HomeMy WebLinkAboutOrdinance - 2005-O0054 - Waterworks System Surplus Revenue Refunding Bonds, Series 2005 43.080,000 - 07/01/2005ORDINANCE NO. 2005-00054
INCLUDED IN TRANSCRIPT UNDER TAB 1
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TRANSCRIPT OF PROCEEDINGS
pertaining to
$43,080,000
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFFUNDING BONDS
SERIES2005
Vmson &Elkins
An"ORNEYS AT LAW
VIHSOH & BJ(IHS L.L.P.
3700 TRAMMELL CROW CENTER
2001 ROSS AVENUE
DALLAS, TEXAS 75201-2975
TELEPHONE (214) 220-7700
VOICE MAIL (214) 22:0-7999
FAX (214) :zzo.ms
)
$43,080,000
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING BONDS
SERIES2005
TABLE OF DOCUMENTS
DOCUMENT TAB NO.
I. BOND DOCUMENTS
1.1 Certified Ordinance Providing for the Issuance of the Bonds 1
1.2 Pricing Certificate 2
1.3 Resolution Authorizing Refunded Bonds 3
1.4 Certified Defeasance Resolution 4
1.5 Paying Agent/Registrar Agreement 5
1.6 Preliminary Official Statement 6
1.7 Official Statement 7
1.8 Purchase Contract 8
1.9 Deposit Agreement Relating to Refunded Bonds 9
1.10 Specimen Bonds 10
1.11 Insurance Commitment 11
1.12 Insurance Policy 12
II. CERTIFICATES. LETTERS AND RECEIPTS
2.1 General and No-Litigation Certificate 13
2.2 Signature Identification of Paying Agent 14
2.3 Instruction Letter to Bank 15
2.4 Attorney General/Comptroller Instruction Letter 16
2.5 Affidavit of Publication ofNotice of Redemption 17
2.6 Federal Tax Certificate 18
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2. 7 Form 8038-G and Evidence of Transmittal
2.8 Receipt and Delivery Certificate of Paying Agent/Registrar
2.9 Certificate of Insurer
2.10 Rating Letters
2.11 Certificate Pursuant to Purchase Contract
2.12 Hedge Agreement Termination Payment Confirmation
DI. OPINIONS
TAB NO.
19
20
21
22
23
24
3.1 ApprovingOpinionofBond Counsel 25
3.2 Supplemental Opinion of Bond Counsel 26
3.3 Opinion of Attorney General and Comptroller's Registration 27
Certificate
3.4 Opinion of Insurer's Counsel 28
3.5 Opinion of Underwriter's Counsel 29
3.6 Opinion of City Attorney 30
3. 7 Reliance Letter 31
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MINUTES AND CERTIFICATION PERTAINING TO
PASSAGE OF AN ORDINANCE
STATEOFTEXAS §
COUNTY OF LUBBOCK §
CITY OF LUBBOCK §
On the 26th day of May, 2005, the City Council of the City of Lubbock, Texas, convened
in a regular meeting at the regular meeting place thereof: the meeting being open to the public
and notice of said meeting. giving the date, place and subject thereof, having been posted as
prescribed by Chapter 551 , Texas Government Code, as amended; and the roll was called of the
duly constituted officers and members of the City Council, which officers and members are as
follows:
Marc McDougal, Mayor
Tom Martin, Mayor Pro Tern
Linda DeLeon
Floyd Price
Gary 0 . Boren
Phyllis S. Jones
Jim Gilbreath
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Members of
the Council
and all of said persons except Linda DeLeon were present, thus constituting a quorum.
Whereupo~ among other business, a written Ordinance bearing the following caption was
introduced:
AN ORDINANCE OF THE CI1Y COUNCIL OF THE CI1Y OF LUBBOCK,
TEXAS, AtiTHORIZING THE ISSUANCE OF CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING
BONDS, SERIES 2005, IN AN AMOUNT NOT TO EXCEED $48,000,000;
PROVIDING FOR THE AWARD AND SALE ffiEREOF IN ACCORDANCE
WITH SPECIFIED PARAMETERS; LEVYING A TAX AND PLEDGING
SURPLUS WATERWORKS SYSTEM REVENUES IN PAYMENT TiiEREOF;
PRESCRIBING THE FORM OF SAID BONDS; APPROVING EXECUTION
AND DELIVERY OF AN ESCROW AGREEMENT AND A BOND
PURCHASE AGREEMENT; APPROVING THE OFFICIAL STATEMENT;
ENACTING OTHER PROVISIONS RELATING TO mE SUBJECT; AND
DECLARING AN EFFECTIVE DATE
The Ordinance, a full, true and correct copy of which is attached hereto, was read and
reviewed by the City Council. Thereupo~ it was duly moved and seconded that the Ordinance
be passed and adopted.
The Presiding Officer put the motion to a vote of the members of the City Council, and
the Ordinance was passed and adopted by the following vote:
AYES: 6
NOES: 0
ABSTENTIONS: 0
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MINUTES APPROVED AND CERTIFIED TO BE TRUE AND CORRECT~ and to
correctly reflect the duly constituted officers and members of the City Council of said City, and
the attached and following copy of said Ordinance is hereby certified to be a true and correct
copy of an official copy thereof on file among the official records of the City, all on this the 26th
day of May, 2005.
[SEAL]
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Ctty ecretary
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ORDINANCE
relating to
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
Adopted: May 26, 2005
Section 1.1
Section 1.2
Section 1.3
Section 1.4
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER PRELIMINARY MA TIERS
Definitions ............................................................................................................... 2
Findings ................................................................................................................... 6
Table of Contents, Titles, and Headings ................................................................. 6
Interpretation ........................................................................................................... 6
ARTICLE II
SECURITY FOR THE BONDS; INTEREST AND SINKING FUND; PRIOR LIEN,
PREVIOUSLY ISSUED AND ADDITIONAL OBLIGATIONS
Section 2.1
Section 2.2
Section 2.3
Section 2.4
Section 2.5
Section 2.6
Section 2.7
Section 3.1
Section 3.2
Section 3.3
Section 3.4
Section 3.5
Section 3.6
Section 3.7
Section 3.8
Section 3.9
Section 3.10
Section 3.11
Section 3.12
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Payment of the Bonds ............................................................................................. 7
Interest and Sinking Fund ....................................................................................... 8
Deposits to Interest and Sinking Fund .................................................................... 8
Issuance of Prior Lien and Additional Obligations ................................................. 8
Bonds Subordinate to Prior Lien Obligations, Covenants and Agreements ........... 9
Pledge of Revenues ................................................................................................. 9
System Fund ............................................................................................................ 9
ARTICLE III
AUTHORIZATION; GENERAL TERMS AND PROVISIONS
REGARDING THE BONDS
Autll.orization ........................................................................................................... 10
Date, Denomination, Maturities, and Interest ....................................................... 10
Medium, Method, and Place ofPayment .............................................................. ll
Execution and Registration of Bonds .................................................................... 11
Ownership ............................................................................................................. 12
Registration, Transfer, and Exchange ................................................................... 12
Cmcellation ............................................................................................................ 13
TeDl.porary Bonds ................................................................................................... 13
Replacement Bonds ............................................................................................... 14
Book-Entry-Only System ...................................................................................... 15
Successor Securities Depository; Transfer Outside Book-Entry~Only System .... 16
Payrnen.ts to Cede & Co ........................................................................................ 16
ARTICLE IV
REDEMPTION OF BONDS BEFORE MATURITY
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Section 4.1
Section 4.2
Section 4.3
Section 4.4
Section 4.5
Section4.6
Section 4.7
Section 4.8
Section 5.1
Section 5.2
Section 5.3
Section 5.4
Section 5.5
Section 5.6
Section 5.7
Section 6.1
Section 6.2
Section 6.3
Section 6.4
Section 6.5
Section 7.1
Section 7.2
Section 7.3
Section 7.4
Section 7.5
Section 8.1
Section 8.2
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Redem.ption ............................................................................................................ 16
Optional Redernption ............................................................................................ 16
Mandatory Sinking Fund Redemption .................................................................. 17
Partial Redernption ................................................................................................ 17
Notice of Redemption to Owners .......................................................................... 17
Payment Upon Redernption .................................................................................. 18
Effect of Redemption ............................................................................................ 18
Lapse of Payment .................................................................................................. 19
ARTICLEV
PAYING AGENT/REGISTRAR
Appointment of Initial Paying Agent/Registrar .................................................... 19
Qualifications ........................................................................................................ 19
Maintaining Paying Agent/Registrar ..................................................................... 19
Tennination ........................................................................................................... 19
Notice of Change to Owners ................................................................................. 19
Agreement to Perfonn Duties and Functions ........................................................ 20
Delivery of Records to Successor ......................................................................... 20
ARTICLE VI
FORM OF THE BONDS
Fonn Generally ..................................................................................................... 20
Fonn of the Bonds ................................................................................................. 20
CUSIP Registration ............................................................................................... 27
L-egal Opinion ........................................................................................................ 27
Bond Insurance ...................................................................................................... 27
ARTICLE VII
SALE AND DELIVERY OF BONDS; DEPOSIT OF PROCEEDS
Sale of Bonds; Official Statement ......................................................................... 27
Control and Delivery of Bonds ............................................................................. 29
Deposit of Proceeds ............................................................................................... 29
Tennination of Swap ............................................................................................. 29
Approval of Escrow Agreement for the BRA Bonds ............................................ 30
ARTICLE VIII
INVESTMENTS
Investments ............................................................................................................ 30
Investment Income ................................................................................................ 30
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Section 9.1
Section 9.2
Section 9.3
Section 9.4
Section 9.5
Section 9.6
Section 9.7
Section 9.8
Section 9.9
Section 9.10
ARTICLE IX
PARTICULAR REPRESENTATIONS AND COVENANTS
Payment of the Bonds ........................................................................................... 30
Other Representations and Covenants ................................................................... 30
Provisions Concerning Federal Income Tax Exclusion ........................................ 31
No Private Use or Payment and No Private Loan Financing ................................ 31
No Federal Guaranty ............................................................................................. 31
Bonds Are Not Hedge Bonds ................................................................................ 32
No-Arbitrage Covenant ......................................................................................... 32
Arbitrage Rebate ................................................................................................... 32
Information Reporting ........................................................................................... 32
Continuing Obligation ........................................................................................... 33
ARTICLE X
DEFAULT AND REMEDIES
Section 10.1 Events ofDefault. .................................................................................................. 33
Section 10.2 Renledies for Default ............................................................................................ 33
Section 10.3 Reznedies Not Exclusive ....................................................................................... 33
ARTICLE XI
DISCHARGE
Section 11.1 Discharge ............................................................................................................... 34
ARTICLE XII
CONTINUING DISCLOSURE UNDERTAKING
Section 12.1 Annual Reports ...................................................................................................... 34
Section 12.2 Material Event Notices .......................................................................................... 34
Section 12.3 Limitations, Disclaimers and Amendments .......................................................... 35
ARTICLE XIII
AMENDMENTS; ATTORNEY GENERAL MODIFICATION
Section 13.1 Amendments .......................................................................................................... 36
Section 13.2 Attorney General Modification ............................................................................. 3 7
Exhibit A -Description of Annual Disclosure of Financial Information .................................... A -1
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Exhibit B -Refunding Parameters .............................................................................................. B-1
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AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LUBBOCK,
TEXAS, AUTHORIZING THE ISSUANCE OF CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING
BONDS, SERIES 2005, IN AN AMOUNT NOT TO EXCEED $48,000,000;
PROVIDING FOR THE AWARD AND SALE THEREOF IN ACCORDANCE
WITH SPECIFIED PARAMETERS; LEVYING A TAX AND PLEDGING
SURPLUS WATERWORKS SYSTEM REVENUES IN PAYMENT THEREOF;
PRESCRIB1NG THE FORM OF SAID BONDS; APPROVING EXECUTION
AND DELIVERY OF AN ESCROW AGREEMENT AND A BOND
PURCHASE AGREEMENT; APPROV1NG THE OFFICIAL STATEMENT;
ENACT1NG OTHER PROVISIONS RELATING TO THE SUBJECT; AND
DECLARING AN EFFECTIVE DATE
WHEREAS, pursuant to a Water Supply Agreement dated as of May 11, 1989, as
amended (the ''Water Supply Agreement"), by and between the City of Lubbock, Texas (the
"City'') and the Brazos River Authority (the "Authority''), certain revenue bonds of the Authority
were issued and sold to finance and refinance the construction of surface water supply facilities
known as Lake Alan Henry (the "Project");
WHEREAS, the currently outstanding revenue bonds of the Authority issued for the
Project are identified as follows: "Brazos River Authority Special Facilities (Lake Alan Henry)
Revenue Refunding Bonds, Series 1995," dated June 1, 1995, outstanding in the aggregate
principal amount of$40,465,000 (the "BRA Bonds");
WHEREAS, pursuant to the Water Supply Agreement, so long as the BRA Bonds are
outstanding, the Authority is obligated to operate the Project and the City is obligated to pay the
debt service on the BRA Bonds (the "Debt Service Obligation');
WHEREAS, the City desires to assume operation of the Project and to obtain title to any
and all rights and interests in the Project owned by the Authority and, pursuant to the Water
Supply Agreement, may do so once the BRA Bonds are no longer outstanding;
WHEREAS, pursuant to an ordinance adopted on April 11, 2002, the City entered into an
interest rate hedge agreement (the "Swap") with JPMorgan Chase Bank (the "Counterparty''), in
connection with the anticipated issuance of variable rate water revenue bonds to refund the Debt
Service Obligation;
WHEREAS, the City now desires to terminate the Swap and to issue fixed rate tax and
waterworks system surplus revenue refunding bonds to (i) refund a portion of the termination
payment owed to the Counterparty pursuant to the Swap (the ''Tennination Paymenf') and (ii)
refund the Debt Service Obligation (collectively with the Tennination Payment, the "Refunded
Obligations");
WHEREAS, Chapter 1207, Texas Government Code, authorizes the City to issue
refunding bonds and to deposit the proceeds from the sale thereof, and any other lawfully
available funds or resources, directly with the paying agent for the BRA Bonds, JPMorgan Chase
Bank, National Association (hereinafter the "Escrow Agent'), and such deposit, if made before
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the payment dates for the BRA Bonds, shall constitute the making of firm banking and financial
arrangements for the discharge and final payment of the BRA Bonds;
WHEREAS, Chapter 1207 further authorizes the City to enter into an escrow agreement
with the Escrow Agent with respect to the safekeeping, investment, reinvestment, administration
and disposition of any such deposit and the Escrow Agreement hereinafter authorized constitutes
an escrow agreement of the kind authorized and permitted by said Chapter 1207;
WHEREAS, the City Council desires to delegate, pursuant to Section 1207.007, Texas
Government Code, and the parameters of this Ordinance, to the Chief Financial Officer/ Assistant
City Manager of the City, the authority to approve the amount, the interest rate, price and terms
of the Bonds authorized hereby, to obtain bond insurance for the Bonds if it is economically
advantageous to do so, to determine the amount of the Termination Payment to be refunded with
proceeds of the Bonds and to otherwise take such actions as are necessary and appropriate to
effect the sale of the Bonds;
WHEREAS, the City Council hereby finds and determines that the refunding
contemplated in this Ordinance will benefit the City by enabling the City to assume operation
and obtain full title to the Project, relieve the City of its obligations pursuant to the Swap and
enable the City to issue fixed rate tax and surplus waterworks system revenue bonds, and that
such benefit is sufficient consideration for the refunding of the Refunded Obligations;
WHEREAS, the City Council has found and determined that it is necessary and in the
best interest of the City and its citizens that it authorize by this Ordinance the issuance and
delivery of its bonds at this time; and
WHEREAS, the meeting at which this Ordinance is considered is open to the public as
required by law, and public notice of the time, place, and purpose of said meeting was given as
required by Chapter 551, Texas Government Code, as amended; therefore,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK:
ARTICLE I
DEFINITIONS AND OTHER PRELIMINARY MATIERS
Section 1.1 Definitions.
Unless otherwise expressly provided or unless the context clearly requires otherwise in
this Ordinance, the following terms shall have the meanings specified below:
"Additional Obligations" means tax and revenue obligations hereafter issued which by
their terms are payable from ad valorem taxes and additionally payable from and secured by a
parity lien on and pledge of the Net Revenues of the System of equal rank and dignity with the
lien and pledge securing the payment of the Previously Issued Obligations and the Bonds.
"Authority" means the Brazos River Authority, an authority operating under Article XVI,
Section 59 of the Texas Constitution.
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"Bond" means any of the Bonds.
"Bond Date" means the date designated as the initial date of the Bonds in accordance
with Section 3.2(a) of this Ordinance.
"Bond Purchase Agreement" means the bond purchase agreement approved in
Section 7.1 (b) of this Ordinance.
"Bonds" means the bonds authorized to be issued by Section 3.1 of this Ordinance and
designated as "City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Reftmding
Bonds, Series 2005."
"BRA Bonds" means the Brazos River Authority Special Facilities (Lake Alan Henry)
Revenue Reftmding Bonds, Series 1995, dated June 1, 1995, issued in the original principal
amount of$58,170,000 to refund certain outstanding bonds of the Authority issued to finance the
Project.
"City'' means the City of Lubbock, Texas.
"Closing Date" means the date of the initial delivery of and payment for the Bonds.
"Collection Date" means , when reference is being made to the levy and collection of
annual ad valorem taxes, the date annual ad valorem taxes assessed each year by the City
become delinquent under applicable law.
"Designated Payment!fransfer Office" means (i) with respect to the initial Paying
Agent/Registrar named in this Ordinance, the Designated Payment!fransfer Office as designated
in the Paying Agent/Registrar Agreement, or at such other location designated by the Paying
Agent/Registrar and (ii) with respect to any successor Paying Agent/Registrar, the office of such
successor designated and located as may be agreed upon by the District and such successor.
"DTC" means The Depository Trust Company of New York, New York, or any
successor securities depository.
"DTC Participant'' shall mean brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations on whose behalf DTC was created to hold securities
to facilitate the clearance and settlement of securities transactions among DTC Participants.
"Escrow Agent" means JPMorgan Chase Bank, National Association, as escrow agent
under the terms of the Escrow Agreement.
"Escrow Agreement" means that certain Escrow Agreement by and among the City, the
Authority and the Escrow Agent, pertaining to the defeasance of the BRA Bonds.
"Escrow Fund" means the fund by that name established in the Escrow Agreement.
"Event of Default" means any event of default as defined in Section I 0.1 of this
Ordinance.
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"Fiscal Year" means such fiscal year as shall from time to time be set by the City
CounciL
"Gross Revenues'' means, with respect to any period, all income, revenues and receipts
received from the operation and ownership of the System.
"Initial Bond" means the initial bond authorized by Section 3.4(d) of this Ordinance.
"Interest and Sinking Fund" means the interest and sinking fund established by
Section 2.2 of this Ordinance.
"Interest Payment Date" means the date or dates on which interest on the Bonds is
scheduled to be paid until their respective dates of maturity or prior redemption, such dates being
February 15 and August 15 of each year, commencing on the date set forth in the Pricing
Certificate.
"MSRB" means the Municipal Securities Rulemak:ing Board.
''NRMSIR" means each person whom the SEC or its staff has detennined to be a
nationally recognized municipal securities information repository within the meaning of the Rule
from time to time.
''Net Revenues" means the Gross Revenues of the System, with respect to any period,
after deducting the System's Operating and Maintenance Expenses during such period.
"Operating and Maintenance Expenses" means all reasonable and necessary expenses
directly related and attributable to the operation and maintenance of the System, including, but
not limited to, the cost of insurance, the purchase and carrying of stores, materials, and supplies,
the payment of salaries and labor, and other expenses reasonably and properly charged, under
generally accepted accounting principles, to the operation and maintenance of the System or by
statute deemed to be a first lien against Gross Revenues. Depreciation charges on equipment,
machinery, plants and other facilities comprising the System and expenditures classed under
generally accepted accounting principles as capital expenditures shall not be considered as
"Operating and Maintenance Expenses'' for purposes of determining "Net Revenues."
"Outstanding" means when used in this Ordinance with respect to Bonds, Previously
Issued Obligations or any Additional Obligations, as the case may be, as of the date of
determination, all Obligations and any Additional Obligations theretofore sold, issued and
delivered by the City, except:
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(1) Bonds, Previously Issued Obligations or any Additional Obligations
cancelled or delivered to the Paying Agent/Registrar for cancellation in
connection with the exchange or transfer of such obligations;
(2) Bonds, Previously Issued Obligations or any Additional Obligations paid
or deemed to be paid in accordance with the provisions of Article XI
hereof; and
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(3) Bonds, Previously Issued Obligations or any Additional Obligations that
have been mutilated, destroyed, lost, or stolen and replacement bonds have
been registered and delivered in lieu thereof.
"Owner'' means the person who is the registered owner of a Bond or Bonds, as shown in
the Register.
"Paying Agent/Registrar" means initially JPMorgan Chase Bank, National Association,
or any successor thereto as provided in this Ordinance.
"Previously Issued Obligations" means the outstanding City of Lubbock, Texas, Tax and
Waterworks System Surplus Revenue Certificates of Obligation, Series 2004, dated
> September 15, 2004, issued in the original principal amount of $3,1 00,000; the outstanding City
of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation,
Series 2003, dated July 15, 2003, issued in the original principal amount of $9,765,000; the
outstanding City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates
of Obligation, Series 2002, dated February 15, 2002, issued in the original principal amount of
$6,450,000; the outstanding City of Lubbock, Texas, Tax and Waterworks System Surplus
Revenue Certificates of Obligation, Series 1999, dated September 15, 1999, issued in the original
principal amount of $24,800,000; and the outstanding City of Lubbock, Texas, Tax and
Waterworks System Surplus Revenue Refunding Bonds, Series 1999, dated April I, 1999, issued
in the original principal amount of$12,300,000.
"Pricing Certificate" means a certificate or certificates to be signed by the Chief Financial
Officer/ Assistant City Manager of the City.
"Prior Lien Obligations" means all bonds or other similar obligations of the City
presently outstanding or that may be hereafter issued, payable in whole or in part from and
secured by a lien on and pledge of the Net Revenues of the System and such lien and pledge
securing the payment thereof is prior and superior in claim, rank and dignity to the lien on and
pledge of the Net Revenues securing the payment of the Previously Issued Obligations and the
Bonds.
"Record Date" means the last business day of the month next preceding an Interest
Payment Date.
"Register'' means the Register specified in Section 3.6(a) of this Ordinance.
"Representations Letter'' means the Blanket Letter of Representations between the City
andDTC.
"Representative" means RBC Dain Rauscher Inc. as representative of the Underwriters
named in the Bond Purchase Agreement.
''Rule" means SEC Rule 15c2-12, as amended from time to time.
"SEen means the United States Securities and Exchange Commission.
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"SID" means any person designated by the State of Texas or an authorized department,
officer or agency thereof, as and detennined by the SEC or its staff to be a state information
depository within the meaning of the Rule from time to time.
"Similarly Secured Obligations" means collectively the Bonds, the Previously Issued
Obligations, and any Additional Obligations.
"System" means the City's Waterworks System, being all properties, facilities and plants
currently owned, operated and maintained by the City for the supply, treatment, transmission and
distribution of treated potable water, together with all future extensions, improvements,
replacements and additions thereto.
"Unclaimed Payments" means money deposited with the Paying Agent/Registrar for the
payment of principal of, redemption premium, if any, or interest on the Bonds as the same come
due and payable or money set aside for the payment of Bonds duly called for redemption prior to
maturity.
"Underwriters" means the underwriters of the Bonds named in the Bond Purchase
Agreement.
"Water Supply Agreement" means the agreement, dated as of May 11, 1989, as amended,
by and between the City and the Authority pursuant to which the City is obligated to pay debt
service on the BRA Bonds.
Section 1.2 Findings.
The declarations, determinations, and findings declared, made, and found in the preamble
to this Ordinance are hereby adopted, restated, and made a part of the operative provisions
hereof.
Section 1.3 Table of Contents, Titles. and Headings.
The table of contents, titles, and headings of the Articles and Sections of this Ordinance
have been inserted for convenience of reference only and are not to be considered a part hereof
and shall not in any way modify or restrict any of the terms or provisions hereof and shall never
be considered or given any effect in construing this Ordinance or any provision hereof or in
ascertaining intent, if any question of intent should arise.
Section 1.4 Interpretation.
(a) Unless the context requires otherwise, words of the masculine gender shall be
construed to include correlative words of the feminine and neuter genders and vice versa, and
words of the singular nwnber shall be construed to include correlative words of the plural
nwnber and vice versa.
(b) This Ordinance and all the tenns and provisions hereof shall be liberally
construed to effectuate the purposes set forth herein.
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ARTICLE II
SECURITY FOR THE BONDS; INTEREST AND SINKING FUND; PRIOR LIEN,
PREVIOUSLY ISSUED AND ADDITIONAL OBLIGATIONS
Section 2.1 Payment of the Bonds.
Pursuant to the authority granted by the Texas Constitution and laws of the State of
Texas, there shall be levied and there is hereby levied for the current year and for each
succeeding year thereafter while any of the Bonds or any interest thereon is outstanding and
unpaid, an ad valorem tax on each one hundred dollars valuation of taxable property within the
City, at a rate sufficient, within the limit prescribed by law, to pay the debt service requirements
of the Bonds, being (i) the interest on the Bonds, and (ii) a sinking fund for their redemption at
maturity or a sinking fund of two percent per annwn (whichever amount is the greater), when
due and payable, full allowance being made for delinquencies and costs of collection.
The ad valorem tax thus levied shall be assessed and collected each year against all
property appearing on the tax rolls of the City most recently approved in accordance with law,
and the money thus collected shall be deposited as collected to the Interest and Sinking Fund.
Said ad valorem tax, the collections therefrom, and all amounts on deposit in or required
hereby to be deposited to the Interest and Sinking Fund are hereby pledged and committed
irrevocably to the payment of the principal of and interest on the Bonds when and as due and
payable in accordance with their terms and this Ordinance.
The amount of taxes to be assessed and provided annually for the payment of principal of
and interest on the Bonds shall be determined and accomplished in the following manner:
(a) Prior to the date the City Council establishes the annual tax rate and passes an
ordinance levying and assessing ad valorem taxes each year, the City Council shall determine:
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(i) The amount on deposit in the Interest and Sinking Fund after (x)
deducting therefrom the total amount of debt service requirements to become due
on Bonds prior to the next Collection Date for the ad valorem taxes to be
assessed, and (y) adding to the Bond Fund the amount of Net Revenues of the
System appropriated and allocated thereto to pay such debt service requirements
prior to the next Collection Date;
(ii) The amount of Net Revenues, if any, appropriated and to be set
aside for the payment of the debt service requirements on the Bonds between the
Collection Date for the taxes then to be assessed and the Collection Date for the
taxes to be assessed during the next succeeding calendar year; and
(iii) The amount of debt service requirements to become due and
payable on the Bonds between the Collection Date for the taxes then to be
assessed and the Collection Date for the taxes to be assessed during the next
succeeding calendar year.
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(b) The amount of taxes to be assessed and collected annually each year to pay the
debt service requirements on the Bonds shall be the amount established in paragraph (iii) above
less the sum total of the amounts established in paragraphs (i) and (ii), after taking into
consideration delinquencies and costs of collecting such annual taxes.
Section 2.2 Interest and Sinking Fund.
(a) The City hereby establishes a special fund or account to be designated the "City
of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Refunding Bonds,
Series 2005, Interest and Sinking Fund" (the "Interest and Sinking Fund"), said fund to be
maintained at an official depository bank of the City separate and apart from all other funds and
accounts of the City.
(b) Money on deposit in or required by this Ordinance to be deposited to the Interest
and Sinking Fund shall be used solely for the purpose of paying the interest on and principal of
the Bonds when and as due and payable in accordance with their terms and this Ordinance.
Section 2.3 De,posits to Interest and Sinking Fund.
The City hereby covenants and agrees to cause to be deposited in the Interest and Sinking
Fund prior to each interest and principal payment date from the Net Revenues of the System,
after deduction of all payments required to be made to special funds or accounts created for the
payment and security of the Prior Lien Obligations, an amount equal to one hundred percent
(100%) of the amount required to fully pay the accrued interest and principal of the Bonds then
due and payable by reason of maturity or redemption prior to maturity, such deposits to pay
accrued interest and principal on the Bonds to be made in substantially equal monthly
installments on or before the last business day of each month beginning the month the Bonds are
delivered to the Underwriters.
The monthly deposits to the Interest and Sinking Fund, as hereinabove provided, shall be
made until such time as such Fund contains an amount equal to pay the principal of and interest
on the Bonds to maturity. Ad valorem taxes levied, collected and deposited in the Interest and
Sinking Fund for and on behalf of the Bonds may be taken into consideration and reduce the
amount of the monthly deposits otherwise required to be deposited in the Interest and Sinking
Fund from the Net Revenues of the System. In addition, any proceeds from the sale of the Bonds
in excess of the amount required to refund the Refunded Obligations and pay the costs of issuing
the Bonds shall be deposited in the Interest and Sinking Fund, which amount shall reduce the
sums otherwise required to be deposited in said Fund from ad valorem taxes and the Net
Revenues of the System.
Section 2.4 Issuance of Prior Lien and Additional Obligations.
(a) The City hereby expressly reserves the right to hereafter issue Prior Lien
Obligations, without limitation as to principal amount or subject to any terms, conditions, or
restrictions other than as may be required by law or otherwise.
(b) The City hereby expressly reserves the right to issue Additional Obligations,
without limitation or any restriction or condition being applicable to their issuance under the
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tenns of this Ordinance, payable from and, together with the other Similarly Secured
) Obligations, equally and ratably secured by a parity lien on and pledge of the Net Revenues of
the System.
Section 2.5 Bonds Subordinate to Prior Lien Obligations, Covenants and Agreements.
It is the intention of the City Council and accordingly hereby recognized and stipulated
that the provisions, agreements and covenants contained herein bearing upon the management
and operations of the System and the administering and application of revenues derived from the
operation thereof, shall to the extent possible be harmonized with like provisions, agreements
and covenants contained in ordinances authorizing the issuance of Prior Lien Obligations, and to
the extent of any irreconcilable conflict between the provisions contained herein and in
ordinances authorizing the issuance of Prior Lien Obligations, the provisions, agreements and
covenants contained therein shall prevail to the extent of such conflict and be applicable to this
Ordinance but in all respects subject to the priority of rights and benefits, if any, conferred
thereby to the holders or owners of the Prior Lien Obligations. Notwithstanding the above, any
change or modification affecting the application of revenues derived from the operation of the
System shall not impair the obligation of contract with respect to the pledge of revenues herein
made for the payment and security of the Bonds.
Section 2.6 Pledge of Revenues.
The City hereby covenants and agrees that, subject only to a prior lien on and pledge of
the Net Revenues of the System for the payment and security of Prior Lien Obligations, the Net
Revenues of the System, with the exception of those in excess of the amounts required to be
deposited to the Interest and Sinking Fund as hereafter provided, are hereby pledged, equally and
ratably, to the payment of the principal of, redemption premiwn, if any, and interest on the
Bonds and the other Similarly Secured Obligations as herein provided, and the pledge of the Net
Revenues of the System herein made for the payment of the Bonds shall constitute a lien on the
Net Revenues of the System in accordance with the tenns and provisions hereof and be valid and
binding in accordance with the tenns hereof without any filing or recording thereof (except in the
official records of the City), physical delivery of such Net Revenues or further act by the City.
Section 2.7 System Fund
The City hereby reaffinns its covenant and agreement made in connection with the
issuance of the Previously Issued Obligations that all Gross Revenues (excluding earnings from
the investment of money held in any special funds or accounts created for the payment and
security of Prior Lien Obligations) shall be deposited from day to day as collected into an "City
of Lubbock, Texas, Waterworks System Operating Fund" (the "System Fund") which Fund shall
be kept and maintained at an official depository bank of the City. All moneys deposited into the
System Fund shall be pledged and appropriated to the extent required for the following purposes
and in the order of priority shown, to wit:
First: To the payment of all necessary and reasonable Operation and Maintenance
Expenses of the System as defined herein or required by statute to be a first charge on and claim
against the Gross Revenues;
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Second: To the payment of the amounts required to be deposited in the special funds
created and established for the payment, security and benefit of Prior Lien Obligations in
accordance with the terms and provisions of the ordinances authorizing the issuance of Prior
Lien Obligations; and
Third: Equally and ratably to the payment of the amounts required to be deposited in the
special fi.mds and ~ccounts created and established for the payment of Similarly Secured
Obligations.
Any Net Revenues remaining in the System Fund after satisfying the foregoing
payments, or making adequate and sufficient provision for the payment thereof, may be
appropriated and used for any other City purpose now or hereafter permitted by law.
ARTICLE III
AUTHORIZATION; GENERAL TERMS AND PROVISIONS
REGARDING THE BONDS
Section 3.1 Authorization.
The City's bonds to be designated "City of Lubbock, Texas Tax and Waterworks System
Surplus Revenue Refi.mding Bonds, Series 2005'' (the "Bonds"), are hereby authorized to be
issued and delivered in accordance witli the Constitution and laws of the State of Texas,
) specifically Chapter 1207, Texas Govenunent Code, as amended, and Article VIll of the City's
Home-Rule Charter. The Bonds shall be issued in the aggregate principal amount designated in
the Pricing Certificate, such amount not to exceed $48,000,000, for the purpose of refunding the
Refi.mded Obligations and paying the costs of issuing the Bonds.
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Section 3.2 Date, Denomination, Maturities, and Interest.
(a) The Bonds shall be dated the date set forth in the Pricing Certificate (the "Bond
Date"). The Bonds shall be in fully registered form, without coupons, in the denomination of
$5,000 or any integral multiple thereof and shall be numbered separately from one upward,
except the Initial Bond, which shall be numbered T-1.
(b) The Bonds shall mature on February 15 in the years and in the principal amounts
set forth in the Pricing Certificate provided that the maximum maturity for the Bonds shall not
exceed twenty years.
(c) Interest shall accrue and be paid on each Bond respectively until its maturity or
prior redemption, from the later of the Bond Date or the most recent Interest Payment Date to
which interest has been paid or provided for at the rates per annwn for each respective maturity
specified in the Pricing Certificate. Such interest shall be payable semiannually on each Interest
Payment Date. Interest on the Bonds shall be calculated on the basis of a three hundred sixty
(360) day year composed of twelve (12) months of thirty (30) days each.
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Section 3.3 Medium. Method. and Place ofPavment.
(a) The principal of, redemption premium, if any, and interest on the Bonds shall be
paid in lawful money of the United States of America.
(b) Interest on the Bonds shall be payable to the Owners as shown in the Register at
the close ofbusiness on the Record Date.
(c) Interest shall be paid by check, dated as of the Interest Payment Date, and sent
United States mail, first class postage prepaid, by the Paying Agent/Registrar to each Owner, at
the address thereof as it appears in the Register, or by such other customary banking arrangement
acceptable to the Paying Agent/Registrar and the Owner; provided, however, that the Owner
shall bear all risk and expense of such alternative banking arrangement.
(d) The principal of each Bond shall be paid to the Owner thereof on the due date,
whether at the maturity date or the date of prior redemption thereof, upon presentation and
surrender of such Bond at the Designated Payment!fransfer Office of the Paying
Agent/Registrar.
(e) If the date for the payment of the principal of or interest on the Bonds shall be a
Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the
Designated Payment!fransfer Office of the Paying Agent/Registrar is located are required or
authorized by law or executive order to close, then the date for such payment shall be the next
succeeding day that is not a Saturday, Sunday, legal holiday, or day on which banking
institutions are required or authorized to close, and payment on such date shall for all pwposes
be deemed to have been made on the due date thereof as specified in Section 3.2 of this
Ordinance.
(f) Unclaimed Payments shall be segregated in a special escrow account and held in
trust, uninvested by the Paying Agent/Registrar, for the account of the Owners of the Bonds to
which the Unclaimed Payments pertain. Subject to Title 6 of the Texas Property Code,
Unclaimed Payments remaining unclaimed by the Owners entitled thereto for three years after
the applicable payment or redemption date shall be applied to the next payment on the Bonds
thereafter coming due; to the extent any such moneys remain three years after the retirement of
all outstanding Bonds, such moneys shall be paid to the City to be used for any lawful purpose.
Thereafter, neither the City, the Paying Agent/Registrar, nor any other person shall be liable or
responsible to any Owners of such Bonds for any further payment of such unclaimed moneys or
on account of any such Bonds, subject to Title 6 of the Texas Property Code.
Section 3.4 Execution and Registration of Bonds.
(a) The Bonds shall be executed on behalf of the City by the Mayor and the City
Secretary, by their manual or facsimile signatures, and the official seal of the City shall be
impressed or placed in facsimile thereon. Such facsimile signatures on the Bonds shall have the
same effect as if each of the Bonds had been signed manually and in person by each of said
officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of
the City had been manually impressed upon each of the Bonds.
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(b) In the event that any officer of the City whose manual or facsimile signature
appears on the Bonds ceases to be such officer before the authentication of such Bonds or before
the delivery thereof, such manual or facsimile signature nevertheless shall be valid and sufficient
for all purposes as if such officer had remained in such office.
(c) Except as provided below, no Bond shall be valid or obligatory for any purpose or
be entitled to any security or benefit of this Ordinance unless and until there appears thereon the
Certificate of Paying Agent/Registrar substantially in the form provided herein, duly
authenticated by manual execution by an officer or duly authorized signatory of the Paying
Agent/Registrar. It shall not be required that the same officer or authorized signatory of the
Paying Agent/Registrar sign the Certificate of Paying Agent/Registrar on all of the Bonds. In
lieu of the executed Certificate of Paying Agent/Registrar described above, the Initial Bond
delivered at the Closing Date shall have attached thereto the Comptroller's Registration
Certificate substantially in the form provided herein, manually executed by the Comptroller of
Public Accounts of the State of Texas, or by his duly authorized agent, which Certificate shall be
evidence that the Bond has been duly approved by the Attorney General of the State of Texas,
that it is a valid and binding obligation of the City, and that it has been registered by the
Comptroller of Public Accounts of the State ofTexas.
(d) On the Closing Date, one initial Bond reflecting the terms set forth in the Pricing
Certificate, representing the entire principal amolint of all Bonds, payable in stated installments
to the Representative, or its designee, executed by the Mayor and City Secretary, approved by
the Attorney General, and registered and manually signed by the Comptroller of Public
Accounts, will be delivered to the Representative or its designee. Upon payment for the Initial
Bond, the Paying Agent/Registrar shall cancel the Initial Bond and deliver a single registered,
definitive Bond for each maturity, in the aggregate principal amount thereof, to DTC on behalf
of the Underwriters.
Section 3.5 Ownership.
(a) The City, the Paying Agent/Registrar, and any other person may treat the person
in whose name any Bond is registered as the absolute owner of such Bond for the purpose of
making and receiving payment as herein provided (except interest shall be paid to the person in
whose name such Bond is registered on the Record Date)> and for all other purposes, whether or
not such Bond is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by
any notice or knowledge to the contrary.
(b) All payments made to the Owner of a Bond shall be valid and effectual and shall
discharge the liability of the City and the Paying Agent/Registrar upon such Bond to the extent
of the sums paid.
Section 3.6 Registration. Transfer. and Exchange.
(a) So long as any Bonds remain outstanding, the City shall cause the Paying
Agent/Registrar to keep at the Designated Payment/Transfer Office a register (the "Register'') in
which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar
shall provide for the registration and transfer of Bonds in accordance with this Ordinance.
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(b) The ownership of a Bond may be transferred only upon the presentation and
surrender of the Bond at the Designated Paymentlfransfer Office of the Paying Agent/Registrar
with such endorsement or other evidence of transfer as is acceptable to the Paying
Agent/Registrar. No transfer of any Bond shall be effective until entered in the Register.
(c) The Bonds shall be exchangeable upon the presentation and surrender thereof at
the Designated Paymentlfransfer Office of the Paying Agent/Registrar for a Bond or Bonds of
the same maturity and interest rate and in a denomination or denominations of any integral
multiple of $5,000, and in an aggregate principal amount equal to the unpaid principal amount of
the Bonds presented for exchange. The Paying Agent/Registrar is hereby authorized to
authenticate and deliver Bonds exchanged for other Bonds in accordance with this Section.
(d) Each exchange Bond delivered by the Paying Agent/Registrar in accordance with
this Section shall constitute an original contractual obligation of the City and shall be entitled to
the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of
which such exchange Bond is delivered.
(e) No service charge shall be made to the Owner for the initial registratio~
subsequent transfer, or exchange for a different denomination of any of the Bonds. The Paying
Agent/Registrar, however, may require the Owner to pay a sum sufficient to cover any tax or
other governmental charge that is authorized to be imposed in connection with the registration,
transfer, or exchange of a Bond.
) (f) Neither the City nor the Paying Agent/Registrar shall be required to issue,
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transfer, or exchange any Bond called for redemption, in whole or in part, where such
redemption is scheduled to occur within forty-five (45) calendar days after the transfer or
exchange date; provided, however, such limitation shall not be applicable to an exchange by the
Owner of the uncalled principal balance of a Bond.
Section 3. 7 Cancellation.
All Bonds paid or redeemed before scheduled maturity in accordance with this
Ordinance, and all Bonds in lieu of which exchange Bonds or replacement Bonds are
authenticated and delivered in accordance with this Ordinance, shall be cancelled and proper
records made regarding such payment, redemption, exchange, or replacement. The Paying
Agent/Registrar shall then return such cancelled Bonds to the City or may in accordance with
law destroy such cancelled Bonds and periodically furnish the City with Bonds of destruction of
such Bonds.
Section 3.8 Temporazy Bonds.
(a) Following the delivery and registration of the Initial Bond and pending the
preparation of definitive Bonds, the City may execute and, upon the City's request, the Paying
Agent/Registrar shall authenticate and deliver, one or more temporary Bonds that are printed,
lithographed, typewritten, mimeographed, or otherwise produced, in any denomination,
substantially of the tenor of the definitive Bonds in lieu of which they are delivered, without
coupons, and with such appropriate insertions, omissions, substitutions, and other variations as
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the officers of the City executing such temporary Bonds may determine, as evidenced by their
signing of such temporary Bonds.
(b) Until exchanged for Bonds in definitive form, such Bonds in temporary form shall
be entitled to the benefit and security of this Ordinance.
(c) The City, without wtreasonable delay, shall prepare, execute and deliver to the
Paying Agent/Registrar; thereupon, upon the presentation and surrender of the Bond or Bonds in
temporary fonn to the Paying Agent/Registrar, the Paying Agent/Registrar shall authenticate and
deliver in exchange therefor a Bond or Bonds of the same maturity and series, in definitive form,
in the authorized denomination, and in the same aggregate principal amount, as the Bond or
Bonds in temporary form surrendered. Such exchange shall be made without the making of any
charge therefor to any Owner.
Section 3.9 Rcmlacement Bonds.
(a) Upon the presentation and surrender to the Paying Agent/Registrar of a mutilated
Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a
replacement Bond of like tenor and principal amount, bearing a number not contemporaneously
outstanding. The City or the Paying Agent/Registrar may require the Owner of such Bond to pay
a sum sufficient to cover any tax or other govenunental charge that is authorized to be imposed
in connection therewith and any other expenses connected therewith.
(b) In the event that any Bond is lost, apparently destroyed or wrongfully taken, the
Paying Agent/Registrar, pursuant to the applicable laws of the State of Texas and in the absence
of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall
authenticate and deliver a replacement Bond of like tenor and principal amount, bearing a
number not contemporaneously outstanding, provided that the Owner first complies with the
following requirements:
(i) furnishes to the Paying Agent/Registrar satisfactory evidence of his
or her ownership of and the circumstances of the loss, destruction, or theft of such
Bond;
(ii) furnishes such security or indemnity as may be required by the
Paying Agent/Registrar to save it and the City harmless;
(iii) pays all expenses and charges in connection therewith, including,
but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar,
and any tax or other governmental charge that is authorized to be imposed; and
(iv) satisfies any other reasonable requirements imposed by the City
and the Paying Agent/Registrar.
(c) If, after the delivery of such replacement Bond, a bona fide purchaser of the
original Bond in lieu of which such replacement Bond was issued presents for payment such
original Bond, the City and the Paying Agent/Registrar shall be entitled to recover such
replacement Bond from the person to whom it was delivered or any person taking therefrom,
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except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost, or expense incurred by the City or the
) Paying Agent/Registrar in corutection therewith.
(d) In the event that any such mutilated, lost, apparently destroyed, or wrongfully
taken Bond has become or is about to become due and payable, the Paying Agent/Registrar, in its
discretion, instead of issuing a replacement Bond, may pay such Bond when it becomes due and
J payable.
)
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(e) Each replacement Bond delivered in accordance with this Section shall constitute
an original additional contractual obligation of the City and shall be entitled to the benefits and
security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such
replacement Bond is delivered.
Section 3.10 Book-Entry-Only System.
(a} Notwithstanding any other provision hereof, upon initial issuance of the Bonds,
the Bonds shall be registered in the name of Cede & Co., as nominee of DTC. The definitive
Bonds shall be initially issued in the form of a single separate Bond for each of the maturities
thereof.
(b) With respect to Bonds registered in the name of Cede & Co., as nominee of DTC,
the City and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC
Participant or to any person on behalf of whom such a DTC Participant holds an interest in the
Bonds. Without limiting the immediately preceding sentence, the City and the Paying
Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the
records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in
the Bonds, (ii) the delivery to any DTC Participant or any other person, other than an Owner, as
shown on the Register, of any notice with respect to the Bonds, including any notice of
redemption, or (iii) the payment to any DTC Participant or any other person, other than an
Owner, as shown in the Register of any amount with respect to principal of, premium, if any, or
interest on the Bonds. Notwithstanding any other provision of this Ordinance to the contrary, the
City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose
name each Bond is registered in the Register as the absolute owner of such Bond for the pwpose
of payment of principal of, premium, if any, and interest on Bonds, for the purpose of giving
notices of redemption and other matters with respect to such Bond, for the purpose of registering
transfer with respect to such Bond, and for all other pwposes whatsoever. The Paying
Agent/Registrar shall pay all principal of, premium, if any, and interest on the Bonds only to or
upon the order of the respective Owners as shown in the Register, as provided in this Ordinance,
or their respective attorneys duly authorized in writing, and all such payments shall be valid and
effective to fully satisfy and discharge the City's obligations with respect to payment of,
premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person
other than an Owner, as shown in the Register, shall receive a Bond evidencing the obligation of
the City to make payments of amounts due pursuant to this Ordinance. Upon delivery by DTC to
the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a
new nominee in place of Cede & Co., the word "Cede & Co." in this Ordinance shall refer to
such new nominee ofDTC.
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(c) The Representations Letter previously executed and delivered by the City, and
applicable to the City's obligations delivered in book-entry·only form to DTC as securities
) depository, is hereby ratified and approved for the Bonds.
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Section 3.11 Successor Securities Deoository; Transfer Outside Book-Entry-Only
System.
In the event that the City determines that it is in the best interest of the City and the
beneficial owners of the Bonds that they be able to obtain Bonds, or in the event DTC
discontinues the services described herein, the City shall (i) appoint a successor securities
depository, qualified to act as such under Section l7(a) of the Securities and Exchange Act of
1934, as amended, notify DTC and DTC Participants of the appointment of such successor
securities depository and transfer one or more separate Bonds to such successor securities
depository; or (ii) notify DTC and DTC Participants of the availability through DTC of Bonds
and cause the Paying Agent/Registrar to transfer one or more separate registered Bonds to DTC
Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no
longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of
DTC, but may be registered in the name of the successor securities depository, or its nominee, or
in whatever name or names Owners transferring or exchanging Bonds shall designate, in
accordance with the provisions of this Ordinance.
Section 3.12 Payments~ Cede & Co.
Notwithstanding any other provision of this Ordinance to the contrary, so long as the
Bonds are registered in the name of Cede & Co., as nominee of DTC, all payments with respect
to principal of, premium, if any, and interest on such Bonds, and all notices with respect to such
Bonds shall be made and given, respectively, in the manner provided in the Representations
Letter.
ARTICLE IV
REDEI\1PTION OF BONDS BEFORE MATURITY
Section 4.1 Redemntion.
The Bonds are subject to redemption before their scheduled maturity only as provided in
this Article IV.
Section 4.2 Optional Redeml'!tion.
(a) The City reserves the option to redeem Bonds in the manner provided in the Form
of Bond set forth in Section 6.2 of this Ordinance with such changes as are required by the
Pricing Certificate.
(b) If less than all of the Bonds are to be redeemed pursuant to an optional
redemption, the City shall determine the maturity or maturities and the amounts thereof to be
redeemed and shall direct the Paying Agent/Registrar to call by lot the Bonds, or portions
thereof, within such maturity or maturities and in such principal amounts for redemption.
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(c) The City, at least forty-five (45) days before the redemption date, unless a shorter
period shall be satisfactory to the Paying Agent/Registrar, shall notify the Paying
Agent/Registrar of such redemption date and of the principal amount of Bonds to be redeemed.
Section 4.3 Mandatory Sinking Fund Redemption.
(a) Bonds designated as "Term Bonds," if any, in the Pricing Certificate are subject
to scheduled mandatory redemption and will be redeemed by the City, in part at a price equal to
the principal amount thereof, without premium, plus accrued interest to the redemption date, out
of moneys available for such purpose in the Interest and Sinking Fund, on the dates and in the
respective principal amounts as set forth in the Pricing Certificate.
(b) At least forty-five (45) days prior to each scheduled mandatory redemption date,
the Paying Agent/Registrar shall select for redemption by lot, or by any other customary method
that results in a random selection, a principal amount of Term Bonds equal to the aggregate
principal amount of such Term Bonds to be redeemed, shall call such Term Bonds for
redemption on such scheduled mandatory redemption date, and shall give notice of such
redemption, as provided in Section 4.5.
(c) The principal amount of the Term Bonds required to be redeemed on any
redemption date pursuant to subparagraph (a) of this Section 4.3 shall be reduced, at the option
of the City, by the principal amount of any Term Bonds which, at least forty-five (45) days prior
to the mandatory sinking fund redemption date (i) shall have been acquired by the City at a price
) not exceeding the principal amount of such Term Bonds plus accrued interest to the date of
purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (ii) shall have
been redeemed pursuant to the optional redemption provisions hereof and not previously credited
to a mandatory sinking fund redemption.
)
)
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Section 4.4 Partial Redemption.
(a) A portion of a single Bond of a denomination greater than $5,000 may be
redeemed, but only in a principal amount equal to $5,000 or any integral multiple thereof. If
such a Bond is to be partially redeemed, the Paying Agent/Registrar shall treat each $5,000
portion of the Bond as though it were a single Bond for purposes of selection for redemption.
(b) Upon surrender of any Bond for redemption in part, the Paying AgentiRegistrar,
in accordance with Section 3.6 of this Ordinance, shall authenticate and deliver an exchange
Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond so
surrendered, such exchange being without charge.
(c) The Paying Agent/Registrar shall promptly notify the City in writing of the
principal amount to be redeemed of any Bond as to which only a portion thereof is to be
redeemed.
Section 4.5 Notice of Redemption to Owners.
(a) The Paying Agent/Registrar shall give notice of any redemption of Bonds by
sending notice by United States mail, first class postage prepaid, not less than thirty (30) days
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before the date fixed for redemption, to the Owner of each Bond (or part thereof) to be
redeemed, at the address shown on the Register at the close of business on the Business Day next
) preceding the date of mailing such notice.
(b) The notice shall state the redemption date, the redemption price, the place at
which the Bonds are to be surrendered for payment, and, if less than all the Bonds outstanding
are to be redeemed, an identification of the Bonds or portions thereof to be redeemed.
(c) Any notice given as provided in this Section shall be conclusively presumed to
have been duly given, whether or not the Owner receives such notice.
Section 4.6 Payment Upon Redemption.
(a) Before or on each redemption date, the City shall deposit with the Paying
Agent/Registrar money sufficient to pay all amounts due on the redemption date and the Paying
Agent/Registrar shall make provision for the payment of the Bonds to be redeemed on such date
by setting aside and holding in trust such ammmts as are received by the Paying Agent/Registrar
from the City and shall use such funds solely for the purpose of paying the principal of and
) accrued interest on the Bonds being redeemed.
)
(b) Upon presentation and surrender of any Bond called for redemption at the
Designated Paymentffransfer Office on or after the date fixed for redemption, the Paying
Agent/Registrar shall pay the principal of, redemption premiwn, if any, and accrued interest on
such Bond to the date of redemption from the money set aside for such purpose.
Section 4.7 Effect of Redemption.
(a) Notice of redemption having been given as provided in Section 4.5 of this
Ordinance, the Bonds or portions thereof called for redemption shall become due and payable on
the date fixed for redemption and, unless the City defaults in its obligation to make provision for
the payment of the principal thereof or accrued interest thereon, such Bonds or portions thereof
shall cease to bear interest from and after the date fixed for redemption, whether or not such
Bonds are presented and surrendered for payment on such date.
(b) If the City shall fail to make provision for payment of all sums due on a
redemption date, then any Bond or portion thereof called for redemption shall continue to bear
interest at the rate stated on the Bond until due provision is made for the payment of same by the
City.
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Section 4.8 Lapse of Payment.
) Money set aside for the redemption of Bonds and remaining unclaimed by the Owners of
such Bonds shall be subject to the provisions of Section 3.3{f) hereof.
ARTICLEV
) PAYING AGENT/REGISTRAR
)
Section 5.1 Ap.nointment of Initial Paying Agent/Registrar.
JPMorgan Chase Bank, National Association, is hereby appointed as the initial Paying
Agent/Registrar for the Bonds.
Section 5.2 Qualifications.
Each Paying Agent/Registrar shall be a conunercial bank, a trust company organized
under the laws of the State of Texas, or other entity duly qualified and legally authorized to sezve
) as and perfonn the duties and sezvices of paying agent and registrar for the Bonds.
)
)
Section 5.3 Maintaining Paying Agent/Registrar.
(a) At all times while any of the Bonds are outstanding, the City will maintain a
Paying Agent/Registrar that is qualified under Section 5.2 of this Ordinance. The Mayor is
hereby authorized and directed to execute an agreement with the Paying Agent/Registrar
specifying the duties and responsibilities of the City and the Paying Agent/Registrar in
substantially the fonn presented at this meeting, such fonn of agreement being hereby approved.
The signature of the Mayor shall be attested by the City Secretary.
(b) If the Paying Agent/Registrar resigns or otherwise ceases to sezve as such, the
City will promptly appoint a replacement.
Section 5.4 Termination.
The City, upon not less than sixty (60) days notice, reserves the right to tenninate the
appointment of any Paying Agent/Registrar by delivering to the entity whose appointment is to
be terminated written notice of such termination.
Section 5.5 Notice of Change to Owners.
Promptly upon each change in the entity serving as Paying Agent/Registrar, the City will
cause notice of the change to be sent to each Owner by United States mail, first class postage
prepaid, at the address thereof in the Register, stating the effective date of the change and the
name and mailing address of the replacement Paying Agent/Registrar.
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Section 5.6 Agreement to Perform Duties and Functions.
By accepting the appoinbnent as Paying Agent/Registrar and executing the Paying
Agent/Registrar Agreement, the Paying Agent/Registrar is deemed to have agreed to the
provisions of this Ordinance and that it will perform the duties and functions of Paying
Agent/Registrar prescribed thereby.
Section 5.7 Delivery of Records to Successor.
If a Paying Agent/Registrar is replaced, such Paying Agent, promptly upon the
appointment of the successor, will deliver the Register (or a copy thereof) and all other pertinent
books and records relating to the Bonds to the successor Paying Agent/Registrar.
ARTICLE VI
FORM OF THE BONDS
Section 6.1 Form Generally.
(a) The Bonds, including the Registration Certificate of the Comptroller of Public
Accounts of the State of Texas, the Certificate of the Paying Agent/Registrar, and the
Assignment form to appear on each of the Bonds, (i) shall be substantially in the form set forth in
this Article, with such appropriate insertions, omissions, substitutions, and other variations as are
permitted or required by this Ordinance and the Pricing Certificate, and (ii) may have such
letters, numbers, or other marks of identification (including identifying numbers and letters of
the Committee on Uniform Securities Identification Procedures of the American Bankers
Association) and such legends and endorsements (including any reproduction of an opinion of
counsel) thereon as, consistently herewith, may be determined by the City or by the officers
executing such Bonds, as evidenced by their execution thereof.
(b) Any portion of the text of any Bonds may be set forth on the reverse side thereof,
with an appropriate reference thereto on the face of the Bonds.
(c) The definitive Bonds, if any, shall be typewritten, photocopied, printed,
) lithographed, or engraved, and may be produced by any combination of these methods or
produced in any other similar manner, all as determined by the officers executing such Bonds, as
evidenced by their execution thereof.
\
(d) The Initial Bond submitted to the Attorney General of the State of Texas may be
typewritten and photocopied or otherwise reproduced.
Section 6.2 Form of the Bonds.
The form of the Bonds, including the form of the Registration Certificate of the
Comptroller of Public Accounts of the State of Texas, the form of Certificate of the Paying
Agent/Registrar and the form of Assignment appearing on the Bonds, shall be substantially as
follows:
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(a) Form of Bond.
REGISTERED
No. __
INTEREST RATE:
__ %
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE REFUNDING BONDS
SERIES 2005
MATURITY DATE: BOND DATE: ____ , __
REGISTERED
$. ___ _
CUSIP NUMBER:
The City of Lubbock (the "City"), in the County of Lubbock, State of Texas, for value
received, hereby promises to pay to
or registered assigns, on the Maturity Date specified above, the sum of
_________ DOLLARS
and to pay interest on such principal amount from the later of the Bond Date specified above or
the most recent interest payment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing
______ 2• All capitalized terms used herein but not defined shall have the meaning
assigned to them in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Pa)ment!fransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest pa)ment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
1 Insert based upon the Pricing Certificate.
2 Insert based upon the Pricing Certificate.
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Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
) payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
If the date for the payment of the principal of or interest on this Bond shall be a Saturday,
) Sunday, legal holiday, or day on which banking institutions in the city where the Designated
Paymentffransfer Office of the Paying Agent/Registrar is located are required or authorized by
law or executive order to close, the date for such payment shall be the next succeeding day that is
not a Saturday, Sunday, legal holiday, or day on which banking institutions are required or
authorized to close, and payment on such date shall have the same force and effect as if made on
the original date payment was due.
)
)
This Bond is one of a series of fully registered Bonds specified in the title hereof issued
in the aggregate principal amount of$ 3 (herein referred to as the "Bonds"), issued
pursuant to a certain ordinance of the City (the "Ordinance") for the purpose of refunding certain
outstanding obligations of the City.
[The City has reserved the option to redeem the Bonds maturing on or after February 15,
___ before their respective scheduled maturities in whole or in part in integral multiples of
$5,000 on February 15, __,or on any date thereafter, at a redemption price of par, plus accrued
interest to the date fixed for redemption. If less than all of the Bonds are to be redeemed, the
City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall
direct the Paying Agent/Registrar to call by lot Bonds, or portions thereof within such maturity
or maturities and in such amounts, for redemption. t
[Bonds maturing on February 15, (the "Term Bonds") are subject to mandatory
sinking fund redemption prior to their scheduled maturity, and will be redeemed by the City, in
part at a redemption price equal to the principal amount thereof, without premium, plus interest
accrued to the redemption date, on the dates and in the principal amounts shown in the following
schedule:
Redemption Date Principal Amount
February 15, __ $, ___ _
February 15, __ (maturity) $, ___ _
The Paying Agent/Registrar will select by lot or by any other customary method that
results in a random selection the specific Term Bonds (or with respect to Term Bonds having a
denomination in excess of $5,000, each $5,000 portion thereof) to be redeemed by mandatory
3 Insert based upon the Pricing Certificate.
4 Insert optional redemption provisions and revise as necessary to conform to the Pricing Certificate.
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redemption. The principal amount of Term Bonds required to be redeemed on any redemption
date pursuant to the foregoing mandatory sinking fund redemption provisions hereof shall be
reduced, at the option of the City, by the principal amount of any Term Bonds which, at least 45
days prior to the mandatory sinking fund redemption date (i) shall have been acquired by the
City at a price not exceeding the principal amount of such Term Bonds plus accrued interest to
the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (ii)
shall have been redeemed pursuant to the optional redemption provisions hereof and not
previously credited to a mandatory sinking fund redemption. ]5
Notice of such redemption or redemptions shall be given by United States mail, first class
postage prepaid, not less than 30 days before the date fixed for redemption, to the registered
owner of each of the Bonds to be redeemed in whole or in part. Notice having been so given, the
Bonds or portions thereof designated for redemption shall become due and payable on the
redemption date specified in such notice; from and after such date, notwithstanding that any of
the Bonds or portions thereof so called for redemption shall not have been surrendered for
payment, interest on such Bonds or portions thereof shall cease to accrue.
As provided in the Ordinance, and subject to certain limitations therein set forth, this
Bond is transferable upon surrender of this Bond for transfer at the designated office of the
Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to
the Paying Agent/Registrar; thereupon, one or more new fully registered Bonds of the same
stated maturity, of authorized denominations, bearing the same rate of interest, and for the same
aggregate principal amount will be issued to the designated transferee or transferees.
The City, the Paying Agent/Registrar, and any other person may treat the person in whose
name this Bond is registered as the owner hereof for the purpose of receiving payment as herein
provided (except interest shall be paid to the person in whose name this Bond is registered on the
Record Date) and for all other purposes, whether or not this Bond be overdue, and neither the
City nor the Paying Agent/Registrar shall be affected by notice to the contrary.
IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Bond and the
series of which it is a part is duly authorized by law; that all acts, conditions, and things to be
done precedent to and in the issuance of the Bonds have been properly done and performed and
have happened in regular and due time, fonn, and manner as required by law; that ad valorem
taxes upon all taxable property in the City have been levied for and pledged to the payment of
the debt service requirements of the Bonds within the limit prescribed by law; that, in addition to
said taxes, further provisions have been made for the payment of the debt service requirements of
the Bonds to be additionally payable from and secured by a lien on and pledge of the Net
Revenues (as defined in the Ordinance) of the City's Waterworks System (the "System"), such
lien and pledge, however, being (i) junior and subordinate to the lien on and pledge of the Net
Revenues of the System securing the payment of Prior Lien Obligations (as defined in the
Ordinance) currently outstanding and hereafter issued by the City and (ii) on parity with the lien
on and pledge of the Net Revenues of the System securing the payment of the Previously Issued
5 Insert mandatory sinking fund redemption provisions, if any, and revise as necessary to conform to the Pricing
Certificate
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Obligations (as defined in the Ordinance) and any Additional Obligations (as defined in the
Ordinance) hereafter issued; that in the Ordinance, the City reserves and retains the right to issue
Prior Lien Obligations while the Bonds are outstanding without limitation as to principal amount
or subject to any tenns, conditions or restrictions other than as may be required by law or
otherwise, as well as the right to issue Additional Obligations payable from and, together with
the Bonds and the Previously Issued Obligations, equally and ratably secured by a parity lien on
and pledge of the Net Revenues of the System; and that the total indebtedness of the City,
including the Bonds, does not exceed any constitutional or statutory limitation.
IN WITNESS WHEREOF, the City has caused this Bond to be executed by the manual
or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile
signature of the City Secretary, and the official seal of the City has been duly impressed or
placed in facsimile on this Bond.
Mayor, City of Lubbock, Texas
City Secretary,
City of Lubbock, Texas
[SEAL]
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(b) Form of Comptroller's Registration Bond. The following Comptroller's
Registration Bond may be deleted from the definitive Bonds if such Bond on the Initial Bond is
) fully executed.
)
)
OFFICE OF THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
§
§
§
REGISTER NO. __ _
I hereby certify that there is on file and of record in my office a Certificate of the
Attorney General of the State of Texas to the effect that this Bond has been examined by him as
required by law, that he finds that it has been issued in conformity with the Constitution and laws
of the State of Texas, and that it is a valid and binding obligation of the City of Lubbock, Texas;
and that this Bond has this day been registered by me.
Witness my hand and seal of office at Austin, Texas,-------·
[SEAL] Comptroller of Public Accounts
of the State of Texas
(c) Form of Certificate of Paying Agent/Registrar. The following Certificate of
Paying Agent/Registrar may be deleted from the Initial Bond if the Comptroller's Registration
Bond appears thereon.
CERTIFICATE OF PAYING AGENT/REGISTRAR
) The records of the Paying Agent/Registrar show that the Initial Bond of this series of
)
)
Bonds was approved by the Attorney General of the State of Texas and registered by the
Comptroller of Public Accounts of the State of Texas> and that this is one of the Bonds referred
to in the within-mentioned Ordinance.
Dated:
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JPMorgan Chase B~ National Association
as Paying Agent/Registrar
By:
Authorized Signatory
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(d) Form of Assignment.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or
typewrite name, address and Zip Code of transferee): --------------
(Social Security or other identifying number: the within Bond and all
rights hereunder and hereby irrevocably constitutes and appoints --------
attorney to transfer the within Bond on the books kept for registration hereof, with full power of
substitution in the premises.
Dated:
NOTICE: The signature on this Assignment
must correspond with the name of the
registered owner as it appears on the face of
the within Bond in every particular and must
be guaranteed in a manner acceptable to the
Paying Agent/Registrar.
Signature Guaranteed By:
Authorized Signatory
(e) The Initial Bond shall be in the form set forth in paragraphs (a), (b) and (d) of this
Section, except for the following alterations:
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(i) immediately under the name of the Bond the headings
"INTEREST RATE" and "MA TIJRIIT DATE" shall both be completed with the
expression "As shown below"; and
(ii) in the first paragraph of the Bond, the words "on the maturity date
specified above" shall be deleted and the following will be inserted: "on
February 15 in each of the years, in the principal installments and bearing interest
at the per annum rates set forth in the following schedule:
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Principal Installments Interest Rate
(Information to be inserted from the Pricing Certificate pursuant to
Section 3.2 of this Ordinance)
Section 6.3 CUSIP Registration.
The City may secure identification numbers through the CUSIP Service Bureau Division
of Standard & Poor's, A Division of the McGraw-Hill Companies, New York, New York, and
may authorize the printing of such numbers on the face of the Bonds. It is expressly provided,
however, that the presence or absence of CUSIP numbers on the Bonds shall be of no
significance or ·effect in regard to the legality thereof and neither the City nor the attorneys
approving said Bonds as to legality are to be held responsible for CUSIP numbers incorrectly
printed on the Bonds.
Section 6.4 Legal Opinion.
The approving legal opinion of Vinson & Elkins L.L.P., Bond Counsel, may be attached
to or printed on the reverse side of each Bond over the certification of the City Secretary, which
may be executed in facsimile.
Section 6.5 Bond Insurance.
Information pertaining to bond insurance, if any, may be printed on each Bond.
ARTICLE VII
SALE AND DELIVERY OF BONDS; DEPOSIT OF PROCEEDS
Section 7.1 Sale of Bonds; Official Statement.
(a) The Bonds shall be sold at negotiated sale to the Underwriters in accordance with
the terms of this Ordinance, including this Section 7.l(a) and Exhibit B hereto, provided that all
of the conditions set forth in Exhibit B can be satisfied. As authorized by Chapter 1207, Texas
Government Code, as amended, the Chief Financial Officer/Assistant City Manager is authorized
to act on behalf of the City upon determining that the conditions set forth in Exhibit B can be
satisfied, in selling and delivering the Bonds and carrying out the other procedures specified in
this Ordinance, including determining whether to acquire bond insurance for the Bonds, the
aggregate principal amount of the Refunded Obligations, the aggregate principal amount of the
Bonds and price at which each of the Bonds will be sold, the number and designation of series of
Bonds to be issued, the form in which the Bonds shall be issued, the years in which the Bonds
will mature, the principal amount to mature in each of such years, the rate of interest to be borne
by each such maturity, the first interest payment date, the dates, prices and tenns upon and at
which the Bonds shall be subject to redemption prior to maturity at the option of the City and
shall be subject to mandatory sinking fimd redemption, and all other matters relating to the
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issuance, sale and delivery of the Bonds, including the refunding of the Refunded Obligations,
all of which shall be specified in the Pricing Certificate.
The authority granted to the Chief Financial Officer/ Assistant City Manager under this
Section 7.1(a) shall expire at 5:00p.m., August 31, 2005 unless otherwise extended by the City
Council by separate action.
Any finding or determination made by the Chief Financial Officer/ Assistant City
Manager relating to the issuance and sale of the Bonds and the execution of the Bond Purchase
Agreement in connection therewith shall have the same force and effect as a finding or
determination made by the City CounciL
(b) The Chief Financial Officer/ Assistant City Manager is hereby authorized and
directed to execute and deliver, and the City Secretary is hereby authorized and directed to attest,
a bond purchase agreement (the "Bond Purchase Agreement") which Bond Purchase Agreement ·
is hereby accepted, approved and authorized in substantially the form submitted to the City and
upon completion of the terms of the Bond Purchase Agreement in accordance with the terms of
the Pricing Certificate and this Ordinance, the Chief Financial Officer/ Assistant City Manager is
authorized and directed to execute such Bond Purchase Agreement on behalf of the City and the
Chief Financial Officer/ Assistant City Manager and all other officers, agents and representatives
of the City are hereby authorized to do any and all things necessary or desirable to satisfy the
conditions set out therein and to provide for the issuance and delivery of the Bonds. The Bonds
shall initially ·be registered in the name of the Representative.
(c) The form and substance of the Preliminary Official Statement for the Bonds and
any addenda, supplement or amendment thereto, are hereby in all respects approved and adopted,
and the Preliminary Official Statement is hereby deemed final as of its date within the meaning
and for the purposes of paragraph (b)(l) of Rule 15c2-12 under the Securities Exchange Act of
1934, as amended. The Chief Financial Officer/ Assistant City Manager and City Secretary are
hereby authorized and directed to cause to be prepared a final Official Statement incorporating
applicable pricing information pertaining to the Bonds, and to execute the same by manual or
facsimile signature and deliver appropriate numbers of executed copies thereof to the
Representative. The Official Statement as thus approved, executed and delivered, with such
appropriate variations as shall be approved by the Chief Financial Officer/ Assistant City
Manager and the Representative, may be used by the Underwriters in the public offering and sale
thereof. The City Secretary is hereby authorized and directed to include and maintain a copy of
the Official Statement and any addenda, supplement or amendment thereto thus approved among
the permanent records of this meeting. The use and distribution of the Preliminary Official
Statement in the public offering of the Bonds by the Underwriters is hereby ratified, approved
and confirmed.
(d) All officers of the City are authorized to execute such documents, Bonds and
receipts as they may deem appropriate in order to consummate the delivery of the Bonds in
accordance with the tenns of sale therefor including, without limitation, the Bond Purchase
Agreement.
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(e) The obligation of the Underwriters identified in subsection (a) of this Section to
accept delivery of the Bonds is subject to such purchaser being furnished with the final,
) approving opinion of Vinson & Elkins L.L.P ., bond counsel for the City, which opinion shall be
dated and delivered the Closing Date.
'
)
)
Section 7.2 Control and Delivery of Bonds.
(a) The Chief Financial Officer/Assistant City Manager of the City is hereby
authorized to have control of the Initial Bond and all necessary records and proceedings
pertaining thereto pending investigation, examination, and approval of the Attorney General of
the State of Texas, registration by the Comptroller of Public Accounts of the State of Texas and
registration with, and initial exchange or transfer by, the Paying Agent/Registrar.
(b) After registration by the Comptroller of Public Accounts, delivery of the Bonds
shall be made to the Underwriters thereof under and subject to the general supervision and
direction of the Chief Financial Officer/ Assistant City Manager, against receipt by the City of all
amounts due to the City under the tenns of sale.
Section 7.3 Dsmosit of Proceeds.
(a) First: All amounts received on the Closing Date as accrued interest on the Bonds
from the Bond Date to the Closing Date, shall be deposited to the Interest and Sinking Fund.
(b) Second: A portion of the proceeds from the sale of the Bonds, and other lawfully
available funds of the City, if any, as set forth in the Pricing Certificate shall be deposited to the
Escrow Fund to refund the BRA Bonds and, to the extent not otherwise provided for, to pay all
expenses arising in connection with the establishment of such Escrow Fund and the refunding of
the BRA Bonds.
(c) Third: A portion of the proceeds from the sale of the Bonds, together with other
lawfully available funds of the City, as set forth in the Pricing Certificate, shall be paid to the
Counterparty to fund the Tennination Payment.
(d) Fourth: A portion of the proceeds from the sale of the Bonds, as set forth in the
Pricing Certificate, shall be applied to pay costs of issuance.
(e) Fifth: Any remaining balance on the Closing Date, as set forth in the Pricing
Certificate, shall be deposited to the Interest and Sinking Fund.
Section 7.4 Tennination of Swap.
The Chief Financial Officer/ Assistant City Manager of the City is hereby authorized to
detennine the portion of the Termination Payment to be refunded with proceeds of the Bonds
and to take such actions and execute such documents as are necessary to terminate the Swap. In
addition, the Chief Financial Officer/ Assistant City Manager of the City is hereby authorized to
apply the amount of surplus Net Revenues of the System needed and lawfully available, in
addition to the proceeds of the Bonds, to fully fund the Termination Payment.
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Section 7.5 Aimroval of Escrow Agreement for the BRA Bonds .
.., The Escrow Agreement, in substantially the form presented at this meeting, and its
execution and delivery by the Mayor are hereby authorized and approved. The signature of the
Mayor shall be attested by the City Secretary. The Chief Financial Officer/ Assistant City
Manager and the Mayor are each hereby authorized (i) to make such contributions are necessary
for the Escrow Fund from lawfully available funds of the City and (ii) to make necessary
1 arrangements for the purchase of the Federal Securities, if any, referenced in the Escrow
Agreement, as may be necessary for the Escrow Fund, and the application for the acquisition of
the Federal Securities is hereby approved.
ARTICLE VIII
INVESTMENTS
Section 8.1 Investments.
(a) Money in the Interest and Sinking Fund created by this Ordinance, at the option
) of the City, may be invested in such securities or obligations as permitted under applicable law.
)
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(b) Any securities or obligations in which such money is so invested shall be kept and
held in trust for the benefit of the Owners and shall be sold and the proceeds of sale shall be
timely applied to the making of all payments required to be made from the fund from which the
investment was made.
Section 8.2 Investment Income.
Interest and income derived from investment of the Interest and Sinking Fund shall be
credited to such Fund.
ARTICLE IX
PARTICULAR REPRESENTATIONS AND COVENANTS
Section 9.1 Payment of the Bonds.
On or before each Interest Payment Date while any of the Bonds are outstanding and
unpaid, there shall be made available to the Paying Agent/Registrar, out of the Interest and
Sinking Fund, money sufficient to pay such interest on and principal of, redemption premium, if
any, and interest on the Bonds as will accrue or mature on the applicable Interest Payment Date
or date of prior redemption.
Section 9.2 Other Rtmresentations and Covenants.
(a) The City will faithfully perform, at all times, any and all covenants, undertakings,
stipulations, and provisions contained in this Ordinance, each Bond and the ordinances or
contracts authorizing the issuance of the Prior Lien Obligations; the City will promptly pay or
cause to be paid the principal of, redemption premium, if any, and interest on each Bond on the
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dates and at the places and manner prescribed in such Bond; and the City will, at the times and in
the manner prescribed by this Ordinance, deposit or cause to be deposited the amounts of money
specified by this Ordinance.
(b) The City is duly authorized under the laws of the State of Texas to issue the
Bonds; all action on its part for the creation and issuance of the Bonds has been duly and
effectively taken; and the Bonds in the hands of the Owners thereof are and will be valid and
enforceable obligations of the City in accordance with their tenns.
Section 9.3 Provisions Concerning Federal Income Tax Exclusion.
The City intends that the interest on the Bonds shall be excludable from gross income for
purposes of federal income taxation pursuant to sections 1 03 and 141 through I 50 of the Internal
Revenue Code of 1986, as amended (the "Code,), and the applicable regulations promulgated
thereunder (the "Regulations"). The City covenants and agrees not to take any action, or
knowingly omit to take any action within its control, that if taken or omitted, respectively, would
cause the interest on the Bonds to be includable in the gross income, as defined in section 61 of
the Code, of the holders thereof for purposes of federal income taxation. In particular, the City
covenants and agrees to comply with each requirement of Sections 9.3 through 9.9 of this
Article IX; provided, however, that the City shall not be required to comply with any particular
requirement of Sections 9.3 through 9.9 of this Article IX if the City has received an opinion of
nationally recognized bond counsel ("Counsel's Opinion") that such noncompliance will not
adversely affect the exclusion from gross income for federal income tax purposes of interest on
the Bonds or if the City has received a Counsel's Opinion to the effect that compliance with
some other requirement set forth in Sections 9.3 through 9.9 of this Article IX will satisfy the
applicable requirements of the Code, in which case compliance with such other requirement
specified in such Counsel's Opinion shall constitute compliance with the corresponding
requirement specified in Sections 9.3 through 9.9 of this Article IX.
Section 9.4 No Private Use or Pavment and No Private Loan Financing.
The City shall certify, through an authorized officer, employee or agent, that, based upon
all facts and estimates known or reasonably expected to be in existence on the date the Bonds are
delivered, the proceeds of the Bonds will not be used in a manner that would cause the Bonds to
be "private activity bonds" within the meaning of section 141 of the Code and the Regulations.
The City covenants and agrees that it will make such use of the proceeds of the Bonds, including
interest or other investment income derived from Bond proceeds, regulate the use of property
financed, directly or indirectly, with such proceeds, and take such other and further action as may
be required so that the Bonds will not be ''private activity bonds" within the meaning of section
141 of the Code and the Regulations.
Section 9.5 No Federal Guaranty.
The City covenants and agrees not to take any action, or knowingly omit to take any
' action within its control, that, if taken or omitted, respectively, would cause the Bonds to be
"federally guaranteed" within the meaning of section 149(b) of the Code and the Regulations,
except as permitted by section 149(b)(3) of the Code and the Regulations.
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Section 9.6 Bonds Are Not Hedge Bonds.
The City covenants and agrees not to take any action, or knowingly omit to take any
action, and has not knowingly omitted and will not knowingly omit to take any action, within its
control, that, if taken or omitted, respectively, would cause the Bonds to be "hedge bonds"
within the meaning of section 149(g) of the Code and the Regulations.
Section 9. 7 No-Arbitrage Covenant.
The City shall certify, through an authorized officer, employee or agent, that, based upon
all facts and estimates known or reasonably expected to be in existence on the date the Bonds are
delivered, the City will reasonably expect that the proceeds of the Bonds will not be used in a
manner that would cause the Bonds to be "arbitrage bonds" within the meaning of section 148(a)
of the Code and the Regulations. Moreover, the City covenants and agrees that it will make such
use of the proceeds of the Bonds including interest or other investment income derived from
Bond proceeds, regulate investments of proceeds of the Bonds, and take such other and further
action as may be required so that the Bonds will not be "arbitrage bonds" within the meaning of
section 148(a) of the Code and the Regulations.
Section 9.8 Arbitrage Rebate.
If the City does not qualify for an exception to the requirements of Section 148(f) of the
Code, the City will take all necessary steps to comply with the requirement that certain amounts
earned by the City on the investment of the "gross proceeds" of the Bonds (within the meaning
of section 148(f)(6)(B) of the Code}, be rebated to the federal government. Specifically, the City
will (i) maintain records regarding the investment of the gross proceeds of the Bonds as may be
required to calculate the amount earned on the investment of the gross proceeds of the Bonds
separately from records of amounts on deposit in the funds and accounts of the City allocable to
other bond issues of the City or moneys which do not represent gross proceeds of any Bonds of
the City, (ii) calculate at such times as are required by the Regulations, the amount earned from
the investment of the gross proceeds of the Bonds which is required to be rebated to the federal
government, and (iii) pay, not less often than every fifth anniversary date of the delivery of the
Bonds or on such other dates as may be permitted under the Regulations, all amounts required to
be rebated to the federal government. Further, the City will not indirectly pay any amount
otherwise payable to the federal government pursuant to the foregoing requirements to any
person other than the federal government by entering into any investment arrangement with
respect to the gross proceeds of the Bonds that might result in a reduction in the amount required
to be paid to the federal government because such arrangement results in a smaller profit or a
larger loss than would have resulted if the arrangement had been at arm's length and had the
yield on the issue not been relevant to either party.
Section 9. 9 Information Re.porting.
The City covenants and agrees to file or cause to be filed with the Secretary of the
) Treasury, not later than the 15th day of the second calendar month after the close of the calendar
quarter in which the Bonds are issued, an information statement concerning the Bonds, all under
and in accordance with section 149(e) of the Code and the Regulations.
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Section 9.10 Continuing Obligation.
Notwithstanding any other provision of this Ordinance, the City's obligations under the
covenants and provisions of Sections 9.3 through 9.9 of this Article IX shall survive the
defeasance and discharge of the Bonds.
ARTICLE X
DEFAULT AND REMEDIES
Section 10.1 Events of Default.
Each of the following occurrences or events for the purpose of this Ordinance is hereby
declared to be an Event of Default:
(i) the failure to make payment of the principal of, redemption
premium, if any, or interest on any of the Bonds when the same becomes due and
payable; or
(ii) default in the performance or observance of any other covenant,
agreement, or obligation of the City, which default materially and adversely
affects the rights of the Owners, including but not limited to their prospect or
ability to be repaid in accord·ance with this Ordinance, and the continuation
thereof for a period of sixty (60) days after notice of such default is given by any
Owner to the City.
Section 10.2 Remedies for Default.
(a) Upon the happening of any Event of Default, then any Owner or an authorized
representative thereof: including but not limited to a trustee or trustees therefor, may proceed
against the City for the purpose of protecting and enforcing the rights of the Owners under this
Ordinance by mandamus or other suit, action or special proceeding in equity or at law in any
court of competent jurisdiction for any relief permitted by law, including the specific
performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing
that may be unlawful or in violation of any right of the Owners hereunder or any combination of
such remedies.
(b) It is provided that all such proceedings shall be instituted and maintained for the
equal benefit of all Owners of Bonds then outstanding.
Section 10.3 Remedies Not Exclusive.
(a) No remedy herein conferred or reserved is intended to be exclusive of any other
available remedy, but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in
equity; provided, however, that notwithstanding any other provision of this Ordinance, the right
to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this
Ordinance.
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(b) The exercise of any remedy herein conferred or reserved shall not be deemed a
waiver of any other available remedy.
ARTICLE XI
DISCHARGE
Section 11.1 Discharge.
The Bonds may be defeased, discharged or refunded in any manner permitted by
applicable law.
ARTICLE XII
CONTINUING DISCLOSURE UNDERTAKING
Section 12.1 Annual Re,ports.
) (a) The City shall provide annually to each NRMSIR and to any SID, within six (6)
months after the end of each fiscal year, financial information and operating data with respect to
the City of the general type included in the final Official Statement, being the information
described in Exhibit A hereto. Any financial statements so to be provided shall be (i) prepared in
accordance with the accounting principles described in Exhibit A hereto, and (ii) audited, if the
) City commissions an audit of such statements and the audit is completed within the period during
which they must be provided. If the audit of such financial statements is not complete within
such perio~ then the City shall provide notice that audited financial statements are not available
and shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR
and any SID. The City shall provide audited financial statements for the applicable fiscal year to
each NRMSIR and to any SID when and if audited financial statements become available.
)
(b) If the City changes its fiscal year, it will notify each NRMSIR and any SID of the
change (and of the date of the new fiscal year end) prior to the next date by which the City
otherwise would be required to provide financial information and operating data pursuant to this
Section.
(c) The financial information and operating data to be provided pursuant to this
Section may be set forth in full in one or more documents or may be included by specific
referenced to any docwnent (including an official statement or other offering document, if it is
available from the MSRB) that theretofore has been provided to each NRMSffi. and any SID or
J filed with the SEC.
)
)
Section 12.2 Material Event Notices.
(a) The City shall notify any SID and either each NRMSIR or the MSRB, in a timely
manner, of any of the following events with respect to the Bonds, if such event is material within
the meaning of the federal securities laws:
(i) principal and interest payment delinquencies;
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(ii) nonpayment related defaults;
(iii) unscheduled draws on debt service reserves reflecting financial
difficulties;
(iv) unscheduled draws on credit enhancements reflecting financial
difficulties;
(v) substitution of credit or liquidity providers, or their failure to
perform;
(vi) adverse tax opinions or events affecting the tax-exempt status of
the Bonds;
(vii) modifications to rights of Owners;
(viii) redemption calls;
(ix) defeasances;
(x) release) substitution, or sale of property securing repayment of the
Bonds; and
(xi) rating changes.
(b) The City shall notify any SID and either each NRMSIR or the MSRB, in a timely
manner, of any failure by the City to provide financial information or operating data in
accordance with Section 12.1 of this Ordinance by the time required by such Section.
Section 12.3 Limitations, Disclaimers and Amendments.
(a) The City shall be obligated to observe and perform the covenants specified in this
Article for so long as, but only for so long as, the City remains an "obligated person" with
respect to the Bonds within the meaning of the Rule, except that the City in any event will give
notice of any redemption calls and any defeasances that cause the City to be no longer an
"obligated person."
(b) The provisions of this Article are for the sole benefit of the Owners and beneficial
owners of the Bonds, and nothing in this Article, express or implied, shall give any benefit or any
legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to
provide only the financial information, operating data, financial statements, and notices which it
has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide
any other infonnation that may be relevant or material to a complete presentation of the City's
financial results, condition, or prospects or hereby undertake to update any information provided
in accordance with this Article or otherwise, except as expressly provided herein. The City does
not make any representation or warranty concerning such information or its usefulness to a
decision to invest in or sell Bonds at any future date.
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UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE OWNER
OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR
TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY
THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY
COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF
ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH
BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC
PERFORMANCE.
(c) No default by the City in observing or perfonning its obligations under this
Article shall constitute a breach of or default under the Ordinance for purposes of any other
provisions of this Ordinance.
(d) Nothing in this Article is intended or shall act to disclaim, waive, or otherwise
limit the duties of the City under federal and state securities laws.
(e) The provisions of this Article may be amended by the City from time to time to
adapt to changed circumstances that arise from a change in legal requirements, a change in law,
or a change in the identity, nature, status, or type of operations of the City, but only if (i) the
provisions of this Article, as so amended, would have permitted an underwriter to purchase or
sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account
any amendments or interpretations of the Rule to the date of such amendment, as well as such
changed circumstances, and (ii) either (A) the Owners of a majority in aggregate principal
amount (or any greater amount required by any other provisions of this Ordinance that authorizes
such an amendment) of the outstanding Bonds consent to such amendment or (B) an entity or
individual person that is unaffiliated with the City (such as nationally recognized bond counsel)
determines that such amendment will not materially impair the interests of the Owners and
beneficial owners of the Bonds. If the City so amends the provisions of this Article, it shall
include with any amended financial infonnation or operating data next provided in accordance
with Section 12.1 an explanation, in narrative form, of the reasons for the amendment and of the
impact of any change in type of financial infonnation or operating data so provided.
(f) Any filing required to be made pursuant to this Article XII may be made through
the facilities of DisclosureUSA or such other central post office as may be approved in writing
by the SEC for such purpose. Any such filing made through such central post office will be
deemed to have been filed with each NRMSIR and SID or MSRB as if such filing had been
made directly to such entity.
ARTICLEXIll
AMENDMENTS; ATIORNEY GENERAL MODIFICATION
Section 13.1 Amendments.
) This Ordinance shall constitute a contract with the Owners, be binding on the City, and
)
shall not be amended or repealed by the City so long as any Bond remains outstanding except as
pennitted in this Section. The City may, without consent of or notice to any Owners, from time
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to time and at any time, amend this Ordinance in any manner not detrimental to the interests of
the Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission
herein. In addition, the City may, with the written consent of the Owners of the Bonds holding a
majority in aggregate principal amount of the Bonds then outstanding, amend, add to, or rescind
any of the provisions of this Ordinance; provided that, without the consent of all Owners of
outstanding Bonds, no such amendment, addition, or rescission shall (i) extend the time or times
of payment of the principal of, premium, if any, and interest on the Bonds, reduce the principal
amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify
the tenns of payment of the principal of, premium, if any, or interest on the Bonds, (ii) give any
preference to any Bond over any other Bond, or (iii) reduce the aggregate principal amount of
Bonds required to be held by Owners for consent to any such amendment, addition, or rescission.
Section 13.2 Attorney General Modification.
In order to obtain the approval of the Bonds by the Attorney General of the State of
Texas, any provision of this Ordinance may be modified, altered or amended after the date of its
adoption if required by the Attorney General in connection with the Attorney General 's
examination as to the legality of the Bonds and approval thereof in accordance with the
applicable law. Such changes, if any, shall be provided to the City Secretary and the City
Secretary shall insert such changes into this Ordinance as if approved on the date hereof.
(Execution Page Follows]
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PRESENTED, FINALLY PASSED AND APPROVED, AND EFFECTIVE on the 26th
day of May, 2005, at a regular meeting of the City Council of the City of bock, Texas.
)
ATTEST:
~~ 1::> ~ RE CCAGARiA, City Secre~
j [SEAL]
APPROVED AS TO CONTENT:
By: '=~~
LEE ANN DUMBAULD,
Chief Financial Officer/ Assistant City Manager
)
APPRO AS TO FORM:
) By:
)
)
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EXHIBIT A
DESCRIPTION OF ANNUAL DISCLOSURE OF FINANCIAL INFORMATION
The following information is referred to in Article XII of this Ordinance.
Annual Financial Statements and Operating Data
The financial information and operating data with respect to the City to be provided
annually in accordance with such Section are as specified (and included in the Appendix or other
headings of the Official Statement referred to) below:
1. The portions of the financial statements of the City appended to the Official
Statement as Appendix B, but for the most recently concluded fiscal year.
2. Statistical and financial data set forth in Tables I through 6 and 8 through 18 of
the Official Statement.
Accounting Principles
The accounting principles referred to in such Section are the accounting principles
described ·in the notes to the financial statements referred to in Paragraph 1 above.
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REFUNDING PARAMETERS
In accordance with Section 7.0l(a) of the Ordinance, the following conditions with respect to the
Bonds must be satisfied in order for the Chief Financial Officer/ Assistant City Manager to act on
behalf of the City in selling and delivering the Bonds.to the Underwriters:
(a) the price to be paid for the Bonds shall be not less than 100% of the aggregate
principal amount of the Bonds;
(b) the Bonds shall not bear interest at a rate greater than the maximum rate allowed
by Chapter 1204, Texas Government Code, as amended;
(c) the aggregate principal amoWlt of the Bonds authorized to be issued for the
purposes descnoed in Section 3.1 shall not exceed the maximum amount authorized in
Section 3.1 and shall equal an amount sufficient to (i) provide for the refunding of the Debt
Service Obligation, (ii) pay the costs of issuing the Bonds and (iii) refund the maximum amount
of the Termination Payment determined by the City's bond counsel to be eligible under federal
tax law to be refunded with tax-exempt bonds on the date of pricing of the Bonds;
(d) the maximum maturity for the Bonds shall not exceed twenty years;
(e) the refunding of the Refunded Obligations shall not result in a gross or a net
present value loss; and
(f) the Bonds to be issued, prior to delivery, must have been rated by a nationally
recognized rating agency for municipal securities in one of the four highest rating categories for
long tenn obligations.
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PRICING CERTIFICATE
) Re: $43,080,000 City of Lubbock, Texas Combination Tax and Water System Revenue
Refunding Bonds, Series 2005 (the "Bonds'')
I, the undersigned officer of the City of Lubbock, Texas (the "City''), do hereby make and
execute this Pricing Certificate pursuant to an ordinance adopted by the City Council of the City
on May 26, 2005 (the "Ordinance") captioned as follows:
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LUBBOCK,
TEXAS, AUTHORIZING THE ISSUANCE OF CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING
BONDS, SERIES 2005, IN AN AMOUNT NOT TO EXCEED $48,000,000;
PROVIDING FOR THE AWARD AND SALE THEREOF IN ACCORDANCE
WITH SPECIFffiD PARAMETERS; LEVYING A TAX AND PLEDGING
SURPLUS WATERWORKS SYSTEM REVENUES IN PAYMENT THEREOF;
PRESCRIBING TiiE FORM OF SAID BONDS; APPROVING EXECUTION
AND DELIVERY OF AN ESCROW AGREEMENT AND A BOND
PURCHASE AGREEMENT; APPROVING THE OFFICIAL STATEMENT;
ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT; AND
DECLARING AN EFFECTIVE DATE
authorizing the issuance of the Bonds. Capitalized terms used in this Pricing Certificate shall
have the meanings given such tenns in the Ordinance.
Tax and Waterworks System Surolus Revenue Refunding Bonds. Series 2005
1. As authorized by Section 7.1 of the Ordinance, I have acted on behalf of the City in
selling the Bonds to the Underwriters, for whom RBC Dain Rauscher Inc., acts as
representative, pursuant to the tenns of a bond purchase contract in substantially the form
accepted, approved and authorized pursuant to Section 7.1 of the Ordinance, for the swn
of $45,718,737.20 (representing the principal amount of $43,080,000, plus a reoffering
premium of $2,930,321.05 and less an underwriters' discount of $291,583.85), and
having the following terms, conditions and provisions, all as authorized pursuant to
Section 7.1 of the Ordinance:
A. The Bonds shall be issued in the aggregate principal amount of $43,080,000, shall
be dated July 1, 2005 (the "Original Issue Date'') and bear interest from such date, shall mature
on February 15 in the years and in the principal amounts and shall bear interest payable on
February 15 and August 15 of each year, commencing February 15,2006, at the rates set forth in
the following schedule:
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Year Principal Installments Interest Rate
2006 $1,700,000 3.250%
2007 2,030,000 5.000%
2008 2,135,000 4.0000/o
2009 2,240,000 5.000%
2010 2,340,000 4.000%
2011 2,465,000 5.000%
2012 2,585,000 4.000%
2013 2,715,000 5.000%
2014 2,865,000 4.000%
2015 3,015,000 5.000%
2016 3,190,000 5.000%
2017 3,370,000 5.000%
2018 3,560,000 5.000%
2019 3,775,000 5.000%
2020 2,480,000 5.000%
2021 2,615,000 5.000%
B. In accordance with the parameters contained in Section 7.1 and Exhibit B of the
Ordinance, the undersigned does hereby find, certify and represent that the foregoing terms of
the Bonds satisfy the following requirements and parameters contained within such Section 7.1
and Exhibit B:
{i) the price to be paid by the Underwriters for the Bonds shall be 106.125%
of the aggregate principal amom1t of the Bonds, which is not less than 100% of the aggregate
principal amoWlt of the Bonds;
(ii) the Bonds do not bear interest at a rate greater than the maximum rate
allowed by Chapter 1204, Texas Government Code, as amended;
(iii) the aggregate principal amount of the Bonds issued for the purposes
described in Section 3.1 does not exceed the maximum amount authorized in Section 3.1 and
equals an amount sufficient to (i) provide for the refunding of the Debt Service Obligation, (ii)
pay the costs of issuing the Bonds and (iii) refund the maximum amount of the Tennination
Payment ($5,880,000) detennined by the City's bond counsel to be eligible under federal tax law
to be refunded with tax·exernpt bonds on the date of pricing of the Bonds;
{iv) the maximum maturity for the Bonds is 2021 which does not exceed
twenty years;
{v) the refunding of the Refunded Obligations does not result in a gross loss
or a net present value loss; and
(vi) the Bonds have been rated, or will be rated prior to delivery, by a
nationally recognized rating agency for municipal securities in one of the four highest rating
categories for long tenn obligations.
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2. $38~999,297.69 of the proceeds of the Bonds and $4,747,294.98 of prior debt service
funds shall be deposited to the Escrow Fund. $5,880,000 of the proceeds of the Bonds
plus $812,000 of lawfully available funds of the City shall be applied to pay the
Tennination Payment $225,000.00 from the proceeds of the Bonds shall be deposited to
the Cost of Issuance Fund for the pmpose of paying costs and expenses incurred with
respect to the issuance of the Bonds. $107,657.63 of the proceeds of the Bonds shall be
applied to pay the bond insurance premium. Accrued interest plus $506,781.88 of
proceeds of the Bonds shall be deposited to the debt service fund for the Bonds.
3. The Bonds shall be issued substantially in the form attached hereto as Exhibit A.
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Executed as of the 1st day of July, 2005.
Chief Financial Officer/ Assistant City Manager
City of Lubbock, Texas
Signature Page for Pricing Certificate
)
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EXHIBIT A
The form of the Bonds, including the form of the Registration Certificate of the Comptroller of
Public Accounts of the State of Texas, the form of Certificate of the Paying Agent/Registrar and
the fonn of Assigrunent appearing on the Bonds, shall be substantially as follows:
(a) Form of Bond.
REGISTERED
No. __
INTEREST RATE:
__ %
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
MATURITY DATE: BOND DATE:
February 15 __ July 1, 2005
REGISTERED
$. ___ _
CUSIP NUMBER:
The City of Lubbock (the "City''), in the County of Lubbock, State of Texas, for value
received, hereby promises to pay to
or registered assigns, on the Maturity Date specified above, the sum of
_________ DOLLARS
and to pay interest on such principal amount from the later of the Bond Date specified above or
the most recent interest payment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office''), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
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the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the ''Record Date," which shall be the last business
day of the month next preceding such interest payment date.
) If the date for the payment of the principal of or interest on this Bond shall be a Saturday,
Sunday, legal holiday, or day on which banking institutions in the city where the Designated
Payment!fransfer Office of the Paying Agent/Registrar is located are required or authorized by
law or executive order to close, the date for such payment shall be the next succeeding day that is
not a Saturday, Sunday, legal holiday, or day on which banking institutions are required or
authorized to close, and payment on such date shall have the same force and effect as if made on
the original date payment was due.
This Bond is one of a series of fully registered Bonds specified in the title hereof issued
in the aggregate principal amount of $43,080,000 (herein referred to as the "Bonds''), issued
pursuant to a certain ordinance of the City (the "Ordinance'') for the purpose of refunding certain
outstanding obligations of the City.
The City has reserved the option to redeem the Bonds maturing on or after February 15,
2016 before their respective scheduled maturities in whole or in part in integral multiples of
$5,000 on February 15, 2015, or on any date thereafter, at a redemption price of par, plus accrued
interest to the date . fixed for redemption. If less than all of the Bonds are to be redeemed, the
City shall detennine the maturity or maturities and the amounts thereof to be redeemed and shall
direct the Paying Agent/Registrar to call by lot Bonds, or portions thereof within such maturity
or maturities and in such amounts, for redemption.
Notice of such redemption or redemptions shall be given by United States mail, first class
postage prepaid, not less than 30 days before the date fixed for redemption, to the registered
owner of each of the Bonds to be redeemed in whole or in part. Notice having been so given, the
Bonds or portions thereof designated for redemption shall become due and payable on the
redemption date specified in such notice; from and after such date, notwithstanding that any of
the Bonds or portions thereof so called for redemption shall not have been surrendered for
payment, interest on such Bonds or portions thereof shall cease to accrue.
As provided in the Ordinance, and subject to certain limitations therein set forth,· this
Bond is transferable upon surrender of this Bond for transfer at the designated office of the
Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to
the Paying Agent/Registrar; thereupon, one or more new fully registered Bonds of the same
stated maturity, of authorized denominations, bearing the same rate of interest, and for the same
aggregate principal amount will be issued to the designated transferee or transferees.
The City, the Paying Agent/Registrar, and any other person may treat the person in whose
name this Bond is registered as the owner hereof for the purpose of receiving payment as herein
provided (except interest shall be paid to the person in whose name this Bond is registered on the
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Record Date) and for all other purposes, whether or not this Bond be overdue, and neither the
City nor the Paying Agent/Registrar shall be affected by notice to the contrary.
IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Bond and the
series of which it is a part is duly authorized by law; that all acts, conditions, and things to be
done precedent to and in the issuance of the Bonds have been properly done and performed and
have happened in regular and due time, form, and manner as required by law; that ad valorem
taxes upon all taxable property in the City have been levied for and pledged to the payment of
the debt service requirements of the Bonds within the limit prescribed by law; that, in addition to
said taxes, further provisions have been made for the payment of the debt service requirements of
the Bonds to be additionally payable from and secured by a lien on and pledge of the Net
Revenues (as defined in the Ordinance) of the City's Waterworks System (the "System''), such
lien and pledge, however, being (i) junior and subordinate to the lien on and pledge of the Net
Revenues of the System securing the payment of Prior Lien Obligations (as defined in the
Ordinance) currently outstanding and hereafter issued by the City and (ii) on parity with the lien
on and pledge of the Net Revenues of the System securing the payment of the Previously Issued
Obligations (as defined in the Ordinance) and any Additional Obligations (as defined in the
Ordinance) hereafter issued; that in the Ordinance, the City reserves and retains the right to issue
Prior Lien Obligations while the Bonds are outstanding without limitation as to principal amount
or subject to any terms, conditions or restrictions other than as may be required by law or
otherwise, as well as the right to issue Additional Obligations payable from and, together with
the Bonds and the Previously Issued Obligations, equally and ratably secured by a parity lien on
and pledge of the Net Revenues of the System; and that the total indebtedness of the City,
including the Bonds, does not exceed any constitutional or statutory limitation.
IN WITNESS WHEREOF, the City has caused this Bond to be executed by the manual
or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile
signature of the City Secretary, and the official seal of the City has been duly impressed or
placed in facsimile on this Bond.
City Secretary,
City of Lubbock, Texas
[SEAL]
UJB200niOOI
Dallas 986016_1.doc
Mayor, City of Lubbock, Texas
A-3
)
(b) Form of Comptroller's Registration Certificate. The following Comptroller's
Registration Certificate may be deleted from the definitive Bonds if such Certificate on the Initial
Bond is fully executed.
OFFICE OF THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
§
§
§
REGISTER NO. __ _
I hereby certify that there is on file and of record in my office a Certificate of the
Attorney General of the State of Texas to the effect that this Bond has been examined by him as
required by law, that he finds that it has been issued in conformity with the Constitution and laws
of the State of Texas, and that it is a valid and binding obligation of the City of Lubbock, Texas;
and that this Bond has this day been registered by me.
Witness my hand and seal of office at Austin, Texas,-------·
[SEAL] Comptroller of Public Accounts
of the State ofTexas
(c) Form of Certificate of Paying Agent/Registrar. The following Certificate of Paying
Agent/Registrar may be deleted from the Initial Bond if the Comptroller's Registration
Certificate appears thereon.
CERTIFICATE OF PAYING AGENT/REGISTRAR
The records of the Paying Agent/Registrar show that the Initial Bond of this series of
Bonds was approved by the Attorney General of the State of Texas and registered by the
Comptroller of Public Accounts of the State of Texas, and that this is one of the Bonds referred
to in the within-mentioned Ordinance.
Dated:
LUB200niOOI
Dallas 986016_l.doc
A-4
JPMorgan Chase Bank, National Association
as Paying Agent/Registrar
By:
Authorized Signatory
)
(d) Form of Assignment.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or
typewrite name, address and Zip Code of transferee): --------------
(Social Security or other identifying number: the within Bond and all
rights hereunder and hereby irrevocably constitutes and appoints --------
attorney to transfer the within Bond on the books kept for registration hereof, with full power of
substitution in the premises.
Dated:
NOTICE: The signature on this Assignment
must correspond with the name of the
registered owner as it appears on the face of
the within Bond in every particular and must
be guaranteed in a manner acceptable to the
Paying Agent!R.egistrar.
Signature Guaranteed By:
Authorized Signatory
(e) The Initial Bond shall be in the fonn set forth in paragraphs (a), (b) and (d) of this
Section, except for the following alterations:
(A) immediately under the name of the Bond the headings
"INTEREST RATE" and "MA TURlTY DATE" shall both be completed with the expression
"As shown below"; and
(B) in the first paragraph of the Bond, the words "on the maturity date
specified above" shall be deleted and the following will be inserted: "on February 15 in each of
the years, in the principal installments and bearing interest at the per annum rates set forth in the
following schedule:
UJB200fil001
DaDas 986016_l.doc
Principal Installments Interest Rate
(Information to be inserted from the Pricing Certificate pursuant to Section 7.1 of
this Ordinance)
A-5
)
CERTIFICATE FOB RESOLUTION
THE STATE OF TEXAS
BRAZOS RIVER AUTHORITY
we, the undersigned officers of the Brazos
Authority (the "Issuer"), hereby certify as follows:
. .
River
1. That the Board of Directors of said Issuer convened
in· SPECIAL MEETING ON THE 24TH DAY OF MAY ,. 1995, at the
designated meeting place, and the roll was called of the
duly constituted officers and members of said Board, to wit:
Lyndon Olson, President
Helen Martin, Vice President
Ruth c. Schiermeyer, Secretary
Deborah H. Bell
Ada G. Conner
Hulen M. Davis
Patty Eason
Lynn Elliott
Charles J. "Jack" Farrar
Ramiro A. Galindo
J. J. Gibson
.Horace R. Grace
Everet E. Kennemer, III
Lee M. Kidd
David F. Lengefeld
Lynda Kay Lyle
Johnoween s . Mathis
Karen c. Matkin
Charles R. Moser
Judith Vernon
John M. wehby
and all of said persons were present, except the following
absentees : (ls ,..,[), £' ~,, . IV, JAr i" lt/e-1, 1r.,
::-::::-----------~~-----=~' thus constituting a quorum.
Whereupon, among other business, the following was
transacted at said Meeting: a written resolution captioned
RESO~UTION
AUTHORIZING THE ISSUANCE OF BRAZOS RIVER AUTHORITY
SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE
REFUNDING BONDS, SERIES 1995, IN THE AGGREGATE
PRINCIPAL AMOUNT NOT TO EXCEED $60, 000, 000, TO
PROVIDE FUNDS TO REFUND BRAZOS RIVER AUTHORITY
SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE
BONDS, SERIES 1989 AND 1991; ALLOWING CERTAIN
AMENDMENTS TO THE CONTRACI' BETWEEN THE AUTHORITY
AND THE CITY OF WBBOCK, TEXAS WITHOUT BONDHOLDER
CONSENT; AUTHORIZING THE GENERAL MANAGER TO
ESTABLISH THE INTEREST RATES AND PERFORM OTHER
ACI'S; PRESCRIBING THE FORM OF THE BONDS, PROVIDING
FOR THE EXECUTION AND DELIVERY OF SAID BONDS, AND
PRESCRIBING OTHER MATTERS RELATING THERETO
was duly introduced for the consideration of said Board. It
was then separately and duly moved and seconded that such
Resolution be adopted; and, after due discussi-on, said
motion, carrying with it the adoption of said. Resolution,
prevailed and carried by the following votes:
' 1
AYES:
NOES:
All members of said Board snown
present above voted 11Aye" except:
ABSTENTIONS: -
2. That true, full and correct copies of the aforesaid
Resolution adopted at the Meeting described in the above and
foregoing paragraph are attached to and follow thi.s
Certificate; that said Resolution has been duly recorded in
said Board's minutes of said Meeting; that the above and
foregoing paragraph is a true, full and correct excerpt from
said Board's minutes of said Meeting pertaining to the
adoption of said Resolution; that the persons named in the
above and foregoing paragraph are the duly chosen,
qualified, and acting officers and members of said Board as
indicated therein; and that each of the officers and members
of said Board was duly and sufficiently notified officially
and personally, in advance, of the time, place and purpose
of the aforesaid Meeting, and that said Resolution would be
introduced and considered for adoption at said Meeting, and
each of .said officers and members consented, in advance, to
the holding of said Meeting for such purpose; and that said
Meeting was open to the public, and public notice of the
time, place and purpose of said Meeting was given, all as
required by the Texas Government Code, Chapter 551, as
amended.
3. That said Resolution has not been modified, amended
or repealed and said Resolution remains in full force and
effect as of this date.
SIGNED AND SEALED this
(SEAL)
)
RESOLUTION
AUTHORIZING THE ISSUANCE OF BRAZOS RIVER AUTHORITY
SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE REFUNDING
BONDS, SERIES 1995, IN THE AGGREGATE PRINCIPAL AMOUNT NOT
TO EXCEED $60, 000, 000, TO PROVIDE FUNDS TO REFUND BRAZOS
RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY)
REVENUE BONOS, SERIES 1989 AND 1991; ALLOWING CERTAIN
AMENDMENTS TO THE CONTRACT BETWEEN THE AUTHORITY AND THE
CITY OF LUBBOCK, TEXAS WITHOUT BONDHOLDER CONSENT~
AUTHORIZING THE GENERAL MANAGER TO ESTABLISH THE INTEREST
RATES AND PERFORM OTHER ACTS; PRESCRIBING THE FORM OF THE
BONDS, PROVIDING FOR THE EXECUTION AND DELIVERY OF SAID
BONDS, AND· PRESCRIBING OTHER MATTERS RELATiNG THERETO
WHEREAS, Brazos River Authority (the "Authority") was duly
created and is lawfully operating under Chapter 13, Acts of the
Second Called Session of the 41st Texas Legislature, 1929, as
amended (formerly compiled as Article 8280-101, V.A.T.c.s., as
amended), pursuant to and in furtherance of the purposes of Article
_XVI, Section 59, of the Constitution of Texas; and
WHEREAS, the City of Lubbock (11Lubbock") and the Authority are
authorized to make and enter into a contract whereby the Authority
will cause water supply facilities to be acquired, constructed and
operated to provide a long-term, firm supply of surface water to
Lubbock; and
WHEREAS, the Authority has heretofore entered into the
Contract (as hereinafter defined) with Lubbock pursuant to such
authority whereby the Authority caused such facilities to be
acquired and constructed; and
WHEREAS, the Authority and Lubbock have determined to reserve
the right to amend or modify the Contract with respect to the
maintenance and operations of Lake Alan Henry (as hereinafter
defined) and other matters; and
WHEREAS, in the accomplishment of said purposes, the Board of
Directors of the Authority authorized the issuance of and sold its
Brazos River Authority Special Facilities (Lake Alan Henry) Revenue
Bonds, Series 1989 and 1991, in the aggregate principal amounts of
$16, 970,000 (the "Series 1989 Bonds'') and $39,685,000 (the "Series
1991 Bonds"), respectively, al~ in accordance with the resolutions
authorizing said Series 1989 Bonds and Series 1991 Bonds adopted by
said Board of Directors of the Authority on October 16, 1989 and
January 21, 1991, respectively; and
WHEREAS, it is deemed by the Board to be appropriate and
necessary at this time to issue negotiable revenue bonds pursuant
to Articles 717k and 717q, V.A.T.S., as amended, and the Contract
for the purpose of refunding all of the Series 1989 Bonds and
Series 1991 Bonds.
NOW 1 THEREFORE, IT IS HEREBY RESOLVED BY THE BOARD OF
DIRECTORS OF BRAZOS RIVER AUTHORITY: ·
) ARTICLE I
Section 1.1. Recitals. The recitals set forth in the
preamble hereof are incorporated herein and shall have the same
force and effect as if set forth in this Section.
Section 1.2. Definitions. Throughout this Resolution the
following terms and expressions as used herein shall be construed
and are intended to have the following meanings, to wit:
(a) 1'Accountant" means an independent certified public
accountant or an independent firm of certified public accountants;
(b) "Acts" means Articles 717q and Chapter 13, Acts of the
Second Called Session of the 41st Texas Legislature, 1929, as
amended (formerly compiled as Article 8280-101, V.A.T.C.S., as
amended);
(c) "Additional Bonds" means the additional revenue bonds on
a parity with the Bonds which the Authority reserves the right to
issue in the future, as provided in this Resolution;
(d) "Agreement Date" means the date of the Contract;
(e) "Amortization Installment" means, with respect to any
Term Bonds, the amount of money which is required to be deposited
into the "Mandatory Redemption Account" for retirement of such Term
Bonds (whether at maturity or by mandatory redemption and including
redemption premium, if any) provided that the total Amortization
Installments for such Term Bonds shall be sufficient to provide for
retirement of the aggregate principal amount of such Term Bonds;
(f) "Authority" or "Issuer" means Brazos River Authority and
any other public body or agency at any time succeeding to the
property, rights, powers and obligations thereof;
(g) "Authorized Officer" means the General Manager of the
Authority;
(h) "Board of Directors" or "Board" means the Board of
Directors of the Authority;
(i) "Bond" or "Bonds" means the Brazos River Authority
Special Facilities (Lake Alan Henry) Revenue Refunding Bonds,
Series 1995, authorized to be issued and sold by this Resolution;
(j) "Capital Costs" means those moneys received pursuant to
the Contract and required thereby to be transferred to the Debt
Service Fund, the Repair and Replacement Reserve Fund and the
Reserve Fund for the benefit of the owners of the Bonds and
Additional Bonds ;
2
)
(k) "Code" means the Internal Revenue Code of 1986, and any
amendments thereto:
(1) "Completion Date" means the date on which the Consulting
Engineer certifies that construction of Lake Alan Henry is complete
and the reservoir is operational;
(m) "Construction Fund" means the Brazos River Authority
Special Facilities (Lake Alan Henry) Construction Fund created by
the 1989 Resolution:
(n) "Construction Period" means the period of time commencing
upon the Authority's award of the initial contract for construction
o~ Lake Alan Henry and ending on the Completion Date;
(o) "Consulting Engineer" means an engineer with a favorable
reputation for competence in water resources engineering employed
by the Authority to provide consulting services in connection with
Lake Alan Henry;
(p) "Contract" means the agreement, dated May 11, 1989, as
amended from time to time, between Lubbock and the Authority;
(q) "Debt Service" means the amount of money required to pay
capital Costs, plus fees, charges, and costs such as those of the
Paying Agent/Registrar, which are incurred incident to the handling
and servicing of Bonds and any Additional Bonds;
(r) "Debt Service Fund" means the Brazos River Authority
Special Facilities (Lake Alan Henry) Revenue Bonds Debt Service
Fund created by the 1989 Resolution;
(s} "Depository" means the bank or banks which the Authority
selects (whether one or more), in accordance with law, as its
depository;
(t) "Eligible Securities" means those investment securities
described in the Public Funds Inves~ment Act of 1987, Article
842a-2, V.A.T.C.S. from time to time, as amended;
(u) ••Engineering Report" means the report of Freese and
Nichols, dated 1978, entitled "Feasibility Report on the
Justiceburg Reservoir", as may be supplemented or amended from time
to time;
(v) "Lake Alan Henry" means the dam and the reservoir to be
impounded thereby (formerly known as Justiceburg Reservoir) and all
related land and interests in land, water, water rights and all
other interests owned by the Authority (whether corporeal or ~ncor
poreal), as such dam has been constructed by the Authority and as
same and the said reservoir are further described in the
Engineering Report as the 11Justiceburg Reservoir", with said dam
and reservoir proposed to be located on the South Fork of the
3
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Double Mountain Fork of the Brazos River, together with additions
thereto and improvements thereof; provided that, notwithstanding
the foregoing, and to the extent now or hereafter authorized or
permitted by law, the term Lake Alan Henry shall not include any
water or sewer facilities which the Authority finds by resolution
not to be a part of Lake Alan Henry and which may be acquired or
constructed by the Authority in the future with the proceeds from
the issuance of "Special Facilities Bonds", which if issued will be
special revenue obligations of the Authority which are not secured
by or payable from the Net Revenues, but which will be secured by
and payable solely from other contract revenues or payments re-
ceived from any other legal entity in connection with s~ch
facilities; and such revenues or payments shall not be considered
as or constitute Net Revenues of Lake Alan Henry, unless and to the
extent otherwise provided in the resolution or resolutions
authorizing the issuance of such "Special Facilities Bonds";
(w) "Lubbock" means the city of Lubbock, Texas;
(x) "Maintenance and Operation costs" means all costs of
repairs and replacements of Project for which no special fund is
created and all costs considered by Authority to be required for
proper maintenance and operation of Project, including (for greater
certainty but without limiting the generality of the foregoing) the
direct costs of labor, equipment, supplies, materials, energy,
professional services, superVision, engineering, accounting,
administration, auditing, insurance and payments made by Authority
in satisfaction of judgments resulting from claims not covered by
Authority's insurance, plus any additional cost or expenses which
may be imposed upon Authority in payment of claims in amounts
preapproved by Lubbock, and in connection with the fulfillment of
its obligations under the Contract by taxation or as a result of
actions requested by Lubbock or regulations or requirements
lawfully imposed by the State of Texas, the United States, any
governmental subdivision of the State of Texas or any federal
agency, plus the share of Authority's unallocated general and
administrative expenses determined annually by Authority•s
certified public accountants to be appropriate to cover Authority's
expense of supervision and administration attributable to its
obligations under the Contract plus any certified reimbursement
amount due Lubbock under Section 28 of the Contract:
(y) "Management Fees" means· the fees by such name received by
the Authority pursuant to the Contract;
(z) "Mandatory Redemption Account" means the account by such
name created by the 1989 Resolution.
