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Ordinance - 9959-1996 - Refunding Bond Sweries Levying Ad Velorum Tax - 12/19/1996
. -~ FIRST READING Item No. 33 December 19. 1996 SECOND READING ltej No. 4 Jan1ary 9, 1997 ORDINANCE NO. 9959 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 1997"; specifying the terms and features of said bonds; levying a continuing direct annual ad valorem tax for the payment of said bonds; and resolving other matters incident and related to the issuance, sale, payment and delivery of said bonds, including the approval and execution of a Paying Agent/Registrar Agreement, a Purchase Contract and a Special Escrow Agreement and the approval and distribution of an Official Statement; and providing an effective date. I WHEREAS, the City Council of the City of Lubbock, Texas (the "City") has heretofore issued, sold, and delivered, and there is currently outstanding, obligations totalling in principal amount $16,860,000 (collectively, the "Refunded Obligations") more particularly described as follows: (1) City of Lubbock, Texas, General Obligation Bonds, Series 1987, dated April 15, 1987, maturing on February 15 in each of the years 2005 through 2007, and aggregating in principal amount $ 900,000 (2) City of Lubbock, Texas, General Obligation Bonds, Series 1989, dated August 15, 1989, maturing on February 15 in each of the years 2000 through 2009, and aggregating in principal amount $3,745,000 (3) City of Lubbock, Texas, Certificates of Obligation, Series 1989, dated August 15, 1989, maturing on February 15 in each of the years 2000 through 2009, and aggregating in principal amount $1,900,000 (4) city of Lubbock, Texas, General Obligation Bonds, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2003 through 2009, and aggregating in principal amount$ 100,000 (5) City of Lubbock, Texas, Combination Tax and Waterworks System Subordinate Lien Revenue certificates . of Obligation, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2003 through 2009, and aggregating in p1:incipal amount $5,645, ooo . ( . ' (6) City of Lubbock, Texas, Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue Certificates of Obligation, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2003 through 2009, and aggrega- ting principal amount $1,420,000 ( 7) City of Lubbock, Texas, General Obligation · Refunding Bonds, series 1992, dated April 1, 1992, maturing on February 15 in each of the years 2001 through 2003, and aggregating principal amount $2,550,000 AND WHEREAS, pursuant to the provisions of Article 717k, V.A.T.c.s., as amended, the City Council is authorized to issue refunding bonds and deposit the proceeds of sale directly with any place of payment for the Refunded Obligations, and such deposit, when made in accordance with said statute, shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded Obligations; and WHEREAS, the City Council hereby finds and determines that general obligation refunding bonds should be issued at this time to refund the Refunded Obligations, and such refunding will result in the City saving approximately $744,030.45 in debt service payments on such indebtedness and further provide present value savings of approximately $534,533.34; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION 1: Authorization -Designation -Principal Amount -Purpose. General obligation refunding bonds of the City shall be and are hereby authorized to be issued in the aggregate principal amount of $17,530,000 to be designated and bear the title "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 199711 (hereinafter referred to as the "Bonds"), for ,the purpose of providing funds for the discharge and final payment of certain outstanding obligations of the city (identified in the preamble hereof and referred to as the "Refunded Obligations") and to pay costs of issuance, in accordance with authority conferred by and in conformity with the Constitution and laws of the State of Texas, including Article 717k, V.A.T.c.s. SECTION 2: Fully Registered Obligations -Bond Date - Authorized Denominations -Stated Maturities -Interest Rates. The Bonds shall be issued as fully registered obligations only, shall be dated January 15, 1997 (the "Issue Date"), shall be in denominations of $5,000 or any integral multiple (within a Stated Maturity, except for the single Initial Bond referenced in Section 8) thereof, and shall become due and payable on February 15 in -2- I J . ' each of the years and in principal amounts Maturities") and bear interest at the rate(s) accordance with the following schedule: (the "Sta!ted per annum in YEAR OF MATURITY 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 PRINCIPAL INSTALLMENTS $ 130,000 140,000 695,000 1,550,000 1,515,000 2,585,000 1,725,000 1,995,000 1,970,000 1,950,000 1,645,000 1,630,000 INTEREST RATE 3.901 4.15\ 4.25\ 4.35\ 4.451 5.00% 4.701 4.751 4.85\ 5.751 5.00\ s.oot The Bonds shall bear interest on the unpaid principal amounts from the Issue Date at the rate(s) per annum shown above in this Section (calculated on the basis of a 360-day year of twelve 30-day months). Interest on the Bonds shall be payable on February 15 and August 15 in each year, commencing August 15, 1997. SECTION 3: Terms of Payment -Paying Agent /Registrar. The principal of, premium, if any, and the interest on the Bonds, due and payable by reason of maturity, redemption or otherwise, shall be payable only to the registered owners or holders of the Bonds (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 Norwest Bank Texas, National Association, Dallas, Texas to serve as Paying Agent/Registrar for the Bonds is hereby approved and confirmed. Books and records relating to the registration, payment, exchange and transfer of the Bonds (the "Security Register") shall at all times be kept and maintained on behalf of the City by the Paying Agent/Registrar, all as provided herein, in accordance with the terms and provisions of a "Paying Agent/Registrar Agreement", substantially in the form attached hereto as Exhibit A, and such reasonable rules and regulations as the Paying Agent/Registrar and the City may prescribe. The Mayor Pro Tem and City Secretary are No Text . I hereby authorized to execute and deliver such Agreement in connection with the delivery of the Bonds. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds are paid and discharged, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Bonds, 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 Bonds shall be payable at the Stated Maturities or redemption, only upon presentation and surrender of the Bonds to the Paying Agent/Registrar at its designated offices in Minneapolis, Minnesota (the "Designated Payment/Transfer Off ice") • Interest on the Bonds shall be paid 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 shall be paid by the Paying Agent/Registrar (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 Bonds 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 est•blished 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. -4- No Text . l SECTION 4: Redemption. (a) Optional Redemption. The Bonds having Stated Maturities on and after February 15, 2008 shal1 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, 2007 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 Bonds (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 Bonds, 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 Bonds shall be entered in the minutes of the governing body of the City. (c) Selection of Bonds for Redemption. If less than .all Outstanding Bonds of the same stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Bonds as representing the number of Bonds outstanding which is obtained by dividing the principal amount of such Bonds by $5,000 and shall select the Bonds to be redeemed within such Stated Maturity by lot. (d) Notice of Redemption. Not less than thirty (JO) days prior to a redemption date for the Bonds, 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 Bond 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 Bonds, (ii) identify the Bonds 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 Bonds, 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 Bonds, or the principal a.mount thereof to be redeemed, shall be made at the Designated Payment/Transfer Off ice of the Paying ' , . , Agent/Registrar only upon presentation and surrender thereof by the Holder. If a Bond 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 Bondl(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 Bond (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 Bonds- Predecessor Bonds. The Paying Agent/Registrar shall obta.in, record, and maintain in the Security Register the name and address of each and every owner of the Bonds issued under and pursuant to the provisions of this Ordinance, or if appropriate, the nominee thereof. Any Bond may be transferred or exchanged for Bonds of other authorized denominations by the Holder, in person or by his duly authorized agent, upon surrender of such Bond to the Paying Agent/Registrar at the Designated Payment/Transfer Off ice 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 Bond (except for the single Initial Bond referenced in Section 8 hereof) for transfer at the Designated Payment/Transfer Office of the Paying Agent/ Registrar, one or more new Bonds shall be registered and issued to the assignee or transferee of the previous Holder; such Bonds to be in authorized denominations, of like Stated Maturity and of a like aggregate principal amount as the Bond or Bonds surrendered for transfer. At the option of the Holder, Bonds (other than the single Initial Bond referenced in section 8) may be exchanged for other Bonds of authorized denominations and having the same stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Bonds surrendered for exchange, upon surrender of the Bonds to be exchanged at the Designated Payment/Transfer Office of the Paying Agent/ Registrar. Whenever any Bonds are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new Bonds to the Holder requesting the exchange. · All Bonds issued in any transfer or exchange of Bonds 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 -6- No Text . . obligations of the City, evidencing the same obligation to pay, and entitled to the same benefits under this Ordinance, as the Bonds surrendered in such transfer or exchange. All transfers or exchanges of Bonds 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. Bonds cancel led by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be "Predecessor Bonds," evidencing all or a portion, as the case may be, of the same obligation to pay evidenced by the new Bond or Bonds registered and delivered in the exchange or transfer therefor. Additionally, the term "Predecessor Bonds" shall include any mutilated, lost, destroyed, or stolen Bond for which a replacement Bond has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 11 hereof and such new replacement Bond shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Bond. Neither the City nor the Paying Agent/Registrar shall be required to issue or transfer to an assignee of a Holder any Bond called for redemption, in whole or in part, within 45 days of the date fixed for the redemption of such Bond; provided, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a Bond called for redemption in part. SECTION 6: Book-Entry only Transfers and Transactions. Notwithstanding the provisions contained in Sections 3, 4 ands hereof relating to the payment, and transfer/exchange of the Bonds, 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 requirements and procedures identified in the Letter of Representation, by and between the City, the Paying Agent/Registrar and OTC {the "Depository Agreement") relating to the Bonds. Pursuant to the Depository Agreement and the rules of OTC, the Bonds shall be deposited with DTC who shall hold said B9nds for its participants (the "OTC Participants"). While the B~nds are held by OTC under the Depository Agreement, the Holder of the Bonds on the Security Register for all purposes, including payment and notices, shall be Cede & co •. , as nominee of OTC, . -7- No Text . . notwithstanding the ownership of each actual purchaser or owner of each Bond (the "Beneficial owners") being recorded in the records of OTC and OTC Participants. In the event OTC determines to discontinue serving as securities depository for the Bonds or otherwise ceases to provide book-entry clearance and settlement of securities transactions in general or the City determines that OTC is incapable of properly discharging its duties as securities depository for the Bonds, the City covenants and agrees with the Holders of the Bonds to cause Bonds to be printed in definitive form and provide for the Bond certificates to be issued and delivered to DTC Participants and Beneficial owners, as the case may be. Thereafter, the Bonds in definitive form shall be assigned, transferred and exchanged; on the Security Register maintained by the Paying Agent/Registrar and payment of such Bonds shall be made in accordance with the provisions of Sections 3, 4 and 5 hereof. SECTION 7: Execution -Registration. The Bonds shall be executed on behalf of the City by the Mayor Pro Tem under its seal reproduced or impressed thereon and countersigned by the City secretary. The signature of said officers on the Bonds may be manual or facsimile. · Bonds bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the Issue Date shall be deemed to be duly executed on behalf of the City, notwithstanding that such individuals or either of them shall cease to hold such offices at the time of delivery of the Bonds to the initial purchaser(s) and with respect to Bonds delivered in subsequent exchanges and transfers, all as authorized and provided in the Bond Procedures Act of 1981, as amended. No Bond shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Bond 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 Bond shall be conclusive evidence, and the only evidence, that such Bond bas been duly certified, registered and delivered. SECTION 8: Initial Bond(s). The Bonds herein authorized shall be initially issued either (i) as a single fully registered bond in the total principal amount noted in Section 1 with principal installments to become due and payable as provided in section 2 hereof and numbered T-1, or (ii) as twelve (12) fully -8- No Text registered bonds, being one bond.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 Bond ( s) ") and, in either case, the ~ni tial Bond ( s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Bond(s) shall be the Bonds 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 Bond(s), the Paying Agent/ Registrar, pursuant to written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial Bond (s) delivered hereunder and exchange therefor definitive Bonds of authorized denominations, Stated Maturities, princ.ipal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser(s), or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. SECTION 9: Forms. A. Forms· Generally. The Bonds, 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 Bonds, 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 on insured Bonds 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 Bonds as evidenced by their execution. Any portion of the text of any Bonds may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Bond. The definitive Bonds and the Initial Bond(s) shall be printed, lithographed, or engraved or typewritten, photocopied or otherwise reproduced in any other similar manner, all as determined by the officers executing such Bonds as evidenced by their execution thereof. -9- No Text . . B. REGISTERED NO. Form of Definitive Bond. UNITED STATES OF AMERICA STATE OF TEXAS CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION REFUNDING BOND, SERIES 1997 REGISTERED $ ___ _ Issue Date: Interest Rate: Stated Maturity: CUSIP NO: January 15, 1997 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 order of the Registered owner named above, or the registered assigns thereof, on the Stated Maturity date specified above the Principal Amount hereinabove stated (or so much thereof as shall not have been paid upon prior redemption) , and to pay interest on the unpaid principal amount hereof from the Issue Date at the per annum rate of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 15 and August 15 in each year, commencing August 15, 1997. Principal of this Bond is payable at its stated Maturity or redemption to the registered owner hereof, upon presentation and. surrender, at the Designated Payment/Transfer Off ice of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor. Interest is payable to the registered owner of this Bond (or one or more Predecessor Bonds, as defined in the Ordinance hereinafter referenced) whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date, and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register 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 Bond 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. -10- No Text This Bond is one of the series specified in its title issued in the aggregate principal amount of $17,530,000 (herein referred to as the "Bonds") for the purpose of providing funds for the discharge and final payment of certain outstanding obligations of the City (identified in the Ordinance hereinafter referenced and referred to as the "Refunded Obligations") and to pay costs of issuance, under and in strict conformity with the Constitution and laws of the State of Texas, including Article 717k, V.A.T.c.s., and pursuant to an Ordinance adopted by the City Council of the City (herein referred to as the "Ordinance"). The Bonds maturing on and after February 15, 2008 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, 2007, or on any date thereafter, at the redemption price of par, together with accrued interest to the date of redemption and upon 30 days prior written notice being sent by United States Mail, first class postage prepaid, to the registered owners of the Bonds to be redeemed, and subject to the terms and provisions relating thereto contained in the ordinance. If this Bond (or any portion of the principal sum hereof) shall have been duly called for redemption and notice of such redemption duly given, then upon such redemption date this Bond (or the portion of the principal sum hereof to be redeemed) shall become due and payable, and interest thereon shall cease to accrue from and after the redemption date therefor, provided moneys for the payment of the redemption price and the interest 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. In the event of a partial redemption of the principal amount of this Bond, payment of the redemption price of such principal amount shall be made to the registered owner only upon presentation and surrender of this Bond to the Designated Payment/Transfer Office of the Paying Agent/Registrar, and there shall be issued to the registered owner hereof, without charge, a new Bond or Bonds of like maturity and interest rate in any authorized denominations provided by the Ordinance for the then unredeemed balance of the principal sum hereof. If this Bond is selected for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer this Bond 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 hereof in the event of its redemption in part. -11- No Text The Bonds are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City. 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 of the provisions of which the owner or bolder of this Bond 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 Bonds; the terms and conditions relating to the transfer or exchange of this Bond; 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 this Bond may be discharged at or prior to its maturity, and deemed to be no longer Outstanding thereunder; and for other terms and provisions contained therein. Capitalized terms used herein have the meanings assigned in the Ordinance. This Bond, 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 new fully registered Bonds of the same stated Maturity, of authorized denominations, bearing the same rate of interest, 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, shall treat the registered owner 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 Bond 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 -12,. No Text the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. It is hereby certified, recited, represented and declared 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 Bonds 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 Bonds 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 Bonds 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 Bonds by the levy of a tax as aforestated. In case any provision in this Bond 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. The terms and provisions of this Bond 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 Bond to be duly executed under the official seal of the City as of the Issue Date. COUNTERSIGNED: City Secretary (SEAL) CITY,OF LUBBOCK, TEXAS Mayor Pro Tem -13- No Text c. *Form of Registration Certificate of comptroller of Public Accounts to appear on Initial Bond[s) only. 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 Bond 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. (SEAL) WITNESS my signature and seal of office this ______ • Comptroller of PUblic Accounts of the State of Texas *NOTE TO PRINTER: Do Not Print on Definitive Bonds D. Form of certificate of Paying Agent/Registrar to appear on Definitive Bonds only. REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR This Bond has been duly issued and registered under the provisions of the within-mentioned Ordinance; the bond or bonds 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 off ices of the Paying Agent/Registrar in Minneapolis, Minnesota, is the Designated Payment/Transfer Office for this Bond. Registration Date: NORWEST BANK TEXAS, NATIONAL ASSOCIATION, Dallas, Texas, as Paying Agent/Registrar By-------,--------Authorized Signature -14- No Text . . 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 Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ••••••••••••••••••• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . attorney to transfer the within Bond 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 Bond in every particular. . . . . . . . . . . . . . . . . . . . . . . . . . . . F. (i) (ii) The Initial Bond(s) shall be in the form set forth in paragraph B of this section. except that the form of the single fully registered Initial Bond shall be modified as follows: immediately under the name of the bond the headings n1nterest Rate ----------" and "Stated Maturity------" shall both be omitted; Paragraph one shall read as follows: Registered OWner: Principal Amount: Dollars The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County ·of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the order of 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: No Text YEAR OF MATURITY PRINCIPAL INSTALLMENTS (Information to be inserted from schedule in Section 2 hereof). INTEREST RATE (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 Issue Date at the per annum rates of interest specified above computed on the basis of a 360-day year of twelve JO-day months; such interest being payable on February 15 and August 15 in each year, commencing August 15, 1997. Principal installments of this Bond are payable in the year of maturity or on a prepayment date to the registered owner hereof by Norwest Bank Texas, National Association, Dallas, Texas (the "Paying Agent/Registrar"), upon presentation and surrender, at its designated offices in Minneapolis, Minnesota (the "Designated Payment/Transfer Office"). Interest is payable to the registered owner of this Bond 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 mo~th 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 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 Bond 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: Leyy• of Taxes. To provide for the payment of the "Debt Service Requirements" of the Bonds, being (i) the interest on the Bonds and (ii) a sinking fund for their redemption at maturity or a sinking f~d of 21 (whichever amount is the greater) , there is hereby levied, and there shall be annually assessed and collected in due time, form, and manner, a tax on all taxable property in the City, within the limitations prescribed by law, and such tax hereby levied on each one hundred dollars' valuation of taxable property in the City for the Debt service Requirements of the Bonds shall be at a rate from year to year as will be ample and sufficient to provide funds each year to pay the principal of and interest on said Bonds while outstanding; full allowance being made for delinquencies and costs of collection; separate books and records relating to the receipt and disbursement of taxes levied, assessed and collected for and on account of the Bonds shall be kept and maintained by the City 1 at all times while the Bonds are Outstanding, and the taxes collected -16- No Text for the payment of the Debt Service Requirements on the Bonds shall be deposited to the credit of a "Special 1997 Refunding Bond Account" (the "Interest and Sinking Fund") maintained on the records of the City and deposited in a special fund maintained at an official depository of the City's funds; and such tax hereby levied, and to be assessed and collected annually, is hereby pledged to the payment of the Bonds. Proper officers of the city are hereby authorized and directed to cause to be transferred to the Paying Agent/ Registrar for the Bonds, from funds on deposit in the Interest and Sinking Fund, amounts sufficient to fully pay and discharge promptly each installment of interest and principal of the Bonds as the same accrues or matures; such transfers of funds to be made in such manner as will cause collected funds to be deposited with the Paying Agent/Registrar on or before each principal and interest payment date for the Bonds. Provided, however, in regard to the interest payment to become due on the Bonds on August 15, 1997, sufficient current funds are available and are hereby appropriated to make such payments; and proper officials of the City are hereby authorized and directed to transfer and deposit to the credit of the Interest and Sinking Fund, such current funds which, together with the accrued interest received from the purchaser, will be sufficient to pay the amount of the interest payment due on the Bonds. on August 15, 1997. SECTION 11: Mutilated -Destroyed -Lost and Stolen Bonds. In case any Bond shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar may execute and deliver a replacement ~ond of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Bond, or in lieu of and in substitution for such destroyed, lost or stolen Bond, 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 Bond, 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 Bond shall be borne by the Holder of the Bond mutilated, or destroyed, lost or stolen. Every replacement Bond 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 No Text other Outstanding Bonds; notwithstanding the enforceability of payment by anyone of the destroyed, lost, or stolen Bonds. 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 Bonds. SECTION 12: satisfaction of Obligation 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 Bonds, at the times and in the manner stipulated in this Ordinance, then the pledge of taxes levied 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. Bonds or any principal amount(s) thereof 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 Bonds or the principal amount(s) thereof at maturity or to the redemption date there£ or, 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 Bonds, 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 Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as ~mended, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/ Registrar, or an authorized escrow agent, 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 Bonds, 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 No Text Paying Agent/Registrar for the payment of the principal of and interest on the Bonds and remaining unclaimed for a period of four (4) years after the Stated Maturity, or applicable redemption date, of the Bonds 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. The term "Government Securities", as used herein, means direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, which are non-callable prior to the respective Stated Maturities of the Bonds and may be United States Treasury Obligations such as the state and Local Government Series and may be in book-entry form. SECTION 13: Ordinance a Contract Amendments outstanding Bonds. 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 Bond remains outstanding except as permitted in this section. The City may, without the consent of or notice to any Holders, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Holders, including the curing of any ambiguity, -inconsistency, or formal defect or omission herein. In addition, the City may, with the consent of Holders holding a majority in aggregate principal amount of the Bonds 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 Bonds, 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 Bonds, 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 Bonds, (2) give any preference to any Bond over any other Bond, or (3) reduce the aggregate principal amount of Bonds required to be held by Holders for consent to any such amendment, addition, or rescission. The term "OUtstanding" when used in this Ordinance with respect to Bonds means, as of the date of determination, all Bonds theretofore issued and delivered under this Ordinance, except: (1) those Bonds cancelled by the Paying Agent/Registrar or delivered to the Paying Agent/ Registrar for cancellation; No Text ( 2) those Bonds deemed to be duly paid by the City in accordance with the provisions of Section 12 hereof; and (3) those mutilated, destroyed, lost, or stolen Bonds which have been replaced with Bonds registered and delivered in lieu thereof as provided in Section 11 hereof. SECTION 14: ·covenants to Maintain Tax-Exempt status. (a) Definitions. When used in this Section, the following terms shall have the following meanings: "Closing Date" means the date on which the Bonds are first authenticated and delivered to the initial purchasers against payment therefor. "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. •computation Date• has the meaning set forth in Section 1.148-l(b) of the Regulations. "Gross Proceeds• means any proceeds as defined in Section 1.148-l(b) of the Regulations, and any replacement proceeds as defined in Section 1.148-l(c) of the Regulations, of the Bonds. •Investment• has the meaning set forth in section 1.148-l(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 Bonds are invested and which is not acquired to carry out the governmental purposes of the Bonds. "Rebate Amount• has the meaning set forth in section 1.148-l(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 Bonds. 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. -20- No Text "Yield" of (i) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and {ii) the Bonds 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 Bond 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 Bond, the City shall comply with each of the specific covenants in this Section. Cc) 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 Bonds: (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 Bonds (including property financed with Gross Proceeds of the Refunded Obligations), 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 Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds (including property financed with Gross Proceeds of the Refunded Obligations), 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. -21- No Text (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 Bonds 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 Inyest 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 Bonds 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 Bonds. (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 Bonds to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. (g) Information Report. The City shall timely file the information required by section 149 (e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the secretary may prescribe. (h) Rebate of Arbitrage· Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder: (1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last outstanding Bond is discharged. However, to -22- No Text the extent permitted by law, the City may commingle Gross Proceeds of the Bonds 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 Bonds until six years after the final Computation Date. (3) As additional consideration for the purchase of the Bonds 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 Interest and Sinking 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 Bonds equals (i) in the case of a Final Computation Date as defined in Section 1.148-J(e)(2) of the Regulations, one hundred percent ( 1001) of the Rebate Amount on such date; and (ii) in the case of any other computation Date, ninety percent (901) 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-l(h) of the Regulations~ -23- No Text (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 Bonds, 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 Bonds not been relevant to either party. (j) Elections. The City hereby directs and authorizes the Mayor, Mayor Pro Tem, City Secretary, City Manager, and 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 Bonds, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. (k) Bonds Not Hedge Bonds. (1) At the time the original bonds refunded by the Bonds were issued, the City reasonably expected to spend at least est of the spendable proceeds of such bonds within three years after such bonds were issued and (2) not more than 501 of the proceeds of the original bonds refunded by the Bonds were invested in Nonpurpose Investments having a substantially guaranteed Yield for a period of 4 years or more. (1) oualified Advance Refunding. The Bonds are issued exclusively to refund the Refunded Obligations, and the Bonds will be issued more than 90 days before the redemption of the Refunded Obligations. The City represents as follows: (1) The Bonds are the second advance refunding of the original bonds refunded by the Series 1992 Refunded Obligations and the first advance refunding of all other Refunded Obligations, within the meaning of section 14 9 ( d) ( 3) of the Code. The Bonds are a current refunding of the Series 1987 Refunded Obligations as payment for such Series 1987 Refunded Obligations will occur within ninety (90) days after the issuance of the Bonds. (2) The Refunded Obligations are being called for redemption, and will be redeemed not later than the earliest date on which such bonds may be redeemed. ( 3) The initial temporary period under section 148(c) of the Code will end: (i) with respect to the proceeds of the Bonds not later than JO days after the date of issue of such Bonds; and (ii) with respect to -24- No Text proceeds of the Refunded Obligations on the Closing Date if not ended prior thereto. (4) on and after the date of issue of the Bonds, no proceeds of the Refunded Obligations will be invested in Nonpurpose Investments having a Yield in excess of the Yield on such Refunded Obligations. (5) The Bonds are being issued for the purposes stated in the preamble of this Ordinance. There is a present value savings associated with the refunding. In the issuance of the Bonds the City has neither: (i) overburdened the tax-exempt bond market by issuing more bonds, issuing bonds earlier or allowing bonds to remain outstanding longer than reasonably necessary to accomplish the governmental purposes for which the Bonds were issued; (ii) employed on "abusive arbitrage device" within the meaning of Section 1.148-lO(a) of the Regulations; nor (iii) employed a "device" to obtain a material financial advantage based on arbitrage, within the meaning of section 149 (d) (4) of the Code, apart from savings attributable to lower interest rates and reduced debt service payments in early years. (6) The refunding of the City's General Obligation Refunding Bonds, Series 1992 (the "Series 1992 Bonds") is pursuant to section 1313(b) of The Tax Reform Act of 1986. The original bonds refunded by the Series 1992 Bonds were issued prior to August 16, 1986, and the . average maturity of the Bonds does not exceed 120 percent of the average reasonably expected economic life of the facilities being refinanced by the Bonds. SECTION 15: sale of Bonds -Official statement Approval. The Bonds authorized by this ordinance are hereby sold by the City to Morgan Keegan & Co., Inc., Artemis Capital Group, Inc. and Estrada Hinojosa & Company, Inc. (herein referred to as the "Purchasers") in accordance with the Purchase Contract, dated January 9, 1997, attached hereto as Bxbibit Band incorporated herein by reference as a part of this Ordinance for all purposes. The Mayor Pro Tem 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 in the Purchase contract are true and correct in all material respects and shall be honored and performed by the City. -25- No Text . . Furthermore, the use of the Official Statement by the Purchasers in connection with the public offering and sale of the Bonds 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, Mayor Pro Tem, City Secretary, City Manager, or Assistant City Manager, one or both 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 January 9, 1997, in the reoffering, sale and delivery of the Bonds to the public. The Mayor Pro Tem 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. SECI'ION 16: special Escrow Agreement Approval and Execution. The "Special Escrow Agreement" (the "Agreement") by and between the City and Norwest Bank Texas, National Association, Dallas, Texas (the "Escrow Agent•) , attached hereto as Bxhibit C and incorporated herein by reference as a part of this Ordinance for all purposes, is hereby approved as to form and content, and such Agreement in substantially the form and substance attached hereto, together with such changes or revisions as may be necessary to accomplish the refunding or benefit the City, is hereby authorized to be executed by the Mayor Pro Tem and City Secretary for and on behalf of the City and as the act and deed of this City Council; and such Agreement as executed by said officials shall be deemed approved by the City Council and constitute the Agreement herein .approved. Furthermore, appropriate officials of the City in cooperation with the Escrow Agent are hereby authorized and directed to make the necessary arrangements for the purchase of the Federal Securities referenced in the Agreement and the delivery thereof to the Escrow Agent on the day of deli very of the Bonds to the Purchasers for deposit to the credit of the "SPECIAL 1997 CITY OF LUBBOCK, TEXAS, REVENUE REFUNDING BOND ESCROW FUND" (the "Escrow Fund"); all as contemplated and provided in Article 717k, V.A.T.c.s., as amended, this Ordinance and the Agreement. SECTION 17: Control and custody of Bonds. The Mayor ~a Tem 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 Bonds, and shall take and have -26- No Text charge and control of the Initial Bond(s) pending the apptoval thereof by the Attorney General, the registration thereof by the comptroller of Public Accounts and the delivery thereof to the Purchasers. Furthermore, the Mayor, Mayor Pro Tem, City Manager, Assistant City Manager, and City Secretary, any one or more of said officials, are hereby authorized and directed to furnish and execute such agreements, documents and certifications relating to the City and the issuance, sale and delivery of the Bonds, including certifications as to facts, estimates, circumstances and reasonable expectations pertaining to the use, expenditure and investment of the proceeds of the Bonds, as may be necessary for the approval of the Attorney General, the registration by the comptroller of Public Accounts and the delivery of the Bonds to the Purchasers, and, together with the city's bond counsel and the Paying Agent/Registrar, make the necessary arrangements for the delivery of the Initial Bond(s) to the Purchasers and the initial exchange thereof for definitive Bonds. SECTION 18: Proceeds of Sale. Immediately following the delivery of the Bonds, the proceeds of sale thereof (less cei::t,ain costs of issuance and the accrued interest received from the Purchasers of the Bonds) shall be deposited with the Escrow Agent for application and disbursement in accordance with the provisions of the Agreement. The proceeds of sale of the Bonds not so deposited with the Escrow Agent for the refunding of the Refunded Obligations shall be disbursed and deposited for payment of costs of issuance and deposited in the Interest and Sinking Fund all in accordance with written instructions from the city. Additionally, on or immediately prior to the date of the deli very of the Bonds to the Purchasers, the Assistant City Manager shall cause to be transferred in immediately available funds to the Escrow Agent from moneys on deposit in the interest and sinking funds maintained for the payment of the Refunded Obligations the sum of $610,000 to accomplish the refunding. SECTION 19: Notices to Holders -Waiver. Wherever this Ordinance provides for notice to Holders of any event, such notice·· shall be sufficiently given (unless otherwise herein expressly provided) if in writing and sent by United States Mail, first class postage prepaid, to the address of each Holder appearing in the Security Register at the close of business on the business day next preceding the mailing of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency' of such notice with respect to all other Bonds. Where this Ordinance -27- No Text . . 