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Home My WebLink AboutOrdinance - 9815-1995 - Issuance Of 13,505,000 Electric Light And Power System Revenue Bond Series 1995 - 06/23/1995CITY OF LUBBOCK SPECIAL CITY COUNCIL MEETING June 23, 1995 8:30A.M. The City Council or the City or Lubbock, Texas, met in special session on the %3rd day or June 1995 In the City Coundl Chambers, ftrSt ftoor, City Ha11, 1625 13th Street, Lubbock, Texas, at 8:30 A.M. Present: Mayor David R. Langston, Mayor Pro Tem Randy Neugebauer, Councilmember Max L. lnce, Coundlmember Alex Cooke, Oty Manager Bob Cass, City Attorney John C. Ross, Jr., and City Secretary Betty M. Johnson. Absent: Coundlmember Victor Hernandez, Councllmember T. J. Patterson, and Councilmember Windy Sitton. Mayor Langston called the meeting to order at 8:35 A.M. ( 1.) ( 2.) ( 3.) The Invocation was (iven by J. Robert Massengale, Director or Electric Utilities. Pledge or Allegiance was (iven in unison by those In the Coundl Chambers. ORDINANCE 1#9815--Autborizjng the issuance of$13.505.000 "City of Lubbock. Texas. Electric Light and Power System Revenue Refunding Bonds, Series 1995." ORDINANCE #9815 AN ORDINANCE AUTIIORIZING TilE ISSUANCE OF $13,505,000 "CITY OF LUBBOCK, TEXAS, ELECTRIC LIGHT AND POWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1995"; PRESCRIBING TilE FORMS, TERMS, AND PROVISIONS OF SAID BONDS; PLEDGING TilE NET REVENUES OF TilE CITY'S ELECTRIC LIGHT AND POWER SYSTEM TO TilE PAYMENT OF TilE PRINCIPAL OF AN INTEREST ON SAID BONDS; ENACTING PROVISIONS INCIDENT AND RELATED TO TilE ISSUANCE, PAYMENT, SECURITY, SALE AND DELIVERY OF SAID BONDS, INCLUDING TilE APPROVAL AND DISTRIBUTION OF AN OFFICIAL STATEMENT PERTAlNING TIIERETO, TilE APPROVAL OF A PAYING AGENT/REGISTRAR AGREEMENT, TilE APPROVAL OF A PURCHASE CONTRACT, TilE APPROVAL OF A SPECIAL ESCROW AGREEMENT, EXERCISING TilE CITY'S RIGHT TO OPTIONALLY REDEEM ITS OUTSTANDING SERIES 1976, SERIES 1987, AND SERIES 1988 ELECTRIC LIGHT AND POWER SYSTEM REVENUE BONDS, AND PROVIDING AN EFFECTIVE DATE. Mark Hindman, Director of Support Services, and Mark Westergard, Bond Counsel from Fulbright & Jaworski, presented comments. Of the $28,029,964.55 current principal outstanding of Electric Light and Power System Revenue Bonds, $12,440,000 has been identified as favorable for debt service savings in an advance refunding. Specific series identified include: Principal $440,000 3,500,000 8.500,000 $12,440,000 Serjes Series 1976 Series 1987 Series 1988 Total Current Interest Rate 6.25% 7.0o/o and S.OOAI 7.0%% .' t Special City Council Meeting June 23. 1995 Page456 This issue is a negotiated sale. Prudential Securities Incorporated is acting as lead underwriter, and Athena Capital Corporation and Estrada Hinojosa & Company are acting as underwriters. First Southwest Company's financial advisors for the City of Lubbock project a current market interest rate of 5.33 percent. A principal amountof$13,505,000 is necessary to make the required deposit of$13,184,735.25 to the escrow account to refund the debt on the call date and to pay all costs related to issuance. The average annual cash savings on debt service is $61 ,500. Issuing bonds to advance refund specific LP&L Revenue Bonds would result in an annual debt service savings. As it is in the best financial interest of the organization, staff recommended approval. Motion was made by Councilmember Cooke, seconded by Councilmember lnce to pass on second and rmai reading Ordinance #9815 as recommended by staff. Motion carried: 4 Yeas; 0 Nays. There being no further business to come before Council, motion was made by Councilmember Cooke, seconded by Mayor Pro Tern Neugebauer to adjourn the meeting at 8:39 a.m. Motion carried: 4 eas; 0 a ATTEST: ~~~~ Read and approved this the 13th day of J ATTEST: ~~~~ 456 I . I ; .. ·: No Text TE:LE:PHON E:: 214/855·8000 F"ACSIM I LE:: 214/855·8200 MARK S. WE:STERGARD . PARTNER DIRECT DIAL: 214/855-8002 Ms. Betty Johnson City of Lubbock 1625 13th Street Lubbock, Texas 79401 FULBRIGHT & .JAWORSKI LL.P. A RE:GISTE:FIE:D 1-IMITE:D l-IABILITY PAFITNE:FISHIP 22oo Ross AvENUE SUITE 2800 DAl-l-AS. TEXAS 75201 December 4, 1995 RECEIVED DEC 06 1995 CITY SECRETARY lUBBOCK. TEXAS HOU WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NE:W YORK LOS ANGE:LE:S LONDON HONG KONG Re: $13,560,000 "City of Lubbock, Texas, Electric Light and Power System Revenue Refunding Bonds, Series 1995'' Dear Betty: Enclosed is a copy of the completed form 8038-G for your transcript of proceedings that was sent to the IRS to be filed. MSW:da Enclosure D192439.pl Please call if you have any questions. Very truly yours, -?Y{~ Mark S. Westergard PQJ-y}\_ Ov-J__ lroo L X J I{ LP--Iii ~ / /kJNiliv No Text Information Return for Tax.&empt GcMmmental Obligations ~~> Under lnfllrnlll R.venue Code tleCtion 149(e) • See lepllldalnelruc:tiont. OMB No. 1545-0720 Use Form 8038-GC If the issue rice Ia under $100.000. Issuer'• name City of Lubbock, Texas 2 Issuer'• employer identification number 75-600059-0 3 Number and street (or P.O. box If mail is not delivered to street address) 1625 13th Street 5 City or town, state and ZIP code Lubbock, Texas 7 City of Lubbock, Texas, Electric Ught and Power Syttem Revenue Refunding Bonds, Series or 1ssue and enter the issue 9 0 Education (attach tchedule--eee instructions) ••.••...•..••••••.•••.••.•...........••. 10 0 Health and hospital (attach tchedule--eee instructions) •.••••.••.••••.••••...•••••••••.. 11 0 Transportation .•••.••••.••.•••••••••••••.•••.•.•••••.••••••...•.••••••••..•.• 12 0 Public tafet:y .••••.•••••••.••••••••.•••••••.....••••••••••••••••••••...•••••. 13 0 Environment (including tewage bonds) ••••••.•••.•••••••••••.•••••••...•••••.•..••. 14 0 Housing ...•.•...•••••.•••..•••••••••••.•.••.•••.•••••••••••.••••••••••.•... 15 GO Utilities .....••.•.••••••••••••.••••••••••••••••••••••••••.•••••••••.••.••••.• 18 0 Other. Describe (see instructions) •--------------------- 17 If obligations are tax or other revenue anticipation bonds, check box • 0 18 If 0 4 Report number G1995 • 3 6 Date of Issue Jul 8 CUSIP Number 549203NC7 27' 1995 .. ~ -• ~,# Afr.,... -.,, ., ;; ;--· ' ~·. ·-:::...,: <. ,. • ~ • ' .. > ...... " 29 Enter the remaining weighted average maturity of the bondt to be refunded . • • • • • • • . • • • • • • • • . • . • • • • • • • . • 7 , 7 Q 16 vears 30 Enter the last date on which the refunded bonds will be called • • • • • • • • • • • • • • • • • . • • • • . • • • . • • . • • . . . . • • • April 15, 19 98 31 Enter the date(s) the refunded bonds were latued • 5/7 6 j 5/8 7 ; 5/88 32 Enter the amount of the state volume cap allocated to the latue • • • • • • • • • • • • . • • • • • • • • • • • • • • • . • • • • • . . . • -0- 33 Enter the amount of the bonds designated by the latuer under tection 265(b)(3)(B)(i)ll0 (amalllatuer exception) • -.,.---_....;0~_----- 34 Pooled financings: a Enter the amount of the proceeds of this laeue that are to be used to make loans to other governmental units b If this issue · a loan made from the proceeds of another tax-exempt Issue, check box 35 lfthels For Papetwork Reduction Al:it Notice, eee page 1 cf the lnalruc:tions. c.tt. No. S3773S • N/A • 0 and enter the name of Form 8038-G . ~e.. 5-93) .... , ' .. TELEPHONE: 21./855·8000 P'ACSIMILE: Zl./855•8200 MARK S. WESTERGARD PARTNER DIRECT DIAL! 214/855-8002 FULBRIGHT & JAWORSKI LLP. A REGISTEI'IED LIMITED LIABILITY PAI'ITNEIIISHIP 2200 ROSS AVENUE SUITE 2SOO DAL.L.AS. TEXAS 7!5201 November 6, 1995 CERTIFIED MAIL #Z 063 399 852 RETURN RECEIPT REQUESTED Internal Revenue Center Philadelphia, PA 19255 Re: Information Report Pursuant to Section 149 (e) Ladies and Gentlemen: HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YOI'IK LOS ANGELES LONDON HONG KONG Enclosed herewith is a statement by the City or Lubbock concerning its bonds styled "City or Lubbock, Texas, Electric Light and Power System Revenue Refunding Bonds, Series 1995" submitted in compliance with the requirements or Section 149 (e) or the Internal Revenue Code or 1986, as amended. Also enclosed is a xeroxed copy or such statement together with a business rep)y envelope. We request that the origin&l statement be filed, and the zel'ODd copy be date stamped as acknowledgement or filing and returned to us in the envelope provided. cc: Tommy Gonzales MSW:dla Enclosures. Very tru1y yours, --wfa-4-A--U~ Mark S. Westergard PS Form 3800, March 1993 ~ ~,~ ~ !i ' 1'1 ::s II) N u;ozo:c .... CD 0 0 ftl ftl CJ ~S~:ln a- 02491~.1 0-\D N VI VI ~ < fD e fD en fD 1'1 < .... 0 fD CD "'C :; ~. UJ < c Qj -·~ !~:a~ .... :-~c. .... UJ -0 0 .Jl ~ n ~ -0 ... .D a< ~ C'D ~ -· 3 ~-~ .,.o :.1'1 ... 11 0 "=' :1 ~ 1\J .. 0 -c ~3.. .. , .. :..::. X en s: -0 0 0 0 ~ 0 -t"'" c: C" C" 0 0 ~ tl1 I-' fD 0 rt >1 ..... 0 -. CERTIFICATE Of NO-PEfAULT THE STATE OF TEXAS § s COUNTY OF LUBBOCK 5 s CITY OF LUBBOCK S We,. the und.ersiqned, Mayor and City Treasurer respectively, of the City of Lubbock., Texas, DO HEREBY CERTIFY as follows: That the City of Lubbock, Texas, is not in default as to any covenant, concUtion or obligation contained in the orclinances authorizinq the outstanding Previously Issued Bonds secured by a lien on the City's Electric Liqht and Power system (all as defined in the Ordinance authorizinq the "City of LubbOCk, Texas, Electric Liqht and Power system Revenue Refundinq Bonds, Series 1995" and that there is on hand in the Special Electric Light and Power System Revenue Bond Retirement and Reserve Fund pertaining to the outstandinq obliqations with the amount required to be therein. this [SEAL! City Treasurer City of Lubbock, Texas No Text Verbatim Transcript Special City Council Meeting June 23, 1995 Item #3 -ORDINANCE #9815--authorizing the issuance of $13,505,000 "City of Lubbock, Texas, Electric Light and Power System Revenue Refunding Bonds, Series 1995." Mayor Langston: Councilmember Cooke: Mayor Langston: Councilmember Ince: Mayor Langston: Mayor Pro Tern Neugebauer: Robert Massengale: Mayor Pro Tern Neugebauer: Robert Massengale: Councilmember Cooke: Betsy Wood: Mayor Pro Tern Neugebauer: Betsy Wood: Reads caption. So move. A motion by Councilman Cooke, and do I have a second? I second. Second by Councilman Ince, any further discussion on this item? What kind of rate are we going to get on this Robert? I can't tell you the rate, but Betsy can. But, the savings on this, the potential savings, the present value savings is 6 percent. and that equates to? $748,000 over the life of the bonds, go ahead ... It's a full point better than anticipated. The rate is 5.21. 5.21, and when will these bonds accrue ... when will they be given ... what's the issue date on these? June 15 No Text Special City Council Meeting June 23, 1995, Item #3 Page2 Mayor Pro Tern Neugebauer: Betsy Wood: Councilman Cooke: Mayor Pro Tern Neugebauer: Mayor Langston: ? Councilman Cooke: Mayor Pro Tern Neugebauer: Mark Westergard: All talking Mayor Pro Tern Neugebauer: Mark Westergard: Mayor Pro Tern Neugebauer: How much? June 15 What's the date that begins on July 27th. July 27th. Just one question, I just got curious. In preparing a bunch of documents, I saw Brazos River Authority on some of them, this doesn't have anything to do with those? No. You know, one more time, City of Lubbock bonds with their Double A Rating, we're suddenly Triple A price. There's no insurance involved with all this? There is insurance ... But your insurance premium is the lowest this town has ever seen ... that's the lowest insurance premium ... So that was the reason to go with the insurance because the premium was so low? That's one of your stronger points ... So are you saying that the premium actually paid for itself in the yield? No Text • Special City Council Meeting June 23, 1995, Item #3 Page3 Mark Westergard: Mayor Langston: All: Mayor Langston: SILENCE Mayor Langston: Oh, absolutely! We wouldn't do it if ... Any other discussion? Questions? Hearing none, without objection, I'll call for the question. All in favor respond by saying "Aye." Aye. Any opposed by ''Nay." This item passes: 4 Ayes; 0 Nays. No Text Verbatim Transcript City Council Meeting June 22, 1995 Item 28-Consider an ordinance authorizing the issuance of$13,505,000 "City of Lubbock, Texas, Electric Light and Power System Revenue Refunding Bonds, Series 1995." Mayor: Mark Hindman: Mr. Hindman. Yes, Mr. Mayor and Council, due to the market conditions it was feasible for us to refund approximately $12.5 million dollars in bonds were issued at three different issues and we had provided the council with some estimates of potential savings we anticipated through this refunding, and that refunding has been priced now and we have some new figures which we will provide to you, and we also have a handout that we can give to you. Joe Smith, with First Southwest Company, has the numerical analysis of the refunding and he is also prepared to answer any questions regarding any of the figures and we also have Mark Westergard, our bond counsel from Fulbright and Jaworski, here who is able to answer of the legal questions that you might have. This was a refunding for savings only; we did not extend the term of the bonds. We ended up with a net present value percent of refunding principal of6.019 percent. We had estimated a savings of lower than that, somewhere around 5.2 percent savings. This will give us an average annual debt service savings of $70,000.00, a little over $70,000.00, and the savings was spread out pretty much evenly over the term of the bonds. We were able to get a net increase cost of5.21 percent, which is good, which indicates the conditions of the market being appropriate for us to do a refunding at this time. Be happy to answer any questions we have from Council now or anything regarding this refunding. No Text City Council Meeting June 22, 1995, Item #28 Page2 Councilmember Ince: Mark Hindman: Councilmember Ince: Mark Hindman: Councilmember Patterson: Mark Hindman: Mayor Langston: Councilmember Patterson: Mayor Langston: Mark, just to recap this, there's a simply way as that by taking this course of action we're not lengthening our debt service, we're not going from ten years to fifteen years for example, and at the same time we're going to save approximately $70,000.00 over the same term that these bonds would be in effect each year for the City of Lubbock. That's it. That is correct. OK. The previous interest rates on these bonds varied between 6 1/4 percent and 8 percent Now we're down to a net increase cost of 5.2 percent. So the timing is right? The timing is very right. We were evaluating this and First Southwest evaluates this on a regular basis, any bonds that they have that they feel the market is right for us to refund and we were looking at this last fall as were we the next issue with the Brazos River and the market turned away from us pretty much at the last moment and this time we're able to go through and get it a good time in the market. Any further discussion on this item? I so move. I have a motion by Councilman ... INAUDIBLE --all talking at once. Joe Smith: Mr. Westergard would like to comment on this position of the proceeds before the vote. No Text .. City Council Meeting June 22, 1995, Item #28 Page3 Mark Westergard: I have one quick thing to say; even for meWs a quick thing. These bonds are insured by MBIA Insurance Company. You got the lowest bid we have ever seen for any insurance premium. This is an extremely favorable reflection on the City, but one of the conditions that MBIA has asked for in the bond ordinance, that you are considering right now, is the condition that if the City sells the system, proceeds of the sale will be used to pay off all outstanding debt. So, some of those sale proceeds are dedicated to pay off debt. Councilmember Patterson: Councilmember Cooke: Mark Hindman: Joe Smith: Mayor Langston: Councilman lnce: Sounds fair. No problem. That's a good point. I would also to say this was a ... we rushed through this refunding in order to make the window of the market and also we're working on a sec deadline of July 3rd, with reporting provisions that we want to evaluate a little further before we get into, and so I would just like to say publicly our thanks to Joe and his staff of First Southwest for the hard, and extra work, and also to Betsy Wood, our Chief Accountant, because they put in a lot of extra hours to get this in, so we could hit the market and ge~ it before the new reporting deadlines, which we really want to evaluate further before we come under. Also, have with us here representatives from Prudential Securities. You want to introduce ... I think all of you know Mr. Deaton Rigsby, the Manager in Lubbock for Prudential Securities and the Investment Banker for Prudential Securities, Lacey Truelove Crowe from the Dallas office. I'd like to say that this is the sixth underwriting that Prudential has handled for the City of Lubbock, including the Brazos River, and they've done an outstanding job, and I'm very proud to be associated with them. Joe, you always do a great job. Betsy, we appreciate you and we're glad to have representatives from our financial groups with us as well. I second the motion. No Text • City Council Meeting June 22, 1995, Item #28 Page4 Mayor Langston: All: Mayor Langston: SILENCE Mayor Langston: Have a motion by Councilman Patterson, and a second by Councilman lnce. Any further discussion then on this item? Hearing none without objection, I'll call for the question, all in favor respond by saying "Aye." Aye. Any opposed by "Nay." This item passed 6 Yeas; 0 Nays. No Text omciAL STATEMENT Dated: June 23, 1995 NEW ISSUE-Book-Entry-Only "Other Relevant Information • Ratinas: Moody's: "Aaa" Stmdarcl& Poor's: "AAA" fiteb Investors Service, LP.: "AAA" (MBIA Insurance Corporation Insured; see "Bond Information - Munldpal Bond Insurance" and Ratings" herein) In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Other Relevant Information· Tu. Exemption" herein, including the alternative minimum tax on corporations. Dated: June 15, 1995 $13,560,000 CITY OF LUBBOCK, TEXAS (IAibbock Count:r) ELECTRIC LIGHT AND POWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1995 Due: April15, as shown below The $13,560,000 City of Lubbock, Texas (the "City") Electric Light and Power System Revenue Refunding Bonds, Series 1995 (the "Bonds") are issued pursuant to the Constitution and general laws of the State of Texas, particularly Article 717k, Vernon 'a Annotated Texas CiVil Statutes ("VATCS"), as amended, and other applicable laws, the Charter of the City of Lubbock, Texas, and an Ordinance (the "Ordinance") passed by the City Council. The Bonds are special obligations of the City and, together with certain other outstanding revenue bonds of the City arc payable, both as to principal and interest, solely from and secured by a first lien on and pledge of the Net Revenues of the City's Electric Light and Power System. The Cit:r has not covenanted nor obligated itself to pay the Bonds from monies rlised or to be raised from taxation (see "Bond lnformat,ion-Authority for Issuance and Security for the Bonds"). Interest on the Bonds will accrue from June IS, l99S, and will be payable April IS and October 15 of each year, commencing October IS, 1995, and will be calculated on the basis ofa 360-day year of twelve 30-day months. The Bonds arc initially issuable only to Cede & Co., the nominee of The Depos~ry Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical deliveey of the Bonds wiD be made to the purdlasers 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 beneficial owners of the Bonds. Sec "Bond Information-Book-Entry-Only System• herein. The initial Paying Agent/Registrar shall be Norwest Bank Minnesota, National Association, Minneapolis, ~innesota; Co-Registrar shall be Norwest Bank Texas, National Association, Lubbock, Texas (see "Bond Information-Paying AgentiRtgistrar"). I ''i, Proceeds from the sale of the Bonds will be used to provide funds sufficient to refund $440,000 principal amount of the City's outstanding Eectric Ught and Power System Revenue Bonds, Series 1976, $3,500,000 principal amount of the City's outstanding Electric Light and Power System Revenue Bonds, Series 1987, and $8,500,000 principal amount of the City's outstanding Electric Light and Power System Revenue Bonds, Series 1988 and to pay costs of issuance of the Bonds (sec "Plan of Financing" and "Schedule 1"). Payment of the principal of and interest on the Bonds when due will be insured by a Municipal Bond Guaranty Insurance Policy to be issued simultaneously with the delivery of the Bonds by MBIA Insurance Corporation ("MBIA ") . .NIB lA See Maturity Schedule and Redemptio11 Provisions 011 Inside of Cover The Bonds arc offered when, as and if issued by the City and received by the Underwriters, subject to prior sale, withdrawal or modification of the offer without notice, the approval oflegality and tax exemption by Fulbright& Jaworski L.L.P., Dallas, Texas, Bond Counsel, and the approving opinion of the Attorney General of the State of Texas. The legal opinion will be printed on or attached to the Bonds (see Appendix C, "Form of Bond Counsel's Opinion"). Certain legal matters will be passed upon for the Underwriters by ~cCaJl, Parldturst & Horton L.L.P., Dallas, Texas, Counsel for the Underwriters. It is expected that the Bonds will be available for delivery through DTC on or about July 27, 199S. PRUDENTIAL SECURITIES INCORPORA1ED ATHENA CAPITAL CORPORA110N EsTRADA HINOJOSA & COMPANY, INC. MATURITY. SCHEDuLE Yield Yield Maturity Interest or Maturity· Interest or Anrll 1s Rate Price Amount A12rit 15 _B!L ~ 1996 3.80% 3.80% $ 1,265,000 2003 4.90% 5.00% 1997 4.15% 4.15% 1,240,000 2004 5.00% 5.15% 1998 4.35% 4.35% 1,210,000 2005 5.15% 5.25% 1999 . 4.50% 4.50% 1,185,000 2006 5.30% SAO% 1,340,000. 2000 4.50% 4.60% 1,165,000 2007 5.40% 5.50% 1,315,000 2001 4.65% 4.75% 800,000 2008 5.50% 5.60% 1,285,000 2002 4.80% .4.90% (Accrued inter-at from June 15, 1995, to be added) The City reserves the right, at its option, to redeem Bonds having stated maturities on and after April 15, 2005, in whole or in part, on Apri115, 2004, or any date thereafter, at the par value thereof, plus accrued interest to the date fixed for redemption (see "Bond Information -Redemption of Bonds"). 2 No dealer, broker, salesman or other person has been authorized by the City or the Underwriters to give any information, 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 or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is unlawful to make such an offer, solicitation or sale. The information set forth herein has been obtained from the City and other sources which are believed to be reliable. The information and expressions of opinion herein 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. · The price and other terms respecting the offering and sale of the Bonds may be changed from time to time by the Underwriters after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering price, including sales to dealers who may sell the Bonds into investment accounts. In connection with the offering of the Bonds, the Underwriters may over--allot or effect trsnsactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open martet. Such stabilizing. if commenced, may be discontinued at any time. TABLE OF CONTENTS OFFlCIAL STATEMENT Description of Bonds • . . . . . . . • . . . . . . . 1 CITY ADMINISTRATION Elected Officials .. • . . . . . . . . • . . • . • . . 4 Appointed Officials . . . . . . . . . . . . . . . . • 4 Consultants and Advisors • . . . • . . . . . . . . S SELECTED DATA FROM THE OFFICIAL STATEMENT . . . . . . . . . . . . . . . . . . . • 6 INTRODUCTION . . . . . • . . • . . . . . . . . . • . . 8 PLAN OF FINANCING Purpose • • . . . . . . . . . . . . • . . • . . . . . . 8 The Refunded Bonds . . . . . . . • . . . . • . . . 8 Sources and Uses of Funds . . . . . . . . . . . . 9 BOND INFORMATION Authority for Issuance . . • . • • . • . • • . . . . 10 General . . . . . . . . . . . • . . . . . . • . . . . . 10 Security for Bonds . . . . . . . . . . . . . . . . • 10 Pledge of Net Revenues . . . . . . . . . . . . . . 10 Enforcement of Remedies . • . . • . . . • • . . . . 11 Rates .••.....•........•....•.. 11 Redemption of Bonds .•.... ·. . . . . . . . . 11 Additional Bonds . • . . . • . . . . . . . . . . . . 12 Book-Entry-Only System . . . . . . . • . . . . . 12 Paying Agent/Registrsr . . . . . . . . . . . . . . 13 Transfer, Exchange and Registrstion • . . . . • 13 Limitation on Transfer of Bonds Called for Redemption . . . • . . . . . . . . . . . . . . 13 Record Date for Interest Payment . . . . . . . . 14 Municipal Bond Insurance ....•. , . • . . . 14 DEBT INFORMATION Debt Service Requirements 17 ELECTRIC LIGHT AND POWER SYSTEM Operating Statement . . • . . . . . . . . • . . • . 17 Coverages and Fund Balances . . . . . . . . . . 17 Monthly Electric Rates . . . . . . . . . . . . . . 18 Selected Customer Usage and Billings . . . . . 19 Billings . . . . . . . . . . . . . . . • • . . . . . . . 19 Eleven Largest Customers . . . . . • . . . . . . 19 3 Analysis of Electric Bills .............. ·. . 20 Statistical Data . . . . . . . • . . . . . . . . . . . . . . 20 Comparison of Selected Electric Utilities' Average Summer Monthly Bill . . . . • . . . . . . . . . 21 CITY'S EQUITY IN THE ELECTRIC LIGHT AND POWER SYSTEM . . . . . . . . . . . . . . . . . . . 22 LUBBOCK POWER AND LIGHT ... ·~........ 23 CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY AND THE SYSTEM . . 26 INVESTMENTS......................... 29 SELECTED PROVISIONS OF THE BOND ORDINANCE . . . . . . . . . . . . . . . . . . . . . . 32 OTHER RELEVANT INFORMATION Ratings ......... : ......... ·.'. . . . . . 46 Tax Exemption . . . . . . . . . . . . . . . . . • . . . . 46 Tax Accounting Treatment of Discount and Premium on Certain Bonds . . . . . . . . , . . . . . . . . 46 Litigation . . . . . . . . . . • . . . . . . . . . . . . . . 47 Registration and Qualification of Bonds for Sale . 47 Legal Investments and Eligibility to Secure Public Funds in Texas . • . . . . . . . . . . . . . . . . 47 Legal Opinions and No-Litigation Certificate . . . . 48 Underwriting . . . . . . . . . . . . . . . . . . . . • . . . 48 Verification of Arithmetical and Mathematical Computations . . . . . . . . . . . . . . . . . . . 48 Financial Advisor • . . . . . . . . . . . . . . . . . . . 48 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 49 APPENDICES General Information Regarding the City . . . . . . . A Excerpts from the Comprehensive Annual Financial Report . . . . . . . • . . . . . B Form of Bond Counsel's Opinion ..• , . . . • . . . C Specimen of Municipal Bond Guaranty Insurance Policy . . . . . . . . . . . . D The cover page herenf, this page, the appendices included herein and any addenda, supplement or amendment hereto, are part of the Official Statement. CITY ADMINISTRATION Elected OfrlciaJs City Council David R. Langston Mayor Randy Neugebauer Mayor Pro Tern ' and Councilmember Victor Hernandez Councilmember T .J. Patterson Councilmember Windy Sitton Councilmember Max lnce Councilmember Alex "TyK Cooke Councilmember Appointed OffJCiaJs l;!ame Bob Cass City Manager .John C. Ross, Jr. City' Attorney Betty M. Johnson City Secretary Length of Service 3 Years 3 Years 1 Year 11 Years 1 Year 3 Years 3 Years Position Gavino Sotelo First Assistant City Manager Quentin Thomas Assistant City Manager Debra Forte' Assistant City Manager Carolyn Aliamus Director of Culture, Leisure and Recreation J. Robert Massengale · Director of Electric Utilities Term ExJ:!ires May, 1996 May, 1998 May, 1998 May, 1996 May, 1998 May, 1996 May, 1996 Doug Goodman . Director of Health and Community Services Mary Andrews Director of Human Resources Tom Tuning Director of Information and Communication Services Anna Mosqueda Director of Management Services Jim Bertram Director of Strategic Planning Mark Hindman Director of Support Services Larry Hoffman Director of Transportation Terry Ellerbrook Director of Water Utilities Don Stevens Fire Chief Ken Walker Chief of Police Betsy Wood, CPA· Chief Accountant 4 Occui!ation Attorney-at-Law Investments Attorney-at-Law Co-Publisher, SouthWest Digest Businesswoman President, lnce Insurance Company Investments Length of Length of Employment Time in With City Thjs Position of Lubbock Since September, 1992 Since April, 1976 Since August, 1978 Since August, 1978 Since March, 1993 Since April, 1990 Since March, 1995 Since March, 1995 Since May, 1994 Since May, 1994 Since January, 1995 Since January, 1995 Since March, 1994 Since March, 1994 Since December, 1994 Since February, 1980 Since August, 1993 Since June, 1980 Since March, 1994 Since August, 1988 Since October, 1993 Since October, 1989 Since December, 1994 Since November, 1989 Since November, 1993 Since September, 1970 Since November, 1993 Since May, 1987 Since November, 1993 Since September, 1982 Since November, 1994 . SinceMarch, 1982 Since August, 1986 Since August, 1986 Since March, 1994 Since March, 1994 Since February, 1993 Since January, 1985 Consultants and Advisors Consuhing Engineers for Lubbock Power and Light Resource Management International, Inc. Austin, Texas Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . . . • . • . . . . . Robinson Burdette Martin & Cowan, L.L.P. Lubbock, Texas Bond Counsel ..••..•.......•..•....•....••.•..... ; ............ ; Fulbright & Jaworski L.L.P. Dallas, Texas Fmancial Advisor . • . . . . . . . . . . . . . • . . . . • . . . . . . . . . . . . . . • . . . . . • . . . . . . . First Southwest Company Dallas and Abilene, Texas For additional info~tion regarding'the City, please contact: Mr. Mark Hindman Director of Support Services City of Lubbock P. 0. Box 2000 Lubbock, Texas 79457 (806) 767-2980 s or Mr. Joe W. Smith First Southwest Company P. 0. Box 2754 Abilene, Texas 79604-2754 (915) 672-8432 SELECT£D .DATA FROM mE OFFICIAL STATEMENT The selected data .on this page is subject in all respects to the more complete infonnation and definitions contained or incorporated in th.is 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 data page from this Official Statement or to otherwise use it without the entire Official Statement. This data page was prepared to present the purchasers of the Bonds infonnation concerning the Bonds, revenues pledged to the Bonds, a description of the revenue base and other pertinent data, all as more fully described herein. The Issuer ..................•.. The Bonds ..........•.........• Securit~. for the Bonds ............ ,. . ',i;''• The City of Lubbock, Texas is a political subdivision located in Lubbock County operating as a home-rule city under the laws of the State of Texas and a charter approved by the voters on December 27, 1917, and amended from time to time. The Charter provides for the Council-Manager fonn of government for the City. The Mayor is eJected at-large for a two year tenn 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 tenns of three members of the City Council expire each even year. The Council fonnulates operating policy for the City while the City Manager is the chief administrative officer. Lubbock is the County Seat of Lubbock County, Texas, and is located on the South Plains of West Texas approximately 320 miles west of Dallas. The City's 1995 estimated population is 191,020. The City is approximately 104 square miles in area. Texas Tech University, a major State institution of higher education, is located in Lubbock. The Bonds an: being issued in the principal amount of$13,560,000 pursuant to the Constitution and general laws of the State of Texas, particularly Article 717k, VATCS, as amended, and other applicable laws, the Charter of the City of Lubbock, Texas and an Ordinance passed by the City Council of the City (see "Bond lnfonnation -Authority for Issuance"). The Bonds cons~~l.!te .~J?t'9ial obligations of the City payable, both as to principal and interest, and secured, together with certain other outstanding revenue bonds of the City, by a first lien on and pledge of the Net Revenues of the City's Electric Light and Power System (the "System"). The System provides electric service within the City limits and such area is also served by Southwestern Public Service Company with whom it competes for customers (see "The System"). The City has not covenanted or obligated itself to pay the Bonds from monies raised or to be raised from taxation (see "Security for Bonds"). Optional Redemption . . . . . . . . . . . . . . The City reserves the right, at its option, to redeem Bonds having stated maturities on and after April 15, 2005, in whole or in part, on April 15, 2004, or any date thereafter, at the par value thereof plus accrued interest to the date fiXed for redemption (see "Bond Infonnation -Redemption of Bonds•). Tax Exemption . . . . . . . . . . . . . . . . . • In the opinion of Bond Counsel, the interest on the Bonds will be excludable from gross income for purposes of federal income tax under existing law, subject to the matters described under "Other Relevant lnfonnation -Tax Exemption• herein, including the alternative minimum tax on corporations. 6 Use oC Bond Proceeds . • . . . . . . . . • . . . Proceeds from the sale of the Bonds will be used to provide funds sufficient to refund $440,000 principal amount of the City's outstanding Electric Light and Power System Revenue Bonds, Series 1976, $3,500,000 principal amount of the City's outstanding Electric Light and Power System Revenue Bonds, Series 1987, and $8,500,000 principal amount of the City's outstanding Electric Light and Power System Revenue Bonds, Series 1988 and to pay costs of issuance of the Bonds (see "Plan of Financing" and "Schedule I"). · . Investment Considerations • . . . . . . . . . . Electric utilities in the State and nation are experiencing a rapidly changing business environment due to increased environmental regulation and more competitive market forces resulting from new federal and state legislative and regulatory proposals aimed at opening the market for the sale of electricity and fuel used in the generation of eleCtricity. The City is currently undertaking a comprehensive assessment of its options with respeet to its electric utility system. In particular, the City is exploring the possibility of selling its electric utility system, entering into joint ventures for the construction of new generation facilities and seeking new sources of purchased power, among other options. The City presently expects to issue directly or through a municipal power agency, in which it is· a member, approximately $10,000,000to $12,000,000 in debt within the next 12 months to fmance its share of a new cogeneration facility with Texas Tech University. If bonds are issued by the municipal power agency, the City would agree to purchase power from the agency, which would result in the expense being paid as an operating expense which, according to State law, is paid prior to paying debt service on the debt of the System, including the Bonds. Payment Record . .. . . . . .. .. . . .. .. .. .. .. .. .. The City has never defaulted . Selected Issuer Indices Net ·Coverage Fiscal System Data Revenues of Year Estimated kWh Systern Available . Annual Annual Ending City to Peak kW Electric for Debt Debt Service Debt 9-30 Pom!lation (I) System Demand Connections Service Rsaguirements Service 1990 186,206 934,099,116 199,063 45,114 $18,467,791 $ 6,638,940 2.78X 1991 187,137 958,946,784 196,480 46,014 19,164,072 6,350,015 3.02X 1992 187,493 963,324,518 211,654 47,194 20,377,101 6,909,297 2.9SX 1993 187,981 1,008,166,940 215,333 '48,081 17,269,174 6,611,852 2.61X 1994 190,038 1,046,666,402 247,843 49,097 15,874,446 6,007,971 2.64X {1) Source: 1990: U.S. Census; 1991-1994: estimates by City of Lubbock, Texas. 7 OFFICIAL STATEMENT relating to. $13,560,000 CITY. OF LUBBOCK, TEXAS . . •. ,. . . . .. (Lubbock County) . ELECTRIC LIGHT AND POWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1995 INTRODUCTION '. l I • This. Official Statement, which .includes the. ~:over page and the Appendices hereto, provides certain information regarding the issuance by the City of Lubbock, Texas (the "~ity") of its Electric Light and Power System Revenue Refunding Bonds, Series 1995 (the ''Bonds") .. Capitalized tenns. used .in this Official Statement have the same meanings assigned to such tenns in the ordinance authorizing the issuance of the Bonds (the· "Ordinance") except as otherwise indicated herein. The C~y is~ ~litical subdivision ofthe State of Texas, organized and existing under the laws of the State of Texas. The Bonds are issued pursuant to the Constitution and general laws of the State ofTexas, particularly Article 717k, Vernon's Annotated Civil Statutes ("V ATCS''), as amended, and other applicable laws, the Charter of the City of Lubbock, Texas, and the Ordinance passed by the City Council of the City of Lubbock (the "City Council") on the date of sale of the Bonds. There follows in Jhls Official Statement descriptions of the Plan of Financing, the Bonds and certain information about the City and its fmances. ,All d~criptions of documents contained herein are only summaries and are qualified in their entirety by reference to each separate docuf!lent. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Abilene and Dallas, Texas. PLAN OF FINANCING Purpose The Bonds are being issued to provide funds sufficient to refund $440,000 principal amount of the City's outstanding Electric Light and Power System Revenue Bonds, Series 1976, $3,500,000 principal amount of the City's outstanding Electric Light and Power System Revenue Bonds, Series 1987, and $8,500,000 principal amount of the City's outstanding Electric Light and Power System Revenue Bonds, Series 1988 (the "Refunded Bonds"), totaling $12,440,000 Refunded Bonds, and to pay costs of issuance of the Bonds (see "Schedule 1"). The refunding will result in a debt seririce 8avings .. The Refunded Bonds. Refunded Bonds .. , The Refunded Bonds, and interest due thereon, are to be pald on the scheduled inten?St payment dates and principal redemption dates. from funds. to be deposited pursuant to a certain Esc~w Agreement (the "Escrow Agre(:ment") between the City and Jllorwest Bank Minnesota, National Association, Minneapolis, Minnesota (the "Escrow Agent"). The Ordinance provides that from the proceeds of the sale of the Bonds to the initial purchasers thereof, the City will deposit with the Escrow Agent the amount necessary to accomplish the discharge and make final payment of the Refunded Bonds. Such funds will be held by the Escrow Agent in an escrow .account (the "EscrowFund") and used to purchase direct obligations of the United States of America (the "Federal Securities"). KPMG Peat Marwick LLP, a nationally recognized accounting finn, will verify at the time of the delivery of the Bonds to the initial purchasers thereof that 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. By the deposit of the Federal Securities and cash with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of the Refunded Bonds. In the opinion of Bond Counsel, as a result of such defeasance and in reliance on the Accountant's Verification Report, the Refunded Bonds will no longer be payable from, or secured by, a lien on, the revenues of the City's Electric Light and Power System but will be payable solely from the principal of and interest on the Federal Securities held for such purpose by the Escrow Agent, and the lien securing the payment of the Refunded Bonds, together with all obligations of the City to the holders of the Refunded Bonds under the ordinances( pursuant to which the Refunded Bonds were issued and will be discharged. 8 The City has covenanted in the Escrow Agreement to make timely deposits in the Escrow Fund, from lawfully available funds, of additional funds in the amounts required to pay the principal of and interest on the Refunded Bonds should, for any reason, the cash balances on deposit or scheduled to be on deposit in the Escrow Fund be insufficient to make such payments. Sourees and Uses of Funds The proceeds from the sale of the Bonds will be applied approximately lis follows: Sources: Principal amount of the Bonds $ 13,560,000.00 Accrued interest 76,716.21 Total Sources of Funds $ 13afi36,716.21 Uses of Funds: Deposit to Escrow Fund $ 13,221,953.94 Deposit to Interest and Sinking Fund 80,874.94 Underwriters' Discount 104,791.68 Costs of issuance 115,000.00 Bond Insurance Premium 37,000.00 Original Issue Discount 77,095.65 Total Application of Funds $ 131636,716.21 9 BOND INFORMATION Authority for Issuance The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, particularly Article 717lc, VATCS, as amended, and other applicable laws, the Charter of the City of Lubbock, Texas, and the Ordinance passed by the City Council on the date of sale of the Bonds. General Interest on the Bonds will accrue from June 15, 1995 and will be payable April15 and October 15 of each year commencing October 15, 1995, and will be calculated on the basis of a 360-day year of twelve 30-day months. Security for Bonds The Bonds are special obligations of the City payable, both as to principal and interest, solely from and secured by a flrst lien on and pledge of the Net Revenues of the City's Electric Light and Power System (the "System") after the payment of maintenance and operating expenses. Maintenance and operating expenses include contractual payments which under Texas laws and their provisions are established as operating expenses including purchased power and energy. The Bonds are not a charge upon any other income or revenues of the City and shall never constitute an indebtedness or pledge of the general credit or taxing powers of the City. The Ordinance does not create a lien or mortgage on the System and any judgment against the City may not be enforced by levy and execution against any property owned by the City. As additional security, there has been established a Reserve Portion of the Bond Fund which shall be funded in an amount at least equal to the average annual debt service requirements of the outstanding Previously Issued Bonds, and the Bonds and any Additional Bonds issued on a parity with the Bonds (collectively, the "Bonds Similarly Secured"). The Reserve Portion of the Bond Fund will be fully established on the date of delivery of the Bonds. Pledge of Net Revenues All of the Net Revenues derived from the operation of the System, with the exception of those in excess of the amounts required to establish and maintain the Special Funds created for the payment and security of the Bonds Similarly Secured, are irrevocably pledged by the Ordinance for the payment of the Previously Issued Bonds, the Bonds and Additional Bonds, if issued, and the interest thereon, and the Ordinance ordains that the Previously Issued Bonds, the Bonds and the Additional Bonds, if issued, and the interest thereon, shall constitute a flrst lien on the Net Revenues of the System. Following the issuance of the Bonds and the refunding of the Refunded Bonds, the City will have $29,149,965 in principal amount of outstanding Bonds Similarly Secured. As defmed in the Ordinance: "Net Revenues" shall mean the gross revenues of the System less expenses of operation and maintenance. Such expenses of operation and maintenance shall not include depreciation charges or funds pledged for the Bonds Similarly Secured, but shall include all salaries, labor, materials, repairs, and extensions necessary to render services; provided, however, that in determining Net Revenues, only such repairs and extensions as in the judgment of the City Council, reasonably and fairly exercised are necessary to keep the System in operation and render adequate service to the City and inhabitants thereof, or such as might be necessary to meet some physical accident or condition which otherwise would impair the security of the Bonds Similarly Secured, shall be deducted. "System" shall mean all properties real, personal, mixed or otherwise, now owned or hereafter acquired by the City of Lubbock through purchase, construction or otherwise, and used in connection with the System and in anywise pertaining thereto, whether situated within or without the limits of the City. to "Previously Issued Bonds" shall mean the outstanding and unpaid revenue bonds, designated "CITY OF LUBBOCK, TEXAS ELECTRIC LIGHT AND POWER SYSTEM REVENUE BONDS", and payable from and secured by a first lien on and pledge of the Net Revenues of the System. • Additional Bonds" shall mean the additional parity obligations the City reserves the right to issue in accordance with the terms and conditions of the Ordinance. "Bonds Similarly Secured" shall mean the Previously Issued Bonds, the Bonds and Additional Bonds. See "Selected PrOvisions of the Bond Ordinance". Enforcement or Remedies Except for the remedy of mandamus to enforce the City's covenants and obligations under the Ordinance, the Ordinance does not establish other remedies or specifically enumerate the Events of Default with respect to the Bonds. The Ordinance does not provide for a trustee to enforce the covenants and obligations of the City. In no event will registered owners have the right to have the maturity of the Bonds accelerated as a remedy. The enforcement of the remedy of mandamus may be difficult and time consuming. No assurance can be given that a mandamus or other legal action to enforce a default under the Ordinance would be successful. 