(aa) ''Net Revenues" means Revenues less Maintenance and
Operation Costs;
(bb) "Parity Bonds" means the Bonds and any Additional Bonds.
4
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)
)
(cc) "Paying Agent/Registrar .. means the banking institution
named in Section 2.4(a), and its herein permitted successors or
assigns~
(dd) "Payments" means all payments required to be made to the
Authority under the terms of the Contract;
(ee) "Person" shall be as defined in the Code Construction Act
(Chapter 311, Texas Government Code);
(ff) "Project" means Lake Alan Henry;
(gg) "Project Costs" means all costs of constructing the
Project, including (without being limited to) all necessary costs
for permitting of acquisition of land, easements and mineral
rights, clearing, relocations, administration costs, planning and
design, field supervision and inspection, engineering, legal
expenses and expenses of financing and construction, and all
payments and reimbursements to Lubbock as provided in the Contract;
(hh) "Registration Books" shall be the books so designated in
Section 2.4(a)~
(ii) "Repair and Replacement Fund Required Amount" means the
amount of $500,000 now on deposit in the Repair and Replacement
Reserve Fund or such increased amount or amounts as hereafter
required from time to time by resolution or resolutions of the
Board authorizing Additional Bonds;
(jj) ''Repair and Replacement Reserve FUnd" means the Brazos
River Authority Special Facilities (Lake Alan Henry) Revenue Bonds
Repair and Replacement Reserve Fund created by the 1989 Resolution;
(kk) "Reserve FUnd" means the Brazos River Authority Special
Facilities (Lake Alan Henry) Revenue Bonds Reserve Fund created by
the 1989 Resolution;
(11) "Reserve Fund Required Amount" means the average annual
principal and interest requirements computed at time of issuance of
the Bonds and Additional Bonds until such amount is increased from.
time to time by resolution or resolutions of the Board authorizing
Additional Bonds;
(mm)
hereto;
"Resolution" means this resolution and any amendments
(nn) "Revenue Fund" means the Brazos River Authority special
Facilities (Lake Alan Henry) Revenue Bonds Revenue Fund created by
the 1989 Resolution;
( oo) "Revenues" :means the gross receipts and income from
ownership or operation of Lake Alan Henry received by the Authority
(i) as Payments made pursuant to the Contract and (ii) from any
5
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other sources; such term, however, does not include Payments by
Lubbock which are Management Fees or which are capital advances to
th~ Authority for capital improvements or capital donations of
property in lieu of payments of money;
(pp) "Series 1989 Bonds''
preamble to this Resolution;
has the meaning set forth in the
(qq) "Series 1991 Bonds" has the meaning set forth in the
preamble to this Resolution;
(rr) "Term Bonds" means any Bonds and those Additional Bonds
which shall be subject to retirement by operation of the Mandatory
Redemption Account;
(ss) 11 1989 Resolution" means the resolution adopted by the
Board of Directors on october 16, 1989 authorizing the issuance and
sale of the Series 1989 Bonds;
(tt) "1991 Resolution" means the resolution adopted by the
Board of Directors on January 21, 1991 authorizing the issuance and
sale of the series 1991 Bonds;
(uu) "Year" shall mean the regular fiscal year used by the
Authority in connection with the operation of Lake Alan Henry,
which may be any twelve consecutive months period established by .
the Authority.
Section 1. 3. CONSTRUCTION. For all purposes of this
Resolution, except where the context otherwise requires, (a) words
of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders and words of
the neuter gender shall be deemed and construed to include
correlative words of the masculine and feminine genders; and (b)
words of the singular numbers shall be deemed and construed to
include correlative words of the plural number and vice versa.
ARTICLE II
AUTHORIZATION, FORM, EXECUTION AND DELIVERY OF BONDS
Section 2.1. The Bonds. In order to obtain funds to refund
the series 1989 Bonds in the aggregate principal amount of
$16,015,000 maturing in the years 1995 through 2019, inclusive, and
the Series 1991 Bonds in the aggregate principal amount of
$38,290,000 maturing in the years 1995 through 2021, inclusive
(collectively, the "Refunded Bonds"), the Board hereby authorizes
and directs the issuance of refunding revenue bonds of the
Authority to be designated "Brazos River Authority Special
Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series 1995",
·in the aggregate principal ·amount not to exceed $60,000,000.
6
section 2.2. Initial Date. Penominatioo, HUmber, Maturities,
and Characteristics of the Bonds. As authorized by Article 717q,
V.A.T.C.S., as amended, the Authorized Officer is hereby
authorized, appointed, and designated as the officer or employee of
the Authority authorized to act on behalf of the Authority in the
selling and delivering of the Bonds and carrying out the other
procedures specified in this Resolution, including the use of a
book-entry-only system with resp.ect to the Bonds and the execution
of an appropriate letter of representations if deemed appropriate,
the determining and fixing of the date of the Bonds, any additional
designation or title by which the Bonds shall be known, the price
at which the Bonds will be sold, the amount of each maturity of
principal thereof, the due date of each such maturity (not
exceeding forty years from the date of the Bonds), the rate of
interest to be borne by each such maturity, the interest payment
dates and periods, the dates, price and terms upon and at which the
Bonds shall be subject to redemption prior to due date or maturity
at the option of the Authority, any mandatory sinking fund
redemption provisions, procuring municipal bond insurance, and
_approving modifications to this Resolution and executing such
instruments, documents and agreements as may be necessary with
respect thereto, if it is determined that such insurance would be
financially desirable and advantageous, and all other matters
relating to the issuance, sale and delivery of the Bonds, and the
refunding of the Refunded Bonds. The Authorized Officer, acting
for and on behalf of the Authority, is authorized to arrange for
the Bonds to be sold at either public, private or negotiated sale
and to enter into and carry out a bond purchase agreement with any
purchaser, underwriter or underwriters of the, at such price, in
the aggregate principal amount not exceeding $60,ooo,ooo, with such
maturities of principal, with such interest rates, and with such
optional and mandatory sinking fund redemption provisions, if any,
and other matters, as shall be set forth therein. The bond
purchase agreement shall be in such form and substance as are
acceptable to the Authorized Officer, provided that the price to be
paid for the Bonds shall be not less than 97% of the initial
aggregate principal amount thereof plus accrued interest thereon
from their date to their delivery, and no Bond shall bear interest
at a rate greater than 10% per annum. The Authorized Officer is
further authorized, for and on behalf of the Authority, to approve·
any official statement, and any supplements thereto, or any private
placement memorandum relating to the Bonds and referred to in any
such bond purchase agreement. It is further provided, however,
that, n0twithstanding the foregoing provisions, the Bonds shall .not
be delivered unless, prior to their delivery, the Bonds have been
rated by a nationally recognized rating agency for municipal long
term obligations, as required by said Article 717q, as amended.
Section 2.3. Refunded Bonds; Escrow Agreement. Certain of
the Refunded Bonds are subject to redemption, at the option of the
Authority, and the Authorized Officer is hereby authorized to cause
all of the Refunded Bonds that are subject to redemption to be
called for redemption, and the proper notice of such redemption to
7
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)
be given, and in each case at a redemption price of par, plus
accrued interest to the date fixed for redemption on August 15,
1999, with respect to the Series 1989 Bonds, and February 15, 2001,
with respect to the Series 1991 Bonds. The Authorized Officer is
further authorized to enter into and execute on behalf of the
Authority an escrow agreement with Texas Commerce Bank National
As.sociation, Austin, Texas which will provide for the payment in
full of the Refunded Bonds. In addition, the Authorized Officer is
authorized to purchase such securities, to execute such
subscriptions for the purchase of the United States Treasury
Securities., state and Local Government Series and to transfer and
deposit such cash from available funds, as may be necessary for the
Escrow Fund described in 3.1(b).
Section 2.4. Paying Agent/Registrar. (a) The Authority
shall keep or cause to be kept at the principal corporate trust·
office of Texas Commerce Bank National Association, Dallas, Texas,
or such other banking institution named in accordance with the
provisions of Section 2.4(g) hereof (the "Paying Agent/Registrar"),
.books or records of the registration and transfer of the Bonds (the
"Registration Books"), and the Authority hereby appoints the Paying
Agent/Registrar as its registrar and transfer agent to keep such
books or records and make such transfers and registrations under
such reasonable regulations as the Authority and Paying Agen~jReg-
_istrar may prescribe; and the Paying Agent/Registrar shall make
such transfers and registrations as herein provided. It shall be
the duty of the Paying Agent/Registrar to obtain from the
registered owner and record in the Registration Books the address
of such registered owner of each Bond to which payments with
respect to the Bonds shall be mailed, as herein provided. The
Authority or its designee shall have the right to inspect the
Registration Books during regular business hours of the Paying
Agent/Registrar, but otherwise the Paying Agent/Registrar shall
keep the Registration Books confidential and, unless otherwise
required by law, shall not permit their inspection by any other
entity. Registration of each Bond may be transferred in the Regis~
tration Books only upon presentation and surrender of such bond to
the Paying Agent/Registrar for transfer of registration and
cancellation, together with proper written instruments of assign-
ment, in form and with guarantee of signatures satisfactory to the
Paying Agent/Registrar, evidencing the assignment of the bond, or
any portion thereof in any integral multiple of $5,000, to the
assignee or assignees thereof, and the right of such assignee or
assignees to have the bond or any such portion thereof registered
in the name of such assignee or assignees. Upon the assignment and
transfer of any Bond or any portion thereof, a new substitute bond
or bonds shall be issued in conversion and exchange therefor in the
manner herein provided. However, in the event of a nonpayment of
interest on a scheduled payment date, and for thirty (30) days
thereafter, a new record date for such interest payment (a "Special
Record Date") will be established by the Paying Agent/Registrar, if
and when funds for the payment of such interest have been received
from the Issuer. Notice of the Special Record Date and of the
8
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)
)
scheduled payment date of the past due interest (which shall be 15
days after the Special Record Date) shall be sent at least five (5)
business days prior to the Special Record Date by United States
mail, first-class postage prepaid, to the address of each
registered owner appearing on the Registration Books at the close
of business on the last business day next preceding the date of
mailing of such notice.
(b) The entity in whose name any Bond shall be registered in
the Registration Books at any time shall be treated as the absolute
owner thereof for all purposes of this Resolution, whether or not
such bond shall be overdue, and the Authority and the Paying
Agent/Registrar shall not be affected by any notice to the
contrary; and payment of, or on account of, the principal of,
premium, if any, and interest on any such bond shall be made only
to such registered owner. All such payments shall be valid and
effectual to satisfy and discharge the liability upon such bond to
the extent of the sum or sums so paid.
(c) The Authority hereby further appoints the Paying
Agent/Registrar to act as the paying agent for paying the principal
of and interest on the Bonds, and to act as its agent to conve~
and exchange or replace Bonds, all as provided in this Resolution.
The Paying Agent/Registrar shall keep proper records of all
payments made by the Authority and the Paying AgentjRegist~ar with
respect to the Bonds, and of all conversions and exchanges of
Bonds, and all replacements of such bonds, as provided in this
Resolution.
(d) Each Bond may be converted and exchanged for fully
registered bonds in the manner set forth herein. Each Bond issued
and delivered pursuant to this Resolution, to the extent of the
unpaid or unredeemed principal amount thereof, may, upon surrender
of such bond at the principal corporate trust office of the Paying
Agent/Registrar, together with a written request therefor duly
executed by the registered owner or the assignee or assignees
thereof, or its or their duly authorized attorneys or representa-
tives, with guarantee of signatures satisfactory to the Paying
Agent/Registrar, at the option of the registered owner or such
assignee or assignees, as appropriate, be converted into and
exchanged for fully registered bonds, without interest coupons, in
the form prescribed in the FORM OF BOND set forth in this
Resolution, in the denomination of $5,000, or any integral multiple
of $5,000 (subject to the requirement hereinafter stated that each
substitute bond shall have a single stated maturity date), as
requested in writing by such registered owner or such assignee or
assignees, in an aggregate principal amount equal to the unpaid or
unredeemed principal amount of any bond or bonds so surrendered,
and payable to the appropriate registered owner, assignee, or
assignees, as the case may be. If any Bond or portion thereof is
assigned and transferred or converted, each such bond issued in
exchange therefor shall have the same principal maturity date and
bear interest at the same rate as the Bond for which it is being
9
)
exchanged. Each substitute Bond shall bear a letter and/or number
to distinguish it from each other Bond. The Paying Agent/Registrar
shall convert and exchange or replace Bonds as provided herein, and
each fully registered Bond delivered in conversion of and exchange
for or replacement of any bond or portion thereof as permitted or
required by any provision of this Resolution shall constitute one
of the Bonds for all purposes of this Resolution, and may again be
converted and exchanged or replaced. It is specifically provided,
however, that any Bond delivered in conversion of and exchange for
or replacement of another bond prior to the first scheduled
interest payment date on the Bonds shall be dated the same date as
such bond, but each substitute Bond so delivered on or after such
first scheduled interest payment date shall be dated as of the
interest payment date preceding the date on which such substitute
bond is delivered, unless such bond is delivered on an interest
payment date, in which case it shall be dated as of such date of
delivery; provided, however, that if at the time of delivery of any
substitute Bond the interest on the Bond for which it is being ex-
changed has not been paid, then such bond shall be dated as of the
_date to which such interest has been paid in full. on each
substitute Bond issued in conversion of and exchange for or
replacement of any bond or bonds issued under this Resolution there
shall be printed thereon a Paying Agent/Registrar's Authentication
Certificate, and no such bond shall be deemed to be issued or
outstanding unless such Certificate is so executed. The Paying
Agent/Registrar promptly shall cancel all Bonds surrendered for
conversion and exchange or replacement. No additional ordinances,
orders, or resolutions need be passed or adopted by the Board of
the Authority or any other body or person so as to accomplish the
foregoing conversion and exchange or replacement of any Bond or
portion thereof, and the Paying Agent/Registrar shall provide for
the printing, execution, and delivery of the substitute Bonds in
the manner prescribed herein. Pursuant to Article 717k-6,
V. A. T. C. S. , and particularly Section 6 thereof, the duty of
conversion and exchange or replacement of bonds as aforesaid is
hereby imposed upon the Paying Agent/Registrar, and, upon the
execution of the above Paying Agent/Registrar's Authentication
Certificate, the converted and exchanged or replaced bond shall be
valid, incontestable, and enforceable in the same manner and with
the same effect as the Bonds which originally were delivered-
pursuant to this Resolution, approved by the Attorney General, and
registered by the Comptroller of Public Accounts. Neither the
Board nor the Paying Agent/Registrar shall be required (1) to
issue, transfer, or exchange any bond during a period beginning at
the opening of business 30 days before the day of the first •ailing
of a notice of redemption of bonds and ending at the close of
business on the day of such mailing, or (2) to transfer or exchange
any bond so selected for redemption in whole when such redemption
is scheduled to occur within 30 days.
(e) All Bonds issued in conversion and exchange or
replacement of any other bond or portion thereof, (i) shall be
issued in fully registered form, without interest coupons, with the
10
'
)
principal of and interes~ on such bonds to be payable only to the
registered owners thereof, (ii) may be redeemed prior to maturity,
(iii) may be transferred and assigned, (iv) may be converted and
exchanged for other Bonds, (v) shall have the characteristics, (vi)
shall be signed and sealed, and (vii) the principal of and interest
on the Bonds shall be payable, all as provided, and in the manner
required or indicated, in the FORM OF BOND set forth in this
Resolution.
(f) The Authority shall pay the Paying AgentjRegistrar1 s
reasonable and customary fees and charges for making transfers,
conversions and exchanges of Bonds, but the registered owner of any
Bond requesting such transfer, conversion or exchange shall pay any
taxes or other governmental charges required to be paid with
respect thereto. In addition, the Authority hereby covenants with
the registered owners of the Bonds that it will ( i) pay the
reasonable and standard or customary fees and charges of the Paying
Agent/Registrar for its services with respect to the payment of the
principal of and interest on the Bonds, when due, and (ii) pay the
_fees and charges of the Paying Agent/Registrar for services with
respect to the transfer and exchange of registration of Bonds
solely to the extent above prov ided, and with respect to the
conversion and exchange of Bonds solely to the extent above
provided.
{g) The Authority covenants with the registered owners of the
Bonds that at all times while the Bonds are outstanding the
Authority will provide a competent and legally qualified Paying
Agent/Registrar for the Bonds under this Resolution, and that the
·Paying Agent/Registrar will be one entity. The Authority reserves
the right to, and may, at its option, change the Paying
Agent/Registrar upon not less than 60 days' written notice to the
Paying Agent/Registrar. In the event that the entity at any time
acting as Paying Agent/Registrar (or its success or by merger,
acquisition, or other method) should resign or otherwise cease to
act as such, the Authority covenants that promptly it will appoint
a competent and legally qualified national or state banking
institution which shall be a corporation organized and doing
business under the laws of the United States of America or of any
state, authorized under such laws to exercise trust powers, subject·
to supervision or examination by federal or state authority, and
whose qualifications substantially are similar to the previous
Paying Agent/Registrar to act as Paying Agent/Registrar under this
Resolution. Upon any change in the Paying Agent/Registrar, the
previous Paying Agent/Registrar promptly shall transfer and deliver
the Registration Books (or a copy thereof), along with all other
pertinent books and records relating to the Bonds, to the new
Paying Agent/Registrar designated and appointed by the Authority.
Upon any change in the Paying Agent/Registrar, the Authority
promptly will cause a written notice thereof to be sent by the new
Paying Agent/Registrar to each registered owner of such bonds, by
United States mail, first class postage prepaid, which notice also
shall give the address of the new Paying Agent/Registrar. By
11
)
accepting the position and performing as such, each Paying
Agent/Registrar shall be deemed to have agreed to the provisions of
th.is Resolution, and a certified copy of this Resolution shall be
delivered to each Paying Agent/Registrar.
Section 2.5. Forms. The form of all Bonds, including the
forms of the Paying Agent/Registrar's certificate, the form of
Assignment, and the form of the Comptroller's Registration
Certificate to accompany the Bonds on the initial delivery thereof,
shall be, respectively, substantially as follows, with such
appropriate variations, omissions or insertions as are permitted or
required by this Resolution:
R-_
MATURITY PATE
(FORM OF BOND)
UNITED STATES OF AMERICA
STATE OF TEXAS
BRAZOS RIVER AUTHORITY
SPECIAL FACILITIES (LAKE ALAN HENRY)
REVENUE REFUNDING BOND
SERIES 1995
INTEREST RATE ORIGINAL ISSUE PATE
June 1, 1995
PRINCIPAL
AMOUNT $ ___ _
CUSIP
ON THE MATURITY DATE SPECIFIED ABOVE, the Brazos River
Authority (the "Issuer"), a governmental agency and body politic
and corporate of the State of Texas, for value received, hereby
promises to pay to PRUDENTIAL SECURITIES INCORPORATED, or to the
registered assignee hereof (either being hereinafter called the
"registered owner") the principal amount of
DOLLARS
and to pay interest thereon from the Original Issue Date stated
above, to the date of its scheduled maturity, or the date fixed for
its redemption prior to its scheduled maturity, at the rate per
annum specified above, with said interest being payable
February 15, 1996, and semiannually thereafter on each August 15
and February 15, except that if this Bond is dated later than
February 15, 1996, such interest is payable semiannually on each
February 15 and August 15 following its date.
THE PRINCIPAL OF AND INTEREST ON this Bond are payable in
lawful money of. the United states of America, without exchange ·or
collection charges. The principal of this bond shall be paid to
the registered owner hereof upon presentation and surrender of this
bond at maturity or upon the date fixed for its redemption prior to
maturity, at the principal corporate trust office of Texas Commerce
Bank National Association, Dallas, Texas, which is the "Paying
12
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'
Agent/Registrar" for this Bond. The payment of interest on this
Bond shall be made by the Paying Agent/Registrar to the registered
owner hereof as shown on the Registration Books kept by the Paying
Agent/Registrar at the close of business on the last business day
of the month next preceding each interest payment date by check
drawn by the Paying Agent/Registrar on, and payable solely from,
funds of the Issuer required to be on deposit with the Paying
Agent/Registrar for such purpose as hereinafter provided; and such
check shall be sent by the Paying Agent/Registrar by United states
mail, first-class postage prepaid, on each such interest payment
date, to the registered owner hereof at its address as it appears
on the Registration Books kept by the Paying Agent/Registrar, as
hereinafter described; provided, that in the alternative such
payment may be made by any other method requested in writing by the
registered owner, at the risk and expense of such registered owner,
subject to the approval of the Paying Agent/Registrar. 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 Date11 ) will be established by the Paying
_Agent/Registrar, if and when funds for the payment of such interest
have been received from the Issuer. Notice of the Special Record
Date and of the scheduled payment date of the past due interest
(which shall be 15 days after the Special Record Date) shall be
sent at least five business days prior to the Special Record Date
by United States mail, first-class postage prepaid, to the address
of each owner of a Bond appearing on the Registration Books at the
close of business on the last business day next preceding the date
of mailing of such notice. The Issuer covenants with the
registered owner of this Bond that prior to-each principal payment
date and interest payment date for this Bond it will make available
to the Paying Agent/Registrar the amounts required to provide for
the payment, in immediately available funds, of all principal of
and interest on the Bonds (hereinafter defined), when due.
IF THE DATE for the payment of the principal of or interest on
this Bond shall be a Saturday, Sunday, a legal holiday, or a day on
which banking institutions in the city where the Paying
Agent/Registrar is located are authorized by law or executive order
to close, then the date for such payment shall be the next
succeeding day which is not such a Saturday, Sunday, legal holiday,·
or day on which banking institutions are authorized to close; and
payment on such date shall have the same force and effect as if
made on the original date payment was due.
THIS BOND is one of a series of bonds of like . tenor and
effect, dated as of June l, 1995, except as to number, principal
amount, interest rate, maturity and right of prior redemption,
aggregating Fifty Eight Million One Hl:U).dred Seventy Thousand
Dollars ($58,170,000) (herein sometimes called the "Bonds"), issued
pursuant to a resolution (the "Resolution") of the Board of
Directors of the Issuer for the purpose of providing funds for
refunding all of the Brazos River Authority Special Facilities
13
) (Lake Alan Henry) Revenue Bonds, Series 1989 and 1991. All Bonds
of this series are issuable solely as fully registered bonds,
without interest coupons, in the denomination of any integral
multiple of $5,000.
ON AUGUST 15, 2005, or on any date thereafter, the Bonds of
this Series may be redeemed prior to their scheduled maturities, at
the option of the Issuer, with funds derived from any available and
lawful source, ·as a whole, or in part, and, if in part, the
particular Bonds, or portions thereof, to be redeemed shall be
selected and designated by the Issuer (provided that a portion of
a Bond may be redeemed only in an integral multiple of $5,000), at
a redemption price equal to the principal amount to be redeemed
plus accrued interest to the date fixed for redemption.
The Bonds of this Series maturing in 2021 are sUbject to·
mandatory redempt-ion prior to maturity in part at random, by lot or
other customary method selected by the Paying Agent/Registrar, at
par plus accrued interest to the redemption date, in amounts
.sufficient to redeem said Bonds on August 15 in the years and
principal amounts shown on the following schedule:
2016
2017
2018
2019
2020
2021 (maturity)
AMOUNT
$3,255,000
3,455,000
3,660,000
3,890,000
2,660,000
2,810,000
The principal amount of said Bonds maturing in 2021 required
to be redeemed pursuant to the operation of such mandatory
redemption provision shall be reduced, at the option of the Issuer,
by the principal amount of said Bonds which, at least 50 days prior
to the mandatory redemption date {1) shall have been acquired by
the Issuer at a price not exceeding the principal amount of such
Bonds plus accrued interest to the date of purchase thereof, and
delivered to the Paying Agent/Registrar for cancellation, {2) shall
haye been purchased and cancelled by the Paying Agent/Registrar at-
the request Qf the Issuer at a price not exceeding the principal
amount of such Bonds plus accrued interest to the date of purchase,
or (3) shall have been redeemed pursuant to the optional redemption
provisions and not theretofore credited against a mandatory
redemption requirement. ·
AT LEAST thirty (30) ~ays prior to the date any such Bonds are
to be redeemed, {i) a written notice of redemption shall be given
to the registered owner of each Bond or a portion thereof being
called for redemption by depositing such notice in the United
States mail, first-class postage prepaid, addressed to each such
registered owner at his address as shown on the Registration Books
14
)
}
)
of the Paying Agent/Registrar, and (ii) notice of such redemption
shall be published one (1) time in a financial journal or
publication of general circulation in the United States of America
carrying as a regular feature notices of municipal bonds called for
redemption; provided, however, that the failure to send, mail, or
receive such notice described in (i) above, or any defect therein
or in the sending or mailing thereof, shall not affect the validity
oJ; effectiveness of the proceedings for the redemption of any Bond,
and it is hereby specifically provided that the publication of
notice described in (ii) above shall be the only notice actually
required in connection with or as a prerequisite to the redemption
of any Bonds. By the date fixed for any such redemption, due
provision shall be made by the Issuer with the Paying
Agent/Registrar for the payment of the required redempti~n price
for the Bonds or the portions thereof which are to be so redeemed,
plus accrued interest thereon to the date fixed for redemption. If
such notice of redemption is given, and if due provision for such
payment is made, all as provided above, the Bonds, or the portions
thereof which are to be so redeemed, thereby automatically shall be
_redeemed prior to their scheduled maturities, and shall not bear
interest after the date fixed for their redemption, and shall not
be regarded as being outstanding except for the right of the
registered owner to receive the redemption price plus accrued
interest to the date fixed for redemption from the Paying
Agent/Registrar out of the funds provided for such .payment. The
Paying Agent/Registrar shall record in the Registration Books all
such redemptions of principal of the Bonds or any portion thereof.
If a portion of any such Bond shall be redeemed a substitute Bond
or Bonds having the same maturity date, bearing interest at the
same rate, in any denomination or denominations in any integral
multiple of .$5,000, at the written request of the registered owner,
and in an aggregate principal amount equal to the unredeemed
portion thereof, will be issued to the registered owner upon the
surrender thereof for cancellation, at the expense of the Issuer,
all as provided in the Resolution authorizing the Bonds.
THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL
MULTIPLE OF $5,000 may be assigned and shall be transferred only in
the Registration Books of the Issuer kept by the Paying
Agent/Registrar acting in the capacity of registrar for the Bonds,.
upon the terms and conditions set forth in the Resolution. Among
other requirements for such assignment and transfer, this bond must
be presented and surrendered to the Paying Agent/Registrar,
together with proper instruments of assignment, in form and with
guarantee of signatures satisfactory to the Paying Agent/Registrar,
evidencing assignment: of this bond or any portion or portions
hereof in any integral multiple of .$5,000 to the assignee or
assignees in whose name or names this Bond or any such portion or
portions hereof is or are to be transferred and ·registered. The
form of Assignment printed or endorsed on this Bond may be executed
by the registered owner to evidence the assignment hereof, but such
method is not exclusive, and other instruments of assignment satis-
15
)
factory to the Paying AgentjRegistrar~may be used to evidence the
assignment of this Bond or any portion or portions hereof from time
to time by the registered owner. A new Bond or Bonds payable to
such assignee (which then will be the new registered owner of such
new Bond or Bonds), or to the previous registered owner in the case
of the assignment and transfer of only a portion of this Bond, may
be delivered by the Paying Agent/Registrar in conversion of and
exchange for this Bond, all in the form and manner as provided in
the Resolution. Also, as provided in the Resolution, this Bond
may, at the request of the registered owner or the assignee or
assignees hereof, be converted into and exchanged for a like
aggregate principal amount of fully registered bonds, without
interest coupons, payable to the appropriate registered owner,
assignee, or assignees, as the case may be, having the same
maturity date, and bearing interest at the same rate, in any
denomination or denominations in any integral multiple of $5,000 as
requested in writing by the appropriate registered owner, assignee,
or assignees, as the case may be, upon surrender of this Bond to
the Paying Agent/Registrar for cancellation, all in accordance with
the form and procedures set forth in the Resolution. The Issuer
-shall pay the Paying Agent/Registrar's reasonable standard or
customary fees and charges for transferring, converting and
exchanging any Bond or portion thereof, but the one requesting such
transfer, conversion or exchange shall pay any taxes or
governmental charges required to be paid with respect thereto, all
as a condition precedent to the exercise of such privilege of
transfer, conversion and exchange. In any circumstance, neither
the Issuer nor the Paying Agent/Registrar shall be required (1) to
make any transfer or exchange during a period beginning at the
opening of business 30 days before the date of the first mailing of
a notice of redemption of bonds and ending at the close of business
on the day of such mailing, or (2) to transfer or exchange any
bonds so selected for redemption when such redemption is scheduled
to occur within 30 calendar days.
IN THE EVENT any Paying Agent/Registrar for the Bonds is
changed by the Issuer, resigns, or otherwise ceases to act as such,
the Issuer has covenanted in the Resolution that it promptly will
appoint a competent and legally qualified substitute therefor,
whose qualifications substantially are similar to the previous.
Paying Agent/Registrar it is replacing, and promptly will cause
written notice thereof to be mailed to the registered owners of the
Bonds.
BY BECOMING the registered owner of this Bond, the registered
owner thereby acknowledges all of the terms and provisions of the
Resolution, agrees to be bound by such terms and provisions,
acknowledges that the Resolution is duly recorded and available for
inspection in the official minutes and records of the Issuer; and
agrees that the terms and provisions of this Bond and the
Resolution constitute a contract between each registered owner
hereof and the Issuer.
16
)
)
THE RESOLUTION provides that the Bonds of this issue are
issued in accordance with the requirements of law and, together
with additional parity bonds which may be issued hereafter, are
secured by a pledge of and shall be payable solely from and equally
secured by a lien on and pledge of the 11Net Revenues," as defined
in the Resolution. The Resolution defines "Net Revenues•• to mean
the gross receipts and income from the ownership and operation of
Lake Alan Henry received by the Authority including receipts
pursuant to the Contract (as therein defined), less Maintenance and
Operation Costs (as therein defined). Reference is hereby made to
the Resolution for a full and complete statement of (a) the nature
and extent of such pledge and security, (b} the rights and
responsibilities of the Issuer with respect thereto, (c) the rights
and circumstances under and the purposes for which the Resolution
and Contract may be amended, (d} the rights of the Issuer to issue
bonds on a parity and of equal dignity with this issue of Bonds,
subject to compliance with the terms and requirements of the
Contract, and (e) other matters relating to or affecting this issue
_of Bonds and the rights of the registered owners thereof, the
rights and duties of the Issuer, this Bond and the issue of which
it is a part, being subject to all of the provisions thereof, and
to all of which the registered owner of this Bond by his acceptance
hereof agrees and assents.
THE REGISTERED OWNER HEREOF shall never have the right to
demand payment of this obligation out of any funds raised or to be
raised by taxation.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions
and things required by_ the Constitution and laws of the State of
Texas to happen, to exist and to be performed precedent to and in
the issuance of this issue of Bonds, the adoption of the
Resolution, the making of such contract and the pledge of said
revenues have happened, do exist and have been performed as so
required.
IN WITNESS WHEREOF, Brazos River Authority has caused this
Bond to be signed by the manual or facsimile signature of the
President of the Brazos River Authority and attested by the manual
or facsimile signature of its Secretary, and the corporate seal of
the Brazos River Authority to be duly impressed or placed in
facsimile on this bond.
17
\
),
j
BRAZOS RIVER AUTHORITY
. President
(SEAL)
ATTEST:
secretary
FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
(To be executed if this Bond is not accompanied by an
executed Registration Certificate of the
Comptroller of Public Accounts of the State of Texas)
It is hereby certified that this Bond has been issued under
the provisions of th.e Resolution described in the text of this
Bond; and that this Bond has been issued in conversion of and
exchange for or replacement of a bond, bonds, or a portion of a
bond or bonds of an issue which originally was approved by the
Attorney General of the State of Texas and registered by the
Comptroller of Public Accounts of the State of Texas.
Dated: ----------------TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Paying Agent/Registrar
By: ____ ~~~~~~~------~~--------Authorized Representative
18
)
FORM OF ASSIGNMENT
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
! ______ _, Please insert Social Security or Taxpayer
Identification Number of Transferee
(Please print or typewrite name and address, including zip
code, of Transferee)
the
within Bond and all rights thereunder, and hereby irrevocably
constitutes and appoints
----------------~~--~~~----~--~~~--~~~~--~--~~~~~' attorney, to register the transfer of the within Bond on the books
·kept for registration thereof, with full power of substitution in
the premises.
Dated: ____________ _
Signature Guaranteed:
NOTICE: Signature(s) must be
guaranteed by an eligible
guarantor institution parti-
cipating in a securities
transfer association recog-
nized signature guarantee
program.
NOTICE: The signature above ·
must correspond with the
name of the registered owner
as it appears upon the front
of this Bond in every partic-
ular, without alteration or
enlargement or any change
whatsoever.
FORM OF COMPTBOLLER'S REGISTRATION CERTIFICATE
OFFICE OF COMPTROLLER
THE STATE OF TEXAS . . REGISTER NO.
I hereby certify that there is on file and of record ln my
office a certificate of the Attorney General of the State of Texas
to the effect that this Bond has been examined by him as required
by law, and that he finds that it has been issued in conformity
with the constitution and laws of the State of Texas, and that it
is a valid and binding special obligation of Brazos River Authority
and that the contracts therein mentioned are valid and have been
approved, and said Bond has this day been registered by me.
19
... "
l.
Witness my hand and seal of office at Austin,· Texas this
(SEAL)
Comptroller of Public Accounts
of the State of Texas
Section 2.6. Execution of Bonds. The Bonds shall be signed
manually or by the facsimile signature of the President of the
Authority and attested by the manual or facsimile signature of the
Secretary of the Authority, and the official seal of the Authority
shall be affixed thereto or a facsimile of such seal shall be
placed thereon. All facsimile signatures shall have the same·
effect as though they were manual signatures. In case any officer
whose signature or facsimile signature shall appear on any Bond
shall cease to be such officer before the delivery of such bonds,
such signature or facsimile signature shall nevertheless be valid
-and sufficient for all purposes the same as if he had remained in
office until such delivery.
section 2. 7. Approyal and Registration of Bonds. The proper
officers of the Authority shall prepare and the Secretary of the
·Authority shall certify a complete transcript of these proceedings,
and such transcript shall thereupon be submitted to the Attorney
General ·of the State of Texas for his examination with a request
that he examine the same and approve the Bonds to be issued under
the provisions of this Resolution, and no such bonds shall be
issued under the terms of this Resolution unless and until the same
shall have been approved by the Attorney General of the state of
Texas and registered by the Comptroller of Public Accounts of the
State of Texas as required by law. Upon registration of said
bonds, the Comptroller of Public Accounts (or a deputy designated
in writing to . act for the Comptroller) shall manually sign the
Comptroller's certificate of registration prescribed herein, and
the seal of said Comptroller shall be affixed to each of said
certificates.
Section 2. 8. Furtber Procedures. The officers, employees and
agents of the Authority, and each of them, shall be and they are
hereby expressly authorized, empowered and directed from time to
time and at any time to do and perform all such acts and things and
to execute, acknowledge and deliver in the name and· under the
corporate seal and on behalf of the Authority all such instruments,
whether or not herein mentioned, as may be necessary or desirable
in order to carry out the terms and provisions of this Resolution
and of the Bonds to be issued hereunder, including, if appropriate,
providing for a municipal bond insurance legend for the Bonds.
20 '
)
)
ARTICLE III
APPLICATION OF BOND PROCEEDS
section 3.1. Bond Proceeds. From the proceeds of the sale of
the Bonds to the PUrchaser thereof the following deposits shall be
made:
(a) To the Interest and Sinking Fund -the interest accrued
on the Bonds received upon delivery of same to the Purchaser, if
any, plus any additional amount directed to be so deposited by an
officer, employee or agent of the Authority pursuant to Section 2.8
hereof;
(b) To the ~scrow Aqent -the amount necessary to fund the
deposit in the Brazos River Authority Special ·Facilities (Lake Alan
Henry) Revenue Bonds, Series 1989 and 1991 Escrow FUnd;
{c) To the Authority -the balance to pay the costs of
issuance of the Bonds, and for any other lawful purpose.
ARTICLE IV
PLEDGE, FUNDS, APPLICATION OF REVENUES
Section 4.1. PLEDGE· The Bonds and any Additional Bonds are
and shall be secured by and payable from a first lien on and pledge
of the Net Revenues including such revenues within the FUnds
referred to .in this Resolution. The Bonds and any Additional Bonds
are and will be secured by and payable only from the Net Revenues,
and are not secured by or payable from a mortqage or deed of
trust on any properties, whether real, personal, or mixed,
constituting Lake Alan Henry. The owners of the Bonds or
Additional Bonds shall never have the right to demand payment from
taxes, nor shall they have the right to demand payment thereof out
of any other funds of the Authority.
Section 4 • 2 • FVNPS. The following special funds of the
Authority have heretofore been created by the 1989 Resolution and
shall be continued for so long as any of Bonds or Additional Bonds.
shall be outstanding and unpaid:
( i) the "Brazos River Authority Special Facil.ities (Lake Alan
Henry) Revenue Bonds Revenue Fund" (the "Revenue Fund");
(ii) the "Brazos River Authority Special Facilities (Lake Alan
Henry) Revenue Bonds Repair and Replacement Reserve Fund" (the
"Repair and Replacement Reserve Fund");
(iii) the "Brazos River Authority Special Facilities (Lake Alan
Henry) Revenue Bonds Debt Service Fund" (the "Debt Service Fund")
and created as an account therein there is hereby established the
"Mandatory Redemption Account";
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)
(iv) the "Brazos River Authority Special Facilities (Lake Alan
Henry) Revenue Bonds Reserve FUnd" (the "Reserve Fund'');
(v) the "Brazos River Authority Special Facilities (Lake Alan
Henry) Construction Fund" (the "Construction Fund").
Monies in said Funds shall be maintained at a Depository of
the Authority, and shall be charged with a lien in favor of the
owners of the Bonds and Additional Bonds until said monies are paid
out in accordance with this Resolution.
Section 4.3. REVENUE FUND. All Revenues other than capital
· Costs and Management Fees received as Payments pursuant to the
Contract shall be deposited in the Revenue Fund as received and
shall be used to pay as a firs·t charge against said Fund, the
Maintenance and Operation Costs as they shall become due from time
to time. ·
Section 4 .4. DEBT SERYICE FUND. Monies in the Debt Service
FUnd shall be used for the sole purpose of paying the principal of
(including Amortization Installments) and interest on all Bonds and
any Additional Bonds, as the same shall mature and come · due,
together with the fees of the Paying Agent/Registrar and the costs
of servicing the Bonds and all Additional Bonds.
Section 4.5. RESERVE FUND. Monies in the Reserve Fund shall
be used for the sole purpose of retiring the last of any Bonds or
Additional Bonds as they shall mat~re or paying principal of and
interest on any Bonds or Additional Bonds when and to the extent
the amounts in the Debt Service FUnd are insufficient for such
purpose.
Section 4 • 6. REPAIR AND REPLACEMENT RESERVE FUND. Monies in
the Repair and Replacement Reserve Fund shall be used for the sole
purpose of making necessary repairs or replacement of worn, damaged
or obsolete portions of Lake Alan Henry.
Section 4.7. FLQW OF FUNDS· capital Costs as received by the
Authority and Net Revenues remaining on deposit in the Revenue FUnd
after payment of the Maintenance and Operation costs shall be·
deposited to the following funds, at the times and in the order of
priority listed below:
(1) To the Debt service fund -in addition to all amounts
heretofore required to be deposited to the credit of the Debt
Service Fund, the amounts, at the times, as follows:
(i) such amount, deposited on or before the 5th calendar
day prior to each interest payment date, as will be sufficient,
together with other amounts, if any, then on hand in the Debt
Service Fund and available for such purpose, to pay the interest
scheduled to accrue and come due on the Bonds on the next
succeeding interest payment date;
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(ii) such amounts, deposited on or before the 5th
calendar day prior to each principal payment date, as will be
sufficient, together with other amounts, if any, then on hand in
the Debt Service Fund and available for such purpose, to pay
the principal s cheduled to mature and come due on the Bonds on
the next succeeding principal payment date;
(iii) such amounts, as s hall be required as Amortization
Installments for any Term Bonds of the· Bonds, deposited in the
Mandatory Redemption Account on or before the 5th calendar day
prior to each mandatory redemption date for any such Term Bonds,
for the redemption of Term Bonds; and
(iv) such amounts required to pay the fees, the Paying
Agent/Registrar and other costs of servicing the Bonds.
(2) Operation of Mandatocy Redemption Account. As
Amortization Installments of the Term Bonds of the Bonds there
shall be deposited to the credit of th.e Mandatory Redemption
_Account respective amounts on the dates as required to pay the
redemption price of any such Term Bonds.
The Authority shall redeem any Term Bonds of the Bonds on the
dates in each of the years in which they are scheduled to be
mandatorily redeemed. The principal amount of the Term Bonds
required to be redeemed pursuant to the operation of such mandatory
redemption provisions shall be reduced, at the option of the
Authority, by the principal amount of any Term Bonds which, (1)
shall have been acquired by the Authority at a price not exceeding
the principal amount of such Term Bonds plus accrued interest to
the date of purchase thereof, and delivered to the Paying
Agent/Registrar for cancellation, {2) shall have been purchased and
cancelled by the Paying Agent/Registrar at the request of the
Authority with moneys in the Mandatory Redemption Account, ·at a
price not exceeding the principal amount of such Term Bonds plus
accrued interest to the date of purchase thereof, or (3) have been
redeemed pursuant to any optional redemption provisions and not
theretofore credited against a mandatory redemption requirement.
On the maturity date of any Term Bonds, the Authority shall. apply
the monies on hand in the Mandatory Redemption Account for the
·payment of the principal of the maturing Term Bonds.
(3) To the Reserve Fund -an amount, if any, in equal
payments, required on or before the 5th calendar day prior to each
interest payment date, beginning with the first such interest
payment date following the occurrence of a deficiency to restore
any deficiency in the Reserve Fund Required Amount in not more than
five (5) years. So long as the amount on deposit in the Reserve
Fund equals or exceeds the Required Amount, no transfers into the
Reserve Fund shall be required.
(4) To the Repair and Replacement Reserve fund -an amount,
if any, in equal payments, required on or before the 5th calendar
day prior to each interest payment date, beginning with the first
such interest payment date following the occurrence of a deficiency
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in the Required Replacement Fund Required Amount, to restore any
deficiency in the Repair and Replacement Fund Required Amount in
no~ more than five (5) years. So long as the amount on deposit in
the Repair and Replacement Reserve FUnd equals or exceeds the
Repair and Replacement Fund Required Amount, no transfers to the
Repair and Replacement Reserve Fund shall be required.
Section 4.8. DEFICIENCIES: ExcESS NET REVENQES. (a) If on
any occasion there shall not be sufficient Net Revenues to make the
required deposits into the Debt Service Fund, the Reserve Fund and
the Repair and Replacement Reserve Fund, then such deficiency shall
be made up as soon as possible from the next available Net
Revenues, or from any other sources available for such purpose.
(b) Subject to making the required deposits to the credit of
the Debt Service Fund, the· Reserve Fund and the Repair and
Replacement Reserve Fund when and as required by this Resolution,
or any resolution authorizing the issuance of Additional Bonds, the
excess Net Revenues may be used by the Authority for any
.lawful purpose.
Section 4.9. PAYMENT OF BONDS. On or before each principal
or interest payment date while any of the Bonds are outstanding and
unpaid, the Authority shall make available to the Paying
Agent/Registrar therefor, out of the Debt Service Fund (and the
Reserve FUnd, if necessary) money sufficient to pay such interest.
on and such principal of the Bonds as shall becqme due and mature
on such dates, respectively, at stated maturity o·r by redemption
prior to maturity. The Paying Agent/Registrar shall destroy all
paid Bonds and furnish the Authority with an appropriate
certificate of cancellation or destruction.
Section 4. 10. SECURITY AND INVESTMENT OF FUNPS. The
Authority will cause the Depository to secure and keep secured, in
the manner required by law, all cash funds on deposit in the Funds
herein established with it, and will cause the Paying
Agent/Registrar to secure all funds deposited with it as other
trust funds are secured. Money in the Debt Service Fund, the
Reserve Fund and the Repair and Replacement Reserve Fund shall be
invested and reinvested in Eligible Securities. All interest and
profits from such investments, to the extent not required to be
rebated to the United States as provided in Section 13.3, shall be
credited to the Revenue Fund to the extent not needed to cure any
deficiency, if any, within any such Funds.
Section 4.11. PAYMENTS FROM OTHER SOQRCES. Nothing in this
Resolution prohibits the Authority from applying money other than
Net Revenues to the payment of the Bonds, but i~ it does apply
money from any of its funds other than Net Revenues, the Authority
shall be entitled to reimburse such fund from Net Revenues
thereafter received for the amount advanced plus interest lost by
Authority on account of such advance.
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ARTICLE V
THE CONTRACT, ACCOUNTING,
INSPECTION AND AUDITS
Section 5 .1. THE CQHTRACT, FISCAL PROVISIONS. The Authority
covenants and warrants that it has entered into the Contract with
Lubbock, and the Contract is enforceable in accordance with its
terms.
Section 5.2 ENFQRCEHENT. The Authority covenants to and with
the owners of the Bonds that it will keep in effect and enforce the
Contract and that it will not voluntarily consent to or permit the
rescission thereof or non-performance thereunder; and the Authority
will not consent or agree to any amendment to the Contract which
would (a) reduce the amounts payable thereunder for Capital Costs,
(b) extend the time of such payments, (c) adversely affect the
pledge of Net Revenues, or (d) which would in any manner impair or
-adversely affect the rights of the owners of the Bonds and
Additional Bonds, if any, to payment thereof from the sources, and
at the times, places and in the manner set forth herein. Subject
to the preceding sentence, the Authority and Lubbock may amend or
modify the Contract with respect to terms and conditions of the
ownership, if any, operations and maintenance of Lake Alan Henry
and other matters including, but not limited to, providing for the
ownership, if any, operations and maintenance of Lake Alan Henry by
Lubbock. All other provisions of this Resolution except the second
preceding sentence to the contrary notwithstanding, any such
amendDent or modification of the contract may provide and, if so
provided, will have the effect that upon transfer of responsibility
for ownership, if any, operation and maintenance of Lake Alan Henry
to Lubbock, the Authority will be relieved of all further
covenants, duties and obligations provided for herein with respect
thereto. If Lubbock fails to make Payments under the Contract as
required thereby, the Authority will take all necessary.action to
preserve and protect the rights of the owners of the Bonds with
respect thereto in order to assure the payment of the Bonds and
the interest thereon when due.
Section 5. 3 . CONTRACT PAYMENTS. The Authority covenants to
furnish Lubbock with schedules of Payments to be made by Lubbock to
the Authority pursuant to the Contract during each succeeding
Fiscal Year, all in accordance with the terms of the contract.
Section 5. 4. ACCOQNTING AND REPQRTING. The Authority
covenants that proper books of record and account will be kept in
which true, full and correct entries will be made of all income,
expense and transactions of and in relation to Lake Alan Henry, and
each and every part thereof.
Section 5 . 5 . PUBLIC INSPBCTION. The Authority further
coyenants and agrees that Lake Alan Henry, and each and every part
thereof, and all books, records, accounts, documents and vouchers
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relating to the construction, operation, maintenance, repair,
improvement and extension thereof, will at all times be open to
inspection by Lubbock and the owners of Bonds and their respective
representatives.
section 5.6. AUDITS. Following the end of each Year after
the Completion Date, the Authority, as part of the overall audit of
the Authority, shall have an Accountant audit all Funds established
by this Resolution and submit a written report of each such audit
to the Authority each year. The scope of the audit shall be such
that the Accountant can render an independent opinion as to the
financial condition of Funds created herein and as to the adequacy
and correctness of the accounting records pertaining thereto.
The audit report shall recommend any activities which, in the
professional judgment of the Accountant, may be advisable to assure
compliance with the provisions· of this Resolution.
Section 5. 7. PAYMENT FOR AVDIT. The costs of the audits
prepared under this Article V shall constitute Maintenance and
_operation Costs.
Section 5.8. COPIES OF AQDIT. Upon request, the Authority
shall furnish a copy of the audit to the Purchaser of the Bonds and
to the registered owners of the Bonds at the time outstanding
r~questing same in writing.
ARTICLE VI
INSURANCE
Section 6.1. INSURANCE· (a) The Authority covenants that it
will at all times keep insured such parts of Lake Alan Henry as
would usually be insured by corporations operating like properties,
with a responsible insurance company or companies, against risks,
accidents or casualties against which and to the extent insurance
is usually carried by corporations operating like properties. At
any time while any contractor engaged in construction work shall .be
fully responsible therefor, the Authority shall not be required to
carry insurance on the work being constructed if the cont;.ractor is
required to carry appropriate insurance. All such policies shall-
be open to the inspection of the owners of the Bonds and their
representatives at all reasonable times. Upon the happening of any
loss or damage covered by insurance from one or more of said
causes, the Authority shall make due proof of loss and shall do all
things necessary or desirable to cause the insuring companies to
make payment in full directly to the Authority. The proceeds of
insurance covering such property, together with any other funds
necessary and available for such purpose, shall be used forthwith
by the Authority for repairing the property damaged or replacing·
the property destroyed; provided, however, that if said insurance
proceeds and other funds are insufficient for such purpose, then
said insurance proceeds pertaining to Lake Alan Henry shall 'be
used, at the option of the Board, promptly as follows:
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(i) for the redemption prior to maturity of the Bonds
and Additional Bonds, ratably in the proportion that the
outstanding principal of each series of Bonds or Additional
Bonds bear to the total outstanding principal of all Bonds and
Additional Bonds, provided that if on any such occasion the
principal of any such series is not subject to redemption, it
shall not be regarded as outstanding in making the foregoing
computation; or
(ii) if none of the outstanding Bonds or Additional
Bonds is subject to redemption, then for the purchase on the
open market and retirement of said Bonds and Additional Bonds
in the same proportion as prescribed in the foregoing clause
(i), to the extent practicable; provided that the purchase
price for any Bond or Additional Bond shall not exceed the
redemption price of such Bond or Additional Bond on the first
date upon which it becomes subject to redemption; or
. (iii) the insurance proceeds, or the remainder thereof,
shall be deposited in a special and separate trust fund, at a
Depository of the Authority, to be designated the ••Insurance
Account11 • The Insurance Account shall be held until such time
as the foregoing clauses (i) andjor (ii) can be complied with,
or until other funds become available which, together with the
Insurance Account, will be sufficient to make the repairs or
replacements originally required, whichever of said events
occurs firs t.
(b) The foregoing provisions of (a) above notwithstanding,
the Authority shall have authority either to self-insure or enter
into co-insurance or similar plans where risk of loss is shared in
whole or in part by the Authority.
(c) The annual audit required by Section 5.6 shall contain a
section commenting on whether the Authority has complied with the
requirements of this Section with respect to the maintenance of
insurance, and listing all policies carried, and whether all
insurance premiums upon the insurance policies to which reference
is hereinbefore made have been paid.
Section 6. 2. UNUSED INSURANCE PRQCEEOS . Any insurance
proceeds remaining after the completion of and payment for any ·such
reconstruction or repair shall be deposited to the credit of the
Debt Service Fund.
ARTICLE VII
ADDITIONAL BONDS AND REFUNDING -BONDS
Section 7 .1. DEFINITIONS. For the purpose of this Article
VII, the following definitions shall apply:
(a) "Completion Bonds" means any bonds issued to pay the
Project Costs to complete the acquisition and construction of Lake
Alan Henry.
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(b) 11 Improvement Bonds" means bonds issued for improvements,
betterments, extensions or replacements of Lake Alan Henry, which
may include bonds issued by the Authority to provide additional
facilities for the withdrawal, treatment and delivery to Lubbock of
water from Lake Alan Henry.
Section 7. 2. COMPLETION BQNDS AND IMPROVEMENT BQNOS. Subject
to the provisions of Section 7.3, the Authority reserves the riqht
to issue Completion Bonds and Improvement Bonds which, in the
discretion of the Authority, may be Additional Bonds or subordinate
l~en bonds junior to the Bonds, or Bonds which a portion of same
may be Additional Bonds o.r subordinate lien bonds.
Section 7. 3. REQUIREMENTS. (a) Completion Bonds may be
issued in such amounts and at such times as the Authority may deem
appropriate.
(b) Improvement Bonds may be issued under (i) the
circl.imstances and subject to the limitations contained in the
Contract, or {ii) under other circumstances considered desirable by
the Authority if Lubbock shall agree to an amendment of the
Contract increasing Payments thereunder by aqgreqate amounts
sufficient, with other revenues from Lake Alan Henry, to pay when
due all interest on and principal of the Improvement Bonds at the
time proposed to be issued and the maintenance of any special funds·
created in connection therewith.
Section 7.4. REFUNDING BQNDS. The Authority reserves the
right to issue refunding bonds to refund all or any part of the
outstanding Bonds or Additional Bonds (pursuant to any law then
available), or for any other lawful purpose, upon such terms and
conditions as the Authority may deem to be in the best interest of
the Authority and Lubbock.
Section 7.5. AUTHORIZATION. Completion Bonds, Improvement
Bonds, and Refunding Bonds permitted by this Article to be issued
shall be authorized by resolutions of the Board of Directors which
shall prescribe the for.m and terms of such bonds.
ARTICLE VIII
REMEDIES
Section 8.1. SUITS BY OWNERS. In the event of a default
hereunder by the Authority, any owner of the Bonds or Additional
Bonds or group of owners of the Bonds and Additional Bonds owning
no less than 25% of the aggregate principal amount of the
outstanding Bonds and Additional Bonds may file suit or action for
the enforcement of any covenants of the Authority or rights of
owners of the Bonds · and Ac;ldi tional Bonds to require proper and
efficient construction andjor operation of Lake Alan Henry and the
application of any income therefrom. By such suit or action, the
owners of the Bonds and Additional Bonds may enjoin any act or
thing which may be unlawful or in violation of the rights of the
owners of the Bonds and Additional Bonds. Provided, however, the
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foregoing shall not affect or impair the right of any owner of the
Bonds or Additional Bonds to enforce the payment of the principal
of and interest on any Bond or Additional Bond at and after the
maturity thereof or the time the same comes due.
Section 8. 2. TRUSTEE. In the event of default, the owners of
at least twenty-five percent (25%) in the aggregat~ principal
amount of outstanding Bonds and Additional Bonds are authorized to
appoint a Trustee which shall be a national bank having trust
powers and having a combined capital and surplus of not less than
$10, ooo, 000, and located either within or without the state of
Texas. Not more than one Trustee shall serve at any one time.
Such Trustee, with or without having possession of the Bonds or
Additional Bonds., shall have the following powers:
(a) To direct the operation of Lake Alan Henry by the
Authority and the application of Payments under the contract,
or take possession o.f and operate Lake Alan Henry and make
proper application of any revenues thereof; or
{b) To file any suit or action which could be filed by
the owners of Bonds.
Section 8. 3. CONCWSIQN Of OEFAQLT. After such event of
default has been cured and an additional event of default does not
appear, in the discretion of the Trustee, to be i:nuninent, the
Trustee shall return the possession, operation and maintenance of
Lake Alan Henry to the Board of Directors.
Section 8. 4 • LIMITATION OF TBUSTEE' S LIABILITY. Any Trustee
appointed under this Article shall not be personally liable for any
loss or damage whatsoever to any person whomsoever arising out of
any action or failure on its part to act or for any error or
judgment made in good faith except for fraud, willful misconduct or
negligence.
Section 8. 5. QXHER REMEDIES; REMEDIES NOT WAIVED. No remedy
herein specified is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other available remedy·
or remedies, now or hereafter existing at law or in equity, or by
statute. No delay or omission to exercise any right or power shall
impair any such right or power or shall be construed to be a waiver
of any default or acquiescence therein, and every such right and
power may be exercised from time to time and as often as may be
deemed expedient.
ARTICLE IX
AMENDMENTS
Section 9.1. AMENDMENT. (a) The owners of Bonds and
Additional Bonds aggregating in principal amount two-thirds of the
aggregate principal amount of the Bonds and Additional Bonds at the
time outstanding (but not including in any case Bonds · and
29
Additional Bonds which may then be held or owned by or for the
account of the Authority) shall have the right from time to time to
approve an amendment of this Resolution which may be deemed
necessary or desirable by the Authority, provided, however, that
nothing herein contained shall permit or be construed to permit the
amendment of the terms and conditions contained in this Resolution
or in the Bonds and Additional Bonds so as to:
(i) Make any change in the maturity of the Bonds and
Additional Bonds;
(ii) Reduce the rate of interest borne by any of the Bonds and
Additional Bonds;
(iii) Reduce the amount of the principal payable on the Bonds
and Additional Bonds;
(iv) Modify the terms of payment of principal of or interest
on the Bonds and Additional Bonds, or any of them, or
impose any conditions with respect to such payment; ·
(v) Change the minimum percentage of the principal amount of
Bonds and Additional Bonds necessary for consent to sach
amendment; or
(vi) Affect the rights of the holders of less than all of the
Bonds and Additional Bonds then outstanding;
unless such amendment or amendments be approved by the owners of
all of the Bonds and Additional Bonds at the time outstanding.
(b) The provisions of this Resolution notwithstanding, the
Authority may, without the consent of any of the owners of Bonds or
Additional Bonds, pursuant to amendatory resolution, from time to
time:
(i) impose upon the Authority conditions or restrictions
additional to, but not in diminution of, those contained
in this Resolution respecting the issuance of Additional
Bonds;
(ii) undertake covenants additional to but not inconsistent
with those contained in this Resolution;
(iii) correct any ambiguity or correct. or supplement any
inconsistent or defective provision contained in this
Resolution or any amendatory resolution; or
(iv) amend or modify this Resolution to reflect the amendments
or modifications to the Contract relating to the terms
and conditions of the operations and maintenance of Lake
Alan Henry as provided for in Section 5. 2 of this
Resolution.
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Section 9 .2. NOTICE REQUIRED. If at any time the Authority
shall desire to amend this Resolution under this Article, the
Authority shall cause notice of the proposed amendment to be
published in a financial newspaper or journal published in The City
of New York, New York or in the State of Texas, once during each
calendar week for at least two successive calendar weeks. Such
notice shall bri efly set forth the nature of the proposed amendment
and shall state that a copy thereof is on file at the principal
offices of the Authority, the Paying Agent/Registrar and with each
of the Participants for inspection by all owners of Bonds and
Additional Bonds. Such publication is not required, however, if
notice in writing by first-class mail, postage prepaid, is given to
each owner of Bonds and Additional Bonds. ·
section 9 .3. ADOPTION or AMBNDHENT. Whenever at any time
within one year from the date of the first publication of said
notice or other service or written notice the Authority shall
receive an instrument or instruments executed by the owners of at
least two-thirds in aggregate principal amount of Bonds and
Additional Bonds then outstanding, which instrument or instruments
-shall refer to the proposed amendment described in said notice and
which specifically consent to and approve such amendment in
substantially the form of the copy thereof on file with the Paying
Agent/Registrar, the Authority may adopt the amendatory resolution
in substantially the same form.
Section 9.4. EFFBCTIYE UPON ADOPTION. Upon the adoption of
any amendatory resolution pursuant to the provisions of this
Article, this Resolution shall be deemed to be amended in
accordance with such amendatory resolution, and the respective
rights, duties and obligations under this Resolution of the
Authority and ·all the owners of outstanding Bonds and Additional
Bonds shall thereafter be determined, exercised and enforced
hereunder, subje ct in all respects to such amendments.
Section 9.5 . REVQCATIQN OF CONSENT. Any consent given by an
owner of a Bond or Additional Bond pursuant to the provisions -of
this Article shall pe irrevocable for a period of six months from
the date of the first publication of the notice provided for in
this Article, and shall be conclusive and binding upon all future
owners of the same bond during such period. Such consent may be
revoked at any time after six months from the date of the first
publication of such notice by the owner who gave such consent, or
by a successor in title, by filing notice thereof with the Paying
Agent/Registrar and the Authority, but such revocation s~all not be
effective if the owners of two-thirds aggregate principal amount of
the Bonds and Additional Bonds outstanding have,. prior to the ·
attempted revocation, consented to and approved the amendment.
Section 9.6. PRQOF OF OWNERSHIP. For the purpose of this
Article, ownership of any Bond or Additional Bond and the date of
owning the same shall be proved by the entries in the Registration
Books kept by the Paying Agent/Registrar.
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ARTICLE X
GENERAL COVENANTS
Section 10.1. PAYMENT OF BONDS AND INTEREST. The Authority
covenants and agrees that Payments will be sufficient to provide
funds for the payment of all Maintenance and Operation Costs and to
duly and punctually pay the principal of every Bond and Additional
Bond and the interest thereon, on the dates, at the place and in
the manner specified in such bonds, and that it will faithfully do
and perform and at all times fully observe any and all covenants,
undertakings and provisions contained herein or in such bonds.
Section 10.2. BATE COVENANT. The Board has fixed,
established, and will maintain and collect such rates, charges and
fees, including but not limited to the Payments, for the use and
availability of Lake Alan Henry at all times as are necessary to
produce Revenues in no less than amounts suffic:;:ient (1) to pay all
current Maintenance and Operation Costs, and (2) to produce Net
_Revenues for ea~h Year sufficient to pay the principal of and
interest on the Bonds and Additional Bonds as the same mature and
come due, and all other amounts required by this Resolution and
other resolutions authorizing such Bonds and Additional Bonds.
A '
Section 10.3. LEGAL ABtLITY . The Authority represents that
it is a governmental agency and body politic and corporate of the
State of Texas, duly created, organized and existing under the
Constitution and laws of the State of Texas and has proper
authority from all other public bodies and authorities, if any,
having jurisdiction thereof to execute and deliver the Contract and
to pledge the Net Revenues in the manner and form as herein done or
intended, and that all corporate action on its part to that end has
been duly and validly taken.
Section 10.4. COMPLetiON OF PROJECT. The Authority further
covenants that it will use its best efforts to timely complete the
Project in accordance with the Contract and the Engineering Report.
Section 10.5. OTHER LIENS. The Authority further covenants
that there is not now outstanding and that the Authority will not
at any time ~reate or allow to accrue or to exist any lien upon
Lake Alan Henry, or any part thereof, or the revenues pledged
herein to the payment of the principal of and ·interest on the
Bonds, at any time derived from the operation thereof, or any of
its funds, except as authorized by this Resolution; that the
security of the Bonds will not be impaired in any way as a result
of any action or any non-action on the part of the Authority, its
Board of Directors or officers, or any thereof, and that the
Authority will acquire and continuously preserve good and
·indefeasible title to Lake Alan Henry for the duration of the
easements on the land upon which Lake Alan Henry is to be built and
each and every part thereof owned by the Authority. The foregoing
notwithstanding, the Authority reserves the right to create pledges
and liens on the Net Revenues subordinate to the liens herein
created.
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Section 10.6. KEEP FRANCHISES AND PEBMITS IN EFFECT. The
Authority further covenants that it will use its best efforts to
ensure that no franchises, permits, privileges, or easements will
be allowed to lapse or be forfeited so long as the same shall be
necessary for Lake Alan ·Henry.
Section 10. 7. GOVERNMENTAL REQUIREMENTS : LIENS : CI.AIMS. The
Authority covenants that it will use its best efforts to observe
and comply with all valid requirements of any governmental
authority relative to Lake Alan Henry or any part thereof, and that
it will pay or cause to be discharged, or will make adequate
provision to satisfy and discharge, within sixty (60) days after
the same shall accrue, all lawful claims and demands for labor,
materials, supplies, or other objects which, if unpaid, might by
law become. a lien upon such Project or any part thereof or the
revenue therefrom; provided, however, that nothing in this Sect~on
contained shall require the Authority to pay or cause to be
discharged, or make provision for any such lien or charge, so long
as the validity thereof shall be contested in good faith and by
_appropriate legal proceedings.
Section 10.8. fURTHER ASSURANCE. The Authority covenants
that it will take such further action as may be required to carry
out the purposes of this Resolution and to assure its validity.
Section 10.9. SALE AND LEASE OF PROPERTY. (a) The Authority
covenants that so long as the Bonds or any of them shall be
outstanding, and except as in this Section otherwise permitted,
after the Completion Date it will not sell, lease or otherwise
dispose of or encumber any part of Lake Alan Henry, or any of the
Revenues derived therefrom except as provided herein. The
Authority may from time to time sell any machinery, fixtures,
appar~tus, tools, instruments, or other movable property and any
materials used in connection therewith, if the Authority shall
determine that such articles are no longer needed or are no longer
useful in connection with the operation and maintenance of Lake
Alan Henry. The Authority may from time to time sell such real
estate or interests therein that is not needed or serves no useful
purposes in connection with the operation and maintenance of the
Project. The proceeds of any sale of real property acquired from.
the proceeds of the series 1989 Bonds, the Series 1991 Bonds and
Additional Bonds, if any, shall be deposited in the Debt Service
Fund.
(b) The Authority may lease any of its lands (or its interest
therein) comprising a part of Lake Alan Henry for any purpose, if
such lease or the use of such lands will not be detrimental to the
operation and maintenance of Lake Alan Henry. All rentals,
revenues, receipts and royalties derived by the Authority from any
and all leases so made, shall be deposited in the Revenue Fund.
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I.
ARTICLE XI
LOST, STOLEN, MUTILATED BONDS
(a) In the event any outstanding Bond is damaged, mutilated,
lost, stolen, or destroyed, the Paying Agent/Registrar shall cause
to be printed, executed, and delivered, a new Bond of the same
principal amount, maturity, and interest rate, as the damaged,
mutilated, lost, stolen, or destroyed Bond, in replacement for such
Bond in the manner hereinafter provided.
(b) Application for replacement of damaged, mutilated, lost,
stolen, or destroyed Bonds shall be made by the registered owner
thereof to the Paying Agent/Registrar. In every case of loss,
theft, or destruction of a Bond, the registered owner applying for
a replacement bond shall furnish to the Authority and to the Paying
Agent/Registrar such security or indemnity as may be required by
them to save each of them harmless from any loss or damage with
respect thereto. Also, in every case of loss, theft, or
_destruction of a Bond, the registered owner shall furnish to the
Board and to the Paying Agent/Registrar evidence to their
satisfaction of the loss, theft, or destruction of such Bond, as
the case may be. In every case of damage or mutilation of a Bond,
the registered owner shall surrender to the Paying Agent/Registrar
for cancellation the Bond so damaged or mutilated.
(c) Notwithstanding the foregoing provisions of this Section,
in the event any such Bond shall h~ve matured, and no default has
occurred which is then continuing in the payment of the principal
of, redemption premium, if any, or interest on the Bond, the Board
may authorize the payment of the same (without surrender thereof
except in the case of a damaged or mutilated Bond) instead of
issuing a replacement Bond, provided security or indemnity is
furnished as above provided in this Section.
(d) Prior to the issuance of any replacement bond, the Paying
Agent/Registrar shall charge the registered·owner of such Bond with
all legal, printing, and the expenses in connection therewith.
Every replacement bond issued pursuant to the provisions of this
Section by virtue of the fact that any Bond is lost, stolen, .or
destroyed .shall constitute a contractual obligation of the
Authority whether or not the lost, stolen, or destroyed Bond shall
be found at any time, or be enforceable by anyone, and shall be
entitled to all the benefits of this Resolution equally and
proportionally with any and all other Bonds duly issued under this
Resolution.
(e) In accordance with Section 6 of Article 717k-6,
V.A.T.c.s., this section shall constitute authority for the
issuance of any such replacement bond without necess·ity of further
action by the Authority or any other body or person, and.the duty
of the replacement of such bonds is hereby authorized and imposed
upon the Paying Agent/Registrar, and the Paying Agent/Registrar
shall authenticate and deliver such Bonds in the form and manner
and with the effect, as provided in Section 2.4(d) of this
34
Resolution for Bonds issued in conversion and exchange for other
Bonds.
ARTICLE XII
DEFEASANCE
(a) Any Bond shall be deemed to be paid and no longer
outstanding when payment of the principal of, redemption premium,
if any, on such Bond, plus interest thereon to the date thereof
(whether such due date be by reason of maturity, upon redemption,
or otherwise), either (A) shall have been made or cau.sed to· be made
in accordance with the terms thereof, or {B) shall have been
provided by irrevocably depositing with a paying agent, in trust
and irrevocably set as.ide exclusively for such payment (1) money
sufficient to make such payment or (2) Federal Securities, as
hereinafter defined, certified by an independent public accounting
firm of national reputation to mature as to principal and interest
in such amount and at such times as will insure the availability
_without reinvestment, of sufficient money to make such payment, and
all necessary and proper fees, compensation and expenses of such
payment agent for the Bonds pertaining to this Bond with respect to
which such deposit is made shall have been paid or the payment
thereof provided for. 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 benefits of this Resolution, except for the
purposes of any such payment from such money of Federal Securities.
(b) The deposit under clause (B) of paragraph (a) shall be
deemed a payment of a Bond as aforesaid when proper notice of
redemption of such Bond shall have been given, in accordance with
this Resolution. Any money so deposited with a paying agent as
herein provided may at the discretion of the Board also be invested
in Federal Securities, maturing in the amounts and times as
hereinbefore set forth, and all income from all Federal Securities
in the hands of a paying agent which is not required for the
payment of the Bond, the redemption premium, if any, and interest
thereon, with respect to which such money has been so deposited, .
shall be turned over to the Board.
(c) For the purpose of this Article, the term "Federal
Securities" 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, and which are noncallable and which at the time of
investment are legal investments under the laws of the state of
Texas for the money proposed to be invested therein.
(d) Notwithstanding any provision of this Resolution, al~
money or Federal Securities set aside and held in trust pursuant to
the provisions of this Article for the payment of Bonds, the
redemption premium, if any, and interest thereon, shall be applied
to and used solely for the payment of the particular Bonds, the
redemption premium, if any, and interest thereon, with respect to
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1 •
which such money or Federal securities have been set aside in
trust.
(e) Notwithstanding anything elsewhere in this Resolution
contained, if money or Federal Securities have been deposited or
set aside with a paying agent pursuant to this Article for the
payment of Bonds and such Bonds shall not have in fact been
actually paid in full, no amendment to the provisions of this
Article shall be made without the consent of the owner of each Bond
affected thereby.
ABTICLE XIII
MISCELLANEOUS
section 13.1. REPEAL. All resolutions or parts thereof, or
other corporate action of the Authority or of the Board of
·Directors, which in any manner or to any extent conflict with any
provisions of this Resolution, shall be, and such other resolutions
and corporate action are hereby expressly repealed.
Section 13.2. SEYEBABILITY. In case any one or more of the
pr-ovisions of this Resolution shall be held to be invalid . or
ineffective by any court of competent jurisdiction or invalid or
ineffective as to any person or circumstance, the remainder hereof
and the application of such provision or -provisions to persons o~
circumstances other than those as to which it is held invalid shall
not be affected thereby.
Section 13.3. COVENANTS REGARDING TAX-EXEMPTION. The
Authority covenants to refrain from any action which would
adversely affect, or to take such action as .to assure, the
treatment of the Bonds as obligations described in Section 103 of
the Code, the interest on which is not includable in the "gross
income" of the holder for purposes of federal income taxation. In
furtherance thereof, the Authority covenants as follows:
(a) to take any action to assure that no more than 10
percent of the proceeds of the Bonds or the projects financed
therewith (less amounts deposited to a reserve fund, if any}
are used for any ''private business use," as defined in section
14l(b)(6) of the Code or, if more than 10 percent of the
proceeds or the projects financed therewith are so used, that
amounts, whether or not received by the Authority, with
respect to such private business use, do not, under the terms
of this Resolution or any underlying arrangement, directly or
indirectly, secure or provide for the payment of more than 10
percent of the debt service on the Bonds, in contravention of
Section 141(b}(2} of the Code;
(b) to take any action to assure that in the event that
the "private business use" described in subsection (a) hereof
exceeds 5 percent of the proceeds of the Bonds or the projects
financed therewith (less amounts deposited into a reserve
fund, if any) then the amount in excess of 5 percent is used
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;
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for a "private business use" which is "related" and not
"disproportionate", within the meaning of Section 141 (b) (3) of
the Code, to the governmental use;
(c) to take any action to assure that no amount which is
greater than the lesser of $S,ooo,ooo, or five percent of the
proceeds of the Bonds (less amounts deposited into a reserve
fund, if any) is directly or indirectly used to finance loans
to persons, other than state or local governmental units, in
contravention of Section 141(c) of the Code;
(d) to refrain from taking any action which would
otherwise result in the Bonds being treated as "private
activity bonds" within the meaning of Section 141(b) of the
Code;
(e) to refrain from taking any action that would result
in the Bonds being "federally guaranteed" within the meaning
of section 149(b) of the Code;
(f) to refrain from using any portion of the proceeds of
the Bonds, directly or indirectly, to acquire or to replace
funds which were used, directly or indirectly, to acquire
investment property (as defined in Section 148(b) (2) of the
Code) which produces a materially higher yield over the term
of the Bonds, other than investment property acquired with --
(1) proceeds of the Bonds invested for a reasonable
temporary period of three years or less or, in the case
of a refunding bond, for a period of 30 days or less
until such proceeds are needed for the purpose for which
the bonds are issued,
(2) amounts invested in a bona fide debt service
fund, within the meaning of Section 1.148-l(b) of the
Treasury Regulations, and
(3) amounts deposited in any reasonably required
reserve or replacement fund to the extent such amounts do
not exceed 10 percent of the proceeds of the Bonds;
(g) to otherwise restrict the use of the proceeds of the
Bonds or amounts treated as proceeds of the Bonds, as may be
necessary, so that the Bonds do not otherwise contravene the
requirements of Section 148 of the Code (r~lating to
arbitrage) and, to the extent applicable, Section 149(d) of
the Code (relating to advance refundings); and
(h) to pay to the United States of America at least once
during each five-year period (beginning on the date of
delivery of the Bonds) an amount that is at least equal to 90 .
percent of the "Excess Earnings," within the meaning of
Section 148(f) of the Code and to pay to the United States of
America, not later than 60 days after the Bonds have been paid
37
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in full, 100 percent of the amount then required to be paid as
a result of Excess Earnings under Section 148(f) of the Code.
In order to facilitate compliance with the above covenant
(h} , a "Rebate Fund" is hereby established by the Authority for the
sole benefit of the United States of America, and such Fund shall
not be subject to the claim of any other person, including without
limitation the bondholders. The Rebate Fund is established for the
additional purpose of compliance with section 148 of the Code.
For purposes of the foregoing (a) and (b), the Authority
understands that the term "proceeds" includes "disposition
proceeds" as defined in the Treasury Regulations and, in the case
of refunding bonds, transferred proceeds (if any), and proceeds of
the refunded bonds expended prior to the date of issuance of the
Bonds. It is the understanding of the Authority that the covenants
contained herein are intended to assure compliance with the Code
and any regulations or rulings promulgated by the u.s. Department
of the Treasury pursuant thereto. In the event that regulations or
.rulings are hereafter promulgated which modify, or expand
provisions of the Code, as applicable to the Bonds, the Authority
will not be required to comply with any covenant contained herein
to the extent that such failure to comply, in the opinion of
nationally-recognized bond counsel, will not adversely affect the
exemption from federal income taxation of interest on the Bonds
·under section 103 of the code. In the event that regulations or
rulings are hereafter promulgated which impose additional
requirements which ~re applicable to the Bonds, the Issuer agrees
to comply with the additional requirements to the extent necessary,
in the opinion of nationally recognized bond counsel, to preserve
the exemption from federal income taxation of interest on the Bonds
under section 103 of the Code. In furtherance of such intention,
the Authority hereby authorizes and directs the General Manager to
execute any documents, certificates or reports required by the Code
and to make such elections, on behalf of the Authority, which may
be permitted by the Code as are consistent with the purpose for the
issuance of the Bonds.
Section 13.4. Beaspn for B~fUnains. It is specifically found
and determined by the Authority that the refunding of the Refunded.
Bonds in the manner herein provided will result in a debt service
savings, reducing the Net Revenues required of Lubbock, and
therefore, it is in the best interest of the Authority and Lubbock
that such refunding be accomplished, and the Refunded Bonds be
refunded, discharged and retired thereby.
Section 13 • 5. PRINTING OF STATEMENT OF INSUBANCE. The
Authority hereby authorizes any statement of insurance with respect
to the Bonds furnished by any rnunicipal bond insurance company
insuring the Bonds to be printed on or attached to the Bonds.
Section 13.6. OPEN ME~XING. It is hereby officially found
and determined that the meeting at which this Resolution is adopted
is open to the public as required by law and that public notice of
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the time, place and purpose of said meeting was given as required
by Chapter 551, Texas Government Code, as amended.
39
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CERTIFICATE OF GENERAL MANAGER
I, the undersigned General Manager of the Brazos River
~uthority (the "Authority"), acting pursuant to the authority
granted to me by resolution of the Board of Directors of the
Authority adopted on May 24, 1995 (the "Resolution") relating to
the issuance of Brazos River Authority Special Facilities (Lake
Alan Henry) Revenue Refunding Bonds, series 1995 (the 11Bonds")
hereby find, determine and commit on behalf of the Authority that:
1. I have, pursuant to the above cited authority, approved
the specific terms of the Bonds and the sale thereof to the
underwriters all as set forth in and evidenced by my approval and
execution of the Bond Purchase Agreement, dated June 6, 1995,
between and atnong the . Authority and the underwriters and the
Official Statement, dated May 31, 1995, relating to the Bonds.
2. It has been determined that it would be financially
desirable and advantageous to procure for the benefit of the Bonds
municipal bond insurance. Therefore, the Bonds shall be insured by
a Municipal Bond New Issue Insurance Policy issued by Financial
Guaranty Insurance Company and the Resolution is hereby modified in
connection therewith for purposes of the Bonds by adding a new
Article XIV captioned "ADDITIONAL PROVISIONS WITH RESPECT TO BONDS
RELATING TO BOND INSURANCE•• which article shall read in its
entirety as follows:
ARTICLE XIV
ADDITIONAL PROVISIONS WITH RESPECT TO BONDS
RELATING TO BOND INSURANCE
Section 14.1. QEFINITIOMS. For purposes of Article XIV of
this Resolution, the following additional definitions shall apply:
(a) "Bond Insurance Policy" means the municipal bond new
issue insurance policy issued by the Bond Insurer that guarantees
payment of principal of and interest on the Bonds.
(b) "Bond Insurer" means Financial Guaranty Insurance
Company, a New· York stock insurance company, or any successor
thereto.
Section 14.2. CERTAIN INFORMATION PROVIDED. The Bond .Insurer
shall be provided with the following info~ation:
(a) Within 120 days after the end of the Authority's fiscal
year, the Authority shall provide to the ·Bond Insurer any budget
prepared under the Contract with respect to the Project, the
Authority's annual audited financial statements and a statement of
the amount on deposit in the Reserve Fund as of the last valuation.
(b) Each official statement or other disclosure, if any,
prepared in connection with the issuance of Additional Bonds or ~ny
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other debt issued by the Authority relating to the Project
subordinate to the Bonds.
(c) Notice of any draw upon or deficiency due to market
fluctuation in the amount, if any, on deposit in the Reserve Fund.
(d) Notice of the redemption, other than mandatory sinking
fund redemption, of any of the Bonds, or of any advance refunding
of the Bonds, including the principal amount, maturities and CUSIP
numbers thereof.
(e) Such additional information as the Bond Insurer may
reasonably request from time to time.
Section 14. 3 • RE[)EMPI'ION NOTICE REQUIREMENTS. Notice of any
.redemption of Bonds sh.all either (i) explicitly state that the
proposed redemption is conditioned on there being on deposit in the
applicable fund or account on the redemption date sufficient money
to pay the full redemption price of the Bonds to be redeemed or
(ii) be sent only if sufficient money to pay the full redemption
price of the Bonds to be redeemed is on deposit in the applicable
fund or account.
Section 14.4 . EYENTS OF DEFAULT. In determining whether a
~ayment default has occurred under this Resolution or whether a
payment on the Bonds has been made under the Resolution, no effect
shall be given to payments made under the Bond Insurance Policy.
Section 14.5 . NOTICE OF DEfAULT . The Bond Insurer shall
receive immediate notice of any payment default (including a
Capital costs payment default) and notice of any other default
known to the Authority within 30 days of the Authority's knowledge
thereof. •
Section 14. 6. DEEMED OWNER OF BONDS. For all purposes of the
provisions of this Resolution governing events of default and
remedies, the Bond Insurer shall be deemed to be the sole owner of
the Bonds it has insured for so long a s it has not failed to comply
with its payment obligations under the Bond Insurance Policy.
Section 14.7. PAYING AGENT/REGISTRAR. No resignation or
removal of the Paying Agent/Registrar shall become effective until
a successor has been appointed and has accepted the duties of
Paying Agent/Registrar. The Bond Insurer shall be furnished with
written notice of the resignation or removal of the Paying
Agent/Registrar and the appointment of any successor thereto.
Section 14.8. PARTY IN INTEREST. The Bond Insurer shall be
included as a party in interest and as a party entitled to (i)
notify the Authority, the Trustee, if any, or any applicable
receiver of the occurrence of an event of default and (ii) request
the Trustee, if any, or receiver to intervene in judicial
proceedings that affect the Bonds or the security therefor. The
Trustee, if any, or receiver sha·ll be required to accept notice of
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default from the Bond Insurer.
Section 14 • 9. RESOUJl'ION AMENDMENTS. Any amendment or
supplement to this Resolution and all other principal financing
documents shall be subject to the prior written consent of the Bond
Insurer. Any rating agency rating the Bonds must receive notice of
each amendment and a copy thereof at least 15 days in advance of
its execution or adoption. The Bond Insurer shall be provided with
a full transcript of all proceedings relating to the execution of
any such amendment or supplement.
Section 14 .10. ADVANCE REFUNDING. In the event of an advance
refunding of the Bonds, the Authority shall cause to be delivered
a verification report of an independent nationally recognized
certified public accountant. If a forward supply contract is
employed in connection with the refunding, (i) such verification
report shall expressly state that the adequacy of the escrow to
accomplish the refunding project relies solely on the initial
escrowed investments and the maturing principal thereof and
interest income thereon and does not assume performance under or
compliance with the forward supply contract and (ii) the applicable
escrow agreement shall provide that in the event of any discrepancy
or difference between the terms of the forward supply contract and
the escrow agreement and authorizing document, the terms of the
escrow agreement and authorizing document shall be controlling.
Section 14 .11. INSURANCE PRQCEDURES. For so long as the
Bonds are insured by the Bond Insurer, the following procedures
shall apply:
(i) If, on the third day preceding any interest payment date
for the Bonds there is not on deposit with the Paying
Agent/Registrar sufficient moneys available to pay all principal of
and interest on the Bonds due on such date, the Paying
Agent/Registrar shall immediately notify the Bond Insurer and State
street Bank and Trust company, N.A., New York, New York or its
successor as its Fiscal Agent (the "Fiscal Agent") of the amount of
such deficiency. If, by said interest payment date, the Authority
has not provided the amount of such deficiency, the Paying
Agent/Registrar shall simultaneously make available to the Bond
Insurer and to the Fiscal Agent the registration books for the
Bonds maintained by the Paying Agent/Registrar. rn addition:
(A) The Paying Agent/Registrar shall provide the Bond Insurer
with a list of the registered owners entitled to receive principal
or interest payments from the Bond Insurer under the terms of the
Bond Insurance Policy and shall make arrangements for the Bond
Insurer and its Fiscal Agent (1) to mail checks or drafts to
registered owners entitled to receive full or partial interest
payments from the Bond Insurer and (2) to pay principal .of the
Bonds surrendered to the Fiscal Agent by the registered owners
entitled to receive full or partial principal payments from the
Bond Insurer; and
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(B) The Paying Agent/Registrar shall, at the time it makes
the registration books available to the Bond Insurer pursuant to
(A) above, notify registered owners entitled to receive the payment
of principal of or interest on the Bonds from the Bond Insurer (1)
as to the fact of such entitlement, (2) that the Bond Insurer will
remit to them all or part of the interest payments coming due
subject to the terms of the Bond Insurance Policy, (3) that, except
as provid·ed in paragraph (ii) below, in the event that any
registered owner is entitled to receive full payment of principal
from the Bond Insurer, such registered owner must tender his Bond
with the instrument of transfer in the form provided on the Bond
executed in the name of the Bond Insurer, and (4) that, except as
provided in paragraph (ii) below, in the event that such registered
owner is entitled to receive partial payment of principal from the
Bond Insurer, such registered owner must tender his Bond for
payment first to the Paying Agent/Registrar, which shall note on
such Bond the portion · of principal paid by the Paying
Agent/Registrar, and then, with an acceptable form of assignment
executed in the name of the Bond Insurer, to the Fiscal Agent,
which will then pay the unpaid portion of principal to the
registered owner subject to the terms of the Bond Insurance Policy.
(ii) In the event that the Paying Agent/Registrar has notice
that any payment of principal of or interest ·on a Bond has been
recovered from a registered owner pursuant to the united States
Bankruptcy Code by a trustee in bankruptcy in accordance with the
final, nonappealable order of a court having competent
jurisdiction, the Paying Agent/Registrar shall, at the time it
provides notice to the Bond Insurer, notify all registered owners
that in the event that any registered owner's payment is so
recovered, such registered owner will be entitled to payment from
the Bond Insurer to the extent of such recovery, and the Paying
Agent/Registrar shall furnish to the Bond Insurer its records
evidencing the payments of principal of and interest on the Bonds
which have been made by the Paying Agent/Registrar and subsequently
recovered from registered owners, and the dates on which such
payments were made.
(iii) The Bond Insurer shall, to the extent it makes payment
of principal of or interest on the Bonds, become subrogated to the
rights of the recipients of such payments in accordance with the
terms of the Bond Insurance Policy and, to evidence such
subrogation, (1) in the case of subrogation as to claims for past
due interest, ·the Paying Agent/Registrar shall note the Bond
Insurer's rights as subrogee on the registration books maintained
by the Paying Agent/Registrar upon receipt from the Bond Insurer of
proof of the payment of interest thereon to the registered owners
of such Bonds and (2) in the case of s~rogation as to claims for
past due principal, the Paying Agent/Registrar shall note the Bond
Insurer 1 s rights as subrogee on the registration books for the
Bonds maintained by the Paying Agent/Registrar upon receipt of
proof of the payment of principal thereof to the registered owners
of such Bonds. Notwithstanding anything in this Resolution or the
Bonds to the contrary, the Paying Agent/Registrar shall make
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payment of such past due interest and past due principal directly
to the Bond Insurer to the extent that the Bond Insurer is a
subrogee with respect thereto.
section 14.12. NQTICES. The notice addresses for the Bond
Insurer and the Fiscal Agent are as follows:
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
Attention: General Counsel
State Street Bank and Trust Company, N.A.
61 Broadway
New York, New York 10006
Attention: Corporate Trust Department
Section 14. 13. PAYMENT Ql3LIGATIONS. The obligation of
Lubbock to make payments of Capital Costs in accordance with the
) terms of the Contract shall be absolute and unconditional, free of
deductions and without any abatement,. offset, recoupment,
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diminution or set-off whatsoever. ·
. Section 14. 14. Wl3IIDCK' S OBLIGA~IONS. Lubbock shall be
.obligated to provide to the Bond Insurer the following:
(a) Within 120 days after the end of Lubbock's fiscal year,
Lubbock shall provide to the Bond Insurer any budget prepared under
the · Con~ract with respect to the Project and Lubbock's annual
audited financial statements.
(b) With respect to Lubbock's waterworks system:
(i) The number of system users as of the end of the fiscal
year;
(ii) Notificat'ion of the withdrawal of any system user
comprising 5% or more of system sales measured in terms of revenue
dollars since the last reporting date;
(iii) Any significant plant retirements or expansions planned
or undertaken since the last reporting date;
(iv) Maximum and average daily usage for the fiscal year:
(v) Updated capital plans for expansion and improvement
projects;
(vi) Results of annual engineering inspections, if any,
occurring at the end of the fiscal year; and
(vii) Such additional information as the Bond Insurer may
reasonably request from time to time.
)
Witness my hand as of June 6, 1995.
BRAZOS RIVER AUTHORITY
Roy A. Roberts
General Manager
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CERTIFICATE FOR
A RESOLUTION APPROVING THE TRANSFER OF ALL OF THE AUTHORITY'S
INTERESTS IN LAKE ALAN HENRY AND ALL RELA1ED FACILITIES TO THE CITY OF
LUBBOCK; APPROVING THE DEFEASANCE OF AND CALLING FOR REDEMPTION
CERTAIN OF THE OUTSTANDING BRAZOS RIVER AUTHORITY SPECIAL FACil-ITIES
(LAKE ALAN HENRY) REVENUE REFUNDING BONDS, SERIES 1995; AND ENACTING
OTHER PROVISIONS RELATED THERETO
THE STATE OF TEXAS
BRAZOS RIVER AUTIIORJTY
I, the undersigned, Secretary of the Board ofDirectors ofBrazos River Authority, being the
official keeper of the minutes and records of said Authority, hereby certify as follows:
I. The Board ofDirectors of said Authority convened in SPECIAL MEETING ON THE
11TH DAY OF JULY, 2005, at the designated meeting place, and the roll was called of the duly
constituted officers and members of said Board, to~ wit:
Steve D. Pena, Presiding Officer
Roberto Bailon, Asst. Presiding Officer
PJ Ellison, Secretary
Christopher S. Adams, Jr.
Suzanne Alderson Baker
Truman 0 . Blum
Ronald D. Butler II
Mark J. Carrabba
Jacqueline Baly Chaumette
Robert M. Christian
Christopher D. DeCluitt
Roldolfo (Rudy) Garcia
Wade Compton Gear
Fred Lee Hughes
Carolyn H. Johnson
Roberta (Jean) Killgore
Jere Lawrence
Martha Stovall Martin
Billy Wayne Moore
John R. Skaggs
Salvatore A. Zaccagnino
and, at the time of adoption of the resolution hereinafter described, all of said persons were present
and voted, except the following absentees: Fred Lee Hughes. Whereupon, a quorum being present,
the following was transacted at said Meeting: a written
A RESOLUTION APPROVING THE TRANSFER OF ALL OF THE AUTHORITY'S
INTERESTS IN LAKE ALAN HENRY AND ALL RELATED FACILITIES TO THE CITY OF
LUBBOCK; APPROVING THE DEFEASANCE OF AND CALLING FOR REDEMPTION
CERTAIN OF THE OUTSTANDING BRAZOS RIVER AUTHORITY SPECIAL FACILITIES
(LAKE ALAN HENRY) REVENUE REFUNDING BONDS, SERJES 1995; AND ENACTING
OTHER PROVISIONS RELATED THERETO
was duly introduced for the consideration of said Board and duly read. It was then duly moved and
seconded that said Resolution be adopted; and, after due discussion, said motion, carrying with it the
adoption of said resolution, prevailed and carried with all members present voting "AYE" except the
following:
)
NAY: None.
ABSTAIN: Suzanne Alderson Baker
2. That a true, full, and correct copy of the aforesaid Resolution adopted at the Meeting
described in the above and foregoing paragraph is attached to and follows this Certificate~ that said
Resolution has been duly recorded in said Board's minutes of said Meeting~ that the above and
foregoing paragraph is a true, full, and correct excerpt from said Board's minutes of said Meeting
pertaining to the adoption of said Resolution; that the persons named in the above and foregoing
paragraph are the duly chosen, qualified, and acting officers and members of said Board as indicated
therein; and that each of the officers and members of said Board was du1y and sufficiently notified
officially and personally, in advance, of the time, place, and purpose of the aforesaid Meeting, and
that said Resolution would be introduced and considered for adoption at said Meeting; and that said
Meeting was open to the public, and public notice of the time, place, and purpose of said Meeting was
given, all as required by Chapter 551, Texas Government Code.
SIGNED AND SEALED the lf"n.. day of July, 2005.
(AUTHORITY SEAL)
cretary, Board ofDirectors,
Brazos River Authority
)
A RESOLUTION APPROVING THE TRANSFER OF ALL OF
THE AUTHORITY'S INTERESTS IN LAKE ALAN HENRY
AND ALL RELATED FACILITIES TO THE CITY OF
LUBBOCK; APPROVING TilE DEFEASANCE OF AND
CALLING FOR REDEMPTION CERTAIN OF THE
OUTSTANDING BRAZOS RIVER AUTHORITY SPECIAL
FACUJTIES (LAKE ALAN HENRY) REVENUE REFUNDING
BONDS, SERIES 1995; AND ENACTING OTHER PROVISIONS
RELATED THERETO
WHEREAS, to provide for costs related to Lake Alan Henry, John T. Montford Dam and
all appurtenances to the lake and dam (collectively, the "Project"), the Board of Directors (the
"Board") of the Brazos River Authority (the "Authority") adopted a resolution (the "Bond
Resolution") authorizing the issuance of its Special Facilities (Lake Alan Henry) Revenue
Refunding Bonds, Series 1995, dated June 1, 1995 (the "Bonds"), currently outstanding in the
aggregate principal amount of$45,515,000 and maturing on August 15 in the years 2005 through
2015 and 2021;
WHEREAS, the Bonds are payable from contract payments received from the City of
Lubbock, Texas (the "City") pursuant to that certain Water Supply Agreement between the
Authority and the City, dated May 11, 1989, as amended (the "Agreement");
WHEREAS, the City has notified the Authority of its desire to prepay its obligation
under the Agreement and, pursuant to its rights under Section 14 of the Agreement, to obtain the
Authority's interests in the Project and assume operation and maintenance of the Project;
WHEREAS, the City Council of the City adopted an ordinance (the "Ordinance") on
May 26, 2005, authorizing the issuance of its Tax and Waterworks System Surplus Revenue
Refunding Bonds, Series 2005 (the "Refunding Bonds"), for the purpose of obtaining funds
sufficient, when added to the debt service and reserve funds held for the benefit of the owners of
the Bonds in the Revenue Fund, Debt Service Fund, Reserve Fund and Repair and Replacement
Reserve Fund (each as defined in the Bond Resolution) in accordance with the Bond Resolution
(collectively, the "Reserve Funds"), to defease the Bonds maturing on August 15 in each of the
years 2006 through 2015 and 2021 (the "Refunded Bonds");
WHEREAS, in accordance with the Ordinance and the pricing certificate authorized
thereby, the City will deposit a portion of the proceeds of the Refunding Bonds in an amount
sufficient, together with the Reserve Funds, to defease the Refunded Bonds, with JPMorgan
Chase Bank, National Association, the paying agent/registrar for the Bonds (the "Paying Agent")
pursuant to a deposit agreement between the City, the Paying Agent and the Authority (the
"Deposit Agreement");
WHEREAS, the Board finds and determines that it is in the best interests of the Authority
and consistent with the Agreement that the Reserve Funds and proceeds of the Refunding Bonds
as described above be applied to the defeasance of the Refunded Bonds, that the Deposit
Agreement be approved, and that all of the Bonds maturing on and after August 15, 2006, be
called for redemption on August 16, 2005 (the ''Redemption Date"), as provided herein;
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WHEREAS, when such firm banking arrangements in accordance with Chapter 1207,
Texas Government Code, as amended ("Chapter 1207"), have been made for the payment of
principal and interest to the Redemption Date of the Refunded Bonds, then the Refunded Bonds
shall no longer be regarded as outstanding except for the purpose of receiving payment from the
funds provided for such purpose;
WHEREAS, the Board acknowledges that all notice requirements contained in the
Agreement specified as conditions precedent to (i) the discharge of the City's obligations under
the Agreement, (ii) the reassignment to the City of Permit No. 4155 (the "Permit") issued by the
Texas Water Commission (predecessor to the Texas Commission on Environmental Quality) and
(iii) the transfer of the Authority's interests in the Project to the City, have been satisfied or
waived;
WHEREAS, upon the defeasance of the Bonds as described herein, the Board desires to
consummate the assignment, transfer and conveyance to the City of all of the Authority's real
and personal property rights and interests related to the Project and the transfer of management
and operation of the Project to the City and the reassignment to the City of the Permit; and
WHEREAS, the meeting at which this Resolution is considered is open to the public as
required by law, and the public notice of the time, place and purpose of said meeting was given
as required by Chapter 551, Texas Government Code, as amended;
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE
BRAZOS RIVER AUTHORITY:
Section 1. Findings. The findings and determinations set forth in the preambles
hereof are hereby incorporated by reference as if repeated in full.
Section 2. Deposit of Reserve Funds. The transfer and deposit with the Paying
Agent of the Reserve Funds is hereby authorized, directed and approved.
Section 3. Approval of Deposit Agreement. The Deposit Agreement, in substantially
the form attached hereto as Exhibit A together with such changes or revisions as may be
necessary to accomplish the prepayment and discharge of the Refunded Bonds, and its execution
and delivery by the General Manager/CEO and Secretary or Assistant Secretary of the Board, are
hereby authorized and approved. Such Deposit Agreement as executed by said officials shall be
deemed approved by the Board and constitute the Deposit Agreement herein approved.
Section 4. Payment and Redemption of Refunded Bonds. Following the deposits
with the Paying Agent as herein described, the Refunded Bonds shall be payable solely from and
secured by the cash on deposit with the Paying Agent for such purpose and shall cease to be
payable from a first lien on and pledge of the Net Revenues, as defined in the Bond Resolution,
and any other moneys and securities pledged under the Bond Resolution. The Bonds maturing
on August 15 in each of the years 2006 through 2015 and 2021 are hereby called for redemption
on August 16, 2005, at the price of par plus accrued interest, provided that such redemption is
conditioned on there being sufficient funds on deposit with the Paying Agent to pay the
redemption price of such Bonds.
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Section 5. Notice of Redemption and Deposit. Not later than July 14, 2005, the
Secretary of the Board is hereby authorized and directed to make all arrangements necessary to
notify the holders of the Refunded Bonds of the redemption in accordance with the provisions of
the Bond Resolution, including causing (i) a copy of this Resolution to be filed, together with the
suggested form of notice of redemption attached hereto as Exhibit B to be sent to bondholders,
with the Paying Agent and (ii) at least thirty (30) days prior to the Redemption Date, a notice of
redemption to be published one time in a financial journal or publication of general circulation in
the United States of America carrying as a regular feature notices of municipal bonds called for
redemption.
Section 6. Transfer and Assignment of Interests in the Project. The Board hereby
approves, upon the defeasance of the Bonds, the assignment, transfer and conveyance to the City
of aU of the Authority's real and personal property rights and interests related to the Project and
the transfer of management and operation of the Project to the City and the reassignment to the
City of the Permit, provided that the City Council of the City shall take action to approve an
"AGREEMENT TO TRANSFER LAKE ALAN HENRY" substantially in the same form as
attached hereto.
Section 7. Execution and Delivery of Documents; Actions to be Taken. The
Presiding Officer, Assistant Presiding Officer, Secretary and any Assistant Secretary of the
Board and the General Manager/CEO are each hereby authorized and directed to consent to,
accept, execute, attest and affix the Authority's seal to such other agreements, assignments,
certificates, contracts, documents, instruments, releases, financing statements, letters of
instruction, authorizations for the expenditure of funds of the Authority as may be required,
written requests, and other papers, whether or not mentioned herein, as may be necessary or
convenient to carry out or assist in carrying out the purposes of this Resolution and to take any
and all actions required to be taken to effect the purposes of this Resolution in accordance with
this Resolution, the Bond Resolution and the laws of the State of Texas.
Section 8. Power to Revise Form of Documents. Notwithstanding any other
provision of this Resolution, the Presiding Officer, Assistant Presiding Officer and Secretary of
the Board and the General Manager/CEO are each hereby authorized to make or approve such
revisions in the form of the documents approved hereby as in the opinion of the Authority's
Bond Counsel and General Counsel may be necessary or convenient to carry out or assist in
carrying out the purposes of this Resolution.
Section 9. Conflicting Prior Actions. All orders, resolutions or any actions thereof of
the Board in conflict herewith are hereby expressly repealed.
Section 10. Effective Date. This Resolution shall be effective immediately upon its
adoption.
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PASSED, APPROVED AND EFFECTIVE TillS July 11, 2005.
ATTEST:
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~~~Board of Directors
-4-
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EXHIBIT A
DEPOSIT AGREEMENT AND RECEIPT FOR DEPOSIT
JPMorgan Chase Bank, National Association (the "Paying Agent"}, being the successor
paying agent/registrar for the Brazos River Authority Special Facilities (Lake Alan Henry)
Revenue Refunding Bonds, Series 1995 (the "Bonds") issued pursuant to a bond resolution (the
"Resolution") adopted by the Brazos River Authority (the "Authority') on May 24, 1995, hereby
agrees with the Authority and the City of Lubbock, Texas (the "City") for the benefit of the
Authority, the City and the owners of the Bonds maturing on August 15 in each of the years
2006 through 2015 and 2021 (collectively, the "Refunded Bonds"), as follows :
1.1 The Paying Agent acknowledges that the total amount of principal and interest
due on the Refunded Bonds on August 16, 2005 (the "Redemption Date") is $43,746,592.67,
representing principal in the amount of$43,740,000 plus accrued interest on the Refunded Bonds
of$6,592.67.
1.2 The City and the Authority acknowledge that funds in payment of such principal
and interest (the "DeposiC) will be irrevocably deposited with the Paying Agent on August 15,
2005, composed of$39,505,186.53 from the proceeds ofthe City's Tax and Waterworks System
Surplus Revenue Refunding Bonds, Series 2005 (the "Refunding Bonds") plus $4,241,406.14 of
debt service and reserve funds held for the benefit of the owners of the Bonds under the
Resolution. The Paying Agent acknowledges receipt of the Deposit and certifies that the Deposit
is equal to the principal of and interest on the Refunded Bonds due on the Redemption Date and
that, pursuant to Article XII of the Resolution, such Refunded Bonds are deemed not to be
outstanding. If for any reason the Deposit shall be insufficient to pay the principal of and interest
on the Refunded Bonds on the Redemption Date, the City shall timely deposit additional funds
with the Paying Agent in the amount required to make such payment. Notice of any such
insufficiency shall be immediately given by the Paying Agent to the City by the fastest means
possible, but the Paying Agent shall in no manner be responsible for the City's failure to make
such additional deposit.
1.3 The Deposit shall be irrevocably held by the Paying Agent in trust for the benefit
of the owners of the Refunded Bonds pursuant to Article XII of the Resolution for the purpose of
paying the principal of the Refunded Bonds on the Redemption Date, together with all interest
due thereon to the Redemption Date, and, immediately following the receipt of the Deposit, the
Paying Agent agrees to hold the Deposit uninvested in a separate account and to apply and
disburse the Deposit solely for the payment of the principal of and interest on the Refunded
Bonds on the Redemption Date.
1.4 Any portion of the Deposit that is not required to be used by the Paying Agent for
the payment of principal of and interest on the Refunded Bonds shall be delivered by the Paying
Agent to the City.
A-1
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EXECUTED TillS--------·
BRAZOS RIVER AUTHORITY
By:
Name:
Title:
Signature Page for Deposit Agreement
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EXECUTEDTlllS ________________ ~
CITY OF LUBBOCK, TEXAS
By:
Name:
Title:
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Signature Page for Deposit Agreement
LUB200niOOO
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EXECUTED THIS--------
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
By:
Name:
Title:
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>
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Signature Page for Deposit Agreement
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EXH!BITB
CONDITIONAL NOTICE OF REDEMPTION
BRAZOS RIVER AUTIIORITY
SPECIAL F ACUITIES (LAKE ALAN HENRY) REVENUE
REFUNDING BONDS, SERIES 1995
DATED JUNE 1, 1995
NOTICE IS HEREBY GIVEN that the bonds of the above series maturing on and after
August 15, 2006 and aggregating in principal amount $43,740,000 have been called for
redemption on August 16, 2005 at the redemption price of par and accrued interest to the date of
redemption, provided that such redemption is conditioned on there being sufficient funds on
deposit to pay the redemption price; such bonds being more particularly described as follows:
Principal Amount to be
Year ofMaturity Redeemed CUSIP Number
2006 $ 1,855,000 105912 BVO
2007 1,950,000 105912 BWS
2008 2,065,000 105912BX6
2009 2,175,000 105912 BY4
2010 2,290,000 105912 BZl
2011 2,430,000 105912 CAS
2012 2,565,000 105912 CB3
2013 2,720,000 105912 CCI
2014 2,890,000 105912 CD9
2015 3,070,000 105912 CE7
2021 19,730,000 105912 CG2
Provided that sufficient funds to pay the redemption price shall be on deposit, the bonds
described above shall become due and payable on August 16, 2005 and interest on such bonds
shall cease to accrue from and after said redemption date. Payment of the redemption price of
said bonds shall be paid to the registered owners of the bonds only upon presentation and
surrender of such bonds to JPMorgan Chase Bank, National Association, at its designated office
in Dallas, Texas, at the following address: 2001 Bryan Street, 9th Floor, Dallas, Texas 75201,
Attention: Operations.
THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for
the redemption of said bonds and pursuant to a resolution by the Board of Directors of the
Brazos River Authority.
982026_2.DOC
LUB200niOOOO
JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION
as Paying Agent/Registrar
Address: 2001 Bryan Street, 9th Floor
Dallas, Texas 75201
)
'
THE STATE OF TEXAS §
COUNTY OF MCLENNAN §
AGREEMENT TO TRANSFER LAKE ALAN HENRY
This agreement is entered into this day of , 2005, by and
between the Brazos River Authority (hereinafter referred to as the "AUTHORITY"), and
the City of Lubbock, Texas (hereinafter referred to as the "CITY").
WITNESSETH: that whereas the AUTHORITY is the holder of Permit No. 4146
(hereinafter referred to as the "Permit") to impound water in and to divert, use and reuse
water from Lake Alan Henry; and
WHEREAS, in order to conserve and develop water resources in the Brazos
River watershed, the AUTHORITY works in cooperation with cities, towns, districts, and
other entities to carry out such purpose, and
WHEREAS, the AUTHORITY and the CITY entered into a Water Supply
Agreement dated May 11, 1989 (as amended) (hereinafter referred to as the
"Agreement") in which the AUTHORITY agreed to construct, maintain, and operate
Lake Alan Henry for the sole benefit of the CITY; and
WHEREAS, the AUTHORITY issued and sold Lake Alan Henry Revenue
Refunding Bonds, Series 1995 in the amount of $58,170,000 (hereinafter referred to as
"BONDS") pursuant to a bond resolution (hereinafter referred to as the "BOND
RESOLUTION") in order to refinance such construction; and
WHEREAS, the BOND RESOLUTION provides that the AUTHORITY and the
CITY may transfer the ownership and operation of Lake Alan Henry from the
AUTHORITY to the CITY, and
WHEREAS, the Agreement required a one year notice from the CITY to the
AUTHORITY regarding any contemplated transfer of ownership of Lake Alan Henry, as
contemplated in the Agreement; and
WHEREAS, the CITY tendered notice of such contemplated transfer to
AUTHORITY in a letter dated May 25, 2005 which requested that such transfer take
place no later than August 15, 2005; and
WHEREAS, the one year notice requirement contemplated a full due diligence
process prior to any such contemplated transfer and the notice by CITY did not comply
with such notice requirement; and ·
WHEREAS, the CITY will issue its own bonds (hereinafter referred to as the
"REFUNDING BONDS") to effectuate the defeasance and redemption of the BONDS,
and
982026 _2.DOC
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WHEREAS, the BONDS issued to finance Lake Alan Henry will be redeemed on
Augu~16,2005;and
WHEREAS, the REFUNDING BONDS were priced on June 30, 2005 and the
CITY and RBC Dain Rauscher Inc. executed the Bond Purchase Agreement for the
REFUNDING BONDS on July 1, 2005; and
WHEREAS, subsequent to the defeasance and redemption of the BONDS , a
transfer of ownership and operation of Lake Alan Henry to the CITY from the
AUTHORITY may occur.
) NOW THEREFORE, the CITY and the AUTHORITY (hereinafter referred to as the
"PARTIES"), in consideration of the mutual consideration, covenants, obligations and
benefits provided herein, agree as set forth above and hereinafter:
)
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1. The AUTHORITY hereby waives the one (1) year notice requirement that is
contained in the AGREEMENT.
2. The CITY shall, on or before August 16, 2005, redeem the BONDS. In the event
the BONDS are not redeemed on or before August 16, 2005, this Agreement
shall be null and void.
3.
4.
The CITY will own, operate and maintain, from August 16, 2005 (hereinafter
referred to as "TRANSFER DATE") forward, the Lake Alan Henry dam, lake, and
all other related property transferred under this agreement (hereinafter referred to
as the "PROJECT') in a prudent manner and monitor and inspect the
infrastructure related to the PROJECT in accordance with generally accepted
engineering principles. The CITY accepts the PROJECT from the AUTHORITY
"AS IS" and the AUTHORITY makes no warranties, express or implied, relating
to the PROJECT. Furthermore, the CITY accepts full responsibility for the
PROJECT hereby conveyed and the CITY hereby releases the AUTHORITY
from any and all liabilities, claims, losses, damages, and expenses that may arise
out of the AUTHORITY'S maintenance and/or operation of the PROJECT prior to
the TRANSFER DATE.
The AUTHORITY and the CITY shall make the necessary arrangements to have
all utilities transferred from the AUTHORITY to the CITY by August 16, 2005.
The AUTHORITY shall provide the CITY a list of contract and service providers
by July 11, 2005.
5. The AUTHORITY has prepared a Personal Property Inventory List (hereinafter
referred to as "PPIL") and submitted the PPIL to the CITY. The CITY
acknowledges receipt of the PPIL and has reviewed and inspected the the items
listed on the PPIL. There are no outstanding issues, questions, or problems, all
982026_2.DOC
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such issues, questions, and/or problems have been resolved at the mutual
satisfaction of both PARTIES.
6. The AUTHORITY will convey and assign all real property and personal property
associated with the ownership, operation or maintenance of Lake Alan Henry
and/or the PERMIT by deed and assignment without warranty and bill of sale
(hereinafter referred to as the "DEED"), in the form attached hereto as Exhibit
"A". The AUTHORITY shall provide to the CITY a list of real property interests
conveyed to the Authority for the PROJECT. The CITY acknowledges that the
list is a compilation of the data currently maintained by the AUTHORITY and that
the AUTHORITY makes no representations as to the completeness or accuracy
of the records . The CITY may also identify the real property interests in the real
property records of the counties in which the PROJECT is located. Any interest
depicted or described on either the AUTHORITY compilation or through CITY
due diligence shall be included in Exhibit "A" to the DEED.
7. By acceptance of the conveyance described in Paragraph 6, above , to the extent
allowed by law, the CITY agrees to defend, indemnify, save and keep the
AUTHORITY harmless from any and all claims, actions, losses, damages, and
expenses which arise out of the AUTHORITY'S acquisition of real property for
the PROJECT to the same extent, and only to the same extent, as AUTHORITY
has indemnified third party grantors in such acquisitions.
8. The AUTHORITY has submitted to the CITY copies of all existing management,
operation and emergency plans and CITY acknowledges receipt and possession
of such plans. After reviewing the plans submitted and determining the
sufficiency of such plans, the CITY shall use the submitted plans as a basis for
the management and operation of the PROJECT until such time the CITY
amends, modifies, updates, or institutes new management, operation and
emergency plans for the PROJECT. The CITY, at its sole expense, may select,
in its discretion, an engineering firm to assist with dam maintenance, evaluation
and safety, and when making the selection, may take into consideration, along
with other factors, the current engineering firm responsible for this function.
9. The AUTHORITY will initiate, by applying to the Texas Commission on
Environmental Quality, the process of reassignment of the Permit to the CITY as
soon as practical but in no event shall such process be initiated later than ten
(10) business days after the TRANSFER DATE.
10. The CITY shall evaluate retaining the two (2) Authority employees and will
propose a transition plan no later than July 15, 2005.
11. In the event that any action taken in implementing these steps requires CITY
Council or AUTHORITY Board ratification or approval, such action shall be
submitted to the appropriate body for approval prior to August 16, 2005.
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12. On or before 90 days after the TRANSFER DATE, the AUTHORITY shall present
a final accounting of expenses incurred with regard to the Operations and
Maintenance of the Project and due and owing AUTHORITY by CITY under the
terms of the Agreement, compared to amounts received from the CITY.
