 9th day of March. 2001, under Registration Number 63931. Given under my hand and seal of office, at Austin, Texas, the 9th day of March. 2001. CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas O OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora, n Bond Clerk 0 Assistant Bond Clerk in the office of the Comptroller of the State e*� of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 9th day of March. 2001, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: City of Lubbock. Texas Tax and Solid Waste System Surplus Revenue Certificate of Obli_ ation Series 2001, numbered T-1 dated February 1. 2001, and that in signing the certificate of registration I used the following signature: IN WITNESS WHEREOF I have executed this certificate this the 91h day of March, 2001. 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 63931. GIVEN under my hand and seal of office at Austin, Texas, this the 9th day of March 2001. 1Y� CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas Vince V'iaille Vice Prendent City of Lubbock s� Ms. Debra Forte P. 0. Box 2000 Lubbock, Texas 79457 Phone: (806) 775-2002 Fax: (806) 775-2051 City of Lubbock Mr. 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 FIRST SOUTHWEST COMPAM' March 7, 2001 Morgan Keegan & Co., Inc. Mr. Ted White 5956 Sherry Lane, Suite 1900 Dallas, Texas 75225 Phone: (214) 692-9866 Fax: (214) 692-1851 U.S. Trust Company of Texas, N.A. Ms. Pat Blue 2001 Ross Avenue, Suite 2700 Dallas, Texas 75201 Phone: (214) 754-1259 Fax: (214) 754-1303 American State Bank Ms. Shirley Dodson P. 0. Box 1401 Lubbock, Texas 79408-1401 Phone: (806) 767-7182 Fax: (806) 763-8269 Re: Closing Instructions for the $2,770,000 City of Lubbock, Texas, Tax & Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (the "Certificates") Payment for the above referenced Certificates is scheduled to occur at 10:00 AM, CST, on Thursday, March 15, 2001, and payment therefor is to occur at the offices of U.S. Trust Company of Texas, N.A. ("U.S. Trust"). SOURCES OF FUNDS Par Amount of Certificates ....................... $ ........................... 2,770,000.00 Net Reoffering Premium ........................................... ........... 19,126.80 Accrued Interest (02/01/01 to 03/15/01).............................. 15 820.60 Less: Underwriters Discount ................................. .............. (22,846.60) Less: Original Issue Discount.............................................(21,157.75) TOTAL FUNDS AVAILABLE AT CLOSING ..................... $ 2,760,943.05 INVESTMENT BANKERS SINCE 1946 opl' 1001 Main Street - Suite 802 - Lubbock, Texas 79401-3322 - 806-749-3792 - Fax 806-749-3793 - Mobile 806-777-1347 USES OF FUNDS Deposit to Project Construction Fund .................................. $ 2,690,000.00 Deposit to Project Construction Fund (rounding amount)... 4,622.45 Deposit to Interest & Sinking Fund (accrued interest) ........ 15,820.60 Paying Agent/Registrar Fee ................................................. 500.00 Costs of Issuance.................................................................. 50,000.00 TOTAL USES OF FUNDS .................................................... $ 2,760,943.05 (A) On Thursday, March 15, 2001, the Underwriters, represented by Morgan Keegan & Co., Inc. shall wire $2,760,943.05 in immediately available funds to the paying agent bank, U.S. Trust, prior to 10:00 AM, CST, for the account of the City of Lubbock, in payment for the purchase price of the Certificates. Wiring Instructions for U.S. Trust are as follows: Chase NYC ABA 9021000021 ., Credit: U.S. Trust Co. NY Acct. #9201073195 Further Credit: City of Lubbock, CO Series 2001 Account #76510100, Attn: Pat Blue (B) On Thursday, March 15, 2001, U.S. Trust shall wire or transfer immediately available funds prior to 11:00 AM, CST, as follows: (1) 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 ...................... $ 2,710,443.05 (Project Construction Funds $2,694,622.45 and I&S Funds $15,820.60) (2) Retain in payment of services to be rendered as Paying Agent/Registrar (3) Transmit by wire to Bank One, Texas ABA # 111000614, Attn: Jack Addams Account #1822155345 for client # 033616 for credit to First Southwest Company for costs of issuance ................ 