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, such provision is subject to judicial construction. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptey 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 any remedies under the Ordinance would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptey 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. In addition, while the City has covenanted to secure the Bonds by a first lien on the Net Revenues, Bond Counsel will opine only that a valid and enforceable lien has been grated on the Net Revenues. Bond Counsel has not been requested to, and has not, rendered any opinion as to the priority status of the pledge of the Net Revenues. Rates The City has covenanted in the Ordinance that rates and charges for electric power and energy afforded by the System will be established and maintained to provide revenues sufficient at all times to pay: (1) all necessary and reasonable expenses of operating and maintaining the System as set forth herein in the definition "Net Revenues" and to recover depreciation; (b) the amounts required to be deposited to the Bond Fund to pay the principal of and interest on the Bonds Similarly Secured as the same becomes due and payable and to accumulate and maintain the reserve amount required to be deposited therein; and (c) any other legally incurred indebtedness payable from the revenues of the System and/or secured by a lien on the System or the revenues thereof. Redemption or Bonds The City reserves the right, at its option, to redeem Bonds having stated maturities on and after April 15, 2005, in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on April 15,2004, or any date thereafter, at the par value thereof plus accrued interest to the date ftxed for redemption. If less than all of the Bonds of a maturity are to be redeemed, the Paying Agent/Registrar shall determine by lot the Bonds, or portions thereof, within such maturity to be redeemed. 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, ftrst class, postage prepaid, to each registered owner of a Bond to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSlVEL Y PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND, N01WITHST ANDING THAT ANY BOND OR PORTION THEREOF HAS 11 NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE TO ACCRUE. Additional Bonds Additional parity obligations may be issued provided the conditions of the Ordinance are met. See "Selected Provisions of the Bond Ordinance-Section 21". The City is considering the issuance of approximately $12,000,000 Additional Bonds within the next 12 months to fmance the City's share of construction of a second cogeneration plant at Texas Tech University; Texas Tech University would fmance approximately 50% of the cost of construction. The City is also considering financing the project through the West Texas Municipal Power Agency, in which case the City would enter into a power purchase agreement. Amounts paid under power purchase agreements are operating expenses of the System which, in accordance with State law, must be paid prior to debt service. Book-Entry-Only System The Depository Trust Company ("DTC"), 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 such maturity, and will be deposited with DTC. DTC is a limited purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities 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 ftle with the Securities and Exchange Commission. · Purchases of Bonds under the DTC system must be made b)' or through Direct Participants, which Will receive a credit for the Bonds on DTC's recorda. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") .is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confmnation 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 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. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's 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 determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. 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). 12 Principal and interest payments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payable date in accordance with their respective holdings shown on DTC's reoords unless DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be responsibility of such Participant and not of DTC, the Paying Agent/Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the 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 will be printed and delivered. Use of Certain Terms in Other Sections uf this Ojficial 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 should 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 as described above, notices that are to be given to registered owners under the Ordinances will be given only to DTC. Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City or the Underwriters. Paying AgentJRegistrar The initial Paying Agent/Registrar is Norwest Bank Minnesota, National Association, Minneapolis, Minnesota; Co-Registrar is Norwest Bank Texas, National Association, Lubbock, 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 while the Bonds are outstanding 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 noticp thereof to b~ sent to each registeJ:C<) ()Wiler ()f the Bj:mds by United S,~t~s mail, fust class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Transfer, 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. A Bond may be assigned by the execution of an assignment form on the Bond or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Bond or Bonds will be delivered by the Paying Agent/Registrar, in lieu of the Bond being transferred 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 cancelled, and the written instrument of transfer or request for exchange duly \.. .. ecuted 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 Bond or 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. Limitation on Transfer of Bonds CaUed for Redemption Neither the City .nor the Paying Agent/Registrar shall be required to transfer or exchange to an assignee of the owner of the Bonds any Bond called for redemption, in whole or in part, within 45 days of the date f1Xed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncaUed balance of a Bond. 13 Record Date for Interest Payment The record date ("Record Date") for the interest payable 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, fmt class postage prepaid, to the address of each registered owner 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. Municipal Bond Insurance · The following information has been furnished by MBIA Insurance Corporation (the "Insurer") for use in this Official Statement. Reference is made to Appendix D for a specimen of the Insurer's policy. The Insurer's policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the Issuer to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the Insurer's policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner of the Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law (a "Preference"). The Insurer's policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Bond. The Insurer's policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. The Insurer's policy also does not insure against nonpayment of principal of or interest on the Bonds resulting from the insolvency, negligence or any other act or omission of the Paying Agent or any other paying agent for the Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of a Bond the payment of an insured amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with State Street Bank and Trust Company, N.A., in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Bonds or presentment of such other proof of ownership of the Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Bonds as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Bonds in any legal proceeding related to payment of insured amounts on the Bonds, such instruments being in a form satisfactory to State Street Bank and Trust Company, N .A., State Street Bank and Trust Company, N .A. shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Bonds, less any amount held by the Paying Agent for the payment of such insured amounts and legally available therefor. The Insurer, formerly known as Municipal Bond Investors Assurance Corporation, is the principal operating subsidiary ofMBIA Inc., a New York Stock Exchange listed company. MBIA Inc. is not obligated to pay the debts of or claims against the Insurer. The Insurer is domiciled in the State of New York and licensed to do business in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. The Insurer has one European branch in the Republic of France. As of March 31, 1995 the Insurer had admitted assets of $3.5 billion (unaudited), total liabilities of $2.4 billion (unaudited), and total capital and surplus of $1.1 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of December 31, 1994, the Insurer had admitted assets of $3.4 billion (audited), total liabilities of $2.3 billion (audited), and total capital and surplus of$1.1 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. All information regarding the 14 Insurer, a wholly owned subsidiary of MBIA Inc., including the fmancial statements of the Insurer for the year ended December 31, 1994, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of MBIA Inc. for the year ended December 31, 1994 is hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof. Any statement contained in a document incorporated by reference herein shall be modified or superceded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is incorporated by reference herein modifies or supercedes such statement. Any statement so modified or superceded shall not be deemed, except as so modified or superceded, to constitute a part of this Official Statement. Furthermore, copies of the Insurer's year end fmancial statements prepared in accordance with statutory accounting practices are available from the Insurer. A copy of the Annual Report on Form 10-K of MBIA Inc. is available from the Insurer or the Securities and Exchange Commission. The address of the Insurer is 113 King Street, Armonk, New York 10504. Moody's Investors Service rates the claims paying ability of the Insurer" Aaa". Standard & Poor's Ratings Group, a division of The McGraw Hill Companies, Inc. ("Standard & Poor's") rates the claims paying ability of the Insurer "Aaa •. Fitch Investors Service, L.P., rates the claims paying ability of the Insurer" AAA". Each rating of the Insurer should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of the Insurer and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of either or both ratings may have an adverse effect on the market price of the Bonds. The Insurer does not guaranty the market price of the Bonds nor does it guaranty that the ratings on the Bonds will not be reversed or withdrawn. DISCLOSURE OF GUARANTY FUND NONPARTICIPATION: In the event the Insurer is unable to fulfill its contractual obligation under this policy or contract or application or certificate or evidence of coverage, the policyholder or certificateholder is not protected by an insurance guaranty fund or other solvency protection arrangement. Such information has not been independently verified by the City or the Underwriter and is not guaranteed as to completeness or accuracyby the City or the Underwriter and is not to be construed as a representation of the City or the Underwriter. 15 Debt Service Requirements Fiscal Year %Of Ending Outsl!nding Debt (I) The Bonds Combined Principal 9-30 PrinciJ!!!l Interest Iol!l PrinciJ!!!l Interest Tgtal Rmuirements Retired 1996 $ 3,070,000 $ 935,780 $ 4,005,780 $ 490,000 $ 547,973 $ 1,037,973 $ 5,043,753 1997 2,259,243 1,389,532 3,648,775 385,000 638,948 1,023,948 4,672,723 1998 1,783,598 1,286,202 3,069,800 515,000 622,970 1,137,970 4,207,770 1999 828,098 1,194,390 2,022,488 1,365,000 600,568 1,965,568 3,988,056 2000 739,026 1,155,212 1,894,238 1,340,000 539,143 1,879,143 3,773,381 43.82% 2001 1,320,000 440,988 1,760,988 1,315,000 478,843 1,793,843 3,554,831 2002 1,265,000 356,883 1,621,883 1,285,000 417,695 1,702,695 3,324,578 2003 855,000 275,033 1,130,033 1,265,000 356,015 1,621,015 2,751,048 2004 845,000 219,458 1,064,458 1,240,000 294,030 1,534,030 2,598,488 ~ 2005 375,000 164,063 539,063 1,210,000 232,030 1,442,030 1,981,093 81.48% = 2006 375,000 140,625 515,625 1,185,000 169,715 1,354,715 1,870,340 ~ -2007 375,000 117,188 492,188 1,165,000 106,910 1,271,910 1,764,098 ~ .... 2008 315,000 93,750 468,750 800,000 44,000 844,000 1,312,750 0. 2009 375,000 70,313 445,313 445,313 ::: 2010 375,000 46,875 421,875 421,875 98.71% > :3 2011 375,000 23,438 328,438 398,438 100.00% 0 z $15.589,965 $7,909,730 $23.499,695 SJ3.560.000 $5,048,840 $18,608,840 $42.108.535 (1) Does not include requimnents of refunded bonds. ELECTRIC LIGHT AND POWER SYSTEM (Lubbock Power and Light ("LP&L"J) OPERATING STATEMENT Fiscal Year Ended Sel!tember 301 ForeCllst )99~ (I) 1224 J993 19~ 1991 1990 REVENUES Operating Revenues: $49,271,634(2) Charges for Services $ 55,341,399 $54,529,45?21 $ 52,949,180 $ 50,196,280 $ 49,142,119 Non-Operating Income 3,116,781 3,070,263 3,894,~20 4,081,02~ ~,19.,225 .,926,1~8 GROSS REVENUES $ 58,464,180 $51,599,120 $ 56,843,100 $ 54,277,305 $ 53,935,024 $52,197,792 OPERATING EXPENse» Personal Services $ 6,292,385 $ 6,609,920 $ 6,212,277 $ 5,818,308 $ 5,551,454 $ 4,922,469 Supplies 681,343 475,988 497,123 488,079 524,486 329,585 Maintenance 889,469 914,779 931,605 716,045 593,018 439,659 Power Plant Fuel 14,867,272 15,649,760 17,218,768 14,852,235 17,852,220 17,294,422 Purchased Power 13,575,58441 14,290,08141 11,184,414 8,406,635 7,144,743 8,095,769 Uncollectible Accounts 432,819 412,527 268,666 405,934 ..().. 526,533 Other Charges ~,648,949 ~.~72,.12 3,255,613 3,212,968 3,098,971 2,j:21,564 TOTAL OPERATING. EXPENSE ~ £!,387,821 ~1,7~,274 ~ ~9.~74,526 ~ ~3,900,204 ~ 34,770,952 ~33,730,000 NET REVENUES ! J81076,359 !1518741446 ! p,269,174 ! 2013771101 ! 191164,072 J18,4671l91 Electric Connections 50,211 49,097 48,081 47,194 46,014 45,114 (1) Source: City of Lubbock, Texas. (2) In April, 1990, the fuel cost factor was reduced from $0.02571/kWh to $0.020636/tWh. In October, 1993, the City reduced System rates by approximately 2.6%. (3) Operating expense excludes depreciation and capital expenditures. (4) For fiscal years 1994 and 1995, the City has increased its expenditures for purchased power relative to power plant fuel expense as a result of mechanical problems at its base-loaded generation facility, the Holly Plant. COVERAGES AND FUND BALANCES Electric Light and Power System Revenue Bonds To Be Outstsnding Outstsnding After Issuance of the Bonds • • • • . • • • • • • • • • • • • • • • • • • • . • • • . • • • • • . . • • • . . • . . •••.• $29,149,965 Aversge Annual Principal and Interest Requirements, 199612011 (including the Bonds) .••.••.••••..•••••.•.••... $ 2,631,784 Coversge by Net Revenues, Fiscal Year Ended 9-30-94 •••••••••••••.••.•••.....•••.•••••••.•••••••. 6.03 Times Maximum Principal and Interest Requirements, Electric System Revenue Bonds, Fiscal Year Ending9-30-96 •••••••••••••••••••.••.•••••••.•••••••••.••••••••••.••••...•.• $5,043,753 Coversge by Net Revenues, Fiscal Year Ended 9-30-94 •••••••••••••••..•..••.••.•.•••••••••.•••.••• 3.15 Times Interest and Sinking Fund, 5-31-95 • • • • • . • • • • . • • • • • • • . , • • • . . . . . . . • . . • . • • . . • . • . • . • • • • . . • . • • • $ 5, 031,871 Reserve Fund, 5-31-95 Ul ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• $ 3,413,183 (1) The present Reserve Portion of the Bond Fund (the Interest and Sinking Fund) is fully established; the •Required Reserve Fund Amount• is $3,413,183. In the Ordinance the City will covenant to maintain in the Reserve Portion of the Bond Fund a Required Reserve Fund Amount which is not less than the average annual principal and interest requirements of all outstanding Bonds calculated following issuance of the Bonds; this Required Reserve Amount is $2,631,784. Aa a result upon delivery of the Bonds the Reserve Fund Portion of the Bond Fund wilt be reduced to the Required Reserve Fund amount which will be fUlly established. 17 Monthly Electric Rata Electric rates in the City are set by City Council Ordinance and are the same for LP&L and Southwestern Public . Service Company except for church, school and municipal rates, and minor variations in billing policies, and South Plains Electric Cooperative customers. Present rates became effective October 15, 1993 (see "Lubbock Power and Light", below). During Fiscal Year Ended 9-30-94, LP&L had 49,097 meters in service and billed an average of $0.055 per kWh. Residential and General Service Rates (Effective 10-15-93j1> (1) Approximately 79% of LP&L customers are billed under the rate schedules shown below. ·Special rate schedules are available for certain customers such as churches, city street lighting, etc. Residential (34,224 meters@ 9-30-94: revenues $20,138,250 for Fiscal Year Ended 9-30-94) Service Availability Charge $ 4.65 per month All kilowatt hours ("kWh") per month@ $0.04 per kWh used during summer months All kWh per month @ $0.036 per kWh used during wiitter months Summer Months: June-September Wmter Months: October -May Plus: Fuel Cost Recovery (I) General Service (4,527 meters@ 9-30-94; revenues $10,278,436 for Fiscal Year Ended 9-30-94) Service Availability Charge: $10.00 per month First 1,000 kWh per month 0.0510 per kWh* (Summer) Next 6,000 kWh per month All additional kWh per month 0.0460 per kWh* (Winter) 0.0250 per kWh 0.0103 per kWh *Add to the first 200 kWh for every kilowatt ("kW") of demand in excess of 10 kWs. Demand: Measured as the customers kW demand for the 30-minute period of greatest use during the month. Plus: Fuel Cost Recovery <1> Minimum Charge: $10.00 per month for demand of 10 kW or less, plus $3.50 per kW for next 15 kW above 10 kW, plus $2.30 per kW for all additional kW. No demand shall be taken as less than 50% of highest demand established in 12 months ending with current month. Large General Service (77 meters@ 9-30-94; revenues $10,595,189 for Fiscal Year Ended 9-30-94) Service Availability: $ 1,850.00 Cost per kWh for all additional kW in excess of 200 kW First 230 kWh used per month per kW of demand, or the first 120,000 kWh used per month, whichever is greater Next 230 kWh used per month per kW of demand All additional kWh used per month ~: Fuel Cost Recovery <t> $ 8.50 0.0051 per kWh 0.0038 per kWh 0.0031 per kWh Minimum Charge: The demand charge. No demand shall be taken as less than 60% of the highest demand established in 12 months ending with the current month. Primary Service Discount: A discount of 3% of the demand charges and energy charges (excluding all fuel cost recovery amounts) will be allowed when service is supplied at a line voltage of 12 kilovolt ("kV") or greater. (1) Fuel Cost Recovery: The charge per kilowatt hour is increased by a fuel factor per kilowatt hour as provided in current Southwestern Public Service Tariff7100 (Public Utility Commission of Texas sheet IV-69). The City charges the Southwestern Public Service fuel factor to its customers, although the City's fuel costs are approximately 10% higher than those of Southwestern. The fuel factor has remained constant in the past for approximately one year, although it is subject to change at any time. The fuel factor is currently $0.020636/kWh. All rates are subject to fuel cost recovery. Large General Service customers qualifying for the 3% discount are billed at a fuel factor of $0.019749. 18 Selected Customer Usage and Billings Residential Customer Commercial Customer Fuel Cost Recovery Per kWh Billings Monthly Usage kWh kW 781 7,368 36 $0.020636 $0.020636 Monthly Billing $52.01 (summer) $48.88 (winter) $507.45 (summer) $476.45 (winter) Customers of LP&L and the City's water, sewer and solid waste departments are billed simultaneously on one statement. A 2% discount is given to residential electric customers who pay their bill within 16 days of the date it is mailed to them; an additional 1% is deducted if payment is by bank draft. A 5% late payment penalty is applied after 22 days. If the bill has not been paid on the next billing date, a statement is mailed showing the past due bill together with the current bill. If the bill remains delinquent 7 days after the date of the second statement, a reminder/cut-off notice is mailed. The cut-off notice specifies that service will be discontinued in 7 days if payment in full is not made. At the end of the 7 day period, a field collector calls on the customer and if he is unable to collect payment, service is cut off. The reconnection charge, including electric. service if the customer is connected to the City's electric system, is $15.00 before 5:00 PM and $25.00 after 5:00 PM and during weekends and holidays. Average Billing Plan <Residential Customers OnM: Upon request any residential customer, whose average monthly bill is $25.00 or more, may be billed monthly based upon his average bill (estimated if applicable) plus a portion of any unbilled balance. Customers having delinquent or disputed bills are not eligible for billing under this plan. Eleven Largest Customers (Annual Consumption and Revenue, Fiscal Year Ended 9-30-94) Customers Texas Tech University (2) City of Lubbock Plains Co-Op Oil Mill Lubbock Independent School District Methodist Hospital United Supermarkets University Medical Center Weingarten Realty McLane Foods Lubbock Capital Corporation Purina Mills (1) Megawatt Hours (•MWh•); MWh = 1,000 kWh. Megawatt Hours O> Billed 127,133 97,299 59,399 34,585 8,849 8,673 6,303 5,504 5,262 4,758 4,147 Revenues ($000) $5,450 4,993 2,141 1,843 489 406 249 252 233 196 219 (2) In 1988, LP&L and Texas Tech University (•Texas Tech") entered into a twenty year agreement with three five year options for Texas Tech to purchase steam from LP&L's E.Z. Brandon generating station located on the Texas Tech campus. Under the contract Texas Tech purchases electricity at LP&L's adjusted industrial rate during the contract term. If electric service is terminated by Texas Tech adjustments in the price of steam go into effect. In order to produce steam, the facility must be operated to generate electricity, and the University is required under the contract to purchase steam. The adjusted cost of steam would reflect the cost of generating power if the University ceases purchasing power from the City. If Texas Tech negotiates to purchase power and energy from another supplier LP&L has the right to meet such price. 19 Analysis oC Electric Bills For Fiscal :Xear Ended S~tember 30, 1294 }993 199~ 1991 1990 All Customers: Average Monthly kWh Per Meter 1,709 1,685 1,632 1,667 1,611 Average Monthly Bill Per Meter $ 94.32 $ 95.44 $ 92.15 $ 93.25 $ 91.01 Average Monthly Revenue Per kWh $ 0.055190 $ 0.056640 s 0.056464 $ 0.055938 $ 0.056492 Resideolial Customea: Average Monthly kWh Per Meter 781 745 701 693 679 Average Monthly Bill Per Meter $ 49.16 $ 48.13 $ 45.53 $ 44.80 $ 43.69 Average Monthly Revenue Per kWh $ 0.062944 $ 0.064604 $ 0.064950 $ 0.064646 $ 0.064344 Commercial and Industrial: Average Monthly kWh Per Meter 7,368 7,832 7,665 8,161 1,592 Average Monthly Bill Per Meter $ 366.26 $ 404.31 $ 394.13 $ 416.19 $ 395.52 Average Monthly Revenue Per kWh $ 0.049709 $ 0.051622 $ 0.051419 $ 0.050997 $ 0.052096 MuniciJ2!!l and Street Lighting: Average Monthly kWh Per Meter 11,633 10,925 9,889 9,996 10,164 Average Monthly Bill Per Meter $ 588.76 $ 564.13 $ 507.47 $ 508.08 $ 519.43 Average Monthly Revenue Per kWh $ 0.050611 $ 0.051636 $ 0.051316 $ 0.050828 $ 0.051104 Statistical Data For Fiscal Year Ended Se~ember 30, 1994 !993 199~ 1991 1990 kWh TO SYSTEM 1,046,666,402 1,008,166,940 963,324,518 958,946,784 934,099,116 Sales of kWh: Residential Service 394,944,956 367,266,312 336,917,937 328,496,243 320,017,504 Commercial and Industrial Service 495,378.017 494.355,258 481.969,249 .. 494,727,453 469.282.059 Total General Consumers 890,322,973 861,621,570 818,887,186 823,223,696 789,299,563 Municipal and Street Lighting 97,~98,546 89,675,740 81,053,919 81,~86,874 8~,697,991 Total Sales to All Consumers 987,621,519 951,297,310 . 899,941,105 904,910,570 871 '997 ,554 Loss and Unaccounted For 59,044,883 56,869.630 63.383,413 54,036,214 62.101.562 kWh TO SYSTEM 1,046,666,402 1,008,166,940 963,324,518 958,946,784 934,099,116 Average Residential Meters 42,286 41,103 40,029 39,510 39,285 Average Commercial and Industrial Meters 5,410 5,260 5,240 5,052 5,151 Average Municipal and Street Lighting Meters 700 684 683 681 678 Average Total 48,396 47,047 45,952 45,243 45,114 J'otal Plant Peak kW Demand (ll 255,000 221,000 218,000 200,500 208,500 System Peak kW Demand 247,843 215,333 211,654 196,480 199,063 (1) Represents total generation, includes system requirements and line losses. 20 Comparison or Selected Electric Utilities' Average Summer Monthly Bill Summer, 1994, Residential Bill ror 1,000 kWh Lubbock Power and Light, Lubbock, Texas (I> Central Power and Light, Corpus Christi, Texas (2) El Paso Electric Company, El Paso, Texas (2) Gulf States Utilities, Beaumont, Texas (2) Houston Light and Power, Houston, Texas (2) Southwestern Electric Service Company, Dallas, Texas <ZJ Texas-New Mexico Power Company <ZJ TU Electric, Dallas, Texas (2) West Texas Utilities, Abilene, Texas (2) Austin Electric Utility Department, Austin, Texas <1> City Public Service, San Antonio, Texas <I> Florida Power and Light, Miami, Florida (ZJ Public Service Company, Denver, Colorado (2) Boston Edison, Boston, Massachusetts <ZJ (1) Publicly owned municipal utility. (2) Investor owned utility. 21 $ 65.29 86.65 108.08 77.01 95.03 71.63 94.51 87.40 85.22 72.14 71.66 74.41 70.27 130.54 CITY'S EQUITY IN THE ELECTRIC LIGHT AND POWER SYSTEM til Fiscal Year Ending Seotember 30, 1994 1993 1992 1991 1990 Property, Plant and Equipment $ 127,663,619 $ 123,910,848 $ 97,105,298 $ 94,082,430 $ 91,961,978 Less: Allowance for Depreciation (41,§76,07§) (44,099,854) {47,474,1021 (44,869,941) (43,432,702) $ 79,987,543 $ 79,810,994 $ 49,631,196 $ 49,212,489 $ 48,529,276 Construction in Progress 8,792,901 6,164,069 ~4,750,075 32,231,233 31,381,384 Net Fixed Asset Value $ 88,780,444 $ 85,975,063 $ 84,381,271 $ 81,443,722 $ 79,910,660 Plus: Capital Projects Fund 10,830,18()121 11,369,683 10,336,915 9,323,804 3,630,333 Permanent Capital Maintenance Fund 5,487,735 6,845,764 5,534,751 5,499,122 3,566,001 System Improvement Fund 42,560 1,269,459 4,516,157 3,707,769 2,126,505 Economic Development Fund 775,730 975,108 841,935 737,503 531,840 Advance to Other Funds 1,765,513 1,765,513 1,765,513 1,765,513 1,765,513 Deferred Charge 1,770,032 1,718,821 1,718,821 1,147,462 1,143,966 Net Working Capital 9,574,043 9,687,534 9,684,327 10,024,845 9,642,575 Value of the System $ 119,026,237 $ 119,606,945 $ 118,779,690 $ 113,649,790 $ 102,317,393 Net Revenue Bond Debt Revenue Bonds Outstanding 31,679,798 $ 35,304,965 $ 39,234,965 $ 43,294,965 $ 39,005,000 N Less: Interest and Sinking and Reserve Fund {10,125,069) (9,744,182) {9,354,564) (9,293,89~ (8,548,698) N $ 21,554,729 $ 25,560,783 $ 29,880,401 $ 34,001,070 $ 30,456,302 Plus: Unamortized Premium $ ..()... $ 14,833 $ 31,149 $ 31,149 41,532 Accrued Revenue Bond Interest 1,040,923 1,085,320 1,229,182 1,212,632 1,439,201 Accrued Vacation and Sick Leave 1,206,213 1 '159 ,.264, 1,027,985 .1,006,463 1,025,431 Arbitrage Rebate Liability ..()... ..()... 182.153 204,079 239,847 Net Revenue Bond Debt $ 23,801.865 $ 27,820,200 $ 32,350.870 $ 36,455,393 s 33.202,313 City's Equity in System $ 95,224,372 $ 91.786,745 $ 86,428.820 $ 77,194,397 $ 69,115,080 Percentage City's Equity in System 80.00% 76.74% 72.76% 67.92% 67.55% (1) Source: City of Lubbock, Texas; Comprehensive Annual Financial Reports. (2) The City is currently financing approximately $4 million in renovations to its Plant 2 generating facilities from amounts in the Capital Projects Fund. LUBBOCK POWER AND LIGHT Lubbock Power and Light ("LP&L ")was established in 1916, and is presently the largest municipal system in the West Texas region and the third largest in the State of Texas. LP&L and Southwestern Public Service Company ("Southwestern"), an investor owned utility company operating within the corporate limits of the City, each provide electric service to residents and businesses of the City. Essentially aU of the City is covered by both systems, each of which has parallel lines throughout the City; one small area is served exclusively by South Plains Electric Cooperative and one small area is served exclusively by LP&L. As of September, 1994, LP&L served 58.3% of all connections. Southwestern was granted a new 20-year franchise by the City in 1982. The company pays the City a franchise tax of 3% of its gross receipts which is deposited into the City's General Fund; LP&L makes an equivalent payment in lieu of taxes to the General Fund of the City. As of September, 1994, Southwestern supplied power to approximately 41.7% of the customers in Lubbock. LP&L generates part of its power requirements through the use of three generating stations located within the City. In recent years, the City has generated between 50% and 65% of its power. These plants are geographically separated and deliver bulk power to substations through a 69 kilovolt (kV) transmission loop system. LP&L currently contracts for the purchase of 40 megawatts (MW) of power from Southwestern; power is delivered via two interconnections, each capable of delivering up to 100 MW to LP&L. Generating Stations ... The total generating capacity of LP&L is 220,500 kW. Gas turbine generators provide the system with 52,500 kW of ready reserve and quick-start generation for emergency and peaking service. A high efficiency gas turbine at Texas Tech University (E.Z. Brandon Station) is base loaded. Generating units consist of the following: Manufacturer Nordberg Nordberg Westinghouse Westinghouse Westinghouse Westinghouse General Electric Worthington General Electric General Electric General Electric Year Installed 1946 1947 1952 1953 1958 1964 1965 1971 1974 1978 1990 Station 2* 2* 2* 2* 2* Holly Holly Holly Holly Hotly E.Z. Brandon Prime Mover Diesel Diesel Steam Turbine Steam Turbine Steam Turbine Gas Turbine Steam Turbine Gas Turbine Gas Turbine Steam Turbine Gas Turbine** Fuel Dual Fuel Dual Fuel Gas or Oil Gas or Oil Gas or Oil Gas or Oil Gas or Oil Gas or Oil Gas or Oil Gas or Oil Gas or Oil Generator Capacity inkW 2,500 2,500 11,500 11,500 22,000 12,500 44,000 18,000 22,000 54,000 20,000 220,500 *Since 1982, Station No.2 has been kept on standby and is used for peak and emergency power purposes. In 1995, the City Council authorized LP&L to repair several facilities at Plant No.2. These repairs when completed in 1995 will add 38.5 MW of capacity to Plant No. 2. The generator capacities shown above reflect the rated capacities of the Plant 2 generating units following completion of the renovations. These repairs are estimated to cost about $4,000,000 and will be fmanced solely out of LP&L's reserves. Available capacity at Plant No.2 also allows LP&L to purchase additional low cost non-firm power from Southwestern Public Service Company. **High efficiency, cogeneration plant located at Texas Tech University; waste heat is used to produce steam which is sold to the University. Interconnection . . . An interconnection with Southwestern was completed and LP&L commenced buying power from Southwestern in December, 1981. In April, 1986, a second interconnection with Southwestern was energized; each interconnection is capable of providing up to 100 MW to LP&L. Purchased Power ... LP&L's current contract with Southwestern was executed in January, 1994, and extends to December 31, 2004, with year to year extensions thereafter subject to five years notice of termination by either party. The contract provides for "firm power", "emergency energy" and "non-fum" energy; non-firm energy purchases by LP&L are made on an economic dispatch basis and are subject to Southwestern's sole discretion to make such sales. Southwestern is the only interconnection to LP&L 's system; the City must give two years notice of intention to take power from another supplier. LP&L has notified Southwestern of its intent to seek additional sources of power supply starting January 1, 1997. The City specifies 23 its fltlll power requirements five years in advance subject to adjustment by plus or minus 30% at least one year in advance. LP&L has designated 40 MW for 1995, 35 MW for 1996, 40 MW for 1997, 1998 and 1999. These are adjusted from the original nominations of 40 MW for 1995, 45 MW for 1996, SS MW for 1997 and 55 MW for 1998. Southwestern will make such fltlll power and energy available to LP&L as specified, provided it has sufficient capacity in its existing facilities for any requested increase. Southwestern serves an area covering parts of five states including the Panhandle and South Plains of Texas, parts of eastern New Mexico, western Oklahoma and southern Kansas with an integrated electric generating and distnbution system. Gas Supply Contracts ... The City uses approximately 7 Billion Cubic Feet ("BCF") of natural gas each year, and has entered into long-term contracts (a contract exceeding one year in duration) for the supply of approximately 4 BCF per year. The balance of the City's gas supply is acquired on the basis of spot market purchases. The City currently has in place four gas supply agreements including two contracts with Power-Tex Joint Venture, a subsidiary of the Hadson Corporation, which supply the System's base loaded units at the Holly Generation Plant. The City is in the last 18 months of a five year contract which requires the City to take 1 BCF of gas annually in 1995 and 1996 at a price which is based upon the average of three specified indices plus SO%. This contract contains a ceiling price of gas which is generally equal to the cost of fltlll purchased power available to the City. The City's obligation under the contract is a take-or-pay obligation. In addition to the contract descnbed above, the City entered into a new five year agreement with Power-Tex Joint Venture effective January 1, 1995. This new Power-Tex contract requires the City to purchase 3 BCF of natural gas per year for the fli'St two years and requires the City to purchase 4 BCF in the final three years ofthe contract. The price is based upon an index published in "Inside F.E.R.C. 's Gas Market Report" each month under a table entitled "Price of Spot Gas Delivered to Pipelines" for gas delivered into the Northern Natural Gas Company in Texas, Oklahoma and Kansas plus $0.15. The contract provides for the transportation of gas at an additional charge of$0.15 per Million Btus, which delivery charge increases to $0.17 in the last two years of the agreement. The contract permits the City to nominate a volume of gas and delivery period (not to exceed 12 months) to be fixed in price upon 30 days notice. This clause allows the City to reduce its exposure to price increases during the specified period. The contract also permits the City to purchase an additionallO,OOO Million Btus of natural gas per day if it needs the gas for the new cogeneration facility to be jointly buih and fmanced by the City and Texas Tech University. The City believes that this new contract offers significant savings over the old Power-Tex contract, and notes that if the terms of this contract had been in place in 1993, the cost of 3 BCF of gas would have been reduced by approximately $1.4 million. Gas can be delivered to the Holly Plant through three pipelines connected to the plant, including a pipeline owned by the City which runs from the Choctaw Field near Post, Texas, a line owned by Hadson Gas Corporation and a line owned by Energas Corporation. In addition to the Power-Tex contracts, the City has a contract in place with Adobe Gas Marketing,. a subsidiary of Hadson Corporation, for the sale of gas to the Brandon cogeneration plant on the campus of Texas Tech University. This contract guarantees 1.6425 BCF of natural gas per year to that location through August 30, 1998. The price of the gas escalates 5.5% per year. For the fiscal year beginning September 1, 1995, the contract price is $2.149 per Mbtu plus $0.20 for transportation. The City also has in place a contract for the purchase of the full production of the Choctaw Field. Actual production varies, but is typically about . 730 BCF annually. The price for this gas is 85% of the weighted average price paid to the System's other fltlll gas suppliers. The City owns the pipeline from the Choctaw Field. The price of this gas in recent years has varied around the $2.00 per Mbtu level. The agreement expires in 2008. As a matter of policy, the City has historically established a practice of generating approximately 65% of its power needs and purchasing power for the balance of its needs. In 1994 and through part of 1995, the City has purchased power to meet approximately SO% of its needs due to mechanical failure of a turbine at the Holly Plant and to other mechanical problems that limited its generation capacity. As a result of the Holly Plant downages, the City commenced an approximately $4 million renovation program for the Plant 2 Units 4, 5, 6 and 7 in late 1994. These improvements are being financed through cash reserves of the System. According to the System's consulting engineers, the restoration of the Plant Z Units will provide an additional 38.5 MW of production capacity to the System (the Table under "Lubbock Power and Light Generating Stations" reflects the rated capacities of the Plant 2 Units after the conclusion of the renovations), and the City will recover the cost of the improvements over a three year period as compared to purchasing power over the same period. The Plant Z Units had not had major equipment overhauls and maintenance since 1982 when they were relegated to standby reserve status. Since 1982 there had been little or no maintenance of the Units because the System did not require the capacity, except to provide a portion of the City's peaking generation. However with the breakdown of Holly in the summer of 1994, increases in its load and the City's inability to arrange to buy additional power from Southwestern Public Service Company except at expensive emergency power rates, the City has determined to renovate the Plant 2 Units. 24 Transmission and Distribution .•• A 69,000volt (69 k.V) transmission loop system, 73.89 miles in length, provides bulk power to eleven 69,000/12470 bulk substations with a combined base capacity of 351 megavolt amps (MV A). With all cooling systems in operation, these substations could provide up to 532 MVA. Of the above 69kV transmission lines, 27.41 miles have been constructed for operation at 115 k.V. When system load dictates, these Jines will be energized to 115kV and provide an additional 2SO~ of transmission capacity. due to the increased voltage. LP&L also. has two interconnections with Southwestern Public Service which can provide up to 200 MV A of additional power; these interconnections .are tied to LP&L through 4.3S miles of 230 k.V transmission Jines. The distribution system includes approximately 643.61 miles of overhead distribution lines and approximately 217.90 miles of underground distribution Jines. There are three 12,470/4160 volt substations in the distribution system. Net system load for Fiscal Year Ended September 30, 1994, was 1,046,666,402 kilowatt hours (kWh) with a peak: demand of 2SS,OOO k.W. Continuing Tpnsmission and Djstn'bution System Improvement Program ..• Since 1980 the City estimates that it has spent over $70 million on distn'bution system improvements, ahnost all of which has been rmanced with operating reserves. A transmission and distn'bution system construction and improvement program using internally generated funds is in progress. Recent Substation Construction and Facilities Relocation Program (1) A "South Substation" to meet expected load growth in south and southwest Lubbock and expected load growth along the 1-27 corridor was constructed in 1992; this substation will also prevent future voltage problems in this region; the substation consists of two 1S/2012S MV A transformers with all required substation facilities, 69 kV transmission line extensions and 12.5 kV distribution feeder lines. (2) East/West Freeway Clearing ... The State's construction plans for an east/west freeway across Lubbock require that a major 69 kV transmission line along with numerous distribution lines located on or along existing public streets and alleys be relocated. The City has funded this project with proceeds of a prior bond issue. The estimated cost of this project is $3.7 million. (3) LP&L is presently renovating four generating units within its station no. 2. This project, when completed in 199S, will add approximately 38.5 MW of usable generation to the LP&L system. The estimated cost of this project is $3,700,000 which is being rmanced with available LP&L funds. Integrated Resource Plan On June 23, 1994, the City of Lubbock contracted with Resource Management International Inc. ("RMI") to conduct an Integrated Resource Plan for LP&L. RMI was to help LP&L plan for the most reliable and economical method of supplying power to LP&L 's growing loads. RMI was specifically instructed to rmd the least cost approach in meeting these loads for both the short term and long term. All reasonable alternatives were to be considered. Certain specific issues were to be included in their report. These include the following: A. Continue operations of LP&L's existing generation and purchase remaining needs as required. B. Upgrade and modify LP&L's existing generation to produce additional power and purchase remaining needs as required. C. Construct or participate in new generation to supplement LP&L's existing system. D. Sell LP&L's existing generation and purchase all needed power from others. E. Sell LP&L. F. Some combination of the above or other alternatives not listed. This report is to be completed in July, 1995. Early indications in this report strongly recommended repairing several units at Plant No. 2; LP&L is currently in the process of repairing and upgrading Plant No. 2. An additional 38.S MW may be obtained due to these actions. Early indications in the report have also indicated the need to pursue negotiations with Texas Tech University to construct a second cogeneration plant on the campus. Texas Tech would contribute approximately half of the cost of this project. LP&L expects to sell additional revenue bonds to rmance the remaining $12,000,000. The report is also indicating that additional major capital additions should not be pursued; most additional generation is expected to be met by Independent Generators through purchase contracts and by using the existing transmission systems to buy the least cost power from a variety of other utilities. More details are expected with the receipt of the completed report. The Sale of the System Option .