AUTHORITY shall rebate any excess payments received from CITY, or CITY
shall remit an amount to the AUTHORITY equal to any deficiency.
13. AUTHORITY and CITY each represent and warrant to the other that they have
taken all corporate or other action necessary to authorize the execution and
performance of this Agreement and are and will continue to be duly authorized to
perform this Agreement.
14. AUTHORITY and CITY will execute, acknowledge and deliver or file or cause the
same to be done, all additional agreements, undertakings, conveyances,
assignments, bills of sale, transfers or other assurances necessary to effectuate
or perform the obligations and agreements of each party hereto.
15. If any provision of this Agreement is held to be illegal, invalid or unenforceable for
any reason, such provision shall be fully severable and th is Agreement shall be
construed as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement. In such event, the remaining provisions of
this Agreement shall remain in full force and effect.
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BRAZOS RIVER AUTHORITY
Phil Ford
General Manager/C E 0
ATIEST:
mVRichard/LAH-Transfer Agreement
July6, 2005
982026_2.DOC
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CITY OF LUBBOCK
MARC McDOUGAL
MAYOR
ATIEST:
Rebecca Garza
City Secretary
APPROVED AS TO CONTENT:
Lee Ann Dumbauld
Chief Financial Officer/
Assistant City Manager
Thomas Adams
Deputy City Manager
APPROVED AS TO FORM:
Richard K. Casner
First Assistant City Attorney
)
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Exhibit "A"
to
Agreement to Transfer Lake Alan Henry
DEED AND ASSIGNMENT WITHOUT WARRANTY
AND
BILL OF SALE
STATE OF 1EXAS §
§ KNOW ALL MEN BY THESE PRESENTS:
COUNTIES OF GARZA AND KENT §
This Deed and Assignment Without Warranty, dated this 16th day of August, 2005, is by
and between the Brazos River Authority, a river authority of the State of Texas ("Grantor"),
whose address is -------" and the City of Lubbock, Texas, a Texas home rule
municipal corporation ("Grantee"), whose address is P. 0 . Box 2000, Lubbock, Texas 79457.
WHEREAS, Grantor and Grantee entered into that certain Water Supply Agreement (the
"Agreement"), dated on or about May 3, 1989, wherein Grantor agreed, for and on the behalf of
Grantee, to construct, maintain and operate Lake Alan Henry, and its related infrastructure (the
"Project");
WHEREAS, the Agreement provides, among other things, that Grantee, in connection
with such services to be performed by Grantor, would convey to Grantor certain real property
interests related to the Project;
WHEREAS, pursuant to the tenns of the Agreement, Grantee did so convey to Grantor
such real property interests related to the Project;
WHEREAS, the Agreement was amended, among other amendments, by that certain
Amendment No. 1 to Water Supply Agreement, dated on or about February 27, 1992 (the
''Amendment");
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WHEREAS, the Amendment provides that Grantor, for and on behalf of Grantee, was to
acquire certain interests related to the exploration for, production of, transportation of and/or
storage of oil, gas and minerals which may be affected by the Project;
WHEREAS, Grantor acquired numerous interests in real property, including without
limitation, interests in oil, gas and minerals, pursuant to the terms of the Agreement, as amended
by the Amendment;
WHEREAS, the Agreement, as amended by the Amendment, provides that upon the
occurrence of certain conditions, as described therein, Grantor is to convey the real property
interests, including without limitation, interests in oil, gas and minerals, and personal property
acquired pursuant to the terms thereof to Grantee;
WHEREAS, such conditions have occurred, and Grantor, such action having been duly
authorized by its board of directors, now desires to convey such property to Grantee.
NOW, THEREFORE, the BRAZOS RIVER AUTHORITY, a river authority of the State
of Texas, for and in consideration of the sum ofTen and No One Hundred Dollars ($10.00), and
other good and valuable consideration, has GRANTED, ASSIGNED, SOLD and CONVEYED,
and by these presents does hereby GRANT, ASSIGN, SELL and CONVEY, without warranty of
any kind or type, unto the CITY OF LUBBOCK, a Texas home rule municipal corporation, all of
the GRANTOR'S real property and real property interests together with all associated personal
property and equipment located thereon, acquired by Grantor under the terms of the Agreement,
as amended by the Amendment, including without limitati·Jn surface and mineral fee, easements,
rights of way, royalty interests, production payments, overriding royalty interests, leasehold
interests, interests arising from farmout agreements, possibilities of reverters, reversions,
conditions subsequent, rights of re-entry, covenants, rights under conditions or covenants,
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subordinations and rights under subordination agreements, options and rights of first refusal,
described on Exhibit "N', and/or having been conveyed, assigned, described or delivered in the
instruments described on Exhibit "A", attached hereto (the "Real Property''), together with all
personal property and equipment located upon the Real Property or related to the Project,
including without limitation, tank batteries, storage facilities, flow lines, gathering lines,
pumping and lifting equipment, all utilities connections, poles, lines, docks, furniture, machinery,
vehicles, boats, documents, records, warranties, including without limitation, all personal
property described on Exhibit "B", attached hereto (the "Personal Property'') (the Real Property
and Personal Property are herein referred to collectively as the "Property"). It is the intent of
Grantor to convey to Grantee all real property, interests in real property and associated personal
property acquired by Grantor pursuant to the terms of the Agreement, as amended by the
Amendment, whether or not such properties are specifically described on Exhibit "A" or Exhibit
"B'', attached hereto. THE CONVEYANCE OF Tiffi PERSONAL PROPERTY SHALL BE
ON A "WHERE IS" and "AS IS" BASIS, AND SHALL BE WITHOUT REPRESENTATION
OR WARRANTY WHATSOEVER, EXPRESSED, STATUTORY OR IMPLIED.
TO HAVE AND TO HOLD the Grantor's interests in the Property unto Grantee and
Grantee's successors and assigns forever; HOWEVER EXCLUDED AND EXCEPTED FROM
THIS ENTIRE DEED ARE ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED,
REGARDING TilE REAL AND PERSONAL PROPERTY, INCLUDING, WITHOUT
LIMITATION, ANY WARR.Al\TTIES ARISING AT CO:MM.ON LAW OR IMPLIED AS A
RESULT OF §5.023 OF THE PROPERTY CODE OR ITS SUCCESSOR.
Executed this day of ---------' 2005, but effective for all purposes the
16th day of August, 2005.
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GRANTOR:
By: _______________________ __
Name: ------------------------Title: __________________ _
STATE OF TEXAS
COUNTY OF MCLENNAN §
This instrument was acknowledged before me on this ____ day of ________ ___;
2005 by as of the Brazos River Authority, a river
authority in the State of Texas.
Notary Public, State of Texas
My commission expires: ____ _
GRANTEE:
CITY OF LUBBOCK
MARC McDOUGAL, MAYOR
ATTEST:
Rebecca Garza, City Secretary
APPROVED AS TO CONTENT:
Lee Ann Dumbauld
ChiefFinancial Officer/Assistant City Manager
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EdBucy
Right-of-Way Agent
APPROVED AS TO FORM:
Richard K. Casner
First Assistant City Attorney
STATE OF 1EXAS
COUNTY OF LUBBOCK
§
§
This instrument was acknowledged before me on this ___ day of ------.....J
2005 by Marc McDougal as Mayor of the City of Lubbock.
982026 _2.DOC
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Notary Public, State of Texas
My commission expires: ____ _
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PAYING AGENT/REGISTRAR AGREEMENT
between
CITY OF LUBBOCK, TEXAS
and
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
Pertaining to
City of Lubbock, Texas
Tax and Waterworks System Swplus Revenue Refunding Bonds
Series 2005
Dated as of July 1, 2005
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TABLE OF CONfENfS
Page
Recitals ........................................................................................................................................ l
ARTICLE I
APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR
Section 1.01. Appointinent. ................................................................................................... 1
Section 1.02. Compensation .................................................................................................. 1
ARTICLEll
DEFINITIONS
Section 2.01. Definitions ....................................................................................................... 2
ARTICLEID
PAYING AGENT
Section 3.01. Duties of Paying Agent. .................................................................................. 3
Section 3.02. Pa}'Illent Dates ................................................................................................. 3
ARTICLE IV
REGISTRAR
Section 4.01. Transfer and Exchange .................................................................................... 4
Section 4.02. The Bonds ....................................................................................................... 4
Section 4.03. Form ofRegister .............................................................................................. 4
Section 4.04. List of Owners ................................................................................................. 5
Section 4.05. Cancellation of Bonds ..................................................................................... 5
Section 4.06. Mutilated, Destroyed, Lost, or Stolen Bonds .................................................. 5
Section 4.07. Transaction Infonnation to Issuer ................................................................... 6
ARTICLEV
THE BANK
Section 5.01. Duties ofBank ................................................................................................. 6
Section 5.02. Reliance on Documents, Etc ........................................................................... 6
Section 5.03. Recitals of Issuer ............................................................................................. 7
Section 5.04. May Hold Bonds ............................................................................................. 7
Section 5.05. Money Held by Bank ...................................................................................... 7
Section 5.06. Indemnification ............................................................................................... 8
Section 5.07. Interpleader ...................................................................................................... 8
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01. Amendxnent ..................................................................................................... 8
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Section 6.02. Assigrunent ...................................................................................................... 8
Section 6.03. Notices ............................................................................................................. 8
Section 6.04. Effect of Headings ........................................................................................... 9
Section 6.05. Successors and Assigns ................................................................................... 9
Section 6.06. Separability ...................................................................................................... 9
Section 6.07. Benefits of Agreement .................................................................................... 9
Section 6.08. Entire Agreement ............................................................................................ 9
Section 6.09. Counterparts .................................................................................................... 9
Section 6.1 0. T ern1ination. ......................................................••............................................ 9
Section 6.11. Governing Law .............................................................................................. 10
EXECUTION .............................................................................................................................. 1
Annex A -Schedule of Fees for Service as Paying Agent/Registrar
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PAYING AGENT/REGISTRAR AGREEMENT
THIS PAYING AGENT/REGISTRAR AGREEMENT (the or this ''Agreement"), dated
as of July 1, 2005, is by and between CITY OF LUBBOCK., TEXAS (the .. Issuer~'), and
JPMorgan Chase Bank, National Association (the "Bank~'), a New York state banking
corporation duly organized and existing under the laws of the United States of America.
WHEREAS, the Issuer has duly authorized and provided for the issuance of its Tax and
Waterworks System Surplus Revenue Refunding Bonds, Series 2005 (the "Bonds"), dated July
1, 2005, to be issued as registered securities without coupons; and
WHEREAS, all things necessary to make the Bonds the valid obligations of the Issuer, in
accordance with their terms, will be taken upon the issuance and delivery thereof; and
WHEREAS, the Issuer is desirous that the Bank act as the Paying Agent of the Issuer in
paying the principal, redemption premium, if any, and interest on the Bonds, in accordance with
the terms thereof, and that the Bank act as Registrar for the Bonds; and
WHEREAS, the Issuer has duly authorized the execution and delivery of this Agreement,
and all things necessary to make this Agreement the valid agreement of the Issuer, in accordance
with its tenns, have been done;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I
APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR
Section 1.01. Appointment.
(a) The Issuer hereby appoints the Bank to act as Paying Agent with respect to the
Bonds in paying to the Owners of the Bonds the principal, redemption premium, if any, and
interest on all or any of the Bonds.
(b) The Issuer hereby appoints the Bank as Registrar with respect to the Bonds.
(c) The Bank hereby accepts its appointment, and agrees to act as, the Paying Agent
and Registrar.
Section 1.02. Compensation.
(a) As compensation for the Bank's services as Paying Agent/Registrar, the Issuer
hereby agrees to pay the Bank the fees and amounts set forth in Annex A hereto for the first year
of this Agreement, or such part thereof as this Agreement shall be in effect, and thereafter while
this Agreement is in effect, the fees and amounts set forth in the Bank's current fee schedule then
in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the
Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be
effective upon the first day of the following Fiscal Year.
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(b) In addition, the Issuer agrees to reimburse the Bank upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Bank in accordance
with any of the provisions hereof, including the reasonable compensation and the expenses and
disbursements of its agents and counsel.
ARTICLE II
DEFINmONS
Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following tenns have the
following meanings when used in this Agreement:
"Bank" means JPMorgan Chase Bank; National Association.
"Bank Office" means the Bank's office in Dallas, Texas. The Bank will notify the Issuer
in writing of any change in location of the Bank Office.
''Bond" or "Bonds" means any or all of the Issuer's Tax and Waterworks System Surplus
Revenue Refunding Bonds, Series 2005, dated July 1, 2005.
"Bond Ordinance" means the ordinance of the City Council of the Issuer authorizing the
issuance and delivery of the Bonds.
"Fiscal Year'' means the 12 month period ending September 30th of each year.
"Issuer" means the City of Lubbock, Texas.
"Issuer Request" and "Issuer Order'' means a written request or order signed in the name
of the Issuer by the Mayor of the Issuer, or any other authorized representative of the Issuer and
delivered to the Bank.
"Legal Holiday'' means a day on which the Bank is required or authorized by applicable
law to be closed.
"Owner" means the Person in whose name a Bond is registered in the Register.
''Paying Agenf' means the Bank when it is performing the functions associated with the
terms in this Agreement.
"Person" means any individual, corporation, partnership, joint venture, association, joint
stock company, trust, unincorporated organization, or government or any agency or political
subdivision of a government.
"Predecessor Bonds" of any particular Bond means every previous Bond evidencing all
or a portion of the same obligation as that evidenced by such particular Bond (and, for the
purposes of this definition, any Bond registered and delivered under Section 4.06 in lieu of a
mutilated, lost, destroyed or stolen Bond shall be deemed to evidence the same obligation as the
mutilated, lost, destroyed or stolen Bond).
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"Record Date" means the last Business Day of the month next preceding an interest
payment date established by the Bond Ordinance.
"Register" means a register in which the Issuer shall provide for the registration and
transfer of Bonds.
"Responsible Officer" when used with respect to the Bank means the Chainnan or Vice
Chairman of the Board of Directors, the Chainnan or Vice Chairman of the Executive
Committee of the Board of Directors, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier,
any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customanly
performing functions similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to whom such matter
is referred because of his knowledge of and familiarity with the particular subject.
"Stated Maturity'' means the date or dates specified in the Bond Ordinance as the fixed
date on which the principal of the Bonds is due and payable or the date fixed in accordance with
the terms of the Bond Ordinance for redemption of the Bonds, or any portion thereof, prior to the
fixed maturity date.
ARTICLE Ill
PAYING AGENT
Section 3.01. Duties of Paying Agent.
(a) The Bank, as Paying Agent and on behalf of the Issuer, shall pay to the Owner, at
the Stated Maturity and upon the surrender of the Bond or Bonds so maturing at the Bank Office,
the principal amount of the Bond or Bonds then maturing, and redemption premium, if any,
provided that the Bank shall have been provided by or on behalf of the Issuer adequate funds to
make such payment.
(b) The Bank, as Paying Agent and on behalf of the Issuer, shall pay interest when
due on the Bonds to each Owner of the Bonds (or their Predecessor Bonds) as shown in the
Register at the close of business on the Record Date, provided that the Bank shall have been
provided by or on behalf of the Issuer adequate fimds to make such payments; such payments
shall be made by computing the amount of interest to be paid each Owner, preparing the checks,
and mailing the checks on each interest payment date addressed to each Owner's address as it
appears in the Register on the Record Date.
) Section 3.02. Payment Dates. The Issuer hereby instructs the Bank to pay the principal
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o:t: redemption premium, if any, and interest on the Bonds at the dates specified in the Bond
Ordinance.
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ARTICLE IV
REGISTRAR
Section 4.01. Transfer and Exchange.
(a) The Issuer shall keep the Register at the Bank Office, and subject to such
reasonable written regulations as the Issuer may prescribe, which regulations shall be furnished
to the Bank herewith or subsequent hereto by Issuer Order, the· Issuer shall provide for the
registration and transfer of the Bonds. The Bank is hereby appointed "Registrar' for the pmpose
of registering and transferring the Bonds as herein provided. The Bank agrees to maintain the
Register while it is Registrar. The Bank agrees to at all times maintain a copy of the Register at
its office located in the State ofTexas.
(b) The Bank as Registrar hereby agrees that at any time while any Bond is
outstanding, the Owner may deliver such Bond to the Registrar for transfer or exchange,
accompanied by instructions from the Owner, or the duly authorized designee of the Owner,
designating the persons, the maturities, and the principal amounts to and in which such Bond is
to be transferred and the addresses of such persons; the Registrar shall thereupon, within not
more than three (3) business days, register and deliver such Bond or Bonds as provided in such
instructions. The provisions of the Bond Ordinance shall control the procedures for transfer or
exchange set forth herein to the extent such procedures are in conflict with the provisions of the
Bond Ordinance.
(c) Every Bond surrendered for transfer or exchange shall be duly endorsed or be
accompanied by a written instrument of transfer, the signature on which has been guaranteed in a
manner satisfactory to the Bank, duly executed by the Owner thereof or his attorney duly
authorized in writing.
(d) The Bank may request any supporting documentation it feels necessary to effect a
re-registration.
Section 4.02. The Bonds. The Issuer shall provide an adequate inventory of
unregistered Bonds to facilitate transfers. The Bank covenants that it will maintain the
unregistered Bonds in safekeeping and will use reasonable care in maintaining such unregistered
Bonds in safekeeping, which shall be not less than the care it maintains for debt securities of
other governments or corporations for which it serves as registrar, or which it maintains for its
own securities.
Section 4.03. Form of Register.
(a) The Bank as Registrar will maintain the records of the Register in accordance
with the Bank's general practices and procedures in effect from time to time. The Bank shall not
be obligated to maintain such Register in any form other than a form which the Bank has
currently available and currently utilizes at the time.
(b) The Register may be maintained in written form or in any other form capable of
being converted into written form within a reasonable time.
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Section 4.04. List of Owners.
(a) The Bank will provide the Issuer at any time requested by the Issuer, upon
payment of the cost, if any, of reproduction, a copy of the information contained in the Register.
The Issuer may also inspect the information in the Register at any time the Bank is customarily
open for business, provided that reasonable time is allowed the Bank to provide an up-to-date
listing or to convert the information into written form.
(b) The Bank will not release or disclose the content of the Register to any person
other than to, or at the written request of, an authorized officer or employee of the Issuer, except
upon receipt of a subpoena or court order or as otherwise required by law. Upon receipt of a
subpoena or court order the Bank will notify the Issuer so that the Issuer may contest the
subpoena or court order.
Section 4.05. Cancellation of Bonds. All Bonds surrendered for payment, redemption,
transfer, exchange, or replacement, if surrendered to the Bank, shall be promptly cancelled by it
and, if surrendered to the Issuer, shall be delivered to the Bank and, if not already cancelled,
shall be promptly cancelled by the Bank. The Issuer may at any time deliver to the Bank for
cancellation any Bonds previously certified or registered and delivered which the Issuer may
have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly cancelled
by the Bank. All cancelled Bonds held by the Bank shall be disposed of pursuant to the
Securities Exchange Act of 1934.
Section 4.06. Mutilated. Destroyed. Lost. or Stolen Bonds.
(a) Subject to the provisions of this Section 4.06, the Issuer hereby instructs the Bank
to deliver fully registered Bonds in exchange for or in lieu of mutil~ destroyed, lost, or stolen
Bonds as long as the same does not result in an overissuance.
(b) If (i) any mutilated Bond is surrendered to the Bank, or the Issuer and the Bank
receives evidence to their satisfaction of the destruction, loss, or theft of any Bond, and (ii) there
is delivered to the Issuer and the Bank such security or indemnity as may be required by the
Bank to save and hold each of them hannless, then in the absence of notice to the Issuer or the
Bank that such Bond has been acquired by a bona fide purchaser, the Issuer shall execute, and
upon its request the Bank shall register and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost, or stolen Bond, a new Bond of the same stated maturity and of like
tenor and principal amount bearing a number not contemporaneously outstanding.
(c) Every new Bond issued pursuant to this Section in lieu of any mutilated,
destroyed, lost, or stolen Bond shall constitute a replacement of the prior obligation of the Issuer,
whether or not the mutilated, destroyed, lost, or stolen Bond shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of the Bond Ordinance equally and ratably with
all other outstanding Bonds.
(d) Upon the satisfaction of the Bank and the Issuer that a Bond has been mutilated,
destroyed, lost, or stolen, and upon receipt by the Bank and the Issuer of such indemnity or
security as they may require, the Bank shall cancel the Bond number on the Bond registered with
a notation in the Register that said Bond has been mutilated, destroyed, lost, or stolen; and a new
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Bond shall be issued of the same series and of like tenor and principal amount bearing a number,
according to the Register, not contemporaneously outstanding.
(e) The Bank may charge the Owner the Bank's fees and expenses in connection with
issuing a new Bond in lieu of or exchange for a mutilated, destroyed, lost, or stolen Bond.
(f) The Issuer hereby accepts the Bank's current blanket bond for lost, stolen, or
destroyed Bonds and any future substitute blanket bond for lost, stolen, or destroyed Bonds that
the Bank may arrange, and agrees that the coverage under any such blanket bond is acceptable to
it and meets the Issuer's requirements as to security or indemnity. The Bank need not notify the
Issuer of any changes in the security or other company giving such bond or the terms of any such
bond, provided that the amount of such bond is not reduced below the amount of the bond on the
date of execution of this Agreement. The blanket bond then utilized by the Bank for lost, stolen,
or destroyed Bonds by the Bank is available for inspection by the Issuer on request
Section 4.07. Transaction Infonnation to Issuer. The Bank will, within a reasonable
time after receipt of written request from the Issuer, furnish the Issuer information as to the
Bonds it has paid pursuant to Section 3.01; Bonds it has delivered upon the transfer or exchange
of any Bonds pursuant to Section 4.01; and Bonds it has delivered in exchange for or in lieu of
mutilated, destroyed, lost, or stolen Bonds pursuant to Section 4.06 of this Agreement.
ARTICLEV
lliEBANK
Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth
herein and in accordance with the Bond Ordinance and agrees to use reasonable care in the
performance thereof. The Bank hereby agrees to use the funds deposited with it for payment of
the principal of, redemption premium, if any, and interest on the Bonds to pay the Bonds as the
same shall become due and further agrees to establish and maintain all accounts and fimds as
may be required for the Bank to function as Paying Agent.
Section 5.02. Reliance on Documents.. Etc.
) (a) The Bank may conclusively rely, as to the truth of the statements and correc1ness
of the opinions expressed therein, on certificates or opinions furnished to the Bank.
(b) The Bank shall not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the
pertinent facts.
(c) No provisions of this Agreement shall require the Bank to expend or risk its own
funds or otherwise incur any financial liability for performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is
) not assured to it.
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(d) The Bank may rely and shall be protected in acting or refraining from acting upon
any ordinance, resolution, certificate, statement, instrmnent, opinion, report, notice, request,
direction, consent, order, certificate, note, security, or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or parties. Without limiting
the generality of the foregoing statement, the Bank need not examine the ownership of any
Bonds, but is protected in acting upon receipt of Bonds containing an endorsement or instruction
of transfer or power of transfer which appears on its face to be signed by the Owner or an
attorney-in-fact of the Owner. The Bank shall not be bound to make any investigation into the
facts or matters stated in an ordinance, resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, certificate, note, security, or other paper or
document supplied by Issuer.
(e) The Bank may consult with coWISel, and the written advice of such coWISel or any
opinion of counsel shall be full and complete authorization and protection with respect to any
action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon.
(f) The Bank may exercise any of the powers hereunder and perform any duties
hereunder either directly or by or through agents or attorneys of the Bank.
Section 5.03. Recitals oflssuer.
(a) The recitals contained herein and in the Bonds shall be taken as the statements of
the Issuer, and the Bank assumes no responsibility for their correctness.
(b) The Bank shall in no event be liable to the Issuer, any Owner or Owners, or any
other Person for any amount due on any Bond except as otherwise expressly provided herein
with respect to the liability of the Bank for its duties under this Agreement.
Section 5.04. May Hold Bonds. The Bank. in its individual or any other capacity, may
become the Owner or pledgee of Bonds and may otherwise deal with the Issuer with the same
rights it would have if it were not the Paying Agent/Registrar, or any other agent.
Section 5.05. Money Held by Bank
(a) Money held by the Bank hereWtder need not be segregated from any other fimds
provided appropriate accounts are maintained.
(b) The Bank shall be under no liability for interest on any money received by it
hereunder.
(c) Subject to the provisions of Title 6, Texas Property Code, any money deposited
with the Bank for the payment of the principal, redemption premium, if any, or interest on any
Bond and remaining unclaimed for three years after final maturity of the Bond has become due
and payable will be paid by the Bank to the Issuer, and the Owner of such Bond shall thereafter
look only to the Issuer for payment thereof: and all liability of the Bank with respect to such
monies shall thereupon cease.
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(d) The Bank will comply with the reporting requirements of Chapter 7 4 of the Texas
Property Code.
(e) The Bank shall deposit any moneys received from the Issuer into a trust account
to be held in a paying agent capacity for the payment of the Bonds, with such moneys in the
account that exceed the deposit insurance, available to the Issuer, provided by the Federal
Deposit .Insurance Corporation to be fully collateralized with securities or obligations that are
eligible under the laws of the State ofTexas and to the extent practicable under the laws ofthe
United States of America to secure and be pledged as collateral for trust accounts until the
principal and interest on the Bonds have been presented for payment and paid to the owner
thereof. Payments made from such trust account shall be made by check drawn on such trust
account unless the owner of such Bonds shall, at its own expense and risk, request such other
medimn of payment.
Section 5.06. Indemnification. To the extent permitted by law, the Issuer agrees to
indemnify the Bank, its officers, directors, employees, and agents for, and hold them harmless
against, any loss, liability, or expense incurred without ~egligence or bad faith on their part
arising out of or in connection with its acceptance or administration of the Bank's duties
hereunder, and under Article V of the Bond Ordinance, including the cost and expense (including
its counsel fees) of defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties under this Agreement.
Section 5.07. Intexpleader. The Issuer and the Bank agree that the Bank may seek
) adjudication of any adverse claim, demands or controversy over its persons as well as funds on
deposit in a court of competent jurisdiction within the State of Texas; waive personal service of
any process; and agree that service of process by certified or registered mail, return receipt
requested, to the address set forth in this Agreement shall constitute adequate service. The Issuer
and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of
competent jurisdiction within the State of Texas to determine the rights of any person claiming
any interest herein.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01. Amendment This Agreement may be amended only by an agreement in
writing signed by both of the parties hereof.
Section 6.02. Assignment This Agreement may not be assigned by either party without
the prior written consent of the other.
Section 6.03. Notices. Any request, demand, authorization, direction, notice, consent,
waiver, or other document provided or pennitted hereby to be given or furnished to the Issuer or
the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses
shown below:
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(b)
(c)
if to the Issuer:
if to the Bank:
City of Lubbock, Texas
1625 13th Street
Lubbock, Texas 79457
Attention: Cash and Debt Manager
JPMorgan Chase Bank,
National Association
2001 Bryan Street, 8th Floor
Dallas, Texas 75201
Attention: Corporate Trust Department
Section 6.04. Effect of Headings. The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
Section 6.05. Successors and Assigns. All covenants and agreements herein by the
Issuer shall bind its successors and assigns, whether so expressed or not.
Section 6.06. Se.parability. If any provision herein shall be invalid, illegal, or
unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 6.07. Benefits of Agreement Nothing here~ express or implied, shall give to
any Person, other than the parties hereto and their successors hereunder, any benefit or any legal
or equitable right, remedy, or claim hereunder.
Section 6.08. Entire Agreement This Agreement and the Bond Ordinan.ce constitute the
entire agreement between the parties hereto relative to the Bank acting as Paying
Agent/Registrar, and if any conflict exists between this Agreement and the Bond Ordinance, the
Bond Ordinance shall govern.
Section 6.09. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall constitute one and
the same Agreement
Section 6.10. Termination.
(a) This Agreement will tenninate on the date of final payment by the Bank issuing
its checks for the final payment of principal, redemption premium, if any, and interest of the
Bonds.
(b) This Agreement may be earlier tenninated upon sixty (60) days written notice by
either party; provided, that, no tennination shall be effective until a successor bas been appointed
by the Issuer and has accepted the duties imposed by this Agreement. A resigning Paying
Agent/Registrar may petition any court of competent jurisdiction for the appointment of a
successor Paying Agent/Registrar if an instrument of acceptance by a successor Paying
Agent/Registrar has not been delivered to the resigning Paying Agent/Registrar within sixty (60)
days after the giving of notice of resignation.
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(c) The provisions ofSection 1.02 and of Article Five shall survive and remain in full
force and effect following the tennination of this Agreement.
Section 6.11. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State ofTexas.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first written above.
ATIEST:
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RebCa Garza, City Secretary
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JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION
By:
Title:
SCHEDULE OF FEES FOR SERVICE AS PAYING AGENT/REGISTRAR
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~--.... JPMorgan
Proposal and Schedule of Fees for Services as
Escrow Agent and Paying Agent and Registrar in connection with
City of Lubbock TIIX and Waterworks System Surplus Revenue Refunding Bonds, Series 2005
Based upon our current understanding of your proposed transaction, our fee proposal is as follows:
Notes:
Pricing for Paying Agent and Registrar
The Paying Agent and Registrar Fee covers the maintenance of records as
registrar, processing of transfers, and payment of interest/principal funds for
Debt Service.
Annual Fee (payable annually in advance)
One-Time Payment Option (payable at closing)
Pricing for Escrow Agent
$300.00
$2,500.00
The Escrow Agent Fee covers the consideration of documents and the
normal administrative duties of the escrow agent according to the governing
documents. Pricing includes distribution of the call notice to holders of
record, redemption processing, and notification to NRMSIRs. Any
publication expenses (i.e. Bond Buyer, regional periodical, financial
periodicals, etc.) for the call notice will be billed to the Issuer at cost
One Time Fee (payable at closing) $0.00*
*Based on escrow proceeds being held uninvested overnight
Please note that our willingness to act in the capacities specified above and the fees designated in this
proposal are indicative and based upon our understanding of the transaction. We reserve the right to
revise this proposal should any material aspect of the transaction differ from our understanding. Also, our
acceptance of the above contracts and duties is subject to our usual internal review, document review and
the receipt of appropriate immunities and indemnities.
JPMorgan's Trust Accounting Reporting (TAR) website gives corporate and municipal issuers 24/7
Internet access to infonnation on their cash and asset transactions/positions free of charge. TAR also
electronically posts and archives trust and escrow account statements so you can access them online,
easily at your convenience. With functionality allowing the user to customize reporting, choose fonnat,
drill down for detail, and download for convenience, Trust Accounting Reporting on the Web is a
powerful decision-making and account management tool. To further facilitate your TAR online
experience, intra-day updates are provided for more timely and accurate reporting. This capability gives
you the option of viewing asset details as of intra-day, close-of-business or to review prior month-end
reports. Please visit us at www.jpmorgan.com/tar for more details or contact your JPMorgan Relationship
Manager or Sales Representative.
J.P. Morgan Trust Company, N. A. • 201 Main Street-3rd Floor, Fort Worth, TX 76102
Telephone: (817) 878-7505 • Facsimile: (817) 878-7540
jeffrey.c.salavarria @jpmorgan.com
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JPMorgan Fee Proposal
July 21, 2005
Annual fees include one standard audit confirmation per year without charge. Standard audit
confirmations include the final maturity date, principle paid, principal outstanding, interest cycle, interest
rate, interest paid, cash and asset information, interest rate, and asset statement information. Non-
standard audit confirmation requests may be assessed an additional foe.
Perfonnance of any extraordinary service or incurring extraordinary expenses, such as those in connection
with any default, account resignation, or outside legal counsel charges, will be billed in addition to the
stated per annum fees.
To help the government fight the funding of terrorism and money laundering activities, Federal law
requires all financial institutions to obtain, verify, and record information that identifies each person who
opens an account. When you open an account, we will ask for information that will allow us to identify
you.
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PRELIMINARY OFFICIAL STATEMENT
Dated June 28, 2005
NEW ISSUE -Book-Entry-Only
Ratings:
Moody's: Applied For
S&P: Applied For
Fitch: Applied For
See ("Other Information-
Ratings" bereio)
In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax pwposes under
existing law and the Bonds are not private activity bonds. See "Tax Matters" herein for a discussion of the opinion of Bond
Counsel, including a description of alternative minimum tax consequences for corporations.
$.43,385,000"
CITY OF LUB.BOCK, TEXAS
(Lubbock County)
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING BONDS, SERIES 2005
Dated Date: July I, 2005 Due: February 15, as shown inside cover
PAYMENT TERMS ••. Interest on the $43,385,000* City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue
Refunding Bonds, Series 2005 (the "Bonds") will accrue from July I, 2005 (the "Dated Date") and will be payable February 15
and August IS of each year conunencing February 15, 2006, and will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The
Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the
Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be
made to the owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by tbe Paying
Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for
subsequent payment to the beneficial owners of the Bonds. See "The Bonds -Book-Entry-Only System" herein. The initial
Paying Agent/Registrar is JPMorgan Chase Bank, National Association, Dallas, Texas (see "The Bonds -Paying
Agent/Registrar'').
AUTRORIT'V li'OR ISSIJANC£ •.. The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, (the
"State} particularly Chapter 1207, Texas Government Code, as amended, and constitute direct obligations of the City of
Lubbock, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax,
within tbe limits prescribed by law, on a[\ taxable property within the City, and (ii) a pledge of surplus Net Revenues of the
City's Waterworks System. as provided in the ordinance auth.orizing the Bonds (tbe "'rdinance") (see "The Bonds -Authority
for Issuance}.
PURPOSE ••• Proceeds from the sale of the Bonds will be used for the purpose of (i) refunding the obligation of the City to pay
debt service on the outstanding Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series
1995 (the "BRA Bonds"), issued with respect to the construction of Lake Alan Henry (see "The Bonds-Defeasance of the BRA
Bonds"), (ii) refunding a portion of the termination payment owed by the City in connection with the termination of an interest
rate hedge agreement entered into in connection with the anticipated issuance of bonds to refund the BRA Bonds (see "The
Bonds -Interest Rate Hedge Agreement Termination Payment''), and (iii) paying costs of issuance of the Bonds.
BoND INSURANCE ••• The City has made application to m~micipal bond insurance companies to have the payment of the
principal of and interest on the Bonds insured by a municipal bond guaranty policy.
CUSIP PRE.f1X: S49187
SEE MA TUJUTY SciiEDULE, 9 Digit CUSIP AND REDEMPTION PROVISIONS
ON THE REVERSE OF THIS PAGE
LEGALlTY ..• The Bonds are offered for delivery when, as and if issued and received by Underwriters and subject to the
approving opinion of the Attomey General ofTexas and the opinion of Vinson & Elkins L.L.P., Bond Counsel, Dallas, Texas
(see Appendix C, "Form of Bond Counsel's Opinion"). Certain legal matters will be passed upon for the Underwriters by
McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Counsel for the Underwriters.
DELIVERY ... It is expected that the Bonds will be available for delivery through DTC on August 15, 2005.
• Preliminary, subject to change ..
RBC DAIN RAUSCHER INc.
MERRILL LYNCH & Co. PIPER JAFFRAY & Co.
MATURITY SCHEDULE* CUSIP Prefix: 549187 <n
Principal Maturity Interest Initial CUSJP Principal Maturity IntereSt Initial CUSIP
Amount {Febru!!::z: IS l Rate Yield Suffill 11' Amount !!:ebruary I 51 Rate Yield Suffill 111
$ 1,7SS.OOO 2006 P2 (2) $ 2,880,000 2014 Q2(1)
2,060,000 2007 P3 (0) 3,045,000 2015 Q3 (9)
2,145,000 2008 P4 (8} 3,220,000 2016 Q4(7)
2,230,000 2009 PS (S} 3,405,000 2017 QS(4)
2,330,000 2010 P6 (3) 3,595,000 2018 Q6(2)
2,445,000 2011 P7 (I) 3,810,000 2019 Q7 (0)
2.570.000 2012 PS (9) 2.525,000 2020 Q8(8)
2,715,000 2013 P9 (7) 2,655,000 2021 Q9(6)
(Accrued Interest from July 1, 1005 to be added)
• Preliminary, subject to change.
(1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and
Poor's CUSIP Service Bureau, A Division of The McGraw-Hill Companies, Inc. This data is not intended to create a database
and does not serve in any way as a substitute for the CUSIP Services. Neither the City nor the Underwriters shall be responsible
for the selection or correctness of the CUSIP numbers shown on the inside cover page.
OPTlONAL REDEMPTJON ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after
February 15, 2016, in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on February 15,2015, or
any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds -Optional
Redemption").
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For purpose of COttJplitma with Rule I Sel-l 1 of the United Stata S«Uritia ond &chai!P C<lmlltu.tion. this documMt tU the SDIM fMY be supplemtN«/ or
corrected from tine-1<>-lime. moy be treoted 4J o Preliminary Offield SIDtefJit:tlt of the City with rup«t 10 tM 8otJds described herein. wlticlt luu beelt "dumed
f~t~ol .. by the City as of the date hereof (or of any ~h S14pplemoot or correction) acop1 for the ominl4rt of na lltOTelhan the lnfor-Jion provided by Sub#ction
(b)( I) of Rule 15c2-12.
Tlris Offklo/ SfiJremenr. which includes the cOllflr poge. illS ide cover poge ond the Appendie<!$ ~to. does nor constilllle on offer to sell or the solicitDiion of an offer
to bt.ty In ony jurisdiction to any penon to whom it is unlawfolto make such offer. solicltotion or sale.
No deoler. broker. solesper:ron or ot/re.r perum luu been authoriud to gi~~t lnf~ or ID moke "IIJ' repreoentDIUm 01/re.r tlum tlw.u contoined In this Officio/
Stsztetnenr. tutd. if gi~ or f1IOtk. S11Ch other inj'tJmuJrfon or repreunkllions -st not be relied upoll.
Tlte iriftm11tJtion su forth httreln hr4 been obtained from the City and othefo .rovrca /Ndieved ta be ref fob/e. bur such informDI!Qn u not part~ntud as fiJ accurt~Cy or
cotnplttUtes.t and is not to be corut,.ed os the promise or gi!QTQ/Itu of /JJe FiiiDncial Ad.isor. TIW Official Statcmml contains. in piJrl. Ulimlltes ond mtllte., of
opinion which ore not intUIIkd os storemenzs of [oct. tJitd no representotion is JMde 113 to the correcmess of SIICh U1Uroat8S and opiltiofll. or tho/ they will N
reoltzed.
lh ilf.!ormmlon ond DprUiiofll if opilfi011 contained lrenin ore subject 10 cltange without 1101/ce. altd neither w dellvwy of thi$ Officio/ Slll~mentlfOr any :w/e
mt>de henundu sho/L 11nder 01fJ1 cireuiiUiilncU, erNie ony Implication thllt rhere luu ben M chonp ill the offoirt of the Cit)l or other matters d8Scri«d herein •inc• tiN dole hereof $« "Other ltif"'-tion -C01t1U.uing Disdosllrt of /'lfor7NZ/iqn" for a duerlp1/on of tire Cily's rmdenokiJJg to FO•ilh cutllin in,l'o.-lo~ orr
sz conlilltliflg basis.
THE BONDS ARE EXEMPT FROM REGISTRATION WfTH THE SECUR.fl1ES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAf'E NOT BEEN
REGISTERED THEREWfTH. THE REGISTRATION. QUAUF/CATION. OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPUCABLE SECURITIES
LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE S£CUR.fl1ES HAJ'E BEEN REGISTERED Oft EXEMPTED SHOULD NOT BE REGARDED AS A
RECOMMENDATION THEREOF.
NEITHER THE CITY NOR THE UNDERWRITERS MAKE ANY REPRESENTATION OR WARRANn' WTTH RESPECT TO THE /NFO!tMATION CONTAINED IN
THIS OFFICIAL STATEMENT REGARDING THE DEPOS!T'ORY TRUST COMPANY OR ns BOOK-ENTIIY-ONLY SYSTEM. AS SUCH INFORMATION HAS
BEEN PURNTSHED BY THE DEPOSfT'ORY TRUST COMPANY IN CONNECTION WITH THE OFFERING OF THE BONDS.
THE UNDERWRITERS M.4 Y OYER-Al.WT OR EFFECT TRANSACTIONS THAT STABIUZE OR M.4/NTAIN THE M.41U(ET PR/CES OF THE BONDS AT A
LEYEL ABOVE THAT WHICH MIGHT OTHERWISE PRE/I AIL IN THE OPEN MARKET. SUCH STABILIZING. IF COMMENCED. MAY BE DISCONTINUED AT
ANY11ME.
'1'hlf Underwrisen ht111e pf'OIIided the follliWing sentence for inclusion in the Officwl Statenwu. T1te Underwritus have re>iewed the infonrllllkm in this Official
Sr-.nrt in li«<O'dance wltlt. DIUI r4 piJrl of. thsir ~porulbllllies to inwuton tmder the federal UCI/rities low.J Q.J applied to the facts sznd Cli'CIIIfl$tQ/1CeS oftlris
lraiiStrtion. but the Ulllkrwritcn do not gutN'411tte the occunuy or C<Hitplttlnt.SS of mch il!f'omtm/()lt.
TABLE OF CONTENTS
OFFICIAL STATEMENT SUMMARY--·-··-·---··-------····· 4
CITY OFFICIALS, STAFF AND CONSULTANTS ................. 6
ELECTED Of'FJCIALS .............................................................. 6
S£LECTED ADMINISTRATIV£ STAfF ...................................... 6
CONSULT ANTS AND ADVISORS ............................................. 6
INTRODUCTION .................. _ .. -~ ................................. ~ ............ 7
THE BONDS·--····-·-·· .. ·-···----------··-····-······· .. ·-·-------·-· 7
BOND INSORANCE ...................... -.. --··-···· .. ··-.. •••••••• ........ 13
DISCUSSION OF RECENT FINANCIAL AND
MANAGEMENT EVENTS ....... -................................ -.. 14
TAX IN FORMATION.-.............. -.--.. ·--·-·-····-·-··-· .... 7.7
TABU! I • V Al.UA nON, EXEMmONS AND GENERAL
OBLJGATION DEBT .................................................... 30
TABLE 2 -TAXABL.E ASSeSSED V ALUAnDNS BY
CA TEOORY ................................................................ 32
TABLE 3A • V ALUA nON AND GeNI!RAl. 0BLIOA nON DEBT
HISTORY .................................................................... 33
TABLE38-0!liUVAnONOf06NERALPu~POSEfuNOED
TAX DEBT ................................................................. 33
TABLE4 -TAX.RATB,UVY AND COI..L£CTION HISTORY .33
TABbES-TENl.AJt.OESTTAXPAYERS ............................... 34
TABLE 6 -TAX ADEQUACY ................................................ 34
TABLE 7 -EsnMATllD OVERLAPPING DEBT ...................... 35
DEBT INFORMATION ._ ........... ---·---·-----·---·· ........ 36
TABLE 8A • P~O-FORMA GENERAL OBLIGA noN DEBT
SERVICE REQUIIU!MENTS .......................................... 36
TABLE 88 -DIVISION Of DEBT SERVICE REQUIREMENTS. 37
TABLE 9 -INTEREST AND StNK.lNG FUND BUDGET
PROJ£CTION .............................................................. 38
TABLE 10 ~ C0MPVTATIONOf'SELf-5VPPORnNG0EBT ... 39
TABLE 11 -AUTHORIZED BUT UN!SSUEO GENEIW..
OBuGAnoN BoNos ................................................. 40
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TABLE 12-0Tii£R 0BUOATIONS •.••••••...............••..•••••••••••• 40
FINANCIAL INFORMATION.-... -.............................. -42
TABLE 13 -CHANGES IN NET ASSETS .............................. .42
TABLE 13-A -GENERAL FOND REVENUES AND
BXP£N0111JR.Il HISTORY ............................................ 43
TABLE 14 -MUNICIPAL SALES TAX HISTORY ................... 44
TABLE 15-CuRRENT INVESTMENTS ................................... 48
THE SYSTEM ................... --.. ··---·-·--............ --·-··-------· 49
CONTRACTS AND FACILtnES .............................................. 49
T ABL£ 16-MONTHLY WATER RATES ................................ 52
TABLE 17-HISTORJCAL WATER CONSUMPTION .............. 52
TABLE 18 - W ATER.WORICS SVSTSM CONDENSED
STATEMENT Of' OPEitATIONS ................................... 53
TAX MATTERS-------·-.. ·-------·---.. ·-···-------···· 54
OTHER INFORMATION --·-....................... -----... -....... 56
RA.TINOS .............................................................................. S6
UTIOATION .......................................................................... S6
REOISTRA TION AND QvAUf'ICATION OF BoNDS FOR SAJ..f! 56
LEGAL INVESTMENTS AND ELIGIBIUlY TO SECURE PUBUC
FUNDS IN Tti.XA.S .................. _ .. _ ...................... _ ...... 57
LEGAL OPINIONS ................................................................. 57
CONnNUING DISCLOSURE Of INFORMATION ..................... 57
FINANCIAL ADVISOR ........................................................... 59
thiOI!RWRlnNG ................................................................... 59
FORWARO-LooJC.ING STATEMENTS DISCLAIMER ................ 59
MISCELLANEOUS ................................................................. 59
APPENDICES
GENERAL INFORMA nON REGARDING THE CtTY ................. A
CXCI!.RPTS FROM THt: ANNUAL FINl'INCIAL R!:I'ORT .......... B
FORM OF BoNOCOUNSiil'S OPINION ................................. C
The cover page hereof, this page, the appendices included hezein
and any addenda, supplement or amendment hereto, are put of !he
Official Statement.
OFFICIAL STATEMENT SUMMARY
This swrunary is subject in all respects to the more complete infonnation and definitions contained or incorporated in this
Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No
person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official
Statement.
THE CITY ..................................... The City of Lubbock, Texas (the "City") is a political subdivision and municipal corporation
of the State, located in Lubbock County, Texas. The City covers approximately liS square
miles and has an estimated 200S population of209,120 (see "Introduction -Description of the
City").
THEBoNDS .................................. The Bonds are issued as $43,38S,OOO• Tax and Waterworks System Surplus Revenue
Refunding Bonds, Series 200S. The Bonds are issued as serial bonds maturing on February
15 in each of the years 2006 through 2021 (sec "The Bonds -Description of the Bonds").
PAYMENT OF INTEREST .............. Interest on the Bonds accrues from July I, 2005, and is payable February IS, 2006, and each
August IS and February 15 thereafter until maturity or prior redemption (see "The Bonds -
Description of the Bonds" and "'The Bonds -Optional Redemption").
AtmiORITY FOR ISSUANCE .......... The Bonds are issued pursuant to the general laws of the State, particularly Chapter 1207,
Texas Govenunent axle, as amended, and an Ordinance passed by the City Council of the City
{see "The Bonds-Authority for Issuance").
SECURITY FOR THE
BoNDS ........................................... The Bonds constitute direct obligations of the City, payable from a combination of (i) the levy
and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on
all taxable property within the City, and (ii) a pledge of surplus Net Revenues of the City's
Waterworks System (see "The Bonds-Security and Source of Payment").
INI'tNDEP SOURCES
OF PAYMENT ................................. The Bonds are expected to be self-supporting obligations payable from the surplus revenues
of the Waterworks System (see "Table 3B -Derivation of General Purpose Funded Tax
Debt"). As noted above, the Bonds are payable from an ad valorem tax levied by the City
Council in the Ordinance. In the Ordinance, the City has covenanted to assess an annual ad
valorem tax if needed to pay debt service on the Bonds in the event that funds are not
available from the Waterworks System to make payment on the Bonds.
REDEMPTION ...................... ......... The City reserves the right, at its option, to redeem Bonds having stated maturities on and
after February 15, 2016, in whole or in part in principal amounts of $5,000 or any integral
multiple thereof, on February 15, 2015, or any date thereafter, at the par value thereof plus
accrued interest to the date of redemption (see "The Bonds -Optional Redemption").
TAX EXEMmON ............................ In the opinion of Bond Counsel, the interest on the Bonds will be excludable from gross income
for federal income tax purposes under existing law and the Bonds are not private activity bonds.
See "Tax Matters -Tax Exemption" for a discussion of the opinion of Bond Counsel, including a
description of the alternative minimwn tax consequences for corporations.
UsE OF PROCEEDS .. .... .... ...... . .. . ... Proceeds from the sale of the Bonds will be used for the purpose of (i) refunding the
obligation of the City to pay debt service on the outstanding Brazos River Authority Special
Facilities (Lake Alan Heruy) Revenue Refunding Bonds, Series 1995 (the "BRA Bonds"),
issued with respect to the construction of Lake Alan Henry (see "The Bonds -Defeasance of
the BRA Bonds"), (ii) refunding a portion of the termination payment owed by the City in
connection· with the termination of an interest rate hedge agreement entered into in connection
with the anticipated issuance of bonds to refund the BRA Bonds (see "The Bonds -Interest
Rate Hedge Agreement Tennination Payment''), and (iii) paying costs of issuance of the
Bonds.
RA TlNGS ........... ... .. .. .. ... ............ ... The presently outstanding tax supported debt of the City is rated "A 1" by Moody's Investors
Service, Inc. ("Moody's"), "AA-" by Standard & Poor's Ratings Services, A Division of The
McGraw-Hill Companies, Inc. ("S&P") and "AA-" by Fitch Ratings ("Fitch"). The City also
has issues outstanding which are rated "Aaa" by Moody's, "AAA" by S&P and "AAA" by
Fitch through insurance by various commercial insurance companies. Applications for
contract ratings on the Bonds have been made to Moody's, S&P and Fitch (see "Other
Information -Ratings").
* Preliminary, subject to change.
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BooK-ENTRY-ONLY
SYSTEM ...................................... The definitive Bonds will be initially registered and delivered only to Cede & Co., the
nominee of DTC pursuant to the Book-Entry-Only System described herein. Beneficial
ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples
thereof. No physical delivery of the Bonds will be made to the beneficial owners thereof.
Principal of, premium, if any, and interest on the Bonds will be payable by the Paying
Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the
participating members of DTC for subsequent payment to the beneficial owners of the Bonds
(see "The Bonds-Book-Entry-Only System").
PAYMENT REcoRD..................... The City has never defaulted in payment of its general obligation lAX debt.
WATERWORKS SYSTEM CONDENSED STATEMENT OF 0P"ERATIONS
Fiscal Year Ended S~tember 30,
2004 2003 2002 2001 2000
REVENUE
Operating Revenues $ 31,907,893 $ 32,770.781 $ 32,727,207 $ 30,463.694 $ 29,037,723
Non-Operating Revenues 539,413 1,337,330 1,313,649 2,491,890 3,404,850
Gross Revenues $ 32,447,306 $ 34,108,111 $ 34,040,856 $ 32,955,584 $ 32.442,573
EXPENSE
Operating Expense <•I 20,550,379 20,137,448 19,596,079 20,194,590 18,238,503
Net Revenues $ 11,896,927 $ 13,970,663 $ 14,444,777 $ 12,760,994 $ 14,204,071
Water Meters 72,500 75,505 71,039 70,756 70,037
(I) Operating expense includes construction repayment costs and operating and maintenance charges paid to CRMW A and BRA and
excludes depreciation and capital expenditures.
GENERAL FUND CONSOLIDATED SrA TEMENT SUMMARY
Fiscal Year Ended S~tember 30,
2004 2003 2002 2001 2000
Fund Balance at Beginning of Year $ 9,417,346 $ 16,598,252 (I) $ 16,716.042 s 16,620,652 $ 17,248,025
Total Revenues and Transfers 97,437,436 91,753,809 92,490,374 90,463,799 85,518,102
Total ExpenditureS and Transfers 94,160,257 98,934,715 90,594,059 90,368,409 86,145,475
Fund Balance at End of Year s 12,694,525 $ 9,417,346 $ 18,612.357 $ 16,716,042 $ 16,620,652
Less: Reserves· and Designations ~1.903,690l ~2,361 ,860~ p,8S7,096!
Undesignated Fund Balance $ 12,694,525 $ 9,417,346 $ 16,708,667 s 14,354,182 $ 13,763,556
(I) The .. Fund Balance at Beginning of Year" was restated. See .. Discussion of Recent Finaru:ial and Management Events-FY
2003 Audit Restatements, Reclassifications and Internal Controls Issues" for a further explanation of the restatements.
For additional information regarding the City, please contact:
Ms. Lee Ann Dumbauld
CFO/ACM
City of Lubbock
P.O. Box 2000
Lubbock, Texas 79457
Phone (806) 775-2016
Fax (806) 775-2051
Mr. Vince Viaille
First Southwest Company
or 1001 Main Street
Suite802
Lubbock, Texas 79401
Phone(806)749-3792
Fax (806) 749-3793
5
Mr. Jason Hughes
First Southwest Company
or 325 North St Paul Street
Suite800
Dallas, Texas 75201
Phone (214) 943-4000
Fax (214) 953-4050
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CITY OFflCIALS. STAFF AND CONSULTANTS
Eu:cn:o OmCIALS (
Date of Tenn
City Council Installation to Office Expires Occupation
Marc McDougal* May.2002 May.2006 Business Owner. Real Estate
Mayor
(
Linda DeLeon May,2004 May, 2006 Business Owner
Councilmember, District I
Floyd Price June. 2004 May, 2008 Retired
Councilmember, District 2
Gary Boren May,2002 May,2006 Business Owner, Personnel Services (
Councilmember, District 3
Phyllis Jones May,2004 May,2008 Self-Employed
Councilmember, District 4
Tom Martin May, 2002 May,2006 Retired Law Enforcement
Councilmember, District 5
Jim Gilbreath May,2003 May, 2008 Business Owner
Councilmember, District 6
• Mr. McDougal has served on the Council since May, 1998.
SELECTtD ADMINISTRATIVE STAFF
Date of Employment Dale of Employment Total Government
Name Position in Current Position with Ci~ ofLA.Ibbock Service
Lou Fox City Manager February, 2004 February,2004 Z4 Years
Tom Adams Deputy City Manager August, 2004 August, 2004 22 Years
Lee Ann Dumbauld Chief Financial Officer/ Assistant City Manager July,2004 July, 2004 2()+ Ye&'S
Quincy White Assistant City Manager September, 2000 September, 2000 13 Years
Anita Burgess CityAtlomey December. 1995 December, 1995 9 Years
Rebeoca Gan:a City Secretary January, 2001 August, 1996 SYears
Andy Bun:ham Cash & Debt Manager November, 1998 November, 1998 6Years
CONSULT ANTS AND ADVISORS
Auditors .......................................................................................................................................................................... KPMG LLP
Dallas, Texas
Bond Counsei ................................................................................................................................................ Vinson & Elklns L.L.P.
Dallas, Texas
Financial Advisor ...................................................................................................................................... First Southwest Company
Lubbock and Dallas, Texas
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OFFICIAL STATEMENT
RELATING TO
$43,385.000*
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING BONDS, SERIES 2005
INTRODUCTION
This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of
$43,385,000* City of Lubbock. Texas Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 2005.
Capitalized tenns used in this Official Statement have the same meanings assigned to such terms in the Ordinance authorizing
the issuance of the Bonds, except as otherwise indicated herein.
There follows in this Official Statement descriptions of the Bonds and certain information regarding the City and its finances. All
descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such
document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Dallas,
Texas.
DESCRIPTlON OF TRE Can: ... The City is a political subdivision and municipal corporation of the State, duly organized and
existing under the laws of the State, including the City's Home Rule Charter. The City was incorporated in 1909, and first
adopted its Home Rule Charter in 1917. The City operates under a Council/Manager form of government with a City Council
comprised of the Mayor and six Councilmembers. The Mayor is elected at-large for a two-year term ending in an even-
numbered year. Each of the six members of the City Council is elected from a single-member district for a four-year term of
office. The terms of three members of the City Council expire in each even-numbered year. The City Manager is the chief
administrative officer for the City. Some of the services that the City provides are: public safety (police and frre protection),
highways and streets, electric, water and sanitary sewer utilities, airport, sanitation and solid waste disposal, health and social
services, culture-recreation, public transportation, public improvements, planning and zoning, and general administrative
services. The 2000 Census population for the City was 199,564; the estimated 2005 population is 209,120. The City covers
approximately II S square miles.
FINANCIAL AND MANAGEMENT CHALLENGES •.. In the past three fiscal years, the City has experienced a variety of financial and
management challenges, and certain investigations and reports conducted or prepared by the City or its consultants have found
weaknesses in the City's general management and financial practices. both with the City in general and the City's electric utility
system, known as Lubbock Power & Light ("LP&L .. ), in particular. The City is of the view that it has substantially addressed
many of these conditions. Reference is made to "Discussion of Recent Financial and Management Events" for a discussion of
these events and a description of how the City has responded to these events.
THE BONDS
DEScRJmON OF mE BONDS ••. The Bonds are dated July 1, 2005, and mature on February J 5 in each of the years and in the
amounts shown on the inside cover page hereof. Interest will be computed on the basis of a 36()..day year of twelve 30-day
months, and will be payable on February IS and August IS, commencing February IS, 2006. The definitive Bonds will be
issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and
delivered only to Cede & Co., the nominee of The Depository Trust Company {"DTC") pursuant to the Book-Entry-Only System
described herein. No physical delivery of tbe Bonds will be made to the owners thereof. Principal of, premium, if any, and
interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts
so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "The Bonds -
Book-Entry-Only System" herein.
PURPOSE .•. Proceeds from the sale of the Bonds will be used for the purpose of (i) refunding the obligation of the City to pay
debt service on the outstanding Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series
1995 (the "BRA Bonds"), issued with respect to the construction of Lake Alan Henry, (ii) refunding a portion of the termination
payment owed by the City in connection with the termination of an interest rate hedge agreement entered into in connection with
the anticipated issuance of bonds to refund the BRA Bonds, and (iii) payiog costs of issuance of the Bonds. The BRA Bonds are
subject to optional redemption on any date beginning August 15, 2005, at a price of par plus accrued interest to the redemption
date. (See "The System-Contracts and Facilities-Other Surface Water Supply Resources.")
• Preliminary, subject to change.
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DEFEASANCE OF THE BRA BoNDS ... Upon delivery of the Bonds to the Underwriters and pursuant to a resolution adopted by
the Brazos River Authority ("BRA"), BRA will deposit the portion of the Bond proceeds received from the City. together with
other lawfully funds, with JPMorgan Chase Bank. National Association, as paying agent/registrar (the "BRA Bonds Paying
Agent") for the BRA Bonds. The BRA Bonds Paying Agent will verify that the amount deposited will be sufficient to
accomplish the discharge and final payment of the BRA Bonds on August 16. 2005, the redemption date for the outstanding
BRA Bonds. By the deposit of cash with the BRA Bonds Paying Agent, BRA will have effected the defeasance of all of the
outstanding BRA Bonds in accordance with Texas law, such BRA Bonds will not be deemed as being outstanding obligations of
BRA. and the obligation of the City to make payments in support of the debt service on the BRA Bonds will be extinguished.
INTEREST RATE HEDGE AGREEMENT TERMINATlON PAYMENT ... On April 11, 2002, the City entered into an Interest Rate
Hedge Agreement (the "Swap Agreement") with JPMorgan Chase Bank ("JPM") in connection with the City's anticipated
issuance of water revenue refunding bonds to refund the BRA Bonds. The City entered into the Swap Agreement in order to
protect against the risk of interest rate changes between March 28, 2002 and May l, 2005 and to achieve lower borrowing costs
associated with the issuance of such water revenue refunding bonds by the City to effect the payment of all of its contractual
obligations with respect to the debt service on the BRA Bonds, which could not be advance refunded. Payments under the Swap
Agreement are made on an actual/actual basis on the first day of each month, commencing in June 2005 and ending in August
2022. The City is obligated to make payments to JPM calculated on a notional amount of $40,465,000 and a fixed rate equal to
5.260% of the notional amount, and JPM is obligated to make reciprocal payments to the City calculated on such notional
amount and a variable interest rate calculated on the basis of The Bond Market Association (BMA) Municipal Swap Index.
In lieu of issuing such water revenue refunding bonds, the City has detennined to (i) issue the Bonds to provide funds to BRA to
enable BRA to refund the BRA Bonds and (ii) terminate the Swap Agreement In accordance with the terms of the Swap
Agreement, the City is obligated to pay a termination payment (the "Termination Payment") in order to terminate the Swap
Agreement. A portion of the proceeds of the Bonds, together with other lawfully available funds of the City, will be used to
refund the City's obligation to pay the Termination Payment on the date the Bonds are delivered to the UndeiWriters. The City
currently estimates that the amount of the Termination Payment will not exceed $7,500,000. The Termination Payment is
calculated based upon a number of factors relating to market conditions as they exist on the date the Termination Payment is to
be made, and the City can make no assurances that the current estimate of the Termination Payment will conform to how market
conditions will exist on the date the Termination Payment is to be made, which is expected to be the date of the delivery of the
Bonds.
For additional information with respect to the Swap Agreement, see Note m, G "Surface Water Supply-Brazos River Authority
-Lake Alan Henry" in the financial statements of the City attached as Appendix B.
AurnoRJTV FOR ISsUANCE ••. The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas,
particularly Texas Government Code, Chapter 1207, as amended, and by the Ordinance passed by the City Council.
SECVRJTV AND SOURCE OF PA YMENr ••. The Bonds are payable from a continuing direct annual ad valorem tax levied by the City in
an amount sufficient to provide for the payment of principal of and interest on the Bonds, which tax must be levied within limits
prescribed by law. Additionally, the Bonds are payable from and secured by a parity lien on and pledge of Net Revenues of the
City's Waterworks System (the "System"), as provided in the Ordinance authorizing the Bonds. Such lien and pledge is junior and
subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of "Prior Lien Obligations" (as
defined in the Ordinance) now outstanding and that hereafter may be issued by the City, on a parity with the obligations
described below as the ~·Junior Obligations", and prior and superior in claim, rank, and dignity to the lien on and pledge of the
Net Revenues securing payment of certain subordinate lien obligations of the City (the "Subordinate Obligations"). Currently,
the City's has no Prior Lien Obljgations. The Subordinate Obligations consist of the City's Tax and Waterworks System
(Limited Pledge) Revenue Certificates of Obligation, Series 1993, 1995, 1998 and 1999, outstanding in the aggregate principal
amount of$6,890,000.
There are currently outstanding five series of Junior Obligations secured by a lien on and pledge of the Net Revenues of the
System on parity with the Bonds. The "Junior Obligations" consist of the City's (i) Tax and Waterworks System Surplus
Revenue Certificates of Obligation, Series 2004. outstanding in the principal amount of $2,690,000, (ii) Tax and Waterworks
System Surplus Revenue Certificates of Obligation, Series 2003, outstanding in the principal amount of$9,455,000, (iii) Tax and
Waterworks System Surplus Revenue Certificates of Obligation, Series 2002, outstanding in the principal amount of $6,025,000,
(iv) Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 1999, outstanding in the principal amount of
$4,035,000, ·and (v) Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 1999, outstanding in the principal
amount of$8,680,000.
In the Ordinance, while the Bonds are outstanding, the City reserves the right to issue Prior Lien Obligations without
limitation as to principal amount or subject to any terms, conditions or restrictions other tban as may be required by law,
as well as the right to issue Additional Obligations payable from and, together with tbe Bonds and the outstanding Junior
Obligations, equally and ratably secured by a parity lien on and pledge of the Net Revenues of the System.
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TAX RAn: LIMITATION •.• All taxable property within the City is subject to the assessment, levy and collection by the City of a
continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax
debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and linrits its
maximum ad valorem tax rate to $2.50 per SIOO Taxable Assessed Valuation for all City purposes. The Home Rule Charier of
the City adopts the constitutionally authorized maximum tax rate of$2.50 per $100 Taxable Assessed Valuation.
OmONAL R:WEMYTJON •.. The City reserves the right, at its option, to redeem Bonds having stated maturities on and after
February IS, 2016, in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on February 15, 2015, or
any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds are to be
redeemed, the City may select the maturities of Bonds to be redeemed. If less than all the Bonds of any maturity are to be
redeemed, the Paying Agent/Registrar (or DTC whi le the Bonds are in Book-Entry-Only form) shall determine by lot the Bonds,
or portions thereof. within such maturity to be redeemed. If a Bond (or any portion of the principal sum thereof) shall have been
called for redemption and notice of such redemption shall have been given, such Bond (or the principal amount thereof to be
redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the
redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying
Agent/Registrar on the redemption date.
NoncE OF RtDEMPTJON ••• Not less than 30 days prior to a redemption date for the Bonds, the City shall cause a notice of
redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds to be redeemed, in
whole or in 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
CONCLUSNELY 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 N01WllHSTANDING TIIAT ANY
BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR
PORTION THEREOF SHALL CEASE TO ACCRUE.
AMENDMENTS ••. The City may amend the Ordinance without the consent of or notice to any registered owners in any manner
not detrimental to the interests of the registered owners, including the curing of any ambiguity, inconsistency, formal defect or
omission therein. In addition, the City may, with the written consent of the holders of a majority in aggregate principal amount
of the Bonds then outstanding, amend, add to, or rescind any of the provisions of the Ordinance, except that, without the consent
of the registered owners of all of the Bonds no such amendment, addition or rescission may (1) change the date specified as the
date on which the principal on any installment of interest is due payable, reduce the principal amount or the rate of interest, or in
any other way modify the terms of their payment, (2) give any preference to any Bond over any other Bond or (3) reduce the
aggregate principal amount required to be held by owners for consent to any amendment, addition or waiver.
DEFEASANCE ••• The Ordinance provides that the City may discharge its obUgations to the registered owners of any or all of the
Bonds to pay principal, interest and redemption price thereon in any matter permitted by law. Under cunent Texas law, such
discharge may be accomplished by either (i) depositing with the Comptroller of Public Accounts of the Sate of Texas a sum of
money equal to principal, premiwn, if any and all interest to accrue on the Bonds to maturity or redemption and/or (ii) by
depositing with a paying agent or other authorized escrow agent amounts sufficient to provide for the payment and/or redemption
of the Bonds; provided that such deposits may be invested and reinvested only in (a) direct, noncallable obligations of the United
States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable
obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally
guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized
investment rating firm not less than AAA or its equivalent, and (c) ooncallable obligations of a state or an agency or a county,
municipality, or other political subdivision of a state that have been refunded and that arc rated as to investment quality by a
nationally recognized investment rating firm not less than AAA or its equivalent.
Under cunent Texas law, upon the making of a deposit as described above, such Bonds shall no longer be regarded to be
outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the
Bonds have been made as described above, all rights of the City to initiate proceedings to call the Bonds for redemption or to
take any other action amending the tenns of the Bonds are extinguished; provided however, the right to call the Bonds for
redemption is not extinguished if the City: (i) in the proceedings providing for the finn banking and financial arrangements,
expressly reserves the right to call the Bonds for redemption; (ii) gives notice of the reservation of that right to the owners of the
Bonds immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the
reservation be included in any redemption notices that it authorizes.
BooK-ENTRY~NL Y SYSTEM ... This section describes how owner:ship of tlu! Bonds is to be transferred and how the principal
of. premium, if any, and inurest on the Bonds are w be paid to and credited by The Depository Trust Company ("DTC"), New
York. New York, while the Bonds are registered in its nominee name. The information in this section concerning DTC and the
Book-Entry.Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City
bell~ the source of such information w be reliable, but takes no respomibility for the accuracy or completeness the.reoj
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The City cannot and does not give any assurance that (I) DTC will distribute payments of debt seiVice on the Bonds. or
redemption or other notices. to DTC Participants. (2) DTC Participants or others will distribute debt se!Vice payments paid to
DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners. or that they
will do so on a timely basis. or (3) DTC will seiVe and act in the manner described in this Official St4tement. The current rules
applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed
in dealing with DTC Participants are on file with DTC.
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the
name of Cede & Co. {DTC's pannership nominee) or such other name as may be requested by an authorized representative of
DTC. One fully-registered Bond will be issued for each maturity of the Bonds, in the aggregate principal amount of each such
maturity, and will be deposited with DTC.
DTC, the world's largest depository, 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 Unifonn Corrunercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million
issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85
countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among
Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry
transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities Bonds.
Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC").
DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing
Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing
Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange,
Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing
corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or iodirectly
{"Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on
file with the Securities and Exchange Commission. More infonnation about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the
Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner'') is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confinnation from DTC of
their purchase. Beneficial Owners are, however, 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 interests in the Bonds are to be accomplished by entries made on the books
of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive bond representing
their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds 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., or such other name as may be requested by an authorized representative ofDTC. The deposit
of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any 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 Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other corrununications 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. Beneficial Owners of Bonds may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions,
tenders, defaults. and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to
ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In
the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of
notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC' s practice is
to detennine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. {nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a
Direct Participant in accordance with DTC's Procedures. 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
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Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an
authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and
corresponding detail information from the City or the Paying Agent/Registrar, on payable date in accordance with their
respective holdings shown on DTC's records. 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 beacer form or registered
in "street name, "and will be the responsibility of such Participant and not of DTC nor its nominee, 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 payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the City or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the
responsibility of DTC. and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to
the City or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained,
Bonds are required to be printed and delivered
Subject to DTC's policies and guidelines, the City may 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 or Certain Terms in Otber Sections of this Official Statement In reading this Official Statement it should be understood
that while the Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to registered
owners should be read to include the person for which the Participant acquires aD 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 Ordinance will be given only to DTC.
Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to
accuracy or completeness by, and is not to be construed as a representation by the City or the Underwriters.
Effect of Termination of Book-Entry-Only System In the event that the Book-Entry-Only System is discontinued, printed
Bonds will be issued to the holders and the Bonds wiiJ be subject to transfer, exchange and registration provisions as set forth in
the Ordinance and summarized under 'The Bonds -Transfer, Exchange and Registration" below.
PAYING AGENTIREGJSTRAR .•• The initial Paying Agent/Registrar is JPMorgan Chase Bank, National Association, Dallas,
Texas. In the Ordinance, the City retains the right to replace the Paying Agent/Regisll:ar. The City covenants to maintain and
provide a Paying Agent/Registrar at all times until the Bonds are duly paid and any successor Paying Agent/Registrar shall be a
commercial bank or trust company organized under the laws of the State of Texas or other entity duly qualified and legally
authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds. Upon any change in the
Paying Agent/Registrar for the Bonds, the City agrees to promptly cause a written notice thereof to be sent to each registered
owner of the Bonds by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying
Agent/Registrar.
Interest on the Bonds shall be paid to the registered owners appearing on the registration books of the Paying Agent/Registrar at
the close of business on the Record Date (hereinafter defined), and such interest shall be paid (i) by check sent United States
mail, first class postage prepaid, to the address of the registered owner recorded in the registration books of the Paying
Agent/Registrar or (ii) by such other method, acceptable to the Paying Agent/Registrar requested by, a.od at the risk and expense
of, the registered owner. Principal of the Bonds will be paid to the registered owner at the stated maturity or earlier redemption
upon presentation to the designated paymeutltransfer office of the Paying Agent/Registrar. If the date for the payment of the
principal of or interest on the Bonds shall be a Saturday, Swulay, a legal holiday or a day when banking institutions in the city
where the designated payment/transfer office of the Paying Agent/Registrar is located are authorized to close, then the date for
such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and
effect as if made on the date payment was due.
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
to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner,
except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer.
Bonds may be assigned by the execution of an assignment form on the respective Bonds or by other instrument of transfer and
assignment acceptable to the Payit~g Agent/Registrar. New Bonds will be delivered by the Paying Agent/Registrar, in lieu of the
Bonds being transferred or exchanged, at the designated 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 a.o exchange or
transfer of Bonds will be delivered to the registered owner or assignee of the registered owner in not more than three business
days after the receipt of the Bonds to be canceled, and the written instrument of transfer or request for exchange duly executed
by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds registered
and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like a~gate
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principal amotmt as the Bonds surrendered for exchange or transfer. See "The Bonds • Book·Entry-Only System" herein for a
description of the system to be utilized initially in regard to ownership and transferability of the Bonds. Neither the City nor the
Paying Agent/Registrar shall be required to transfer or exchange any Bond called for redemption, in whole or in part. within 45
days of the date fixed for redemption; provided, however. such limitation of transfer shall not be applicable to an exchange by
the registered owner of the uncalled balance of a Bond.
RECORD DATE FOR INTEREST PAYMENT ..• The r.ecord date ("Record Date") for the interest payable on the Bonds on any
interest payment date means the close of business on the last business day of the preceding month.
In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such
interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment
of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the
past due interest {"Special Payment Date", which shall be IS days after the Special Record Date) shall be sent at least five
business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of
a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next
preceding the date of mailing of such notice.
BONDHOLDERS' REMEVJ£S • • • The Ordinance does not establish specific events of default with respect to the Bonds. Under
State law there is no right to the acceleration of maturity of the Bonds upon the failure of the City to observe any covenant under
the Ordinance. Although a registered owner of Bonds could presumably obtain a judgment against the City if a default occurred
in the payment of principal of or interest on any such Bonds, such judgment could not be satisfied by execution against any
property of the City. Such registered owner's only practical remedy, if a default occurs, is a mandamus or mandatory injunction
proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on
the Bonds as it becomes due. The enforcement of any such remedy may be difficult and time consuming and a registered owner
could be required to enforce such remedy on a periodic basis. The Ordinance does not provide for the appointment of a trustee to
represent the interests of the bondholders upon any failure of the City to perfonn in accordance with the tenns of the Ordinance,
or upon any other condition. Furthennore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S.
Bankruptcy Code. Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged
source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a
security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy
Court approval, the prosecution of any other legal action by creditors or bondholders of an entity which has sought protection
under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be
subject to the approval of the Bankruptcy Court (which could require that the action be beard in Bankruptcy Court instead of
other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in
administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the
enforceability of the Ordinance and the Bonds are qualified with respect to the customary rights of debtors relative to their
creditors .
. UsE OF BoND PROCEEDS ... Proceeds from the sale of the Bonds are expected to be ellpended as follows:
SOURCES OF FUNDS:
Principal Amount oflhe Bonds
A£crued Interest
Reoffenng Premium
Total Sources of Funds
USES OF FUNDS~
Deposit with BRA Bonds Paying Agent
Refunding of Swap Termination Payment
Deposit to Interest and Sinking Fund (Includes Rounding)
UndC!Writers' Discounl
Original Issue Discount
Gross Bond Insurance Premium
Costs of Issuance
Total Uses of Funds
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BOND INSURANCE
The City has made application to municipal bond insurance companies to have the payment of the principal of and interest on the
Bonds insured by a municipal bond guaranty policy.
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DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS
In the past three fiscal years (a fiscal year is referred to herein as "FY," with the year designation being the year in which the
fiscal year ends; each City fiscal year begins on October l and ends on September 30), the City has experienced a variety of
financial and management challenges. In response to the events and circumstances that have created such challenges, the City or
consultants retained by it have conducted a series of audits and reviews of City government. Certain of the reports, including
those described below, revealed weaknesses in the City's general management and financial practices. The City is of the view
that progress has been made in correcting many of these conditions (see "Discussion of Recent Financial and Management
Events -City's Responses to Recent Financial and Management Events"), although further work will be required before the City
is capable of meeting its financial policies, particularly those associated with fund operating and rate stabilization reserves (see
"Financial Information -Financial Policies").
The following discussion includes an analysis of the events that have occurred in the last two fiscal years, in particular. a
summary of the measures taken in response to the challenges that have arisen, and a current description of the City's financial
and management position.
Caution Regarding Fonvard·Lookiag Statements
This Official Statement, and in particular the information under the heading "Discussion of Recent Financial and Management
Events," contains forward-looking statements. Although the City believes such forward-looking statements are based on
reasonable assumptions, any such forward-looking statement involves uncertainties and is qualified in its entirety by reference to
the considerations described below, among others, that could cause the actual financial results of the City to differ materially
from those contemplated in such forward-looking statements.
The City cannot fully predict what effects factors of the nature described below may have on the operations of the City and
financial condition of the general fund of the City (the "General Fund") or its business-type activities, including its electric
enterprise fund, which operates as Lubbock Light & Power (referred to herein as "LP&L" or the "electric fund"), but the effects
could be significant. The discussion of such factors herein does not purport to be comprehensive or definitive, and these matters
are subject to change subsequent to the date hereof. With respect to LP&L, extensive information on the electric utility industry
is, and will be, available from the legislative and regulatory bodies and other sources in the public domain, and potential
purehasers of the securities of the City should obtain and review such information.
Among the factors that could affect the operations and financial condition of the City in general, and its electric utility in
particular, are the following:
> Significant changes in governmental policies and regulatory actions, including those of the Federal Energy
Regulatory Commission, the United States Environmental Protection Agency (the "EPA"), the United States
Department of Homeland Security, the United States Department of the Treaswy, the Texas Commission on
Environmental Quality ("TCEQ"), the Public Utility Commission of Texas (the "PUC") and the Southwest Power
Pool, Inc., with respect to:
-changes in and compliance with environmental and safety laws and policies effecting the City's water,
sewer, stonnwater and solid waste funds;
• changes in and compliance with national and state homeland security laws and policies effecting the City's
water, sewer, solid waste and airport funds;
-electric transmission cost rate structure;
-purchased power and recovery of investments in electric system assets;
-acquisitions and disposal of assets and facilities; and
-present or prospective wholesale and retail competition in the electric industry;
> Unanticipated population growth or decline, and changes in market demand, demographic patterns and the
development of technology affecting the City's service area, its general government and public safety expenditures and
City revenue from:
-investor owned utility franchise fees,
-City utility and service fees
-sates tax revenues; and
-ad valorem tax revenues;
> With respect to LP&L:
• the implementation of or adjustments made to new business strategies by LP&L;
-competition for retail and wholesale customeiS by LP&L, particularly competition with Xcel (as defined
below} and its subsidiaries;
-access to adequate electric transmission facilities to meet current and future demand for energy;
-pricing and transportation of coal, natural gas and other commodities that may affect the cost of energy
purehased by LP&L;
-inability of various contractual counterparties to meet their obligations to the City, and with LP&L in
particular with respect to LP&L's fuel and power purchase arrangements
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>With respect to the City's financial perfonnance in general:
-legal and administrative proceedings and settlements; and
-significant changes in critical accounting policies.
FY 2003 Financial Concern5 and Mid-Year Budget Amendments
Going into FY 2003, the City Council adopted General Fund and Enterprise Fund budgets that were balanced. However, during
the prepan1tion of the budget it was apparent that the transfers to the General Fund from the City's electric fund would need to be
reduced as compared to transfers included in prior years' budgets. This situation arose as a result of the cumulative effect of net
losses to LP&L afte,. transfers to the City's General Fund. During FY 2003, interfund loans were made to LP&L from the water
fund and the General Fund.
A number of factors contributed to the LP&L losses (see "Discussion of Recent Financial and Management Events-Past Events
Relating to LP&L and West Texas Municipal Power Ageocyj; a significant factor was that LP&L, unlike most other municipal
electric utilities in Texas, competes directly with Southwestern Public Service Company (''SPS"), a subsidiary of a large investor
owned energy company, Xcel Energy, Inc. Xcei Energy, Inc., and its subsidiaries with which the City has contracted for energy
and other services-principally SPS-and with which it competes, are hereinafter referred to collectively as "Xcel." Xcel is
based in Minneapolis, Minnesota, and is the fourth-largest combination electricity and natural gas energy company in the U.S.
In addition to the service area that has dual certification with Xcel, a small part of the City is also served by South Plains Electric
Cooperative ("SPEC"). The City, through LP&L, has competed for both wholesale and retail electric customers against investor
owned utilities for over 80 years. This competition bas existed despite the fact that the City is not within the transmission system
governed by the Electric Reliability Council of Texas ("ERCOT"). ERCOT was opened to retail electric competition through
the adoption of State deregulation legislation that went into effect on January I, 2002.
The competitive environment has made it difficult for LP&L to fully recover its fuel costs, particularly during periods of volatile
and historically high natural gas prices. Prior to calendar year 2000, nann! gas prices generally ranged from $2.00 to $3.00 per
lhousand cubic foot. Since 2000, gas prices have held within a general range of $5.00 to $6.00 per thousand cubic foot, and
reached as high as $25 per thousand cubic foot in February 2003. Despite the increases in gas prices that began in calendar year
2000, LP&L produced positive net operating income in each year until FY 2003. All LP&L electric generating units, which
provided approximately 35% of its energy requirements in recent years preceding FY 2004 (the remaining energy was acquired
through power purchase agreements), operate with natural gas as the primary generation fuel. Moreover, a majority of the units
are older and significantly less fuel efficient than more modem units.
Prior to FY 2004, the Cily operated LP&L in a manner that was designed to recover administrative or indim:t costs provided by
the General Fund for LP&L (such as legal and financial servioes) as well as certain other gen.eral transfers. Such transfers
lnchtded a payment in lieu of ad valorem taxes, an allocation for indirect costs such as legal and financial servioes, and a cost of
business transfer (wllich approximates a payment in lieu of franchise taxes, and was based on 3% of the gross operating revenues
of LP&L) (collectively, the "Cost Recovery Payments''). In addition to the Cost Recovery Payments, prior to FY 2003 LP&L
was required to annually transfer to the General Fund amounts to support economic development incentives in the Cily, a
payment designated for infrastructure use, a "gas tax" transfer, and a reimbw-sement of the street lighting expense incurred by the
City (collectively, the "Other Transfer Amounts''). Over the ten year period from 1993 to 2002, the average annual operating
income of LP&L before transfers was $8 million, and during that period, LP&L transfers to the General Fund fur payments in
lieu of taxes and recovery of costs of business averaged $8 million per year.
During the preparation of the FY 2003 City budgets, it was evident that the amount of money transferred from LP&L to the
General Fund would need to be reduced given the financial condition of LP&L. Consequently, the FY 2003 budget trimmed
$4.8 million from LP&L transfers included in prior year budgets. In February 2003, during a period of extraordinarily bigh
natural gas prices. City finance staff projected that, in the absence of corrective ~ the electric enterprise fund would have
an operating loss of $24 million for FY 2003.
During the then current practice of undertaking a mid-year budget assessment, in the Spring of 2003 the Cily Council amended
the LP&L and General Fund budgets to eliminate $7.7 million in transfers from LP&L to the General Fund: City management
then undertook a comprehensive rev.iew of the General Fund and other enterprise funds for the pwpose of identifying budget cuts
throughout City government that would offset the reduced LP&L transfers. ffitimately, the City Council adopted budget
amendments during the Spring 2003 mid-year review that totaled $9.7 million for the General Fund (hereinafter refened to as the
"2003 Budget Adjustments"), which represented approximately I O.S% of the original FY 2003 General Fund budget In addition
to the $7.7 million budget adjustment made to address the LP&L transfer reduction, the Cily Council determined to write off$2
million owed to the General Fund from the golf course enterprise fund. A number of other budget adjustments were made
including (i) the elimination of$2.5 million of capital expenditure items; (ii) a reorganization of th.e s~ of Cily government
was implemented that consolidated a number of positions; (iii) the implementation of a general hiring freeze throughout all City
depanments, and the elimination of 100 positions in both the Genenl Fund and the electric fund (approximately 4() positions
were eliminated at LP&L, a majority of which were in the energy production area); and (iv) a 1% increase of the transfers-in-
lieu-of-franchise-payments was made for the water and solid waste funds, which increased the transfer for those funds from 3%
to 4% of their respective gross revenues.
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Other measures that were taken after the 2003 Budget Amendments to address the projected LP&L operating loss included an
increase in the fuel cost adjustment ("FCA") for residential and small conunercial customers of LP&L by $0.01 per kWh
effective May I, 2003 and, effective June I, 2003, the City increased the FCA for its two largest customers, which include Texas
Tech University ("Texas Tech"), and which account for approximately 10% of the energy sales of LP&L. At the time of the
May 1, 2003 FCA increase for residential and small conunercial customers, the total electric cost energy for that class ofLP&L's
customers was approximately 30% above those ofXcel. In addition, in August 2003, the City issued two series of tax-supported
debt to refund $8.5 million of LP&L revenue bonds and to provide $13 million for LP&L capital expenditures. The City
anticipates that such debt will be self-supporting from LP&L revenues, although as discussed below, LP&L failed to generate
sufficient revenues to pay all of its outstanding bonds for FY 2003; nevertheless, the issuance of tax-supported debt for LP&L
reduced the cost ofbonowing for, and outstanding debt attributed directly to, LP&L.
Past Events Relating to LP&L and West Texas Municipal Power Agency
The City is a member of WTMP A, a municipal power agency that was formed by concurrent ordinances adopted by the
governing bodies of the cities of Brownfield, Floydada, Lubbock and Tulia, Texas (the "Member Cities") in 1983. The original
purpose of WTMP A was to engage in the generation, tJansmission, sale and exchange of electric energy to the Member Cities.
As described below, undet the heading "Discussion of Recent Financial and Management Events -City's Responses to Recent
Financial and Management EventS-Recent Measures taken to Address Financial and Management Concerns at LP&L," the
scope of WTMP A's activities has changed as a result of a series of related agreements reached among WTMP A and the Member
Cities in December 2003 (the "WTMPA Settlements"). WTMPA is a separate political subdivision under the laws of the State.
In June 1998, WTMPA issued $28,910,000 of its Revenue Bonds, Series 1998 (the "WTMPA Bonds"), to finance the
construction and acquisition of a 62 MW electric co-generation project (the "WTMPA Project"). The WTMPA Project consists
of a 40 MW combustion turbine generator-(the "Massengale Unit 8 turbine") and the re-powering of an existing 22 MW
generation unit, each located at the City's J.R. Massengale Plant
The Massengale Unit 8 turbine was originally scheduled to go online in the Spring of 1999, but during the course of the run test,
the turbine experienced a catastrophic failure. In May 2001, the City and WTMPA filed a lawsuit against the manufacturer of
the Massengale Unit 8 turbine and the gas company that supplied fuel for the Unit. in connection with the failure of the turbine.
During September 2002, the City engaged in mediation with the turbine manufacturer and the gas company with respect to the
settlement of the litigation. During the course of the mediation, the director ofLP&L and a City Council member who served on
the Board of WTMP A and as chairman of WTMP A made statements to the effect that WTMP A had retained the sum of$1.6
million, representing proceeds of the WTMP A Bonds, from the turbine manufacturer until the litigation could be resolved.
Subsequent investigations revealed that such amount had been retained, but the money had eventually been applied, in February
2002, to pay debt service on the WTMPA Bonds. In addition, as a result of the delayed completion of the Unit, costs associated
with replacement energy were incurred by WTMP A, and the amount of that expense and the responsibility for the expense.,
subsequently became a disputed claim of the City against WTMPA (see "Discussion of Recent Financial and Management
Events -City's Responses to Recent Financial and Management Events -Recent Measures taken to Address Financial and
Management Concerns at LP&L").
As a result of the confusion over the existence of the retained amount, the City embarked upon a series of internal financial and
management audits of the relationship between LP&L and WTMPA, as well as an analysis of the internal controls of the City
with respect to LP&L. Such audits (collectively, the "LP&UWTMPA Management Audit") are available on the City's website
at: www.cUubbock.t.x.us under the heading "West Texas Municipal Power Agency Audit." None of these reviews uncovered
any malfeasance with respect to the administration of LP&L or WTMPA funds. However, the reviews concluded that the
prevailing view that guided the administration of WTMPA affairs by the management of LP&L, was that WTMPA was
indistinguishable from L;P&L. This view stemmed from the facts that LP&L was contractually committed on a joint and several
basis to pay the WTMPA Bonds, the wrMPA Project was operated by LP&L and. as a practical matter, LP&L was taking all
the energy from the WTMPA Project (the other Member Cities received lower-cost energy purchased under wrMPA and City
power purchase contracts with SPS). According to the audits, this management perspective had resulted in a consistent failure to
follow the terms of the various WTMPA organizational, operational and power purchase agreements. In addition to poor
contract administration by the management ofLP&L, there were findings in the LP&LIWI'MPA Management Audit to the effect
that LP&L was acting without proper oversight from the City Council and the City Manager's office. For a discussion of the
measures talcen to address the criticisms made in the audits, see "Discussion of Recent Financial and Management Events -City's
Responses lo Recent Financial and Management Events-General Fund and General Government Actions" below.
In April2003, the WTMP A Member Cities (including the City) engaged Ernst & Young LLP ("E& Y") to conduct an audit of the
records ofWTMPA and LP&L. The final report ofE&Y was delivered in May 2003, and included findings of misallocation of
costs among the Member Cities. The repon noted that no evidence of misappropriation of assets or intentional omissions of
financial information was discovered. The E&Y report found that the misallocations, adding an interest factor for such
allocations, and an unbilled 5% management allocation that LP&L was entitled to under the power agreements, would result in a
total amount owing to the City of$5,590,746, of which the City owed itself. as a Member City ofWTMPA, approximately 9()0.4
of the total amount.
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In March 2005, the City delivered its Combination Tax and Electric Light and Power System Surplus Revenue Certificates of
Obligation, Series 2005, in the aggregate principal amount of$23,055,000. A portion of the proceeds of this issue were used by
the City to acquire the WTMPA Project WTMPA used the proceeds received from the City to defcase all of the outstanding
WTMPA Bonds.
Financial Staff and City Management Turnover
Following the publication of the LP&UWTMPA Management Audit and the E&Y audit, several key City officers and LP&L
management personnel resigned. Among the officials and management of the City who resigned was a member of the City
Council with almost II years of service, the City Manager, who had served 27 years with the City (the last ten of which as City
Manager), the Deputy City Manager, who had almost 8 years of service to the City, the Assislant City Manager for Public
Works, who had over five years of service to the City, and the Chief Executive Officer of LP&L, who had served in tha.t capacity
since 1998. Also. in late sununer of 2002, the City's Chief Accountant died during the implementation of Governmental
Accounting Scandards Board Slalement34 ("GASB 34"). Between the beginning ofFY 2002 and the close ofFY 2003, some 29
persons who held senior management positions with the City left the City's employment, some on their own accord and others as
a result of a reorganization of City government For a discussion of the City's responses to these events, see "Discussion of
Recent Financial and Management Events • City's Responses to Recent Financial and Management Events" below.
September 30, 2003 Financial Results
The General Fund ... As hereafter described in "Discussion of Recent Financial and Management Events · FY 2003 Audit
Restatements, Reclassifications and Internal Controls Issues", the financial position of the City in FY 2003 was impacted by
significant changes in th.e reporting entity and prior period adjustments and reclassifications of the City's FY 2002 financial
stltements. With respect to the General Fund, the begiMing fund balance/net assets was restated from $18.6 million to $16.6
million. The restatement was attribulable to the write off of a receivable in the General Fund from the City's golf fund.
In addition, the General Fund experienced a $7.2 million reduction in fund balance/net assets in FY 2003, the most significant
drawdown of the General Fund reserves in over ten years. The decrease in fund balance occurred because of the $9.3 million
transfer to LP&L to ensure the ongoing operation ofLP&L and the payment of the senior lien revenue bonds issued by the City
for LP&L. In addition, the General Fund reduction in fund balance was a result of the forgiveness of originally budgeted
payments in lieu of taxes, franchise fees and indirect costs of $4.8 million from the electric fund to the General Fund. The
aggregate result of restatement of the beginning fund balance and the FY 2003 use of fund balance was a General Fund ending
balance of$9.4 million. Coming in to FY 2003, the City had a fund balance (adjusted) of $18.6 million. The City has adopted a
policy (the "General Fund Balance Policy") to maintain an unreserved General Fund balance equal to two months operating
expenditures. At September 30, 2002 the Geoeral Fund balance exceeded the General Fund Balance Policy by $4.5 million. At
September 30, 2003, the General Fund Balance Policy required a fund balance of $14.2 million. As a result of the FY 2003
events described above, the City was $4.8 million under the fund balance required ~mder its policy at the close of FY 2003. The
decline in General Fund balance limits the City's ability to mitigate future risks of revenue shortfalls and unanticipated
expenditures. Reference is made to the information hereafter presented under the headings "Discussion of Recent Financial and
Management Events-FY 2004 Budget and Year-End Financial Results" and"· FY 2005 Budget," for a discussion ofFY 2004
results for the General Fund and a summary of the City's planning for FY 2005.
The Electric &md ... With respect to the City's electric fund (LP&L), the measures taken by the City Council during the FY
2003 mid-year budget review yielded substantial results as measured by the projected operating loss of$24 million in February
2003. LP&L ended FY 2003 with a $6.3 million operating loss. Before taking into account transfers from other funds, the
electric fund reported a $9 million loss, the first such loss in over ten years. As a consequence of the operating loss, LP&L failed
to meet its revenue bond ra.te covenant Wider wbich the City has agreed to set rates for the electric system sufficient to produce
net revenues equal to 100% of its senior lien bonded indebtedness. In FY 2003, LP&L produced $0.704 million that was
available for the payment of debt service, which represents a 0.3 times coverage of average annual debt service and a 0.2 times
coverage of maximum annual debt service, in each case after taking into account the issuance of City general obligation debt for
LP&L that occurred in August 2003 (see ''Discussion of Recent Financial and Management Events -FY 2003 Financial
Concerns and Mid. Year Budget Amendments" for a description of such debt). Under the terms of its bond ordinances, tbe
failure to meet the rate covenant, while significant. did not result in the acceleration of LP&L's debt Moreover, the failure did
not materially affect LP&L's operations, as LP&L was able to malce its debt payments after receiving a $9.3 million contribution
from the General Fund, and LP&L has never defaulted in the payment of its bonded indebtedness. In making its debt payments,
LP&L has not used any moneys set aside as a debt service reserve fund under its senior lien revenue bond ordinances.
The electric fund added $0.587 million to total net assets for the year after factoring in the $9.6 million contribution from the
General Fund. Cash and cash equivalents for LP&L were $0.330 million at September 30, 2003. AE. described above under
"Discussion of Recent Financial and Management Events · FY 2003 Financial Concems and Mid-Year Budget Amendments," in
May 2003, the City Council implemented an increase in the FCA ofLP&L, by $0.01 per kWh which resulted in LP&L's rates for
residential and commercial customers being approximately 30% above those of Xcel. AE. a result, from May 1, 2003 to
September 30, 2003 LP&L lost approximately 5.6% of its aJStomers. Despite the iocrease in the FCA, operating revenues for
LP&L declined from $97.4 millioa in FY 2002 to $91.7 million in FY 2003, while operating expenses increased from $88.3
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million in FY 2002 to $98 million in FY 2003, which reflects a $10.7 million increase in cost of purchased fuel and power during
the year. For FY 2003. LP&L's average fuel cost was approximately 61% above the cost in FY 2002. LP&L was able to reduce
its fuel payments as a result of negotiating a third purchased power contract with SPS in July 2003 to minimize the use of its
generation assets.
Despite the relatively small operating income that resulted after taking into account the General Fund contribution to LP&L., total
net assets of the electric fund decreased by $3.9 million during the year, to $88.5 million, as a result of a restatement of the
begirming fund balance. The restatement reflected the write off of a $4.48 million receivable recorded from WTMPA in FY
2002, although the obligation was disputed by the other Member Cities of WTMP A. As described below under "Discussion of
Recent Financial and Management Events • City's Responses to Recent Financial and Management Events • Recent Measures
taken to Address Financial and Management Concerns at LP&L," the WTMPA Settlements have resolved the disputed
receivable.
Other Major Enterprise Funds: Water. Sewer. Solid Waste and Stoanwater .. .In addition to the electric fund, for wbicb FY 2003
financial results are discussed above, the City's other major enterprise funds, consisting of the water, sewer, solid waste and
stormwater funds, produced total operating revenues of$71.6 million in FY 2003, as compared to $73.6 million for FY 2002. In
FY 2003, operating expenses for those funds were $57.7 million, as compared with $51.6 million for FY 2002. Net operating
transfers for the other major enterprise funds totaled $12.8 million in FY 2003 as compared to $6.5 million in FY 2002. The
increase in net transfers out was due primarily to an increase of $5.2 million in net transfers from the solid waste fund that was
attributable to the write off of an interfund loan made to the community investment fund in connection with an economic
development grant agreement (see "Discussion of Recent Financial and Management Events • FY 2003 Audit Restatements,
Reclassifications and Internal Controls Issues -Audit Restatements"). In addition, operating expenses of the solid waste fund
increased $5.8 million over FY 2002, which was the result of a change in accounting estimate related to depreciation expense for
the City's landfills.
FY 2003 Audit Restatements, Reclassifications and Internal Controls Issues
As was the case with other municipalities in the State and U.S., the implementation of GASB 34 by the City in FY 2002 effected
a substantial change in the presentation of the City's financial statements. Prior to the implementation of GASB 34,
governmental accounting standards did not require the use of a government-wide perspective in the presentation of financial
information; instead, fund accounting was generally used to present financial data. Under GASB 34, fund accounting has been
supplemented by government-wide statements and certain aspects relating to the presentation of the fund level statements have
been modified, as well, particularly with respect to the presentation of restricted and unrestricted net assets within each fund. For
additional information regarding accounting policies that are applicable to the City, see Note I. "Summary of Significant
Accounting Policies" in the financial statements of the City attached as Appendix B.
The FY 2002 financial statements, and the City's financial statements dating to F¥1993, were audited by Robinson Bwdette
Martin Seright & Burrows, L.L.P. (the "Former External Auditor''). In keeping with the overall reassessment of its financial and
management affairs undertaken by the City following the occurrence of the events summarized under "Discussion of Recent
Financial and Management Events-Past Events Relating to LP&L and West Texas Municipal Power Agency FY 2003," in the
Summer of 2003, the City conducted a request for qualifications for its external auditor and selected KPMG L.L.P. ("KPMG") to
audit its FY 2003 financial statements. Consequently, the Former External Auditor guided the City through the initial year
implementation of GASB 34, while in the second year of GASB 34 financial reporting, the City's financial statements were
audited by KPMG.
Audit Restatements ..• During the preparation of the FY 2003 CAFR, some seven restatements to beginning fund balance/net
assets were made to various fund level statements of the City. The restatements totaled $36.7 million. These restatements
represented an aggregate increase in net assets of the City of $2.56 million, as some affected funds had their beginning balances
restated to a higher figure, while other funds were restated to decrease their begiMing fund balance.
As described above under "Discussion of Recent Financial and Management Events -FY 2003 'Financial Concerns and Mid-
Year Budget Amendments," the General Fund was restated from a fund balance of $18.6 million to $16.6 million to reflect a
write off for an account receivable, which as of September 30, 2002 bad ceased to be collectible. Also, as described above under
"'Discussion of Recent Financial and Management Events -September 30, 2003 Financial Results • The Electric Ftmd," the
electric fund's beginning fund balance was restated downward by $4.48 million to reflect a receivable from WTMPA that was
uncollectible. Other enterprise fund restatements include an $0.867 million increase in the water fund beginning balance and a
$0.722 million increase in the sewer fund beginning balance, each of which were made to reflect a change in accounting
treatment pertaining to the appropriate party that is responsible for reimbursement of fees collected by the City for new water
and sewer cormections. With respect to the impact on a particular fund asset, the most significant restatement in beginning fund
balance occurred in the City's community investment fund, a fund used in prior years to account for economic development
initiatives, which was restated from a begiMing balance of $46.8 million to $36.8 million. The change was associated with an
economic development grant made by that fund in FY 2002 that was originally reflected on the accounting statements of the City
as a loan. In preparing the 2003 CAFR, it was determined that such transaction should be treated as a grant, not a loan, although
Market Lubbock, Inc., a component unit of the City that administers the grant agreement, retains certain recourse actions in the
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event that the grant recipient fails to satisfy its economic development initiative agreement. As a result, the receivable in the
community investment fund for the $10 million amount was deleted as an asset of the fund ($6 million of the SIO million grant
had originally been funded through an interfund loan to the community investment fund from the water and solid waste funds).
In addition to these five restatements of existing fund balances, in preparing the 2003 CAFR, new assessments were made with
respect to two entities with which the City has long-standing contractual relationships: a corporate entity that does business
under conttact with the City as "Citibus", and WTMPA, a legally separate municipal corporation. In prior fiscal years, the
fonner entity had been accounted for by the City as a discretely presented component unit of the City, while the City's
relationship with WTMPA had been described in the footnotes to City financial statements as a contingent liability of the City,
because the City had contractually agreed to provide a debt service guarantee for the debt of the agency. In the 2003 CAFR. the
accounting treatment of these entities was reconsidered, and each was added to the City's financial statements as an enterprise
fund. The result of the addition of each of these funds was an increase in net assets, in the amount of S I 2.3 million for the new
transit fund, and $3.2 million for the new WTMPA fund.
Audit Reclassifications ... In addition to the restatements swrunarized above, other reclassifications of net assets were made in
connection with the preparation of the FY 2003 CAFR. Except for the restatements that were made to the financial statements,
as described above, the reclassifications did not affect the "bottom line" statement of net assets for a particular fund, and did not
reflect the discovery of missing funds or uncollectible amounts from the prior fiscal period. Instead, the reclassifications pertain
to the portion of a fund's net assets that are shown as invested in plant, restricted for future claims or that are unrestricted and
available to support the operations of the entity, and as such. the incorrect information shown in the portions of the FY 2002
financial statements that required corrections, or reclassifications, could have provided a reader of the financial statements with
misleading information regarding the liquidity of such funds.
In the preparation of the FY 2003 CAFR. it was discovered that the portion of net assets shown in certain of the financial
statements, particularly with respect to the enterprise funds (or business-type activities), bad been mathematically iocorrectly
calculated in the FY 2002 CAFR. While the government-wide statement of net assets of the City included in the FY 2002 CAFR
showed $37.9 million unrestricted net assets for busines~type activities of the City, the fund financial statements showed an
aggregate amount of unrestricted net assets of the enterprise funds that totaled $195.2 million of unrestricted net assets. The FY
2003 CAFR reports in the government-wide statement of net assets of the City $32.9 million of unrestricted net assets for
business-type activities of the City and the fund financial statements in the FY 2003 CAFR report an aggregate amount of
unrestricted net assets for the enterprise funds that total $30.2 million (certain reconciliations are required to balance
government-wide and fund level reports, thus small differences should appear between the two presentations).
Internal Controls Issues .. .In accordance with accounting guidelines, the external auditor customarily provides the governmental
entity with a '"'management letter" that includes a discussion of any material weaknesses in the audited government's internal
control structure. In its FY 2003 Management Letter (the ''2003 Management Letter''), KPMG noted several weakness in the
City's internal controls, including an overall internal control weakness in the City during FY 2003. The 2003 Management
Letter noted that the City operated during FY 2003 with an interim City Manager, an interim Chief Financial Officer and a
vacant Internal Auditor, and thai a high turnover of staff within the City Manager's office dating to late 2002 had a significant
effect oa the City's internal control structure. See ''Discussion ofRecent Financial and Management Events-Financial Staff and
City Management Turnover" above.
In addition., the 2003 Management Letter noted deficiencies in the year end GAAP financial reporting cycle, citing as examples
the significant restatement of beginning net assets/fund balances and the reclassifications described above, as well as numerous
adjustments that were required to be posted after the initial closing of the City's books for FY 2003. The failure to timely obtain
financial statements from component units, including WTMPA, was also noted. KPMG reconunended that the City review the
personnel within the City's accounting department and the accounting staff within LP&L to determine whether sufficient
qualified personnel were in place to provide accurate aud timely closi11g of the City's books and preparation of annual financial
statements. Other material wcalcnesses noted include the failure of the City to properly reconcile its cash balances, the failure of
LP&L to meet its bond n~te covenant (as descn'bed above under •'Discussion of Recent Financial and Management Events -
September 30, 2003 Financial Results -The Electric Fund"), a lack of oversight or monitoring of contnu:ts with other entities
(for example, WTMPA), and the failure of the City to abide by its General Fund Balance Policy (as described above under
"Discussion of Recent Financial and Management Events-September 30,2003 Financial Results-The General Fund").
FY 2004 Budget and Year-End Financial Results
General Fund ... The City Council adopted the FY 2004 budget on September 18, 2003. In adopting the FY 2004 budget, the
City Council restricted the transfers out of the electric fund to a transfer to the General Fund to an amotmt equal to the indirect
cost recovery amount, or $1.1 million, whicb represented an approximately $6.6 million reduction in transfers from LP&L from
the original FY 2003 budget. In Mdition., the City Council instructed the interim City Manager to prepare lhe budget using the
principal that taxes would not increase as a result of the increase in taxable value from reappraisals of existing properties, wbicb
has represented a substantial portion of tax base growth in previous years. AI. a result, the tax rate was reduced from $0.5700 per
$100 of taxable valuation in FY 2002 to $0.5457 in FY 2003, the equivalent of$1.9 million in revenue, although the tax rate was
projected to generate additional revenues of $1.1 million due to new construction in the City. Other revenue enhancements
included in the FY 2004 budget were increases in the franchise fees assessed to the gas franchisee and to Xcel, eacb of which
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increased from 3% of gross revenues to 5% effective December I. 2003. In addition, the transfers from the water and solid waste
funds for the cost of business transfer (which approximates a payment in lieu of franchise taxes) was increased from 3% to 6% of
gross revenues. On the expenditure side. seven employment positions were eliminated from the General Fund budget. while an
additional five police officers and nine firefighters were funded in the budget. Total revenues and expenditures budgeted for the
General Fund were balanced, at $94.2 million. Based upon unaudited financial records through the first eleven months of FY
2004, and projecting revenues and expenses to the end of FY 2004, the City estimates that the General Fund balance will grow
by approximately $4.4 million at year-end, to $13.8 million, which would place the City $0.9 million under its General Fund
Balance Policy. Among the most significant factors affecting the projected year end results of the General Fund are stable
growth in the sates tax. and other revenues overall and reduced expenditures through operating and administrative efficiencies.
While no finn assurances can be given that these projected results will be achieved, the City believes that such projection is
reasonable based upon cwrent financial data. In FY 2004, LP&L's revenues were sufficient to make debt setvice payments on
its bonded indebtedness without a transfer from the General Fund.
Excerpts from the City's Comprehensive Annual Financial Report of the fiscal year ended September 30, 2004 (the "FY 2004
CAFR"), including the audited financial statements and the management discussion and analysis {the .. MD&A") are attached as
Appendix B. Reference is made to Appendix B for a more complete presentation ofFY 2004 financial results (the complete FY
2004 CAFR is available from the City upon request and may be downloaded from the City's web site:
http://www.ci.lubbock.tx.us).
intmllis~ fynds ••. With respect to the major enterprise funds of the City, in FY 2003. the City adopted rate ordinances for the
water and sewer enterprise funds that included a series of four 3% increases in water rates and a series of four 5% increases in
·sewer rates. FY 2004 was the second year ofsucb increases (but see "Discussion of Recent Financial and Management Events-
FY 2005 Budget" for a discussion of possible additional rate increases in the water, sewer and stormwater funds in FY 2005
below). Other key budgetary measures included the decrease in transfers from the electric fund to the General Fund and the
increase in the cost of business transfer for the water and solid waste funds, each described above, and a planned use of fund
balance in the stonnwater fund to pay increased debt service on tax-supported debt issued by the City for drainage projects.
Based upon unaudited financial records for the first eleven months of FY 2004, and projecting revenues and expenses to the end
of the fiscal year, the City estimates that LP&L will produce positive net income after transfers of $1 million at year end. Based
upon unaudited financial records for the first eleven months of FY 2004, the City estimates that the fund balances of the water,
sewer, solid waste and stonnwater funds will increase by $1.6 million, $0.164 million, $0.2 million and $3.8 million,
respectively at FY 2004 year end. While no firm assurances can be given these projected results will be achieved, the City
believes such projections are reasonable based upon current fmancial data.
City's Responses to Recent Financial and Management Events
As described above, the City bas encountered in recent years criticism of its management practices in various reports and audits
prepared by the City and outside consultants. At the same time, the City has experienced financial downturns, particularly in the
General Fund and at LP&L. Moreover, through reorganizations of government designed to address these shortcomings, and in
response to political pressures by the City Council to provide a more accountable City government while reducing the growth of
the cost of City government, a significant number of senior management staff of the City have departed. In FY 2004, the City
implemented a number of significant steps to address both its management needs and financial challenges. Certain of the
measures taken by the City to strengthen City government in general, and to address its financial challenges, are described
below.
General Fund and General Government Actions
> General Fund Budgetary Actions ... As discussed above under "Discussion of Recent Financial and Management Events -FY
2003 Financial Concerns and Mid-Year Budget Amendments" in adopting the 2003 Budget Amendments, as well as the FY
2004 budget and the FY 2005 budget, the City has demonstrated the ability after FY 2003 to meet General Fund obligations with
balanced operating results. This has been achieved through various budget cuts and other austerity measures, including
eliminating approximately 100 positions City-wide. The City will need to restore its General Fund balance over a period of
years. The new City management anticipates that during FY 2005 the City will establish a replenishment target for the General
Fund. For FY 2004, General Fund balance ended with a surplus of$12,127,969. While no assurances can be given as to future
financial results, based on historic expenditure trends an increase in General Fund balance of an additional $1 million to $2
million is expected for FY 2005 year end. City management also has implemented monthly assessments of the budgel
> Citv Management Changes ... In February, 2004, the City completed its search for a new City Manager with the employment
of Lou Fox. In late June 2004, City Manager Fox announced a new slate of senior managers for the City, including the hiring of
a new Deputy City Manager, a new Chief Financial Officer/Assistant City Manager and a new Director oflnteroal Audit (which
position was created by the City Council in FY 2003, but was vacant until filled in June 2004). Eac:h of the positions were filled
by individuals from outside of the City, and each of the new City officers has extensive government service (see "City Officials,
Staff and Consultants -Selected Administrative Staff'). Collectively, the new management team represents over 80 years of
government service experience. The City is of the view that these moves reflect a return to management stability, and that they
will assist the City in addressing the general internal control weakness cited by KPMG in the 2003 Management Letter.
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> Establishment of Audit Committee ... Through the adoption of a resolution in June 2003, the City Council established an
independent Audit Committee composed of five members. The City believes it is one of only a few municipalities nationwide
that has created an audit committee, taking its design in large part from the provisions of Sarbanes-Oxley Public Company
Accounting Reform and Investor Protection Act The Audit Committee is charged with maintaining an open avenue of
communication between the City Council, City Manager, internal auditor and independent external auditor to assist the City in
fulfilling its fiduciary responsibility to its citizens. The committee has the power to conduct or authorize investigations into the
city's financial performances, internal fiscal controls, exposure and risk assessment. It reports to the City Council. The
establishment of the Audit Committee is designed to serve as an additional check on the preparation of the City's financial
statements and to avoid weaknesses in the City's internal controls, including the status and adequacy of information systems and
security.
The chairperson is appointed by the Mayor and the other positions are filled by a vote of the City Council At least two members
of the Audit Committee are required to have a background in financial reporting, accounting or auditing, and at least one member
is required to be a certified public accountant. The current membership of the committee consists of Mike Epps, an Executive
Vice President at American State Bank in Lubbock, Jim Bnmjes, Senior Vice Chancellor and Chief Financial Officer for the
Texas Tech University System; Dan Benson, a professor at the Texas Tech University School of Law with expertise in federal
criminal law and appellate procedure; RJ. Givens, a real estate agent in the City; and Kim Turner, the Director of Internal Audit
at Texas Tech. Mr. Brunjes is the chair of the Audit Committee.
Recent Measures taken to Address Financial and Management Concerns at LP&L
> New Chief Execytjve Officer for LP&L .. .In March 2003, R. Canoll McDonald contracted with the City to perform the duties
of Director of Electric Utilities for the City. Mr. McDona.ld had previously been employed by LP&L, most recently in 1994,
when he retired as CEO of LP&L. Mr. McDonald has over 40 years experience in the electric utility business in Lubbock and
the surrounding area, having also served in various positions with Southwestern Public Service Company (now Xcel) for over 25
years. Mr. McDonald's contract is scheduled to expire in May 2006. Under the management of Mr. McDonald, the City and
LP&L have . implemented a variety of measures designed to improve the accountability of LP&L to the City and to better
position the utility for future profitability. Certain of those measures are described in the paragraphs that follow. The Electric
Board (hereinafter defmed) bas commenced the process of hiring a successor to Mr. McDonald and expects to bave completed
this process by December 2005. The City believes it is Mr. McDonald's intent to assist any successor as needed until his
contract expires.
> Increase in Fuel Cost Adjusb1lent ... As described under "Discussion of Recent Financial and Management Events -Past
Events Relating to LP&L and West Texas Municipal Power Agency" in May 2003, the City Council approved an increase in the
FCA portion of the residential and small commercial customers rate class by SO.Ol per kWh, an avenge increase of 12.5% for
both residential and commercial customers, which resulted in LP&L being approximately 30% higher in oost for those rate
classifications than Xcel. The increase was approved in order to pass through fuel costs that had been incurred by LP&L but not
recovered through its rate base. LP&L adjusts its FCA each month, and may do so under the existing methodology without
further action of the City Council, to reflect cUJTent energy prices plus an additional measure to recover a portion of the rolling
eighteen month average for uncollected fuel expense; provided, however, that no such adjustment is typically made unless the
overall cost of energy after the FCA adjustment permits LP&L to remain competitive with Xcel. If the adjustments will not
permit LP&L to remain competitive and are not passed through, they become an unrecovered fuel expense. As a result of the
increase, from May 1, 2003 to September 30, 2003 LP&L lost approximately 5.6% of its customers. After losing almost 4,000
metered customers following the May I, 2003 FCA increase, LP&L began to increase its customer count in May 2004. Since
May 2004, LP&L has had an average increase of approximately 263 customers per month. The City has undertaken periodic
adjustments to its fuel cost to remain competitive with Xcel In May 2005, the City FCA was increased by $0.085 per kWh, an
increase that was in line with a rate increase imposed by Xcel.
>Establishment of New Elecbjc Utilities Board ... In December 2003, the City Council appointed the Lubbock Electric Utility
Governance Commission to review and evaluate various issues relating to the governance of LP&L. In February 2004, that
Commission presented its findings to the City Council (the "Electric Utility Govemance Report''), and on February 5, 2004, the
City Council adopted an ordinance (the "LP&L Governance Ordinance") (1) creating a new Electric Utilities Board (the
"Electric Board")· for LP&L (the new board replaces a former board that was advisory only), (2) reserving certain duties and
responsibilities with respect to LP&L to the City Council (i.e., the powers to approve LP&L's annual budget, set LP&L's rates;
issue debt for LP&L; exercise the power of eminent domain for LP&L; and require the payment of an annual fee to the City),
and (3) mandating the creation of certain reserve accounts by LP&L and restricting the transfer of revenues from LP&L to any
other fund of the City, including, particularly, the General Fund, until such reserves have been funded. The Electric Board was
appointed in February 2004. In June 2004, the City initiated a solicitation to the holders ofLP&L's senior revenue debt seeking
approval to amend each LP&L bond ordinance to provide for the governance of LP&L by the Electric Board. In accordance
with the provisions of the bond ordinances, the City was obligated to obtain the consent of at least 51% of the LP&L
bondholders, and in August 2004 the City received the requisite consents. The City amended the bond ordinances to provide for
the governance ofLP&L by the Electric Board in Janwuy 2005.