500.00 50.000.00 Total Disbursement of Funds............................................................................... $ 2,760,943.05 r 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, Vince Viaille cc: Jack Addams First Southwest Company cZ CERTIFICATE AS TO TAX EXEMPTION The undersigned, being the duly chosen and qualified Managing Director of Finance of the City of Lubbock, Texas (the "Issuer"), hereby certifies with respect to "City of Lubbock, Texas, General Obligation Bonds, Series 2001", dated February 1, 2001, in the principal amount of $9,100,000 (the "Bonds") and "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001", dated February 1, 2001, in the principal amount of $2,770,000 (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 (collectively, 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 issued 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. B. Purpose and Size. _1. The Bonds are being issued pursuant to an ordinance of the Issuer, finally adopted by the City Council of the Issuer on February 8, 2001 (hereinafter referred to as the "Bond Ordinance") to finance the costs of (i) street improvements, including drainage, cubs, gutters, landscaping, sidewalks, curb ramps and utility line relocation and the acquisition of land and right-of-way therefor, (ii) traffic signalization and assorted communications equipment and (iii) acquiring or improving, or both, land for park purposes (collectively, the 'Bond Projects"), and to pay costs of issuance. 2. The Certificates are being issued pursuant to an ordinance of the Issuer, finally adopted by the City Council of the Issuer on February 8, 2001 (hereinafter referred to as the "Certificate Ordinance") to finance the costs of closing a municipal landfill (the "Certificate Project"), and to pay costs of issuance. 3. Terms used and not defined herein have the same meaning given to them in the respective ordinances. 4. The Bond Projects and the Certificate Project (collectively, 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 any of the Projects or any part thereof for and on behalf of the Issuer. The Issuer does not expect to enter into any contract for the operation, maintenance or management of any of the Projects or any part thereof. 5. 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 3189104.2 Go governmental unit pursuant to which the Issuer expects that proceeds of the Obligations, 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). 6. The amounts received from the sale of the Obligations, when added to the amounts expected to be received from the investment thereof, do not exceed the amounts required to pay the costs of the Projects and of issuing the Obligations. !^ 7. No receipt from the sale of the Obligations 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 Obligations. C. Source and Disbursement of Funds. 1. The Obligations are being issued and delivered to the underwriters (the "Purchaser") 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 $11,847,215.22 calculated as follows: Principal Amount of the Bonds......................................$9,100,000.00 Principal Amount of the Certificates..............................$2,770,000.00 Accrued Interest on the Bonds...........................................$52,767.92 Accrued Interest on the Certificates...................................$15,820.60 Reoffering Premium on the Bonds.....................................$60,268.30 Reoffering Premium on the Certificates ....................... $19,126.80 Original Issue Discount on the Bonds................................$63,055.60 Original Issue Discount on the Certificates .........................$21,157.75 Underwriters' Discount on the Bonds.................................$63,708.45 Underwriters' Discount on the Certificates..........................$22,846.60 TOTAL: ........................................................................ $11,847,215.22 3. The Issuer has caused the deposit or disbursement of such amount as follows: Disposition Amount Deposited accrued interest on the Bonds to the $ 52,767.92 Interest and Sinking Fund Deposited accrued interest on the Certificates $ 15,820.60 to the Certificate Fund Deposited to the Bond Construction Fund $8,944,754.25 Deposited to the Certificate Construction Fund $2,694,622.45 Disbursed to pay Costs of Issuance $ 139,250.00 $11,847,215.22 4. Proceeds of the Bonds in the amount of $52,767.92 representing accrued interest received from the Purchaser are being deposited on the date hereof in the 3189104.2 FM Interest and Sinking Fund to be used to pay the first payment of interest to become due on the Bonds on February 15, 2002. Proceeds of the Certificates in the amount of $15,820.60 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, 2002. 