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 20: Cancellation. All Bonds surrendered for payment, redemption, transfer, exchange, or replacement, if surrendered to the Paying Agent/Registrar, shall be promptly cancelled by it and, if surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already cancelled, shall be promptly cancelled by the Paying Agent/ Registrar. The City may at any time deliver to the Paying Agent/Registrar for cancellation any Bonds previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly cancelled by the Paying Agent/Registrar. All cancelled Bonds held by the Paying Agent/Registrar shall be returned to the City. SECTION 21: Legal Opinion. The obligation of the Purchasers to accept delivery of the Bonds is subject to being furnished a final opinion of Fulbright & Jaworski L.L.P., Attorneys, Dallas, Texas, approving such Bonds as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for such Bonds. A true and correct reproduction of said opinion or an executed counterpart thereof is hereby authorized to be either printed on definitive printed obligations or deposited with DTC along with the global certificates for the implementation and use of the Book Entry Only System used in the settlement and transfer of the Bonds. SECTION 22: CUSIP Numbers. COSIP numbers may be printed or typed on the Bonds deposited with The Depository Trust Company or on printed definitive Bonds. It is expressly provided, however, that the presence or absence of COSIP numbers on the definitive Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving the Bonds as to legality are to be held responsible for COSIP numbers incorrectly printed or typed on the definitive Bonds. SECTION 23: 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, and this Ordinance and all its provisions .is -28- No Text • ' intended to be and shall be for the sole and exclusive benefit of the City, the Paying Agent/Registrar and the Holders. · SECTION 24: 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 25: 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 26: Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 27: 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 28: Seyerability. 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 29: Incorporation of Findings and Determinations. The findings and determinations of the City Council contained in the preamble hereof are hereby incorporated by reference and made a part of this Ordinance for all purposes as if the same were restated in full in this Section. SECTION 30: continuing Disclosure undertaking. (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "IISRB" means the Municipal Securities Rulemaking Board. "NRMSIR" means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. -29- No Text • ' "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, 1996) financial information and operating data with respect to the City of the general type included in the final Official Statement approved on the date hereof, being the information described in Exhibit D hereto. Financial statements to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit D 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 so provided, then the City shall provide audited financial statements for the applicable fiscal year to each NRMSIR and any SID, when and if audited financial statements become 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 Bonds, if such event is material within the meaning of the federal securities laws: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; -30- No Text .. ' 3 • Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; s. 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; 7. Modifications to rights of holders of the Bonds; 8. Bond calls; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the Bonds; 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) Limitat1ons, D1scla1mers, 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 nobligated person" with respect to the Bonds within the meaning of the Rule, except that the City in any event will give the notice required by subsection (c) hereof of any Bond 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 Bonds, 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 -31- No Text . ' such information or its usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BONO 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, BOT EVERY RIGHT ANO 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 Bonds.in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the outstanding Bonds 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 Bonds. 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 Bonds from lawfully purchasing or selling Bonds in such offering. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data filed with each NRMSIR and SID pursuant to subsection (b) of this Section an explanation, in narrative form, of the reasons for the amendment and of the impact -82- No Text ,. • ; • . of any change in the type of financial information or operating data so provided. SECTION 31: 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 32: Effective Date. This Ordinance shall be in force and effect from and after its passage on second and final reading and IT IS SO ORDAINED. PASSED ANO ADOPTED ON FIRST READING, this December 19, 1996. PASSED ANO ADOPTED ON SECOND ANO FINAL READING, this the 9th day of January, 1997. ATTEST: (City Seal) Alex "Ty" Mayor Pro -33- No Text FIRST READING Item No. 33 December 19, 1996 ORDINANCE 9959 PAYING AGENT/REGISTRAR AGREEMENT SECOND READING Item No. 4 January 9, 1997 THIS AGREEMENT entered into as of January 9, 1997 (this "Agreement"), by and between the City of Lubbock, Texas (the "Issuer"), and Norwest Bank Texas, National Association, 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, General Obligation Refunding Bonds, Series 1997" (the "Securities") in the aggregate principal amount of $17,530,000, such Securities to be delivered to the initial purchasers on or about February 13, 1997; and WHEREAS, the Issuer bas selected the Bank to serve as paying agent, registrar and transfer agent with respect to such Securities; and WHEREAS, the Bank bas agreed to serve in such capacities for and on behalf of the Issuer and is duly qualified and otherwise capable of performing the duties and services contemplated by this Agreement with respect to the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Ap,pointment. 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. No Text section 1.02. compensation. As compensation for the ~ank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Annex A attached hereto for the remainder of the Fiscal Year during which the Agreement is executed and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. This agreement assumes retention by the Paying Agent of the float on uninvested funds held in accounts by the Paying Agent. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office• means the offices of the Bank located in Minneapolis, Minnesota at the address appearing 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 ordinclnce of the governing body of_ ~e Issuer pursuant to which the Securities are issued, certified by the Secretary or any other officer of the Issuer and delivered to the Banlc. "Fiscal Year" means the fiscal year of the Issuer, ending September 30th. "Holder" and "Security Holder" each means the Person in whose name a security is registered in the Security Register. "Issuer Request" and "Issuer Order" means a written request or order signed in the name of the Issuer by the Mayor, Mayor Pro Tem, City Manager, Director of Financial -2- No Text Services, 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, 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. No Text 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 t~e Holder upon surrender of the Security to the Bank at the following address: Norwest Bank National Association Corporate Trust Services Sixth and Marquette Minneapolis, Minnesota 55479-0113 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. 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 No Text 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. -5- No Text The security Register may be maintained in written form or in any other form capable of being converted into·written form within a reasonable time. section 4.04. List of security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. 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 • os. 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 securi- ties. The Issuer hereby instructs the Bank, subject to the provisions of Section 11 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. No Text .. 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 J.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen securities pursuant to Section 4.06. ARTICLE FIVE THE BANK section s.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 s.02. Reliance on Documents. Etc, conclusively rely, as to the truth of the co~rectness of the opinions expressed therein, on opinions furnished to the BanJt. (a) 'lhe Bank may statements and certificates or (b) The Bank shall not be liable for any error of judgment made in good faith by·a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or 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 9ther paper or document supplied by Issuer. -7- No Text (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 s.os. 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 Security and remaining unclaimed for four 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 -8- No Text 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", effective December 12, 1994, 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 .9. No Text shall be mailed or delivered to the Issuer or the BanJt, respectively, at the addresses shown on page 11. 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. section 6. 06. Seyerability. 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 ResolutiQn 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 No Text • 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. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. (CITY SEAL) ATTEST: ~L~~, Kayth Darnell . citye:etary NORWEST BANK TEXAS, NATIONAL ASSOCIATION, Dallas, Texas Address: 4300 Thanksgiving Tower 1601 Elm Street Dallas, Texas 75201 Address: P. o. Box 2000 Lubbock, Texas 79457 -11· ., i I • , ' -I · NORWEST :: i L I $12,410,000 CITY OF LUBBOCK. TEXAS GENERAL OBUGATION REFUNDING BONDS, SERIES 1997 Fee Proposal for Pmn: A~t •od Registrar semm Acceptance Fee $200 Our Acceptance fee covers the review, acceptance and assumption of all responsibilities and duties as paying agent under the agreements, participation in document conferences, establishing records and accounts, authentication and delivery of bonds, receipt of funds, consultation with counsel and attendance at closings. This one time fee is payable at the closing of the financing. IL Administration Fee $200 This annual fee includes the normal day-to-day administration of the issue performed in accordance with the governing document,, maintenance of all administrative records, and the duties and functions associated with the Paying Agency. Our annual administration fee is billed annually in advance and first year fee is due at closing. DL Out-of-Pocket Expenses At cost as incurred All out-of-pocket expenses incurred in connection with the acceptance of the paying agent appointment and annual administration will be billed at actual cost as incurred. Expenses for which we are normally reimbursed include, but are not limited to postage, express mail, mail insurance, long distance calls, fax charges, travel expenses, and wire charges. IV. Extraordinary Services Fees indicated in this schedule are based upon services rendered in accordance with established procedures and during normal business hours. Unusual or extraordinary services such as those provided upon an Event of Default are subject to additional charges based on the duties, responsibilities, and other factors involved. Our proposal is subject in all respects to our review and acceptance of the goveming documents which set forth our dunes and responsibilities. Please note that the Acceptance Fee and Fust Year Annual Fee are due at closing. • J. First Reading Item No. 33 December 19, 1996 ORDINANCE 9959 Sl 7,530,000 CITY OF LUBBOCK, TEXAS General Obligation Refunding Bonds, Series 1997 PURCHASE CONTRACT January 9, 1997 The Honorable Mayor and Members of the City Council , City of Lubbock P.O. Box 2000 Lubbock, Texas 79457 Dear Mayor and Members of the City Council: Second Reading Item Nr:i. 6. -:fl"ri«Ary' Y, 1997 Morgan Keegan & Co., Inc. (the "Authorized Representative") Artemis Capital Group, Inc. and Estrada Hinojosa & Company, Inc. (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 January 9, 1m. 1. Purchase and Sale of the Bonds. 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 $17,530,000 principal amount of City of Lubbock, Texas General Obligation Refunding Bonds, Series 1997 (the "Bonds") The Bonds shall have the dated date, the maturities and bear interest from the date or dates at the rate or rates per annum as shown in the Official Statement (heremafter defined). such interest being payable as shown in the OfficiaJ Statement. The purchase price for the Bonds shall be $17,505,034.08 (representing the principal amount of the Bon~ less an Underwriters' discount on the Bonds of $122,710.00, plus aggregate original issue premium on the Bonds of $31,495.50, and plus accrued interest in the amount of$66,248.S8). Morgan Keegan & Co., Inc. represents that it has been duly authorized to execute this Purchase Contract and has been duly authori.zed to act hereunder as the Authorized Representative. All actions which may be taken by the Underwriters may be taken by the Authorized Representative alone. 2. Ordinance. The Bonds shall be as descnl>ed in and shall be issued and secured under the provisions of the Ordmance authorizing the issuance and sale of the Bonds finally adopted by the City No Text on January 9, 1997 (the "Ordinance"). The Bonds shall be secured and payable as provided in the Ordinance. 3. Public Offering. It shall be a condition of~ obligations of the City to sell and deliver the Bonds to the Underwriters, and of the obligations of the Underwriters to purchase and accept delivery of the Bonds, that the entire principal amount of the Bonds 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 Bonds., at not in excess of the initial public offering prices, as set forth in the Official Statement, plus interest accrued on the Bonds from the date of the Bonds, provided that at least 100/4 of each maturity of the Bonds shaft be sold at the initial public offering prices 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 SI 75,300. The City agrees to hold such check una.sbed until the Closing to ensure the performance by the Underwriters of their obtiga1:ion to purchase, accept delivery of and pay for the Bonds at the Cosing. Concurrently with the payment by the Underwriters of the purchase price of the Bonds, 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 Bonds 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 Bonds, as aet 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 Bonds at the Cosing 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. 1be Underwriters hereby ap not to stop or cause payment on said check to be stopped unless the City bas breached any of the terms of this Purchase Contract. S. OtrJ.Cial Statement Exhibit A hereto is the Of1icial Statement, including the cover pages and Appendices thereto, of the City, dated January 9, 1997, with respect to the Bonds. The Official Statement, including the cover page and Appendices thereto, as further amended only in the manner herein provided, is hereinafter c-alled the •Official Statement • The City hereby authorizes the.Escrow Agreement, hereinafter defined, the Ordinance and the Official Statement and the information therein contained to be used by the Underwriters in comiection with the public offering and sale of the Bonds. The City confirms its consent to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement, relative to the Bonds., dated December IS, 1996 (the "Preliminary Official Statement"), in connection with the preliminary public offering and sale of the Bonds, and it is "deemed final" as of its date, within the meaning, and for the purposes, of Rule 1Sc2-12 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 tht; Underwriters' obligations under the Rule and the applicable rules of the Municipal Bonds Rv1emaking 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. 2 No Text 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 Bonds has expired or (d) the date that is 90 days after the date hereof: any event shall occur which 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 it: 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, concerning every entity, enterprise, fund, account or person that is material to an evaluation of the offering of the Bonds. The City has not failed to comply with any undertaking specified in paragraph (b XS)(i) of the Rule within the last five years. 6. Representadom, Warranties and Agreemenu of the Oty. On the date hereo( the City represents, warrants and agrees as follows: (a) The City is a home rule m.micipality and a political ll.lbdivision of the State of Texas and a body politic and corporate, and bas fWl legal right, power and authority to enter into this Purchase Contract and the Escrow Agreement pertaining to the Bonds between the City and the Escrow Agent named therein (the "Escrow Agreement•), to adopt the Ordinance, to sell the Bonds, and to issue and deliver the Bonds to the Underwriters as provided herein and to cany out and conMJffllate all other transactions contemplated by the Ordinance, the Escrow Agreement and this Purchase Contract; (b) By official action ·of the City prior to or concurrently with the acceptance hereot the City has duly adopted the Ordinance, bas duly authorized and approved the execution and delivery of, and the performance by the City of the obligations contained in the Bo~ the Escrow Agreement and this Purchase Contract and has duly authorized. and approved the _ . performance by the City of its obligations contained in the Ordinance, the Escrow Agreement 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, which would have a material and adverse effect upon the b1isiness or financial condition of the City; and the execution and delivery of the Escrow Agreement and this Purcba.se Contract by the City and the execution and delivery of the Bonds and the adoption of the Ordinance by the City and compliance with the provisions of each thereof will not violate or constitute a breadi of or default under any existing law, administrative 3 No Text 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 which would constitute a condition precedent to the performance by the City of its obligations to sell and deliver the Bonds 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 material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (f) Between the date of this Purchase Contract and the Closing, the City will not, without the prior written consent of the Underwriters, issue any additional bonds, notes or other obligations for borrowed money payable in whole or in part from ad valorem taxes, 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 firumcial position of the City, (g) Except as desaibed in the Official Statement, no litigation is pending or, to the knowledge of the City, threatened in any court atrecting the corporate existence of the City, the title of its officers to their respective offices, or seeking to restrain or agoin the issuance or delivery of the Bonds, the levy, collection or application of the ad valorem taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the issuance, execution, delivery, .payment, seani.ty or validity of the Bonds, or in any way contesting or affecting the validity or enforceability of the Ordinance, the Escrow Agreement, or this Purchase Contract, or contesting the powers of the City, or any authority for the Bonds, the Ordinance, the Escrow Agreement, or this Purchase Contract or contesting in any way the completenms, 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 Bonds for sale and the determination of their eligtoility for investment under the laws of such jurisdictions as the Authorized Represeotative d~gnates, and will use its best efforts to continue such qualifications in effect so long as required for distn"bution of the Bonds; provided, however, that the City will not be required to execute a general 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 Bonds, the Escrow Agreement and the Ordinance contained in the Official Statement accuratdy summarize certain provisions of such instruments, and the Bonds, when validly t'XCCUted, authentic.ated 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; 4 No Text (j) If prior to the Closing an event occurs affecting the City which 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 S~ the City will supplement or amend the Official Statement in a form and in a manner approved by the Authorized Representative; (k) Any certifiatte, signed by any official of the City authorized to do so in connection with the transactions contemplated by this Purchase Contract, shall be deemed a representation and warranty by the City to the Underwriters as to the statements made therein; and ()) 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. 7. Cosing. At 10:00 ~ Central T'une, on February 13, 1997 (the "Closing•). the City will deliver the initial bonds (as defined in the Ordinance) to the Underwriters and, provided the , Underwriters shall have made arrangements with The Depository Trust Company ("DTC•). for the Bonds to be immobilized and thereafter traded as book-entry only Bonds, the City shall take appropriate steps to provide DTC with one detinite bond for each year of maturity of the Bonds. and to provide the Underwriters with the other documents hereinafter mentioned, and the Underwriters will accept such delivery and pay the purchase price of the Bonds as set forth in Paragraph 1 hereof in immediately available fimds. 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 u aforesaid sbaD be made at the office of Fulbright & Jaworski L.L.P ., 2200 Ross Avenue, Suite 2800, Dallas, Texas 7S201, 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 tbe 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 IS of the date of'Closing. Accordingly, the Underwriters' obligations under this Purchase Contract to purchase and pay for the Bonds shall be subject to the performance by tbe City of its obligations to be performed hereunder and under such doaunents 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 sba1l be true, complete and correct in an material respects on the date hereof and on and IS of the date of Closing, as if made on the date of Closing; (b) At the time of the Closing, the Ordinance and the Escrow Agreement shall be in full force and effect, and the Ordinance and the Escrow Agreement shall not have been amended, modified or supplemented and the Official Statement shall not have been amended, modified or supplemented, ex:cept as may have been agreed to by the Authorized Representative; s No Text •I> ( 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) The City will purdiase or cause to be purdiased the Federal Securities (as defined in the Official Statement relating to the Bonds) as may be necessmy to effect the refunding of the Citys outstanding obligations as contemplated by the Escrow Agreement; (f) 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 its seal as having been duly adopted by the City and u being in effect, with such changes or amendments as may have been agra,d to by the Underwriters; the Ordinance shall contain the agreement of the City, in form sarisfactory to the Underwriters, which is described under the caption •Contimring Disclosure of Information• in the Preliminary Officw Statement; (3) The opinion or opinions, dated the date of Cosing, ofFulbright &. 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 ofT~ approving the Bonds as required by law and the registration certfficate of the Comptroller of Public Accounts of the State of Texas; (S) The supplemental~ dated the date of Cosing, of Bond Counsel, addressed to the City and the Underwriters, to the effect that (i) 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 vvith its terms; (d) in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions "Plan of Financing,• •ne Bonds" (except the subcaption "Book-Entry Only System"), •Tax Matters,• •Contimdng Disclosure of Information,• "Legal Opinions• and "Legal Investments and Eligtl>ility to Secure Public Funds in Texas,• and such firm is of the opinion that the information relating to the Bonds 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 Bonds, such information conforms to the Ordinance; and (Iii) the Bonds are exempt from registration pursuant to the Bonds 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 No Text (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 Bonds are exempt Bonds within the meaning of Section 3(aX2) of the Bonds Act of 1933, as amended, and it is not necessary in connection with the sale of the Bonds to the public to register the Bonds under the Bonds At:,t 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 of the Official Statement, nothing has come to the attention of said firm which 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 necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (7) A certificate, dated the date of Closin& signed by appropriate officers 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; (n) e,ccept to the extent disclosed in the Offida1 Statement, no litigation is pending tll', to the knawiedge of IUCb persons, threatened in any court to restrain or enjoin the issuance or delivery of the Bonds, or the (eyy, cx,llection or application of the ad valorem taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereo( or in any way contesting or affecting the validity of the Bonds, the Ordmance, the F.scrow Agreement, or this Purchase Contract, or contesting the powers of the City or the authorization of the Bonds 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 tbreateDed 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 bas 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 (rv) that there has not been any material and adverse change in the affairs or financial condition of the City since September-301 1996, the la• date as to which audited financial information is available; (8) An opinion of the City Attorney addre$sed to the Underwriters and dated the date of Closing substantially in the form and substance ofExlu'bit 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 Bonds, it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; 7 No Text (10) A copy of a special report prepared by Ernst & Young LLP 'With respect to the Bonds addressed to the City, Bond Counsel, Underwriters' Counsel and the Underwriters verifying the arithmetical computations of the adequacy of the maturing principal and interest on the escrowed securities and uninvested cash on band under the Escrow Agreement to pay, when due, the principal of and interest on the bonds being refunded and the computation of the yield with respect to such refunded bonds and the Bonds; (11) Evidence of the rating on the Bonds, which shall be "Aa" or better by Moody's Investors Service, Inc. ("Moody's•) and •AA• or better by Standard and Poor'~ Corporation ("S&P"), shall be delivered in a form acceptable to the Underwriters; and (12) 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 contaimd in the Official Statement and the due performance and satisfaction by the City at or prior to the date of Closing of an agreements then to be performed and an conditions then to be satisfied by the City. All of the opinions, letters, certificates, instruments and other documents mentioned above or ctsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof it:· but only it: 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 aecept delivery of and to pay for the Bonds 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 Bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate, the se.curity 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 obligatjons of the City and the Underwriters set forth in Paragraphs 10 and 12 hereof shall continue in fw1 force and effect. 9. Termination. The Underwriters may terminate its 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 S~ or recomm~nded to the Congress for passage by the President of the United States or favorably reported for passage to ather House of the Congress by any Committee of such House, or (Ii) a decision shall have been rendered by a court established under Article m of the Constitution of the United States or by the United States Tax Court, or (ill) an order, ruling or regu)ation shall have been issued or proposed by or on behalf of the Treaswy Department of the United States or the Internal Revenue Service or any other agency of the United States, or (IV) a release or official ~ 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), (ill), or (IV), would be to impose, directly or indirectly, 8 No Text federal income taxation upon interest received on obligations of the general character of the Bonds 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 Bonds 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 marlcetability or materially reduce the market price of obligations of the general character of the Bonds. (b) Aey action shall have been taken by the Bonds and Exchange Commission or by a court which 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 Bonds, or any action shall have been taken by any CO\D1 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 aball be amended or an amendment aball be proposed, or (u.) legislation aball be enacted, or (m) a decision shall have been rendered as to matters ofTexas Jaw, or (w) any order, ruling or regulation shall have been issued or proposed by or on bebalf of the State of Texas by an official, agency or department thereo( affecting the tax status of the City, its property or income, its bonds (mcluding the Bonds) or the interest thereon, which in the judgment of the Authorized Representative would materially affect the . market price of the Bonds. ( d) (i) A general suspension of trading in Bonds shall have occurred on the New York Stock Exchange, or (u) the United States shall have become engaged in hostilities (mcluding the escalation of any hostilities existing on the date hereo( whether or not foreseeable), the effect of which, in either case described in clause (i) and fu.1, is, in the judgment of the Authorized Representative, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Bonds on the terms and in the manner contemplated in this Purchase Contract and the Official Statement. (e) An event• described in Paragraph· 6(j) hereof occurs which, 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 Bonds. (f) A general banking moratorium shall have been declared by authorities of the United States, the State ofNew York or the State of Texas. (g) A lowering of the rating of II Aa11 and II AA 11, initially assigned to the Bonds by Moody's and S&P, respectively, shall occur prior to the Cosing. 10. Expenses. (a) The City shall pay out of the bond proceeds all expenses incident to the issuance of the Bonds, including but not limited to: (i) the cost of the preparation, printing and distn"bution of the Preliminary Official Statement and the Official Statement; (d) the cost of the 9 No Text preparation and printing of the Bonds; (m) the fees and expenses of Bond Counsel to the City; (iv) the fees and disbursements of the City's accountants, advisors, and of any other experts or consultants retained by the City including the fee of Ernst & Young LLP for the preparation of the verification rq,ort relating to the refunding; and (v) the fees for the bond ratings and any travel or other expenses incurred incident thereto; (b) The Underwriters shall pay© all advertising expenses in connection 'With the offering of the Bonds; (ti) the cost of the preparation and printing of all the underwriting documents; and (di) the fee ofMcCall, Parkhurst & Horton L.L.P. for such firm's opinion required by Paragraph 8(f)(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 conmmication 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, Texas 75225, Attention: Alan Scarisbrick. 12. Parties in Interest. This Purchase Contract is made solely for the benefit of the City and , the Underwriters (mduding the successors or assigns of any Underwriter) and no other person ahaD acquire or have any right under this contract. The City's representations, warranties and agreements contained in this Purchase Contract ahaD remain operative and in full force and effect, regardless of © any investigations made by or on behalf of the Underwriters, and (n) delivery of any payment for the Bonds 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. [The remainder of this page is intentionally blank. J 10 No Text "' 13. 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 9th day of January. 1997 Very truly yours, Morgan Keegan & Co •• Inc. Artemis Capital Group, Inc. Estrada Hinojosa & Company. Inc. By: Morgan Keegan & Co., Inc. Authoriz.ed Representative By: Rian~ Title: _Ir,/......_{) __________ _ By: __ ___;i;;;,,,,,c;;..,._~"---..x..L--------- Mayor City of Lubbock, T (CfIYSEAL) Attest: 11 No Text ·~· . ,; FIRST READING Item No. 33 ·" December 19, 1996 .J ORDINANCE 9959 SECOND READING Item No. 4 January 9, 1997 A RESOLUTION providing for the redemption of certain outstanding obligations of the City; and resolving other matters incident and related to the redemption of such obligations. WHEREAS, pursuant to ordinances passed and adopted by the City Council of the City of Lubbock, Texas, the following described obligations were duly authorized to be issued and are currently outstanding, to wit: (1) City of Lubbock, Texas, General Obligation Bonds, Series 1987, dated April 15, · 1987, maturing on February 15 in each of the years 2005 through 2007, and aggregating in principal amount $900,000; (2) City of Lubbock, Texas, General Obligation Bonds, series 1989, dated August 15, 1989, maturing on February 15 in each of the years 2000 through 2009, and aggregating in principal amount $3,745,000; (3) City of Lubbock, Texas, certificates of Obligation, Series 1989, dated August 15, 1989, maturing on February 15 in each of the years 2000 through 2009, and aggregating in principal amount $1,900,000; ( 4) City of Lubbock, Texas, General Obligation Bonds, Series 1991, dated Kay 15, 1991, maturing on February 15 in each of the years 2003 through 2009, and aggregating in principal amount $700,000; (5) City of Lubbock, Texas, Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2003 through 2009, and aggregating in principal amount $5,645,000; (6) City of Lubbock, Texas, Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue certificates of Obligation, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2003 through 2009, and aggregating in principal amount $1,420,000; and No Text ·t1 ( 7) Cl ty of Lubbock, Texas, General Obligation Refunding Bonds, series 1992, dated Aprill, 1992, maturing on February 15 in each of the years 2001 through 2003, and aggregating in principal amount $2,550,000; AND WHEREAS, the above identified obligations were authorized, issued, sold and delivered subject to the right and authority of the City to redeem the same prior to maturity, as provided in the respective authorizing ordinances and in said obligations; and WHEREAS, in connection with the advance refunding of the above described obligations, the Council hereby finds and determines that obligations of the respective series should be redeemed prior to their maturities on the dates and in the manner hereinafter provided and in accordance with the requirements prescribed therefor and notice of redemption of such obligations should be approved and authorized to be given at this time by the Council; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK, TEXAS: SECTION 1: The bonds of that series known as "City of Lubbock, Texas, General Obligation Bonds, Series 1987", dated April 15, 1987, maturing in the years 2005 through 2007, and aggregating in principal amount $900,000, shall be redeemed and the same are hereby called for redemption on February 15, 1997, at the price of par and accrued interest to the date of redemption. The City secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to bondholders, with Norwest Bank. Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank., National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such bonds; such suggested form of notice of redemption being attached hereto as Bzhibit A and incorporated herein by reference as a part of this resolution for all purposes. SECTION 2: The bonds of that series known as "City of Lubbock, Texas, General Obligation Bonds, Series 1989", dated August 15, 1989, maturing in the years 2000 through 2009, and aggregating in principal amount $3,745,000, shall be redeemed and the same are hereby called for redemption on February 15, 1999, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to bondholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying -2- No Text ,I agent/registrar to Texas Commerce Bank, National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such bonds; such suggested form. of notice of redemption being attached hereto as Exhibit Band incorporated herein by reference as a part of this resolution for all purposes. SECTION 3: The certificates of obligation of that series known as "City of Lubbock, Texas, Certificates of Obligation, Series 1989", dated August 15, 1989, maturing in the years 2000 through 2009, and aggregating in principal amount $1,900,000, shall be redeemed and the same are hereby called for redemption on February 15, 1999, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form. of notice of redemption to be sent to certificateholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas commerce Bank National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such obligations; such suggested form of notice of redemption being attached hereto as Exhibit c and incorporated herein by reference as a part of this resolution for all purposes. SECTION 4: The bonds of that series known as "City of Lubbock, Texas, General Obligation Bonds, Series 1991", dated Hay 15, 1991, maturing in the years 2003 through 2009, and aggregating in principal amount $700,000, shall be redeemed and the same are hereby called for redemption on February 15, 2001, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to bondholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such bonds; such suggested form of notice of redemption being attached hereto as Exhibit D and incorporated herein by reference as a part of this resolution for all purposes. SECTION 5: The certificates of obligation of that series known as •city of Lubbock, Texas, Combination Tax and Waterworks system Subordinate Lien Revenue Certificates of Obligation, Series 1991", dated Hay 15 1991, maturing in the years 2003 through 2009, and aggregating in principal amount $5,645,000, shall be redeemed and the same are hereby called for redemption on February 15, 2001, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to certificateholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor -3- No Text ,I paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such obligations; such suggested form of notice of redemption being attached hereto as Exhibit E and incorporated herein by reference as a part of this resolution for all purposes. SECTION 6: The certificates of obligation of that series known as "City of Lubbock, Texas, Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue certificates of Obligation, Series 1991", dated May 15, 1991, maturing in the years 2003 through 2009, and aggregating in principal amount $1,420,000, shall be redeemed and the same are hereby called for redemption on February 15, 2001, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to certificateholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank National Association, LUbbock, Texas), in accordance with the redemption provisions applicable to such obligations; such suggested form of notice of redemption ~ing attached hereto as Bxhibit rand incorporated herein by reference as a part of this resolution for all purposes. SECTION 7: The bonds of that series known as "City of Lubbock, Texas, General Obligation Refunding Bonds, Series 1992", dated April 1, 1992, maturing in the years 2001 through 2003, and aggregating in principal amount $2,550,000, shall be·redeemed and the same are hereby called for redemption on February 15, 1999, at the price of par and accrued interest to the date of redemption. The city Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to bondholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such bonds; _such suggested form of notice of redemption being attached hereto as bhibit G and incorporated herein by reference as a part of this resolution for all purposes. SECTION 8: The redemption of the obligations described above being associated with the advance refunding of such obligations, the approval, authorization and arrangements herein given and provided for the redemption of such obligations on the redemption dates designated therefor and in the manner provided shall be irrevocable upon the issuance and delivery of the "City of Lubbock, Texas, General Obligation Refunding Bonds, Series 1997n, dated January 15, 1997; and the City Secretary is hereby authorized and directed to make all arrangements necessary to -4- No Text '# t ... - notify the holders of such obligations of the City's decision to redeem such obligations on the dates and in the manner herein provided and in accordance with the ordinances authorizing the issuance of the obligations. PASSED AND ADOPTm, this January 9, 1997. ATTEST: (City Seal) No Text • FULBRIGHT & JAWORSKI LLP. CITY SECRETA~Y LUBBOCK, TEY,AS l • 1Qo11\1\'in CR: I A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 Ross AVENUE HOUSTON WASHINGTON, D.C. TELEPHONE: 214/855·8000 F"ACSIMILE: 214/655·8200 WRITER'S DIRECT DIAL NUMBER: 214/&55-8024 Ms. Kaythie Darnell City Secretary City of Lubbock P. 0. Box 2000 Lubbock, Texas 79457 SUITE 2800 DALLAS, TEXAS 75201 January 29, 1997 AUSTIN SAN ANTONIO DALLAS NEW VOF!K LOS ANGELES LONDON HONG KONG Re: $17,530,000 "City of Lubbock, Texas, General Obligation Refunding Bonds, Series 1997", dated January 15, 1997 Dear Ms. Darnell: In reference to the issuance of the above described bonds, enclosed herewith is an executed Paying Agent/Registrar Agreement for the City's records. DC Enclosure 03811321 Should you have any questions, please advise. D1 e Callahan Senior Legal Assistant '. ·') / • ,. ~ FIRST READING ,,,, . Item No. 33 December 19, 1996 ORDINANCE 9959 PAYING AGENT/REGISTRAR AGREEMENT ' SECOND READING Item No. 4 January 9, 1997 THIS AGREEMENT entered into as of January 9, 1997 (this "Agreement"), by and between the City of Lubbock, Texas (the "Issuer"), and Norwest Bank Texas, National Association, 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, General Obligation Refunding Bonds, series 1997" (the "Securities") in the aggregate principal amount of $17,530,000, such Securities to be delivered to the initial purchasers on or about February 13, 1997; and WHEREAS, the Issuer has selected the Bank to serve as paying agent, registrar and transfer agent with respect to such Securities; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and is duly qualified and otherwise capable of performing the duties and services contemplated by this Agreement with respect to 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. No Text • t • Section 1.02. Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Annex A attached hereto for the remainder of the Fiscal Year during which the Agreement is executed and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. This agreement assumes retention by the Paying Agent of the float on uninvested funds held in accounts by the Paying Agent. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2. 01. Def in it ions. 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 offices of the Bank located in Minneapolis, Minnesota at the address appearing in Section 3.01 hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Bond Resolution" means the resolution, order, or ordinance of the governing body of the Issuer pursuant to which the securities are issued, certified by the Secretary or any other officer of the Issuer and delivered to the Bank. "Fiscal Year" means the fiscal year of the Issuer, ending September 30th. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and "Issuer order" means a written request or order signed in the name of the Issuer by the Mayor, Mayor Pro Tem, City Manager, Director of Financial -2- No Text Services, Assistant City Manager, or City Secretary, any one or more of said officials, and delivered to the BanJc. "Legal Holiday" means a day on which the BanJc 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 BanJc means the Chairman or Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the BanJc 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 "BanJc, " 11 Issuer, 11 and "Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. -3- ( The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01. Duties of Paying Agent. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the following address: Norwest Bank National Association Corporate Trust Services Sixth and Marquette Minneapolis, Minnesota 55479-0113 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. OS 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. 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 Issµer and subject to such reasonable regulations as the Issuer and Bank i -4- No Text , . 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. -5- No Text The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04. List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. 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 Securi- .tJ.ll. The Issuer hereby instructs the Bank, subject to the provisions of Section 1.1 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. -6- No Text .. section 4. 07. Transaction Information to Issuer. The Banlc will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE THE BANK Section s.01. Duties of Bank. The Banlc undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. section s.02. Reliance on Documents, Etc. conclusively rely, as to the truth of the correctness of the opinions expressed therein, on opinions furnished to the Banlc. (a) '!be Bank may statements and certificates or (b) The Banlc shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Banlc was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Banlc 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 Banlc 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 Banlc 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 Banlc 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. -7- No Text (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 s.os. 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 Security and remaining unclaimed for four 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 -8- No Text .. • 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", effective December 12, 1994, 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 .9. No Text ' .. • shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on page 11. 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. OS. successors and As§iqns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. 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 -10- No Text • ... 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. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. (CITY SEAL) ATTEST: NORWEST BANK TEXAS, NATIONAL ASSOCIATION, Dallas, Texas Address: 4300 Thanksgiving Tower 1601 Elm Street Dallas, Texas 75201 Address: P. o. Box 2000 Lubbock, Texas 79457 -11- No Text ~ ~ , . I . · N O R W E S' T ~ I . L n. $12,410,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 1997 Fee Proposal for Paying Agent and Registrar Services Acceptance Fee $200 Our Accept.a.nee fee covers the review, acceptance and assumption of all responsibilities and duties as paying agent under the agreements, participation in document conferences, establishing records and accounts, authentication and delivery of bonds, receipt of funds, consultation with counsel and attendance at closings. This one time fee is payable at the closing of the financing. Administration Fee $200 This annual fee includes the normal day-to-day administration of the issue performed in accordance with the governing documents, maintenance of all administrative records, and the duties and functions associated with the Paying Agency. Our annual adminim:ration fee is billed annually in advance and first year fee is due at closing. Ill. Out-of-Pocket Expenses At cost as incurred All out-of-pocket expenses incurred in connection with the accept.a.nee of the paying agent appointment and annual administration will be billed at actual cost as incurred. Expenses for which we are normally reimbursed include, but are not limited to postage, express mail, mail insurance, long distance calls, fax charges, travel expenses, and wire charges. IV. Extraordinary Senices Fees indicated in this schedule are based upon services rendered in accordance with established procedures and during normal business hours. Unusual or extraordinary services such as those provided upon an Event of Default are subject to additional charges based on the duties, responsibilities, and other factors involved. Our proposal is subject in all respects to our review and acceptance of the governing documents which set forth our duties and responsibilities. Please note that the Acceptance Fee and First Year Annual Fee are due at closing. , ~ ' . First Reading Item No •. 33 December 19, 1996 ORDINANCE 9959 $17,530,000 CITY OF LUBBOCK, TEXAS General Obligation Refunding Bonds, Series 1997 PURCHASE CONTRACT January 9, 1997 The Honorable Mayor and Members of the City Council , City of Lubbock P.O. Box 2000 Lubbock,Texas79457 Dear Mayor and Members of the City Council: Second Reading lteI!l NCI. 4. -'!tl"ri.ila.ry' '9'. 199 7 Morgan Keegan & Co., Inc. (the "Authorized Representative") Artemis Capital Group, Inc. and Estrada Hinojosa & Company, Inc. (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 January 9, 1997. 1. Purchase and Sale of the Bonds. 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 $17,530,000 principal amount of City of Lubbock, Texas General Obligation Refunding Bonds, Series 1997 (the "Bonds") The Bonds shall have the dated date, the maturities and bear interest from the date or dates at the rate or rates per annum as shown in the Official Statement (hereinafter defined), such interest being payable as shown in the Official Statement. The purchase price for the Bonds shall be $17,505,034.08 (representing the principal amount of the Bonds, less an Underwriters' discount on the Bonds of $122,710.00, plus aggregate original issue premium on the Bonds of $31,495.50, and plus accrued interest in the amount of $66,248.58). Morgan Keegan & Co., Inc. represents that it has been duly authorized to execute this Purchase Contract and has been duly authorized to act hereunder as the Authorized Representative. All actions which may be taken by the Underwriters may be taken by the Authorized Representative alone. 2. Ordinance. The Bonds shall be as described in and shall be issued and secured under the provisions of the Ordinance authorizing the issuance and sale of the Bonds finally adopted by the City " • ;. . on January 9, 1997 (the "Ordinance"). The Bonds shall be secured and payable as provided in the Ordinance. 3. Public Offering. It shall be a condition of thf.' obligations of the City to sell and deliver the Bonds to the Underwriters, and of the obligations of the Underwriters to purchase and accept delivery of the Bonds, that the entire principal amount of the Bonds 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 Bonds, at not in excess of the initial public offering prices, as set forth in the Official Statement, plus interest accrued on the Bonds from the date of the Bonds, provided that at least 100/4 of each maturity of the Bonds shall be sold at the initial public offering prices 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 $175,300. 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 Bonds at the Closing. Concurrently with the payment by the Underwriters of the purchase price of the Bonds, 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 Bonds 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 Bonds, 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 Bonds 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 Underwriters hereby agree 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. S. Official Statement. Exhibit A hereto is the Official Statement, including the cover pages and Appendices thereto, of the City, dated January 9, 1997, with respect to the Bonds. The Official Statement, including the cover page and Appendices thereto, as further amended only in the manner herein provided. is hereinafter called the "Official Statement." The City hereby authorizes the Escrow Agreement, hereinafter defined. the 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 Bonds. The City confirms its consent to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement, relative to the Bonds, dated December 15, 1996 (the "Preliminary Official Statement"), in connection with the preliminary public offering and sale of the Bonds, and it is "deemed final" as of its date, within the meaning, and for the purposes, of Rule 1Sc2-12 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 th~ Underwriters' obligations under the Rule and the applicable rules of the Municipal Bonds 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. 2 No Text '• 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 Bonds has expired or (ii) the date that is 90 days after the date hereof, any event shall occur which 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, concerning every entity, enterprise, fund, account or person that is material to an evaluation of the offering of the Bonds. The City has not failed to comply with any undertaking specified in paragraph (b X SXi) of the Rule within the last five years. 6. Representationst Wammties 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 bas full legal right, power and authority to enter into this Purchase Contract and the Escrow Agreement pertaining to the Bonds between the City and the Escrow Agent named therein (the "Escrow Agreement"), to adopt the Ordinance, to sell the Bonds, and to issue and deliver the Bonds to the Underwriters as provided herein and to carry out and consummate all other transactions contemplated by the Ordinance, the Escrow Agreement 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 Bonds, the Escrow Agreement and this Purchase Contract and has duly authorized and approved the performance by the City of its obligations contained in the Ordinance, the Escrow Agreement 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, which would have a material and adverse effect upon the business or financial condition of the City; and the execution and delivery of the Escrow Agreement and this Purchase Contract by the City and the execution and delivery of the Bonds 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 3 No Text 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 which would constitute a condition precedent to the performance by the City of its obligations to sell and deliver the Bonds hereunder will have been obtained prior to the Closing; ( e) At the time of the Citys acceptance hereof and at the time of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessazy 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, 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 descn'bed 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 Bonds, the levy, collection or application of the ad valorem taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the issuance, execution, delivery, payment, security or validity of the Bonds, or in any way contesting or affecting the validity or enforceability of the Ordinance, the Escrow Agreement, or this Purchase Contract, or contesting the powers of the City, or any authority for the Bonds, the Ordinance, the Escrow Agreement, or this Purchase Contract or contesting in any way the completeness, accuracy or fairness of the Preliminary Official Statement or the Official Statement; (h) The City will cooperate with the Underwriters in arranging for the qualification of the Bonds for sale and the determination of their eligi'bility 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 Bonds; provided, however, that the City will not be required to execute a general 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 Bonds, the Escrow Agreement and the Ordinance contained in the Official Statement accurately summarize certain provisions of such instruments, and the Bonds, 'When valid1y 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 ot: and subject to the limitations contained in, the Ordinance; 4 No Text 0) If prior to the Closing an event occurs affecting the City which 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) Any certificate, signed by any official of the City authorized to do so in connection with the transactions contemplated by this Purchase Contract, shall be deemed a representation and warranty by the City to the Underwriters as to the statements made therein; and (I) 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. 7. Oosing. At.10:00 AM., Central Time, on February 13, 1997 (the "Closing"), the City 'Will deliver the initial bonds (as defined in the Ordinance) to the Underwriters and, provided the , Underwriters shall have made arrangements with The Depository Trust Company ("DTC"). for the Bonds to be immobilized and thereafter traded as book-entry only Bonds, the City shall take appropriate steps to provide DTC with one definite bond for each year of maturity of the Bonds, and to provide the Underwriters with the other documents hereinafter mentioned, and the Underwriters will accept such delivery and pay the purchase price of the Bonds 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 Fulbright&. Jaworski L.L.P., 2200 Ross Avenue, Suite 2800, Dallas, Texas 7S201, or such other pJace, 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 wammties 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 Bonds shall be subject to the perfonnance 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, the Ordinance and the Escrow Agreement shall be in full force and effect, and the Ordinance and the Escrow Agreement 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; s No Text ·. •I> ( 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) The City will purchase or cause to be purchased the Federal Securities (as defined in the Official Statement relating to the Bonds) as may be necessary to effect the refunding of the City's outstanding obligations as contemplated by the Escrow Agreement; (f) 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 its seal 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, which is described under the caption "Continuing Disclosure of Information" in the Preliminary Official Statement; (3) The opinion or opinions, 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 Bonds as required by law and the registration certificate of the Comptroller of Public Accounts of the State of Texas; (5) The supplemental opinion, dated the date of Closing, of Bond Counsel, addressed to the City and the Underwriters, to the effect that (i) 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 tenns; (ii) in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions "Plan of Financing, It ltThe Bonds" (except the subcaption "Book-Entry Only System"), ltTax Matters," "Continuing Disclosure of Information, It "Legal Opinions" and "Legal Investments and Eligi'bility to Secure Public Funds in Texas, It and such firm is of the opinion that the information relating to the Bonds 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 Bonds. such information conforms to the Ordinance; and (ill) the Bonds are exempt from registration pursuant to the Bonds 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 No Text -. (6) An opinion of McCall, Parkhurst & Horton L.L.P., Undenmters' Counsel addressed to the Undenmters, and dated the date of Closing to the effect that: (i) the Bonds are exempt Bonds within the meaning of Section 3(a)(2) of the Bonds Act of 1933, as amended, and it is not necessary in connection with the sale of the Bonds to the public to register the Bonds under the Bonds Act of 1933, as amended, or to qualify the Ordinance under the Trust Indenture Act of 1939, as amended; and (ti) in their participation in the preparation of the Official Statement, nothing bas come to the attention of said firm which 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 necessary to 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 appropriate officers 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 Bonds, or the levy, collection or application of the ad valorem taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity of the Bonds, the Ordinance, the Escrow Agreement, or this Purchase Contract, or contesting the powers of the City or the authorization of the Bonds 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 Undenmters 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 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 infonnation 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, 1996, the latest date as to which audited financial information is available; (8) An opinion of the City Attorney addressed to the Undenmters and dated the date of Closing substantially in the form and substance of Exhtl>it 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 Bonds, it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; 7 No Text . . . . (10) A copy of a speciaJ report prepared by Ernst & Young LLP v.ith respect to the Bonds addressed to the City. Bond Counsel, Underwriters' Counsel and the Underwriters verifying the arithmetical computations of the adequacy of the maturing principal and interest on the escrowed securities and uninvested cash on hand under the Escrow Agreement to pay. when due, the principal of and interest on the bonds being refunded and the computation of the yield with respect to such refunded bonds and the Bonds; (11) Evidence of the rating on the Bonds. which shall be "Aa11 or better by Moody's Investors Service, Inc. ("Moody's") and "AA" or better by Standard and Poor's Corporation (" S&P"). shall be delivered in a form acceptable to the Underwriters; and (12) 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 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 Bonds 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 Bonds 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 its 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 m 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), (ill), or (iv), would be to impose, directly or indirectly, 8 No Text • • federal income taxation upon interest received on obligations of the general character of the Bonds 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 Bonds 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 Bonds. (b) Any action shall have been taken by the Bonds and Exchange Commission or by a court which 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 Bonds, 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 (ui) 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 (including the Bonds) or the interest thereon, which in the judgment of the Authorized Representative would materially affect the market price of the Bonds. ( d) (i) A general suspension of trading in Bonds shall have occurred on the New York Stock Exchange, or (n) the United States shall have become engaged in hostilities (including the escalation of any hostilities existing on the date hereof, whether or not foreseeable), the effect of which, in either case described in clause (i) and (ii), is, in the judgment of the Authorized Representative, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Bonds on the terms and in the manner contemplated in this Purchase Contract and the Official Statement. (e) An event• described in Paragraph 6(j) hereof occurs which, 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 Bonds. (f) A general banking moratorium shall have been declared by authorities of the United States, the State ofNew York or the State of Texas. (g) A lowering of the rating of" Aa" and "AA", initially assigned to the Bonds by Moodys and S&P, respectively, shall occur prior to the Closing. 10. Expenses. (a) The City shall pay out of the bond proceeds all expenses incident to the issuance of the Bonds, including but not limited to: (i) the cost of the preparation, printing and distnoution of the Preliminary Official Statement and the Official Statement; (ii) the cost of the 9 No Text · . .. • preparation and printing of the Bonds; (tii) the fees and expenses ofBond Counsel to the City~ (iv) the fees and disbursements of the City's accountants, advisors, and of any other experts or consultants retained by the City including the fee of Ernst & Young LLP for the preparation of the verification report relating to the refimding; 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 Bonds; (li) the cost of the preparation and printing of all the underwriting documents; and (iii) the fee ofMcCall, Parkhurst & Horton L.L.P. for such firm's opinion required by Paragraph 8(t)(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., S9S6 Sherry Lane, Suite 1900, Dallas, Texas 7S22S, Attention: Alan Scarisbrick. 12. Parties in Interest. This Purchase Contract is made solely for the benefit of the City and , the Underwriters (mcluding 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 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 Bonds 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 tcnnination of this Purchase Contract. [The remainder of this page is intentionally blank.] 10 No Text 13. 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 9th day of January, 1997 Very truly yours, Morgan Keegan & Co., Inc. Artemis Capital Group, Inc. Estrada IDnojosa & Company, Inc. By: Morgan Keegan & Co., Inc. Authorized Representative By: R-f_llvt,~ Title: ..... kf .......... f? __________ _ By: ----:;;.._-t+;IH---"--',__ _______ _ Mayor City of Lubbock, T (CITYSEAL) Attest: 11 r : \ \ I ; I'' r \ EXHIBIT A OFFICIAL STATEMENT No Text 'l EXHIBITB OPINION OF THE CITY ATTORNEY Morgan Keegan & Co., Inc. Artemis Capital Group, Inc. Estrada Hinojosa & Company, Inc. c/o Morgan Keegan & Co., Inc. S9S6 Sherry Lane, Suite 1900 Dallas, Texas 7S22S = Ladies and Gentlemen: February 13, 1997 I am the City Attorney for the City of Lubbock, Texas (the "City") and have acted as such in connection with the issuance of "City of Lubbock, Texas General Obligation Refunding Bonds, Series 199711, in the aggregate principal amount of$17,S30,000 (the "Bonds"), pursuant to the provisions of an ordinance duly adopted by the City Council of the City on January 9, 1997 (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: l. 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 Bonds, or the collection or application of the ad valorem taxes pledged to pay the principal of and interest on the Bonds, or ( c) contesting or affecting the validity or enforceability of the Bonds, the Ordinance, the Purchase Contract or the Escrow Agreement, ( d) contesting the powers of the City or any authority for the issuance No Text l ; ~ of the Bonds, or the adoption of the Ordinance, or (d) which would have a material and adverse effect on the financial condition 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, No Text • FIRST READING Item No. 33 December 19, 1996 j ORDINANCE 9959 SECOND READING Item No. 4 · January 9, 1997 A RESOLUTION providing for the redemption of certain outstanding obligations of the City; and resolving other matters incident and related to the redemption of such obligations. WHEREAS, pursuant to ordinances passed and City Council of the City of Lubbock, Texas, described obligations were duly authorized to be currently outstanding, to wit: adopted by the the following issued and are (1) city of Lubbock, Texas, General Obligation Bonds, Series 1987, dated April 15, 1987, maturing on February 15 in each of the years 2005 through 2007, and aggregating in principal amount $900,000; (2) city of Lubbock, Texas, General Obligation Bonds, Series 1989, dated August 15, 1989, maturing on February 15 in each of the years 2000 through 2009, and aggregating in principal amount $3,745,000; (3) City of Lubbock, Texas, certificates of Obligatlon, series 1989, dated August 15, 1989, maturing on February 15 in each of the years 2000 through 2009, and aggregating in principal amount $1,900,000; (4) city of Lubbock, Texas, General Obligation Bonds, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2003 through 2009, and aggregating in principal amount $700,000; (5) city of Lubbock, Texas, combination Tax and Waterworks System Subordinate Lien Revenue certificates of Obligation, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2003 through 2009, and aggregating in principal amount $5,645,000; (6) City of Lubbock, Texas, Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue Certificates of Obligation, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2003 through 2009, and aggregating in principal amount $1,420,000; and No Text • (7) City of Lubbock, Texas, General Obligation Refunding Bonds, Series 1992, dated April 1, 1992, maturing on February 15 in each of the years 2001 through 2003, and aggregating in principal amount $2,550,000; AND WHEREAS, the above identified obligations were authorized, issued, sold and delivered subject to the right and authority of the City to redeem the same prior to maturity, as provided in the respective authorizing ordinances and in said obligations; and WHEREAS, in connection with the advance refunding of the above described obligations, the Council hereby finds and determines that obligations of the respective series should be redeemed prior to their maturities on the dates and in the manner hereinafter provided and in accordance with the requirements - prescribed therefor and notice of redemption of such obligations should be approved and authorized to be given at this time by the Council; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK, TEXAS: SECTION 1: The bonds of that series known as "City of Lubbock, Texas, General Obligation Bonds, Series 1987", dated April 15, 1987, maturing in the years 2005 through 2007, and aggregating in principal amount $900,000, shall be redeemed and the same are hereby called for redemption on February 15, 1997, at the price of par and accrued interest to the date of redemption. The city Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to bondholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank, National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such bonds; such suggested form of notice of redemption being attached hereto as Exhibit A and incorporated herein by reference as a part of this resolution for all purposes. SECTION 2: The bonds of that series known as "City of Lubbock, Texas, General Obligation Bonds, Series 1989", dated August 15, 1989, maturing in the years 2000 through 2009, and aggregating in principal amount $3,745,000, shall be redeemed and the same are hereby called for redemption on February 15, 1999, at the price of par and accrued interest to the date·of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to bondholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying -2- No Text agent/registrar to Texas Commerce Bank, National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such bonds; such suggested form of notice of redemption being attached hereto as Exhibit Band incorporated herein by reference as a part of this resolution for all purposes. SECTION 3: The certificates of obligation of that series known as "City of Lubbock, Texas, Certificates of Obligation, Series 1989", dated August 15, 1989, maturing in the years 2000 through 2009, and aggregating in principal amount $1,900,000, shall be redeemed and the same are hereby called for redemption on February 15, 1999, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to certificateholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas) , in accordance with the redemption provisions applicable to such obligations; such suggested form of notice of redemption being attached hereto as Exhibit c and incorporated herein by reference as a part of this resolution for all purposes. SECTION 4: The bonds of that series known as "City of Lubbock, Texas, General Obligation Bonds, Series 199111 , dated May 15, 1991, maturing in the years 2003 through 2009, and aggregating in principal amount $700,000, shall be redeemed and the same are hereby called for redemption on February.15, 2001, at the price of par and accrued interest to the date of redemption. The city Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to bondholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such bonds; such suggested form of notice of redemption being attached hereto as Exhibit D and incorporated herein by reference as a part of this resolution for all purposes. SECTION 5: The certificates of obligation of that series known as "City of Lubbock, Texas, Combination Tax and Waterworks system Subordinate Lien Revenue certificates of Obligation, Series 1991", dated May 15 1991, maturing in the years 2003 through 2009, and aggregating in principal amount $5,645,000, shall be redeemed and the same are hereby called for redemption on February 15, 2001, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to certificateholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor -3- No Text • paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas), in accordance with the redemption provisions applicable to such obligations; such suggested form of notice of redemption being attached hereto as Exhibit E and incorporated herein by reference as a part of this resolution for all purposes. SECTION 6: The certificates of obligation of that series known as "City of Lubbock, Texas, Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue Certificates of Obligation, Series 1991", dated May 15, 1991, maturing in the years 2003 through 2009, and aggregating in principal amount $1,420,000, shall be redeemed and the same are hereby called for redemption on February 15, 2001, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to certificateholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas commerce Bank National Association, Lubbock, Texas) , in accordance with the redemption provisions applicable to such obligations; such suggested form of notice of redemption b~ing attached hereto as Exhibit F and incorporated herein by reference as a part of this resolution for all purposes. SECTION 7: The bonds of that series known as "City of Lubbock, Texas, General Obligation Refunding Bonds, Series 199211 , dated April 1, 1992, maturing in the years 2001 through 2003, and aggregating in principal amount $2,550,000, shall be redeemed and the same are hereby called for redemption on February 15, 1999, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this resolution, together with a suggested form of notice of redemption to be sent to bondholders, with Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas) , in accordance with the redemption provisions applicable to such bonds; .such suggested form of notice of redemption being attached hereto as Exhibit G and incorporated herein by reference as a part of this resolution for all purposes. SECTION a: The redemption of the obligations described above being associated with the advance refunding of such obligations, the approval, authorization and arrangements herein given and provided for the redemption of such obligations on the redemption dates designated therefor and in the manner provided shall be irrevocable upon the issuance and delivery of the "City of Lubbock, Texas, General Obligation Refunding Bonds, Series 1997", dated January 15, 1997; and the City Secretary is hereby authorized and directed to make all arrangements necessary to -4- No Text notify the holders of such obligations of the City's decision to redeem such obligations on the dates and in the manner herein provided and in accordance with the ordinances authorizing the issuance of the obligations. · PASSED AND ADOPTED, this January 9, 1997. ATTEST: (City .. S~al) -5- No Text ,. EXHIBIT A NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS SERIES 1987 DATED APRIL 15, 1987 NOTICE IS HEREBY GIVEN that all bonds of the above series maturing on and after February 15, 2005 and aggregating in principal amount $900, ooo have been called for redemption on February 15, 1997 at the redemption price of par and accrued interest to the date of redemption, such bonds being identified as follows: Year of Maturity 2005 2006 2007 Principal Amount Outstanding $300,000 300,000 300,000 ALL SUCH BONDS shall become·due and payable on February 15, 1997, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said bonds shall be paid to the registered owners of the bonds only upon presentation and surrender of such bonds to Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce BanJt National Association, Lubbock, Texas). THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for the redemption of said bonds and pursuant to a resolution by the City Council of the City of Lubbock, Texas. NORWEST BANK TEXAS, NATIONAL ASSOCIATION, Dallas, Texas Address: 1601 Elm Street, suite 4300 Dallas, Texas 75201 •, .. • EXHIBIT B NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS SERIES 1989 DATED AUGUST 15, 1989 NOTICE IS HEREBY GIVEN that all bonds of the above series maturing on and after February 15, 2000 and aggregating in principal amount $3,745,000 have been called for redemption on February 15, 1999 at the redemption price of par and accrued interest to the date of redemption, such bonds being identified as follows: Year of Maturity 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Principal Amount outstanding $370,000 375,000 375,000 375,000 375,000 375,000 375,000 375,000 375,000 375,000 ALL SUCH BONDS shall become due and payable on February 15, 1999, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said bonds shall be paid to the registered owners of the bonds only upon presentation and surrender of such bonds to Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas). THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for the redemption of said bonds and pursuant to a resolution by the City Council of the City of Lubbock, Texas. NORWEST BANK TEXAS, NATIONAL ASSOCIATION, Dallas, Texas Address: 1601 Elm street, suite 4300 Dallas, Texas 75201 . . •' .. EXHIBIT C NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, CERTIFICATES OF OBLIGATION SERIES 1989 DATED AUGUST 15, 1989 NOTICE IS HEREBY GIVEN that all certificates of obligation of the above series maturing on and after February 15, 2000 and aggregating in principal amount $1,900,000 have been called for redemption on February 15, 1999 at the redemption price of par and accrued interest to the date of redemption, such certificates of obligation being identified as follows: Year of Maturity 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Principal Amount outstanding $190,000 190,000 190,000 190,000 190,000 190,000 190,000 190,000 190,000 190,000 ALL SUCH CERTIFICATES OF OBLIGATION shall become due and payable on February 15, 1999, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said certificates of obligation shall be paid to the registered owners of the certificates of obligation only upon presentation and surrender of such certificates to Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas). . THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for the redemption of said certificates and pursuant to a resolution by the City council of the City of Lubbock, Texas. NORWEST BANK . TEXAS, NATIONAL ASSOCIATION, Dallas, Texas Address: 1601 Elm Street, suite 4300 Dallas, Texas 75201 '• t ,, EXHIBIT D NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS SERIES 1991 DATED MAY 15, 1991 NOTICE IS HEREBY GIVEN that all bonds of the above series maturing on February 15, 2003 through February 15, 2009 and aggregating in principal amount $700, ooo have been called for redemption on February 15, 2001 at the redemption price of par and accrued interest to the date of redemption, such bonds being identified as follows: Year of Maturity 2003 2004 2005 2006 2007 2008 2009 Principal Amount outstanding $100,000 100,000 100,000 100,000 100,000 100,000 100,000 ALL SUCH BONDS shall become due and payable on February 15, 2001, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said bonds shall be paid to the registered owners of the bonds only upon presentation and surrender of such bonds to Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas). THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for :the redemption of said bonds and pursuant to a resolution by the City Council of the City of Lubbock, Texas. NORWEST BANK TEXAS, NATIONAL ASSOCIATION, Dallas, Texas Address: 1601 Elm street, Suite 4300 Dallas, Texas 75201 .. •• EXHIBIT E NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, . COMBINATION TAX AND WATERWORKS SYSTEM SUBORDINATE LIEN REVENUE CERTIFICATES OF OBLIGATION SERIES 1991 DATED MAY 15, 1991 NOTICE IS HEREBY GIVEN that all certificates of obligation of the above series maturing on February 15, 2003 through February 15, 2009 aggregating in principal amount $5,645,000 have been called for redemption on February 15, 2001 at the redemption price of par and accrued interest to the date of redemption, such certificates of obligation being identified as follows: Year of Maturity 2003 2004 2005 2006 2007 2008 2009 Principal Amount outstanding $805,000 805,000 805,000 805,000 805,000 810,000 810,000 ALL SUCH CERTIFICATES OF OBLIGATION shall become due and payable on February 15, 2001, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said certificates of obligation shall be paid to the registered owners of the certificates of obligation only upon presentation and surrender of such certificates to Norwest BanJt Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas Commerce BanJt National Association, Lubbock, Texas). THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for the redemption of said certificates and pursuant to a resolution by the City Council of the City of Lubbock, Texas. NORWEST BANK TEXAS, NATIONAL ASSOCIATION, Dallas, Texas Address: 1601 Elm Street, Suite 4300 Dallas, Texas 75201 No Text ,. EXHIBIT F NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, COMBINATION TAX AND EXHIBITION HALL/AUDITORIUM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION SERIES 1991 DATED MAY 15, 1991 NOTICE IS HEREBY GIVEN that all certificates of obligation of the above series maturing on February 15, 2003 through February 15, 2009 aggregating in principal amount $1,420,000 have been called for redemption on February 15, 2001 at the redemption price of par and accrued interest to the date of redemption, such certificates of obligation being identified as follows: Year of Maturity 2003 2004 2005 2006 2007 2008 2009 Principal Amount outstanding $200,000 200,000 200,000 205,000 205,000 205,000 205,000 ALL SUCH CERTIFICATES OF OBLIGATION shall become due and payable on February 15, 2001, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said certificates of obligation shall be paid to the registered owners of the certificates of obligation only upon presentation and surrender of such certificates to Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas commerce Bank National Association, Lubbock, Texas). THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for the redemption of said certificates and pursuant to a resolution by the City Council of the City of Lubbock, Texas. NORWEST BANK TEXAS, NATIONAL ASSOCIATION, Dallas, Texas Address: 1601 Elm street, Suite 4300 Dallas, Texas 75201 No Text •· EXHIBIT G NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION REFUNDING BONDS SERIES 1992 DATED APRIL 1, 1992 NOTICE IS HEREBY GIVEN that all bonds of the above series maturing on and after February 15, 2001 and aggregating in principal amount $2,550,000 have been called for redemption on February 15, 1999 at the redemption price of par and accrued interest to the date of redemption, such bonds being identified as follows: Year of Maturity 2001 2002 2003 Principal Amount outstanding $865,000 850,000 835,000 ALL SUCH BONDS shall become due and payable on February 15, 1999, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said bonds shall be paid to the registered owners of the bonds only upon presentation and surrender of such bonds to Norwest Bank Texas, National Association, Dallas, Texas (successor paying agent/registrar to Texas commerce Bank National Association, Lubbock, Texas). THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for the redemption of said bonds and pursuant to a resolution by the City Council of the City of Lubbock, Texas. NORWEST BANK TEXAS, NATIONAL ASSOCIATION, Dallas, Texas Address: 1601 Elm Street, Suite 4300 Dallas, Texas 75201 No Text e-~i..a.:~~--J...::..:!li!