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On November 2, 2004, the voters of the City approved a referendum amending the City Charter to require the establishment of
the Electric Board. The purpose of the charter amendment was to ensure the permanent establishment of the Electric Board, as
the action of the City Council in adopting the LP&L Governance Ordinance was subject to repeal by subsequent City Councils.
The chaner amendment requires the City Council to adopt an ordinance (the "New LP&L Governance Ordinance") by no later
than January I, 2005 setting forth other duties and responsibilities of the Electric Board not specifically set forth in the proposed
chaner amendmenl The City Council, utilizing the LP&L Governance Ordinance as a model, adopted the New LP&L
Governance Ordinance on December 16.2004. Each of the New LP&L Governance Ordinance, the bond ordinance amendment
and the chaner amendment contain similar provisions regarding the powers of the Electric Board, although as noted above, and
as further described below, the New LP&L Governance Ordinance includes additional provisions that pertain to the
establishment of financial reserves and restrictions on transfer of funds from LP&L. In addition, the charter amendment
stipulates that the Electric Board shall detennine the transfer and disbursement of all net revenues of the City's electric utility.
The New LP&L Governance Ordinance provides that the Electric Board consist of nine members appointed by the City Council,
and that the City Council consider extensive business and/or financial experience as the primazy qualification for serving on the
Electric Board. Electric Board members serve without compensation. Under the New LP&L Governance Ordinance, the Board
is given the authority, duties and responsibility to ( 1) approve an annual budget and electric rete schedule for submission to the
City Council for approval and, from time to time, submit to the City Council amendments to the budget and/or the electric rate
schedule; (2) oversee the audit of the electric fund, and engage an accounting finn for that purpose; and (3) subject to applicable
law, including the City Charter and Code of Ordinances, govern, manage, administer and operate the City's electric system.,
including contracting for legal and other services sepamte and apart from those provided by the City. In addition, the City
Manager is required to consult with. and seek approval of, the Electric Board prior to appointing and/or removing the director of
LP&L. In accordance with the New LP&L Governance Ordinance, the director ofLP&L reports to the Board
The adoption of the LP&L Governance Ordinance, the charter amendment election, and the subsequent adoption of the New
LP&L ·Govemance Ordinance reflects a decision by the City Council to provide a measure of independent management and
financial self-determination for LP&L. In accordance with the findings presented to the City Council in the Electric Utility
Governance Report, the primal)' purpose of the New LP&L Governance Ordinance is to pennit LP&L to rebuild, and then better
control, its financial reserves with substantially less input in the process from the City Council than in the past. The adoption of
the New LP&L Governance Ordinance follows in the wake of the conclusions reached in the LP&LIWTMPA Management
Audit to the effect that there had been a history of poor contract administration by the management of LP&L relative to
WTMPA, and that LP&L bad acted without proper oversight from the City Council and the City Manager's office. While the
City Council retains substantial powers over the electric system, an additional goat of the City in establishing the Electric Board
is to develop local expertise in a pool of individuals who can provide a sharper focus by the City on the operation of LP&L than
has occurred in the recent past.
> Establishment of Reserve Funds for LP&L: Restriction on Transfers from LP&L ... As noted above, the LP&L Governance
Ordinance includes a provision that requires LP&L to establish reserve funds. Such funds consist of (1) an operations reserve
fund to be equal to three months' gross retail electric revenue as determined by LP&L's previous fiscal year; (2) a rate
stabilization reserve to be funded to an amount equal to two months' gross retail electric revenue as determined by LP&L's
previous fiscal year; and (3) an electric utility development reserve to be funded to a level equal to one months' gross retail
electric revenue as determined by LP&L's previous fiscal year and to be used solely to meet any mpid or unforeseen increase in
development in the City. Under the LP&L Governance Ordinance, the City may not require that LP&L transfer any fee
equivalent to a franchise fee, a payment in lieu of taxes or other disbursement of the net revenues of LP&L until (a) all bond debt
service requirements have been funded (which obligation is senior in right to the obligation to fund the reserves) and (b) the
reserves have been fully funded. As noted above, the charter amendment provides that the Electric Board shall determine the
transfer and disbursement of all net revenues. Consequently, subject to (i) provisions of State laws that govern municipal
utilities, and ·which stipulate that a first use of the utility's gross revenues be used to pay operating expenses, and (ii) the
obligations of the City with respect to LP&L's bonded indebtedness, it is possible that the Electric Board could devise a flow of
funds for LP&L that is substantially different from that set forth in the LP&L Governance Ordinance. To date, the Eleclric
Board has not deviated from the flow of funds contemplated under the LP&L Governance Ordinance.
At present, LP&L bas not funded any of the reserves established under the LP&L Governance Ordinance, as net revenues have
been ina:dequate for that purpose. Moreover, the mere establishment of the funds does not imply that such reserves will be
funded within any panicular time frame, if ever. However, in adopting the LP&L Governance Ordinance and calling the special
charter election, the City Council has evidenced its commitment that LP&L be given the opportunity to regain financial stability
without being obligated to make transfers, other than its indirect cost of business transfer, to the General Fund or any other fund
of the City.
>New Contractual Arrangements Affecting LP&L Operations and Revenues ... In late 2003 and extending into the Summer of
2004, City Management, including LP&L staff in particular, negotiated a series of new agreements that will change the long·
tenn operating plan of LP&L. These agreements, which are summarized below, stemmed from a series of eventS and
circwnstances relating to LP&L that are described herein under "Discussion of Recent Financial and Management Events-Past
Events Relating to LP&L and West Texas Municipal Power Agency," including an ongoing dispute with WTMPA relating to the
responsibility for costs incurred by the City during the delayed completion of the WTMPA Project In addition, as a result of
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continued high (by historic levels) natural gas prices, following the negotiation of an additional wholesale power purchase
agreement between the City and SPS in July 2003, the City concluded that, given the then prevailing gas prices, it was more
economical to purchase wholesale energy from SPS than to operate its gas generation units, a significant portion of which are
older and, in light of current gas prices, obsolete. In recent years, the City has explored several alternatives to the use of its gas
generation units, including the possible acQuisition of new generation, pemaps through a joint venture for a coal generation
filcility, and the possibility of purchasing energy on a wholesale basis from entities other than X eel or its subsidiaries. The City
is in a severely electtic transmission-constrained area. The lack of suffic.ient transmission for delivery of energy to the City and
the absence of other energy providers in the vicinity of the City with excess energy for sale were factors that contributed to the
failure of the City 10 negotiate a wholesale energy purchase agreement with an entity other than Xcel or its subsidiaries.
Consequently, 10 reduce fuel and production expenses, in the Summer of 2004 the City began taking greater amounts of energy
from the Xcel contracts, and restricted the generation of energy primarily to that produced at the WTMP A Project, and only then
during periods of high energy demand. As described below under "Wholesale Energy Agreement with Texas Tech", these
events led to a contract dispute between the City and Texas Tech. the largest LP&L customer.
> The WTMPA Settlement Amement ... In December 2003, the City, WTMPA and the other Member Cities of WTMPA
entered into a series of agreements styled the "Comprehensive Settlement Agreement" Such agreements were negotiated for the
purposes of (1) reallocating among the Member Cities of WTMPA. the rigbt to wrMPA power resources and the costs
associated with such power resources, wbich consist of the WTMP A Project and certain power purchase agreements between
WTMPA and SPS; (2) resolving disputes regarding the composition and voting power of the WTMPA board; and (3) settling the
outstanding, disputed claims for costs incurred by the City on behalf of WTMPA. The WTMPA Settlements include the
following agreements: (a) all of the capacity and energy in the WTMPA Project was allocated to the City or its assignee (under
the 1998 WTMPA Project agreements, the City had an 85% allocation of the energy from the WTMPA Project, although it had
historically taken substantially all of the energy and dispatched purchased energy to the other Member Cities to meet their
needs); (b) the City assumed responsibility for the cost of operation and maintenance of the WTMPA Project; (c) the City agreed
to annually pay WTMPA 1000/o of the debt service due on the wrMPA Bonds (under the basic agreement of WTMPA. the
agency's Power Sale Contract, each of the other Member Cities has joint and several liability for the WTMP A Bonds and will
remain contingently liable in that capacity in the event the City should fail to malce a bond payment obligation); (d) provision
was made for title to the WTMPA Project to transfer to the City upon the retirement of the WTMPA Bonds; and (e) the City
released all of its claims associated with costs that it had asserted was owed in connection with the energy costs incurred by the
City for the Member Cities during the periOO when the WTMP A Project was delayed in coming online. In addition, the
WTMP A Settlements include a purchased power allocation under which the City has agreed to allocate to the other Member
Cities energy requirements nominated by the other Member Cities from other agency purchased power agreements, and the City
agreed to schedule such power for the other Member Cities. The WTMPA Settlements repealed certain power sales agreements
and operating agreements entered into by the parties in connection with the issuance of the WTMPA Bonds that were associated
with the operation of the WTMPA Project. The WTMPA Settlements eliminated the position of WTMPA chairman, but the
relative voting powers of the Member Cities were not modified. Under the WTMPA rules and regulations, each Member City
appoints two members to the WI'MP A Board, each of which has an equal vote (certain actions of the WTMP A Board require a
six vote "super majority"), but, in addition to the atrmnative votes of the board members, the rules and regulations provide, in
effect, a veto right over WTMPA Board actions based upon the amount of net energy conswnecl by each Member City. As
LP&L takes substantially all of the energy ftom WTMPA resoW'Ces, it has a veto over certain of the actions of the WTMPA
Board, including adoption of a budget, certain energy sales and the amendment of the agency's bylaws.
The City believes the comprehensive settlement agreement modifies the principal WTMPA agreements in a manner that better
reflects the historical manner in wliicb the Member Cities have engaged in energy activities. In addition, while LP&L will
continue to schedule power deliveries for all Member Cities, the contract administration of WTMPA agreements has been
simplified by the acquisition by the City of the WTMPA Project and the defeasance of the WTMPA Bonds. As noted under
"Discussion of Recent Financial and Management Events-FY 2003 Audit Restatements, Reclassifications and Internal Controls
Issues," for FY 2003 and subsequent years, WTMPA bas been classified as an entelprise fund of the City, which reflects the
extensive associations between WTMPA and the City.
>New Full ReQuirements Energy Agreement ... In June 2004, WTMPA enteml into a IS year full requirements wholesale
power agreement (the "New Power Agreement") with SPS. The New Power Agreement is effective July 1,2004, and replaces a
series of eJtisting agreements between WTMPA and SPS and the City and SPS, which had expiration dates in 2004 and 2005.
Under the New Power Agreement, SPS or its permitted assigns is obligated to provide all energy requirements for each of the
Member Cities ofWI'MPA. including the City, during the term of the agreement, which tenninatcs on June 30, 2019. As in past
WTMPA agreements, and in accordance with the WTMPA Settlements, LP&L will schedule energy purchased under the
agreement for each of the other WTMPA Member Cities. The New Power Agreement includes a fixed demand charge and
energy components, with a pass through of SPS's fuel cost, which is billed in accordance with SPS's FERC approved fuel cost
adjustment schedule. Under the terms of the New Power Agreement, the fiJted demand charge will increase incrementally, in
most years annually, during the term of the agreement based upon a predeterm.ined schedule set forth in the New Power
Agrcemenl SPS may terminate the agreement upon the occurrence of an adverse regulatory action under which SPS is required
to sell generation.assets, and WTMPA may tenninate the agreement upon notice and during the final four years of the scheduled
termination date if WTMPA acquires an interest io replacement, coal-fired generation. Each party may require adequate
assurances of performance whenever there is a reasonable basis therefor.
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The New Power Agreement represents a significant departure for LP&L, in that it reflects a long-term commitment to take all of
its energy from SPS. The contract reflects a decision of the City to abandon the role of power generator, although, as described
below, in connection with the consummation of the New Power Agreement the City has entered into two unit contingency
agreements (the "Unit Contingency Agreements") with SPS that will require LP&L to maintain its generation units for dispatch
by SPS. Among the implications for LP&L of the New Power Agreement are that LP&L has resolved its long-tenn power
supply issues, and lessened its exposure to fuel price volatility. although SPS will pass through its fuel charges to LP&L on a
monthly billing basis. SPS, in tum, may not pass its fuel costs through to its retail customers in the City more frequently than
once every six months under current State law that requires SPS to seek a rate order from the PUC before increasing retail fuel
cost charges. As a result, the New Power Agreement provides the possibility of both advantages and disadvantages to the City
with respect to cash flow, particularly if the City determines to match its FCA to changes in SPS's fuel adjustment, as it has
generally done in the pasL According to information filed with various regulatory agencies, the City believes that over 60% of
the energy that it purchases from SPS is from coal generation. This fuel mix was a significant factor in the City's determination
to approve the New Power Agreement by WTMP A. fn the event that gas prices should decline over the term of the Agreement,
the City believes that SPS bas the flexibility to switch a larger portion of its generation to gas, including through the use of the
City's generation units in accordance with the Unit Contingency Agreements.
With respect to the competitive posture of the City in light of the long-term commitment of the New Power Agreement, the City
notes that under current market conditions, and taking into account the secondary benefits of the agreement, including future
savings associated with reduced persoMel and maintenance costs as a result of the shift from being an active electric generator to
being a passive generator (for SPS under the tenns of the Unit Contingency Agreements), the wholesale price of the purchased
energy, together with the other financial benefits of the Unit Contingency Agreements and the possible receipt of revenues under
the new WTMP A gas agreement described below, permits the City to compete favorably with SPS.
An additional benefit of the New Power Agreement is that it will pennit the City to increase its efforts in developing LP&L's
distribution ·business. In light of recent rate structure changes implemented by both the City and SPS that require new
developments in the City to fund electric infrastructure througb a development charge paid when the development is platted, new
principals in developments are choosing to install only one electric distribution infrastructure. Since this new development
charge was implemented in FY 2003, all major new developments in the City have selected LP&L as the electric distributor,
which positions the City as a distributor of energy to those developments in the future, even though the retail provider of such
energy could be a utility other that LP&L and other electric providers could choose to build their own distribution infrastructure
to serve the developments.
Perhaps the greatest risk to LP&L from the New Power Agreement is that given the tenn of the agreement and the dynamic
nature of electric competition, over time the wholesale price of the purchased energy will not permit the City to obtain the
favorable margins that are currently being achieved by the City. While the City does not believe that the area served by LP&L
will be opened in the short-term to retail deregulation, as is the case in other parts of the Smte, that could occur during the .term
of the New Power Agreement While there are significant uncertainties as to how such deregulation, if it occurs, would be
administered, it is possible that new retail energy providers could enter the market during the term of the New Power Agreement.
In addition, by tying its energy requirements solely to SPS. and though the other new agreements discussed in this section, the
Cify has significantly increased its dependence on SPS as a counterparty to vital agreements relating to the operation and
financial condition of LP&L. Counterparty risk is risk associated with the counterparty's financial condition, credit ratings,
changes in business strategies and other quantimtive and qualitative measures that could affect the ability of the counterparty to
perform its obligations to the City. Both the long-term Unit Contingency Agreement and the New Power Agreement provides
the City the right to demand certain credit assurances from its counterparty if it has reasonable grounds for insecurity regarding
the performance of any contract obligation.
The City was relatively unrestrained by existing gas purchase and transportation agreements in making the move from a
generation utility to a .full requirements energy purchase business strategy, as only one contract, for gas delivery, was in place
that required the City to pay a fixed price component for gas transportation imspective of whether the City purchases gas. That
contract, between the City and ConocoPhillips, expires in February 2008. In coMection with the Unit Contingency Agreements,
the City has in place standby gas purchase agreements that can be used to supply LP&L with gas to the extent that SPS calls
upon the units, and the City will receive an offset against its minimum gas transportation requirements from ConocoPhillips for
any gas purchased by SPS under the new WTMPA gas contract, if any, described below. While such offset will be subject to the
same risks described below with respect to the new gas contract, the City does not anticipate that it will incur substantial costs in
connection with prior contractual commitments relating to the purchase and transportation of natural gas as a result of the new
LP&L business strategy.
> Other New Energy Related Aereements ... As noted above, in cormection with the negotiation of the New Power Agreement,
the City negotiated the Unit Contingency Agreements, which consist of two agreements that dedicate the City's generation
capacitY solely to SPS, which, subject to certain customary conditions, including reasonable notice and run times, has the right to
call upon one or more of the generation Wlits owned or controlled by LP&L, from time to time to meet energy requirements of
SPS. Including the WTMPA Project, all of the capacity of which, in accordance with the WTMPA Settlements, is dedicated to
LP&L, the City has dedicated generation capacity of 219 megawatts ("MW'') to SPS under the Unit Contingency Agreements.
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The most fuel efficient units within that capacity are the 39 MW capacity of Massengale Unit 8 and the 21 MW capacity of the
Brandon Unit I ("Brandon Station"), which is located on the campus of Texas Tech (the "New Units"). The remaining capacity
is in twelve older units (the "Older Units). With respect to the New Units, SPS may dispatch those Wlits for a three year term
ending June 30, 2007; the term of the Unit Contingency Agreement for the Older Units is fifteen years. matching the term of the
Power Purchase Agreement, with an expiration date of JWle 30. 2019. Aside from the differences in units covered, the term of
the agreements and certain termination provisions in the Older Unit agreement, each Unit Contingency Agreement is
substantially identical. The Unit Contingency Agreements include a demand charge, which must be paid inespective of whether
SPS chooses to take energy from the City's Wlits, and an energy charge that is based upon the output of any of the City's units
that is dispatched for SPS. While the amoWlt of the energy charge will depend upon the energy taken by SPS from the City's
generation units, if any, the Unit Contingency Agreements provide an annual minimum payment by SPS to the City of $6.3
million.
> Natural Gas Sale Agreement ... Subsequent to its execution of the New Power Agreement, WTMP A and other parties entered
into a series of agreements (collectively, the "New WTMPA Gas Agreements) under which WTMPA may acquire natural gas
and effectively exchange it for electric power to realize a cost savings. Under the New WTMP A Gas Agreements, WTMP A may
purchase natural gas from Texas Municipal Gas CoJpOration ("TMGC"') at below-market prices and sell the gas to SPS io return
for a market-priced credit (reduced by nominal administrative and incentive fees) against payments due from WTMPA under the
New Power Agreement. The net savings, if any, will be applied proportionately to reduce the power charges of WTMPA's
Member Cities, including the City. TMGC is a Texas public facility coJpOration created for the purpose of acquiring producing
natural gas reserves and selling its production to mWliCipal entities such as WTMPA and LP&L. The City's standby gas
purchase agreement, mentioned above in connection with the Unit Contingency Agreements, is also with TMGC.
Under the terms of the New WTMP A Gas Agreements, SPS is not obligated to purchase gas from WTMP A unless natural gas
producers, dealers, or other suppliers execute contracts to sell gas to TMGC's upstream gas provider, those suppliers offer to sell
such gas on tenns that SPS considers at least as advantageous as those available from other producers and dealers, and the
aggregate quantities sold do not exceed either SPS's Texas gas rcquirements or the quantities available to WTMPA from TMGC
at a discount from the offered prices or the quantities needed to generate WTMPA's electric requirements. WTMPA's market-
price credit is based on the prices offered by the qualified suppliers, and its supply of gas is dependent on sales by the qualified
suppliers at those prices. TMGC bas secured contracts with five suppliers (Conoco PhiUps, Coral Energy, NGTS, Concorde
Energy, and Tenaska). There can be no assurance that sufficient qualified suppliers will contract to sell gas, or that they will
offer to do so on sufficiently advantageous tenns, to supply all or any portion of WTMPA's gas requirements under the New
WTMP A Gas Agreements. In addition, the discount now offered by TMGC may be reduced as necessary to enable it to comply
with financial covenants, although the discount has remained essentially constant for three years. Moreover, TMGC's reserves
are not expected to be able to meet WTMP A's gas requirements for discount gas beyond 2006, although TMGC has agreed to use
reasonable efforts to acquire additional reserves to do so. For these and other reasons. there can be no assurance that WTMP A
will be able to realize savings in any amoWlt or for any tenn for the benefit of its members under the New WTMPA' Gas
Agreements. Nevertheless, the City believes that the New WTMPA Gas Agreements contain sufficient economic incentives to
induce SPS to qualify sufficient suppliers and to accept gas under the agreements up to the permitted quantities, and that the
TMGC discoW!t will continue to hold. Accordingly, the City has included $4.1 million in gas rebate income in the electric
system's FY 2005 operating budget That amount assumes that the maximwn quantities of gas will be acquired and credited by
SPS under the New WTMPA Gas Agreements in FY 2005; City management is of the view, however, that it is doubtful the
rebate budgeted will be achieved.
> Wholesale Energy Agreement wjth Texas Tech ... As noted above, Texas Tech, a four year Smte institution of higher
education with a student enrollment of almost 29,000, is the largest customer ofLP&L in terms of both energy sold and revenues
generated. In 1990, the City constructed Brandon Station on the campus of Texas Tech. The Brandon Station is a cogeneration
'plant and waste heat is used to produce steam which in the past has been sold to the University. In addition, the City owns the
electric distribution system on the campus of Texas Tech. Since 1998, the City bas sold energy to Texas Tech under the terms of
a power sale agreement (the "Old Texas Tech Agreement") that included pricing terms for the sale of steam and penalties io the
event that the City was Wlable to produce steam in accordance with the agreement As described above, begiMing in the
Summer of 2003, as a result of high gas prices, the City generally discontinued the production of energy from its generation
Wlits, including Brandon Station, therefor requiring Texas Tech to use its boilers for the generation of steam. as a result of which
Texas Tech incurred increased costs for natural gas for its boilers. In the Spring of 2004, Texas Tech presented the City with a
claim for stipulated damages under the tenns of the Old Texas Tech Agreement. The parties agreed to mediate the claim.
Following that mediation, the City and Texas Tech commenced new negotiations for an energy sales agreement (the "New Texas
Tech Agreement"). The negotiations have been concluded, although at present the contract bas not been completed for execution
by the parties. In general terms, Texas Tech has agreed to continue to purchase energy from the City at a price that will provide
the City with a small rate of return, and is paying for energy usage at the rates provided in the New Texas Tech Agreement. The
City bas agreed that steam produced at Brandon Station, if any, will be delivered to Texas Tech at oo charge. The City has also
agreed with Texas Tech that it may tenninate the agreement upon reasonable notice to the City, in which event the City will
wheel energy to Texas Tech in accordance with an energy delivery charge. The City is of the view that the New Texas Tech
Agreement has resolved the dispute with its largest customer on tenns that are mutually beneficial for the parties.
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FY 2005 Budget
General Fund 0 0 0 The City Council adopted the FY 2005 budget on September 28, 2004. The City's FY 2005 budget for the
General Fund is balanced with $98 million in total R)venues and expenses. The budget projects chat sales tax revenues will
produce 52% oftotal tax revenues (tax revenues represent86% of the General Fund's total operating revenues), while ad valorem
tax revenue is budgeted to produce 39% of total tax revenues. The FY 2004 budget included a 41% to 46% mix of sales tax
revenues to ad valorem tax revenues. The higher proportion of sales tax revenue to ad valorem tax revenue for FY 2005 versus
FY 2004 is attributable to the one quarter cent sales tax for ad valorem tax reduction that was approved by the voters of the City
on November 4, 2004. Revenues from that sales tax will begin to be received by the City in October 2004. This shift in General
Fund revenue sources represents a greater dependence upon sales tax receipts, which is generally a moR) volatile revenue source
than ad valorem taxes. However, the City's sales tax receipts have not demonstrated the volatility that has been experienced in
other parts of the State, especially following the events of September 11, 2001. As shown in Table 14 "Municipal Sales Tax
History," the City's sales tax receipts have increased each year over tbe past six years.
In FY 2005, the City's total tax rate will decline from $0.S4S7 per $100 taxable assessed valuation in FY 2004 to $0.4597. The
largest decline in the tax rate is in the portion of the tax levied for the General Fund (see "Table 4 -Tax Rate, Levy and
Collection History"). The City's tax roll increased $683 million, or 8.6o/o. from FY 2004 to FY 2005. In keeping with current
City Council policy that taxes not increase solely as a result of the increase in taxable value from tax reappraisals of existing
properties, a portion of the $402 million of the growth attributable to reappraisals was discounted for pwposes of detennining the
tax rate for FY 2005. Other factors used to detennine the tax rate are revenues from the new quarter cent sales tax and a 2.7%
cost ofliving adjustment, as measured by the consumer price index.
The increase in sales tax revenues is intended to offset reduced franchise fee income and ad valorem tax income for the General
Fund during FY 2005. Total transfers to the General Fund from enterprise and internal service funds are budgeted to increase
only marginally, by $1 million, while transfers out increase by $1.7 million. On the expenditure side, administrative services,
street lighting, financial services, fire, police, general government, human resources and planning and transportation budgets are
comparable with FY 2004 budget amounts, with total General Fund operating expenditures increasing by $1.65 million over the
FY 2004 budget.
·Entemrise Funds ... During the Summer of2004 the City made significant changes to City managemenL The new management
is presently assessing available resources for capital expenditures in the City's enterprise fimds, and it is R)CValuating the City's
utility rate structure and its existing capital expenditure plans. It is possible that the FY 2005 budget summarized below will be
amended during the year to reflect this evaluation, and that the FY 2005 budget could be amended in a manner that increases or
decreases planned spending for enterprise fund capital improvements, the use or contribution to reserves and the rate structure for
various enterprise funds.
The FY 2005 budget for the solid waste fund is balanced with $15.5 million of revenues and expenditures, including an increased
transfer to the General Fund of $1.1 million. The FY 2005 budget reflects $22.5 million in sewer fund revenues and
expenditures, with $0.45 million earmarlced as a contribution for sewer fund capital expenditure and an increase of$0.65 million
in the transfer to the General Fund. The sewer budget includes a planned use of$2.3 million of fund reserves. The sewer budget
reflects the third year of a planned overall four year rate increase, with rates increasing by 5% each year. The water fund budget
for FY 2005 is balanced at $39.8 million of revenues and expenditures, which reflects a 17% increase in the water fund budget,
including a planned use of $4.2 million of fund reserves. Operating expenses increase by $1.5 million, spending for water
system improvements increase by $0.9 million, debt and other expenditures of the water fund increase by $2.8 million. The
increase in the water budget reflects the third year of a planned four year rate increase, with rates increasing by 3% each year.
Water transfers to the General Fund are comparable to FY 2004 and the water budget reflects a $0.3 million net increase in
reserves. With respect to the electric fund, the revenues and expenditures incre.ue by $92 million and $82 million, respectively
over the prior year mainly as a result of gas sale revenues and expenditures under the new gas contract between TMGC and
WTMPA. The FY 2005 budget for the stormwater fund is balaru:ed. at $7.3 million of revenues and expenditures, including a
planned use of$0.2 million of fund reserves.
Proposed FY 2006 Budget
Currently, City Management is developing the 2005-06 fiscal year operating budget and Capital Improvement Program. This
process includes.the ongoing evaluations of staffing levels and operating expenditures to ensure the most effective and efficient
use of public resources. Goals for the upcoming budget include additional staffing in public safety and ensuring the solvency of
the water and sewer utilities.
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TAX INFORMATION
A:o V ..U.OREM TAX LAw ••• The appraisal of property within the City is the responsibility of the Lubbock County Central Appraisal
District (the "Appraisal Dislrict"). 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 (defined below) to appraise all property within the Appraisal
District on the basis of I 00% of its market value and is prohibited from applying any assessment ratios. In detennining market value
of property, different medlods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and
market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law
further limits the appraised value of a residence homestead for a tax yt:M to an amount not to exceed the lesser of (I) the rn.arlcet value of
the property, or (2) the swn of (a) IOOAI of the appraised value of the property for the last year in which the property was appraised for
laxation times the munber of years since the property was last appraised, plus (b) the appraised value of the property for the last year in
which the property was appraised plus (c) the market value of all new ~vements to the property. The value placed upon property
within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board
of Directors of the Appraisal District The Appraisal District is required to review the value of property within the Appraisal District
at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of
appraised value of property within the City by petition filed with the Appraisal Review Board.
Reference is made to Title I of the V.T.C.A., Tax Code (the "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 pUIJIOSCS;
and the procedures and limitations applicable to the levy and collection of ad valorem taxes.
Article vm of the State Constitution ("Article Vllf') 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 VITI, and State law, the governing body of a political subdivision, at its option, may grant (l) An
exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled
from all ad valorem taxes thereafter levied by the political subdivision; (2) An exemption of up to 20% of the market value of
residence homesteads. The minimum exemption under this provision is $5,000.
In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be
levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt
if cessation of the levy would impair the obligation of the contract by which the debt was created.
State law and Section 2, Article vm. mandate an additional property tax exemption for disabled vetetans or the surviving spouse or
children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal
property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of$12,000.
Effective January I, 2004, under Article VIII and State law, the governing body of a county, municipality or junior college
district, may provide that the total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons
65 years of age or older will not be increased above the amount of taxes imposed in the year such residence qualified for such
exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or junior
college district, an election must be held to detennine by majority vote whether to establish such a limitation on taxes paid on
residence homesteads of persons 65 years of age or older or who are disabled. Upon providing for such exemption, such freeze
on ad valorem taxes is transferable to a different residence homestead within the taxing unit and to a surviving spouse living in
such homestead who is disabled or is at least 55 years of age. If improvements (other than maintenance or repairs) are made to
tbe property, the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is
increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following
years. Once established, the tax rate limitation may not be repealed or rescinded. The City has established such a limitation on
ad valorem taxes.
Article vm 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 valonm1 taxation unless the governing body
of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation.
Article VIII, Section 1-j, provides for "freeport property,., to be exempted from ad valorem taxation. Freeport property is defined as
goods detained in Texas for 175 days or less for the purpose of assembly, storage. manufacturing, processing or fabrication.
Decisions to continue to tax may. be reversed in the future;· decisions to exempt freeport property are not S\lbject to reversal.
The City may create one or more 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. Other overlapping taxing units may agree to contribute all or part of
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future ad valorem taxes levied and collected against the value of property in the zone in excess of the "'frozen value" to pay or
finance the costs of certain public improvements in the zone. Taxes levied by the City against the values of real property in the
zone in excess of the "frozen value" are not available for general city use but are restricted to paying or financing "project costs"
within 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.
Ef'nCTJVE TAX RATE AND ROLLBACK TAX RATE .•. By each September 1 or as soon thereafter as practicable. the City
Council adopts a tax rate per $100 taxable value for the current year. The City Council is required to adopt the annual tax rate
for the City before the later of September 30 or the 60111 day after the date the certified appraisal roll is received by the City. If
the City Council does not adopt a tax rate by such required date the tax rate for that tax year is the lower of the effective tax rate
calculated for that tax year or the tax rate adopted by the City for the prec:OOing tax year. The tax rate consists of two
components: (I) a rate for funding of maintenance and operation expendit\m::s and (2) a rate for debt service.
Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and «rollback tax rate".
Effective January I, 2000, a tax rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or I 03
per cent of the effective tax rate until a public hearing is held on the proposed tax rate following a notice of such public hearing
(including the requirement that notice be posted on the City's website if the City owns. operates or controls an internet website
and public notice be given by television if the City has free access to a television channel) and the City Council bas otherwise
complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate the
qualifioo voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate
adopted for the current year to the rollback tax rate.
"Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values
(adjusted}. "Adjusted" means lost values are not included in the calculation oflast year's taxes and new values are not included
in this year's taxable values.
''Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's
values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted)
divided by the anticipated tax collection rate.
The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize
an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the
rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year.
Reference is made to the Propeny Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the
calculation of the various defined tax rates.
PROPERTY ASSESSMENT AND TAX PAYMENT ••. Property within the City is generally assessed as of January 1 of each year.
Business inventory may, at the option of the taxpayer, be assessed as of September. Oil and gas reserves are assessed on the
basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October
I of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by
State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final instalbnent
due on August I.
PENAL TIES AND INTEREST • • • Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows:
Cumulative Cumulative
Month Penalty Interest Total
February 6% 1% 7%
March 7 2 9
April 8 3 11
May 9 4 13
June JO 5 IS
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 IS% 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, propeny subject to the City's lien may be sold, in whole or in parcels,
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pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against
an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities,
including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents
governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and
obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many
cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court.
CrrY APPUCA TION OFT AX CODE ••• The City grants an exemption to the market value of the residence homestead of persons
65 years of age or older of$16,600; the disabled are also granted an exemption of$10,000.
The City has not granted any part of the additional exemption of up to 200/o of the market value of residence homesteads; the
minimum exemption that may be granted under this provision being $5,000.
The City has established the tax freeze on residence homesteads of disabled persons and persons 65 and over.
See Table 1 for a listing of the amounts of the exemptions described above.
Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt.
The City does not tax nonbusiness personal property; and the Appraisal District collects taxes for the City.
The City does not pennit split payments of taxes, and discounts for early payment of taxes are not allowed by the City, allhough
permitted on a local-option basis by the Property Tax Code.
In the past, the City bas taxed freeport property, although beginning with the 1999 tax year the City has exempted freeport
property from taxation.
The City collects an additional one-eighth cent sales tax for reduction of ad valorem taxes. The City held an election on
November 4, 2003 to increase this tax by one quarter cent, for a total of three eighths of a cent The rate increase became
effective.on October 1, 2004.
The City has adopted tax abatement policies, as described below.
TAX ABATEMENT POLICIES ... The City has established a tax abatement program to encourage economic development. In order
to be considered for tax abatement, a project must be located in a reinvestment zone or enterprise zone (a commercial project
must be in an enterprise zone) and must meet several criteria pertaining to job creation and property value enhancement. The
City bas established three enterprise zones, the north zone, of approximately 18.6 square miles, the south zone, of approximately
15.7 square miles, and lhe international airport zone, of approximately 10.3 square miles. At present, !here are 20 active
enterprise projects and tax abatements, principally in lhe northeast and southeast sections of the City. In accordance with State
law, the City has adopted policies for granting tax abatements, which provide guidelines for tax abatements for both industrial
and commercial projects. The guidelines for industrial and commercial projects are similar, except that qualifying industrial
projects may receive a ten year abatement, while qualifying commercial projects are limited to five year tax abatements.
Although older abatements made by the City were given full (100%) tax abatement, since 1997 the City has negotiated
abatements on a declining percentage basis, with a portion of the tax value being added to the City's tax roll each year during the
life of the abatement. The City's policies provide a variety of criteria that affect the terms of the abatement, including the
projected life of the project, the type of business seeking the abatement, with certain businesses targeted for abatement. the
amowtt of real or personal property to be added to the tax roll, lhe number of jobs to be created or retained, among other factors.
The policies disallow abatements for certain categories of property, including real property, inventories, tools, vehicles, aircraft,
and housing. Eacb abatement policy provides for a recapture of the abated taxes if the business is discontinued during the term
of the agreement, except for discontinuances caused by natural disaster or other factors beyond the reasonable control of the
applicant. For a description of the amount of property in the City that has been abated for City taxation pwposes, sec "Table 1 -
Valuations. Exemptions, and General Obligation Debt."
TAX INCREMENT FINANCING ZONES ... Chapter 31 I, Texas Tax Code, provides that the City and other taxing entities may
designate a continuous geographic area in its jurisdiction as a TIF if the area constitutes an economic or social liability in its
present condition and use. Other overlapping taxing units may agree to contribute all or a portion of their taxes collected against
the "'Incremental Value" in the TIF to pay for TIF projects. Any ad valorem taxes relating to growth of the tax base in a TIF
above the frozen base may be used only to finance improvements within the TIF and are not available for the payment of other
tax supported debt of the City and other participating taxing wtits. Together with other taxing 1.mits, the City participates in two
TIFs, the Central Business District Reinvestment Zone (the "Downtown TIF') and the North Overton Tax Increment Financing
Reinvestment Zone (the "North Overton TIF'').
The Downtown TIF covers an approximately 0. 71 square-mile area which includes part of the central business district and abuts
the North Overton TIF. The baSe taxable values of the TIF are frozen at the level of taxable values for 2001, the year of creation
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at $101,376,054. In FY 2005, the Downtown TIF has a taxable value of$117,046,263 before taking into account tax abatements
and exemptions. After tax abatements and exemptions, the tax value in the TIF is $114,147,891. Consequently, for the year
ended September 30, 2005, no deposit will be made to the tax: increment fund for the Downtown TIF. In addition to the City, the
County, County Hospital District and the High Plains Underground Water Conservation District (collectively, the "Taxing
Units"} participate in the Downtown TIF. Given the relative tax rates of the participants, it is anticipated that the City will be the
largest contributor to the tax increment fund if there is growth from the frozen base. The Downtown TIF was created pursuant to
City ordinance and official action of the other participating taxing entities and is to expire in 2021.
In addition to the Downtown TIF. the City enacted an ordinance in 2001 establishing the North Overton TIF. Each of the other
Taxing Units in the Downtown TIF also participate in the North Overton TIF. As is the case with the Downtown TfF, the taxes
levied by the City in the FY 2005 represent approximately 54.8% of all taxes levied by all participating Taxing Units. The City
ordinance establishing the North Overton TIF provides that the TIF will tenninate on December 31, 2031 or at an earlier time
designated by subse<tuent ordinance of the City Council. The North Overton TIP consists of approximately 325 acres near the
Central Business District of the City. The frozen tax base for the North Overton TIF was established as of January 1, 2002 at
$26,940,604. During the first year of its existence, there was no tax increment in the zone, due to the demolition of existing
structures as land was being acquired and prepared for future development. As of January I, 2004, there was approximately
$10,750,157 of tax increment value in the North Overton TIF.
TABU 1 -V ALliATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT
2004 Market Valuation Established by Lubbock Central Appraisal District
Less Exemptions/Reductions at 1000.4 Market Value:
Residential Homestead Exemptions
Homestead Cap Adjustment
Disabled Veterans
AgriculturaVOpen-Space Land Use Reductions
Pollution Exemptions
Solar and Wind-powered E~temptions
Freeport E~temptions
Tax Abatement Reductions {II
Historical Exemption
2004 Taxable Assessed Valuation
City Funded Debt Payable from Ad Valorem Taxes
General Obligation Debt (as of 6-28-05) (2)
The Bonds
Total Funded Debt Payable from Ad Valorem Taxes
Less: Self Supporting Debt (as of6-28-05) ())
Waterworlcs System General Obligation Debt
Sewer System General Obligation Debt
Solid Waste Disposal System General Obligation Debt
Drainage Utility System General Obligation Debt
Tax Increment Financing General Obligation Debt
Electric Light and ·Power System General Obligation Debt
General Purpose Funded Debt Payable from Ad Valorem Taxes c•>
General Obligation Interest and Sinking Fund as of 4-30-05
Ratio Total Funded Debt to Taxable Assessed Valuation
Ratio General Purpose Funded Debt to Taxable Assessed Valuation
2005 Estimated Population • 209,120 (S}
Per Capita Taxable Assessed Valuation -$41.432
$ 202,962,443
97,892,885
13,497,140
53,151,155
2,706,800
80,992
62,093,896
63,387,926
144,359
$ 291,725,000
43,385,000
$ 103,236,413
39,888,274
8.052,027
72,485,000
3,675,000
43,340,000
Per Capita Total Funded Debt Payable from Ad Valorem Taxes-$1,602
Per Capita General Purpose Funded Debt Payable from Ad Valorem Taxes -$308
(t) See above, "Tax Infonnation ·Tax Abatement Policy".
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$ 9,160,109,105
495,918,196
$ 8,664,190,909
$ 335,110,000
270,676,714
$ 64,433,286
$ 1,433,694
3.87%
0.74%
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(2) The statement of indebtedness does not include outstanding $24,840,000 Electric Light and Power System Revenue Bonds,
as these Bonds are payable solely from the Net Revenues of the City's Electric Light and Power System. Includes the General
Obligation Refunding Bonds, Series 2005 (the "Refunding Bonds") expected to be delivered on July 28, 200S. Excludes
outstanding bonds and certificates of obligation to be refunded by the Refunding Bonds.
(3) As a matter of policy, the City provides debt service on general obligation debt issued to fund improvements to its
Waterworks System. Sewer System, Solid Waste System and Drainage System from surplus revenues of these Systems (see
"Table 8A -Pro-Forma General Obligation Debt Service Requirements"', "Table 8B • Division of Debt Service Requirements"',
"Table 9 -Interest and Sinking Fund Budget Projection"' and ''Table 10-Computation of Self-Supporting Debt").
"Waterworks System General Obligation Debt" includes $103,236,413 principal amount of outstanding general obligation bonds
and certificates of' obligation that were issued to finance Waterworks System improvements, and that are being paid, or are
expected to be paid, from Waterworks System revenues. A portion of the proceeds of the Bonds will refund the City's obligation
to pay debt service on bonds issued by the Brazos River Authority in coMection with the construction of Lake Alan Henry by
the Brazos River Authority. It is expected after the Bonds are issued that the City will take title to Lake Alan Heruy. The City
has no outstanding Waterworks System Revenue Bonds but has obligated revenues of the Waterworks System under water
supply contracts.
"Sewer System General Obligation Debt" includes $39,888,274 principal amount of general obligation bonds and Bonds of
obligation that were issued to finance Sewer System improvements, and that are being paid, or are expected to be paid, from
Sewer System revenues. The City has no outstanding Sewer System Revenue Bonds.
"Solid Waste Disposal System General Obligation Debt» includes $8,052,027 principal amount of general obligation debt that
was issued for Solid Waste System improvements, and that is being paid, or is expected to be paid, from revenues derived from
Solid Waste service fees. The City has no outstanding Solid Waste Disposal System Revenue Bonds.
"Drainage Utility System General Obligation Debt" includes $72,485,000 principal amount of general obligation debt that was
issued for Drainage System improvements, and that is being paid, or that is expected to be paid, from revenues derived from
Drainage Utility System fees. The City has no outstanding Drainage Utility System Revenue Bonds.
''Tax Increment Financing General .Obligation Debt" represents $3,675,000 principal amount of general obligation Tax
Increment Bonds of Obligation issued for construction of improvements in the North Overton TIF, and is being paid, or is
expected to be paid, from revenues derived from the Pledged Tax Increment Revenues. The City bas no outstanding Tax
Increment Financing Revenue Bonds. However, for FY 2004 the City projects that the incremental tax revenue available to
cover debt service on the existing Tax Increment Bonds will cover approximately 300/o of such debt, and that for FY 2005 (based
upon the January I, 2004 tax roll), the incremental tax revenue available to cover debt service on the existing Tax Increment
Bonds will cover approximately 60% of such debt In FY 2006, based upon development projections that the City believes to be
reasonable, but which are dependent in part on future economic conditions and other factors that the City can not control and as
to which it can give no assurances, the City anticipates that tax increment revenues will be adequate to cover debt requirements
on the existing Tax Increment Bonds. In the interim, the City intends to make an interfund loan to cover the debt service, and if
the projected development in the North Overton TIF proceeds as expected, the City would repay such loan from revenues
received in future years. The North Overton master plan projects additional debt to be issued by the City for infrastructure
improvements in the TIF. If that occurs, there would likely be years in which the TIF would not produce revenues in amowtts
sufficient to cover all debt issued for it, at least until the TIF has reached full build-out status.
"Electric Light and Power System General Obligation Debt" includes $43.340,000 principal amount of general obligation Bonds
and refunding bonds that were issued to finance Electric Light and Power System improvements and to refund certain Electric
Light and Power System Revenue Bonds.
(4) "General Purpose Funded Debt Payable from Ad Valorem Taxes" includes $64,433,286 of general obligation debt and
$881,250 principal amowtt of outstanding Tax and Airport Stuplus Revenue Bonds of Obligation on wbicb debt service is
provided from Passenger Facility Charge ('"'PFC') revenues (see Footnote (2), "Table 9 • Interest and Sinking Fund Budget
Projection").
(5) Source: City of Lubbock, Texas.
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TABLE 2 -TAXABLE AssESSED V ALVATIONS BY CATEGORY
TaJCable Appraised Value fOT Fiscal Year Ended September 30,
2005 2004 2003
%of o/o of %of
Cate~ry Amount Total Amount Total Amount Total
Real. Resideutial, Single-family $5,156,169,884 56.29% $4,690,158,161 55.50% $4,282,214,635 56.78%
Real, Residential, Multi-Family 614,631.057 6.71% 561,569.488 6.64% 455,993,262 6.05%
Real. Vacant U!tsffracts 135.464,357 1.48% 108,625,954 1.29% 93,473,144 1.24%
Real, Ac:reage (Land Only) 64,528,231 0.70% 65.880,410 0.78% 59,644,977 0.79%
Real, Farm and Ranch Improvements 10,391,139 0.11% 10.835,088 0.13% 11,391.782 0.15%
Real, Commercial and Industrial 1,701,145,839 18.S7% 1,638.846, 765 19.39% 1,370,730,397 18.18%
Real. Oil. Gas and Other Mineral Res«Ves 11.298,200 0.12% 8.923,810 0.1 1% 7,909,460 0.10%
Real and Tangible Personal, Utilities 173,908,469 1.90% 185,761.346 2.20% 192,138,423 2.55%
Tangible Personal, Commercial and Industrial 1.198-078,620 13.08% 1.090.862,579 12.91% 974,534,729 12.92%
Tanp'ble Personal, Other 15,279,192 0.17% 16.287,022 0.19% 15,336,364 0.20%
Real Property, Inventory 10,987,935 0.12% 4,774,287 0.06% 11,087,603 O.IS%
Special Inventory 68,226,182 0.74% 68,663,514 0.81% 67,339,159 0.89%
Total Appraised Value Before Exemptions s 9,160,109,105 100.00% S8,4S 1.188,424 100.00% $7,541,793,935 I 00. ()()9/o
Less: Total Exemptions/Reductions (495,918,196) (529,598,044) (199,449,068)
Taxable Asseued Value $ 8,664, I 90,909 $7,921,590,380 $7,342,344,867
Taxable Appraised Value for Fiscal Year Ended September 30,
2002 2001
%of %of
Cate&Ory Amount Total Amount Total
Real. Residential, Singlo-Family $3,935,486,660 53.59% S3,771 ,725,980 53.71•.4
Real, Residential, Multi-Family 466,T75,473 6.36% 453,863,141 6.46%
Real, Vacant Ultsrrracu 96,407,484 1.31% 88,103,541 1.25%
Rea~ Acreage (Land Only) 60,17\,506 0.82% 60.125,617 0.86%
Rul, Fann and Ranch lmprovemm ts 12.003,318 0.16% 11,000,161 0.1 6%
Real, Commercial and lndumial 1,445.748,160 19.69% 1,348,046, I 23 19.20%
Rea~ Oil, Gas and Other Mineral Res«Vcs 8,849,390 0.12% 7,000,000 0.10%
Real and Tmg1'ble Personal, Utilities I 85,588,935 2.53% 18 I ,228,303 2.58%
Tangible Personal, Commercial and Industrial 1,039,521,384 14.16% \,072,7\3,960 15.28%
Tangible Penonal, Other 1$,296,446 0.21% 14,786,889 0.21%
Special Inventory 10,279,056 0.14% 13,320,136 0.19%
Real Property, Inventory 67,429,634 0.92% 0.00%
Total Appraised Value Before Exemptions $7,343,557,446 100.00% $7,021,9\8,851 100.00%
Less: Total Exemptions/Reductiollll (434,247 ,739) (383,007,758)
Tllllllble Assessed Value $6,909.309,707 $6,638,911,093
NOTE: Valuations shown are certified taxable assessed values reported by the Lubbock Central Appraisal District to the City
for pUfl'OSCS of establishing and levying the City's annual ad valorem tax rate and to the State Comptroller of Public Accounts.
Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates
records.
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TABLE 3A -VALUATION AND GENERAL 0BLlGA TlON DEBT HISTORY
General Purpose Ratio
Fiscal Taxable Funded Tax Debt Tax Debt Funded
Year Taxable Assessed Outstanding to Taxable Debt
Ended Estimated Assessed Valuation at End Assessed Per
9/30 PoEulation 111 Valuation <~I Per Capita ofYear<J• Vatuation C!!fita
2001 201,097 $ 6,638,911,093 $ 33,013 $ 58,122,809 0.88% $ 289
2002 202,000 6,909,309,707 34,205 63,115,346 0.91% 312
2003 204,737 7,342,344,867 35,862 70,188,204 0.96% 343
2004 206,290 7,921 ,590,380 38,400 70,161,218 0.89% 340
2005 209,120 8,664,190,909 41,432 64,433,286 0.74% 308
(!) Source: The City of Lubbock, Texas
(2) As reported by the Lubbock Central Appraisal District on City's annual State Property Tax Board Reports; subject to change
during the ensuing year.
(3) Does not include self-supporting debt (see Table 3B and footnote 3 to Table 1).
TABLE 38 -DERJVATlON OF GENERAL PURPOSE FuNDED TAX DEBT
The following table sets forth certain info.rmation with respect to the City's general purpose and self-supporting general
obligation debt The City is revising its capital improvement plan, but the City expects to issue additional self-supporting
general obligation debt within the three to five year time frame. See "Debt Info.rmation-Capital Improvement Program and
Anticipated Issuance of General Obligation Debt"'
Fiscal Funded Tax Debt Less: General Purpose
Year Outstanding Self-Supporting Funded Tax Debt
Ended at End Funded Tax Outstanding
9130 of Year Debt at End ofYear
2001 $ 175.408,321 $ 117,285,512 $ 58,122,809
2002 217,269,682 154,154,335 63,115,346
2003 295,935,000 225,746,796 70,188,204
2004 285,885,000 215,723,783 70,161,217
2005 335,110,000 (I) 270,676,714 (I) 64,433,286
(1) Projected, includes the Bonds. Includes the General Obligation Refunding Bonds, Series 2005 and excludes the bonds and
certificate of obligation refunded by such bonds. Preliminary, subject to change.
TABLE4-TAX RATE, LEVY AND COLLECTION HISTORY
Fiscal %of Current %ofTotal
Year Distribution Tax Tax
Ended Tax General Economic Interest and Collections Collections
9/30 Rate Fund Develol!ment Sinkins Fund Tax Le:;x toTaxLe~ toTaxLe~
2001 $ 0.5700 $ 0.42718 $ 0.03000 $ 0.11282 $ 37,841,145 97.58% 99.29%
2002 0.5700 0.42844 0.03000 0.11156 39,351,225 97.60% 99.41%
2003 0.5700 0.43204 0.03000 0.10796 42,286,967 97.25% 98.78%
2004 0.5457 0.41504 0.03000 0.10066 43,659,111 97.02% 99.69%
2005 (l) 0.4597 0.33474 0.03000 0.09496 39,786,978 94.75% (I) 96.48% (I)
(I) Collections for part year only, through April30, 2005.
(2) For a discussion of the factors affecting the decline in the 2005 General Fund tax rate, see "Discussion of Recent Financial
and Management Events • FY 2005 Budget."
33
TABU: S -TEN LARGEST TAXPAYERS
2004/05 %ofTotal
Taxable Taxable
Assessed Assessed
Name ofTax2axer Nature ofProee!!I Valuation Valuation
Macerich Lubbock LTD Partnership Regional Shopping Mall $ 111.433,954 1.290/o
Southwestern Bell Telephone Co. Telephone Utility 59,427,700 0.690/o
Southwestern Public Service Electric Utility 53,466,701 0.62%
United Supennarkets Distribution Center Retail Grocery 48,241,512 0.56%
Grinnell Corp-Flow O:mtrol Division Manufacturing/Fire Sprinklers 45,933,080 0.53%
Pyco Industries Cottonseed Oil Mill 43,349,210 0.50%
McLane Food Services Food Wholesale 37,823,550 0.44%
Walmart Supen:enter Retail 34,779,467 0.400/o
X Fab Texas, Inc. Electronic Manufacturing 29,152,174 0.34%
Lubbock SMSA Ltd. Partnership Telephone Utility 27,671,690 0.32%
$ 491,279,038 5.67%
GENERAL 0BUGATION DEBT LIMITATION •.. No general obligation debt limitation is imposed on the City under current State
law or the City's Home Rule Charter (see "Tax Rate Limitation").
TABLE 6 -TAX ADEQUACY I)
Maximum Principal and Interest Requirements,
All General Obligation Debt, 20Q6<2l ................................... ~ ................................................................................... $ 34,064,137
$0.4012 Tax Rate at 98%Collection Produces ................................................................................................................. $ 34,065,519
Maximum Principal and Interest Requirements,
General Purpose General Obligation Debt, 2005°l .................................................................................................. $ 8,094,947
$0.0954 Tax Rate at 98% Collection Produces ................................................................................................................. $ 8,100,325
(I) Based on 2004-2005 taxable assessed valuation. Preliminary, subject to change.
(2) See Table 8A.
(3) See Table 88.
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TABLE 7 -ESTIMATED OVERLAPPING DEBT
Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities
on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures.
This statement of direct and estimated overlapping ad valorem tax bonds (''Tax Debt") was developed from infonn.ation
contained in ''Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts
relating to the City, the City bas not independently verified the accuracy or completeness of such infonn.ation, and no person
should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed may have issued
additional Tax Debt since the date bereof, and such entities may have programs requiring the issuance of substantial amounts of
additional Tax Debt, the amount of which caMot be determined. The following table reflects the estimated share of overlapping
Tax Debt of the City .
2004105 Total Funded Ciry's Authorized
Taxable Debl Estimated Overlapping But Unissued
Assessed Tu As Of % G.O.Dcbt Debt As Of
Taxi !!!I Jurisdiction Value Rate 04-30.05 ~licable As of04-30.05 04-30..05
City of Lubbo<:k s 8,605,424.748 s 0.45970 $ 335.110,000 (I) 100.00".4 s 335,110,000 s 31,717,000
Lubbock Independent School District 6,303,3}9,726 1.60560 103,675.060 98.91% 102.545,002 52,248,5~3
Lubbock County IO.l9S..9S9.098 0.25587 76,610,000 82.94% SOS,347
Lubbock County Hospital District 10.194,687,81 I 0.10742 82.94%
High Plains UodergrOUDd Wa!.er CQnservalion
District No. I 10..194,687,81 I 0.00830 82.94%
frenship lndtpendent S<:hool District 1,290,505.343 1.68060 41,960,026 64.44% 27,039,041
Idalou Independent S<:hool District 128,551,070 1.50000 795,000 1.10% 8,745
Lubbock-Cooper Independc:Dt Sdlool District 613.192.253 1.51760 13,219,SSS IS.30% 2.022,592
New Deal Indepeadent School District 124.288,155 1.50000 0.03%
Total Dire<:! and Overlapping G.O. Debt s 466,725,379
Ratio of Di=t and Ovcrtappipg G.O. Debt to Taxable Assessed Valu.uion . . . . . . . . . • . • • . • • . • . . . • . . • • . . . . • . . • . . . . . . • . . • . • . S.42%
Per Capita Din:ct and Ovc:rlapping G.O. Debt .............................................................................. S 2.262
(1) Includes the Bonds. Includes the General Obligation Refunding Bonds, Series 200S and excludes the bonds and certificate
of obligation refunded by such bonds. Preliminary, subject to change.
35
DEBT INFORMATION TABLE 8A • PRo-FoRMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS Fiscal Year Total %of Ended Outstanding Debt (l)(ll The Bonds()> Combined Principal 9/30 Principal Interest Total -Principal Interest Total Requirements Retired 2005 $ 16,005,000 $ 11,899,223 $ 27,904,223 $ . $ . $ . $ 27,904,223 2006 16,855,000 13,220,391 30,075,391 1,755,000 2,233,746 3,988,746 34,064,137 2007 17,685,000 12,361,331 30,046,331 2,060,000 1,927,800 3,987,800 34,034,131 2008 17,200,000 11,659,253 28,859,253 2,145,000 1,856,788 4,001,788 32,861,041 2009 16,945,000 10,953,741 27,898,741 2,230,000 1,774,650 4,004,650 31,903,391 26.45% 2010 16,625,000 10,247,&42 26,872,842 2,330,000 1,680,538 4,010.S38 30,883,379 2011 16,930,000 9,514,175 26,444,175 2,445,000 1,576,013 4,021,013 30,465,188 2012 16,040,000 8,777,341 24,817,341 2,570,000 1,456,750 4,026,750 28,844,091 2013 16,345,000 8,051,342 24,396,342 2,715,000 1,324,625 4,039,625 28,435,967 2014 16,700,000 7,289,808 23,989,808 2,880,000 1,184,750 4,064,750 28,054,558 53.67% 2015 14,030,000 6,598,759 20,628,759 3,045,000 1,036,625 4,081,625 24,710,384 2016 13,470,000 5,973,250 19,443,250 3,220,000 880,000 4,100,000 23,543,250 2017 13,080,000 5,336,010 18,416,010 3,405,000 714,375 4,119,375 22,535,385 2018 13,555,000 4,692,011 18,247,011 3,595,000 539,375 4,134,375 22,381,386 2019 12,065,000 4,027,596 16,092,596 3,810,000 354,250 4,164,250 20,256,846 77.39% 2020 10,920,000 3,471,701 14,391,701 2,$25,000 195,875 2,720,875 17,112,$76 2021 8,880,000 2,991,103 11,871,103 2,655,000 66,375 2,721,375 14,$92,478 2022 8,465,000 2,568,695 11,033,695 I 1,033,69$ 2023 7,195,000 2,188,830 9,383,830 9,383,830 2024 4,950,000 1,8S3,2Sl 6,803,251 6,803,251 90.38% 2025 3,485,000 1,644,639 5,129,639 5,129,639 2026 3,395,000 1,463,114 4,858,114 4,858,114 2027 3,575,000 1,283,950 4,858,950 4,858,950 2028 3,755,000 1,095,068 4,850.068 4,8$0,068 2029 3,955,000 896,385 4,851,385 4,851,385 95.SS% 2030 4,170,000 686,998 4,8$6,998 4,856,998 2031 4,390,000 466,390 4,856,390 4,856,390 2032 2,240,000 297,2$0 2,537,250 2,537,250 2033 2,350,000 182,SOO 2,532,500 2,532,500 2034 2,475,000 61,875 2,536,875 2,536,875 100.00% $ 307,730,000 $ 151,753,820 $ 459,483,820 $ 43,385,000 $ 18,802,534 $ 62,187,534 $ 521,671,354 (I) "Outstanding Debt" does not include lease/purchase obligations. Includes the General Obligation Refunding Bonds, Series 2005 and excludes the bonds and certificate of obligation refunded by such bonds. (2) Average life of the issue is 8.850 years. Interest on the Certificates has been calculated at the TIC rate of 4. I 80% for purposes of illustration. Preliminary, subject to change. 36 ....... ~ ,..... 0"\ " "
'"' ....... ... J TABLE 88 -DMSION OF DEBT SERVICE R£QUIREMENTS Less: less: Less: Less: Less: Less: Solid Waste Dnlnage Tax Eletrric Waterworks Sewer Disposal Utilily Increment light and Genenl System System System System Financing Power System Purpose General Genenl Genenl General General General General Combined Requirements<Jl Obligation Obligation Obligation Obligation Obligation Obligation Obligation Princieal Interest Total Requirements (I' Reguirements ~uirements Reguirements Reguirements Reguiremenrs Reguirements $ 16,005,000 $ 11,899,223 $ 27,904,223 $ 6,544,773 $ 5,834,616 $ 789,006 $ 4,671,744 $ 286,725 $ 1,682,411 $ 8,094,947 18,610,000 15,454,137 34,064,137 10,788,940 5,379,087 796,411 4,840,465 285,600 4,388,907 7,584,727 19,745,000 14,289,131 34,034,131 10,676,165 5,556,890 783,365 4,841,912 289,100 4,314,586 7,572,113 19,345,000 13,516,041 32,861,041 10,267,799 5,221,615 773,284 4,843,899 287,225 4,247,086 7,214,132 19,175,000 12,728,391 31,903,391 10,106,551 4,937,709 758,285 4,841,240 285,&25 4,171,149 6,802,632 18,955,000 11,928,379 30,8&3,379 9,939,849 4,644,926 743,402 4,843,115 289,825 4,092,593 6,329,670 19,375,000 11,090,188 30,465,188 9,847,495 4,482,884 722,710 4,842,660 288,525 4,027,099 6,253,815 18,610,000 10,234,091 28,844,091 8,968,796 4,244,153 711,200 4,837,830 287,025 3,944,649 5,850,438 19,060,000 9,375,967 28,435,967 8,925,514 4,055,291 699,174 4,840,404 285,325 3,875,449 5,754,811 19,580,000 8,474,558 28,054,558 8,889,693 3,890,831 681,755 4,838,253 288,325 3,797,476 5,668,225 17,075,000 7,635,384 24,710,384 8,767,612 2,019,849 664,681 4,842,053 285,909 3,721,389 4,408,892 16,690,000 6,853,250 23,543,250 8,735,122 1,239,870 647,661 4,841,828 287,950 3,641,379 4,148,940 16,485,000 6,050,385 22,535,385 8,704,911 1,201,060 625,225 4,837,078 289,450 3,564,751 3,312,910 17,150,000 5,231,386 22,381,386 8,656,237 1,170,909 612,346 4,841,953 285,369 3,493,669 3,320,904 15,875,000 4,381,846 20,256,846 8,306,782 1,134,378 418,175 4,836,203 285,694 1,953,781 3,321,834 13,445,000 3,667,576 17,112,576 5,901,650 378,450 411,863 4,839,578 290,309 1,957,625 3,327,102 11,535,000 3,057,478 14,592,478 4,003,431 381,581 404,813 4,836,703 289,056 1,951,238 2,725,656 8,465,000 2,568,695 11,033,695 1,280,781 378,819 270,400 4,852,254 287,181 1,954,388 2,009,873 7,195,000 2,188,830 9,383,830 740,588 53,563 273,644 4,850,863 289,713 1,953,363 1,222,099 4,950,000 1,853,251 6,803,251 737,100 51,188 271,294 4,851,845 286,650 272,863 332,313 3,485,000 1,644,639 5,129,639 -. . 4,852,714 276,925 3,395,000 1,463,114 4,858,114 -. -4,858,114 3,575,000 1,283,950 4,858,950 -4,858,950 3,755,000 1,095,068 4,850,068 ---4,850,o68 3,955,000 &96,385 4,851,385 -. -4,851,385 4,170,000 686,998 4,856,998 -. . 4,856,998 4,390,000 466,390 4,856,390 -. 4,856,390 2,240,000 297,250 2,537,250 --2,537,250 2,350,000 182,500 2,532,500 --. 2,532,500 2,475,000 61!875 2,5361875 --2,5361875 $ 351,115,000 s 170,556,354 $ 521,671,354 s 150,795,790 $ 56,263,666 $ 12,058,693 $ 138,263,118 $ 5,750,781 === s 63,283,273 $ 95,256,033 (I) Includes the -Bonds. Includes the General Obligation Refunding Bonds, Series 2005 and excludes the bonds and certificate of obligation refunded by such bonds. Preliminary, subject to change. 37
TABLE 9 -INTEREST AND SINKING FuND BUDGET PROJECTION
General Obligation Debt Service Requirements (Pro-Fonna), Fiscal Year Ending 9-30-05
Fiscal Agent, Tax Collection and Other Uses
Total R«tuirements
Sources of Funds
Interest 8Jld Sinking Fund, 9-30-04
Budgeted Ad Valorem Tax Receipts
Budgeted Transfers From:
Water Fund <II
Sewef Fund (II
Solid Waste Fund 111
Drainage Utility Fund II)
Electric Fund
TIFFund111
Airport Fund • from Passenger Facility Charges ("PFCs")
Budgeted Interest Earned
Total Sources of Funds
Projected Balance, 9-30-05
(1) See "Table 10-Computation of Self-Supporting Debt".
(2)
$
$
$
$
$
$
27,904.223
15,000
27,919,223
2,852,843
7,954,344
7,085,088
5,940,796
813,084
4,852,706
1,682,411
286,725
195,630
189,405
31,853,032
3,933,809
(2) ·Passenger Facility Charges ("PFCs") are authorized by the Federal Aviation Administration ("FAA"). PFC revenues must
be used for allowable costs of FAA approved airport projects, including debt service on airport obligations issued for
approved airport projects. The City has issued several series of debt for municipal airport improvements ("Airport Debt"),
including tax and airport surplus revenue Bonds of obligation in 1993 and 1998, and general obligation refimding bonds in
1985 and 1997, which refunded prior issues of Airpon Debt A portion of the refunding bonds have been allocated to the
airport in proportion to the principal amount of Airport Debt that was refunded. PFC revenues collected for fiscal year
ending 9-30-04 were $1,402,033, and, $195,650 ofPFC revenues have been budgeted for payment of Airport Debt in 2004-
05, which «{uates to self-supporting Airpon Debt with a principal balance of $1,368,750. For 2004-05, the portion of
Airport Debt that is being funded from general fund contributions (ad valorem taxes) equates to a principal balance of
$2,366,250.
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TABLE 10 -COMPUTATION OF SELF•SVPPORTING DEBT
THE WATERWOIU<S SYSTEM (II
Net System Revenue Available, Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-05
Balance Available for Other Pu~poses
Requirements for System General Obligation Debt. Fiscal Year Ending 9-30-05
Percentage of System General Obligation Debt Self-Supporting
$ 16,142,912
-()...
s 16,142,912
$ 6,544,773
100.00%
(I) Each Fiscal Year the City tnmsfers Net Revenues of the Waterworks Enterprise Fund to the Genetal. Obligation Interest and
Sinking Fund in an amount equal to debt service requirements on Waterworks System general obligation debt
THE SEWER SYSTEM(Il
Net System Revenue Available, Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-05
Balance Available for Other Pu1p0ses
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-05
Percentage of System General Obligation Debt Self-Supporting
$ 8,720,503
-0-
$ 8,720,503
$ 5,834,616
100.00%
(I) Each Fiscal Year the City tnmsfers Net Revenues of the Sewer Ente!prise Fund to the General Obligation Interest and Sinking
Fund in an amo1mt equal to debt service requirements on Sewer System general obligation debt
THE SOLID WASTE DISPOSAL SYSTEM c••
Net System Revenue A vail able, Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-05
Balance Available for Other Purposes
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-0S
Percentage of System General Obligation Debt Self-Supporting
·s 2,538,S6S
-0-
$ 2,538,565
$ 789,006
100.00%
(1) Each Fiscal Year the City transfers Net Revenues of the Solid Waste Enterprise F~md to the General Obligation Interest and
Sinking Fund in an amount equal to debt service requirements on Solid Waste System general obligation debt
THE DRAINAGE SYSTEM (J)
Net System Revenue Available, Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-05
Balance Available for Other Purposes
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-05
Percentage of System General Obligation Debt Self-Supporting
$ 5,167,840
-0-
$ 5,167,840
$ 4,671,744
10().00%
(I) Each Fiscal Year the City transfers Net Revenues of the Drainage Enterprise Fund to the General Obligation Interest and
Sinking Fund in an amount equal to debt service requirements on Drainage System general obligation debt.
THE ELECTRJC LlGHT AND POWER SYSTEM CO
Net Electric Light and Power System Revenue Available, Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-05
Balance Available for Other Purposes
Requirements for Electric System General Obligation Debt. Fiscal Year Ending 9-30-05
Percentage of Electric System General Obligation Debt Self-Supporting
$ 10,269,560
4,276,703 s 5,992,857
$ 1,682,411
100.00%
(I) The City transfers Net Revenues of the Electric Light and Power Ente~prise Fund to the General Obligation Interest and Sinking
Fund in an amount equal to debt service requirements on Electric Light and Power System general obligation debt
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TABLE 11 • AUTHORJZED BUT UNISSUED GEN£RAL OBLIGATION BoNDS
Waterworks System
Sewer System
Street Improvements
Street Improvements
Purpose
Civic Center/Auditorium Renovations and Improvements
Park Improvements
Police/Municipal Coun Facilities
Library Improvements
Fire Stations
Animal Shelter Renovations and Improvements
Date
Authorized
10-17-87
5-21-77
5-1-93
5-15..{)4
5-\5..{)4
5·15-04
5-15-04
S-15-04
5-15-04
5-15-04
Amount
Authorized s 2,810,000
3,303,000
10,170,000
9,210.000
6,450,000
6.395.000
3,350,000
2,145,000
1.405,000
1,045,000
$ 46,283,000
Amount
Previously
Issued s 200,000
2,175,000
10,166,000
1,590,000
190,000
85,000
160,000
$ 14,566,000
Unissued
Balance s 2,610,000
1,128,000
4,000
7,620,000
6,450,000
6,205,000
3,350,000
2,145,000
1,320,000
885,000
$ 31,717,000
ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ••• The City Council adopted a resolution during the 1984-85 budget
process establishing capital maintenance funds for capital projects. A capital improvement plan is made for planning purposes
and may identify projects that will be deferred or omitted entirely in fuiUre years. In addition, as conditions change. new projects
may be added that are not currently identified Under current City policy, for a project to be funded as a capital project it must
have a cost of $25,000 or more and a life of seven or more years. For FY 2004, the City Council approved $10.4 million in total
expenditures for capital projects for all general purpose projects, as well as projects for the electric fund. water fund, sewer fund,
solid waste fund, stonnwater fund and airport fund (down from SS7.9 million in FY 2003). The Capital Projects Fund budget for
FY 2004 also included an additional $151.9 million in future improvements for all City departments over the four succeeding
fiscal years. The improvements included in the City's capital improvement plan are generally funded from a blend of bond
proceeds, reserves or current year revenue sources.
As shown in Table II, the City bas $27.9 million of authorized but unissued bonds from the May 15, 2004 bond election. When
that election was held, the City anticipated that the bonds would be issued over the 2004 through 2008 time frame. The City
typically issues voted bonds for general purpose City projecu, such as streets, parks, libraries, civic centers and public safety
imp.rovements. However, the City has incurred substantial tmvoted tax supported debt to fund portions of the capital budget of
the electric fund, water fund, sewer fund, solid waste fund, stonnwater fund and airpon fund. As described elsewhere in this
Official Statement, such enterprise fund indebtedness is generally anticipated to be self~supporting from enterprise fund
revenues.
Within the next six months, the City anticipates issuing approximately $6,000,000 in general obligation bonds from its voted
authority and approximately $37,500,000 in ad valorem tax and waterworks system revenue certificates of obligation to finance
various capital projects. In addition, the City's General Obligation Refunding Bonds, Series 2005, are expected to be delivered
on July 28, 2005.
TABLE 12-OTHER 0BUGATIONS
At December 31,2004, the City had capital lease obligations for leased equipment in the following amounts:
Fiscal Govenunental Business-type Total
Year Capital Lease Capital Lease Capital Lease
Ended Minimum Minimum Minimum
9/30 Pa~ent Payment PaX!!!ent
2005 $ 854,159 s 643,732 s 1,497,891
2006 545,380 418,741 964,121
2007 353,694 353,694
Less:
Interest p8,S82} ~65,572~ ~104,154~
$ 1,360.957 $ 1,350,595 $ 2,711,552
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PENSION FlJND ... TEXAS MUNICIPAL RETIREMENT SYSTEM (l)(l) ••• All pennanent, full-time City employees who are not
firefighters are covered by the Texas Municipal Retirement System {"TMRS"). TMRS is an agent, multiple-employer, public-
employee retirement system which is covered by a State statute and is administered by six trustees appointed by the Governor of
Texas. TMRS operates independently of its member cities.
The City joined TMRS in 1950 to supplement Social Security. All City employees except firefighters are covered by Social
Security. Options offered under TMRS. and adopted by the City, include current, prior and antecedent service credits, five year
vesting, updated service~crcdit, 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 fur one by the
City. Since October II, 1997, the employee contribution rate has been 7% of gross salary. The City's contribution rate is
calculated each year using actuarial techniques applied to experience. The 2004 contribution rate is 14.54%. 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, 2003, the actuarial value of assets held by TMRS (not including those of the Supplemental Disability Fund,.
which is "pooled,), for the City were $182,884,183. Unfunded actuarial accrued liabilities on December 31, 2003 were
$56,925,251, which is being amortized over a 25-year period beginning January, 1997. Total contributions by the City to TMRS
for calendar year 2003 were $8,747.723.
FIREMEN'S RELIEF AND R£TIREMENT FUND (1> ••• City of Lubbock firefighters are members of the locally administered
Lubbock Firemen's Relief and Retirement Fund (the "Fund"), operating under an act passed in 1937 by the State Legislature and
adopted by City firefighters, by vote of the department, in 1941. Firefighters are not covered by Social Security.
The Fund is governed by seven trustees, three firefighters, two outside trustees (appointed by the other trustees), the Mayor or
the representative thereof and the chief financial officer or the representative thereof. Execution of the act is monitored by the
Firemen's Pension Commissioner, who is appointed by the Governor.
Benefits of retired firemen are determined on a "formula" or a "final salary" plan. Actuarial reviews are performed every two
years, and the fund is audited annually. Firefighters contribute a percentage of full salary into the fund. The firefighters'
contribution rate for 2005 is 12.43%. The City must contribute a like amount; however, the city contributes on a basis of the
percentage of salary which is a ratio adjusted annually that bears the same relationship to the firefighter's contribution rate that
the City's rate paid into the TMRS and FICA bears to the rate other employees pay into the TMRS and FICA. The City's
contribution rate for 2005 is 19.94%.
As of December 31, 2003, unfunded pension benefit obligations were $16,588,639 which is being amortized over a 13 year
period beginning January I, 1997.
(1) For historical information concerning the retirement plans, see Appendix B, "Excerpts from the City's Annual Financial
Report"-Note #In, Subsection E, "Retirement Plans".)
(2) Source: Texas Municipal Retirement System, Comprehensive Annual Financial Repon for Year Ended December 31,
1003, "CityofLubbock, T~".
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FINANCIAL INFORMATION
TABLE 13 -CJuNC£S IN NET ASsE-rs<1> c
Fiscal Year Ended S~tember 30,
2004 2003 2002
Govemmencal Govemmenla) Governmental
Activities Activities Activities
REVENUES· (in OOO's) (in OOO'sl ~in OOO'sl
Program Revenues:
( Charges for services $ 12,713 s 13,888 s 9,369
Operating grants and conlributions 9,643 12,137 7,007
General Revenues:
Property Taxes 44,497 42,303 40,408
Sales Taxes 30,555 29,092 28.903
Other Taxes 3,793 3,712 3.681
Franchise Taxes 9,654 6,613 6,998
Granl/conlributions not restricted to specific programs (25) (
Other 4,274 3,834 6,227
Total Revenues $ 1151129 s 111,579 $ 102,568
EXPENSES·
Administrative/Community Services s 22,313 s 21,793 s 32,483
Electric 2,471 2,373 2,585
Financial Services 2,387 1,965 1,908 < Fire 21,998 20,207 18,664
General Government 20,562 21,009 23,436
Human Resources 777 786 883
Police 33,249 31,429 29,715
Streets 10,789 9,827 5,940
Public Works 3,078 9,856 4,322
Interest on 1..-T Debt 4,593 3,346 3,382
Total Expenses s 122,217 s 122,591 s 123,318
Change in net assets before special icems &: ttansfers (7,088) (11,012) (20,750)
Special items (687)
Transfers 9,745 2,554 15,668
Change in net assets s 2,657 s (8,458) $ (5,769)
Net assets-beginning of year, as restated $ 101,684 s 110,142 s 115,911
Net assets -end of year $ 104,341 $ 101,684 $ I 10,142
(1) Data shown in Table 13 reflects general governmental activities reponed in accordance with GASB Statement No. 34. The
FY 2003 financial statements include a management discussion and analysis of the operating results of such fiscal year,
including restatements to beginning fund balances and net assets. As of the date of this Official Statement, a copy of the FY
2003 financial statement can be accessed through the City's website, http://www.ci.lubbock.tx.us.
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TABLE 13-A -GENERAL FUND REVENUES AND EXPENDITURE HISTORY
Fiscal Year Ended September 3o,<•>
Revenues 2004 2003 2002 2001 2000
Ad Valorem Taxes $ 33,233,274 $ 32,194,087 $ 29,885,252 s 28,604,141 $ 26,595,709
Sales Taxes 30,554,632 29,092,032 28,902.649 28,183,746 27,121,078
Franchise Fees 9,654,447 6,612,822 6,998,085 7,684,683 6,619,155
Miscellaneous Taxes 939,456 848,816 820,507 774,587 743,771
Licenses and Pennits 1,982,281 1,875.118 1,475,451 1,202,794 1,138,924
Intergovernmental 428,459 348,787 351,878 333,171 365,671
Charges for Services 4,467,733 4,945,591 4,472,094 4,299,958 4,210,334
Fines 3,675,856 3,672,509 3,069,362 3,051,055 2,834,208
Miscellaneous Taxes 1.442,677 1,532,346 1,058,237 995,494 1,143,226
Interest 334,730 285,756 433,393 1,058,096 1,108,662
Operating Transfers <l> 10,723,891 1(),345,945 15,023,466 14,276,074 13,636,764
Total Revenues and Transfers $ 97,437,436 $ 91,753,809 $ 92,490,374 $ 90,463,799 $ 85,518,102
Expcndih!res
General Government $ 5.633.469 $ 5,717,151 $ 5,596,868 $ 5,772,031 $ 5,255.236
Financial Services 2,333.469 1,969,413 1,958.051 1,833,933 1,919,299
Non-departmental 214,562 175,499 1,497,485 1,716,167 606,843
Admin/Communicty Services 18,156,455 17,837,076 17,997,152 18,314,255 17,293,247
Police 32,400,371 30,321,182 28,905,651 28,139,047 25,561,261
Fire 20,613,077 19,511,797 18,632,109 17,903,118 17,183,526
Streets 7,180,843 6,610,394 6,510,394 7,443,017 8,004,402
Electric Utilities 2,185,286 2,o?8,277 2,168,620 2,146,212 1,923,584
Human Resources 754,225 180,529 895,311 913,250 871,596
capital Outlay 475,585 378,059 480,749
Operating Transfers 4,212,915 13,555,338 5,951,669 6,187,379 7,526,481
Total Expenditures $ 94,160,257 $ 98,934,715 $ 90,594,059 $ 9013681409 $ 86,145.475
Excess (Deficiency) of Revenues
and Transfers Over Expenditures $ 3,277,179 $ (7.180,906) $ 1,896,315 $ 95,390 $ (627,373)
Fund Balance at Beginning of Year 9,417,346 16,598,252 <•• 16,716,042 16,620,652 17,248,025
Fund Balance at End of Year $ 12,694,525 $ 9,417,346 $ 18.612,357 $ 16,716,042 $ 16,620,652
Less: Reserves and Designations O> (1,903,690) (2.361,860) (2,857,096)
Undesignated Fund Balance $ 12,694,525 $ 9,417,346 $ 16,708,667 $ 14,354,182 $ 13,763,556
(I) Prior years have been restated to reflect CIUTent organization.
(2) For fiscal year 2003/04, the water, solid waste and waste water funds transferred an amOWit sufficient to cover the pro rata
share of the City's general and administrative expenses and an amount representing a payment in lieu of ad valorem taxes. The
water and solid waste funds ttansfem:d an amount representing a franchise payment equal to 4% of gross receipts. The waste
water fund ttansferred an amount representing a franchise payment equal to 6% of gross receipts. The Electric System was not
required to make transfers to the General Fund for any of the foregoing purposes during the fiscal year.
(3) The City's financial policies target a General Fund undesignated balance of at least two months of General fund
expenditures. The undesignated fund balance is at 81% of the target established by the City's financial policies.
(4) The "Fund Balance at Beginning of Year" was restated.
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T ABLIE 14 -MUNICIPAL SALES TAX HISTORY
The City has adopted the Municipal Sales and Use Tax Act. VTCA, Tax Code, Chapter 321, which grants the City the power to
impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not
pledged to the payment of the Bonds or other debt of the City. In addition, in January, 1995, the voters of the City approved the
imposition of an additional sales and use tax of one-eighth of a cent as authorized by VTCA, Tax Code, Chapter 323, as
amended. Collection for the additional tax corrunenced in October, 1995 with the proceeds from the one-eighth cent sales tax
designated for the use and benefit of the City to replace property tax revenues lost as a result of the adoption of the tax. At an
election held in the City on November 4, 2003, voters approved an additional one-quarter cent sales and use tax, with the
proceeds to be dedicated to the reduction of ad valorem taxation, and an additional one-eighth cent sales and use tax under
Section 4A of the Texas Development Corporation Act, to be used for economic development in the City. The City began to
receive proceeds of these taxes in October 2004. Collections and enforcements of the City's sales tax are effected through the
offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, to the City monthly, after
deduction of a 2% service fee. Historical collections of the City's 1.125% local Sales and Use Tax are shown below:
Fiscal
Year %of Equivalent of
Ended Total Ad Valorem Ad Valorem
9/30 CollecteJ•> TaxLe~
2001 $ 28,183,746 74.48% $
2002 28,902,648 73.37%
2003 29,092,032 73.85%
2004 30,554,632 70.67%
2005 20,587,235 m 51.74%
(I) Excludes bingo tax receipts.
(2) Based on population estimates of the City.
(3) Partial collections October J, 2004 through Apri130, 2005.
Effective October I. 2004 the sales tax breakdown for the City is as follows:
City:
City Sales & Use Tax
City Sales & Use Tax for Property Tax Relief
City Sales & Use Tax for Economic Development
County Sales & Use Tax
State Sales & Use Tax
Total
FINANCIAL POLICIES
Tax Rate
0.4245
0.4183
0.3962
0.3857
0.2376
1.000¢
0.375¢
0.125¢
0.500¢
6.250¢
8.250¢
Per
Capita (l}
$ 140.15
143.08
142.09
148.1 I
98.45
Basis of Accounting . . . The accounting policies of the City conform to generally accepted accounting principles of the
Governmental Accounting Standards Board and program standards adopted by the Government Finance Officer's Association of
the United States and Canada ("GFOA"). The GFOA has awarded a Certificate of Achievement for Excellence in Financial
Reporting to the City for each of the fiscal years ended September 30, 1984 through September 30, 2002. The City will submit
the City's 2004 report to GFOA to determine its eligibility for another certificate.
Comprehensive Annual Financial Report fCAFRJ •.. Begitming with the year ended September 30, 2002, the City's CAFR has
been presented under the Governmental Ae«~unting Standard Board ("GASB") Statement No. 34, Basic Financwl Statements -
and Management's Discussion and Analysis -for State and Local Governments. GASB Statement No. 37, Basic Financial
Statements -and Management's Discusswn and Analysis-for Stare and LoCtJl Governments: Omnibus, and GASB Statement No.
38, Certain Financial Note Disclosures. For additional information regarding accounting policies that are applicable to the City,
see Note l. "Summary of Significant Accounting Policies" in the financial statements of the City attached as Appendix B.
General Fund Balance ... The City's objective is to maintain an unreservedlundesignated fund balance at a minimum of an
amount equal to two months budgeted operating expenditures to meet unanticipated contingencies and fluctuations in revenue.
The City's General Fund currently has an unreservedlundesignated fund balance that is at 80.9% of the targeted working capital
reserve amount.
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Enterprise Fund Balance ... It is the policy of the City to maintain Unrestricted Net Assets equal to three months operating
expense and debt requirements in each of the Electric, Water, Solid Waste and Sewer funds for unforeseen contingencies
(although the Electric System has not funded any operating reserves under this policy). The City's financial policy provides that
such Net Assets shall be accumulated over a ten year period. which commenced in 1996. For a variety of reasons, including
increased transfers from the water, sewer and solid waste funds to the General Fund following the <»Ssation of transfers to the
General Fund from the electric fund in FY 2003, the City is not presently in compliance with its fund balance policies for all its
enterprise funds. See "Discussion of Recent Financial and Management Events -September 30, 2003 Financial Results."
According to audited numbers for FY 2004, the current requirements for operating and rate stabilization reserves for each
ente~prise fund and current unrestricted net assets for each ente~prise fund are as follows:
Enterprise Fund Current Reserve AduaJ
Required Unrestricted Net
Assets
Electric $28.5 million $7.0million
Water $6.5 million $14 million
Sewer $4.2 million $6.3 million
Storm Water $.S million $1.3 million
Solid Waste $4.7 million $6.0 million
Airport (t) $1.97 million $-1 million
(I) The Airport Fund has not recovered from the events of September II, 2001.
Enterprise Fund Revenl{§§ ... It is the policy of the City that each of the Electric, Water, Solid Waste and Sewer funds be
operated in a manner that results in self sufficiency, without the need for additional monetary transfers from other funds
(although the Electric System received transfers from the General Fund during the FY 2003). Such self sufficiency is to be
obtained through the rates, fees and charges of each of these enterprise funds. For purposes of determining self sufficiency, cost
recovery for each enterprise fimd includes direct operating and maintenance expense, as well as indirect cost recovery, in-lieu of
transfers to the General Fund for property and franchise lax payments, capital expenditures and debt service payments, where
appropriate.
12elzt Service FU11{i 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:
I) Prior to August I, the City Manager submits to the City Council a proposed operating budget for the fiscal year
commencing the following October I. The operating budget includes proposed expenditures and the means of
financing them.
2) Public hearings are conducted to obtain taxpayer comments.
3) Prior to October I the budget is legaUy enacted through passage of an ordinance.
4) The City Manager is authorized to transfer budgeted amounts between accounts below the depanment level. Any
transfer of funds between depanments or higher level are presented to the City Council for approval by ordinance
before the funds are transferred or expended. Expenditures may not legally exceed budgeted appropriations at the
fimd level.
5) Fonnal 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. Fonnal
·budgetary integration is not employed for Debt Service funds because effective budgetary control is alternatively
achiev.ed through general obligation bond indenture and other contract provisions.
6) The Budget for the General Fund is adopted on a basis consistent with generally accepted accounting principles.
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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) Budgelaly comparison is presented for the General Fund in the combin~ financial statement section of the
Cemprehensive Annual Financial Report.
The City has received the Distinguished Budget Presentation Award from the GFOA for the following budget years beginning
October I, 1983-88 and 1990-04. The City will submit the FY 2005 budget to the GFOA to determine its eligibility for another
award.
Insurance and Risk Management ... The City is self-insured for public entity liability and health benefits covenge. Risk
management purchases a $10,000,000 excess insurance policy for liability claims io excess of$250,000, per occurrence. Airport
liability insurance and workers' compensation is insu~ under guaranteed cost policies. The Health Benefits are covered a fully
insur~ program with a $10,765,643 cap and a $150,000 individual cap. The City maintains insurance policies with large
deductibles for fire and extended property coverage and boiler and machinery 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 September 30,2004 the total Net Assets of these insurance funds were as follows:
Self-insurance -health
Self-insurance -risk management
$ 4,375,796
$ 5,727,822
The City obtains an actuarial study of its risk management fund (the "Risk Fund") every year. In fiscal year 2004, an actuarial study
was conducted that consi~ the types of insurance protection obtained by the City, the loss exposure and loss history, and claims
being paid or reserved that are not covered by insurance. The 2004 actuarial review recommended that the liabilities of the Risk
FWld be increased to $6,437,000 from $4,824,000 to the minimwn expected confidence level of the Govenunent Accounting
Standard Board Statement Number I 0 ("GASB I 0"), which requires maintenance of risk management assets at a level representing at
least a 50% confidence level that all liabilities, if presented for payment immediately, could be paid. The Risk Fund has net assets
restricted for inSU11lnce claims of $5,715,000 over the recommended funding level. Given the risk net assets balan¢e, the City
exceeds the minimum GASB 10 requirement.
INVESTMENTS
The City invests its investable funds in investments authorized by TelUIS law in accordance with investment policies approved by the
City Council of the City. Both state law and the City's investment policies are subject to change.
LEGAL INVESTMENTS ... Under Texas taw, the City is authorized to invest in (I) obligations, including letters of credit, of the United
States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3)
collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security
for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on
which are WlCOnditionally guaranteed or insured by, or backed by tbe full faith and credit of, the State of Texas or the United States
or their respective agencies and instrumentalities, (S) obligations of states, agencies, counties, cities, and other political subdivisions
of any state rated as to investment quality by a nationally recognized investment rating finn not Jess than A or its equivalent, (6)
certificates of deposit that are guaranteed or insured by the Federal Deposit Insurance Corporation or are secured as to principal by
obligations described in the preceding clauses or in any other manner and amount provided by law for City deposits, (7) certificates
of deposit and share certificates issued by a state or federal credit union domiciled in the State of Texas that are guaranteed or insured
by the Federal Deposit Insurance Corporation or the National Credit Union Sbarc Insurance Fund, or are secured as to principal by
obligations described in the clauses (I) through (5) or in any other manner and amount provided by law for City deposits, (8) fully
collateralized repurchase agreements that have a defined tennination date, are fully secured by obligations described in clause (1),
and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9)
bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are
ra1ed at least A-l or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper that is
ra1ed at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally
recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or ~tate bank, (I I) no-
load money marlcet mutlial funds regulated by the Secwities and Exchange Commission that have a dolW" weighted average portfolio
maturity of90 days or less and include in their investment objectives the maintenance of a stable net asset value of$1 for each share,
(12) no-load mutual funds registered with the Securities and Exchange Conunission that have an average weighted maturity ofless
than two years; invests exclusively in obligations described in the preceding clauses; and are continuously rated as to investment
quality by at least one nationally recognized investment rating fum of not less than AAA or its equivalent, (13) bonds issued,
assumed, or guaranteed by the State of Israel, aod (14) guaranteed investment contracts secured by obligations of the United
States of America or its agencies and instrumentalities, other than the prohibited obligations described in the next succeeding
paragraph.
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The City may invest in such obligations directly or through government investment pools that invest solely in such obligations
provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized ntting service.
The City is specifically prohibited from investing in: (I) obligations whose payment represents the coupon payments on the
outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose
payment represents the principal stream of c.ash flow from the underlying morl~cked security and bears no interest; (3)
collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage
obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index.
Effective September I, 2003, governmental bodies in the State are authorized to implement securities lending programs if (i) the
securities loaned under the program are collateralized, a loan made under the program allows for termination at any time and a
loan made under the program is either secured by {a) obligations that are described in clauses (I) through (6) of the first
paragraph under this subcaption, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a
nationally recognized investment rating finn not less than "A" or its equivalent, or (c) cash invested in obligations that are
described in clauses (I) through (S) and (10) through (13) of the first paragraph under this subcaption, or an authorized
investment pool; (ii) securities held as collateral under a loan are pledged to the governmental body, held in the name of the
governmental body and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a
Joan made under the program is placed through either a primaJY government securities dealer or a financial institution doing
business in the State of Texas; and (iv) the agreement to lend securities has a tenn of one year or less.
INVESTMENT PouaES ... Under Texas law, the City is required to invest its fimds under written investment policies that primarily
emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of
investment management; and that includes a list of authorized investments for City fimds, maximwn allowable stated maturity of any
individual investment and the maximwn average dollar-weigbted maturity allowed for pooled fund groups. All City funds must be
invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment. Each
Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of
principal, (3) liquidity, (4) marketability of each investment. (S) diversification of the portfolio, and (6) yield.
Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of
·prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for
investment, oonsidering the probable safety of capital and the probable income to be derived." At least quarterly the investment
officers of the City shall submit an investment report detailing: (I) the investment position of the City, (2) that all investment officers
jointly pn::pared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending
value of each pooled fund group. (4) the book value and market value of each separately listed asset at the beginning and end of the
reporting period, (S) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each
individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment
sttategy statements and (b) state law. No person rnay invest City funds without express written authority from the City Council.
ADDmONAL PROVISIONS ... Under Texas law the City is additionally required to: (1) annually review its adopted policies and
stntegies; (2) require any investment officers' with personal business relationships· or relatives with fu:ms seeking to sell securities to
the entity' to disclose the relationship and file a statement with the Texas Ethics Conunission and the City Council; (3) require the
registered principal of finns seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b)
acknowledge that reasonable controls and procedtm:S have been i!Jlllemen!cd to preclude impl\ldent investment activities, and (c)
deliver a written statement attesting to these requirements; ( 4) perfonn an annual audit of the management controls on investments and
adhemlce to the City's investment policy; (S) provide specific investtneot training for the Treasurer, Chief Financial Officer and
investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse
repurchase agreement funds to no greater than 1he tenn of the reverse repurchase agreement; (7) restrict its investment in mutual
funds in the aggregate to no more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves
and other funds held for debt service, and to invest no portion of bond proceeds, reserves and funds held for debt service, in
mutual funds; and (8) require local government investment pools to confonn to the new disclosure, rating, net asset value, yield
calculation, and advisory board requirements.
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TABLE 15-CURRENT INVESTMENTS
As of April 30, 2005, the City's investable funds were invested in the following categories:
Estima!cd fair
Book Val~ Marlcet Valuc111
%ofTo1al % ofTotal
~ Par Value Value Book Value Value Mulce1 Value
Uni!Cd States Acency Obligarions $ 27,000,000 26,997,764 14.83 s 26,724,160 14.70
Interest Bearing Bank Depositslll 96,220,620 96,220,620 52.87 96,220,620 52.94
Money Mulcel Murual Funds111 2,928,474 2,928,474 1.61 2,9.28,474 1.61
Local government investment pools141 55,864,393 55,864,393 30.69 55,864,393 30.74
182,013,487 182,011,251 100.00 181,737,647 100.00
Weicbttd
Aver.gc
Maturity (Days)
462 days
1 day
1 day
1 day
70days
(I) Market prices are obtained through infonnation provided by Wells Fargo Brokerage Services, LLC. As of such date, the market
value of such investments was approximately I 00.00010 of their book value. No funds of the City are invested in mortgage-backed
securities. The City holds all investmentS tO maturity which minimizes the risk of market price volatility.
(2) Deposits are held at Wells Fargo Bank. Texas N.A. in fully collateralized interest earning savings accounts.
(3) Money Martc:et Mutual Funds (MMMF's), used by the City, have investment objectives that include achieving a stable net asset
value of$1.00 per share.
(4) Local government investment pools consist of entities with investment objectives that include achieving a stable net asset value of
$1.00per share. The investment pools used by the City indude TexPool and TexSTAR. TexSTAR is a local government investment
pool for whom First Southwest Asset Management. Inc., an affiliate of First Southwest Company, provides customer service and
marketing for the pool TexSTAR cUITefltly maintains a .. AAA" rating from Standard & Poor's and has an investment objective of
achieving and maintaining a stable net asset value of $1.00 per share. Daily investments or redemptions of funds is allowed by the
participants. First Southwest Company is the Financial Advisor for the City in connection with the issuance of City debt
[TlfE 'REMAINDER OF THIS PAGE IN'reNTIONALL Y LEFT BLANK)
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THE SYSTEM
CONTRACTS AND FACILITIES
Water Supply ... The primal)' source of water for Lubbock is the Sanford Dam and Reservoir Project of the Canadian River
Municipal Water Authority ("CRMWA"), which delivers raw water from its Lake Meredith reservoir, located on the Canadian
River about 50 miles north of Amarillo, Texas, and about 170 miles north of the City, to member cities through an underground
aqueduct system. Lubbock is one of eleven member cities ofCRMWA; other members are Amarillo, Pampa, Borger, Plainview,
Slaton, Levelland. Brownfield, Tahoka, O'Donnell and Lamesa. Lake Meredith was constructed pursuant to a contract between
CRMWA and the U.S. Bureau of Reclamation dated November 28, 1960, as amended. The City, as a participating member,
contracted with the CRMW A to pay its pro-rata portion of the total reimbursable cost of the project Payments under the
contract commenced in 1969. In the Spring of 1999, the City applied approximately $12,212,861 of the proceeds of a series of
refunding bonds to prepay its share of the Bureau of Reclamation loan. In accordance with its contract with CRMW A, the City
pays an annual operating and maintenance charge to CRMW A of certain fixed and variable expenses associated with the project
Lubbock received approximately 27,546 acre feet of water from CRMW A in Calendar Year 2004, approximately 74% of its total
consumption. On average, LaJce Meredith water has provided 800/o to 85% of Lubbock's water supply needs, with the balance of
IS% to 20% being supplied by well water from the City-owned Sandhills well field in Bailey County (the "City Well Field").
When the City and other members of CRMW A originally contracted for the right to receive water from Lake Meredith in 1960,
the water yield of the Lake was expected to be greater than it has actually produced. Each year, the Board of CRMWA
determines with respect to each member city the portion of water based upon original water yield assumptions that will be
provided to each city during the year.
In 2004, due to an extended drought reducing Lake Meredith inflow and causing the lake level to decrease to an all time low
level, CRMW A reduced the annual allocation to 30,429 acre feet. In April 2005, due to increased lake levels and acquisition of
additional groundwater rights by CRMWA, the allocation was increased to 33,352 acre feel Lubbock bas purchased an
additional 1,228 acre feet from the City of Pampa.
In 1996, CRMWA member cities elected to participate in the North Panhandle Water Project (the "CRMWA Well Project").
The CRMW A Project involves CRMW A purchasing 42,765 acres of water rights northeast of Borger, Texas, which occurred in
August 1996. Following the acquisition of the water rights: wells were drilled and pipelines and other improvements were
constructed to permit the groundwater to be pumped to the CRMW A pipeline where it is blended with surface water from Lake
Meredith and delivered to member cities, including the City. The total cost of the CRMWA Well Project was approximately $81
million, of which the City's share is was approximately $30.2 million, based on the allocated share of water from the reservoir.
The City's share of the water rights acquisition (which represents approximately 37% of the total CRMW A Well Project cost),
approximately $7.1 million, was funded from existing water funds of the City, and the City's portion of the CRMWA Project's
construction cost, approximately $23.1 million, was financed through the issuance by the City of certificates of obligation in
1999.
With the water from Lake Meredith and the ground water produced by the CRMW A Well Project, the City's CRMW A water
allocation was increased from 38,000 acre feet per year to 42,986 acre feet per year. The City's annual average water
consumption is 43,489 acre feet. Benefits of the CRMWA Well Project include: improving the quality of water available to the
City by blending·the ground water with the Lake Meredith water that has a relatively high saline quantity, conserving water-in
the City Well Field, which provides the City with a ground water supp1y, and postponing the need to construct water treatment
and delivery facilities for water from the Lake Alan Henry reservoir.
CRWMA has completed and is operating a desalinization project for the Canadian River that feeds into LaJce Meredith. The
total cost of the desalinization project was approximately $10 million, with the State of Texas and the U.S. Govcmment
contributing one third of the cost each and the member cities of CRMW A contributing one third of the cost. The City's share of
this project was approximately $1.4 million.
Q1bg Surface Water Supply Sources ... In 1994, the BRA, on behalf of the City, completed construction of the John T.
Montford Dam, in order to impound a conservation reservoir, known as the LaJce Alan Henry reservoir, on the South Fork of the
Double Mountain Fork of the Brazos River. The Lake Alan Henry reservoir, located about 65 miles southeast of Lubbock, was
planned and constn.lcted to enhance the provision of estimated long tenn water supply needs. The City has contracted with the
BRA for the maintenance of the dam and open~tion of the reservoir.
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On May II. 1989. the City entered into a contract with the BRA, to implement the construction of the Montford Dam and Lake
Alan Henry. As of May 2005, the outstanding principal balance of the BRA Bonds was $45,515.000. Under its contract with
the BRA, the City each year pays to the BRA: (a) amounts sufficient to pay debt service; (b) maintenance and operations costs;
and (c) management fees. In addition, the City will buy and pay for the entire amount of water which can be supplied by the
project whether or not used Payments under the contract constitute operating expenses of the City's Waterworks System,
payable from gross revenues of the Waterworks System. The Bonds are being issued in part to provide funds to BRA to enable
BRA to refund the City's obligation with respect to the BRA Bonds (see "The Bonds-Defeasance of the BRA Bonds").
At conservation storage, the reservoir will contain 115,937 acre-feet of water; mean depth at conservation storage will be
approximately 40 feet; maximum depth at the dam will be approximately 90 feet. The contributing drainage or watershed area is
an estimated 394 square miles. Presently the reservoir is at the normal pool elevation (115,937 acre-feet of water) with a depth
of approximately 70 feet at the dam.
In 1988, future population and water demand estimates for Lubbock, projected by the Texas Water Development Board,
indicated a 60 to 78 percent increase in Lubbock's population by the year 2040. Recent updates reveal a more likely growth rate
of approximately 0.5% increase per year, or an estimated 30% increase in population during this same time period. Due to the
City's participation in the CRMWA Well Project, construction of the associated facilities necessary to bring the Lake Alan
Henry water to the City (pipeline, pump stations, and an additional water treatment plant) has been delayed until use of this
water supply resource is required to meet water demand. The Lake Alan Henry reservoir is viewed as a long-range water supply
for the City. Based upon the City's participation in the CRMWA Well Project, its water rights in the City Well Field in Bailey
County and the water from Lake Alan Henry, the City believes that it has addressed its water supply for at least the next forty
years. See ~The Systems-Waterworks System-Water Supply Study".
In order to optimize the value of the Lake Alan Henry reservoir, the City in 1997 began constructing recreational improvements
on the 580.acre "Public Access Area" located on the North Shore of the reservoir. To date the City has constructed a four-lane
boat ramp. a paved road. a parking lot, a boat dock and a fishing pier. In order to defray the cost of maintaining the reservoir as a
recreational facility, the City implemented a user fee schedule in March, 1997. Revenue from user fees during 2004 is estimated
to be $446,506.
Ground Water Suoply .... Approximately 20% of the City's water is obtained from the City Well Field, which consists of 251
wells, all producing from the Ogallala formation, which underlies the High Plains of Texas. The wells are used primarily fer
peaking purposes. Except for the addition of disinfection, the City's ground water does not require treatment before it is
introduced into the water distribution system.
Wellhead Protection ... Lubbock initiated the Wellhead Protection Program ("WHP") in response to a growing need to maintain
its existing groundwater supply and to protect it from environmental harm. In the face of recent droughts, water has bewme the
most precious resource in West Texas. Phase I of the WHP began in 1994 when Lubbock and the League of Women Voters
recruited and trained citizen volunteers. These volunteers, working with a map of Lubbock's 235 water supply wells, surveyed
land owners and identified possible sources of contamination located on their property. This extensive effort revealed possible
contamination that ranged from abandoned water wells and underground storage tanks to auto salvage yards and municipal
sewage lines.
As a result of Phase I activities, the Texas Natural Resource Conservation Commission (now known as the Texas Commission on
Environmental Quality, and hereafter referred to as "TCEQ") began pursuing a federal grant from the United States
Environmental Protection Agency ("EPA"} for the pwpose of conducting non-point source pollution prevention and reduction
activities. Prior to pursuing this grant, the TCEQ approached the City to encourage its participation in a $161,000 project to
establish a wellhead protection program for its public water supply wells. On September 14, 1995. the City Council authorized
the City's participation in the WHP.
Public Education Program ..• In an effort to minimize the need to acquire more water sources, the City implemented a youth
education program. in 1997. The goal of this program is to teach water conservation techniques to elementary children in the
· Lubbock Independent School District; bring an awareness to elementary children about water treatment, water reclamation, and
disposal of treated effluent by land application; to promote the protection of groundwater through education about water
percolation and the impacts of illegal dumping of oil, gasoline, and other pollutants that eventually contaminate groundwater.
The City's average daily residential water usage of approximately 190 gallons per capita per day ("GPCD") is higher than the
State's average of 167 GPCD. The City is situated in an arid region which requires more water per capita for landscape irrigation
than many parts of the State. By implementing a youth education program, Lubbock hopes to make its children, the futW'e
consumers of the utility, aware of limitations in water supplies and the need to conserve these supplies.
Water Treatment Faciiitjes .•. The water treatment plant for the treatment of raw water received from CRMW A bas a design
capacity of 61.4 million gallons per day ("mgd'') and a maximum hydraulic capacity of75 mgd. The plant has a 1,200 acre-feet
open storage reservoir which permits storage of raw water during "off-peak" periods. and 8.5 million gallons ("mgn) clearwell
storage for treated water.
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The City's raw water treatment plant treats CRMW A raw water deliveries for the cities of Brownfield, Lamesa, Levelland.
O'Donnell, Slaton and Tahoka prior to CRMW A delivery to those cities. Under contractual agreements with these cities, the
City is fully reimbursed for all costs of this treatment, including capital costs and debt service; the combined percentage in
treatment plant costs for these cities is 20.34%.
Water Storage ... Storage capacity includes a I ,200 acre-foot open storage reservoir near the water treatment plant, which
permits the storage of surplus water received from the CRWMA in off-peak periods. In addition, 13 storage reservoirs and 4
elevated steel storage tanks provide storage capacity of 66.750,000 gallons, sufficient for peak hours and fire protection
requirements.
Water Distribution Facilities ... The City's water distribution system includes approximately 1,264 miles of distribution lines,
237 miles of water supply lines and 3,882 fire hydrants. The distribution system extends throughout the City and is designed for
expansion. Present pumping capacity is over 200 mgd. Present water supply capacity is 106 mgd.
Certain of the water resoun:es of the City, specifically Lake Alan Henry, have relatively high costs associated with delivery of
the water to the City. Moreover, within the vicinity of the City there is a substantial amount of ground water, although the
relative yield of groundwater differs from location to location and the use of ground water as a supply represents a non-
sustainable use. Other issues that the City has addressed in recent years is the reduced yield of Lake Meredith, which lies in an
area that has experienced a prolonged drought, and which has had growing salinity that affects the aesthetics of the water,
although it continues to meet applicable potable water quality standards. In addition, in recent years, City staff and consultants
have been working to better assess the use of effluent by the City, panicularly in light of recent regulatory actions relating to the
City's land application discharge of effluent and the and the costs incu!Ttld by the City in addressing the regulatory actions. See
"The Systems-Sewer System-Discharge Permit Issues".
While the City at present has an adequate water supply and, with the construction of Lake Alan Henry, it has a potential long-
term additional supply. the costs of delivery of that water to the City are expected to be high. With these considerations, among
others, in mind, the City Council in March 2003 authorized a water consultant to prepare a comprehensive assessment to be used
by the City for its long-term wa~er planning purposes. The consultant has been charged with analyzing the City's cwrent water
supplies, including the reuse of treated effluent, potential alternative water supply and reuse options and the potential for the City
to realize value from its existing water supplies when they are not being utilized by the City. Among other aspects of the study,
the consultant has been engaged to determine the ultimate capacity of the CRMW A pipeline and related water sources and to
what degree they can meet the future water needs of the City and other CRMW A member cities, and costs associated with any
proposed upgrades to the CRMWA facilities; determining a firm yield for Lake Meredith; determining whether the City's Well
Field can be expanded, and the costs and projected life of the underground water located there; analyzing the different water
demand scenarios for Lake Alan Henry and whether that water supply can be bener used by other users than the City; assessing
the future demand of the. City and other entities within a 50 mite radius of the City for water; determining future markets for
water in the vicinity of the City; examining the prospects for water alliances and partnerships; and providing an assessment of
water conservation methods available to reduce the per capita consumption of water in the City.
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TABLE 16-MONTHLY WATU RATES
On August 26, 1999, the Lubbock City Council adopted a three year 12% increase in water rates to generate revenues sufficient
to pay the debt service on the City's $24,800,000 Tax & Waterworks System Surplus Revenue Certificates of Obligation, Series
1999, which funded the City's share of the construction cost of the CRMW A Well Project On August 29, 2002. the City
Council adopted a water rate ordinance that provided for an approximately 3% water rate increase for the 2002-03 fiscal year,
and three additional rate increases of approximately 3% to be implemented in each of the following three fiscal years. The City
Council reviews water rates in connection with the adoption of the annual City budget, and it is possible that the anticipated rate
increases could be greater or less in future years due to operating costs of the Waterworks System and the necessity of making
additional capital improvements to the Waterworks System. The table below shows the rate for the current year. as compared to
the rates in place for the 2002-()3 fiscal year.
Base Rate
3/4" meter
I" meter (single family residential)
1" meter (irrigation)
I" meter (other than residential)
I%" meter
2" meter
3" meter
4" meter
6" meter
8" meter
10" meter
Flow Rate Charge per l ,000 Gallons
Single Family Residential
Multi-Family Residential
Commercial
Schools
Sprinkler System
Prior
Rate
$ 9.43
12.01
11.21
20.14
37.97
59.51
128.91
336.59
668.92
848.75
1,693.39
$ 1.73
1.46
1.60
1.63
2.02
Rate Effective
10/112004
$ 9.71
12.37
11.55
20.74
39.11
61.29
132.78
346.69
688.99
874.21
1,744.19
$ 1.78
1.51
1.64
1.68
2.08
City Staff is in the process of preparing the Fiscal Year 2006 budget to present to the City Council for consideration. It is
anticipated that a rate increase of 3% for Fiscal Year 2006 will be part of the budget proposal presented to the City Council.
TABLE 17 • HlSFORICAL WATER CONSUMPTION (MILLION GALLONS)
Average Maximum
Calendar Daily Consumption
Year Consum~tion Da'i./Year
2000 39.413 67.815
2001 38.255 73.086
2002 37.401 63.911
2003 38.119 73.605
2004 34.421 65.994
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TABLE 18-WAT£RWORKS SYSTEM CONDENSED STATEMENT OF OPERATIONS
Fiscal Year Ended S~tember 30,
2004 2003 2002 2001 2000
REVENUE
Operating Revenues $ 31,907,893 $ 32,770,781 $ 32,727.207 s 30,463,694 $ 29,037,723
Non-Operating Revenues 539,413 1.337,330 1,313,649 2.491,890 3,404,850
Gross Revenues $ 32,447,306 $ 34,108,111 s 34,040,856 s 32,955,584 $ 32,442.573
EXPENSE
Operating Expense <ll 20,550,379 20,137,448 19,596,079 20,194,590 18,238,503
Net Revenues $ 11,896,927 $ 13,970,663 $ 14,444,777 $ 12,760,994 $ 14.204.071
Water Meters 72,500 75,505 71,039 70.756 70,037
( 1) Operating expense includes cons «ruction repayment costs and operating and maintenance charges paid to CRMW A and BRA and
excludes depreciation and capital expenditures.
Note: The City has no outstanding or authorized Waterworks System Revenue Bonds, however. there is general obligation debt
outstanding issued or planned for issuance for water system purposes on which annual debt service is provided from revenues of the
System, including the Bonds (see "Table 10 ·Computation of Self-Supporting Debt"). It is the City's policy and intention to maintain
rates and charges for water service that will provide Net Revenues of the Waterworks System that will fully provide for debt service
on general obiigation debt issued for Waterworks System pwposes over the life of the present Waterworks System general obligation
and any additional Waterworks System general obligation debt issued in the future.
Within the Waterworks System enterprise fund, the City maintains a woiking capital fund reserve and a rate stabilization reserve. As
for other City ente~prise funds, the financial policies of the City include a rolling ten year accumulation period for such reserves. At
present, the ten year reserve goal for Waterwodcs System working capital is $8,300,000 and for System rate stabilization is
$1,700,000. While no assurances can be given, City Staff anticipate that the actual amowts in such reserves will be approximately
$8.391,000 and $1 ,680,000 at the end of the current fiscal year.
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TAX MATTERS
TAX EXEMPTION ••• In the opinion of Vinson & Elkins L.L.P., Bond Counsel, (i) interest on Bonds is excludable from gross
income for federal income tax purposes under existing law and (ii) interest on the Bonds is not subject to the alternative
minimum tax on individuals and corporations, except as described below in the discussion regarding the adjusted current
earnings adjustment for corporations.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes a number of requirements that must be satisfied for
interest on state or local obligations, such as the Bonds, to be excludable from gross income for federal income tax purposes.
These requirements include limitations on the use of bond proceeds and the source of repayment of bonds, limitations on the
investment of bond proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of bond proceeds
be paid periodically to the United States and a !'e([Uirement that the issuer file an information report with the Internal Revenue
Service. The Issuer has covenanted in the Ordinance that it will comply with these requirements.
Bond Counsel's opinion will assume continuing compliance with the covenants of the Ordinance pertaining to those sections of
the Code that affect the exclusion from gross income of interest on the Bonds for federal income tax purposes and, in addition,
will rely on representations by the Issuer, the Issuer's Financial Advisor and the Underwriters with respect to matters solely
within the knowledge of the Issuer, the Issuer's Financial Advisor and the Underwriters, respectively, which Bond Counsel has
not independently verified. If the Issuer should fail to comply with the covenants in the Ordinance or if the foregoing
representations or report should be determined to be inaccurate or incomplete, interest on the Bonds could become taxable from
the date of delivery of the Bonds, regardless of the date on which the event causing such taxability occurs.
The Code also imposes a 200/o alternative minimum tax on the "alternative minimum taxable income" of a corporation if the
amount of such alternative minimum tax is greater than the amount of the corporation's regular income tax. Genemlly, the
alternative minimum taxable income of a corporation (other than any S corporation, regulated investment company, REIT,
REMIC or FASIT), includes 75% of the amount by which its "adjusted current earnings" exceeds its other "alternative minimum
taxable income.~ Because interest on tax exempt obligations, such as the Bonds, is included in a corporation's "adjusted current
earnings," ownership of the Bonds could subject a corporation to alternative minimum tax consequences.
Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from
the receipt or accrual of interest on, or acquisition, ownership or disposition of, the Bonds.
Bond Counsel's opinions are based on existing law, which is subject to change. Such opinions are further based on Bond
Counsel's knowledge of facts as of the date thereof. Bond Counsel assumes no duty to update or supplement its opinions to
reflect any facts or circumstances that may thereafter come to Bond Counsel's attention or to reflect any changes in any law that
may thereafter occur or become effective. Moreover, Bond Counsel's opinions are not a guarantee of result and are not binding
on the Internal Revenue Service (the "Service"); rather. such opinions represent Bond Counsel's legal judgment based upon its
review of existing law and in reliance upon the representations and covenants referenced above that it deems relevant to such
opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state
or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the
Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published proc~ures the
Service is likely to treat the Issuer as the taxpayer and the Owners may not have a right to participate in such audit. Public
awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the
audit regardless of the ultimate outcome of the audit
ADDITIONAL FEDERAL INCOME TAX CONSIDERATIONS
COLLATERAL TAX CONSEQUENCES
Prospective purchasers of the Bonds should be aware that the ownership of tax exempt obligations may result in collateral
federal income tax consequences to financial institutions, life insurance and property and casualty insurance companies, certain S
corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits,
taxpayers wbo may be deemed to have incurred or continued indebtedness to purchase or carry tax exempt obligations, taxpayers
owning an interest in a FASIT that holds tax-exempt obligations and individuals otherwise qualifying for the earned income
credit. In addition, certain foreign corporations doing business in the United States may be subject to the "'branch profits tax" on
their effectively connected earnings and profits, including tax exempt interest such as interest on the Bonds. These categories of
prospective purchasers should consult their own tax advisors as to the applicability of these consequences. Prospective
purchasers of the Bonds should also be aware that. under the Code, taxpayers are required to report on their returns the amount of
tax-exempt interest, such as interest on the Bonds, received or accrued during the year.
TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE PREMIUM
The issue price of all or a portion of the Bonds may exceed the stated redemption price payable at maturity of such Bonds. Such
Bonds (the "Premium Bonds") are considered for federal income tax pwposes to have "bond premium" equal to the amount of
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such eJtcess. The basis of a Premium Bond in the bands of an initial owner is reduced by the amount of such eJtcess that is
amortized during the period such initial owner holds such Premium Bond in detennining gain or loss for federal income tax
purposes. This reduction in basis will increase the amount of any gain or decrease the amount of any loss recognized for federal
income tax purposes on the sale or other tuable disposition of a Premium Bond by the initial owner. No corresponding
deduction is allowed for federal income tax purposes for the reduction in basis resulting from amortizable bond premium. The
amount of bond premium on a Premium Bond that is amortizable each year (or shorter period in the event of a sale or disposition
of a Premium Bond) is detennined using the yield to maturity on the Premium Bond based on the initial offering price of such
Bond.
The federal income tax consequences of the purchase. ownership and redemption, sale or other disposition of Premium Bonds
that are not purchased in the initial offering at the initial offering price may be detennined according to rules that differ from
those described above. All owners of Premium Bonds should consult their own tax advisors with respect to the determination for
federal, slate, and local income tax pwposes of amortized bond premium upon the redemption, sale or other disposition of a
Premium Bond and with respect to the federal, state, local. and foreign tu consequences of the purchase, ownership, and sale,
redemption or other disposition of such Premium Bonds.
Tax Accounting Treatment of Original Issue Discount Bonds
The issue price of all or a portion of the Bonds may be less than the stated redemption price payable at maturity of sucb Bonds
(the "Original Issue Discount Bonds"). In such case. the difference between (i) the amount payable at the maturity of each
Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond constitutes
original issue discount with respect to such Original Issue Discount Bond in the hands of any owner who has purchased such
Original Issue Discount Bond in the initial public offering of the Bonds. Generally, such initial owner is entitled to exclude from
gross income (as defined in Section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond
equal to that portion of the amount of such original issue discount allocable to the period that sucb Original Issue Discount Bond
continues to be owned by such owner. Because original issue discount is treated as interest for federal income tax purposes, the
discussion regarding interest on the Bonds under the caption "Collateral Tax Consequences" generally applies, and should be
considered in connection with the discussion in this portion of the Official Statement
In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity,
however, the amount realized by such owner in excess of the basis of such Original Issue 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 Original Issue
Discount Bond was held by such initial owner) is includable in gross income.
The foregoing discussion assumes that (a) the Underwriter has purchased the Bonds for contemporaneous sale to the public and
(b) all of the Original Issue Discount Bonds have been initially offered, and a substantial amount of each maturity thereof has
been sold, to the general public in ann's-length transactions for a price (and with no other consideration being included) not more
than the initial offering prices thereof slated on the cover page of this Official Statement. Neither the Issuer nor Bond Counsel
has made any investigation or offers any comfort that the Original Issue Discount Bonds will be offered and sold in accordance
with such assumptions.
Under existing law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity
thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual
anniversary dates of the date of the Bonds and ratably within each sucb six-month period) and the accrued amount is added to au
initial owner's basis for such Original Issue Discount Bond for purposes of detennining the amount of gain or loss rerognized by
such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is
equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield
to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the
length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Bond.
The federal income tax consequences of the purchase, ownership, and redemption, sale or other disposition of Original Issue
Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules
which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors
with respect to the determination for federal, state, and local income tax purposes of interest accrued upon redemption, sale or
other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences
of the purchase, ownershlp, redemption, sale or other disposition of such Original Issue Discount Bonds.
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OTHER INFORMATION
RATINGS
The presently outstanding tax supported debt of the City is rated "AI" by Moody's, "AA-" by S&P and "AA-" by Fitch. The
City also has issues outstanding which are rated "Aaa" by Moody's, "AAA" by S&P and "AAA" by Fitch through insurance by
various commercial insurance companies. Applications for contract ratings on this issue have been made to Moody's, S&P and
Fitch. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings
reflect only the respective views of such organizations and the City makes no representation as to the appropriateness of the
ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised
downward or withdrawn entirely by either or both of such rating companies, if in the judgment of either or both companies,
circwnstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market
price of the Bonds.
LmGATION
The City is involved in various legal proceedings related to alleged personal and property damages, breach of contract and civil
rights cases, some of which involve claims against the City that exceed $500,000. State law limits municipal liability for
personal injury at $250,000/$500,000 and property damage at $100,000 per claim. The following represents the significant
litigation against the city at this time.
There is one claim pending against the City, which is in a preliminary stage, that the City Attorney believes could be brought
under Section 1983 of the post-Civil War Civil Rights Act ("Section 1983"). If a claim should be made under that law and
damages are ultimately assessed against the City, the City would not be subject to limitations on damages. Insurance should
cover all but the self-insured retention.
The City is also involved in a lawsuit with the City's firefighters regarding pay issues. The firefighters obtained a $688,000
judgment against the City for damages that accrued through July 2002. Damages have continued to accrue since July 2002. The
City appealed this judgment, and the Court of Appeals overturned the judgment The plaintiffs have filed an appeal to the Texas
Supreme Court. The Supreme Court has not made a decision on whether to hear the appeal. While any liability would not be
cov~ by an insurance policy, the City Attorney only assesses the potential that the firefighters wilt obtain relief from· the
Texas Supreme Court as possible.
The City is also involved in a suit filed by the general contractor for a large drainage project in the City. In the suit, the
contractor asserted damages in excess of $2.3 million under a breach of contract claim. The City obtained a summary judgment
in this case against the contractor. The contractor has appealed the decision to the Fifth Circuit Court of Appeals. While this
liability is not covered by any insurance policy, the City Attorney only assesses the likelihood ofre<:overy by the contractor as
possible.
The City has also been sued by a another contractor who was not awarded the bid on a different portion of the stonnwater
drainage project. The contractor has alleged violations of the state bid statute and a violation of Section 1983. The plaintiffs
took a nonsuit in state court andre-filed the case in federal court The federal court has dismissed the contractor's Section 1983
claims, and the contractor has filed a Notice of Appeal. The City Attorney assesses the likelihood of liability as possible.
Potential damages are unknown. The City Attorney believes there is insurance coverage for the Section 1983 claim, although
there is a dispute with the carrier regarding coverage.
The City has been sued by six plaintiffs who allege that the City and or Lubbock County failed to properly record information in
its cemetery records that would show where their relative$ were buried. The Plaintiffs' attorney indicates that he has about
eighty other clients with similar claims. The City will assert a defense under statutes of limitations, that the City was not the
owner of the property during portions of the time in question, and that the allegations fail to state a claim upon which relief can
be granted. The City Attorney assesses the potential for liability as possible. There is no insurance coverage for these claims.
The City intends to vigorously defend itself on all claims, although no assurance can be given that the City will prevail in all
cases. However, the· City Attorney and City management is of the view that its available sources for payment of any such
claims, which include insurance policies and City reserves for self insured claims, are adequate to pay any presently foreseeable
damages (see "Financial Policies -Insurance and Risk Management").
On the date of delivery of the Bonds to the Underwriters, the City will execute and deliver to the Underwriters a certificate to the
effect that, except as disclosed herein, no litigation of any nature has been filed or is pending, as of that date, to restrain or enjoin
the issuance or delivery of the Bonds or which would affect the provisions made for their payment or security or in any manner
question the validity of the Bonds.
REGISTRATION AND QVALU'ICATlON 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
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exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in
reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any
jurisdiction. The City assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in
which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for
qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the
availability of any exemption from securities registration provisions.
LEGAL INVESTMENTS AND EUGI81UTV TO SECURE PVBLIC FuNDS IN TEXAS
Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are
negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and aulhorized investments
for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or
public agencies of the State of Texas. With respect to investment in the Bonds by municipalities or other political subdivisions
or public agencies of the State of Texas, the Public Funds Investment Act. Chapter 2256, Texas Government Code, requires that
the Bonds be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency. See .. Other
Information -Ratings" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent
investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with capital of one million
dollars or more, and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of. the State, its
agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by
the City has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in
those states.
LEGAL OPINIONS
The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Bonds. including
the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Bond and to the effect that the
Bonds are valid and legally binding obligations of the City, and based upon examination of such transcript of proceedings, the
_approving legal opinion of Bond Counsel, to like effect and to the effect that the interest on the Bonds will be excludable from
gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under "Tax
Matters" herein, including the alternative minimum tax on corporations. Bond Counsel was not requested to participate, and did
not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto
.or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such
finn has reviewed the information under the captions "The Bonds" (exclusive of the subcaption "Book-Entry-Only System'),
"Tax Matters" and "Continuing Disclosure of Information" and lhe subcaptions "Legal Opinions" and "Legal Investments and
Eligibility to Secure Public Funds in Texas" under the caption "'ther Information" in the Official Statement and such finn is of
the opinion that the information relating to the Bonds and the legal issues contained under such captions and subcaptions is an
accurate and fair description of the laws and legal issues addressed therein and, with respect to the Bonds, such information
conforms to the Ordinance. The legal fee to be paid to Bond Counsel for services rendered in connection with the issuance of the
Bonds is contingent on the sale and delivery of the Bonds. The legal opinion will accompany the Bonds deposited with DTC or
will be printed on the Bonds in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be
passed upon for the Underwriters by McCall, Parld!urst & Horton L.L.P., Dallas, Texas, Counsel to the Underwriters.
The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys
rendering the opinions as to the legal issues expressly addressed therein. In rendering a legal opinion, the attorney does not
become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future
performance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute
that may arise from the transaction.
CONTINUING DlSCLOSURE OF INFORMATION
In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial oWllers of the Bonds.
The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the
agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely
notice of specified material events, to certain infonnation vendors. This information will be available to securities brokers and
others who subscribe to receive the information from the vendors.
ANNUAL REPORTS ... The City will provide certain updated financial information and operating data to certain infonn.ation
vendors annually. The information to be updated includes all quantitative financial information and operating data with respect
to the City of the general type included in this Official Statement under Tables numbered I through 6 and 8A through 18, and in
Appendix B. The City wilt update and provide this information within six months after the end of each fiscal year ending in or
after 2005. The City will provide the updated information to each nationally recognized municipal securities information
repository ("NRMSIR") approved by the staff of lhe United States Securities and Exchange Commission ("SEC") and to any
state infonnation depository ("SID") that is designated and approved by the State of Texas and by the SEC staff.
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The City may provide updated information in full text or may incorporate by reference certain other publicly available
documents, as pennitted by SEC Rule I 5c2-12. The updated information will include audited financial statements, if the City
commissions an audit and it is completed by the required time. If audited financial statements are not available by the required
time, the City will provide unaudited financial information and operating data which is customarily prepared by the City by the
required time, and audited financial statements when and if such audited financial statements become available. Any such
financial statements will be prepared in oocordance with the accounting principles described in Appendix B or such other
accounting principles as the City may be required to employ from time to time pursuant to state law or regulation.
The City's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year,
unless the City changes its fiscal year. If the City changes its fiscal year. it will notify each NRMSIR and the SID of the change.
The Municipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC staff as a
qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P. 0 . Box 2177, Austin, Texas 78768-
2177, and its telephone number is 5121476-6947. The Municipal Advisory Council has also received Securities and Exchange
Commission approval to operate, and has begun to operate, a "central post office" for infonnation filings made by municipal
issues, such as the City. A municipal issuer may submit its infonnation filings with the central post office, which then transmits
such infonnation to the NRMSIRs and the appropriate SID for filing. This central post office can be accessed and utilized at
www.DisclosureUSA.com ("DisclosureUSA"). The City may utilize DisclosureUSA for the filing of information relating to the
Bonds.
MATERIAL EVENT NOTICES ... The City will also provide timely notices of certain events to certain information vendors. The
City will provide notice of any of the following events with respect to the Bonds, if such event is material to a decision to
purchase or sell Bonds: (I) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled
draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial
difficulties; (5) substitution of credit or liquidity providers. or their failure to perfonn; (6) advene tax opinions or events
affecting the tax-exempt status of the Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls; (9) defeasances;
(I 0) release. substirution, or sale of property securing repayment of the Bonds; and (II) rating changes. In addition, the City will
provide timely notice of any failure by the City to provide infonnation, data, or financial statements in accordance with its
agreement described above under "Annual Reports. •• The City will provide each notice described in this paragraph to the SID
and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB .. ).
AVAILABILITY OF INFORMAnON FROM NRMSIRs AND SID ... The City has agreed to provide the foregoing infonnation only
to NRMSIRs (or the MSRB in the case of Material Events Notices) and the SID. The information will be available to holders of
Bonds only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the
information through securities brokers who do so.
AMENDMENTS ... The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances
that arise from a change in legal requirements, a change in Jaw, or a change in the identity, nature, status, or type of operations of
the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the offering
described herein In compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of
such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal
amoWJt of the outstanding Bonds consent to the amendment or (b) any person unaffiliated with the City (such as nationally
recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial
owners of the Bonds. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC
amends or repeals the applicable provisions of the SEC Rule I 5c2-12 or a court of final jurisdiction enters judgment that such
provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not
prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. If the City so amends
the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its
agreement described above under .. Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of
the impact of any change in the type of financial information and operating data so provided.
COMPLIANO: WITH PRIOR UNDERTAKINGS ... The City became obligated to file annual reports and financial statements with
the state information depository ("SID") and each nationally recognized municipal securities information repository
("NRMSIRj in an offering that took place in 1997. All of the City's General Obligation debt reports and financial statements
were timely filed with both the SID and each NRMSlR; however, due to an administrative oversight, the City filed its fiscal year
end 1999, 2000, and 2001 Electric and Power Revenue debt reports late to the SID and each NRMSIR. The financial
infonnation has since been filed, as well as a notice of late filing. The City has implemented procedures to ensure timely filing
of all fu~ financial information. Under previous continuing disclosure agreements made in connection with LP&L revenue
bonds, the City committed to make prompt filings with the SID and either each NRMSIR or the MSRB upon the occurrence of
any "non-payment related defaults... The City's FY 2003 audited financial statements were not available tmtil mid-September
2004. Therefore, when the City made its annual disclosure filing with the SID and NRMSIRs in March 2004, it filed tmaudited
financial statements in accordance with its undertaking. Several references in that filing, including in the unaudited MD&A. in
notes to those statements and in the statistical tables, reported that for FY 2003 LP&L had failed to meet its rate covenant (see
.. Discussion of Recent Financial and Management Events -September 30, 2003 Financial Results -The Electric Fundj.
Because there was an uncertainty as to an amount by which the rate covenant would fail to be met, which was not finally
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detennine1:1 until the audited financials were released in September 2004 (although the City had a reasonable belief prior to that
time that the rate covenant had not been met), the City waited until September 2004 to make its event filing of non-compliance
with its LP&L rate covenant.
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, does not assume any responsibility for the
information. covenants and representations contained in any of the legal documents with res~t 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.
The Financial Advisor to the City has provided the following sentence for inclusion in this Official St1tement. The Financial
Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City
and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but
the Financial Advisor does not guarantee the accuracy or completeness of sucb information.
UNDERWRITING
The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City, at an underwriting discount of
$ . The Underwriters will be obligated to purchase aU of the Bonds if any Bonds a.re purchased. The Bonds to be
offered to the public may be offered and sold to catsin dealm (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.
fORWAJU>-LooKJNG STATEMENTS DISCLAIMER
The statements contained in this Official Statement, and in any other information provided by the City, that are not purely
historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies
regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements
included in this Official Statement are based on information available to the City on tbe date hereof, and the City assumes no
obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed
in such forward-looking statements.
The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently
subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying
assumptions and estimates and possible changes or developments in social, economic, business, industry, marlcet, legal, and
regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, supplim,
business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions
related to the foregoing involve judgements with respect to, among other things, future economic, competitive, and market
conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are
beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this Official Statement will prove to be accurate.
MISCELLANEOUS
The financial data and other information contained herein have been obtained from the City's ~rds, audited financial statements
and other sources which a.re believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein
wilt be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made
subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete
statements of such provisions and reference is made to such documents for further information. Reference is made to original
documents in all respects.
The Ordinance authorizing the issuance of the Bonds will also approve.the form and content of this Official Statement, and any
addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds by lbe Underwriters.
ATI'EST:
lsi ·REBECCA GARZA
City Secretary
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lsi MARC McDOUGAL
Mayor
City of Lubbock, Texas
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APPENDIX A
GENERAL INFORMATION REGARDING THE CITY
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THE CITY
LOCATION
The City of lubbock, which is the County Seat ofLubbock County, Texas, is located on the South Plains of West Texas. Lubbock is
the economic, educational, cultural and medical services center of the area.
POPULATION
Lubbock is the ninth largest City in Texas:
1910Census
1920Census
1930Census
1940Census
1950Census
1960Census
1970Census
1980 Census
1990Census
2000Census
2005 (Estimated) 111
City of Lubbock
(Corpo@te Limits)
1,938
4,051
20,520
31,853
71,747
128,691
149,701
173,979
186,206
199,564
209,120
Metroj)Oiitan Statistical Area l"MSA "') (l.ubboclc Countyl
1970 Census 179,295
I 980 Census 211,65 I
1990 Census 222,636
2000 Census 242,628
(I) Source: City of Lubbock, Texas
AGRICVLTO'RE; BVSIN!SS AND INDUSTRY
Lubbock is the center of a highly mechanized agricultural area with a majority of the crops irrigated with water from underground
sources. Principal crops are cotton and grain sorghums with livestock a major additional source of agricultural income. In 2003,
approximately 2.2 million hales of cotton were produ«d in Lubbock and the 25-<:ounties sum>unding Lubbock. This was less than
the 3.2 million hales produced in 2002 and is 27% below the 1 0-year average of2.80 million bales. Projections for the 2004 cotton
crop are 3.89 million bales, depending on the growing conditions and the weather during the 2004 production season. (I) Two
major vegetlble oil plants located in Lubbock have a combined weekly capacity between 50,000 and 70,000 tons of cottonseed oil
and soybean oil. Several major seed companies are headquartered in Lubbock.
Over 200 manufacturing plants in Lubbock produce such products as semiconductors, vegetable oils, irrigation equipment and pipe.
plastics products, fann equipment, paperboard boxes, custom millwork/shutters, foodstuffs, prefabricated homes, poultry and
livestock feeds, boilers and pressure vessels, automatic sprinkler system heads. and structural steel fabrication.
(1) Source: Plains Cotton Growers, Inc., Lubbock, Texas.
LUBBOCK MSA LABOR FORCE Es'riMATrS (l)
March
200511)
Civilian Labor Force 139,181
Total Employment 133,308
Unemployment 5,873
Percent Unemployment 4.20%
(I) Source: Texas Workforce Commission.
(2) Subject to revision.
2004
138.516
132,065
6,451
4.70%
A -1
Annual Averases
2003 2002 2001 2000
130,645 128,131 127,293 124,756
125,969 124,228 124,046 121,482
4,676 3,903 3,247 3,274
3.60% 3.00% 2.600/0 2.60%
Estimated non-agricultural wage and salaried jobs in various categories as of December, 2004 were: Ill
Manufacturing
Construction
Trade, Transportation & Public Utilities
Finance. Insurance and Real Estate
Education & Health Services
lnfonnation
Leisure &Hospitality & Other
Government
Total
5,400
5,.300
25,500
16,700
17,900
5,800
19,700
28,500
124,800
(1} Source: Texas Workforce Commission.
MAJOR EMJ'LOYERS(300 EMPLOYEES OR MORE}
Company
Texas Tech University
Covenant Health System
Lubbock Independent School District
University Medical Center
United Supennarkets
City of Lubbock
Texas Tech Health Sciences Center
Cingular
Convergys Corporation
Lubbock County
Lubbock State School
Texas Dept. of Criminal Justice Psychiatric Hospital
Fn:nsbip lSD
Tyco Fire Protection
G Boren Services, Inc.
SBC/Southwestem Bell
Walmart Supercenter
U.S. Postal Service
State National Bank of West Texas
Texas Department of Transportation
Gene Messer Ford Inc.
Lubbock-Cooper lSD
Lubbock Regional MHMR Center
Operator Service Company
Sonic Drive In
ChaseCom/Staffinark
Wells Fargo Phone Bank
Lubbock Christian University
Plains Capital Bank
NTS Communications, Inc.
American State Bank
-Dillaros Department Stores
Cox Cable of Lubbock, Inc.
McLane High Plains
Sodexho School Services
ARAMARK
Lubbock Heart Hospital
Interim Healthcare of West Texas
(I) Source: Market Lubbock.
(2) Full and part time.
Type of Business
State University
Hospital
Public Schools
Hospital
Supennarkets
City Government
Medical and Allied Health School
Wireless Communications
Call Center
County Government
School for Mentally Retarded
Psychiatric Hospital
Public Schools
Manufacturing/Fire Sprinklers
StaffingiHR Consulting
Telephone Utility
Discount Retailer
Post Office
Bank
State Highway and Street Maintenance
Automobile Dealership
Public Schools
Social Services
Customer Service
Restaurants
Call Center
Bank Phone Center
College/University/Professional School
Bank
Telephone Utility
Bank
Department Store
Cable Utility
Wholesale Food Distribution
Facilities Management
Managed Food Services
Heart Hospital
Home Health Care
Estimated
Employees
July, 2004'''
9,919 121
4,310
3,504
2,310
2,156
2,109
2,010
1,750
1,450
950-1200
850
755 IJJ
639
525
516
500-999
500-999
500-999
500
474
449
444
427
427
425
400
392
384
371
367
355
341
339
330
316
316
308
300
(3) See Texas Department of Criminal Justice ("TDCT') Prison Psychiatric Hospital following for more detailed infonnation.
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EDUCATION-TEXAS TECH UNIVERSITY
Established in Lubbock in 1923, Texas Tech University is the fifth largest State-owned University in Texas and bad a Spring, 2005,
enrolbnent of 28.549. Accredited by the Southern Association of Colleges and Schools, the University is a C<H!>ducation.al, State-
supported institution offering a bachelor's degree in I 58 major fields, the master's degree in 107 major fields, the doctorate degree in
64 major fields. and a professional degree in 2 major fields (law and medicine).
The University proper is situated on 451 acres of the 1,829 acre campus, and has over 160 pennanent buildings with additional
construction in progress. Spring, 2004, total employment was 9.919 full time and part time employees.
The medical school had an enrollment of2,100 for Spring, 2005. not including residents; there were 77 graduate students. The School
of Nursing had a Spring, 2005, enrollment of 443. The Allied Health School had a Spring, 2005, enrollment of 731.
Source: Texas Tech University.
OTHER EDUCATION INFORMATION
The Lubbock Independent School District, with an area of 87.5 square miles, includes over 9()0,4, of the City of Lubbock.. There are
approximately 3,504 total employees. The District operates four senior high schools, nine junior high schools, 39 elementarY schools
and other educational programs.
Scholastic Membership History <ll
School
Year
20()0-()1
2001-02
2002-03
2003-04
2004..()5
Average
Daily
Attendance
27,046
27,019
27,094
26,800
28,474 (l)
(l) Soun:e: Superintendent's Office, Lubbock Independent School District.
.(2) Estimated.
Lubbock Christian University, a privately owned, oo-educa.tional senior college located in Lubbock, had an eiU'Oilment of 1,819 for
the Spring Semester, 2005.
The State of Texas School for the Mentally Retarded, located on a 226-acre site in Lubbock, consists of 40 buildings with bed-
capacity for 436 students; 400 students were in residence. There are approximately 850 professional and other employees.
Wayland Baptist College, Plainview Texas, operates a Lubbock Campus which had a Spring. 2005, enrollment of 650 students.
TRANSPORTATION
Scheduled airline ttansportation at Lubbock Preston Smith International Airport is furnished by Southwest Airlines, Continental
Airlines and American Eagle; non-stop service is provided to Dallas-Fort Worth International Airport, Datlas Love Field, Bush
Intercontinental Airport (Houston), Houston Hobby, El Paso, Las Vegas, Austin, and Albuquerque. Passenger boardings for
2001 536,670, for 2002 513,096 for 2003 514,250 and 541,549 for 2004. Extensive private aviation services are located at the
airport.
Rail transportation is furnished by the Burlington Northern Santa Fe Railroad with through service to Dallas, Houston, Kansas City,
Chicago, Los Angeles and San Francisco. Short-haul rail service is also furnished by the Seagraves, Whiteface and Lubbock
Railroad. Texas, New Mexico and Oklahoma Bus Lines, a subsidiary of Greyhound Corporation, provides bus service. Several
motor freight connnon carriers provide service.
Lubbock has a well-developed. highway networfc including Interstate 27 (Lubbock-AmariUo), four U.S. Highways. one State
Highway, a controlled-access outer loop and a county-wide system of paved farm..to-maricet roads.
A-3
GOVERNMENT AND MILITARY (II
The fonner air base, now known as Reese Teclmology Center (the "Center'') is a 2500-acre campus with over I million square feet
of space. The Center is the Sth largest Research Park in the United States and is considered by Department of Defense as "one of
the most rapid and successfully redeveloped closed military bases in the country.,. The Center is currently 80% occupied with II
commercial tenants employing over 670 people (created over the tast three years). Anchor tenants include Texas Tech Research
and the 4,200-student campus of South Plains College., a two-year community college.
Reese Center is the home of the prized Institute of Environmental and Human Health (TIEHH). TIEHH is a joint venture between
Texas Tech University and Texas Tech University Health Sciences Center and researches the exposure and effects toxic chemicals
have on human health and the environment T1EHH has assisted in stimulating the Lubbock economy with over $50 million in
grants. TIEHH's location as the anchor tenant at the Reese Teclmology Center has assisted the facility in being transfonned into a
research, industrial and commercial center.
Current areas of specialty at the Center include Biotechnology, Environmental Sciences, Food Technology and Work Force
Development Reese Center recently received an EDA grant for $1.7 million dollars to install an OC-192 fiber optic network
and wireless system for the entire campus making it a leader in high tech communications. Other research facilities that have been
relocated to Reese Technology Center are the Texas Tech University Wind Engineering and Advanced Vehicle Engineering
Research Centers. Total economic impact of the Reese Technology Center has been $26.8 million dollars over the last three
years.
State of Texas ..• More than 25 State of Texas boaids., departments, agencies and commissions have offices in Lubbock; several of
these offices have multiple units or offices.
Federal Govemmenr ... Several Federal departments and various other administrations and agencies have offices in Lubbock; a
Federal District Court is located in the City.
(I) Source: City of Lubbock, Texas.
TEXAS DEPARTMENT OF CRIMINAL JUSTICE (""TDCJ") PRISON PSYCIDA TRIC HOSPITAL
TDCJ operates a 550-bed Prison Psychiatric Hospital and a 48-bed regional prison hospital on a I ,303 acre site in southeast Lubbock.
An adjacent 400-bed capacity "trusty" facility houses prison trusties some of whom work at the bospital. Employment for all
facilities is approximately 870 with an annual estimated payroll of$17 million and an estimated remaining annual operating budget
of$27 million.
HOSPITALS AND MEDICAL CARE
There are four hospitals in the City with over 1 ,500 beds. Covenant Medical Center is Che largest and also operates an accredited
nursing school. Lubbock County Hospital District, with boundaries contiguous with Lubbock OH.mty, owns the University Medical
Center which it operates as a teaching hospital for the Texas Tech Health Sciences Center. There are 102 clinics and over 700
practicing physicians, surgeons, and dentists. Lubbock's Health Care Sector employs over 17,000 people with a total payroll of
$543.3 million and draws patients from 77 counties in West Texas and Eastern New Mexico. A radiology center for the treatment
of malignant diseases is located in the City.
RECREATION AND ENTERTAINMENT
Lubbock's Mackenzie Regional Park and over 115 City parks and playgrounds provide recreation centers, shelter buildings. a garden
and art center, swimming pools, a golf course, teMis and volley ball courts, baseball diamonds and picnic areas, including the
Yellowhouse Canyon Lakes system of six lakes and 750 acres of adjacent parkland extending from nor1hwest to southeast Lubbock
along the Yellowhouse Canyon. There are several privately-owned public swinuning pools, golf courses, and country clubs.
The City of Lubbock has developed a 36 square block area of approximately I 00 acres adjacent to downtown Lubbock under the
Lubbock Memorial Civic Center program. Approximately SO acres contain the 300,000 square foot Lubbock Memorial Civic
Center, the main City library building and State Department of Public Safety offices; a SO-acre peripheral area has been redeveloped
privately with office buildings, hotels and motels, a hospital, and other facilities.
Available to residents are Texas Tech University programs and events, Texas Tech University Museum, Planetarium and Ranching
Heritage Center exhibits and programs, United Spirit Arena and its events, Lubbock Memorial Civic Center and its evealS, Lubbock
Symphony Orchestra programs, Lubbock Theatre Center, Lubbock Civic Ballet, Municipal Auditorium and coliseum programs and
events, the library and its branches, the annual Panhandle--South Plains Fair, college and high school football, basketball and other
sporting events, as well as modern movie theaters.
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CHURCHES
Lubbock has approximately 300 churches representing more than 2S denominations.
UTILITY SERVICES
Water and Sewer-City of Lubbock.
Gas-Atmos Energy Company.
Electric-City of Lubbock (Lubbock Power & Light) and Xcel Energy; and, in a small area., South Plains Electric Co-operative.
ECONOMIC INDICES 1'l
Year
2000
2001
2002
2003
2004
Building
Permits
$ 200.427,650
294,064,200
314,077,929
417,252,162
408,726,402
Water
70,Jl1
70,756
72,615
72,505
74,026
Utility Connections
Gas
65,000
65,332
67,308
69,954
70,196
(1) All data as oft2-31, except where noted; Source: City of Lubbock.
Electric
(LP&L Only)<ll
58,724
59,431
62,713
62.203
63,076
(2) Electric connections are those of City of Lubbock owned Lubbock Power and Light ("LP&L") and do not include those ofXcel
Energy or South Plains Electric Cooperative. LP&L provides service to approximately 70% of the electric customers in the City.
BUILDING PERMITS BY CLASSIFICATION o>
Residential Pennies
Single Family Multi-Family Total Residential Commercial,
No. No. Public Total
Calendar No. Dwelling Dwelling and Other Building
Year Units Value Units (1) Value Units <ll Value Permits Permits
2000 819 $87.501,009 281 $11,548,809 1,100 $ 99,049,818 $101,377,832 $200,427,650
2001 941 108.589,812 853 37,242,260 1,794 145,936,072 148,128,128 294,064,200
2002 1,281 148,190,769 549 31,700,960 1,830 178,891,729 134,186,200 314,077,929
2003 1,288 172,679,23$ 1.595 101,540,351 2,883 274,219,589 143,032.573 417,252,162
2004 1,204 169,075,633 2,382 114,339,697 3,586 283,415,330 125,311,072 408,726,402
2005 (3) 546 84,646,181 140 9,717,000 686 94,363,181 78,560,300 172,923,481
(I) Source: CityofLubbock, Texas.
(2) Data shown under "No. Dwelling Units" is for each individual dwelling unit, and is not for separate buildings; includes duplex,
triplex, quadruplex and apartment permits.
(3) Through May 31,2005.
A-S
APPENDIXB
EXCERP'IS FROM THE
CITY OF LUBBOCK, TEXAS
ANNUAL FINANCIAL REPORT
For the Year Ended September 30, 2004
The information contained in this Appendix consists of excerpts from the City of Lubbock,
Texas Annual FilWlCial Report for the Y car Fnded September 30, 2004, and is not intended
to be a complete statement of the City's financial condition. Reference is made to the
complete Report for further information.
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KPMGLLP
Suite 3100
717 North Harwood Street
Dallas. TX 75201·6585
Independent Auditors' Report
The Honorable Mayor and Members of the City Council
City of Lubbock, Texas:
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of the City of Lubbock, Texas. as of and for the year ended September 30,
2004. which collectively comprise the City's basic financial statements as listed in the table of contents.
These financial statements are the responsibility of the City of Lubbock's management. Our responsibility
is to express opinions on these financial statements based on our audit. We did not audit the financial
statements of Market Lubbock Economic Development Corporation and Civic Lubbock, Inc. which
comprise the aggregate discretely presented component units. In addition, we did not audit the West Texas
Municipal Power Agency. which is both a major fund and represents 4 percent, 1 percent, and 22 percent
of the assets, net assets, and revenues of the business-type activities, respectively. Those financial
. statements were audited by other auditors whose reports thereon have been furnished to us, and our
opinions, insofar as they relate to the amounts included for the Market Lubbock Economic Development
Corporation. Civic Lubbock, Inc .. and the West Texas Municipal Power Agency are based on the reports of
the other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to fmancial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The financial statements of Market Lubbock Economic Development Corporation, Civic
Lubbock, Inc. and the West Texas Municipal Power Agency Fund were not audited in accordance with
Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, based on our audit and the reports of other auditors, the financial statements referred to
above present fairly, in all material respects, the respective financial position of the governmental
activities, the business-type activities, the aggregate ruscretely presented component units, each major
fund, and the aggregate remaining fund information of the City of Lubbock, Texas, as of September 30,
2004, and the respective changes in financial position and cash flows, where applicable, thereof and· the
budgetary comparison for the General Fund for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
ln accordance with Government Auditing Standards, we have also issued a report dated March 28, 2005 on
our consideration of the City of Lubbock's internal control over fmancial reporting and our tests of its
compliance with certain provisions oflaws. regulations. contracts, and grant agreements and other matters.
KPMG LI.P 8 U.S. lim<IO~ l10bili:y .,..rtr.....,;p, i$ ti>Ct U.S.
m.•rnoer 1k7n of KPMG ltdOIN.uon.aJ . .1 SWIN c:oopet111fN-.
17
. The purpose of that report is to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing and not to provide an opinion on the internal control over
financial reporting or on compliance. That report is an integral part of an audit performed in accordance
with Government Auditing Standards and should be considered in assessing the results of our audit.
The management's discussion and analysis and schedules of funding progress on pages 19 through 34 and
73 and 77, respectively, are not a required part of the basic financial statements but are supplementary
infonnation required by accounting principles generally accepted in the United States of America. We have
applied certain limited procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the required supplementary infonnation. However, we did not
audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Lubbock's basic financial statements. The introductory section, combining fund
statements and schedules, and statistical section are presented for purposes of additional analysis and are
not a required part of the basic financial statements. The combining fund statements and schedules have
been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic
financial statements and, in our opinion, based on our audit and the reports of other auditors, are fairly
stated in all material respects in relation to the basic financial statements taken as a whole.
March 28, 2005
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
As management of the City of Lubbock, Texas (City), we offer readers this narrative
overview and analysis of the financial activities of the City for the fiscal year ended
September 30,2004.
We encourage readers of these financial statements to consider the information included in
the transmittal letter and in the other sections of the Comprehensive Annual Financial Report
{CAFR) e.g., combining statements and the statistical section in conjunction with this
discussion and analysis.
Financial Highlights
These financial highlights sununarize the City•s financial postflon and operations as
presented in more detail in the Basic Financial Statements {BFS), as listed in the
accompanying Table of Contents.
• The assets of the City exceeded its liabilities at September 30, 2004 by $546 million (net
assets). Of this amount, $51 million (unrestricted net assets) may be used to meet the
City's ongoing obligations ~o citizens and creditors.
• The City's total net assets decreased by nearly $2.7 million as a result of operations
during the fiscal year.
• The ending unreserved fund balance for the General Fund was $12.1 million or
approximately 13.5% of total General Fund expenditures, or 14.0% of total General Fund
revenues.
• All of the City's governmental funds reported combined ending fund balances of $47.7
million. Of this total amount, $13.8 million is available for spending at the City's
discretion.
• All of the City's business-type activities reported combined ending net assets of $442.4
million. Of this total amount, $41.2 million is available for spending at the City's
discretion.
• The City's proprietary funds net assets decreased by nearly $5.0 million from $437.1
million to $432.1 million. The Electric Fund (Lubbock Power & Light or LP&L) ended
the year with operating income of nearly $3.3 million erasing a $6.3 million operating
loss experienced in the prior year.
• Near the end of the fiscal year, the City issued $22.6 million of bonds to refund $23.2
million in outstanding bonds. As a result of this transaction, the City will experience an
economic gain of $0.8 million and an accounting loss of $1.0 million, with 4.2% in
present value savings.
19
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
Overview of the Financial Statements
Basic FinanciaJ Statements. Management's Discussion and Analysis (MD&A) is intended
to serve as an introduction to the City's BFS. The BFS are comprised of three components:
l) Government-Wide Financial Statements (GWFS), 2) Fund Financial Statements (FFS),
and 3) Notes to Basic Financial Statements (Notes). This CAFR also contains other
supplementary information in addition to the BFS.
Government-Wide Financial Statements. The GWFS, shown on pages 35-37 of this
report, contain the statement of net assets and the statement of activities, described below:
The statement of net assets presents infonnation on all of the City's assets and
liabilities (including capital assets and short-and long-term liabilities), with the
difference between the two reported as net assets using the accrual basis. Over time,
increases or decreases in net assets serve as a useful indicator of whether the financial
position of the City is improving or deteriorating.
The statement of activities presents a comparison between direct expenses and
program revenues for each of the City's functions or programs (referred to as
"activities,). Direct expenses are those that are specifically associated with an
activity and are therefore clearly identifiable with that activity. Program revenues
include charges paid by the recipient of the goods or services offered by the program,
in addition to grants and contributions that are restricted to meeting the operational or
capital requirements of a particular activity. Revenues that are not directly related to
a specific activity are presented as general revenues. The comparison of direct
expenses with revenues from activities identifies the extent to which each activity is
self-financing, or alternatively, draws from any City generated general revenues. The
governmental activities {activities that are principally supported by taxes and
intergovernmental revenues) of the City include administration of conununity
services, electric (street lighting), fmancial services, ftre, general government, human
resources, police, streets, and public works. The business-type activities (activities
intended to recover all of their costs through user fees and charges) of the City
include Electric (LP&L), Water, Sewer, Solid Waste, Stormwater, Transit, and
Airport. All changes in net assets are reported as soon as the underlying event giving
rise to the change occurs (accrual basis), regardless of the timing of related cash
flows. Thus, revenues and expenses are reported in this statement for some items that
will only result in cash flows in future fiscal periods, such as uncollected taxes and
earned but unused vacation leave.
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City of Lubbock, Texas
Management) s Discussion and Analysis
For the Year Ended September 30) 2004
Component Units. The GWFS include not only the City itself (the "primary
govenunent"), but also two legally separate entities (the "component units): Market
Lubbock Economic Development Corporation, d/b/a Market Lubbock, Inc. and Civic
Lubbock, Inc., for which the City is financially accountable. These entities provide
economic development services and arts and cultural activities for the City. Financial
information for these component units is reported separately in the GWFS in order to
differentiate them from the City's fmancial information. Neither of these component
units are considered major component units.
Fund Financial Statements. A fund is defined as a fiscal and accounting entity with
a self-balancing set of accounts recording cash and other financial resources, together
with all related liabilities and residual equities or balances, and changes therein,
which are segregated for the purpose of carrying on specific activities or attaining
certain objectives in accordance with special regulations, restrictions, or limitations.
The principal role of funds in the new financial reporting model is to demonstrate
fiscal accountability. The City, as with other state and local governments, uses fund
accounting to ensure and demonstrate compliance with fmance-related legal
requirements.
The focus of the FFS is on major funds. Major funds are those that meet minimum
criteria (a percentage of assets, liabilities, revenue, or expenditures/expenses of fund
category and of the governmental and enterprise funds combined), or those that the
City chooses to report as major funds given their qualitative significance. Nonmajor
funds are aggregated and shown in a single column in the appropriate fmancial
statements. Combining schedules of nonmajor funds are included in the CAFR
following the BFS. All of the funds of the City can be divided into three categories:
governmental funds, proprietary funds, and fiduciary funds.
Governmental FFS. Governmental funds are used to account for essentially the
same functions reported as governmental activities in the GWFS. However, unlike
the GWFS, governmental FFS focus on near-term inflows and outflows of spendable
resources, as well as on balances of spendable resources available at the end of the
City's fiscal year. Such information is useful in evaluating the City's near-term
fmancing requirements.
Because the focus of governmental funds is narrower than that of the GWFS
(modified accrual versus accrual basis of accounting, and current financial resources
versus economic resources), it is useful to compare the information presented for
governmental funds with similar information presented for governmental activities in
the GWFS. By doing so, readers may better understand the long-tenn impact of the
near-term fmancing decisions. Reconciliations are provided for both the
govenunental fund balance sheet and the governmental fund statement of revenues,
expenditures, and changes in fund balances to facilitate the comparison between
governmental funds and governmental activities.
21
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30) 2004
The City maintains 24 individual govenunental funds. Information is presented
separately in the govenunental ftmd balance sheet and in the governmental fund
statement of revenues, expenditures) and changes in fund balances for the General
Fund only. The General Fund is considered to be a major fund. Data from the other
governmental funds are combined into a single aggregated presentation. The City
adopts a budget annually for the General Fund and all other funds. A budgetary
comparison statement has been provided for the General Fund to demonstrate
compliance with this budget. It is presented in the FFS following the statement of
changes in revenues, expenditures, and changes in fund balances. The governmental
FFS can be found on pages 39-43 of this report.
Proprietary FFS. The City maintains two different types of proprietary funds.
Enterprise funds are used to report the same functions presented as business-type
activities in the GWFS. Enterprise FFS provide the same type of information as the
GWFS, only in more detail. The City uses enterprise funds to account for its Electric
(LP&L). Water, Sewer, West Texas Municipal Power Agency (WTMPA),
Stonnwater, Transit, Solid Waste, and Airport activities, of which the first five
activities are considered to be major funds by the City and are presented separately.
The latter three activities are considered nonmajor funds by the City and are
combined into a single aggregated presentation.
Internal service funds are an accounting device used to accumulate and allocate costs
internally among the City's various functions. The City uses internal service funds to
account for its fleet of vehicles, management information systems, risk management,
print shop. and central warehouse activities among others. The services provided by
the internal service funds benefit both governmental and business-type activities, and
accordingly, they have been included within governmental activities and business-
type activities, as appropriate, in the GWFS. All internal service funds are combined
into a single aggregated presentation in the proprietary FFS. Reconciliations .are
provided for both the proprietary fund statement of net assets and the proprietary fund
statement of revenues, expenses, and changes in fund net assets to facilitate the
comparison between enterprise funds and business-type activities. The proprietary
FFS can· be found on pages 44-55 of this report.
Fiduciary FFS. Fiduciary funds are used to account for resources held for the
benefit of parties outside the government. Fiduciary funds are not reflected in the
GWFS because the resources of those funds are not available to support the City's
own programs. The City presents an agency fund as its only fiduciary fund in the
FFS. The fiduciary FFS can be found on page 56 of this report.
Notes to Basic Financial Statements. The Notes provide additional information that is
essential to a full understanding of the data provided in the GWFS and FFS. The Notes
can be found on pages 57-90 of this report.
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
Required Supplementary Information Other Than MD&A. The City has presented
required supplementary information relating to its progress in funding its obligation to
provide pension benefits to its employees in the Notes to the BFS.
Government-Wide Financial Analysis
As noted earlier, net assets serve as a useful indicator of the City's financial position. For the
City, assets exceeded liabilities by $546 million (net assets) at the close of the fiscal year.
This compared to assets exceeding liabilities by $549 million (net assets) at the end of the
prior fiscal year. As a result of operations, total net assets decreased by $2.7 million during
the period.
By far the largest portion of the City's net assets, 78.7%, reflect its investment in capital
assets, e.g., land, buildings, infrastructure, machinery, and equipment, less any related debt
used to acquire those assets that is still outstanding at the close of the fiscal year. The City
uses these capital assets to provide services to citizens; consequently, these assets are not
available for future spending. Although the City's investment in capital assets is reported net
of related debt, it should be noted that the resources needed to repay this debt must be
provided from other sources, since the capital assets themselves cannot be used to liquidate
these liabilities.
City of Lubbodc Net Assets
September 30
(in ooo•s)
Governmental Business-Type
Activities Actmties Total
2004 2003 2004 2003 2004 2003
Current and other assets $ 100,489 78,784 177,959 188,071 278,448 266,861
Capital assets 129,014 121,735 611,703 617,465 740,717 739,200
Total assets 229,503 200,519 789,662 805,542 1,019,165 1,006,061
Cum:nt liabilities 48,739 25,697 44,156 37,774 92,895 63,471
Noncurrent liabilities 76,423 73,138 303,173 320,024 379,596 393,162
Total liabilities 125,162 98,835 347,329 357,798 472!491 456,633
Net assets:
Invested in capital assets,
net of related debt 74,433 78,475 355,816 371,427 430,249 449,902
Restricted 20,339 4,391 45,417 43..389 65,756 47,780
Unrestricted 9,569 18,818 41,190 32,928 50,759 51,746
Total net assets $ 104,341 101,684 442,423 447,744 546,764 549,428
An additional portion of the City's net assets, 12%, represents resources that are subject to
external restrictions on how they may be used. The remaining balance of unrestricted net
assets of $50.7 million may be used to meet the City's ongoing obligations to citizens and
creditors.
23
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
The City also reports positive balances in all three categories of net assets for the City as a
whole, as well as for its separate governmental activities, and business-type activities.
The City's governmental activities experienced an increase in net assets of $2.7 million,
while net assets decreased by $8.5 million during the prior fiscal year. This increase is
primarily a result of strong growth in new construction and better than anticipated sales tax
revenues coupled with a concentrated effort by City management to contain expenditures.
This is the second year in a row that the City Council has been able to cut property tax rates
while streamlining City operations.
The City's business-type activities experienced a decrease in net assets of$5.3 million during
the current fiscal year as compared to an increase of $3.6 million during the prior fiscal year.
This decrease in net assets resulted from a change in accounting estimate on the life of the
City's landfill. This change in accounting estimate resulted in the nearly doubled
depreciation in the Solid Waste Fund.
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City of Lubbock, Texas
Management's Discussion and Analysis
) For the Year Ended September 30,2004
Changes in Net Assets
Details of the following summarized information can be found on pages 36-37 of this report.
City of Lubbock Changes in Net Assets
} For the Year Ended September 30
(in OOO's)
Business-
Governmental Type
Adivities Activities Totals
Revenues: 2004 2003 2004 2003 2004 2003
Program Revenues:
Charges for services $ 12,713 13,888 181,411 178,536 194,124 192,424
Operating gnmt.s and contnbutions 9,643 12,137 6,739 5,219 16,382 17,356
Capital grants and contributions 9,269 7,909 9,269 1,9f:IJ
General ~«venues:
Property taxes 44,497 42,303 44,497 42,303
Sales taxes 30,555 29,092 30,555 29,092
Other taxes 3,793 3,712 3,793 3,712
Franchise fees 9,654 6,613 9,654 6,613
Grantsloontributions not restricted
to specific programs 259 259
Other 4,274 3,834 2,932 ?:,737 7,206 6,571
Total revenues 115z129 ( 11,579 2001351 194z660 3151480 306~39
Expemes:
Administrati.ve/C<lmmunity Services 22,313 21,793 22,313 21,793
) Electric 2,471 2,373 2,471 2,373
Financial Services 2,387 1,965 2,387 1,965
Ftre 21,998 20,207 21,998 20;ut!
General Government 20,562 21,009 20,562 21,009
Human Resources 777 786 777 786
Police 33,249 31,429 33,249 31,429
Planning and Transportation 10,789 9,827 10,789 9,827
Public Works 3,078 9,856 3,078 9,856
Interest on long-tenn debt 4,593 3,346 4,593 3,346
Electric 110,591 105,216 110,591 105,216
Warer 27,879 27,461 27,879 27,461
Sewer 17,020 17,248 17,020 17,248
Solid Waste 17,662 19,559 17,662 19,559
) Stormwater 5,357 3,315 5,357 3,315
Thlnsit 10,565 9,163 10,565 9,163
Airport 6,853 6,479 6,853 6,479
Golf 21 21
Total Expenses 122,217 122,591 1951927 188z462 318,144 3111053
O&ange in net assets before
special items and transfers (7,088) (11,012) 4,424 6,198 (2,664) (4,814)
' Special items
Transfers 9,745 2,554 ~9.74~ !6554}
Chmge in net assets 2,657 (8,458) (5,321) 3,644 (2,664) (4,814)
Net assets· beginning of year 101,684 110,142
Net assets • end of year $ ll>4;~1 Ilii1~
447,744
446423
444,100
447,744
549,428 ~m 554~42 ~91 28
) 25
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
Governmental activities. Governmental activities increased the City's net assets by $2.7
million. Key elements of the increase follow:
• Transfers to/from business-type activities during the fiscal year increased govenunental
activities net assets by $9.7 million. During the prior fiscal year these transfers increased
governmental activities net assets by approximately $2.7 million. This is a net increase
of $7.1 million in resources to governmental activities, which is the primary factor for the
increase in net assets. Transfers from the business-type activities included payments in
lieu of taxes, franchise fees, and indirect costs of operations for centralized services such
as payroll and purchasing.
• Total expenses decreased by nearly $.4 million from the prior year due primarily to a
payment made in the prior year of $5.5 million for the City's share of the Marsha Sharp
Freeway Project. This project will be owned and maintained by the State of Texas.
However, the governmental activities did increase planning and transportation spending
of$1.0 million for the City's streets and had an increase in public safety spending. police
and fire of$3.6 million--a result of the City Council•s conunitment to public safety.
• Revenues increased by approximately $3.6 million. The key factors impacting this
increase include increases in property taxes of $2.1 million due to the additional property
being added to the tax rolls, increases in franchise fees of $3.0 million due to changes in
the fee structures, and increases in sales taxes of nearly $1.5 million. Also, charges for
services and operating grants and contributions decreased by $1.1 million and 2.5
million~ respectively.
This graph depicts the expenses and program revenues generated through the City's various
govenunental activities.
Expenses and Program Revenues-Governmental Activities
$35,000
$30,000
$15,000
$20,000
$15,000
$10,000
$5,000
so
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
The following graph reflects·the source of the revenue and the percentage each source
represents of the total.
Charges for
Services
It%
Operating grants &
Contributions
8%
Franchise Fees
8%
3%
Revenues by Sour«-Governmental Activities
Miscellaneous
4%
Sales Taxes
17%
Property Taxes
39o/o
Business-type activities. Business~type activities decreased the City's net assets by $5.3
million as a result of operations. Key elements of this increase follow:
• Charges for services for business-type activities increased by $2.9 million. This is
mainly due to increased sales in the Electric Fund (LP&L) with revenues up nearly $10.8
million over the prior year. Sales for the water fund were $.9 million less than the prior
fiscal year in spite of an increase in rates, because 2004 was the second wettest year in
recorded history for the City. WTMPA revenues were impacted because of the capital
lease of the co-generation power plant JRM8 to the Electric Fund. The plant was not
utilized due to the continued high natural gas prices.
27
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
• Capital grants and contributions continue to be a significant revenue source for the
Electric (LP&L), Airport, Water, and Sewer Funds during the current fiscal year,
producing nearly $9.3 million in revenue. This is comparable to the prior fiscal year's
support of $7.9 million. These contributions primarily came from federal grants and
from water and sewer lines and taps that were funded by property owners.
• Expenses increased in total by $7.5 million over the prior fiscal year. This is mainly due
to the increased cost of operations for electric activity, which increased nearly $5.4
million over the prior year. The storrnwater activity experienced a $2.0 million increase
in expenses due primarily to scheduled interest payments on debt. The transit activity
expenses increased by $1.4 million over the prior year due to the increased cost of
personal services and other services.
The following graph reflects the revenue sources generated by the business-type activities.
As noted earlier, these activities include Electric (LP&L), Water, Sewer, Solid Waste,
Transit, WTMP A, Airport, and Stormwater Drainage.
Charges for
Services
9lo/o
Revenues by Source -Business-type Activities
28
Captial Grants &
Contributions
So/o
Operating Grants
& Contribntions
3%
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
Financial Analysis of the City,s Funds
Governmental funds. The focus of the City's governmental funds is to provide infonnation
on near-tenn inflows, outflows, and balances of spendable resmaces. Such infonnation is
useful in assessing the City's fmancing requirements. In particular, unreserved fund balance
serves as a useful measure of the City's resources available for spending at the end of the
fiscal year.
At the end of the fiscal year the City's governmental funds reported combined ending fund
balances of $47.7 million. This compared to $50.3 million at the end of the prior fiscal year.
A significant portion of this decrease resulted from the planned spend-down of fund balance
in the Capital Projects Fund. This resulted in a reduction of net assets of $5.7 million. This
reduction was partially offset by the results of operations of the General Fund that ended the
year adding $3.3 million to net assets. Of the ending governmental fund balance, $13.8
million or 28.9% constituted umeserved fund balance, which is available for spending at the
City's discretion. This compared to $10.6 million or 21 .1% at the end of the prior fiscal year.
The remainder of the fund balance is reserved to indicate it has already been committed to, I)
pay debt service, 2) use in construction of approved capital projects, or 3) for other restricted
purposes.
The General Fund is the chief operating fund of the City. At the end of the fiscal year,
unreserved fund balance in the General Fund was approximately $12.1 million compared to
$8.4 million in the previous fiscal year, representing an increase of$3.7 million. Total fund
balance (reserved and unreserved) approximated $12.7 million at the end of the fiscal year
compared to $9.4 million at the end of the prior fiscal year. As a measure of the General
Fund's liquidity, it is useful to compare both unreserved fund balance and total fund balance
to total fund expenditures. Unreserved fund balance represented 13.4% of total General
Fund expenditures compared to 9.8% of total General Fund expenditures in the prior year.
Total fund balance represented 14.1% of total General Fund expenditures compared to 11.0%
in the prior year. The increase in fund balance is primarily a result of strong growth in new
construction and better than anticipated sales tax revenues, coupled with a concentrated effort
by City management to contain expenditures.
Proprietary funds. The City's proprietary funds provide essentially the same type of
infonnation found in the GWFS, but in more detail.
29
City of Lubbock, Texas
Management~ s Discussion and Analysis
For the Year Ended September 30,2004
Unrestricted net assets of the major proprietary funds at the end of September 30 are shown
next with amounts presented in OOOs:
2004 2003
Electric Fund $ 7,006 2,367
Water Fund 14,078 15,551
Sewer Fund 6,343 4,286
WTMPA 1,743 2,155
Stonnwater 1,305 869
$ 30,475 25,228
The Electric FWld (LP&L) increased unrestricted net assets by $4.6 million as opposed to a
decrease of $.4 million during the prior year. This is mainly due to the results of operations,
a capital contribution from the Water, Sewer, Stormwater, and Solid Waste FWlds of $1.8
million for prior years costs of the utility billing system and a decision by City Council not to
charge for payments in lieu of taxes and franchise fees until adequate cash reserves are
established.
The Water Fund reflected a current year decrease in unrestricted net assets of nearly $1.5
million compared to an increase of $3.6 million during the prior year. This is due to
decreases in consumption. Despite a raise of approximately 3% in water rates, revenues were
down with record rainfall.
The Sewer Fund reflected a current year increase in unrestricted net assets of approximately
$2.1 million compared to a $1.9 million decrease during the prior year. This is primarily due
to sewer rates increases to all customers.
The WTMP A Fund reflected a decrease in unrestricted net assets of $.4 million primarily as a
result of operations. The prior fiscal year's change was an increase in unrestricted net assets
of $2.5 million.
The Stormwater Fund experienced an increase in unrestricted net assets of $.4 million during
the fiscal year compared to a $1.6 million increase in the prior fiscal year. The increase
continues to be due to an increase in stormwater rates of nearly 200%. This increase was
necessitated to provide long-term funding for system improvements, maintenance, and flood
prevention.
30
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
General Fund Budgetary Highlights
Differences between the original budget and the final amended budget were minimal. This is
·a result of the truth-in-budgeting initiative championed by the City CounciL This resulted in
fewer amendments as City management also made a concentrated effort to reduce spending
and streamline operations. This also resulted in a planned increase in the General Fund's
fund balance.
Adjustments were made to expenditures to lessen the impact of the net reductions in transfers
from LP&L. The General Fund ended the fiscal year with expenditures more than $1.3
million less than budgeted.
As noted earlier, the City chose to issue $22.6 million in bonds to refund $23.2 million in
outstanding debt. This resulted in present value savings of $836,312, decreasing total debt
service requirements by $874,031. The transaction resulted in an accowtting loss of
$1,019,912.
Due to stronger than anticipated growth in new construction and better than expected sales
tax revenue, actual revenues were nearly $3.3 million more than budgeted for the fiscal year.
Capital Assets and Debt Administration
Capital assets. The City's investment in capital assets for its govenunental and business-
type activities at September 30, 2004 amounted to $741 millio~ net of accwnulated
depreciation. This was a $1.5 million increase over the prior fiscal year's balance of $739
million, net of accumulated depreciation. This investment in capital assets includes land.
buildings and improvements, equipment, construction in progress, and infrastructure.
Major capital asset events during the fiscal year included the following:
• Work continued in the Water Fund with another $3.3 million expended on the
construction of water lines ahead of the Marsha Sharp Freeway. Total expenditures on
the project to date are $4.3 million.
• $1.7 million was expended on Cell II construction at the landfill. Total expenditures on
the project to date total $3.9 million.
• $1.3 million was expended on the construction of the MacKenzie Park Amphitheater.
Expenditures to date on the project total $1.7 million.
• Scheduled improvements to LP&L's distribution infrastructure amount to $4 million. In
addition, the Electric Fund spent an additional $3.2 million on a new substation to
provide service to South and Southeast Lubbock. Total expenditures for this project to
date total $3.7 million.
31
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
• The City continues work on a flood relief project linking South Lubbock's chain ofplaya
lakes with an underground drainage system spending $3.2 million during the fiscal year.
Expenditures to date on the project total $4.8 million.
At the end of the fiscal year, the City has construction commitments of $113 million.
City or Lubbock Capital Auets
(Net or Accumulated Depreciation)
September 30
Governmental
Activities
(in OOO's)
Bosiness-
Type
Activities Totals
2004 2003 2004 1003 2004 2003
Land
Buildings
Improvements other
than buildings
Machinery and equipment
Construction in progress
Total
$ 8,608 7,996
23,794 25,602
37,183
15,957
43,472
$ 129,014
37,100
14,881
36,156
121,735
31,676 31,676
68,302 71,525
330,842
66,922
113,961
611,703
329,618
79,957
104,689
617,465
40,284
92,096
368,025
82,879
157,433
740,717
Additional information about the City's capital assets can be found on pages 70-72 ofthis
report.
Long-term debt. A summary of the City's total outstanding debt follows:
General obligation bonds
Revenue bonds
Total
City of Lubbock Outstanding Debt
General Obligation and Revenue Bonds
September 30
(in OOO's)
Goverameotal
Ac:tivitie•
2004 1003
s 70.221 69,808
$ 70,221 69,808
Busiaeas-
Type
Activities
2004 2003
215,664 226,127
94,605 I 01,295
310,269 327,422
Totals
l004
285,885
94,605
380,490
2003
295,935
101J95
397.230
39,672
97,127
366,718
94,838
140,845
739,200
There is no direct 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 all City pwposes to $2.50
per $100 of assessed valuation. The Attorney General of the State of Texas permits an
allocation of $1.50 of the $2.50 maximum tax rate for general obligation bonds debt service.
32
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City of Lubbock, Texas
Management, s Discussion and Analysis
For the Year Ended September 30, 2004
The current interest and sinking fund tax rate per $100 of assessed valuation is $0.09496,
which is significantly below the maximum allowable tax rate.
Over the fiscal year, the City's total outstanding debt decreased by $16.74 million, or 4.2%.
This is compared to an increase of $62.5 million, or 18.8%, during the prior fiscal year.
The decrease in outstanding debt is attributed to the payment of scheduled debt service
totaling $21.28 million and a reduction in outstanding debt of $.585 million as a result of the
refunding. The reductions in outstanding debt were offset by the issuance of $5.125 million
in debt to fund streets projects and the capital improvements plan.
During the fiscal year, the City issued $2.025 million of General Obligation Bonds, Series
2004. This issuance was the first installment of the $30 million capital improvement debt
issuance approved by voters in 2004 to fund the current capital improvements plan. The City
also issued $3.1 million in Tax and Waterworks System Surplus Revenue Certificates of
Obligation, Series 2004. This issuance funded streets projects that included right-of-way
costs on the Marsha Sharp Freeway project, envirorunental study costs for future
thoroughfares, and for citywide traffic signals and streetlights.
The City also issued $22.62 million of General Obligation Refunding Bonds, Series 2004 to
defease $23.205 million in outstanding bonds.
All bonds issued during the fiscal year were insured to provide a lower cost of interest
expense for the City's taxpayers. It is the City's policy to evaluate each bond issue to
determine whether it is economically feasible to purchase bond insurance.
The City of Lubbock maintains an "AA-" rating from Standard & Poor's and Fitch Ratings,
Inc. and an "Al" rating from Moody's Investors Service for general obligation debt The
revenue bonds of LP&L and WTMPA have been rated "BBB-, by Standard & Poor's,
"BBB+" by Fitch Ratings, Inc., and "A3" by Moody's Investors Service.
Additional information about the City•s long-term debt can be found on pages 80-84 of this
report.
Economic Factors and the Next Fiscal Year's Budget and Rates
• At the end of the City's fiscal year the unemployment rate for the Lubbock area was 2.9
percent This is a decrease from a rate of 3.1 percent one year earlier. This compares
favorably to the state's average unemployment rate of 5.5 percent and the national
average of5.1 percent on December 30,2004.
• Total retail sales reflected a 2.4 percent increase over the prior year.
33
City of Lubbock, Texas
Managemenf s Discussion and Analysis
For the Year Ended September 30> 2004
• Building pennits for new construction decreased from 3,125 during 2003 to 2,644 in
2004, or about a 15% decrease. This compares to a 25% decrease during the prior period.
Conversely, building pennit values for new construction decreased from $370.6 million
in 2003 to $357.2 million in 2004, or about a 3.6% decrease.
• Total occupancy in local hotels and motels remained constant and the occupancy tax
totaled nearly $2.9 millioit; nearly identical to the amount received during the prior ftscal
year.
• City Council again decided to support the operations of the Electric Fund by forgoing
transfers for payments in lieu of taxes, and franchise fees for the upcoming fiscal year.
The City Council intends to continue this support until such time as the Electric FWld has
adequate monetary reserves.
All of these factors were considered in preparing the City of Lubbock's budget for the 2004-
2005 fiscal year.
During the just ended fiscal year, unreserved fund balance in the General Fund increased by
nearly $3.7 million to $12.1 million compared to $8.4 million at the end of the prior fiscal
year. It is intended that the unreserved undesignated fund balance be equal to 15% of
operating expenditures, which equates to approximately $13.5 million. The City ended the
year nearly $1.4 million under this target. City Management anticipates meeting this goal
within the next few years.
The Electric Fund increased rates in May 2004 twelve and one half percent for the larger
conunercial consumers as a result of higher than anticipated cost of power. Residential and
small conunercial consumers rates remained relatively unchanged due to the· rate increases
implemented in the prior fiscal year.
Both the Water and Sewer Funds rates were increased for the 2003-2004 fiscal year. The
water rates were increased by an average of 3 percent and the sewer rates were increased by
an average of 5 percent for all customers. Currently, the City is in the process of having a
rate study completed for both the water and sewer rates. The results of this study will impact
future water rates. The water and sewer rates affected both residential and conunercial
·consumers by approximately the same percentage. These rate increases were necessary to
cover increased operating costs due to inflationary pressures.
Requests for Information
This fmancial report is designed to provide a general overview of the City of Lubbock's
fmances. Questions concerning any of the information provided in the report or requests for
additional financial information should be addressed to the Chief Financial Officer, P.O. Box
2000, Lubbock, Texas. 79457.
34
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CITY OF LUBBOCK, TEXAS
&sic
FINANCIAL
SATEMENTS
c
CITY OF LUBBOCK, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2004
Prima!1 Govemment ( GovemmentaJ Business-Type Component
Activities Activities Total Units
ASSETS
Pooled cash and cash equivalents $ 30,797,510 25,309,543 56,107,053 1,519,082
Investments 7,503,969 6,077,077 13,581,046 494,669
Receivables, net 16,383,864 29,811,958 46,195,822 158,612
Internal balances (555,465) 555,465 ,.
' Due from other governments 1,308,277 1,308,277
Due from others 1,470,831 1,119,160 2,589,991
Inventories 190,034 2,114,453 2,304,487 87,425
Investment in property 218,503 218,503
Prepaid expenses 897,648 897,648 25,229
Restricted assets:
Cash and cash equivalents 2,152,275 44,658,899 46,811,174 100,000 (
Incentives advances 9,164.684
Investments 6,723.257 63,543,690 70,266,947
Accounts receivable 1,013,813 1,013,813
Bond proceeds receivable 27,745,000 27,745,000
Mortgage receivables 5,653,444 5,653,444
Capital assets: r
Non-depreciable 52,080,271 145,637,526 197,717,797 366,332 ....
Depreciable 76,933,607 466,065,1 18 542,998,725 881,214
Deferred charges 3,751,695 3,751,695
Other assets 4,071 4,071
Total Assets 229,503,025 7891662,468 1,019,165,493 12,797,267
UABIUTIES c Accounts payable 5,758,795 17,892,025 23,650,820 462,805
Due to others 35,195 35,195 547,519
Due to other governments 80,937
Accrued expenses 3,204,277 2,310,777 5,515,054 156,108
Accrued interest payable 387,855 1,611' 164 1,999,019
Payable to escrow agent 22,620,000 22,620,000
Customer deposits 1,000,526 1,000,526 (
Deferred revenue 3,120,823 29,353 3,150,176 9,029,763
Noncurrent liabilities:
Due within one year:
Bonds payable 4,955,949 17,271,718 22,227,667
Compensated absences 5.475,861 2,143,563 7,619,424
Accrued insurance claims 2,354,536 1,184,210 3,538,746 ,.
Capital leases payable 826,018 622,442 1,448,460 2,085,606 "
Due in more than one year:
Bonds payable 65,265,268 292,082,188 357,347,456
Deferred premium on bonds 1,179,722 1,179,722
Compensated absences 9,442,647 2,016,571 11,459,218
Accrued insurance claims 5,252,644 5,252,644
Landfill closure and postclosure care 3,051 ,1 16 3,05l116 c Capital leases payable 534,939 770 765 1,305,704 1,455,515
T otalliabilities 125,161,885 347,239,062 472,400,947 13,818,273
NET ASSETS
Invested in capital assets, net of related debt 74,433,159 355,816,406 430,249,565 1,247,546
Restricted for:
Capital projects 7,869,506 38,650,935 46,520,441 c
Debt service 2,223,003 1,050,347 3,273,350
Other purposes 10,246,203 5,715,380 15,961,583 100,000
Unrestricted (deficit) 9,569.269 411190,338 50,759,607 !2.368,552}
Total Net Assets $ 104,341,140 442,423,406 546,764.546 {1,021,006)
See accompanying Notes to Basic Financial Statements.
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CITY OF LUBBOCK, TEXAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Functions/Programs
Primary Government:
Governmental Activities:
Administration/Community Services $
Street Ughting
Financial Services
Fire
General Government
Human Resources
Police
Planning and Transportation
Public Works
Interest on long-Tenn Oebt
Total Governmental Activities
Business-Type Activities:
Electric
Water
Sewer
Solid Waste
Storm water
Transit
Airport
Total Business-Type Activities
Total Primary Government
Component Units:
Civic Lubbock, Inc.
Market lubbock, Inc.
Expenses
22,313,139
2,471,382
2,387,188
21,998,241
20,563,083
777,035
33,248,228
10,788,596
3,078,122
4,593,150
122,218,164
110,591,149
27,879,343
17,020,092
17,661,438
5,356,649
10,565,159
6,852,874
195,926,704
318,144,868
1,609,630
5,721.854
Charges for
Services
2,912,165
10,600
3,516,980
5,424,232
849,147
12.713,124
105,433,133
31,907,893
18,889,095
11,641,316
6,019,490
2,893,507
4,626,270
181,410,704
194,123,828
1,731,625
127,826
Total Component Units $ ===7=,3=3=1,=484== 1,859,451
General revenues:
Taxes:
Property
Sales
Occupancy
Other
Franchise fees
Investment earnings
Miscellaneous
Transfers, net
Total general revenues and transfers
Change in net a$SelS
Net assets -beginning of year
Net assets -end of year
See accompanying Notes to Basic Financial Statements.
36
Program Revenues
Operating
Grants and
Contributions
6,041.2&7
1,972,229
1,629,923
9.643,439
5,336,794
1,402,003
6.738,797
16~382,236
6,707,783
6,707,783
Capital
Grants and
Contributions
1,849,662
2,642,n8
3,203,482
1,573.384
9,269,306
9,269,306
Net (Expense) Revenue and
Changes in Net Assets
Prima!l Government
Governmental Business-Type
Activities Activities
$ (13,359,687)
(2,471,382)
(2,387.188)
(21,987,641}
(15,073,874)
(777,035)
(26,194,073}
(10,788,596)
(2,228,975)
i4,593,150~
~99.861,601}
(3,308,354)
6,671,328
5,072,485
(6,020,122)
662,841
(2,334,858)
748,783
1,492,103
(99,861,601) 1,492,103
44,496,973
. 30,554,632
2,853,205
939,456
9,654,447
1,151,620 2,859,344
3,123,572 72,870
9,745,250 ,9,745,250~
102,519,155 {61813,036}
2,657,554 (5,320,933)
101,683,586 447l44.339
$ 104,341,140 442,423,-i06
Total
(13,359,687)
(2,471 ,382)
(2,387,188)
(21,987,641)
(15,073,874)
(777,035)
(26.194,073)
(10,788,596}
(2,228,975}
~4.593,150l
{99,861 ,601l
(3,308,354)
6,671,328
5,072,485
(6,020,122)
662,641
(2,334,858)
748,783
1,492,103
(98,369,498]
44,496,973
30,554,632
2,853,205
939,456
9,654,447
4,010,964
3,196,442
95,706,119
(2,663,379)
549,427,925
546,764,546
37
Component
Units
121,995
1,113,755
1,235,750
8,636
8,636
1,244,386
(2,265,392)
(1,021,006)
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CITY OF LUBBOCK, TEXAS c
BALANCE SHEET
GOVERNMENTAL FUNDS
SEPTEMBER 30, 2004
Other Total c General Debt Service Governmental Governmental
Fund Fund Funds Funds
ASSETS
Pooled cash and cash equivalents $ 5,888,268 2.282,997 21,407,030 29.578,295
Investments 1,426,351 553,024 5,229,256 7,208,631
Taxes receivable (net) 6,864,967 533,715 90,102 7,488,784 c Accounts receivable (net) 6,098,853 162.485 2,433,012 8,694,350
Interest receivable 79,463 2,119 20,146 101,728
Due from other funds 1,930,500 1.930,500
Due from other governments 13,637 1,294,640 1,308,277
Due from others 781,704 679,746 1,461,450
Investment in property 218,503 218,503
Inventory 120,860 120.880
Bonds proceeds receivable 22,620,000 5,125,000 27,745,000
Secured receivables 5,653,444 5,653,444
Advances to other funds 445,676 445.676
Total Assets 23,650,299 26,154,340 42,150,879 91,955,518 (
LIABILITIES
Accounts payable 1,836,027 418,017 3,131,290 5,385,334
Due to others · 35,195 35,195
Due to other funds 1.480,500 1,480,500
·Accrued liabilities 3,036,761 121,374 3,158,135 ,
Payable to escrow agent 22.620.000 22,620,000 "
Advances from other funds 1,469,381 1,469,361
Deferred revenue 6,047,791 475,303 3,547,898 10,070,992
T otalliabilities 10,955,774 23,513,320 9,750,443 44,219.537
FUND BALANCES c
Reserved for:
Prepaid items/inventory 120,880 120,880
Advances to other funds 445,676 445,676
Debt service 2,641,020 2,641,020
Capital projects 24,870,961 24,870,961 c Special revenue -grants 5,871.947 5,871,947
Unreserved, reported in
General Fund 12,127,969 12,127,969
Special revenue funds 1,734,312 1,734,312
Capital projects funds ~76,784} 176.784}
Total fund balances 12,694,525 2,641,020 32,400,436 47,735,981 c
Total liabilities and Fund Balances $ 23,650,299 26,154,340 42,150,879 91,955,518
See accompanying Notes to Basic Financial Statements. (
39 <
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CITY OF LUBBOCK, TEXAS
RECONCILIAT10N OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET ASSETS
SEPTEMBER 30, 2004
) Total fund balance -governmental funds $ 47,735,981
Amounts reported for governmental activities in the statement of net assets are
different because:
"I Capital assets used in governmental activities are not financial
resources and therefore are not reported in the funds. 129,013,878
Internal service funds (ISF's) are used by management to charge the costs of
certain activities. such as insurance and telecommunications. to individual
funds. The portion of the assets and liabilities of the I SF's primarily serving
) governmental funds are included in governmental activities in the statement of
net assets as follows:
Net assets 8,953,624
Net book value of capital assets (included in captial assets above) (1,353,658)
Compensated absences 193,517
Amounts due from business-type ISFs for amounts overcharged 18,240
'\
Certain liabilities are not due and payable in the current period
and therefore are not reported in the funds. Those liabilities are as
follows:
General obligation bonds (70,221,217)
Capital leases payable (1,360,957)
"' Compensated absences (14,918,508)
J Accrued interest on general obligation bonds (387,855)
Bond premiums are recognized as an other financing source in the fund
statements but the premiums are amortized over the life of the bonds in the
government-wide statements. (1,179,722)
) Actual City contributions to the fire fighter's pension trust fund is greater than
the actuarially determined required contribution. This will reduce future funding
requirements and is not recognized as an asset at the fund level but is a
prepaid expense in the Statement of Net Assets. 897,648
Revenue eamed but unavailable in the funds is deferred. 6,950,169 .,
Net assets of governmental activities $ 104,341,140
)
) See accompanying Notes to Basic Financial Statements. 40
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CITY OF LUBBOCK, TEXAS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
c
Other Total
General Debt Service Governmental Governmental
Fund Fund Funds Funds
REVENUES
Taxes $ 74,381,814 7,943,630 5,373,390 87,698,834
Fees and fines 3,675,857 3,675,857
Licenses and permits 1,982,281 1,962,281
I ntergovemmental 428,458 9,214,981 9,643,439
Charges for services 4,467,730 849,147 5,316,677
Interest 334,730 28,622 375,997 739,349
Miscellaneous 1,442,675 1,612,800 3,055,475
Total revenues 86,713,545 7,972,252 17,426,315 112,112,112
EXPENDITURES
Current:
Administration/Community Services 18,156,455 18,156,455
Electric ~street lighting 2,185,286 2,185,286 c
Financial Services 2,333,469 2,333,469
Fire 20,613,077 20,613,077
General Government 5,633,469 16,992 13,650,037 19,300,496
Human Resources 754,225 754,225
Police 32,400,371 32,400,371
Planning and Transportation 7,180,843 7,180,843 ,. ...
Non-<lepartmental 214,562 214,562
Public Works 3,012,987 3,012,987
Debt service:
Principal 4,498,304 4,498,304
Interest and other charges 4,749,272 4,749,272
Capital outlay 475,585 16,190,551 16,666,136 c
Total expenditures 89,947,342 9,264,568 32,853,575 132,065,485
Excess {deficiency) of revenues
over (under) expenditures (3,233,797) (1,292,316) (15,427,260) (19,953,373)
OTHER FINANCING SOURCES (USES) ,.
\. Long-term debt issued 22,620,000 5,125,000 27,745,000
Due escrow agent (22,620,000) (22,620,000)
Bond premium (discount) 1,179,722 1,179,722
Capital leases 1,535,075 1,535,075
Transfers in 10,723,691 20,715,403 6,120,514 37,559,808
Transfers out {4,212,915~ {19,955,679~ ~3.871 ,880) (28,040,474) c Total other financing sources (uses) 6,510,976 1,939,446 8,908,709 17,359,131
Net change in fund balances 3,277,179 647,130 (6,516,551) (2,594,242)
Fund balances ~ beginning of year 9,417,346 1,993,890 38,918,987 50,330,223
Fund balances ~ end of year $ 12,694,525 2,641,020 32,400,436 47,735,981
(
See accompanying Notes to Basic Financial Statements.
41 <
CITY OF LUBBOCK, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Net change in fund balances -total governmental funds
Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the
cost of those assets is allocated over their estimated useful lives and reported as depreciation
expense. This is the amount by which capital outlays of $16,666,136 exceeded depreciation of
$9,813,391 in the current period.
Bond proceeds provide current financial resources to governmental funds, but issuing debt increases
long-term liabilities in the Statement of Net Assets. Repayment of bond principal is an expenditure in
the governmental funds. but the repayment reduces long-term liabilities in the Statement of Net Assets.
This is the amount by which proceeds of $27.7 45,000 exceeded repayments and debt defeasence of
$27,118,304.
Capital lease transactions provide current financial resources to governmental funds and repayment of
principal is an expenditure. This is the amount by which proceeds of $1,535,075 exceeded repayments
of $1,170,595.
) Bond premiums are recognized as an other financing source in the governmental funds. but are
considered deferred assets on the Statement of Net Assets. This amount will be amortized over the life
of the bonds.
Estimated long-term liabilities for compensated absences are recognized as expenses in the Statement
of Activities as earned, but are recognized when current financial resources are used in the
govemmentarfunds. This amount is the net change in the estimated long-term liability for
) compensated absences during the year.
\
Estimated long-term liabilities for rebatable arbitrage are recognized as expenses in the Statement of
Activities as earned, but are recognized when current financial resources are used in the governmental
funds. This amount is the net change in the estimated long-term liability for rebatable arbitrage during
the year.
Property taxes levied and court fines and fees earned, but not available, are deferred in the
governmental funds, but are recognized when earned (net of estimated uncolledibles) in the Statement
of Activities. This amount is the net change in deferred property taxes and court fines and fees for the
year.
The difference between the par value of debt defeased which is greater than the par value of the new
..., debt is recognized as a contra expense in the Statement of Activities, but is a Note disclosure in the
fund statements.
Actual City contributions to the fire fighter's pension trust fund are greater than the actuarially
determined Net Pension Obligation (NPO). This amount is recognized as an expenditure at the fund
level but is accrued when overpaid and reduces expenses on the Statement of Activities
Internal service funds are used by management to charge the costs of certain activities, such as
insurance and telecommunications, to individual funds. The net revenue (expense) of certain internal
service funds is reported with governmental activities.
Accrued interest is recognized as expenses in the Statement of Activities as incurred, but is recognized
when current financial resources are used in the governmental funds. This amount is the net change in
, the accrued interest this year.
The net effect of various miscellaneous transactions involving capital assets (e.g., sales and trade--ins)
is to increase net assets.
Change in net assets of governmental activities
See accompanying Notes to Basic Financial Statements. 42
$ (2,594,242)
6,652,745
(626,696)
{364,480)
(1,179,722)
(2,225.479)
122,984
2,537,966
213,682
15,025
(94,019)
(57,560)
57,328
$ 2,657,554
c
CITY OF LUBBOCK, TEXAS
BUDGETARY COMPARISON STATEMENT
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Variance with
Final Budget c
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
REVENUES
Taxes and fees $ 71,855,445 72,262,445 74,381,814 2,119,369
Fees and fines 3,288,500 3,288,500 3,675,857 387,357 ~
Licenses and permits 1,823,721 1,807,550 1,982,281 174,731 \
Intergovernmental 372,192 455,907 428,458 (27,449)
Charges for services 4,541,034 4,325,642 4.467,730 142,088
Interest 236,689 164,118 334,730 170,612
Miscellaneous 935,379 1,125,711 1,442,675 316,964
Total Revenues 83,052,960 83.429,873 66,713,545 3,283,672 (
EXPENDITURES
Administration/Community Services 18,403,905 18,365,948 18,156,455 209,493
Electric -street lighting 2,302,033 2,210,784 2,185,286 25,498
Financial Services 1,873,928 2,185,455 2,333,469 (148,014) ( Fire 21,026,400 20,775,537 20,613,077 162,460
General Government 5,435,697 5,507,366 5,633,469 (126,103)
Human Resources 714,338 801,863 754,225 47,638
Police 32,531,242 32,419,834 32,400,371 19,463
Planning and Transportation 7,659,089 7,664,495 7,180,843 483,652
Capital Outlay 53,000 502.136 475,585 26,551 ;'
Non-departmental 849,200 849,200 214,562 634,638 "'
Total Expenditures 90,848,832 91,282,618 89,947,342 1,335,276
Excess (deficiency) of revenues
over (under) expenditures (7. 795,872) (7,652,745) (3,233, 797) 4,618,948 c
OTHER FINANCING SOURCES (USES)
Transfers in 11,138,094 10,936,402 10,723,691 (212,511)
Transfers out {3,342,222} (3,441 ,959) !4,212,915) ~770,956~
Total other financing sources (uses) 7,795,872 7,494,443 6,510,976 (983,467)
Net change in fund balances {358,302) 3,277,179 3,635,481 ,.
Fund balances -beginning of year 9,417,346 9,417,346 9,417,346 "'
Fund balances -end of year $ 9,417,346 9,059,044 12,694,525 3,635,481
,.
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See accompanying Notes to Basic Financial Statements. c
43 (
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CITY OF LUBBOCK, TEXAS
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
) SEPTEMBER 30, 2004
Business-ty(!e Activities-Enterf!rise Funds
West Texas
Municipal Power
Electric Water Sewer A9enc~ (WTMPA~
ASSETS
Current assets:
Pooled cash and cash equivalents $ 2,633,706 9,646,398 4,300,692 627,826
Investments 637,979 2,336,705 1,041,762
~ Receivables. net 13,392,448 3.935,759 2,356,470 6,892,959
Interest receivable 7,694 34,961 11,658
Due from others 26,081
Due from other funds 261,500
Inventories 321981 170,483
Total current assets 16l041806 1614131887 7l10,602 7!5201785
' Noncurrent assets:
Restricted cash and cash equivalents 5,435,733 9,888,565 247,331 1,050,347
Restricted investments 5,017,600 12,590,121 572.230
Receivables, net 21,216,605
Restricted interest reeeivable 2,456 25.426 21,201
Deferred charges 3,344,444 407,251
) Other assets 4,071
Advances to other funds
Capital assets:
Land 756,714 12,724,350 12,578,774
Construction in progress 9,468,738 45,999,985 5,227,618
Buildings 8,067,549 21,573,970 23,857,432
Improvements other than buildings 167,860,376 200,308,490 105,745,673 25.200 ' Machinery and equipment 48,790,387 19,405,223 15,656,542
Less accumulated depreciation (941090,5051 {7718891617) (53,936,873} (25.200}
Total capital assets 140,873.259 222,122.401 109.329,366
Total noncurrent assets 154,673.492 244,630.584 110.170,128 22,676.203
Total Assets $ 171.378.300 2611044,471 11718801730 30,1961986
)
" See accompanying Notes to Basic Financial Statements.
44
Business-type Activities-Enterprise Funds
Total Nonmajor Total
Enterprise Proprietary
Stormwater Funds Funds
$ 938,663 5,826,657 23,973,942
227,378 1,509,702 5,753,546
705,599 2,226,503 29,509,738
7.264 29,257 90,834
1,091,079 1,119,160
261,500
467,557 671,021
1,878,904 11,150,755 61,379,741
22.394,882 4,990,434 44,007,292
22,785,586 10,306,990 51,272,527
21,218,605
23,277 28,282 100,642
3,751,695
4,071
1,023,705 1,023,705
115,669 5,500,647 31,676,154
43,053,522 9,493,563 113,263,426
64,580 41,756,630 95,320,161
8,158,852 91,972,033 574,070,824
2,766,404 43,677,838 130,496,394
{8.368,621) {100,941,974} {335,252,790)
45,790,406 91,458,737 609,5741169
90,994,151 107,808,148 730,952.706
$ 92,873,055 118,958,903 792,332,447
45
Internal
Service
Funds
2,554,816
618,869
309
9,381
13,148
1,512,586
4,709,109
2,803,882
18,994,420
150,686
45,603
65,343
1.632,378
1,608,618
313,341
8,178,213
(8,315, 760}
3,482,133
25,476,724
30,165.833
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STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
'\ SEPTEMBER 30, 2004
Business-type Activitles-Enter~rise Funds
West Texas
Municipal Power
) Electric Water Sewer A9enc~ {WTMPA}
LIABIUTIES
Current liabilities:
Accounts payable $ 8,516,408 730,385 224,644 6,196,307
Accrued expenses 1,015,631 166,986 131,540
) Accrued interest payable
Accrued insurance claims
602,093 700,818 122,246 129,608
Due to other funds
Customer deposits 969,689 24,715
lease payable 1,525,000 235,259
Bonds payable 3.653,385 5,908,680 4,015.748 1.525,000
) Total current liabilities 16,282,206 7.531.584 4,729.437 7,850,915
Noncurrent liabilities:
Compensated absences 1,941,690 742,146 372,324
Deferred revenue
Accrued insurance claims
Landfill closure and post closure care
) Contracts/leases payable 18,679,792 422,232
Bonds payable 44.217,709 104.820.983 40,329,424 19,552,463
Total noncurrent liabilities 64,839,191 105,563,129 41.123.980 19.552.463
T otalliabilities 81.121.397 113,094,713 45,853.417 27.403,378
) NET ASSETS
Invested in capital assets, net of related debt 76,855,904 125,395,032 65,684,404
Restricted for:
Capital projects 6,394,802 8,476,392
Debt service 1,050,347 ., Other purposes
Unrestricted 7,006,197 14,078,334 6,342.909 1,743,263
Total Net Assets $ 90,256,903 147,949.758 7210271313 2,793.610
'
See aocompanying Notes to Basic Financial Statements.
46
Business-type Activities-Enterprise Funds
Total Nonmajor Total
Enterprise Proprietary
Stonnwater Funds Funds
$ 54,385 1,157,219 16,879,348
471,617 405,685 2,191,459
56,399 1,611,164
711,500 711,500
6,122 1,000,526
387,183 2,147,442
1,281.550 887,355 17.271.718
1.807.552 3.611,463 41,813.157
71,659 626,968 3,754,787
29,353 29,353
3,051,116 3,051,116
348,533 19,450,557
71,801.015 11,360,594 292,082,188
71.872.674 15,416,564 318,368,001
73,680,226 19.028.027 360,181,158
5,504,853 82,376,213 355,816,406
12,383,463 11,396,278 38,650,935
1,050,347
1,304,513 6,158,385 36.633,601
$ 19,192,829 99,930,876 432,151,289
47
Internal
Service
Funds
1,386,138
165,460
3,538,746
5,090,344
598,864
5,252,644
s .8s1 .soa
10,941,852
3,462,133
10,089,636
516721212
19,243,981
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CITY OF LUBBOCK, TEXAS
RECONCILIATION OF THE STATEMENT OF NET ASSETS-PROPRIETARY FUNDS
TO THE STATEMENT OF NET ASSETS
SEPTEMBER 30, 2004
Total net assets-enterprise funds
Amounts reported for business-type activities in the Statement of Net Assets are
different because:
Internal service funds (ISFs) are used by management to charge the costs of
certain activities, such as insurance and telecommunications, to individual funds.
The portion of assets and liabilities of the ISFs primarily serving enterprise funds
are included in business-type activities in the Statement of Net Assets as follows:
Net assets of business-type ISFs
Amounts due to governmentaiiSFs for amounts overcharged
Net assets of business-type activities
See accompanying Notes to Basic Financial Statements.
49
$ 432,151 ,289
10,290,357
(18,240}
$ 442,423,406
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CITY OF LUBBOCK
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Buslness-T~I!! Activities-Ente!]!rlse Funds
West Texas
Municipal Power
Electric Water s-er Agen9: (WTMPA}
OPERATING REVENUES
Charges for services $ 103,864,178 32,222,280 18.203,020 48,966,215
) Provision for bad debts !2.312,477! {!38,125) (301 ,780)
Charges for services (net) 101.551 ,701 31,484,155 17,901,240 48,966,215
New taps and reconnects 423,738
Effluent water sales 754,970
Commodity sales 232.885
Landing fees
Parking
Rentals
) Concessions
Miscellaneous
Total Operating Revenues 101,551,701 31,907,893 18,889,095 48,966,215
OPERATING EXPENSES
Personal services 8.294,785 5.274,209 3,522,215 331,148
Supplies 456,933 1,021,166 642,9<48
) Maintenance 2,756,885 2,019,918 1,095,564 320,000
Purchase of fuel and power 73,969.427 48,936,216
Collection expense 1,850,565 346,446 158,619
Other services and charges 3.758,830 6,138,536 4,070,608 1,685
Depreciation and amortization 9,033,112 5,958,903 5,075,034 133,274
Total Operating Expenses 98,269,972 22,263,297 14,752,815 49,880,942
Operating Income (Loss) 3.28t.n9 9,644,596 4,136,280 !914,n7l
"' NON-OPERATING REVENUES (EXPENSES)
Interest income 129,257 588,435 88,789 1,006,104
Passenger fadlity ctlarges/Federal grants
Disposition of assets (240,692) 88,773 (8,481) (2.825.018)
Miscellaneous 1,420,053 (137,795) (571 '119)
Pass-through grant payments
Interest expense on bonds !3.353,899~ !5,584,522! ,2, 188,707! {1.062,316!
) Total non-operating revenues (expenses) {2.045.281l {5,045,109l {2.679,518l ~.881.2301
Income (loss) before contributions and transfers 1.236,448 4,599,487 1,456,762 (3,795,957)
Capital contributions 1.849.662 2.642,778 3,203,482
Transfers in 1.777.956 6,891,766 6,235,864 356,922
Transfers (out} {3.150,195! {11,172,003l {8,032,942l
Change in net assets 1.713.871 2.962,028 2,863,166 (3,439,035)
Total net assets -beginning of year 88,543.032 144,987,730 69,164,147 6,232,645
Total net assets-ending $ 90,256,903 147,949,758 72,027,313 2.793,610
See accompanying Notes to Basic Financial Statements.
)
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Business-T~e! Activities-Ente~rise Funds c
Other Nonmajor Total lntemal
Enterprise Enterprise Service
Stonnwater Funds Funds Funds
$ 6,131,808 14,835,148 224,222,649 35,943,622
{112.318! {439,776! {3,904,476!
6,019,490 14,395,372 220,318,173 35,943,622 ,.
423,738 \.
754,970
232,885
749,037 749,037
1,065,838 1,065.838
1,696.683 1,696,683
1,114,712 1,114,712 c 139,451 139,451 175,459
6,019,490 19,161,093 226,495,487 36,119,081
645,260 9,643,788 27.711,405 5.272,295
1,599,917 3,720,964 6,852,554
148,564 2,647,316 8,988,247 1,473,732
122,905,643 c 295,069 292,217 2,942,916
49,413 4,398,830 18,417,902 23,122,204
553.592 13,291,441 34.045,356 602,494
1,691.898 31,873,509 218,732,433 37,323,279
4,327,592 {12,712,416! 7,763,054 (1,204, 198)
594,120 320,356 2,727,061 544,554
I" "'
6,738,797 6,738,797
(981,284) (3,966,702) (7,434)
(307,464) (334,780) 68,895 12,584
(1,568,721) {1 ,568,721)
{3.658,830) {424,539) {16,272,813!
(3,372,174) 3,749,829 (12,273,483) 549,704 (
955,418 (8,962,587) (4,510,429) (654,494)
1,573,384 9,269,306
4,307,251 1,874,760 21,444,519 225,916
!4.618.513) {4.216,115) !31!189,768)
644,156 (9,730,558) (4,986,372) (428,578)
18,548,673 1 09,661 ,434 437,137,661 19,672,559
$ 19,192,829 99,930,876 432,1 51,289 19,243,981 c
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CITY OF LUBBOCK, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN
FUND NET ASSETS OF PROPRIETARY FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Net change in fund net assets -total enterprise funds
Amounts reported for business-type activities in the statement of activities are
different because:
Internal service funds (ISFs) are used by management to charge the costs of certain
activities such as fleet services. central warehousing activities, management
information activities. etc. to individual funds. The net revenue (expense) of certain
ISFs is reported with business-type activities.
Change in net assets of business-type activities
See accompanying Notes to Basic Financial Statements.
53
$ (4,986,372)
(334,561)
$ (5,320,933)
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CITY OF LUBBOCK, TEXAS
STATEMENT OF CASH Ft.OWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
)
Buslnen·T~e!: Activities· Enterertee Funds
West Texas
Municipal Power
Elec;tric Water Sewer Agenc]liWTMPAJ
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 101.626.637 32.863.422 19,074.799 47,216,295
Paymellts to suppliers (78.396.377) ( 11,220 ,827) {6.259.433) (47.864.595}
Payments to employees {7,891.004) (5, 117 ,293} (3.401.569)
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Otner reoeipts (payments) 1,179.361 !49.0221 jS79.600l
Net casn provided (used) by operating ac::tivities 16.518.617 16.476.280 8.634.197 !646.300l
CASH FLOWS FROM NONCAPITAL AND RELATED
FINANCING ACTMTIES
Transfers in f'tom Olher funds 1.1n.sss 6,891,766 6.235,864 356,922
Transfers out to other funds (3,150.195) (11.172.003} (8.032.942)
Short-term interfund borrowings 3.678.500 5,909
Advances from (ta) other funds
) Opett~ting grants
Payments received!( made) on advances (to)lfrom other funds !4.644,8651
Net cash provided (used) by noncapital
and related flnandng actiVities !8.017.1041 !601,737~ i1.791,1692 356~922
CASH FLOWS FROM CAPITAl AND RELATED
FINANCING ACTMnES
Purchase$ of capital assets (12.307.612) (11.663.809) (5.551.770)
Sale of capital assets 2,646.037 110.281 201,939 22,810,000
) Recelpts(paymenta} on leases (174,165) 2,580,495
Payments for bone! issuance costs (30.085)
Principal paid on revenue bonds (4,413,300) (1,464.741) (1.525,000)
Interest paid on revenue bond$ (3,353.899) (2,233.809} ( 1.070, 799)
Principal paid on genernl obligation bonds end other debt (4.838.318) (3,654,354)
lnteresl paid on genernl obligation bonds (3.391.605) (2.345.232}
Issuance of revenue. G.O. bonds. and c:epifallease$ 647,923 (22.810.000}
Passenger facility Chargeelcapilal gmnts
Contributed capital 1,849,662 2,!!12J324 3,090,696
) Net cash provided (used) fat capital anel related
financing activities {15.609,197~ l20,161,754l !8.432,8861 !15.304~
CASH FLOWS FROM INVESnNG ACnlltTIES
Proceeds from sales and maturitios of investments 932.430 10.21&.$27 2.665.663
PIJrchase of investments (6.588.009) (5.7&4,121) (626.508)
Interest eaming$ on caSh and investments 52,369 571 337 86 012 17,005
Net cash provided by (used for) investing ae1ivities
Net increase (decrease) in cash
,5,603,21 Ol 4,997,143 2,125,167 17.005
end cash equivalents (10.710.8&4) 709.&32 735.309 (287,677)
Cash and cash equivalents • beginning of year 18.760.333 18.825.031 3.812,714 1 965 850
Ca.sn and cash equiValents • end of year 8,0$9,439 19,534,963 4,548,023 1678173
ReconclllaUon of operating Income (loss) to net cash provided
(used) by operating activities:
Opernting income (lou) 3.281.729 9.844.596 4,136,280 (914,727)
"' Adjustme.nts to reooncile operating inc:ome {k»$)
to net cash provided (used} by oper.ating activities:
Depreciation and amortization 9,033,112 5.958,903 5.075.034 117.994
Other Income (expense) 1,179.361 (49.022) (579,600)
Change in current assets and liabilities:
Accounts receillable 74.936 955,547 185,704 (1,589.301)
Inventory 4,000 (53.333)
Prepaid expenses
Oue from other governments 18.286
Aecwnts payal)le 1,876,018 (172.499) (82.105) 1,724,455
Other accrued expenses 262.470 27,350 54,872 15.279
Customer deposit$ 644,570 24.715
lnetease (decrease) in compensated absences 162,421 121 737 44012
Net cash provided (used) by operating adillities 16 518.617 16,476,280 8,834,197 !646.300l
Supplemental cash flow Information:
Noncash capHallmprovements; anCI other Change$ $ 20,204,792 96133 112 786
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CrTY OF LUBBoa<, TEXAS
STATEMENT OF CASH FlOWS
l'ttOPRIETARY FUNDS
FOR lltE YEAR ENDED SEPTEMBER SO, 2004
B•ln--~ ActMtiM • ErU.DriR Funda
Olher NoniMjOr Internal ( ent.rprlae Sel\'lce
Stormwat.r Fanda Totals Funda
CASH FUlWS FROM OPERATING ACTMTIES
Receipts fTom euttomers $ e,o.r.ne 20,044,130 226.875.082 36,000,252
Payrnents to suppliers (510,507) (8,079,833) (152.331,572) (31.042,646)
Payrnenls to e~IO)'IMIS (870,18e) (9,618,018) (2e,8e&,073) (5,1 08,035}
01hor r.ceipta (paymentS) ~307,464) [1,2$0,351) [1,007,078) 19348
Net C88h pnMded (usee!) by ~Ung edlvtties 4,559 819 1.097,928 .s,840,So41 [131,081}
CASH F\..OW8 FROM NONCAPIT.Al. AND RE~TED
RNANClNG ACTMTIES
Tn111elera in tom other funds 4,307,251 1,874.760 21,-4+4.519 225,916
·T ranafera out to oCher fUnds (4.618,513) (4.218,115) (31,1 •• 768)
Short-term inte!fund borroWii1Q$ (644,181) 3,040,228 1,611
Advanc.• from (ID) Oll'ler fUnds {1,036,740) (1,038,740)
Operating grants 3.788.073 3,7811,073
Payments recaived'(made) on advanoes (ID)Ifrom otller funds 1,045,135 [3,599,73Ql c Net cash ptOYided (used) by noncapital
IHid relaled financing activities [311,26.al, 790,932 {!,573,418l 227.527
CASH F1..0WS FROM CAPITAL AND RELATED
FINANCING ACTMTIES
Puldlua ot capbl asaeta (3,447,001) (3,928,747) (38,898,946) (823,430)
s.hl of capital .,.., 225,164 2.5,893,421
R~ts) on leases 2,408,330
Pllymenb fDr bond issuance costs (373,851) (403,936)
Principal paid on revenue bonds (546,551) (7.~11.592)
lntllnltl paid on AtYenue bonds {3,658.830) (10,317,337)
Ptlnelpal paid on oel'llll'lll obligation bonds and Oll'let debt (762,349) (9,255,021)
lnt.,..t paid on general obligation bonds (430,980) {6,1e7,am
lssuence'of 1'811111'1118, G.O. bonds, and cepltal ... ses {22,182,077)
PUMnget lacifity ehatgeslcapital grants 1,402,003 1,402.003
CQntributed capital 1,573,384 9,188,068
Net c:ash provided (used) for capital and related ( financing adM1ies (!,6~389)" ~295,378) ,54,186,!!!1!) ~,43!!)
CASH FlOW$ RlOM INVEmNG ACTMnES
Proc:e8ds IRlm .. , .. and maturftias of lnveelmllllb 1.380,757 7,275,615 12,454,3t2 6,594,3211
PurchaMot~ 332,312 (4,648,301) (17,32.4,817) (5,081,927)
lntetelt eetninga 011 cash and ._..,._ts 589,12.0 291,746 1.se7,set 511,156
Net cash pnMded by (uead fer) lrweeting adMtiea 2,~11111 2.819,080 8 717 3114 2,043,558
Net lnc~UM (dec:rease) In cash
and Clllh equivalents (1.141.833) 2,512,544 (8,182,81e) 1.316,574 c Caah and caah equivalents • beginning of yMr 24,475,378 8,304,547 76,183,ts3 4,042,124 C.lh and cull equivalents • end of )'llllr 23,333,545 10,817,091 e7,aa1.234 5,358,698
Reconcln.tlon of operating Income (1oM) to net cuh provided
{lllecl) ~ optnllng tcUVItlel:
e>p.rdng Income (los8) 4,327,5112 {12.712,418) 7,783,054 {1 ,204.198)
AdjultrnlltiQ·to l'eelOnclle operating Income (Iota)
ID net cash pnMded (used) by operating dvltlas: c Dlpnlc:ldon and amonlzatlon 553,592 13,291,441 3-4,030,078 602.494
Other Income (expeme) (307,484) (1,344,022) (1,100,747) 19,3-48
Ctw.nge In CUI1'8nlaasela and liebililla:
Aocounts recetY8ble 28.289 883,037 531,212 (118,829)
Inventory (41,924) (91.257) (114,330)
P~ld lllCpiiM88 12,097 12,097
CUe from oth• goyemments (1~.307) (178,021)
Aocounta payable (11,800) 514,153 3,648,222 450,968 au-eoaued expetl$8$ (35,352) 130,682 455,301 ,..
" Cua1Dmer depoelta 150 689,435 470,855 I~~CPUe (de<n~eae) In compenMIDd absei'ICft 4782 558,037 ft1,1189 ~7,189!
Net cash pnwided (used) by operating aciMlles 4,559,818 1,097,928 48,840,341 f131,081)
SuJ)t)l-nbll c .. l! flow lnfonndon:
N~llh capllallmllfC)Vemenb ll!1d other~ $ 214n 20,435,188
Sae IICCOI!Ip&n)'ing Noles 1D Basic Financial Sll""'**-
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ASSETS
CITY OF LUBBOCK, TEXAS
STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
SEPTEMBER 30, 2004
Cash and cash equivalents $
Investments. at fair value:
Pools
Total assets
LIABILITIES
Accounts payable
Total liabilities $
'See accompanying Notes to Basic Financial Statements.
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Agency
Fund
1,099
73
1,172
1,172
1,172
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Basic Financial Statements (BFS) of the City of Lubbock, Texas (City) have been prepared in confonnity
with Accounting Principles Generally Accepted in the United States of America (GAAP) as applied to
government units, including specialized industry practices as specified in the American Institute of Certified
Public Accountants audit and accounting guide titled Audits ofStote and Local Governmental Units (GASB 34
Edition). The Governmental Accounting Standards Board (GASB) is the acknowledged standard-setting body
for establishing governmental accounting and financial reporting principles. With respect to proprietary
activities related to business-type activities and ent.erprise funds, including component un its, the City applies all
applicable GASB pronouncements as well as f inancial Accounting Standards Board (FASB) Statements and
Interpretations, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins of the
Committee on Accounting Procedure. issued on or beCore November 30, 1989, unless those pronouncements
conflict with or contradiCt GASB pronouncements. The more significant accounting policies are described
below.
A. REPORTING ENTITY
The City is a municipal corporation governed by a Council-Manager form of government. The City,
incorporated in 1909, is located in the northwestern part of the state. The City currently occupies a land area of
115 square miles and serves a population exceeding 206,000. The City is empowered to levy a property tax on
both real and personal properties located within its boundaries. Tt is also empowered by slate stalule to extend
its corporate limits by annexation, whicll occurs periodically when deemed appropriate by the city council.
The City provides a full range of services, including police and fire protection; recreational activities and
cultural events; construction and maintenance of highways, streets, and other infrastructure; and sanitation
services. The City also provides utilities for electricity, water, sewer, and stormwater as well as a public
transportation system.
The BFS present the City and its component units and Include all activities, organizations, and functions for
which the City i.s considered to be financially accountable. The criteria considered in determining activities to
be reported within the City's BFS are based upon and consistent with those set forth in the Codification of
Governmental Accounting Standards. Section 2100, "Defining the Financial Reporting Entity." The criteria
include whether:
• The organization is legally separate (can sue and be sued in its own name),
• The City holds the corporate powers oftbe organization,
• The City appoints a voting majority of the organization's board,
• The City is able to impose its will on the organization,
• The organization has the potential to impose a financial benefit or burden on the City, or
• There is fiscaJ dependency by the organization on the City.
As required by GAAP, the BFS present the reporting entity which consists of the City (the primary
government), organizations for which the City is financiaJiy accounlable, and other organizations for which the
nature and significance of their relationship with the City arc such that exclusion could cause the City's BFS to
be misleading or incomplete.
BLENDED COMPONENT UNITS
The Urban Renewal Agency (URA) has been included in the City's financial reporting entity within the
primary government using the blended method because, although it is legally separate, its operations are so
intenwined with the City thal it is, in substance, a part of the City. The URA was fonned to provide urban
renewal services including rehabilitation of housing, acquisition of housing. and disposition ofland. The URA
Board is composed of nine members appointed by the Mayor with the consent of the City Council, and acts
only in an advisory capacity to the City Council. All powers to govern the URA are held by the City CounciL
There arc no separate financial statements available for the URA.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30,2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY (CONTINUED)
West Texas Municipal Power Agency (WTMPA) is a legally l>eparate municipal corporation, a political
subdivision of Texas. and body politic and corporate, formed in 1983, governed by a Board of eight directors
who serve without compensation. WTMPA has no employees and instead contracts with the Cily for general
operations. WTMPA may engage in the business of generation, transmission, sale, and exchange of electric
energy to the four panicipating public entities: Lubbock. Tulia, Brownfield, and Floydada. WTMPA may also
participate in power pooling and power exchange agreements with other entities. WTMPA provides electricity
to its four member cities with the City having an 88.5% interest in its operations. Each member city appoints
two members to the WTMPA board, however an affirmative vote of the "majority in interest" is required to
approve the operating budget, approve capital projects, approve debt issuance. and approve any amendments to
WTMPA rules and regulations. The City maintains the "majority in interest" vote based on Kilowatt purchases.
and consequently has majority voting control. As the City purchases approximately 88.5% of the electricity
brokered, WTMPA provides services almost exclusively to the City and is therefore presented as a blended
enterprise fund. Their separate audited financial statements may be obtained through the City.
DISCRETELY PRESENTED COMPONENT UNITS
The financial data for the Component Units are shown in the Government-Wide Financial Statements. They are
reponed in a separate column to emphasize that they are legally separate from the City. The following
Component Units are included in the reponing entity because the primary government is financially
accountable, is able to impose its will on the organization, or can significantly influence operations and/or
activities of the organization. · ··-
Civic Lubbock, Inc. is a legally separate entity that was organized to foster and promote the presentation of
wholesome educational, cultural, and entenainment programs for the general moral. intellectual, physical
improvement, and welfare of the citizens of Lubbock and its surrounding area. The seven-member board is
appointed by the City Council. City Council approves the annual budget. Separate financial statements for
Civic Lubbock may be obtained from them at I 50 I 6ch Street, Lubbock. Texas.
Market Lubbock Economic Development Corporation, dba Market Lubbock, is a legally separate entity
that was formed on October 10. 1995 by the City Council to create, manage. operate. and supervise programs
and activities to promote, assist, and enhance economic development within and around the City. The City
Council appoints the seven-member board and its operations are funded primarily through budgeted allocations
of the City's property and hotel occupancy taxes. Separate financial statements may be obtained from Market
Lubbock. at 1301 Broadway, Suite 200, Lubbock, Texas.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY <CONTINUEDl
RELATED ORGANIZATIONS
The City Council is responsible for appointing the members of the boards of other organi7.ations but the City's
accountability for these organizations does not extend beyond making board appointments. The City Council is
not able to impose its will on these entities and there is no tinancial benefit or burden relationship. Bonds
issued by these organizations do not constitute indebtedness of the City. The following Related Organizations
are not included in the reporting entity:
The Housing Authority of the City of Lubbock (Authority) is a legally separate entity. The Mayor appoinLS
the five-member board.
The Lubbock Health Facilities Development Corporation promotes health facilities development. City
Council appoints the seven-member board.
The Lubbock Housine Finance Corporation, Inc. was formed pursuant to the Texas Housing Finance
Corporation Act, to finance the cost of decent, safe, and affordable residential housing. The Mayor appoints the
seven-member board.
North & East Lubbock Community Dtvelopment Corporstion (CDC) was formed from the recommendation
of the mayor's commission formed in May 2002 to examine the condition of North &. East Lubbock.
Incorporated in February 2004, the CDC began work to effectuate change in North and East Lubbock. The
North &. East Lubbock Community Development Corporation is a local entity that drives sodal change;
promotes autonomy and empowerment by increasing the supply of quality and affordable housing, generating
. economic activity, and coordinating the efficient delivery of social services. The City Council appoints two
members of an eleven-member board. The City Council is not able to impose its will on the entity and there is
no financial benefit/burden relationship.
The Lubbock Education Facilities Authority, Inc. is a non-profit corporation and instrumentality of the City
and was created pursuant to the Higher Education Authority Act, Chapter 53 Texas Education Code for the
purpose of aiding institutions of higher education. secondary school, and primary schools in providing
educational facilities, housing facilities. The seven-member Board is appointed by the City Council.
The Lubbock Firemen's Retirement and Relief Fund (Pension Trust 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. The Mayor's designee, the Cash & Debt Manager, three firefighters elected by members
of the Pension Trust Fund and two at-large members elected by !he Board, govern its affairs. It is funded by
contributions from the firefighters and City matching contributions. As provided by enabling legislation, the
City's responsibility to the Pension Trust Fund is limited to matching monthly contributions made by the
members. Title to assets is vested in the Pension Trust Fund and not in the City. The Stale Firemen's Pension
Commission is the governing body over the Pension Trust Fund and the City cannot significantly influence its
operations. Their separate audited financial statements may be obtained through the City.
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CITY OF LUBBOCK, TEXAS
Notes to Basic financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
l11e City's financial statements are prepared using the reporting model specified in GASB Statement No. 34-
Basic FilUlncial Statements -and MalUJgement ·s Discussion and Analysis -for State and Local Governments,
GASB Statement No. 37 -Basic Financial Statements -and Managements Discussion and Analysis -For
State and Local Govermrunts -Omnibus, GASB Statement No. 38 -Certain Financial Statements Note
Disclosures, and GASB Interpretation No. 6 -Recognition a!Ui Measurement of Certain Liabilities and
Expenditures in Governmental Fund Flnancial Statements. As specified by Statement No. 34, the Basic
Financial Statements (BFS) include both Government-Wide and Fund Financial Statements.
The Government-Wide Financial Statements (GWFS) (i.e., the Statement of Net Assets and the Statement of
Activities) report information on all of the non-fiduciary a~;tivities of the City and its blended component units
as a whole. The discretely presented component units are also aggregately presented within these statements.
The effect of interfund activity has been removed from these statements by allocation of the activities of the
various internal service funds to the governmental and business-type activities on a fund basis ba.<~ed on the
predominant users of the services. Governmental activities, which are primarily supported by taxes and
intergovernmental revenues, arc reported separately from business-type activities, which rely to a significant
extent on fees and charges for support. All activities. both governmental and business-type, are reported in the
GWFS using the economic resources measurement focus and the accrual basis of accounting, which includes
long-term assets and receivables as well as long-term debt and obligations. The GWFS focus more on the
sustainability of the City as an entity and the change in aggregate financial position resulting from the activities
of the fiscal period.
The Government-Wide Statement of Net Assets reports all financial and capital resources of the City, excluding
those reported in the fiduciary fund. It is displayed in the format of assets less liabilities equals net assets, with
the assets and liabilities shown in order of their relative liquidity. Net assets are required to be displayed in
three components: (I) invested in capital assets net of related debt, (2) restricted, and (3) unrestricted. Invested
in capital assets net of related debt equals capital assets net of accumulated depreciation and reduced by
outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the
acquisition, construction, or improvement of those assets. Restricted net assets are those with constraints
placed on their usc by either: (I) externally imposed by creditors (such as through debt covenants), grantors,
contributors, or laws or regulations of other governments; or (2) imposed by law through constitutional
provisions or enabling legislation. All net assets not otherwise classified as invested in capital assets net of
related debt or restricted, are shown as unrestricted. Reserva1ions or designations of net assets imposed by the
City, whether by administrative policy or legislative actions of the City Council that does not otherwise meet
the definition of restricted net assets, are not shown in the GWFS.
The Government-Wide Statement of Activities demonstrates the degree to which the dira:t expenses for a given
function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with
a specific function or segment Program revenues include, (I) charges to customers or applicants who purchase,
use, or directly benefit from goods, services, or privileges provided by a given function or segment; and (2)
grants and contributions that are restricted to meeting the operational or capital requirements of a particular
function or segment. Taxes and other items not properly included among program revenues are reported instead
as general revenues. The general revenues support the net costs of the functions and segments not covered by
program revenues.
Also part of the BFS are Fund Financial Statements (FFS) for governmental funds, proprietary funds, and the
fiduciary fund, even though the latter is excluded from the GWFS. The focus of the FFS is on major funds, as
defined by GASB Statement No. 34. Although GASB Statement No. 34 sets forth minimum criteria for
determination of major funds, i.e., a percentage of assets, liabilities, revenue, or expenditures/expenses of fund
category and of the governmental and enterprise funds combined. It also gives governments the option of
displaying other funds as major funds. The City can elect to add some funds as major funds because of
outstanding debt or community focus. Major individual governmental funds and major individual enterprise
funds are reported as separate columns in the FFS. Other non-major funds are combined in a single column in
the appropriate FFS.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septenlber30,2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING. AND FINANCIAL STATEMENT
PRESENTATION
Fund Financial Statements
The GWFS are reported using the eeonomic resources measurement focus and the accrual basis of aeeounting,
as are the proprietary FFS. The City's fiduciary FFS includes only an agency fund that uses the accrual basis of
accounting. However, because agency funds report only assets and liabilities, this fund does not have a
measurement focus. Revenues arc recorded when earned and expenses are recorded when a liability is incum:d,
regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which
they are levied. Grants and similar items arc reeognized as revenue as soon as all eligibility requirements have
been met.