•. As mentioned above, one aspect of the RMI study is the assessment of the sale of LP&L. In early 1995, Southwestern Public Service Company made an offer to the City to purchase LP&L by making installment payments of $9 million per year over a 30 year period. The City's legal advisors have advised the City that such an installment sale is not permitted by State law. In addition, any sale would require a referendum to approve the sale, as the City Charter specifically requires that two-thirds of the voters of the City approve the sale at an election before the sale can be consummated. The City Manager has been instructed by the City Council to make recommendations to the Council for the composition of a task force which will examine and make recommendations on the possible sale of the utility. Should the City ultimately determine to sell LP&L, and should the voters approve the sale, the City is required by the Ordinance to defease all of the System debt, which could result in the Bonds being escrowed to their first call date. No assurance can be given as to the ultimate determination as to the disposition of LP&L. West Texas Municipal Power Agency (the "Agency") The Cities of Lubbock, Brownfield, Floydada and Tulia, Texas (the "Cities") have created the Agency under the provisions of Section 4a and 4b of Article 1435a, Revised Civil Statutes of Texas, as amended, as a joint power agency, a separate municipal corporation, a political subdivision of the State of Texas and a body politic and corporate with the powers provided in Sections 4a and 4b of Article 1435a, in Article 1435b and in other laws. The Agency has no taxing power. Each of the Cities owns and operates a municipal electric light and power system, and all are within a 75-mile radius of Lubbock. The eight place Board of Directors of the Agency consists of two directors from each City. The purpose of the Agency is to engage in the generation, transmission, sale and exchange of electric energy to the member Cities and to any private entities who may be joint owners with the Agency of an electric generating facility. The Agency also represents the Cities with respect to rate proceedings with Southwestern Public Service Company. CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY AND THE SYSTEM General Factors Affecting the Electric Utility Industry The electric utility industry in general has been experiencing, or may in the future, experience, problems including (a) the effects of inflation upon the costs of operation and construction of generating units, (b) substantially increased capital outlays and longer construction periods for the larger and more complex new generating units, (c) uncertainties in predicting future load requirements, (d) problems of cost and availability of fuel, (e) compliance with rapidly changing environmental, safety and licensing requirements, (f) the effects of conservation on the use of electric energy, (g) uncertainties associated with the development of a national energy policy and (h) increased competition from cogenerators, independent power producers and retail wheeling (should open retail wheeling become a legal regulatory reality as wholesale wheeling has). Any of these factors may require modification of facilities with resulting increases in construction and operation costs. Factors Impacting Current and Future Operations of the System Regulatory Matters ... As a municipal utility, the System is generally exempt from direct regulation by the Texas Public Utility Commission ("PUC") except for appellate jurisdiction for rates set over any service area outside of the City limits. The System does not currently serve areas outside the City limits. The System is also not subject to federal regulation in the establishment of rates, the issuance of securities or the operation, maintenance or expansion of the System under current federal statutes and regulations. However, the System is indirectly impacted by the actions of both State and federal regulatory agencies as a resuh of, among other factors, its status as a power purchaser from Southwestern Public Service Company, and its competitive standing with Southwestern. Because the City generally meets the rate tariffs of Southwestern, rate cases of Southwestern before the PUC may result in changes in the System's rate tariffs, as well. In fact, in October, 1993, the PUC held a rate hearing initiated by certain consumer groups and industrial customers of Southwestern which resulted in an approximately 2.9% decrease in rates charged by Southwestern in the City. The City simultaneously adjusted its rate tariffs, which resulted in an approximately 2.6% decline in the System's rates (the decline was slightly different because of differences in the composition of the City's customer base). Ultimately, the ability of the System to increase its rates is dependent upon approval by the PUC of Southwestern's rate increases. In addition, the City, as a wholesale customer of Southwestern, has generally intervened in its PUC and Federal Energy Regulatory Commission ("FERC") filings. Changes in Service Area ... The System's service area consists of the area within its current boundaries, except for a small portion of the City which is served by the South Plains Electric Cooperative ("SPEC"). The area surrounding the City is generally served by other investor owned utilities or electric cooperatives which have been certificated as to their right to serve a distinct area. As a result of a settlement entered into in 1982 between the City and SPEC, the PUC has approved the expansion of the City's service area into certain areas to the southeast and west of the City, if such area is eventually annexed and becomes part of the City. The City is generally growing to the south and southwest, with the fastest area of growth being the southwest, in the area certificated for service by SPEC. 26 Wholesale and Retail Wheeline •.• With the passage of the Energy Policy Act of 1992 (the "Energy Act"), FERC was given broad authority to direct utilities under its jurisdiction to make their transmission systems available for use by others at compensatory rates. This new "open-access" environment has begun to provide an expanded and more competitive market for both generators and wholesale producers of electricity, and such increased competition has only begun to develop, involving primarily cogenerators and independent power producers. In the recently completed session of the Texas Legislature, a new public utility regulatory act for the State was enacted (it is currently awaiting action by the Governor); this act will possibly expedite the changes which were begun through the enactment of the Energy Act. This act of the Legislature includes the authorization for the first time in the State for wholesale wheeling of power. This legislation complements the provisions of the Energy Act by authorizing regulatory exemptions for the sale of power on a wholesale basis in the State. Since the City is interconnected only with Southwestern Public Service Company, it has historically been a "captive market" for Southwestern. As the City has not had the opportunity to make a full assessment of this legislation (should it be signed into Jaw) and the recent transmission tariff which was ftled with FERC by Southwestern, it cannot defmitively assess the impact of these developments on the System. However, the City has given notice to Southwestern, in accordance with the terms of its power purchase contract, that it intends to seek other suppliers of purchased power beginning in 1997. The City must still purchase the minimum amounts of power from Southwestern under its contract through the fmal term thereof (see "Lubbock Power and Light - Purchased Power"). While the City views the wholesale transmission developments favorably, they contain the threat of increased competition for the System. As the area of law continues to develop, the City may fmd that large power customers will seek to reduce their power costs by contracting with cogenerators, independent power purchasers or other remote power producers. Unlike many utilities, the City has a long history of price and service competition and is optimistic that because of its relatively low rates, it will continue to offer attractive rates to its customer base, although no assurance can be given that low- priced power sources will not emerge as the market continues to develop. A second aspect of the new legislation reduces the barriers contained in prior law which prevented a power generator like the City from contracting with electric cooperatives and joint operating power agencies for joint construction and ownership of generating properties. As a result, the City has requested its consulting engineer to examine the possibility of constructing a jointly owned 400 MW gas-fired generating facility with the West Texas Municipal Power Agency and a consortium of electric cooperatives. No determination has been made with respect to this project and the review of the undertakings is in the early stages. During the 1995 session of the Texas Legislature, legislation was introduced but not passed which would have provided for "retail wheeling" in the State, that is, a retail customer located in one utility's service area could contract to obtain power from another utility or non-utility source. Such retail wheeling is specifJ.caUy excluded from the new powers given to FERC under the Energy Act. Many believe that this leaves authority for retail wheeling with state regulatory bodies and state legislatures. The City cannot predict whether the State legislature will eventually enact laws authorizing retail wheeling in the State, but one potential effect of this is that utilities with low-cost power, such as the System, may be better able to compete for new and existing loads. Competition with Southwestern Public Service Company . . . Few, if any other municipally-owned electric utilities in the State, compete as directly as the System does with Southwestern. In recent years the System has continued to add market share versus the Southwestern customer base. Jn competing with Southwestern, the City competes with an investor owned utility which has a service base in five states and access to capital and management which is commensurate with its size. The City represents one of, if not the, largest cities served by Southwestern. In recent years the City has generally been able to purchase relatively low cost power from Southwestern to supplement its own production. The City believes that it can continue to provide a mix of purchased power and generated power so that it can continue to operate the System profitably notwithstanding that it expects that it will continue to have to match or beat the rates of Southwestern in order to maintain or increase its market share. In addition, if the two utilities continue to offer power at the same or very similar rates, non-price competition factors will be an important determinant to maintaining market share. The City is committed to offering its customers reliable service, convenience in paying their electric bills, providing personal service and other measures which it believes are important in marketing the System to the community. Contribution to the City's General Fund ..• City records indicate that the System has long made an annual contribution to the City's General Fund. Since 1979, the amount contributed each year has increased from approximately $1.35 million to approximately $6.21 million in the year ended September 30, 1994. The System's contribution to the General Fund is in part a payment in lieu of taxes, a payment in lieu of franchise taxes and a reimbursement of amounts collected attributable to street lighting in the City. In 1994, the System's contribution to the General Fund represented approximately 8.34% of the City's General Fund revenues (as compared to approximately 4.30% for the transfer from the sewer fund and 5.54% from the water fund). As fmancial demands increase on the City, the City may look for increased contributions from its enterprise funds, including the System, as a source of funding to meet its operating budget. Jn the future, it will continue to be important that the needs of the City are appropriately balanced with those of the System if the System is to continue to provide competitive rates in the increasingly competitive market, to maintain its access to the fmancial markets and to maintain and build new generating and distribution facilities. 27 Environmental Matters . . . In ~nt years, Congress has amended the federal Clean Air Act in certain respects which impacts the electric utility industry. On November 15, 1990, amendments to the Clean Air Act were enacted which seek to improve the ambient air quality throughout the United States by the year 2000 through the reduction of sulphur dioxide and nitrogen oxide emissions from electric utility power plants, particularly those fueled by coal. The System does not generate power through coal-fired generation facilities, however, a portion ofthe power which is purchased from Southwestern is coal-produced. The City believes that Southwestern is in compliance with provisions of the Clean Air Act which require reduced levels of sulphur dioxide by the year 2000, but it is possible that Southwestern may have to take additional and expensive measures to comply with the release levels mandated for the second phase of the Act, 'Which goes into effect in the year200S. No determination has been made by the City of its long-range power and fuel suppliers. However, these environmental laws have required the installation of continuous emission monitors at the City's gas generation facilities, may impact the City's options in the future as to how it generates power, and could result in significant increases in the price of available power and fuel supplies. 28 INVESTMENTS Fund lavestments. The City invests in investments authorized by Texas law in accordance with written investment policies that are approved by the Investment Review Committee. The City Council has delegated responsibility for the investment authority to the City Treasurer who is also the Director of Support Services. The City Treasurer chairs the Investment Review Committee which also includes the Director of Electric Utilities, Director of Management Services, Chief Accountant and Assistant Treasurer. Policy changes and updates are approved by the committee. The committee reviews the performance of the investment portfolio on a monthly basis. Both state law and the City's investment policies are subject to change. Legal Investments. Undercurrent Texas law, the City is authorized to invest in: 1) Obligations of the United States or its instrumentalities; 2) Direct obligations of the State of Texas or its agencies; 3) Other obligations, the principal and interest on which are unconditionally guaranteed by the State of Texas or the United States (or its agencies or instrumentalities); 4) Obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated as to investment quality by a nationally recognized investment rating firm and having received a rating of not less than A or its equivalent; S) Certificates of Deposit issued by state and national banks domiciled in the state that are guaranteed or insured by the FDIC, or its successor; or secured by obligations that are described above, which are intended to include all direct (federal) agency or instrumentality issued mortgage-backed securities rated AAA by a nationally recognized rating agency or by Article 2529b-1, v.t.c.s., and that have a market value of not less than the principal amount of the certificates (or in any other manner and amount provided by law for deposits of the investing entities); 6) Certificates of Deposit issued by savings and loan associations domiciled in this state that are guaranteed or insured by the FSLIC, or its successor, or secured by obligations that are described above, which are intended to include all direct federal agency or instrumentality issued mortgage-backed securities that have a market value of not less than the principal amount of the certificates or in any other manner and amount provided by law for deposits of the investing entities; 7) Prime Domestic Bankers' Acceptances with a stated maturity of 270 days or less from the date of its issuance that will be, in accordance with its terms, liquidated in full at maturity, that is eligible collateral for borrowing from a Federal Reserve Bank, and that is accepted by a bank: organized and existing under the laws of the United States or any state, the short-term obligations of which (or of a bank holding company of which the bank: is the largest subsidiary) are rated at least A-1, P-1, or the equivalent by at least one nationally recognized credit rating agency. 8) Commercial paper with a stated maturity of 270 days or less from the date of its issuance that either: is rated not less than A-1, P-1, or the equivalent by at least two nationally recognized credit rating agencies; or is rated at least A-1, P-1, or its equivalent by at least one nationally recognized credit rating agency and is 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 thereof; 9) Fully collateralized direct repurchase agreements having a defmed termination date, secured by direct obligations of the United States or its agencies and instrumentalities, pledged with a third party selected or approved by the political·entity, and placed through a primary government securities dealer, as defmed by the Federal Reserve or a bank: domiciled in this State. "Repurchase agreement" means a simultaneous agreement to buy, hold for specified time, and then sell back at a future date, obligations described above, the principal and interest of which are guaranteed by the United States, or any of its agencies, in market value of not less than the principal amount of the funds disbursed. The term includes direct security repurchase agreements and reverse security repurchase agreements. Fully collateralized repurchase agreements shall in addition to the wording of the act be limited as follows: repurchase agreements shall be collateralized at 102% of the money value of the transaction at the time of purchase and in no case should the collateral value be allowed to go below 101%, the maturity of the collateral security shall be no longer than ten years, and the market value of the collateral shall be priced at least weekly; 10) SEC-registered, no-load money market mutual funds with a dollar-weighted average portfolio maturity of 120 days or less whose assets consist exclusively of the obligations described above and whose investment objectives include seeking to maintain a stable net asset value of $1 per share. However, a city or county cannot invest in the aggregate more than 20 percent of its monthly average fund balance, excluding bond proceeds, in money market mutual funds or invest its funds, or funds under its control, excluding bond proceeds, in any one money market mutual fund in an amount that exceeds 10 percent of the total assets of the money market mutual fund; 11) Common trust funds or comparable investment devices owned or administered by banks domiciled in this state and whose assets consist exclusively of all or a combination of the obligations described above. The common trust funds of banks may be used if they are available; they comply with the provisions of the Internal Revenue Code of 1986 and applicable federal regulations governing the investment of bond proceeds; and they meet the cash flow requirements and the investment needs of the city. 29 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, are consistent with the operating requirements of the City, and yield the highest possible rate of return within these constraints. 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 primary objective of the investment policy is to preserve the capital in the overall portfolio. Each investment transaction seeks to ftrst ensure that capital losses are avoided, whether they be from securities defaults or erosion of market value. The second 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 third objective is diversify to avoid incurring unreasonable risks regarding securities owned. The fourth objective is to obtain the highest yield on investments within the other four objectives. The fifth objective is to conform to all Federal, State, and other legal requirements. 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: 100% in United States Treasury obligations 50% in Certificates of Deposit 40% in Federal Instrumentalities or Agencies 30% in Repurchase Agreements collateralized by Federal Instrumentalities, or 100% in Repurchase Agreements collateralized 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 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 at least two of the Investment Review Committee members. 30 ------··-·-·~-·-····-·-·-··--·~-~-------------------------- w - Current Investments. As of 5-31-95, the City's invesuble funds were invested in the following categories of investment: Estimated Book Value Fail: Market Value <tl %of %of Weighted Par Total Book Average CatefrorV Value Value Book Value Value Value Maturity United States Treasury Obligations $ 59,400,000 $ 58,926,086 40.24% $ 58,959,643 100.06% 17.0 Months United States Agency Obligations 51,255,000 57,141,071 39.02% 56,721,937 99.27% 12.0 Months Repurchase Agreements Collateralized by U.S. Treasury Obligations 30,000,000 30,000,000 20.49% 30,000,000 100.00% 1 Week~ Bank Certificates of Deposit 283,600 283,600 0.19% 283,600 100.00% 43 Days TexPoot (local government investors pool managed by the Texas State Treasurer) 90.256 90,256 0.06% 90.256 100.005 1 day ! 147!0281856 ! 14614411013 100.005 1 !461055,435 99.74% 12.0 Months (1) As detennined by the City by reference to published quotations, dealer bids, and cOmparable infonnation. (2) The City's policy is to limit repurchase agreements to a one week maturity; on S-31-95 the maturity of the City's outstanding agreements was 1 day. Average portfolio yield for the eight months period ending 5-31-95 was 5.554%. The City invests with the intent to hold all investments to maturity which minimizes the risk of market price volatility. No funds of the City are invested in mortgage-backed securities. There are no investments in derivatives except for a $2,000,000 Federal Home Loan Bank Agency Floating Rate Note maturing July, 1996, which adjusts quarterly based on the following fonnula: tO-year Constant Maturity Treasury rate ("CMT") plus 160 Basis Points minus 3-Month London Interbank Offered Rate ("LIBOR"); market value on 5-31-95 was approximately $1,900,000 (1.30% of the market value of the City's portfolio). To prevent the possibility of loss of resoun:es, the City attempts to identify and limit exposure to default risk. Default risk is controlled through internal procedures and controls. The use of a third party safekeeping agent and a delivery versus payment system control this risk. In addition, the City's investment transactions are audited annually by an independent auditor. SELECTED PROVISIONS OF THE BOND ORDINANCE The City Council will adopt an ordinance (the "Ordinance") authorizing the Bonds, which will be in substantially the same fonn as the Ordinances authorizing the outstanding Electric Light and Power System Revenue Bonds, pertinent provisions of which are shown below. SECTION 10: Defmitions. That for all purposes of this ordinance and in particular for clarity with respect to the issuance of the Bonds herein authorized and the pledge and appropriation of revenues therefor, the following defmitions are provided: (a) The tenn "Additional Bonds" shall mean the additional parity obligations the City reserves the right to issue in accordance with the tenns and conditions prescribed in Section 21 hereof. (b) The tenn "Bonds" shall mean the $13,560,000 "City of Lubbock, Texas, Electric Light and Power System Revenue Refunding Bonds, Series 1995," dated June 15, 1995, authorized by this ordinance. (c) The tenn "Bonds Similarly Secured" means the Previously Issued Bonds, the Bonds and Additional Bonds. (d) The tenn "Fiscal Year" shall mean the twelve month accounting period used by the City in connection with the operations of the System which may be any twelve (12) consecutive month period established by the City. (e) The tenn "Net Revenues" shall mean the gross revenues of the. System less expenses of operation and maintenance. Such expenses of operation and maintenance shall not include depreciation charges or funds pledged for the Bonds Similarly Secured, but shall include all salaries, labor, materials, repairs, and extensions necessary to render services; provided, however, that in detennining."Net Revenues", only such repairs and extensions as in the judgment of the City Council, reasonably and fairly exercised, are necessary to keep the System in operation and render adequate service to the City and inhabitants thereof, or such as might be necessary to meet some physical accident or condition which otherwise would impair the security of the Bonds Similarly Secured, shall be deducted. (f) The tenn "Previously Issued Bonds" shall mean the outstanding and unpaid revenue bonds, designated "CITY OF LUBBOCK, TEXAS, ELECTRIC LIGHT AND POWER SYSTEM REVENUE BONDS" and payable from and secured by a first lien on and pledge of the Net Revenues of the System, further identified by issue or series as follows: (1) Series 1975-A, dated September 15, 1975, in the original principal amount of $2,000,000; (2) Series 1976, dated April 15, 1976, in the original principal amount of $4,400,000; (3) Series 1987, dated April15, 1987, in the original principal amount of $7,000,000; (4) Series 1988, dated May 15, 1988, in the original principal amount of $17,000,000; (5) Series 1991, dated May 15, 1991, in the original principal amount of $7,500,000; (6) Series 1991A and Series 1991B, dated July 15, 1991, in the original principal amount of $9,424,964.55. (i) The tenn "System" shall mean all properties, real, personal, mixed or otherwise, now owned or hereafter acquired by the City of Lubbock through purchase, construction or otherwise, and used in connection with the City's Electric Light and Power System and in anywise pertaining thereto, whether situated within or without the limits of the City. SECTION 11: Pledge. That the City hereby covenants and agrees that all of the Net Revenues derived from the operation of the System, with the exception of those in excess of the amounts required to establish and maintain the special Funds created for the payment and security of the Bonds Similarly Secured, are hereby irrevocably pledged for the payment of the Previously Issued Bonds, the Bonds and Additional Bonds, if issued, and the interest thereon, and it is hereby ordained that the Previously Issued Bonds, the Bonds and Additional Bonds, if issued, and the interest thereon, shall constitute a first lien on the Net Revenues of the System. 32 SECTION 12: Rates and Charges. That the City hereby covenants and agrees with the owners of the Bonds that rates and charges for electric power and energy afforded by the System will be established and maintained to provide revenues sufficient at all times to pay: (a) all necessary and reasonable expenses of operating and maintaining the System as set forth herein in the definition "Net Revenues" and to recover depreciation; (b) the amounts required to be deposited to the Bond Fund to pay the principal of and interest on the Bonds Similarly Secured as the same becomes due and payable and to accumulate and maintain the reserve amount required to be deposited therein; and (c) any other legally incurred indebtedness payable from the revenues of the System and/or secured by a lien on the System or the revenues thereof. SECTION 13: Segregation of Revenues/Fund Designations. All receipts, revenues and income derived from the operation and ownership of the System shall be kept separate from other funds of the City and deposited within twenty-four (24) hours after collection in the "Electric Light and Power System Fund" (created and established in connection with the issuance of the Previously Issued Bonds), which Fund (hereinafter referred to as the "System Fund") is hereby reaffirmed and shall continue to be kept and maintained at an official depository bank of the City while the Bonds remain Outstanding. Furthermore, the •special Electric Light and Power System Revenue Bond Retirement and Reserve Fund" (hereinafter referred to as the "Bond Fund"), created and established in connection with the issuance of the Previously Issued Bonds, is hereby reaffmned and shall continue to be maintained by the City while the Bonds remain Outstanding. The Bond Fund is and shall continue to be kept and maintained at the City's official depository bank, and moneys deposited in the Bond Fund shall be used for no purpose other than for the payment, redemption and retirement of Bonds Similarly Secured. SECTION 14: Svstem Fund. The City hereby reaffmns its covenant to the holders of the Previously Issued Bonds and agrees with the owners of the Bonds that the moneys deposited in the System Fund shall be used first for the payment of the reasonable and proper expenses of operating and maintaining the System, as identified in Section lO(e) hereof. All moneys deposited in the System Fund in excess of the amounts required to pay operating and maintenance expenses of the System, as hereinabove provided, shall be applied and appropriated, to the extent required and in the order of priority prescribed, as follows: (i) To the payment of the amounts required to be deposited in the Bond Fund for the payment of principal of and interest on the Bonds Similarly Secured as the same become due and payable; and (ii) To the payment of the amounts, if any, required to be deposited in the Bond Fund to accumulate and maintain the reserve amount as security for the payment of the principal of and interest on the Bonds Similarly Secured. SECTION 15: Bond Fund. (a) That, in addition to the required monthly deposits to the Bond Fund for the payment of principal of and interest on the Previously Issued Bonds, the City hereby agrees and covenants to deposit to the Bond Fund an amount equal to one hundred percentum (100%) of the amount required to fully pay the interest on and principal of the Bonds falling due on or before each maturity and interest payment date, such payments to be made in substantially equal monthly installments on or before the 1st day of each month beginning on or before the lst day of the month next following the month the Bonds are delivered to the initial purchaser. The required monthly deposits to the Bond Fund for the payment of principal of and interest on the Bonds shall continue to be made as hereinabove provided until such time as (i) the total amount of deposit in the Bond Fund, including the "Reserve Portion" deposited therein, is equal to the amount required to fully pay and discharge aU outstanding Bonds Similarly Secured (principal and interest) or (ii) the Bonds are no longer outstanding, i.e., the Bonds have been fully paid as to principal and interest or all the Bonds have been refunded. Accrued interest and premium, if any, received from the purchasers of the Bonds shall be deposited in the Bond Fund, and shall be taken into consideration and reduce the amount of the monthly deposits hereinabove required which would otherwise be required to be deposited in the Bond Fund from the Net Revenues of the System. (b) In addition to the amounts to be deposited in the Bond Fund to pay current principal and interest for the Bonds Similarly Secured, the City reaffirms its covenant to the holders of the Previously Issued Bonds and agrees to accumulate and maintain in said Fund a reserve amount (the "Reserve Portion") equal to not less than the average annual principal and interest requirements of aU outstanding Bonds Similarly Secured (calculated and redetermined at the time of issuance of each series of Bonds Similarly Secured). 33 In accordance with the ordinances authorizing the issuance of the Previously Issued Bonds, there is currently on deposit to the credit of the Reserve Portion of the Bond Fund the sum of $3,413,183. By virtue of the issuance of the Bonds, the amount required to be on deposit in the Reserve Portion of the Bond Fund is reduced to $2,631,784. No additional amount is required to be deposited to the credit of the Reserve Portion in order that the total amount is not less than the average annual principal and interest requirements of the outstanding Bonds Similarly Secured after giving effect to the issuance of the Bonds (the "Required Reserve Fund Amount"). The Reserve Portion of the Bond Fund shall be made available for and reasonably employed in meeting the requirements of the Bond Fund if need be, and if any amount thereof is so employed, the Reserve Portion in the Bond Fund shall be fully restored to the Required Reserve Fund Amount as rapidly as possible from the first available Net Revenues of the System in the System Fund subject only to the priority of payments hereinabove prescribed in Section 14. Any amounts in excess of the Required Reserve Fund Amount shall be transferred to the System Fund. The amount on deposit in the Reserve Portion of the Bond Fund which is in excess of the Required Reserve Fund Amount by virtue of the issuance of the Bonds shall be transferred to the System Fund. SECTION 16: Payment of Bonds. While any of the Bonds are outstanding, the proper officers of the City are hereby authorized to transfer or cause to be transferred to the Paying Agent, from funds on deposit in the Bond Fund, including the Reserve Portion, if necessary, amounts sufficient to fully pay and discharge promptly as each installment of interest and principal of the Bonds accrues or matures or comes due by reason of redemption prior to maturity; such transfer of funds to be made in such manner as wi1I cause immediately available funds to be deposited with the Paying Agent for the Bonds at the close of the business day next preceding the date of payment for the Bonds. SECTION 17: Deficiencies in Funds. That, if in any month the City shall, for any reason, fail to pay into the Bond Fund the full amounts above stipulated, amounts equivalent to such deficiencies shall be set apart and paid into said Fund from the fJ.rst available and unallocated Net Revenues of the System in the following month or months and such payments shall be in addition to the amounts hereinabove provided to be otherwise paid into said Fund during such month or months. SECTION 18: Excess Revenues. Any surplus Net Revenues of the System remaining after all payments have been made into the Bond Fund and after all deficiencies in making deposits to said Fund have been remedied, may be used for any other City purposes now or hereafter permitted by law, including the use thereof for the retirement in advance of maturity of the Bonds Similarly Secured by the purchase of any of such Bonds Similarly Secured on the open market at not exceeding the market value thereof. Nothing herein, however, shall be construed as impairing the right of the City to pay, in accordance with the provisions thereof, any junior lien bonds legally issued and payable out of the Net Revenues of the System. SECTION 19: Security of Funds. That moneys on deposit in the System Fund (except any amounts as may be properly invested) shall be secured in the manner and to the fullest extent required by the laws of the State of Texas for the security of public funds. Moneys on deposit in the Bond Fund shall be continuously secured by a valid pledge of direct obligations of, or obligations unconditionally guaranteed by the United States of America, having a par value, or market value when less than par, exclusive of accrued interest, at all times at least equal to the amount of money to be deposited in said Fund. AU sums deposited in said Bond Fund shall be held as a trust fund for the benefit of the holders of the Bonds Similarly Secured, the beneficial interest in which shall be regarded as existing in such holders. To the extent that money in the Reserve Portion of the Bond Fund is invested under the provisions of Section 20 hereof, securing such money as provided otherwise in this section, is not required. SECTION 20: Investment of Reserve Portion of Bond Fund. The custodian bank shall, when authorized by the City Council, invest the Reserve Portion of the Bond Fund in direct obligations of, or obligations guaranteed by the United States of America, or invested in direct obligations of the Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association, Federal Home Loan Banks or Banks for Cooperatives, and which such investment obligations must mature or be subject to redemption at the optiori of the holder, within not tO exceed five years from the date of making the investment. Such obligations shall be held by the depository impressed with the same trust for the benefit of the bondholders as the Bond Fund itself, and if at any time uninvested funds shall be insufficient to permit payment of principal and interest maturities for the Bonds Similarly Secured, the said custodian bank shall sell on the open market such amount of the securities as is required to pay said Bonds Similarly Secured and interest when due and shall give notice thereof to the City. AU moneys resulting from maturity of principal and interest of the securities shall be reinvested or accumulated in the Reserve Portion of the Bond Fund and considered a part thereof and used for and only for the purposes hereinabove provided with respect to said Reserve Portion, provided that when the full amount required to be accumulated in the Reserve Portion of the Bond Fund (being the amounts 34 required to be accumulated by the ordinances authorizing the Bonds Similarly Secured) is accumulated, any interest increment may be used in the Bond Fund to reduce the payments that would otherwise be required to pay the current debt service requirements on Bonds Similarly Secured. Amounts on deposit in any of the Funds herein referred to and allocable to the Bonds or Additional Bonds, if issued, shall be invested as provided in the Public Funds Investment Act of 1987 and in this ordinance to the extent the investment provisions of this ordinance are consistent with such Act. Subject to the foregoing, amounts on deposit in any of the Funds herein referred to and allocable to the Bonds may, to the extent consistent with the foregoing and to the extent listed on Exhibit B hereto, be invested in cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with direct obligations of, including obligations issued or held in book-entry form on the books of, the Department of the Treasury of the United States of America), or direct obligations of, including obligations issued or held in book-entry form on the books of, the Department of the Treasury of the United States of America. Additionally, subject to the restrictions and limitations of the preceding paragraphs, the following may be used for all purposes other than defeasance investments in refunding escrow accounts and investment of accrued and capitalized (if any) interest: (1) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including: Export-Import Bank, Farmers Home Administration, General Services Administration, U.S. Maritime Administration, Small Business Administration, Government National Mortgage Association, U.S. Department of Housing and Urban Development (PHA's) and Federal Housing Administration; (2) bonds, notes or other evidences of indebtedness rated "AAA" by Standard & Poor's Corporation and "Aaa" by Moody's Investors Services issued by the Federal National Mortgage Association or the Federal Home Loan Corporation with remaining maturities not exceeding three years; (3) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "A-1" or "A-1 +" by Standard & Poor's and "P-1" by Moody's and maturing no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank); (4) commercial paper which is rated at the time of purchase in. the single highest classification, "A-l+n by . Standard & Poor's and "P-1" by Moody's Investor Services and which matures not more than 270 days after the date of purchase; (5) investments in a money market fund rated "AAAm" or "AAAm-G" or better by Standard & Poor's Corporation; (6) Pro-refunded Municipal Obligations defmed as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local government unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on the escrow, in the highest rating category of Standard & Poor's Corporation and Moody's Investors Service, Inc. or any successors thereto; or (B)(i) which are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or obligations described in paragraph (1) above, which fund may be applied only to the payment of such principal of and interest and redemption premium; if any, on such bonds or other obligations on the maturity date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which fund is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate; With respect to the Bonds, the value of the above investments shall be determined as follows: (a) as to investments the bid and asked prices of which are published on a regular basis in The Wall Street Journal (or, if not there, then in The New York Times): the average of the bid and asked prices for such investments so published on or most recently prior to such time of determination; (b) as to investments the bid and asked prices of which are not published on a regular basis in The Wall Street Journal or The New York Times: the average bid price at such time of determination for such investments by any two nationally recognized government securities dealers (selected by the Trustee in its absolute discretion) at the time making a market in such investments or the bid price published by a nationally recognized pricing service; 35 (c) as to certificates of deposit and bankers aocepta.nces: the face amount thereof, plus accrued interest; and SECTION 21: Issuance of Additional Parity Bonds. That, in addition to the right to issue bonds of inferior lien as authorized by the laws of the State of Texas, the City hereby reserves the right to issue Additional Bonds which, when duly authorized and issued in compliance with the terms and conditions hereinafter appearing, shall be on a parity with the Previously Issued Bonds and the Bonds herein authorized, payable from and equally and ratably secured by a first lien on and pledge of the Net Revenues of the System. The Additional Bonds may be issued in one or more installments, provided, however, that none shall be issued unless and until the following conditions have been met: (a) That the Mayor and City Treasurer have certified that the City is not then in default as to any covenant, condition or obligation prescribed by any ordinance authorizing the issuance of Bonds Similarly Secured then outstanding, including showings that all interest, sinking and reserve funds then provided for have been fully maintained in accordance with the provisions of said ordinances; (b) That the applicable laws of the State of Texas in force at the time provide permission and authority for the issuance of such bonds and have been fully complied with; (c) That the City has secured from an independent Certified Public Accountant his written report demonstrating that the Net Revenues of the System were, during the last completed Fiscal Year, or during any consecutive twelve (12) months period of the last fifteen (15) consecutive months prior to the month of adoption of the ordinance authorizing the Additional Bonds, equal to at least one and one-half (1-1/2) times the average annual principal and interest requirements of all the bonds which will be secured by a first lien on and pledge of the Net Revenues of the System and which will be outstanding upon the issuance of the Additional Bonds; and further demonstrating that for the same period as is employed in arriving at the aforementioned test said Net Revenues were equal to at least one and one-fifth (1-1/5) times the maximum annual principal and interest requirements of all such bonds as will be outstanding upon the issuance of the Additional Bonds; (d) That the Additional Bonds are made to mature on April 15 or October 15, or both, in each of the years in which they are provided to mature; (e) The Reserve Portion of the Bond Fund shall be accumulated and supplemented as necessary to maintain a sum which shall be not less than the average annual principal and interest requirements of all bonds secured by a fJist lien on and pledge of the Net Revenues of the System which will be outstanding upon the issuance of any series of Additional Bonds. Accordingly, each ordinance authorizing the issuance of any series of Additional Bonds shall provide for any required increase in the Reserve Portion, and if supplementation is necessary to meet all conditions of said Reserve Portion, said ordinances shall make provision that same be supplemented by the required amounts in equal monthly installments over a period of not to exceed sixty (60) calendar months from the dating of such Additional Bonds. When thus issued, such Additional Bonds may be secured by a pledge of the Net Revenues of the System on a parity in all things with the pledge securing the issuance of the Bonds and the Previously Issued Bonds. SECTION 22: Maintenance and Operation -Insurance. That the City hereby covenants and agrees to maintain the System in good condition and operate the same in an efficient manner and at reasonable cost. The City further agrees to maintain insurance for the benefit of the registered owners of the Bonds of the kinds and in the amounts which are usually carried by private companies operating similar properties, and that during such time all policies of insurance shall be maintained in force and kept current as to premium payments. All moneys received from losses under such insurance policies other than public liability policies are hereby pledged as security for the Bonds Similarly Secured until and unless the proceeds thereof are paid out in making good the loss or damage in respect of which such proceeds are received, either by replacing the property destroyed or repairing the property damaged, and adequate provisions are made within ninety (90) days after the date of the loss for making good such loss or damage. The premiums for all insurance policies required under the provisions of this Section shall be considered as maintenance and operation expenses of the System. SECTION 23: Records -Accounts -Accounting Reoorts. That the City hereby covenants and agrees so long as any of the Bonds or any interest thereon remain outstanding and unpaid, it will keep and maintain a proper and complete system of records and accounts pertaining to the operation of the System separate and apart from all other records and accounts of the City in accordance with generally accepted accounting principles prescribed for municipal corporations, and complete and correct entries shall be made of all transactions relating to said System, as provided by applicable law. The registered owner of any Bonds, or any duly authorized agent or agents of such owner, shall have the right at all reasonable times to inspect all such records, accounts and data relating thereto and to inspect the System and all properties comprising same. The City further agrees that as soon as possible following the close of each Fiscal Year, it will cause an audit of such books and accounts to be made 36 by an independent ftnn of Certified Public Accountants. Each such audit, in addition to whatever other matters may be thought proper by the Accountant, shall particularly include the following: (a) A detailed statement of the income and expenditures of the System for such Fiscal Year; (b) A balance sheet as of the end of such Fiscal Year; (c) The Accountant's comments regarding the manner in which the City has complied with the covenants and ~uirements of this ordinance and his recommendations for any changes or improvements in the operation, records and accounts of the System; (d) A list of the insurance policies in force at the end of the Fiscal Year on the System properties, setting out as to each policy the amount thereof, the risk covered, the name of the insurer, and the policy's expiration date; (e) A list of the securities which have been on deposit as security for the money in the Bond Fund throughout the Fiscal Year and a list of the securities, if any, in which the Reserve Portion of the Bond Fund has been invested. (f) The total number of metered and unmetered customers, if any, connected with the System at the end of the Fiscal Year. Expenses incurred in making the audits above referred to are to be regarded as maintenance and operating expenses of the System and paid as such. Copies of the aforesaid annual audit shall be immediately furnished to the Executive Director of the Municipal Advisory Council of Texas at his office in Austin, Texas, and, upon written ~uest, to the original purchasers and any subsequent registered owner of the Bonds. SECTION 24: Remedies in Event of Default. That, in addition to all the rights and remedies provided by the laws of the State of Texas, the City covenants and agrees particularly that in the event the City (a) defaults in payments to be made to the Bond Fund as ~uired by this ordinance or (b) defaults in the observance or performance of any other of the covenants, conditions or obligations set forth in this ordinance, with the consent of MBIA Insurance Corporation the registered owner of any of the Bonds shall be entitled to a writ of mandamus issued by a court of proper jurisdiction compelling and ~uiring the City Council and other officers of the City to observe and perform any covenant, condition or obligation prescribed in this ordinance. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power, or shall be construed to be a waiver of any such default or acquiescence therein, and every such right or power may be exercised from time to time and as often as may be deemed expedient. The specific remedies herein provided shall be cumulative of all other existing remedies and the specifications of such remedies shall not be deemed to be exclusive. SECTION 25: Special Covenants. The City hereby further covenants as follows: (a) That it has the lawful power to pledge the revenues supporting this issue of Bonds and has lawfully exercised said power under the Constitution and laws of the State of Texas, including Articles 717k and 1111 et seq. Tex. Rev. Civ. Stat.; that the Previously Issued Bonds, the Bonds and the Additional Bonds, when issued, shall be ratably secured under said pledge of income in such manner that one bond shall have no preference over any other bond of said issues. (b) That, other than for the payment of the Previously Issued Bonds and the Bonds, the Net Revenues of the System have not been pledged to the payment of any debt or obligation of the City or of the System. (c) That, so long as any of the Bonds or any interest thereon remain outstanding, the City will not sell, lease or encumber the System or any substantial part thereof; provided, however, this covenant shall not be construed to prohibit the sale of such machinery, or other properties or equipment which has become obsolete or otherwise unsuited to the efficient operation of the System when other property of equal value has been substituted therefore, and, also, with the exception of the Additional Bonds expressly permitted by this ordinance to be issued, it will not encumber the Net Revenues of the System unless such encumbrance is made junior and subordinate to all of the provisions of this ordinance. In the event the City sells the System, the City will use proceeds of such sale to provide for final payment of the Bonds, the Previously Issued Bonds, and any Additional Bonds. · (d) The City will cause to be rendered monthly to each customer receiving electric services a statement therefor and will not accept payment of less than all of any statement so rendered, using its power under existing ordinances and under aiJ such ordinances to become effective in the future to enforce payment, to withhold service from such delinquent customers and to enforce and authorize reconnection charges. 37 (e) That the City will faithfully and punctually perfonn all duties with respect to the System required by the Constitution and laws of the State of Texas, including the making and collecting of reasonable and sufficient rates for services supplied by the System, and the segregation and application of the revenues of the System as required by the provisions of this ordinance. (1) No free service shall be provided by the System and to the extent the City or its departments or agencies utilize the services provided by the System, payment shall be made therefor at rates charged to others for similar service. SECTION 26: Special Obligations. The Bonds are special obligations of the City payable from the pledged Net Revenues of the System and the registered owners thereof shall never have the right to demand payment thereof out of funds raised or to be raised by taxation. SECTION 27: Bonds are Negotiable Instruments. Each of the Bonds herein authorized shall be deemed and construed to be a "Security", and as such a negotiable instrument, within the meaning of Article 8 of the Unifonn Commercial Code. SECTION 28: Ordinance to Constitute Contract. The provisions of the Ordinance shall constitute a contract between the City and the registered owner or owners from time to time of the Bonds and no change, variation or alteration of any kind of the provisions of the Ordinance may be made, except as pennitted in this Section. The City may, after giving notice to MBIA Insurance Corporation but without the consent of or notice to any registered owner or owners, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the registered owners and, with the consent of MBIA Insurance Corporation and the owner or owners holding a majority in aggregate principal amount of the Bonds then Outstanding affected thereby, the City may amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of MBIA Insurance Corporation and all registered owners 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 therefor, or the rate of interest thereon, or in any other way modify the tenns 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 for consent to any such amendment, addition or rescission. SECTION 29: Covenants to Maintain Tax-Exempt Status. (a) Definitions. When used in this Section, the following tenns shall have the following meanings: "Closing Date" means the date on which the Bonds are fmt 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, enacted 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 defmed in Section 1.148-l(b) of the Regulations, and any replacement proceeds as defmed in Section 1.148-1(c) of the Regulations, of the Bonds. "Investment" has the meaning set forth in Section 1.148-1(b) of the Regulations. "Nonpurpose Investment" ineans any investment property as defmed 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 1.148-1(b) of the Regulations. • Regulations" means any proposed, temporary, or fmallncome 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. "Yield" of (1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (2) the Bonds has the meaning set forth in section 1.148-4 of the Regulations. 38 (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 fmanced 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 defmed 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 recogoized 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. (c) No Private Use or Private Pavments. 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 refmanced directly or indirectly with Gross Proceeds of the Bonds (including property fmanced 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 refmanced directly or indirectly with such Gross Proceeds (including property fmanced 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. (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 fmance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if (1) property acquired, constructed, or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes, (2) capacity in or service from such property is committed to such person or entity under a take-or-pay, output, or similar contract or arrangement, or (3} indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed, or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. (e) Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the regulations and rulings thereunder, the City shall not at any time prior to the fmal 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 Reoort. The City shall timely flle 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 of the Bonds (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 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(t) of the Code and the Regulations and rulings thereunder. The City shall maintain such 39 calculations with its official transcript of proceedings relating to the issuance of the Bonds until six years after the fmal 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 ease of a Final Computation Date as defmed in Section 1.148-3(e)(2) of the Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date.· In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied by Fonn 8038-T or such other fonns and infonnation as is or may be required by Section 148(1) 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 such an error is made, to discover and promptly to correct such enor 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 by section 1.148-3(h) of the Regulations. (i) Not to Divert Arbitrage Profits. Except to the extent pennitted 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 fmal 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 ann'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, City Manager, City Secretary, and Director of Support Services, either or any combination of them, to make elections pennitted 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, fonn 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 85% of the spendable proceeds of such obligations within three years after such obligations were issued. (2) Not more than 50% of the proceeds of the original obligations refunded by the Bonds were invested in Nonpurpose Investments having a substantially guaranteed Yield for a period of 4 years or more. (1) Qualified Advance Refunding. The Bonds are being 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 first advance refunding of the Refunded Obligations within the meaning of section 149(d) of the Code. (2) The Refunded Obligations are being called for redemption, and will be redeemed: (i) in the case of any Refunded Obligations issued after 1985, not later than the earliest date on which such bonds may be redeemed and on which the City will realize present value due service savings (detennined without regard to administrative expenses) on the issue; and (ii) in the ease of any Refunded Obligations issued before 1986, not later than the earliest date on which such issue may be redeemed at par and on which the City will realize present value debt service savings (detennined without regard to administrative expenses) on the issue. (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 30 days after the date of issue of such Bonds; and (ii) with respect to the 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. 40 (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 government purposes for which the Bonds were issued; (ii) employed an "abusive arbitrage device" within the meaning of Section 1.148-10(a) of the Regulations; nor (iii) employed a "device" to obtain a material fmancial advantage based on arbitrage, within the meaning of section 149(d) of the Code, apart from savings attributable to lower interest rates and reduced debt service payments in early years. SECTION 30: Final Deposits: Governmental Obligations. The terms "Outstanding" and "outstanding" when used in this Ordinance with respect to Bonds means, as of the date of determination, aU Bonds theretofore issued and delivered under this Ordinance, except: (1) those Bonds theretofore canceled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Bonds for which payment has been duly provided by the City by the irrevocable deposit with the Paying Agent/Registrar of money in the amount necessary to fully pay the principal of, premium, if any, and interest thereon to maturity or redemption, as the case may be, provided that, if such Bonds are to be redeemed, notice of redemption thereof shall have been duly given pursuant to this Ordinance or irrevocably provided to be given to the satisfaction of the Paying Agent/Registrar, or waived; (3) those Bonds that have been mutilated, destroyed, lost or stolen and replacement Bonds have been registered and delivered in lieu thereof as provided in Section 32 hereof; and (4) those Bonds for which the payment of the principal of, premium, if any, and interest on which has been duly provided for by the City in accordance with law. (a) All or any of the Bonds shaD be deemed to be paid, retired and no longer outstanding within the meaning of this Ordinance when payment of the principal of, and redemption premium, if any, on such Bonds, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, upon redemption, or other otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption), or (ii) shall have been provided by irrevocably depositing with, or making available to, the Paying Agent, in trust and irrevocably set aside exclusively for such payment, (1) money sufficient to make such payment or (2) Government Obligations, certified by an independent public accounting firm of national reputation, to mature as to principal and interest in such amounts. and at such times as will insure the availability, without reinvestment, of sufficient money to make such payment, and aU necessary and proper fees, compensation and expenses of the Paying Agent pertaining to the Bonds with respect to which such deposit is made shaD have been paid or the payment thereof provided to the satisfaction of the Paying Agent. At such time as a Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefit of this Ordinance or a lien on and pledge of the Net Revenues of the System, and shall be entitled to payment solely from such money or Government Obligations. The term "Government Obligations, • as used in this Section, shall mean direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, which may be United States Treasury obligations such as its State and Local Government Series, and which may be in book-entry form. (b) That any moneys so deposited with the Paying Agent may at the direction of the City also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and aU income from all Government Obligations in the hands of the Paying Agent pursuant to this Section which is not required for the payment of the Bonds, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be turned over to the City or deposited as directed by the City. (c) That the City covenants that no deposit will be made or accepted under clause (a)(ii) of this Section and no use made of any such deposit which would eause the Bonds to be treated as arbitrage bonds within the meaning of section 148 of the Internal Revenue Code of 1986, as amended. (d) That notwithstanding any other provisions of this Ordinance, aU money or Government Obligations set aside and held in trust pursuant to the provisions of this Section for the payment of the Bonds, the redemption premium, if any, and interest thereon, shall be applied to and used for the payment thereof, the redemption premium, if any, and interest thereon and the income on· such money or Government Obligations shall not be considered to be income or revenues of the System. 41 (e) The provisions of this Section and this Ordinance are subject to the applicable unclaimed property laws of the State of Texas. SECTION 47: Payments Under the Policy. A. In the event that, on the second Business Day, and again on the Business Day, prior to the payment date on the Obligations, the Paying Agent has not received sufficient moneys to pay all principal of and interest on the Obligations due on the second following or following, as the case may be, Business Day, the Paying Agent shall immediately notify the Insurer or its designee on the same Business Day by telephone or telegraph, confmned in writing by registered or certified mail, of the amount ofthe deficiency. B. If the deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent shall so notify the Insurer or its designee. C. In addition, if the Paying Agent has notice that any Bondholder has been required to disgorge payments of principal or interest on the Obligation to a trustee in Bankruptcy or creditors or others pursuant to a fmal judgment by a court of competent jurisdiction that such payment constitutes· a voidable preference to such Bondholder within the meaning of any applicable bankruptcy laws, then the Paying Agent shall notify the Insurer or its designee of such fact by telephone or telegraphic notice, confmned in writing by registered or certified mail. D. The Paying Agent is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Holders of the Obligations as follows: 1. If and to the extent there is a deficiency in amounts required to pay interest on the Obligations, the Paying Agent shall (a) execute and deliver to State Street Bank and Trust Company, N .A., or its successors under the Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Insurer as agent for such Holders in any legal proceeding related to the payment of such interest and an assignment to the Insurer of the claims for interest to which such deficiency relates and which are paid by the Insurer, (b) receive as a designee of the respective Holders (and not as Paying Agent) in accordance with the tenor of the Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (c) disburse the same to such respective Holders; and 2. If and to the extent of a deficiency in amounts required to pay the principal of the Obligations, the Paying Agent shall (a) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Insurer as agent for such Holder in any legal proceeding relating to the payment of such principal and an assignment to the Insurer of any of the Obligation surrendered to the Insurance Paying Agent of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Paying Agent and available for such payment (but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (b) receive as designee of the respective Holders (and not as Paying Agent) in accordance with the tenor of the policy payment therefor from the Insurance Paying Agent, and (c) disburse the same to such Holders. E. Payments with respect to claims for interest on and principal of the Obligations disbursed by the Paying Agent from proceeds of the Policy shall not be considered to discharge the obligation of the Issuer with respect to such Obligations, and the Insurer shall become the oWI\er of such unpaid Obligation and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. F. Irrespective of whether any such assignment is executed and delivered, the Issuer and the Paying Agent hereby agree for the benefit of the Insurer that: 1. They recognize that to the extent the Insurer makes payments, directly or indirectly (as by paying through the Paying Agent), on account of principal.of or interest on the Obligations, the Insurer will. be subrogated to the rights of such Holders to receive the amount of such principal and interest from the Issuer, with interest thereon as provided and solely from the sources stated in this Indenture and the Obligations; and 2. They will accordingly pay to the Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the ftrst paragraph of the Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this Indenture and the Obligation, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Obligations to Holders, and will otherwise treat the Insurer as the owner of such rights to the amount of such principal and interest. G. In connection with the issuance of additional Obligations, the Issuer shall deliver to the Insurer a copy of the disclosure document, if any, circulated with respect to such additional Obligations. 42 H. Copies of any amendments made to the documents executed in connection with the issuance of the Obligations which are consented to by the Insurer shall be sent to Standard &. Poor's Corporation. I. The Insurer shall receive notice of the resignation or removal of the Paying Agent and the appointment of a successor thereto. J. The Insurer shall receive copies of all notices required to be delivered to Bondholders and, on an annual basis, copies ofthe Issuer's audited ftnancial statements and the Annual Budget. Notices: Any notice that is required to be given to a holder of the Obligation or to the Paying Agent pursuant to the Indenture shall also be provided to the Insurer. All notices required to be given to the Insurer under the Indenture shall be in writing and shall be sent by registered or certified mail addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New York, 10504 attention: Surveillance. 43 EXHIBIT B MBIA LIST OF PERMISSIBLE INVESTMENTS A. Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. B. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself). 1. U.S. Exoort-Imoort Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership 2. Fanners Home Administration (FmHA) Certificates of beneficial ownership 3. Federal Financing Bank 4. Federal Housing Administration Debentures (FHA) 5. General Services Administration Participation certificates 6. Government National Mortgage Association (GNMA or "Ginnie Mae") GNMA -guaranteed mortgage-backed bonds GNMA -guaranteed pass-through obligations 7. U.S. Maritime Administration Guaranteed Title XI fmancing 8. U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures-U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds-U.S. government guaranteed public housing notes and bonds C. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself:) 1. Federal Home Loan Bank System Senior debt obligations 2. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") Participation Certificates Senior debt obligations 3. Federal National Mortgage Association (FNMA or "Fannie Mae") Mortgage-backed securities and senior debt obligations 4. Student Loan Marketing Association (SLMA or "Sallie Mae") Senior debt obligations 5. Resolution Funding Corn. (REFCORP) obligations 6. Farm Credit System Consolidated systemwide bonds and notes D. Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAAm; or AAm. E. Certificates of deposit secured at all times by collateral described in (A) and/or (B) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral. 44 F. Certi.fieates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF. G. Investment Agreements, including GIC's, acceptable to the Insurer. H. Commercial paper rated, at the time of purchase, "Prime • 1" by Moody's and • A·1" or better by S&P. I. Bonds or notes issued by any state or municipality which are rated by Moody's and S&P in one of the two highest rating categories assigned by such agencies. 1. Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of "Prime-1" or • A3" or better by Moody's and • A-1" or "A" or better by S&P. K. Repurchase agreements provide for the transfer of securities from a dealer bank or securities farm (seller/borrower) to a municipal entity (buyer/lender), and the transfer of cash from a municipal entity to the dealer bank or securities farm with an agreement that the dealer bank or securities farm will repay the cash plus a yield to the municipal entity in exchange for the securities at a specified date. Repurchase Agreements must satisfy the following criteria or be approved by the Insurer. 1. Rs;pos must be between the municipal entity and a dealer bank or securities firm a. Primarv dealers on the Federal Reserve reporting dealer list which are rated A or better by Standard & Poor's Ratings Group and Moody's Investors Services, or b. Banks rated • A" or above by Standard & Poor's Ratings Group and Moody's Investors Services. 2. The written repo contract must include the following: a. Securities which are acceptable for transfer are: (1) Direct U.S. governments, or (2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA & FHLMC) b. The term of the repo may be up to 30 days c. The collateral must be delivered to the municipal entity, trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee (if the trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificated securities). d. Valuation of Collateral (1) The securities must be valued weekly. marked-to-market at current market price plus accrued interest (2) The value of collateral must be equal to 104% of the amount of cash transferred by the municipal entity to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by municipality, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal105%. 3. Legal opinion which must be delivered to municipal entity: Repo meets guidelines under state law for legal investment of public funds. Additional Notes 1. Any state administered pool investment fund in which the issuer is statutorily permitted or required to invest will be deemed a permitted investment. 2. Debt Service Reserve Fund (DSRF) investments should be valued at fair market value and marked to market at least once per year. DSRF investments may not have maturities extending beyond 5 years. · 45 OTIIER RELEVANT INFORMATION Ratings Moody's Investors Service has assigned to the Bonds a rating of "Aaa", Standard & Poor's Ratings Group, a division of The McGraw Hill-Companies, Inc. has assigned to the Bonds a rating of .R AAA" and Fitch Investors Service, L.P. has assigned to the Bonds a rating of "AAA" with the understanding that upon delivery of the Bonds, a Municipal Bond Guaranty Insurance Policy insuring the timely payment of the principal of and interest on the Bonds will be issued. by MBIA Insurance Corporation. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. Such ratings reflect· only the respective views of such organizations and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by such rating companies, if in the judgment of such rating 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. 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 defmed 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. 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 the Tax Reform Act of 1986 and the environmental tax imposed by the Superfund Revenue Act of 1986 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 with the provisions of the Ordinance by the City 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 and the facilities fmanced therewith by persons other than state or local governmental units, the manner in which the proceeds of the Bonds are to be invested, the periodic calculation and payment to the United States Treasury of arbitrage "profits" from the investment of the proceeds, and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants would cause interest on the Bonds to be includable in the gross income of the owners thereof from the date of 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, fmancial 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 or 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, 46 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 actuariaUy in accordance with the constant interest method over the life of a Discount Bond, taking into account the semiannual compounding of ace rued interest, at the yield to maturity on such Discount Bond and generally wiU 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 and the environmental tax imposed by Sections SS and S9A, respectively, 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 wiU 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, fmancial 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, 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 and disposing of Discount Bonds. It is possible that, under applicable provisions governing determination 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 wiU 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 amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity. Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable 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. 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 fmancial 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 Scetion 3(a) (2); and the Bonds have not been qualified under the Sceurities Act ~f Texas in reliance upon various exemptions contained therein; nor have the Bonds been quallfied 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 quallfication 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 ~ure Public 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 loan associations, insurance companies, fiduciaries, and trustees; so long as the Bonds maintain an investment grade rating of "A" or better, they are eligible investments for the sinking fund of cities, towns, villages, school 47 districts, and other political subdivisions or public agencies of the State of Texas". See "Ratings" for the current rating of the Bonds. 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. 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 and No-Litigation CertifiCate 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 Exemption" herein, including the alternative minimum tax on corporations. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Bonds, or which would affect the provision made for their payment or security, or in any manner questioning the validity of said Bonds will also be furnished. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions "Plan of Financing", "Bond Information" (except for the subcaption "Book-Entry-Only System") and the subcaptions "Tax Exemption", "Tax Accounting Treatment of Discount/Premium Bonds" and "Legal Investments and Eligibility to Secure Public Funds in Texas" under the caption "Other Relevant Information" and such firm is of the opinion that the information relating to the Bonds and the Ordinance contained under such captions is accurate and correct in all material respects addressed under such captions. The legal fee to be paid 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 DTC or will be printed on the Bonds in the event of the discontinuance of the Book-Entry-Only System. McCall, Parkhurst & Horton L.L.P. will pass upon certain matters for the Underwriters. The legal fee of such fmn is contingent on the delivery of the Bonds. Underwriting The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City at an aggregate discount of $104,791.68 from the initial offering price of the Bonds. 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. VerifiCation of Arithmetkal and Mathematical Computations 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 Acquired Obligations and the forecasted payments of principal and interest to redeem the Refunded Bonds, and (b) Computation of the yields on the Bonds and the Federal Securities will be examined by KPMG Peat Marwick LLP, certified public accountants. Such computations will be based solely on assumptions and information supplied by First Southwest Company on behalf of the City. KPMG Peat Marwick LLP will restrict its procedures to examining the arithmetical accuracy of certain computations and will not make any study or evaluation of the assumptions and information on which the computations are based and, accordingly, will not express an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. 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. · 48 Miscellaneous The fmancial data and other information contained herein have been obtained from the City's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in aU respects. All estimates, statements and assumptions in this Official Statement and the appendices hereto have been made on the best information available and are believed to be reliable and accurate. Any statements in this Official Statement involving matters of opinion or estimates, whether or not expressly so stated, are intended as such and not as representations of fact and no representation is made that any of such statements will be realized. The execution and delivery of this Official Statement by its Mayor was duly authorized by the City Council of the City on June 23, 1995. CITY OF LUBBOCK, TEXAS Is/ DAVID R. LANGSTON Mayor ATTEST: lsi BETTY M. JOHNSON 49 miS PAGE LEFf INTENTIONALLY BLANK SCHEDULE I SCHEDULE OF REFUNDED BONDS TillS PAGE LEFT INTENTIONALLY BLANK Maturity April IS 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 CITY OF LUBBOCK, TEXAS SCHEDULE OF REFUNDED BONDS $440,000 Electric Light and Power System Revenue Bonds, Series 1976; Dated April 15, 1976 Callable April IS. 1995 m Principal Interest AmOUnt Rate s 220,000 6.25% 220,000 6.25% $440.000 $3,500,000 Electric Light and Power System Revenue Bonds, Series 1987; Dated April 15, 1987 Callable April 15. 1997 (7) Principal Interest Amount Rate s 350,000 7.45% 350,000 7.55% 350,000 7.60% 350,000 7.70% 350,000 7.75% 350,000 7.80% 350,000 7.90% 350,000 8.00% 350,000 7.00% 350,000 7.00% $3.500.000 SCHEDULE I $8,500,000 Electric Light and Power System Revenue Bonds, Series 1988; Dated May 15, 1988 CaPable April 15. 1998 rn Principal Interest Amount Rate s 850,000 7.00% 850,000 7.00% 850,000 7.00% 850,000 7.00% 850,000 7.00% 850,000 7.00% 850,000 7.00% 850,000 7.00% 850,000 7.00% 850,000 7.00% ~8,5!;!2,000 (1) Series 1976 original amount $4,400,000; amount outstanding May 15, 1995, $440,000. Maturities April15, 1996 through 1997, totaling $440,000, shown above, will be called for redemption on October 15, 1995, and will be redeemed at their par value plus accrued interest to said date fiXed for redemption. (2) Series 1987 original amount $7 ,000,000; amount outstanding May 15, 1995, $4,200,000. Maturities April15, 1998 through 2007, totaling $3,500,000, shown above, will be called for redemption on April 15, 1997, and will be redeemed at their par value plus accrued interest to said date fixed for redemption. (3) Series 1988 original amount $17,000,000; amount outstanding May IS, 1995, $11,050,000. Maturities Apri115, 1999 through 2008, totaling $8,500,000, shown above, will be called for redemption on April15, 1998, and will be redeemed at their par value plus accrued interest to said date fixed for redemption. TillS PAGE LEFT INTENTIONALLY BLANK APPENDIX A GENERAL INFORMATION REGARDING THE CITY TillS PAGE LEFT INTENTIONALLY BLANK Location The City of Lubbock, County Seat of Lubbock County, Texas, is located on the South Plains ofWeat Texas. Lubbock is the economic, educational, cultural and medical center of the area. Population Lubbock is the ninth largest City in Texas: 1910 Census 1920 Census 1930 Census 1940 Census 1950 Census 1960 Census 1970 Census 1980 Census 1990 Census 1993 (Estimated)* 1994 (Estimated)* 1995 (Estimated)* *Source: City of Lubbock, Texas City of Lubbock (Corporate Limits) 1,938 4,051 20,520 31,853 71,390 128,691 149,701 173,979 186,206 187,981 190,038 191,020 Metropolitan Statistical Area ("MSA ") (Lubbock County) 1970 Census 179,295 1980 Census 211,651 1990 Census 222,636 1995 (Estimated) 228,394 Agriculture; Business and Industry Lubbock is the center of a highly mechanized agricuhural area with a majority of the crops irrigated with water fro!TI underground sourees. Principal crops are cotton and grain sorghums with livestock a major additional source of agricultural income. In 1993 cotton production in the 25-eounty area in and around Lubbock was 3.45 million bales; 1992 production was 1.4 million bales; estimated 1994 production is 3.1 to 3.2 million bales (source: Plains Cotton Growers, Inc., Lubbock, Texas). Three major vegetable oil plants located in Lubbock have a combined weekly capacity of over 1,869 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. Lubbock MSA Labor Foree Estimates April March February April March February 1995 (I) 1995 1995 1994 1994 1224 Civilian Labor Force 118,700 117,900 117,700 116,100 117,600 117,200 Total Employment 114,100 112,900 112,900 111,200 111,700 111,000 Unemployment 4,600 5,000 4,800 4,900 5,900 6,200 Percent Unemployment 3.9% 4.2% 4.1% 4.2% 5.0% 5.3% (1) Subject to revision. Source: Texas Employment Commission. A-1 Estimated non-agricultural wage and salaried jobs in various categories as of April, 1995, were: Manufacturing Mining Construction Transportation Trade Finance, Insurance and Real Estate Services 7,900 200 4,000 5,500 30,300 4,700. 29,100 23.800 105,500 Government Total Major employers in Lubbock (with 300 employees or more) are: Company Texas Tech University Methodist Hospital Lubbock Independent School District TTU Health Sciences Center Reese Air Force Base City of Lubbock St. Mary of the Plains Hospital University Medical Center United Supermarkets Lubbock State School Caprock Home Health Services Texas Instruments, Incorporated U.S. Postal Service Lockheed Support Systems, Inc. Furrs Cafeterias State Department of Highways United Parcel Service Industrial Molding Corporation Southwestern Bell Telephone Company Notwest Bank Texas, National Association ARA Food Service Lubbock Regional MHMR Center State Department of Human Services Pay & Save Corporation Marriott School Services Fleming Foods of Texas Dillards Department Stores McLane High Plains Rip Griffin Truck Service Center * Full and part time. Product State University Hospital Public Schools Medical and Allied Health School U.S. Military Installation City Government Hospital Hospital Supermarkets School for Mentally Retarded Home Health Care Service Semiconductors Post Office Aircraft-Transportation Equipment Cafeterias Highway and Street Construction Courier Services Manufacturing/Plastic Products Telephone Utility Bank Food Broker Social Services Social Services Lowe's Retail Groceries Hotel/Housekeeping and Hotel Wholesale Groceries ·Department Store Wholesale Food Distribution Truck Travel Centers Estimated Employees March, 1995 5,016* 3,750 3,230 2,501 2,440** 1,850 1,836 1,800 1,474 975 975 850*** 629 500 500 484 480 460 450 415 400 400 380 380 350 350 340 329 300 ** Military and civilian (see "Government and Militaryfl), following for a description of recent actions of the Defense Closure and Realignment Commission relative to the base. *** As projected by Texas Instruments ("TI") for November, 1995, following restructuring announced in March, 1995; present employment is approximately 1 ,350. The personal productivity products division (consumer and peripheral products) and the custom manufacturing service division (circuit board assemblies) will be consolidated at the corporate sites in Austin, Temple and DaUas over the next seven months. TI officials stated that they have no intention of closing the Lubbock plant's semiconductor fabrication unit, which has 850 full-time employees; the plant is the second largest Tl facility of its kind in the United States and the sole producer of EPROM memory chips. Source: Business Development Support Service, City of Lubbock, Texas. A-2 Education .•. Texas Tech University .