5. Separate construction fund for each series of Obligations will be maintained on the books and records of the Issuer and will be accounted for separately "* from all other funds of the Issuer on the books of account of the Issuer, and will be used to pay costs of the Projects the Obligations were issued and sold. 6. The Issuer estimates that in income and profit in the aggregate amount of $285,000.00 will be received from the investment of the amounts deposited to the Bond Construction Fund pending the disbursement of such amounts for the governmental purposes the Bonds are being issued. All of such income and profit will be used to pay any cost overruns on the Bond Projects or if there are none, deposited to the Interest and Sinking Fund and used to pay principal of and interest on the Interest and Sinking Fund within one year of receipt. 7. The Issuer estimates that in income and profit in the aggregate amount of $85,000.00 will be received from the investment of the amounts deposited to the Certificate Construction Fund pending the disbursement of such amounts for the governmental purposes the Certificates are being issued. All of such income and profit will be used to pay any cost overruns on the Certificate Projects or if there are none, deposited to the Certificate Fund and used to pay principal of and interest on the A^s Certificates within one year of receipt. D. Temporary Periods and Time for Expenditures. 1. 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 Obligations. 2. After entering into said contracts, completion of the Projects and the allocation of net sales proceeds of the Obligations to expenditures will proceed with due diligence. 3. The Issuer expects that all of the net sales proceeds of the Obligations will be spent within three years from the date hereof, and that all investment proceeds of the Obligations will be spent within one year from the date of receipt. 4. Approximately $236,224.00 of the proceeds of the Obligations 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 (except possibly for expenditures meeting the preliminary expenditures exception set forth in section 1. 1 50-2(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 Obligations 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 3189104.2 e*, '3' 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. E. Interest and Sinking Fund for the Bonds. 1. Pursuant to the Bond Ordinance, the Issuer has levied a tax on all taxable property in the Issuer to pay principal of and interest on the Bonds as such become due, and such tax has been pledged to the payment of the Bonds. Amounts collected from such tax for the payment of the principal of and interest on the Bonds are to be deposited to the credit of the Interest and Sinking Fund maintained on the books of the Issuer. 2. The Interest and Sinking Fund will be maintained by the Issuer primarily to achieve a proper matching of revenues and debt service payments within each bond year. The Issuer expects that the following will occur with respect to the money in the Interest and Sinking Fund: a. Such fund will be depleted at least once each bond year, except possibly for a carryover amount not to exceed the greater of the previous bond year's earnings on the Interest and Sinking Fund or one -twelfth of the previous bond year's debt service requirements on the Bonds; b. All amounts deposited to such fund to pay debt service on the Bonds will be spent within 13 months of deposit; and C. All amounts received from the investment of such fund will be deposited therein and will be expended within twelve months of receipt. 3. Except as described above, no funds of the Issuer have been or will be pledged to payment of the principal of or interest on the Bonds or otherwise restricted so as to give reasonable assurance of the availability of such funds for such purpose. F. Certificate Fund and System Fund. 1. Pursuant to the Certificate Ordinance, the Issuer has levied a tax on all taxable property in the Issuer to pay principal of and interest on the Certificates as such become due, and such tax has been pledged to the payment of the Certificates. Amounts collected from such tax for the payment of the principal of and interest on the Certificates are to be deposited to the credit of the Certificate Fund maintained on the books of the Issuer. 