Because the enterprise funds are combined into a single business-type activities column on the GWFS. certain
interfund activities between these funds are eliminated in the consolidation for the GWFS, but are included in
the fund columns in the proprietary FFS. The effect of inter-fund activity has been eliminated from the GWFS.
Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City's electric, water
and sewer functions and various other functions of the government. Elimination of these charges would distort
the direct costs and program revenues reported for the various functions concerned. For instance, 88.5% of the
operations of WTMPA representing transactions between WTMPA and Lubbock Power & Light have been
eliminated for the GWFS presentation and for the electric BTA.
Governmental FfS are reported using the current financial resources measurement focus and the modified
accrual basis of accounting. This is tile traditional basis of accounting for governmental funds. This presentation
is necessary, (I) to demonstrate legal and covenant compliance, (2) to demonstrate the sources and uses of
liquid resources, and (3) to demonslrat.e how the City's actual revenues and expenditures conform to the annual
budget Revenues are recognized as soon as they arc both measurable and available. Revenues are considered to
be available when they are collectible within the current period or soon enough thereafter to pay liabilities of
the current period. For this purpose. the government considers revenues to be available, generally, if they are
collected within 45 days of the end of the current fiscal period, with the exc.eption of sales taxes which are
considered to be available if they are collected within 60 days of year end. The City considers the grant
availability period to be one year for revenue recognition. Expenditures generally are recorded when a liability
is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to
compensated absences, and claims and judgments are recorded only when the liability has matured. Because
the governmental FFS are presented on a different basis of accounting than the GWFS, a reconciliation is
provided immediately following eacl\ fund statement These reconciliations explain the adjustments necessary
to convert the FFS into the governmental activities column of the GWFS.
Property taxes, sales taxes, franchise taxes, occupancy taxes, grants. licenses, court fines, and interest associated
with the current fiscal period are all considered to be susceptible to accrual and have been recognized as
revenues of the current fiscal period. Only the portion of special assessments receivable due within the current
fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items
are considered to be measurable and available only when the City receives cash.
Fund Accounting
The City uses funds to report its financial position and the results of its operations. Fund accounting segregates
funds according to their intended purpose and is designed to demonstrate legal compliance and to aid financial
management by segregating transactions related to certain governmental functions or activities. A fund is a
separate accounting entity with a self-balancing set of accounts, which includes assets, liabilities, fund
balance/net assets, revenues and expenditures/expenses.
Governmental funds are those through which most of the governmental functions of the City are financed. The
City reports two major governmental funds:
The General Fund. The General Fund as the City's primary operating fund accounts for all financial resources
of the general government, except those required to be accounted for in another fund.
The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general
long-term obligation principal and interest (other than debt service payments made by proprietary funds).
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING. AND FINANCIAL STATEMENT
PRESENTATION CCONTfNUEDl
Enterprise Funds arc used to account for operations, (l) that are financed and operated in a manner similar to
private business enterprises where the intent of the governing body is that the costs (expenses, including
depreciation) of providing goods or services to the general public on a continuing basis be financed or
recovered through user charges; or {2) where the governing body has decided that periodic detennination of
revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy,
management control, accountability, or other purposes. The City reports the following major enterprise funds:
The Electric Fund accounts for the activities of Lubbock Power & Light (LP&L), the City-owned electric
production and distribution system.
The Water Fund accounts for the activities of the City's water system.
The Sewer Fund accounts for the activities of the City's sanitary sewer system.
The West Texas Municipal Power Agency (WTMPA) Fund accounts for the activities of power
generation and power brokering to member cities. Member cities include Lubbock with 88.S%
ownership, and Tulia, Brownfield, and Floydada comprising the remaining II. S% ownership.
The Stormwater Fund aceounts for the activities of the stormwaler utility, which provides stormwater
drainage for the City.
The City reports the following non-major funds:
Governmental Funds
Special Revenue Funds are used to aceount for the proceeds of specific revenue sources (other than
special assessments or major capital projects) that are legally restricted to expenditures for specified
purposes.
Capital Projects Funds are used to account for financial resources to be used for the acquisition or
construction of major capital improvements (other than those recorded in the proprietary funds).
The Permanent Fund is used to repon resources that are legally restricted to the extent that only
earnings, and not principal, may be used for purpose of perpetual care for the cemetery grounds.
Proprietary Funds distinguish operating revenues and expenses from non-operating items. Operating
revenues and expenses generally result from providing services and producing and delivering goods in
connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the
City's enterprise funds and of the City's internal service funds are charges to customers for sales and
services. Operating expenses for enterprise funds and internal service funds include the cost of sales and
services, administrative expenses., and depreciation on capital assets. All revenues and expenses not
meeting this definition are reported as non-operating revenues and expenses.
Internal Service Funds are used to account for services provided to other departments, agencies of
the departments or to other governments on a cost reimbursement basis (i.e., fleet maintenance,
central warehouse, print shop, self-insurance, etc.).
Enterprise Funds are used to account for services to outside users where the full cost of providing
services, including capital, is to be recovered through fees and charges, e.g., Lubbock Preston Smith
International Airport (airport fund), Citibus, and the solid waste fund.
Fiduciary .Funds include an Agency Fund that is used to account for assets held by the City as an
agent for private organizations.
62
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
D. BUDGETARY ACCOUNTING
The City Manager submits a proposed operating budget and capital improvement plan to the City Council
annually for the upcoming tiscal year. Public hearings are conducted to obtain taxpayer comments, and the
budget is legally enacted through passage of an ordinance by City Council. City Council action is also required
for the approval of any supplemental appropriations. All budget amounts presented in the budget comparison
statement reflect the original budget and the amended budget, which have been adjusted for legally authorized
supplemental appropriations to the annual budgets during the fiscal year. 'IRe operating budget is adopted on a
basis consistent with GAAP for the General Fund. Budgetary control is maintained at the department level in
the tollowing expenditure categories: personnel services, supplies, other charges. and capital outlay.
Management may make administrative transfers and increases or decreases in accounts within categories, as
long as expenditures do not exceed budgeted appropriations at the fund level, the legal level of control. All
annual operating appropriations lapse at the end of the fiscal year. Capital budgets do not lapse at fiscal year
end but remain in effect until the project is completed and closed.
In addition to the tax levy for general operations, 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, is sufficient to pay all debt service due during the fiscal year.
E. ENCUMBRANCES
At the end of the fiscal year, encumbrances for goods and services that have not been received are canceled. At
lhe beginning of the next fiscal year, management reviews all open encumbrances. During the budget revision
process, encumbrances may be re-established. On October I, 2004, the General Fund had no significant
amounts of open encumbrances.
F. ASSETS, LIABILITIES AND FUND BALANCE/NET ASSETS
Equity in Pooled Cash and Investments -The City pools the resources of the various funds in order to
facilitate the management of cash and enhance investment earnings. Records are maintained which reflect each
fund's txtuity in the pooled account. The City's investments are stated at fair value. except for repurchase
agreements with maturities, when purchased, of one year or less. Fair value is based on quoted market prices as
of the valuation date.
Cash Equivalents -Cash equivalents are defined as short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three months or less when purchased
which present an insignificant risk of changes in value because of changes in interest rates.
Property Tax Receivable -The value of all real and business property located in the City is assessed annually
on January I in conformity with Subtitle E of the Texas Property Code. Property taxes are levied on October 1
on those assessed values and the taxes are due on receipt of the tax bill. On the following January I, a tax lien
attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. The taxes are
considered delinquent if not paid before February 1. Therefore, at fiscal year end all property taxes receivable
are delinquent, but are secured by a lax lien.
At the GWFS level property tax revenue is recognized upon levy. In governmental funds, the City records
property taxes receivable upon levy and defers tax revenue until the taxes are collected or available. For each
fiscal year, the City recognizes revenue in the amount of taxes collected during the year plus an estimate of
taxes to be collected in the subsequent 4S days. The City allocates property tax revenue between the General,
certain Special Revenue, and Debt Service funds based on tax rates adopted for the year of levy. The Lubbock
Central Appraisal District assesses property values, bills, collects, and remits the property taxes to the City. The
City adjusts the allowance for uncollectible taxes and deferred tax revenue at fiscal year end based upon
historical collection experience. To write off property taxes receivable, the City eliminates the receivable and
reduces the allowance for uncollectible accounts.
Enterprise Funds Receivables-Within the Electric, Water, Sewer, and WTMPA Enterprise Funds, services
rendered but not billed as of the close of the fiscal year are accrued and this amount is reflected in the accounts
receivable balances of each fund. Amounts billed are reflected as accounts receivable net of an allowance for
uncollectible accounts.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
F. ASSETS, LIABILITIES. AND FUND BALANCE/NET ASSETS CCONTI!';{UEO>
Inventories • Inventories consist of expendable supplies held for consumption. Inventories are valued at cost
using the average cost method of valuation, and are accounted for using the consumption method of accounting,
i.e., inventory is expensed when used rather than when purchased.
Prepaid Items • !•repaid items are accounted for under the consumption method.
Restricted Assets • Certain enterprise fund and governmental activities assets are restricted for construction;
consequent.ly, net assets have been restricted for these amounts. The excess of other restricted assets over
related liabilities are included as restricted net assets for capital projects, rate stabilization, economic
development, and bond indentures.
Mortgage Rueivables • Mortgage receivables consist of loans made to Lubbock residents under the City's
Community Development loan program. These loans were originally funded primarily througll grants received
from the U.S. Department of Housing and Urban Development.
Capital Assets and Depreciation • Capital assets, including public domain infrastructure (streets, bridges,
sidewalks and other assets that are immovable and of value only to the City) are defined as assets with an initial,
individual cost of more than SS,OOO and an estimated useful life in excess of one year. These capital assets are
reported in the GWFS and the proprietary FFS. Capital assets are recorded at cost or estimated historical cost if
purchased or constructed. Donated assets are recorded at the estimated fair value on tile date of donation.
Major outlays for capital assets and improvements are capitalized as the projects are constructed. The cost of
nonnal maintenllnce and repairs that do not add to the value of the asset or materially extend the asset lives are
not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the
related capital assets.
Depreciation is computed using the straight·line method over the estimated useful lives as follows:
lnti'astructurcllmprovements
Buildings
Equipment
Water rights
10-50 years
15-SO years
3-15 years
85 years
Interest C11pitalization -Because the City issues general-purpose capital improvement bonds, which are
recorded within the proprietary funds, the City capitalizes interest costs for business-type activities and
enterprise funds according to the Financial Accounting Standards Board (F ASB) Statement No. 34
Capitalization of Interest Co.rt and FASB Statement No. 62 Capilolization of Interest Co.rts. The City
capitalized interest of approximately $457,000, net of interest earned, for the business-type activities and the
enterprise funds during the current fiscal year.
Advances to Other Funds -Amounts owed to one fund by another that are not due within one year are
recorded as advances to other funds.
Use of Estimates -The preparation of financial statements in confonnity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses/expenditures during the reporting period.
Actual results could differ from those estimates.
64
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
G. REVENUES. EXPENSES AND EXPENDITURES
Interest Income on pooled cash and investments is allocated monlhly base:d on the percentage of a fund's six·
month rolling average monthly balance in pooled cash and investments to the total citywide six-month rolling
average monthly balance in pooled cash and investments, except for certain Fiduciary funds. certain Special
Revenue Funds, Capital Project Funds, and certain Internal Service Funds. The interest income on pooled cash
and investments of these funds is repon ed in the General fund or the Debt Service Fund.
Sales Tax Revenue for the City results from an allocation of 1.125% of the total sales tax levy of 7 .875o/o,
which is collected by the State of Texas and remitted to the City monthly. The tax is collected by the vendor
and is required to be remitted to the State by the 20th of the month following collection. The tax is then paid to
the City by the lOth of the next month.
Grant Revenue from federal and state grants is recognized as revenue as soon as all eligibility requirements
have been met. The availability period for grants is considered to be one year.
Inter-fund Transactions are accounted for as revenues, e:otpenditures, expenses, or other financing sources or
uses. 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. In addition, transfers are made
between funds to shift resources from a fund legally authorized to receive revenue to a fund authorized to
expend the revenue.
Compensated Absences consists of vacation leave and sick leave. Vacation leave of 10-20 days is granted to
all regular employees dependent upon the date employed, years of service, and civil service status. Currently,
up to 40 hours of vacation leave may be "carried over" to the next calendar year. The City Is obligated to make
payment upon retirement or termination for any available, unused vacation leave.
Sick leave for employees is accrued at I·V. days per month with a maximum accrual status of 200 days. After
15 years of continuous full time service for non-civil service personnel. vested sick leave is paid on retiremem
or termination at the current hourly rate for up to 90 days.. Upon retirement or tennination, Civil Service
Personnel (Police) are paid for up to 90 days accrued sick leave after one year of employment. Civil Service
Personnel (Firefighters) are paid for up to 135 days of accrued sick leave upon retirement or termination. The
Texas Civil Service laws dictate certain benefits and personnel policies above and beyond those policies of the
City.
The liability for the accumulated vacation and sick leave is recorded in the GWFS and in the FFS for
proprietary fund employees when earned. The liability is recorded in the governmental FFS to the extent it is
due and payable.
Post Employment Benefits for retirees of the City of Lubbock include the option to purchase health and life
insurance benefits at their own expense. Amounts to cover premiums and administrative costs, with an
incremental charge for reserve funding, are determined by the City's heallh care administrator. Employer
contributions are funded on a pay·as·you-go basis and approximated $1.3 million for fiscal 2004. These
contributions are included in the amount of insurance expense reflected in the financial activity reported in the
Health Insurance Internal Service Fund.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septetnber30,2004
NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABU-ITY
A. NET ASSET/FUND BALANCE DEFICJTS
The deficit of $76,784 in the General Capital Projecrs Fund is due to timing differences of incuning capital
outlay expenditures for an internally financed project The fund balance should be positive by the end of fiscal
year 2004/2005 with the final internal payback from the Special Revenue Funds.
The deficit of $6,700 in the Investment Pool Internal Service Pund is the result of not recovering actual cost
with the allocation of interest earnings to this fund. This also represenrs a timing difference.
The deficit of$1,864,119 in Market Lubbock: Inc. (MLI) is due to long-term commitmenlS for incentive and
special project contraclS and tentative open convention offers. MLI management expects future receiplS of
funding from the City ofLubbock to pay these long-term commitmenrs.
No other funds of the City had deficirs in either total fund balances or total net asselS.
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
A. POOLED CASH AND INVESTMENTS
The City's investment polices are governed by State statute and City ordinances. The following are authorized
investments for the City and all are authorized and further defined by the Public Funds Investment Act (Chapter
2256) ("PFIA''):
• Obligations of the United States or its agencies and instrumentalities, which have a liquid market with
a readily d~rminable market value.
• Direct obligations of this state or ilS agencies and instrumentalities.
• Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or
backed by the full faith and credit of, this state or the United States or their respective agencies and
instrumencalities.
• Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to
investment quality by a nationally recognized investment rating firm not less than A or its equivalent
• Fully collateralized certificates of deposit issued by a state or national bank doing business in Texas
and guaranteed, or insured by the Federal Deposit Jnsurance Corporation or its successor, secured by
obligations authorized by this subchapter, or secured in any other manner and amount provided by
law for deposits of the investing entity.
• Fully collateraliz.cd repurchase agreements with a defined termination date; and secured by
obligations authorized by the Act; such collateral pledged to the City, held in the City's name, and
deposited at the time the investment is made with the City or with an independent third party selected
and approved by the City. Repurchase agreements must be purchased through a primary government
securities dealer, as defined by the Federal Reserve, or a bank doing business in this state. The tenn
of any reverse repurchase agreements may not exceed 90 days after the date the reverse security
repurchase agreement is delivered. Money received by the City under the tenns of a reverse security
rcpurcltase agreement shall be used to acquire additional authorized investments, but the term of the
authorized investments acquired must mature not later than the expiration date stated in the reverse
security repurchase agreement.
• Bankers' acceptances with a stated maturity of 270 days or fewer from the date of its issuance; and
liquidated in full at maturity; and eligible for collateral for borrowing from a Federal Reserve Bank;
and accepted by a bank organized and existing under the laws of the United States or any state, if the
short-term obligations of the bank, or of a bank holding company of which the bank is the largest
subsidiary, are rated not less than A-1 or P-1 or an equivalent rating by at least one nationally
recognized credit rating agency.
• Commercial paper with a stated maturity of270 days or fewer from the date of its issuance, and rated
not less than A-I or P-1 or an equivalent rating by at leasl two nationally recognized credit rating
agencies.
66
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
A. POOLED CASH AND INVESTMENTS I CONTINUED)
• No-load money market mutual funds regulated by the Securities and Exchange Commission, and with
a dollar-weighted average stated maturity of 90 days or fewer, and whose investment objectives
include the maintenance of a stable net asset value of$1 for each share.
• AAA-rated, constant dollar, investment pools aulhorized by the City Council and as further defined
by the Act, which invests in eligible securities as authorized by the PFIA. Government Pool
investments as of September 30,2004, were invested in TexPool and TexSTAR.
TexPool. The Comptroller of Public Accounts (the "Comptroller") is the sole officer, director and
shareholder of the Texas Treasury Safekeeping Trust Company (the "Trust Company"} which is authorized to
operate TexPool. Pursuant to the TexPool Participation Agreement, administrative and investment services to
TexPool are provided by Lehman Brothers Inc. and F'eder.ued Investors, Inc. ("Lehman and Federated"),
under an agreement with the Comptroller, acting on behalf of the Trust Company. The Comptroller
maintains oversight of the services provided to TexPool by Lehman and Federated. In addition, the TexPool
Advisory Roard advises on TexPool's Investment Policy and approves any fee increases. As required by the
PFIA, the Advisory Board is composed equally of participants in TexPool and other persons who do not have
a business relationship with TexPool who are qualified to advise TexPool. TexPool is currently rated AAAm
by Standard and Poor's. An explanation of the significance of such rating may be obtained from Standard &
Poor's at 1221 Avenue of the Americas, New York, New York 10020.
TexSTAR. Texas Short Term Asset Reserve Program ("TEXSTAR") has been organized in conformity with
the lntcrlocal Cooperation Act. Chapter 791 of the Texas Government Code, and the Public Funds
Investment Act, Chapter 2256 of the Texas Government Code. JPMorgan Fleming Asset Management
(USA), Inc. ("JPMFAM") and First Southwest Asset Management, Inc. ("FSAM") serve as co-administrators
for TEXST AR under an agreement with the TEXST AR board of directors (the "Board"). JPMF AM provides
investment services, and FSAM provides participant services and marketing. Custodial, transfer agency,
fund accounting and depository services are provided by JPMorgan Chase Bank and/or its subsidiary J.P.
Morgan Investor Services Co. Finally, TEXST AR is currently rated AAAm by Standard and Poor's. An
explanation of the significance of such rating may be obtained from Standard & Poor's at 1221 Avenue of the
Americas, New Y.ork, New York l 0020.
Collateral is required for demand deposits, certificates of obligation, and repurchase agreements at 102% of
all amounts not covered by Federal deposit insurance. Obligations that may be pledged as collateral are
obligations of the United States and its agencies and obligations of the state and its subdivisions. The City's
deposits and investments are categorized below to indicate the level of custodial credit risk assumed by the
City at September 30, 2004.
INVESTMENT CATEGORY OF CUSTODIAL CREDIT RISK
(1) Insured, registered. or securities held by the City or its agent in the City's name.
(2) Uninsured and unregistered, with securities held by the counterparty's agent or trust department in
the City's name.
(3) Uninsured and unl'(:gistered, with securities held by the counterparty or by the trust department or
agent but not in the City's name.
DEPOSIT CATEGORY OF CUSTODIAL CREDIT RISK
(I) Insured or collaterali1.ed with securities held by the City or by its agent in the City's name.
(2) Collateralized with securities held by the pledging financial institution's trust department or agent
in the City's name.
(3) Uncollateraliz.ed.
Amounts invested in investment pools and money market funds are not categorized. because they do not
represent securities that exist in physical form.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
A. POOLED CASH AND INVESTMENTS <CONTINUED>
The following table is a schedule of the City's pooled cash and investments at September 30, 2004:
Care gory
lnvet~UDenUI !!l ~ ~3~
P.Qrrwy ~ovemmen'
U.S. Treasuries $ 3,998,817
Agency Obligations 36,658,090
Investment Pools
Money Market Mutual Fund
Total Primacy Government
A,gmq Fund!!
Investment Pools
Total Agency Funds
Total Investments
Catb and Catcgoty Bank
BankDe~cs !Al ~~ !C} B.W.ce
Primary Government $ 95,899,156 . 95,899,156
ApcyFunds 1,099 1,()99
Total $ 95,900,255 95,900,255
CanyiDg
.Amount
~.998,817
36,658,()90
47,413,743
2,796,414
90,867,064
73
73
90,867,137
Canyiag
Amount
95,899,156
1,099
95,900,255
Cash and investments listed above include investment pools and money market mumal funds (mmmf).
The table below categorizes the investment pools and mmrnfs as cash and equivalents in unrestricted
funds. Restricted funds include investment pool and nunmf balances. The difference in total investment
balances between the table above and the table below totals $7,019,071, whicll is due to the different
reporting methods used in each table. Cash and investments are reported in the Statement of Net Assets
as:
Total Tocal
Primary Agency
Gonnunent Puoct. TotaJ
Casb and Equivalents • Unrestl:icted $ 56,107,053 56,107,053
Cash and Equiwlencs · Restricted 46,811,17• 1,()99 46.812,273
Total Cash and Equiva!C1lcs 102,918,227 1,(199 t02,919,326
Investmencs · Unratti~d 13,581,046 1!,581,046
Investments -Restricted 7Cl,U6.~7 73 70,267 ,O']J)
Total Iuvesunenca 83,847,993 73 83,848,066
Total Casb and Investments $ 186,766)20 1,172 186,767,392
68
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statemen1S
September30,2004
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
B. INTERFUND TRANSACTIONS
lnterfund balances. specifically the due to and due from other funds, are short-tenn loans to cover
temporary cash deficits in various funds. This occasionally occurs prior to bond sales or grant
reimbursements. These outstanding balances ~ repaid within the following fiscal year.
lnterfund balances, specifically advances to and from other funds, are longer-tenn loans to cover Council
directed intemal financing of certain projects. At September 30, 2004 the City has nearly $1.S million of
this type of internal financing. These balances are assessed an interest charge and are repaid over time
through operations and transfers.
Net interfund receivables and payables between governmental activities and business-type activities in the
amount of $SSS,46S, are included in the govenunent-wide financial statements. The following amounts
due to other funds or due from other funds, including advances, are included in the fund financial
statements (all amounts in thousands):
Inted'und Payables:
Governmental Funds:
Nonmajor Govemmenw
P.roprietary Funds:
Electric
Nonmajor Proprietary
Totals
Govemmental
Funds
General
1,930
$ 2,376
lnterfund Receivables
Proprie~ Funds
Water Sewer Solid Waste
1,024
261
261 1,024
Net transfers of$9,745,250 from business-type activities to governmental activities, up from $2.6 million
during the prior year, on the government-wide statement of activities is primarily the result of 1) debt
service payments made from the debt servi~ fund, but funded from an operating fund; 2) subsidy transfers
from unrestricted general funds; and 3) transfers to move indirect cost allocanons, payments in lieu of
taxes (Pll.OT), and franchise fees to the general fund or other funds as appropriate. The following
interfund transfers are reflected in the fuod financial statements (alJ amounts in thousands):
Governmental
Funds
hstetfund Transfers Oua:
Debt Nonmajor Storm-Nonmajor Intc:nl
Totals
2,954
707
3,661
Sewer Water Entc:p«ise SenK:c Tot:ds Iatetfuncl General Service Gov. Elect:J:ic Water -
Govemmental Funds:
General Fund $
Debt Service Fund
Norunajor Governmental 3,221
Proprietuy Funds:
Electric
Water
Sewer
Stormwate.r
wrMPA
Nonmajor Ente.tprisc
Internal Service Funds
Total
9 1,679
93 6,799
6,236
4,307
849 935
41
$ 4,213 t9,9S6
1,483
160
1,449
90
91
1,068
1,679
357
3,997
6,799
3l0
1,751
6,236
311
4,307
3,872 3,150 11,172 8.,033 4,619
69
2,114
935
1,121
4,2t6
10,724
20,715
6,121
1,778
6,892
6,236
4,307
357
1,875
226
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE Ill. DETAIL NOTES ON ALL ACTMTIES AND FUNDS
C. DEFERRED CHARGES
The total deferred charges of $3,344.444 in the Elec:uic Enterprise Fund represents an advertising contract
with the United Spirit Arena. The advertising {and amortization) began with the opening of the sports
arena in fiscal year 2000 and will continue for 30 years.
The total deferred charges of $407,251 in the West Texas Municipal Power Agency Fund represents
unamortized bond issuance costs related to the bonds issued to build the JRM8 cogeneration facility.
D. CAPITAL ASSETS
Capital asset activity for the year ended September 30, 2004, was as follows:
Primary Government:
Governmental Activities
Begitming
Balaa.ce lu.a:easea Decreases
Capital Assets not being deprewted:
Land $ 7,996,406 611,843
Construction in Ptogress 36,155,690 14,140,550 6,824,218
Total Capital Assets not being depreciated 44,152,096 14.752,393 6,824,218
C2pital 4ssets being depreciated:
Buildings 51,475,936 6,864 28,522
Impcovemeots Othu th2n Buildings 125,742,157 3,908,958
Machinery and Equipment 48,896,000 5,585,646 1,526,973
Total Capital Assets being depreciated 226,114,09$ 9,501,468 1,555,495
Less Accumubted Depteciation for.
Buildif18$ 25,873,452 1,815,260 28,522
lmpto~emeats Other· than Buildings 88,642,271 3,826,069
Machinety and Equipment 34,015,313 4,426,516 1,443,900
Total Accumulated Dcpceciarion 148,531,036 10,067,845 1,472,422
Total Capital Assets being depceciatcd, act 77,583,057 (566,377) 83.073
Govemmenllll.Activities Capital Assets, net $ 121,735,153 14,186,016 6,907,291
Depreciation expense was charged to functions/programs of the governmental activities as foUows:
Governmental activities:
General Government
F"mancial Sc:rvices
Human Resou«es
Administration/Community Services
Fite
Police
Streets
Electtic
Iatemal Se.c:vice Funds
Total depteciation expense-governmental activities
Tnnsfet in to accumulated depreciation-govanmc:ntal activities
lnc:rese in accumulated deptec:iation -governmental adivities
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Balances
8,608.,249
43,472,022
52,080,271
51,454,278
129,651,115
52,954,673
Z4,060,066
27,660,190
92,468,340
36,997,929
157,126,459
76,.933,607
129,013,878
$ 325,447
5,279
4,636
3,646,.365
841,694
1,339.872
3,364,002
286,096
162,702
9,976,093
91,752
$ 10,067,845
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
SepteDlber30,2004
NOTE m. DETAIL NOTES ON ALL ACfiVITIES AND FUNDS
D. CAPITAL ASSETS (CONTINUED)
Busines&-Type Activities
Begi!Uliag
Balance lncrease10 Decreases
C:apital Assets not being depteciated:
wd $ 31,676,155
Construction in Progress 104,689,207 28,965,883 19,693,719
Total C:apital. &sets not being depreciated 136,365,362 28,965,883 19,693,719
Cipital. Assets being depreciated:
Buildings 96,941,635 6,034 18,891
Improvements Other than Buildings 555,982,769 20,441,780 2,065,581
Machine')' 211d Equipment 137,992,381 25,692,500 30,927,318
Total Cipital. &sets being depteci2ted 790,916,785 46,140,314 33,011,790
Less Accumulated Depteei:atioo foe
Buildings 26,180,634 2,465,313 18,891
Improvements Other than Buildings 225,416,823 19,574,185 1,473,470
Machinery and Equipment 58,219,321 12,838,270 5,221,994
Tow Accumulated Depreciation 309,816,778 34,877,768 6,714,355
Tow Cipital &sets being depreciaced, net 481,100,007 11,262,546 26,297,435
Business-Type Activities Capital Assets, net $ 617,465,369 40,228,429 45,991,154
Depreciation expense was charged to functions/programs of the business-type activities as follows:
Business-Type Activities:
Electric
Water
Sewer
Storm water
Solid Waste
A.Uport
Tnnsit
Internal Service Funds
Total depreciation expense -business-type :ac:livities
Transfer in to :acCUII\ulated deprcciatioo. -business-type :activities
lnctese in =mulated depreciation -business-type activities
71
End.iog
Balances
31,676,155
113,961,371
145,637,526
96,928,778
574,358,968
ll2,757,563
804,045,309
28,627,056
243,517,538
65,835,597
337,980,191
466,065,118
611,702,644
$ 9,121,124
5,958,903
S,o75,034
SSJ,S92
8,016,067
3,255,401
2,019,973
439,792
34,439,886
437,882
$ 34,877,768
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
D. CAPITAL ASSETS (CONTINUED>
Con&truction Comadtmeats
The City had many construction projc«s in progress at fiscal year end. Public Safety projects include
construction of a fire pump test pit. Park projects include park irrigation and lighting systems. Street
projects include the widening of 98111 street from Slide to Frankford. A security upgrade of Police
Headquarters was also underway.
Electric projects included the final touches on a new substation. Water projects included a new project to
develop W8kr wells south of Loop 289. Sewer projects included construction of sewer lines ahead of the
Marsha Sltarp Freeway. Airport projects included an cxtc:nsion of the airport's taxiways. Two large
Storm water projects arc underway. The first project provides for the construction of an outfilll storm sewer
from Clapp Park to Yellowhouse Canyon and a series of upstream stonn sewers that will provide various
protections around four playa lakes. The second project provides for the construction of a flood relief
project for south Lubbock's chain of playa Jakes.
Original Remaining
P~ecca CommicmCDca S~t-co-Datc Coaumtimcubl
Publk Safety s 9~71,433 7,799~79 t,571,8S4
Puk Improvements 13,078.502 7,481,061 5,597,441
Street lmptovements 25,866,652 15,479.352 10.387,300
Pemuneat Street Maincmance 1,788,000 1,626,990 161,010
General Capibl Projects 355,171 285,505 69,666
Genenll Facilities and Syttetn Improvement~~ 10,062,864 7,n3,96s 2,288,896
Tax Increment Fund Cspital Projects 3,800,000 1,198~97 2,601,40.3
Gunt Te.aorism Lab 1,179,000 892,540 286,460
Electric 14,650,111 9,488,738 5,161.373
Water 70,435,418 45,999,985 24,435,433
Sewer 11,001,937 5,.227,618 5,774~19
Solid Waste 9,591,700 5,950,400 3,641,300
A.itport 16,058,200 3~39,364 12,718,836
Transit 203,799 203,799
Sto.nnwata 79,900,000 43,053,522 36~.478
Internal Sa:vice Fund 2,956,000 1,632,378 1~23,622
Total s '!JO;J;98,787 157,433.396 112.865.~91
72
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septernber30,2004
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
E. RETIREMENT PLANS
Each qualified employee is included in one of two retirement plans in which the City of lubbock
participates. These are the Texas Municipal Retirement System (TMRS) and the Lubbock Firemen's
Relief and Retirement Fund (LFRRF). The City does not maintain the accounting records, hold the
investments or administer either retirement plan.
Summary of significant data for each retirement plan follows:
TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS)
Plan Description
The City provides pension benefits for all of its full-time employees (with the exception of firefighters)
through a non-traditional, joint contributory, hybrid defined benefit plan in the state-wide TMRS, one of
794 administered by TMRS, an agent multiple-employer public employee retirement system.
Benefits depend upon the sum of the employee's contributions to the plan, with interest. and the City·
financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for
service rendered before the plan began of a theoretical amount equal to two times what would have been
contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service
since the plan began are a percent (I 00%, I SO%, or 200%) of the employee's accumulated contributions.
In addition, the City can gt;lnt, as often as annually, another type of monetary credit referred to as an
updated service credit which is a theoretical amount which, when added to the employee's accumulated
contributions and the monetary credits for service since the plan began, would be the total monetary credits
and employee contributions accumulated with interest if the current employee contribution rate and City
matching per<:ent 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 S or more years of service or with 20 years of service
regardless of age. A member is vested after 5 years. The plan provisions are adopted by the governing
body of the City, within the options available in the state statutes governing TMRS and within the actuarial
constraints also in the statutes.
Contributions
The contribution rate for the employees is 7% and the City matching ratio is currently 2 to 1, both as
adopted by the governing body of the City. Under the state law governing TMRS, the actuary annually
determines the City contribution rate and the prior service cost contribution rate, both of which are
calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the
currently accruing monetary credits due to the City matching percent, which are the obligation of the City
as of an employee's retirement date, not at the time the employee's contributions are made. The normal
cost contribution rate is the actuarially detennined percent of payroll neassary to satisfy the obligation of
the City to each employee at the time his/her retirement becomes effective. The prior service contribution
rate amortizes the unfunded (overfunded} actuarial liability (asset) over the remainder of the plan's 25-year
amortization period. The unit credit actuarial cost method is used for determining the City contribution
rate. Both the employees and the City make contributions monthly. Since the City needs to know its
contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial
valuation that serves as the basis for the rate and the calendar year when the rate goes into effect (i.e.
December 31, 2003 valuation is effective for rates beginning January 2005).
73
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE m. DETAU.. NOTES ON ALL ACTIVITIES AND FUNDS
E. RETIREMENT PLANS (CONTINUED>
Actuarial Assumptions
The actuarial assumptions for the December 31, 2003 valuations arc as follows:
Actuarial cost method: Unit credit
Amortization method:
Remaining amortization period:
Level percent of payroll
2S years~ open period
Amortized cost Asset valuation method:
Investment rate of return:
Projected salary increases:
Includes inflation at:
Cost of Living adjustments:
As or
September 30
2001
2002
2003
7%
None
None
None
Annual Pension
Cost
$ 8,398,884
8,803,613
8,708,867
Centribution
Made
8,398,884
8,803,613
8,708,867
TEXAS MUNICIPAL RETIREMENT SYSTEM
THREE-YEAR IUSTORJCAL SCHEDULE OF ACTUARIAL LIABILITIES
A.ND FUNDING PROGRESS REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
AI or
DccemberJI
2001
2002
2003
As of
December31
2001
2002
2003
Actuarial Value of
AJsets
$ 172,510,622
181,191,012
182,884,183
Auuaal Covered
Payroll
$ 58,173,019
60,285,077
57,571,743
Actuarial
Accrued
Liability
21S,S84,035
228,372,843
239,809,434
UAALasa%
or covered
Payroll
74.0%
78.3%
98.9%
Unfunded
Actuarial
Accrued
Pereentqe Liability
Funded (VAAL)
SO.OOAI 43,073,413
79.3% 47,181,831
76.3% 56,925,251
The City of Lubbock is ~ne of 794 municipalities having the bc:raefit plan administered by TMRS. Each of
the miDiicipalities has an annual, individual actuarial valuation performed. AJI assumptions for the
December 31, 2003 valuations are contained in the 2003 TMRS Comprehensive Annual Financial Report,
a copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153.
74
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septernber30,2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
E. RETIREMENT PLANS {CONTINUED)
LUBBOCK FIREFIGHTER'S RELIEF AND RETIREMENT FUND (LFRRF)
Plan Description
The Board of Trustees of the LFRRF is the administrator of a single-employer defined benefit pension
plan. It is reported by the City as a related organization and is not considered to be a part of the City
financial reporting entity. Firefighters in the Lubbock Fire Department ar~ covered by the LFRRF.
The LFRRF provides service retirement, death, disability and withdrawal benefits. These benefits fully
vest after 20 years of credited service. A partially vested Benefit is provided for firefighters who terminate
employment with at least 10 but less than 20 years of service. Employees may retire at age 50 with 20
years of service. A reduced early service retirement benefit is provided for employees who terminate
employment with 20 or more years of service. The LFRRF Plan effective November l, 2003 provides a
monthly normal service retirement benefit, payable in a Joint and Two· Thirds to Spouse form of annuity,
equal to 68.92% of final 48-month average salary plus $335.05 per month for each year of service in
excess of 20 years.
A firefighter has the option to participate in a Retroactive Deferred Retirement Option Plan (RETRO
DROP) which provides a lump sum benefit and a reduced annuity upon termination of employment.
firefighters must be at least 5 I with 21 years of service at the selected "RETRO DROP benefit calculation
date" (which is prior to date of employment termination). Early RETRO DROP with benefit reductions is
available at age SO with 20 years of service for the selected "early RETRO DROP benefit calculation
date". A Partial Lump Sum option is also available where a reduced monthly benefit is determined based
on an elected lump sum amount such that the combined present value of the benefits under the option is
actuarially equivalent to that of the normal form of the monthly benefit. Optional forms are also available
at varying levels of surviving spouse benefits instead of the standard two·thirds form.
There is no provision for automatic postretirement benefit increases. LFRRF has the authority to provide,
and has periodically provided for in the past, ad hoc postretirement benefit increases. The benefit
provisions of this plan are authorized by the Texas Local Fire Fighter's Retirement Act (TLFFRA).
TLFFRA provides the authority and procedure to amend benefit provisions.
Contributions Required and Contributions Made
The contribution provisions of this plan are authorized by TlFFRA. TLFFRA provides the authority and
procedure to change the amount of contributions determined as a percentage of pay by each firefighter and
a percentage of payroll by the City.
State law requires that each plan of benefits adopted by LFRRF 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, LFRRF's normal cost contribution rate
is determined as a percentage of payroll. The excess of the total contribution rate over the normal cost
contribution rate is used to amortize LFRRF's unfunded actuarial accrued liability (UAAL), if any, and the
number of years needed to amortize LFRRF's unfunded actuarial liability, if any, is detennined using a
level percentage of payroll method.
The costs of administering the plan are financed by LFRRF.
75
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
E. RETIREMENT PLANS (CONTINUED)
Annual Pension Cost
For the fiscal year ended September 30, 2004. the City of Lubbock's Annual Pension Cost (APC) for the
Lubbock Fire fund was equal to $2,582,713 as described below in item 4 in the table below. Based on the
results of the December 31,2002 actuarial valuation of the Plan Effective November I, 2003, the Board's
actuary found that the fund had an adequate financing arrangement, as described in the paragraph below,
based on the fixed level of the firefighter contribution rates and on the assumed level of City contribution
rates. Based on the Plan Effective November I, 2003, LFRRF's funding policy rC(Juires contributions
equal to 12.43% of pay by the firefighters. Contributions by the City are based on a formula, which causes
the City's contribution rate to fluctuate from year to year. The December 31, 2002 actuarial valuation
(most recent available) reflecting the Plan Effective November I, 2003 assumes that the City's
contributions will average 18.67% of payroll in the future.
Therefore, based on the December 31, 2002 actuarial valuation of the Plan Effective November 1, 2003,
the Annual Required Contributions (ARC) are not actuarially determined but are equal to the City's actual
contributions beginning January I, 2003. Prior to January I, 2003, the ARC was based on the December
31, 2000 actuarial valuation and was actuarially determined as described below.
The following shows the development of the Net Pension Obligation (NPO) as of September 30, 2004:
1. Annual Required Contributions (ARC)
2. Interest on NPO
3. Adjustment to ARC
4. Annual Pension Cost (APC)
5. Actual City Contributions made
6. Increase (Decrease) in NPO/(asset)
7. NPO/(asset) at October I, 2002
8. NPO/(asset) at September 30, 2003
$2,597,738
(70,609)
55,584
2.582,713
(2,597, 738)
(15,025)
(882,623)
($897,648)
The ARC for the period October I, 2002 through September 30. 2004 was based on the December 31,
2002 actuarial valuation. The entry age actuarial cost method was used with the normal cost calculated as
a level percentage of payroll. The actuarial value of assets was market value smoothed by a five-year
deferred recognition method, with the actuarial value not more than 1 I 0% or less than 9()0,4 of the market
value of assets. The actuarial assumptions included in an investment return assumption of 8% per year
(net of expenses), projected salary increases including promotion and longevity averaging 6% per year
over a 25-year career. and no postretirement cost-of-living adjustments. An inflation assumption of 4%
per year was included in the investment return and salary increase assumptions. The UAAL is amortized
with the excess of the assumed total contribution rate over the normal cost rate. The number of years
needed to amortize the UAAL is determined using an open, level percentage of payroll method, assuming
that the payroll will increase 4% per year, and was 25 years as of the December 31, 2002 actuarial
valuation based on the plan provisions effective November I, 2003.
76
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
SepteDlber30,2004
NOTE 10. DET AD... NOTES ON ALL ACfiVITIES AND FUNDS
E. RETIREMENT PLANS <CONTINUED}
Further details concerning the financial position of the LFRRF and the latest actuarial valuation are
available by contacting the Board of Trustees, LFRRF, City of Lubboclc, P.O. Box 2000, Lubbock, Texas
79457. A stand-alone financial report is available by contacting the LFRRF.
Fiscal Year Ended
9/30/02
9{30103
9/30/04
Trend lnformatioa
Annual Pension Cost
(APq
$ 1,379,564
1,964,788
2,582,713
Percentage of APC
Contributed
148%
Ill
101
ANALYIS OF FUNDING PROGRESS
NetPeasion
Obligation
(Asset)
(660,692)
(882,623)
(897,648)
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
Actuarial Actuarial Entry Age Unfunded Funded Aanual VAAL/
VaiRation Value of Actuarial AAL Ratio (alb) Covered Funding Dale AsseCS(a) Accrued (UAAL) Pay ron Excess as a
Liability fFuading (e) Percentage of
(AAL)(b) exeea Covered
(b-a)
12131/98 1,2 $ 90,364,681 97,533,314 7,168,633 92.7% 10,290,190
12131/00 1 ,3 119,660,788 114,675,049 (4,985,739) 104.3 12,243,913
12/31/02 1,4 111,261,775 127,850,414 16,588,639 87.0 13,521,366
1. Economic and demographic assumptions wcte revised.
2. Reflects changes in plan benefit provisions effective November I, 1999.
3. Reflects changes in plan benefit provisions effective December I, 200 I.
4. Reflects changes in plan benefit provisions effective November I, 2003.
5. The covered payroll is based on estimated annualized salaries used in the valuation.
F. DEFERRED COMPENSATION
The City offm its employees two deferred compensation plans in accordance with Internal Revenue Code
("IRC'') Section 457. The plans, available to all City employees, permit them to defer a portion of their
salary until future years. The deferred compensation is not available to employees until termination,
retirement, death, or unforeseeable emergency. The plans' assets arc held in trust for the exclusive benefits
of the participants and their beneficiaries.
The City does not provide administrative services or have any fiduciary responsibilities for these pbms;
therefore, they arc not pieScntcd in the BFS.
77
Payroll
!{b-a~e}
69.7%
(40.7)
122.7
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
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 Wa$ created in 1953 and comprises eleven
cities. including the City of Lubbock. The budget, financing, and operations of the District are governed
by a Soard 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, 2004, the Board was
comprised of 18 members. two of which represented the City.
The City contracted with the CRMWA to reimburse it for a portion of the cost of the Canadian River Dam
and aqueduct system in exchange for surface water. Prior to fiscal year 1998-99, such payments were
made solely from water system revenues and were not considered general obligations of the City. The
City's pro rata share of annual fixed and variable operating and reserve assessments are recorded as an
expense of obtaining surface water.
Prior to fiscal year 1998-99, long-term debt was owed to the U.S. Bureau of Reclamation for the cost of
construction of the facility, which was completed in 1969. The City's allocation of project coscs was
$32,905,862. During the year ended September 30, 1999, bonds in the principal amount of$12,300,000
were issued to pay off the construction obligation owed to the U.S. Bureau of Reclamation via CRMWA in
the amount of $20,809,067. The difference of $8,509,067 was a discount in the remaining principal
provided by the U.S. Bureau of Reclamation to the member cities. This discount has been recorded as a
deferred gain on refunding and is being amortized over the life of the refunding bonds. At September 30,
2004, $5,904,703 remains unamortized. The annual principal and interest payments are included in the
disclosures for other City related long-tenn debt The above cost for the rights are recorded as capital
assets and are being amortized over 85 years. The cost and debt are recorded in the Water Enterprise
Fund.
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, issued bonds for the construction of the darn 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 of the authority, as well as funds sufficient to pay all
capital costs associated with construction. The City will receive sulface water for the payments to BRA.
Approximately $515,005 was paid to the BRA for maintenance and operating costs during the fiscal year.
The BRA issued $16,970,000 in revenue bonds in 1989 and $39,685,000 in revenue bonds in 1991. These
bonds were refunded July 1995. Construction of the dam and lake facilities began in 1989. The City is
obligated to provide sufficient funds over the remaining life of the bonds to service the debt requirement.
The asset, Lake Alan Henry dam and facilities, are recorded as capital assets and are being depreciated
over 50 years. The financial activity, along with the related obligation, is accounted for in the Water
Enterprise Fund.
In order to protect against the risk of interest ~ate changes between March 28, 2002 and May 1, 2005, the
City entered into an interest rate swap agreement with JPMorgan Chase (herein referred to as the "Swap
Provider") rated A+ by Standard & Poor's and Aa3 by Moody's Investors Service with a notational dollar
amount of $40,465,000. The City entered into an interest rate swap in order to achieve lower borrowing
costs associated with an anticipative boJTOwing in 2005. This boJTOwing will prepay and refund the
obligation of the City to pay debt service on Special Facilities (Lake Alan Henry) Revenue Refunding
Bonds, Series 1995 issued by the BRA to finance or refinance the construction of surface water supply
facilities' known as Lake Alan Henry pursuant to a Walcr Supply Agreement, dated as of May II, 1989, as
amended, between the BRA and the City; and under this agreement commencing Each August I, starting
78
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septe~ber30,2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
G. SURFACE WATER SUPPLY (CONTINUED>
August I, 2003 up to and including August I, 2005 the Swap Provider pays a premium of S280.000 to the
City and in addition beginning May I, 2005, !he swap Provider will pay the City of Lubbock interest on
the notational amount of the swap based on the Bond Market Association (BMA) Municipal Bond Index
on a monthly lacruallactua\) basis. On a monthly (30/360) basis, the City of Lubbock pays the Swap
Provider interest at the fixed rate of 5.2600.4. Additionally, the Swap Provider has the right but, not the
obligation, to tenninate the transaction in whole when the 180 day weighted average of the Municipal
Bond Index is more than 6.50%, but with no market value cost to the City. The notational amount of the
swap reduces annually; the reductions begin on August I, 2006 and mature on August I, 2022. As of
December I 0, 2004, rates were as follows:
Fixed payment
Variable payment
Fixed 5.260%
BMA 1.450%
At December 10, 2004 the swap agreement had a negative fair value of $6,075,000. The fair value was
developed by using the zero coupon method. This method calculates the future net settlement payments
required by the agreement assuming that the current forward rates implied by the yield curve correctly
anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the
current yield curve for hypothetical zero-<:oupon bonds due on the date of each future net settlement on the
swap.
At December 10, 2004, the City was not exposed to credit ri.sk because the swap had a negative fair value.
However, should interest rates change and the fair value of the swap become positive, the City could be
exposed to credit rislc in the amount of the derivative's positive fa.ir value. Should !he swap have a
positive fair value at some point the Swap Provider may be required to collateralize a percentage of their
exposure. Since inceplion no impairments in respect to the Provider's ratings have occurred.
The City's derivative contract uses the International Swap Dealers Association Master Agreement. The
swap agreements include standard termination events, such as failure to pay, credit rating downgrades, and
bankruptcy. Although the City has obtained provisions to avoid an unwanted early termination event, the
result of such an occurrence could result in the City being required to make an unanticipated termination
payment.
79
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septenlber30,2004
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
H. LOri~ TERM DEBT
GENERAL OBLIGATION BONDS AND CERTIFICATES OF OBLIGATION:
Anrage Fiaal Balaace
Interest Issue Maturity AmoDnt Outstanding
Rate Date Date Issued 9~
9.01 05-15-91 02-15-ll $ 1,085,000 370,000
5.50 05-15-92 02-15-04 34,.520,000 1,725,000
3.97 05~1-93 02-IS-15 14,425,000 725,000
5.39 1~1-93 02-15-14 3,625,000 1,825,000
5.39 1~1-93 02-15-14 2,550,000 1,300,000
5.20 1~1-93 02-15-14 1,470,000 225,000
5.14 1~1-93 02-15-14 19,215,000 2,895,000
5.50 05-15-95 02-15-15 4,690,000 235,000
5.07 12-IS-95 02-15-16 6,505,000 650,000
5.07 12-15-95 02-15-16 10,000,000 1,000,000
4.91 01·15-97 02-15-09 17,530,000 9,190,000
4.61 01~1-98 02-IS-08 1,330,000 610,000
4.71 01~1-98 02-15-18 10,260,000 7,200,000
4.36 Ot-15-99 02-IS-14 20,835,000 18,870,000
4.58 01-15-99 02-15-19 15,3.55,000 11,505,000
4.77 04-01-99 02-15-19 6,100,000 4,515,000
4.71 04-01-99 02-15-19 12,300,000 9,300,000
5.37 09-15-99 02-15-20 24,800,000 21,600,000
5.54 03-15-00 02-15-20 7,000,000 2,430,000
4.90 02~1~1 02-15-21 9,100,000 8,410,000
4.81 02-01~1 02-15-21 2,770,000 2,350,000
5.25 <16-01~1 02-15-31 35,000,000 33,715,000
4.68 02-15-02 02-15-22 9,400,000 9,095,000
4.71 02-IS-02 02-15-22 6,450,000 6,235,000
4.70 02-15-02 02-15-22 1,545,000 1,490,000
4.62 07~1-02 02-15-22 2,605,000 2,440,000
3.18 07-01-02 02-15-10 10,810,000 7,865,000
4.42 07-15~3 02-15-23 11,855,000 11,255,000
4.47 07-15-03 02-15-24 9,165,000 9,765,000
4.48 07-15-03 02-15·24 680,000 680,000
4.47 07-15~3 02-15·24 3,590,000 3,590,000
4.87 07-15~3 02-15-34 40,135,000 40,135,000
4.47 07-15~3 02-15-24 3,795,000 3,79.5,000
4.60 08-15~3 04-15-23 8,900,000 8,465,000
4.60 08-IS-03 04-15-23 13,270,000 12,625,000
4.09 ()9..28-04 02-15-24 2,025,000 2,025,000
4.08 09-28-04 02-15-24 3,100,000 3,100,000
3.58 09-28-04 02·15-20 2~6201000 22,620,000
Total $411,010,000 285,88S,OOO(A)
(A) Excludes net defened gains and losses on advance refundings, prior year band djscounts of
$4,993,103 ($3,813,381 business-type and $1,179,722 governmental). Additionally, this
amount includes $215,663,783 of bonds used to finance enterprise fund activities.
At September 30, 2004, management of the City believes that it was in compliance with all financial bond
covenants on outstanding general obligation bonded debt, certificates of obligation. and water revenue
bonded debt.
80
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septetnber30.2004
NOTE DI. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
H. LONG-TERM DEBT (CONTINUED>
ELECTRIC REVENUE BONDS
Final Amount
Interest Rate(%} Issue Date Maturity Date blued
3.80 to 5.50 6-15·95 4-15-08 s 13,560,000
4.25 to 6.25 1-01-98 4-15-18 9,170,000
4.05 to S.OO S-Ol-98 2-15-18 28,910,000
3.10to 5.00 1-15-99 4-15-19 14,975,000
4.00to 5.25 7-01-01 4-15-21 9!200!000
Total $ 75~815,000
• Balance outstanding excludes ($595,420) of discount on bonds sold .
WATER REVENUE BONDS
Final Amount
Issue Date Maturity Date Issued
Balucc
Outstanding
9-30-()4
4,360,000
6,440,000
21,285,000
9,185,000
7.8202000
49,090,000 •
Interest Rate
3.80 to 5.50% 6-l-95 8-15-21 $58,170,000 45,515,000 •
• Balance outstanding excludes ($4,132,838) discount and deferred losses on bonds sold or
refunded
The annual requirements to amortize all outstanding debt of the City as of September 30, 2004 are as
follows:
Govcmmcntal Aaivitiea Buai.Deu-TIJ!!: Ac:1ivitin
Fiac:al Gennal Obli&ation Bondi General Oblielion Bonds R.eveauc: Bonds
Year Priacil!al Iaterat PriaciJ:!!! lntaeet PrincieaJ httttest
2004-05 $ 4,955,949 2,975,462 11,104,051 9,824,743 6,265,000 4,784,861
2005-06 4,479,101 2,867,175 10,845,899 9,380,451 6,305,000 4,475,173
2006-{17 4,685,492 2,674,605 11,329.508 8,916,898 6,370,000 4,176,228
2007-DB 4,514,994 2,491,285 11,035,006 8,444,872 6,115,000 3,869,100
2008-()9 4,468,654 2,298,592 10,861,346 7,974,453 5,415,000 3,571,735
2009-14 21,145,278 8,592,662 53,604,722 32,762,481 27,995,000 13,717,183
2014-19 15,776,749 4,246,685 44,128,251 21,506,908 29,750,000 6,206,365
2019-24 10,195,000 896,451 29,230,000 11,982,075 6,390,000 527,850
2024-29 17,900,000 6,371,230
2029-34 15,625,000 1,695,013
Tows s 70,221,217 27,042,917 215,663,783 118,859,1.24 94,605,000 41,328,494
The annual requirements on capital leases of the City as of September 30, 2004, including interest payments
of$106,232 are as follows:
Govemmcncal Bu1iaeu-Type Total
Capital Lca1e Capical Leaec Capital Lc.ee
Fiecal Minimum Minimum Minimum
Year Pa~cnt Pal!!c•• PaEcnt
2004-05 $ 854,159 666,220 1,520,.379
2005-06 545,380 418,741 964,121
2006-07 353,694 353,694
2007-08 22,202 22,.202
Less:
Interest !38,5822 ~67:6502 ~106,232~
Total 1,360,957 1,393~07 2,754,164
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
H. LONG-TERM DEBT <CONTINUED)
The carrying values on the leased assetS of the City as of September 30, 2004 are as follows:
Accumulated Net Book
GtosaValue Dee.reciatiou. Value
Governmental Activities $ 3,558,439 1,441,188 2,Jt7,301
Business-Type Activities 3,404,477 1,0641892 2,339,585
Total Le2sed Assets $ 6,962,966 2,506,080 4,456,886
Long·term obligations (net of discounts and premiums) for governmental and business-type activities for
the year ended September 30, 2004 are as follows:
Debt Payable Debt Payable
9/J0/'}1.)03 Additioau Ddedoos 9/l0/'11»4
Governmental activities:
Tax-Supported-
Obligation Bonds $ 69,808,204 27,745,000 27,331,987 70,221,217
Rcbatable Atbittage 122,984 122,984
Capital Leases 996,4i7 1,535,075 1,170,595 1,360,957
Compensated Abiellces 12,636,967 7,918,589 5,637,048 14,918,508
InsutUce Claim Payable 2,72tJ,8<J7 14,328,}84 14,694,745 2,354,536
Bond Discounts/Premiums 1,179,722 1,179,722
Total Governmental acdviues 86,285,529 52,706,i70 43,957,}59 90,034,94U
Business-Type activitiee:
Self-Supported •
Obligation Bonds 226,126,796 10,463,013 215,663,78)
Revenue Bonds 101.,295,000 6,69(),000 94,605,000
Capital Leases 1,941,223 1,844,606 2,392,622 1,393,207
Rebatable Arbitrage 119,152 119,152
Closun:/Post Closure 2,690,001 361,tt5 3,051,116
Compensated Absences 3,695,242 2,849,947 2,385,047 4,160,142
Insurance Claim Payable 6,000,000 5,904,.528 5,467,674 6,436,854
Bond Discouncs/P.remiuau: {1,496,3981 2,796,962 2,215,441 ~914,877)
Total Bueiness-Type activities $ 340,371,016 13,757,158 29,732,949 324,395,225
Payments on bonds payable and arbitrage payable for governmental activities are made in the Debt Service
Fuod. Accrued compensated absences that pcl1ain to governmental activities will be liquidated by the
General Fund and Special Revenue funds. The Risk Management Internal Service Fund will liquidate
insurance claims payable that pertain to governmental activities. Payments for the capital leases that
pertain to tbc governmental activities will be liquidated by the general fund.
82
Due in
one '!.eat
4,955,949
826,018
5,475,861
2,354,536
13,612,364
11,104,051
6,2.65,000
622,442
2,143,.563
1,184,.210
~7,333l
21,221,933
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
H. LONG-TERM DEBT <CONTINUED)
The total long-term debt is reconciled to the total annual requirements to amortize long-term debt as
follows:
J.ong-rcrm debt • Governmental Acaviti.cs
l.ong-rcrm debe • Su,;in<."SS·typc Ac.rivilk'l<
(ntcTC:SI
Total amount nf debt
Ner gains/losses, prcmiums/di~counts
I.e$~: R.ebatablc arbitrage
l..css: Capirillcascs
Len: Insurance claims paynblc
Less: Compcn$arcd abscnscs
J..c~s: Closure/ post closure
Tocal ocher debt
Tom! future bonded dcbr rcquuemc:ms
$ 90,034,94()
324,395,225
187,230,535
(264,845)
(2,754,164)
(8,791 ,390)
(19 ,078 ,650)
(l,051, 116)
601.660,700
(33,940, 165)
s 567,720,535
The City Council called an election for May 15, 20(}4 co seek voter approval to issue general-purpose tax-
supported bonds in the amount of $30,000,000, which represents the City's current six-year general-
purpose debt plan. The following seven propositions were approved by the voters: street improvements,
$9,210,000; civic center/auditorium renovations and improvements, $6,450,000; park improvements,
$6,395,000; police/municipal court facilities, $3,350,000; library improvements, $2, 145,000; fire stations,
$1,405,000 and animal shelter renovations and improvements, $\,04S,OOO. The City previously issued a
capital improvement plan to voters in 1999, when voters in the City approved a $37,385,000 capital
improvement plan. In September 2004, the City issued $2,025,000 General Obligation Bonds, Series 2004.
This issuance was the first installment of the capital improvement debt iSStJance approved by the voters in
2004. The Obligations were issued at a net discount of $23,332. After paying issuance costs of$50,000,
the net proceeds were $1,95 I ,668. The proceeds from the sale of the Obligations will be used to fund the
following projects: Fire station improvements, $80,000; animal shelter improvements, $154,000; park
improvements, $181,000; street improvements, $1,420,000; traffic control improvements, $100,000; and
costs associated with issuance of the bonds.
In September 2004, the City issued $3,100,000 Tax and Waterworks System Surplus Revenue Certificates
of Obligation, Series 2004. The Certificates were issued at a net discount of $36,042. After paying
issuance costs of $58,000, the net proceeds were $3,005,958. Proceeds from the sale of these Certificates
will be used for street improvements, including drainage. streetlights, and traffic signalization and the
acquisition of land and necessary rights-of-way; and costs associated with the issuance of the Certificates.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
J. ADVANCED REFUNDING
On September 28, 2004, the City issued General Obligation Refunding Bond~ Series 2004 {"Refunding
Bonds") with a par value of $22,620,000 and a net interest cost of 3.7855% to refund $23,205,000 of
outstanding bonds. These bonds were issued to refund a portion of the City's outstanding tax-supported
debt to lower the debt service requirements on such indebtedness.
The Refunding Bonds were issued at a net premium of $1,815,646. After paying issuance costs of
$304,179, the net proceeds were $24,224,912. The net proceeds from the issuance of the Refunding
Bonds were deposited with the Escrow Agent (JPMorgan Chase Bank, Dallas, Texas) in an amount
necessary to accomplish the discharge and final payment of the Refunded Bonds on their scheduled
redemption date. These funds will be held by the Escrow Agent in a special escrow fund and used to
purchase direct obligations of the United State of America Under the escrow agreement, between the City
and JPMorgan Chase Bank, the escrow fund is irrevocably pledged to the payment or principal and interest
on the Refunded Bonds. The Refunded Bonds were removed from the City's basic financial statements.
As a result of the refunding, the City decreased its total debt service requirements by $874,031, which
resulted in an economic gain of$836,312 and an accounting loss of$1,019,912. The net premium and
bond issuance costs are allocated to both the governmental funds and the ente~J~rise funds based on the
fund type which will be responsible for servicing the debt.
J. CONDUIT DEBT
The City issued Housing Finance Co~J~oration Bonds, Health Facilities Development Co~J~oration Bonds,
and Education Facilities Authority Bonds .to provide financial assistance to private sector entities for the
acquisition and construction of facilities deemed to be in the public interest. The bonds are secured by the
property financed. Upon repayment of the bonds, ownership of the acquired facilities transfers to the
private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision
thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as
liabilities in the accompanying financial statements.
As of September 30, 2004, there were seven series of Lubbock Health Facilities Development Corporation
Bonds outstanding with an aggregate principal amount payable of$338,358,912. The bonds were issued
between 1993 and 2002. Also as of September 30, 2004, there was one series of Lubbock Education
Facilities Authority lnc. Bonds outstanding with an aggregate principal amount payable of $11,000,000.
The bonds were issued in 1999.
K. RISK MANAGEMENT
The Risk Management Fund was established to acx::ount for liability claims, worker's compensation claims,
and premiums for property/casualty insurance coverage. The Risk Management Fund generates its revenue
through charges to other departments, which are based on costs.
ln April 1999. the City purchased worker's compensation coverage, with no deductible, from a third party.
Prior to April 1999 the City was self insured for worker's compensation claims. Any claims outstanding
prior to Aprill999 continue to be the responsibility of the City.
The City's self insurance liability program is on a cash flow basis, which means that the servicing
contractor processes, adjusts and pays claims ftom a deposit provided by the City. The City accounts for
the liability program by charging premiums based upon losses, administrative fees and reserve
requirements. In order to control the risks associated with liability claims, the City purchased excess
liability coverage in September 1999 which is renewed annually. The policy has a $10 million annual
aggregate limit and is subject to a $250,000 deductible per claim.
84
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
J<. RISK MANAGEMENT (CONTINUED)
For self-insured coverage, the Risk Management Fund establishes claim liabilities based on estimates of
the ultimate cost of claims (including future claim adjustment expenses) that have been reported but not
setlltd, and of claims that have been incurred but not reported (IBNR). The length of time for which such
costs must be estimated varies depending on the covenge involved. 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 liability
coverage. Claim liabilities are recomputed periodically using a variety of actuarial and statistical
techniques to pmduce 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 tJ1ey are incurred.
Additionally, property and boiler coverage is accounted for in the Risk. Management Fund. The property
insurance policy was purchased from an outside insurance carrier. The policy has a $250,000 deductible
per occurrence, and the boiler coverage insurance deductible is up to $250,000 dependent upon the unit.
Premiums arc charged to funds based upon estimated premiums for the upcoming year.
Other small insurance policies, such as surety bond coverage and miscellaneous floaters, are also
accounted for in the Risk Management Fund. Funds are charged based on premium amounts and
administrative charges. The City has had no significant reductions in insurance coverage during the fiscal
year. Settlements in the current year and preceding two years have not exceeded insurance coverage. The
City accounts for all insurance activity in Internal Service Funds.
L. HEALTHINSURANCE
The City provides medical and dental insurance for all full-time employees that are accounted for in the
Health Insurance Fund. Revenue for the health insurance premiums are generated from each cost center
based upon the number of active full-time employees. The City's plan is self-insured under an
Administrative Services Only (ASO) Agreement. The ASO Agreement provides excess coverage of
$150,000 per covered individual annually and an aggregate cap of $12,546.913. The insurance vendor
based on medical trend, claims history, and utilization determines the aggregate deductible. The contract
requires an IBNR reserve of approximately $2.3 million.
The City also provides full-time employees basic term life insurance and long-term disability insurance.
Revenues for the life insurance premiums and long-term disability premiums are also generated from each
cost center based upon the number of active employees. The life insurance policy has a face value of
$10,000 per employee. The City will disconlinue providing long-term disability insurance as an employer
paid benefit during fiscal year 2004·0.5. Long-term disability premiums are set at a rate per $100 of annual
salary.
Full-time employees may elect to purchase medical and dental insurance for eligible dependents and the
City subsidizes dependent premiums to reduce the cost to employees. Employees may also elect to
participate in several voluntary insurance programs such as a cancer income policy, voluntary life, and
personal accident insurance. Voluntary insurance products are fully paid by the employee.
Retiring City employees may elect to retain medical and dental insurance and a reduced amount of life
insurance on themselves and eligible dependents. The retiree pays a portion of the premium costs, but the
City subsidies retiree premiums by about $1.3 million annually. The life insurance is fully paid by the
retiree.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE 01. DETAIL NOTES ON ALL ACTMTIES AND FUNDS
M. ACCRUED INSURANCE CLAIMS
N.
The Self-Insurance Funds establish 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 Self-Insurance Funds during the past
two years ended September 30:
2004 2003
Wotkea' Compensation and Liability Resecves at
beginning of fiscal year s 6,000,000 6,000,000
Claims &penses 5,467,674 4,.561,925
Claims Payments ~5,030,8202 ~4,561,9252
Worken' Compensation and Liability Reserves at end of
fiscal year 6,436,8S4 6,000,000
Medical t.nd Denw Claims Liability at beginning of fiscal
year 2,720,897 2,685,925
CWms Expenses 14)28,384 13,148,048
Cbims Payments ~14,694,74~ ~13,113,07~
Medical and Denllll Claims Liability at end of fiscal year 2,354,536 2,720)397
Total Self-Insurt.nce Liability at end of fiscal year 8,791,390 8,720,897
Total Assets to pay claims at eod of weal year 18,920,469 19,741,497
Accrued insutance claims payable from restricted usets -
eutttnt 3,538,746 4,220,897
Accrued insurmce claims payable -noncurrent 5,252,644 4,500,000
Total aca:ued insurt.nce claims 8,791,390 8,720,8'17
LANDFILL CLOSl!RE AND POSTCLOSURE CARE COST
State and federal laws and regulations require the City to place final covers on its landfill sites when they
stop accepting waste and to perform certain maintenance and monitoring functions a1 the sites for thirty
years after closure. Although closure and postclosure care costs will be paid only near or after the date thlll
the landfills stop accepting waste, the City reports a portion of these closure and postclosure costs as
operating expenses (and recognizing a corresponding liability) in each period based on landfill capacity
used as of each balance sheet date.
The S3,051,116 included in landtiJJ closure and postclosure care liability at September 30. 2004,
represents the cumulative amount expcoscd by the City to dab: for its two landfills that are registered under
TCEQ permit numbers 69 (Landfill 69) and 22~2 (Landfill 2252), less amounts thai have been paid. Over
92 percent of the estimated capacity of Landfill 691w been used to date, with $753,669 remaining to be
recognized over the remaining closure period, which is estimated at three years. Approximately 2.2
percent of the estimated capacity of Landfill 2252 has been used to date, with $22.867,597 remaining to be
recognized over the remaining closure period, which is estimated at over 80 years. Postclosure care costs
are based on prior estimates and have been adjusted for inflation. Actual costs may be different due to
inflation, deflation, changes in technology, or changes in regulations.
Tbe City is required by st8tc and federal laws aod regullllions to provide assurance thlll ftnAilcial resources
will be available to provide for cloSI.Il"C, postclosure care, and remediation or containment of environmental.
hazards at its landfills. The City is in compliance with these requirements and has chosen tbe Local
Government Financial Test mechanism for providing this assurance. The City expects to finance costs
through normal operations.
86
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
o. DISAGREGA TIQN OF ACCOUNTS
Aooouacs R.eoeivable Sumawuy
O:lutt Prqx:rty
Fuxa ~ TxDOT Paving Grana~ Mille.
Gcwemmental activities:
G:naalFund $ 4,537,134 SS1,1SS 472,281 403,300 385,906
DebtSerW:e 162,485
NoaMajor ~4331012 5,!38
Tocal $ 4,537,134 SS1,1SS 472,281 403,300 1.433,012 554,331
.Ac::couuls Receivable ~III!*Y
Gc:naaJ From Credit Bal:mceat
Oln8umc:r Olhets Oint Mile. 9/Y,/04
Business-type Aaiv:ities
ElectJ:ic 14,192,556 35~ 14,227,763
w.atet 4,181,134 452 7,559 4,189,145
Sewer 2,380.864 89,104 11,875 1.481,843
Stor:mwater 768,042 768,042
WIMP A 7,568,176 7;,68,176
Non-Mqor 2)3!,690 2,580 ~726 ~74,996
Tocal $ 311422,462 89,.556 2,580 95,367 31,609,965
Allowance tor Doubdul.Accouacs Summ!!I
Balance at
AccoUDtS Taxes 9/30/04
Govcmmenml
General Fund s 250,925 1,202.795 1,453,720
Debt Service Fuod 438,808 438,808
Non-Major 5,938 5,938
Business-Type
Electric 835,.314 835,.314
Water 253,.386 253,.386
Sewer 125,.372 125,.372
Storm water 62,443 62,443
WTMPA 675,217 675,217
Noo-Major 1481493 148493
Total $ 2,357,088 1,641.603 3,998,691
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6,349,778
162,485
1.438,950
8,951,213
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE m. DETAIL NOTES ON ALL ACI'lVITIES AND FUND
o. DISAGREGATION OF ACCOUNIS <CONIINUEI»
Accounts Payable Summ!UJ:
Vouchc.n Accounts lo•eatmc:nts Miacellaaeoua
Governmental
{Jj:nen.l Fund $ 454,395 1.287,984 93,648
Debt Service 167,374 250,643
Non-Major 349,943 2,371,925 174,987 234,437
Business-Type
Electric 679,590 7,644,824 3,410 188,584
Water 78,964 580,589 1,462 69,370
Sewer 163,982 23,978 2,344 34)40
Stonnwater 1,172 S3,213
WTMPA 6,196,307
Non-Major 183,429 795,927 M39 174,224
Total $ 1,911,475 19,122,121 436,485 794,603
P. DISAGREGATION OF ACCOUNIS • GOYERNMENT~WIDE
Net Receivables
Accounts lnta-est Taxes .laatemal Setrice
Receivable Receivable Receivable FW1ds RA:ceivablea
Governmental
Acti:vitic5 $ 8,694,350 101,728 7,488,784 99,002
Business-Type
Ac:Uvir:ies 29,509,738 191,476 110,744
Total $ 38,204,088 293,204 7,488,784 209,746
Accouats Payable
Accouats Iatemal Serrice Balance at
P~ble Funds P~ables 9/30/04
Govemmental
Activities $ 5,385,334 373,461 5,758,795
Business-Type
Activities 16,879,348 1,012,677 17,892,02.5
Total $ 22,264,682 1,386,138 23.650,820
Q. FUND CLOSURES
Balaa.c:e at
9/30/04
1,836,027
418,017
3,1l1,292
8,516,408
730,385
224,644
54,385
6,196,307
1,157~19
22,264,684
Balance at
9/30/04
16,38$,864
29,811,958
46,195,822
In fiscal year 2004, management sttearnlincd the accounting process and closed the folJowing funds:
Jnfonnation Technology Improvements a.nd Community Improvements.
88
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septer:nber30,2004
NOTE IV. CONTINGENT LIABILITIES
A. FEDERAL GRANTS
In the normal course of operations, the City receives grant funds from various Federal and state agencies.
The grant programs are subject to audits by agents of the granting authority to ensure compliance with
conditions precedent to the granting of funds. Any liability for reimbursement which may arise as the result
of audits of grants is not believed to be significant.
8. LITIGATION
The City is currently involved in the following lawsuits which could have an impact on the financial
position if the City is found liable.
Adams. et al v. City of Lubbock:
The City has been sued by numerous firefighters employed by the City of Lubbock. They claim that the
City did not properly pay its firefighters for "move-up" pay pursuant to the Civil Service Act. Pursuant to
the Civil Service Act firefighters can move-up and perform temporary duties in higher classifications.
When they perform these duties they are entitled to the pay of the higher classification. While the City has
paid them this higher pay, the plaintiffs assert they arc also entitled to the "seniority pay" which they've
earned at the lower classification. Their basis for this assertion is that the statute says that they are entitled
to the base pay of the higher classification plus any "longevity or seniority pay".
Both sides filed Motions for Summary Judgment in the trial court and the court ruled in favor of the
plaintiffs. The City's Motion for Summary Judgment was denied. Plaintiffs were awarded damages.
collectively, in the amount of$688,000 for damages through July 12, 2002, which includes pre-judgment
interest. Plaintiffs were denied attorney's fees.
The City of Lubbock appealed the trial court's decision to the appellate court. On October 7, 2004, the
Appeals Court reversed the judgment of the trial court and rendered a decision in favor of the City, holding
that the City paid its employees properly under the Civil Service Act. The Plaintiffs filed a Motion for
Rehearing, which was denied. Plaintiffs have indicated they will attempt to have the Texas Supreme Court
review the case.
Barnard Construction Company, Inc. v. Citv of Lubbock:
The Plaintiff is a construction company suing the City for breach of contract. The plaintiff alleges the City
owes it nearly $2,400,000 for rock it excavated on a drainage project. They assert that they are owed
$204,000 for rock excavated on Line AI and assert they are owed nearly $2,200,000 for rock excavated on
other lines on the project.
The City has agreed to pay for approximately $176,000 of rock excavated on Line A 1. However, the City
denied that it owes Barnard any compensation for rock excavated on the other Lines. The City filed a
Motion for Summary Judgment as to this issue and a Trial Court ruled in the City's favor on September 28,
2004. Barnard has indicated it will appeal.
Jeanette Livingston, et at v. City of Lubbock:
Six Plaintiffs filed suit against the Cily alleging that the City and/or County failed to properly record
information in its cemetery records that would indicate where their relatives were buried. The Plaintiffs'
attorneys have indicated that he has approximately eighty other clients in the same or similar position. The
City asserts it is not responsible for the improper recordation by the prior entities. The City also asserts that
the Plaintiffs have no physical injuries and there is no cause of action in Texas for the negligent infliction
of emotional di$tress. The City is also asserting defenses under the statute of limitations. At this time,
damages are difficult to ascertain but, collectively, they would meet the $200,000 materiality definition for
damages.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE IV. CONTINGENT LIABILITIES
B. LITIGATION (CONTINUED)
Marcie Tam1er v. City of Lubbock:
The Plaintiff sued the City for racial discrimination, pursuant to 42 U.S.C. § 1981, after she was
terminated from her employment with the City of Lubbock. The City asserts that she was terminated
because she sent duplicate mileage reimbursement requests to both the City her employer, and Texas Tech
University.
The Plaintiff also sued Texas Tech. but Texas Tech was dismissed. The City does not believe the potential
damages are above $200.000.
C. SITE REMEDIATION
The City has identified specific locations requiring site remediation relative to underground fuel storage
tanks and historical fire training sites. The potential exposure is not readily determinable as of September
30, 2004. In the opinion of management, the ultimate liability will not have a materially adverse effect on
the City's financial position.
NOTE V. SUBSEQUENT EVENTS
A. VOTER APPROVED CHARTER AMENDMENT
The voters of the City of Lubbock on November 2, 2004, voted to amend the Charter of the City of
Lubbock providing for an Electric Utility Board composed of nine Lubbock citizens and eligible voters
appointed by City Council be created to govern, manage, and operate the City's electric utility. The City
Council appointed the nine members of the new Electric Utility Board on November 12, 2004 pursuant to
the Charter Amendment passed by the voters of the City of Lubbock on November 2, 2004. The purpose of
the change is to give closer scrutiny to LP&L 's competitive position and long term financial viability.
B. LUBBOCK ECONOMIC DEVELOPMENT ALLIANCE. INC. CLEDAl
Lubbock Economic Development Alliance.. Inc. (LEDA) is a 501C-4 Corporation created by the Lubbock
City Council to take the lead in economic development for the City. LEDA is led by a five member Board
appointed by the: City Council and is funded by a !18 cent increase in the sales tax. The sales tax increase
was approved by the voters for economic development activities in November 2003. LEDA will be
considered a component unit of the City when it begins collecting funds from operations during the fiscal
year 2004-05.
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APPENDJXC
FORM OF BOND COUNSEL'S OPINION
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[FORM OF BOND COUNSEL OPINION]
[Closing Date)
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CITY OF LUBBOCK, TEXAS
COMBINATION TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE REFUNDING BONDS
SERIES2005
WE~ VE represented the City of Lubbock, Texas (the "City"), as its Bond Counsel in
connection with an issue of bonds (the "Bonds,) described as follows:
CITY OF LUBBOCK, TEXAS CO:MBINATION TAX AND WATERWORKS
SYSTEM SURPLUS REVENUE REFUNDING BONDS, SERIES 2005, dated
July l, 2005, issued in the principal amount of$ ______ _
The Bonds mature, bear interest, are subject to redemption prior to maturity and may be
transferred and exchanged as set out in the Bonds and in the ordinance adopted by the City
Council of the City authorizing their issuance (the "Ordinance") and the Pricing Certificate
executed pursuant to the Ordinance.
WE HAVE represented the City as its Bond Counsel for the sole purpose of rendering an
opinion with respect to the legality and validity of the Bonds under the Constitution and laws of
the State of Texas and with respect to the exclusion of interest on the Bonds from gross income
for federal income tax purposes. We have not investigated or verified original proceedings,
records, data or other material, but have relied solely upon the transcript of proceedings
described in the following paragraph. We have not assumed any responsibility with respect to
the financial condition or capabilities of the City or the disclosure thereof in connection with the
sale of the Bonds. Our role in connection with the City's Official Statement prepared for use in
connection with the sale of the Bonds has been limited as described therein.
IN OUR CAP A CITY as Bond Counsel, we have participated in the preparation of and
have examined a transcript of certified proceedings pertaining to the Bonds, on which we have
relied in giving our opinion. The transcript contains certified copies of certain proceedings of the
City, customary certificates of officers, agents and representatives of the City, and other public
officials and other certified showings relating to the authorization and issuance of the
Vinson & Elkins UP Attorneys at Law Allstln Beijing Dallas
Oubai Houston London Moscow New YOI!c Tokyo Wasfllngton
Tl'3mmell Crow Center, 2001 Ross Avenue, Suite 3700
Dallas, Texas 75201-2975 Tel214.220.7700 Fa 214.220.7716
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Certificates. In addition, we have examined a resolution of the Brazos River Authority ("BRA")
approved in connection with the defeasance by the Brazos River Authority of its Special
Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series 1995 (the "Refunded Bonds")
with a portion of the proceeds of the Bonds. We have also examined executed Bond No. 1 of
this issue.
BASED ON SUCH EXAMINATION, IT IS OUR OPINION THAT:
(A) The transcript of certified proceedings evidences complete legal
authority for the issuance of the Bonds in full compliance with the Constitution
and laws of the State of Texas presently effective and, therefore, the Bonds
constitute valid and legally binding obligations of the City; and
(B) A continuing ad valorem tax upon all taxable property within the
City, necessary to pay the interest on and principal of the Bonds, has been levied
and pledged irrevocably for such purposes, within the limit prescribed by law, and
the total indebtedness of the City, including the Bonds, does not exceed any
constitutional, statutory or other limitations. In addition, the Bonds are further
secured by a subordinate lien on and pledge of the Net Revenues (as defined in
the Ordinance) of the City's Waterworks System in the manner and to the extent
provided in the Ordinance.
THE RIGHTS OF THE OWNERS of the Bonds are subject to the applicable provisions
of the federal bankruptcy laws and any other similar laws affecting the rights of creditors of
political subdivisions generally, and may be limited by general principles of equity which permit
the exercise of judicial discretion.
IT IS OUR FURTHER OPINION THAT:
(1) Interest on the Bonds is excludable from gross income for federal
income tax purposes under existing law; and
(2) The Bonds are not "private activity bonds, within the meaning of
the Internal Revenue Code of 1986, as amended (the "Code," and interest on the
Bonds is not subject to the alternative minimum tax on individuals and
corporations, except that interest on the Bonds will be included in the "adjusted
current earnings" of a corporation (other than an S corporation, regulated
investment company, REIT, REMIC or FASIT) for purposes of computing its
alternative minimum tax liability.
In providing such opinions, we have relied on representations of the City, the City's
financial advisor and the underwriters of the Bonds with respect to matters solely within the
·knowledge of the City, the City's financial advisor and the underwriters respectively, which we
have not independently verified, and have assumed continuing compliance with the covenants in
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the Ordinance pertaining to those sections of the Code that affect the exclusion from gross
income of interest on the Bonds for federal income tax purposes. If such representations are
determined to be inaccurate or incomplete or the City fails to comply with the foregoing
provisions of the Ordinance, interest on the Bonds could become includable in gross income
from the date of original delivery, regardless of the date on which the event causing such
inclusion occurs.
Except as stated above, we express no opinion as to any federal, state or local tax
consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or
disposition of, the Bonds.
The opinions set forth above are based on existing law, which is subject to change. Such
opinions are further based on our knowledge of facts as of the date hereof. We assume no duty
to update or supplement these opinions to reflect any facts or circumstances that may hereafter
come to our attention or to reflect any changes in any law that may hereafter occur or become
effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal
Revenue Service (the "Service"); rather, such opinions represent our legal judgment based upon
our review of existing law and in reliance upon the representations and covenants referenced
above that we deem relevant to such opinions. The Service bas an ongoing audit program to
determine compliance with rules that relate to whether interest on state or local obligations is
includable in gross income for federal income tax purposes. No assurance can be given whether
or not the Service will commence an audit of the Bonds. If an audit is commenced, in
accordance with its current published procedures the Service is likely to treat the City as the
taxpayer. We observe that the City has covenanted in the Ordinance not to take any action, or
omit to take any action within its control, that if taken or omitted, respectively, may result in the
treatment of interest on the Bonds as includable in gross income for federal income tax purposes.
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OFFICIAL STATEMENT
Dated July 1, 2005
Ratings:
Moody's: "Aaa"
S&P: "AAA"
Fitch: "AAA"
FSA Insured
NEW ISSUE -Book-Entry-Only
(See "Bond Insurance"
and "Other Information-
Ratings" herein)
In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax purposes under
existing law and the Bonds are not private activity bonds. See "Tax Matters" herein for a discussion of the opinion of Bond
Counsel, including a description of alternative minimum tax consequences for corporations.
$43,080,000
CITY OF LUBBOCK, TEXAS
(Lubbock County)
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING BONDS, SERIES 2005
Dated Date: July 1, 2005 Due: February 15, as shown inside cover
PAYMENT TERMS ... Interest on the S43,080,000 City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue
Refunding Bonds, Series 2005 (the "Bonds") will accrue from July I, 2005 (the "Dated Date") and will be payable February 15
and August 15 of each year commencing February I 5, 2006, and will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The
Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the
Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be
made to the owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying
Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for
subsequent payment to the beneficial owners of the Bonds. See "The Bonds · Book-Entry-Only System" herein. The initial
Paying Agent/Registrar is JPMorgan Chase Bank, National Association, Dallas, Texas (see "The Bonds • Paying
Agent/Registrar'').
AUTHORITY FOR ISSUANCE ... The Bonds are issued pursuant to the Constitution and general laws of the State of Texas (the
"State"), particularly Chapter 1207, Texas Government Code, as amended, and constirute direct obligations of the City of
Lubbock, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax,
within the limits prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus Net Revenues of the
City's Waterworks System, as provided in the ordinance authorizing the Bonds (the "Ordinance") (see "The Bonds -Authority
for Issuance").
PuRPOSE ... Proceeds from the sale of the Bonds will be used for the purpose of (i) refunding the obligation of the Ciry to pay
debt service on the outstanding Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series
1995 (the "BRA Bonds"), issued with respect to the construction of Lake Alan Henry (see "The Bonds-Defeasance of the BRA
Bonds"), (ii) refunding a portion of the termination payment owed by the Ciry in connection with the termination of an interest
rate hedge agreement entered into in connection with the anticipated issuance of bonds to refund the BRA Bonds (see "The
Bonds-Interest Rate Hedge Agreement Termination Payment"), and (iii) paying costs of issuance of the Bonds.
PFSA. The scheduled payment of principal and interest on the Bonds when due will be guaranteed under an insurance
policy to be issued concurrently with the delivery of the Bonds by Fl NANCl AL SECURITY ASSURANCE INC.
CUSIP PREFIX: 549187
SEE MATURITY SCHEDULE, 9 Digit CUSIP AND REDEMPTION PROVISIONS
ON THE REVERSE Of THIS PAGE
LEGALITY ... The Bonds are offered for delivery when, as and if issued and received by Underwriters and subject to the
approving opinion of the Attorney General of Texas and the opinion of Vinson & Elkins L.L.P., Bond Counsel, Dallas, Texas
(see Appendix C, "Form of Bond Counsel's Opinion"). Certain legal matters will be passed upon for the UndeJWriters by
McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Counsel for the UndeJWriters.
DELIVERY ... It is expected that the Bonds will be available for delivery through DTC on August 15, 2005.
RBC DAIN RAUSCHER INC.
MERRILL LYNCH & Co . PJPERJAFFRAY & co.
OFFICIAL STATEMENT SUMMARY
This summary is subject in all respects to the more complete information and definitions contained or incorporated in this
Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No
person is authorized to detach this summary from this Otllcial Statement or to otherwise use it without the entire Official
Statement.
THE CITY ..................................... The City of Lubbock.. Texas (the ... Ci1y'') is a political subdivision and municipal corporntion
of the State. located in Lubbock County. Texas. The City covers approximately 115 square
miles and has an estimated 2005 population of209.120 (see -Introduction-Description of the
City'').
THE BoNOS .................................. The Bonds are issued as $43,080.000 Tax and Waterworks System Surplus Revenue
Refunding Bonds, Series 2005. The Bonds are issued as serial bonds maturing on February
15 in each of the years 2006 through 2021 (see "1be Bonds· Description of the Bonds-).
PAYMENT Of' INTEREST .............. Interest on the Bonds accrues from July I. 2005. and is payable February I 5. 2006. and each
August 15 and February 15 thereafter until maturity or prior redemption (see ··The Bonds -
Description of the Bonds" and -The Bonds· Optional Redemption").
AUTHORITY fi'OR ISSUANCE .......... The Bonds are issued pursuant to the general laws of the State. particularly Chapter 1207,
Texas Government Code, as amended. and an Ordinance passed by the City Council of the City
(see "The Bonds -Authority for lsS'uance'').
SECURITY fOR THE
BoNOS ........................................... The Bonds constitute direct obligations of the City, payable !Tom a combination of(i) the levy
and collection of a direct and continuing ad valorem tax, within the limits prescribed by law. on
all taxable property within the City, and (ii) a pledge of swplus Net Revenues of the City's
Waterworks System (see '"The Bonds· Security and Source of Payment").
INTENDr.D SoURCES
OF PAYM&NT ................................. The Bonds are expected to be self-supporting obligations payable from the surplus revenues
of the Waterworks System (see MTable 3B -Derivation of Genernl Purpose Funded Tax
Debt"). As noted above. the Bonds are payable from an ad valorem tax levied by the City
Council in the Ordinance. In the Ordinance, the City has covenanted to assess an annual ad
valorem tax if needed to pay debt service on the Bonds in the event that funds are not
available from the Waterworks System to make payment on the Bonds.
REDEMPTION ............................... The City reserves the right. at its option, to redeem Bonds having stated maturities on and
after February 15, 2016. in whole or in part in principal amounts of $5.000 or any integral
multiple thereof. on February 15, 2015. or any date thereafter. at the par value thereof plus
accrued interest to the date of redemption (see "'The Bonds· Optional Redemption/.
T A. X E.XEMP'T'ION ............................ In the opinion of Bond Counsel. the interest on the Bonds will be excludable from gross income
for federnl income tax purposes under existing law and the Bonds are not private activity bonds.
See "Tax Matters· Tax Exemption" for a discussion of the opinion of Bond Counse~ including a
description of the alternative minimum tax consequences for corporations.
USE Of' PROCEEDS ....................... Proceeds from the sale of the Bonds will be used for the purpose of (i) refunding the
obligation of the City to pay debt service on the outstanding Brazos River Authority Special
Facilities (Lake Alan Henry) Revenue Refunding Bonds. Series 1995 (the -BRA Bonds}.
issued with respect to the construction of Lake Alan Henry (see ''The Bonds-Defeasance of
the BRA Bonds'}, (ii) refunding a portion of the termination payment owed by the City in
connection with the termination of an interest rate hedge agreement entered into in connection
with the anticipated issuance of bonds to refund the BRA Bonds (see ''The Bonds -Interest
Rate Hedge Agreement Termination Payment'), and (iii) paying costs of issuance of the
Bonds.
RntNGS ...................................... The Bonds are rated "Aaa" by Moody's Investors Service. Inc. ("Moody's"), nAAA" by
Standard & Poor's R<ltings Services. A Division of The McGraw~Hill Companies.. Inc.
("S&P") and "AAA" by Fitch Ratings ("Fitch") by virtue of insurance policies to be issued by
Financial Security Assurance Inc. The presently outstanding uninsured tax supported debt of
the City is rated "AI" by Moody's, "AA·" by S&P and "AA·" by Fitch. The City also has
multiple issues outstanding which are rated "Aaa" by Moody's.. "AAA" by S&P and "AAA"
by Fitch through insurance by various commercial insurance companies (see "Other
lnibrmation -Ratings").
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BooK-ENTRY-ONLY
SYSTEM ...................................... The definitive Bonds will be initially registered and delivered only to Cede & Co., the
nominee of DTC pursuant to the Book·Entty-Only System described herein. Beneficial
ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples
thereof. No physical delivery of the Bonds will be made to the beneficial owners thereof.
Principal of, premium, if any, and interest on the Bonds will be payable by the Paying
Agent/Registrar to Cede & Co .• which will make distribution of the amounts so paid to the
participating members of DTC for subsequent payment to the beneficial owners of the Bonds
(see .. The Bonds· Book·Ently·Only System").
PAYMENT RECORD..................... The City has never defaulted in payment of its generaJ obligation tax debt.
WATERWORKS SYSTEM CONDENSED ST UEMENT OF OPERATIONS
Fiscal Year Ended S~tember 30.
2004 2003 2002 2001 2000
REVENUE
Operating Revenues $ 31,907,893 s 32.770.781 $ 32.727,207 s 30,463,694 $ 29,037,723
Non-Operating Revenues 539.413 1,337.330 1.313,649 2,491.890 3.404.850
Gross Revenues s 32,447,306 s 34,108,111 s 34,040,856 s 32,955,584 s 32,442,573
EXPENSE
Operating Expense 01 20.550.379 20.137.448 19.596.079 20.194.590 18.238.503
Net Revenues s 11.896.927 s 13.970.663 $ 14.444.777 $ 12.760.994 $ 14.204.071
Water Meters 72.500 75,505 71,039 70,756 70,037
(I) Operating expense includes construction repayment costs and opemting and maintenance charges paid to CRMWA and BRA and
excludes depreciation and capital expenditures.
GENERAL fUND CONSOLIDATtD STATEMENT SUMMARY
Fiscal Year Ended SS!tember 30 .
2004 2003 2002 2001 2000
Fund Balance at Beginning ofYear s 9,417,346 s 16,598,252 (l) $ 16.716.042 s 16.620.652 s 17,248.025
Total Revenues and Transfers 97,437,436 91,753,809 92.490.374 90,463,799 85,518,102
Total Expenditures and Transfers 94.160.257 98.934,715 90.594.059 90.368.409 86.145.475
Fund Balance at End of Year $ 12,694,525 s 9,417,346 $ 18.612,357 $ 16,716.042 $ 16.620.652
Less: Reserves and DesignaJions ( 1.903.690) (2.361.860) (2.857,096)
UndesignatA:d Fund Balance s 12.694.525 s 9.417.346 s 16.708.667 s 14.354.182 s 13.763,556
(I) The .. Fund Balance at Beginning of Year" was restated. See ··Discussion of Recent Financial and Management Events· FY
2003 Audit Restatements. Reclassifications and Internal Controls Issues" for a further explanation of the restatements.
For additional information regarding the City, please contnct:
Ms. Lee Ann Dumbauld
CFO/ACM
City of Lubbock
P.O. Box 2000
Lubbock. Texas 79457
Phone (806) 775·2016
Fax (806) 775·2051
Mr. Vince Viaille
First Southwest Company
or 100 I Main Street
Suite 802
Lubbock. Texas 7940 I
Phone (806) 749~3792
Fax (806) 749-3793
5
Mr. Jason Hughes
First Southwest Company
or 325 North St Paul Street
Suite800
Dallas, Texas 75201
Phone (214) 943·4000
Fax (214) 953-4050
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CITY OFFICIALS, STAFF AND CONSULT ANTS
ELECTED 0FF1ClALS 0
Date of Term
City Council Installation to Office Expires Occupation
Marc McDougal• May, 2002 May. 2006 Business Owner. Real ES1ate
Mayor
0 Linda DeLeon May. 2004 May. 2006 Business Owner
Councilmember. District I
Floyd Price June, 2004 May, 2008 Retired
Councilmember, District 2
Gwy Boren May, 2002 May. 2006 Business Owner. Personnel Services 0
Councilmember, District 3
Phyllis Iones May, 2004 May. 2008 Self-Employed
Councilmember. District 4
Tom Martin May. 2002 May. 2006 Retired Law Enforcement 0
Councilmember, DistrictS
Jim Gilbreath May, 2003 May, 2008 Business Owner
Councilmember, District 6
• Mr. McDougal has served on the Council since May, 1998.
SELECTED ADMJNISTRATIVE STAFF
Date of Employment Date of Employment Total Government
Name Position in Current PO$ition with Ci!l: of Lubbock Service
Lou Fox City Marutger February. 2004 February. 2004 24 Years
Tom Adorns Deputy City Manager August. 2004 August, 2004 22 Years
t~ Ann Dumbauld Chief Financial Otllcer/Assistant City Manager July, 2004 July. 2004 20+ YllarS
Quincy White Assistant City Manager September. 2000 September. 2000 13 Years
Anita Burgess City Attorney December. 1995 December, 1995 9 Years
Rebeoc:l Garz:a City Secretary Januat}'. 2001 Aug\JSI. 1996 8Ye:ltS
Andy Burcham Cash & Debt Manager November, 1998 November, \998 6 Years
CONSULTANTS AND ADVISORS
Auditors .......................................................................................................................................................................... KPMG LLP
Dallas. Texas
Bond Counsei ................................................................................................................................................ Vinson & Elkins L.L.P.
Dallas, Texas
Financial Advisor ...................................................................................................................................... First Southwest Company
Lubbock and Dallas. Texas
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OFFICIAL STATEMENT
RELATING TO
$43,080,000
CITY OF LUBBOCK, TEXAS
TAX Al~D WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING BONDS, SERIES 2005
INTRODUCTION
This Otlicial Statement, which includes the Appendices hereto. provides certain information regarding the issuance of
$43,080,000 City of Lubbock. Texas Tax and Waterworks System Surplus Revenue Refunding Bonds. Series 2005. Capitalized
terms used in this Official Statement have the same meanings assigned to such terms in the Ordinance authorizing the issuance of
the Bonds, except as otherwise indicated herein.
There tbllows in this Ofllcial Stntement descriptions of the Bonds and certain information regarding the City and its finllllces. All
descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such
document. Copies of such documents may be obtained from the City's financial Advisor, First Southwest Company, Dallas,
Texas.
DESCRII'TION OF THE Cmr ... The City is a political subdivision and municipal corporation of the State. duly organized and
existing under the laws of the State. including the City's Home Rule Charter. The City was incorporated in 1909. and first
adopted its Home Rule Charter in 1917. The City operates under a Councii!Milllager form of government with a City Council
comprised of the Mayor and six Councilmembers. The Mayor is elected at-large for a two-year term ending in an even·
numbered year. Each of the six members of the City Council is elected from a single-member district for a four·year term of
office. The terms of three members of the City Council expire in each even-numbered year. The City Manager is the chief
administr.ttive officer for the City. Some of the services that the City provides are: public safety (police and fire protection),
highways and streets, elecnic, water and sanitary sewer utilities, airport, sanitation and solid waste disposal, health and social
services, culture-recreation, public transportation, public improvements, planning and zoning, and general administr.ttive
services. The 2000 Census population for the City was 199,564; the estimated 2005 population is 209.120. The City covers
approximately II S square miles.
FINANCIAL AND MANACt:Mt:NT CHALLENGES •. .ln the past three fiscal years. the City has experienced a variety of financial and
management challenges, and certain investigations and reports conducted or prepared by the City or its consultants have found
weaknesses in the City's general management and financial practices. both with the City in general and the City's electric utility
system, known as Lubbock Power & Light ("LP&L "), in particular. The City is of the view that it has substantially addressed
many of these conditions. Reference is made to "Discussion of Recent financial and Management Events" for a discussion of
these events and a description of how the City has responded to these events.
THE BONDS
DESCRiPTION OF THE BoNDS ••• The Bonds are dated July I, 2005. and mature on February 15 in each of the years and in the
amounts shown on the inside cover page hereof. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. and will be payable on February IS and August 15, commencing february 15, 2006. The definitive Bonds will be
issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and
delivered only to Cede & Co .. the nominee of The Depository Trust Company ( .. DTC") pursuant to the Book-Entry-Only System
described herein. No physical delivery of the Bonds will be made to the owners the reo£. Principal of,. premium, if any. and
interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co .. which will make distribution of the amounts
so paid to the participating members of DTC tbr subsequent payment to the beneficial owners of the Bonds. See "The Bonds •
Book·Entry·Only System" herein.
PURPOSE ••• Proceeds from the sale of the Bonds will be used for the pWJ1ose of (i) refunding the obligation of the City to pay
debt service on the outstanding Brazos River Authority Special facilities (Lake Alan Henry) Revenue Refunding Bonds, Series
1995 (the "BRA Bonds"), issued with respect to the construction of Lake Alan Henry, (ii) refunding a portion of the termination
payment owed by the City in connection with the termination of an interest rate hedge agreement entered into in connection with
the anticipated issuance ofbonds to refund the BRA Bonds, and (iii) paying costs of issuance of the Bonds. The BRA Bonds are
subject to optional redemption on any date beginning August IS, 2005, at a price of par plus accrued interest to the redemption
date. (See "The System-Contracts and Facilities-Other Surtace Water Supply Resources.")
DEFEASANCE OF THE BRA BoNDS ... Upon delivery of the Bonds to the Underwriters and pursuant to a resolution adopted by
the Brazos River Authority ('*BRA''), BRA will deposit the portion of the Bond proceeds received from the City, together with
other lawfully funds. with JPMorgan Chase Bank, National Association, as paying agent/registrar (the "BRA Bonds Paying
Agent'') for the BRA Bonds. The BRA Bonds Paying Agent wilt verify that the amount deposited will be sufficient to
accomplish the discharge and final payment of the BRA Bonds on August 16, 2005, the redemption date for the outstanding
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BRA Bonds. By the deposit of cash with the BRA Bonds Paying Agent, BRA will have effected the defeasance of all of the
outstanding BRA Bonds in accordance with Texas law, such BRA Bonds will not be deemed as being outstanding obligations of
BRA, and the obligation of the City to make payments in support of the debt service on the BRA Bonds wilt be extinguished.
INTEREST RATE HEDGE ACRUMENTTERMINATION PAYMENT .•• On April It, 2002. the City entered into an Interest Rate
Hedge Agreement (the ""Swap Agreement-) with JPMorgan Chase Bank (''JPM'") in connection with the City's anticipated
issuance of water revenue refunding bonds to refund the BRA Bonds. The City entered into the Swap Agreement in order to
protect against the risk of interest rate changes between March 28. 2002 and May 1, 2005 and to achieve lower borrowing costs
associated with the issuance of such water revenue relunding bonds by the City to effect the payment of all of its contractual
obligations with respect to the debt service on the BRA Bonds, which could not be advance refunded. Payments under the Swap
Agreement are made on an actual/actual basis on the first day of each month. commencing in June 2005 and ending in August
2022. The City is obligated to make payments to JPM calculated on a notional amount of$40.465,00(} and a fixed rate equal to
5.260% of the notional amount, and JPM is obligated to make reciprocal payments to the City calculated on such notional
amount and a variable interest rate calculated on the basis of The Bond Market Association (BMA) Municipal Swap Index.
In lieu of issuing such water revenue refunding bonds, the City has determined to (i) issue the Bonds to provide funds to BRA to
enable BRA to refund the BRA Bonds and (ii) terminate the Swap Agreement. In accordance with the terms of the Swap
Agreement. the City is obligated to pay a termination payment (the '"Termination Payment'') in order to terminate the Swap
Agreement. A portion of the proceeds of the Bonds, together with other lawfully available funds of the City. will be used to
refund the City's obligation to pay the Termination Payment on the date the Bonds are delivered to the Underwriters. The
Termination Payment and the costs associated with etTecting the Termination Payment are currently estimated to be S6,692,000
(see ''The Bonds -Use of Bond Proceeds'). The Termination Payment is calculated based upon a number of !actors relating to
market conditions as they exist on the date the Termination Payment is to be made, and the City can make no assurances that the
amount of funds dedicated to paying the Termination Payment and related costs will conform to how market conditions will exist
on the date the Termination Payment is to be made. which is expected to be the date of the delivery of the Bonds. ln any event.
the City does not anticipate that the Termination Payment and related coSts will exceed $7 . .500.000.
For additional information with respect to the Swap Agreement. see Note III. G "Surface Water Supply -Brazos River Autho rity
-Lake Alan Henry" in the financial statements of the City attached as Appendix B.
AuntORtTY FOR ISSUANCE •.. The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas.
particularly Texas Government Code. Chapter 1207, as amended. and by the Ordinance passed by the City Council.
SECURITY AND SouRCt Of PAYMENT ... The Bonds are payable from a continuing direct annual ad valorem tax levied by the
City in an amount sufficient to provide for the payment of principal of and interest on the Bonds, which tax must be levied
within limits prescribed by Jaw. Additionally. the Bonds are payable from and secured by a parity lien on and pledge of Net
Revenues of the City's Waterworks System (the -System'"). as provided in the Ordinance authorizing the Bonds. Such lien and
pledge is junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of-Prior Lien
Obligations" (as defined in the Ordinance) now outstanding and that hereafter may be issued by the City, on a parity with the
obligations described below as the "Junior Obligations,"' and prior and superior in claim. rank. and dignity to the lien on and
pledge of the Net Revenues securing payment of certain subordinate lien obligations of the City (the ""Subordinate Obligations").
Currently. the City's has no Prior Lien Obligations. The Subordinate Obligations consist of the City's Tax and Waterworks
System (limited Pledge) Revenue Certiticates of Obligation. Series 1993, 1995. 1998 and 1999, outstanding as of July 28. 2005
in the aggregate principal amount of $6,890,000.
There are currently five series of Junior Obligations secured by a lien on and pledge of the Net Revenues of the System on parity
with the Bonds outstanding as of July 28. 2005 in the aggregate principal amount of $30,855,000. The Junior Obligations
consist of the City's (i) Tax and Waterworks System Surplus Revenue Certificates of Obligation. Series 2004. outstanding in the
principal amount of $2.690.000. (ii) Tax and Waterworks System Surplus Revenue Certificates of Obligation. Series 2003,
outsiJlrtding in the principal amount of$9,455,000. {iii) Tax and Waterworks System Surplus Revenue Certificates of Obligation,
Series 2002, outstanding in the principal amount of$6.025.000. (iv) Tax and Waterworks System Surplus Revenue Certificates
of Obligation. Series 1999, outstanding in the principal amount of $4,035.000. and (v) Tax and Waterworks System Surplus
Revenue Refunding Bonds, Series 1999, outstanding in the principal amount of$8,680,000.
Ln th~ Ordinanee, while tM Bonds are outstanding, the City res~rves the right to issue Prior Li~n Obligations without
limitation as to principal amount or subject to any terms, conditions or restrictions other than as may be required by l1w,
as well as the right to issue Additional Obligations payable from and, together with the Bonds and the outstanding Junior
Obligations, equally and ratably secured by a pariey lteo on aod pledge of tbe Net Revenue5 of the System.
TAX RATE LIMITATION .•. All taxabl.e property within the City is subject to the assessment. levy and collection by the City of a
continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax
debt within the limits prescribed by law. Article XI. Section 5. of the Texas Constitution is applicable to the City. and limits its
maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of
the City adopts the constitutionally authorized maximum tax rate of$2.50 per SIOO Taxable Assessed Valuation.
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OPTIONAL REDEMPTION .•• The City reserves the right, at its option, to redeem Bonds having stated maturities on and after
February IS, 2016, in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on February IS, 201S, or
any date thereafter. at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds are to be
redeemed. the City may select the maturities of Bonds to be redeemed. If less than all the Bonds of any maturity are to be
redeemed. the Paying Agent/Registrar (or DTC while the Bonds are in Book-Entry-Only form} shall detennine by lot the Bonds,
or portions thereof. within such maturity to be redeemed If a Bond (or any portion ofth.e principal sum thereof) shall have been
called for redemption and notice of such redemption shall have been given, such Bond (or the principal amount thereof to be
redeemed} shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the
redemption date. provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying
Agent/Registrar on the redemption date.
NOTICE OF REDEMPTION ... Not less than 30 days prior to a redemption date for the Bonds. the City shall cause a notice of
redemption to be sent by United States mail. first class, postage prepaid, to the registered owners of the Bonds to be redeemed. in
whole or in part. at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the
close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE
CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER
RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS CALLED FOR REDEMPTION SHALL
BECOME DUE AND PAYABLE ON THE SPECifiED REDEMPTION DATE. AND NOTWITHSTANDING THAT ANY
BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR
PORTION THEREOF SHALL CEASE TO ACCRUE.
AMENDMENTS ••• The City may amend the Ordinance without the consent of or notice to any registered owners in any manner
not detrimental to the interests of the registered owners, including the curing of any ambiguity, inconsistency, fonnal defect or
omission therein. In addition, the City may, with the written consent of the holders of a majority in aggregate principal amount
of the Bonds then outstanding, amend, add to. or rescind any of the provisions of the Ordinance. except that. without the consent
of the registered owners of all of the Bonds no such amendment, addition or rescission may (I) change the date specified as the
date on which the principal on any installment of interest is due payable. reduce the principal amount or the rate of interest. or in
any other way modify the tenns of their payment. (2) give any preference to any Bond over any other Bond or (3) reduce the
aggregate principal amount required to be held by owners for consent to any amendment, addition or waiver.
DEFEASANCE ••. The Ordinance provides that the City may discharge its obligations to the registered owners of any or all of the
Bonds to pay principal. interest and redemption price thereon in any matter pennitted by law. Under current Texas law, such
discharge may be accomplished by either (i) depositing with the Comptroller of Public Accounts of the State of Texas a sum of
money equal to principal, premium. if any and all interest to accrue on the Bonds to maturity or redemption o.nd/or (ii) by
depositing with. a paying agent or other authorized escrow agent amounts sullicient to provide for the payment and/or redemption
of the Bonds; provided that such deposits may be invested and reinvested only in (a) direct, noncallable obligations of the United
States of America. including obligations that are unconditionally guaranteed by the United States of America. (b) noncallable
obligations of an agency or instrumentality of the United States of America. including obligations that are unconditionally
guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized
investment rating finn not less than AAA or its equivalent. and (c) noncallable obligations of a state or an agency or a county,
municipality. or other political subdivision of a state that have been refunded and that are rated as to investment quality by a
nationally recognized investment rating finn not less than AAA or its equivalent.
Under current Texas law. upon the making of a deposit as described above. such Bonds shall no longer be regarded to be
outstanding or unpaid. After finn banking and tinancial anangements for the discharge and final payment or redemption of the
Bonds have been made as described above, all rights of the City to initiate proceedings to call the Bonds for redemption or to
take any other action amending the terms of the Bonds are extinguished; provided however, the right to call the Bonds for
redemption is not extinguished if the City: (i) in the proceedings providing tbr the finn banking and financial arrangements,
expressly reserves the right to call the Bonds for redemption; (ii) gives notice of the reservation of that right to the owners of the
Bonds immediately following the making of the finn banking and linancial arrangements; and (iii) directs that notice of the
reservation be included in any redemption notices that it authorizes.
BooK-ENTRY-ONLY SYSTEM ..• This section describes how ownership of the Bonds is to be transferred and how the principal
of. premium. if any. and interest on the Bonds are to be paid lo and credited by The Depository Trust Compaey ("DTC"), New
York. New York. while the Bonds are registered in its nominee name. The information in this section concerning DTC and the
Book-Entry-Only S,vstem has been provided by DTC for use in disclosure documents such as this Official Statement. The City
believes the source of such information to be reliable. but 1aus no responsibility for the accuracy or completeness thereof.
The City cannol and does not give any assurance that (1) DTC will distribute payments of deb/ service on the Bonds. or
redemption or other notices. to DTC Participants, (2) DTC Participants or others will distribu/e debt service payments paid 10
DTC or its !Wminee (as the registered owner of the Bonds). or redemption or other notices. to the Beneficial Owners. or that they
will do so on a timely basis. or (3) DTC will serve and act in the manner described in this Official Statement. The current rules
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applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed
in dealing with DTC Participants are on file with DTC.
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC"s partnership nominee) or such other name as may be requested by an authorized representa.tive of
DTC. One fully-registered Bond will be issued for each maturity of the Bonds, in the aggregate principal amount of each such
maturity, and will be deposited with DTC.
DTC. the world's largest depository, is a limited-purpose trust oompany organized under the New York Banking Law. a
Kbanking 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 Exclumge Act of 1934. DTC holds and provides asset servicing for over 2 million
issues of U.S. and non-U.S. equity issues. corporate and municipal debt issues. and money market instruments from over 85
countries that DTC"s participants (''Direct Participants'") deposit with DTC. DTC also facilitates the post-trade settlement among
Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry
transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities Bonds.
Direct Participants include both U.S. and non-U.S. securities brokers and dealers. banks, trust companies, clearing corporations.
and certain other organizations. OTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC'").
DTCC, in tum, is owned by a number ot' Direct Participants of DTC and Members of the National Securities Clearing
Corporation. Government Securities Clearing Corporation, MBS Clearing Corporation. and Emerging Markets Clearing
Corporation. (NSCC, GSCC. MBSCC. and EMCC. also subsidiaries of DTCC), as well as by the New York Stock Exchange.
Inc .. the American Stock Exchange LLC. and the National Association of Securities Dealers. Inc. Access to the DTC system is
also available to others such as both U.S. and non-U.S. securities brokers and deniers, banks, trust companies, and clearing
corporations that clear through or maintain a custodial relationship with a Direct Participant. either directly or indirectly
( .. Indirect Participants"). DTC bas Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on
file with the Securities and Exchange Commission. More intormation about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants. which will receive a credit for the
Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ('"Beneficial Owner .. ) is in tum to be
recorded on the Direct and Indirect Participants" records. Beneficial Owners will not receive written confirmation from DTC of
their purchase. Beneticial Owners are, however. 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 interests in the Bonds are to be accomplished by entries made on the books
of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive bond representing
their ownership interests In Bonds. except in the event that use ofthe book-entry system for the Bonds 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 .. or such other name as may be requested by an authorized representative of DTC. The deposit
of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in
beneficial ownership. OTC 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 Direct and Indirect Participants will remain responsible for keeping account oftheir holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Part.icipants. by Direct Participants to Indirect Participants.
and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by ammgements among them. subject
to any statutory or regulatory requirements as may be in etTect !rom time to time. Beneficial Owners of Bonds may wish to take
certain steps to augment the tronsmission to them of notices of significant events with respect to the Bonds, such as redemptions.
tenders. defaults. and proposed amendments to the Bond documents. For example. Beneficial Owners of Bonds may wish to
ascertain that the nominee holding the Bonds tor their benefit has agreed to obtain and transmit notices to Beneticial Owners. In
the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of
notices be provided directly to them.
Redemption notices shall be sent to DTC. lf less than all of the Bonds within a maturity are being redeemed. DTC"s practice is
to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other OTC nominee) will consent or vote with respect to Bonds unless authorized by a
Direct Participant in accordance with DTC's Procedures. 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal und interest payments on the Bonds will be made to Cede & Co .. or such other nominee as may be requested by an
authorized representative of DTC. DTC's practice is to credit Direct Participants" accounts upon DTC's receipt of funds and
corresponding detail intbrmation from the City or the Paying Agent/Registrar. on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to Beneticial Owners will be governed by standing
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instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered
in ·'street name,'" and will be the responsibility of such Participant and not of DTC nor its nominee, 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 payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the City or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to
the City or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained.
Bonds are required to be printed and delivered.
Subject to DTC's policies and guidelines, the City may 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.
Usc of Certain Terms in Other Sections of this Official Statement In reading this Official Statement it should be Wlderstood
that while the Bonds are in the Book-Entry-Only System, references in other sections of this Otlicial 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 Ordinance will be given only to DTC.
Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to
accuracy or completeness by. and is not to be construed as a representation by the City or the Underwriters.
Effect of Termination of Book-Entry-Only System In the event that the Book-Entry-Only System is discontinued, printed
Bonds will be issued to the holders and the &nds will be subject to transfer, exchange and registration provisions as set forth in
the Ordinance and summarized under 1'he Bonds ·Transfer, Exchange and Registration" below.
PAYING AGENT!Ri.GISTRAR ••. The initial Paying Agent/Registrar is IPMorgan Chase Bonk. National Association. Dallas.
Texas. In the Ordinance. the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and
provide a Paying Agent/Registrar at all times until the Bonds are duly paid and any successor Paying Agent/Registrar shall be a
commercial bank or trust company organized under the laws of the State of Texas or other entity duly qualified and legally
authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds. Upon any change in the
Paying Agent/RegiS1rar for the Bonds. the City agrees to promptly cause a written notice thereof to be sent to each registered
owner of the Bonds by United States mail, first class, postage prepaid. which notice shall also give the address of the new Paying
Agent/Registrar.
lnteres1 on the &nds shall be paid to the registered owners appearing on the registration books of the Paying Agent/Registrar at
the close of business on the Record Date (hereinafter detined). and such inlerest shall be paid (i) by check sent United States
mail. first crass postage prepaid. to the address of the registered owner recorded in the registration books of the Paying
Agent/Registrar or (ii) by such other method. acceptable to the Paying AgenlfR.egistrar requested by, and at the risk and expense
of,. the registered owner. Principal of the Bonds will be paid to the registered owner at the stated maturity or earlier redemption
upon presentation to the designated payment/transfer office of the Paying Agent/Registrar. If the date for the payment of the
principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city
where the designated payment/transfer office of the Paying Agent/Registrar is located are authorized to close. then the date for
such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and
effect as if made on the date payment was due.
TRANSFER, EXCHANGE ANO REGISTRATION ... In tile event the Book-Entty-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
to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner,
except for any lax or other governmental charges required to be paid with respect to such registration, exchange and transfer.