•• Established in Lubbock in 1923, Texas Tech University is the fifth largest State-owned University in Texas and had a Fall, 1994, enrollment of 24,083. Accredited by the Southern Association of Colleges and Schools, the University is a co-educational, State- supported institution offering the bachelor's degree in 158 major fields, the master's degree in 107 major fields, the doctorate degree in 64 major fields, and the professional degree in 2 major fields (law and medicine). The University proper is situated on 451 acres of the 1,829 acre campus, and has over 160 permanent buildings with additional construction in progress. Fall, 1994, faculty membership was 786 full-time and 142 part-time. Health Sciences Center faculty membership for 1994 is 907 full-time and 121 part-time. Including the Health Sciences Center, the University's operating budget for 1994-95 is $341.8 million of which $90.5 million is from State appropriations; book value of physical plant assets, including the Health Sciences Center, is in excess of $696 million. The medical school had an enrollment of 422 for Fall, 1994, not including residents; there were 35 graduate students. The School of Nursing had a Fall, 1994, enrollment of 411 including the Permian Basin Program, located in Midland/Odessa; there were 56 graduate students. The Allied Health School had a Fall, 1994, enrollment of 452. Source: Texas Tech University. Other Education Information The Lubbock Independent School District, with an area of 87 .S square miles, includes over 90% of the City of Lubbock. There are approximately 3,230 total employees, including 2,512 certified (professional) personnel and 718 other employees. The District operates four senior high schools, ten junior high schools, 40 elementary schools and other educational programs. Scholastic Membership History* School Year 1989-90 1990-91 1991-92 1992-93 1993-94 Student Membership 30,861 30,684 30,736 31,103 30,571 Refined Average Daily Attendance 28,373 28,101 28,090 28,359 27,731 * Source: Superintendent's Office, Lubbock Independent School District. Lubbock Christian University, a privately owned, co-educational senior college located in Lubbock, had an enrollment of 1,171 for the Fall Semester, 1994. South Plains College, Levelland, Texas (South Plains Junior College District) operates a major off-campus teaming center in a downtown Lubbock, 7-story building owned by the College. College offerings cover technical/vocational subjects; Fall Semester, 1994, enrollment was 866 including a major off-campus teaming 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; 422 students were in residence .. The School's operating budget for 1993/94 was in excess of $19.9 million; there are approximately 975 professional and other employees. Transportation Scheduled airline transportation at Lubbock International Airport is furnished by Southwest Airlines, Atlantic Southeast Airlines, United Express and American Eagle; non-stop service is provided to Dallas-Fort Worth International Airport, Dallas Love Field, Denver, El Paso, Austin, Amarillo and Albuquerque. 1994 passengerboardings totaled 611,497. Extensive private aviation services are located at the airport. Rail transportation is furnished by the Atchison, Topeka and Santa Fe Railway Company and the Burlington-Northem,Inc. with through service to Dallas, Houston, Kansas City, Chicago, Los Angeles and San Francisco. Short-haul rail service is also furnished by the Seagraves, Whiteface and Lubbock Railroad. Texas, New Mexico and Oklahoma Bus Lines, a subsidiary of Greyhound Corporation, provides bus service. Several motor freight common carriers provide service. A -3 Lubbock has a well developed highway network including Interstate 27 (Lubbock-Amarillo), 4 U.S. Highways, 1 State Highway, a controlled-access outer loop and a county-wide system of paved farm-to-market roads. Government and Military Reese Air Force Base ("Reese"), located adjacent to the western boundary of Lubbock, provides undergraduate pilot training as the 64th Flying Training Wmg. The Base covers over 3,000 acres and has approximately 1,440 military and 1,000 civilian and contract personnel. On June 23, 1995, the Defense Base Closure and Realignment Commission ("BRAC") aMounced that Reese was included in the fmallist of bases recommended for closure to be submitted to the President by July 1. Presidential and Congressional action on the list is pending. The City has begun development of 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 would not have a positive impact on the Lubbock economy, the current growth in other economic sectors should minimize or neutralize closure of the base. In addition, there could be a positive economic impact from the re-use of the base. LP&L does not serve Reese. Source: City of Lubbock, Texas. State of Texas ... More than 25 State of Texas boards, departments, agencies and commissions have offices in Lubbock; several of these offices have multiple units or offices. Federal Government ... Several Federal departments and various other administrations and agencies have offices in Lubbock; a Federal District Court is located in the City. Texas Department of Criminal Justice ("TDCJ") Prison Psychiatric Hospital TDCJ is constructing a 550 bed Prison Psychiatric Hospital on a 1,303 acre site in southeast Lubbock. The Hospital will employ approximately 800 with an annual estimated payroll of $17,000,000 and an estimated remaining annual operating budget of $16,000,000. Construction is estimated to be completed in June, 1995. Included in construction of the Hospital is a 400 bed capacity "trustee" facility to house prison trustees who will work at the hospital. In addition TDCJ will construct a 48 bed regional prison hospital on this site. Hospitals and Medical Care There are six hospitals in the City with over 2,000 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.) 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. Recreation and Entertainment Lubbock's Mackenzie Regional Park and over 70 City parks and playgrounds provide recreation centers, shelter buildings, a garden and art center, swimming pools, a golf course, tennis and volley baD 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 50 acres contain the 300,000 square foot Lubbock Memorial Civic Center, the main City library building and State Department of Public Safety offices; a 50 acre peripheral area has been redeveloped privately with office buildings, hotels and motels, a hospital and other facilities. A-4 Available to residents arc 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 hbrary and its branches, the annual Panhandle-South Plains Fair, college and high school football, basketball and other sporting events; modern movie theatres. Lubbock is now the home of a professional minor-league baseball team, the Lubbock Crickets. They arc an expansion team in the Texas-Louisiana Baseball League. In the 1995 season the Crickets will play 100 games, including SO games on their homefield, Dan Law Field at Texas Tech University. Churches Lubbock has approximately 300 churches representing more than 25 denominations. Utility Services Water and Sewer • City of Lubbock. Gas -Energas Company. Electric -City of Lubbock (Lubbock Power & Light) and Southwestern Public Service Company; and, in a small area, South Plains Electric Co-operative. Economic Indices (1) Year 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Building Permits $ 168,740,229 139,317,252 100,046,309 10S,1S9,S2S 105,363,072 140,855,719 131 ,333, 756 142,921,124 174,346,368 162,427,737 (1) All data as of 12-31; Source: City of Lubbock. Water 60,051 60,751 61,027 61,628 61,857 62,178 62,267 62,898 63,006 64,921 Utility Connections Gas 56,600 56,900 57,266 57,886 60,312 61,700 60,803 60,208 61,448 62,670 Electric !LP&L OnM(l) 40,506 41,759 42,696 43,781 44,518 45,301 46,245 47,194 48,526 49,391 (2) Electric connections are those of City of Lubbock owned Lubbock Power and Light (HLP&L ") and do not include those of Southwestern Public Service Company or South Plains Electric Cooperative. A-5 BuDding Permits by Classirlcation Residential ~ermits Commercial, Sjngle Famil:y: Multj-familv Total Residential Public Total Calendar No. No. Dwelling No. Dwelling and Other Building Year Units Value Units o> Value Units<'> Value Permits Permits 1985 601 50,100,350 162 5,250,300 763 55,350,650 113,389,579 168,740,229 1986 599 49,329,236 14 566,000 613 49,895,236 89,422,016 139,317,252 1987 508 44,466,937 ..().. ..().. 508 44,466,937 55,579,372 100,046,309 1988 414 35,588,945 ..().. ..().. 414 35,588,945 69,570,580 105,159,525 1989 368 31,345,375 12 440,800 380 31,786,175 73,576,897 105,363,072 > 1990 368 35,652,140 8 416,000 376 36,068,140 104,787,579 140,855,719 Cl'l 1991 424 38,574,190 -0--0~ 424 38,574,190 92,759,566 131,333,756 1992 603 58,530,190 44<2) 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 (1) Data shown under "No. Dwelling Units" is for each individual dwelling unit, and is not for separate buildings; includes duplex, triplex, quadruplex ~nd apartment permits. (2) Includes one retirement center with 40 dwelling units. Source: City of Lubbock:, Texas. The rollowing tax and debt inrormation with respect to the City of Lubbock. Texas has been included in the Appendix solely to provide a general description of the community served by the Electric Light and Power System. The Bonds are special obligations or the City payable solely from the Pledged Revenues of the System and do not constitute an indebtedness to which the full faith and credit or taxing power of the City will be pledged. TAX INFORMATION Ad Valorem Tax Law The appraisal of property within the City is the responsibility of the Lubbock Central 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 aU property within the Appraisal District on the basis of 100% 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 chalJenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the VTCA, Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VID, and State law, the governing body of a political subdivision, at its option, may grant: (1) an exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; (2) an exemption of up to 20% of the market value of residence homesteads; minimum exemption $S ,000. The City grants an exemption to the market value of the residence homestead of persons 6S years of age or older of $16,700; the disabled are also granted an exemption of $10,000. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $1,500 to a maximum of $3,000. Article VIII provides that eligible owners of both agricultural land (Section 1-d} and open-space land (Section 1-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempted from ad valorem taxation. The City does not tax nonbusiness personal property and the Lubbock Central Appraisal District colJects taxes for the City of Lubbock. Article VID, Section 1-j of the Texas Constitution provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defmed as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication .. The exemption became effective for the 1990-91 fiscal year and theresfter unless action to tax such property was taken prior to April 1, 1990. Decisions to continue the tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. The City has taken action to tax freeport property. 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. The City has adopted a tax abatement policy and has outstanding agreements that abate certain values for 1994 and, prospectively, 1995 and 1996 as described under "Valuation, Exemptions and Debt Obligations", following. The Lubbock Central Appraisal District collects taxes for the City. A -7 Valuation, Exemptions and Debt Obligations 1994 Market Valuation Established by Lubbock Central Appraisal District Less Exemptions/Reductions at 100$ Market Value: Residence Homestead (Over 65 or Disabled) Disabled Veterans Exemptions AgriculturaVOpen-Space Land Use Reductions Value lost because property is exempted from taxation under the Property Redevelopment and Tax Abatement Act U> 1994 Taxable Assessed Valuation City Funded Debt Payable From Ad Valorem Taxes General Obligation Debt (as of 5-31-95) CZ> Less Self-Supporting Debt: (3) Waterworks System General Obligation Debt Sewer System General Obligation Debt Solid Waste Disposal System General Obligation Debt General Purpose Funded Debt Payable From Ad Valorem Taxes Interest and Sinking Fund (as of 5-31-95) $ 5,313,780,878 $ 180,818,380 3,559,645 31,766,396 10.324.437 226.468.858 $ 5,087,312,020 $ 148,178,752 $ 27,333,157 59,773,539 2,987,041 90.093,737 $ 58,085,015 $ 1,231,239 Ratio Total Funded Debt to Taxable Assessed Valuation •.....•.........•.............•... Ratio General Purpose Funded Debt to Taxable Assessed Valuation ................•.......... 2.91% 1.14$ 1995 Estimated Population-191,02()('> Per Capita 1994 Taxable Assessed Valuation -$26,632.36 Per Capita Total Funded Debt-$775.72 Per Capita General Purpose Funded Debt -$304.08 (1) Article 1066f, VTCA, pennits granting of tax abatements for qualifying businesses; the City has entered into two such agreements with McLane Foodservice-Lubbock, a division of McLane, Inc., Temple, Texas ("McLane"), an institutional food service distributor. The fltSt abatement agreement which began in the 1988 tax year covered McLane's improved real property in the City; 1994 is the fmal year of this agreement; in 1995 the abated value {$4,800,284 for 1994) will be added to the tax rolls. The second agreement covering additional improved real property in the City began in 1994 and will continue through 2001. For 1994 McLane's total real property market value is $11,075,054, total abated values are $10,299,697; the taxable value of real property after abatement is $775,357. The City also has an agreement with J. R. Brady covering a tract of land with a restaurant loeated on a portion of the tract. 1994 market value of the property is $231,816 and the taxable value after abatement is $207,076, resulting in abated values of$24,740. In addition the City has nine additional abatement agreements; depending on completion of construction of the structures being abated these abatements will be effective for 1995 or 1996 taxable values. Based on the City's 1994 tax rate of $0.64 per $100 assessed valuation total taxable assessed values that will be abated under these nine agreements are an estimated $4,656,000. (2) Includes $4,690,000 General Obligation Bonds, Series 1995; $2,000,000 Tax and Hotel Occupancy Tax Surplus Revenue Certificates of Obligation, Series 1995; and $900,000 Tax and Airport Surplus Revenue Certificates of Obligation, Series 1995, delivered to the purchasers on 6-15-95. The statement of indebtedness does not include outstanding $29,149,965 Electric Light and Power System Revenue Bonds {including the Bonds) as these bonds are payable solely from the net revenues of the System. The statement also does not include outstanding $360,000 Airport Revenue Bonds, as these bonds are payable solely from gross revenues derived from the City of Lubbock Airport. On May 11, 1995, City Council declared their intention to defease the remaining Airport Revenue Bonds in September, 1995. The Waterworks System, the Sewer System and the Solid Waste Disposal System have no outstanding Revenue Bond debt. A-8 (3) The City provides for debt service on general obligation debt issued to fund Waterworks System improvements, Sewer System improvements and Solid Waste Disposal System improvements from surplus revenues of these Systems (see "Debt Information", "Interest and Sinking Fund Budget Projection", "Computation of Self-supporting Debt"). "Waterworks System General Obligation Debt" includes $14,433,157 principal amount of outstanding general obligation bonds and $12,900,000 principal amount of outstanding Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation. The City has no outstanding Waterworks System Revenue Bonds. "Sewer System General Obligation Debt" includes $10,163,539 principal amount of outstanding general obligation bonds; and $49,610,000 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 $2,302,041 principal amount of outstanding general obligation debt (bonds and certificates of obligation) and $685,000 principal amount of outstanding Combination Tax and Solid Waste Disposal System Revenue Certificates of Obligation. The City has no outstanding Solid Waste Disposal System Revenue Bonds. (4) Source: City of Lubbock, Texas. A-9 > ..... 0 Taxable Assessed Valuations by Category Taxable Aooraised Value for Fiscal Year Ended Seotember 30, 1995 1994 1993 %of %of %of Categoa &nount Total &Dount Total Ainount Total Real, Residential, Single-Family $ 2,754,503,815 51.84% $ 2,667,702,100 52.03% $ 2,479,218,812 50.80% Real, Residential, Multi-Family 337,977,738 6.36% 318,160,996 6.21% 304,357,639 6.24% Real, Vacant Lotsfrracts 99,547,319 1.87% 100,240,564 1.96% 107,622,442 2.20% Real, Acreage (Land Only) 45,954,067 0.86% 45,288,322 0.88% 47,932,220 0.98% Real, Farm and Ranch Improvements 12,739,995 0.24% 11,784,081 0.23% 13,987,009 0.29% Real, Commercial and Industrial 1,039,190,164 19.56% 1,020,680,238 19.91% 1 ,012,208,927 20.74% Real, Oil, Gas and Other Mineral Reserves 15,018,920 0.28% 22,178,990 0.43% 24,858,113 0.51% Real and Tangible Personal, Utilities 159,462,546 3.00% 152,961,630 2.98% 149,994,794 3.07% Tangible Personal, Commercial and Industrial 819,836,742 15.43% 763,606,589 14.89% 717;385,702 14.70% Tangible Personal, Other 9,479,831 0.18% 8,120,819 0.16% 7,690,791 0.16% Real Property, Inventory <tl 10,2§2,741 0.38~ 16,600,495 0.32~ 15,190,587 ~% Total Appraised Value Before Exemptions $ 5,313,780,878 100.00% $ 5,127,324,820 100.00% $ 4,880,447,036 100.00% Less: Total Exemptions/Reductions ~26,468,858 216,561,776 112,696,868 Taxable Assessed Value ~ 5,087131~1020 ~ 4191017631048 ~ 4,667!7501168 Taxable Appraised Value For Fiscal Year Ended S£1!!ember 30, 1992 1991 %of %of Categoa Amount Total Amount Total Real, Residential, Single-Family $ 2,449,828,200 49.49% $ 2,413,925,206' 48,95% Real, Residential, Multi-Family 304,256,344 6.15% 313,170,381 6.35% Real, Vacant Lotsfrracts 111,914,454 2.26% 117,839,348 2.39% Real, Acreage (Land Only) 48,816,013 0.98% 52,453,590 .1.06% Real, Farm and Ranch Improvements 13,063,630 0.26% 13,508,943 0.27% Real, Commercial and Industrial 1,073,602,333 21.69% 1,076,715,771 21.84% Real, Oil, Gas and Other Mineral Reserves 25,638,500 0.52% 22,182,456 0.45% Real and Tangible Personal, Utilities 147,789,832 2.98% 153,608,032 3.12% Tangible Personal, Commercial and Industrial 755,234,901 15.26% 745,511,197 15.12% Tangible Personal, Other 7,363,639 0.15% 6,360,698 0.13% Real Property, Inventory n> 12,759,249 0.26% 15,746,173 0.32~ Total Appraised Value Before Exemptions $ 4,950,267,095 100.00% $ 4,931 ,021, 795 100.00% Less: Total Exemptions/Reductions 108,659,315 212,233,202 Taxable Assessed Value ~ 4!741,607.780 ~ 4,718!788,593 (1) Residential inventory properties in the hands of developers or builders; each group of properties in this category is appraised on the basis of its value · as a whole as a sale to another developer or builder. This category initiated in 1988. Note: Basis of assessment for all years is 100% of appraised (market) value. Taxable properties are revalued each year. Valuation 1111d Funded Debt History Ratio General General Purpose Purpose Funded Funded General FUical Taxable Tax Debt Debt to Purpose Year Taxable Assessed Outstanding Taxable Funded Ended Estimated Assessed Valuation at End Assessed Debt ~ PoJ2ulation <ll Valuation <2l Per Cai!ita of Year (3) Valuation Per Ca)2ita 1986 188,283 $4,012,901,338 $ 21,313 $ 39,848,682 0.99% $212 1987 188,694 4,408,325,399 23,362 37,540,011 0.85% 199 1988 190,017 4,476,572,268 23,558 39,670,291 0.89% 209 1989 191,403 4,567,387,737 23,863 43,066,998 0.94% 225 1990 186,206 4,645,914,710 24,950 39,179,106 0.84% 210 1991 187,137 4,718,788,593 25,216 43,144,916 0.91% 231 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 (4) 1.14% 304 (1) Source: City of Lubbock, Texas, except 1990 is U.S. Census. (2) Basis of assessment for all years 100% of market value. All taxable property is revalued each year. (3) Funded Tax Debt less Self-supporting Funded Tax Debt. Derivation of General Purpose Funded Tax Debt is: General Purpose Funded Funded Fiscal Tax Debt Less: Tax Debt Year Outstanding Self-Supporting Outstanding Ending at End Funded Tax at End 9-30 of Year Debt of Year 1986 $ 79,889,070 $ 40,040,388 $ 39,848,682 1987 78,279,070 40,739,059 37,540,011 1988 82,958,752 43,288,461 39,670,291 1989 86,898,752 43,831,754 43,066,998 1990 79,088,752 39,909,646 39,179,106 1991 95,783,752 52,638,836 43,144,916 1992 131,813,752 88,220,550 43,593,202 1993 137,358,752 97,773,447 39,585,305 1994 152,693,752 96,784,694 55,909,058 199514} 148,178,752 90,093,737 58,085,015 Note: For aU years Self-Supporting Debt includes Waterworks System and Sewer System General Obligation Debt. 1991~1995 includes Solid Waste Disposal System General Obligation Debt. See ~valuation, Exemptions and Debt Obligations~. {4) Anticipated. A -11 Tax Rate, Levy and Collection History Fiscal Year Qistribution Ended Tax General Economic Interest and %Current %Total 9-30 B!te fl!nd Q~velonment Sinking Fund Iax Lev! Collections Collections 1986 $0.60 $0.2553 $0.0500 $0.2947 $24,077,408 94.16% 96.60% 1987 0.60 0.2762 . 0.0500 . 0.2738 26,448,985 95.75% 98.85% 1988 0.61 0.2767 0.0500 0.2833 27,303,606 95.94% 98.96% 1989 0.64 0.3171 0.0500 0.2729 29,231,282 96.01% 98.98% 1990 0.64 0.3314 0.0500 0.2586 29,733,854 96.15% 99.10% 1991 0.64 0.3468 0.0300 0.2632 30,200,247 96.58% 99.42% 1992 0.64 0.3754 0.0300 0.2346 30,313,029 97.38% 99.38% 1993 0.64 0.4045 O.o355 0.2000 . 29,879,149 97.53% 99.72% 1994 0.64 0.4170 0.0231 0.1999 31,334,334 97.89% 100.64% 1995 0.64 0.4254 0.0300 0.1846 32,558,797 96.81%(1) 98.05%(1) (1) Collections for part year only, through April 30, 1995. Property within the City is assessed as of January 1 of each year (except for business inventory which may, at the option of the taxpayer, be assessed as of September 1); taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Split payments are not permitted. Discounts are not allowed. Taxpayers 65 years of age or older are permitted by State law to pay taxes on homesteads in four installments with the fU'St due on February 1 of each year and the final installment due on August 1. Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Month Penalt:t Interest I2Y!! February 6% 1% 7% March 7% 2% 9% April 8% 3% 11% May 9% 4% 13% June 10% 5% 15% July 12% 6% 18% After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homeStead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due the City and all other taxing entities. Federal law does not allow for the collection of penahy 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 in bankruptcy or by order of the bankruptcy court. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), enacted on August 9, 1989, contains certain provisions which affect the time for protesting property valuations, the fixing of tax liens and the collection of penalties and interest on delinquent taxes on real property owned by the FDIC and the RTC. Under FIRREA, real property held by the FDIC or RTC is still subject to ad valorem taxation, but (i) no real property of the FDIC or RTC is subject to foreclosure or sale without the consent of the FDIC or RTC and no involuntary lien shall attach to such property, (ii) the FDIC or RTC shall not be liable for any penalties or fines, including those arising from the failure to pay any real property tax when due and (ill) notwithstanding the failure of a person to challenge an appraisal in accordance with State law, such value will be determined as of the period for which such tax is imposed. A-12 Ten Largest Taxpayers Name of Taxpayer Texas Instruments Incorporated South Plains Mall Southwestern Bell Telephone Company Southwestern Public Service Company Plains CcHJp Oil Mill Methodist Hospital Fleming Companies Incorporated Eagle-Picher Industries H. A. Sessions Firat National Bank <1> Nature of Property Electronics Manufacturer Regional Shopping Mall Telephone Utility Electric Utility Agricultural Processing Medical Office Buildings Wholesale Groceries Heavy Equipment Manufacturing Commercial Property and Other Real Estate Bank (1) Now Norwest Bank Texas, National Association. Tax Rate Limitation 1994 % ofTotal Taxable 1994 Taxable Assessed Assessed V!!luation Valuation $ 83,059,510 1.63% 79,345,876 1.56% 76,752,333 1.51% 44,466,763 0.87% 29,749,307 0.58% 24,242,753 0.48% 23,675,511 0.47% 22,980.,142 0.45% 19,150,589 0.38% 1~,5~0,§§1 ~ $419.943.445 8.25% - 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 Assessed Valuation for all City purposes. The City operates under a Home Rule Charter which adopts the constitutional provisions. By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the 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 bas held a public hearing on the proposed increase following notice to the taxpayers and otherwise complied with the 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 determine whether or not to reduce the tax rate adopted for the following year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted} from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) 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 Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize up to an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. In January, 1995, voters in the City approved an additional one-eighth cent sales tax; collection ofthe tax will begin in October, 1995. Reference is made to the Tax Code for defmitive requirements for the levy and collection of ad valoremtaxes and the calculation of the various de(med rates. A-13 > Assessed Valuations, Tax Rates, Direct and Overlapping Funded Debt Payable from Ad Valorem Taxes and Authorized But Unissued Bonds of Overlapping Taxing Jurisdictions 1994-95 Total City's Taxable 1994-95 Funded Estimated Overlapping Assessed Tax Debt As of % Funded Debt Taxing Jurisdiction Valuation Rate 5-31-95 A;enlicable As of 5-31-95 City of Lubbock $5,087,312,020 $ 0.64000 $ 58,085 ,015<1> 100.00% $ 58,085,015 Lubbock Independent School District 4,629,130,050 1.47500 67,054,96~ 98.60% 66,116,199 Lubbock County 6,033,971,324 0.17117 3,040,000 84.44% 2~566,976 Lubbock County Hospital District 6,033,971,324 0.10499 ..().. 84.44% ..().. High Plains Underground Water Conservation District No. 1 6,033,971,324 0.00840. ..().. 84.44% ..().. Frenship Independent School District 497,305,665 1.47000 33,538,739 64.91% 21,769,995 Idalou Independent School District 105,640,124 1.45043 2,620,000 1.29% 33,798 Lubbock-Cooper Independent School District 174,166,033 1.47600 4,509,555 15.20% 685,452 New Deal Independent School District 76,048,312 1.50000 ..().. 0.07% ..().. Roosevelt Independent School District 92,205,681 1.50000 ..().. 5.11% ..().. Total Direct and Overlapping Funded Debt • . • • . . • . . . . • . . . . . . . . . • . • . . . . • • . . . . . • . . . • . . . $149,257,435 Ratio of Direct and Overlapping Funded Debt to 1994 Taxable Assessed Valuation . . . . ~ . . . " .. " . . . ~ ~ . . . .. . . . . . 2.93% Per Capita Overlapping Funded Debt . . . . . . . . . . . • . . . • . . . . . . . . . . . . . . . . . . . • . . . . . . . . . . . . . . . . $781.37 (1) General purpose general obligation debt. (2) Adjusted for $17,279,969 Unlimited Tax School Building and Refunding Bonds sold 5-3-95. (3) The District plans to sell these Bonds in 1995. Authorized But Unissued Debt As of 5-31-95 $ 10,247,000 17,920,275" -0-· ..().. ..().. 15,050,000 ..().. (3) 4,500,000 ..().. ..().. Expenditures of the various taxing bodies within the territory of the City are paid out of ad valorem taxes levied by these taxing bodies on properties within the City. These political taxing bodies are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax bonds was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas and from information furnished by 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. Furthermore, certain of the entities listed may have issued additional bonds since the date stated above, and such entities may have programs requiring the issuance of substantial amounts of additional bonds the amount of which cannot be determined. This table reflects the estimated share of overlapping funded debt of the City. Juterest and Siuking Fund Budget Projecdou General Obligation Debt Service Requirements, F,iscal Year Ending 9-30-95 Fiscal Agent, Tax Collection and Other Uses Total Requirements Sources of Funds Interest and Sinking· Funds (at4leginningcof Fiscal Year) Budgeted Ad Valorem Tax Receipts Budgeted Transfers From: Water Fund m Sewer Fund (ll Solid Waste Fund U> Airport Fund Budgeted Interest Earned Budgeted appropriation from available funds Total Sources of Funds Estimated Balance, 9-30-95 {1) See "Computation of Self-Supporting Debt". Computadou or Self'-Supportiug Debt The Waterworks System (1) $19,551,549 1201385 $19,671,934 $ 268,630 9,162,809 3,449,991 4,309,112. 155,834 468,861. 750,000 7751266. $19,940,503 $ 2681569 Net System Revenue Available, Fiscal Year Ended 9-30-94 .................. I •••••••••••• Less: Revenue Bond Requirements, Fiscal Year Ending 9-30-94 ...............•..... I ••••• I Balance Available for Other Purposes. I ••• I I I ••••••••••••. • •••••••••••••••••• I ••••• System General Obligation Debt Requirements, Fiscal Year Ending 9-30-94 .................. ·: . Balance ...•..••...•..•......•........ · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · Percentage of System General Obligation Debt Self-Supporting ................•......... I •• $12,814,746 -0- $12,814,746 4.823.457 $ 7,991,289 100.00% {1) Through Fiscal Year Ended 9-30-91 it was the City's policy each Fiscal Year to transfer from Water Enterprise Fund surplus to the General Fund an amount at least equivalent to debt service requirements on Waterworks System General Obligation Debt. Beginning with Fiscal Year Ending 9-30-92 the.City budgetedand commenced a multi-year planned shift to direct support of Waterworks System General Obligation Debt by transfer from Water Enterprise Fund surplus to the General Obligation Interest and Sinking Fund; for Fiscal Year Ending 9-30-95 $3,449,991 is a budgeted transfer to the Interest and Sinking Fund for Waterworks System General Obligation debt service. This staged shift is anticipated to continue through Fiscal Year Ending 9-30-96 with total Waterworks System General Obligation debt service for each year thereafter to be provided by direct transfer from Water Enterprise Fund surplus. The 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 Waterworks System General Obligation debt service is shifted each year to the General Fund tax rate. The effect of this reallocation, beginning with FiscaiYear Ending9-30-92, can be seen in the distribution of the Tax Rate under "Tax Rate, Levy and Collection History" and in "Interest and Sinking Fund Budget Projection". The City bas no outstanding revenue bonds payable from a lien on the net revenues of the Waterworks System. A-15 The Sewer System (l) Net System Revenue Available, Fiscal Year Ended 9-30-94 ................. , ........ , ... . Less: Revenue Bond Requirements, Fiscal Year Ending 9-30-95 ................•.•......... $9,440,423 -0- Balance Available forOther Purposes .............................. ·, ............ . System General Obligation Debt Requirements, Fiscal Year Ending 9-30-95 .......•....... , .... . Balance •.......•••••••.•....•.............•..............•........... $9,440,423 6.376,959 $3,063,064 Percentage of System General Obligation Debt Self-Supporting . . . ..............•.•........ ·• 100.00% (1) State Revolving Fund ("SRF"l Loans The City has received three loans totaling $50,600,000 from the Texas Water Development Board ("TWDB") under the SRF loan program to fmance major wastewater treatment and disposal improvements. Three separate series of Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation (the "Sewer System Certificates") were delivered to TWDB to evidence these loans as follows: Sewer A! of 5-31-95* System Project Principal Loan Certificate Loan Closing Completion Outstanding Maturity Project Amount Series Date Date Princii!al (Que 2-15} A s 1,655,000 1991 January, 1992 1993 $ 1,415,000 1996-2012 B 34,520,000 1992 June, 1992 1994 32,795,000 1996-2014 c 14,4~~.000 1993 June, 1993 July, 1995** 14,425,000 1996-2015 $ 50,600,000 $48,635,000 . * Principal of each series of Certificates matures in an approximately equal amount each year over the years of principal maturity shown. Debt service requirements on these Sewer System Certificates is being paid from System net revenues by direct deposit to the General Obligation Interest and Sinking Fund. For Fiscal Year Ending 9-30-95 debt service on the Sewer System Certificates is $4,309,112 which is a budgeted transfer to the Interest and Sinking Fund. ** Anticipated. Other Sewer System General Obligation Debt For Sewer System General Obligation debt service other than for the SRF loans discussed above it has been the City's policy each Fiscal Year to transfer from Sewer Enterprise Fund surplus to the General Fund an amount at least equivalent to debt service requirements on this Sewer System General Obligation Debt; for Fiscal Year Ending 9-30-95 this debt service is $2,067,847. Beginning in Fiscal Year Ending 9-30-96, similarly to that described under "The Waterworks System", above, a staged shift to direct support of this debt sei"Vice will be initiated from Sewer Enterprise Fund surplus to the General Obligation Interest and Sinking Fund; this staged shift is anticipated to continue through Fiscal Year Ending 9-30-97 with total Sewer Systell1 General Obligation debt service for each year thereafter to be provided by direct transfer from Sewer Enterprise Fund surplus. The City has no outstanding revenue bonds payable from a lien on the net revenues of the Sewer System. A-16 The Solid Waste Disposal System (1) Net System Revenue Available, Fiscal Year Ended 9-30-94 ....•.... · •.•..••...•.•...••...•. Less: Revenue Bcind Requirements, Fiscal Year Ended 9-30-94 ..... · .. : •... : •.• ~ .•.•........ Balance Available for Other Purposes •••.•....•.................•••..•............ System General Obligation Debt Requirements, Fiscal Year Ended 9-30-95, ......••...•....•..... Balance •.......•....•....•.•.•.. · .. · . · · · · · · · · · · · · · · · · · · · · • · · · · · · · · · · · · $4,940,976 -0- $4,940,976 755,834 $4,185,142 Percentage of System General Obligation Debt Self-Supporting . . . . . . . . . . . . . . • . . . . . . • . . . . . . . • . . 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. Authorized General Obligation Bonds Purpose Waterworks System Sewer System Street Improvements Library Parb Fire Department Date Authorized 10-17-87 5-21-77 5-1-93 5-1-93 5-1-93 5-1-93 Amount· Authorized $ 2,810,000 3,303,000 10,170,000 2,780,000 5,385,000 470.000 Amount Heretofore Issued <ll $ 200,000 2,175,000 5,156,000 2,780,000 3,890,000 470.000 Unissued Balance $ 2,610,000 1,128,000 5,014,000 -0- 1,495,000 -0- $24,918,000 $14,671.000 $10.247,000 (1) Including $4,690,000 General Obligation Bonds, Series 1995, delivered to the purchaser on 6-15-95. Anticipated Issuance of Authorized General Obligation Bonds and Other Obligations Street Improvements Parks 1996 $2,242,000 99o:ooo $3,232,000 1997 $1,800,000 320,000 . $2.120,000 1998 $ 972,000 185,000 . $1.157,000 Total $5,014,000 '1.495,000 $6,509,000 Note: The City has no present plans for the sale and issuance of authorized but unissued $2,610,000 Waterworks System Bonds and $1,128,000 Sewer System Bonds or for the authorization, sale and issuance of other general obligation debt. Funded Debt Limitation There is no direct funded debt limitation in the City Charter or under State law. The City operates under a Home Rule Charter that limits the maximum tax rate, for aU City purposes, to $2.50 per $100 Assessed Valuation. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.~0 maximum tax rate for general obligation debt service. A-17 Other Obligations (1) The City has entered into lease agreements for the purpase of acquiring certain properties and equipment. As of 5-31-9S capital leases were as follows: Balance Payable from: 1925 1926 1997 loten:st Qutstagding Enterprise Fund Solid Waste-Scraper $ 22,297 $ 5,514 $ .()... $ (525) $ 27,346 Internal ~ervice Fund Computer Equipment $124,398 $373,194 $715,288 $ (94,833) $1,118,047 Pension Funds Texas Municipal Retirement System ... AU permanent, 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 me!llber cities. The City of Lubbock joined the System in 1950 to supplement Social Security. All City employees except ftrefighters are covered by Social Security. Options offered under the System, and adopted by the City, include current, prior and antecedent service credits, ten year vesting, updated service credit, occupational disability benefits and survivor benefits for the spouse of a vested employee. An employee who retires receives an annuity based on the amount of the employees contributions over- matched two for one by the City. Employee contn'bution rate is 6% of gross salary. The City's contribution rate is calculated each year using actuarial techniques applied to experience. The 1994 contribution rate was 10.42%; the 1995 contribution rate is 11.48%. 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, 1993, assets held by the System, not including those of the Supplemental Dissbility Fund which is "pooled", for the City of Lubbock were $95,946,540. Unfunded accrued liabilities on December 31, 1993, were $25,547,239, which is being amortized over a 25 year period beginning January, 1995. Totai contributions by the City to the System for Calendar Year 1993 were $4,579,094. Firemen's Relief and Retirement Fund .•. City of Lubbock firefighters are members of the locally administered Lubbock Firemen's Relief and. Retirement Fund, operating underan act passed in 1937 by the State Legislature and adopted by City fuefighters, 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 fmancial officer, or his representative. Execution of the act i~ monitored by the Firemen's Pension Commissioner, who is appointed by the Governor. Benefits of retired ftremen are determined on a "formula" or a "final sslary" plan. Actuarial reviews are performed every two years, and the fund is audited annually.. Firefighters .contribute 11% of full sslary 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 fighfighter'.s contribution rate that the City's rate paid into the Texas Municipal Retirement System and FICA bean to the rate other employees pay into the Texas Municipal Retirement System and FICA. The City's contribution rate for 1995 is 15.42%. As of December 31, 1993, unfunded liabilities were $15,006,685 which is being amortized over a 28 year period beginning January 1, 1993. Contributions by the City to the Fund for Calendar Year 1993 were $1,300,725. * Sources: Texas Municipal Retirement System, Comprehensive Annual Financial Report for Year Ended December 31, 1993. City of Lubbock, Texas. A-18 General Fund Revenues and Expenditures fiscal :Xears Ended Setltem!!g: 30, Revenues Budget 1225 1994 1993 1992 1991 1990 Ad Valorem Taxes $21,315,161 $20,211,459 $ 18,780,657 $17,689,820 $16,213,919 $ 14,911,385 Sales Taxes 19,000,000 19,467,903 17,731,784 16,386,350 15,907,117 15,530,468 Franchise Taxes 5,040,827 5,247,351 4,498,921 4,196,663 3,488,691 3,377,870 Miscellaneous Taxes 1,035,000 631,158 561,774 616,722 667,478 712,203 Licenses and Pennits . %0,728 1~038,m 882,878 753,667 768,924 719,979 Intergovernmental -895,634 .1,310,604 1,280,182 1,286,662 1,227,449 1,511,791 Charges for Services 2,498,516 2,326,521 2,160,504 2,287,530 2,081,955 2,243,428 Fines 2,423,000 2,141,811 2,421,749 2,152,145 2,378,986 2,489,471 Miscellaneous 2,598,130 2,738,708 2,412,629 2,905,332 4,042,185 3,222,731 Operating Transfers (in) 13,120,198 13,810,921 14,044,552 13,796,281 13,890,~16 1~.175,35~ :s Total Revenues and Transfers (in) $68,887,194 $68,925,208 $64,775,630 $62,071,172 $60,666,920 $57,894,678 2! ~ Expenditures - > General Government (1) $ 2,731,960 $ 2,664,896 $ 2,382,947 $2,412,645 $ 2,449,344 ~ -Financial Services (1) . 2,071,418 2,065,725 2,023,360 1,910,799 1,815,589 a -Management Services (1) 1,989,477 2,037,481 2,368,479 2,579,610 2,500,230 "' Development Services (1) 6,662,148 6,397,086 6,593,869 6,274,866 5,831,381 '=' Public Safety and Services (1) 47,253,201 45,611,706 44,624,486 42,247,744 39,968,470 ~ Non-Departmental (1) 661,181 648,242 11,203 29,532 265,108 Operating Transfers (out) (1} 5,194,276 3,766,698 3,113,~01 4,642,478 4,304,580 ~ Total Expenditures and Transfers (out) $68,837,817 $66,563,661 $ 63,191.834 $61,117.845 $60,097,674 $57,134,702 Excess of Revenues and Transfers (in) Over . Expenditures (out) $ 49,377 $ 2,361,547 $ 1,583,796 $ 953,327 $ 569,246 $ 759,976 Residual Equity Trsnsfer .().. .().. .().. .().. (64,212) (22,969) Fund Balance at Beginning of Year 14,746,780 12,385.233 10.801,437 9,848.110 9.343,076 8,606,069 Fund Balance at End of Year $ 14,796,157 $14,746,780 $ 12,385,233 $ 10,801,437 $ 9,848,110 $ 9,343,076 Less: Reserves and Designations ( 1,1 OS ,248)(2) (1,0~6,628) {1,254,118) £1,274,992) (1,769,501) {1, 706,614) Undesignated Fund Balance $ 13.690,909 $ 13.690,152 $ 11.131.115 $ 9.526,445 $ 8,078,603 $ 7,636,402 (1) Expenditures have been reclassified for Fiscal Year Ending 9-30-95 and are not comparable to prior years classifications. Reference is made to the City's 1994-95 Budget for these classifications. (2) Estimated. Municipal Sales Tax History The City has adopted the Municipal Sales and Use Tax 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, as noted under "Tax Rate Limitation", in January, 1995, voters approved the levy of a one-eighth cent sales and use tax as authorized by V ATCS, Tax Code, Chapter 323, as amended; collection will commence in October, 1995; proceeds of the one-eighth cent sales tax are for the use and benefit of the City to replace property tax revenues lost as a result of the adoption of the tax and 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 Teitas, who remits the proceeds of the tax, after dCduction 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 %of Equivalent of Ended Total Ad Valorem Ad Valorem Per 9-30 ~ollected Tax Le~ Tax Rate CaRita* 1985 $13,310,105 51.95% $0.341 $70.94 1986 12,953,236. 53.8090 0,323 68.80 1987 12,563,905 41.50% 0.285 66.58 1988 13,960,077 51.14% 0.312 73.47 1989 15,059,012 51.52% 0.330 78.68 1990 15,530,468 52.23% 0.334 83.40 1991 15,907,117 52.61% 0.337 85.00 1992. 16,386,350 54.06%. 0.346 87.40 1993 17 '7;; 1 '784 59.35%. 0.380 94.33 1994 19,467,903 62.13% 0.396 102.44 *Based on estimated population for all years except 1990 which is U.S. Census. 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 current report has been· submitted to GFOA to determine its eligibility for another Certificate. l - . General Fund Balance ... The City's objective is to achieve and maintain a General Fund balance equivalent to two months operating cost 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: 1) Prior to August 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to October 1, the budget is legally enacted through passage of an ordinance. 4) The City Manager is authorized to transfer budgeted amounts between departments and funds. Expenditures may not legally exceed·budgeted appropriations at the fund level. 5) Formal budgetary integration is employed as a management control device during the year for the Convention and Tourism, Criminal Investigation, and Capital Projects Funds. Budgets are adopted on an annual basis. Formal budgetary integration is not employed for Debt Service Funds because effective budgetary control is alternatively achieved through general obligation bond indenture and other contract provisions. A-20 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 m;eived the GFOA'11 award for Distinguished Budget Presentation for the following budget years: October 1, 1983-88 and October 1, 1990-93. The City has submitted the current budget to the GFOA to determine its eligibility for another certificate. 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 ftre 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 9-30-94 the reserves had the following balances: Reserve for self-insurance -health Reserve for self-insurance -other than health A-21 $2,075,335 $3,989,332 miS PAGE LEFT INTENTIONALLY BLANK APPENDIX B EXCERPTS FROM mE CITY OF LUBBOCK, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended September 30, 1994 The infonnation contained herein has been reproduced from the City of Lubbock, Texas Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 1994. The infonnation presented represents only a part of the Annual Report and does not purport to be a complete statement of the City's financial condition. Reference is made to the complete Comprehensive Annual Financial Report for further infonnation. TABLE OF CONTENTS Auditor's Opinion .................................................................................................................... 