2. The Certificate Ordinance requires that all revenues received by the Issuer by reason of its ownership and operation of the System shall be deposited as received in the System, to be disbursed in the following order of priority: a. for payment of Maintenance and Operation expenses of the System; 3189104.2 4 0 b. for payment into the special funds and accounts created and established for the payment, and benefit of any Prior Lien Obligations; c. for payment of the Certificates; d. for use by the Issuer for any other purpose of the Issuer now or hereafter permitted by law. 3. The Certificate Fund will be maintained by the Issuer primarily to achieve a proper matching of revenues and debt service payments within each bond year. The Issuer expects that the following will occur with respect to the money in said Certificate Fund: „k a. Such fund will be depleted at least once each bond year, except possibly for a carryover amount not to exceed the greater of the previous bond year's earnings on such Certificate Fund or one -twelfth of the previous bond year's debt service requirements on the Certificate; b. All amounts deposited to such fund to pay debt service on the Certificates will be spent within 13 months of deposit; and C. All amounts received from the investment of such fund will be deposited therein and will be expended within twelve months of receipt. 4. Except as described above, no funds of the Issuer have been or will be pledged to payment of the principal of or interest on the Certificates or otherwise restricted so as to give reasonable assurance of the availability of such funds for such purpose. G. Yield and Nonpurpose Investments. 1. The discount factor required to reduce the principal and interest to be paid on the Obligations to a present value on the date hereof, compounding semiannually, equal to the initial offering prices at which a substantial amount of each maturity of the Obligations was sold to the public, is 4.7942336%. In determining the initial offering price at which a substantial amount of each maturity of the Obligations was sold to the public, the Issuer has relied on certificates from the managing underwriter that purchased the Obligations. 2. No other obligations of the Issuer which are reasonably expected to be paid from substantially the same source of funds as the Obligations were sold within 15 days from the date the Obligations were sold. 3. 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. 3189104.2 -5- O H. No Abusive Arbitrage 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. EXECUTED AND DELIVERED MAR 15 2001 CITY OF LUBBOCK, TEXAS 889104.1 AA� Interim Managing Director of Finance *"*1 -6- n,. CLOSING CERTIFICATE THE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § WE, the undersigned, Mayor and City Manager, respectively, of the City of Lubbock, Texas (the "City"), in conformity with the requirements of the Purchase Contract, dated February 8, 2001 (the "Purchase Contract"), by and between the City and Morgan Keegan & Company, Inc. and Samco Capital Markets (collectively, the "Underwriters"), DO HEREBY CERTIFY, in relation to the issuance and delivery of the "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001", dated February 1, 2001 (the "Certificates") and the Official Statement, dated February 8, 2001 (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; 889077.1 (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 Solid Waste 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, 2000 the latest date as to which audited financial information is available. -1- r �j TO CERTIFY WHICH, witness our hands and the seal of the City of Lubbock, Texas, this March 15, 2001. CITY OF LUBBOCK, TEXAS r v Mayor City Manager (City Seal) 889077.1 -2- 2 RECEIPT FOR PAYMENT THE STATE OF TEXAS COUNTY OF DALLAS On the date hereof the following described certificates of obligation: "CITY OF LUBBOCK, TEXAS, TAX AND SOLID WASTE SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001", dated February 1, 2001, in the aggregate principal amount of $2,770,000 (the "Certificates") were delivered to the purchaser(s) thereof, namely: MORGAN KEEGAN & COMPANY, INC. AND SAMCO CAPITAL MARKETS 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 $2,770,000.00 REOFFERING PREMIUM 19,126.80 ORIGINAL ISSUE DISCOUNT (21,157.75) UNDERWRITER'S DISCOUNT (22,846.60) ACCRUED INTEREST 15,820.60 TOTAL AMOUNT RECEIVED ON DELIVERY OF THE CERTIFICATES ........... $2,760,943.05 Furthermore, the undersigned has on the date of this receipt (i) transmitted funds in the amount of $2,710,443.05 to American State Bank, Lubbock, Texas (the City's depository bank) for deposit to the credit of the City's Consolidated Account #87793), (ii) retained the sum of $500.00 in payment of the first year's paying agent/registrar fees and (iii) transmitted the sum of $50,000.00 to First Southwest Company for the payment of costs of issuance; all in accordance with instructions received. 