~.....,i-4-.!¥'!!~-....-q Notary Public in and for Lubbock Count # of the So LUBBOCK AVALANCHE-JOURNAL Morris Communication Corporation FORl\158-10 No Text NEW ISSUE • Book-Entry-Only - OFFICIAL STATEMENT Dated January 9, 1997 ORDINANCE NO. 9959 December 19, 1996 Ratings: Moody's: "Aa" S&P: "AA" See ("Other Information - Ratings" herein) ln the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes wider 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 INSTITimONS $17,530.000 CITY OF LUBBOCK, TEXAS (Lubbock County) GENERAL OBLIGATION REFUNDING BONDS, SERIES 1997 Dated Date: January IS. 1997 Due: February IS. as 1how11 on Inside cover PAYMENT TERMS .•. Interest on the SI 7,530,000 City of Lubbock, Texas, General Obligation Refunding Bonds, Series 1997 (the "Bonds") will accrue from January IS, 1997 (the "Dated Date"), and will be payable August IS and February 15 of each year commencing August IS, 1997, and will be calculated on the basis ofa 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 ("OTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations ofSS,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 Bonds -Book-Entry-Only System" herein. The initial Paying Agent/Registrar is Norwest Bank Texas, N.A., Dallas, Texas (see "The Bonds • Paying Agent/Registrar"). AumoRITY POil lsSUANCE ... The Bonds are issued pursuant to the Constitution and general laws of the State of Texas (the "State"). including particularly Article 717k, Vernon's Annotated Texas Civil Statutes ("VATCS"), as amended, and are direct 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 limits prescribed by law, as provided in the ordinance authorizing the Bonds (the "Ordinance") (see "The Bonds -Authority for Issuance"). PURPOSE .•• The Bonds are being issued to provide funds sufficient, with certain other available funds of the City, to refund $16,860,000 of the City's outstanding debt, including $900,000 General Obligation Bonds, Series 1987, $3,745,000 General Obligation Bonds, Series 1989, $1,900,000 Certificates of Obligation, Series 1989, $5,645,000 Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation, Series 1991, $1,420,000 Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue Certificates of Obligation, Series 1991, $700,000 General Obligation Bonds, Series 1991 and $2,550,000 General Obligation Refunding Bonds, Series 1992 (collectively, the "Refunded Bonds") in order toJower the overall debt service requirements of the City, and to pay the costs associated with the issuance of the Bonds. · SEE MATUJtITY ScllEDULE REVERSE OF Tills PAGE REDEMPTION OmoN ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February IS, 2008, in whole or in part in principal amounts of$S,000 or any integral multiple thereof, on February l S, 2007, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds • Optional Redemption"). 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 Opinion"). 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 th~t the Bonds will be available for delivery through The Depository Trust Company on February 13, 1997. MORGAN KEEGAN & Co., INC. ARTEMIS CAPITAL GROUP, INC. ESTRADA HINOJOSA & COMPANY, INC. ( - MATURITY SCHEDULE Price Price Maturity or Maturity or Amount February 15 Rate Yield Amount February 15 Rate Yield $ 130,000 1998 3.900% 3.900% $ 1,725,000 2004 4.700% 4.800% 140,000 1999 4.150% 4.150% 1,995,000 2005 4.750% 4.900% 695,000 2000 4.250% 4.350% 1,970,000 2006 4.850% 4.950% 1,550,000 2001 4.350%1 4.4500/4 1,950,000 2007 5.750% 5.050% 1,515,000 2002 4.450% 4.550% 1,645,000 2008 5.000% 5.150% 2,585,000 2003 5.000% 4.7000/4 1,630,000 2009 5.000% 5.2500/4 (Accrued Interest from January 15, 1997 to be added) 2 No dealer, broker, salesman or other person has been authorized by the City or the Underwriters to give any iriformation. or to make any representations other than those contained in this Official Statement, and. if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Underwriters. This Official Statement does not constitute an offer to sell Bonds in any jurisdiction to any person to whom it is unlawfal to make such offer in such jurisdiction. Certain iriformation set forth herein has been obtained from the City and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriters. Any iriformation and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this 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. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PR/CFS OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS OFFICIAL STATEMENT SUMMARY ......................... 4 CITY OFFICIALS, STAFF AND CONSULTANTS ..... 6 ELECTED OFFICIALS .................................................... 6 SELECTED ADMINISTRATIVE STAFF ............................. 6 CONSULTANTS AND ADVISORS .................................... 6 INTRODUCTION ............................................................ 7 PLAN OF FINANCING ................................................... 7 THE BONDS ..................................................................... 8 TAX INFORMATION ................................................... 12 TABLE I • VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT .......................................... 14 TABLE 2 • TAXABLE AsSESSED VALUATIONS BY CA"IEGORY ...................................................... 16 TABLE 3A • VALUATION AND GENERAL OBLIGATION DEBT HISTORY ................................................ 17 TABLE3B • DERIVATION OF GENERAL PllRPosE FUNDED TAX DEBT ......................................... 17 TABLE 4 • TAX RATE, LEVY AND COLLECTION HISTORY ......................................................... 17 TABLES -TENLARGESTTAXPAYERS ..................... 18 TABLE6 • TAXADEQUACY .................................... 18 TABLE 7 -ESTIMATED OVERLAPPING DEBT ............ 19 DEBT INFORMATION ................................................. 20 TABLE SA • GENERAL OBLIGATION DEBT SERVICE REQUlREMENTS ............................................... 20 TABLE 88 • DIVISION OF DEBT SERVICE REQUIREMENTS ............................................... 20 TABLE 9 • INTEREST AND SINKING FUND BUDGET PROJECTION .................................................... 21 TABLE 10 -COMPUTATION OF SELF-SUPPORTING DEBT .............................................................. 21 TABLE 11 • AU1HORIZED BUT UNJSSUED GENERAL OBLIGATION BONDS ........................................ 22 TABLE 12-OTIIEROBLIGATIONS ............................. 23 FINANCIAL INFORMATION ..................................... 24 TABLE 13 • GENERAL FUND REVENUES AND EXPENDITURE HISTORY ................................... 24 TABLE 14 • MUNICIPAL SALES TAX HISTORY ......... 25 CAPITAL PROJECTS PROGRAM ................................... 25 3 TABLE 15 • CURRENT INVESTMENTS ........................ 28 TAXMATTERS ............................................................ 30 ~ CONTINUING DISCLOSURE OF INFORMATION 32 OTHER INFORMATION ............................................. 34 RATINGS .................................................................. 34 LmGATION .............................................................. 34 REGISTRATION AND QUALIFICATION OF BONDS FOR SALE ................................................. · •..•••...••. 34 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PuBLIC FUNDS 1N TExAs ................................. 34 LEGAL OPINIONS ...................................................... 34 FINANCIAL ADVISOR ................................................ 3 5 VERIFICATION OF MAmEMATICAL COMPUTATIONS .. 35 UNDERWRITING ....................................................... 35 MISCELLANEOUS ...................................................... 35 SCHEDULE OF REFUNDED B01\'DS ................................................ SCHEDULE I APPEI\'DICES GENERAL INFORMATION REGARDING TIIE CITY ......... A EXCERPTS FROMTIIE ANNuAL FINANCIAL REl'oRT •• B FORM OF BOND COUNSEL'S OPINION ..•...• : ................ C The cover pages hereof, this page, the appendices included herein and any addenda. supplement or amendment hereto, are part of the Official Statement. 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 Bonds 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, County Seat of Lubbock County, is a political subdivision and municipal corporation of the State, located in Lubbock County, Texas. The City covers approximately I04 square miles and has an estimated 1996 population of 193,064 (see "Introduction • Description of City"). THE BONDS .................................. The Bonds are issued as $17,530,000 General Obligation Refunding Bonds, Series 1997. The Bonds are issued as serial bonds maturing February 15, 1998 through February 15, 2009 (see "The Bonds -Description of the Bonds"). PAYMENT OF INTEREST .............. Interest on the Bonds accrues from January 15, 1997, and is payable August 15, 1997, and each February 15 and August 15 thereafter until maturity or prior redemption (see "The Bonds -Description of the Bonds" and "The Bonds• Optional Redemption"). AumORITY FOR lsSUANCE.......... The Bonds are issued pursuant to the general laws of the State, including particularly Article 717k, VA TCS, and an Ordinance passed by the City Council of the City ( see "The Bonds - Authority for Issuance"). SECURITY FOR TIIE BONDS .......... The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property located within the City (see "The Bonds -Security and Source of Payment"). OPTIONAL REDEMPTION .. ; .......... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2008, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2007, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds -Optional Redemptior,"). TAX EXEMPTION .......................... In the opinion of Bond Counsel, the interest on the Bonds 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, together with certain available City funds, will be used to provide funds sufficient to refund $16,860,000 of the City's outstanding debt, including $900,000 General Obligation Bonds, Series 1987, $3,745,000 General Obligation Bonds, Series 1989, $1,900,000 Certificates of Obligation, Series 1989, $5,645,000 Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation, Series 1991, $1,420,000 Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue Certificates of Obligation, Series 1991, $700,000 General Obligation Bonds, Series 1991, and $2,550,000 General Obligation Refunding Bonds, Series 1992 in order to lower the overall debt service requirements of the City and to pay the costs associated with the issuance of the Bonds. RATINGS ..................................... Moody's Investors Service, Inc. ("Moody's") has assigned to the Bonds and the City's outstanding tax-supported debt a rating of "Aa" and Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P") has assigned to the Bonds and the City's outstanding tax-supported debt a rating of "AA". The City also has one issue outstanding which 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 Bonds will be initially registered and delivered only to Cede & C9., the nominee of DTC pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5:ooo or integral multiples thereof. No physical delivery of the Bonds witl be made to the beneficial 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 4 Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members ofDTC for subsequent payment to the beneficial owners of the Bonds (see "The Bonds -Book-Entry-Only System"). PAYMENT REcoRD. ..... ... . . ... . .. ... . The City has never defaulted in payment of its indebtedness. SELECTED FINANCIAL INroRMATION Fiscal Year Ended 9-30 1992 1993 1994 1995 1996 1997 Estimated City Population Cl) 187,493 187,981 190,038 191,020 193,064 193,064 (3) Taxable Assessed Valuation $ 4,741,607,780 4,667,750,168 4,910,763,048 5,087,312,020 5,399,356,462 5,567,072,641 (1) Source: Estimates by City of Lubbock, Texas. (2) Does not include self-supporting debt. Per Capita General Taxable Purpose Assessed Funded Valuation Tax Debt (2) $ 25,290 $ 43,593,202 24,831 39,585,305 25,841 55,909,058 26,632 58,085,015 27,967 67,438,562 28,835 61,728,035 (3) No official estimate has yet been made for 1997, this figure used for illustration only. (4) Projected; includes the Bonds and excludes 1he Refunded Bonds. (5) In process of collection. (4) Per Capita General Purpose Funded Tax Debt $ 233 211 294 304 349 320 GENERAL FUND CONSOLIDATED STATEMENT SUMMARY Ratio General Purpose Funded Tax Debt to Taxable Assessed Valuation 0.92% 0.85% 1.14% 1.14% 1.25% (4) 1.11% (4) Fiscal Year Ended September 30, 1996 1995 Fund Balance at Beginning of $ 17,655,263 $ 14,746,780 Year Total Revenues and Transfers 75,697,081 71,851,128 Total Expenditures and Transfers 75,679,959 68,942,645 Fund Balance at End of Year $ 17,672,385 $ 17,655,263 Less: Reserves and Designations (4,974,060) (701,640) Undesignated Fund Balance $ 12,698,325 $ 16,953,623 For additional information regarding the City, please contact: Ms. Anna Mosqueda Mr. Joe W. Smith Executive Director 1994 $ 12,385,233 68,925,208 66,563,661 $ 14,746,780 (1,056,628) $ 13,690,152 1993 $ 10,801,437 64,775,630 63,191,834 $ 12,385,233 (1,254,118) $ 11,131,115 Mr. Vince Viaille Principal %of Total Tax Collections 99.38% 99.73% 100.65% 100.63% 100.03% NIA CS> 1992 $ 9,848,110 62,071,172 61,117,845 $ 10,801,437 (1,274,992) $ 9,526,445 Director of Financial Services City of Lubbock P. 0. Box2000 or First Southwest Company P. 0. Box 2754 or First Southwest Company l 00 l Main Street Lubbock, Texas 79457 (806) 767-2015 Abilene, Texas 79604-2754 (915) 672-8432 s Suite 802 Lubbock, Texas 79401 (806) 749-3792 CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS City Council Vacant (I) Length of Service Term Expires Occupation Mayor Alex "Ty" Cooke Mayor Pro Tern and Councilmember, District 6 Victor Hernandez Councilmember, District l T. J. Patterson Councilmember, District 2 Vacant (1) Councilmember, District 3 Max Ince Councilmember, District 4 Randy Neugebauer Councilmember, District 5 4 Years 2 Years 12 Years 4 Years 4 Years (I) Special election to be held January 18, 1997 to fill vacant seats. SELECTED ADMINISTRATIVE STAFF Name Position Bob Cass City Manager Anita Burgess City Attorney Kaythie Darnell City Secretary Gavino Sotelo First Assistant City Manager Debra Forte Assistant City Manager Anna Mosqueda Director of Financial Services Betsy Bucy Finance Manager Jimmy Rodriguez Chief Accountant CONSULTANTS AND ADVISORS May, 1998 May,2000 Business May, 1998 Attorney-at-Law May, 2000 Co-Publisher May, 1998 May,2000 Insurance Agent May, 1998 Land Development Length of Length of Employment in Employment with Current Position City ofLubbock September, 1992 April, 1976 December, 1995 December, 1995 September, 1996 September, 1996 March, 1995 March, 1995 January, 1995 January, 1995 December, 1994 November, 1989 February, 1996 January, 1985 July, 1996 July, 1991 Total Government Service 20 Years 1 Year 14 Years 24 Years 18 Years 7 Years 11 Years 5 Years Auditors ....................................................................................................................... Robinson Burdette Martin & Cowan, L.L.P. Lubbock, Texas Bond Counsel ........................................................................................................................................ Fulbright & Jaworski L.L.P. Dallas, Texas Financial Advisor ...................................................................................................................................... First Southwest Company Abilene and Lubbock, Texas 6 OFFICIAL STATEMENT RELATINGTO $17,530,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 1997 INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $17,530,000 City of Lubbock, Texas, General Obligation Refunding Bonds, Series 1997. Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Ordinance adopted on the date of sale of the Bonds which authorized the issuance of the Bonds, except as otherwise indicated herein. There follows in this Official Statement descriptions of the Bonds 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. DESCRJPTION OF fflE CITY ••• The City, County Seat of Lubbock County, 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 year. Each of the six members of the City Council resides in a separate single-member district and is elected by the qualified voters of this district for a four year tenn. The terms of three members of the City Council expire each even 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, 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, while the estimated 1996 population is 193,064. The City covers approximately 104 square miles PLAN OF FINANCING PURPOSE . • • The Bonds are being issued to provide funds sufficient, with certain other available funds of the City, to refund $16,860,000 of the City's outstanding debt, including $900,000 General Obligation Bonds, Series 1987, $3,745,000 General Obligation Bonds, Series 1989, $1,900,000 Certificates of Obligation, Series 1989, $5,645,000 Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation, Series 1991, $1,420,000 Combination Tax and Exhibition HalVAuditorium (Limited Pledge) Revenue Certificates of Obligation, Series 1991, $700,000 General Obligation Bonds, Series 199 l and $2,550,000 General Obligation Refunding Bonds, Series 1992 (collectively, the "Refunded Bonds") in order to lower the overall annual debt service requirements of the City, and to pay the costs of issuance of the Bonds. See Schedule I for a detailed listing of the Refunded Bonds and their respective call dates at par. REFUNDED BoNDS ... The principal and interest due on the Refunded Bonds are to be paid on the scheduled interest payment dates and the respective redemption dates of such Refunded Bonds, from funds to be deposited pursuant to a certain Escrow Agreement (the "Escrow Agreement") between the City and Norwest Bank Texas, N.A., Dallas, Texas (the "Escrow Agent"). The Ordinance provides that from the proceeds of the sale of the Bonds, the City will deposit with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Bonds on their respective redemption dates. Such funds will be held by the Escrow Agent in a special escrow account (the "Escrow Fund") and used to purchase direct obligations of the United States of America (the "Federal Securities"). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the · principal of and interest on the Refunded Bonds. Ernst & Young L.L.P ., a nationally recognized accounting firm, will verify at the time of delivery of the Bonds to the Underwriters the mathematical accuracy of the schedules that demonstrate the Federal Securities will mature and pay interest in such amounts which, together with uninvested funds, if any, in the Escrow Fund, will be sufficient to pay, when due, the principal of and interest on the Refunded Bonds. Such maturing principal of and interest on the Federal Securities will not be available to pay the Bonds (see "Other Information -Verification of Mathematical Computations"). By the deposit of the Federal Securities and cash, if necessary, with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of all of the Refunded Bonds in accordance with the law. It is the opinion of Bond Counsel that as a result of such defeasance and in reliance upon the report of Ernst & Young L.L.P., the Refunded Bonds will be outstanding only for the purpose of receiving payments from the Federal Securities and any cash held for such purpose by the Escrow Agent and such 7 Refunded Bonds will not be deemed as being outstanding obligations of the City payable from taxes nor for the purpose of applying any limitation on the issuance of debt. · · The City has covenanted in the Escrow Agreement to make timely deposits to the Escrow Fund, from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Bonds, if for any reason, the cash balance on deposit, or scheduled to be on deposit, in the Escrow Fund is insufficient to make such payment. SOURCES AND USES OF FUNos ... The proceeds from the sale of the Bonds together with the City's contribution to the refunding, will be applied approximately as follows: SOURCES OF FUNDS: Principal Amountofthe Bonds Net Reoffering Premium Accrued Interest (01/15/97 to 02/13/97) Cash Contribution by the City Total Sources of Funds USES OF FUNDS: Deposit to Escrow Fund Deposit to Interest and Sinking Fund Underwriter's Discount Costs of Issuance Rounding Total Uses of Funds THE BONDS $ 17,530,000.00 31,495.50 66,248.58 610,000.00 $ 18,237,744.08 $ 17,930,253.19 66,248.58 122,710.00 115,000.00 3,532.31 $ 18,237,744.08 DESCRIPTION OF THE BONDS ... The Bonds are dated January 15, 1997, and mature on February 15 in each of the years and in the amounts shown on the inside 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 August 15 and February 15, commencing August 15, I 997. The definitive Bonds will be issued only in fully registered fonn 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 ("OTC") pursuant to the Book-Entry-Only System described herein. 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 OTC for subsequent payment to the beneficial owners of the Bonds. See "Book-Entry- Only System" herein. The Bonds will be issued only in fully registered fonn 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 ("OTC") pursuant to the Book-Entry-Only System described herein. 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 ofDTC for subsequent payment to the beneficial owners of the Bonds. 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 Article 717k, V ATCS, as amended, and by the Ordinance passed by the City Council. SECURITY AND SOURCE 011 PAYMENT ... All taxable property within the City is subject to a continuing direct annual ad valorem tax levied by the City sufficient to provide for the payment of principal of and interest on all bonds and other obligations secured by and payable from an ad valorem tax. 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 sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and 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. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all General Obligation debt service, as calculated at the time of issuance. OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2008, in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on February 15, 2007, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds are to be 8 redeemed, the City may select the maturities of Bonds to be redeemed. If less than all the Bonds of any maturity are to be redeemed, the Paying Agent/Registrar (or OTC while the Bonds are in Book-Entry-Only form) shall determine by lot the Bonds, or portions thereof, within such maturity to be redeemed. If a Bond ( or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Bond (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. NOTICE OF REDEMPTION .•• Not less than 30 days prior to a redemption date for the Bonds, 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 Bonds to be redeemed, in whole or in pa.rt, 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 HA VE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HA VINO BEEN SO GIVEN, THE BONDS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE TO ACCRUE. BOOK-ENTRY-ONLY SYSTEM ... The Depository Trust Company ("OTC"), New York, New York, will act as securities depository for the Bonds. The Bonds 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 Bonds in the aggregate principal amount of each such maturity and will be deposited with OTC. 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 17 A of the Securities Exchange Act of J 934. OTC holds securities that its participants ("Direct Participants") deposit with OTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities 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 Bonds under the OTC 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 Bond ("Beneficial Owner") is in tum 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 Bonds 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 Bonds, except in the event that use of the book-entry system described herein is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. OTC has no knowledge of the actual Beneficial Owners of the Bonds; DTCs records reflect only the identity of the Direct Participants to whose accounts such Bonds 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 Bonds within an issue are being redeemed, DTC's practice is to detennine 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 Bonds. 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 Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). 9 Principal and interest payments on the Bonds will be made to DTC. I>TC's practice is to credit Direct Participants' accounts on each payable date in accordance with their respective beddings shown on DTG'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 ~ame." 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 OTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. OTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained,' Bonds 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, Bonds wiH 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 Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners sh,:>Uld be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except ~ 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 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. PAYING AGENT/REGISTRAR ... The initial Paying Agent/Registrar is Norwest Bank Texas, N.A., Dallas, Texas. In the Ordinance, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times·until the Bonds are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the laws of the State of Texas or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds. Upon any change in the Paying Agent/Registrar for the Bonds, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. TR/\NSJi'ER, ExCHANGE AND REGISTRATION ... In the event the Book-Entry-Only System should be discontinued, the Bonds may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner. except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Bonds may be assigned by the execution of an assignment fonn on the respective Bonds or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Bonds will be delivered by the Paying Agent/Registrar, in lieu of the Bonds being t{ansferred or exchanged, at the principal office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Bonds issued in an exchange or transfer of Bonds will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Bonds to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Bonds surrendered for exchange or transfer. See "Book-Entry-Only System" herein for a description of the system to be utilized initially in regard to ownership and transferability of the Bonds. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Bond called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance ofa Bond. RECORD DATE FOR INTEREST PAYMENT ... The record date ("Record Date") for the interest payable on the Bonds 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 Bond 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. · · 10 BONDHOLDERS' REMEDIES ... The Ordinance does not establish specific events of default with respect to the Bonds. Under State law there is no right to the acceleration of maturity of the Bonds upon the failure of the City to observe any covenant under the Ordinance. Although a registered owner of Bonds could. presumably obtain a judgment against the City if a default occurred in the payment of principal of or interest on any such Bonds, 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 valoreni tax sufficient to pay principal of and interest on the Bonds as it becomes due. ·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 Ordinance does not provide for the appointment of a trustee to represent the intere!'.ts of the bondholders upon any failure of the City to perform in accordance with the terms of the 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. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Bonds are qualified with respect to the customary rights of debtors relative to their creditors. .11 TAX INFORMATION ADV ALOREM TAX LA w ... 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 I 00% of its market value and is prohibited from applying any assessment ratios. 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 detennination 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 }aw 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: (I) 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 anned 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 l-d-1), including open-space land devoted to fann 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 }.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 tum 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. EFFECTIVE TAX RA TE AND ROLLBACK TAX RA TE ... 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. Under State law, the tax rate consists of two components: (I) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. As a matter of policy, the City dedicates a portion of its maintenance and operations tax rate to its Economic Development Fund, and such designation is reflected in certain tables herein. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". The City Council may not adopt a tax rate that exceeds the lower of the rollback tax rate or 103% of the effective tax rate until it has held a public hearing on the proposed increase following notice to the taxpayers and otherwise complied with the Property Tax Code. 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 detennine 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 (ac:ljusted) 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 tidditional 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 i.s generally assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September t. 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 I 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. 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°/4 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. CITV 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$16,700; the disabled are also granted an exemption ofSl0,000. The City has not granted any part of the additional exemption of up to 20% of the market value of residence homesteads which may be granted on a local option basis. 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. The City does not pennit split payments, and discounts are not allowed. The City does tax freeport property. The City collects an additional one-eighth cent sales tax for reduction of ad valorem taxes. 13 · 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 amount and tenn of abatement shall be detennined 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 DISTRICT ... Together with other taxing units, the City participates in a Tax Increment District ("TID") pursuant to Article 1066e, v:r.c.s. The TID covers an approximately 0.71 square-mile area which includes part of the central business district. the Overton Addition and the Broadway Corridor of the City. 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 tm for 1986 was $98, I 80,307; the 1996 taxable assessed value of property in the TID is less than the tax base and there is no current tax increment. TABLE 1 -VALUATION, ExEMPTI0NSANDGENERALOBLIGATI0NDEBT _ 1996 Market Valuatiori Established by the Lubbock Central Appraisal District (excluding totally exempt property) (as of 1-1-96) Less Exemptions/Reductions at 100% Market Value: _Residential Homestead Exemptions Disabled Veterans Agricultural/Open-Space Land Use Reductions Tax Abatement Reductions (J) 1996 Taxable Assessed Valuation City Funded Debt Payable from Ad Valorem Taxes General Obligation Debt (as of 12-15-96) (2) The Bonds Total Funded Debt Payable from Ad Valorem Taxes Less: Self Supporting Debt (3) Waterworks System General.Obligation Debt Sewer System General Obligation Debt Solid Waste Disposal System General Obligation Debt · Hotel Occupancy Tax Certificates of Obligation Debt General Purpose Funded Debt Payable from Ad Valorem Taxes (4) General Obligation Interest and Sinking Fund as of 9-30-96 Ratio Total Funded Debt to Taxable Assessed Valuation Ratio General Purpose FuIJ.ded Debt to Taxable .Assessed Valuation 1996 Estimated Population -193,064 (5) $ $ $ Per Capita 1996 Taxable:Assessed Valuation -$28,835.37 185,924,596 13,I07,824 37,299,672 15,121,802 . 134,903,752 17,530,000 24,761,027 55,896,685 2,422,529 1,735,000 Per Capita Total Funded Debt Payable from Ad Valorem Taxes -$789.55 Per Capita General Purpose Funded Debt Payable from Ad Valorem Taxes -$350.24 (I) See above, "Tax Infonnation -Tax Abatement Policy". $5,818,526,535 251,453,894 $5,567,072,641 $ 152,433,752 84,815,241 $ 67,618,511 $ 1,676,182 2.74% L22% (2) The statement of indebtedness does not include $16,860,0QIJ, general Qbli~ation Debt behlg refu~ded. The. statement o(indebtednes,s also does not include outstanding $25;589,965 Electric Light and Power System Revenue Bonds as these are·payable solely from the net revenues of the System. (3) The City provides for debt service on general obligation debt issued to fund Waterworks System improvements, Sewer System improvements. Solid Waste Disposal System improvements, and 'Hotel ·Occupancy improvements from surplus' revenues of these Systems· (see "Tables SA -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 • Compu~tion of Self-Supporting Debt") 14 "Waterworks System General Obligation Debt" includes $8,410,000 principal amount of the Bonds, $9,901,027 principal amount of outstanding general obligation bonds and $6,450,000 principal amount of outstanding Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation, The City has no outstanding Waterworks System Revenue Bonds but the City has obligated revenues of the Waterworks System to make payments under water supply contracts. "Sewer SyStem General Obligation Deb'r includes $1,140,000 principal amount of the Bonds, $7,996,685 principal amount of outstanding · general obligation bonds and $46,760,000 principal amount of outstanding Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation. The City has no outstanding Sewer System Revenue Bonds. "Solid WaSte Disposal System General Obligation Debt" includes $2,422,529 principal amount of outstanding general obligation debt. The City has no outstanding Solid Waste Disposal System Revenue Bonds. "Hoed Occupancy Tax Certificates of Obligation" includes $1,735,000 principal amount of outstanding general obligation debt. (4) "General Purpose Funded Debt Payable from Ad Valorem Taxes• includes $4,015,000 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. IS TABLE l • TAXABLE AssESSED VALUATIONS BY CATEGORY Taxable Appraised Value for Fiscal Year Ended September 30, 1997 1996 1995 %of %of Category Amount Total Amount Total Amount Real, Residential, Single-Family $ 3,019,393,785 51.89% $ 2,933,814,784 52.0'1°/4 $ 2,754,503,815 Real, Residential, Multi-Family 348, 118,848 5.98% 342,785,637 6.08% 337,977,738 Real, Vacant Lots/Tracts 100,053,738 1.72% 102,325,087 1.82% 99,547,319 Real, Acreage (Land Only) 45,572,096 0.78% 48,457,195 0.86% 45,954,067 Real, Fann and Ranch Improvements 6,933,323 0.12% 11,513,821 0.21% 12,739,995 Real, Commercial and Industrial 1,121,128,529 19.27% 1,090,617,874 19.36% 1,039,190,164 Real, Oil, Gas and Other Mineral Reserves 9,263,830 0.16% 9,722,690 · 0.17% 15,018,920 Real and Tangible Personal, Utilities 167,598,757 2.88% 161,811,254 2.87% 159,462,546 Tangible Personal, Commercial and Industrial 974,209,635 16.74% 903,591,253 16.04% 819,836,742 Tangible Personal, Other 11,028,113 0.19% 9,588,811 0.17% 9,479,831 Real Property, Inventory (l) 15,225,881 0.26% 19,795,564 0.35% 20,069,741 Total Appraised Value Before Exemptions $ 5,818,526,535 100.00% $ 5,634,023,970 100.00% $· 5,313,780,878 Less: Total Exemptions/Reductions 251,453,894 234,667,508 226,468,858 Taxable Assessed Value $ 5,567,072,641 $ 5,399,356,402 $ 5,087,312,020 Taxable Appraised Value for Fiscal Year Ended September 30, 1994 1993 %of %of Category Amount Total Amount Total Real, Residential, Single-Family $ 2,667,702,100 52.03% $ 2,479,218,812 50.80% Real, Residential, Multi-Family 318,160,996 6.21% 304,357,639 6.24% Real, Vacant Lots/Tracts I 00,240,564 1.96% 107,622,442 2.20% Real, Acreage (Land Only) 45,288,322 0.88% 47,932,220 0.98% Real, Farm and Ranch Improvements 11,784,081 0.23% 13,987,009 0.29% Real, Commercial and Industrial 1,020,680,238 19.91% 1,012,208,927 20.74% Real, Oil, Gas and Other Mineral Reserves 22,178,990 0.43% 24,858,113 0.51% Real and Tangible Personal, Utilities 152,961,630 2.98% 149,994,794 3.07% Tangible Personal, Commercial and Industrial 763,606,589 14.89% 717,385,702 14.70% Tangible Personal, Other 8,120,819 0.16% 7,690,791 0.16% Real Property, Inventory 16,600,495 0.32% 15,190,587 0.31% Total Appraised Value Before Exemptions $ 5,127,324,824 100.00% $ 4,880,447,036 100.00% Less: Total Exemptions/Reductions 216,561,776 212,696,868 Taxable Assessed Value $ 4,91 o, 763,048 $ 4,667,750,168 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. 16 ~ T s[. 6.: t.: O.l o.: 19.! 0.~ 3.( 15.4 0.1 0.3 100.0 TABLE 3A -VALUATION AND GENERAL OBLIGATION DEBT HISTORY Ratio of General General Purpose Purpose General Funded Funded Purpose Fiscal Taxable Tax Debt TaxDebt Funded Year Taxable Assessed Outstanding to Taxable ·Tax Debt Ended Estimated Assessed Valuation at End Assessed Per 9-30 Population(l) Valuation (2) Per Capita ofYear(3) Valuation Capita 1992 187,493 $4,741,607,780 $ 25,290 $ 43,593,202 0.92% 233 1993 187,981 4,667,750,168 24,831 39,585,305 0.85% 211 1994 190,038 4,910,763,048 25,841 55,909,058 1.14% 294 1995 191,020 5,087,312,020 26,632 58,085,015 1.14% 304 1996 193,064 5,399,356,462 27,967 67,438,562 1.25% 349 1997 193,064 (4) 5,567,072,641 28,835 61,728,035 (5) 1.11% (5) 320 (5) (I) Source: Estimates by City of Lubbock, Texas. (2) As reported by the Lubbock Central Appraisal District on City's annual State Property Tax Board Reports; subject to change during the ensuing year. (3) Does not include self-supporting debt. (4) No official estimate has yet been made for 1997, this figure used for illustration only. (5) Projected; includes the Bonds and excludes the Refunded Bonds. TABLE 3B • DERIVATION OF GENERAL PURPOSE FllNDED TAX DEBT Fiscal Funded Tax Debt Year Outstanding Ended at End 9/30 of Year 1992 $ 131,813,752 $ 1993 137,358,752 1994 152,693,752 1995 148,178,752 1996 151,763,752 1997 (1) 138,914,318 (I) Projected; includes the Bonds and excludes the Refunded Bonds. TABLE 4 -TAX RATE, LEVY AND COLLECTION HISTORY Fiscal Year Distribution Less: Self-Supporting Funded Tax Debt 88,220,550 97,773,447 96,784,694 90,093,737 84,325,190 77,186,283 Ended Tax General Economic Interest and General Purpose Funded Tax Debt Outstanding at End of Year $ 43,593,202 39,585,305 55,909,058 58,085,015 67,438,562 61,728,035 % Current 9/30 Rate Fund Development Sinking Fund Tax Levy Collections 1992 $0.64000 $0.37540 $ 0.03000 $ 0.23460 $ 30,313,029 97.38% 1993 0.64000 0.40450 0.03550 0.20000 29,879,149 97.53% 1994 0.64000 0.41700 0.02310 0.19990 31,334,334 97.89% 1995 0.64000 0.42540 0.03000 0.18460 32,481,841 98.34% 1996 0.58590 0.39650 0.03000 0.15940 31,634,830 98.19% % Total Collections 99.38% 99.73% 100.65% 100.63% 100.03% 1997 0.58590 0.37771 0.03000 0.17819 32,617,479 In process of collection 17 \ \.., TABLES• TENLARGESTTAXPAYERS 1996 %ofTotal Taxable Taxable Assessed Assessed Name of Taxpayer Nature of Property Valuation Valuation South Plains Mall Regional Shopping Mall $ 80,729,983 1.45% Texas Instruments, Inc. Electronics Manufacturer 80,471,430 1.45% Southwestern Bell Telephone Co. Telephone Utility 76,313,567 1.37% Southwestern Public Service Co. Electric Utility 48,420,929 0.87% Methodist Hospital Hospital and Medical Office Buildings 35,087,086 0.63% Wal-Mart Stores Discount Retail Stores 31,620,399 0.57% Plains Co-op Oil Mill, Inc. Agricltural Processing 30,135,220 0.54% Eagle-Picher Industries, Inc. Heavy Equipment Manufacturing 29,661,742 0.53% Fleming Companies, Inc. Wholesale Groceries 25,564,286 0.46% Paymaster-ADM Agricultural Processing 24,909,559 0.45% $ 462,914,201 8.32% 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 "Plan of Financing -Tax Rate Limitation"). TABLE6 -TAXADEQUACY(l) Maximum Principal and Interest Requirements, All General Obligation Debt, 1997 (l) ........................................................................ , ....................... ; .................... $21,439,990 $0.3971 Tax Rate at 97% Collection Produces ................................................................................................................. $ 21,443,640 Maximum Principal and Interest Requirements, · General Purpose General Obligation Debt, 1997 (1) , .............................................................................................. $ 9,378,998 $0.1737 Tax Rate at 97% Collection Produces ................................................................................................................. $ 9,379,905 (1) See Tables 8A and 8B. 18 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. Total City's 1996 Funded Overlapping Authorized Taxing Jurisdiction City of Lubbock Lubbock Independent School District Lubbock County Lubbock County Hospital District High Plains Underground Water Conservation District No. t Frenship Independent School District Idalou Independent School District Lubbock-Cooper Independent School District New Deal Independent School District Roosevelt Independent School District Total Direct and Overlapping Funded Tax Debt $ Taxable 1996 Assessed Tax Value Rate 5,567,072,641 $ 0.S8590 S,327,440,Sl t l.48700 S,S73,035,736 0.16893 S,573,035,736 0.10340 5,573,035,736 0.00840 406,043,107 l.44800 t,616,898 1.38680 31,992,334 t.57900 36,003 l.46000 S,958,724 t.50000 Ratio of Direct and Overlapping Funded Tax Debt to Taxable Assessed Valuation Per Capita Overlapping Funded Tax Debt Debt AsOf 12-1S-96 $ 67,618,Sll 74,715,969 2,680,000 -0- -0- 36,873,739 2,490,000 8,644,555 -0- -0- Estimated G.O. But Unissued % Tax.Debt Debt As Of Applicable As of 12~15-96 12-15-96 (I) 100.00% $ 67,618,Sll (I) ·s · 3,742,000 98.91% 73,901,565 4,S00,27S 82.94% 2,222,792 500,000 82.94% -0--0- 82.94% -0--0- 64.44% 23,761,437 10,050,000 1.10% 27,390 -0- 15.30"/4 1,322,617 -0- 0.03% -0--0- 4.72% -0--0- $ 168,854,312 3.03% $ 874.60 (1) General Purpose Funded Tax Debt; excludes self-supporting General Obligation Debt (see "Table l • Valuation, Exemptions and General Obligation Debt"). Includes the Bonds and excludes the Refunded Bonds. 19 DEBT INFORMATION TABLE 8A -GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS Fiscal· Year Total Debt %of Ending Outstanding Debt <1> The Bonds Service Principal 9-30 Principal Interest Total Principal Interest Total Requirements Retired 1997 $ 13,519,434 $ 7,423,692 $ 20,943,126 $ -0-$ 496,864 $ 496,864 $ 21,439,990 1998 13,270,076 6,110,582 19,380,658 130,000 849,233 979,233 20,359,891 1999 13,091,493 S,363,995 18,455,488 140,000 843,793 983,793 19,439,281 2000 10,019,986 6,663,100 16,683,086 695,000 826,119 1,521,119 18,204,205 2001 8,549,442 S,688,027 14,237,469 l,SS0,000 777,638 2,327,638 16,565,107 40.00% 2002 7,738,639 4,596,568 12,335,207 l,SIS,000 710,216 2,225,216 14,560,423 2003 6,164,682 3,771,138 9,935,820 2,585,000 611,883 3,196,883 13,132,703 2004 5,950,000 2,987,336 8,937,336 1,725,000 506,720 2,231,720 11,169,056 2005 .5,645,000 2,694,836 8,339,836 1,995,000 418,801 2,413,801 10,753,637 2006 5,625,000 2,407,939 8,032,939 1,970,000 323,648 2,293,648 10,326,587 66.84% 2007 5,605,000 2,122,828 7,727,828 1,950,000 219,813 2,169,813 9,897,641 2008 S,255,000 1,847,944 7,102,944 1,645,000 122,625 1,767,625 8,870,569 2009 4,990,000 1,586,388 6,576,388 1,630,000 40,750 1,670,750 8,247,138 · · 2010 6;110;000 1,297,883 7,407,883 7,407,883 2011 6,115,000 983,050 7,098,050 i,098,050 88.68% 2012 4,900,000 710,100 . 5,610,100 5,610,100 2013 4,870,000 474,125 5,344,125 5,344,125 2014 4,870,000 239,838 5,109,838 5,109,838 2015 1,785,000 81,206 1,866,206 1,866,206 2016 830,000 19,713 849,713 849,713 100.00% $ 134,903,752 $ 57,070,288 $ 191,974,040 $ 17,530,000 $ 6,748,103 $ 24,278,103 $ 216,252,143 (I} "Outstanding Debt" includes self-supporting debt, but does not include the Refunded Bonds or lease/purchase obligations. TABLE 8B -DIVISION OF DEBT SERVICE REQUIR.EMENTS Less: Less: Less: Less: Solid Waste Hotel Waterworks Sewer Disposal Occupancy General Fiscal System System System Tax Purpose Year General General General General General Ending Combined Requirements <O Obligation Obligation Obligation Obligation Obligation 9-30 Principal Interest Total Requirements Requirements Requirements Requirements Requirements 1997 $ 13,519,434 $ 7,920,556 $ 21,439,990 $ 4,296,117 $ 6,699,075 $ 680,680 $ 385,120 $ 9,378,998 1998 13,400,076 6,959,815 20,359,891 4,042,364 6,500,044 487,533 387,775 8,942,175 1999 13,231,493 6,207,788 19,439,281 3,773,006 6,284,329 466,274 387,415 8,527,657 2000 10,714,986 7,489,219 18,204,205 3,409,891 6,029,663 443,797 390,903 7,929,951 2001 10,099,442 6,465,665 16,565,107 3,099,788 5,450,115 416,526 393,663 7,205,015 2002 9,253,639 5,306,784 14,560,423 2,611,453 5,157,067 285,994 6,505,909 2003 8,749,682 4,383,021 13,132,703 2,265,985 4,894,860 1,891 5,969,967 2004 7,675,000 3,494,056 11,169,056 1,710,896 4,659,913 4,798,247 2005 7,640,000 3,113,637 10,753,637 1,642,360 4,471,161 4,640,116 2006 7,595,000 2,731,587 10,326,587 1,551,145 4,304,399 4,471,043 2007 7,555,000 2,342,641 9,897,641 1,480,086 4,136,695 4,280,860 2008 6,900,000 1,970,569 8,870,569 1,189,708 3,659,266 4,021,595 2009 6,620,000 1,627,138 8,247,138 1,106,575 3,497,876 3,642,687 2010 6,110,000 1,297,883 7,407,883 977,024 3,259,615 3,171,244 2011 6,115,000 983,050 7,098,050 926,801 3,128,766 3,042.483 2012 4,900,000 710,100 5,610,100 90,652 2,939,536 2,579,912 2013 4,870,000 474,125 5,344,125 87,356 2,776,974 2,479,795 2014 4,870,000 239,838 5,109,838 84,059 2,645,513 2,380,266 2015 1,785,000 81,206 1,866,206 741,313 1,124,893 2016 830,000 19,713 849,713 849,713 $152,433,752 $ 63,818,391 $ 216,252,143 $ 34,345,866 $ 81,236,180 $ 2,782,695 $ 1,944,876 $ 95,942,526 (1) Excludes the Refunded Bonds and includes the Bonds. 20 TABLE 9 • INTEREST AND SINKING FuND BUDGET PROJECTION General Obligation Debt Service Requirements, Fiscal Year Ending 9-30-97 Fiscal Agent, Tax Collection and Other Uses Total Requirements Sources of Funds Interest and Sinking Fund, 9-30-96 . Budgeted Ad Valorem Tax Receipts Budgeted Transfers From: Water Fund (1) Sewer Fund (1) Solid Waste Fund (I) . Hotel Occupancy Tax Fund (I) Airport Fund • from Passenger Facility Charges ("PFCs") (2) Budgeted Interest Earned Budgeted Appropriations from General Capital Projects Fund Total Sources of Funds Estimated Balance, 9-30-97 (1) See "Table 10 -Computation of Self-Supporting Debt". $ 21,439,990 114,194 $ 21,554,184 $ 1,676,182 9,940,329 4,290,382 3,929,745 680,513 385,120 549,024 153,000 793,000 $ 22,397,295 $ 843,111 (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 Revemie Certificates of Obligation (the "Airport Certificates") in 1993 and 1995 to fund certain approved airport improvements. The outstanding principal balance of the Airport Certificates on 12-15-96 was $4,015,000; debt service on the Airport Certificates is provided from PFC revenues. PFC revenues in fiscal year ending 9-30-96 were $1,793,408. Debt service on other airport general obligation debt (principal balance outstanding at 12-15-96 $7,460,156) is provided from ad valorem taxes. · TABLE 10 -COMPUTATION OF SELF-SUPPORTING DEBT THE WATERWORKS SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-96 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-97 Balance Available for Other Puposes Requirements for System Tax Bonds, Fiscal Year Ending 9-30-97 Percentage of System General Obligation Bonds Self-Supporting $ $ $ 12,198,630 -0- 12,198,630 4,296,117 100.00% (1) Each Fiscal Year the City transfers from net revenues of the Waterworks Enterprise Fund to the General Obligation Interest and Sinking Fund an amount equal to debt service requirements on System general obligation debt. 'The City has no outstanding revenue bonds payable from a lien on the net revenues of the Waterworks System. THE SEWER SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-96 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-97 Baiance Available for Other Puposes Requirements for System Tax Bonds, Fiscal Year Ending 9-30-97 Percentage of System General Obligation Bonds Self-Supporting $ $ $ 10,836,311 -0- 10,836,311 6,699,075 100.00% (1) Through Fiscal Year Ended 9-30-91 it was the City's policy each Fiscal Year to transfer from Sewer Enterprise surplus to the General Fund an amount at least equivalent to debt service requirements o~ Sewer System General Obligation Debt. Jn 1991 the City initiated a major wastewater tteatment and disposal improvement program financed through Texas Water Development Board State Revolving Fund ("SRF") loans totaling $50,600,000. 'These loans are evidenced by three series of Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation (the "Sewer System Certificates•); at 12-15-96 the outstanding principal balance of the Sewer System Certificates was $46,110,000 and the outstanding principal balance of other Sewer System General Obligation Debt was $9,769,163; a total Sewer System General Obligation Debt of $55,879,163. 21 Beginning with Fiscal Year Ended'9-30-92, in connection with the above improvement program, ihe City commenced a multi-year planned shift to direct support of Sewer System General Obligation Debt by transfer from Sewer Enterprise Fund surplus to lhe General Obligation Interest and Sinking Fund. For Fiscal Year Ending 9-30-97 Sewer System General Obligation debt service is $6,699,158; of this budgeted ttansfers from the Sewer Enterprise Fund are $3,929,745 to the Interest and Sinking Fund and $2,766,054 to the General Fund with the $3,359 balance being provided from accumulated Interest and Sinking Funds. The City anticipates !bat this staged shift will continue lhrough Fiscal Year Ending 9-30-2000 wilh total Sewer System General Obligation debt service for each year thereafter to be provided by direct ttansfer from Sewer Enterprise Fund surplus. This multi-year staged shift is necessary to avoid exceeding the City's "rollback tax rate" (see "Tax Rate Limitation") as a portion of the Interest and Sinking Fund Tax Rate formerly levied for Sewer System General Obligation debt service is shifted each year· to the General Fund Tax Rate. The effect of this reallocation, together with a similar reallocation of Waterworks System General Obligation debt service completed in Fiscal Year Ending 9-30-97, can be seen in the distribution of the Tax Rate under "Table 4 -Tax Rate, Levy and Collection History~ and in "Table 9 -Interest and Sinking Fund Budget Projection". THE SOLID WASTE DISPOSAL SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-96 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-97 Balance Available for Other Puposes Requirements for System Tax Bonds, Fiscal Year Ending 9-30-97 · Percentage of System General Obligation Bonds Self-Supporting $ 7,966,279 -0- $ 7,966,279 $ 680,680 100.00% (1) Each Fiscal Year the City transfers from net revenues of the Solid Waste Enterprise Fund to the General Obligation Interest and Sinking Fund an amount equal to debt service requirements on System general obligation debt. THEHOTEL0CCUPANCYTAX (1) Revenue Available, Fiscal Year Ended 9-30-96 Less: Requir-ements for Revenue Bonds, Fiscal Year Ending 9-30-97 Balance Available for Other Puposes Requirements for Tax Bonds, Fiscal Year Ending 9-30-97 Percentage of General Obligation Bonds Self-Supporting $ 2,077,604 -0- $ 2,077,604 $ 385,120 100.00% (1) Each Fiscal Year the City transfers revenues of the Hotel/Motel Special Revenue Fund to the General Obligation Interest and Sinking Fund an amount equal to debt service requirements on Hotel Occupancy Tax obligations. TABLE 11 · AumORIZED BUT UNISSUED GENERAL OBLIGATION BoNDS Amount Date Amount Previously Unissued Purpose Authorized Authorized 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 $ 16,283,000 $ 12,541,000 $ 3,742,000 ANfICIPATED lsSUANCE OF GENERAL OBLIGATION DEBT ... The City expects to issue between $15 million and $20 million in Combination Tax and Waterworks System Surplus Revenue Certificates of Obligation in the summer of 1997 to finance raw water transmission lines. Although the Certificates will be secured by a pledge of ad valorem tax revenues, these Certificates are expected to be self-supporting from revenues of the Water System. 22 TABLE 11 • OmER OBLIGATIONS The City has entered into lease agreements for lhe purpose of acquiring certain properties and equipment. As of 9-30-96 capital leases were as follows: : Fiscal Year Ending ~30 Balance Payable from: 1997 1998 1999 Interest Outstanding Internal Service FWtd Computer F.quipment $ 373,194 $342,094 $ -0-. $ 34,153 $ 681,135 Communications Fund Radio F.quipment $ 592,762 $592,762 $592,762 $ 129,138 $1,649,148 Total $ 965,956 $934,856 $592,762 $ 163,291 $2,330,283 PENSION FUNDS TEXAS MUNICIPAL RETIREMENT SYSTEM (1) ... All pennanent, full-time City employees who are not firefighters are covered by the Texas Municipal Retirement System. The System 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. The System operates independently of its member cities. The City of Lubbock joined the System in 1950 to supplement Social Security. All City employees except firefighters are covered by Social Security. Options offered under the System, and adopted by the City, include current, pdor 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. The City's contribution rate is calculated each year using actuarial techniques applied to experience. The 1996 contribution rate was 12.03%; the 1997 contribution rate is 12.50%. 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, 1995, assets held by the System, not including those of the Supplemental Disability Fund which is "pooled", for the City of Lubbock were $109,679,187. Unfunded accrued liabilities on December 31, 1995 were $30,473,556, which is being amortized over a 25-year period beginning January, 1997. Total contributions by the City to the System for CalendarYear 1995 were $5,011,685. (2) FIREMEN'S RELIEF AND RETIREMENT FUND (I) .•. City of Lubbock firefighters are members of the locally administered Lubbock Firemen's Relief and Retirement 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 detennined on a "fonnula" or a "final salary" plan. Actuarial reviews are perfonned 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 Texas Municipal Retirement System and FICA bears to the rate other employees pay into the Texas Municipal Retirement System and FICA. The City's contribution rate for 1996 was 16.13%. As of December 31, 1995, unfunded pension benefit obligations were $17,989,960 which is being amortized over a 28 year period beginning January I, 1994. (1) For historical information concerning the retirement plans, see Appendix B, "Excerpts from the City's Annual Financial Report" -Note #IU, Subsection E, "Retirement Plans.") (2) Source: Texas Municipal Retirement System, Comprehensive Annual Financial Report for Year Ended December JI, 1995, "City of Lubbock, Texas". 23 FINANCIAL INFORMATION TABLE 13 -GENERAL F'uND•REVENUES AND ~PENDITURE HISTORY Fiscal Years Ended September 30, 1996 1995 1994 1993 1992 Revenues: Ad Valorem Taxes $ 21,776,739 $ 22,024,013 $ 20,211,459 $ 18,780,657 $ 17,689,820 Sales Taxes 22,827,516 20,082,629 19,467,903 17,731,784 16,386,350 Franchise Taxes 5,180,874 5,168,825 5,247,351 4,498,921 4,196,663 Miscellaneous Taxes 171,555 159,171 631,158 561,774 616,722 Licenses and Permits 1,125,809 1,184,292 1,038,772 882,878 753,667 Intergovernmental 1,417,496 1,422,117 1,310,604 1,280,182 1,286,662 Charges for Services 2,725,584 2,420,122 2,326,521 2,160,504 2,287,530 Fines 3,144,431 2,339,288 2,141,811 2,421,749 2,152,145 MisceJJaneous 3,561,238 3,840,458 2,738,708 2,412,629 2,905,332 Operating Transfers <1> 13,765,839 13,210,213 13,810,921 14,044,552 13,796,281 Total Revenues and Transfers $ 75,697,081 $ 71,851,128 $ 68,925,208 $ 64,775,630 $ 62,071,172 Expenditures: General Government $ 3,462,253 $ 3,180,655 $ 2,731,960 $ 2,664,896 $ 2,382,947 Financial Services 1,834,463 1,780,443 2,071,418 2,065,725 2,023,360 Management Services 2,526,119 2,320,670 1,989,477 2,037,481 2,368,479 Development Services 7,041,640 6,716,104 6,662,148 6,397,086 6,593,869. Public_ Safety and Services 50,891,276 48,339,953 47,253,201 45,611,706 44,624,486 Non-Departmental 894,426 963,205 661,181 648,242 11,203 Operating Transfers 9,029,782 5,641,615 5,194,276 3,766,698 3,113,501 Total Expenditures and . Transfers $ 15,619,959 $ 68,942,645 $ 66,563,661 $ 63,191,834 $ 61,117,845 Excess of Revenues and Transfers (in) Over . · Expenditures ( out) $ 17,122 $ 2,908,483 $ 2,361,547 $ 1,583,796 $ 953,327 Fund Balance at Beginning of Year 17,655,263 14,746,780 12,385,233 10,801,437 9,848,110 Fund Balance at End of Year $ 17,672,385 $ 17,655,263 $ 14,746,780 $ 12,385,233 $ 10,801,437 Less: Reserves and Designations <2> {4,974,060~ Q0l,6402 {1,056,628} {1,254,118} p,274,9922 Undesignated Fund Balance $ 12,698,325 $ 16,953,623 . $ 13,690,152 $ 11,131,115 $ 9,526,445 (I) The City's financial policies provide for transfers to the General Fund from the City's enrerprise funds. The policies provide that the water, wasre 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 and an amount representing a payment in lieu of ad valorem truces. The Electric System makes transfers fot the foregoing purposes, and, in addition, makes a transfer reflecting the System's share of street lighting expense. The Sewer System cum:ntly makes a transfer for a portion of Sewer Sysrem General Obligation debt service (see "Table IO -Computation of Self-Supporting Debt, The Sewer Sysrem''). (2) The City's financial policies target a General Fund 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. 24 TABLE 14 -MUNICIPAL SALES TAX HISTORY, The City has adopted the Municipal Sales and Use T~ Act, VATCS, 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 Bonds. 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 V ATCS, 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; the revenues of the tax are not pledged to the payment of the Bonds. Collections and enforcements 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 1% Local Sales and Use Tax, for the years shown, has been: Fiscal Year Ended Total 9-30 Collected (I) 1992 $ 16,386,350 1993 17,731,784 1994 )9,467,903 1995 20,082,629 1996 22,827,516 (I) Excludes bingo tax receipts. (2) Based on population estimates of the City. The sales tax breakdown for the City is as follows: CAPITAL PROJECTS PROGRAM City: City Sales & Use Tax Property Tax Relief County Sales & Use Tax State Sales & Use Tax Total %of AdValorem Tax Levy 54.06% 59.35% 62.13% 61.83% 72.16% Equivalent of $ AdValorem Tax Rate 0.3456 0.3799 0.3964 0.3948 0.4228 1.000¢ 0.125¢ 0.500¢ 6.250¢ 7.875¢ Per Capita(2) $ 87.40 94.33 102.44 105.13 118.24 The City Council adopted a resolution during the 1984-85 budget process establishing permanent capital maintenance. funds for capital projects. 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 9-30-97, the City Council has approved $26,962,318 in expenditures for capital projects. The Capital Projects Funds budget for 1996-1997 also identifies $13,361,950 in future improvements. 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 of Lubbock for each of the fiscal years ended September 30, 1984 through September 30, 1993. The City's 1994 report has been submitted to GFOA to determine its eligibility for another certificate. 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. This should be sufficient to provide financing for necessary projects, unanticipated contingencies, and fluctuations in anticipated revenues. 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: 25 1) Prior to August l, 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 I 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 also received the GFOA's award for Distinguished Budget Presentation for the following budget years: October 1, 1983-88 and October 1, 1990-94. The City will submit the current budget to the GFOA to determine its eligibility for another award. Insurance ... Except for Airport liability insurance, the City is self-insured for liability, workers' compensation, and health benefits coverage. 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 9-30-96 the reserves had the following balances: Reserve for self-insurance -health Reserve for self-insurance -risk management $ $ 1,623,529 1,806,398 The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council and monitored by the Investment Review committee of the City. Both state law and the City's investment policies are subject to change. LEGAL lNvESTMENTS ... The following are eligible investments as authorized by V.T.C.A., Government Code, Section 2256 (the Public Funds Investment Act) as amended: (I) Obligations of the United States or its agencies and instrumentalities, (2) Direct obligations of this state 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 and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, this state 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 recogniz.ed investment rating firm not less than A or its equivalent, (6) Certificates of deposit issued by a state or national bank domiciled in this state or a savings and loan association domiciled in this state and guaranteed by the Federal Deposit Insurance Corporation or its successor, secured by obligations authorized by this subchapter, or secured in any other manner and amount provided by law for deposits of the investing entity, (7) Repurchase agreements with a defined termination date; and secured by obligations authorized by V.T.C.A., Government Code 2256.009 (a)(l); a pledged to the City, held in the City's name, and ·deposited. at the time the investment is made with the City or with a third party selected and approved by the City; placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in this state. The term of any reverse repurchase agreements may nof exceed 90 days after the date the reverse security repurchase agreement is delivered. Money received by the City under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments, but the term of the authorized investments acquired must 26 mature not later than the expiration date stated in the reverse security repurchase agreement, (8) Bankers' acceptances with a stated maturity of 270 days or fewer from the date of its issuance; and liquidated in full at maturity; and eligible for collateral for borrowing from a Federal Reserve Bank; and accepted by a bank organized and existing under the laws of the United States or any state, if the short-term obligations of the bank, or of a bank holding company of which the bank is the· largest subsidiary, are rated not less than A-1 or P-1 or an equivalent rating by at least one nationally recognized credit rating agency, (9) Commercial paper with a stated maturity of 270 days or fewer from the date of its issuance, and rated not less than A-1 or P-1 or an equivalent rating by at least two nationally recognized credit rating agencies or one nationally recognized credit rating agency and fully secured by an irrevocable letter of credit issued by a bank organized and existing under the laws of the United States or any state, (10) No-load money market mutual funds regulated by the Securities and Exchange Commission, and with a dollar- weighted average stated maturity of less than two years, invested exclusively in obligations approved by this subchapter, continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or · its equivalent, and conforms to the requirements ofV.T.C.A., Government Code, Section 2256.016(b) and (c), (11) Investment pools authorized by the City's governing body which invests in eligible securities as authorized by this subchapter. The following investments are prohibited by V.T.C.A., Government Code, Section 2256: (1) Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal, i.e. interest-only collateralized mortgage obligations (IO's), (2) Obligations whose payment represents the principal stream of cash flow· from the underlying mortgage-backed security collateral and bears no interest, i.e. principal-only collateralized mortgage obligations (PO's), (3) Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years, (4) Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index, i.e. CMO · inverse floaters, ( 5) Investment in the aggregate· of more than 80 percent of the entity;s monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in money market mutual funds or mutual funds; investment in .the aggregate of more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in mutual funds; investment of any portion of bond proceeds, reserves, and funds held for debt service, in mutual funds; and investment of its funds or funds under its control, including bond proceeds and reserves and other funds held for debt service, in any one mutual fund in an amount that exceeds 10 percent of the total assets of the mutual fund. In addition to the ineligible securities designated above, the City prohibits any investment in derivatives as defined by the City, money market mutual funds, and mutual funds as well as securities lending and reverse repurchase agreements. 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 and that address investment diversification, yield, maturity, and the quality and capability of investment management, and all City funds must be invested in investments that protect principal which are consistent with the operating requirements of the City and yield the highest possible rate of return. · Under Texas law, City investments must be made "with judgement 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." No person may invest City funds without express written authority from the City Treasurer. The City maintains the minimum amount of cash in its bank accounts to meet daily needs and to protect its principal while receiving the highest yield possible from investing all temporary excess cash. There are five objectives which the Investment Policy addresses. The first objective is to conform to all Federal, State, an<i other legal requirements. The second objective of the investment policy is to preserve the capital in the overall portfolio; each investment transaction seeks to first ensure that capital losses are avoided, whether they be from securities defaults or erosion of market value. The third objective is to maintain sufficient liquidity to meet the City's needs; the City is required to maintain 10% of its portfolio in instruments that mature in 180 days or less. The fourth objective is diversification to avoid incurring unreasonable risks regarding securities owned. The fifth objective is to obtain the highest yield on investments within the other four objectives. The day to day investment activities are performed by the City's Assistant Treasurer. The City may invest to the following limits as a percentage of its total portfolio: 1000/4 in United States Treasury obligations 500/4 in Certificates of Deposit 400/4 in Federal Instrumentalities or Agencies 30% in Repurchase Agreements collateralized by Federal Instrumentalities, or 1000/4 in Repurchase Agreements collatei:alized by United States Treasury obligations Investments in a qualifying Investment Pool (in accordance with Resolution dated May 28, 1992) should be limited to no more than 5% of the total assets in the pool. Diversification protects interest income from the volatility of interest rates and the avoidance of undue concentration of assets in a specific maturity sector; therefore, portfolio maturities are staggered. Securities are also selected which provide for stability of 27 income. The asset allocation:of the portfolio is flexible depending upon the outlook for the economy and the securities market. Should conditions warrant, these guidelines can be exceeded by approval of the Investment Review Committee. TABLE 15 -CURRENT INVESTMENTS As of9-30-96, the City's investible funds were invested in the following categories of investment:. Estimated Fair Book Value Market Value O> Weighted %of Total %of Book Average Type Par Value Value Book Value Value Value Maturity United States Treasury Obligations $ 59,027,914 $ 59,008,215 35.92% $ 59,090,782 100.14%. 20.5 Months United States Agency Obligations· 84,500,000 84,165,963 51.24% 84,137,833 99.97% 5.8 Months Mutual Funds 21,085,752 21,08S,752 12.84% 21,085,752 100.00% I Day $ 164,613,666 $ 164,259,930 100.00% $ 164,314,367 100.03% 10.4Months (I) As determined by the City by reference to published quotations, dealer bids, and comparable information. As of such date, the market value of such investments (as determined by the City by reference to published quotations, dealer bids, and comparable infonnation) 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. During the 1995 Texas legislative session, substantial changes were enacted to the Public Funds Investment Act effective September 1, I 995. Much of the modification was clarification of past sections, however some of the changes will require specific changes to the investment procedures of most Texas entities. Specific changes to the City's policy and reporting procedure were required, however significant portfolio changes were not necessary. The following list highlights the substantive changes to the Act: 1) Specifically addressing the maximum allowable stated maturity of any individual investment and the weighted average maturity of each internal pool in the adopted Investment Policy. 2) Formally adopting an "Investment Strategy Statement" that specifically addresses each fund's investment. That Strategy Statement will describe its objectives concerning: · a) suitability of investment type, b) · preservation and safetY of principal, c) liquidity, d) marketability of each investment, e) diversification of the portfolio, and f) yield. 3) Creating the requirement for the governing body to annually review the Policy and Strategy. 4) 5) 6) 7) 8) 9) Requiring 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 entity's governing body. Requiring the registered principal of firms seeking to sell securities to the entity to : a) receive and review the 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 Requiring an annual internal audit of the management controls on investments and adherence to the entity's Investment Policy; the annual audit can be an internal or an external at the entity's discretion. Requiring specific investment training for the Treasurer, Chief Financial Officer and Investment Officers. Restricting specific mortgage securities as investments, deposit collateral and repurchase agreement securities. Allowing insured and collateralized deposits in savings and loan and credit union institutions domiciled in the State of Texas. " . ' , . . ' •, \' . ·. ' IO) Restricting reverse repurchase agreements to not more than 90 days and restricting the investment or'reverse repurchase agre~ent funds to no gre.ater than the term of the reverse repurc~ ~ent. -28 11) Allowing money market mutual funds without restriction to investment type. 12) Allowing investing up to 15% of the entity's monthly average fund balance in mutual bond funds that are registered, have an average life less than two years and are AAA rated. 13) Requiring local government investment pools that confonn to the new disclosure, rating, net asset value, yield calculation. and advisory board requirements. 14) Requiring a quarterly written report to the entity's governing body that must include: a) detailed position report, b) signatures of all of the Investment Officers, c) beginning period market value and book value, d) additions and changes to market value and book value, e) ending period market value and book value, f) stated maturity dates of each separately invested asset, g) allocation of each investment to a fund or pool, and h) a statement of compliance with the Investment Policy and Strategy. 29 TAXMATTERS TAX ExEMPTION ... The delivery of the Bonds is subject to the opinion of Bond Counsel to the effect that interest on the Bonds 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 opinion is reproduced as Appendix C. The statute, regulations, rulings, and court decisions on which such opinion is based are subject to change. Interest on all tax-exempt obligations, including the Bonds, 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 (REIT), or a real estate mortgage investment conduit (REMIC). 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 Bonds pertaining to the use, expenditure, and investment of the proceeds of the Bonds and will assume continuing compliance by the City with the provisions of the Ordinance subsequent to the issuance of the Bonds. The Ordinance contains covenants by the City with respect to, among other matters, the use of the proceeds of the Bonds, the manner in which the proceeds of the Bonds are to be invested, and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants would cause interest on the Bonds to be includable in the gross income of the owners thereof from date of the issuance of the Bonds. 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 Bonds. Prospective purchasers of the Bonds should be aware that the 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, 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 BONDS ... The initial public offering price of certain Bonds (the "Discount Bonds") may be less than the amount payable on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a substantial amount of the Discount Bonds 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 Bond. A portion of such original issue discount allocable to the holding period of such Discount Bond by the initial purchaser will, upon the disposition of such Discount Bond (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 Bonds 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 Bond, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Bond 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 Sections 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, 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 Bond by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Bond was held) is includable in gross income. Owners of Discount Bonds should consult with their own tax advisors with respect to the determination of accrued original issue discount on Discount Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning ·90 and disposing of Discount Bonds. It is possible that, under applicable provisions governing detennination of state and local income taxes; accrued interest on Discount Bonds 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 (the "Premium Bonds") may be greater than the amount payable on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a substantial amount of the Premium Bonds 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 Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial purchaser must be reduced each year by the amortiz.able bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortiz.able 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 Bond. The amount of premium which is amortiz.able each year by an initial purchaser is detennined by using such purchaser's yield to maturity. Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the detennination of amortimble bond premium on Premium Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Bonds. 31 CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. 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, 8A, 8B and JO through 15 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 1996. 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-l 2. 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 audited financial statements when and if the audit report becomes 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. 0. 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, if such event is material to a decision to purchase or sell Bonds: (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 Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes. Neither the Bonds nor the Ordinance 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 infonnation, 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 infonnation will be available to holders of Bonds only if the holders comply with the procedures and pay the charges established by such infonnation 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 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 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 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 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 Bonds. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in 32 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 U1''DERTAKINGS ••• The City mil! complied in all material respects with all continuing disclos~ agreements made by it in accordance with SEC Rule 1Sc2;.J2. ' · · , 33 OTHER INFORMATION RATINGS Moody's has assigned to the·Bbnds and the City's outstanding tax-supported debt a rating of"Aa" and S&P has assign~d to the Bonds and the City's outstanding tax-supported debt a rating of"AA". The City also has one issue outstanding which is rated "Aaa" by Moody's and "MA" 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 organi:zations 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 either or both companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. 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 BoNDS FOR SALE The sale of the Bonds has 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 Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds 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 PuBuc FuNDs IN TEXAS Section 9 of the Bond Procedures Act provides that the Bonds "shall constitute negotiable instruments, and are investment securities governed by Chapter 8, Texas Uniform Commercial Code, notwithstanding any provisions of law or court decision to the contrary, and are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, savings and Joan associations, insurance companies, fiduciaries, and trustees, and for the sinking fund of cities, towns, villages, school districts, and other political subdivisions or public agencies of the State of Texas". The Bonds are eligible to secure deposits of any public funds of the state, its agencies and political subdivisions, and are legal security for those deposits to the extent of their market value. For political subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (V.T.C.A., Government Code, Chapter 2256), the Bonds 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. No review by the City has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. LEGAL OPINIONS The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Bond and to the effect that the Bonds 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 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. 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 "Plan of Financing" (exclusive of "Use of Proceeds"), "The Bonds" (exclusive of subcaptions "Book-Entiy-Only System" and "Bondholders' Remedies"), "Tax Matters" and "Continuing Disclosure oflnformation" 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 Bonds 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 Bonds, ,such information conforms to the Ordinance. The legal fee to be paid to Bond Counsel for services rendered in connection ,with the issuance of the Bonds is contingent on the sale and delivery of the Bonds. The legal opinion will accompany the Bonds deposited with OTC or will be printed on the Bonds in the event of the discontinuance of the Book-Entiy-Only System. Certain legal matters will be passed upon for the Underwriters by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Counsel to the Underwriters. The legal fee of Underwriters' Counsel is contingent on the sale and delivery of the Bonds. 34 FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Bonds. The Financial Advisor's fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. 