3 General Purpose F"mandal Statements: Combined Balance Sheet • Primary Government Fund Types. Ac:c:ount 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 Discn:tely Presented Component Units ..................................................................................................... 18 Combined Statement of Revenues. Expenditures and Changes in Fund Balances-Budget (GAAP Basis) and Actual· General Fuod ........................................... 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 the CoiObined Financial Statements ............................................................................ 26 Enterprise Funds: Combining Balance Sheet. ....................... , ............................................. , ................................. 66 Combining Statement of Revenue, Expenses and Changes in Fund Equity/R.etained Earnings ............................................................................................... 68 Combining Statement of Cash Flows ....................................................................................... 69 Robinson Burdette Martin &C9wan,L.L.P .. certified public accountants INDEPENDENT AUDITOR'S REPORT The Honorable David R. Langston Mayor of Lubbock 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 September 30, 1994, and for the year then ended, as listed in the Table of Contents. These general purpose financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these 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 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 estimate 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, 1994, 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. As discussed in Note III N. to the general purpose financial statements, in 1994 the City changed its method of accounting for closure and postclosure care costs of municipal landfills to conform with Governmental Accounting Standards Board Statement No. 18. As discussed in Note VI to the general purpose financial statements, in 1994 the City restated its beginning fund balance/retained earnings to conform with Governmental Accounting Standards Board Statement No. 14. 3 Out audit was made for the purpose of forming an opinion on the general purpose finanCial statements taken as a whole. The combining financial statements 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. January 20, 1995 Lubbock, Texas ~.I/4SP/I kd::He · /11;:Jrj1';f 9 cpwei'~ £. J.. I. GENERAL PURPOSE FINANCIAL STATEMENTS 5 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET • PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 1994 With Comparative Totals for September 30, 1993 Governmental Fund Types Special Debt Capital General Revenue Service Projects ~ Pooled cash and cash equivalents $ 9,100,485 $ 4,296,882 $ 140,881 $ 35,809,025 Receivables {net, where applicable, of allowance for uncollectibles): Taxes, including interest. . · · penalities, and liens 3,939,437 80,783 338,997 Accounts, notes, and mortgages 771,491 13,505 Interest 364,487 12,988 53,870 Due from other funds 3,880,500 25,000 5,000 Due from other governments Due from other agencies 42,925 1,284 Prepaid items 36,757 Advances to other funds 1,019,872 Inventory, at average cost Restricted assets: Pooled cash and cash equivalents Accounts receivable Interest receivable Deferred charges Fixed assets (net of accumulated depreciation) Other assets {net of accumulated amortization) Amount available in Debt Service Funds Amount to be provided for retirement of general long-term debt and payment of notes and leases payable Total assets $ 19,155,954 $ 4,404,158 $ 558,748 $ 35,815,309 6 Totals Proprietary Fiduciary Primary Fund Types Fund T~pe Account Grou~s Government General (Memorandum Internal Trust and General Long-term Only) Enterprise Service Agency Fixed Assets Debt 1994 $ 14,913,468 $ 1,516 $ 6,507,901 $ -$. -$ 70,770,158 4,359,217 8,488,350 44,200 1,045,514 10,363,060 501,704 933,049 3,"910,500 251,977 1,594,707 1,846,684 44,209 5,574 36,453 78,784 2,976,012 3,995,884 153,516 2,036,082 2,189,598 81,022,664 10,516,702 157,510 91,696,876 83,600 75,009 158,609 124,261 56,851 181,112 1,770,032 1,770,032 378,058,999 5,218,364 806,720 201,556,282 585,640,365 22,840,539 22;840,539 ., 413,768 413;768 56,482,588 56,482,588 $ 511,190,696 $ 17,985,177 $ 10,112,352 $ 201,556,282 $ 56,896,356 $ 857,675,032 (continued) See accompanying notes to financial statements 7 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET ·PRIMARY GOVERNMENT FUND TYPES, ACCOUNT GROUPS AND DISCRETELY PRESENTED COMPONENT UNITS September 30, 1994 With Comparative Totals for September 30,1993 Component Units Governmental Proprietary T~pe T~pes Visitors and Convention Civic Bureau Citibus Lubbock ~ Pooled cash and cash equivalents $ 420,672 $ 157,259 $ 291,978 Receivables (net, where applicable, of allowance for uncollectibles}: Taxes, including interest, . penalities, and liens 338 367,908 19,275 Accounts, notes, and mortgages Interest 137 Due from other funds Due from other governments Due from other agencies Prepaid items 32,415 26,826 Advances to other funds Inventory, at average cost 182,408 55,797 Restricted assets: Pooled cash and cash equivalents 37 Accounts receivable Interest receivable Deferred charges Fixed assets (net of accumulated depreciation) 4,830,664 51,071 Other assets (net of accumulated amortization} Amount available in Debt Service Funds Amount to be provided for retirement of general long·term debt and payment of notes and leases payable Total assets $ 4531425 $ 515381239 $ 4451121 8 $ Totals Component Units 1994 869,909 387,521 137 59,241 238,205 37 4,881,735 $ . 6,436,785 Totals Reporting Entity (Memorandum Only) 1994 1993 $ 71,640,067 $ 53,837,578 4,746,738 3,843,475 10,363,060 8,824,683 933,186 960,272 3,910,500 4,289,750 1,846,684 5,102,844 44,209 124,762 138,025 75,428 3,995,884 3,995,883 2,427,803 3,297,154 91,696,913 108,756,498 158,609 134,691 181,112 190,109 1,770,032 1,718,821 590,522,100 544,508,611 22,840,539 23,227,667 413,768 4,228,648 56,482,588 45,245,368 $ 864,111,817 $ 812,362,242 (continued) 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, 1994 With Comparative Totals for September 30, 1993 Governmental Fund Types .Special Debt Capital General Revenue Service Projects Liabilities Accounts and vouchers payable $ 2,539,356 $ 68,799 $ - $ 223,518 Contracts payable 1,604,364 Due to other funds 30,000 Due to other governments 26,483 Accrued general obligation interest 15,374 Other accrued liabilities .1.653,460 8,387 Current portion of general obligation bonds and contruction obligation payable Payable from restricted assets: Accounts payable Accrued interest Accrued insurance claims Revenue bonds payable {current portion) Customer deposits Deferred compensation Deferred revenues 189,875 129,606 Advances from other funds 650,000 Advances from other agencies Accrued insurance claims Notes and leases payable Construction obligation payable General obligation bonds {net of current portion) Revenue bonds payable Accrued vacation and sick leave Anticipated landill closure and postclosure Total liabilities $ . 4,409,174 $ 77,186 $ 144,980 $ 2,507,882 10 otals Proprietary Fiduciary Primary Fund Types Fund T~pe Account Groups General Government (Memorandum Internal Trust and General Long-term Only) Enterprise Service Agency Fixed Assets Debt 1994 $ 2,883,965 $ 913,984 $ 608,178 $ - $ - $ 7,237,800 1,017,669 2,622,033 1,850,000 2,030,500 3,910,500 26,483 1,211,693 1,227,067 596,610 116,363 30,798 2,405,618 11.251,531 11,251,531 1,511,114 286,062 1,797,176 1,051,466 1,051,466 2,649,198 2,649,198 4,461,507 4,461,507 371,993 371,993 5,941,113 5,941,113 319,481 397,600 2,948,284 3,995,884 4,779,218 4,779,218 69,331 1,348,344 2,142 1,419,817 23,099,024 23,099,024 92,878,656 49,228,275 142,106,931 81,150,020 81,150,020 2,245,872 343,471 7,665,939 10,255,282 6,465,141 6,465,141 $ 232,513,192 $ 13,384,924 $ 8,610,589 $ -$ 56,896,356 $. 318,544,283 (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, 1994 With Comparative Totals for September 30, 1993 Component Units Governmental --·· ---P~opnetary Type Visitors and ----·--Types Convention Civic Bureau Citibus Lubbock Liabilities Accounts and vouchers payable $ 32,815 $ 547,775 $ 228,689 .Contracts payable Due to other funds Due to other governments Accrued general obligation interest Other accrued liabilities 134 89,800 Current portion of general obligation bonds and contruction obligation payable 15,575 Payable from restricted assets: Accounts payable Accrued interest Accrued insurance claims Revenue bonds payable {current portion) Customer deposits Deferred compensation Deferred revenues 14,417 Advances from other funds Advances from other agencies 70,000 Accrued insurance claims Notes and leases payable Construction obligation payable General obligation bonds (net of current portion) Revenue bonds payable Accrued vacation and sick leave Anticipated landill closure and postclosure Total liabilities $ 32,949 $ 707,575 $ 258,681 12 Totals Totals Component Reporting Entity Units (Memorandum Only) --·-1994---f994 1993 $ 809,279 $ 8,047,079 $ 6,554,957 2,622,033 2,267,233 3,910,500 4,294,750 26,483 26,483 1,227,067 1,306,245 89,934 2,495,552 2,633,851 15,575 11,267,106 5,899,099 1,797,176 512,611 1,051,466 1,100,669 2,649,198 2,410,865 4,461,507 4,421,507 371,993 391,491 5,941,113 6,426,305 14,417 333,898 347,925 3,995,884 3,995,884 70,000 70,000 70,000 4,779,218 3,997,401 1,419,817 5,540,224 23,099,024 23,823,531 142,106,931 132,151,103 81,150,020 85,602,104 10,255,282 10,131.421 6,465,141 $ 999,205 $ 319,543,488 $ 303,905,659 (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, 1994 With Comparative Totals for September 30, 1993 E.v_nd_f_g!illy and Other Credits Contributed capital Investment in general fixed assets Retained earnings: Reserved for capital projects Reserved for permanent capital maintenance 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 - other than health Reserved for leasing Unreserved Fund balances: Reserved for prepaid items Reserved for advances to other funds Reserved for debt service Reserved for capital projects Reserved for industrial development Reserved for Federal housing programs Unreserved: Designated for subsequent year's expenditures Designated for operating leases Designated for capital projects Undesignated Total retained earnings/ fund balances Total fund equity and other credits Total liabilities and fund equity and other credits $ General 36,757 1,019,871 13,690.152 ~~~-----· 14 Governmental Fund Type~ ·------·---- Special Revenue -$ 100,000 1,044,999 811,664 500,000 1,870,309 4,326,972 --~·~--·-·-- Debt Service -$ 413,768 Capital Projects 33,817,268 (509,841) 33,307,427 $ Proprietary Fund Types Enterprise 118,346,746 $ 42,264,625 8,359,662 4,006,440 8,949,595 775,730 9,220,367 86,754,339 160,330,758 ____E__8,677' 504 Internal Service 3,677,032 $ 1,406,760 124,116 2,075,335 3,989,332 117,759 (6,790,081) 923,221 4,600,253 Totals Fiduciary Pnmary Fund Type Account Groups Government Trust and General Agency Fixed Assets - $ - $ 201 ,556,282 2,008,964 (507,201) ----- 1,501,763 1,501,763 201,556,282 General Long-term Debt - $ (Memorandum Only) --1994 ____ 122,023,778 201,556,282 43,671,385 8,483,778 4,006,440 8,949,595 775,730 9,220,367 2,075,335 3,989,332 117,759 79,964,258 36,757 1,019,871 413,768 33,917,268 1,044,999 2,008,964 811,664 500,000 _21~.550,689 -------~~~-._!~J~9 $ 511,190,696 $ 17,98~7 $_ 10,112,352 $ 201,556,282_$~ 56,896,356 $_ ~~L&J§..,Q~~ (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, 1994 With Comparative Totals for September 30, 1993 Fund Eguity a.llilQther Credits Contributed capital Investment in general fixed assets Retained earnings: Reserved for capital projects Reserved for permanent capital maintenance 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 - otherthan health Reserved for leasing Unreserved Fund balances: Reserved for prepaid items Reserved for advances to other funds Reserved for debt service Reserved for capital projects Reserved for industrial development Reserved for Federal housing programs Unreserved: Designated for subsequent year's expenditures Designated for operating teases Designated for capital projects Undesignated Total retained earnings/ fund balances Total fund equity and other credits Total liabilities and fund equity and other cred1ts $ 16 Component Umts Gov.,.,.e-==rn=-=m""""e:-:n"'ta::-11__...'-"---------pro-prietary --· ---- Type __ T.Ly,p,_e_s _______ _ V1sitors and Convention Bureau -$ 420,476 ---~~0.476 420,476 ----···--~-~-- Citibus 4,830,664 $ ------ Civic Lubbock 37 186,403 186,440 __ .:~~~_9.:§64 ___ _!_86, 4_~Q_ Totals Totals Component Reporting Entity Units (Memorandum Only) 1994 -·nr~ n~gg $ 4,830,664 $ 126,854,442 $ 122,746,912 201,556,282 195,205,517 37 43,671,422 63,711,610 8,483,778 10,179,938 4,006,440 4,653,618 8,949,595 7,963,593 775,730 975,108 9,220,367 5,888,592 2,075,335 2,010,004 3,989,332 3,331,852 117,759 912,759 186,403 80,150,661 49,115,829 36,757 45,290 1,019,871 1,019,871 413,768 4,228,648 33,917,268 19,022,104 1,044,999 1,044,999 2,008,964 420,476 1,232,140 1,349,396 500,000 500,000 198,004 __ 14,543,419 14,352,939 606,916 216,157,605 190,504,154 5,437,580 ~~4,56_8,329 508,456,583 $ 6,436,785 $ ----~,_§..1,.:!_ 1_1,817 $ 812,362,242_ -. - 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, 1994 With Comparative Totals for Year Ended September 30, 1993 Governmental Fund T~2es Special Debt Capital General Revenue Service Projects Revenues: Taxes and special assessments $ 45,557,871 $ 4,385,839 $ 9,736,547 $ 355,003 Licenses and permits 1,038,772 Intergovernmental 1,310,604 Charges for services 2,326,521 43,292 Fines and forfeits 2,141,811 Contributions Miscellaneous 2,738,708 '383,585 1,672,874 Total revenues 55,114,287 4,769,424 11,409,421 398,295 Expenditures: Current: General government 2,731,960 925,.003 Financial services 2,071,418 Management services 1,989,477 Development services 6,662,148 Public safety and services 47,253,201 Non-departmental 661,181 37,000 Capital outlay 60,982 8,439,504 Debt service: Principal retirement 10,289,840 Interest and fiscal charges 3,664,807 Collections 67,700 Total expenditures 61,369,385 1,022,985 14,022,347 8,439,504 Excess (deficiency) of revenues over (under) expenditures (6,255,098) 3,746,439 (2,612,926) (8 '041 ,209) Other financing sources (uses): Bond proceeds 17,209,000 Operating transfers in 13,810,921 11,010,245 5,603,710 Operating transfers out (5,194,276) (4,494,400) (12,212, 199) (386,178) Total other financing sources (uses) 8,616,645 (4,494,400) (1 ,201 ,954) 22,426,532 Excess (deficiency) of revenues and other financing sources over (under) expenditures and other uses 2,361,547 (747,961) (3,814,880) 14,385,323 Fund balances at beginning of year as previously reported 12,385,233 5,295,904 4,228,648 18,922,104 Change in accounting principle (See Note VI.) (220,971) Fund balances at beginning of year as restated 12,385,233 5,074,933 4,228,648 18,922,104 Residual equity transfer in Residual equity transfer out Fund balances at end of year $ 14 746 780 $ 4,32M72 $ 41~,768 $ 33,307,427 18 $ $ Fiduciary Fund T~e Expendable Trust - 7,124,575 589,761 7,714,336 8,785,254 487,544 9,272,798 (1 ,558,462) 267,201 (145,302) 121,899 (1 ,436,563) 929,362 2,008,964 2,938,326 1 501 763 $ $ Totals Primary Government (Memorandum On I~} 1994 60,035,260 1,038,772 8,435,179 2,369,813 2,141,811 5,384,928 79,405,763 12,442,217 2,071,418 1,989,477 6,662,148 47,253,201 698,181 8,988,030 10,289,840 3,664,807 67,700 94,127,019 {14,7211256) 17,209,000 30,692,077 (22,432,355) 25,468,722 10,747,466 41,761,251 1,787,993 43,549,244 54.296.710 Component Unit Governmental T~ee Visitors and Convention Bureau $ 790,367 $ 9,312 799,679 599,565 609 600,174 199,505 199,505 220,971 220,971 $ 420,476 $ Totals Reporting Entity (Memorandum Only) 1994 60,825,627 1,038,772 8,435,179 2,369,813 2,141,811 5,394,240 80,205,442 13,041,782 2,071,418 1,989,477 6,662,148 47,253,201 698,790 8,988,030 10,289,840 3,664,807 67,700 94,727,193 !14,521l51) 17,209,000 30,692,077 (22,432,355) 25,468,722 10,946,971 41,761,251 2,008,964 43,n0,215 54,717.186 $ $ 1993 56,142,297 882,878 8,040,811 2,372,145 2,421,749 33,500 4,102,484 73,995,864 10,353,434 2,065,725 2,037,481 6,397,086 45,611,706 648,242 8,687,684 3,979,594 3,210,974 128,940 83,120,866 !9. 125,002) 26,107,407 (15,406, 143) 10,701,264 1,576,262 40,184,989 40,184,989 14,944 {14,944) 41.761.251 See accompanying notes to financial statements 19 20 CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUNO BALANCES -BUDGET (GAAP BASIS) AND ACTUAL GENERAL FUND Year Ended September 30, 1994 General Fund Variance- favorable Budget Actual (unfavorable) Revenues: Taxes $ 44,340,013 $ 45,557,871 $ 1,217,858 Licenses and permits 974,985 1,038,772 63,787 Intergovernmental 1,284,139 1,310,604 26,465 Charges for services 2,221,476 2,326,521 105,045 Fines and forfeits 2,321,000 2,141,811 (179,189) Miscellaneous 2,681,331 2,738,708 57,377 Total revenues 53,822,944 55,114,287 1,291,343 Expenditures: Current: General government 2,863,740 2,731,960 131,780 Financial services 2,110,113 2,071,418 38,695 Management services 2,071,146 1,989,477 81,669 Development services 7,058,091 6,662,148 395,943 Public safety and services 47,604,982 47,253,201 351,781 Non-departmental 669,920 661,181 8,739 Total expenditures 62,377,992 61,369,385 1,008,607 Deficiency of revenues under expenditures (8,555,048) (6,255,098) 2.299,950 Other financing sources (uses): Operating transfers in 13,710,654 13,810,921 100,267 Operating transfers out (5,603,735) (5,194,276) 409,459 Total other financing sources 8,106,919 8,616,645 509,726 Excess (deficiency) of revenues and other financing sources over (under) expenditures (448,129) 2,361,547 2,809,676 Fund balance at beginning of year 12,385,233 12,385,233 Fund balance at end of year $ 11,937,104 $ 14,746,780 $ 2,809,676 See accompanying notes to financial statements 21 CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN EQUITY ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESENTED COMPONENT UNITS Year Ended September 30, 1994 With Comparative Totals for Year Ended September 30, 1993 Totals Primary Government (Memorandum Pro~rieta!:l Fund Tyees Only) Internal Enterprise Service 1994 Operating revenues: Charges for services $ 104,772,984 $ 23,515,699 $ 128,288,683 New taps and reconnects 272,969 272,969 Effluent water sales 770,730 770,730 Commodity sales 502,321 502.321 Landing fees 579,274 579,274 Parking 1,393,640 1,393,640 Greenfees and memberships 282,959 282,959 Pro shop sales 56,115 56,115 Rentals 1,506,400 1,506,400 Concessions 786,786 786,786 Administrative charges 69,906 69.906 Total operating revenues 110,924,178 23,585.605 134,509.783 Operating expenses: Personal services 16,789,142 4,162,336 20,951,478 Insurance 11,516,769 11,516,769 Supplies 2,592,363 167,682 2,760,045 Materials 6,821,778 6,821,778 Maintenance 4,521,719 587,505 5,109,224 Uncollectible accounts 810,157 810,157 Purchase of fuel and power 29,939,848 29,939,848 Collection expense 1,532,121 1 ,532,121 Other services and charges 11,618,912 559,178 12,178,090 Depreciation 11,057,576 530,661 11,588,237 Total operating expenses 78,861,838 24,345,909 103,207,747 Operating income (loss) 32.062,340 (760,304} 31,302,036 Nonoperating revenues (expenses): Interest 4,624,732 343,058 4,967,790 Disposition of properties 122,875 71,427 194,302 Miscellaneous 1,729,814 27,423 1,757,237 Interest and fiscal charges (10,937,107) (73,666) (11,010,773) Cash grants and reimbursements Total nonoperating revenues (expenses) (4,459,686) 368,242 !4.091 ,444) Income (loss) before operating transfers 27,602,654 (392,062) 27,210,592 Transfers: Operating transfers in 12,794,840 1,363,418 14,158,258 Operating transfers out (22,237,980) (180,000) (22 ,417 ,980) Total transfers in (out) {9.443, 140) 1,183,418 (8.259,722) Net income before extraordinary item 18,159,514 791,356 18,950,870 Extraordinary item-loss on extinguishment of debt 715,288 715,288 Net income (loss) 17,444,226 791,356 18,235,582 Depreciation on fixed assets acquired by contributions 545,386 545,386 Retained earnings at beginning of year as previously reported 148,611,038 131,865 148,742.903 Change in accounting principle (See Note VI.) (6,269,892) (6,269,892) Retained earnings at beginning of year as restated 142,341,146 131,865 142,473,011 Residual equity transfer in Retained earnings at end of year 160,330,758 923,221 161,253,979 Contributions at beginning of year as previously reported 119,069,880 3,677,032 122,746,912 Change in accounting principle (See Note VI.) (3,365,551) (3,365,551) Contributions at beginning of year as restated 115,704·,329 3,677,032 119,381 ,361 Capital contributions 3,187,803 3,187,803 Residual equity transfer out Depreciation on capital contributions {545,386) (545,386) Contributions at end of year 118,346,746 3,677,032 122,023,778 Total equity at end of year $ 278,677,504 s 4,600,253 $ 283,277,757 22 Comj?onent Units Totals Totals Component Reporting Entity Proerieta~ T~es UnitS ~Memorandum On~} Civic Lubbock, Citibus Inc. Fund 1994 1994 1993 $ 1,130,940 $ 1,065,144 $ 2,196,084 $ 130,484,767 $ 121,572,582 272,969 259,904 770,730 466,954 ·502,321 515,750 579,274 692,051 1,393,640 1,285,899 282,959 412,864 56,115 69,588 1.506,400 2,675,959 786,786 105,637 69,906 68,705 1,130,940 1,065,144 2,196,084 136,705,867 128,125,893 891,650 1,583,610 2,475,260 23,426,738 23.001,788 271,802 218,150 489,952 12,006,721 11,991,817 2,760,045 2,694,929 6,821,778 6,433,727 699,035 699,035 5,808,259 5,853,137 810,157 639,851 29,939,848 28,403,182 1,532,121 1,610,250 792,159 792,159 12,970,249 12,689,198 41,771 207,720 249,491 11,837,728 10,662,940 1,205,223 3,500,674 4l05,897 107,913,644 103,980,819 (74,283) (2,435.530) (2,509,813) 28,792,223 24,145,074 4,623 4,623 4,972,413 5,779,562 194,302 (349,827) 1,757,237 2,719,082 (2,958) (3,136) (6,094) (11,016,867) (10,338,896) 2,230,946 2,230,946 ·2,230,946 1,606,687 1,665 2,227,810 2,229,475 {1.861 ,969) (583,392) (72,618) (207,720) (280,338) 26.930,254 23,561,682 14,158.258 11,088,284 {22,417,980} {211185,537) {8,259,722) (10,097.253) (72,618) (207,720) (280,338} 18,670,532 13,464,429 7151288 (72,618) (207,720) (280,338) 17,955,244 13,464,429 207,720 207,720 753,106 796,834 148,742,903 134,453,750 259.058 259,058 {6,010,834) 259,058 259,058 142,732,069 134,453,750 27,890 186,440 186,440 161,440,419 148.742.903 122,746,912 116,482,255 3,365,551 31365,551 3,365,551 3,365,551 122,746,912 116,482,255 1,672,833 1,672,833 4,860,636 7,254,744 (193,253) {207,720) {207,720) (753,106) {!96.834) 4,830,664 4,830,664 126,854.442 122,746,912 $ 186.440 $ 4.830.664 $ 5.017.104 $ 288.294.861 $ 271,489.815 See accompanying notes to financial statements 23 CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF CASH FLOWS· ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESENTED COMPONENT UNITS Years Ended September 30, 1994 With Comparative Totals for Year Ended September 30, 1993 Totals Primary Government Pro12rieta~ Fund T~es (Memorandum Internal On I~) Ente!Erise Service 1994 Cash flows from operating activities: Operating income (loss) $ 32,062,340 $ (760,304) $ 31,302,036 Adjustments to reconcile net income to net cash from operating activities: Depreciation 11,057,576 530,661 11,588,237 Increase (decrease) in long-term payables not requiring cash flow (239,476) 669,520 430,044 Other income 1,701,314 697 1,702,011 Change in current assets and liabilities: Accounts receivable (696,711) (49,161) (745,872) Inventory 145,676 701,755 847,431 Due from other governments 356,845 356,845 Prepaid expenses 770 (36,453) (35.683) Accounts payable 900,632 544,444 1,445,076 Due to other funds (575,000) (320.000) (895,000) Other accrued expenses (218,480) (22,015) (240,495) Sales tax payable (75,947) (75,947) Customer deposits (19,498) (19,498) Deferred revenue Net cash provided by operating activities 44,400,041 1,259,144 Cash flows from capital and related financing activities: Payments for gas reserves (51,211) (51,211) Purchases of property, plant and equipment (46,984,508) (1,240,947) (48.225,455) Sale of property, plant and equipment 202,154 75,303 277,457 Payments on leases (59,108) (59,108) Principal paid on revenue bonds (4,438,212) (4,438,212) Interest paid on revenue bonds (6,667,358) (6,667,358) Principal paid on general obligation bonds (5,140,319) (5,140,319) Interest paid on general obligation bonds (4,398,131) (4,398,131) Issuance of general and certificate of obiligation bonds 9,651,000 9,651,000 Principal paid on long-term debt 148,941 148,941 Interest paid on long-term debt (73,666) (73,666} Receipts from building rent 26,726 26,726 Contributed capital 1,852,671 1,852,671 Net cash used for capital and related financing activities (55,884,081) (1,212,584) ~57,096,665) Cash flows from noncapital and related financing activities: Operating transfers in from other funds 10,998,341 1,363,418 12,361,759 Operating transfers out to other funds (22,237,980) (180,000) (22,417,980) Payments on advance from general fund 1,796,499 1,796,499 Cash grants and reimbursements Net cash provided (used) by noncapital and related financing activities ~9.443,140) 1,183,418 (8,259,722) Cash flows from investing activities: Interest earnings on cash and investments 343,044 4,948,611 Net cash provided by investing activities 343,044 4,948,611 Net increase (decrease) in pooled cash and cash equivalents (16,321,613) 1.573,022 (14,748,591) Pooled cash and cash equivalents at beginning of year as previously reported 112,627,382 8,945,196 121,572,578 Change in accounting principle (See Note VI.) (369,637) {3691637) Pooled cash and cash equivalents at beginning of year as restated 112,257,745 8,945,196 121.202.941 Pooled cash and cash equivalents at end of year $ 95,936.132 $ 10.518.218 $ 106.454.350 Supplemental cash flow information: Cash paid by primary government during fiscal 1994 for interest was $11,139,155. 24 $ $ Comeonent Units Totals Prof!rieta~ Types Component Civic Lubbock, Citibus Units Inc. (74,283} $ 41,771 11,257 7,538 (1,963} 60,668 (11,664) (1,208) 32,116 (1,718} (29,746} (2,958) {34,422) 4,623 4,623 2,317 289,698 289,698 292,015 $ Fund 1994 (2,435,530) $ (2,509,813) $ 207,720 249,491 (13,934) (2,677) 14,380 21,918 5,275 3,312 83,991 144,659 (11,664) (34.243) (34,243) (1,208) (2.172,341) {2, 140,225) (1,718) (29,746) (3, 136} (6,094) {3, 136) (37,558) 638,007 638,007 1,614,790 1,614,790 2,252,797 2,252.797 4623 4623 77,320 79,637 79,939 369,637 79.939 369,637 157 259 s 44~.~74 s See aceompanying notes to financial statements 25 Totals Reporting Entity ~Memorandum On I}') 1994 1993 28,792.223 $ 24,145,074 11,837,728 10,655,423 430,044 1,733,341 1,702,011 2,639,553 (748,549) (1,380,411} 869,349 151.585 356,845 (396,195) (32,371) (9.181} 1,589,735 593,290 (906,664) (1,051,131} (274,738} 15,300 (75,947} (14,724} (19,498) (11,328) (1,208) (546,754) 43,518,960 36,523,842 (51,211) (48,227' 173) (61,904,928) 277,457 44,249 (59,108) (70.956) (4,438,212) (4,678,400) (6,667,358} (6,631,180) (5,140,319) (4,937,659) (4,398,131) (3,864,426} 9,651,000 14,480,000 119,195 (64,428) (79,760) (16,467} 26,726 66,051 1,852,671 4,439,701 (57' 134,223} (63,138,443) 12,999,766 11,093,818 (22,417,980) (21,196,189) 1,796,499 (16,511) 1,614,790 1,606,687 {6,006,925) (8,512,195) 4,953,234 6,584,965 4,953,234 6,584,965 (14,668,954) (28,541,831) 121,572,578 150,114,409 121,572,578 150,114,409 106,9QMZ4 $ 121 ,§ZZ,578 CITY OF LUBBOCK Notes to Financial Statements September 30, 1994 I. Summary of Significant Accounting Policies .......................................... 29 A. Reporting Entity ............................................................................. 29 B. Basis of Presentation -Fund Accounting ......................................... 31 C. Basis of Accounting ........................................................................ 32 D. Budgetary Accounting .................................................................... 33 E. Encumbrances ................................................................................ 33 F. Assets, Liabilities and Fund Equity .................................................. 34 G. Risk Management. ........................................................................... 35 H. Revenues, Expenses and Expenditures ............................................ 3 5 I. Total Memorandum Only ................................................................. 37 J. Reclassification ................................................................................ 37 II. Stewardship, Compliance and Accountability ......................................... 37 A. Retained Earnings/Fund Balance Deficits ........................................ 37 III. Detail Notes on all Funds and Account Groups ...................................... 38 A. Pooled Cash and Investments ......................................................... 38 B. lnterfund Transactions .................................................................... 40 C. Deferred Charge ............................................................................. 40 D. Property, Plant and Equipment.. ..................................................... 41 E. Retirement Plans ............................................................................. 42 F. Deferred Compensation .................................................................. 50 G. Surface.Water Supply ..................................................................... 50 H. Other Enterprise Fund Activities ..................................................... 51 26 CI1Y OF LUBBOCK Notes to Financial Statements September 30, 1994 I. Segment Information -Enterprise Funds ......................................... 52 J. Lease Agreements .......................................................................... 52 K. Long-Term Debt. .......................................................................... 54 L. Advanced Defeasement ................................................................. 58 M. Accrued Insurance Claims ............................................................ 61 N. Landfill Closure and Postclosure Care Cost.. .................................. 61 IV. Contingent Liabilities ........................................................................... 62 A. Federal Grants .............................................................................. 62 B. Litigation ...................................................................................... 62 V. Financial Instruments ........................................................................... 63 VI. Restatement of Beginning Balances ...................................................... 63 VII. Subsequent Event. ............................................................................... 64 A. Management Agreement for Golf Operations ................................. 64 27 28 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Lubbock, Lubbock County, Texas (City) have been prepared in conformity with Generally Accepted Accounting Principles (GAAP) as applicable to governmental units. The Government Accounting Standards Board (GASB) is the acknowledged standard-setting body for establishing governmental accounting and financial reporting principles. With respect to proprietary activities, inc:uding component units, the City has adopted GASB Statement No. 20, "Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting." The City has elected to apply all applicable GASB pronouncements as well as Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) Opinions, issued on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements. The more significant accounting policies are described below. A. REPORTING ENTITY; In June, 1991, the GASB issued Statement No. 14, "The Financia!Reporting Entity". In accordance with this statement, the City has presented those entities which comprise the primary government along with its discretely presented Component Units in the fiscal year 1994 general purpose financial statements. The effect of the changes on fund equity due to the adoption of GASB Statement No. 14 is included in Note VI. The City is a municipal corporation governed by a Mayor-Council form of government. As required by GAAP, the general purpose financial statements present the reporting entity which consists of the primary government, organizations for which the primary government is financially accountable and other organizations for \\·hich the nature and significance of their relationship with the primary government are such that exclusion could cause the City's general purpose financial statements to be misleading or incomplete. BLENDED COMPONENT UNITS The following Component Units have been presented as blended Component Units because the Component Unit's governing body is substantially the same as the governing body of the City, or the Component Unit provides services almost entirely to the primary government. The Urban Renewal Agency (URA) was formed to provide low-income housing to qualifying recipients. Houses are purchased with Community Development Block Grant funds and offered at below-market interest rate mortgages to qualifying recipients. As loans are repaid, monies are accumulated to purchase additional housing. The Mayor, with the consent of the City Council, is empowered by law to appoint the nine member board to govern operations. The agency is funded by appropriations from the City's Community Development Block Grant. While URA is legally separate from the City, it is reported as if it were part of the primary government because it provides services almost entirely to the primary government. Financial activity is included in the Community Development Expendable Trust Fund for fiscal year 1994. Prior to fiscal year 1994, URA did not meet the criteria for inclusion in the City's reporting entity (See Note Vl). Lubbock Arts Alliance Grants Review Committee is a subcommittee of the Lubbock Arts Alliance, Inc. This committee recommends projects to be funded with hotel-motel tax proceeds for approval by the City Council. This committee is funded by appropriations from the City's share of hotel-motel tax proceeds and the financial activity is included in the Arts and Related Items Special Revenue Fund. DISCRETELY PRESENTED COMPONENT UNITS The Component Unit columns in the combined financial statements include the financial data of the City's other Component Units. They are reported in a separate column to emphasize that they are legally separate from the City. The following Component Units are included in the reporting entity because the primary government is financially accountable and is able to impose its will on the organization. A primary government has the ability to impose its will if it can significantly influence operations and/or activities of an organization. 29 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY; (CONTINUED> City Transit Management Co., Inc. dba Citibus (Citibus). In 1993, the City renewed a live year management agreement with McDonald Transit Associates, Inc. to manage and operate a city owned transportation system (Citibus). Citibus is a legally separate entity. The City Council appoints the seven-member Lubbock Public Transit Advisory Board, and approves the annual budget. The City is responsible for funding deficits. Citibus is reported as a proprietary type component unit. Civic Lubbock, Inc. promotes the cultural and educational usage of the Lubbock Memorial Civic Center and Lubbock Municipal Coliseum. The 15 member board is appointed by the City Council with a dual appointment to the Civic Center Board. The City Council approves the budget for Civic Lubbock, Inc. Civic Lubbock, Inc. is reported as a proprietary type component unit. Lubbock Convention and Visitor's Bureau, Inc. (LCVB) promotes the City as a convention center and facilitates tourism in Lubbock. Prior to September 30, 1994, board members were appointed by the Lubbock Chamber of Commerce (Chamber), and operations were managed by the Chamber. On October I, 1994, a new entity was incorporated, the Convention and Tourism Bureau of Lubbock, Inc. (CTBL). The CTBL board is appointed by the City Council. The primary source of funding is an allocation of hotel-motel tax collections. The City Council approved the budget for LCVB and will approve the budget of CTBL. LCVB is reported as a governmental type component unit. The combined financial statements present financial statements for. each of the three discretely presented component units. Copies of financial statements of the individual component units may be obtained from their respective administrative offices listed below. Administrative Offices City Transit Management , Co. Inc. dba Citibus 801 Texas Lubbock, Texas Civic Lubbock, Inc. 150 1 6th Street Lubbock, Texas RELATED ORGANIZATIONS CTBL, Inc. 14th Street and Avenue K Lubbock, Texas The City's officials are also responsible for appointing the members of the boards of other organizations but the City's accountability for these organizations does not extend beyond making the appointments. The following are related organizations which have not been included in the reporting entity: Housing Authority of the City of Lubbock is legally separate. The Mayor with the consent of the City Council appoints the five-member board. It is the City Attorney's opinion that the Housing Authority is independent of the City of Lubbock. The Authority is not fiscally dependent on the City of Lubbock and the City Council is not able to impose its will on the entity. The City of Lubbock has no responsibility for debt issued by the Housing Authority. Lubbock Firemen's Retirement and Relief Fund 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 Assistant City Manager for Financial Services, three firefighters elected by members of the fund, and two at-large members elected by the Board. II 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 Fund is limited to matching monthly contributions made by the members. Title to assets is vested in the fund and not in 30 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY; lCONTJNUED) the City. The State Firemen's Pension Commission exercises general oversight authority over the Fund; thus, the City of Lubbock does not significantly influence operations. Lubbock Arts Alliance, Inc. (Alliance) is dedicated to the promotion and improvement of the arts and sponsoring the Annual Lubbock Arts Festival. Except for the Grants Committee, reported as a Component Unit of the City of Lubbock, the Alliance is not fiscally dependent on the City, and the City is not able to exert its will on the Alliance. Lubbock Health Facilities Development Corporation (LHFDC) promotes health facilities development. The City Council appoints the seven-member board. Bonds issued by LHFDC do not constitute indebtedness of the City. The City does not govern operations of LHFDC. Omnimax is a theater financed with proceeds from bonds issued by the City. The Omnimax is leased to the Science Spectrum Inc. The City Council 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, affordable residential housing. The mayor appoints the seven-member board. It is the opinion of the city attorney that LHFC is independent of the City. Indebtedness of the Corporation 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 comprise its assets, liabilities, reserves, fund equity, revenues, and expenditures/expenses. The various funds are classified into three categories: governmental, proprietary and fiduciary. The following fund types and account groups are used by the City: 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 he accounted for in another fund. Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or major capital projects) that are legally restricted to expenditures for specified purposes. Debt Service Funds are used to account for the accumulation of financial resources for the payment of interest and principal on the general long-term debt of the City. Capital Project Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Proprietary Funds or Trust Funds). PROPRIETARY FUND TYPES Enterprise Funds are used to account for operations of the City (a) that are financed and operated in a manner similar to private business enterprises, where the intent is to provide goods or services to the 31 CITY OF LUBBOCK, TEXAS Notes·to Financial Statements September 30, 1994 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B. BASIS OF PRESENTATION-FUND ACCOUNTING (CONTINUED> general public on a continuing basis, the cost of which is to be recovered in whole or part through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income .is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Internal Service Fund is used to account for the financing of goods and services provided by one department or agency to other departments or agencies of the City, or to other .governments, on a user charge basis. FIDUCIARY FUND TYPES Transactions related to assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments and other funds, are accounted for in fiduciary fund types. Fiduciary fund types are comprised of: Expendable Trust Funds account for assets received and expended by the City as trustee in essentially the same manner as governmental fund types. Agency Funds are used to account for assets held by the City as a custodial trustee. They are accounted for on the modified accrual basis of accounting, but do not have a measurement focus, as agency funds do not account for operations. ACCOUNT GROUPS General Fixed Assets Account Group represents a summary of the fixed assets of the City, other than those fixed assets reported in the Proprietary Funds. Capital expenditures of the Capital Projects Fund are the primary source from which the detailed records of the general fixed assets account group are developed. Capital expenditures are carried in this account group as construction in progress until the projects are completed and are then capitalized by function and classification. Infrastructure fixed assets such as streets, highways, bridges, sidewalks, street lighting, traffic poles and signals, and storm sewers, are accounted for in the General Fixed Assets Account Group and reported in the Schedule of General Fixed Assets. General fixed assets are not depreciated and are recorded at historical cost.at the time of acquisition. Donated assets are recorded at their fair market value on the date donated. General Long-Term Debt Account Group is used to account for the City's liability for general long- term debt presently consisting of general obligation bonds, certificates of obligation, long-term notes payable, long-term leases, and obligations for employee vacation, sick-leave benefits, insurance ·claims and rebatable arbitrage, other than those reported in the Proprietary Funds. C. BASIS OF ACCOUNTING The modified accrual basis of accounting and the flow of .current financial resources 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 and sales taxes, certain grant revenue and investment income. The accrual basis of ·accounting and the flow of economic resources is followed in 'the enterprise funds and internal service funds. Under this method of accounting, revenues are recognized when earned and expenses are recorded when a liability is incurred. 