45008115 DELIVERED, this March 15, 2001. U.S. TRUST COMPANY OF TEXAS, N.A. �.J Dallas, Texas By Title 4A4 /M A�", ^6 11 TELEPHONE: 214/855-8000 FACSIMILE: 214/855-8200 FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 ROSS AVENUE, SUITE 2800 DALLAS, TEXAS 75201-2784 March 15, 2001 HOUSTON WASHINGTON, D.C. AUSTI N SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG IN REGARD to the authorization and issuance of the "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001" (the "Certificates"), dated February 1, 2001 (the "Certificate Date"), in the principal amount of $2,770,000, we have examined into the legality and validity of the issuance thereof by the City of Lubbock, Texas (the "City"), which Certificates are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a maturity), mature annually on February 15 in each of the years 2002 through 2021, unless redeemed prior to maturity in accordance with the redemption provisions stated on the Certificates, and bear interest on the unpaid principal amount from the Certificate Date at the rates per annum stated in the ordinance authorizing the issuance of the Certificates (the "Ordinance"), such interest being payable on February 15 and August 15 in each year, commencing February 15, 2002, to the registered owners shown on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Certificates). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Certificates under the Constitution and laws of the State of Texas, and with respect to the exclusion of the interest on the Certificates from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City. Our examinations into the legality and validity of the Certificates included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the City relating to the authorization and issuance of the Certificates, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Certificate executed and delivered initially by the City, which we found to be in due form and properly executed. 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: 3187490 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 Solid Waste System in the manner and to the extent provided in the Ordinance; except to the extent that 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. 0 Page 2 of legal opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 ", dated February 1, 2001 2. Assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and certifications of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Certificates, interest on the Certificates for federal income tax purposes (a) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), of the owners thereof pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions thereunder, and (b) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporations, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust, or a financial asset securitization investment trust (FASIT). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. WE EXPRESS NO 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 interest in a FASIT, 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. EHE:dfc 3187490 TELEPHONE: 2 14/855-8000 FACSIMILE: 214/855-8200 FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 ROSS AVENUE, SUITE 2800 HOUSTON DALLAS, TEXAS 75201-2784 WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES M I N N EAPOLIS LONDON HONG KONG March 15, 2001 City of Lubbock, Texas 1625 13t" St. Lubbock, Texas 79401 Morgan Keegan & Co., Inc. SAMCO Capital Markets c/o Morgan Keegan & Co., Inc. 5956 Sherry Lane, Suite 1900 Dallas, Texas 75225 Re: $2,770,000 "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001", dated February 1, 2001 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 February 8, 2001, which also approved and authorized the distribution of the final Official Statement, dated February 8, 2001 (the "Official Statement") relating to the Certificates and approved and authorized the execution of the Purchase Contract, dated February 8, 2001 ("Purchase Contract") with Morgan Keegan & Co. Inc. and SAMCO Capital Markets, 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 "Plan of ,Financing", "The Obligations" (except under the subcaptions "Book -Entry Only System" and Holders Remedies"), Tax Matters", Continuing Disclosure of Information" (except under the subcaption "Compliance with Prior Undertakings"), "Legal Opinions" (exclusive of the last two 45010331 LZ I i Page 2 of Legal Opinion of Fulbright & Jaworski L.L.P. Re: $2,770,00 "City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 ", dated February 1, 2001 sentences 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 instruments therein described and, with respect to the Certificates, such information conforms to the