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 Bonds, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. VERIFICATIONOFMATHEMATICALCOMPl.JTATIONS The arithmetical accuracy of certain computations included in the schedules provided by First Southwest Company on behalf of the City relating to (a) computation of forecasted receipts of principal and interest on the Federal Securities and the forecasted payments of principal and interest to redeem the Refunded Bonds and (b) computation of the yields of the Bonds and the Federal Securities were examined by Ernst & Young L.L.P., certified public accountants. Such computations were based solely on assumptions and information supplied by First Southwest Company on behalf of the City. Ernst & Young L.L.P. has restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. Such verification shall be based upon information supplied to Ernst & Young L.L.P. by the City and First Southwest Company and shall be relied upon by Bond Counsel in rendering its' opinion with respect to the tax exemption of interest UNDERWRmNG The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City, at an underwriting discount of $122,710.00 from the initial offering prices of the Bonds to the public as shown herein. The 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 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. MISCELLANEOUS The fmancial data and other information contained herein have been obtained from the City's records, audited fmanciaJ 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 resolutions contained in this Official Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further infonnation. Reference is made to ·original documents in all respects. The Ordinance authorizing the issuance of the Bonds 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 ofthe Bonds by the Underwriters. ATTEST: Kaythie Darnell City Secretary 35 Alex "Ty" Cooke Mayor Pro Tem City of Lubbock. Texas THIS PAGE LEFT BLANK INTENTIONAUY > l • SCHEDULE OF REFUNDED :BONDS . Schedule I Gene~I Obligatio~ Bonds, Series _1987 ·Original Interest Original Dated Date Maturity Rates Amount 04/15/87 2-15-2005 6.500% $ 300,000 2-15-2006 6.5000/4 300,000 2-15-2007 6.5000/o 300,000 $ 900,000 The 2005-2007 maturities will be redeemed prior to original maturity on February 15, 1997 at par. General Obligation Bonds, Series 1989 Original Interest Original Dated Date Maturity Rates Amount 08/15/89 2-15-2000 6.750% $ 370,000 2-15-2001 6.8000/4 375,000 2-15-2002 6.100% 375,000 2-15-2003 6.000% 375,000 2-15-2004 6.000% 375,000 2-15-2005 6.000% 375,000 2-15-2006 6.000% 375,000 2-15-2007 6.000% 375,000 2-15-2008 6.000% 375,000 2-15-2009 6.000% 375,000 $ 3,745,000 The 2000-2009 maturities will t:,e redeemed prior to original maturity on February 15, 1999 at par. Certificates of Obligation, Series 1989 Original Interest Original Dated Date Maturity Rates Amount 08/15/89 2-15-2000 6.750% $ 190,000 2-15-2001 6.800% 190,000 2-15-2002 6.1000/4 190,000 2-15-2003 6.000% 190,000 2-15-2004 6.000% 190,000 2-15-2005 6.000% 190,000 2-15-2006 6.000% 190,000 2-15-2007 6.000% 190,000 2-15-2008 6.000% 190,000 2-15-2009 6.000% 190,000 $ 1,900,000 The 2000-2009 maturities will be redeemed prior to original maturity on February 15, 1999 at par. Combulation. Tax and W4terworks System Subordinate Lien Revenue Certificates of Obligation, Serles 1991 Original Dated Date 05/15/91. Ori . al .~ Maturity 2-15-2003 2-15-2004 . 2-15-2005 2-1.5-2006 2-15-2007 2-15-2008 2-15-2009 lnterest Rates 6.5000/4 6.500% 6.500% 6.250% 6.250% 5.750% 5.7500/4 $ $ Amount 805,000 805,000 805,000 805,000 805,000 810,000 810,000 5,645,000 Schedule I continued The 2003-2009 maturities will be redeemed prior to original maturity on February 15, 2001 at par. Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Revenue Certificates of Obligation, Series 1991 Original Dated Date 05/15/91 Original Maturity 2-15-2003 2-15-2004 2-15-2005 2-15-2006 2-15-2007 2-15-2008 2-15-2009 Interest Rates 6.5000/o 6.500% 6.5000/4 6.2500/4 6.2500/o 6.2500/o 5.7500/o Amount $ 200,000 200,000 200,000 205,000 205,000 205,000 205,000 $ 1,420,000 The 2003-2009 maturities will be redeemed prior to original maturity on February .15, 2001 at par. General Obligation Bonds, Series 1991 Original Dated Date 05/15/91 Original Maturity 2-15-2003 2-15-2004 2-15-2005 2-15-2006 2-15-2007 2-15-2008 2-15-2009 Interest Rates 6.5000/4 6.500% 6.5000/4 6.250% 6.2500/o 6.2500/o 5.7500/o Amount $ 100,000 100,000 100,000 100,000 100,000 100,000 100,000 $ 700,000 The 2003-2009 maturities will be redeemed prior to original maturity on February 15, 2001 at par. General Obligation Refunding Bonds, Series 1992 Original Interest Original Dated Date Maturity Rates Amount 04/01/92 2-15-2001 5.9000/o $ 865,000 2-15-2002 6.0000/4 850.000 2-15-2003 6.1000/o 835,000 $ 2,550,000 The 2001-2003 maturities will be redeemed prior to original maturity on February 15, 1999 at par. APPENDIX A GENERAL INFORMATION REGARDING TIIE CITY • Amarillo • Qty of Lubbock Fort Worth• •Dallas • * Austin San Antonio Til1S PAGE LEFf BLANK INTENTIONALLY THE CITY LocATION The City of Lubbock, COunty Seat of Lubbock County, Texas, is located on the South Plains of West Texas. Lubbock is the economic, educational, cultural and medical center of the area. POPl.lLATION Lubbock is the ninth largest City in Texas: 1910 Census 1920Census 1930Census 1940 Census . . 1950Census 1960Census 1970Census 1980Census 1990Census 1994 (Estimated) (I) 1995 (Estimated) (I) 1996 (Estimated) (I) City of Lubbock · (Corporate Limits) · 1,938 4,051 20,520 31,853 71,390 128,691 149,701 173,979 186,206 190,038 191,020 193,064 Metropolitan Statistical Area ("MSA "} (Lubbock County) <1>. 1970 Census 179,295 1980 Census 211,651 1990 Census 222,636 1995 (Estimated) 228,394 1996 (Estimated) 230,838= ( 1) Source: City of Lubbock, Texas AGRICULTURE; BUSINF.SS AND L>mUSTRY 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 1995 cotton production in the 25-county area in and around Lubbock: was 2.60 million bales: 1994 production was 3.09 million bales; estimated 1996 production is 2.81 million bales.<1> 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. Ll.mBOCIC MSA LABOR FORCE EsnMATES 111 Civilian Labor Force Total Employment Unemployment Percent Unemployment October, 1996 (2) 123,000 119,200 3,800 3.1% (1) Source: Texas Employment Commission. (2) Subject to revision. · September, 1996 122,000 117,700 4,300 3.5% . August, 1996 124,000 119,100 4,900 4.0% A-I October, September, August, 1995 1995 1995 121,400 119,700 121,900 117,000 115~200 116;600 4,400 4,500 5,300 3.6% 3.7% 4.4% Estimated non-agricultural wage and salaried jobs in various categories as of October, 1996, were: Manufacturing Construction Transportation Trade 7,600 4,400 6,000 Finance, Insurance and Real ~e Services 32,900 5,100 31,600 24,200 111,800 Government Total Major employers in Lubbock (with 300 employees .or more) are: <1J Company Texas Tech University Lubbock Independent School District , Methodist Hospital TTU Health Sciences Center St. Mary of the Plains Hospital University Medical Center City of Lubbock United Supermarkets Reese Air Force Base Texas Instruments, Incorporated Lubbock State School Wal-Mart Texas Department of Criminal Justice Psychiatric Hospital Furrs Cafeterias U.S. Postal Service Southwestern Bell Telephone Company McDonald's Industrial Molding Corporation Lubbock Regional MHMR Center Caprock Home Health Services ARA Food Service Dillard's Department Stores Pay & Save Corporation Marriott School Services Lubbock Avalanche-Journal State University Public Schools Hospital Product Medical and Allied Health School Hospital Hospital City Government Supermarkets U. S. Military Installation Semiconductors School for Mentally Retarded Discount Retailer Psychiatric Hospital Cafeterias Post Office Telephone Utility Restaurants Manufacturing/Plastic Products Social Services Home Health Care Service Food Broker Department Stores Lowe's Retail Groceries Hotel/Housekeeping and Hotel Newspaper (l) Source: Business Development Suppon Service, City of Lubbock, Tew. (2) Full and part time. &timated Employees September, 1996 6,905 (2) 3,124 2,983 2,292 2,177 2,143 1,808 1,250 1,142 (l) 1,000 980 878 850 (4) 658 500 460 431 427 425 419 385 384 350 350 342 (3) Mililll.ry and civilian as of August, 1996 (see "Government and Military" following for a description of recent actiom of the Base Closure and Realignment Commission relative to the base). (4) See "Tew Department of Criminal Justice ("TDCJ") Prison Psychiatric Hospital" following for more detailed information. EDUCATION -TEXAS TEcH UNIVERSITV :&tablished in Lubbock in 1923, Texas 'Tech University is the fifth largest State-owned University in Texas and had a Fall, 1996, enrollment of 24,717. · J.ccredited by the Southern Association of Colleges -and Schools, the University is a co-educational, State- supported instituti<,m off~ting a bachelor•~ degb:e in 158 majo~ fields, the master's degree in 107 major fields, the doctorate degree in 64 major fields, and a professional de,g~~ in 2 majoi; f~lds (law and 111edicine). / , · · · The University proper is sin.iated on 451 ~cres of the 1,829 acre camp~. and has o~er 160 pennaitent buildings with additional construction in progress. Fall, 1996, total employment was 6,905. Health Sciences Center faculty membership for 1996 is 547 full-time and 122 part-time. Including the Health Sciences Center, the University's operating budget for 1996/97,is $~5~.Q:41,055; book value of physical plant assets, including the Health Sciences Center, is in excess of $1,234,417,417 million. · · A-2 The medical school had an enrollment of 323 for Fall, 1996, riot including residepts;. th~~ w,ere 46 graduate students. The School of Nursing had a Fall, 1996, enrollment of 335 including the Pennian Basin Program, located in Midland/Odessa; there were 76 graduate students. The Allied Health School had.a Fall, 1996, enrollment of 3.13. , ' . '. •'' . , . . ' . Source: Texas Tech University. Ol1mR EoucA'l10N L'WORMA'l10N ,The Lubbock Independent School District, with itn area of 87 .5 square miles, includes over 90% of the City of Lubbock. There are approximately 3,448 total employees. The District operates four senior high schools, ten junior high schools, 40 elementary schools and other educational programs. Scholastic Membership History Ct> School Year 1991-92 · 1992--93 1993-94 1994-95 1995-96 1996-97 Average Daily Attendance 28,090 28,357 28,111 28,089 · 27,799 '· 27,581 (2) Lubbock Christian University, a privately owned, co-educational senior college located in Lubbock, had. an enrollment of 1,124 for the Fall Semester, 1996. 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 . subj~; .Fall Semester, • 1996, enrollment was 1,425 including a major off-campus l~ing center at Reese Air Force Base. 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 440 students; 394 students were in residence. The School's operating budget for 1996/97 is in excess of $18.2 million; there are approximately 882 professional and other employees. · · (1) Source: Superintement's Office, Lubbock Independent School District. (2) Estimated. TRANSPORTATION Scheduled airline transportation at Lubbock ~ionai Airport is furnished by Southwest.Airlines, Continental Atlantic Southeast Airlines, United Express and American F.agle; non-stop :service is provided to Dallas-Fort Worth International Airport, Dallas • Love 'Field, Denver, Bl Paso, Austin, Amarillo and Albuquerque. Passenger boardings for 1995 totaled 611,000 and for fiscal· year ended September 30, 1996, 613,522. 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. Shon-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. 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 Mn.rrARY (IJ Reese Air Force Base ("Reese"), located adjacent to the western boundary of Lubbock. is an undergraduate pilot training as .the 64"' Flying Training Wing. The Base covers over 3,000 acres and has approximately 764 military and 378 civilian and contract personnel as of August, 1996. On March 1, 1995, the Secretary of the Air Force announced that Reese 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. The final A-3 recommendation was submiaedto the President in July, 1995 .. The President and Congress have approved·the recommendations froin.BRAC and Reese is schedulecfto close on October 1, 1997. . . . - As a result, the City is developing a re-use plan for the facilities .. Reese Air Force Base represents approximately 2.6% of the local work: force. While closure of the base will not have a positive impact on the Lubbock economy, the .current gro'Wth in other economic sectors should miniini2:e or neutralize closure of the base. In addition, there could be a positive economic impact from the re-use of the base. State of Texas • . • More than 25 State of Texas boards, departments, agencies and commissions have offices in Lubbock; several of these offices have. ~tiple units or offices. . . . . . Federal Government • . • Several Federal departments and various other administrations and agencies have offices in Lubbock; a Federal District Court is locatedlin the City. (1) Source: City of Lubbock, Texas. TElis DEPARTMENT OF CRIMINAL JUS11CE (''TDCJ") PrusoN PsYCHIATRIC Bosm'AL TDO constructed a SSO-bed Prison Psychiatric Hospital and a 48-bed regional prison hospital on a 1,303 acre site in southeast Lubbock. The total employment'for all facilities will be approximately 591 with an annual estimated payroll of $17 million and an estimated remaining annual operating budget of $27 million. Included in construction of the Hospital is a 400-bed capacity •trustee•· facility to house prison trustees some of whom will work at the hospital. BOSPITAI.S AND MEDICAL CARE There are six hospitals in the City with over 2,200 beds. Methodist Hospital 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 numerous clinics and over 600 practicing physicians and surgeons (M.D.s) plus the Texas Tech University Medical School Staff, and over, 100 _dentists. A radiology center for the treatment of malignant diseases is located in the City. · REcllEATION AND ENTERTAINMENT Lubbock's Mackenzie Regional Park and over 70 City parks and playgrounds provide recreation centers, · shelter buildings, ·~ 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 four lakes and 500 acres of adjacent parkland extending from northwest to southeast Lubbock along the Yellowhouse Canyon. There are several privately-owned public swimming pools and 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-SO acres contain the 300,09() 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: 1 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 ' brandies, the annual Panhandle-South Plains Fair, college and high school football, basketball,-and other sporting' events as well as modern movie theatres. . Lubbock is now the home of a pro~ional ,minor~league basebaH team~ the_ Lutlbock .Crickets. They are. an expansion team in the Texas~Louisiana Baseball League~. In· the 1996 season the. Crickets played 48 .. regular season• games and three playoff games on their homefield, Dan Law Field at Texas Tech University. . . CmlRcHE.S Lub~k has approximately 300 ch~• represent~ more than 25 ¥tomioations. ; .. : ' ; ' 't"' . .., .·, ,'.•,· .. ; . ' . , .• Um..nY 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. EcONOMJC INDICES (ti Year 1991 1992 1993 1994 1995 Building Permits $ 131,333,756 142,921,124 174,346,368 162.427,737 177,744,359 Utility Connections Water 62,267 62,898 (3) 63,006 64,921 65,700 Gas 60,803 60,208 61,448 62,670 62,558 Electric (LP&L On1y)Cll 46,245 47,194 48,526 49,391 50,448 (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 ro approximately 60% of 1he electric customers in 1he City. (3) As of 9-30-92. BUILDING PERMrrs BY CLAsslFICATION O> Residential Permits Commercial, Single Family Multi-Family Total Residential Public Total Calendar No. No. Dwelling No. Dwelling and Odler Building Year Units Value Units <'Zl Value Units ('Z) Value Permits Permits 1991 424 $ 38,574,190 -0-$ ..().. 424 . $ 38,574,190 $ 92,759,566 $ 131,333,756 1992 603 58,530,190 44 (J) 1,743,000 647 60,273,190 82,647,934 142,921,124 1993 673 72,894,295 58 2,313,197 731 75,207,492 99,138,876 174,346,368 1994 686 73,318,480 260 6,271,150 946 79,589,630 82,838,107 162,427,737 1995 5(,() 58,923,555 39 10,404,000 589 69,327,555 108,416,804 177,744,359 (1) Source: City of Lubbock, Texas. (2) Data shown Wider "No. Dwelling Units" is for each individual dwelling unit, and is not for separate buildings; includes duplex, triplex, quadruplex and apartment permits. (3) Includes one retirement center with 40 dwelling units .. TIUS PAGE LEFT BLANK INTENTIONALLY APPENDIXB EXCERPTS FROM TIIE CITY OF LUBBOCK. TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 1996 The information contained in this Appendix consists of excerpts from the City of Lubbock, Texas Annual Financial Report for the Year Ended September 30, 1996, 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 LEFT BLANK INTENTIONALLY FINANCIAL SECTION CITY OF LUBBOCK, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED SEPTEMBER 30, 1996 TABLE OF CONTENTS Auditor's Opinion ............................................................................................................................... 3 General Purpose Financial Statements: Combined Balance Sheet -Primary Government Fund Types, Account Groups and Discretely Presented Component Units ........................................................................................................ 6 Combined Statement of Revenue, Expenditures and Changes in Fund Balances -Primary Government Fund Types, Expendable Trust Funds and Discretely Presented Component Units .................................... 18 Combined Statement of Revenues, Expenditures and Changes in Fund Balances--Budget (GAAP Basis) and Actual -General Fund ............................................................................................................ 21 Combined Statement of Revenues, Expenses and Changes in Equity-- All Proprietary Fund Types and Discretely Presented Component Units ................................................ 22 Combined Statement of Cash Flows -All Proprietary Fund Types . . and Discretely Presented Component Units ...... · ......................... ~ ................................................... 24 Notes to Financial Statements ......................................................................................................•.. 26 (THis PAGE INTENTIONALLY LEFI' BLANK) Robinson Burdette Martin · · &Cowan,L.L.P. ,. certified public accountants . . ' INDEPENDENT AUDITOR'S REPORT Mayor Pro Tempore Alex Cooke Members of City Council City of Lubbock, Texas We have audited the accompanying general-purpose financial statements of the City of Lubbock, Texas, as of and for the year then ended September 30, 1996, 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 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, 1996, 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 a report dated January 3, 1997, on our consideration of the City of Lubbock, Texas internal control structure and a report dated January 3, 1997, on its compliance with laws and regulations. Our audit was made for the purpose of fqrming 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 audit of the general-purpose financial statements and, in our opinion, is fairly presented in all material respects in relation to the general-purpose financial statements taken as a whole. The information listed as Statistical Section and Supplementary Information 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 3, 1997 Lubbock, Texas £✓ J✓ /1.f' ,11 < cpµl,;n J 4 '5u rd 11' f--r e /JJ .:>r ;/,a ;.. . J.. A • .~ 7,r ,.: ' -. ..i General Purpose Financial Statements: .. ,,, ' CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET· PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 1996 With Comparative Totals for September 30, 1995 Governmental Fund Types Special Debt Capital General Revenue Service Projects ~ Pooled cash and cash equivalents $ 11,307,081 $ 2,423,336 $ 1,623,358 $ 45,898,265 Receivables (net, where applicable, of allowance for uncollectibles): Taxes, including interest, penalities, and liens 4,304,391 48,477 272,635 Accounts, notes, and mortgages 344,371 Interest 713,493 15,180 18,994 Due from other funds 4,007,000 Due from other governments 135,699 Due from other agencies 841,459 677,147 Prepaid items 72,160 Advances to other funds 622,272 Inventory, at average cost Restricted assets:· Pooled cash and cash equivalents Accounts receivable Interest receivable Due from other agencies 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 $ 22,347,926 $ 3,164,140 $ 1,914,987 $ 45,898,265 6 Proprietary Fiduciary Fund Types Fund Ttpe Account Groups General . Internal Trust and General Long-term Enterprise Service Agency Fixed Assets Debt $ 18,848,482 $ 795,838 $ 7,988,106 $ -$ -$ 8,824,574 3,847 2,719,807 426,925 2,707,003 59,046 747,073 18,013 - 80,295 3,307,083 98,467 1,786,476 70,844,838 9,880,314 147,326 95,296 66,780 157,771 51,010 19,207 2,210,261 416,211,358 8,642,078 920,406 214,934,833 22,066,284 1,676,182 69,764,374 $ 5431150,385 $ 2410501861 $ 121s22a71s $ 21419341833 $ 711440.556 $ (conUnued) See accompanying notes to financial statements 7 Totals Primary Government {Memorandum Only) 1996 88,884,466 4,625,503 11,892,599 1,174,592 '6,714,003 941,818 1,536,619 152,455 .· · 3;929,355 ts84;9as · so:872;478 162,076 208,781 . 19,207 2,210,261 "640,708,675 22,066,284 1,676,182 69,764,374 939,4241671 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET -PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 1996 With Comparative Totals for September 30, 1995 ~ Pooled cash and .cash equivalents Receivables (net, where applicable, of allowance for uncollectibles): Taxes, including interest, .. , . penalities, and liens : J:\.ccounts, notes, and mortgages Interest Due from other funds Pue from other governments Due from other agencies Prep,aid items Adv,ances to other funds Jnventory, at average cost Restricted assets: ,· Poo~d ~sh and cash equivalents : Accounts receivable : ,lnter,est receivable -. · .Dµe ;from other agencies 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 Component Units Governmental Types Marketing, Market Entertainment, Travel, Lubbock Tourism & Sports, Inc. Inc. $ 550,259 $ 3,568,023 $ 17.,500. 3,001 661,892 3,859 $ 574,619 $ : 4,229,915 $ 8 P~oprietary Types Civic Lubbock . Citibus . Inc. -$ 874,724 29,213 438,681. 909 14,962 197,315 47,696 225,221 4,929,624 30,075 5,565,620 $ · 1,222,800 Component Units Account Groups General Fixed Assets Marketing, Entertainment, Travel, Tourism & Sports, Inc. $ 182,023 $· 1821023 $ $ Totals Component· Units 1996 4,993,006 29,213 456,181 909 3,001 661,892 18,821 245,011 225,221 5,141,722 11i7141977 (continued) Totals Reporting Entity (Memorandum Only) 1996 1995 $ 93,877,472 $ . 86,468,157 4,654,716 4,868,353 12,348,780 . 12,613,835 1,175,501 1,181,697 6,717,004 3;849,000. 1,603,710 1,554,522 .. 1,536,619 618,923 171,276 190,178 3,929,355 4,148,284, 2,129,954 2,072,759. 81,097,699 82,477,808 162,076 419,444 208,781 · 182,005 19,207 ~ 2,210,261 2,210,261 645,850,397 613,688,617 22,066,284 22,453,412 1,676,182 1,757,429 69,764,374 58,168,397 $ 951.199.648 $ 898.923.081 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, 1996 With Comparative Totals for September 30, 1995 Governmental Fund Types Special Debt Capital General Revenue Service Projects Liabilities Accounts and vouchers payable $ 2,238,903 $ 697,180 $ -$ 228,692 Contracts payable 1,638,826 Due to other funds 643,000 Due to other governments 26,483 34,282 Accrued general obligation interest Other accrued liabilities 2,034,764 18,043 Current portion of general obligation bonds and contruction·obligation payable · Payable from restricted assets: Accounts payable Accrued interest Other accrued liabllities Accrued insurance claims Revenue bonds payable ( current portion) Customer deposits Deferred compensation Deferred revenue 375,391 238,805 Advances from other funds Advances from other agencies Accrued insurance· claims Notes and leases payable Construction obligation payable - General obligation bonds (net of current portion)· Revenue bonds payable (net of current portion) Accrued vacatf6n and sick leave · Anticipated landfill closure and postclosure Total liabilities $ 4,675,541 $ 1,392,505 $ 238,805 $ 1,867,518 10 Totals Proprietary Fiduciary Primary Fund Trpes Fund Ti:pe Account Grou~s Government eneral (Memorandum Internal Trust and General Long-term Onl~ Enterprise Service Agency Fixed Assets Debt 199 $ 3,548,239 $ 882,616. $ 655,951 $ - $ - $ 8,251,581 839,573 2,478,399 2,010,000 2,707,003 1,354,000 6,7.14,003 -60,765. 1,020,279 1,020,279 592,698 133,128 46,046 2,824,679 8,499,052 8,499,052 899,385 448,212 1,347,597 641,687 . 641'.687 -3,461 3,461 1,797,048 t,797,048 3,036,537 3,036,537 401,759 401,759 7,064,889 7,064,889 . 614,196 981,071 2,948,284 3,929,355 2,978,107 2,978,107 48,038 2,330,284 2,378,322 21,592,301 21,592,301. 80,853,062 63,131,999 143,985,061 72,285,490 72,285,490 2,354,748 414,767 ~.308,557 11,078,072 7,565,016 7,565,016 $ . 207,168,935 $ 14,642,910 $ 9,120,886 $ • $ 71,440,556 $ 310,547,656 (continued) See accompanying notes to financial statements 11 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET· PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 1996 With Comparative Totals for September 30, 1995 Liabilities Accounts and vouchers payable Contracts payable Due to other funds Due to other governments Accrued general obligation interest Other accrued liabilities Curren~. portion of general obligation bonds and contruction obligation payable Paya,bl.e from restricted assets: Accounts payable Accrued interest Other accrued liabilities Accrued insurance claims Revenue bonds payable {current portion) Cu~tomer deposits Deferred compensation Deferred revenue Advances from other funds Advances from other agencies Accrued insurance claims Notes and leases payable Construction obligation payable 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 Types Marketing, Entertainment, Travel, Tourism & Sports, Inc.· $ 283,213 $ 3,001 4,400 $ 290,614 $ 12 Component Units Market Lubbock Inc. 7,407 $ 86,296 7,404 101,107 $ · Proprietary Types Civic Lubbock, Citibus ln·c. 420,047 $ 738,035 65,902 145,949 15,065 70,000 635,996 $ 819,002 ------'-- Component Units Account Groups General Fixed Assets Totals Totals Marketing, Component Reporting Entity Entertainment, Travel, Units . . (Memorandum Ont~) . . . .. Tourism & Sports, Inc. HH~G 1996 , . .1 95 ... $ $ 1,448,702 $ 9,700,283 $ 10,926,707. 2,478,399 2,487,326 3,001 6,717,004 3,849,000 · 152,198 212,963 r· ·. 26,483 1,020,279 1,193,909 157,753 2,982,432 2,903, 19.4 · · 8,499,052 10,954;883 1,347,597 2,774,578 641,687 · 661,692 ; 3,41:Ml 1,797,048l ~400;593 3,036,537 ~553,733 401,759 373,544 7,064,889 6;725,503 15,065 629,261 842,864 . 3,929,355 . 4,148,28:4 70,000 70,000 70,000 2,978,107 2,978,107 2,378,322 3~163,804 21,592,301 22,355,448 143,985,061 137,918,988 72,285,490 75,313,745 11,078,072 11,205,960 7,565,016. · 6,974,271 $ -$ 1,846,719 $. 312,394,375 $ 313,802,616 (continued) See accompanying notes to financial statements . 13 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET -PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 1996 With Comparative Totals for September 30, 1995 Governmental Fund Types Special Debt Capital General Revenue Service Projects Euad l;gyi~ aad;Otber Credit§ 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 leasing Unreserved Fund balances: · Reserved for prepaid items 72,160 Reserved for advances to other funds 622,272 Reserved for debt service 1,676,182 Reserved for capital projects 44,030,747 Reserved for fine arts center 500,000 Reserved for industrial development Reserved for Federal housing programs Unreserved: Designated for subsequent year's expenditures 4,279,628 147,847 Undesignated 12,698,325 1,123,788 Total retained earnings/fund balances 17,672,385 1,771,635 1,676,182 44,030,747 Total fund equity and other credits 17,672,385 1,771,635 1,676,182 44,030,747 Total liabilities and fund equity and other credits $ 2213471926 $ 311641140 $ 1.914.987 $ 4518981265 14 Proprietary Fund Types Enterprise $ 121,933,400 $ 34,120,103 11,628,767 5,863,159 9,801,302 1,525,537 2,899,727 148,209,455 214,048,050 335,981.450 Internal · Service 4,323,090 $ 602,324 735,854 1,626,058 4,804,354 (2,683,729) 5,084,861 9,407,951 Fiduciary Fund Type Trust and Agency -$ 3,787,539 (385,707) 3,401,832 3,401,'832 Account Grour; . . eneral · General Long-term Fixed Assets Debt - $ 214,934,833 214,934,833 -$ Totals Primary Government (Memorandum On~ 19 126,256,49<5 214,934,833 34,722,427 12~364,621 5,863,159 .. 9,801,302 1,525,537 2,899,727 1,626,058 4,804,354 145,525,726. 72,160 . 622,272 1,676,182 .«;030,747 500,000 3,787,539 4,427,475 13,436,406 287,685,692 628,877,015 · l 543,150,385 $ 24,050,861 $ · 12,522,718 $ · 214,934,833 $ 7'1,440,556 $ 939,424,671 (continued) See accompanying notes to financial statements 15 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET· PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 1996 With Comparative Totals for September 30, 1995 Fund· Equity and Other Credits ContributeR capib:11 Investment 'i~ general fixed assets Retained earnings: Reserved.for capital projects Reserved ·tor facilities/system im~rovements Reserved for system improvements Res~~ed for rate stabilization Reserved for economic development Reserved per bond indentures Reserved for self Insurance -health Reserved for self insurance - risk management R~s~rved for leasing Unreserved Fund batahces: Res~rved for prepaid items Reserved for advances to other funds Reserved for debt service Reserved for capital projects Reserved for fine arts center Reserved for industrial development Reserved for Federal housing programs Unreserved: Designated for subsequent year's expenditures Undesignated Total retained earnings/fund balances Total fund equity and other credits Total liabilities and fund equity and other credits Governmental Types· Marketing, Entertainment, Travel, Tourism & Sports, Inc. $ - $ 3,859 280,146 284,005 284,005 $ 574,619 $ 16 Component Units Market Lubbock Inc. - $ 4,128,808 4,128,808 4,128,808 4,229,915 $ Proprietary · Types Citibus 4,929,624 $ 4,929,624 5,565,620 $ Civic Lubbock, Inc. 225,221 178,577 403,798 403,798 1,222,800 Component Units Account Groups General Fixed Assets Marketing, Entertainment, Travel, Tourism & Sports, Inc. $ 182,023 182,023 $ 1821023 $ $ Totals Component Units 1996 4,929,624 182,023 225,221 178,577 3,859 280,146 4,128,808 4,816,611 9:928;258 · 11i174,977 $ $ Totals Reporting Entity (Memorandum Onl~ 1996 1 5 131,186,114 $ 127,959,729 215,116,856 204,508,845 34,947,648 36,391,139 12,364,621 9,023,613 5,863,159 4,602,621 9,801,302 8,912,700. 1,525,537 1,378,993 2,899,727 8,583,798. 1,626,058 1,196,952 . 4,804,354 3,309,518 117,759 145,704,301 tt:8,373,727 76,019 -79,368 622,272 622,272 1,676,182 1,757,429 44,030,747 33,698,47'4 500,000 1,809,295 3,787,539 3,100,936 ·4,707,621 1,036,153 17,565,214 . 18,657,144 292,502,303 252,651,891 638,805,273 •: 585,120,465 95111991648 $ 898,9231081 See accompanying notes to financial statements 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, 1996 With Comparative Totals for Year Ended September 30, 1995 Revenues: Taxes and special assessments J Licenses and permits · · Intergovernmental Charges for services Fines and forfeits Contributions . Miscellaneous ' Total revenues Expenditures: Current: General gover~ment Financial services Management services· Development services Public safety and services Non-departmental Capital outlay" · Debt service: Principal retirement , . Interest and fiscal Charges Collections , • c , Total expenditures Excess (deficiency) or revenues over (under} expenditures Other financing sources·(uses): Bond proceeds Operating transfers in Operating transfers out Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other uses General. 49,956,684 $ 1,125,809 1,417,496 ·2,725,584 3,144,431 3,561,238' 61,931,242 . 3,462,253 1,834,463 " 2,526,119 7,041,640 · 50,891,276 894,426 . : 66,650,177 (4,718,935) 13,765,839 (9,029,782) 4,736,057 ·17,122 · 17,655,263 Governmental Fund TyPeS Special Revenue. 3,896,826 $ 279,311 4,176,137 8,236,111 594,060 8,830,171 (4,654,034) 2,583,929 (1,874,701) 709,228 Debt Service 8,60(),785 $ 103,859 8,704,644 4,961,453 3,530,502 18,703 8,510,658 193,986 12,447,670 (12,722,903) (275,233) (81,247) 1,757,429 Capital Projects • $ 491,411 134,648 1,926,731 2,552,7!30 234,720 12,184,616 72,011 12,491,347 (9,938,557) 16,505,000 10,386,254 (5,140,689) 21,750,565 11,812,008 32,218,739 Fiduciary Fund Tvpe Expendable Trust Totals Primary Government (Memorandum Only) 1996 • $ 62,454,295 1,125,809 6,406,726 7,824,222 3,216,995 3,144,431 134,648 313,443 6,184,582 6,720,169 84,084,982 6,761,522 168,078 6,929,600 (209,431) 567,312 (11) 567,301 357,870 3,043,962 18,459,886 1,834,463 2,526,119 7,041,640 50,891,276 1,129,146 12,946,754 4,961,453 3,602,513 18,703 103,411,953 (19,326,971) 16,505,000 39,751,004 (28,768,086) 27,487,918 8,160,947 60,391,834 Fund balances at beginning of year Fund balances at end of year $ 17,672,385 $ (3,944,806) 5,716,441 1.771,635 $ 1,676,182 $ 44,030.747 $ 3,401,832 $ 68,552,781 Component Units Governmental T)'.E!es Marketing, Entertainment, Travel, Tourism and Seorts, Inc. $ $ 1,004,557 27,949 1,032,506 1,096,237 21,501 1,117,738 {85,232) Market Lubbock, Inc. $ 6,667,860 70,227 6,738,087 2,609,279 2,609,279 4,128,808 4,128,808 Totals Component Units 1996 1,004,557 6,667,860 98,176 1,no,se3 3,705,516 21,501 3)27,017 4,043,576 4,043,576 369,237 $ (85,232) 369,237 284.005 $ 4.128,808 $ 4.412,813 See accompanying notes to financial statements · 19 $ Totals Reporting Entity (Memorandum Only) 1996 62,454,295 1,125,809 s,82s,ne 3,216,995 3,144,431 6,802,508 6,282,758 91,855,575 22,165,402 1,834,463 2,526,119 7,041,640 50,891,276 1,129,146' 12,968;255' 4,96f;,"53J 3,602;5ll13l t~mai f07',.t3Bt9101 {15,283,395) 16,505,000 39,751,004 (28,768,086) 27,487,918 12,204,523 60,761,071 $ 1995 60,234,506 1,184,292 10,812,251 2,659,321 2,339,288. 86,085 613651613' 83,683,356 13,450,704 UB0,443 2,320,670 8,716,104 48,339,953 963,205 12,955,307 4,331,964 2,820,762 72.169 93-,7.a't,2&1 (10,0671925) 6,690,000 31,247,295 (21,825,485) 16,111,810 6,043,885 54,717,186 S 72,965.594 $ 60,761,071 .: ,' ,,, ..... ':''' ., \ ~·~ ~~ ~, ~. LUBBOCK TEXAS 20 CITY OF L,UBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN : FUND BALANCES,_ BUDGET (GAAP BASIS)AND ACTUAL .· . . GENERAL FUND ·• . Year Ended September30, 1996 · GeneralFund. Budget Actual Revenues: Taxes $ 49,303,875 $ 49,956,684 $ Licenses and permits 1,056,160 1,125,809 lntergovemmental 1,377,337 1,417,496 Charges for services 2,536,454 2,725,584 Fines and forfeits 2,745,000 3,144,431 Miscellaneous 3,492,064 3,561,238 Total revenues 60,510,890 61,931,242 Expenditures: • . Current General government 3,638,268 3,462,253 Financial services 1,854,484 1,834,463 Management services 2,628,242 2,526,119 Development services 7,648,168 7,041,640 . Public safety and services 51,540,940 50,891,276 Non-departmental 794,800 894,426 Total expenditures 68,104,902 66,650;117 Deficiency of revenues under expenditures {7,594,012) (4,7tS;935)) Other financing sources (uses): Operating transfers in 13,701,054 13,765,839 Operating transfers out (8,904,643) (9,029,782) : . Total other financing sources 4,796,411 4,736,057 Excess (deficiency) of revenues and other financing sources over (under) expenditures (2,797,601) 17,122 Fund balance at beginning of year 17,655,263 17,655,263 Fund balance at end of year $ 14,8571662 $ 17,672,385 $ See accompanying notes to financial statements ·. :,:, 21 Variance- favorable (unfavorable) 652,809 69,649 40,159 · 189,130 · 399,431 69,174 , 1,420,352' 176,015 20,021 ,·102,123 , , . 60,6,528,. 649,664 (99,626) 1,454,725 · '2,875,077 64,785 (125,139) (60,354) i 2,814,723 2.814,723 cfrv'or= t:.Gaeock,'tEXAS COMBINED ST{ft EME.t-lt)'.)~i;~GYE}UJES~, iticPENSES. A~,p, CHAN~ES iN 'e'ciUITY ALL PROPRIETARY FUND TYPES AND [)ISCRE:TEL,Y PRt!SENTED COMPONENT UNITS 1 ',, "! -':,J · t l. Yef:!r:En~e9 S~p,t~b~t30, .1~96 ,.. With .C.(.)1Tlparative Totals for Year Ended September 30, 1995 ,:,' 'f .:,• Operating revenues: Ch~~,for services N~ tapS;ii!nd reconnects :,. <: :· Efflu,nt.water sales Commddity sales L~ntltngfees . .. . · Parking Gr~n fees and membership$ Pro shop sales · Rentals Concessions Administrative charges Total operating revenues ·: :-:·. Op~tin'! pxpenses: Peniqnal services Subsidization of Insurance prernidms. lnsuraru::is( . . . . ·, Supplies:, Materials Maintenance Uncoilectible accounts Purchase of fuel and power CQll~ction expense other' services and charges. Depreciation Total operating expenses Operating Income . , ~, -~ ~ Nonope~_!ing revenues (ex~nses): Interest Passenger facility charge Disposition of properties Miscell~oeous Interest and fiscal charges Cash grants and reimbursements Totalnonoperatlngrevenues(expenses) Income (loss) before operating transfers Transfers: Operating transfers In Operating transfers out ·Total transfers In (out) Net income . . . · Depreciation on fixed assets acquired by contributions Retained earnings at beginning of year as previously reported Adjustment (See Note VI.) Retained earnings at beginning of year as restated Retained eamlngs at end of year Contributions at beginning of year as previously reported Adjustment Contributions at beginning of year as restated Capital contributions Depreciation on capital contributions Contributions at end of year Total equity at end of year $ Proprietary Fund Types Totals Primary Government (Memorandum Only) Internal Enterprise Service 1996 117,573,488 $ 121,688 490,646 468,403 728,089 1,433,259 1,335,166 810,699 122,961,438 16,721,694 2,641,185 5,165,217 720,761 31,312,384 1,770,879 16,874,065 12,606,232 87,812,417 35,149,021 5,272,422 1,793,408 416,007 2,174,832 (10,232,865) (576,196) 34,572,825 12,785,904 (24,254,541) (11,468,637) 23,104,188 664,001 189,398;224 881,637 190,279,861 214,048,050 119,451,563 119,451,563 3,145,838 (664,001) 121,933,400 25,218,165 $ 67492 25,285,657 4,942,064 9,618,415 · 186,311 5,899,740 742,599 1,534,300 491 731 .23,415,160 1,870,497 413,166 (22;1108) .. 285,198 · (135,682) 539,874 2,410,371 486,039 (320) 485,719 2,896,090 142,791,653 ;;121,688 490,646 · 468;403 , ' .. 728,089 1,433,259 1,335,166 810,699 67,492 , 148,247,095 21,663,758 9,618,415 2,827,496 5,899,740 5,907,816 720,761 31,312,384 1,770,879 18,408,365 .13,097,963 37,019,518 · 5,685.,588 1,793,408 393;199 '2,460,030 (10,368,547) (36,322) 36,983,196 13,271,943 (24,254,861) (10,982,918) 26,000,278 664,001 2,188,771 191,586,995 881,637 2,188,771 192,468,632 5,084,861 219,132,911 3,784,846 123,236,409 3,784,846 123,236,409 538,244 3,684,082 (664,001) $ 335,981.450 $ 4,323,090 126.256,490 9,407,951 .$ ==34===5~,38==9=.4:!:0:!::1 22 Component Units Totals Totals Component Reporting Entity Proerieta!}'. Tmes Units (Memorandum Ont~} Civic Lubbock, Inc. Citibus 1996 1996 1995 $ 1,262,766 $ 1,237,838 $ 2,500,604 s 145,292.257 s 133,808,335 121,688 · 115,510 490,646 463,080. 468,403 439,629 728,089 636,602 1,433,259 1,382,649 16,140 3,200. 1,335,166 1,314,406 810,699 819,608 671492 69.105 1,262.766 · 1.237,838 2,500,604 150,7471699 139,068,264 . 887,576 1,935,606 2,823,182 24,486,940 23,279,026 737,312 281,797 253,359 535,156 10,153,571 11,028,391 2,827,496 2,750,996 5,899,740 5,640,435 1,020,782 1,020,782 6,928,598 6,199,678 . -720,761 830,827 31,312,384 27,349,436 1,770;879 1,567,607 · 737,962 737,962 · 19,146,327 14,508,193 • 11548 274,986 286,534 13,384.497 12.600,699 1,180.921 4.222,695 5,403.616 116,631,193 106,498.600 81,845 (2,984,857) (2,903,012) 34,116,506 32,569,664 18,128 18,128 5,703,716 5,446,724 1,793,408 1,740,335 393,199 424,909 · 2,460,030 2,323,816 (4,519) (4,519) (10,373,066) (7,726,563) 2,714,390 2,714,390 2,714,390 2,494,604 18,128 2,709,871 2,727,999 2,691,677 4,703,825 99,973 (274,986) (175,013) 36.808,183 37,273,489 13,271,943 13;228,971 (24,254,861). (22,650.781) (10,982,918) . (9,421.810) 99,973 (274,986) (175,013) 25,825,265 27,851,679 274,986 274,986 938,987 1,178,039 303,825 303,825 191,.89(1,820 161,440,419 . t81,637 1,420,681 303.625 303.825 2· 192,77~457. 162,861,100 403,798 403.798 . · 219,536;?09 191.890.818 4,723,322 4,723,322 127,959,131 . 126,854,442 (1,420,681) ... 4,723,322 '4,723,322 127,959,731" 125,433,761 ~z;-;,: :'.• 481,288 481,288 ,4,165,370 . 3,704,009 (274.986) (274,986) (938,987) (1,178,039) 4,929,624 4,929,624 131,186,114 127,959,731 $ 4Q3,7S§ $ 4,929,§24 $ . ·-§.333,422 J 350.122.s2i s . . '• '319,850,549 ' L .. , . See accompanying not':5 to financial statements ?1 CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF CASH FLOWS - ALL PROPRIETARY FUND TYPES ANO DISCRETELY PRESENTED COMPONENT UNITS Years Ended September 30, 1996 With Comparative Totals for Year Ended September 30, 1995 Cash flows from operating activities: Operating income (loss) $ Adjustments to reconcile operating Income (loss) to net cash from operating activities: Deptegation Increase _(decrease) In long-term payables not requiring cash flow Other income Change in current assets and liabilities: Accounts receivable Inventory· Due from other governments Prepaid expenses Accounts payable Due to other funds Other accrued expenses Sales tax payable Customer deposits Deferred revenue Loss·on sale of assets Net cash provided by (used for) operating activities Cash flows from capita! and related financing activities: Payments for gas reserves ' Purchases of property, plant and equipment Sale ofproperty, plant and equipment Receipts (payments) on leases Principal paid on. revenue bonds . Interest paid on revenue bonds Principal paid on general obligation bonds Interest paid on general obligation bonds lssu.ance of general and certificate of oblllgation bonds Principal paid on long-term debt Interest paid on long-term debt Receipts from building rent Contributed capital Net cash used for capital and related financing activities Cash flows from noncapital and related financing activities: Operating transfers In from other funds Operating transfers out to other funds Advances from other funds Cash grants and reimbursements Book overdrafts Net cash provided (used) by noncapital and related financing activiti~s Cash flows from investing activities: Interest earnings on cash and lnvesbnents · Net cash provided by investing activities Net Increase (decrease) in pooled cash and cash equivalents Proprietary Fund Types Enterprise 35.149,021 $ 12,606,232 (376,839) 3,968,240 587,109 (34,466) 1,022,461 (2,010,383) 15,000 524,n7 (39,787) 28,215 · 51,439,580 (29,751,905) 626,571 42,499 · (3,545,451) (5,887,164) (7,933,305) (4,539,335) 23,293 1,607,081 (49,357,716) 12,785,904 (24,254,541) 530,000 (10,938,637) 5,291.469 5,291.469 Internal Service • -1,870,497 $ 491,731 42,243 215,925 372,215 (18,157) 124 (2,020,703) (37,220) 136,593 1,053,248 (1,970,995) 56,779 (827,981) (135,682) 13,380 538,244 {2,326,255) 486,039 (320) 485,719 410,107 410,107 (377,181) Totals Primary Government (Memorandum Only) 1996 37,019,518 13,097,963 (334,596) 4,184,165 959,324 (52,623) 1,022,461 124 (4,031,086) (22,220) 661,370 (39,787) 28,215 52.492,828 (31,722.900) 683,350 (785,482) (3,545,451) (5,887,164) (7,933,305) (4,539,335) 23,293 (135,682) 13,380 2,145,325 (51,683,971) 13,271,943 (24,254,861) 530,000 (10,452,918) 5,701,576 5,701,576 (3,942,485) Pooled cash and cash equivalents at beginning of year Pooled cash and cash equivalents at end of year $ (3,565,304) 93,258,624 89,693,320 $ 11,053,333 104,311,957 10,676,152 $ ===1=00=,3=6==9=,4::7=2 Supplemental cash flow information: Noncash capital contributions for the Enterprise Funds during fiscal year 1995-96 was $1,538,757. 