Bonds may be assigned by the execution of an assignment form on the respective Bonds or by other instrument of transfer and
assignment acceptable to the Paying Agent/Registrar. New Bonds will be delivered by the Paying Agent/Registrar. in lieu of the
Bonds being transferred or exchanged. at the designated office of the Paying Agent/Registrar, or sent by United States mail first
class, postage prepaid. to lhe new registered owner or his designee. To tbe extent possible. new Bonds issued in an exchange or
transfer of Bonds will be delivered to the registered owner or assignee of the registered owner in not more than three business
days after the receipt of the Bonds to be canceled. and the written instrument of transfer or request for exchange duly executed
by the registered owner or his duly authorized agent. in form satisfactory to the Paying Agent/Registrar. New Bonds registered
and delivered in an exchange or trnnsfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate
principal amoun1 as the Bonds surrendered for exchange or transrer. See ·'The Bonds • Book-Entry-Only System" herein for a
description of the system to be utilized initially in regard to ownership and transfernbility of the Bonds. Neither the City nor the
Paying Agent/Registrar shall be required to transfer or exchange any Bond called for redemption, in whole or in part, within 45
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days of the date fixed for redemption: provided, however, such limitation of transfer shall not be applicable to an exchange by
the registered owner of the uncalled balance of a Bond.
RECORD DATt FOR iNTEREST PAYMENT ... The record date (''Reoord Date") for the interest payable on the Bonds on any
interest payment date means the close of business on the last business day of the preceding month.
In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such
interest payment (a "Special Record Date-) will be established by the Paying Agent/Registrar. if and when funds for the payment
of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date ofthe
past due interest ("Special Payment Date'', which shall be 15 days after the Special Record Date) shall be sent at least tive
business days prior to the Special Record Date by United States mail, first class postage prepaid. to the address of each Holder of
a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next
preceding the date of mailing of such notice.
BoNDHOLDERS' REMEDIES ••• The Ordinance does not establish specific events of default with respect to the Bonds. Under
State Jaw there is no right to the acceleration of maturity ofthe Bonds upon the failure of the City to observe any covenant under
the Ordinance. Although a registered owner of Bonds could presumably obtain a judgment against the City if a default occuned
in the payment of principal of or interest on any such Bonds, such judgment could not be satisfied by e:otecution against any
property of the City. Such registered owner's only practical remedy, if a default occurs. is a mandamus or mandatory injunction
proceeding to compel the City to levy. assess and collect an annual ad valorem tax sullicient to pay principal of and interest on
the Bonds as it becomes due. The enforcement of any such remedy may be difficult and time consuming and a regiStered owner
could be required to ent(JrCe such remedy on a periodic basis. The Ordinance does not provide for the appointment of a trustee to
represent the interests of the bondholders upon any failure of the City to perform in accordance with the terms of the Ordinance.
or upon any other condition. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S.
Bankruptcy Code. Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged
source of revenues, the pledge of ta.xes in support of a general obligation of a bankrupt entity is not specifically recognized as a
security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy
Court approval. the prosecution of any other legal action by creditors or bondholders of an entity which has sought protection
under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors. the ability to enforce would be
subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of
other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in
administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the
enlhrccabilizy of the Ordinance and the Bonds are qualified with respect to the customary rights of debtors relative to their
creditors.
Ust: OF BoND PROCEt:OS ... Proceeds from the sale of the Bonds are expected to be expended as follows:
SOURCES OF FUNDS:
Principal Amount of the Bonds s 43,080.000.00
Reoffering Premium 2.930.321.05
Cash Contribution (includes BRA Bonds reserve funds) 5, 559,294.98
Accrued Interest 24 7. 500. 00
Total SourcesofFunds s 51.817.ll6.03
USES OF FUNDS:
Refunding BRA Bonds $ 43.746.592.67
SWAP Termination Costs 6.692,000.00
Debt Service Fund Deposit (includes accrued interest and excess bond proceeds) 753,388.84
Underwriter's Discount 291,583.85
Costs oflssuance (includes Bond Insurance Premium) 333.550.67
Total Uses of Funds $ 51.817.116.03
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BOND lNSURANCE
Other than with respect to information concerning financial Security Assurance Inc. (wfinancial Security") contained under the
caption "BOND lNSURANCE" and Appendix D "Municipal Bond Insurance Policy Specimen" herein. none of the information
in this Official Statement has been supplied or verified by Financial Security and Financial Security makes no representation or
wananty, express or implied, as to (i) the accuracy or completeness of such infonnation; (ii) the validity of the Bonds; or (iii) the
tax exempt status of the interest on the Bonds.
BoNO INSURANCE POLICY
Concurrently with the issuance of the Bonds, Financial Security will issue its Municipal Bond Insurance Policy for the Bonds
(the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in
the form of the Policy included as Appendix D to this Official Statement.
The Policy is not covered by any insurance security or guaranty fund established under New York. California. Connecticut or
florida insurance law.
FINANCIAL SECtJRilY AssURANCE INC.
Financial Security is a New York domiciled financial guaranty insurance company and a wholly owned subsidiary of Financial
Security Assurance Holdings Ltd. ("Holdings"). Holdings is an indirect subsidiary of Dexia. S.A., a publicly held Belgian
corporation. and of Dexia Credit LocaL a direct wholly-owned subsidiary of Dexia. S.A. Dexia, S.A., through its bank
subsidiaries. is primarily engaged in the business of public finance. banking and asset management in France. Belgium and other
European countries. No shareholder of Holdings or Financial Security is liable for the obligations of Financial Security.
At March 31, 2005, Financial Security's total policyholders' surplus and contingency reserves were approximately
$2,321,918,000 and its total unearned premium reserve was approximately $1,672.672,000 in accordance with statutory
accounting principles. At March 31,2005, Financial Security's total shareholder's equity was approximately $2.726,667,000 and
its total net unearned premium reserve was approximately $1,356.678,000 in accordance with generally accepted accounting
principles.
The financial statements included as exhibits to the annual and qu8.11er\y reports filed by Holdings with the Securities and
Exchange Commission are hereby incorporated herein by reference. Also incorporated herein by reference are any such
financial statements so filed from the date of this Official Statement until the termination of the offering of the Bonds. Copies of
materials in~rporated by reference will be provided upon request to Financial Security Assurance Inc.: 31 West 52nd Street,
New York, New York 10019, Attention: Communications Depa.r1ment (telephone (212) 82~0100).
The Policy does not protect investors against changes in market value of the Bonds, which market value may be impaired as a
result of changes in prevailing interest rates, changes in applicable ratings or other causes. Financial Security makes no
representation regarding the Bonds or the advisability of investing in the Bonds. Financial Security makes no representation
regarding the Official Statement. nor has it participated in the preparation thereof. except that Financial Security has provided to
the Issuer the information presented under this caption for inclusion in the Official Statement.
{THE REMAINDER OF THIS PAOE INTENTIONALLY LEFT BLANK)
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DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS
In the past three fiscal years (a fiscal year is referred to herein as ·'FY,,. with the year designation being the year in which the
fiscal year ends; each City fisc:al year begins on October I and ends on September 30), the City has experienced a variety of
financial and management challenges. In response to the events and circumstances that have created such challenges, the City or
consultants retained by it have condllcted a series of audits and reviews of City government. Certain of the reports, including
those described below. revealed weaknesses in the City's general management and financial practices. The City is of the view
that progress has been made in correcting many of these conditions (see "'Discussion of Recent Financial and Management
Events· City's Responses to Recent Financial and Management Events"}, although funher work will be required before the City
is capable of meeting its financial policies, particularly those associated with fund operating and rate stabilization reserves (see
"'Financial Information -Financial Policies).
The following discllSsion includes an analysis of the events that have occurred in the last two fiscal years, in particular. a
summary of the measures taken in response to the challenges that have arisen, and a current description of the City's financial
and management position.
Caution Regarding Forward·Look.ing Statements
This Official Statement. and in particular the information under the heading ·'Discussion of Recent Financial and Management
Events. .. contains forward-looking statements. Although the City believes such forward-looking statements are based on
reasonable assumptions, any such forward-looking statement involves uncertainti.es and is qllalified in its entirety by reference to
the considerations described below, among others. that could cause the actual financ ial results of the City to differ materially
from those contemplated in such forward-looking statements.
The City cannot fully predict what effects factors of the nature described below may have on the operations of the City and
financial condition of the general fund of the City (the MGeneral Fund) or its business-type activities, including its electric
enterprise fund. which operates as Lubbock Light & Power (referred to herein as ·'LP&L" or the ·'electric fund'), but the effects
could be significant. The discussion of such factors herein does not purport to be comprehensive or definitive. and these matters
are subject to change subsequent to the date hereof. With respect to LP&L. extensive information on the electric utility industry
is. and will be, available from the legislative and regulatory bodies and other sources in the public domain. and potential
purchasers of the securities of the City should obtain and review such information.
Among the factors that could atTect the operations and financial condition of the City in general. and its electric utility in
particular, are the following:
> Significant changes in governmental policies and regulatory actions, including those of the Federal Energy
Regulatory Commission. the United States Environmental Protection Agency (the ··EPA"), the United States
Department of Homeland Security, the United States Department of the Treasury. the Texas Commission on
Environmental Quality ("TCEQ"), the Public Utility Commission of Texas (the "PUC'") and the Southwest Power
Pool, Inc., with respect to:
-changes in and compliance with environmental and safety laws and policies effecting the City's water.
sewer. storm water and solid waste funds:
-changes in and compliance with national and state homeland security laws and policies effecting the City's
water. sewer. solid waste and airport funds:
• electric transmission cost rate structure:
• purchased power and recovery of investments in electric system assets;
-acquisitions and disposal of assets and facilities: and
-present or prospective wholesale and retail competition in the electric industry:
> Unanticipated population growth or decline. and changes in market demand. demographic patterns and the
development of technology affecting the City's service nrea.. its general government and p11blic safety expenditures and
City revenue from:
-investor owned utility franchise tees,
-City utility and service tees ·
• sales tax revenues: and
-ad valorem tax revenues:
> With respect to LP&L:
-the implementation of or adjustments made to new business strategies by LP&L:
-competition for retail and wholesale customers by LP&L, particularly competition with Xcel (as defined
below) and its subsidiaries:
. access to adequate electric transmission facilities to meet current and future demand for energy;
-pricing and transportation of coal. natural gas and other commodities that may affect the cost of energy
purchased by LP&L:
-inability of various CO!\tractual counterparties to meet their obligations to the City. and with LP&L in
particular with respect to LP&L's fuel and power purchase arrangements
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> With respect to the City's financial performance in general:
-legal and administrative proceedings and settlements; and
-significant changes in critical accounting policies.
FY 2003 Financial C&ncems and Mid-Year Budget Amendments
Going into FY 2003, the City Council adopted General Fund and Enterprise Fund budgets that were balanced. However, during
the preparation of the budget it was apparent that the transfers to the General Fund from the City's electric fund would need to be
reduced as compnred to transfers included in prior years' budgets. This situation arose as a result of the cumulative effect of net
losses to LP&L after transfers to the City's General Fund. During FY 2003, interfund loans were made to LP&L from the water
fund and the General Fund.
A number of factors contributed to the LP&L losses (see ''Discussion of Recent Financial and Management Events -Past Events
Relating to LP&L and West Texas Municipal Power Agency"); a significant factor was that LP&L, unlike most other municipal
electric utilities in Texas, competes directly with Southwestern Public Service Company ("SPS''), a subsidiary of a large investor
owned energy company, Xcel Energy, Inc. Xcel Energy, Inc., and its subsidiaries with which the City has contracted for energy
and other services -principally SPS -and with which it competes, are hereinafter referred to collectively as "Xcel." Xcel is
based in Minneapolis, Minnesota. and is the fourth-largest combination electricity and natural gas energy company in the U.S.
In addition to the service area that has dual certification with Xcel, a small part of the City is also served by South Plains Electric
Cooperative (''SPECw). The City, through LP&L. has competed tbr both wholesale and retail electric customers against investor
owned utilities for over 80 years. This competition has existed despite the fact that the City is not within the transmission system
governed by the Electric Reliability Council of Texas ("ERCOT"). ERCOT was opened to retail electric competition through
the adoption of State deregulation legislation that went into etTect on January I, 2002.
The competitive environment has made it difficult for LP&L to fully recover its fuel costs, particularly during periods of volatile
and historically high natural gas prices. Prior to calendar year 2000, natural gas prices generally ranged from $2.00 to $3.00 pee
thousand cubic foot. Since 2000. gas prices have held within a general range of $5.00 to $6.00 per thousand cubic foot. and
reached as high as $25 per thousand cubic foot in February 2003. Despite the increases in gas prices that began in calendar year
2000, LP&L produced positive net operating income in each year until FY 2003. All LP&L electric generating units, which
provided approximately 35% of its energy requirements in recent years preceding FY 2004 (the remaining energy was acquired
through power purchase agreements). operate with natural gas as the primary generation fuel. Moreover, a majority of the units
are older and significantly less fuel efficient than more modem units.
Prior to FY 2004, the City operated LP&L in a manner that was designed to recover administrative or indirect costs provided by
the General Fund for LP&L (such as legal and financial services) as well as certain other general transfers. Such transfers
included a payment in lieu of ad valorem taxes. an allocation for indirect costs such as legal and fmancial services, and a cost of
business transfer (which approximates a payment in lieu of franchise taxes, and was based on 3% of the gross operating revenues
ofLP&L) (collectively. the "Cost Recovery Payments). In addition to the Cost Recovery Payments. prior to FY 2003 LP&L
was RX~Uired to annually tronsfer to the General Fund antounts to support economic development incentives in the City, a
payment designated for infrastructure use. a ·'gas tax-tronsfer. and a reimbursement of the street lighting expense incurred by the
City (collectively, the "Other Transfer Amounts''). Over the ten year period from 1993 to 2002, the average annual operating
income of LP&L before transfers was $8 million. and during that period,. LP&L transfers to the General Fund for payments in
lieu of taxes and recovery of costs of business averaged $8 million per year. ·
During the preparation of the FY 2003 City budgets, it was evident that the amount of money transferred from LP&L to the
General Fund would need to be reduced given the financial condition of LP&L. Consequently, the FY 2003 budget trimmed
$4.8 million from LP&L transfers included in prior year budgets. In February 2003, during a period of extraordinarily high
natural gas prices, City finance stlliT projected that, in the absence of corrective measures, the electric enterprise fund would have
an operating loss of$24 million for FY 2003.
During the then current practice of undertaking a mid-year budget assessment, in the Spring of2003 the City Council amended
the LP&L and General Fund budgets to eliminate $7.7 million in transfers from LP&L to the General Fund. City management
then undertook a comprehensive review of the General Fund and other enterprise funds for the purpose of identifying budget cuts
throughout City government that would offset the reduced LP&L transfers. Ultimately. the City Council adopted budget
amendments during the Spring 2003 mid-year review that totaled $9.7 million lbr the General Fund (hereinafter referred to as the
"2003 Budget Adjustments''), which represented approximately 10.5%ofthe original FY 2003 General Fund budget. In addition
to the $7.7 million budget adjustment made to address the LP&L trunsfer reduction, the City Council determined to write off$2
million owed to the General Fund from the golf course enterprise fund. A number of other budget adjustments were made
including (i) the elimination of$2.5 million of capital expenditure items; (ii} a reorganization of the structure of City government
was implemented that consolidated a number of positions: (iii) the implementation of a general hiring freeze throughout all City
departments. and the elimination of 100 positions in both the General Fund and the electric fund (approximately 40 positions
were eliminated at LP&L. a majority of which were in the energy production area); and (iv) a 1% increase of the transfers-in-
lieu-of-franchise-payments was made for the wuter and solid waste funds, which increased the transfer for those funds from 3%
to 4% of their respective gross revenues.
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Other measures that were taken after the 2003 Budget Amendments to address the projeCted LP&L operating loss included an
increase in the fuel cost. adjustment ("FCA~) tor residential and small commercial customers of LP&L by $0.01 per kWh
effective May I, 2003 and, effective June I. 2003. the City increased the FCA for its two lnrgest customers, which include Texas
Tech University (';Texas Tech''), and which account for approximately 100/o of the energy sales of LP&L. At the time of the
May I. 2003 FCA increase for residential and small commercial customers. the total electric cost energy for that class of LP&L's
customers was approximately 30% above those of XceL In addition. in August 2003. the City issued two series of tax-supported
debt to refund $8.5 million of LP&L revenue bonds and to provide $13 million for LP&L capital expenditures. The City
anticipates that such debt will be self-supporting from LP&L revenues.. although as discussed below, LP&L failed to generate
sufticient revenues to pay all of its outstanding bonds for FY 2003; nevertheless, the issuance of tax-supported debt for LP&L
reduced the cost of borrowing for. and outstanding debt attributed directly to, LP&L.
Past Events Relating to LP&L and West Texas Municipal Power Agency
The City is a member of WTMPA, a municipal power agency that was formed by concurrent ordinances adopted by the
governing bodies of the cities of Brownfield. floydada. Lubbock and Tulia. Texas (the -Member Cities') in 1983. The original
purpose of WTMPA was to engage in the generation, transmission, sale and ex:change of electric energy to the Member Cities.
As described below. under the heading "'Disc ussion of Recent Financial and Management Events -City's Responses to Recent
Financial and Management Events • Recent Measures taken to Address Financial and Management Concerns at LP&L." the
scope ofWTMPA's activities has changed as a result of a series of related agreements reached among WTMPA and the Member
Cities in December 2003 (the .. WTMPA Settlements'"). WTMPA is a separate political subdivision under the laws of the State.
In June 1998. WTMPA issued S28,910.000 of its Revenue &nds. Series 1998 (the "'WTMPA Bonds""). to finance the
construction and acquisition of a 62 MW electric co-generation project (the "WTMPA Project'"). The WTMPA Project consists
of a 40 MW combustion turbine generator (the "Massengale Unit 8 turbine-) and the re-powering of an existing 22 MW
generation unit. each located at the City's J. R.. Massengale Plant
The Massengale Unit 8 turbine was originally scheduled to go online in the Spring of 1999. but during the course of the run test.
the turbine experienced a catastrophic failure. In May 2001. the City and WTMPA filed a lawsuit against the manufacturer of
the Massengale Unit 8 turbine and the gas company that supplied fuel for the Unit. in connection with the failure of the turbine.
During September 2002. the City engaged in mediation with the turbine manufacturer and the gas company with respect to the
settlement of the litigation. During the course of the mediation. the director of LP&L and a City Council member who served on
the !Ward of WTMPA and as chairman of WTMPA made statements to the effect that WTMPA had retained the sum of$1.6
million, representing proceeds of the WTMPA Bonds. !rom the turbine manufacturer until the litigation could be resolved.
Subsequent investigations revealed that such amount had been retained. but the money had eventually been applied. in February
2002. to pay debt service on the WTMPA Bonds. In addition. as a result of the delayed completion of the Unit. costs associated
with replacement energy were incurred by WTMPA. and the amount of that expense and the responsibility for the expense,
subsequently became a disputed claim of the City against WTMPA (see ··Discussion of Recent Financial and Management
Events -City's Responses to Recent Financial and Management Events • Recent Measures taken to Address Financial and
Management Concerns ac LP&l..'"),
As a result of the confusion over the existence of the retained nrnount. the City embnrked upon a series of internal financial and
management audits of the relationship between LP&L and WTMPA. as well as an analysis of the internal controls of the City
with respect to LP&L Such audits (collectively. the MLP&LIWTMPA Management Audit'") nre available on the City's website
at: www.cUubbock.tx.us under the heading MWest Texas Municipal Power Agency Audit."" None of these reviews uncovered
any malleasance with respect to the administration of LP&L or WTMPA tunds. However. the reviews concluded that the
prevailing view that guided the administration of WTMPA affairs by the management of LP&L was that WTMPA was
indistinguishable from LP&L. This view stemmed from the facts thai LP&.L was contractually committed on a joint and several
basis to pay the WTMPA Bonds, the WTMPA Project was operated by LP&L and. as a practical matter. LP&L was taking all
the energy from the WTMPA Project (the other Member Cities received lower-cost energy purchased under WTMPA and City
power purchase contracts with SPS). According to the audits, this management perspective had resulted in a consistent failure to
follow the terms of the various WTMPA organizational. operational and power purchase agreements. In addition to poor
contract administration by the management ofLP&L. there were findings in the LP&LIWTMPA Management Audit to the effect
that LP&L was acting without proper oversight from the City Council and the City Manager's otlice. For a discussion of the
measures taken to address the criticisms made in the audits. see ·'Discussion of Recent Financial and Management Events • City's
Responses to Recent Financial and Management Events-General Fund and General Government Actions'' below.
In April 2003, the WTMPA Member Cities (including the City) engaged Ernst & Young LLP ("E&Y") to conduct an audit of the
records of WTMP A and LP&L. The final report of E&. Y was delivered in May 2003. and included findings of misallocation of
costs among the Member Cities. The report noted that no evidence of misappropriation of assets or intentional omissions of
tinancial intormation was discovered. The E&Y report found that the misallocations.. adding an interest factor for such
allocations.. and an unbilled 5% management allocation that LP&.L was entitled ro under the power agreemenrs. would result in a
total amount owing to the City of$5.590,746. of which the City owed itself, as a Member City of WTMPA. approximately 90%
of the total nrnount.
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In March 2005, the City delivered its Combination Tax and Electric Light and Power System Surplus Revenue Certificates of
Obligation, Series 2005, in the aggregate principal amount ofS23,0SS,OOO. A portion of the proceeds of this issue were used by
the City to acquire the WTMPA Project. WTMPA used the proceeds received from the City to defease all of the outstanding
WTMPA Bonds.
Financial Staff and City Management TurDover
Following the publication of the LP&UWTMPA Management Audit and the E&Y audit, several key City ot1icers and LP&L
management personnel resigned. Among the officials and management of the City who resigned was a member of the City
Council with almost 11 years of service, the City Manager, who had served 27 years with the City (the last ten of which as City
Manager), the Deputy City Manager, who had almost 8 years of service to the City, the Assistant City Manager tbr Public
Works. who had over five years of service to the City, and the Chief Executive Ot1icer ofLP&L, who had served in that capacity
since 1998. Also. in late summer of 2002, the City's Chief Accountant died during the implementation of Governmental
Accounting Standards Board Statement 34 ("GASB 34"). Between the beginning of FY 2002 and the close of FY 2003. some 29
persons who held senior management positions with the City left the City's employment, some on their own accord and others as
a result of a reorganization of City government. For a discussion of the City's responses to these events. see "Discussion of
Recent Financial and Management Events ·City's Responses to Recent Financial and Management Events" below.
September 30, 2003 Financial Results
The Geneml Fund ... As hereafter described in ''Discussion of Recent Financial and Management Events • FY 2003 Audit
Restatements, Reclassifications and Internal Controls Issues,., the financial position of the City in FY 2003 was impacted by
significant changes in the reporting entity and prior ~riod adjustments and reclassifications of the City's FY 2002 financial
statements. With respect to the General Fund, the beginning fund balance/net assets was restated from $18.6 million to $16.6
million. The restntement was attributable to the write off of a receivable in the General Fund from the City's golf fund.
In addition, the General Fund experienced a $7.2 million reduction in fund balance/net assets in FY 2003, the most significant
drawdown of the General Fund reserves in over ten years. The decrease in fund balance occurred because of the $9.3 million
transfer to LP&L to ensure the ongoing operation ofLP&L and the payment of the senior lien revenue bonds issued by the City
for LP&L. In addition, the General Fund reduction in fund balance was a result of the forgiveness of originally budgeted
payments in lieu of taxes, &anchise fees and indirect costs of $4.8 million from the electric fund to the General Fund. The
aggregate result of restatement of the beginning fund balance and the FY 2003 use of fund balance was a General Fund ending
balance of$9.4 million. Coming in to FY· 2003, the City had a fund balance (adjusted) of$18.6 million. The City has adopted a
policy (the "General Fund Balance Policy') to maintain an unreserved General Fund balance equal to two months operating
expenditures. At September 30, 2002 the General Fund balance exceeded the General Fund Balance Policy by $4.5 million. At
September 30, 2003, the General Fund Balance Policy required a fund balance of $14.2 million. As a result of the FY 2003
events described above. the City was $4.8 million under the fund balance required under its policy at the close ofFY 2003. The
decline in General Fund balance limits the City's ability to mitigate future risks of revenue shortfalls and unanticipated
expenditures. Reference is made to the information hereafter presented under the headings .. Discussion of Recent Financial and
Management Events· FY 2004 Budget and Year·End Financial Results"' and"· FY 2005 Budget," for a discussion ofFY 2004
results for the General Fund and a summary of the City's planning for FY 2005.
The Electric Fund ... With respect to the City's electric fund (LP&L), the measures taken by the City Council during the FY
2003 mid-year budget review yielded substantial results as measured by the projected operating loss of $24 million in February
2003. LP&L ended FY 2003 with a $6.3 million operating loss. Before taking into account transfers from other funds, the
electric fund reported a $9 million loss. the first such loss in over ten years. As a consequence of the operating loss. LP&L failed
to meet its revenue bond rate covenant under which the City has agreed to set rates for the electric system sufficient to produoe
net revenues equal to 100% of its senior lien bonded indebtedness. In FY 2003, LP&L produced $0.704 million that was
available tbr the payment of debt service, which representS a 0.3 times coverage of average annual debt service and a 0.2 times
coverage of maximum annual debt service, in each case after taking into account the issuance of City general obligation debt tor
LP&L that occurred in August 2003 (see ·'Discussion of Recent Financial and Management Events -FY 2003 Financial
Concerns and Mid-Year Budget Amendments" for a description of such debt). Under the terms of its bond ordinances, the
failure to meet the rate covenant, while significant. did not result in the acceleration of LP&L's debt. Moreover, the failure did
not materially affect LP&L's operations. as LP&L was able to make its debt payments after receiving a $9.3 million contribution
from the General Fund, and LP&L bas never defaulted in the payment of its bonded indebtedness. In making its debt payments,
LP&L has not used any moneys set aside as a debt servioe reserve fund under its senior lien revenue bond ordinances.
The electric fund added $0.587 million to total net assets for the year after factoring in the $9.6 million contribution from the
General Fund. Cash and cash equivalents for LP&L were $0.330 million at September 30, 2003. As described above under
•'Discussion of Recent Financial and Management Events • FY 2003 Financial Concerns and Mid-Year Budget Amendments." in
May 2003, the City Council implemented an increase in the FCA ofLP&L, by $0.01 per kWh which resulted in LP&L's rates for
residential and commercial customers being approximately 30% above those of Xcel. As a result, from May 1, 2003 to
September 30, 2003 LP&L lost approximately 5.6% of its customers. Despite the increase in the FCA, operating revenues for
LP&L declined from $97.4 million in FY 2002 to $91.7 million in FY 2003, while operating expenses increased from $88.3
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million in FY 2002 to $98 million in FY 2003, which reflects a S 10.7 million increase in cost of purchased fuel and power during
the year. For FY 2003. LP&L's average fuel cost was approximately 61 % above the cost in FY 2002. LP&L was able to reduce
its fuel payments as a result of negotiating a third purchased power contract with SPS in July 2003 to minimize the use of its
generation assets.
Despite the relatively small operating income that resulted after taking into account the General Fund contribut ion to LP&L, total
net assets of the electric fund decreased by $3.9 million during the year, to $88.5 million, as a result of a restatement of the
beginning fund balance. The restatement retlected the write otf of a $4.48 million receivable recorded from WTMPA in FV
2002. although the obligation was disputed by the other Member Cities of WTMPA. As described below under "Discussion of
Recent Financial and Management Events • City's Responses to Recent Financial and Management Events-Recent Measures
taken to Address Financial and Management Concerns at LP&L:' the WTMPA ~lements have resolved the disputed
receivable.
O!her Major Enternrise Funds: Water. Sewer. Solid Waste apd Storrowater .. .In addition to the electric fund. for which FY 2003
financial results are discussed above, the City's other major enterprise funds, consisting of the water. sewer. solid waste and
stormwater funds, produced total operating revenues of$71.6 million in FV 2003, as compared to $73.6 million for FY 2002. In
FV 2003, operating expenses for those funds were S57. 7 million, as compared with 151.6 million for FY 2002. Net operating
transfers for the other major enterprise funds totaled $12.8 million in FY 2003 as compared to $6.5 million in FY 2002. The
increase in net transters out was due primarily to an increase of $5.2 million in net transfers from the solid waste fund that was
attributable to the write otT of an interfund loan made to the community investment fund in connection with an economic
development grant agreement {see ··Discussion of Recent Financial and Management Events -FY 2003 Audit Restatements,
Reclassitications and Internal Controls Issues • Audit Restatements"). In addition, operating expenses of the solid waste fund
increased $5.8 million over FY 2002, which was the result of a change in accounting estimate related to depreciation expense for
the City's landfills.
FY 2003 Audit Restatements, Reclllssitications aod Internal Controls Issues
As was the case with other municipalities in the State and U.S .• the implementation ofGASB 34 by the City in FY 2002 effected
a substantial change in the presentation of the City's financial stntements. Prior to the implementation of GASB 34,
governmentnl accounting standards did not require the use of a government-wide perspective in the presentation of financial
information: instead. fund accounting was generally used to present tinancial data. Under GASB 34, fund accounting has been
supplemented by government-wide statements and certain aspects relating to the presentation of the fund level statements have
been modified. as well. particularly with respect to the presentntion of restricted and unrestricted net assets within each fund. For
additional information regarding accounting policies that are applicable to the City, see Note I. .. Summary of Significant
Accounting Policies~ in the financial statements of the City attached as Appendix B.
The FY 2002 financial statements. and the City's financial statements dating to FY1993, were audited by Robinson Burdette
Martin Seright & Bull'Ows., L.L.P. (the ,.former External Auditor'). In keeping with the overall reassessment of its financial and
management atfairs undertaken by the City following the occurrence of the events summarized under ''Discussion of Recent
Financial and Management Events -Past Events Relating to LP&L and West Texas Municipal Power Agency FY 2003,'' in the
Summer of 2003, the City conducted a request for qualifications for its e~temal auditor and selected KPMG L.L.P. ("KPMG'") to
audit its FY 2003 financial statements. Consequently. the Former External Auditor guided the City through the initial year
implementution of GASB 34, while in the second year of GASB 34 financial reporting, the City's financial statements were
audited by KPMG.
Audit Restatements ... During the preparation of the FY 2003 CAFR, some seven restatements to beginning fund balance/net
assets were made to various fund level statements of the City. The restatements totaled $36.7 million. These restatements
represented an aggregate increase in net assets of the City of S2.56 million. as some affected funds had their beginning balances
restnted to a higher figure, while other funds were restated to decrease their begiMing fund balance.
As described above under ''Discussion of Recent Financial and Management Events -FY 2003 Financial Concerns and Mid-
Year Budget Amendments.'' the General Fund was restated from a fund balance of $18.6 million to $16.6 million to reflect a
write off for an account receivable. which as of September 30, 2002 had ceased to be collectible. Also, as described above under
·'Discussion of Recent Financial and Management Events -September 30. 2003 Financial Results -The Electric Fund," the
electric fund's begiMing fund balance was restated downward by $4.48 million to reflect a receivable from WTMPA that was
uncollectible. Other enterprise fund restatements include an $0.867 million increase in the water fund beginning balance and a
$0,722 million increase in the sewer fund beginning balance. each of which were made to reflect a change in accounting
treatment pertaining to the appropriate party that is responsible for reimbursement of fees collected by the City for new water
and sewer connections. With respect to the impact on a particular fund assel the most significant restatement in beginning fund
balance occurred in the City's community investment fund, a fund used in prior years to account for economic development
initiatives. which was restated from a beginning balance of S46.8 million to S36.8 million. The change was associated with an
economic development grant made by that fund in F'Y 2002 that was originally reflected on the accounting statements of the City
as a loan. (n preparing the 2003 CAFR. it was determined that such transaction should be treated as a granl not a Joan. although
Market Lubbock. lnc .• a component unit ot'the City that administers the grant agreement. retains certain recourse actions in the
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event that the grant recipient fails to satisfy its economic development initiative agreement. As a result, the receivable in the
community investment fund for the $10 million amount was deleted as an asset of the fund ($6 million of the $10 million grunt
had originally been funded through an interfund loan to the community investment fund from the water and solid waste funds).
In addition to these five restatements of existing fund balances. in preparing the 2003 CAFR, new assessments were made with
respect to two entities with which the City has long-standing contractual relationships: a corporate entity that does business
under contract with the City as ·'Citibus", and WTMPA, a legally separate municipal corporotion. In prior fiscal years, the
former entity had been accounted for by the City as a discretely presented component unit of the City, while the City's
relationship with WTMPA had been described in the footnotes to City financial statements as a contingent liability of the City,
because the City had contractually agreed to provide a debt service guarantee for the debt of the agency. In the 2003 CAFR, the
accounting treatment of these entities wns reconsidered, and each was added to the City's financial statements as an enterprise
fund. The result of the addition of each of these funds was an increase in net assets, in the amount of$12.3 million for the new
transit fund. and $3.2 million for the new WTMPA fund.
Audit Reclassifications ... In addition to the restatements summarized above, other reclassifications of net assets were made in
connection with the preparation of the FY 2003 CAFR. Except for the restatements that were made to the financial statements,
as described above, the reclassifications did not affect tfte ·'bottom line" statement of net assets for a particular fund, and did not
retlect the discovery of missing funds or uncollectible amounts from the prior fiscal period. Instead, the reclassifications pertain
to the portion of a fund's net assets that are shown us invested in plant, restricted for future claims or that are unrestricted and
available to support the operntions of the entity, and us such, the incorrect information shown in the portions of the FY 2002
fmancial statements that required corrections, or reclassifications, could have provided a reader of the financial statements with
misleading information regarding the liquidity of such funds.
In the preparation of the FY 2003 CAFR,. it was discovered that the portion of net assets shown in certain of the financial
statements. particularly with respect to the enterprise funds (or business-type activities). had been mathematically incorrectly
calculated in the FY 2002 CAFR. While the government-wide statement of net assets of the City included in the FY 2002 CAFR
showed $37.9 million unrestricted net assets for business-type activities of the City, the fund financial statements showed an
aggregate amount of unrestricted net assets of the enterprise funds that totaled $195.2 million of unrestricted net assets. The FY
2003 CAFR reports in the government-wide statement of net assets of the City $32.9 million of unrestricted net assets for
business-type activities of the City and the fund financial statements in the FY 2003 CAFR report an aggregate amount of
unrestricted net assets for the enterprise funds that total $30.2 million (certain reconciliations are required to balance
government-wide and fund level reports, thus small differences should appear between the two presentations).
Intemul Controls Issues 0 0 .In accordance with accounting guidelines, the external auditor customarily provides the governmental
entity with a -management letter'' that includes a discussion of any material weaknesses in the audited government's internal
control structure. In its FY 2003 Management Letter (the "2003 Management Letter"), KPMG noted several weakness in the
City's internal controls. including an overall internal control weakness in the City during FY 2003. The 2003 Management
Letter noted that the City opernted during FY 2003 witb an interim City Manager, an interim Chief Financial Officer and a
vacant Internal Auditor, and that a high turnover of staff within the City Manage(s office dating to late 2002 had a significant
effect on the City's internal control structure. See ~Discussion of Recent Financial and Management Events-Financial Staff and
City Management Turnover" above.
In addition, the 2003 Management Letter noted deficiencies in the year end GAAP financial reporting cycle. citing as examples
the significant restatement of beginning net assets/fund balances and the reclnssifications described above. as well as numerous
adjustments that were required to be posted after the initial closing of the City's books for FY 2003. The failure to timely obtain
financial statements from component units. including WTMPA, was also noted. KPMG recommended that the City review the
personnel within the City's accounting department and the accounting staff within LP&L to determine whether sufficient
qualified personnel were in place to provide accurate and timely closing of the City's books and preparation of annual financial
statements. Other material weaknesses noted include the failure of the City to properly reconcile its cash balances. the failure of
LP&L to meet its bond rate covenant (as described above under .. Discussion of Recent Financial and Management Events -
September 30, 2003 Financial Results • The Electric Fund .. ), a lack of oversight or monitoring of contracts with other entities
(for example, WTMPA), and the failure of the City to abide by its General Fund Balance Policy (us described above under
"Discussion of Recent Financial and Management Events-September 30,2003 Financial Results-The General Fund").
FY 2004 Budget and Year-End Financial Results
General Fund ... The City Council adopted the FY 2004 budget on September 18. 2003o In adopting tbe FY 2004 budget. the
City Council restricted the transfers out of the electric fund to a transfer to the General Fund to an amount equal to the indirect
cost recovery amount. or $1.1 million, which represented an approximately $6.6 million reduction in transfers from LP&L from
the original FY 2003 budget. In addition. the City Council instructed the interim City Manager to prepare the budget using the
principle thot taxes would not increase as a result of the increase in taxable value from reappraisals of existing properties. which
has represented a substantial portion of tax base growth in previous years. As a result, the tax rate was reduced from $0.5700 per
SIOO of taxable valuation in FY 2002 to S0.5457 in FY 2003, the equivalent ofSI.9 million in revenue. although the tax rate was
projected to generate additional revenues of $1.1 million due to new construction in the City. Other ~venue enhancements
included in the FY 2004 budget were increases in the franchise fees assessed to the gas franchisee and to Xcel, each of which
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increased from 3% of gross revenues to 5% effective December I. 2003. In addition, the transfers from the water and solid wnste
funds for the cost of business transfer (which approximates a payment in lieu of franchise taxes) was increased from 3% to 6% of
gross revenues. On the expenditure side. seven employment positions were eliminated from the General Fund budget.. while an
additional five police ollicers and nine firefighters were funded in the budget. Total revenues and expenditures budgeted for the
General fund were balanced. at $94.2 million. Based upon unaudited financial records through the first eleven months of FY
2004, and projecting revenues and expenses to the end of FY 2004. the City estimates that the General fund balance will grow
by approximately $4.4 million at year-end. to $13.8 million, which would place the City $0.9 million under its General Fund
Balance Policy. Among the most significant factors atTecting the projected year end results of the General Fund are stable
growth in the sales tax and other revenues overall and reduced expenditures through operating and administrative elliciencies.
While no firm assurances can be given that these projected results will be achieved. the City believes that such projection is
reasonable based upon current linancial data. In FY 2004, LP&L's revenues were sullicient to make debt service payments on
its bonded indebtedness without a transfer from the General fund.
Excerpts trom the City's Comprehensive Annual Financial Report of the fiscal year ended September 30. 2004 (the ·'FY 2004
CAFR''), including the audited financial statements and the management discussion and analysis (the -MD&A'") are anached as
Appendix B. Reference is made to Appendix B for a more complete presentation ofFY 2004 financial results (the complete FY
2004 CAFR is available from the City upon request and may be downloaded from the City's web site:
http://www.ci.lubbock.tx.us).
Enternrise Funds ... With respect to the major enterprise funds of the City. in FY 2003, the City adopted rate ordinances for the
water and sewer enterprise funds that included a series of four 3% increases in water rates and a series of four 5% increases in
sewer rates. FY 2004 was the second year of such increases (but see ''Discussion of Recent Financial and Management Events •
FY 2005 Budget'' for a discussion of possible additional rate increases in the water, sewer and stormwater funds in FY 2005
below). Other k.ey budgetary measures included the decrease in transfers from the electric fund to the General Fund and the
increase in the cost of business transfer for the water and solid waste funds, each described above, and a planned use of fund
balance in the stormwater fund to pay increased debt service on tax-supported debt issued by the City for drainage projects.
Based upon unaudited tinancial records for the tirst eleven months of FY 2004. and projecting revenues and expenses to the end
of the fiscal year. the City estimates that L.P&L will produce positive net income after translers of $1 million at year end. Based
upon unaudited financial records for the first eleven months or FY 2004. the City estim::~tes that the fund balances of the water.
sewer, solid waste and stormwater funds will increase by $1.6 million. $0.164 million. $0.2 million and $3.8 million,
respectively at fY 2004 year end. While no lirrn assurances can be given these projected results will be achieved. the City
believes such projections are reasonable based upon current tinancial data.
City's Responses to Recent Finaocial~tnd Management Events
As described above, the City has encountered in recent years criticism of its management practices in various reports and audits
prepared by the City and outside consultants. At the same time. the City bas experienced financial downturns .. particularly in the
General Fund and at LP&L. Moreover. through reorganizations of government designed to address these shortcomings. and in
response to political pressures by the City Council to provide a more accountable City government while reducing the growth of
the cost of City government. a significant number of senior management staff of the City have departed. In FY 2004. the City
implemented a number of significant steps to address both its m41011gement needs and financial challenges. Certain of the
measures taken by the City to streng1hen City government in general. and to address its financial challenges, are described
below.
General Fund and General Government Actions
> Geperal Fund Budgetarv Actions ... As discussed above under""Discussion of Recent Financial and Management Events· FY
2003 Financial Concerns and Mid-Year Budget Amendments-in adopting the 2003 Budget Amendments. as well as the FY
2004 budget and the FY 2005 budget, the City has demonstrated the ability after FY 2003 to meet General Fund obligations with
balanced operating results. This has been achieved through various budget cuts and other austerity measures. including
eliminating approximately I 00 positions City-wide. The City will need to restore its General Fund balance over a period of
years. For FY 2004. General Fund balance ended with a surplus of$12.127,969. While no assurances can be given as to future
financial results. based on historic expenditure trends an increase in General Fund balance of an additioiUll Sl million to $2
million is expected for FY 2005 year end. City management also has implemented monthly assessments of the budget.
> Cjty Management Changes ... In February, 2004. the City completed its search for a new City Manager with the employment
ot' Lou Fox. In late June 2004, City Manager Fox announced a oew slate of senior managers lbr the City. including the lliring of
a new Deputy City Manager. a new Chief Financial Ollicer/ Assistant City Manager and a new Director of Internal Audit (which
position was created by the City Council in fY 2003, but was vacant until filled in June 2004). Each of the positions were tilled
by individuals from outside of the City, and each of the new City otlicers has extensive government service (see "City Otlicials.
Staff and Consultants • Selected Administrative Statr'). Collectively. the new management team represents over 80 years of
government service experience. The City is of the view that these moves reflect a return to management stability. and that they
will assist the City in addressing the general internal control weakness cited by KPMG in the 2003 Management Letter.
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> Establishment of Audit Committee ... Through the adoption of a resolution in June 2003, the City Council established an
independent Audit Committee composed of five members. The City believes it is one of only a few municipalities nationwide
that has created an audit committee, taking its design in large part from the provisions of Sarbanes·Oxley Public Company
Accounting Reform and Investor Protection Act. The Audit Committee is charged with maintaining an open avenue of
communication between the City Council, City Manager. intemaJ auditor and independent external auditor to assist the City in
fulfilling its fiduciary responsibility to its citizens. The committee hos the power to conduct or authorize investigations into the
city's financial performances, internal fiscal controls, exposure and risk assessment. It reports to the City Council. The
establishment of the Audit Committee is designed to serve as an additional check on the preparation of the City's financial
statements and to avoid weaknesses in the City's internal controls, including the status and adequacy of information systems and
security.
The chairperson is appointed by the Mayor and the other positions are filled by a vote of the City Council. At least two members
of the Audit Committee are required to have a background in financial reporting, accounting or auditing, and at least one member
is required to be a certified public accountant. The current membership of the committee consists of Mike Epps, an Executive
Vice President at American State Bank in Lubbock, Jim Brunjes, Senior Vice Chancellor and Chief Financial Officer for the
Texas Tech University System; Dan Benson, a professor at the Texas Tech University School of Law with expertise in federal
criminal law and appellate procedure; R.J. Givens, a real estate agent in the City; and Kim Turner, the Director of Internal Audit
at Texas Tech. Mr. Brunjes is the chair of the Audit Committee.
Recent Measures taken to Address Financial and Management Concerns at LP&L
>New Chief Executive Officer for LP&L .. .In March 2003, R. Carroll McDonald contracted with the City to perform the duties
of Director of Electric Utilities for the City. Mr. McDonald had previously been employed by LP&L, most recently in 1994,
when he retired llS CEO of LP&L. Mr. McDonald has over 40 years experience in the electric utility business in Lubbock and
the surrounding area. having also served in various positions with Southwestern Public Service Company (now Xcel) for over 25
years. Mr. McDonald"s contract is scheduled to expire in May 2006. Under the management of Mr. McDonald, the City and
LP&L have implemented a variety of measures designed to improve the accountability of LP&L to the City and to better
position the utility for future protitability. Certain of those measures are described in the paragraphs that follow. The Electric
Board (hereinafter defined) has commenced the process of hiring a successor to Mr. McDonald and expects to have completed
this process by December 2005. The City believes it is Mr. McDonald's intent to assist any successor as needed until his
contract expires.
> Increase in Fuel Cost Adjustment ... As described under "'Discussion of Recent Financial and Management Events -Past
Events Relating to LP&L and West Texas Municipal Power Agency" in May 2003, the City Council approved an increase in the
FCA portion of the residential and small commercial customers rate class by $0.01 per kWh. an average increase of 12.5% for
both residentiaJ and commercial customers. which resulted in LP&L being approximately 30% higher in cost for those rate
classifications than Xcel. The incre:tse was approved in order to pass through fuel costs that had been incurred by LP&L but not
recovered through its rate base. LP&L adjusts its FCA each month, and may do so under the existing methodology without
further action of the City CounciL to reflect current energy prices plus an additional measure to recover a portion of the rolling
eighteen month average for uncollected fuel expense; provided, however, that no such adjustment is typically made unless the
overall cost of energy after the FCA adjustment permits LP&L to remain competitive with Xcel. If the adjustments will not
permit LP&L to remain competitive and are not passed through. they become an unrecovered fuel expense. As a result of the
increase. from May 1·. 2003 to September 30, 2003 LP&L lost approximately 5.6% of its customers. After losing almost 4,000
metered customers following the May I, 2003 FCA increase, LP&L began to increase its customer count in May 2004. Since
May 2004, LP&L has had an average increase of approximately 263 customers per month. The City has undertaken periodic
adjustments to its fuel cost to remain competitive with Xcel. In May 200S, the City FCA was increased by $0.085 per kWh, an
increase that was in line with a rate increase imposed by Xcel.
> Establishment of New Electric Utilities Board ... In December 2003. the City Council appointed the Lubbock Electric Utility
Governance Commission to review and evaluate various issues relating to the governance of LP&L. In Febi'Wil)' 2004. that
Commission presented its findings to the City Council (the ·'Electric Utility Governance Report''), and on Febi'Wil)' S, 2004, the
City Council adopted an ordinance (the "'LP&L Governance Ordinance'') (I) creating a new Electric Utilities Board (the
"'Electric Board') for LP&L (the new board replaces a former board that was advisory only), (2) reserving certain duties and
responsibilities with respect to LP&L to the City Council (i.e .• the powers to approve LP&L's annual budget; set LP&L's rates;
issue debt for LP&L; exercise the power of eminent domain for LP&L; and require the payment of an annuaJ fee to the City),
and (3) mandating the creation of certain reserve accounts by LP&L and restricting the transfer of revenues from LP&L to any
other fund of the City, including, particularly, the General Fund. until such reserves have been funded. The Electric Board was
appointed in February 2004. In June 2004, the City initiated a solicitation to the holders of LP&L's senior revenue debt seeking
approval to amend each LP&L bond ordinance to provide for the governance of LP&L by the Electric Board. In accordance
with the provisions of the bond ordinances.. the City was obligated to obtain the consent of at least 51% of the LP&L
bondholders, and in August 2004 che City received the requisite consents. The City amended the bond ordinances to provide for
the governance ofLP&L by the Electric Board in January 2005.
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On November 2. 2004. the voters of the City approved a referendum amending the City Charter to require the establishment of
the Electric Boord. The purpose of the charter amendment was to ensure the permanent establishment of the Electric Board. as
the action of the City Council in adopting the LP&L Governance Ordinance was subject to repeal by subsequent City Councils.
The charter amendment requires the City Council to adopt an ordinance (the ""New LP&L Governance Ordinance'") by no later
than January L 2005 setting torth other duties and responsibilities of the Electric Board not specifically set forth in the proposed
charter amendment. The City Council. utilizing the LP&L Governance Ordinance as a model, adopted the New LP&L
Governance Ordinance on December 16,2004. Each of the New LP&L Governance Ordinance. the bond ordinance amendment
and the charter amendment contain similar provisions regarding the powers of the Electric Board. although as noted above. and
as further described below. the New LP&L Governance Ordinance includes additional provisions that pertain to the
establishment of financial reserves and restrictions on transfer of funds from LP&L. In addition. the charter amendment
stipulates that the Electric Board shall determine the transfer and disbursement of all net revenues ofthe City's electric utility.
The New LP&L Governance Ordinance provides that the Electric Board consist of nine members appointed by the City Council,
and that the City Council consider extensive business and/or financial experience as the primary qualification tor serving on the
Electric Board. Electric Board members serve without compensation. Under the New LP&L Governance Ordinance. the Board
is given the authority, duties and responsibility to (I) approve an annual budget and electric rate schedule tor submission to the
City Council lor approval and. from time to time. submit 10 the City Council amendments to the budget and/or the electric rate
schedule; (2) oversee the audit of the electric fund, and engage an accounting firm for that purpose: and (3) subject 10 applicable
law. including the City Charter and Code of Ordinances. govern. manage. administer and operate the City's electric system,
including contracting for legal and other services separate and apart from those provided by the City. In addition. the City
Manager is required to consult with. and seek approval of. the Electric Bourd prior to appointing an.d/or removing the director of
LP&L. In accordance with the New LP&L Governance Ordinance, the director ofLP&L reports to the Board.
The adoption of the LP&L Governance Ordinance. the charter amendment election. and the subsequent adoption of the New
LP&L Governance Ordinance reflects a decision by the City Council to provide a measure of independent management and
financial self-determination for LP&L. In accordance with the tindings presented to the City Council in the Electric Utility
Governance Report. the primary purpose of the New LP&L Governance Ordinance is to permit LP&L 10 rebuild, and then better
control. its financial reserves with substantially less input in the process from the City Council than in the past. The adoption of
the New LP&L Governance Ordinance follows in the wake of the conclusions reached in the LP&UWTMPA Management
Audit to the etTect that there had been a history of poor contract administration by the management of LP&L relative 10
WTMPA. and that LP&L had acted without proper oversight from the City Council and the City Manager's office. While the
City Council retains substantial powers over the electric system, an additional goal of the City in establishing the Electric Board
is to develop local expertise in a pool of individuals who can provide a sharper locus by the City on the operation of LP&.L than
has occuned in the recent past.
> Estab1ishment of Reserve Funds for LP&L; Restriction on Transfers from LP&L ... As noted above. the LP&L Governance
Ordinance includes a provision that requires LP&L to establish reserve funds. Such funds consist of (I) an operations reserve
fund to be equal to three months' gross retail electric revenue as determined by LJ>&.L's previous fiscal year. (2) a rate
stabilization reserve to be funded to an amount equal to two months' gross retail electric revenue as determined by LP&L's
previous tiscal year: and (3) an electric utility development reserve to be funded to a level equal to one months' gross retail
electric revenue as determined by LP&L's previous fiscal year and to be used solely to meet any rapid or unforeseen increase in
development in the City. Under the LP&L Governance Ordinance. the City may not require that LP&L transfer any fee
equivalent 10 a franchise ft:e. a payment in lieu of taxes or other disbursement of the net revenues of LP&L until (a) all bond debt
service requirements hllve been funded (which obligation is senior in right to the obligation to fund the reserves) and (b) the
reserves have been fully funded. As noted above, the charter amendment provides that the Electric Board shall determine the
transfer and disbursement of aU net revenues. Consequently, subject 10 (i) provisions of State laws that govern municipal
utilities, and which stipulate that a first use of the utility's gross revenues be used to pay operating expenses, and (ii) the
obligations of the City with respect to LP&L's bonded indebtedness. it is possible that the Electric Board could devise a flow of
funds for LP&L that is substantially different from that set forth in the LP&L Governance Ordinance. To date. the Electric
Board has not deviated from the flow of li.mds contemplated under the LP&L Governance Ordinance.
At present, LP&L bas not funded any of the reserves established under the LP&L Governance Ordinance. as net revenues have
been inadequate for that purpose. Moreover. the mere ~lishment of the funds does not imply that such reserves will be
funded within any particular time frame, if ever. However. in adopting the LP&L Governance Ordinance and calling the special
charter election, the City Council hos evidenced its commitment that LP&L be given the opportunity to regain financial stability
without being obligated to make transters, other than its indirect cost of business transter, to the General Fund or any other fund
ofth.e City.
> New Contractual Arrnngemems Affecting LP&L Operations and Revenyes ... In late 2003 and extending into the Summer of
2004. City Management including LP&L statT in particular. negotiated a series of new agreements that will change the long-
term operating plan of LP&L. These agreements, which are summllfized below. stemmed from a series of events and
circumstances relating to LP&L that are described herein under .. Discussion of Recent Financial and Management Events-Past
Events Relating to LP&L and West Texas Municipal Power Agency." including an ongoing dispute with WTMPA relating to the
responsibility for costs incurred by the City during the delayed completion of the WTMPA Project. In addition. as a result of
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continued high (by historic levels) natural gas prices. following the negotiation of an additional wholesale power purchase
agreement between the City and SPS in July 2003, the City concluded that. given the then prevailing gas prices, it was more
economical to purchase wholesale energy from SPS than to operate its gas generation units, a significant portion of which are
older and. in light of current gas prices, obsolete. In recent years. the City has explored several alternatives to the use of its gas
generation units. including the possible acquisition of new generation. perhaps through a joint venture for a coal generation
facility, and the possibility of purchasing energy on a wholesale basis from entities other than Xcel or its subsidiaries. The City
is in a severely electric transmission-constrained area. The lack of sufficient transmission for delivery of energy to the City and
the absence of other energy providers in the vicinity of the City with excess energy for sale were factors that contributed to the
failure of the City to negotiate a wholesale energy purchase agreement with an entity other than Xcel or its subsidiaries.
Consequently, to reduce fuel and production expenses. in the Summer of 2004 the City began taking greater amounts of energy
from the XceJ contracts. and restricted the generation of energy primarily to that produced at the WTMPA Project. and only then
during periods of high energy demand. As described below under "Wholesale Energy Agreement with Texas Tech", these
events led to a contract dispute between the City and Texas Tech. the largest LP&L customer.
>The WTMPA Settlement Agreement ... In December 2003. the City, WTMPA and the other Member Cities of WTMPA
entered into a series of agreements styled the ·'Comprehensive Settlement Agreement.'' Such agreements were negotiated for the
purposes of (I) reallocating among the Member Cities of WTMPA, the right to WTMPA power resources and the costs
associated with such power resources. which consist of the WTMPA Project and certain power purchase agreements between
WTMPA and SPS; (2) resolving disputes regarding the composition and voting power of the WTMPA board; and (3) settling the
outstanding, disputed claims for costs incurred by the Cily on behalf of WTMPA. The WTMPA Settlements include the
following agreements; (a) all of the capacity and energy in the WTMPA Project was allocated to the City or its assignee (under
the 1998 WTMPA Project agreements. the City had an 85% allocation of the energy from the WTMPA Project, although it had
historically taken substantially all of the energy and dispatched purchased energy to the other Member Cities to meet their
needs)~ (b) the City assumed responsibility for the cost of operation and maintenance of the WTMPA Project; (c) the City agreed
to annually pay WTMPA 100% of the debt service due on the WTMPA Bonds (under the basic agreement ofWTMPA, the
agency's Power Sale Contract, each of the other Member Cities has joint and several liability for the WTMPA Bonds and will
remain contingently liable in that capacity in the event the City should fail to make a bond payment obligation); (d) provision
was made for title to the WTMPA Proje<:t to transfer to the City upon the retirement of the WTMPA Bonds; and (e) the City
released all of its claims associated with costs that it had asserted was owed in connection with the energy costs incurred by the
City for the Member Cities during the period when the WTMP A Project was delayed in coming online. In addition. the
WTMPA Settlements include a purchased power allocation under which the City has agreed to allocate to the other Member
Cities energy requirements nominated by the other Member Cities from other agency purchased power agreements, and the City
agreed to schedule such power for the other Member Cities. The WTMP A Settlements repealed certain power sales agreements
and operating agreements entered into by the parties in connection with the issuance of the WTMPA Bonds duu were associated
with the operation of the WTMPA Project. The WTMPA Settlements eliminated the position of WTMPA chairman, but the
relative voting powers of the Member Cities were not modified. Under the WTMPA rules and regulations, each Member City
appoints two members to the WTMP A Board. each of which has an equal vote (certain actions of the WTMP A Board require a
six vote ·'super majority'), but.. in addition to the affirmative votes of the board members. the rules and regulations provide. in
effect.. a veto right over WTMPA Board actions based upon the amount of net energy consumed by each Member City. As
LP&L takes substantially all of dte energy from WTMPA resources, it has a veto over certain of the actions of the WTMPA
Board, including adoption of a budget, certain energy sales and the amendment of the agency's bylaws.
The City believes the comprehensive settlement agreement modifies the principal WTMPA agreements in a manner that better
reflects the historical manner in which the Member Cities have engaged in energy activities. In addition, while LP&L will
continue to schedule power deliveries for all Member Cities, the contract administration of WTMPA agreements has been
simplified by the acquisition by the City of the WTMPA Project and the defeasance ofthe WTMPA Bonds. As noted under
··Discussion of Recent Financial and Management Events· FY 2003 Audit Restatements, Reclassifications and Internal Controls
Issues.~ for FY 2003 and subsequent years. WTMPA has been classified as an enterprise fund of the City, which reflects the
extensive associations between WTMPA and the City.
>New Full Requirements Energy Agreement ... In June 2004. WTMPA entered into a IS year full requirements wholesale
power agreement (the "'New Power Agreement'") with SPS. The New Power Agreement is effe<:tive July 1, 2004. and replaces a
series of existing agreements between WTMPA and SPS and the City and SPS. which had expiration dates in 2004 and 2005.
Under the New Power Agreement. SPS or its permitted assigns is obligated to provide all energy requirements for each of the
Member Cities ofWTMPA, including the City, during the tenn of the agreement, which tenninates on June 30,2019. As in past
WTMPA agreements, and in accordance with the WTMPA Settlements, LP&L will schedule energy purchased under the
agreement for each of the other WTMPA Member Cities. The New Power Agreement includes a fixed demand charge and
energy components, with a pass through of SPS's fuel cost. which is billed in accordance with SPS's FERC approved fuel cost
adjustment schedule. Under the tenns of the New Power Agreement, the fixed demand charge will increase incrementally. in
most years annually. during the tenn of the agreement based upon a predetermined schedul.e set forth in the New Power
Agreement SPS mny terminate the agreement upon the occurrence of an adverse regulatory action under which SPS is required
to sell generation assets, and WTMPA may terminate the agreement upon notice and during the final four years of the scheduled
termination date if WTMPA acquires an interest in replacement, coal-fired generation. Each party may require adequate
assurances of perfonnance whenever there is a reasonable basis therefor.
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The New Power Agreement represents a significant departure for LP&L, in that it reflects a long-term commitment to take al\ of
its energy from SPS. The contract reflects a decision of the City to abandon the role of power generator. although, as described
below, in connection with the consummation of the New Power Agreement the City has entered into two unit contingency
agreements (the "Unit Contingency Agreements'} with SPS that wtll require LP&L to maintain its generation units for dispatch
by SPS. Among the implications tor LP&L of the New Power Agreement are that LP&L has resolved its long-term power
supply issues. and lessened its exposure to fuel price volatility, although SPS will pass through its fuel charges to LP&L on a
monthly billing basis. SPS. in tum. may not pass its fuel costs through to its retail customers in the City more frequently than
once every six months under current State law that requires SPS to seek a rate order from the PUC before increasing retail fuel
cost charges. As a result, the New Power Agreement provides the possibility of both advantages and disadvantages to the City
with respect to cash Jlow, particularly if the City determines to match its FCA to changes in SPS's fuel adjustment. as it has
generally done in the past. According to information tiled with various regulatory agencies. the City believes that over 60% of
the energy that it purchases from SPS is from coal generation. This fuel mix was a signifrcant factor in the City's determination
to approve the New Power Agreement by WTMPA. In the event that gas prices should decline over the term of the Agreement.
the City believes that SPS has the llexibility to switch a larger portion of its generation to gas, including through the use of the
City's generation units in accordance with the Unit Contingency Agreements.
With respect to the competitive posture of the City in light of the long-term commitment of the New Power Agreement the City
notes that under current market conditions. and taking into account the secondary benefits of the agreement, including future
savings associated with reduced personnel and maintenance costs as a result of the shift from being an active electric generator to
being a passive generator (for SPS under the tenns of the Unit Contingency Agreements). the wholesale price of the purchased
energy, together with the other financial benefits of the Unit Contingency Agreements and the possible receipt of revenues under
the new WTMPA gas agreement described below, permits the City to compete favorably with SPS.
An additional benefit of the New Power Agreement is that it will permit the City to increase its efforts in developing LP&L's
distribution business. In light of recent rate structure changes implemented by both the City and SPS that requi re new
developments in the City to fund electric infrastructure through a development charge paid when the development is platted. new
principals in developments are choosing to install only one electric distribution infrastructure. Since this new development
charge was implemented in FY 2003. all major new developments in the City have selected LP&L as the electric distributor,
which positions the City as a distributor of energy to those developments in the future. even though the retail provider of such
energy could be a utility other that LP&L and other electric providers could choose to build their own distribution infrastructure
to serve the developments.
Perhaps the greatest risk to LP&L from the New Power Agreement is that given the term of the agreement and the dynamic
nature of electric competition. over time the wholesale price of the purchased energy will not permit the City to obtnin the
favorable margins that are currently being achieved by the City. While the City does not believe that the area served by LP&L
will be opened in the short-tenn to retail deregulation. as is the case in other parts of the State. that could occur during the term
of the New Power Agreement. While there are significant uncertainties as to how such deregulation, if ir occurs, would be
administered. it is possible that new retail energy providers could enter the market during the tenn of the New Power Agreement.
In addition. by tying its energy requirements solely to SPS. and though the other new agreements discussed in this section, the
City has significantly increased its dependence on SPS as a counterparty to vital agreements relating to the operation and
financial condition of LP&L. Counterparty risk is risk associated with the counterparty's financial condition. credit ratings.
changes in business strotegies and other quantitative and qualitntive measures that could atfect the ability of the counterparty to
pertorm its obligations to the City. Both the long-term Unit Contingency Agreement and the New .Power Agreement provides
the City the right to demand certain credit assurances from its counterparty if it has reasonable grounds for insecurity regarding
the performance of any contract obligation.
The City was relatively unrestrained by existing gas purchase and transportation agreements in making the move from a
genernti{)n utility to a full requirements energy purchase business strategy, as only one contract. for gas delivery, was in place
that required the City to pay a fixed price component for gas transportation irrespective of whether the City purchases gas. That
contract. between the City and ConocoPhillips, expires in February 2008. In connection with the Unit Contingency Agreements.
the City has in place standby gas purchase agreements that can be used to supply LP&L with gas to the extent that SPS calls
upon the units. 81ld the City will receive an otTset against its minimum gas transportation requirements from ConoooPhil\ips for
any gas purchased by SPS under the new WTM PA gas contract if any, described below. While such offset will be subject to the
same risks described below with respect to the new gas contract. the City does not anticipate that it will incur substantial costs in
connection with prior contractual commitments relating to the purchase and transportation of natural gas as a result of the new
LP&L business strategy.
>Other New Energy Related Agreements ... As noted above. in connection with the negotiation of the New Power Agreement.
the City negotiated the Unit Contingency Agreements, which consi~-c of two agreements that dedicate the City's generation
capacity solely to SPS, which. subject to certain customary conditions. including reasonable notice and run times. has the right to
call upon one or more of the generntion units owned or controlled by LP&L, from time to time to meet energy requirements of
SPS. Including the WTMPA Project. all of the capacity of which. in accordance with the WTMPA Settlements. is dedicated to
LP&L. tile City has dedicated generation capacity of219 megawatts ("MW") to SPS under the Unit Contingency Agreements.
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The most fuel efficient units within that capacity are the 39 MW capacity of Massengale Unit 8 and the 21 MW capacity of the
Brandon Unit I ( .. Brandon Station''), which is located on the campus of Texas Tech (the ""New Units''}. The remaining capacity
is in twelve older units (the "'Older Units'). With respect to the New Units, SPS may dispatch those units for a three year tenn
ending June 30, 2007; the tenn of the Unit Contingency Agreement for the Older Units is fifteen years, matching the tenn of the
Power Purchase Agreement, with an expiration date of June 30, 2019. Aside from the differences in units covered, the tenn of
the agreements and certain tennination provisions in the Older Unit agreement, each Unit Contingency Agreement is
substantially identical. The Unit Contingency Agreements include a demand charge, which must be paid irrespective of whether
SPS chooses to take energy from the City's units, and an energy charge that is based upon the output of any of the City's units
that is dispatched for SPS. While the amount of the energy charge will depend upon the energy taken by SPS from the City's
generation units, if any, the Unit Contingency Agreements provide an annual minimum payment by SPS to the City of $6.3
million.
> Natuml Gas Sale Agreement ... Subsequent to its execution of the New Power Agreement, WTMP A and other parties entered
into a series of agreements (collectively, the -New WTMPA Gas Agreements") under which WTMPA may acquire natural gas
and effectively exchange it tor electric power to realize a cost savings. Under the New WTMPA Gas Agreements, WTMPA may
purchase natural gas from Texas Municipal Gas Corporation (''TMGC") at below-market prices and sell the gas to SPS in return
tbr a market-priced credit (reduced by nominal administrative and incentive fees) against payments due from WTMPA under the
New Power Agreement The net savings, if any, will be applied proportionately to reduce the power charges of WTMPA's
Member Cities, including the City. TMGC is a Texas public facility corporation created for the purpose of acquiring producing
natural gas reserves and selling its production to municipal entities such as WTMPA and LP&L. The City's standby gas
purchase agreement, mentioned above in connection with the Unit Contingency Agreements, is also with TMGC.
Under the tenns of the New WTMPA Gas Agreements, SPS is not obligated to purchase gas from WTMPA unless natural gas
producers, dealers, or other suppliers execute contracts to sell gas to TMGC's upstream gas provider, those suppliers offer to sell
such gas on tenns that SPS considers at least as advantageous as those available from other producers and dealers. and the
aggregate quantities sold do not exceed either SPS's Texas gas requirements or the quantities available to WTMPA from TMGC
at a discount from the offered prices or the quantities needed to generate WTMPA's electric requirements. WTMPA's market·
price credit is based on the prices offered by the qualitied suppliers. and its supply of gas is dependent on sales by the qualified
suppliers at those prices. TMGC has secured contracts with five suppliers (Conoco Philips, Coral Energy, NGTS, Concorde
Energy, and Tenaska). There can be no assurance that sufficient qualified suppliers will contract to sell gas, or that they will
offer to do so on sufficiently advantageous tenns. to supply all or any portion of WTMPA's gas requirements under the New
WTMPA Gas Agreements. In addition. the discount now offered by TMGC may be reduced as necessary to enable it to comply
with financial covenants, although the discount has remained essentially constant for three years. Moreover, TMGC's reserves
are not expected to be able to meet WTMPA's gas requirements tbr discount gas beyond 2006, although TMGC has agreed to use
reasonable efforts to acquire additional reserves to do so. For these and other reasons, there can be no assurance that WTMP A
will be able to realize savings in any amount or for any tenn for the benefit of its members under the New WTMPA Gas
Agreements. Nevertheless. the City believes that the New WTMPA Gas Agreements contain sufficient economic incentives to
induce SPS to qualify sutlicient suppliers and to accept gas under the agreements up to the pennitted quantities, and that the
TMGC discount will continue to hold. Accordingly, the City has included S4.1 million in gas rebate income in the electric
system's FY 2005 operating budget That amount asswnes that the maximwn quantities of gas will be acquired and credited by
SPS under the New WTMPA Gas Agreements in FY 2005; City management is of the view, however, that it is doubtful the
rebate budgeted will be achieved.
> Wholesale Energy Agreement with Texas Tech ... As noted above, Texas Tech, a four year State institution of higher
education with a student enrollment ofalmost29.000. is the largest customerofL.P&L in terms of both energy sold and revenues
generated. In 1990, the City constructed Brandon Station on the campus ofTexas Tech. The Brandon Station is a cogeneration
plant and waste heat is used to produce steam which in the past has been sold to the University. !n addition. the City owns the
electric distribution system on the campus of Texas Tech. Since 1998, the City has sold energy to Texas Tech under the tenns of
a power sale agreement (the "''ld Texas Tech Agreement'') that included pricing tenns for the sale of steam and penalties in the
event that the City was unable to produce steam in accordance with the agreement. As described above. beginning in the
Summer of 2003, as a result of high gas prices, the City generally discontinued the production of energy from its generation
units. including Brandon Station, therefor requiring Texas Tech to use its boilers for the generation of steam, as a result of which
Texas Tech incurred increased costs for natural gas for its boilers. In the Spring of2004, Texas Tech presented the City with a
claim for stipulated damages under the tenns of the Old Texas Tech Agreement. The parties agreed to mediate the claim.
Following that mediation, the City and Texas Tech commenced new negotiations for an energy sales agreement (the "'New Texas
Tech Agreement"). The negotiations have been concluded. although at present the contract has not been completed for execution
by the parties. In general terms. Texas Tech has agreed to continue to purchase energy from the City at a price that will provide
the City with a small rate of return, and is paying for energy usage at the rates provided in the New Texas Tech Agreement. The
City has agreed that steam produced at Brandon Station. if any. will be delivered to Texas Tech at no charge. The City has also
agreed with Texas Tech that it may tenninate the agreement upon reasonable notice to the City, in which event the City will
wheel energy to Texas Tech in accordance with an energy delivery charge. The City is of the view that the New Texas Tech
Agreement has resolved the dispute with its largest customer on tenns that are mutually beneficial for the parties.
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FY 2005 Budget
Geneml Fund ... The City Council adopted the FY 2005 budget on September 28. 2004. The City's FY 2005 budget for the
General Fund is balanced with $98 million in total revenues and expenses. The budget projects that sales tax revenues will
produce S2o/o of total tax revenues (tax revenues represent 86% of the General Fund's total operating revenues). while ad valorem
tax revenue is budgeted to produce 39o/o of total tax revenues. The FY 2004 budget included a 41% to 46% mix of sales tax
revenues to ad valorem tax revenues. The higher proportion of sales tax revenue to ad valorem tax revenue for FY 2005 versus
FY 2004 is attributable to the one quarter cent sales tax for ad valorem tax reduction that was approved by the voters of the City
on November 4. 2004. Revenues from that sales ta;< will begin to be received by the City in October 2004. This shift in General
Fund revenue sources represents a greater dependence upon sales tax receipts, which is generally a more volatile revenue source
than ad valorem taxes. However. the City's sales tax receipts have not demonstrated the volatility that has been experienced in
other parts of the State. especially following the events of September II. 2001. As shown in Table 14 .. Municipal Sales Tax
History:• the City's sales tax receipts have increased each year over the past six years.
In FY 2005. the City's total tax rate will decline from $0.5457 per SIOO taxable assessed valuation in FY 2004 to $0.4597. The
largest decline in the tax rate is in the portion of the tax levied for the General Fund (see ·'Table 4 -Tax Rate, Levy and
Collection History'"). The City's tax roll increased $683 million, or 8.6%, from FY 2004 to FY 2005. In keeping with current
City Council policy that taxes not increase solely as a result of the increase in taxable value from tax reappraisals of existing
properties. a portion of the $402 million of the growth attributable to reappmisals was discounted for purposes of determining the
tax mte for FY 2005. Other factors used to determine the ta.x rate are revenues from the new quarter cent sales tax and a 2.7%
cost of living adjustment. as measured by the consumer price index.
The increase in sales tax revenues is intended to offset reduced fumchise fee income and ad valorem tax income for the General
Fund during FY 2005. Total transfers to the General Fund from enterprise and internal service funds are budgeted to increase
only marginally, by Sl million. while transters out increase by S 1.7 million. On the expenditure side, administrative services.
street lighting, financial services. fire, police. general government. human resources and planning and transportation budgets are
comparable with FY 2004 budget amounts, with total General Fund opemting expenditures increasing by $1.65 million over the
FY 2004 budget.
Entemrise Funds ... During the Summer of2004 the City made significant changes to City management The new management
is presently assessing available resources for capital expenditures in the City's enterprise funds, and it is reevaluating the City's
utility rate structure and its existing capital expenditure plans. It is possible that the FY 2005 budget summarized below will be
amended during the year to reflect this evaluation. and that the FY 2005 budget could be amended in a manner that increases or
decreases planned spending for enterprise fund capital improvements. the use or contribution to reserves and the rate structure for
various enterprise funds.
The f'Y 2005 budget for the solid waste fund is balanced with $15.5 million of revenues and expenditures. including an increased
transfer to the General Fund of $1.1 million. The FY 2005 budget retlects $22.5 million in sewer fund revenues and
expenditures. with $0.45 million earmarked as a contribution for sewer fund capital expenditure and an increase of$0.65 million
in the transfer to the General Fund. The sewer budget includes a planned use of$2.3 million of fund reserves. The sewer budget
reflects the third year of a planned overall tour year rate increase. with rates increasing by 5% each year. The water fund budget
for FY 2005 is balanced at $39.8 million of revenues and expenditures. which reflects a 17% increase in the water fund budget,
including a planned use of $4.2 million of fund reserves. Operating expenses increase by $1.5 million. spending tor water
system improvements increase by $0.9 million. debt and other expenditures of the water fund increase by $2.8 million. The
increase in the water budget reflects the third ye:u of a planned four year rate increase. with mtes increasing by 3% each year.
Water transfers to the General Fund are comparable to FY 2004 and the water budget retlects a $0.3 million net increase in
reserves. With respect to the electric fund. the revenues and expenditures increase by $92 million and $82 million. respectively
over the prior year mainly as a result of gas sale revenues and expenditures under the new gas contract between TMGC and
WTMPA. The FY 2005 budget for the stormwater fund is balanced at $7.3 million of revenues and expenditures. including a
planned use of$0.2 million of fund reserves.
Proposed FY 2006 Budget
Currently. City Management is developing the 2005-{)6 fiscal year operating budget and Capital Improvement Program. This
process includes the ongoing evaluations of staffing levels and operating expenditures to ensure the most etTective and etlicient
use of public resources. Goals for the upcoming budget include additional stalling in public safety and ensuring the solvency of
the water and sewer utilities.
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TAX INFORMATION
AD V ALOR£M T A.X LAw ••• The apprnisal of property within the City is the responsibility of the Lubbock County Central Appraisal
District (the ·'Approisal District''). Excluding agricultural nnd open-space land, which may be taxed on the basis of productive
capacity, the Appraisal District is required under the Property Tax Code (defined below) to approise all property within the Appraisal
District on the basis of I OOo/o of its mari:et value nnd is prohibited from applying any assessment ratios. In determining market value
of property. different methods of appraisal may be used. including the cost method of appraisal. the income method of appraisal and
maricet dam comparison method of appraisal and the melhod considered most appropriate by the chief appraiser is to be used. State law
further limits the appraised value of a residence homestead for a tax year to an amoWtt not to exceed the lesser of(l) the maricet value of
the property, or (2) the sum of (a) IOo/o of the appraised value of the property for the last year in which the property was appraised for
taxation times the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in
which the property was appraised plus (c) the market value of all new improvements to the property. The value placed upon property
within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board
of Directors of the Appraisal District. The Appraisal Disnict is required ro review the value of property within the Appraisal District
at least every three years. The City may require annual review at its own e.'(pense. and is entitled to challenge the determination of
appraised value of property within the City by petition filed with the Appraisal Review Board
Reference is made to Title I of the V.T.C.A .• Tax Code (the ·'Property Tax Code}, for identification of property subject to taxation;
property exempt or which may be exempted !Tom ta:<ation. if claimed; the appraisal of property for ad valorem taxation purposes;
and the procedures nnd 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 persolllll property !Tom ad valorem taxation.
Under Section 1-b. Article Vlll. and State law, the governing body of a political subdivision. at its option,. may gr1lllt: (I) An
exemption of not less than $3.000 of the market value of the residence homestead of persons 65 years of age or older and the disabled
from all ad valorem taxes thereafter levied by the political subdivision; (2) An exemption of up to 20% of the marl.:et value of
residence homesteads. The minimwn exemption Wtder this provision is $5,000.
In the case of residence homestead exemptions granted under Section l·b. Article Vlll, ad valorem taxes may continue to be
tevied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt
if cessation of the levy would impair the obligation ofthe contract by which the debt was created
State law and Section 2. Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or
children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal
property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000.
Effective January I. 2004. under Article VIII and State law, the governing body of a county, municipality or junior college
district, may provide that the rota! amount of ad valorem taxes levied on the residence homestead of a disabled person or persons
65 years of age or older will not be increased above the amount of taxes imposed in the year such residence qualified for such
limitation. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or junior
oollege district. an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on
residence homesteads of persons 65 years of age or older or who are disabled. Upon providing for such exemption, such freeze
on ad valorem taxes is transferable to a different residence homestead within the taxing unit and to a surviving spouse living in
such homestead who is disabled or is at least SS years of age. If improvements (other than maintenance or repairs) are made to
the property, the value of the improvements is taxed at the then current tax rate. and the total amount of taxes imposed is
increased to reflect the oew improvements with the new amount of taxes then serving as the ceiling on taxes for the foUowing
years. Onoe established. the tax rate limitation may not be repealed or rescinded. The City has established such a limitation on
ad valorem taxes.
Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section l·d-1), including
open-space land devoted to farm or ranch purposes or open-space lnnd 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 qualif~ed under both Section 1-d
and 1-d-1.
Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body
of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation.
Article VIII, Section 1-j, provides for ''freeport property" to be exempted from ad valorem taxation. Freeport property is defined as
goods detained in Texas for 175 days or less for the purpose of assembly, stornge, manufacturing, processing or fabrication.
Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal.
The City may create one or more ta.x increment financing :z.on.es, under which the tax values on property in the zone are "'frozen'· at
the value of the property at the lime of creation of the zone. Other overlapping taxing units may agree to contribute all or part of
27
future ad valorem taxes levied and collected against the value of property in the zone in excess of the ""frozen value .. to pay or
tirumce the costs of certain public improvements in the zone. Taxes levied by the City against the values of real property in the
zone in excess of the ··frozen value" are not available for general city use but are restricted to paying or financing ''project costs-
within 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 1be abatement agreement could Last for a
period of up to I 0 years.
EFFECTIVE TA.X RATE AND ROLLBACK TAX RAn •.. By each September I or as soon thereafter as procticable, the City
Council adopts a tax rate per $100 taxable value for the current year. The City Council is required to adopt the annual tax rate
for the City before the later of September 30 or the 60'h day after the date the certified approisal roll is received by the City. If
the City Council does not adopt a tax rote by such required date the tax rate for that tax year is the lower of the ··effective tax
rate" calculated for that tax year or the tax rnte adopted by the City for the preceding tax year. The tax rate consists of two
components: (I) a rote for funding of maintenance and operation expenditures and (2) a rate for debt service.
Under the Property Tax Code, the City must annually calculate and publicize its .. effective tax rate" and ·'rollback tax rate"'. A
tax rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or the etTective tax rnte until two
public hearings are held on the proposed tax rate tollowing a notice of such public hearing (including the requirement that notice
be posted on the City's website if the City owns, operates or controls an internet website and public notice be given by television
if the City has free access to a television channel) and the City Council has otherwise complied with the legal requirements for
the adoption of such tax rate. lfthe adopted tax rate exceeds the rollback tax rnte the qualified voters of the City by petition may
require that an election be held to determine whc:ther or not to reduce the tax rote adopted for the current year to the rollback tax
rate.
"Effective tax rate"' means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values
(adjusted). -Adjusted'' means lost values are not included in the calculation of last year's taxes and new values are not included
in this yem's taxable values.
''Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's
values (adjusted) multiplied by l.08 plus a rate that will produce this year's debt service from this year's values (unadjusted)
divided by the anticipated tax collection rate.
The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize
an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective ta.x rate and the
rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year.
Reference is made to the Property Tax Code for definitive requirements for the levy nnd collection of ad valorem ta.xes and the
calculation of the various defined tax rates.
PROPERn AssESSMENT AND TAX PAYMENT ..• Property within the City is genernlly assessed as of January I of each year.
Business inventory may, at the option of the taxpayer, be assessed as of September. Oil and gas reserves are assessed on the
basis of a valuation process which uses an average of the' daily price of oil and gas for the prior year. Taxes become d11e October
I of the same year, and become delinquent on February I of the following year. Taxpayers 65 ye.ars old or older are pennitted by
State law to pay taxes on homesteads in four installments with the first due on February I of each year and the final installment
due on August I.
PINAL TIES AND IN1'l:RF.ST • • . Charges for penalty and interest on the unpaid balance of delinquent taxes are made as tbllows:
Cumulative Cumulative
Month Penalty Interest Total
February 6% 1% 7%
March 7 2 9
April 8 3 11
May 9 4 13
June 10 5 IS
July 12 6 18
After July. penalty remains at 12%, and interest increases at the rate of lo/o 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 ln general. property subject to the City's lien may be sold. in whole or in parcels.
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pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against
an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities.
including governmental units, goes into effect with the filing of any petition In bankruptcy. The automatic stay prevents
governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and
obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court In many
cases post-petition ta.xes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court.
CITY APPLICATION or TAX CODE ... The City grants an exemption to the market value of the residence homestead of persons
65 years of age or older of$16,600; the disabled are also granted an exemption of$10,000.
The City has oot granted any part of the additional exemption of up to 20% of the market value of residence homesteads; the
minimum exemption that may be granted under this provision being SS,OOO.
The City has established the tax freeze on residence homesteads of disabled persons and persons 65 and over.
See Table I for a listing of the amounts of the exemptions described above.
Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debL
The City does not tax nonbusiness personal property; and the Appraisal District collects taxes for the City.
The City does not permit split payments of taxes. and discounts for early payment of taxes are not allowed by the City, although
permitted on a local-option basis by the Property Tax Code.
In the past. the City has taxed freeport property. although beginning with the 1999 tax year the City has exempted freeport
property from taxation.
The City collects an additional one-eighth cent sales tax for reduction of ad valorem taxes. The City held an election on
November 4. 2003 to increase thi s tax by one quarter cent. for a total of three eighths of a cent The rate increase became
effective on October I, 2004.
The City has adopted tax abatement policies, as described below.
TAX ABATEMENT Poucu:s ... The City has established a tax abatement program to encourage economic development. In order
to be considered for tax abatement. a project must be located in a reinvestment zone or enterprise zone (a commercial project
must be in an enterprise zone) and must meet several criteria pertaining to job creation and property value enhancement. The
City has established three enterprise zones. the north zone. of approximately 18.6 square miles, the south zone, of approximately
15.7 square miles, and the intemationa.l airport zone. of approximately 10.3 square miles. At present, there are 20 active
enterprise projects and tax abatements, principally in the northeast and southeast sections of the City. ln accordance with State
law, the City has adopted policies for granting tax abatements. which provide guidelines for tax abatements for both industrial
and commercial projects. The guidelines for industrial and commercial projects are similar, except that qualifying industrial
projects mny receive a ten year abatement. while qualil)ting commercial projects are limited to five year tax abatements.
Although older abatements mode by the City were given full (I 00%) ta.'l abatement, since 1997 the City has negotiated
abatements on a declining percentage basis, with a portion of the tax value being added to the City's tax roll each year during the
life of the abatement. The Cicy's policies provide a variety of criteria that affect the terms of the abatement. including the
projected life of the project. the type of business seeking the abatement. with certain businesses targeted for abatement, the
amount of real or personal property to be added to the tax rol~ the number of jobs to be created or retained, among other factors.
The policies disallow abatements for certain categories of property. including real property, inventories, tools, vehicles, aircraft,
and housing. Each abatement policy provides for a recapture of the abated taxes if the business is discontinued during the term
of the agreement except for discontinuances caused by natural disaster or other factors beyond the reasonable control of the
applicant. For a description of the amount of property in the City that has been abated for City taxation purposes, see '"Table I -
Valuations, Exemptions, and Genernl Obligation Debt"
TAX INCREMENT FINANCING ZoNlS ... Chapter 3 I 1. Texas Tax Code. provides that the City and other taxing entities may
designate a continuous geographk area in its jurisdiction as a TIF if the area constirutes an economic or social liability in its
present condition and use. Other overlapping taxing units may agree to contribute all or a portion of their taxes collected against
the "'Incremental Value" in the TIF to pay for TIF projects. Any ad valorem taxes relating to growth of the tax base in a T1F
above the frozen base may be used only to finance improvements within the TIF and are not available for the payment of other
tax supported debt of the City and other participating taxing units. Together with other taxing units. the City participates in two
TIFs, the Central Business District Reinvestment Zone (the ·'Downtown TIP') and the North Overton Tax Increment Financing
Reinvestment Zone (the -North Overton TIF"').
The Downtown TIF covers an approximately 0.71 square-mile area which includes part of the central business district and abuts
the North Overton TIF. The base taxable values of the TIF are frozen o.t the level of taxable values for 2001, the year of creation
29
at Sl0\,376,054. In FY 2005. the Downtown TIF has a taxable value of$117,046,263 before taking into account tax abatements
nnd exemptions. After tax abatements and exemptions, the tax value in the TIF is $114,147.891. In addition to the City, the
County, County Hospital District and the High Plains Underground Water Conservation District (collectively. the .. Taxing
Units") participate in the Downtown TIF. Given the relative tax rates of the participants. it is nnticipated that the City will be the
largest contributor to the tax increment fund if there is growth from the frozen base. The Downtown Tlf was created pursuant to
City ordinance and official action of the other participating taxing entities and is to expire in 2021.
In addition to the Downtown TIF, the City enacted an ordinance in 200 I establishing the North Overton TIF. Each of the other
Taxing Units in the Downtown TIF also participate in the North Overton TIF. As is the case with the Downtown TIF, the taxes
levied by the City in the FY 2005 represent approximately 54.8% of all taxes levied by all participating Taxing Units. The City
ordinance establishing the North Overton TIF provides that the TIF wilt tenninate on December 31. 2031 or at an earlier time
designated by subsequent ordinance of the City Council. The North Overton TIF consists of approximately 325 acres near the
Central Business District of the City. The frozen tax base for the North Overton TIF was established as of January I. 2002 at
$26,940,604. During the first yenr of its existence, there was no tax increment in the zone. due to the demolition of existing
structures as land was being acquired nnd prepared for future development. As of January I, 2004, there was approximately
Sl 0,750,157 of tax increment value in the North Overton TIF.
TABU I -VALUATION, [XEMf'TIONS AND GENERAL OBLIGATION DEBT
2004 Market Valuation Established by Lubbock Central Appraisal District
Less Exemptions/Reductions at I 00% Market Value:
Residential Homestead Exemptions
Homestead Cap Adjustment
Disabled Veterans
Agricultural/Open-Space Land Use Reductions
Pollution Exemptions
Solar and Wind·po.wered Exemptions
Freeport Exemptions
Tax Abatement Reductions111
Historical Exemption
2004 Taxable Assessed Valuation
City funded Debt Payable from Ad Valorem Taxes
General Obligation Debt (as of 6·28-05) 121
The Bonds
Total Funded Debt Payable from Ad Valorem Taxes
Less: Self Supporting Debt (as of6·28-05) <ll
Waterworks System General Obligation Debt
Sewer System General Obligation Debt
Solid Waste Disposal System General Obligation Debt
Drainage Utility System General Obligation Debt
Tax Increment Financing General Obligation Debt
Electric Light and Power System General Obligation Debt
General Purpose funded Debt Payable from Ad Valorem Taxes <41
General Obligation Interest and Sinking fund as of 4-30-05
Ratio Total Funded Debt to Taxable Assessed Valuation
Ratio General Purpose funded Debt to Taxable Assessed Valuation
2005 Estimated Population • 209.120 (S)
Per Capita Taxable Assessed Valuation • $41.432
s 202,962,443
97.892.885
13,497.140
53.151.155
2,706.800
80.992
62,093.896
63,387,926
144.359
$ 291,725,000
43.080.000
$ 102.931,413
39.888,274
8.052,027
72.485.000
3.675.000
43.340.000
Per Capita Total Funded Debt Payable from Ad Valorem Taxes-$1.601
Per Capita General Purpose Funded Debt Payable from Ad Valorem Taxes· $308
(1) See above, "Tax Information-Tax Abatement Policy''.
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$ 9.160, 109,105
495.918.196
$ 8.664.190.909
$ 334.805.000
270.371.714
$ 64,433.286
s 1.433,694
3.86%
0.74%
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(2) The statement of indebtedness does not include outstanding $24.840,000 Electric Light and Power System Revenue Bonds,
as these Bonds are payable solely from the Net Revenues of the City's Electric Light and Power System. Includes the General
Obligation Refunding Bonds, Series 2005 (the .. Refunding Bonds") expected to be delivered on July 28, 2005. Excludes
outstanding bonds and certificates of obligation to be refunded by the Refunding Bonds.
(3) As a matter of policy. the City provides debt service on general obligation debt issued to fund improvements to its
Waterworks System. Sewer System. Solid Waste System and Drainage System from surplus revenues of these Systems (see
''Table 8A-Pro-Forma General Obligation Debt Service Requirements", "'Table 8B ·Division of Debt Service Requirements''.
·'Table 9 -Interest and Sinking Fund Budget Projection,.. and ·"fable 10 ·Computation of Self-Supporting Debt").
.. Waterworks System General Obligation Debt'' includes $1 02,931.413 principal amount of outstanding general obligation bonds
and certificates of obligation that were issued to finance Waterworks System improvements, and that are being paid. or are
expected to be paid. from Waterworks System revenues. A portion of the proceeds of the Bonds will refund the City's obligation
to pay debt service on the BRA Bonds in connection with the construction of Lake Alan Henry (see -The Bonds-Defeasance of
the BRA Bonds''). It is expected after the BRA Bonds are defea.sed that the City will take title to Lake Alan Henry. The City has
no outstanding Waterworks System Revenue Bonds but has obligated revenues of the Waterworks System under water supply
contracts .
.. Sewer System General Obligation Debt" includes $39,888.274 principal amount of general obligation bonds and Bonds of
obligation that were issued to finance Sewer System improvements, and that are being paid. or are expected to be paid. from
Sewer System revenues. The City has no outstanding Sewer System Revenue Bonds.
·'Solid Waste Disposal System General Obligation Debt'' includes $8,052,027 principal amount of general obligation debt that
was issued for Solid Waste System improvements, and that is being paid, or is expected to be paid, from revenues derived from
Solid Waste service tees. The City has no outstanding Solid Waste Disposal System Revenue Bonds.
·'Drainage Utility System General Obligation Debt'' includes $72.485,000 principal amount of general obligation debt that was
issued for Drainage System improvements, and that is being paid. or that is expected to be paid. from revenues derived from
Drainage Utility System fees. The City has no outstanding Drainage Utility System Revenue Bonds.
~Tax Increment Financing General Obligation Debt" represents $3,675,000 principal amount of generaJ obligation Tax
Increment Certificates of Obligation issued for construction of improvements in the North Overton TIF, and is being paid. or is
expected to be paid. from revenues derived from the Pledged Tax Increment Revenues. The City has no outstanding Tax
Increment Financing Revenue Bonds. However. for FY 2004 the City projects that the incremental tax revenue available to
cover debt service on the existing Tax Increment Certificates of Obligation will cover approximately 30% of such debt, and that
for FY 2005 (based upon the January I. 2004 tax roll), the incremental tax revenue available to cover debt service on the existing
Tax Increment Certificates of Obligation will cover approximately 60% of such debt. In FY 2006. based upon development
projections that the City believes to be reasonable. but which are dependent in part on future economic conditions and other
factors that the City can not control and as to which it can give no assurances, the City anticipates that tax increment revenues
will be adequate to cover debt requirements on the existing Tax Increment Certificates of Obligation. In the interim, the City
intends to make an interfund loan to cover the debt service. and if the projected development in the North Overton TIF proceeds
as expected, the City would repay such loan from revenues received in future years. The North Overton master plan projects
additional debt to be issued by the City for infrastructure improvements in the TIF. If that occurs. there would likely be years in
which the TIF would not produce revenues in amounts sufficient to cover all debt issued for it. at least until the TIF bas reached
full bui I d-o ut status.
"'Electric Light and Power System General Obligation Debt'' includes $43,340.000 principal amount of general obligation Bonds
and refunding bonds that were issued to finance Electric Light and Power System improvements and to refund certain Electric
Light and Power System Revenue Bonds.
(4) ''General Purpose Funded Debt Payable from Ad Valorem Taxes" includes $64,433,286 of general obligation debt and
$881,250 principal amount of outstanding Tax and Airport Surplus Revenue Bonds of Obligation on which debt service is
provided from Passenger Facility Charge ('·PFC") revenues (see Footnote (2), "'Table 9 -Interest and Sinking Fund Budget
Projection").
(5) Source: City of Lubbock. Texas.
31
TABU: 2 -TAXABLE ASSESSED V ALtiATIONS BV CATEGORY
Ta.\'llble Appraised Value for Fiscal Year Ended September 30.
2005 2004 2003
%of ~1i of ''G of
Category Amount Total Amount Tot;d Amount Tot :!I
Real, Residential. Single-Family $5,156,169,884 56.29% $4,690.158,161 55.50% $4,282.214.635 56.78%
Real. Residential. Multi-Family 614,631,057 6.71% 561.569.488 6.64% 455,993.262 6.05%
Re:d, V:JC311t Lotstrracts 135,464.357 1.48% 108,625.954 1.29% 93,473,144 1.24%
Real. Acreage (land Only) 64,528,231 0.70% 65,880,410 0.78% 59.644,977 0.79%
Real. Farm and Ranch Improvements 10,391,139 0.11% 10.835,088 0.13% 11.391,782 0.15%
Real, Commercial and lndustri.U 1,701.145,839 18.57% 1,638,846, 765 19.39% 1.370,730.397 18.18%
Real, Oil, Gas and Ott1er Mineral Reserves 11,298,200 0.12% 8,923.810 0.11% 7,909,460 0.10%
Real and Tllllgible Personal. Utilities 173.908,469 1.90% 185,761.346 2.20% 192.138.423 2.55%
Tangible Personal. Commercial and Industrial 1.198,078,620 13.08% 1,090,86l.S79 12.91% 974,534,729 !2.9:!%
Tangible Personal, Othet' 15.279,192 0.17% 16.287,022 0.19% IS.B6.364 0.20%
Real Propeny. Inventory 10,987,935 0.12% 4,774.287 0.06% 1\,087.603 0.15%
Special Inventory . 68.226,182 0.74% 68,663.514 0.81% 67,339,159 0.89%
Total Appraised V.Uue Before Exemptions $9,160,109,105 100.00% $8,451,188,424 !00.00% $7,541,793.935 100.00%
Less: Total E:.emptions!Reductions (495.918,t96) (529,598,044) ( 199.449,068)
Ta.'Cable Assessed Value $8.664,190.909 $7,921.590.380 $7,342.344,867
Ta.'Cable Appraised Value for Fiscal Year Ended September 30,
2002 2001
%of %of
Cate!)pry Amount Tot.U Amount Total
Real, Residential. Single-family $3.935,486,660 53.59% $3,771,725,980 53.71%
Real. Residential Multi-Family 466,775.473 6.36% 453,863,141 6.46%
Real, Vacllllt Lotsffracts 96,407,484 1.31% 88.108,541 1.25%
Real. Acreage (Land Only) 60,171,506 0.82% 60,125.617 0.86%
Real. F:1t111 and Ranclllmprovements !2,003,318 0.16% 11,000.161 0.16"/o
R~l, Commercial and lndustri.'ll 1,445.748. !60 19.69% 1.348,046,123 19.20%
Real. OiL Gas and Other M !neral Reserves 8.849.390 0.12% 7,000.000 0.10%
Real and Tangible Personal, Utilities 185.588,935 2.53% 181.228,303 2.58%
Tangible Personal Commercial and lndustrilll 1,039.521,384 14.16% 1,072,7 I 3,960 15.28%
Tangible Personal, Other 15.296,446 0.21% 14.786,889 0.21%
Special Inventory 10,279,056 0.14% 13.320.136 O.l9'l'o
Real Propeny. Inventory 67.429,634 0.9:!% 0.00%
Total Appraised Value Before E:<emptions $7,343,557,446 100.00% $7.021,9!8,851 100.00%
Less: Total Exemptions/Reductions ( 434.247, 739) (383,007,758)
T3XIIble Assessed Value $ 6.909.309. 707 s 6,638,911,093
NOTE: Valuations shown are certified taxable assessed values reported by the Lubbock Central Appraisal District to the City
for purposes of establishing and levying the City's annual ad valorem tax rate and to the State Comptroller of Public Accounts.
Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates
records.
32
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TABLE JA • VALUATION AND GENERAL OBLIGATION OUT HfSTORY
General Purpose Ratio
Fiscal Taxable Funded Tax Debt Tax Debt Funded
Year Taxable Assessed Outstanding to Taxable Debt
Ended Estimated Assessed Valuation at End Assessed Per
9/30 Poeularion 111 Valuation 1~1 PerCaeita of Year~>' Valuation Caeita
2001 201.097 s 6.638.911.093 $ 33,013 $ 58,122.809 0.88% $ 289
2002 202,000 6,909.309. 707 34,205 63.115,346 0.91% 312
2003 204.737 7.342.344,867 35,862 70,188.204 0.96% 343
2004 206,290 7,921 ,590.380 38.400 70,161,218 0.89% 340
2005 209,120 8,664.190,909 41,432 64,433,286 0.74% 308
(I) Source: The City ofLubbock, TeXllS
(2) As reported by the Lubbock Central Appraisal District on City's annual State Property Tax Board Reports; subject to change
during the ensuing year.
(3) Does not include self-supporting debt (see Table 38 and footnote 3 to Table 1).
TABU. 38 -DERIVATION Of GENERAL PURPOSE FUN OED TAX DEBT
The following tnble sets forth certain infonnation with respect to the City's general purpose and self-supporting general
obligation debt. The City is revising its capital improvement plan. but the City expects to issue additional self-supporting
general obligation debt within the three to live year time frame. See -Debt Information-Capital Improvement Progrnm and
Anticipated Issuance of General Obligation Debt."
Fiscal Funded Tax Debt Less: General Purpose
Year Outstanding Self-Supporting Funded Tax Debt
Ended at End Funded Ta.x Outstanding
9/30 of Year Debt at End of Year
ToOl s 175.408.321 $ 117,285.512 s 58.122.809
2002 217,269,682 I 54,154.335 63,11 5,346
2003 295,935,000 225,746,796 70,188,204
2004 285.885,000 215,723,783 70.161.217
2005 334,805,000 Ill 270,37f,7J4 (I) 64,433,286
(I) Projected. includes the Bonds. Includes the General Obligation Refunding Bonds. Series 2005 and excludes the bonds and
certificate of obligation refunded by such bonds.
T ABL£ 4 • TAX RATE, LEVY AND COLLECTION HISTORY
Fiscal %ofCurrent %ofTotal
Year Distnbution Tax Tax
Ended Tax General Economic Interest and Collections Collections
9/30 Rate Fund Develo12ment Sinkini fund Tax Levy to Tax Levl to Tax Levl
2001 s 0.5700 s 0.42718 s 0.03000 s 0.11282 s 37,841,145 97.58% 99.29%
2002 0.5700 0.42844 0.03000 0.11156 39,351.225 97.60% 99.41%
2003 0.5700 0.43204 0.03000 0.10796 42,2&6,967 97.25% 98.78%
2004 0.5457 0.41504 0.03000 0.10066 43,659,111 97.02% 99.69%
2005 (l) 0.4597 0.33474 0.03000 0.09496 39,786,978 94.75% II) 96.48% (I)
(I) Collections for part year only, through April 30, 2005.
(2) For a discussion oftbe factors affecting the decline in the 2005 General Fund tax rate. see .. Discussion of Recent Financial
and Management Events· fY 2005 Budget."
33
TABU: 5-TEN LARGESTTA.XPAYl:RS
2004/05 %of Total
Taxable Taxable
Assessed Assessed
Nome ofTaxpa~er Nature of Pro~rty Valuation Valuation
Macerich Lubbock LTD Partnership Regional Shopping Mall $ 111.433,954 1.290.4,
Southwestern Bell Telephone Co. Telephone Utility 59,427.700 0.69%
Southwestern Public Service Electric Utility 53.466.701 0.62%
United Supermarkets Distribution Center Retail Grocery 48,241.512 0.56%
Grinnell Corp-Flow Control Division Manufacturing/Fire Sprinklers 45,933,080 0.53%
Pyco Industries Cottonseed Oil Mill 43.349.210 0.50%
McLane Food Services Food Wholesale 37,823,550 0.44%
Walmart Supercenter Retail 34,779.467 0.40%
X Fab Texas. Inc. Electronic Manufacturing 29.152.174 0.34%
Lubbock SMSA Ltd. Partnership Telephone Utility 27.671.690 0.32%
s 491.279.038 5.67%
GENERAL OBLIGATION DEBT LIMITATION ... No general obligation debt limitation is imposed on the City under current State
law or the City's Home Rule Clklrter (see --rax Rate Limitation").
TABL£6-TAXADEQliAcy{l)
Maximum Principal and Interest Requirements,
All General Obligation Debt. 2006121 ........................................................................................................................ S 34.020,266
$0.4007 Tax Rate at 98o/o Collection Produces ................................................................................................................. $ 34,023.065
Maximum Principal and Interest Requirements.
General Purpo:;e General Obligation Debt 200s01 .................................................................................................. S 8.094.947
$0.0954 Tax Rate at 98o/o Collection Produces ................................................................................................................. S 8.100,325
(I) Based on 2004-2005 taxable assessed valuation.
(2) See Table SA.
(3) See Table 8B.
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TABLE 7-ESTIMATED OVERLAPPING DEBT
Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities
on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures.
This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt'") was developed from information
contain.ed in ·'Texas Municipal ReportS'" published by the Municipal Advisory Council of Texas. 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 Tax Debt since the date bereot: and such entities may have programs requiring 1he issuance of substantial amounts of
additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping
Tax Debt of the City.
2004105 Total Funded City's Authorized
Taxable Debt Estimated Oved1pping But Unissued
Assessed T3X As Of % G.O.Dcbt DcbiAsOf
Taxin1: Jurisdiction Value Rale 6-15-0S AI!Eiicable As oF6-15-0S 6-15.0S
City of Lubbock $ 8.605,424,748 s 0.45970 $ 335.295,000 (I) 100.00% s 335,295.000 s 31,717,000
Lubbocl: Independent School District 6,303,.339,726 1.60560 103,675,060 98.91% 102.545,002 52,248.593
Lubbock County I 0,198,9 59.098 0.25581 76,610.000 82.94o/o 505.341
Lubbock County Hoopital District J0,\94,687,811 0.10742 82.94%
High Plains Underground Water C onservarion
DistriCI No. I 10,194,687.811 0.00830 82.94,..
Fn:nship Independent Sdlool Dislrict 1,290,505,343 1.68060 41,960,026 64.44% 27,039,041
Idalou Independent School District 128,55 I ,070 1.50000 795,000 1.10'Yo 8,745
Lubbocl:-Coopcr Independent School District 613,192,253 1.51760 13.219,555 ls.30% 2,022,592
New Deal Independent School Discrict 124.288.1.S.S J.SOOOO 0.03%
Toral Di~t and Overlapping G.O. Debt s 466,910,379
Ratio of Direct and Overlapping G.O. Debito Taxable Assessed Valu:ation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.43"•
Per Capita Direcl and Overlapping G.O. Debt .............................................................................. S 2,263
(1) Includes the Bonds. Includes the General Obligation Refunding Bonds. Series 2005 and excludes the bonds and certificate
of obligation refunded by such bonds. The General Obligation Refunding Bonds. Series 2005, are to be delivered on July 28,
2005.
35
DEBT INFORMATION TABLE 8A -GENERAL 0BL1CATION DEBT SER\'IC£ REQUIREMENTS Fiscal Year Total %of Ended Outstanding Debt 11~21 TheBondsm Combined Principal 9/30 Princieal Interest Total Princieal Interest Total Reguirements Retired 2005 $ 16,005,000 $ I 1,899,223 $ 27,904,223 $ $ $ -$ 27,904,223 2006 16,855,000 13,220,391 30,075,391 1,700,000 2,244,875 3,944,875 34,020,266 2007 17,685,000 12,361,331 30,046,331 2,030,000 1,919,000 3,949,000 33,995,331 2008 17,200,000 11,659,253 28,859,253 2,135,000 1,825,550 3,960,550 32,819,803 2009 16,945,000 10,953,741 27,898,741 2,240,000 1,726,850 3,966,850 31,865,591 26.45% 2010 16,625,000 10,247,842 26,872,842 2,340,000 1,624,050 3,964,050 30,836,892 2011 16,930,000 9,514,175 26,444,175 2,465,000 1,515,625 3,980,625 30,424,800 2012 16,040,000 8,777,341 24,817,341 2,585,000 1,402,300 3,987,300 28,804,641 2013 16,345,000 8,051,342 24,396,342 2,715,000 1,282,725 3,997,725 28,394,067 2014 16,700,000 7,289,808 23,989,808 2,865,000 1,157,550 4,022,550 28,012,358 53.71% 2015 14,030,000 6,598,759 20,628,759 3,015,000 1,024,875 4,039,875 24,668,634 2016 13,470,000 5,973,250 19,443,250 3,190,000 869,750 4,059,750 23,503,000 0...) 2017 13,080,000 5,336,010 18,416,010 3,370,000 705,750 4,075,750 22,491,760 0\ 2018 13,555,000 4,692,01 I 18,247,01 I 3,560,000 532,500 4,092,500 22,339,51 I 2019 12,065,000 4,027,596 16,092,596 3,775,000 349,125 4,124,125 20,216,72 I 77.40% 2020 10,920,000 3,471,701 14,391,701 2,480,000 192,750 2,672,750 17,064,451 2021 8,880,000 2,991,103 11,871,103 2,615,000 65,375 2,680,375 14,551,478 2022 8,465,000 2,568,695 11,033,695 11,033,695 2023 7,195,000 2,188,830 9,383,830 9,383,830 2024 4,950,000 1,853,251 6,803,251 6,803,251 90.37% 2025 3,485,000 1,644,639 5,129,639 5,129,639 2026 3,395,000 1,463,114 4,858,114 4,858,114 2027 3,575,000 1,283,950 4,858,950 4,858,950 2028 3,755,000 1,095,068 4,850,068 4,850,068 2029 3,955,000 896,385 4,851,385 4,851,385 95.55% 2030 4,170,000 686,998 4,856,998 4,856,998 2031 4,390,000 466,390 4,856,390 4,856,390 2032 2,240,000 297,250 2,537,250 2,537,250 2033 2,350,000 182,500 2,532,500 2,532,500 2034 2,475,000 61,875 2,536,875 2,536,875 100.00% $ 307,730,000 $ 151,753,820 s 459,483,820 $ 43,080,000 $ 18,438,650 $ 61,518,650 $ 521,002,4 70 (I) "Outstanding Debt" does not include lease/purchase obligations. Includes lhe General Obligation Refunding Bonds, Series 2005 and excludes the bonds and certificate of obligation refunded by such bonds. The General Obligation Refunding Bonds, Series 2005, are to be delivered on July 28, 2005. (2) Average life of the issue is 8.839 years. Interest on the Certificates has been calculated at the rates shown on page 2 hereof. (\ {) {) 0 0 o o ·o o e~· · e
v u u G) 0 0 0 0 TABU 88 • DIVISION OF DEBT SERVICE REQliiREIItENTS Less: Less: Less: Less: Less: Less: Solid Waste Drainage Tax Eleccric Wacerworks Sewer Disposal Ulilicy lncremenl Lighc and General Fis~al System Syslem System System Financing Power System Purpose Year General General General General General General General Ended Combined Requirements"> Obligation Oblig«Cion Obligation Obligation Obligacion Obligacion Obligation 9/30 Princieal lnteresc Total Requiremenls(11 Re!Juirements Reguirements Reguirements ReguiremeniS Reguirements Re9uiremenls 2005 $ 16,00.5,000 $ II ,899,223 $ 27,904,223 s 6,544,773 s 5,834.616 s 789,006 s 4,671,744 s 286,725 $ 1,682,411 $ 8,094,947 2006 18,555,000 15,465,266 34,020,266 10,745,()69 5,379,087 796,41 I 4,&41>,465 215,600 4,3U,907 7,584,727 2007 19,715,000 14,280,331 33,995,331 10,637,365 5,556,890 783,365 4,841,912 289,100 4,314,586 7,572,113 2008 19,335,000 13,484,803 32,819,803 10,226,561 5,227,615 773,284 4,843,899 287,225 4,247,086 7,214,132 2009 19,185,000 12,680,591 31,865,591 10,068,751 4,937,709 758,285 4,841,240 285,825 4,171,149 6,802,632 21>10 18,965,000 11,871,892 30,836,892 9,893,361 4,644,926 743,402 4,843,115 289,825 4,092,593 6,329,670 2011 1'),395,000 11,02'),800 30,424,800 9,807,108 4,4&2,884 722,710 4,842,660 288,52.5 4,027,09') 6,253,815 2012 18,625,00() 10,179,641 28,804,641 8,929,346 4,244,153 711,200 4,831,830 287,025 3,944,649 5,&50,438 2013 19,060,000 9,334,067 28,394,067 8,883,614 4,055,291 699,174 4,840,404 285,325 3,87S,449 5,754,&11 2014 19,565,000 8,447,358 28,012,358 8,847,493 3,890,831 681,755 4,838,253 288,325 3,797,476 5,668,225 201.5 17,045,000 7,623,634 24,668,634 8,725,862 2,019,849 664,681 4,842,053 285,909 3,721,389 4,408,892 2016 16,660,000 6,843,000 23,503,000 8,694,872 1,239,870 647,661 4,841,828 287,950 3,641,879 4,148,940 ..., 2017 16,450,000 6,041,760 22,491,760 8,661,286 1,201,060 625,225 4,837,078 289,450 3,564,15 I 3,312,910 .....:j 2018 17,115,000 5,224,511 22,339,51 I 8,614,362 1,170,909 612,346 4,841,953 28.5,369 3,493,669 3,320,904 2019 15,840,000 4,376,721 20,216,721 8,266,657 1,134,378 418,175 4,836,203 285,694 I ,953,781 3,321,834 2020 13,400,000 3,664,451 17,064,451 5,859,525 378,450 411,863 4,839,578 290,309 1,957,625 3,327,102 2021 I 1,495,000 3,656,478 14.551,478 3,962.431 38\,581 4tl4,813 4,836,703 289,056 1,951,238 2,725,656 2022 8,465,()00 2,568,695 11,033,695 1,280,711 378,819 270,400 4,852,254 287,181 1,954,388 2,009,873 2023 7,195,000 2,188,830 9,383,830 740,588 53,563 273,644 4,850,863 289,713 1,953,363 1,222,099 2024 4,950,000 1,853,251 6,803,251 737,100 S1,188 271,294 4,851,845 286,650 272,863 332,313 2025 3,485,000 1,644,639 5,129,639 4,852,714 276,925 2026 3,395,000 1,463,114 4,85&,114 . 4,858.114 2027 3,575,000 1,283,950 4,858,950 4,858,950 2028 3,755,000 1,095,068 4,850,068 . 4,850,068 2029 3,955,000 896,385 4,851,385 4,851,385 2030 4,170.000 686,998 4,856,9~3 -4,856,998 2031 4,390,()00 466,390 4,856,390 --4,&,6,390 2032 2,240,000 297,250 2,537,250 . . 2,537,250 2033 2,350,000 182,500 2,532,500 . 2,532,500 2034 2,475,000 61,875 2,536,875 . . 2,536,875 s 350,810,000 s 170,192,470 s 521,002,470 $ 150,126,906 $ 56,263,666 $ 12,058,693 $ 138,263,118 s 5,750,781 s 63,283,273 s 95,256,033 (I) Includes the Bonds. Includes lhe General Obligation Refunding Bonds, Series 2005 and excludes the bonds and certificate of obligation rerunded by such bonds. TI1e General Obligation Refunding Bonds, Series 2005, are to be delivered on July 28, 2005.
TABLE 9 -INTER'ESf AND SINKING FUND BUDGET PROJECTION
General Obligation Debt Service Requirements (Pro-Forma). Fiscal Year Ending 9-3~5*
Fiscal Agent, Tax Colle<:tion and Other Uses
ToL11 Requirements
Sources of Funds
Interest and Sinking Fund, 9-30-04
Budgeted Ad VaiOI·em Tax Receipts
Budgeted Transfers From:
Water Fund <ll
Sewer Fund (I)
Solid Waste Fund <•>
Drainage Utility Fund <I>
Electric f' und
TIF Fund m
Airport Funo-&om Passenger Facility Charges ("PFCs~)
Budgeted Interest Earned
Total Sources of Funds
Projected Balance, 9-3~5
(I) See ·•Table I()-Computation ofSeJt:Supporting Debt".
(2)
s
s
s
s
s
27.904.223
15.000
27,919,223
2,852.843
7.954,344
7.085.0&8
5,940.796
813.084
4.852,706
1,682.411
286.725
195,630
189.405
31.853.032
3.933.809
(2) Passenger facility Charges ("'PFCs'') are authorized by the Federal Aviation Administration ("FAA''). PFC revenues must
be used for allowable costs of FAA approved airport projects, including debt service on airport obligations issued for
approved airport projects. The City has issued several series of debt for municipal airport improvements (''Airport Debt'').
including tax and airport surplus revenue Bonds of obligation in 1993 and 1998. and general obligation refunding bonds in
1985 and 1997, which refunded prior issues of Airport Debt A portion of the refunding bonds have been allocated to the
airport in proportion to the principal amount of Airport Debt that was refunded. PFC revenues collected for fiscal year
ending 9-30-04 were $1,402.033, and. $195,650 of PFC revenues have been budgeted for payment of Airport Debt in 2004-
0S. which equates to self-supporting Airport Debt with a.. principal balance of $1,368,750. For 2004-05, the portion of
Airport Debt that is being funded from general fund contributions (ad valorem taxes) equates to a principal balance of
$2,366.250.
* See Table 88-footnote (1).