Ordinance. C. The Certificates are exempted securities within the meaning of Section 3(a)(2) of 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. EHE:kis 45010331 Very truly yours, 1e er, Office of the City Attorney P.O. Box 2000 • 1625 13th Street Lubbock, Texas 79457 (806) 775-2222 • Fax (806) 775-3307 OPINION OF THE CITY ATTORNEY Morgan Keegan & Co., Inc. SAMCO Capital Markets Morgan Keegan & Co., Inc. 5956 Sherry Lane Suite 1900 Dallas, TX 75225 Ladies and Gentlemen: March 15, 2001 ^ I am the City Attorney for the City of Lubbock, Texas (the "City") at thetime of the issuance and sale of the "City of Lubbock, Texas Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001," in the aggregate principal amount of $2,770,000 (the "Certificates"), pursuant to the provisions of an ordinance duly adopted by the City Council of the City on February 8, 2001 (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 reviewedsuch 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 n EQ 10. judgment or decree or any trust agreement, loan 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 g q knowledge after due inquiry, ry, 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, ordinance, agreement or other instrument to which the City is a parry or is otherwise subject; and 2. Except as disclosed in the Official 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 theother 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 ofthe 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 Solid Waste 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, r La LAW OFFICES MC -CALL, PARKHURST & HORTON L.L.P. 600 CONGRESS AVENUE 1250 ONE AMERICAN CENTER AUSTIN, TEXAS 78701-3248 TELEPHONE: 512 478-3805 FACSIMILE: 512 472-0871 Morgan Keegan & Co., Inc. SAMCO Capital Markets Morgan Keegan & Co., Inc. 5956 Sherry Lane, Suite 1900 Dallas, Texas 76225 717 NORTH HARWOOD NINTH FLOOR DALLAS, TEXAS 75201-6587 TELEPHONE: 214 754-9200 FACSIMILE: 214 754-9250 March 15, 2001 700 N. ST. MARY'S STREET 1225 ONE RIVERWALK PLACE SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 210 225-2800 FACSIMILE: 210 225-2984 Re: $2,770,000 City of Lubbock, Texas Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 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 "City"), authorizing the issuance of the Certificates, which Certificates you are purchasing pursuant to a Purchase Contract, dated February 8, 2001. 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 of the Securities Act of 1933, as amended, and the Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as amended. r. 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 of the Official Statement dated February 8, 2001 (the "Official Statement") and because the information in the Official Statement under the headings "Book -Entry -Only System," "Tax Matters," "Continuing Disclosure of Information-Compliancewith Prior Undertakings" and the appendices 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, W except as set forth in the last sentence of this 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 participation in the preparation of the Official Statement as your counsel, we had discussions with representatives of the City, including its Financial Advisor and Bond Counsel, regarding the contents of the Official Statement. In the course of such activities, no facts came to our attention which 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 of Information - Compliance with Prior Undertakings" and the appendices 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, 2 LQ CERTIFICATE OF UNDERWRITER rl� The undersigned hereby certifies as follows with respect to the sale and delivery of $2,770,000 City of Lubbock, Texas, Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 (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 February 8, 2001. 4. The term "public", as used herein, means persons other than bondhouses, 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 �Z ' `arL1n , Jodi MORGAN KEEGAN & COMPANY, INC. -,-;A I � By: Title: 45008098.1 — Moody's Investors Service January 24, 2001 99 Church Street New York, New York 70007 Ms. Debra Forte Linda Hird Lrpnick Assistant City Manager Senior vice President City of Lubbock Te!