32 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES C. BASIS OF ACCOUNTING CCONTINUEDl Governmental fund types and expendable trust funds are accounted for using a current financial resources measurement focus. Under the current financial resources measurement focus, only current assets and current liabilities are included on the balance sheet. Net current assets or fund balance is considered a measure of available spendable resources. The flow of financial resources measurement focus is concerned primarily with the measure of interperiod equity (e.g. whether current year revenues were sufficient to pay for current year services). Enterprise funds and internal service funds are accounted for using an economic resource measurement focus. All assets and liabilities including fixed assets and long-term debt are included on the balance sheet. Fund equity is segregated into its contributed capital and retained earnings components. Proprietary fund type operating statements present increases {revenues) and decreases (expenses) in net total assets. D. BUDGETARY ACCOUNTING Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds except for special revenue funds and capital project funds, which adopt project-length budgets. All annual appropriations lapse at fiscal year end. Annually, the City Manager submits to City Council a proposed operating budget for the upcoming fiscal year. Public hearings are conducted to obtain taxpayer comments, and the budget is legally enacted through passage of an ordinance by the City Council. Budgetary control is maintained by department and by the following category of expenditures: personnel services, supplies, maintenance, other charges, and capital outlay. All budget supplements must be approved by the City Council. Administrative transfers, and increases or decreases in accounts within categories may be made by management as long as expenditures do not exceed budgeted appropriations at the fund level. Appropriations for budgeted funds lapse at year end. Budgeted amounts shown are from the revised budget, adopted by resolution on September 9, 1994. During the year, the budget was revised to reflect a 1.50% increase in total revenues and 1.16% increase in total operating expenses/expenditures from the original budget. Each year, in accordance with State law, the City Council sets an ad valorem tax levy for a sinking fund (General Obligation Debt Service) which with cash and investments in the fund, would be sufficient to pay all the bonded indebtedness and interest due in the following fiscal year. E. ENCUMBRANCES At the end of the year, encumbrances for which goods and/or services have not been received are canceled. At the beginning of the next year, prior year encumbrances and related appropriations are re-established through a budget amendment. Re-established encumbrances at October I, 1994 for governmental funds of $1,058,333 are as follows: General Fund Special Revenue Funds Capital Projects Funds Expendable Trust Funds Total 33 $ 945,845 395 61,753 50.340 $ 1.058.333 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F. ASSETS. LIABILITIES AND FUND EQUITY Equity in Pooled Cash and Investments-A "Pooled Cash" concept is used to maintain the cash and investment accounts in the accounting records, Under this method, all cash is pooled for investment purposes and each fund has 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 unrestricted as well as restricted assets. Investments other than those in the deferred compensation plan are stated at cost or amortized cost. Property Tax Receivable-Property taxes are assessed and liens attach on valuations as of January I, levied on October 1 of each year, and become delinquent February I 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 taxes 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 Enterprise Funds. an amount has been recorded for services rendered but not billed as of the close of the fiscal year. 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 Expenses-Prepaid expenses are accounted for under the consumption method. Restricted Assets -Certain enterprise fund assets are restricted for construction which has been funded through long-term debt, therefore, retained earnings have not been reserved for these amounts. The excess of assets restricted for the payment of debt service over certain 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 Asset Account Group are not depreciated. Property, plant and equipment of the Proprietary Funds are stated at cost or estimated market value for donated assets. Depreciation is computed using the straight-line method over the estimated useful lives as foltows: Improvements Buildings Equipment I 0-50 years I 5-50 years 3-15 years Interest Capitalization -The City capitalizes interest cost in its Enterprise Funds on bonds used for fixed asset construction, net of interest income earned on the temporary investment of the tax exempt bond proceeds. Interest costs incurred during the year were $16,229,230 of which $2,042,232 has been capitalized. 34 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F. ASSETS. LIABILITIES AND FUND EQUITY (CONTINUED) Advance to Other Funds ·Amounts owed to one fund by another which are not due within one year are recorded as advances to other funds. These are equally offset by a fund balance reserve amount which indicates they do not constitute available spendable resources. G. RISK MANAGEMENT The City is self insured for medical and dental coverage. The liability for incurred claims represents estimates for medical and dental claims incurred as of September 30, 1994. Some of these claims were reported at September 30, 1994, and others may not be reported until a later date which are incurred but not reported (IBNR). IBNR is actuarially determined by the City's independent insurance administrator. 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 claims from a deposit provided by the City. The City accounts for the worker's compensation program in the Insurance Fund (an Internal Service Fund) by charging premiums based upon losses, administrative fees and reserve requirements. The Fund establishes claim liabilities based on estimates of the ultimate cost of claims (including 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 Insurance Fund. The property insurance policy was purchased from an outside insurance carrier. The policy has a $250,000 deductible per occurrence, and the boiler coverage insurance deductible is $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 miscellaneous floaters, are accounted for in the Insurance Fund. Funds are charged expenditures based on premium amounts and administrative charges. The City has had no significant reductions in insurance coverage during the year. Settlements in the current year and preceding two years have not exceeded insurance coverage. H. REVENUES. EXPENSES AND EXPENDITURES Interest Income on pooled cash and investments is allocated monthly based on the percentage of a fund's average daily equity in pooled cash and investments to the total average daily pooled equity in pooled cash and investments, except for Trust and Agency Funds, certain Special Revenue Funds, Governmental Capital Project Funds, and certain Internal Service Funds. The interest income on pooled cash and investments of these funds is reported in the General Fund or the Debt Service Fund. Sales Tax Revenue-The City has a 1% 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. The tax is then paid to the City by the I Oth of the next month. In addition, voters approved a 1/2 cent sales tax increase to fund land and other incentives for the Department of Defense Accounting Office to be located in Lubbock, Texas. When that project was 35 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H. REVENUES. EXPENSES AND EXPENDITURES (CONTINUED) canceled by the U.S. government, voters repealed the tax. However, due to the timing of the imposition and revocation of the increased tax, the additional 1/2 cent sales tax was collected for the first quarter of fiscal year 1994. A portion of the collected funds was used to defease approximately $3,600,000 of bonds issued to fund the construction of a 550 bed psychiatric hospital for the Texas Department of Corrections. The remaining amount is to be used to fund specific projects as approved by the City Council. Grant Revenue from federal and state grants is recognized to the extent that the related expense has been incurred. lnterfund Transactions or quasi-external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from that fund that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transactions except quasi-external transactions, reimbursements, temporary receivables and payables, and residual equity transfers are reported as operating transfers. 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. Unused vacation leave is lost at the end of the 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 I 1/4 days per month with unlimited accrual status. After I 5 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 are paid for up to 90 days accrued sick leave after one year of employment. The Texas Civil Service laws dictate certain benefits and personnel policies above and beyond those policies of the City. In November 1992, the GASB issued Statement No. 16, "Accounting for Compensated Absences". In accordance with this statement, the City has recorded a liability for accumulated vacation, sick leave, and certain salary related payments, such as employer portion of social security and medicare. The cumulative effect of adoption of GASB Statement No. 16 was not significant to the financial statements 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 fund 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 -Retirees of the City of Lubbock may purchase optional 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. 36 CITY OF LUBBOCK, TEXAS Notes to FinancialStatements September 30, 1994 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H. REYENUES. EXPENSES AND EXPENDITURES (CONTINUED) The following schedule reflects participation in the City's health care program: Participants Active Retired Cobra Active Claims Retired Claims Cobra Claims Total Claims %of Employee Groups to total claims Active Retired Cobra Total% I. TOTAL MEMORANDUM ONLY 1,865 288 II $5,078,893 1,804,237 12.453 $6.895.583 73.65% 26.16% 19% 10000% The Totals (Memorandum Only) columns represent an aggregation of the combined financial statements and do not represent consolidated financial information. Data in those columns do not represent financial position and results of operations, in conformity with GAAP and arc presented only to facilitate analysis. J. RECLASSIFICATION Certain 1993 amounts have been reclassified to conform to 1994 presentation. NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. RETAINED EARNINGS/FUND BALANCE DEFICITS The deficit of$58 in the Canyon Lakes Capital Projects Fund results from necessary expenditures for capital projects. The deficit will be funded in the 1994-95 fiscal year by the Parks Capital Projects Fund. · The deficit of $509,783 in the Storm Sewer and Drainage Capital Projects Fund results from costs incurred to comply with Environmental Protection Agency (EPA) Standards for Stormwater Quality. These costs were incurred prior to the establishment of the Stormwater Utility Enterprise Fund, (established October I, 1993). The reimbursements for these expenditures will be made by the Stormwater Utility Enterprise Fund. The deficit of $3,819,599 in the Airport Enterprise Fund results from the· practice of not funding depreciation. 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 $1,001,392 is the result of placing itself in a more competitive position through non-capital course equipment improvements. Future plans for golf operations are described briefly in Note VII. Subsequent Event. The deficit of $74,043 in Community Services Ex;.c t.Jable Trust Fund is the result of a timing difference between expenditures incurred and the filing of requests for reimbursements. As of 37 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30,1994 NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. RETAINED EARNINGS/FUND BALANCE DEFICITS (CONTINUED) September 30, 1994, Community Services has requested and received an extension for filing the final requests for reimbursement for these funds. These funds have not been accrued as certain reimbusement amounts are not measurable at September 30, 1994 which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $67,372 in Other Grants 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 reimbusement amounts are not measurable at September 30, 1994 which is consistent with the revenue recognition required by the modified accrual basis of accounting. No other funds of the City had deficits in either total fund balances or total retained earnings. NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. POOLED CASH AND INVESTMENTS The City's investment polices are governed by State statute and city ordinances. Permissible investments include direct obiigations 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 I 02% 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, 1994. INVESTMENT CATEGORY OF CREDIT RISK (I) The City's investment category is insured, registered or in securities held by the entity or its agent in the entity's name. (2) Uninsured and unregistered, with securities held by the counter party's trust department or agent in the entity's name. (3) Uninsured and unregistered, with securities held by the counter party or by the trust department or agent but not in the entity's name. DEPOSIT CATEGORY OF CREDIT RISK (A) The City's deposit category is collateralized with securities held by the pledging linancial institutions trust department or agent in the enitity's name. (B) Collateralized with securities held by the pledging financial institution's trust department or agent in the entity's name. (C) Uncollateralized. Pooled Cash and Investments . Tile City's pooled cash and i.nvestments consist of deposits with financial institutions, certificates of deposit. U.S. governmentand agency securities, and deposits jn qualifying investment pools. These investments have varying maturities ranging from one day to fiye 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, 1994: 38 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. POOLED CASH AND INVESTMENTS (CONTINUED) nvestments U. S. Treasury and Agency Obligations- (I) Primary Government $144,571,792 Mutual Funds-Primary Government Government Investment in TEXPOOL Mutual Fund-Primary Government Total Investments- Primary Government Cash and Bank Deposits Cash and Bank Deposits-Primary Government Cash and Bank Deposits-Component Units Cash and Bank Deposits -Reponing Entity (A) $11,867,063 599.583 SI2.422.M2 Category (l) Category (B) s s (3) (C) $ S2ZQ.l2l Cash and Investments are reponed in the financial statements as: Primary G!!Vt:[Dmt:ot Cash and Investments -Restricted $ 91,696,876 Cash and Investments • Non-Restricted ZQ 11Q.IS8 Total Cash and Investments S 162.~62.!234 Carrying amount of deposits $ 11,867,063 Carrying amount of investments ISQ.S22.221 Total Cash and Investments s 162 ~61.034 39 Carrying Amount s 144,571,792 5,941,113 87.066 . $ 150.599.971 Carrying Amount $ 11,867,063 869 946 Sl2.2lZ.OQ2 Component l!oib $ 37 862.2!22 s 862.2~6 869,946 s 8!22.2!16 Market Value s 141,613,692 5,941,113 87.066 $ 147.641 871 Bank Balance $12,280,842 989.742 SIJ.22Q.SS4 Reporting Eo tit! $ 91,696,913 11.6~Q.Q61 s 163.336.280 $ 12,737,009 ISQ S22.211 s 163.336.28Q CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS B. INTERFUND TRANSACTIONS c. lnterfund receivables and payables consisting of due from/to and advances to/from other funds at September 30, 1994 were as follows: lnterfund lnterfund Funds R~l:l:ivabl's £ayabl~~ General Fund $ 4,900,372 $ Debt Service Funds: Debt Service-City Hall Expansion 25,000 Capital Projects Funds: Parks Capital Projects 5,000 Canyon Lakes Capital Projects 5,000 Storm Sewer & Drainage 650.000 General Permanent Capital Projects 25,000 Enterprise Funds: Electric Enterprise Fund 1, 765,512 Water Enterprise Fund 1,210,500 Solid Waste Enterprise Fund 897,600 Golf Enterprise Fund 1,350.000 Internal Service Fund 2.948.284 Expendable Tru~t Funds: Community Development Fund 1,775,000 Community Services Fund 40,000 Library Fund 107,500 Police Fund 74,000 Other Grant Funds J4,QQQ Total $ 7.906.384 $ 7,906 384 DEFERRED CHARGE The deferred charges of $1,770,032 and $1,718,821 at September 30, 1994 and 1993, respectively, 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 $1.56 per MMBTU with an option, which the City has exercised, to purchase an additional 2,000,000 MMBTU at the same price. The remaining amount of prepayment relative to this contract at September 30, 1994 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 $.78 per MMBTU, is paid upon proven determination of the reserves and the balance is to be pai'd upon delivery. The prepayments are to be expensed as the gas is taken until the prepaid units of gas have been consumed. At September 30, 1994 and 1993, I ,317,934 and I ,218,590 MMBTU, respectively. had been delivered, and remaining proven reserves at September 30, 1994 and 1993 were 2,104,273 and 2,203,617 MMBTU, respectively. On August 25, 1994, the City contracted for the purchase of natural gas to be delivered in future years. An amount of $128,699 is included in deferred charges which represents a deposit on future gas deliveries. The City is obligated to purchase 3 million MMBTU of gas per year in fiscal years 1995 and 1996 and 4 million MMBTU of gas in fiscal years 1997, and 1998, and 1999. CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS D. PROPERTY. PLANT AND EQUIPMENT General fixed assets of the City for the year ended September 30, 1994, are as follows: Land Buildings and Improvements Other Improvements Equipment Construction in Progress Total • Includes transfers. 10-1-93 $ 8,611,411 34,316,242 110,514,798 23,933,765 17.829.301 $195.205.517 Additions• $ 278,949 2,251,227 8 434.661 $10.964 837 Construction in progress is composed of the following: Deletions* $ 2,430,985 2.183.087 $4.614.072 Balance 9-30-94 $ 8,611,411 34,316,242 110,793,747 23,754.007 24.080,875 $201.5 56.282 Project Authorization Expended to 9-30-94 Unexpended Balance Fire Station $ 216,820 $ 188,268 $ 28,552 Park Improvements 3,042,732 1,491,760 1.550.972 Street Improvements 31,611,100 6,409,675 25,201.425 Permanent Street Maintenance 2,535,000 2,278,030 256,970 Storm Sewer and Drainage 940,000 825,628 114,372 General Permanent Capital Projects 16,540,201 9,746,048 6,794,153 General Permanent Capital Maintenance ~.2M.!!4!2 l141.4!iZ 2.J2l.lZ2 Total Life-to-Date Activity $60. 150,699 $24 080,!!7!2 Slfi.Qfi2.!!2l Property, plant, and equipment recorded in the Citys' various proprietary funds (including component units) as of September 30, 1994, is as follows: Total Total Internal Primary Component Reporting Enterprise Sm1tt Government Units Entity Land $ 26,065,447 $ 5,839 $ 26,071,286 $ 520,403 $ 26,59 I ,689 Buildings and Improvements 36,829,494 1,791,855 38,621,349 3,818,594 42,439,943 Improvements 276,143,315 197,469 276,340,784 160,782 276,501,566 Equipment 31,305,904 6,971,171 38,277,075 6,492,292 44,769,367 Construction in Progress 1~2.2!!2 21~ 2.0~l.Q2!! I 55.!!42,242 I S5,042.242 Total 523,334,074 11,019,362 534,353,436 10,992,071 545,345,507 Less:Accumulated (145.22~ 025) ( S.!!OQ 228) ( ISI.QZ!i.OZJ) (!i.IIQ.llfil ()52.) !!!i ~Q2) Depreciation Total Sl28.058.222 s S.2ll!.J!i~ SJU222.lfil s !t.l!l!l.ZJS SJ!!l!. J S2 09!! 41 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 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 Luhbock participates. These are the Texas Municipal Retirement System (TMRS) and the Firemen's Relief and Retirement Fund. The City does not maintain the accounting records, hold the investments or administer either fund. Summary of significant data for each retirement plan follows: TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS) Plan Description The City provides pension benefits for all of its full-time employees with the exception of firefighters through a nontraditional, joint contributory, defined contribution plan in the state-wide TMRS, one of over 636 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 defined contribution plans, but they have elected to provide additional voluntary disclosure to help foster a better understanding 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. When added to the employee's accumulated contributions and the monetary credits for service since the plan began, the updated service credit 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 I 0 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-financed 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. Contributions 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 finances 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 of 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 25-year amortization period. When the City periodically adopts updated service credits and increases its annuities in effect, the increased unfunded actuarial liability is to be amortized over a new 25-year period. Currently, the unfunded actuarial cost method is used f, . determining the City contribution rate. Contributions are CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) 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 1994 was $55,813,743 and the City's contributions were based on a payroll of $42,838,84 I. Both the City and the covered employees made the required contributions, amounting to $4,454,452 (10.34% of covered payroll for the months in calendar year 1993, 7.32% normal cost plus 3.02% to amonize the unfunded actuarial liability, and 10.42% for the months in calendar year 1994, 7.39% normal cost plus 3.03% to amonize the unfunded actuarial liability) for the City and $2,570,333 (6%) for the employees. Of the $4,454,452 employer contributions, approximately $3,157,605 was allocated to normal cost while approximately $1,296,847 was allocated to amonize the unfunded actuarial liability. There were no related·pany 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 assets 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 are not dependent upon future salaries. The calculations were made as pan of the annual actuarial valuation as of December 31, 1993. Because of the money-purchase nature of the plan, the interest rate assumption, currently 8.5% per year, does not have as much impact on the results as it does for a defined benefit plan. Market value of assets is not determined for each city's plan, but the market value of assets for TMRS as a whole was 118.0% of book value as of December 31, 1993. Pension Benefit Oblh:atjon Annuitants currently receiving benefits Terminated employees Current employees Accumulated employee contributions including allocated invested earnings Employer-financed vested Employer-financed nonvested Total Pension Benefit Obligation Less: Net Assets Available for Benefits, at Book Value Unfunded Pension Benefit Obligation s 11,702,806 7,023,225 34,645,764 60,886,336 7 235 648 121,493,779 95 946.540 $ 25.547.239 The book value of assets is the amonized cost for bonds and original cost for shon-term securities and stocks. The actuarial assumptions used to compute the actuarially determined City contribution rate are the same as those used to compute the pension benefit obligation. 43 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS <CONTINUED) TEXAS MUNICIPAL RETIREMENT SYSTEM REQUIRED SUPPLEMENTAL DISCLOSURE 10 YEAR HISTORICAL INFORMATION ANALYSIS OF FUNDING PROGRESS Unfunded Unfunded Net Assets Pension Pension Annual PBO as a% As of Available for Benefit Percentage Benefit Covered of Covered D!!,!!IDb!!rJl B!!nl!fil~ Obli2athtn .fJ!.n.d.e.d Qbligathm ~ fJu:nill 1984 $ 32,135,358 $ 47,609,765 67.5% $15,474,407 $28,511,360 54.3% 1985 36,379,281 52,393,316 69.4 16,014,035 . 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 95,946,540 121,493,779 78.9 25,547,239 44,324,483 57.6 REVENUES BY SOURCE Employer Contribution as a% of Year Ended Employee Employer Investment Covered D~:,~:mb~rJl Contributions Contributions ln,2m~ Qtb~:r I2tal ~ 1984 $ 1,425,568 $ 2,044,264 $ 3,033,240 $ -$ 6,503,072 7.2% 1985 1,671,036 2,372,632 3,519,432 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 EXPENSES BY TYPE Transfers Current Service Year Ended Annuity Administrative De,ember 31 Reserve Fund Expenses Refunds Iota! 1984 $ 807,921 $ 552,408 $ 468,690 $ 1,829,019 1985 1,655,712 620,760 477,873 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 44 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS <CONTINUED> FIREMEN'S RELIEF AND RETIREMENT FUND Plan Description The Board of Trustees of the Lubbock Firemen's Relief and Retirement Fund is the administrator of a single-employer defined benefit pension plan maintained for members of the City of Lubbock fire Department under provisions of applicable law of the State of Texas. All firefighters in the Lubbock fire Department are covered by the Lubbock Firemen's Relief and Retirement Fund. The table below summarizes the membership ofthe fund at December 31, 1993. I. 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 December 31, 122.1 175 161 ~ The Lubbock Firemen's Relief and Retirement Fund 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. An e~~:rly service retirement benefit is provided for employees who terminate employment with 20 or more years of service. A partially vested benefit is provided for employees who terminate employment with at least 10 but less than 20 years of service. The monthly benefit at normal retirement, payable in a Joint and 2/3 to Spouse form of annuity, is equal to 68.75% of the final 48-month average salary plus $94.00 per month for each year of service in excess of 20 years. This plan of benefits, which ls ·described below as the "New Plan", became effective December 30, I 993. It was adopted as a result of the December 31, 1992 valuation. Prior to December 20, 1993, the "Old Plan" was in effect. Under that plan the normal service retirement benefit was equal to 66.75% of final 48-month average salary plus $82.00 per month for each year of service in excess of 20 years. Under that plan, Lubbock firefighters were required to contribute 11.00% of their pay to the fund. Lubbock firefighters are also required to contribute I 1.00% of their pay to the fund under the New Plan. At the present time, the City's contributions are based on a formula which causes the City's contribution rate to fluctuate from year to year. Under the Old Plan the City was required to make contributions which would average not less than 13.50% of payroll over the 28-year period beginning January I, 1991. Under the New Plan the City is required to make contributions which will average not less than 14.00"/o of payroll over the 28-year period beginning January I, 1993. The benefit and contribution provisions of this plan are authorized by the Texas Local firefighters Retirement Act (TELFRA). Summary of Significant Accounting Policies and Plan Asset Matters I. Basis of Accounting The Lubbock Firemen's Relief and Retirement Fund financial statements for years prior to 1990, are prepared using the cash basis of accounting. Subsequent years financial statements are prepared on the accrual basis of accountinJZ .. The fund's fiscal year is the calendar year. Employee and employer contributions are recogniz·c<' a; revenues in the period in which they are earned by the fund and expenses are recorded when im;;med. 45 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS <CONTINUED) 2. Method Used to Value Investments The Lubbock Firemen's Relief and Retirement Fund's investments are reported at original cost. Discount accretion and premium amortization are recorded as adjustments to investment income over the life of the security. Investment income is recognized as it is earned. 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 Lubbock Firemen's Relief and Retirement Fund'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, 1992 is based on the actuarial valuation as of December 31, 1992, and the plan in effect on that date. As a result of that valuation a new plan of benefits has been adopted effective December 31, 1993. 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 5.00% 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 postretirement benefit increases. Pension Benefit Obli~:atjon I. 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, 1993 is $58,361,528). 5. Unfunded Pension Benefit Obligation December 31. 1993 $30,771,954 8,426,962 18,841,299 1.004.308 59,044,523 44.037 838 $15.006685 The pension benefit obligation as of December 31, 1993 is based on the New Plan. This plan was in effect on that date and was determined as part of an actuarial update as of that date. The actuarial assumptions used are the same as those listed above for the December 31, 1992 valuation. As a result . of the adoption of the New Plan, the pension benefit obligation as of December 31, 1993 increased $2,008,996 over what it would have been under the Old Plan. -16 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS <CONTINUED) Contributions Required and Contributions Made For the plan in effect December 31, 1992 the funding policy of the Lubbock Firemen's Relief and Retirement Fund required contributions equal to 11.00% of pay by the firemen and contributions which would average not less than 13.50% of payroll by the City over the 28-year period beginning January 1, 1991. The New Plan adopted as a result of the December 31, 1992 valuation requires firemen contributions of 11.00% of pay and City contributions which will average not Jess than 14.00% of payroll over the 28-year period beginning January 1, 1993. For the 1993 calendar year, contributions made were equal to 11.00.% of pay by the firemen and 14.4974% of payroll by the City of Lubbock. While the contribution requirements are not actuarially 'determined, state law requires that each plan of benefits adopted by the fund must be approved by an eligible actuary. The actuary certifies that the contribution commitment by the firefighters and the City provides an adequate financing arrangement. Using the entry age actuarial cost method, the plan's normal cost 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 amortize the plan's unfunded actuarial accrued liability is determined using a level percentage of payroll method. For the Old Plan in effect on December 31, 1992, the normal cost is 19.16% of pay and the amortization period is approximately 13 years. For the New Plan adopted in December 1993 the normal cost is 20.33% of pay and the amortization period is approximately 27 years based on a December 31, 1992 valuation date. For the 1992 calendar year, total contributions of $2,222,803 were required and paid into the fund. For the 1993 calendar year, total contributions of $2,358,925 were required and paid into the fund. 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. Further details concerning the financial position of the Fund and the latest actuarial valuation are available by contacting the Board of Trustees, Firemen's Relief and Retirement Fund, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457. 4i CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) • •• ••• •••• FIREMEN'S RELIEF AND RETIREMENT FUND ANALYSIS OF FUNDING PROGRESS (4) (6) Unfunded Unfunded Pension (l) (l) (3) Pension (S) Benefit Obligation Net Assets Pension Percentage Benefit Annual as a% Fiscal Available Benefit Funded Obligaiton Covered of Covered Payroll .Yw: For Benefits • Oblieatjon ill.l.ill ID.:::.ill fawill (4) I (5) X 100% 1987 $42,780,282 $47,785,715 89.5% $5,005,433 $6,524,303 1988 28,739,352 38,112,853 75.4 9,373,501 6,770,331 1989 .. 32,209,973 42,013,008 76.7 9,803,035 7,338,261 1990 34,663,461 45,378,384 76.4 10,714,923 7,737,659 1991* .. 38,071,363 50,923,389 74.8 12,852,026 8,195,215 1992 40,993,483 53,804,511 76.2 12,811,028 8,484,196 1993 .... 44,037,838 59,044,523 74.6 15,006,685 9,250,527 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 December 31, 1989 by $1 ,412,516. In December, 1991 the plan was amended to increase standard retirement benefits from 65.0% 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. 76.7% 138.4 133.6 138.5 156.8 151.0 162.2 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS <CONTINUED> REVENUES BY SOURCE Year Ended Employee Employer Investment DecemberJt Contribution* Contribution* Income* Jlthu Total 1984 $ 690,410 $ 836,619 $2,447,204 $ 1,891 $3,976,124 1985 720,016 889,620 3,048,840 5 4,658,481 1986 766,468 942,620 2,778,953 2,033 4,490,074 1987 748,051 921,523 2,723,038 35,411 4,428,023 1988 744,736 936,880 2,897,527 4,579,143 1989 . 807,209 1,036,997 4,008,844 7,982 5,861,032 1990 851,143 1,152,051 2,642,338 4,645,532 1991 935,202 1,294,782 2,753,785 4,983,769 . 1992 949,968 1,309,442 2,538,095 4,797,505 1993 986,633 1,300,725 2,383,302 4,670,660 EXPENSES BY TYPE Year Ended Administrative n~~:~ml:"r ~~ B~ndit~· Exp~n~~~· RdY!l!b If! tal 1984 $ 945,199 $90,131 $34,039 $1,069,369 1985 1,046,806 248,499 1,295,305 1986 1,301,712 470,606 49,358 1,821,676 1987 1,722.194 147,148 40,161 1,909,503 1988 2,040,693 150,934 I 5,081 2,206,708 1989 2,111,733 278,679 2,390,412 1990 2,448,809 118,295 35,122 2,602,226 1991 2,522,540 154,683 2,677,223 1992 2,755,358 211,368 2,966,726 1993 2,845,747 290,511 3,136,258 • Amounts prior to 1990 are shown on the cash basis of accounting. ln 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, 1993 PeDsio!l Benefit Obli£ation Annuitants currently receiving benefits Terminated Employees Current Employees Accumulated Employee contributions including allocated investment earnings Employer-financed vested Texas Municipal Retireme!]t System $ 11,702,806 49 7,023,225 34,645,764 60,886,336 Firemen's Retirement Fund $30,771,954 $ 42,474,760 7,023,225 8,426,962 43,072,726 18,841,299 79,727,635 Employer Contribution as a% or covered payroll 12.6% 13.0 13.2 14.1 13.8 14.1 15.1 15.6 15.2 14.5 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III.·DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) Pension Benefit Obli~tatjon Employee-financed nonvested Total PBO Less: Net Assets Available for benefits (TMRS: book value, FRRF: cost) Unfunded PBO f. DEFERRED COMPENSATION Texas Municipal Retirement System $ 7.235.648 121,493,779 95.946.540 $ 25.547.239 Firemen's Retirement fund $ 1.004.308 59,044,523 44.037.838 $ I 5.006.685 Total $ 8.239.956 180,538.302 139.984.378 $ 40.553.924 The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits 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 plan, 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 rights of the City (without being restricted to the provisions of benefits under the plan), subject only to the claims of the City's general creditors. Participant's rights under the plan 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 plan 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 plan are held by an independent administrator and valued at market. The deferred compensation plan is included in the City's financial statements as an agency fund. G. SURFACE WATER SUPPLY Canadian River Municipal Water Authority The Canadian River Municipal Water Authority (CRMWA) is a ·conservation and Reclamation District established by the Texas Legislature to construct a dam, water reservoir and aqueduct system for the purpose of supplying water to surrounding cities. The District was created in 1953 and comprises eleven cities, including the City. The budget, financing and operations of the District are governed by a Board of Directors selected by the governing bodies of each of the member cities, each city being entitled to one or two members dependent upon population. At -September 30, 1994 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, 1994, principal payments in the amount of $705,927 reduced the amount outstanding due to the authority '11 September 30, 1994 to $23,823,53 I, due in annual installments of$1,35 1,543 including in teres! of2.632% until the year 2018. The above cost for the 5'; CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS G. SURfACE WATER SUPPLY (CONTINUED) 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 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 $705,927, interest in the amount of$645,615 and reduce amortization expense by $387,128. Brazos River Authority-Lake Alan Henry During 1989, the City entered into an agreement with the Brazos River Authority (BRA) for the construction, maintenance and operation of the facilities known as Lake Alan Henry. The BRA, which is authorized by the State of Texas to provide for the conservation and development of surface waters in the Brazos River Basin, has issued bonds for the construction of the dam and lake facilities on the South Fork of the Double Mountains Fork of the Brazos River. Total costs are expected to exceed $120 million. The agreement obligates the City to provide revenues to BRA in amounts sufficient to cover all maintenance and operating costs, management fees to the authority, as well as funds sufficient to pay all capital costs associated with construction. The City will receive .surface water for the payments to BRA. Approximately $191,697 was paid to the BRA for maintenance and operating costs in fiscal year 1994. The BRA issued $16,970,000 in revenue bonds in 1989 and $39,685,000 in revenue bonds in 1991. Construction of the dam and lake facilities began in 1989. The City is obligated to provide sufficient funds over the next 30 years to service the debt requirement of these bonds. The financial activity along with the related obligation is accounted for in the Water Enterprise Fund. At September 30, 1994, certain mineral rights associated with land owned by individuals located in the Lake Alan Henry site were not 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 cost. 51 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE Ill. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS I. SEGMENT INFORMATION-ENTERPRISE fUNDS The City maintains seven enterprise funds which provide electric, water, sewer, sanitation, airport, golf. and stormwater drainage. Segment information for the year ended September 30, 1994, was as follows: Solid Electric Water Sewer Waste AlrJMJrt Golf Storm11·ater ..f.sm.d Ew1l1 ..f.sm.d f.wul Ew1l1 hrul Ew1l1 Operating Revenues s 54,529,457 s 27,979,503 $13,037,157 $10,772,887 s 4,134,455 s 470,719 s Depreciation Expense 4.062,156 2,292.385 1,798,452 1,104,235 1,690.601 102,190 1,551 Operating income (loss) 8,742,027 15,020,563 6,296,214 3,482,993 (819,500) (498,783) (161.174) Operating Transfers-in (out) (6,210,203) (3,876,492) 35,766 (618.859) (469.547) (100,304) 1,796,499 Net Income (loss) 3,245,716 6,614,354 4,789,654 2,981,127 (1,211,573) (600,400) 1,625,348 Cumnt capital contributions 188,261 375,297 568,453 185,287 1.328,887 (3,768) Propeny, plant. and Equipment: Additions: 10,580.763 15,902,482 20,269,064 8,080,808 4,751,993 263,127 167.922 Deletions-net: 4,527,817 3,076,112 2,411,552 2,499,243 2,226,271 189,371 41,886 Net Working Capital 9,800,281 ( 1 ,352.432) (869,968) 294,572 50,878 (1,418,70!) 16.160 Allowance for do11btful accounts 392,468 121,530 63,938 83,221 9,930 0 Total assets 132,252.027 198,469,405 108,971,418 18,212,341 50,514,836 1,074,749 1,635,920 Bonds and other long· tenn liabilities payable from operating revenues 29,245,078 102,598,304 58,461,794 10,080,600 6,393,017 541,786 2,7).1 Total Equity $ 95,254,082 $ 88,345,662 $44,630,786 $6,231.235 $43,$02,122 s (911,131) $1,625,348 J. LEASE AGREEME~IS The City has entered into lease agreements with independent third parties for the purpose of acquiring certain properties 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, 1994 were as follows: Balance Maturill! 12at~:i I D 11:[~51 Rate Qulitaodio~ Enterprise Funds: Scraper 1996 7.50% s !!2.lJ I Total Enterprise Funds !!2.33 I Internal Service Telephone Equipment 1995 8.44% 21.340 Computer and Software 1998 5.06% 1.32Z.QQ~ Total Internal Service Funds 1.348,344 Total s 1.411.!!15 Total Enterprise ..E.I!.IHI1 s 110,924.178 11,057,576 32,062.340 (9,443,140) 17.444.226 2.642.417 60.016,159 14,972,252 6.520,790 671,087 511.190.696 207,323.313 s 278,6 77.504 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS J. LEASE AGREEMENTS CCONTINUED) Future minimum lease payments are as follows at September 30, 1994: Fiscal Year Ended September 30 1995 1996 1997 1998 Total Minimum Lease Payments Less: Interest Present Value of Future Minimum Lease Payments $ 461,810 378,768 373,194 342.094 1,555,866 138.191 $1.417.675 The following is a summary of assets acquired under the above capital leases at September 30, 1994: Land Betterments Equipment Total Less: Accumulated Amortization Total $ 278,961 1.915.108 2,194,069 (640.516) $1.553,5'3 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. Accordingly, at September 30, 1994, the City had no material initial or remaining non- cancelable operating leases with terms exceeding one year. Rent expense for 1994 was $380,450. 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 and the lease expires in March, 1995. Scheduled lease payments for the year ending September 30, 1995 are $4,158. Total rent expense for the year ended September 30, 1994 was $29,723. Citibus contracted with Goodyear Tire and Rubber Co.("Goodyear") to provide tires through August 1994. Citibus paid a flat rate per mile for the first 42,000 miles and one-half that rate for excess mileage. The flat rate was adjusted each six months based on Goodyear's manufacturing costs. The total amount paid for 1994 was $58,338. In September t 994, Citibus entered into a six month lease to provide tires under substantially the same terms. 53 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. LONG-TERM DEBT GENERAL OBLIGA IION BONDS AND CERIIFICA IES OF OBLIGATION: Balance Interest Issue Final Amount Outstanding __Bilk _D.m Maturity Date Issued 9-30-94 7.86% 11-15-85 2·15-03 $60,614,070 $5,324,070 •• 7.65 4-15-87 2-15-07 5,960,000 1,800,000 7.35 5-15-88 2-15-03 750,000 205,000 7.46 5-15-88 2-15-08 6,560,000 1,310,000 7.63 8-15-88 2-15-07 5,000,000 1,225,000 7.11 8-15-88 2-15-00 2,774,682 1,239,884 ••• 6.84 8-15-89 2-15-09 3,800,000 2,850,000 6.83 8-15-89 2-15-09 7,445,000 5,595,000 6.64 5-15-91 2-15-11 16,120,000 13,705,000 6.67 5-15-91 2-15-11 4,030,000 3,430,000 6.29 5-15-91 2-15-01 1,145,000 800,000 9.01 5-15-91 2-15-11 1,085,000 920,000 6.69 5-15-91 2-15-11 2,000,000 1,700.000 5.75 4-11-92 2-15-03 24,035,000 22,670,000 •••• 5.50 1-14-92 2-15-12 1,655,000 1,495,000 5.50 5-15-92 2-15-14 34,520,000 34,520,000 5.37 8-15-92 2-15-12 7,565,000 2,695,000 3.97 5-1-93 2-15-15 14,425,000 14,425,000 5.39 10-1-93 2-15-14 3,625,000 3,625,000 5.39 10-1-93 2-15-14 2,550,000 2,550,000 5.20 10-1-93 2-15-14 1;470,000 1,470,000 5.14 I 0-t-93 2-15-14 19,215,000 19,215,000 4.30 12-1-93 2-15~08 2.82~.llQQ 2.8fi~.QQQ ••••• Total $236,208,752 $152,233 954* • Includes $1 03,465,4 77 used to finance enterprise activities . •• Refunding Bonds issued to replace bonds issued 1966-1982 and 1984 . ••• Refunding Bonds issued to replace Certificates of Obligation issued in 1986 . Ba1anceoutstanding includes $59,798 discount on bonds sold . •••• Refunding Bonds issued toreplace bonds issued 1983 and 1985. ••••• Refunding Bonds issued for a partial refunding of bonds iss sued 1987 and 1988 . 54 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. LONG-TERM DEBT <CONTINUED> ELECTRIC REVENUE BONDS: Balance Final Amount Outstanding Interest Rate Issue Date Maturity Date lwwl ~ 4.50to 7.00% 3-15-75 4-15-95 s 6,400,000 s 320,000 5.00 to 7.50 9-15-75 4-15-96 2,000,000 200,000 6.25 4-15-76 4-15-97 4,400,000 674,833 • 7.00 to 10.00 4-15-87 4-15-07 7,000,000 4,550,000 7.00 to 10.00 5-15-88 4-15-08 17,000,000 11,900,000 6.25 to 9.20 5-15-91 4-15-11 7,500,000 6,375,000 5.00 to 6.50 7-15-91 4-15-02 4,424,976 3,319,976 •• 5.0010 6.60 7-15-91 4-15-04 ~.222.282 ~.332.282 ••• Total s ~J.22~.2fi~ S31.622.Z28 • These bonds were issued at a premium to yield an effective rate of5.58%. Balance outstanding includes $14,833 premium on bonds sold. •• ••• Refunding bonds issued for a partial refunding of the bonds issued May 15, 1983 . Refunding bonds issued for a partial refunding ofthe bonds issued April 15, 1984 . WATER REVENUE BONDS: Interest Rate 6.9 to9.0% 6.8 to 8.8 Total Issue Date 10-15-&9 01-15-91 Final Amount Maturity Date lwwl &-15-19 $16,970,000 &·15-21 ' 39 685,000 $5fi 655,000 • ·Balance outstanding includes$211 ,064 discount on bonds sold. n Balance outstanding includes $522,207 discount on bonds sold. AIRPORT REVENUE BONDS: Interest Rate 4.5 to 5.5 Total Total Bonds Issue Date 9-15-78 Final Maturity Date 9·15·98 55 Amount lnlw1 $ 1.130,000 $ LZJO.OOO $348,3)8.7 I 1 Balance Outstanding 09-30-94 $15,803,936 • 3Z.Zfi7.293 •• $53,521.229 Balance Outstanding 9-30-94 $ 3fi0 000 s 360.000 $238.245.481 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. LONG-TERM DEBT (CONTINUED) The annual requirements to amortize all outstanding debt ofthe City as of September 30, 1994, including interest payments of$153,5 I 5, 702, are as follows: General As of Obligation Revenue September 30 liD.n.!I.J .B.wU lii!W l.