24 Com29!!ent Units Totals Totals Proprieta!)'. Types Component Reporting Entity Civic Lubbock, Units (Memorandum Onl~ Inc. Cltibus 1996 1995· 1995 $ 81,845 $ (2,984,857) $ (2,903,012) $ 34,11s;506 ·s 32,569,664 11,548 274,986 286,534 13,384,497 12,600,699 (334,596) 478,602 4,184,165 : 4,050,943 12,263 (82,571) (70,308) 889~016 (1,269,838) 17,421 (21,993) (4,572) (57,195) 355,044 . 1,022,461 . (1,160,601) 13,562 ' . 13,562 13,686; (40,090) 55,840 (5,913) 49,927 (3,981;t59)). 3,952,038 (527) (527) · (22,741)\ 141,184 83,956 83,956 745,326 (923,110) (39,787); 51,378 28,215 1,551 1,193 1,193 11193 . (545) 1 712 193,145 (2,7361392) 121543,247) 491949,581 501808,631 (440,229) (10,419) . (10,419) (31,733;319), (31,104,288) 683,350 784,167 · . (785,482), (63,792) (3,545,451) (6,744,049) (5,887,184) (3,982,939) · (7,933,305) (7,744,768) (4,539,335) (4,089,436) 900,000 23,293 (127,765) (4,519) (4,519) (140,201) , (61,746) 13,380 13;2oa 2,1451325 119831091 (10,419) 14,519) {141938) {5116981909) (50,678,546) -13,271,943 13,867,971 (24,254,861) (22,650,781) 630,000 (397,600) 2,714,390 2,714,390 2,714,390 1,855,604 501820 50,820 50,820 2,765,210 2,765,210 (7,687,708) •' (7,324,806) 18,128 18,128 5,719,704 51477,846 18,128 18,128 . , · 5,;719,704 51477,846 200,854 24,299 225,153 (3,717,332) (1,716,875) 899,091 (24~99) 874.792 105,186,749 1061903,624 $ 1,099,945 $ -$ 1,099,945 $ 101,469,417 $ 105,186,749 See accompanying notes to financial statements ;"1,~ 25 '..1 ~ 0. :i: CITY OF LUBBOCK Notes to Financial Statements September 30, 1996 ·•~· I. ·· Summary of Significant Accounting Policie~: ......................... , . ., ........... 29 A. ·R~p~rt~g Entity .......................................................... -.................................................... 29 B. Basis of Presentation -Fund Accounting ........................................ 31 C. Basis of Accounting ......................................................................... 32 D. Budgetary Accounting ......... '. .......................................................... 33 E. E4tu.~brances ...................................................... ~~ ............ ~ ................................................. r••-~·-············ 33 F. Assets, Liabilities and Fund Equity ................................................. 34 · G. Risk Management ............................................................................ 35 H. Revenues, Expenses and Expenditures: ......... ~ ................................. 35 I. Totals (l\1emorandum Only) ............................................................ 37 J. Reclassification.; .............................................................................. 37 · Il. Stewardship, Compliance and Accountability ...................................... 37 A. Retained Earnings/Fund Balance Deficits ....................................... 37 m. Detail Notes on all Funds and Account Groups ................................... 38 A. Pooled Cash and Investments ......................................................... 38 B. Interfund Transactions .................................................................... 40 C. Deferred Charge ................................... '. ...................... : ................... 40 D. Property, Plant and Equipment ...................................................... 41 E. Retirement Plans ............................................................................. 42 F. Def erred Compensation .................................................................. 50 G. Surface Water Supply ...................... : ......... ; ...................................... 50 · H. Other Enterprise Fund Activities ................................................... 51 26 CITY OF LUBBOCK Notes to Financial Statements September 30, 1996 l Segment Information -Enterprise Funds ........................................ 51 J. Lease Agreements ............................................................................ 52 K. Long-Term Debt ............................................................................. 54 L. Advanced Def easement ................................................................... 57 M. Accrued Insurance Claims ............................................................... 58 N. Land.fill Closure and Postclosure Care Cost .................................... 59 IV. Contingent Liabilities .... : ..................................................................••.... 60 A. Federal Grants ................................................................................. 60 B. Litigation ......................................................................................... 60 C. Site Remediation ............................................................................. 60 V. Financial Instruments; •... ~ .................... , ............. ; ................................... 60 VI. Restatement of Beginn_ing Balances ............•........ ;,• ................................ 61 Vll. Accounting Changes ......... ~ .................................................................... 61 VIll. Subsequent Events ................................................................................. 61 27 LUBBOCK TEXAS 28 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996' NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTINGPOUCIES The financial statements of the City of Lubbock, Lubbock CoWity. 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 bas adopted GASB Statement No. 20, "Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting.• The City bas 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 bas presented those entities which comprise _the primary government a.long with its discretely presented Component Units in the fiscal year 1996 general purpose financial statements. The City is a municipa.1 corporation governed by a Mayor-Council form of governme.o.t. . As required by GAAP, the general purpose financial statements present the reporting entity w,ti.ich 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 die City's genera.I purpose financial statements to be misleading or incomplete. BLENDED COMPONENT UNITS The following Component Unit bas been presented as a blended Component. TJmi: &ecawe although it is legally separate, the Component Unit is so intenwined with theprirmtt:i,govemment 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 Mayc.,r, with the consent of City Council, and aets 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 ihey 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 bas the ability to inipose • its will if it can significantly influence operations and/ or activities of an organization. City Transit Management Co., Inc. dba Citibus (Citibu~) In 1993, the City renewed a five year management agreep:ient. 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 Tr~ilsit 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, ,TEXA.S Notes to Financial Statements September 30, 1996, .. NOTE I. SUMMARY OP:SIGNIFICANT ACCOUNTING:POUCIES Civic Lubbock, Inc. promotes the cultural and educational usage of the Lubbock Memorial Civic Ceni:er and Lubbock ·Municipal Coliseum. The 15•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, In~ On October 10, 1995, the Lubbock City Council created Market Lubbock, Inc., a non-profit corporation responsible for creating, nianaging, 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 propeny tax rate. Market Lubbock, Inc. is· reponed as a governmental type component unit. · Marketing, Entertainment, Travel, Tourism, and Sports, Inc. (MEITS) was formed on September 22, 1995 with the merger of the Civic Center and the Convention and Tourism Bureau of Lubbock, Inc. boards. MEITS promotes the City as a convention center, as a City of interest to tourists, and encourages the use of the . Lubbock Memorial Civic Center and Auditorium/Coliseum as well as other facilities located in the City. The operations are managed b'y a board of directors appointed by the City Council. MEITS is a legally separate entity .. City ' Council approves the annual budget. ·· METTS is reponed as a governmental type component unit. The combined fmancial statements present financial statements for each of the four 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 City Transit Management Market Lubbock, Inc. . Co., Inc. dba Citibus Civic Lubbock, Inc. cl o City of Lubbock MEITS, Inc. 801 Texas 15016th Street 1625 13th Street 14th Street and Avenue K Lubbock, Texas Lubbock, Texas Lubbock, Texas Lubbock, Texas REL.A TED 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 teponing 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 CITY OFLUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POUCIES. A. REPORTING ENTITY lCQNJTNUEDl not in the City. The State Firemen's Pension Commission exercises general oversight authority over the LFRRF; thus, the City •of Lubbock does not significandy influence operations. . Lubbock Arts Alliance, Inc. (Alliance) is dedicated to the promotion and improvement of the am and sponsoring the annual Lubbock Arts Festival. Fisc.:al 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 gove~ operations of LHFDC. Omuimax is a theater financ.cd with proceeds from bonds issued by the City. ·. The Omnimax is leased to the Science Spectrum, Inc. City Council does not appoint the board. The City is not able to impose its .will .on the organization. The City has a contractual. agreement with Science Spectrum, Inc. for the operation and maintenance · of the theater and ·for a. percentage of net revenues to be allocated to the City for debt service reimbursement. · Lubbock Housing Finance Corporation, Inc. (LHFC) was. formed pursuant to the Texas Housing Finance Corporation Act, to finance the cost of decent, safe, aff ordablc. residential housing. The Mayor appoints the seven-member board. It is the opinion of the City. fi.ttorney that LHFC is independent of the City. Indebtedness of the I.HPC does not constitute indebtedness of the City. The City is not able to impose its will on the LHFC. 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 compri,e its assets, liabilities, reserves, fund equity, revenues, and expenditures/expenses. · The various funds are classified into three categories: governmental, propr~tary and fiduciary. The following fund types and account groups are used by the City: . · 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 resuicted to expenditures for specified purposes. . . . Debt Service Funds are used to account for the accwnuktio11 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 construct.ion of major capital facilities (other than those financ.cd by Proprietary Funds or Trust Funds). . . . . ' · . PROPRIETARYFUND TYPES . ,. Enterprise Funds are used to account for operations of the City {a) that are financed ~d operated in a manner similar to private business enterprises, where the intent is 'to provide goods or services .to t~e. general public on a continuing basis, the -=ost of which is tQ be recovered in whole or part 31 CITY OFtUBBOCK, TEXAS Notes to Financial Statements September 30, 19'16 NOTEI. SUMMARY OF SIGNIFICANT A.ccOUN'llNG POI.ICIES ' B. BASIS OF PRESENTATION· FUND ACCOUNTING (CONTINUED) .. '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 c:apital maintenance, public policy,_ management control, ~ccountability, or other purposes. Internal ~ervice Fund is used to acco~t for the.financing of g<>0ds 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 ,organizatiOllS, other governments and other. funds, are accounted for in fiduciary fund types. Fiduciary fund types are comprise~ of: Expendable T{USt 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 I11od.ified accrual basis of accounting. ACCOUNT GROUPS General Fixed Assets Account Group represents a summary of the fJXed 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. · Infrastructure fixed -.sset.s 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 .~t 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, long-term notes payable, loiig-term leases,· and obligations for employee vacation, skk-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 is followed for the governmental fund types, special revenue funds, debt service funds, capital project funds, expendable trust funds, and agency 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, cenain 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 32 ~ITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POUCIES c, BASIS OF ACCOUNTING (CO~ incurred. Governmental fund types and expendable truSt funds arc accounted for using a current financial resources measurement focus. . Under the current financial resources mcasurcmcnt focus, only current· assets and current liabilities arc 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 intcrpcriod equity (e.g. whether current year revenues were sufficient to pay for current year services). Enterprise funds and internal service funds arc accounted for using an economic resource measurement focus. All assets and liabilities including fixed assets and long-term debt arc 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 arc 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 managcI11Cnt as long as expenditures do not exceed budgeted appropriations at the fund level. Budgeted amounts shown arc from the revised budget, adopted by resolution on August 22, 1996. During the year, the budget was revised to reflect a 1.11% increase in total revenues and a 4.62% increase for the General Fund operating expenditures from the original budg¢t.. E-ach 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 e.rid of the year, encumbrances for which goods and/ or services have not been received arc canceled. At the beginning of the next year, management-approved prior year encumbrances and related appropriations are re-established through a budget amendment. Re-established encumbrances at October 1, 1996 for the General Fund is $46,054. 33 CITY OF LUBBdCK, TEXAS; '.' ,. ' '" ~ 'f' ~ ' ,' . ' ' : ' Notes to Fbiancial Statements September030, 1996 NOTE I. ·SUMMA.Ry OF SIGNIFICANT ACCOUNTING POLICIES F. ASSETS, LIABILITIES AND FUND EQUITY Equity in Pooled Cash and In~estments • A "Pooled Cash" concept is used to maintain the cash and investment accounts in the accounting records. Under dus method, all cash is pooled for . 'investment purposes and each fund bas an .. equity. in the pooled cash. amount and earnings therefrom. All amounts included 'in the pooled cash and investment accounts are considered to be •·· cash and cash equivalents. For purposes of the statement of cash flows, the . City considers cash and cash equivalents (including restricted cash and cash equivalents) to be· currency on hand, demand · deposits with banks, and amounts included in pooled cash and investment accounts due to their liquid nature. Cash and cash equivalents are included in both unrestrieted as well as restricted assets. Investments other than those in the deferred compensation plans are stated at cost or amortized cost. 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 receivables in the General· and Debt Service Funds. Deferred' revenue is recorded in an amount equal to net delinquent uxes receivable, less taxes collected within 60 days after the end of the fiscal year. Enterprise Fund Receivables • Within the Electric, Water, Sewer and Solid Waste Enteq,rise Funds; services rendered · but not billed as of the close of the fiscal year, are not considered significant. Amounts billed are reflected as receivables net of an allowance for uncollectibles. Inventories • Inventories in the Proprietary Fund Types consist of expendable supplies held for · consumption, Inventories are valued at cost using the average cost . method of valuation. Proprietary Fund Types. use 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. Restricted Assets • Certain enterprise fund assets are restricted for conruuction which has been funded through long-term debt, therefore, retained earnings have not been reserved for .these amounts. The excess of assets restricted for the payment of debt service over cenain 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 suaight-1:ne method over the eStimated useful lives as follows: Improvements Buildings Equipment 34 10-SOyears 15-SOyears 3-15 years CITYOF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE I. SUMMARYOF SIGNIFICANT ACCOUNTING POUCIES F. ASSETS, UABILITIES AND FUND EQUITY (CONTINUED) Interest Capitalization • The City capitalizes interest cost in its Enterprise Funds _on bonds used £or 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 $14,369,996 of which $1,003,975 has been capitalized. Advances to Other Funds• Amounts owed to one fund by aiiother 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, 1996: Some of these claims were reported at September 30, 1996, and other,s 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 adminisuator. · The City's self-insured worker's compensation and general liability programs are on a cash flow basis, which means that the· service contractor processes, adjusts and pays c:lai.ms: from a deposit provided by the City. The City accounts for the worker's· compensation program· in the Risk Management Fund (an Internal Service Fund) by charging premiums. based upon losses, administrative fees and reserve requirements. The Risk Managment Fund establishes claim liabilities based on estimates of the ultimate cost of claims (mcluding future claim adjUStment expenses} that have been 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 coverages such as general liability. 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 made. · Additionally, property and boiler coverage is accounted for in the Risk Mai!agment Fund.· The property, insurance· policy was purchased from an outside insurance carrier.. The poliq has a $250,000 deductible per occurrence, and the ·boiler coverage insurance deductible is• $2,500 to $100,000, dependent upon the unit. Premiums are charged to funds based upon policy premiums and reserve payments. Other small insurance policies, such as surety bond coverage and miscelJaneotis floaters, are accounted for in the Risk. Managment Fund. · Funds are charged expenditures based on premium amounts and administrative ·charges. The· City ha$ had no significant reductions in insurance coverage during the ye~. 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 monthlybased 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 Trust and Agency Funds, certain Special Revenue Funds, Governmental Capital Project Funds, and certain Internal Service Funds. The interest 35 CITY. OFLUBB.OCK, TEXAS Notes to Financial Statement~· I . September .:fo. 1996 _ . . ' NOTE I. ;.,SUMMAR\': OJ: SIGNIFICANT ACCOUN11NG POLICIES H. REVENUES, EXPENSES 4ND EXPENJ?IllIBES l<:;ONTINUED) 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 resuits from an allocation of L125% of .the total sales tax levy 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. -i:he tax is then paid to the City by the 10th of the next month. On January 21, J995, 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. Inte~fund Transactions.or quasi-e'xi:ernal transactions a;e accounted for as revenues, expenditures or expenses. . T ransaetions 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 reduetions of expenditures/expenses in the fund that is reimbursed. · Nonrecurring or nonroutme permanent tram£ ers of equity are reported as residual equity transfers. All· other_ interfund transaetions except quasi-external transactions, reimbursements, temporary receivables and payables, and residual equity transfers are reported as operating ' trans£ ers. 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. Beginning in calendar year 1995, 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/ 4 days per month with a maximum accrual status of 200 days. After 15 years of continuous full time service for non-civil service personnel, vested sick leave is paid on retirement or termination at the current hourly rate for up to 90 days. Civil Service personnel arc paid for up to 90 days accrued sick leave after one year of employment. The Texas Civil Service laws aictate 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. Financial activity is reported in the Health Insurance Internal Service Fund. The following schedule reflects participation in the City's health care program: Partic;ipants Aetive Retired Cobra 36 1996 1,692 358 14 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE I. ··sUMMARY OF SIGNIFICANT ACCOUNTING POUCIES H, REVENUES.,EXPENSES AND EXPENPIJVRES (CONTINUED) Active C1aims Retired Claims Cobra Claims Total Claims % of Employee Groups to total claims Active Retired Cobra Total% I. TOTALS (MEMORANDUM ONLY) $4,478,359 1,831,049 33,833 !6,343,241 70.60% 28.87% __M% 1QQ..QQ% The Totals (Memorandum Only) columns represent an aggregation of the combined financial statements and do not represent co.molidated financial information. Data in those columns do not represent financial position~~ results of operations, in conformity with GAAP and are presented only to facilitate analysis~ J. RECLASSIFICADON Certain 1995 amounts have been reclassified to conform to 1996 presentation. NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. RETAINED EARNINGS/FUND BALANCE DEFICITS The deficit of $35,442 in the Airport Enterprise Fund results from the practice of not funding depreciation. The majority of debt service for the airport improvements is funded by property taxes and was never intended to be funded by airport revenues. The deficit in the Golf Enterprise Fund of $1,540,821 is the result of placing itself in a more competitive position through non-capital course equipment improvements. On October 14, 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 $43,201 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 reimburseinent amounts are not measurable at September 30, 1996, which is consistent with the revenue recognition required by· the · modified accrual basis of accounting. . The deficit of $94,656 in the Police 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, 1996, which is consistent with the revenue recognition required by the modified accrual basis of 2ccounting. The deficit of $31,828 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 measurable at September 30, 1996, which is consistent with the revenue recognition required by the modified accrual basis of accounting. 37 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE·n. STEWARDSIIlP, COMPLIANCE AND ACCOUNTABIUlY A. RETAINED EARNINGS/FUND BALANCE DEFICITS (CONTINUED.) The deficit of $528,270 in the Internal Service Fleet Maintenance 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. The deficit of $2,353,756 in the Internal Service Radio Shop Fund results from the practice of not recovering depreciation through user charges. Management is evaluating user charges in o.rder to recover depreciation and recover the retained earnings deficit. The Radio Shop Fund also incurred a capital lease of $2.1 million and will recover the financi.ag cost and capital cost from user departments over the next few years. The deficit of $3,869,841 in the Internal Service Management Information Fund results from the practice of not recovering depreciation through user charges. A capital lease in the Management Information Fund also contributed to the retained earnings deficit. Management is evaluating user charges in order to recover depreciation, f1JW1ci.ag and capital costs, and the retained earnings deficit. . . The deficit of $401,176 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. No other funds of the City had deficits in either total fund balances or total retained earnings. NOTE m. 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, 1996. 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 oc its agent in the entity's name. (3) Uninsured and unregistered, with securities held by the counter party oc 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. (,8) Collateralized with securities held by the pledging financial institution's trust department oc agent in the entity's name. (C) Uncollateralized. 38 CITY OF LUBBOCK,TEXAS Notes to Finandal Statements September 30, 1996 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. POOT EP CASH AND INVESTMENTS (CONTINUEQ) Pooled Cash and Investments The City's pooled cash and investments consist of deposits with flJllUlcial institutions, certificates of deposit, U.S. government and agency securities, and depos.its in qualifying investment pools. These investments have varying maturities ranging from one day. to four 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, 1996: Investments (1) U.S. Treasury and Agency Obligations• Primary Government $ 143,174,178 Mutual Funds· Primary Government Total Investments• Primary Government U.S. Treasury and Agency Obligations- Component Units Certificates of deposit• Component Units 3,568,023 50,628 Category (2) (3) Carrying Market Amount Value $ 143,174,178 $ 143,228,615 21,085,752 .. 21,085,752 164,259,930 164,314,367 3,568~oii . 3,579,641 50,628 .. 1 50,628 Repurchase agreement• Component Units $ 159,817 159,817 . 159,817 Working capital management account• Component Units Total Investments- Component Uniu Total Investments- Reporting Entity Cash and BankD osits Cash and Bank Deposits-Primary Government Cash and Bank Deposits-Component Category A B $ 6,239,877. · $ $ Units 1,241,686 . 247 ;762 247,118 4,026,230 4,037,204 $ 168,286,160 S 168,351,571 Carrying C Amount $ 5,497,014 Bank .Balance S . 6,239,877 245i844 . 1,191~997 1,487,530 Cash and Bank Depos.its :..Reporting Entity $ 7;481,563 .,S=======-•·•·. : 5 245,844 · S : .. ,6,68.2,011 ·, "s 7,727,407 39 ,. CITY OF LUBBOCK, TEXAS. Notes to Financial Statements: September 30, 1996 NOTE III. DETAii: NOTES ON ALL FUN1)S AND ACCOUNT GROUPS A. POOLED CASH AND INVESTMENTS «;ONTINUED) B. c. Cash and Investments are reported in the financial statements as: Primary. Component Reporting Government Units Entity Cash and Investments • Restricted $ 80,872,478 $ 225,221 $ 81,097,699 Cash and Investments· Non,Restricted 88,884,466 4,993,006 93,877,472 Total Cash and Investments S 169,756,944 $ 5,218,227 S 174,975,171 Carrying amount of deposits $ 5,497,014 $ 1,191,997 $ 6,689,011 Carrying amount of investments 164,259,930 4,026,230 168,286,160 Total Cash and Investments S 169,756,944 $ 5,218,227 $ 174,975,171 INTERFUND TRANSACTIONS Intcrfu:nd receivables and payables consisting of due from/to and advances to/from other funds at September 30, 1996 were as follows: lnterfund Interfund Funds Receivables Pal'.ables General Fund $ 4,629,272 $ Special Revenue Funds: Hotel/Motel Tax 643,000 Enterprise Funds: Electric Enterprise 1,765,513 Water Enterprise 1,090,499 Sewer Enterprise 451,071 Airport Enterprise 451,071 Golf Enterprise 2,010,000 Stormwater Enterprise 530,000 Internal Service 2,707,003 5,655,287 Expendable Trust Funds: Community Development 941,500 Community Services 35,500 Library 187,000 Police 190,000 Total $ 10,643,358 s 10,643,358 J;2EFERRED CHARGE The deferred charges of $2,210,261 at September 30, 1996 and 1995, represent 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 Sl.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, 1996 is $1,641,333. 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 S.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 comumed. At September 30, 1996 and 1995, 1,317,934 MMBTU had been delivered, and remaining proven reserves at September 30, 1996 and 1995 were 2,104,273 MMBTU. 40 CITY OF LUBBOCK, TEXAS Notes to Financial Statements· September 30, 1996 NOTE ill. DETAIL NOTES ON AU FUNDS AND ACCOUNT GROUPS C. DEFERRED CHARGE (CONTINUED} On August 25, 1994, the City contrac:ted for the purchase of .natural. gas to be delivered in future years. An amount of $568,928 is included in deferred charges which represents a deposit on future gas deliveries. The City is obligated to purchase 4,000,000 MMBTU of gas per year in fiscal years 1998, 1999, and 2000. D, PROPERTY, PLANT AND EQUIPMENT General fixed asseu of the City for the year ended September 30, 1996, are. as follow$: . Balance 10-1-95 Additions .. Deletions .. Land $ 8,611,411 $ $ 21,500 Buildings and Improvements 34,322,249 196,2.39 . 276,699 Other Improvements 111,046,554 3,134,703 Equipment 25,601,272 2,234,710 2,335,764 Construction in Progress 241927,359 12,184,616 4,690,317 Total $204,508,845 $17,750,268 $ 7,324,280 • Includes transfen Construction in progress is composed of the following: Fire Station Park Improvements Street Improvements Permanent Street Maintenance General Permanent Capital Projects General Permanent Capital Maintenance Total Life-to-Date Activity Project Expended Authorization 9-30-96 $ 10,977,539 $ 644,019 5,159,331 2,116,447 35,190,491 11,370,110 3,426,529 2,691,091 16,383,523 10,949,343 9,828,155 4,650,648 $ 80,965,568 · $ 32,421,658 -----= Jlalance 9-30-96 $ 8,589,911 34,241,789 114,181,257 25,500,218 32,421,658 $214,934,833 Unexpended Balance $ 10,333,520 3,042,884 23,820,381 735,438 5,434,180 5,177,507 $ 48,543,910 General fixed asset account group for ME'IT's for the year ended September 30, 1996, are as follows: Balance 10-1-95 Additions Deletions $ Balance 9-30-96 Equipment $ $ 182,023 $ 182,023 Property, plant, and equipment recorded in the City's various proprietary funds (mcluding component units) as of September 30, 1996, is as follows: · Internal Enterprise Service Fund Fund Land S 28,618,982 . · $ 71,182 Buildings and improvements 36,877,346 1,791,855 Improvements · 296,418;881 197,469 Equipment 34,189,371 7,514,337 Construction in Progress 180,465,434 5,850,965 Total 576,570,014 15,425,808 Less: Accumulated Depreciation (160,358,656) (6,783,730) Total $416,211,358 $ 8,642,078 · 41· Total Proprietary Fund Type $ 28,690,164 38,669,201 296,616;350 41,703,708 .186,316,399 591,995,822 (167,142,386) '$424,853,436 Component . Units $ 520,403 3,879,020 173,904 7,078,428 11,651;755 (6,692,056) . $ 4,959,699 Total Reporting Entity Proprietary -Fund Type S 29,210,567 42,548,221 296,790,254 48,782,136 186,316,399 603,647,577 (173,834,442) $429,813,135 CITY OF LUBBOCK, TEXAS : Notes to· Financial Statements September·3o, 1996 NOTE III., DETAIL NOTES ON All-FUNDS AND ACCOUNT GROUPS 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 ('!'MRS) 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 ·.fuefighters through a nontraditional, joint contributory, defined contribution plan in the state- wide TMRS, one of over 670 administered by TMRS, an agent multiple-employer public employee retirement system. It is the opinion of the TMRS management that the plans in TMRS are substantially defmed contribution plans, but they have elected to provide additional voluntary disclosure to hdp foster a better undemanding of some of the nontraditional characteristics of the plan. 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 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 for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had always been in existence, 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. The plan also provides death and disability benefits. A member is vested after 10 years, but he must leave his accumulated contributions in the plan. If a member withdraws his own money, he is not entitled to the employer-fmanced monetary credits, even if he was vested. 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. Contn"butlons The contribution rate for the employees is 6%, and the City matching percent is currently 200%, both as adopted by the governing body of the City. Under the state law governing TMRS, the City contribution rate is annually determined by the actuary. 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 fmances the currently accruing monetary credits due to 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 ~f payroll necessary to satisfy the obligation of the City to each employee at the time his retirement becomes effective. The prior service contribution rate amortizes the unfunded actuarial liability over the remainder of the plan's 42 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE m. DETAil. NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS {CONTINUED} 25-ycar amortization period. When the City periodically adopts updated service credits and increases iu annuities in effect, the increased unfunded actuarial liability is to be amortized over a new 25-ycar period. Currently, the unfunded actuarial liability is being amortized over the 25-ycar period which began January, 1996. The unit credit actuarial cost method is used for determining the City contribution rate. Contributions arc made monthly by both the employees and the City. Since the City needs to know its contribution rate in advance to budget for it, there is a one-year lag between the actuarial valuation that is the basis for the rate and the calendar year when the rate goes into effect. The City's total payroll in fiscal year 1996 was $50,043,840 and the City's contributions were based on a payroll of $43,441,907. Both the City and the covered employees made the required contributions, amounting to $5,268,537 (11.48% of covered payroll for the months in calendar year 1995, 8.22% normal cost plus 3.26% to amortize the unfunded actuarial liability, and 12.37% for the months in calendar year 1996, 8.52% normal cost plus 3.85% to amortize the unfunded actuarial liability) for the City and $2,606,516 (6%) for the employees. Of the $5,268,537 contributions, approximately $3,664,685 was allocated to normal cost while approximately $1,603,852 was allocated to amortize the unfunded actuarial liability. The City adopted changes in the plan since the previous actuarial valuation, which ha~ the effect of increasing the City's contribution rate for 1996 by 0.34% of payroll. There were no related-party transactions. Funding Status and Progress Even though the substance of the City's plan is not to provide a defined benefit in some form, some additional voluntary disclosure is appropriate due to the nontraditional nature of the defined contribution plan which had an initial unfunded pension benefit obligation due to the monetary credits granted by the City for services rendered before the plan began and which can have additions to the unfunded pension benefit obligation through the periodic adoption of increases in benefit credits and benefits. GASB Statement No. 5 defines pension benefit obligation as a standardized disclosure measure of the actuarial present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of public employee pension plans, assess progress made in accumulating sufficient asseu to pay benefits when due, and make comparisons among public employee pension plans. The pension benefit obligation shown below is similar in nature to the standardized disclosure measure required by GASB Statement No. 5 for defined benefit plans, except that there is no need to project salary increases since the benefit credits earned for service to date arc not dependent upon future salaries. The calculations were made as part of the annual actuarial valuation as of December 31, 1995. Because of the money-purchase nature of the plan, the interest rate assumption, currently 8.0% per year, does not have as much impact on the results as it does for a defmed benefit plan. Market value of asseu is not determined for each city's plan, but the market value of assets for TMRS as a whole was 114.2% of book value as of D~cember 31, 1995. Pension Benefit Obligation Annuitants currently receiving benefits Terminated employees Current employees Accumulated employee contributions including allocated invested earnings Employer-financed vested Employcr-fmanced nonvested Total Pension Benefit Obligation Less: Net Assets Available for Benefits, at Book Value Unfunded Pension Benefit Obligation 43 S 16,817,933 10,537,231 38,548,920 66,605,695 7,642.964 140,152,743 109.679,187 $ 30,473.556 CITY OF LUBBOCK,: TEXAS Notes to Financial Statements September 30, 1996 NOTE III. DET.A.ILNOtts ON ALI: FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED} The book value of assets is the amonized cost for bonds and original cost for shon-term securities and stocks: The acruarial assumptions· used ·to compute the actuarially. d.etermined City contribution rate are the same as those used to compute the pellSion benefit obligati9n. The numbers above reflect the adoption of changes in the plan since the previous actuarial valuation, which had the effect of increasing the pension benefit obligation by $2,617,429. TEXAS MUNICIPAL RETIREMENT SYSTEM REQUIRED SUPPLEMENTAL DISCLOSURE 10 YEAR HISTORICAL INFORMATION ANALYSIS OF FUNDING PROGRESS Unfunded Unfunded Net Assets Pension · Pension Annual PBO asa % Asof Available· for Benefit Percentage Benefit Covered of Covered December 31 Benefits Obli&!tion Funded Obli&!tion Pa;rroll Pa;rroll 1985 S 36,379,281 S 52,393,316 69.4% $16,014,035 S 33,420,720 47.9% 1986 41,954,383 58,271,284 72.0 16,316,901 31,233,200 52.2 1987 47,678,645 67,617,486 70.5 19,938,841 31,757,680 62.8 1988 52,910,917 68,298,980 77.5 15,388,063 32,610,720 47.2 ·1989 59,340,355 76,642,544 77.4 17,302,189 34,648,960 49.9 1990 · 67,453,028 88,427,433 76.3 20,974,405 37,469,960 55.9 1991 74,489,168 93,745,652 79.5 19,256,484 39,581,450 48.6 1992 82,930,899 102,479,816 80.9 19,548,917 41,642,633 46.9 1993 95,946,540 121,493,799 78.9 25,547,239 44,324,483 57.6 1994 . 101,453,897 128,062,753 79.2 26,608,856 42,815,350 62.1 1995 109,679,187 140,152,743 78.3 30,473,556 43,750,083 69.6 REVENUES BY SOURCE Employer Contribution as a% of Year Ended Employee Employer Investment Covered December.31 Contributions Contributions Income Other Total Parroll 1985 $ 1,671,036 S 2,372,632 S 3,519,432 s 6,393 $ 7,569,493 7.1% 1986 1,561,660 2,462,401 4,075,372 (450) 8,098,983 7.9 1987 1,587,884 2,475,870 4,610,402 8,674,156 7.8 1988 1,630,536 2,704,942 5,217,750 32,496 9,585,724 8.3 1989 1,732,448 2,965,951 5,819,041 10,517,440 8.6 1990 1,873,498 3,481,188 6,545,398 219,632 12,119,716 9.3 1991 2,374,887 4,469,819 7,349,501 1,090 14,195,297 11.3 1992 2,498,558 4,661,638 7,959,300 494 . 15,119,990 11.2 1993 · 2,659,469 4,579,094 8,706,022 2,806,169 18,750,754 10.3 1994 2,568,921 4,457,659 9,507,141 1,512 16,535,233 10.4 1995 2,625,005 5,011,685 9,844,565 17,481,255 11.5 44 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNf GROUPS E. RETIREMJ;;NT fLAN~ (CONTINUED) EXPENSES BY TYPE Transfers Current Service Year Ended Annuity Administrative December 31 Reserve Fund Expenses Refunds Total 1985 $ 1,655,712 $ 620,760 $ 477,873 s 2,754,345 1986 1,959,906 705,430 438,145 3,103,481 1987 1,614,136 776,861 556,240 2,947,237 1988 2,994,355 834,648 541,990 · 4,370,993 1989 2,656,780 904,570 527,309 4,088,659 1990 2,500,012 985,269 523,057 4,008,338 1991 5,508,879 1,114,763 535,519 7,159,161 1992 4,807,263 1,252,958 618,034 6,678,255 1993 3,880,116 1,329,650 525,347 5,735,113 1994 8,725,889 1,539,167 759,823 11,024,879 1995 6,876,232 1,592,614 790,115 9,258,961 LUBBOCK FIREMEN'S REUEF AND RETIREMENT FUND (LFRRF) Plan Description The Board of Trustees of the LFRRF is the administrator of a single-employer defined benefit pension plan maintained for members of the City of Lubbock Fire Depanment under provisions of applicable law of the State of Texas. All fire fighters in the Lubbock Fue Depanment are covered by the LFRRF. The table below summarizes the membership of the fund at December 31, 1995: 1. Retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them 2. Current employees a. Vested b. Nonvested Total 183 150 .:ll. ~ The LFRRF provides service retirement, death, disability and withdrawal benefits. These benefits become fully vested· 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 before age 50. A partially vested benefit is provided for employees who terminate employment with at least 10 but less than 20 years of service. A fuefighter had the option to panicipate in a Deferred Retirement Option Plan (DROP) which will provide a lump sum benefit and a reduced annuity upon termination of employment. As of December 31, 1995, fuefighters must be at least age 54 with 24 years of service to panicipate in the DROP plan. Under the "New Plan" effective December 20, 1995, the monthly benefit at normal retirement, payable in a Joint and Two-Thirds to Spouse form of annuity, is equal to 69.25% of Final 48- Month Average Salary plus $101.00 per month for each year of service in excess of 20 years. Under the "Old Plan" prior to December 20, 1995 (Plan Effective December 20, 1993}, the monthly normal retirement benefit was equal to 68.75% of Final 48-Month Average Salary plus $94.00 per month for each year of service in excess of 20 years. 45 CIT:Y, OF LUBBOCK, TEXAS Notes to Financial Statements , September 30, 1996 NOTE ID. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) The "New Plan" also provides increased benefits to current pensioners, allows a Retroactive DROP where a firefighter can choose a benefit calculation date prior to the employment termination, allows for a reduced Early Retirement DROP and RETRO DROP at age 50 with 20 years of service and modifies the children's survivor benefits. Under both plans, Lubbock firefighters are required to contribute 11% of their pay to the fund. At the present time, the City of Lubbock's contributions are based on a formula which causes the city's contribution rate to flucruate from year to year. We assume that contributions by the City of Lubbock will average 14.5% of payroll over the 30-year period beginning January 1, 1995. The · -benefit and contribution provisions of this plan are authorized by the Texas Local Fire Fighters' Retirement Act (fLFFRA). Summary of Significant Accounting Policies and Plan Asset Matters 1. Basis of Accounting The LFRRF financial statements are prepared on the accrual basis of accounting. The LFRRF's fiscal year is the calendar year. Employee and employer contributions are recognized as revenues in the period in which the salaries are earned. Expenses are recorded when incurred. 2. Method Used to Value Investments The LFRRF's investments are reported at original cost. Discount accretion and premium amortization is recorded as an adjustment to investment income over the life of the security if significant. Gains and losses on sales of assets are recognized on the · transaction date .. Funding Status and Progress The amount shown as "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits estimated to be payable in the future as a result of employee service to date. These benefits have been adjUSted for the effects of projected salary increases. The "pension benefit obligation" is the actuarial present value of credited projected benefits and is intended to help users assess the LFRRF's funding status on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among public employee retirement systems. This measure is independent of the actuarial funding method used to perform the actuarial valuation. The pension benefit obligation as of December 31, 1995 is based on the actuarial valuation as of December 31, 1994, updated one year, and based on the "New Plan" in effect on December 31, 1995. Actuarial assumptions used in determining the pension benefit obligation as of December 31, 1995 are the same as those used in the December 31, 1994 valuation. Significant actuarial assumptions used include (a) a rate of return on the investment of present and future assets equal to 8.00% per year compounded annually, (b) projected salary increases of 4.5% per year compounded annually, attributable to inflation, (c) additional projected salary increases which averages approximately 1.00% per year, attributable to promotion and longevity and (d) no postreti.rement benefif increases. The actuarial assumptions used to determine the pension benefit obligation are the same as those used to determine the adequacy of the financing arrangement. 46 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) Pension Benefit Obligation 1. Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits 2. Current employees a. Accumulated employee contributions b. Employer-financed vested c. Employer-financed nonvested 3. Total pension benefit obligation 4. Less net assets available for benefits, at book value (market value at December 31, 1995 is $70,729,006). 5. Unfunded pension benefit obligation December 31, 199S S 34,810,031 $ 9,626,887 20,681,058 1,890,819 67,008,795 49,018,835 17,989,960 As a result of the adoption of the "New Plan'\ the pension benefit obligation as of December 31, 1995 increased by $1,415,066 over what it would have been under the •old Plan•. Contributions Required and Contributions Made For the plan in effect December 31, 1995 the funding policy of the LFRllF required contributions equal to 11.00% of pay by the fue fighters and contributions which would average not less than 14.5% of payroll by the City over the 30-year period beginning January 1, 1995. For the 1995 calendar year the City contributed 15.42% of payroll to the LFRRF. A total of $2,351,646 of fire fighters and City contributions were required and paid into the LFRllF during 1995. While the contribution requirements are not actuarially determined, state law requires that each plan of benefits adopted by the LFRRF must be approved by a qualified actuary. The actuary certifies that the contribution commitment by the fue fighters and the City provides an adequate financing arrangement. Using the entry age aauarial cost method, the plan's normal cost is determined as a percentage of payroll. The excess of the total contribution rate over the normal cost rate is used to amortize the plan's unfunded actuarial accrued liability, and the number of years needed to amonize the plan's unfunded actuarial accrued liability is determined using a level percentage of payroll method. For the "Old Plan" in effect at December 31, 1994 the normal cost is 20.06% of pay and the amonization period was approximately 22 years. For the "New Plan'" effective December 20, 1995, the normal cost is 20.29% of pay and the amonization period is approximately 30 years based on a December 31, 1994 valuation date. Ten years of the standardized measure of the pension obligation is unavailable; the information will be presented only for as many years as the measure is available. This data provides information about progress made in accumulating sufficient assets to pay benefits when due. Further details concerning the financial position of the LFRRF and the latest actuarial valuation arc available by contacting the Board of Trustees, LFRRF, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457. 47 CITY OF LUBBOC~ TEXAS Notes to Financiai Statements , 4 ' ,.- September 30, 19~6 · NOTE ID. DETAIL NOTES ON ALL BJNI)S AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) Fiscal Year 1987 1988 1989*"' 1990 1991"'"'"' 1992 LUBBOCK FIREMEN'S RELIEF AND RETIREMENT FUND ANALYSIS OF FUNDING PROGRESS {1) (4) Net Unfunded Assets (2) (3) Pension (S) Available Pension Percentage Benefit Annual For Benefit Funded Obligation Covered Benefits* Obligation {ll / {2} (2} • {1} Pal:'.roll $42,780,282 $47,785,715 89.5% $5,005,433 $6,524,303 28,739,352 38,112,853 75.4 9,373,501 6,770,331 32,209,973 42,013,008 76.7 9,803,035 7,338,261 34,663,461 45,378,384 76.4 10,714,923 7,737,659 38,071,363 50,923,389 7U 12,852,026 8,195,215 40,993,483 53,804,511 76.2 12,811,028 8,484,196 (6) Unfunded Pension Benefit Obligation as a% of Covered Payroll (4}/{S}X100% 76.7% 138.4 133.6 138.5 156.8 151.0 1993**** 44,037,838 59,044,523 74.6 15,006,685 9,250,527 162.2 1994**••· 46,643,604 62,346,484 74.8 15,702,880 9,163,014 171.4 1995***"'*"' 49,018,835 67,008,795 73.2 17,989,960 9,300,857 193.4 * ,...,.. At cost on December 31 of that year. . In October 1989, the plan was amended to increase standard retirement benefits from 64.5% to 65% of average salary and to increase additional seniority benefits from $66 to $74 for each year of service in excess of 20 years. The amendment increased the pension benefit obligation as of December31, 1989 by $1,412,516. . . In December 1991, the plan was amended to increase standard retirement benefits from 65.00k to 66.75% of average salary and to increase additional seniority benefits from $74.00 to $82.00 for each year of service in excess of 20 years. The amendment increased the pension benefit obligation as of December 31,1991 by $2,361,716. ***"" In December, 1993 the plan was amended to increase standard retirement benefits from 66.75% to 68.75% of average salary and to increase additional seniority benefits from $82.00 to $94.00 for each year of service in excess of 20 years. The amendment increased the pension benefit obligation as of December 31, 1993 by $2,008,996. "'***"' New assumptions used in the December 31, 1994 actuarial valuation are: (1) the withdrawal rates were lowered to 50% of the former rates; (2) the salary increase assumption was lowered from 5% to 4.5% plus promotional and longevity increases; (3) disability rates were revised to reflect equal rates for on and off-duty disabilities; and (4) the children's death benefit was changed to assume the benefit would terminate at age 23 rather than age 18 if the child is a full-time student. The new assumptions decreased the pension benefit obligation as of December 31, 1994 by $331,608. •****"' "New Plan• provisions effective December 20, 1995 increased the monthly service retirement benefit from 68.75% of Final 48-Month Average Salary plus $94.00 per month for each year of service in excess of 20 years to 69.25% of Final 48-Month Average Salary plus $101.00 per month for each year of service in excess of 20 years. The "New Plan" provisions increased the pension benefit obligation as of December 31, 1995 by $1,415,066 over what it would have been under the "Old Plan". 48 CITY OF LUBBOCK, TEXAS Notes to Financial Statem:ents September 30, 1996 NOTE m. DETAil. NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) . REVENUES BY SOURCE Employer Contribution as a% Year Ended Employee Employer Investment of Covered December31 Contn1mtion,. Contn"butlon,. Income,. Other Total PaI::oll 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 $ 720,016 766,468 748,051 744,736 807,209 851,143 935,202 949,968 986,633 1,006,892 1,023,881 Year Ended December31 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 $ 889,620 $3,048,840 942,620 2,778,953 921,523 2,723,038 936,880 2,897,527 1,036,997 4,008,844 1,152,051 2,642,338 1,294,782 2,753,785 1,309,442 2,538,095 1,300,725 2,383,302 1,334,219 2,339,112 1,433,153 2,521,398 EXPENSES BY TYPE Benefitsll- $ 1,046,806 1,301,712 1,722,194 2,040,693 2,111,733 2,448,809 2,522,540 2,755,358 2,845,747 3,302,828 3,674,255 Administrative Expense! $ 248,499 470;606 147,148 150,934 278,679 118,295 154,683 211,368 290,511 268,056 263,581 $ 5 2,033 35,411 7,982 Other $ 49,358 40,161 15,081 · 35,122 9,743 41,305 $4,658,481 4,490,074 4,428,023 4,579,143 5,861,032 4,645,532 4,983,769 4,797,505 4,670,660 4,680,223 4,978,432 Total $ 1,295,305 1,821,676 1,909,503 2,206,708 2,390,412 2,602,226 2,677,223" 2,966,726 3,136,258 3,580,627 3,979,141 * Amounts prior to 1990 are shown on the cash basis of accounting. In 1990, the fund changed its basis of accounting to the accrual basis which is in accordance with GAAP. PENSION BENEFIT OBLIGATION (PBO) AS OF DECEMBER 31, 1995 Pension Benefit Obligation Annuitants currently receiving benefits · Terminated Employees Current Employees Accumulated Employee contributions including allocated investment earnings Employer-fmanced vested Employer-financed nonvested TotalPBO ._. Less: .Net Assets Available for benefits . ('TMRS: book value, LFRRF: cost) Unfunded PBO . . 49 TMRS $ 16,817,933 10,537,231 38,548,920 66,605,695 7,642,964 . 140,1~2,743 109,679,187 $ 30,473,556 LFRRF. $ 34,810,031 ~. 9,626,887 20,681,058 1,890,819 . 67,008,795 . 49,018,835 . s l7,989,960 re , Total $ 51,627,964 10,537,231 48,175,807 87,286,753 9,533,783 207,161,538 ' 158,698,022 $ 48,463,516 13.0% 13.2 14.1 13.8 14.1 15.1 15.6 15.2 14.5 14.6 15.4 CITY Oli' LUBBOCK, TEXAS. Notes to Financial Statements September 30, 1996 NOTE In. DETAIL NOTES ON ALL FUNDs AND ACCOUNT GROUPS F. DEFERRED COMPENSATION The City offers its employees two deferred compensation plans created in accordance with Internal Revenue Code 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. All amounts of compensation deferred under the plans, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are {until paid or made available to the employee or other beneficiary) solely the property and right of the City (without being restricted to the provisions of benefits under the plans), subject only to the claims of the City's general creditors. Participant's rights under the plans are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each participant. In management's opinion, the City has no liability for losses under the plans but does have the duty of due care that would be" required of an ordinary prudent investor. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. All assets of the plans are held by an independent administrator and valued at market. The deferred compensation plans are included in the City's· general purpose financial statements as an agency fund. G •. SURFACE WATER SUPPLY Canadian River Municipal Water Authority The Canadian River Municipal Water Authority (CRMW A) 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, 1996 the Board was comprised of 18 members, two of which represented the City of Lubbock. The City contracted with the CRMW A to reimburse it for a. portion of the cost of the Canadian River Dam and aqueduct system in exchange for surface water. Accordingly, such payments are made solely out of water system revenues and are not general obligations of the City. The City's pro rata share of annual fixed and variable operating and reserve assessments is recorded as an expense of obtaining surface water. The long-term debt is 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, 1996, principal payments in the amount of $743,576 reduced the amount outstanding due to the authority at September 30, 1996 to $22,355,448, due in annual installments of $1,351,543 including interest of 2.632% until the year 2018. The above cost for the rights are being amortized over 85 years. The cost and debt are recorded in the Water Enterprise Fund. GAAP requires accounting for debt service as a reduction in construction obligation payable and related interest expense. However, the contract between the City and CRMW A requires the classification of payments to CRMW A to be reflected as operating expenses of· the. Water Enterprise Fund. Accordingly, the adjustment required to convert GAAP expenses to the contractual agreement results in an adjustment to increase operating expenses for principal payments in the amount of.$743,576, interest in the amount of $607,967, and reduce amortization expense by $387,128. so CITY OF LUBBOCK, TEXAS . Notes to Financial Statements September 30, 1996 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS G, SURFACE WATER SUPPLY CCONTINUEQ) Bruos River Authority• Lake Alan Henry During 1989, the City entered into an agreement with the Brazos River Authority (BRA) for the construetion, 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 com 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 cosu, management fees to the authority, as well as funds sufficient to pay all capital cons associated with construction. The City will receive surface water for the payments to BRA. Approximately $300,445 was paid to the BRA for maintenance and operating costs in fiscal year 1996. 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 Ill L. 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 acco~ted for in the Water Enterprise Fund. At September 30, 1996, 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 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, wate~, sewer, solid waste, airpon, goH, and stormwater drainage. 51 q:TI{ OF LUBBOC~ TEXAS Notes to Financial Statements Se,ptember30, 1996 .~OTE Jll. DETAIL NOTES 9N ALL FUNDS AND ACCOUNT GROUPS I. SEGMENT INFORMATION -ENTERPRISE FUNDS (CONTINUED) Segment information for the year ended September 30, 1996, was as follows: Solid Elcctrk Water Sewer Waste Airpon Golf Fund Fund Fund Fund Fund Fund Operating Revenues S 57,126,068 S 27,211,114 S 15,200,091 $17,295,883 S 4,l07,2t3 s Depreciation Expense . 4,299,491 2,529,,06 2,06J,S80 1,756,433 1,869,537 81,281 Oper.1ting income (loss) 8,069,619 13,679,183 7,218,955 5,751,958 (914,127) (84,777) Oper.1ting Transfen In (out) (6,387,579) (2,022,585) (1,014,770) (999,665} (453,205} Net Income' (loss) 3,378,874 8,231,767 4,836,219 5,069,901 720,850 (84,777) Cum:nt capital contributions, net, 13,046 7-43,458 675,125 13,101 1,045,511 (8,404) Propeny, plant, and equipment: Additions: 4,451,510 3,024,735 1,461,034 6,383,895 159,654 Deletions: 6,432,360 262,1188 71,948 737,237 22,075 Net Working Capital 10,068,914 (1,287,833) 2,934,433 2,482,064 (84,106) (2,030,176) Allowance for doubtful accounts 837,639 254,759 98,921 170,934 8,328 Total Assm 134,264,149 208,3O5,SOS 112,133,039 26,672,434 55,452,532 569,719 Bonds and other long• tenn liabilities payable from oper.1ting revenues 24,429,583 93,094,742 52,375,782 9,502,879 6,580,383 Total Equity $103,635,161 $108,962,455 $55,118,769 $16,412,290 $48,269,904 S(l,463,331) J. ~ASE A~REEMENTS Storm water Total Drainage Enterprise Fund Funds Sl,821,069 $122,961,438 6,604 12,606,232 1,428,210 35,149,021 (590,833) (t 1,468,637) 951,354 23,104,188 2,481,837 121,260 15,602,088 7,526,508 503,930 12,587,226 1,370,581 5;753,007 543,150,385 535,930 186,S 19,299 SS,046,202 $335,981,450 The City has entered into lease agreements with independent third panics for the purpose of acquiring certain propenies and equipment. These lease agreements qualify as capital leases for accounting purposes, and therefore, have been recorded as purchases at the present value of the future minimum lease payments as of the date of their inception. Obligations under capital leases at September 30, 1996 were as follows: Maturity Interest Remaining Dates Rate Balance Internal Service Computer and Software 1998 5.06% $ 681,135 Radio Pagers 1999 4.96% 1,649,148 Total $2,330,283 52 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS T. LEASE AGREEMENTS (CONTINUED} Future minimum lease payments are as follows at September 30, 1996: Fiscal Year Ended September 30 Total Minimum Lease Payments Less: Interest 1997 1998 1999 Present Value of Future Minimum Lease Payments $ 965,956· 934,856 592,762 2,493,574 (163,291) $2,330,283 The following is a summary of assets acquired under the above capital leases at September 30, 1996: Equipment Less: Accumulated Amortization Total $4,075,606 (597,967) $3,477,639 Amortization expense on assets under capital leases is included in depreciation expense. The City enters into monthly leases for various items of equipment for purposes of evaluating a future purchase. Accordingly1 at September 30, 1996, the City had no material initial or remaining non-cancelable operating leases with terms exceeding one year. Rent expense for 1996 was $1,022,665. Civic Lubbock, Inc. leases certain space in a retail shopping area in Lubbock, Texas for the purpose of ticket sales and solicitation of civic and promotional events. Payments under this· lease agreement are made monthly. The lease expired in March, 1995, at which time the agreement became a month-to-month lease cancelable with notice. Rent expense for the year ending September 30, -1996 was $22,297. Citibus contraaed with Goodyear Tire and Rubber Co. ("Goodyear") to provide tires through August 1994. Citibus paid a flat rate per tire per mile for the first 42,000 miles and one-half that rate for excess mileage. In September 1994, Citibus entered into a six month lease to provide tires under substantially the same terms. In February 1995, Citibus entered into a new agreement with Goodyear for a 56 month term ending September 30, 1999. The contraa may be terminated at any time by Citibus with written notification to Goodyear. Under the terms of the c9ntraa, Citibus pays a flat rate per tire which is dependent on vehicle type. The flat rate is adjusted each six _months based on the spot market price of rubber and Goodyear's manufaauring costs. The total amount paid for 1996 was $32,092. On July 28, 1994, the City (on behalf of METTS) entered into a five year lease with the Lubbock Chamber of Commerce for office space. The lease requires annual payments of $31,500 due on the fuse day of Oaober of each of the five years beginning October 1, 1994. Accordingly, $31,500 of related lease expense has been incurred for the year ended September 30, 1996. 53 CITY .OF LUBBOC~ TEXAS · Notes to Financial Statements September 30, 1996. NOTE Im DETAIL NOTES ON ALL FUNI>S AND ACCQUNT, (;ROUPS · · K. LONG-TERM; DEBT GENERAL OBLIGATION BONDS AND CERTIFICATES OF OBLIGATION: Interest Rate 7.86% . 7.65 7.46 7.63 7.11 · 6.84 6.83 6.64 6.67 6.19 9.01 6.69 5.75 5.50 5.50 5.37 .. 3.97 5.39 5.39 5.20 5.14 4.30 5.50 4.92 4.78 5.07 5.07 Total .. •• ••• ..... ......... Final Balance !$sue Maturity Amount Outstanding Date Date Issued 9-30-96 11-15-85 2-15-03 $ 60,614,070 $ 1,879,070 "' 4-15-87 2-15-07 5,960,000 1,200,000 5-15-88 2-15-08 6,560,000 660,000 8-15-88 2-15-07 5,000,000 650,000 8-15-88 2-15-00 . . 2,774,682 631,895 ..... 8-15-89 2-15-09 3,800,000 2,470,000 8-15-89 2-15-09 7,445,000 4,855,000 5-15-91 2-15-11 16,120,000 12,095,000 5-15-91 2-15-11 4,030,000 3,030,000 5-15-91 2-15-01 1,145,000 570,000 5-15-91 2-15-11 1,085,000 810,000 5-15-91 2-15-11 2,000,000 1,500,000 4-11-92 2-15-03 24,035,000 16,640,000 ........ la14-92 · 2-15-12 1,655,000 1,335,000 5-15-92 2-15-14 34,520,000 31,070,000 . 8-15-92 2-15-12 7,565,000 1,815,000 5-1-93 2-15-15 14,425,000 13,705,000 10-1-93 2-15-14 3,625,000 · 3,265,000 10-1-93 2-15-14 2,550,000 2,300,000 10-1-93 2-15-14 1,470,000 1,330,000 10-1-93 2-15-14 19,215,000 17;295,000 12-1-93 2-15-08 9,865,000 9,165,000 ............ 5-15-95 2-15-15 4,690,000 .4,460,000 5-15-95 2-15-00 900,000 750,000 5-15-95 2-15-01 2,000,000 1,735,000 12-15-95 2-15-16 6,505,000 6,505,000 12-15-95 2-15-16 10,000,000 10,000,000 S 259,553,752 $ 151,720,965 .............. Refunding bonds issued to replace bonds issued 1966-1982 and 1984 . Refunding bonds issueci to replace Certificates of Obligation issued in 1986 . Balance outstanding includes $42,787 discount on bonds sold. Refunding bonds issued to replace bonds issued 1983 and 1985 • Refunding bonds issued for a partial refunding of bonds issued 1987 and 1988 . Includes $88,631,753 used to finance enterprise activities . 54 . CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. LONG-TERM DEBT (CONTINUED} ELECTRIC REVENUE BONDS: Final Interest Rate Issue Date Maturitt Date 5.00to 7.50% 9-15-75 4-15-96 7.00 to 10.00 4-15-87 4-15-07 7.00 to 10.00 5-15-88 4-15-08 6.25to 9.20 5-15-91 4-15-11 5.00to 6.50 7-15-91 4-15-02 5.00to 6.60 7-15-91 4-15-04 J.80to 5.50 6-15-95 4-15-08 Total Balance Amount Outstanding Issued 9-30-96 $ 2,000,000 $ · 7,000,000 350,000 17,000,000 1,700,000 7,500,000 5,625,000 4,424,976 1,924,976 • 4,999,989 2,919,989 •• 13,560,000 12,906,185 ..... $ 56,484,965 $ 25,426,150 ... .... ..... 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, 1984 . Refunding bonds issued for a partial refunding of the bonds issued April 15, 1976, April 15, 1987, and May 15, 1988. Balance outstanding includes $163,815 discount on bonds sold. WATER REVENUE BONDS: Interest Rate 3.80 to 5.50% Total Issue Date 6-1-95 Final Maturitt Date 8-15-21 Amount Issued $ 58,170,000 Balanr.e Outstanding 09-30-96 $ 56,579,405 • $ 58,170,000 $ 56,579,405 ... Balance outstanding included $880,595 discount on bo~ds sold . ss ,CITY OF LU)lBQC~J:'EXAS -Notes to Financial Statements , ~-~ . -""t-·. ' . ~' Septemb~r 30, J996 NOTE m~ DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS ' 1 •• . , ' . .' • • , .,. ;. . K. LQNG.TERM DEBT (CONTINUED) The annual requirements to amortize all outstanding debt of the City as of September 30, 1996, including interest payments of $124,186,237, are as follows: ldof September 30 · 1997 1998 · 1999 ~ 200() 20()1 : ;2002 2003 2004 2005 2006 .. 2007 . 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 . 2020 2021 Total General Obligation Bonds $ 21,442,805 20,424,089 19,498,918 18,267,618 . 16,646,373 14,623,650 13,1~3,200 11,228,524 10,815,559 10,389,652 9.961,766 8,930,725 8,305,394 7,407,883 7,098,050 5,610,100 5,344,125 5,109,838 1,866,206 849,713 . $217,014,188 Revenue · Bonds $ 9,054,770 8,564,468 8,326,103 8,084,658 7,846,360 7,592,858 7,013,258 6,847,148 6,227,078 6,098,700 5,994,708 5,558,910 4,694,093 4,670,380 4,663,283 4,268,625 4,282,550 4,302,950 4,324,000 4,340,150 4,361,125 4,376,100 4,404,800 2,960,850 2,964,550 S141,822,475 Leases S 965,956 934,856 592,762 S 2,493,574 ,. This schedule does not include the effect of premiums or discounts. Total $ 31,463,531 29,923,413 28,417,783 26,352,276 24,492,733 22,216,508 20,206,458 18,075,672 17,042,637 16,488,352 15,956,474 14,489,635 12,999,487 12,078,263 11,761,333 9,878,725 9,626,675 9,412,788 6,190,206 5,189,863 4,361,125 4,376,100 4,404,800 2,960,850 2,964,550 $ 361,330,237 ot The City has complied in all material respects with the bond covenants as outlined in each issue's indenture. 56 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996. NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS 15.. LQNG-TERM DEBT (CONTINUED) Long-term debt transactions for governmental and proprietary funds for the year ended September 30, 1996 are as follows: Debt Payable Debt Payable Governmental: 10-1-95 Additions Deletions 9-30-96 Tax-Supponed Obligation Bonds S 51,588,452 s 16,505,000 s 4,961,453 S 63,131,999 Compensated Absences 8,337,374 28,817 8,308,557 Total Governmental 59,925,826 16,505,000 4,990,270 71,440,556 Proprietary: Self-Supported Obligation Bonds 96,590,300 7,958,547 88,631,753 Revenue Bonds 86,225,863 49,692 4,270,000 82,005,555 Notes 74,184 74,184 Leases 3,163,804 833,521 2,330,283 Compensated Absences 2,868,586 1291678 228,749 2,769,515 Total Proprietary 188,922,737 179,370 13,365,001 175,737,106 Total City-Wide: Obligation Bonds 148,178,752 16,505,000 12,920,000 151,763,752 Revenue Bonds 86,225,863 49,692 4,270,000 82,005,555 Notes 74,184 74,184 Leases 3,163,804 833,521 2,330,283 Compensated Absences 11,205,960 129,678 257,566 11,078,072 Total City-Wide $248,848,563 $ 16,684,370 S 18,355,271 $247,177,662 The total long-term debt is reconciled to the total annual requirements to amonize long-term debt as follows: Long-Term Debt Interest Total amount of debt Add: Discounts Less: Compensated Absences Total future debt requirements $247,177,662 124,186,237 1,044,410' (11,078,072), $371,363,899 (10,033,662) $361,330,237 L. ADVANCED DEFEASEMENT In fiscal year 1994, the City defeased cenain General Obligation Bonds. Aponion of the proceeds of the Series 1993 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 the portion of the Series 1987 General Obligation Bonds payments due February 15, 1998 through February 15, 2004, the portion of the Series 1988 General Obligation Refunding Bonds payments due February 15, 1999 through February 15, 2008, the portion of the Series 1988 Tax and Golf Course Revenue Certificates of Oblig~tion payments due February 15, 1999 through February 15, 2003, and the ponion of the Series 1988 Combination Tax and Sewer System Subordinate Lien Revenue Cenificates of Obligation payments due February 15, 1999 through February 15, 2007. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 1996, $8,775,000 of bonds outstanding are considered defeased. 51 CITY OF LUBBOCK,TEXAS Notes to Financial Statements· September 3_0, 1996 NOTE Ill. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS L. ADVANCED DEFEASEMENT (CONTINUED) In fiscal year 1994, the City defeased $3,600,000 of the 1992 Tax and Waterworks Certificates of Obligation. The proceeds were used to purchase United States Treasury Securities which were placed in an irrevocable trust to be used solely to def ease 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, 1996, · $3,200,000 of bonds outstanding are considered defeascd. · In fiscal year 1995, the City defeased $205,000 Combination Tax and Golf Course Revenue Certificates of Obligation, Series 1988, and $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. These proceeds were used to purchase United States Treasury Securities, which were placed in an irrevocable trust for the Series 1988 Certificates and a sinking fund for the Series 1993 Bonds to def ease these obligations. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's fmancial statements. On September 30, 1996 $485,000 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 February 15, 1996 through February 15, 2019 and the Series 1991 Brazos River Authority Revenue Bond payments due February 15, 1996 through February 15, 2021. Accordingly, the trust account assets and the liability for the def eased bonds are not included in the City's financial statements. On September 30, 1996, $52,745,000 of bonds outstanding are considered def eased. · In fiscal year 1995, the City of Lubbock defeased certain revenue bonds. 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 partially refund the Series 1976 Eleetric Light and Power System Revenue Bond payments due April 15, 1996 through April 15, 1997, Series 1987 Electric Light and Power System Revenue Bond payments due April 15, 1998 through April 15, 2007, and the Series 1988 Electric Light and Power System Revenue Bond payments due April 15, 1999 through April 15, 2008. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 1996 $12,220,000 of bonds outstanding are considered def eased. M. ACCRUED INSURANCE CLAIMS As discussed in Note I.G., the Risk Managment Fund establishes a liability for ~£-insurance for both reported and unreponed 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: ss CITY OF LUBBOCK, TEXAS Notes to Financial Statements . September 30, 1996. NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS M, ACCRUED INSURANCE CLAIMS (CONTINUED) 1996 1995 Worker's Compensation and Liability Reserves at beginning of fiscal year $ 3,734,341 $ 5,535,452 Claims expenses 2,217;037 2,647,936 Claims payments (503,490) (4,449,047) Reserve adjustment {1,713,54l} Worker's Compensation and liability reserves at end of fiscal year 3,734,341 3,734,341 Medical and Dental Claims Liability at end of fiscal year • 1,040,814 1,644,359 Total Self-Insurance Liability at end of fiscal year $ 4,775,155 $ 5,378,700 Total Assets to pay claims at end of fiscal year $ 8,227,460 $ 6,907,063 Accrued insurance claims payable from .restricted ass_ets-current $ 1,797,048 $ 2,400,593 Accrued insurance claims-non-current 2,978,107 2,978,107 Total accrued insurance claims $ 4,775,155 $ 5,378,700 • The information necessary to prepare the separate disclosure for medical and dental claims liabilities is currently unavailable. · N. LANDFILL CLOSURE AND POSTCLOSURE CARE COST State and federal laws and regulations require the City to place a firial cover. on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for thirty years after closure. Although closure and postclosurc care costs will be paid only near or after the date that the landfill stops accepting waste, the City reports a ponion of these closure and postclosurc costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. The $7,565,016 reported as landfill closure and postclosurc care liability at September 30, 1996, represents the cumulative amount reported to date based on the use of 81 percent of the estimated capacity of the landfill. This amount incl\Klcs $590,745 of expense applicable to fiscal year 1996. The City will recognize the remaining estimated cost of closure and postclosure care of $1,699,284 as the remaining estimated capacity is filled. These amounts arc based on what it would cost to perform all closure and postdosurc care in 1996. The City expects to close the landfill in the year 1998. 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, postclosurc 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 and Government Guarantee mechanism for providing this assurance. The City expects to fmance closure costs through normal operations. S9 C~TY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE IV. CONTINGENT LIABILITIES A. FEDERAL GRANTS In the normal course of operations, the City receives grant funds from various Federal agencies. The grant programs are subject to audit 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 propeny damage, personal injury and personnel practices, disputes over contract awards and propeny condemnation proceedings, and suits contesting the legality of cenain taxes. In the opinion of management, the ultimate outcome of these lawsuits will not have a material adverse effect on the City's financial position as of September 30, 1996. C. SITEREMEDIATION 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, 1996. In the opinion of management, the ultimate liability will not have a material adverse effect on the City's financial position. NOTE V. FINANCIAL INSTRUMENTS The City is subject to off-balance sheet risk associated with assets that are not recorded in the financial statements, specifically with respect to United States Treasury Securities-State and Local Government Series, held in four irrevocable trusts. These include: • a trust to refund a portion of General Obligation Bonds, Series 1987, a ponion of General Obligation Bonds, Series 1988, a ponion of Combination Tax and Golf Course Revenue Cenificam of Obligation, Series 1988 and a portion of Combination Tax and Sewer System Subordinate Lien Revenue Cenificates of Obligation, Series 1988 • a trust to refund a portion of Tax and Waterworks Cenificates of Obligation, Series 1992 • a trust to refund the Bmos River Authority Revenue Bonds, Series 1989 and a ponion of the Brazos River Authority Revenue Bonds, Series 1991 • a trust to refund a portion of the Electric Light and Power System Revenue Bonds, Series 1976, a portion of the Electric Light and Power System Revenue Bonds, Series 1987, and a portion of the Electric Light and Power System Revenue Bonds, Series 1988 Management feels that due to the nature of these securities, there is a minimal amount of credit or market risk associated with these securities. Financial instruments which potentially subject the City to concentrations of credit risk consist primarily of non-insured or collateralized demand deposits and trade receivables. Management believes that the City places its demand deposits in well capitalized financial institutions in amounts that are within the Federal Deposit Insurance Corporation limitations or are collateralized by pledged securities. Concentrations of credit risk are primarily focused on trade receivables which are due from customers. No significant credit losses from individual receivables were experienced during the year. 60 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1996 NOTE VI. RESTATEMENT OF BEGINNING BALANCES Beginning fund equity has been restated to reflect confiscated funds in the Airpon Enterprise Fund . as a liability. The effect of the change was to decrease retained earnings in the Airpon fund by $16,741 and increase liabilities by the same amount. In the Stormwater Enterprise Fund, beginning fund equity has been restated to reflect amounts that were closed to retained earnings in prior years that in fact are capital assets. This change is due to moving a project from the general fund capital projects which expenses capital assets and records them in the General Fixed Asset Account Group to an enterprise fund that capitalized and depreciates fixed assets. The effect of the change was to increase retained earnings and construction in progress in the Stormwater fund by $898,378 and decrease investment in fixed assets and construction in progress by the same amount in the General Fixed Asset Account Group. NOTEVII.ACCOUNTINGCHANGES During fiscal year ending September 30, 1996 GASB Statement No. 24 • Accounting and Financial Reponing for Ccnain Grants and Other Financial Assistance" became effective. The Statement had no material effect on the September 30, 1996 general purpose financial statements of the City. In August 1995, the GASB issued Statement No. 29, •The Use of Not-for-Profit Accounting and Financial Reponing Principles by Governmental Entities•. The provisions of this Statement generally are effective for financial statements for periods beginning after December 15, 1994; the modification of the AICPA Not-for-Profit model for cenain GASB pronouncements is effective for entities that previously have not applied those pronouncements for periods beginning after December 15, 1995. This Statement is not expected to impact the City's financial reponing as the City will continue to use the governmental reponing model and elected in fiscal year 1993-94 the provisions of GASB Statement No. 20, paragraph 7, which provides the City the option of not applying cenain Financial Accounting Standards Board Statements. NOTE VIII. SUBSEQUENT EVENTS The City of Lubbock has scheduled a second reading by the City Council of an advance refunding ordinance to refund cenain general obligation debt amounting to approximately $12-14 million. The expected delivery date of the refunding issue is February 1997. 61 ~ ~ II lflil ~ --~-• ~BCCKTEXAS 62 APPENDIXC FORM OF BOND COUNSEL'S OPlNION TELEPHONE: 214/855•8000 FACSIMILE: 214/855-8200 WRITER'S INTERNET ADDRESS: EESQUIVEL@F"ULBRIGHT.COM WRITER'S DIRECT DIAL NUMBER: 214/855-8013 FULBRIGHT & JAWORSKI L. L. P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 Ross AVENUE SUITE 2800 DALLAS, TEXAS 75201 HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES LONDON HONG KONG WE HA VE ACTED as Bond Counsel in connection with the issuance by City of Lubbock, Texas (the "City") of the "City of Lubbock, Texas General Obligation Refunding Bonds, Series 1997" (the "Bonds") in the aggregate principal amount of $17,530,000, dated January 15, 1997, solely to express legal opinions as to the validity of the Bonds, the defeasance and discharge of the City's outstanding obligations being refunded by the Bonds and the excludability of the interest on the Bonds from gross income for federal income tax purposes, and for no other purpose. We have not been requested to investigate or verify, and we neither expressly nor by implication render herein any opinion concerning, the financial condition or capabilities of the City, the disclosure of any financial or statistical information or data pertaining to the City and used in the sale of the Bonds, or the sufficiency of the security for or the value or marketability of the Bonds. THE BONDS are issuable in fully registered form only and in denominations of $5,000 or any integral multiple thereof. The Bonds have stated maturities of February 15, 1998 through February 15, 2009, unless redeemed prior to maturity in accordance with the optional redemption provisions stated on the Bonds, and interest thereon accrues from the date, at the rates, and in the manner and is payable on the dates, all as provided in the ordinance adopted by the City Council of the City authorizing the issuance of the Bonds (the "Ordinance"). IN RENDERING THE OPINIONS herein we have examined and rely upon original or certified copies of the proceedings had in connection with the issuance of the Bonds, including the Ordinance, the Special Escrow Agreement (the "Escrow Agreement") between the City and Norwest Bank Texas, N.A., Dallas, Texas (the "Escrow Agent"), a special report of Ernst & Young L.L.P., Certified Public Accountants (the "Accountants") and an executed initial Bond; certifications of officers of the City relating to the expected use and investment of proceeds of the sale of the Bonds and certain other funds of the City and to certain other facts within the knowledge and control of the City; and such other material and such matters of law as we deem relevant. In the examination of the proceedings relating to the issuance of the Bonds, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original copies of all documents submitted to us as certified copies, and the accuracy of the statements contained in such documents and certifications. BASED ON OUR EXAMINATION, we are of the opinion that, under applicable law of the United States of America and the State of Texas in force and effect on the date hereof: 0389337 Page 2 of Legal Opinion of Fulbright & Jaworski L.L.P. Re: $17,530,000 "City of Lubbock, Texas, General Obligation Refunding Bonds, Series 1997", dated January 15, 1997 1. The Bonds have been duly authorized by the City and, when 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 within 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 general principles of equity. 2. The Escrow Agreement has been duly authorized, executed and delivered and is a binding and enforceable agreement in accordance with its terms and the outstanding obligations refunded, discharged, paid and retired with the proceeds of the Bonds have been defeased and are regarded as being outstanding only for the purpose of receiving payment from the funds held in trust with the Escrow Agent, pursuant to the Escrow Agreement and in accordance with the provisions of Article 717k, V.A.T.C.S. In rendering this opinion, we have relied upon the verification by the Accountants of the sufficiency of cash and investments deposited with the Escrow Agent pursuant to the Escrow Agreement for the purposes of paying the outstanding obligations refunded and to be retired with the proceeds of the Bonds and the interest thereon. 3. Pursuant to section 103 of the Internal Revenue Code of 1986, as amended to the date hereof(the "Code"), and existing regulations, published rulings, and court decisions thereunder, and assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance relating to sections 141 through 150 of the Code, interest on the Bonds will be excludable from the gross income, as defined in section 61 of the Code, of the owners thereof for federal income tax purposes, and such interest will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals for federal income tax purposes. WE CALL TO YOUR ATTENTION THAT interest on all tax-exempt obligations, such as the Bonds, owned by a corporation (other than an 11S11 corporation or a qualified mutual fund, real estate mortgage investment conduit (REMIC), or real estate investment trust (REIT)) will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code is computed. Page 3 of Legal Opinion of Fulbright & Jaworski L.L.P. Re: $17,530,000 "City of Lubbock, Texas, General Obligation Refunding Bonds, Series 199711 , dated January 15, 1997 WE EXPRESS NO OTHER OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the 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, 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 0389337 No Text Financial Advisory Services Provided By _;:. -FIRST SOUTHWEST COMPANY INVESTMENT BANKERS