_ 212.5537617 P.O. Box 2000 1625 13th Street Lubbock, TX 79457 Dear Ms_ Forte: We wish to inform you that on January 23, 2001, Moody's Rating Committee has assigned a Aa2 rating to the City of Lubbock, Texas General Obligation Bonds, Series 2001 and Tax and Solid Waste Surplus Revenue Certificates of Obligation, Series 2001. Concurrently, Moody's has affirmed the Aa2 rating on city's outstanding General Obligation Debt. — In order for us to maintain the currency of our ratings, we request that you provide ongoing disclosure, including annual financial and statistical information. — Moody's will monitor the rating and reserves the right, in its sole discretion, to revise or withdraw the rating at any time in the future. — The rating as well as any revisions or withdrawals thereof will be publicly disseminated by Moody's through normal print and electronic media and in response to oral requests to Moody's ratings desk. Should you have any questions regarding the above, please do not hesitate to contact me or the analyst assigned to this transaction, Robyn Kapiloff at 212-553-4051. Sincerely Linda Hird Lipnick LHL: am cc: Mr. Vince Vialle — First Southwest Company 1001 Main Street, Suite $02 Lubbock, TX 79457 6.7 W i> 6t,ticr Ctrcc?. iNth f burr Wanc gV'ng l hrcUr,r N-v York.:V Y 10041-WO3 1'uhlic 1`iwnce Katino Tel 2P i;X- 2066 RcferCneC Nn.: 1,183709 Standard & Poor's n Division of 71scMdxr".kfigCampania J1 Ms. Debra Forte anuary 24, 200 City of Lubbock . 1525 13th Street P.O. Sox 2000 Lubbock, TX 79457 Re: $11,570,000 City of L'ubboek, Texas, Consisting of.• $9,100,000 General Obligation ,Bonds and $2, 770,000 Tax and Solid Waste System Surplus Revenue Certificates of Obligation Bonds, Series 2001, dated. February 1, 2001, due: February 15, 2021 Dear Ms. Forte: Pursuant to your request for a Standard & Poor's rating on the above debt obligations, we have reviewed the information furnished to us and, subject to the terns and conditions of the MEMORANIDUMOFAGREEIi?ENT on the reverse side hereof, have assigned a rating of `AA+' to the obligations. S&P views the outlook for this rating over the intermediate to longer term as stable. _ Please note that the ongoing information required includes annual audits and budgets and, for revenue bond ratings in connection with construction financing, progress reports, not less often than quarterly, covering the project being financed and should be forwarded to: Standard & Poor's Ratings Services Public Finance SS Water Street, Muni Drop Box No- 1, 3$-3-10 - New York; NY 10041-0003 S&P relies on the issuer and its counsel, accountants and other experts for the accuracy and — completeness of the information submitted in connection with the rating. In addition, it should be understood that the rating is not a "market" rating nor a recommendation to buy, hold or sell these securities. Please note that the raring, as is the case with all of S&P's municipal ratings, does not address the likelihood th4 interest payable on the Bonds may be deemed or declared includable in the gross income of Bondholders by the relevant authorities at any time. In the event that you decide to include this rating in an Official Statement, prospectus or other offering literature, we request that you include S&P's definition of the rating together with a statement that the rating may be changed, suspended or withdrawn as a result of changes in, or urxavailability of, information. We are pleased to have been of service to you. Thank you for choosing Standard & Poor's Ratings Services. If you have any questions, please contact us. Very truly yours, _ arch cc: Mr. Vince V'iaille, Principal First Southwest Company o �•Y F T I (V FITC;H MCA. DUFF S: 1'Mej,P.i Mr. Andy Burcham Cash and Debt Manager City of Lubbock P.O. Box 2000 Lubbock, TX 712457 January 24, 2001 Re: City of Lubbock, TX — $9,100,000 General Obligation Bonds, Series 2001 $2,770,000 Tax and Solid Waste System Surplus Revenue Certificates of Obligation, Series 2001 bear Mr. Burcham: Fitch has assigned a rating of "AA+° to the above referenced issues. Ratings assigned by Fitch are based on the documents and information provided to us by the City of Lubbock, TX, its experts and agents and are subject to receipt of the final dosing documents. Fitch does not audit or verify the truth or accuracy of such information. It is important that Fitch be provided with all information that may be material to the ratings so that they continue to accurately reflect the condition of the issues. Ratings may be changed, withdrawn, suspended or placed on RatingWatch due to changes in, additions to or the inadequacy of information. Ratings are not recommendations to buy, sell or hold- securities. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect of any security. We are pleased to have had. the opportunity to be of service to you, if we can be of further assistance, please feel free to contact us at any time. Sincerely, l j { Richard P. Larkin" Managing Director Public Finance RPUdb cc: Vince Viaille — First Southwest Company Robert Estrada — Estrada Hinojosa and Company, Inc. e�+ _ The International Raring Agency Fir, h. One Srute Srrccr Plaza, New York. NY 10OO4 r. 212 408 0500 r. SOO 75 FITCH www.firchratings.com No „,, 8038-G I Information Return for Tax -Exempt Governmental Obligations Under Internal Revenue Code section 149(e) (Rev November2000) See separate instructions. OMB No. 1545-0720 Department of the Treasury Caution: Use Form 8038-GC if the issue price is under $100, 000. Internal Revenue Seance Reporting Authority _— _ If Amended Return, check here ► ❑ 1 Issuer's name 2 Issuer's employer identification number City of Lubbock, Texas 75-6000590 3 Number and street (or P.O. box if mail is not delivered to street address) Room/suite 4 Report number 1625 131” Street 302 5 City, town, or post office, state, and ZIP code 6 Date of issue Lubbock, Texas 79401 March 15. 20-01 7 Name of Issue 8 CUSIP Number Tax and Solid Waste System Surplus Revenue, Certificates of Obligation, Series 2001 549187 __M02 __ 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_ - Betsy Buoy, Interim Managing Director of Finance _ (806) 775-3000 _ Type of Issue (check applicable box(es) and enter the issue price) See instructions and attach schedule 11 [] Education....................................................................... 11 12 ❑ Health and hospital................................................................ 12 --------- --- 13 ❑ Transportation.................................................................... 13 ------------ ----- 14 ❑ Public safety..................................................................... 14 15 ❑ Environment (including sewage bonds) ................................................. 15 16 ❑ Housing......................................................................... 16 17 ❑ Utilities......................................................................... 17 18 ® Other. Describe ► Closing Landfill 18 2,767,969.05 19 If obligations are TANS or RANs, check box ► ❑ If obligations are BANs, check box ......... ► ❑ �� 20 If obligations are in the form of a lease or installment sale, check box ......................... ► ❑ r,. M711M Description of Obligations. (Complete for the entire issue for which this form is being filed.) (a) Final maturity date i (b) Issue price (c) Stated redemption (d) Weighted (e) Yield' price at maturity average maturity 21 2-15-2021 $ 2,767,969.05 $ 2,770,000.00 10.254 years 4.79423 % Uses of Proceeds of Bond Issue (including underwriters' discount) 22 Proceeds used for accrued interest....................................................... 22 j 15,820.60 23 Issue price of entire issue (enter amount from line 21, column (b)) ............................... 23 2,767,969.05 24 Proceeds used for bond issuance costs (including underwriters' discount).. i 24 73,346.60 25 Proceeds used for credit enhancement ............................ 25 26 Proceeds allocated to reasonably requirerd reserve or replacement fund ... j 26 r 27 Proceeds used to currently refund prior issues ...................... 27 28 Proceeds used to advance refund prior issues ....................... 28 29 Total (add lines 24 through 28).......................................................... 29 73,346.60 30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here) ............. 30 2,694,622.45 Description of Refunded Bonds (complete this part only for refunding bonds.) 31 Enter the remaining weighted average maturity of the bonds to be currently refunded ...................... ► years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded ...................... ► years 33 Enter the last date on which the refunded bonds will be called ....................................... ► 34 Enter the date(s) the refunded bonds were issued Miscellaneous _ 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) .............. 35 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 1 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)(111) (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........................................................................ . ❑ Please Sign Here 0. ier penalties of perjury, I declare that I have examined this return and accompanying schedules a knowledge and belief, they are true, correct, and comply 14 2001 Signature of issuer's authorized representative Date and to the best of ► Betsy Bucv Interim Managing Director of Finance Type or print name and title n For Paperwork Reduction Act Notice, see page 2 of the Instructions. cat. No. 63773S Form 8038-G (Rev. 11-2000)