&J.ul hW 1995 s 19,632,207 s 10,513,403 s 2,231 $ 461,810 $ 30,609,651 1996 19,634,354 9,885,987 378,768 29,899,109 1997 18,782,037 9,491,693 373,194 28,646,924 1998 17,829,592 9,000,367 342,094 27,172,0S3 1999 16,929,014 8,664,220 25,593,234 2000 15,755,584 8,415,396 24,170,980 2001· 14,403,349 8,185,400 22,588,749 2002 12,836,185 7,937,005 20,773,190 2003 I 1,465,247 7,351,718 18,816,965 2004 9,552,816 7,186,342 16,739,158 2005 9,182,662 6,569,042 15,751,704 2006 8,815,042 6,439,985. 15,255,027 2007 8,442,053 6,337,463 14,779.516 2008 7,448,047 5,891,930 13,339,977 2009 6,866,081 4,961,842 11,827,923 2010 6,022,745 4,942,200 10,964,945 2011 5,766,263 4,932,808 10,699,071 2012 4,330,631 4,537,265 8,867,896 2013 4,116,769 4,552,240 8,669,009 2014 3,934,006 4,574,915 8,508,921 2015 741,313 4,593,920 5,335,233 2016 4,608,575 4,608,575 2017 4,633,190 4,633,190 2018 4,646,060 4,646,060 2019 4,671,840 4,671,840 2020 3,228,480 3,228,480 2021 3.236.040 l.23!i.Q~!l Total $222 48S.22Z s l!i2.282.326 $ 2.231 S I.SSS.S!i!i SJ24 QJM2Q • This schedule does not include the effect of premiums or discounts . The City has complied in all material respects with the bond covenants as outlined in each issue's indenture. 56 * CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. LONG-TERM DEBT <CONTINUED> Long-tenn debt transactions for governmental and proprietary funds for the year ended September 30, 1994 are as follows: Governmental: Tax-Supported Obligation Bonds Notes Compensated Absences Total Governmental Proprietary: Self-Supported Obligation Bonds Revenue Bonds Notes Leases Compensated Absences Total Proprietary Total City-Wide: Obligation Bonds Revenue Bonds Notes Leases Compensated Absences Total City-Wide Debt Payable 10-1-93 Additions $ 39,074,525 $ 20,778,530 2,830,223 2.~62.330 IIUQ2 ~ !2.H!.QZ8 $ 2Q.822.ll2 s 98,284,227 s 15,946,470 90,023,611 74,184 2,710,064 2.5{i2,Q90 124.383 SI2H!i4.1Z6 s 16.070 853 $137,358,752 90,023,611 2,904,407 2,710,064 IO.J3L42Q $243. 128.254 $ s 36,725,000 2~l.18S l6.268.Hl!i $ ~ $ s $ s Debt Payable Deletions 9-30-94 10,624,780 s 49,228,275 2,828,081 2,142 22.123 2.66~.232 JM2~.Q~!l s !i6.!!26.3~6 10,765,220 $ I 03,465,477 4,412,084 85,611,527 74.~84 1,292,389 1,417,675 22.128 2.~82.34~ 16.~66821 s 123.1 !i8.2QB 21,390,000 s 152,693,752 4,412,084 85,611,527 2,828,081 76,326 1,292,389 1,417,675 112.321 IQ 2!i!i.284 JQ,041.82~ s 2~Q.Q~!.~64 The total long-term debt is reconciled to the total annual requirements to amortize long-tenn debt as follows: Long-Term Debt Interest Total amount of debt Add: Discounts Less: Premiums Compensated Absences Total future debt requirements $250,054,564 )53.515 702 733,271 (14,833) (10.255.284) $403,570,266 (9.!i36,846) $394,033.420 Long-term debt obligations of Civic Lubbock, Inc. at September 30, 1994 are summarized as follows: Note Payable to The Plains National Bank of West Texas, dated March I, 1990 in the original amount of$130,000, payable on de• mand, or if no demand is made, in monthly installments of$2,662, including interest at 8%, maturing April!, 1995, collateralized by Select-A-Seat equipment Less current maturities Long-tenn debt less current maturities 57 s 15,575 (I 5.57!i) s 0 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30,1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS L. ADVANCED DEFEASEMENT In: prior years, .the City deteased certain Electric Light and Power System Revenue Bonds. A portion of the proceeds of the Series 1991A Bonds were used to purchase United States Treasury Securities-- State and Local Government Series (the "Series 1991A Restricted Acquired Obligations") which were placed in an irrevocable trust to be used solely to refund that portion of the City's Electric Light and Power System Refunding Revenue Bonds, Series 1983 for payments due April 15, 1994 through April 15, 2002. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 1994, $3,320,000 of bonds outstanding are considered defeased. A_portion of the proceeds of the Series 1991B Bonds were used to purchase United States Treasury Securities--State and Local Government Series (the "Series 1991 B Restricted Acquired Obligations"), which were placed in an irrevocable trust along with an initial cash deposit to be used solely to refund that portion of the City's Electric Light and Power System Revenue Bonds, Series 1984 for payments due April 15, 1995 through April 15, 2004. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. On September 30, 1994, $4,340,000 of bonds outstanding are considered defeased. In fiscal year 1992, the City defeased certain General Obligation Bonds. A portion of the proceeds of the Series 1992 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 that portion of the Series 1983 General Obligation Bonds payments due February 15, 1994 through February 15, 2003 and the portion of the Series 1985 General Obligation Refunding Bonds payments due February 15, 1996 through February 15, .1999. Accordingly, the trust account assets and the liability fot the defeased bonds are not included in the City's financial statements. On September 30, 1994, $22,670,000 of bonds outstanding are considered defeased. On January 20, 1994, the City of Lubbock issued $9,865,000 General Obligation Refunding Bonds, dated December I, 1993. These Bonds were used to partially advance refund the following bond issues: I. $2,100,000 of Series J987.General Obligation Bonds for the payments due February 15, 1998 through February 15, 2004. 2. $3,300,000 of Series 1988 General Obligation Bonds for the payments due February 15, 1999 through February 15, 2004. 3. $350,000 of Series 1988 Combination Tax and Golf Course Revenue Certification Obligation for the payments due February 15, 1999 through February 15, 2003. 4. $3,025,000 of Series 1988 Combination Tax .and Sewer System Subordinate Lein Revenue Certificates of Obligation for the payments due February 15, 1999 through February 15, 2007. A portion ·of the proceeds 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 partially refund the listed above bond issues. As a result, these bonds are considered defeased, and the liability of $8,775,000 has been removed from the books of the City of Lubbock. As a result of the refunding, an extraordinary loss of $689,160 was recorded in the Enterprise Funds. 58 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS L. ADVANCED DEFEASEMENT <CONTINUED) COMBINED SOURCES AND USE OF FUNDS Par Amount of Bonds (Discount)/Premium Accrued Interest from December I, 1993 to December 20, 1994 Cash Contribution Total Sources Total Underwriter's Discount (0.717%) Cost of Issuance Deposit to Debt Service Fund Deposit to Escrow Fund Contingency Total Uses CALCULATION OF ECONOMIC GAIN GROSS PRESENT VALUE DEBT SERVICE SAVINGS Deposit to Debt Service Fund Cash Contribution NET PRESENT VALUE BENEFIT Savings as a % of refunded bond principal amount CASH FLOW DIFFERENCE Prior Debt Service Cash Flow: Series 1987 General Obligation Series 1988 General Obligation Series 1988 Golf General Obligation Series 1988 Sewer Certificates of Obligation Less: New Debt Service Cash Flows Reduced Debt Service Plus: Accrued Interest Less: Cash Contribution Total Reduced Debt Service 59 $3,313,875 5,763,038 537,250 5.257.787 59,254 (331.115) .. s 9,865,000 (60,668) 59,254 331.115 $10.194.701 $ 76,651 105,000 59,254 9,950,415 3.381 $10.194.701 $1,002,217 59,254 (331.115) $ 730.416 8.32% $14,871 ,950 03 574.375) 1,297,575 £271.861) $I .025.714 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNTGROUPS L. ADVANCED DEFEASEMENI <CONTINUED) On August 25, 1994, the City defeased $3,600,000 of the 1992 Tax and Waterworks Certificates of Obligation. Revenues generated by the half-cent sales tax increase approved by a vote of the citizens vote in January 1993, were used to defease these bonds, therefore no economic gain or loss exists. These proceeds were used to purchase United States Treasury Securities which were. placed in an irrevocable trust to be used solely to defease the above indicated bond issue. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. COMBINED SOURCES AND USES OF FUNDS Available Funds Total Sources Purchase price of Sinking Fund Acquired Obligations Purchase price of Defeasance Acquired Obligations Fees Total Uses Prior Debt Service Cash Flow: Less: New Debt Service Cash Flows Reduced Debt Service CASH FLOW DIFFERENCE 60 $ 3,617,000 ~ 3 §IZ.OQQ $ 1,599,000 2,014,500 3.500 ~ 3.61Z.QOQ $5,307,225 0 $5.307,225 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS M. ACCRUED JNSUMNCE CLAIMS As discussed in Note I. G., the Internal Service Fund establishes a liability for self insurance for both reported and unreported insured events, which includes estimates of both future payments of losses and related claim adjustment expenses. The following represents changes in those aggregate liabilities for the Fund during the past two years ended September 30: Worker's Compensation and Liability Reserves at beginning of fiscal year Claims & Changes in estimates Claims Payments Worker's Compensation and Liability Reserves at end of fiscal year Medical and Dental Claims Liability at end of fiscal year • Total Self-Insurance Liability at end of fiscal year Total Assets to pay claims at end of fiscal year Accrued insurance claims payable from restricted assets-current Accrued insurance claims-non-current 122.4 $4,493,086 3,263,335 (2.220 969) 5,535,452 1.892.964 s z.~2M:Hl S B.Z13.8!2S 122.4 $2,649,198 ~.112.218 SM2S.41fi *The information necessary to prepare the separate disclosure for medical and dental claims liabilities is currently unavailable. N. LANDFILL CLOSURE AND POSTCI.OSURE CARE COST 122J $2,351,617 4,185,326 (2.043.857) 4,493,086 1.915.180 S 6.4QS.2fifi S Z.ZS2.Z21 l22.l $2,410,865 3.22MQI S6.~08.2!2!2 In fiscal year 1994, the City adopted GASB Statement No. 18, "Accounting for Municipal Solid Waste Landfill Closure and Postclosure Care Costs". State and federal laws and regulations require the City to place a final 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 postclosure care costs will be paid only near or after the date that the landfill stops accepting waste, the City reports a portion of these closure and postclosure costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. The effects of the implementation have been reflected as a restatement of the beginning retained earnings of the solid waste enterprise fund as discussed in Note VI. 61 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS N. LANDFILL CLOSURE AND POSTCLOSURE CARE COST (CONTINUED) The $6,465,141 reported as landfill. closure and postclosure care liability at September 30, 1994, represents the cumulative amount reported to date based on the use of 69.8 percent of the estimated capacity of the landfill. This amount includes $454,307 and $431,592 of expense applicable to fiscal 1994 and 1993, respectively. The City will recognize the remaining estimated cost of closure and postclosure care of $2,799,259 as the remaining estimated capacity is filled. These amounts are based on what it would cost to perform all closure and postclosure care in 1994. 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, postclosure care, and remediation or containment of environmental hazards at its landfill. The City is in compliance with these requirements and has chosen the Local Government Financial Test and Government Guarantee mechanism for providing this assurance. The City expects to finance closure costs through normal operations. NOTE IV. CONTINGENT LIABILITIES A. FEDERAL GRANTS In the normal course of operations, the City receives grant funds from various Federal agencies. The grant programs are subj~:ct to audit by agents of the granting authority to insure 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.· LITIGATIQN The City is involved in lawsuits arising in the normal course of business, including claims · property damage, personal injury and personnel practices, disputes over contract awards and property condemnation proceedings, arid suits contesting the legality of certain 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, 1994. 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 ip five irrevocable trusts. These include: • a trust to be used to refund a portion of the City's Electric Light and Power System Refunding Revenue Bonds, Series 1983 • a trust to be used to refund a portion of the City's Electric Light and Power System Refunding Revenue Bonds, Seriesl984 · • a trust to be used to refund a portion of General Obligation Bonds, Series 1983 and 1985. • a trust to refund a portion of General Obligation Bonds, Series 1987, a portion of General Obligation Bonds, Series 1988, a portion of Combination Tax and Golf Course Revenue Certificates of Obligation, Series 1988 and a portion of Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation • a trust to refund a portion of Tax and Waterworks Certificates of Obligation, Series 1992. Management feels that due to the nature of these securities, there is 11 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. 62 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 1994 NOTE V. FINANCIAL INSTRUMENTS (CONTINUED) 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. NOTE VI. RESTATEMENT OF BEGINNING BALANCES Beginning fund equity has been restated to reflect the adoption of GASB Statement No.l4 and GASB Statement No. 18. Pooled cash and cash equivalents have been restated to reflect the adoption of GASB Statement No. 14. The Total (Memorandum Only) columns for 1993 were not restated as they are not considered to be financial statements. A reconciliation of the adjustments made to fund equity and pooled cash and cash equivalents is as follows: Beginning fund balance/retained earnings, as previously reported Restatement for cumulative effect of a change in accounting prin· ciple as a result of adoption of GASB Statement No. 14 ·entities included in current year reporting entity LCVB Civic Lubbock, Inc. Citibus URA-Reserve for Federal Housing Programs Restatement for cumulative effect of a change in accounting prin· ciple as a result of adoption of GASB Statement No. 18 Solid Waste Enterprise Total of restatements Beginning fund balance/retained earnings, as restated Special Revenue Funds s ~.22~.2ll4 (220,971) (220,971) $ 5.074 933 63 Expendable Enterprise Trust· Funds Funds SH8 211.ll38 s 222.362 (259,058) 2,008,964 (6,0 lll.834> (6.262.822) 2 008 964 $ 142 341.146 $ 2.938.326 Discretely Presented Component Units s 220,971 259,058 480,!}29 $ 480029 CITY OF LUBBOCK, TEXAS . Notes to Financial Statements September 30, 1994 NOTE VI. RESTATEMENT OF BEGINNING BALANCES (CONTINUED) Contributed Capital, previously reported Restatement for cumulative effect of a change in accounting prin· ciple as a result of adoption of GASB Statement No. 14 Citibus Total of restatements Beginning contributed capital as restated Beginning fund equity as restated Pooled cash and cash equivalents, as previously reported Restatement for cumulative effect of a change in accounting prin· ciple as a result of adoption of GASB Statement No. 14 Civic Lubbock, Inc. Citibus Total of restatements Pooled cash and cash equivalents, as restated $ Special Revenue Funds s 5.074.933 s $ NOTE VII. SUBSEQUENT EVENTS Enterprise Funds $119,069,880 (3.365.55)) (3.365.55)) $~58 045 475 $112,627,382 (79.939) (289,698) (369.637) $112.257,745 A. MANAGEMENT AGREEMENT FOR GOLF OPERATIONS . Expendable Discretely $ Trust Presented Funds Component Units $ 3.365.551 3.365.551 $ 2.938.326 3 365.551 $3.845.580 s $ $ 79,939 289,698 369,637 $ 369.637 On October 14, 1994, the City contracted with Fore Star Golf, Inc. for management services to be provided for the City's golf operations. The management agreement is effective from October 14, 1994 through December 31, 2014. Over the term of the contract, payments will be made according to a sliding scale. In return for payments, the golf course will receive certain capital and noncapital improvements. As a provision of this contract, Civic Lubbock, Inc. will provide concession services at the golf course through December 31, 1994, at which time Fore Star Golf, Inc. assumes responsibility. 64 ENTERPRISE FUNDS The Enterprise Funds are used to account for the operations of the City financed and operated in a manner similar to private business enterprises, where the intent is costing goods or services to the general public on a continuing basis to be recovered in whole or part through user charges. Electric Fund -To account for the operations of the City owned electric system. Water Fund-To account for the operations of the City's water system. Sewer Fund-To account for the operations of the City's sanitary sewer system. Solid Waste Fund -To account for the operations of the City's landfills and its solid waste collection system. Airport Fund-To account for the operations of Lubbock International Airport. Golf Fund-To account for the operations of Meadowbrook Golf Course. Stormwater Fund -To account for the operations of the stormwater utility which provides stormwater drainage for the City. 65 CITY OF LUBBOCK, TEXAS ENTERPRISE FUNDS COMBINING BALANCE SHEET September 30, 1994 With Comparative Totals for September 30, 1993 Totals ~ Eledrle Water Sewer Solid Waste Airport Golf Slormwaler Civic lubbod<, C~ibus Fund Fund Fund Fund Fund Fund Fund Inc. Fund 1994 1993 Currem assets; Pooled cash and cash equivalents $ 7,919,868 s 2.469,867 s 3,580,771 $ 709,554 $ 209,060 $ 350 $ 23,998 s . s • $ 14,913,468 $ 12,781,823 Ac:counts and notes receivable (net) 4,527.290 1.930.542 978,602 827,310 22 ... 606 8.488,350 8.135.161 Interest receivable 197.896 194,274 69,836 35,485 4,213 501,704 473.569 Due from other governments 251,977 251,977 608,822 Pn!paid expenses 5,574 5,574 30,138 Inventory, at cost 127,873 25.643 153,516 559.317 T olal c.urrent assets 12,645,054 4,974,533 4,629.209 1.577,923 437.879 25,993 23,998 2 ... 314,589 22,588.830 Restri<;ted assets: Customer depos~: Pooled cash and cash equivalents 29,710 337,183 5,100 371,993 391.491 Ulilitydepos~: Accounts receivable 3,771 3,171 4,071 Economic developmenl: Pooted cash and cash equivalents 787,008 767,008 968.602 Interest receivable 8,722 8,722 8.506 : •ro rata construdion: Pooled cash and cash equivalents 364,725 652.371 1,017,096 1.240.727 Accounts and interest receivable 41,168 33.711 74,879 70,320 Capital projects: Pvol·!d cash and cash equivalents 10.830,180 17,917.913 5.272.1-47 3,954,831 87,789 44,037 1,493.515 39,580,412 63.987,778 Per"•anent capital maintenance: Pooled cash and cash equivalents 5,487,735 1,121,358 1,183,581 610,050 104.727 8,599 8,514,050 9,940.165 Interest receivable 5.607 2,860 8,487 7,623 0' System improvement: 0' Pooled cash and cash equivalents 42,560 2,409.815 1,539,750 . 48,990 4,039,115. 4.759,520 Interest recei""ble ~28 428 13.565 Rate stabitizatlon: Pooled cash and cash equivelents 3,553,504 5,396.091 8,949,595 7,963,593 Passenger facifity charge c::apitat projects: POOled cash and cash equivalents 3,963,206 3,963,206 Accounts and interest receivable 4,950 4,950 0 ovenue bOnd CUITenl debt sennces: Pooled cash and cash equivalents 8,617.90-4 1.015,453 7,633,357 6,294,352 Interest receivable 93.982 93,982 90.207 Revenue bOnd future debt services: Pooled cash and cash equivalents 3,413,183 2.453,649 300,000 8,166,832 4,321,331 Interest receivable 12.61!2 12.662 13,371 Total restricted assets 27.290.984 25.749,437 18.543,962 4,569.981 5,529,150 1,493.515 81,230,525 100.053.222 Advance to other funds 1,765.513 1.210.499 2.976,012 2,978.012 Deferred charge 1.770,032 1,770.032 1.718,821 Property. plan I and equipment: Land 456.640 1,384,876 12.435.092 377.024 11.296;905 114.910 21!,065,447 26,488.922 Buildings 5.222,338 4.601.116 161.702 27,099 26.628.055 189,184 36.829.494 36.570,118 Improvements other than buildings 117.659,432 84.668.402 41,003,058 528.493 31,163,31!2 1,071.102 49.486 278,1-43,315 268.808,329 Machinery and equipment 4.325,209 5,307,815 3.087,729 15,228.097 2.631.720 655.535 69.799 31,305.90-4 32.522.304 Coostruction in progress 8.792.901 77,487,257 51,323.709 7.218.128 8.161.027 6.892 152,989,914 121.895,949 Allowance for depreciation {47,676,076) {29,755.069) (20.213,043) (11,314,404) (35,273.262) (1.035,471) (7.750) -----{145.275,075) (141.494,481) Net property, plant and equipment 88.780.444 143,694.397 87,798,247 __ 12,06(437 ~7.807 995.260 118.407 378.058,999 -~44.791.!·~- Other assets: Water rights 32,905.862 32,905,862 32.905,862 Allowance for amortization (10.065.323) (10.065.323) (9.678.195) Net other assets 22.840,539 22.840,539 ----23;227.667 T olal assets s 132,252,027 s 198,469,405 $ 108 971 418 $ 18,212.341 $ $ $ • $ -----$ 511,190,!l!llJ, $ ..:-,}95~3~2.,69_3c CITY OF LUBBOCK, TEXAS ENTERPRISE FUNDS COMBINING BALANCE SHEET SepbnnbPr30,1994 With Comparallft Totals for SeptembPr 30, 1993 To!alll L!lbili!ies and ftJnd Egultx; Eledrie Water Sewer Solid Waste Allport Golf SIOI'mwater Civic lubbock. Citibus Fund Fund Fund Fund Fund Fund Fund In<:. Fund 1994 1993 CUITefll fiabilities: Accounls and wur:t~ers payable $ 2,632,198 $ 74,537 $ 51,987 $ 63,672 $ 26,482 $ 28,745 $ 6,344 $ • $ • $ 2,883.965 $ 3,6(5,<494 Due lo other funds 500.000 1,350.000 1.850,000 2.425,000 Aa:ruedgeneral obligation interest 779.734 400.203 27,098 4.658 1,211.693 1.290.871 Other aocrued expenses 212,575 133,380 58,395 124.525 55.519 10,722 1.494 596,810 937,840 Current portion of general obligatiOn bonds and conslrUction obligation payable 5,339.314 4,988,592 568,056 305,000 50.569 11.251.531 5.899.099 T o1a1 current Mabilities 2.844,773 6,326,965 5,499,177 1.283,351 367,001 1,444.694 7,836 17,793,799 14.198.104 liabilities payable from reslrided assets: Acoounls and wur:t1ers payable 196.526 130,717 379,661 612,055 192,153 1,511,11( 491.380 Oeletrl!d revenue 15,825 Aa:rued Interest 1.040.923 10.543 1.051.466 1.100,669 Cooent re-bonds payable 3,840,933 730.574 90.000 4,461.507 4.421,507 COB!omer deposits 29.710 337,183 5,100 371,993 391.491 T otalllallillties (payable from reslrided !ISseiS) 4.908.094 1,198.474 379,661 617,155 292.696 7,396.080 6,420.872 Long-term liabilities: Rewnue bonds (net of curren1 portion) 28,036,885 52,841,155 270,000 81,150.020 85.602,104 o-Advance from other funds 397,600 397.600 397.800 ...... Adv8nOe from other IIIJIIIIdet 70.000 Contrads payable • pro rata 522.314 495.355 1.017,689 858,477 Constnor:lion obliglltion payable 23.099.024 23.099.024 23.823.531 General ,.: igation bonds · (net of current portion) 25.694,966 57,873,918 2,900.341 5,870,000 539.431 92.818,6e6 93,078,578 Notes and •-payable 89,331 8$,331 1.002.311 . "~vacation and sidt leave 1.201:1.213 440,845 92.521 248,187 253.017 2.355 2.734 2,245,872 2.227,398 Landfill cloture and poslcloSure Cln! cost. . 6,485,141 8,465,141 T clallong-lelm Habillties 29.245,078 102,598,304 58,461,794 10,080,800 8,393,017 541,786 2,734 207,323,313 207,055,999 T olalllabillties 36,997,945 110,123,743 6(,340.632 11,981.106 7,072,714 1,986.480 10,572 232,513,192 227,874,775 Fund equity; Conllibuled c.apitlll 8,106,183 34,428.550 23.622.612 4,780,019 47,321,721 89,661 118,346,746 119,069,880 Retained ellllWngs: ReMM!d lor economic development 775,730 775,730 975,108 Reserved lor C8pllal projf!ll;b 10,827,118 17.800,022 4,993,807 3,342,776 3.863,792 44,037 1,493,073 42,264.825 83,706.818 Reserved lor ~nt capiiiJI maOnlenllnc:e 5,325,487 1,120,751 1,183,581 610.050 110.334 9,459 8,359,862 9,843,367 Reserved lor system irrlpriM!menls 11,342 2,407,930 1,539,750 47,418 4,006,440 4,653,618 Reserved for rate stabilization 3,553,504 5,396,091 8,949.595 7,963,593 Resenoed per bond lndenltns 5,449,146 2.466,311 1,304,910 9,220,387 5,888,592 Unreserved 64,759,076 29,036.905 5.528,634 (2.501,610) (9,146,053) (1,054.888) 132,275 86,754,339 55,579,944 T olal retained eamlngs 87,147,899 53.919,112 21.008,174 1,451,216 (3,819,599) ( 1.001,392) 1,625,348 160,330,758 148.611,036 Tclal fund equity 95.254,082 81!1,345,862 44,630,786 8,231.~5 43,502.122 (911,731) 1,625,348 278,677,504 287.680,918 T clal labilities and fund equity s 132,252,027 $ 198,469,405 s 108,971,418 $ 18,212,341 $ 50,574,836 $ 1,!!74.749 s 1,635,920 s -s - $ 511,190,896 $ 495,355,69l, CITY OF LUBBOCK, TEXAS I!:NTeRf>RISI! FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES 1H FUND EQUITY/RETAINED EARNINGS Yur Ended Sept.mber 30, 1994 With Comparative Totals for Ye•r Ended Sept.mber 30, 199S Totals Eleclrlc Water Sewer SolidWaSie Airport Got! Slormwater Civic lubbock. Cilibus Fund Fund Fund Fund Fund Fund Fund InC. Fund 1994 1993 ()pe!ating revenues: Chlllll'" lor services $ 54,529,457 s 27.706.534 s 11.764.106 s 10,772,887 s -s -s . s -s -$ 104,772,964 s 98.118.864 New taps and II!C:OIVIeCis 272.969 272,969 259,904 Ellklent water sales 170,730 770.730 466,954 Commodity sales 502,321 502,321 515,750 landing fees 579,274 579,274 692,051 P811dng 1,393,640 1,393,640 1,285,899 Greenlees and memberships 282.959 282,959 412,864 Pro shop sales 56.115 !56,115 69,588 Rentals 1,374,755 131,645 1,508,400 2,675,959 ConcesSion$ 786,786 788,786 105,637 Total openttlng revenues 54,529,457 27,979,503 13,037,157 10,772.867 4.134.455 470,719 110,924,178 104,603,470 Operating elq)Mses: ~services 6,609,920 3.762,755 1,642,412 2,616.102 1,378,867 455,383 123,703 18,789,142 18,893.137 Supplies 475,988 774,644 577.761 399,017 104,761 249,286 10,906 2.592.363 2.522,290 Mainlenanee 914,779 627,035 517,420 2,118,876 271,046 66,061 8.502 4,521,719 5,211,640 IJneolle<;lible ac:counts 412,527 232,602 83,394 81,634 810,157 839,851 Purdlillse of fuel and power 29.939.648 29,939,648 28.403,182 Cofledion expense 1.225,897 153,212 153.212 • 1.532,121 1,610,250 other services and c:hatges 3,372.212 4,043,822 1,768,292 816,818 1,508,680 96,582 12.508 11,818,912 11,622,759 Oep•<·ciation and amor!ization 4,062.156 2.292.385 1,798,452 1.104.235 1,690,801 102,190 7,557 11.057,576 10,225.296 T olal operating expenses 45,787,430 12,958,940 8,740,943 7,289,894 4,953,955 969,502 161,174 . 78.861,838 79.128,405 (jperaling i~ (loss) 8,742,027 15,020.563 6,296,214 3,482,993 (819,500) (498,783) (181,174) 32,062,340 25,475.065 Nonoperating revenuoes (elq)MseS): 0' Interest 1,494,298 1,351,334 1,334,299 252.009 176,821 15,971 4,624,732 5,481,081 00 Disposition of properties (10,401) 13,937 7,917 52,083 32,098. 37,218 <9.9m 122,875 (387,557) Miscellaneous. Income 1,586,368 (21.118) 3,541 49,856 101,010 10.359 1,729,814 ·2.680.978 Interest on bonds and notes (2.358,371) (5,654,042) (2,453,751) (238,755) (206,327) (29,881) (10,937.107) (10,331,964) Cash gnonls and reimbursements 1,606,687 Total nonoperating revenues (expenses) 713,892 (4,309.889) (1 '107,994) 116,993 103,802 33,687 (9,977) (4,459,686) (990,775) Income (loss) before operating lnm!lftn 9,455,919 10,710,674 5,188,220 3,599,988 (715.898) (485,096) (171,151) 27,802,654 24,464,290 Transfers: O~raling lnm!lfers in 5.099,783 5,829.352 69.206 1.796.499 12,794,640 10,641,022 "'perating lli!lnsfers out (6,21 0,203) (8,978,275) (5, 793,586) (618,859) (489,547) (169,510) (22,237,980) (21.185,537) Totallli!lnsfers In (ouf) (6,210.203) (3,876,492) 35,768 (618,659) (469,547) (100,304) 1,796.499 (9.443,140) (10,344,515) Net Income (loss) before eJdraoldlnaoy item 3.245.718 6.834.182 5.223,986 2,981,127 (1.185,445) (565,400) 1.625,348 16.159,514 14,139,775 Extraordlnaoy item-lou on E!ldinglllshment of debl 219,826 434,332 26,128 35,000 715,288 . Net income(loss) 3.245,716 6,614,354 4,789,854 2,981,127 (1,211,573) (800.400) 1,625.346 17,444,228 ~9.775 Depredation on fixed assets acquired by contributions 8,455 9,379 523,784 3,788 545,388 796,634 Reli!lined earnings at beginning of year as previously repotted 83,902,183 47,296,303 16,209,141 4,480,923 (3.131,610) (404.780) 259,058 148,811,038 133,&46.539 Change in aa:ount1ng princill!e (Note VI.) (6,010,634) (259.058) (6,289,892) Retained earning! at beginning of year as restaled 83.902.183 47,296.303 16,209.141 (1,529,911) (3,131,810) (404,780) 142,341.146 133.&46.539 Residual equity lli!lnsfer in 27.890 Reli!lined earnings at end of year 87,147,699 53.919,112 21,008.174 1,451.216 (3.819,599) (1,001,392) 1,625,348 160,330,758 148,611,038 Contlibutions at beginning of year as previously repotted 7,917,922 34,051,253 23,054,159 4,594.732 45.992.834 93,429 3,365.551 119,069.880 t13.383.400 Change In accounting plinciple (Note VI.) {3,365.551) (3.365,551! Contributions at beginning of year as restated 7,917,922 34,051.253 23.054,159 4,594,732 45,992.634 93, .. 29 115,704,329 113.383,400 Capital conlribulions 188.261 383,752 577,832 185.267 1,852.671 3,187,803 6.676.567 Residual equity transfer out (.,.., .. ..,,.~-. CITY OF LUBBOCK, TEXAS ENTERPRISE FUNDS COMBINING STATEMENT OF CASH FLOWS Year Ended Se~mber 30, 1994 Wiltl Compamtve Totals for Year Ended ~mber 30, 199S Electric Water Sewer Solid Waste Airport Golf Stormwater CM<: Crtibus Tollls Fund Fund Fund Fund Fund Fund Fund lubbock, Inc. Fund .199-4 1993 Cash flows from operating activrties: Operating income ~oss) s 8,742,027 s 15,020,563 s 8,296,214 s 3,482,993 s (819,500} s (498,783) s (161,174) s • s -s 32,062,340 s 25.475.065 Adjust~Mnts to reconcile net income ID net calli from operating acti¥ilift: Depreciation and Amortization 4.062,156 2.292.365 1,798,452 1,104.235 1.600.601 102.100 7,557 11,057,576 10.217,179 Other income 1,566.366 (49,618) 3,541 49.656 101,010 10,359 1,701,314 2,647,500 Increase (decrease) in long-term payables not requiring cash flow 46.949 (733,922) (8,709) 430,843 35.740 (13,111) 2.734 (239,475) (9e6.808) Change in current aS$81$ and liabilities: Accounts receivlble (271.104) (287,417) (138.453) (106,162) 106.485 (896,711) (1.382,138) lnvenlory 200.192 (62.404) 7,8ll!l 145.676 30.3211 Due from oltler governments 356,845 356,845 (396,195) Prepaid expenses (5,574) 6.344 170 (11,2401 Account!~ payable 63,453 (178,906) 270.275 565.939 153,1n 5,207 1,494 000,632 284,014 Due ID oltler funds (725.000) 150,000 (575.000) 33,869 Other accrued espanses (57.0101 (14.2114) (2.064) (1211,409) (12.7101 (6_003) (218.480) (3,561) Sales tax payable (75.941) (75,941) (14,724) Customer deposrts (3,650) (18.563) 715 (19,498) (11,325) Oefemld-ue (548,754) Net cash pr<Wided (used) by oparaling ac!Mties 14,293,432 16.326.637 8,219,236 5,414,236 531,798 (242.253) (143,045) 44,400,041 35,315,605 Cash flows from capital and related financing aetMties: Payment for gn l'elleM!'J {51,211) (51,211) Pun:hase ol property, plant and equipment (8.728,757) (13,204.017) (17.635.417) (5,541,357) (3,475.760) (63,259) (135,941) (46.984,!i06) (61.505.6301 Sale ol property, plant and equipment 39,060 51.610 35,621 -40,220 32.098 3,319 202,154 8.519 Payments on teases (59,106) {59,106) (70.956) a--Princip~ paid on rewnue bonds (3.6-40.000) (682.064) (116,125) (4,438,212) (4,678.4001 "' Interest paid on rewnue bonds (2.400. 768) (4,055,457) {211,133) (!I.M7.3Se) (8,631, 180J Principal paid on general obligation bonds (3, 106,685) (1.426,862) (564.592) (40.000) (5,1-40,319) (4.937,659} tnte,..~! 10<1;d on general obr.gation bonds (1.635,150) (2,491,'167) (240,531) (30,683) (4,396,131) (3.884,428) Issuance.,: general and cellilieale of obr.galion bonds 1,641,000 1,835,000 8,175,000 9,651,000 14,460.000 Principal paid on long-term ck>bt 148,941 148,!141 (84,428) •ntel1!st paid on long-term ~bl (9,535) ;ontribuled capital 1,852,671 1.652,871 4,439,101 Net calli used for caprtal and related financing ac1Miies: (12,761,656) {20,844.022) (19,663.219) (6,365,366) 4,256.748 !130,623) (135.941) (55,884,081) (82,838,1114) Cash flows from noncapitll and related financing actillilies: Operating transfers in from oltler t'un<K 5.099.783 5,829,352 69.206 10,998,341 10,846,55t! Operating transfers out ID other funds (6.210.203) (8,978.275) (5. 793,568) (616,659) (4811,547) (169,5101 (22.237,9801 (21,196,189) Payment on a.:Mtnce from general fund 1,796,499 1,796,499 (18,511) Cash grants and reimburSements 1,606.887 Nel cas~ ~ (used) for noncaprtal and related financing ac!Miies: (6.210,203) (3,876, 492) 35,768 (818,65~ (469.54?.! !100,304) 1,796.499 (9,443,1401 (8,759.45?.! Cash now& from ;,...sting adMties: Interest earnings on cash and investments 1,460.605 1,347,449 1,334,122 2.C9,547 178,339 15,305 4,605,567 8.253.568 Net cash pr<Wided by irM!Sting activities 1,460,605 1,347,449 1,334,122 249,547 178.339 15.305 4.605.567 6,253.568 Net increase (decl1!ase) in pooled cash and cash equivalents (3,217,622) (7,048,428) (10,294,095) (1,320,444) 4,497,339 (457,875) 1,517,513 (18,321,813) (30.026.260) Pooled cash and cash equivalents II beginning of year u previously "'ported 38,325,770 35,220.793 30,372,455 8,599,979 1.229,887 506,681 289,698 79.939 112,827,362 142,653,682 Change in accounting principle (See Note VI.) (289,898) (79.939) (369.637) Pooled cast> and cash equivalents at beginning of yeat as restated 38,325,770 35.220,793 30.3n.4ss 8,599.979 1,229.867 506,881 112,257.745 142,653,662 Pooled cash and cash equivalents at end of year $ 35,106,146 s 26,174,365 s 20,078,360 s 5,279,535 s 5,727,2;15 s --Si:)986s 1 517 513 s . s 95936132 s 112,!!;!7,38;l Supplemental cash flow information: Cash paid during fiscal 1994 for interest -• $11,065,4811. miS PAGE LEFT BLANK INTENTIONALLY APPENDIX C FORM OF BOND COUNSEL'S OPINION -THE BONDS THIS PAGE LEFT INTENTIONALLY BLANK TE:LE:PHON E: 214/SSS·SOOO FACSIMILE: 214/SSS-8200 FULBRIGHT & JAWORSKI L. L. P. A REGISTERED LIMITED LI .... BILITY PAFITNEFISHIP 2200 ROSS AVENUE SUITE 2800 DALLAS, TEXAS 75201 ____ _,1995 HOUSTON WASHINGTON, O.C. "'US TIN SAN ANTONIO CALLAS NEW YOFIK LOS ANGELES LONOON HONG KONG WE HAVE EXAMINED into the legality and validity of the issuance of the "City of Lubbock, Texas, Electric Light and Power System Revenue Refunding Bonds, Series 1995" (the "Bonds"), dated June 15, 1995, in the aggregate principal amount of $13,560,000 by the City of Lubbock, Texas (the uCity"), which Bonds are issuable in fully registered form only, have stated maturities of April15, 1996 through April15, 2008, unless redeemed in accordance with the provisions stated on the Bonds, and interest thereon accrues from the dates, at the rates, in the manner and is payable on the dates, all as provided in the ordinance authorizing the issuance of the Bonds (the "Ordinance"). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Bonds under the Constitution and laws of the State of Texas, the release and discharge of the lien on and pledge of the revenues securing the payment of the obligations being refunded by the Bonds, and with respect to the exclusion of the interest on the Bonds from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City or the City's electric light and power system and have not assumed any responsibility with respect thereto. OUR EXAMINATIONS into the legality and validity of the Bonds included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, the "Special Escrow Agreementu (the "Escrow Agreement") between the City and Norwest Bank Minnesota, National Association, Minneapolis, Minnesota (the "Escrow Agent"), a report of KPMG Peat Marwick, Certified Public Accountants (the "Accountants"), a transcript of certified proceedings of the City relating to the authorization and issuance of the Bonds, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Bonds executed and delivered initially by the City, which we found to be in due form and properly executed. BASED ON OUR EXAMINATIONS, IT IS OUR OPINION that the Escrow Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution, and delivery thereof by the Escrow Agent, is a binding and enforceable agreement between the parties thereto in accordance with its terms (except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights Page 2 of Legal Opinion of Fulbright & Jaworski L.L.P. Re: $13,560,000 "City of Lubbock, Texas, Electric Light and Power System Revenue Refunding Bonds, Series 199511, dated June 15, 1995 or the exercise of judicial discretion in accordance with general principles.of equity).and the outstanding obligations being refunded, discharged, paid and retired with the proceeds of the Bonds, and the terms of the respective ordinances authorizing their issuance, have been defeased and are regarded as being outstanding only for the purpose of receiving payment from the cash and investments, including the income therefrom, held in trust by the Escrow Agent pursuant to the Escrow Agreement and in accordance with the provisions of Article 717k, V.A.T.C.S., as amended. In rendering this opinion, we have relied upon the verification of the Accountants as to the sufficiency of cash and investments deposited with the Escrow Agent for purposes of paying the obligations being refunded with the proceeds of the Bonds and the interest thereon. IT IS FURTHER OUR OPINION that the Bonds have been duly authorized by the City in accordance with the Constitution and laws of the State of Texas now in force, and the Bonds issued in compliance with the provisions of the Ordinance are valid and legally binding special obligations of the City, in accordance with the terms thereof, and, together with the outstanding Previously Issued Bonds (identified and defined in the Ordinance), are payable solely from and equally and ratably secured by a lien on and pledge of the Net Revenues (as defined in the Ordinance) of the City's Electric Light and Power System, 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. The City has reserved the right, subject to satisfying the terms and conditions prescribed in the Ordinance, to issue additional parity obligations payable from the same source and equally secured in the same manner as the Bonds. IT IS FURTHER OUR OPINION that, assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and certifications of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Bonds and the report of the Accountants, 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 hereof, of the owners thereof pursuant to section 103 of such Code, existing regulations, published rulings, and court decisions thereunder, and (2) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Bonds, owned by a corporation will be included in such corporation's adjusted net book income, or adjusted current earnings, for tax years beginning after 1989, for purposes of calculating the alternative minimum taxable income of such corporations, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit (REMIC), or a real estate investment trust Page 3 of Legal Opinion of Fulbright & Jaworski L.L.P. Re: $13,560,000 "City of Lubbock, Texas, Electric Light and Power System Revenue Refunding Bonds, Series 1995", dated June 15, 1995 (REIT). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax and the environmental tax imposed by Sections 55 and 59A of the Code, respectively, will be computed for tax years beginning after December 31, 1986. WE EXPRESS NO OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income tax credit, 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. THIS PAGE LEFT INTENTIQNALI. Y BLANK APPENDIXD SPECIMEN OF MUNICIPAL BOND GUARANTY INSURANCE POLICY ·THIS PAGE LEFT INTENTIONALLY BLANK .IMBIA FINANCIAL GUARANTY INSURANCE POLICY MBIA Insurance Corporation Armonk, New York 10504 Policy No. [NUMBER] MBIA Insurance Corporation (the "Insurer''), in consideration of the payment of the premimn and subject tD the tenns of this policy, hereby oocooditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the Issuer to (PAYING AGENTffRUSlEEJ or its successor (the "Paying Agent") of an amount equal tD (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant tD a mandatory slllking fi.md payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any accelenltion of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other tban any advancement of marurity pursuant tD a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (u) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment coostit:utes an avoidable preference tD such owner within the meaning of any applicable bankruptcy law. The amounts referred tD in clauses (i) and (u) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean: (PAR) (LEGAL NAME OF ISSUE) Upon receipt of telephonic or telegraphic notice, such notice subsequendy confinned in 'Writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with State Street Bank and Trust Company, N.A., in New Y Ol:k, New Y Ol:k, or its suc:cessor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and Sl.ln'etlder of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of the Insured AmoWlts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such inslruments being in a fonn satisfuctDry to State Street Bank and Trust Company, N.A., State Street Bank and Trust Company, NA shall disburse to such owners, or the Paying Agent pa:Yment of the Insured Amounts due on such Obligations, less any amOWlt held by the Paying Agent for the payment of such Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or 211y party whose agreement with the Issuer constitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Annonk, New York I 0504 and such service of process shall be valid and binding. This policy is non<:anceUable for any reason. The premimn on this policy is not refundable for any reason including the payment prior to matllrity of the Obligations. IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in fucsimile on its behalf by its duly authorized officers, this [DA YJ day of [MONTH, YEAR]. COUNTERSIGNED: MBIA Insurance Corporation Resident Licensed Agent Attest: City, State Assistant Secretary I>ISCLOSURE OF GUARANTY FUND NONPARTICIPATION: In the event the Insurer is unable: to fulfill its contractual obligation under this policy or contract or application or certificate or evidence of coverage, the policyholder or ccrtificatcholdcr is not protected by an insurance guaranty fund or other soh ency protection arrangement. Sll).RC'i-TX.f> 4195 WIS PAGE LEFT INTENTIONALLY BLANK - qzt5 THE STATE OF TEXAS COUNTY L K Before m Notar. Pu 1i · and for Lubbock County, Texas on this day personally appeare :\ t of the Southwestern Newspa- pers Corporation, publishers of the Lubbock Avalanche-Journal -Mornin , and Sunday, who being by me duly sworn did depose and say that id ne sp as been published continuously for more than fifty-two weeks pri- or to the first insertion of this ~~PL~~m~:....------------------------ _a...;!!::JL-'ol-!..l!:-.L---at Lubbock County, Texas and the attached print- f the original and was printed in the Lubbock Morris Communication Corporation Subscribed and sworn to before me thi ..... s --~...;;;;_-_ ___,d~a~y~o:mf~{J~e;~J~,zl~-~-~=~~f"19 Cjl:., .~ ... *t~)~~ PATTI TATE FORMS8-10 ~~S,i4_!!U AN ORDINANCE AUTHORIZ· lNG THE ISSUANCE OF S13.50!ACG "CITY OF LUIBOCK, : TEXAS. ELECTRIC LIGHT AND : POWElliYlTEM RI!YINUE 1111!• tUNDING IONOI, URIIU t91"1 P'RIUCRitiNG TH!f ORMii Tl!lltMI: AND PROVr• liONS OP SAID IONDSI PLI!DG· lNG THE NIT REVENUES OP THE CITY'S ELECTRIC LIGHT AND POWER IYSTI!M TO THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON SAID IDNDSI ENACTING PROVI• liONS INCIDENT AND RI!LAT• 1!0 TO THE ISSUANCE, PAV• MENT, SECURITY, SALE AND DELIVERY OF SAID BONOS, IN- CLUDING THI! APPROVAL AND DIITIItiiUTION OF AN OFF I• CIALSTATI!MI!NT PERTAINING THERETO, THE APPROVAL OP A PAYING AGENT/REGISTRAR AGRei!:MENT, THI! APPROVAL I OF A PURCHASE CONTRACT, THE APPROVAL OF A SPECIAL ESCROW AGRI!IIMENT, EXER· CISING THE CITY'I RIGHT TO OPTIONAL\.Y RI!DEI!M ITS OUTITANDING II!RII!I 1976, SE· RII!S ltl7, ANO II!RIE$1918 ELECTRIC LIGH'r AND POWER IVSTI!M REVENUE &ONDS, AND PROVIDINO AN I!FP'EC• TIVI! DATI!. ------·----·· Notary Public, State of Texas ~ COillnliSSion Expires *••• . .:..,;.•co• . 7.QS.200Q No Text