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TABL£10 -COMPUTATION OF S!LF-SUPPOit11NC DEBT
TH! WATERWORKS SYSTEM (II
Net System Revenue Available, Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-05
Balance Available for Other Purposes
Requirements for System General Obligation Debt. Fiscal Year Ending 9-30-05
Percentage of System General Obligation Debt Self-Supporting
s 16,142,912
.().
s 16,142,912
$ 6.544,773
100.00%
(I) Each Fiscal Year the City transfers Net Revenues of the Waterworks Enterprise Fund to the General Obligation Interest and
Sinking Fund in an amount equal to debt service requirements on Waterworks System general obligation debt
THE SEWER SYSTEM (I)
Net System Revenue Available, Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-05
Balance Available for Other Purposes
Requirements for System General Obligation Debt Fiscal Year Ending 9-30-05
Percentage of System General Obligation Debt Self-Supporting
s 8,720,503
-0-
$ 8.720,503 s 5,834.616
IOO.OOo/o
(I) Each Fiscal Year the City transfers Net Revenues of the Sewer Enterprise Fund to the General Obligation Interest and Sinking
Fund in an amount equal to debt service requirements on Sewer System general obligation debt
THE SoUD W ASfE DISPOSAL SYSTEM (II
Net System Revenue Available. Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-05
Balance Available tor Other Purposes
Requirements for System General Obligation Debt. Fiscal Year Ending 9-30-05
Percentage of System Generol Obligation Debt Self-Supporting
s 2,538,565
-0· s 2,538,565 s 789,006
IOO.OOo/o
(I) Each Fiscal Year the City transfers Net Revenues of the Solid Waste Enterprise Fund to the General Obligation Interest and
Sinking Fund in an amount equal to debt service requirements on Solid Waste System general obligation debt.
THE DRAINAGE SYSTEM II)
Net System Revenue Available. Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-05
Balance Available for Other Purposes
Requirements for System General Obligation Debt. fiscal Year Ending 9-30-05
Percentage of System General Obligation Debt Self-Supponing
$ 5.167,840
-0-s 5,167,840 s 4,671,744
100.00%
(I) Each Fiscal Year the City trunsfers Net Revenues of the Drainage Enterprise Fund to the General Obligation Interest and
Sinking Fund in an amount equal to debt service requirements on Droinage System general obligation debt
THE ELECTRIC LICHT AND POWER SYSTEM (I)
Net Electric Light and Power System Revenue Available. Fiscal Year Ended 9-30-04
Less: Requirements for Revenue Bonds. Fiscal Year Ending 9-30-05
Balance Available for Other Purposes
Requirements for Electric System General Obligation Debt, Fiscol Year Ending 9·30-05
Percentage of Electric System General Obligation Debt Self-Supporting
s 10,269,560
4.276.703 s 5,992,857
$ 1,682.411
100.00%
(I) The City transfers Net Revenues oftbe Electric Light and Power Enterprise Fund to the General Obligation Interest and Sinking
Fund in an amount equal to debt service requirements on Electric Light and Power System general obligation debt.
39
TABLE II -AUTHORIZ£0 BUT UNISSUED GENERAL OBLIGATION BONDS
Waterworks System
Sewer System
Street Improvements
Street Improvements
Purpose
Civic Center/Auditorium Renovations and Improvements
Park Improvements
Police/Municipal Court facilities
Library Improvements
Fire Stations
Animal Shelter Renovations and Improvements
Date
Authorized
10-17-87
5-21-77
5-1-93
5·15-04
5·15·04
5-15-04
5-IS-04
5-15·04
5·15-04
5-15-04
Amount
Authorized s 2.810,000
3.303.000
10.170.000
9.2 10.000
6,450.000
6.395,000
3.350.000
2.145.000
1.405.000
1.045,000
$ 46.283.000
Amount
Previously
Issued
$ 200.000
2,175.000
10.166.000
1,590,000
190.000
85,000
160.000 s 14.566.000
Unissued
Balance
$ 2.610.000
1.128.000
4.000
7,620.000
6.450,000
6.205.000
3.350.000
2.145,000
1,320,000
885.000
$ 31.717.000
ANTICIPATED ISSUANCE OF GENERAL OaUGATION 0£81' ... The City Council adopted a resolution during the 1984-85 budget
process establishing capital maintenance funds for capital projects. A capital improvement plan is made tbr planning purposes
and may identitY projects that will be deferred or omitted entirely in future years. In addition, as conditions change. new projects
may be added that are not currenrly identified. Under current City policy, for a project to be funded as a capital project it must
have a oost of $25.000 or more and a li fe of seven or more years. For FY 2004, the City Council approved S I 0.4 million in total
expenditures for capital projects for all general purpose projects, as well as projects tor the electric fund. water fund. sewer fund.
solid waste fund. s10rmwater fund and airport fund (down from $57.9 million in fY 2003). The Capitnl Projects Fund budget for
FY 2004 also included an additional $151.9 million in future improvements for all City departments over the four succeeding
fiscal years. The improvements included in the City's capital improvement plan are generally funded from a blend of bond
proceeds. reserves or current year revenue sources.
As shown in Table II. the City has $27.9 million of authorized but unissued bonds from the May I 5. 2004 bond election. When
thai· election was held, the City anticipated that the bonds would be issued over the 2004 through 2008 time frame. The City
typically issues voted bonds for general purpose City projects. such as streets. po.rks, libraries.. civic centers and public safety
improvements. However. the City has incurred substantial unvoted ta.~ supported debt 10 fund portions of the capital budget of
the electric fund. water fund, sewer fund, solid waste fund. stormwater fund and airport fund. As described elsewhere in this
Official Statement.. such enterprise fund indebtedness is generally anticipated to be selt:supporting from enterprise fund
revenues.
Within the next six months. the City anticipates issuing approximately $7,500.000 in general obligation bonds from its voted
authority and approximately $46,000,000 in ad valorem tax and waterworks system revenue certificates of obligation to tinance
various capital projects. In addition. the City's General Obligation Refunding Bonds, Series 2005, are expected 10 be delivered
on July 28. 2005.
TABLE 12-OTHER OBLIGATIONS
At December 31, 2004, the City had capital lease obligations for leased equipment in tlte tollowing amounts:
Fiscal Governmental Business· type Toral
Year Capital Lease Capital Lease Capiral Lease
Ended Minimum Minimum Minimum
9/30 Pa~ment Pa~ment Pa~ment
2005 s 854.159 $ 643,732 s 1,497.891
2006 545,380 418,74 I 964,121
2007 353,694 353,694
Less:
Interest (38.582) (65.572) (104.154)
s 1.360.957 s 1.350.595 s 2.71 I .552
40
<D
0
0
0
Q
0
Q
0
PENSlON FUND ... TEXAS MUNICIPAL. RIIT!R£MENI SYSTEM (I)(Z) ••• All pennanent, full-time City employees who are not
firefighters are covered by the Texas Municipal Retirement System ("'TMRS"). TMRS is an agenl multiple-employer, public-
employee retirement system which is covered by a State statute and is administered by six trustees appointed by the Governor of
Texas. TMRS operates independently of its member cities.
The City joined TMRS in 1950 to supplement SQCial Security. All City employees except firefighters are covered by SQCial
Security. Options offered under TMRS, and adopted by the City. Include current, prior and antecedent service credits. five year
vesting, updated service credll occupntional 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. Since October II, 1997, the employee contribution rate has been 7% of gross salary. The City's contribution rate is
calculated each year using actuarial techniques applied to experience. The 2004 contribution rate is 14.54o/o. 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. 2003. the actuarial value of assets held by TMRS (not including those of the Supplemental Disability Fund,
which is ·'pooled"), for the City were $182,884.183. Unfunded actuarial accrued liabilities on December 31, 2003 were
$56,925,251, which is being amortized over a 25-year period beginning January, 1997. Total contributions by the City to TMRS
for Calendar Year 2003 were $8,747.723.
FIREMEN'S RELIEF AND RETIREMENT Fl]ND (1) •.• City of Lubbock firefighters are members ofthe locally administered
Lubbock Firemen· s Relief and Retirement Fund (the "Fund"), operating under an act passed in 1937 by the State Legislature and
adopted by City tirefighters, by vote of the departmenl in 1941. Firefighters are not covered by Socinl Security.
The Fund is governed by seven trustees, three firefighters. two outside trustees (appointed by the other trustees), the Mayor or
the representative thereof and the chief financial officer or the representative thereof. Ext(;ution of the oct is monitored by the
Firemen's Pension Commissioner. who is appointed by the Governor.
Benefits of retired firemen are determined on a "fonnula'' or a "'final salary" plan. Actuarial reviews are performed every two
years, and the fund is audited annually. Firefighters contribute a percentage of full salary into the fund. The firefighters'
contribution rate for 2005 is 12.43%. 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 firelighter's contribution rate that
the City's rate paid into the TMRS and FICA bears to the rate other employees pay into the TMRS and FICA. The City's
contribution rate tor 2005 is 19.94%.
As of December 31, 2003. unfunded pension benefit obligations were S 16,588,639 which is being amortized over a 13 year
period beginning January I, 1997.
(I) For historical infonnation concerning the retirement plans, see Appendix B. ''Excerpts from the City's Annual Financial
Report"-Note #Ill, Subsection E, "Retirement Plans''.)
(2) Source: Texas Municipal Retirement System, Comprehensive Anrrual Financial Report for Year Ended December 31,
2003, "CityofLubboclc, Texas".
41
FINANCIAL INFORMATION
TABLE 13 -CHANGES IN NET ASSETS111
Fiscal Year Ended September 30.
2004 2003 2002
Governmental Governmental Governmental
Activities Activities Activities
REYEN!JES· (in OOO's) {in OOO's) {in OOO's)
Program Revenues:
Charges for services $ 12,713 $ 13.888 s 9.369
Operating grants and contributions 9,643 12,137 7,007
General Revenues:
Property Taxes 44.497 42,303 40,408
Sales Taxes 30.555 29,092 28,903
Other Taxes 3.793 3.712 3,681
Franchise Taxes 9.654 6.613 6.998
Grant/contributions not ~stricted to spc:cific program s (25)
Other 4.274 3.834 6.227
Totnl Revenues $ 115.129 $ 11 1,579 $ 102.568
EXpENSES·
Administrative/Community Services $ 22.313 $ 21.793 s 32.483
Electric 2.471 2.373 2.585
Financial Services 2,387 1.965 1.908
Fire 21.998 20.207 18.664
General Government 20,562 21.009 23,436
Human Resources 777 786 883
Police 33.249 31,429 29.715
Streets 10.789 9,827 5,940
Public Works 3,078 9,856 4,322
Interest on L·T Debt 4.593 3.346 3.382 0 Total Expenses $ 122.217 s 122.591 $ 123.318
Change in net assets before special items & transtecs (7,088) (11,012) (20.750)
Special items (687)
Transfers 9.745 2.554 15.668
Ch1111ge in net assets s 2.657 s (8,458) s (5,769)
Net assets· beginning of year, as restated $ 101.684 $ 110.142 $ 115.911
Net assets· end of year $ 104.341 $ 101.684 $ 110,142
(I) Data shown in Table 13 retlects general governmental activities reported in accordance with GASB Statement No. 34. The
FY 2003 tino.ncial statements include a management discussion and analysis of the operating results of such fiscal year. 0 including restatements to beginni"g fund balances and net assets. As of the date of this Otlicial Statement, a copy of the FY
2003 financial statement can be accessed through the City's website, hnp://www.ci.luhbock.tx.us.
0
42
0
0
0
0
0
Q
TABLE 13-A • CENtRAL FUND REVENUES AND E.XP.ENDITUR.E HISTORY
Fiscal Year Ended September 30.01
Revenues 2004 2003 2002 2001 2000
Ad Valorem Taxes $ 33,233,274 s 32.194.087 s 29,885,252 $ 28,604,141 $ 26,595,709
Sales Taxes 30,554,632 29,092,032 28,902,649 28.183,746 27,121.078
Franchise Fees 9,654.447 6.612.822 6,998,085 7,684,683 6,619.755
Miscellaneous Taxes 939,456 848,816 820.507 774,587 743,771
Licenses and Penn its 1,982,281 1,875.118 1,475.451 1,202,794 1,138,924
Intergovernmental 428,459 348.787 351,878 333,171 365,671
Charges for Services 4,467,733 4,945,591 4.472,094 4,299,958 4,210.334
Fines 3,675,856 3,672,509 3,069,362 3,051,055 2,834,208
Miscellaneous Taxes 1,442,677 1.532,346 1.058,237 995,494 1,143,226
Interest 334,730 285,756 433.393 1,058,096 1,108,662
Operating Transfers (ll 10.723,891 10.345.945 15.023.466 14.276.074 13.636.764
Total Revenues and Transfers s 97.437.436 $ 91.753.809 $ 92.490.374 s 90.463.799 s 85.518.102
Expenditures
General Government $ 5.633,469 s 5,717.151 s 5.596.868 s 5,772.031 s 5.255,236
Financial Services 2,333,469 1,969,413 1,958,051 1,833,933 1,919,299
Non-departmental 214.562 175,499 1,497,485 1,716,167 606.843
Admin/Communicty Services 18,156,455 17,837,076 17.997,152 18,314,255 17.293.247
Police 32,400,371 30.321.182 28.905,651 28,139.047 25.561.261
Fire 20.613,077 19,511,797 18,632.109 17,903,118 17,183,526
Streets 7,180,843 6,610.394 6.510,394 7,443.017 8,004,402
Electric Utilities 2.185.286 2,078.277 2,168.620 2,146,212 1,923,584
Human Resources 754,225 780,529 895,311 913,250 871,596
Capital Outlay 415,585 378,059 480.749
Operating Transfers 4.212.915 13.555.338 5.951.669 6.187.379 7.526.481
Total Expenditures s 94.160.257 s 98.934.715 s 90.594.059 s 90.368.409 $ 86.145.475
Excess (Deficiency) of Revenues
and Transfers Over Expenditures $ 3.277,179 s (7,180.906) s 1.896.315 s 95.390 s (627,373)
Fund Balance at Beginning of Year 9.417.346 16.598.252 (41 16.716.042 16.620,652 17.248.025
Fund Balance at End ofYear $ 12,694.525 s 9,417,346 $ 18,612.357 $ 16.716,042 $ 16.620.652
Less: Reserves and Designations 131 (1.903.690) (2.361.860) (2.857,096)
Undesignated Fund Balance s 12.694.525 $ 9.417.346 $ 16.708.667 $ 14.354.182 $ 13.763.556
( 1) Prior years have been restated to reflect current organization.
(2) For fiscal year 2003/04, the water, solid waste and waste water funds transferred an amount sufficient to cover the pro rata
share of the City's general and administtative expenses and an amount representing a payment in lieu of ad valorem taxes. The
water and solid waste funds transferred an amount representing a franchise payment equal to 4% of gross receipts. The waste
water fund transferred an amount representing a franchise payment equal to 6% of gross receipts. The Electric System was not
required to make transfers to the General Fund for any of the foregoing purposes during the fiscal year.
(3) The City's financial policies target a General Fund undesignated balance of at least twO months of General fund
expenditures. The undesignated fund balance is at 81% ofthe target established by the City's financial policies.
(4) The ''Fund Balance at Beginning of Year" was restated.
43
TABL£ 14 • MUN1C1f'ALSALESTAX HISTORY
The City has adopted the Municipal Sales and Use Tax Act, VTCA, Tax Code, Chapter 321, which gron~ the City the power to
impose and levy a 1% Local Sales and Use Tax within the City: the proceeds are credited 10 the General Fund and are not
pledged to the payment of the Bonds or other debt of the City. In addition, in January. 1995, the voters of the City approved the
imposition of an addicional sales and use tax of one-eighth of a cent as authorized by VTCA. Tax Code, Chapter 323, as
amended. Collection for the additional tax commenced in October. 1995 with the proceeds from the one-eighth cent sales tax
designnted lor the use and benefit of the City to replace property tax revenues lost as a result of the adoption of the ta.x. At an
election held in the City on November 4, 2003. voters approved an additional one-quarter cent sales and use tax, with the
proceeds to be dedicated to the reduction of ad valorem taxation, and an additional one-eighth cent sales and use tax under
Section 4A of the Texas Development Corporation Act. to be used for economic development in the City. Tbe City began to
receive proceeds of these taxes in October 2004. Collections and enforcemen~ of the City's sales tax are effected through the
oft"ices of the Comptroller of Public Accounts. State of Texas. woo remits the proceeds of the tax. to the City monthly, after
deduction of a 2% service tee. Historical collections ofthe City's 1.125% local Sales and Use Tax are shown below:
Fiscal
Year %of Equivalent of
Ended Total Ad Valorem Ad Valorem
9/30 Collected< 1 l Tax Lev~
2001 s 28,183.746 74.48% s
2002 28,902,648 73.37%
2003 29,092.032 73.85%
2004 30.554.632 70.67%
2005 20,587,235 Ill 51.74%
( I ) Excludes bingo tax receipts.
(2) Based on population estimates of the City.
(3) Partial collections October I. 2004 through April 30, 2005.
Effective October I. 2004 the sales tax breakdown for the City is as follows:
City:
City Sales &. Use Tax
City Sales & Use Tax for Property Tax Relief
City Sales & Use Tax tor Economic Development
County Sales & Use Tax
State Sales & Use Tax
Total
FINANCIAL POLICIES
Tax Race
0.4245
0.4183
0.3962
0.3857
0.2376
1.000¢
0.375¢
0.125¢
0.500¢
6.250¢
8.250t
Per
Capita <ll
s 140.15
143.08
142.09
148.11
98.45
Basis q[ 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 Govenunent Finance Otlicer's Association of
the United States and Canada ("GFOA"). The GFOA has awarded a Certificate of Achievement for Excellence in Financial
Reporting to the City for each of the fiscal years ended September 30. 1984 through September 30. 2002. The City will submit
the City's 2004 report to GFOA to determine its eligibility for another certificate.
Comprehensive Annual Financial Reoort (CAFRl ... Beginning with the year ended September 30. 2002, the City's CAFR has
been presented under the Governmental Accounting Standard Board ("GASB'') Statement No. 34. Basic Financial Statements-
and Management's Discussion and Analysis-for State and Local Governments. GASB Statement No. 37, Basic Financial
Statements -and Management's Discussion and Analysis ·for Stale and Local Governments: Omnibus, and GASB Statement No.
38. Certain Financial Note Disclosures. For additional intormation regarding accouncing policies that are applicable to the City,
see Note I. ''Summary ofSigniticant Accounting Policies" in the financial statements of the City attached as Appendix B.
General Ftmd Bo/once ... The City's objective is to maintain an unreserved/undesignated fund balance at a minimum of an
amount equal to two months budgeted operating expenditures to meet unanticipated contingencies and fluctuations in revenue.
The City's General Fund currently has an !Jnreserved/undesignated fund balance that is at 80.9o/o of the targeted working capital
reserve amount.
44
0
0
0
0
c
0
0
0
0
0
0
0
0
Enterprise Fund Balancl}. ... It is the policy of the City to maintain Unrestricted Net Assets equal to three months operating
expense and debt requirements in each of the Electric.. Water, Solid Waste and Sewer funds for unforeseen contingencies
(although the Electric System has not funded any operating reserves under this policy). The City's financial policy provides that
such Net Assets shall be accumulated over a ten year period, which commenced in 1996. For a variety of reasons, including
increased transfers from the water. sewer and solid waste funds to the General Fund following the cessation of transfers to the
General Fund from the electric fund in FY 2003. the City is not presently in compliance with its fund balance policies tor all its
enterprise funds. See "Discussion of Recent Financial and Management Events • September 30. 2003 Financial Results ...
According to audited numbers for FY 2004, the cunent requirements for operating and rate stabilization reserves for each
enterprise fund and current unrestricted net assets for each enterprise fund are as follows:
Enterprise Fund Current Reserve Actual
Required Unrestricted Net
Assets
Electric $28.5 million $7.0 million
Water $6.5 million $14 million
Sewer $4.2 million $6.3 million
Stonn Water $.5 million $1.3 million
Solid Waste S4. 7 million $6.0 million
Airport Ill $1.97 million S-1 million
(I) The Airport Fund has not recovered from the events of September 11·, 200 I.
Enterorise Fund Revenues .•. It is the policy of the City that each of the Electric, Water, Solid Waste and Sewer funds be
operated in a manner that results in self sufficiency. without the need for additional monetary transfers from other funds
(although the Electric System received transfers from the General Fund during the FY 2003). Such self sufficiency is to be
obtained through the rates, fees and charges of each of these enterprise funds. For purposes of detennining self sufficiency, cost
recovery for each enterprise fund includes direct operating and maintenance expense, as well as indirect cost recovery, in· lieu of
transfers to the General Fund for property and franchise tax payments, capital expenditures and debt service payments. where
appropriate. ·
Debt Service Fund Balance . . . A reasonable debt service fund balance is maintained in order to compensate for unexpected
contingencies.
Budgetary Procedures ... The City follows these procedures in establishing operating budgets:
1) Prior to August 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year
commencing the following October I. The· operating budget includes proposed expenditures and the means of
t"mancing them.
2) Public hearings are conducted to obtain taxpayer comments.
3) Prior to October I the budget is legally enacted through passage of an ordinance.
4) The City Manager is authorized to transfer budgeted amounts between accounts below the department level. Any
tr.msfer of funds between departments or higher level are presented to the City Council for approval by ordinance
betore the funds are transferred or expended. Expenditures may not legally exceed budgeted appropriations at the
fund level.
5) Fonnal 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. Fonnal
budgetary integration is not employed tbr Debt Service fi.tnds because effective budgetary control is alternatively
achieved through general obligation bond indenture and other contract provisions.
6) The Budget for the General Fund is adopted on a basis consistent with generally accepted accounting principles.
45
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) Budgetnry comparison is presented for the General Fund in the combined financial statement section of the
Comprehensive Annual Financial Report.
The City has received the Distinguished Budget Presentation Award from the GFOA for the following budget years beginning
October I. 1983-88 and 1990-04. The City will submit the FY 2005 budget to the GFOA to determine its eligibility for another
award.
Insurance and Rjsk Management ... The City is self-insured for public entity liability and health benefits coverage. Risk
management purchases a $10.000.000 excess insurance policy for liability claims in excess of$250,000. per occurrence. Airport
liability insurance and workers" compensation is insured under guaranteed cost policies. The Health Benefits are covered a fully
insured program with a $10,765.643 cap and a $150.000 individual cap. The City maintains insurance policies with large
deductibles for fire and extended property coverage and boiler and machinery coverage.
An Insurance Fund has been established in the Internal Service Fund to account for insurance programs and budgeted transters
are made to this fund based upon estimated payments for claim losses.
At September 30.2004 the total Net Assets of these insurance funds were as follows:
Self-insurance -health
Self-insurance -risk management
$ 4.375.796
$ 5.727,822
The City obtains an actuarial study of its risk management fund (the "Risk Fund") every year. In tiscal year 2004. an actuarial study
was conducted that considered the types of insurance protection obtained by the City. the loss exposure and loss history. and claims
being paid or reserved that are not covered by insurance. The 2004 actuarial review recommended that the liabilities of the Risk
Fund be increased to $6,437,000 from $4,824.000 to the minimum expected ronfldence level of the Government Accounting
Standard Boord Statement Number I 0 ("GASB I 0"), which requires maintenance of risk management assets at a level representing at
least a SO% confidence level that all liabilities. if presented for payment immediately. could be paid. The Risk Fund has net assets
restricted for insurance claims of $5,715.000 over the recommended funding level. Given the risk net assets balance. the City
exceeds the minimum GASB 10 requirement
INVESTMENTS
The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the
City Council of the City. Both state law and the City's investment policies are subject to change.
LECAL INVESTMENTS ..• Under Texas law. the City is authorized to invest in (I) obligations. including letters of credit. of the United
States or its agencies and instrumentalities. (2) direct obligations of the Stale of Texas or its agencies and instrumentalities, (3)
collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States. the underlying security
for which is guaranteed by an agency or instrumentality of the United States. ( 4) other obligations. the principal of and interest on
which are unconditionally guaranteed or insured by. or backed by the full faith and credit ot: the State of Texas or the United States
or their respective agencies and instrumentalities. (5) obligations of stales, agencies.. counties, cities, and other political subdivisions
of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalenL (6)
certificates of deposit that are guaranteed or insured by the federal Deposit Insurance Corporation or are secured as to principal by
obligations described in the preceding clauses or in any other manner and amount provided by law for City deposits, (7) certificates
of deposit and share certificates issued by a state or federal credit union domiciled in the State of Texas that are guaranteed or insured
by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund. or are secured as to principal by
obligations described in the clauses (I) through (5) or in any other manner and amount provided by law for City deposits. (8) fully
collateralized repurchase agreements that have a detined termination date. are fully secured by obligations described in clause (I},
and are placed through a primary government securities dealer or a rmancial institution doing business in the State of Texas. (9)
bankers' acceptances with the remaining term of270 days or less. if the short-term obligations of the acx:epting bank or its parent are
rated at least A-I or P·l or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper that is
rated at least A-1 or P-1 or the equivalent by either (n) two nmionally recognized credit rating agencies or (b) one nationally
recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank. (II) no-
load money market mutual funds regulated by the Securities and Exchange Commission that have a dollar weighted average portfolio
maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share.
(12) no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less
than two yem-s: invests exclusively in obligations described in the preceding clauses: and are continuously rated as to invesbnent
quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent, (13) bonds issued,
assumed. or guaranteed by the State of Israel, and (14) guaranteed investment contracts secured by obligations of the United
States of America or its agencies and instrumentalities. other than the prohibited obligations described in the next succeeding
paragraph.
46
0
0
0
0
0
0
0
(j)
The City may invest in such obligations directly or lhrough government investment pools that invest solely in such obligations
provided that the pools are rated no lower d1an AAA or AAAm or an equivalent by at least one nationally recognized rating service.
The City is specifically prohibited from investing in: (I) obligations whose payment represents the coupon payments on the
outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose
payment represents the principaJ stream of cash flow from the underlying mortgage-backed security and bears no interest; (3)
collateralized mortgage obligations that have a stated final maturity of greater than 10 yeaf1>; and (4) collateralized mortgage
obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index.
Effective September I, 2003, governmental bodies in the State are authorized to implement securities lending programs if(i) the
securities loaned under the program are collateralized, a loan made under the program allows for termination at any time and a
loan made under the program is either secured by (a) obligations thai are described in clauses (I) through (6) of the first
paragraph under this subcaption, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a
nationally recognized investment rating tirm not less than ·'A" or its equivalent. or (c) cash invested in obligations that are
described in clauses (I) through (S) and (10) through (13) of the first paragraph under this subcaption., or an authorized
investment pool: (ii) securities held ns collateral under a Joan are pledged to the governmental body, held in the nllltle of the
governmental body and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a
loan made under the program is placed through either a primary government securities dealer or a financial institution doing
business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less.
INVESTMENT POLICIES ... Under Texas law, the City is required to invest its funds under written investment policies that primarily
emphasize safety of principal and liquidity; that address investment diversification., yield, maturity, and the quality and capability of
investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any
individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups. All City funds must be
invested consistent with a formally adopted "Investment Strategy Statement" lhat specifrca.lly addresses each funds' investment Each
Investment Strategy Smtement will describe its objectives concerning: (I) suitability of investment type. (2) preservation and safety of
principal, (3) liquidity, (4) mari<etability of each investment. (5) diversification of the portfolio, and (6) yield.
Under Texas law, City investments must be made ''with judgment and care,. under prevailing circumstances, that a person of
prudence. discretion, and intelligence would exercise in the management of the person·s own affairs. not for speculation., but for
investment considering the probable safety of capital and the probable income to be derived." At least quarterly the investment
officers of the City shall submit an investment report detailing: (I) the investment position of the City, (2) that all investment oflicers
jointly prepared and signed the report, (3) the beginning marl<et value. any additions and changes to marl<et value and the ending
value of each pooled fund group, ( 4) the book value and market value of each separately listed asset at the beginning and end of the
reporting period. (S) the maturity date of each separately invested assel (6) the account or fund or pooled fund group for which each
individual investment was acquired. and (7) the compliance of the investment portfolio as i.t relates to: (a) adopted investment
strategy statements and {b) state law. No person may invest City funds without express written authority from the City Council.
ADDITIONAL PROVISIONS ... Under Texas law the City is additionally required to: (I) annually review its adopted policies and
strategies: (2) require any investment officers' wilh personal business relationships or relatives with fmns seeking to sell securities to
the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the
registered principal of fiJ'tliS seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b)
acknowledge that. reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c)
deliver a written stalement attesting to these requirements; ( 4) perform an annual audit of the management controls on investments nnd
adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and
investment officers: (6) restrict reverse repun:ha.se agreements to not more than 90 days and restrict the investment of reverse
repun:hase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict its investment in mutual
funds in the ag~gate to no more than IS percent of its monthly average fund balance, excluding bond proceeds and reserves
and other funds held for debt service. and to invest no portion of bond proceeds.. reserves and funds held for debt service. in
mutwll funds: and {S) require local government invesnnent pools to conform to the new disclosure, raring, net asset value. yield
calculation. and advisory board requirements.
47
TABU: 15 • CURRENT INVESTMENTS
As of April 30, 2005, the City's investnble funds were invested in the following categories:
Book Value
%orTocal
T;):~ Par Value Value Book Value
United S 131es Agency Oblisations $ 27,000,000 26,997,76-1 14.83
ln~rest Bearing Bank Deposits1:1 96,220.62tJ 96,220,620 52.H7
Money Markel Mutual Funds'11 2.92!1,474 :!.,928.474 1.61
local b'Ovemment inves\ment pools141 55,864.393 55,864,393 30.69
182,1)13,4117 1!12,1)\ 1,251 ltll).t)tl
$
Estimated Fair
Markel Value'"
%of Total
Value Market Value
26,724.160 14.70
%.2.."'11,(,2() 52 .. 94
2,!>2tl,474 1.61
55,1164,393 30.74
ll!\,737,647 ltJ().tJU
Weishced
Average
Marurity (Days)
462 u~ys
I Jay
I Jay
I J.,v
(I) Market prices are obtained through information provided by Wells Fargo Brokerage Services, LLC. As of such date. the mnrket
value of such investments was approximately I 00.00% of their book value. No funds of the City ;u-e invested in mortgage-backed
securities. The City holds all investments to maturity which minimizes the risk of market price volatility.
(2) Deposits are held at Wells fargo Bank. N.A. in fully collateralized interest earning savings accounts.
(3) Money Market MutuaJ Funds (MMMPs), used by the City. have investment objectives that include achieving a stable net asset
value of $1.00 per sh;u-e.
(4) Local government investment pools consist of entities with investment objectives that include achieving a stable net asset value of
Sl.OO per sh;u-e, The investment pools used by the City include TexPool and TexSTAR. TexSTAR is a local government investment
pool for whom First Southwest Asset Management, Inc .• an affiliate of First Southwest Company. provides customer service and
marketing for the pool. TexSTAR cwrently maintains a "AAA" rating from Standard & Poor's and has an investment objective of
achieving and maintaining a stable net asset value of $1.00 per share. Daily investments or redemptions of funds is allowed by the
participants. First Southwest Company is the Financial Advisor for the City in connection with the issuance of City debt.
[THE REMAJNDER OF THIS PAGE INTENTIONALLY LEFT BLANK}
48
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THE SYSTEM
CONTRACTS AND F ACJLITIES
Water Supply ... The primary source of water for Lubbock is the Sanford Dam and Reservoir Project of the Canadian River
Municipal Water Authority ("CRMWA"), which delivers raw water from its Lake Meredith reservoir, located on the Canadian
River about 50 miles north of Amarillo, Texas, and about 170 miles north of the City, to member cities through an underground
aqueduct system. Lubbock is one of eleven member cities of CRMW A; other members are Amarillo. Pampa, Borger, Plainview,
Slaton. Levelland, Brownfield, Tahoka. O'Donnell and Lamesa. Lake Meredith was constructed pursuant to a contract between
CRMW A and the U.S. Bureau of Reclamation dated November 28, 1960, as amended. The City, as a participating member,
contracted with the CRMW A to pay its pro-rata portion of the total reimbursable cost of the project. Payments under the
contract commenced in 1969. In the Spring of 1999, the City applied approximately $12.212,861 of the proceeds of a series of
refunding bonds to prepay its share of the Bureau of Reclamation loan. In accordance with its contract with CRMW A, the City
pays an annual operating and maintenance charge to CRMW A of certain fixed and variable expenses associated with the project.
Lubbock received approximately 27.546 acre feet of water from CRMW A in Calendar Year 2004, approximately 74% of its total
consumption. On average, Lake Meredith water has provided 80% to 85% of-Lubbock· s water supply needs, with the balance of
IS% to 20% being supplied by well water from the City-owned Sandhills well field in Bailey County (the "City Well Field").
When the City and other members of CRMWA originally contracted for the right to receive water from Lake Meredith in 1960,
the water yield of the Lake was expected to be greater than it has actually produced. Each yenr, the Board of CRMWA
determines with respect to each member city the portion of water based upon original water yield assumptions that will be
provided to each city during the year.
In 2004, due to an extended drought reducing Lake Meredith inflow and causing the lake level to decrease to an all time low
level. CRMWA reduced the annual allocation to 30.429 acre feet. In April 2005, due to increased lake levels and acquisition of
additional groundwater rights by CRMWA, the allocation was increased to 33,352 acre feet. Lubbock hDS purchased an
additional 1,228 acre feet from the City of Pampa.
In 19%, CRMWA member cities elected to participate in the North Panhandle Water Project (the "CRMWA Well Project").
The CRMW A Project involves CRMW A purchasing 42. 76S acres of water rights northeast of Borger, Texas. which occurred in
August 1996. following the acquisition of the water rights. wells were drilled and pipelines and other improvements were
constructed to permit the groundwater to be pumped to the CRMW A pipeline where it is blended with surface water from Lake
Meredith and delivered to member cities. including the City. The total cost of the CRMWA Well Project was approximately SSI
million, of which the City's share is was approximately $30.2 million, based on the allocated share of water from the reservoir.
The City's share of the water rights acquisition (which represents approximately 37% of the total CRMWA Well Project cost),
approximately $7. I million, was funded from existing water funds of the City. and the City's portion of the CRMWA Project's
construction cost, approximately $23.1 million. was financed through the issuance by the City of certificates of obligation in
1999.
With the water from Lake Meredith and the ground water produced by the CRMWA Well Project. the City's CRMWA water
allocation was increased from 38.000 acre feet per year to 42,986 acre feet per yenr. The City's annual average water
consumption is 43,489 acre feet. Benefits of the CRMW A Well Project include: improving the quality of water available to the
City by blending the ground water with the Lake Meredith water that has a relatively high saline quantity, conserving water in
the City Well Field. which provides the City with a ground water supply, and postponing the need to construct water treatment
and delivery facilities for water from the Lake Alan Henry reservoir.
CRWMA has completed and is operating a desalinization project for the Canadian River that feeds into Lake Meredith. The
total cost of the desalinization project W".lS approximately SIO million. with the State of Texas and the U.S. Government
contributing one third of the cost each and the member cities of CRMW A contributing one third of the cost. The City's share of
this project was approximately $1.4 million.
Other Surface Water Sup_plv Sources ... In 1994, the BRA, on behalf of the City, completed construction of the John T.
Montford Dam. in order to impound a conservation reservoir, known as the Lake Alan Henry reservoir, on the South Fork of the
Double Mountain Fork of the Brazos River. The La.lce Alan Henry reservoir, located about 65 miles southeast of Lubbock. was
planned and constructed to enhance the provision of estimated long term water supply needs. The City has conttacted with the
BRA tbrthe maintenance of the dam and operation of the reservoir.
49
On May II. 1989. the City entered into a contract with the BRA. to implement the construction of the Montford Dam and Lake
Alan Henry. As of May 2005. the outstanding principal balance of the BRA Bonds was $45,515,000. Under its contract with
the BRA. the City each year pays to the BRA: (a) amounts sufficient to pay debt service: (b) maintenance and operations costs;
and (c) management fees. In addition. the City will buy and pay for the entire amount of water which can be supplied by the
project whether or not used. Payments under the contract constitute operating expenses of the City's Waterworks System.
payable from gross revenues of the Waterworks System. The Bonds are being issued in part to provide funds to BRA to enable
BRA to refund the City's obligation with respect to the BRA Bonds (see ~The Bonds-Defeasance of the BRA Bonds").
At conservation storage, the reservoir will contnin 115,937 acre-feet of water; mean depth at conservation storage will be
approximately 40 feet; maximum depth at the dam will be appro:..imately 90 feet. The contributing dminage or watershed area is
an estimated 394 square miles. Presently the reservoir is at the normal pool elevation (115.937 acre-feet of water) with a depth
or approximately 70 feet at the dam.
In 1988, future population and water demand estimates for Lubbock. projected by the Texas Water Development Board.
indicated a 60 to 78 percenl increase in Lubbock's population by the year 2040. Recent updates reveal a more likely growth rate
of approximately 0.5% increase per year. or an estimated 30% increase in population during this same time period. Due to the
City's participation in the CRMWA Well Project. construction of the associated facilities necessary to bring the Lake Alan
Henry water to the City (pipeline. pump stations.. and an additional water treatment plant) has been delayed until use of this
water supply resource Is required to meet water demand. The Lake Alan Henry reservoir is viewed as a long-runge water supply
for the City. Based upon the City's participation in the CRMWA Well Project. its water rights in the City Well Field in Bailey
County and the water from Lake Alan Henry, the City believes that it has addressed its water supply for at least the next forty
years. See "The Syscems-Waterworks System-Water Supply Study".
In order to oplimize the value of the Lake Alan Henry reservoir. the City in 1997 began constructing recreational improvements
on the 580-acre "Public Access Area" located on the North Shore of the reservoir. To date the City has constructed a four-lane
boat ramp. a paved road. a parking lot, a boat dock and a fishing pier. In order to defray the oost of maintaining the reservoir as a
recreational facility. the City implemented a user tee schedule in March, 1997. Revenue from user fees during 2004 is estimated
to be $446.506.
Ground Water Supo!y ... Approximately 20% of the City's water is obtained from the City Well Field. which consists of 2St
wells, all producing from the Ogallala formation. which underlies the High Plains of Texas. The wells nre used primarily for
peaking purposes. Except for the addition of disinfection. the City's ground water does nol require treatment before it is
introduced into the water distribution system.
Wellhead Protection ... Lubbock initiated the Wellhead Protection Program ("WHP~) in response to a growing need to maintain
its existing groundwater supply and to protect it from environmental harm. In the face ofrecenl droughts. water has become the
most precious resource in West Texas. Phase I of the WHP began in 1994 when Lubbock and the Le:~gue of Women Voters
recruited and trained citizen volunteers. These volunteers. working with a map of Lubbock's 235 water supply wells, surveyed
land owners and identified possible sources of contamination located on their property. This extensive effort revealed possible
contamination that ranged from abandoned water wells and underground storage tanks to auto salvage yards and municipal
sewage lines.
As a result of Phase I activities. the Texas Natural Resource Conservation Commission (now known as the Texas Commission on
Environmental Quality, and hereafter reterred to as "TCEQ") began pursuing a federal grunt from the United States
Environmental Protection Agency ("EPA") tor the purpose of conducting non-p()int source pollution prevention and reduction
activilies. Prior to pursuing this grant the TCEQ approached the City to encourage its participation in a S 161.000 project to
estab lish a wellhead protection progrnm for its public water supply wells. On September 14, 1995, the City Council authorized
the City's pnrticipation in the WHP.
Public Education Program ... In an effort to minimize the need to acquire more water sources. the City implemented a youth
education program in 1997. The goal of this program is to reach water conservation techniques to elementory children in the
Lubbock Independent School District; bring an awareness to elementary children about water treatment. water reclamation. and
disposal of treated effluent by land application; to promote the protection of groundwater through education about water
percolation and the impacts of illegal dumping of oil. gasoline. and other pollutants that eventually contaminate groundwater.
The City's average daily residential water usage of approximately 190 gallons per capita per day ("GPCD") is higher than the
State's average of 167 GPCD. The City is situated in an arid region which requires more water per capita for land.sc3pe irrigntion
than many parts of the State. By implementing a youth education program. Lubbock hopes to make its children. the future
consumers of the utility. aware oflimitntions in water supplies and the need to conserve these supplies.
Water Treatment Facilities ... The water treatmenl plant for the treatment of raw water received from CRMWA has a design
capacity of61.4 million gallons per day {"mgd") and a maximum hydrnulic capacity of75 mgd The plant has a 1.200 acre-teet
open storage reservoir which permits storage of raw water during "off-peak" periods, and 8.5 million gallons ("mg") clearwelt
storage for treated water.
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The City's raw water treatment plant treats CRMWA raw waler deliveries for the cities of Brownfield, Lamesa, Levelland,
O'Donnell, Slaton and Tahoka prior to CRMWA delivery to those cities. Under contractual agreements with these cities, the
City is fully reimbursed for all costs of this treatment, including capital costs and debt service; the combined percentage in
treatment plant costs for these cities is 20.34o/o.
Wa1er Storage ... Storage capacity includes a 1,200 acre-foot open storage reservoir near the water treatment plant, which
permits the storage of surplus water received from the CRWMA in off-peale periods. In additio11-13 storage reservoirs and 4
elevated steel storage tanks provide storage capacity of 66,750,000 gallons, sufficient for peak hours and fire protection
requirements.
Water Distribution Facilities ... The City's water distribution system includes approximately 1,264 miles of distribution lines,
237 miles of water supply lines and 3,882 ftre hydrants. The distribution system extends throughout the City and is designed for
expansion. Present pumping cap~~city is over 200 mgd. Present water supply capacity is l06 mgd.
Certain of the water resources of the City, specifically Lake Alan Henry, have relatively high costs associated with delivery of
the water to the City. Moreover, within the vicinity of the City there is a substantial amount of ground water, although the
relative yield of groundwater differs from location to location and the use of ground water as a supply represents a non-
sustainable use. Other issues that the City has addressed in recent years is the reduced yield of Lake Meredith, which lies in an
area that has experienced a prolonged drought. and which has had growing salinity that affects the aesthetics of the water.
although it continues to meet applicable potable water quality standards. In addition. in recent years, City staff and consultants
have been working to better assess the use of effluent by the City, particularly in light of recent regulatory actions relating to the
City's land application discharge of effluent and the and the costs incurred by the City in addressing the regulatory actions. See
"The Systems-Sewer System -Discharge Permit Issues".
While the City at present has an adequate water supply and, with the construction of Lake Alan Henry. it has a potential long-
term additional supply, the costs of delivery of that water to the City are expected to be high. With these considerations, among
others. in mind, the City Council in March 2003 authorized a water consultant to prepare a comprehensive assessment to be used
by the City for its long-term water planning purposes. The consultant has been charged with analyzing the City's current water
supplies, including the reuse of treated effluent, potential alternative water supply and reuse options and the potential for the City
to realize value from its existing water supplies when they are not being utilized by the City. Among other aspects of the study,
the consultant has been engaged to determine the ultimate capacity of the CRMW A pipeline and related water sources and to
what degree they can meet the future water needs of the City and other CRMWA member cities. and costs associated with any
proposed upgrades to the CRMWA facilities: determining a firm yield for Lake Meredith; determining whether the City's Well
Field can be expanded. and the costs and projected lite of the underground water located there; analyzing the different water
demand scenarios for Lake Alan Henry and whether that water supply can be better used by other users than the City; assessing
the future demand of the City and other entities within a 50 mile radius of the City for water. determining future markets for
water in the vicinity of the City; examining the prospects for water alliances and partnerships; and providing an assessment of
water conservation methods availnble to reduce the per capita consumption of water in the City.
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51
TABLE 16-MONTHLVWATER RATES
On August 26, 1999. the Lubbock City Council adopted a three year 12% increase in water rates to generate revenues sufficient
to pay the debt service on the City's $24.800,000 Tax&: Waterworks System Surplus Revenue Ce11ificates of Obligation. Series
1999, which funded the City's share of the construction cost of the CRMWA Well Project. On August 29, 2002. the City
Council adopted a water rate ordinance that provided for an approximately 3% water rate increase for the 2002~3 fiscal year,
and three additional rate increases of approximately 3% to be implemented in each of the following three fiscal years. The City
Council reviews water rates in connection with the adoption of the annual City budget, and it is possible that the anticipated rate
increases could be greater or less in future years due to operating costs of the Waterworks System and the necessity of making
additional capital improvements to the Waterworl:s Syst.em. The table below shows the rate for the current year. as compared to
the rates in place for the 2003-04 fiscal year.
Base Rate
3/4" meter
I" meter (single tlunily residential)
1" meter (irrigation)
I" meter (other than residential)
I Y:t" meter
2" meter
3" meter
4ft meter
6" meter
8" meter
10" meter
Flow Rate Charge per 1.000 Gallons
Single Family Residential
Multi-Family Residential
Commercial
Schools
Sprinkler System
s
$
Prior
Rate
9.43
12.01
11.21
20.14
37.97
59.51
128.91
336.59
668.92
848.75
1,693.39
1.73
1.46
1.60
1.63
2.02
Rate Effective
10/1/2004
s 9.71
12.37
11.55
20.74
39.11
61.29
132.78
346.69
688.99
874.21
1,744.19
s 1.78
LSI
1.64
1.68
2.08
City Staff is in the process of preparing lhe Fiscal Year 2006 budget to present to the City Council for consideration. It is
anticipated that a rote increase of3% for Fiscal Year 2006 will be part of the budget proposal presented to the City Council.
TABLE 17 ·HISTORICAL WATI!R CONSUMPTION (Mtl.LION GALLONS)
Average Maximum
Calendar Daily Consumption
Year Consumetion Day/Year
2000 39.413 67.815
2001 38.255 73.086
2002 37.401 63.911
2003 38.119 73.605
2004 34.421 65.994
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TABU. 18 • WATERWORKS SYSTEM CONDENSED STATEMENT OF OPERATIONS
Fiscal Year Ended Sej!tember 30.
2004 2003 2002 2001 2000
REVENUE
Operating Revenues $ 31,907,893 $ 32.770.781 $ 32,727.207 s 30,463,694 $ 29,037,723
Non-Operating Revenues 539.413 1.337.330 1.313.649 2.491.890 3.404.850
Gross Revenues $ 32,447,306 $ 34,108,111 s 34,040,856 $ 32,955,584 s 32,442,573
EXPENSE
Operating Expense 111 20.550.379 20.137.448 19.596.079 20.194.590 18.238.503
Net Revenues $ 11.896.927 s 13.970.663 $ 14.444.777 s 12.760.994 $ 14.204.071
Water Meters 72.500 75,505 71,039 70,756 70,037
(I) Operating expense includes construction repayment costs and operating and maintenance charges paid to CRMWA and BRA and
excludes depredation and capital expenditures.
Note: The City has no outstanding or authorized Waterworks System Revenue Bonds, however. there is general obligation debt
outstanding issued or planned for issuance for water system purposes on which annual debt service is provided from revenues of the
System, including the Bonds (see "Table I 0 • Computation of Self-Supporting Debt"). It is the City's policy and intention to maintain
rates and charges for water service that will provide Net Revenues of the Waterworks System that will fully provide for debt service
on general obligation debt issued for Waterworks System purposes over the life of the present Waterworks System general obligation
and any additional Waterworks System general obligation debt issued in the future.
Within the Waterworks System enterprise fund. the City maintains a working capital fund reserve and a rate stabilization reserve. As
for other City enrerprise funds, the financial policies of the City include a rolling ten year accwnulation period for such reserves. At
present. the ten year reserve goal for Waterworks System working capital is $8,.300,000 and for System rate stabilization is
$1 ,700,000. While no assurances can be given, City Staff anticipate that the actual amounts in such reserves will be approximately
$8,391.000 and $1,680,000 at the end of the current fiscal year.
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TAX MATTERS
TAX EXEMPTION ••• In the opinion of Vinson & Elkins L.L.P., Bond Counsel, (i) interest on Bonds is excludable from gross
income for federal income tax purposes under existing law and (ii) interest on the Bonds is not subject to the alternative
minimum tax on individuals and corporations. except as described below in the discussion regarding the adjusted current
earnings adjustment for corporations.
The Internal Revenue Code of 1986. as amended (the "Code"), imposes a number of requirements that must be satisfied for
interest on state or local obligations, such as the Bonds, to be excludable from gross income for federal income ta.x purposes.
These requirements include limitations on the use of bond proceeds and the source of repayment of bonds, limitations on the
investment of bond proceeds prior to expenditure. n requirement thut excess arbitrage earned on the investment of bond proceeds
be paid periodically to the United States and a requirement that the issuer file an infonnation report with the Internal Revenue
Service. The Issuer has covenanted in the Ordinance that it will comply with these requirements.
Bond Counsers opinion will assume continuing compliance with the covenants of the Ordinance pertaining to those sections of
the Code that atTect the exclusion from gross income of interest on the Bonds for tederal income tax purposes and. in addition.
will rely on representarions by the Issuer. the lssucr·s Financial Advisor and the Underwriters with respect to maners solely
within the knowledge of the Issuer. the Issuer's Financial Advisor and the Underwriters, respectively. which Bond Counsel has
not independently verified. (f the Issuer should fail to comply with the covenants in the Ordinance or if the foregoing
representations or repon should be determined to be inaccurate or incomplete. interest on the Bonds could become taxable from
the date of delivery of the Bonds, regardless of the date on which the event causing such taxability occurs.
The Code also imposes a 20% alternative minimum tax on the "alternative minimum taxable income" of a corporation if the
amount of such alternative minimum. tax is greater than the amount of the corporation's regular income tax. Generally, the
alternative minimum taxable income of a corporation (other than any S corporation. regulated investment company, REIT,
REMIC or FASI1). includes 75% of the amount by which its -adjusted current earnings .. exceeds its other ·'alternative minimum
taxable income.,. Because interest on tax exempt obligations, such as the Bonds, is included in a corporation·s "'adjusted current
earnings." ownership of the Bonds could subject a corporation to alternative minimum tax consequences.
Except as stated above. Bond Counsel will express no opinion as to any federal. state or local tax consequences resulting from
the receipt or accrual of interest on. or acquisition. ownership or disposition of, the Bonds.
Bond Counsel's opinions are based on existing law, which is subject to change. Such opinions are further based on Bond
Counsel's knowledge of facts as of the date thereof. Bond Counsel assumes no duty to update or supplement its opinions to
reflect any facts or circumstances that may thereafter come to Bond Counsel's attention or to reflect any changes in any law that
may thereafter occur or become effective. Moreover. Bond Counsers opinions are not a guarantee of result and are not binding
on the Internal Revenue Service (the "Service"''); rather, such opinions represent Bond Counsel's legal judgment based upon its
review of existing law and in reliance upon the representations and covenants referenced above that it deems relevant to such
opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state
or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the
Service will commence an audit of the Bonds. If an audit is commenced. in accordance with its current published procedures the
Service is likely to treat the Issuer as the taxpayer and the Owners may not have a right to participate in such audit. Public
awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the
audit regardless of the ultimate outcome of the audit
ADDITIONAL FEDERAL INCOME TAX CONSIDERATIONS
COLLA URAL TAX CONSEQUENCES •.• Prospective purchasers of the Bonds should be aware that the ownership of tax exempt
obligations may result in collateral federal income ta.x consequences to financial institutions. life insurance and property and
casualty insurance companies, certain S corporations with Subchapter C earnings and profits. individual recipients of Social
Security or Railroad Retirement benetits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase
or carry tax exempt obligations, taxpayers owning an interest in a F AS IT that holds tax-exempt obligations and individuals
otherwise qualifYing for the earned income credit In addition. certain toreign corporations doing business in the United States
may be subject to the ·'branch profits tax .. on their elfectively connected earnings and profits. including tax exempt interest such
as interest on the Bonds. These categories of prospective purchasers should consult their own tax advisors as to the applicability
of these consequences. Prospective purchasers of the Bonds should also be awnre that under the Code, taxpayers are required to
repon on their returns the amount oftax-exempt interest. such as interest on the Bonds, received or accrued during the year.
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T A.X ACCOUNTING TREATMENT OF ORIGINAL ISSUE PREMIUM ••• The issue price of all or a portion of the Bonds may exceed
the stated redemption price payable at maturity of such Bonds. Such Bonds (the '"Premium Bonds'") are considered for federal
income tax purposes to have .. bond premium'' equal to the amount of such excess. The basis of a Premium Bond in the hands of
an initial owner is reduced by the amount of such excess that is amortized during the period such initial owner holds such
Premium Bond in determining gain or loss for federal income tax purposes. This reduction in basis will increase the amount of
any gain or decrease the amount of any loss recognized for federal income tax purposes on the sale or other taxable disposition
of a Premium Bond by the initial owner. No corresponding deduction is allowed for federal income tax purposes for the
reduction in basis resulting from amortizable bond premium. The amount of bond premium on a Premium Bond that is
amortizable each year (or shorter period in the event of a sale or disposition of a Premium Bond) is determined using the yield to
maturity on the Premium Bond based on the initial offering price of such Bond.
The federal income tax consequences of the purchase, ownership and redemption. sale or other disposition of Premium Bonds
that are not purchased in the initial offering at the initial offering price may be determined according to rules that differ from
those described above. All owners of Premium Bonds should consult their own tax advisors with respect to the determination for
federal. state. and local income tax purposes of amortized bond premium upon the redemption. sale or other disposition of a
Premium Bond and with respect to the federal. stlle. local, and toreign tax consequences of the purchase, ownership. and sale,
redemption or other disposition of such Premium Bonds.
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OTHER INFORMATION
RATINGS
The Bonds are rated "Aaa" by Moody's.. "AAA" by S&P and "AAA" by Fitch by virtue of the Policy to be issued by Financial
Security. The presently outstanding uninsured tax supported debt of the City is rated "AI" by Moody's. "AA-" by S&P and
"AA-" by Fitch. The City also has issues outstllllding which are rated "Ana" by Moody's, "AAA" by S&P and "AAA" by Fitch
through insurance by various commercial insurllllce companies. An explanation of the significance of such ratings may be
obtained from the company furnishing the rating. The ratings reflect only the respective views of such organizations and the
City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for
any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such rating
companies.. if in the judgment of either or both companies. circumstances so warrant. Any such downward revision or
withdrawal of such ratings may have an adverse effect on the market price of the Bonds.
LITIGATION
The City is involved in various legal proceedings related to alleged personal and property damages. breach of contract and civil
rights cases. some of which involve claims against the City that exceed $.500,000. State law limits municipal liabiliry for
personal injury at $250.000/SSOO,OOO and property damage at $100,000 per claim. The following represents the significant
litigation against the City at this time.
There is one claim pending against the City. which is in a preliminary stage. that the City Attorney believes could be brought
under Section 1983 of the post-Civil War Civil Rights Act (-Section 198r). If a claim should be made under that law and
damages are ultimately assessed against the City, the City would not be subject to limitations on damages. Insurance should
cover all but the self-insured retention.
The City is also involved in a lawsuit with the City's firefighters regarding pay issues. The firefighters obtained a $688.000
judgment against the City for damages that accrued through July 2002. Damages have continued to accrue since July 2002. The
City appealed this judgment. and the Court of Appeals overturned the judgment. The plaintiffs have filed an appeal to the Texas
Supreme Court. The Supreme Court has not made a decision on whether to hear the appeal. While any liability would not be
covered by an insurllllce policy. the City Attorney only assesses the potential that the firelighters will obtain relief from the
Texas Supreme Court as possible.
The City is also involved in a suit filed by the general contractor for a large drainage project in the Ciry. In the suit. the
contractor asserted damages in excess of S2.3 million under a breach of contract claim. The City obtained a summary judgment
in this case against the contractor. The contractor has appealed the decision to the Fifth Circuit Court of Appeals. While this
liability is not covered by any insurllllce policy. the Cil)' Attorney only assesses the likelihood of recovery by the contractor as
possible.
The City has also been sued by a another contractor who was not awarded the bid on a different portion of the storm.water
drainage project. The contractor has alleged violations of the state bid statute and a violation of Section 1983. The plaintiffs
took a nonsuit in state court andre-filed the case in federal court. The federal court has dismissed the contractor's Section 1983
claims, and the contractor has filed a Notice of Appeal. The City Attorney assesses the likelihood of liability as possible.
Potential damages are unknown. The City Attorney believes there is insurance coverage for the Section 1983 claim. although
there is a dispute with the carrier regarding coverage.
The City has been sued by six plaintiffs who allege that the City and or Lubbock County failed to properly record information in
its cemetery records that would show where their relatives were buried. The Plaintiffs' attorney indicates that he has about
eighty other clients with similar claims. The City will assert a defense under statutes of limitations. that the City was not the
owner of the property during portions of the time in question. and that the allegations fail to state a claim upon which relief c:xn
be granted. The City Attorney assesses the potential for liability as possible. There is no insurllllce coverage for these claims.
The City intends to vigorously defend itself on all claims. although no assurance can be given that the City will prevail in all
cases. However. the City Attorney and Ciry management is of the view that its available sources for payment of any such
claims. which include insurance policies and City reserves for self insured claims. are adequate to pay any presently foreseeable
damages (see "Financial Policies -Insurance and Risk Management").
On the date of delivery of the Bonds to the Underwriters. the City will execute and deliver to the Underwriters a certific:xte to the
effect that. except as disclosed herein. no litigation of any nature has been filed or is pending, as of that date. to restrain or enjoin
the issuance or delivery of the Bonds or which would atlect the provisions made for their payment or security or in any manner
question the validity of the Bonds.
REGISTRATION AND QUALIFICA TJON OF BONOS FOR SALE
The sale of the Bonds has not been registered under the Federal Securities Act of \933. as amended. in reliance upon the
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exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in
reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any
jurisdiction. The City assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in
which the Bonds may be sold. assigned, pledged, hypothecated or otherwise transferred This disclaimer of responsibility for
qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the
availability of any exemption from securities registration provisions.
LtGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS
Section 1201.041 of the Public Security Procedures Act (Chapter 1201. Texas Government Code) provides that the Bonds are
negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments
for insurance companies. fiduciaries. and trustees. and for the sinking funds of municipalities or other political subdivisions or
public agencies of the State of Texas. With respect to investment in the Bonds by municipalities or other political subdivisions
or public agencies of the State of Texas. the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that
the Bonds be assigned a rating of ''A" or its equivalent as to investment quality by a national rating agency. See "Other
Information • Ratings., herein. In addition, various provisions of the Texas Finance Code provide that. subject to a prudent
investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with capital of one million
dollars or more. and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its
agencies, and its political subdivisions. and are legal security for those deposits to the extent of their market value. No review by
the City has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in
those states.
LEGAL OPINIONS
The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Bonds, including
the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Bond and to the et1ect 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 ~ax
Matters" herein, including the alternative minimum tax on corporations. Bond Counsel was not requested to pnrticipate. 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
tirm has reviewed the information under the captions "The Bonds" (exclusive of the subcaption "Book-Entry-Only System"),
'"Tax Matters" and "'Continuing Disclosure of Information" and the subcaptions "Legal Opinions" and "Legal Investments and
Eligibility to Secure Public Funds in Texas~ under the caption '"'ther Information" in the Otlicial Statement and such firm is of
the opinion that the information relating to the Bonds and the legal issues contained under such captions and subcaptions is an
accurate and fair description of the laws and legal issues addressed therein and. with respect to the Bonds, such information
conforms to the Ordinance. The legal fee to be paid to Bond Counsel for services rendered in connection with the issuance of the
Bonds is contingent on the sale and delivery of the Bonds. The legal opinion will accompany the Bonds deposited with DTC or
will be printed on the Bonds in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be
passed upon for the Underwriters by McCall, Parkhurst & Horton L.L.P., Dallas. Texas, Counsel to the Underwriters.
The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys
rendering the opinions as to the legal issues expressly addressed therein. In rendering a legal opinion. the attorney does not
become an insurer -or guarantor of the expression of professional judgment,. of the transaction opined upon. or of the future
performance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute
that may arise from the transaction.
CONTINUING DISCLOSURE OF INFORMATION
In the Ordinance. the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds.
The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the
agreement. the City will be obligated to provide certain updated financial information and operating data annually, and timely
notice of specified material events. to certain information vendors. This information will be available to securities brokers and
others who subscribe to receive the information from the vendors.
ANNUAL REPORTS ••• The City will provide certain updated financial information and operating data to certain information
vendors annually. The information to be updated includes all quantitative financial information and operating data with respect
to the City of the general type included in this Official Statement under Tables numbered I through 6 and 8A through 18, and in
Appendix B. The City will update and provide this information within six months after the end of each fiscal year ending in or
after 200S.. The City will provide the updated information to each nationally recognized municipal securities information
repository ("NRMSIR'') approved by the staff of the United States Securities and Exchange Commission {"SEC! and to any
state information depository (''SID'') that is designated and approved by the State of Texas and by the SEC staff.
57
The City may provide updated intormalion in full text or may incorporate by reference certain other publicly available
documents, as permitted by SEC Rule 15c2-12. The updated information will include audited financial statements. if the City
commissions an audit and it is completed by the required time. If audited financial statements are not available by the required
time, the City will provide unaudited financial intbrmation and operating data which is customarily prepared by the City by the
required time, and audited financial statements when and if such audited tinancial statements become available. Any such
financial statements will be prepared in accordance with the accounting principles described in Appendix 8 or such other
accounting principles as the City may be required to employ from time to time pursuant to state law or regulation.
The City's current fiscal year end is September 30. Accordingly. it must provide updated information by March 31 in each year,
unless the City changes its fiscal year. If the City changes its fiscal year, it will notify eDch NRMSIR and the SID of the change.
The Municipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC statT as a
qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street. P. 0. Box 2177, Austin, Texas 78768·
2177. and its telephone number is 5121476--6947. The Municipal Advisory Council has also received Securities and Exchange
Commission approval to operate. and has begun co operate, a ··cencral post office·· for information tilings made by municipal
issues, such as the City. A municipal issuer may submit its information filings with the central post office. which then tronsmits
such information to the NRMS!Rs and the appropriate SID for filing. This central post office can be accessed and utilized at
www.DisclosureUSA.com ("DisclosureUSA "). The City may utilize Disclosure USA for the filing of information relating to the
Bonds.
MATERIAL EVENT NOTICES ... The City will also provide timely notices of certain events to certain information vendors. The
City will provide notice of any of the following events with respect to the Bonds. if such event is material to a decision to
purchase or sell Bonds: (I) principal and interest payment delinquencies: (2) non-payment related defaults: (3) unscheduled
druws on debt service reserves reflecting linancial difficulties: (4) unscheduled draws on credit enhancements reflecting financial
difficulties; (5) substitution of credit or liquidity providers. or their failure to perform: (6) adverse tax opinions or events
affecting the tax-exempt status of the Bonds: (7) moditications to rights of holders of the Bonds: (8) Bond calls: (9) defeasances:
(10) release, substitution. or sale of property securing repayment of the Bonds: and (II) rating changes. In addition. the City will
provide timely notice of any failure by the City to provide information, data, or tinancial statements in accordance with its
agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID
and to either each NRMSIR or the Municipal Securities Rule making Board ("'MSRB"").
AVAILABILITY OJi' INFORMATION FROM NRMSIRs AND SID ... The City has agreed to provide the foregoing information only
to NRMSIR.s (or the MSRB in the cuse of Material Events Notices) and the SID. The information will be available to holders of
Bonds only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the
information through securities brokers who do so.
AMENDMENTS ... The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances
that arise from a change in legal requirements. a change in law, or a change in the identity. nature, status, or type of operutions of
the City, if (i) the agreement. as amended. would have permitted an underwriter to purchase or sell Bonds in the offering
described herein in compliance with the Rule. taking into account any amendments or interpretations of the Rule to the date of
such amendment as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal
amount of the outstanding Bonds consent to the amendment or (b) any person unaffiliated with the City (such as nationally
recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and benelicial
owners of the Bonds. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC
amends or repeals the applicable provisions of the SEC Rule I Sc2-12 or a court of final jurisdiction enters judgment that such
provisions of the SEC Rule 15c2-12 are invalid. but only if and to the extent that the provisions of this sentence would not
prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. If the City so amends
the agreement. it has agreed to include with the next financial information and operating data provided in .accordance with its
agreement described above under .. Annual Reports'' an explanation. in nanntive form, of the reasons for the amendment and of
the impact of any change in the type of 11nancial information and operating data so provided.
COMPLIANCE WITH PRIOR UNDERTAKINGS •.. The City became obligated to file annual reports and financial Statements with
the state infonnation depository ('"SID'') and each nationally !\!:COgnized municipal securities information repository
( .. NRMSIR") in an offering that took place in 1997. All ofthe City's General Obligation debt reports and financial statements
were timely filed with both the SID and each NRMSIR; however. due to an administrative oversight, the City filed its fiscal year
end 1999, 2000. and 2001 Electric and Power Revenue debt reports late to the SID and each NRMSIR. The financial
information has since been filed. as well as a notice of late tiling. The City has implemented procedures to ensure timely tiling
of all future financial information. Under previous continuing disclosure agreements made in connection with LP&L revenue
bonds. the City committed to make prompt filings with the SID and either each NRMSIR or the MSRB upon the occurrence of
any "'non-payment related detaults."' The City's FY 2003 audited financial statements were not available until mid-September
2004. Therefore, when the City made its annual disclosure filing with the SID and NRMSlRs in March 2004, it filed unaudited
financial statements in accordance with its undertaking. Several references in that tiling, including in the unaudited MD&A, in
notes to those statements and in the statistical tables. reported that for FY 2003 LP&L had failed to meet its rate covenant (see
"'Discussion of Recent Financial and Management Events -September 30, 2003 Financial Results -The Electric Fund'').
Because there was an uncenainty as to an amount by which the rate covenant would fail to be met which \WS not finally
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determined until the audited financials were released in September 2004 (although the City had a reasonable belief prior to that
time that the rate covenant had not been met). the City waited until September 2004 to make its event filing of non-compliance
with its LP&L rate covenant
FINANCLU 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, does not assume any responsibility for the
information. covenants and representations contained in any of the legal documents with respect to the federal income laX status
of the Bonds. or the possible impact of any present. pending or future actions taken by any legislative or judicial bodies.
The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial
Advisor has reviewed the information in this Otlicial Statement in accordance with. and as part of, its responsibilities to the City
and, as applicable. to investors under the federal securities laws as applied to the facts and circurnslllnces of this transaction, but
the Financial Advisor does not guarantee the accuracy or completeness of such information.
UNDERWRITING
The Underwriters have agreed, subject to certain conditions. to pW'Chase the Bonds from the City, at an underwriting discount of
$291,583.85. 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.
FORWARD-LooKING STATEMENTS DISCLAIMER
The statements contained in this Official Statement. and in any other information provided by the City, that are not purely
historical, are forward-looking statements. including statements regarding the City's expectations, hopes, intentions, or strategies
regarding the future. Readers should not place undue reliance on forward-looking statements. All torward-looking statements
included in this Official Statement are based on information available to the City on the date hereof. and the City assumes no
obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed
in such forward-looking statements.
The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently
subject to various risks and uncertainties. including risks and uncertainties relating to the possible invalidity of the underlying
assumptions and estimates and possible changes or developments in social. economic, business, industry, market, legal, and
regulatory circumstances and conditions and actions taken or omitted to be taken by third parties. including customers, suppliers,
business partners and competitors, and legislative. judicial, and other governmental authorities and officials. Assumptions
related to the foregoing involve judgements with respect to, among other things, future economic, competitive, and market
conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are
beyond the control of the City. Any of such assumptions could be inaccurate and. therefore, there can be no assurance that the
forward-looking statements included in this Official Statement will prove to be accurate.
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 resolutions containOO. in this Official Statement are made
subject to all of the provisions of such statutes. documents and resolutions. These swnmaries 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
docwnents in all respects.
The Ordinance authorizing the issuance of the Bonds will also approve the fonn and content of this Official Statement, and any
addenda. supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds by the Underwriters.
ATTEST:
lsi REBECCA GARZA
City Secretary
59
lsi MARC McDOUGAL
Mayor
City of Lubbock, Texas
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GENERAL INFORMATION REGARDING THE CITY
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LOCATION
The City of Lubbock. which is the County Seat of Lubbock County, Texas. is located on the South Plains of West Texas. Lubbock is
the economic.. educational, cultural and medical services center of the area.
POI'Ul.ATION
Lubbock is the ninth largest City in Te.xas:
1910 Census
1920Census
1930Census
1940Census
1950Census
1960Census
1970 Census
1980 Census
1990 Census
2000 Census
2005 (Estimated) 111
City of Lubbock
(Corporate Limits)
1,938
4,051
20,520
31.853
71,747
128,691
149,701
173.979
186,206
199,564
209,120
Metrooolitan Statistical Area C"MSA .. > (Lubbock County)
1970 Census 179,295
1980Census 211,651
1990Census 222,636
2000 Census 242,628
(I) Source: CityofLubboclc. Texas
AGRICULTUR.t; BUSINESS MD INDUSTRY
Lubbock is the center of a highly mechanized agricultural area with a majority of the crops irrigated wich water from underground
sources. Principal crops are cotton and grain sorghums with livestock 11 major additional source of agricultural income. In 2003,
approximately 2.2 million bales of cotton were produced in Lubbock and the 25-counties SUfT'Ounding Lubbock. This was less than
the 3.2 million bales produced in 2002 and is 27% below the 10-year average of2.80 mi1\ion bales. Projections for the 2004 cotton
crop are 3.89 million bales. depending on the growing conditions and the weather during the 2004 production season.m Two
major vegetable oil plants located in Lubbock have a combined weekly capacity between 50,000 and 70,000 tons of cottonseed oil
and soybean oil. Several major seed companies are headquartered in Lubbock.
Over 200 manufacturing plants in Lubbock produce such products as semiconductors, vegetable oils, irrigation equipment and pipe,
plastics products. farm equipment. paperboard boxes. cus'tom millwork/shutters, foodstuffs. prefabricated homes. poultry and
livestock feeds. boilers and pressure vessels, automatic sprinlder system heads. and structural steel fabrication.
(I) Source: Plains Cotton Growers, Inc .• Lubbock, Texas.
LUBBOCK MSA LABOR FORC£ ESTIMATES !11
March
2005(ZJ
Civilian Labor Force 139,181
Total Employment 133,308
Unemployment 5.873
Percent Unemployment 4.20%
(I) Source: Texas Worlcforce Commission.
(2) Subject 10 revision.
2004
138,516
132,065
6ASI
4.70%
A · 1
Annual Ave~es
2003 2002 2001 2000
130.645 128,131 127,293 124,756
125,969 124,228 124,046 121.482
4,676 3,903 3,247 3,274
3.60% 3.00o/o 2.60% 2.60%
Estimated non-agriculturol wage and salaried jobs in various categories as of December, 2004 were: Ill
Manufacturing
Construction
Trade. Transportation & Public Utilities
Finance, Insurance and Real Estate
Education & Health Services
lnfonnation
5.400
5.300
25,500
16,700
17,900
5.800
19.700
28.500
124,800
Leisure &Hospitality & Other
Government
Total
(I) Source: Texas Workforce Commission.
MAJOR EMPLOYERS (300 EMPLOYEES OR MORE)
Company
Texas Tech University
Covenant Heallh System
Lubbock Independent School District
University Medical Center
United Supermarkets
City of Lubbock
Texas Tech Health Sciences Center
Cingular
Convergys Corporation
Lubbock County
Lubbock State School
Texas Dept. of Criminal Justice Psychiatric Hospital
Frenship ISO
Tyco Fire Protection
G Boren Services. Inc.
SBC/Southwestem Bell
Walmart Supercenter
U.S. Postal Service
State National Bank of West Texas
Texas Department ofTransportation
Gene Messer Ford Inc.
Lubbock-Cooper ISO
Lubbock Regional MHMR Center
Operator Service Company
Sonic Drive In
ChaseCom!Staffmark
Wells Fargo Phone Bank
Lubbock Christian University
Plains Capital Bank
NTS Communications, Inc.
American State Bank
Dillards Department Stores
Cox Cable of Lubbock. Inc.
McLane High Plains
Sodexho School Services
ARAMARK
Lubbock Heart Hospital
Interim Healthcare of West Texas
(I) Source: Mart.et Lubbock.
(2) Full and part time.
Type of Business
State University
Hospital
Public Schools
Hospital
Supermarkets
City Government
Medical and Allied Health School
Wireless Communications
Call Center
County Government
School tor Mentally Retarded
Psychiatric Hospital
Public Schools
Manufacturing/Fire Sprinklers
Sraffing/HR Consulting
Telephone Utility
Discount Retailer
Post Office
Bank
State Highway and Sueet Maintenance
Automobile Dealership
Public Schools
Social Services
Customer Service
Restaurants
Call Center
Bank Phone Center
College/University/Professional School
Bank
Telephone Utility
Bank
Department Store
Cable Utility
Wholesale Food Distribution
Facilities Management
Managed Food Services
Heart Hospital
Home Health Care
Estimated
Employees
July, 2004"'
9,919 w
4,310
3,504
2,310
2,156
2,109
2,010
1,750
1,450
950.1200
850
755 (JI
639
525
516
500.999
500.999
500-999
500
474
449
444
427
427
425
400
392
384
371
367
355
341
339
330
316
316
308
300
(3) See Texas Department of Criminal Justice ("TDCJ"') Prison Psychiatric Hospital following tor more detailed information.
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EDUCATION ·TEXAS TECH UNIVERSITY
Established in Lubbock in 1923, Texas Tech University is the fifth largest State-owned University in Texas and had a Spring, 2005.
enrollment of 28,549. Accredited by the Southern Association of Colleges and Schools, the University is a co-educational, State-
supported in.stiMion offering a bachelor's degree in 158 major fields, the master's degree in 107 major fields, the doctorate degree in
64 major fields, and a professional degree in 2 major fields (law and medicine).
The University proper is situated on 451 acres of the 1,829 acre campus. and has over 160 permllllent buildings with additional
construction in progress. Spring, 2004, total employment was 9,919 full time and part time employees.
The medical school had an enrollment of 2.100 for Spring, 2005. not including residents; there were 77 graduate students. The School
ofNursing had a Spring. 2005. enrollment of 443. The Allied Health School bad a Spring, 2005, enrollment of73l.
Source: Texas Tech University.
OTHER EDUCATION INFORMATION
The Lubbock Independent School District. with an area of 87.5 square miles. includes over 900~ of the City of Lubbock. There are
approximately 3.504 total employees. The District operates four senior high schools.. nine junior high schools, 39 elemental)' schools
and other educational programs.
Scholastic MembershiR Historv OJ
School
Year
2()()()..()1
2001.()2
2002.()3
2003-04
2004-05
Average
Daily
Attendance
27.046
27,019
27,094
26,800
28,474 (Z)
(I) Source: Superintendent's Office. Lubbock Independent School District.
(2) Estimated.
Lubbock Christian University, a privately owned. co-educational senior college located in Lubbock, had an enrollment of 1.819 for
the Spring Semester, 2005.
The State of Texas School for the Mentally Retarded, located on a 226-acre site in Lubbock.. consists of 40 buildings with bed-
capacity for 436 students; 400 students were in residence. There are approximately 850 professional and other employees.
Wayland Baptist College, Plainview Texas, operates a Lubbock Campus which had a Spring, 2005. enrollment of650 students.
TRANSPORTATION
Scheduled airline transportation at Lubbock Preston Smith International Airport is furnished by Southwest Airlines. Continental
Airlines and American Eagle; non·stop service is provided to Dallas-Fort Worth International Airport, Dallas Love Field, Bush
Intercontinental Airport (Houston). Houston Hobby, El Paso, Las Vegas, Austin, and Albuquerque. Passenger boardings tbr
2001 536.670, for 2002 513,096 for 2003 514,250 and 541,549 for 2004. Extensive private aviation services are located at the
airport.
Rail transportation is furnished by the Burlington Northern Santa Fe Railroad with through service to Dallas, Houston. Kansas City,
Chicago. Los Angeles and San Francisco. Shott-haul rail service is also furnished by the Seagraves.. Whiteface and Lubbock
Railroad. Texas. New Mexico and Oklahoma Bus Lines. a subsidiary of Greyhound Corporation, provides bus service. Several
motor freight common carriers provide service.
Lubbock has a well-developed highway network including Interstate 27 (Lubbock-Amarillo), four U.S. Highways, one State
Highway, a controlled-access outer loop and a county-wide system of paved farm-to-market roads.
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GOVERNMENT AND MILITARY (ll
The fonner air base. now known as Reese Technology Center (tile "'Center'") is a 2500-acre campus with over I million square feet
of space. The Center is the Sth largest Research Park in the United States and is considered by Department of Defense as '"one of
the most rapid and successfully redeveloped closed military bases in the country.·· The Center is currently 80% occupied with II
commercia.! tenants employing over 670 people (created over the illst tfu~ years). Anchor tenants include Texas Tech Research
and the 4.200-student campus of South Plains College. a two-year community college.
Reese Center is the home of the prized Institute of Environmental and Hwnan Health (TIEHH). TIEHH is a joint venture between
Texas Tech University and Texas Tech University Health Sciences Center and researches the exposure and etfects toxic chemicals
have on human health and the environment. TIEHH has assisted in stimulating the Lubbock economy with over $50 million in
grants. TIEHH's location as the anchor tenant at the Reese Technology Center luis assisted the facility in being transformed into a
research, industrial and commercial center.
Current areas of specialty at the Center include Biotechnology, Environmental Sciences. Food Technology and Work Force
Development. Reese Center recently received an EDA grant tor $1.7 million dollars to install an OC·\92 fiber optic network
and wireless system for the entire campus making it a leader in high tech communications. Other research facilities that have been
relocated to Reese Technology Center are the Texas Tech University Wind Engineering and Advanced Vehicle Engineering
Research Centers. Total economic impact of the Reese Technology Center has been $26.8 million dollars over the last three
years.
Stqte ofT(xqs ... 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 ollices in Lubbock: a
Federal District Court is located in the City.
( 1) Source: City of Lubbock. Texas.
TEXAS DEPARTJ\ilENT OF CRIMINAL JUSTICE ("TDC.r') PRISON PSYCHIATRJC HOSPlTAL
TDCJ operates a SS~bed Prison Psychiatric Hospital and a 48-bed regional prison hospital on a 1,303 acre site in southeast Lubbock.
An adjacent 400-bed capacity '"'trusty" facility houses prison trusties some of whom work at the hospital. Employment for all
facilities is approximately 870 with an annual estimated payroll of$17 million and an estimated remaining annual operating budget
of$27 million.
HOSPlTALS AND MEDICAL CARE
There axe four hospitals in the C'ity with over 1 . .500 beds. Covenant Medical Center is tile largest and also operates an nccredited
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 102 clinics and over 700
practicing physicians, surgeons. and dentists. Lubbock's Health Care Sector employs over 17,000 people with a total payroll of
$543.3 million and draws patients from 77 counties in West Texas and Eastern New Mexico. A radiology center tbr the treatmenc
of malignant diseases is located in the City.
RECREATlON AND ENTERTAINMENT
Lubbock's Mackenzie Regional Park and over \IS City parks and playgrounds provide recreation centers, shelter buildings. a gnrden
and art center, swimming pools. a golf course, tennis and volley ball courts. baseball diamonds and picnic areas. including the
Yellowhouse Canyon Lakes system of six lakes and 750 acres of adjacent parlcland extending from northwest to southeast Lubbock
along the Yellowhouse Canyon. There are severo! privacely-owned public swimming pools, golf courses, and country clubs.
The City of Lubbock has developed a 36 square block area of approximately 100 acres adjacent to downtown Lubbock under the
Lubbock Memorial Civic Center progrorn. Approximately SO acres contain the 300.000 square foot Lubbock Memorial Civic
Center. the main City library building and State Department of Public Safety offices; a 5~acre peripheral area has been redeveloped
privately with office buildings. hotels and motels. a hospital, and other facilities.
Available to residents are Texas Tech University programs and events, Texas Tech University Museum. Planetarium and Ranching
Heritage Center exhibits and programs. Uniled Spirit Arena and its events. Lubbock Memorial Civic Center and its events. Lubbock
Symphony Orchestra programs, Lubbock Theatre Center. Lubbock Civic Ballet Municipal Auditorium and colisewn programs and
events. the library and its branches. the annual Panhandle-South Plains Fair, college and high school football. basketball and other
sporting events. as well as modem movie theaters.
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CHURCHES
Lubbock has approximately 300 chun:hes representing more than 25 denominations.
UfiLITY SERVICES
Water and Sewer-City of Lubbock.
Gas -Atmos Energy Company.
Electric-City of Lubbock (Lubbock Power & Light) and Xcel Energy: and. in a smnll area. South Plains Electric C()-()perative.
ECONOMIC INDICES 111
Year
2000 s
2001
2002
2003
2004
Building
Permits
200,427,650
294,064.200
314.077,929
417,252.162
408.726.402
Water
70,111
70,756
72,61.5
72,.50.5
74,026
Utility Connections
Gas
6.5.000
65.332
67.308
69,954
70,1%
(I) All data as of 12-31, except where noted; Source: City of Lubbock.
Eleetric
(LP&L Only)(Zl
58,724
59,431
62,713
62.203
63.076
(2) Electric connections are those of City of Lubbock owned Lubbock. Power and Light ( .. LP&L} and do not include those of Xcel
Energy or South Plains Electric Cooperative. LP&L provides service to approximately 70% of the electric customers in the City.
BUlLDING PERMITS BY CLASSIFICATION fll
Residential Permits
Single family Multi-Family Total Residential Commercial,
No. No. Public Total
Calendar No. Dwelling Dwelling and Other Building
Year Units Value Units (ll Value Units (lJ Value Permits Permits
2000 819 $87,501,009 281 $11,548,809 1,100 s 99.049.818 $101,377.832 $200,427,650
2001 941 108.589,812 853 37,242.260 1,794 145,936,072 148,128,128 294,064,200
2002 1.281 148,190,769 549 31,700,960 1,830 178.891,729 134,186,200 314,077,929
2003 1,288 172,679,238 1.595 101,540.351 2.883 274.219.589 143,032 . .573 417,252.162
2004 1,204 169,075,633 2.382 114.339.697 3,.586 283.415,330 125,311,072 408.726,402
2005 C}) 546 84,646,181 140 9,717,000 686 94.363,181 78,560,300 172,923.481
(I) Source: City of Lubbock. Texas..
(2) Data shown under ~No. Dwelling Units~ is for each individuaJ dwelling unit, and is not for separote buildings; includes duplex.
triplex, quadruplex and apartment permits.
(3) Through May 3 I. 2005.
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APPENDIX B
EXCERPTS FROM THE
CITY OF LUBBOCK. TEXAS
ANNUAL FINANCIAL REPORT
For the Year Ended September 30, 2004
The intbnnotion contained in this Appendix consists of excerpts from the City of Lubbock.
Texas Annual Financial Report for the Year Ended September 30,2004, and is not intended
to be a complete statement of the City's fmancial condition. Reference is made to the
complete Report tor further intbnnation.
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KPMG U.P
Suite 3100
717 North Harwood Street
Callas. TX 75201-6sa5
Independent Auditors' Report
The Honorable Mayor and Members of the City CoWlcil
City of Lubbock, Texas:
We have audited the accompanying fmancial statements of the governmental activities. the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of the City of Lubbock, Texas, as of and for the year ended September 30,
2004, which collectively comprise the City's basic financial statements as listed in the table of contents.
These financial statements are the responsibility of the City of Lubbock's management. Our responsibility
is to express opinions on these financial statements based on our audit. We did not audit the financial
statement~ of Market Lubbock Economic Development Corporation and Civic Lubbock, Inc. which
comprise the aggregate discretely presented component units. In additi.on, we did not audit the West Texas
Municipal Power Agency, which is both a major fund and represents 4 percent. l percent, and 22 percent
of the assets, net assets, and revenues of the business-type activities. respectiveJy. Those financial
statements were audited by other auditors whose reports thereon have been furnished to us, and our
opinions, insofar as they relate ro the amounts included for the Market Lubbock Economic Development
Corporation, Civic .Lubbock, Inc., and the West Texas Municipal Power Agency are based on the reports of
the other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Audiring Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perfoon
the audit to obtain reasonable assu..-ance about whether the fmancial statements are free of material
misstatement. The financial statements of Market Lubbock Economic Development Corporation, Civic
Lubbock, Inc. and the West Texas Municipal Power Agency Fund were not audited in accordance with
Government Auditing Standa1·ds. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, based on our audit and the repons of other auditors, the financial statements reterred to
above present fairly. in all material respects, the respective financial position of the governmental
activities. the business-type activities, the aggregate discretely presented component units, each major
fund, and the aggregate remaining fund information of the Ciry of Lubbock, Texas. as of September 30,
2004, and the respective changes in financial position and cash flows. where app)icable, thereof and the
budgetary comparison tor the General Fund for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued a report dated March 28, 2005 on
our consideration of the City of Lubbock's internal control over financial reporting and our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
l<PMG U.P. ~ U.S. limot&O li;boilly l>"'""'r$Np. 10 a.. V.S. mo:ni>O' fotl'll Ql !(PIA(; In;~...,. ... 0 SWoo$ GOO;>er.IIIY<>
17
·The purpose of that report is to descnoe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing and not to provide an opinion on the internal control over
financial reporting or on compliance. That report is an integral part of an audit performed in accordance
with Government Auditing Standards and should be considered in assessing the results of our audit.
The management's discussion and analysis and schedules of funding progress on pages 19 through 34 and
73 and 77, respectively, are not a required part of the basic financial statements but are supplementary
information required by accounting principles generally accepted in the United States of America. We have
applied certain limited procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the required supplementary information. However, we did not
audit the information and express no opinion on it.
Our audit was conducted for the purpose of fonning opinions on the financial statements that collectively
comprise the City of Lubbock's basic financial statements. The introductory section, combining fund
statements and schedules, and statistical section are presented for purposes of additional analysis and are
not a required part of the basic financial statements. The combining fund statements and schedules have
been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic
financial statements and. in our opinion, based on our audit and the reports of other auditors, are fairly
stated in all material respects in relation to the basic financial statements taken as a whole.
March 28, 2005
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
As management of the City of Lubbock, Texas (City), we offer readers this narrative
overview and analysis of the financial activities of the City for the fiscal year ended
September 30, 2004.
We encourage readers of these financial statements to consider the information included in
the transmittal letter and in the other sections of the Comprehensive Annual Financial Report
(CAFR) e.g., combining statements and the statistical section in conjunction with this
discussion and analysis.
Financial Highlights
These financial highlights summarize the City's financial pos1t10n and operations as
presented in more detail in the Basic Financial Statements (BFS), as listed in the
accompanying Table of Contents.
• The assets ofthe City exceeded its liabilities at September 30, 2004 by $546 million (net
assets). Of this amount, $51 million (unrestricted net assets) may be used to meet the
City's ongoing obligations to citizens and creditors.
• The City's total net assets decreased by nearly $2.7 million as a result of operations
during the fiscal year.
• The ending unreserved fund balance for the General Fund was $12.1 million or
approximately 13.5% of total General Fund expenditures, or 14.0% of total General fund
revenues.
• All of the City's governmental funds reported combined ending fund balances of $47.7
million. Of this total amount, $13.8 million is available for spending at the City's
discretion.
• All of the City's business·type activities reported combined ending net assets of $442.4
million. Of this total amount, $41.2 million is available for spending at the City's
discretion.
• The City's proprietary funds net assets decreased by nearly $5.0 million from $437.1
million to $432.1 million. The Electric Fund (Lubbock Power & Light or LP&L) ended
the year with operating income of nearly $3.3 million erasing a $6.3 million operating
loss experienced in ilie prior year.
• Near the end of the fiscal year, the City issued $22.6 million of bonds to refund $23.2
million in outstanding bonds. As a result of this transaction, the City will experience an
economic gain of $0.8 million and an accounting loss of $1.0 million, with 4.2% in
present value savings.
19
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
Overview of the Financial Statements
Basic Financial Statements. Management's Discussion and Analysis (MD&A) is intended
to serve as an introduction to the City's BFS. The BFS are comprised of three components:
I) Government-Wide Financial Statements (GWFS), 2) Fund Financial Statements (FFS),
and 3) Notes to Basic Financial Statements (Notes). This CAFR also contains other
supplementary information in addition to the BFS.
Government-Wide Financial Statements. The GWFS, shown on pages 35-37 of this
report, contain the statement of net assets and the statement of activities, described below:
The statement of net assets presents information on all of the City's assets and
liabilities (including capital assets and short-and long-term liabilities), with the
difference between the two reported as net assets using the accrual basis. Over time,
increases or decreases in net assets serve as a useful indicator of whether the financial
position of the City is improving or deteriorating.
The statement of activities presents a comparison between direct expenses and
program revenues for each of the City's functions or programs (referred to as
"activities"). Direct expenses are those that are specifically associated with an
activity and are therefore clearly identifiable with that activity. Program revenues
include charges paid by the recipient of the goods or services offered by the program,
in addition to grants and contributions that are restricted to meeting the operational or
capital requirements of a particular activity. Revenues that are not directly related to
a specific activity are presented as general revenues. The comparison of direct
expenses with revenues from activities identifies the extent to which each activity is
self-financing, or alternatively, draws from any City generated general revenues. The
governmental activities (activities that are principally supported by taxes and
intergovernmental revenues) of the City include administration of community
services, electric (street lighting), financial services, fire, general government, human
resources, police, streets, and public works. The business-type activities (activities
intended to recover all of their costs through user fees and charges) of the City
include Electric (LP&L), Water, Sewer, Solid Waste, Stormwater, Transit, and
Airport. All changes in net assets are reported as soon as the underlying event giving
rise to the change occurs (accrual basis), regardless of the timing of related cash
flows. Thus, revenues and expenses are reported in this statement for some items that
will only result in cash flows in future fiscal periods, such as uncollected taxes and
earned but unused vacation leave.
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
Component Units. The GWFS include not only the City itself (the "primary
government"), but also two legally separate entities (the "component units): Market
Lubbock Economic Development Corporation, d/b/a Market Lubbock, Inc. and Civic
Lubbock, Inc., for which the City is financially accountable. These entities provide
economic development services and arts and cultural activities for the City. Financial
information for these component units is reported separately in the GWFS in order to
differentiate them from the City's financial information. Neither of these component
units are considered_ major component units.
Fund Financial Statements. Afund is defined as a fiscal and accounting entity with
a self·balancing set of accounts recording cash and other financial resources, together
with all related liabilities and residual equities or balances, and changes therein,
which are segregated for the purpose of carrying on specific activities or attaining
certain objectives in accordance with special regulations, restrictions, or limitations.
The principal role of funds in the new financial reporting model is to demonstrate
fiscal accountability. The City, as with other state and local governments, uses fund
accounting to ensure and demonstrate compliance with finance-related legal
requirements.
The focus of the FFS is on major funds. Major funds are those that meet minimum
criteria (a percentage of assets, liabilities, revenue, or expenditures/expenses of fund
category and of the governmental and enterprise funds combined), or those that the
City chooses to report as major funds given their qualitative significance. Nonmajor
funds are aggregated and shown in a single column in the appropriate financial
statements. Combining schedules of nonmajor funds are included in the CAFR
following the BFS. All of the funds of the City can be divided into three categories:
governmental funds, proprietary funds, and fiduciary funds.
Governmental FFS. Governmental funds are used to account for essentially the
same functions reported as governmental activities in the GWFS. However, unlike
the GWFS, governmental FFS focus on near-term inflows and outflows of spendable
resources, as well as on balances of spendable resources available at the end of the
City's fiscal year. Such information is useful in evaluating the City's near-term
financing requirements.
Because the focus of governmental funds is narrower than that of the GWFS
(modified accrual versus accrual basis of accounting, and current financial resources
versus economic resources), it is useful to compare the information presented for
governmental funds with similar information presented for governmental activities in
the GWFS. By doing so, readers may better understand the long-term impact of the
near-term financing decisions. Reconciliations are provided for both the
governmental fund balance sheet and the governmental fund statement of revenues,
expenditures, and changes in fund balances to facilitate the comparison between
governmental funds and governmental activities.
21
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
The City maintains 24 individual governmental funds. [nformation is presented
separately in the governmental fund balance sheet and in the governmental fund
statement of revenues, expenditures, and changes in fund balances for the General
Fund only. The General Fund is considered to be a major fund. Data from the other
governmental funds are combined into a single aggregated presentation. The City
adopts a budget annually for the General Fund and all other funds. A budgetary
comparison statement has been provided for the General Fund to demonstrate
compliance with this budget. lt is presented in the FFS following the statement of
changes in revenues, expenditures, and changes in fund balances. The governmental
FFS can be found on pages 39-43 ofthis report.
Proprietary FFS. The City maintains two different types of proprietary funds.
Enterprise funds are used to report the same functions presented as business-type
activities in the GWFS. Enterprise FFS provide the same type of information as the
GWFS, only in more detail. The City uses enterprise funds to account for its Electric
(LP&L), Water, Sewer, West Texas Municipal Power Agency (WTMPA),
Stormwater, Transit, Solid Waste, and Airport activities, of which the first five
activities are considered to be major funds by the City and are presented separately.
The latter three activities are considered nonmajor funds by the City and are
combined into a single aggregated presentation.
Internal service funds are an accounting device used to accumulate and allocate costs
internally among the City's various functions. The City uses internal service funds to
account for its fleet of vehicles, management information systems, risk management,
print shop, and central warehouse activities among others. The services provided by
the internal service funds benefit both governmental and business-type activities, and
accordingly, they have been included within governmental activities and business-
type activities, as appropriate, in the GWFS. All internal service funds are combined
into a single aggregated presentation in the proprietary FFS. Reconciliations are
provided for both the proprietary fund statement of net assets and the proprietary fund
statement of revenues, expenses, and changes in fund net assets to facilitate the
comparison between enterprise funds and business-type activities. The proprietary
FFS can be found on pages 44-55 of this report.
Fiduciary FFS. Fiduciary funds are used to account for resources held for the
benefit of parties outside the government. Fiduciary funds are not reflected in the
GWFS because the resources of those funds are not available to support the City's
own programs. The City presents an agency fund as its only fiduciary fund in the
FFS. The fiduciary FFS can be found on page 56 of this report.
Notes to Basic Financial Statements. The Notes provide additional information that is
essential to a full understanding of the data provided in the GWFS and FFS. The Notes
can be found on pages 57-90 of this report.
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
Required Supplementary Information Other Tban MD&A. The City has presented
required supplementary information relating to its progress in funding its obligation to
provide pension benefits to its employees in the Notes to the BFS.
Government-Wide Financial Analysis
As noted earlier, net assets serve as a useful indicator of the City's financial position. For the
City, assets exceeded liabilities by $546 million (net assets) at the close of the fiscal year.
This compared to assets exceeding liabilities by $549 million (net assets) at the end of the
prior fiscal year. As a result of operations, total net assets decreased by $2.7 million during
the period.
By far the largest portion of the City's net assets, 78.7%, reflect its investment in capital
assets, e.g., land, buildings, infrastructure, machinery, and equipment, less any related debt
used to acquire those assets that is still outstanding at the close of the fiscal year. The City
uses these capital assets to provide services to citizens; consequently, these assets are not
available for future spending. Although the City's investment in capital assets is reported net
of related debt, it should be noted that the resources needed to repay this debt must be
provided from other sources, since the capital assets themselves cannot be us~d to liquidate
these liabilities.
City of Lubbock Net Assets
September 30
(in OOO's)
Governmental Business-Type
Activities A~ivities Total
2004 2003 2004 2003 2004 2003
Current and other assets $ 100,489 78,784 177,959 188.077 278,448 266.861
Capital assets 129.014 121.735 611.703 617.465 740.717 739.200
Total assets 229.503 200,519 789.662 805.:542 1,019.16:5 1.006.061
Current liabilities 48.739 25,697 44,156 37,774 92,895 63,471
NoncWTent liabilities 76.423 73.138 303J73 320.024 379.596 393.162
Total liabilities 125.162 98.835 347.329 357.798 472.491 456.633
Net assets:
Invested in capital assets.
net of related debt 74,433 78,475 355,816 371,427-430,249 449,902
Restricted 20,339 4.391 45,417 43,389 65,756 47.780
Unrestricted 9.569 18.818 41.!90 32.928 50.759 51.746
Total net assets $ 104.341 101.684 442.423 447.744 546.764 549.428
An additional portion of the City's net assets, 12%, represents resources that are subject to
external restrictions on how they may be used. The remaining balance of unrestricted net
assets of $50.7 million may be used to meet the City's ongoing obligations to citizens and
creditors.
23
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
The City also reports positive balances in all three categories of net assets for the City as a
whole, as well as for its separate governmental activities, and business-type activities.
The City's governmental activities experienced an increase in net assets of $2.7 million,
while net assets decreased by $8.5 million during the prior fiscal year. This increase is
primarily a result of strong growth in new construction and better than anticipated sales tax
revenues coupled with a concentrated effort by City management to contain expenditures.
This is the second year in a row that the City Council bas been able to cut property tax rates
while streamlining City operations.
The City's business-type activities experienced a decrease in net assets of$5.3 million during
the current fiscal year as compared to an increase of $3.6 million during the prior fiscal year.
This decrease in net assets resulted from a change in accounting estimate on the life of the
City's landfill. This change in accounting estimate resulted in the nearly doubled
depreciation in the Solid Waste Fund.
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City of Lubbock, Texas
Management's Discussion and Analysis
0 For the Year Ended September 30,2004
Changes in Net Assets
Details of the following summarized information can be found on pages 36-37 of this report.
Lily of Lubbock Changes in Net Assets
For the Year Ended September 30
(inOOO's)
Business-
Governmental Type
Activities Activities Totals
Revenues: 2004 2003 2004 2003 2004 2003
Program Revenues:
0 Owges for services $ 12,713 13.888 181,411 178,536 194,124 192.424
Operating grants and contributions 9.643 12,137 6,739 5.219 16,382 17.356
Capital gJMts and contributions 9,269 1,9(1) 9,269 7,909
General Revenues:
Property taxes 44,497 42,303 44,497 42,303
Sales taxes 30,555 29,092 30,555 29,092
Other taxes 3,793 3,712 3,793 3,712
Franchise fees 9,654 6,613 9,654 6,613
Gran~contributions not restricted
to specific programs 259 259
Other 4.274 3.834 2.932 2.737 7.206 6.571
Total revenues 115.129 II 1.579 200.351 194.660 315.480 306.239
Expenses:
0 Administrative/Commwtity Services 22,3(3 21.793 22,313 21,793
Electric 2,471 2,373 2,471 2,373
Financial Services 2.387 1,965 2,387 1,965
Fire 21,998 20,207 21,998 20,207
General Government 20,562 21,009 20,562 21,009
Human Resources m 786 m 786
Police 33,249 31,429 33,249 31,429
f) Planning and Transportation 10,789 9,827 10,789 9,827
Public Works 3,078 9,856 3,078 9,856
Interest on long-tenn debt 4,593 3,346 4,593 3,346
Electric 110,591 105,216 110,591 105,216
Water 27,879 27,461 27,879 27.461
Sewer 17,020 17,248 17.020 17,248
Solid Waste 17.662 19,559 17,662 19.559
Stoi'Trlw.lter 5,351 3.315 5,357 3,315
Transit 10,565 9,163 10,565 9,163
Airport 6,853 6,479 6,853 6,479
Golf 21 21
Total Expenses 122.217 122.591 195.927 188.462 318.144 311.053
Change in net assets before
special items and transfers (7,088) (I 1,012) 4,424 6,198 (2,664) (4,814)
~ Special items
Transfers 9.745 2.554 (9.745) (2.554)
Change in net assets 2,657 {8,458) (5,321) 3,644 (2.664) (4,814)
Net assets -beginning of year 101.684 110,142 447,744 444,100 549.428 554.242
Net assets -end of year $ 104.341 101.684 442:423 44"1.144 546.764 549.428
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
Governmental activities. Governmental activities increased the City's net assets by $2.7
million. Key elements of the increase follow:
• Transfers to/from business-type activities during the fiscal year increased governmental
activities net assets by $9.7 million. During the prior fiscal year these transfers increased
governmental activities net assets by approximately $2.7 million. This is a net increase
of $7 .I m iII ion in resources to governmental activities, which is the primary factor for the
increase in net assets. Transfers from the business-type activities included payments in
lieu of taxes, franchise fees, and indirect costs of operations for centralized services such
as payroll and purchasing.
• Total expenses decreased by nearly $.4 million from the prior year due primarily to a
payment made in the prior year of $5.5 million for the City's share of the Marsha Sharp
Freeway Project. This project will be owned and maintained by the State of Texas.
However, the governmental activities did· increase planning and transportation spending
of $1.0 million for the City's streets and had an increase in public safety spending, police
and fire of$3.6 million--a result of the City Council's commitment to public safety.
• Revenues increased by approximately $3.6 million. The key factors impacting this
increase include increases in property taxes of $2.1 million due to the additional property
being added to the tax rolls, increases in franchise fees of $3.0 million due to changes in
the fee structures, and increases in sales taxes of nearly $1.5 million. AJso, charges for
services and operating grants and contributions decreased by $1.1 million and 2.5
million, respectively.
This graph depicts the expenses and program revenues generated through the City's various
governmental activities.
[xpcnsn and Program Revenues-Goventmental A~tivities
$35,000
S30,000
$25,000
$20,000
$15,000
$10,000
$5,000
so
0
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
The following graph reflects the source of the revenue and the percentage each source
represents of the total.
Charges for
Services
11%
Operating grants &
Contributions
8%
Franchise Fees
8%
3%
Revenues by Source -Governmental Activities
Miscellaneous
4%
Sales Taxes
27%
Property Taxes
J!)Ofo
Business-type activities. Business-type activities decreased the City's net assets by $5.3
million as a result of operations. Key elements of this increase follow:
• Charges for services for business-type activities increased by $2.9 million. This is
mainly due to increased sales in the Electric Fund (LP&L) with revenues up nearly $10.8
million over the prior year. Sales for the water fund were $.9 million less than the prior
fiscal year in spite of an increase in rates, because 2004 was the second wettest year in
recorded history for the City. WTMPA revenues were impacted because of the capital
lease of the co-generation power plant JRM8 to the Electric Fund. The plant was not
utilized due to the continued high natural gas prices.
27
City of Lubbock, Texas
Management's Oiscussion and Analysis
For the Year Ended September 30, 2004
• Capital grants and contributions continue to be a significant revenue source for the
Electric (LP&L), Airport, Water, and Sewer Funds during the current fiscal year,
producing nearly $9.3 million in revenue. This is comparable to the prior fiscal year's
support of $7.9 million. These contributions primarily came from federal grants and
from water and sewer lines and taps that were funded by property owners.
• Expenses increased in total by $7.5 million over the prior fiscal year. This is mainly due
to the increased cost of operations for electric activity, which increased nearly $5.4
million over the prior year. The stormwater activity experienced a $2.0 million increase
in expenses due primarily to scheduled interest payments on debt. The transit activity
expenses increased by $1.4 million over the prior year due to the increased cost of
personal services and other services.
The following graph reflects the revenue sources generated by the business-type activities.
As noted earlier, these activities include Electric (LP&L), Water, Sewer, Solid Waste,
Transit, WTMP A, Airport, and Storm water Drainage.
Charges for
Services
9lo/o
Revenues by Source -Business-type Activities
28
Captial Grants &
Contributions
5%
Operating Grants
& Contributions
3%
0
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
Financial Analysis ofthe City's Funds
Governmental funds. The focus of the City's governmental funds is to provide infonnation
on near-tenn inflows, outflows, and balances of spendable resources. Such information is
useful in assessing the City's financing requirements. In particular, unreserved fund balance
serves as a useful measure of the City's resources available for spending at the end of the
fiscal year.
At the end of the fiscal year the City's governmental funds reported combined ending fund
balances of$47.7 million. This compared to $50.3 million at the end ofthe prior fiscal year.
A significant portion of this decrease resulted from the planned spend-down of fund balance
in the Capital Projects Fund. This resulted in a reduction of net assets of $5.7 million. This
reduction was partially offset by the results of operations of the General Fund that ended the
year adding $3.3 million to net assets. Of the ending governmental fund balance, $13.8
mill ion or 28.9% constituted unreserved fund balance, which is available for spending at the
City's discretion. This compared to $10.6 million or 21.1% at the end of the prior fiscal year.
The remainder of the fund balance is reserved to indicate it has already been committed to, 1)
pay debt service, 2) use in construction of approved capital projects, or 3) for other restricted
purposes.
The General Fund is the chief operating fund of the City. At the end of the fiscal year,
unreserved fund balance in the General Fund was approximately $12.1 million compared to
$8.4 million in the previous fiscal year, representing an increase of $3.7 million. Total fund
balance (reserved and unreserved) approximated $12.7 million at the end of the fiscal year
compared to $9.4 million at the end of the prior fiscal year. As a measure of the General
Fund's liquidity, it is useful to compare both unreserved fund balance and total fund balance
to total fund expenditures. Unreserved fund balance represented 13.4% of total General
Fund expenditures compared to 9.8% of total General Fund expenditures in the prior year.
Total fund balance represented 14.1% of total General Fund expenditures compared to 1 I .0%
in the prior year. The increase in fund balance is primarily a result of strong growth in new
construction and better than anticipated sales tax revenues, coupled with a concentrated effort
by City management to contain expenditures.
Proprietary funds. The City's proprietary funds provide essentially the same type of
information found in the GWFS, but in more detail.
29
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
Unrestricted net assets of the major proprietary funds at the end of September 30 are shown
next with amounts presented in OOOs:
2004 2003
Electric Fund $ 7,006 2,367
Water Fund 14,078 15,551
Sewer Fund 6,343 4,286
WTMPA 1,743 2,155
Storm water 1,305 869
$ 30,475 25,228
The Electric Fund (LP&L) increased unrestricted net assets by $4.6 million as opposed to a
decrease of $.4 million during the prior year. This is mainly due to the results of operations,
a capital contribution from the Water, Sewer, Stormwater, and Solid Waste Funds of $1.8
million for prior years costs of the utility billing system and a decision by City Council not to
charge for payments in lieu of taxes and franchise fees until adequate cash reserves are
established.
The Water Fund reflected a current year decrease in unrestricted net assets of nearly $1.5
million compared to an increase of $3.6 million during the prior year. This is due to
decreases in consumption. Despite a raise of approximately 3% in water rates, revenues were
down with record rainfall.
The Sewer Fund reflected a current year increase in unrestricted net assets of approximately
$2.1 million compared to a$ t .9 million decrease during the prior year. This is primarily due
to sewer rates increases to all customers.
The WTMPA Fund reflected a decrease in unrestricted net assets of $.4 million primarily as a
result of operations. The prior fiscal year's change was an increase in unrestricted net assets
of $2.5 million.
The Stormwater Fund experienced an increase in unrestricted net assets of $.4 million during
the fiscal year compared to a $1.6 million increase in the prior fiscal year. The increase
continues to be due to an increase in stormwater rates of nearly 200%. This increase was
necessitated to provide long-term funding for system improvements, maintenance, and flood
prevention.
30
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0
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
General Fund Budgetary Highlights
Differences between the original budget and the final amended budget were minimal. This is
a result of the truth-in-budgeting initiative championed by the City Council. This resulted in
fewer amendments as City management also made a concentrated effort to reduce spending
and streamline operations. This also resulted in a planned increase in the General Fund's
fund balance.
Adjustments were made to expenditures to lessen the impact of the net reductions in transfers
from LP&L. The General Fund ended the fiscal year with expenditures more than $1.3
million less than budgeted.
As noted earlier, the City chose to issue $22.6 million in bonds to refund $23.2 million in
outstanding debt. This resulted in present value savings of $836,312, decreasing total debt
service requirements by $874,031. The transaction resulted in an accounting loss of
$1,019,912.
Due to stronger than anticipated growth in new construction and better than expected sales
tax revenue, actual revenues were nearly $3.3 million more than budgeted for the fiscal year.
Capital Assets and Debt Administration
Capital assets. The City's investment in capital assets for its governmental and business-
type activities at September 30, 2004 amounted to $741 million, net of accumulated
depreciation. This was a $1.5 million increase over the prior fiscal year's balance of $739
million, net of accumulated depreciation. This investment in capital assets includes land,
buildings and improvements, equipment, construction in progress, and infrastructure.
Major capital asset events during the fiscal year included the following:
• Work continued in the Water Fund with another $3.3 million expended on the
construction of water lines ahead of the Marsha Sharp Freeway. Total expenditures on
the project to date are $4.3 million.
• $1.7 million was expended on Cell II construction at the landfill. Total expenditures on
the project to date total $3.9 million.
• $1.3 million was expended on the construction of the MacKenzie Park Amphitheater ..
Expenditures to date on the project total $1.7 million.
• Scheduled improvements to LP&L's distribution infrastructure amount to $4 million. In
addition, the Electric Fund spent an additional $3.2 million on a new substation to
provide service to South and Southeast Lubbock. Total expenditures for this project to
date total $3.7 million.
31
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
• The City continues work on a flood relief project linking South Lubbock's chain of playa
lakes with an underground drainage system spending $3.2 million during the fiscal year.
Expenditures to date on the project total $4.8 million.
At the end of the fiscal year, the City has construction commitments of $1l3 million.
City of Lubbock Capital Assets
(Net of Accumulated Depreci~tion)
September 30
(in OOO's)
Business-
Governmental Type
Activities Activitiu Totals
2004 2003 2004 2003 2004 2003
Land $ 8,608 7.996 31.676 31.676 40,284 39,672
Buildings 23,794 25,602 68.302 71 ,525 92.096 97,127
Improvements other
than buildings 37,183 37,100 330.842 329.6\8 368.025 366,718
Machinery and equipment 15,957 14.881 66.922 79,957 82.879 94,838
Construction in progress 43.472 36.156 \13,961 104.689 157.433 140.845
Total $ 129.014 121.735 611.703 617.465 740.717
Additional information about the City's capital assets can be found on pages 70-72 ofthis
report.
Long-term debt. A summary of the City's total outstanding debt follows:
General obligation bonds
Revenue bonds
Total
$
s
City of Lubbock Outstanding Debt
General Obligation aad Revenue Bonds
September 30
(io OOO's)
Business-
Governmental Type
Ac:tivities Activities
2004 2003 2004 2003
70,221 69.808 215,664 226.127
94.605 101.295
70.221 69.808 310.269 327.422
Totals
2004
285,885
94.605
380.490
2003
295.935
101.295
397.230
739.200
There is no direct 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 all City purposes to $2.50
per $100 of assessed valuation. The Attorney General of the State of Texas permits an
allocation of $1.50 of the $2.50 maximum tax rate for general obligation bonds debt service.
32
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City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2004
The current interest and sinking fund tax rate per $100 of assessed valuation is $0.09496,
which is significantly below the maximum allowable tax rate.
Over the fiscal year, the City's total outstanding debt decreased by $16.74 million, or 4.2%.
This is compared to an increase of $62.5 million, or 18.8%, during the prior fiscal year.
The decrease in outstanding debt is attributed to the payment of scheduled debt service
totaling $2 I .28 million and a reduction in outstanding debt of $.585 million as a result of the
refunding. The reductions in outstanding debt were offset by the issuance of $5.125 million
in debt to fund streets projects and the capital improvements plan.
During the fiscal year, the City issued $2.025 million of General Obligation Bonds, Series
2004. This issuance was the first installment of the $30 million capital improvement debt
issuance approved by voters in 2004 to fund the current capital improvements plan. The City
also issued $3.1 million in Tax and Waterworks System Surplus Revenue Certificates of
Obligation, Series 2004. This issuance funded streets projects that included right·of.way
costs on the Marsha Sharp Freeway project, environmental study costs for future
thoroughfares, and for citywide traffic signals and streetlights.
The City also issued $22.62 million of General Obligation Refunding Bonds, Series 2004 to
defease $23.205 million in outstanding bonds.
All bonds issued during the fiscal year were insured to provide a lower cost of interest
expense for the City's taxpayers. It is the City's policy to evaluate each bond issue to
determine whether it is economically feasible to purchase bond insurance.
The City of Lubbock maintains an "AA-" rating from Standard & Poor's and Fitch Ratings,
Inc. and an "AI" rating from Moody's Investors Service for general obligation debt. The
revenue bonds of LP&L and WTMPA have been rated ''BBB-" by Standard & Poor's,
"BBB+" by Fitch Ratings, Inc., and "A3'' by Moody's Investors Service.
Additional .information about the City's long-term debt can be found on pages 80-84 of this
report.
Economic Factors and the Next Fiscal Year,s Budget and Rates
• At the end of the City's fiscal year the unemployment rate for the Lubbock area was 2.9
percent. This is a decrease from a rate of 3.1 percent one year earlier. This compares
favorably to the state's average unemployment rate of 5.5 percent and the national
average of5.1 percent on December 30, 2004.
• Total retail sales reflected a 2.4 percent increase over the prior year.
33
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2004
• Building permits for new construction decreased from 3,125 during 2003 to 2,644 in
2004, or about a 15% decrease. This compares to a 25% decrease during the prior period.
Conversely, building permit values for new construction decreased from $370.6 million
in 2003 to $357.2 million in 2004, or about a 3.6% decrease.
• Total occupancy in local hotels and motels remained constant and the occupancy tax
totaled nearly $2.9 million, nearly identical to the amount received during the prior fiscal
year.
• City Council again decided to support the operations of the Electric Fund by forgoing
transfers for payments in lieu of taxes, and franchise fees for the upcoming fiscal year.
The City Council intends to continue this support until such time as the Electric Fund has
adequate monetary reserves.
All of these factors were considered in preparing the City of Lubbock's budget for the 2004-
2005 fiscal year.
During the just ended fiscal year, unreserved fund balance in the General Fund increased by
nearly $3.7 million to $12.1 million compared to $8.4 million at the end of the prior fiscal
year. It is intended that the unreserved undesignated fund balance be equal to I 5% of
operating expenditures, which equates to approximately $ L 3.5 mi Ilion. The City ended the
year nearly $1.4 million under this target. City Management anticipates meeting this goal
within the next few years.
The Electric Fund increased rates in May 2004 twelve and one half percent for the larger
commercial consumers as a result of higher than anticipated cost of power. Residential and
small commercial consumers rates remained relatively unchanged due to the rate increases
implemented in the prior fiscal year.
Both the Water and Sewer Funds rates were increased for the 2003-2004 fiscal year. The
water rates were increased by an average of 3 percent and the sewer rates were increased by
an average of 5 percent for all customers. Currently, the City is in the process of having a
rate study completed for both the water and sewer rates. The results of this study will impact
future water rates. The water and sewer rates affected both residential and commercial
consumers by approximately the same percentage. These rate increases were necessary to
cover increased operating costs due to inflationary pressures.
Requests for Information
This financial report is designed to provide a general overview of the City of Lubbock's
finances. Questions concerning any of the information provided in the report or requests for
additional financial information should be addressed to the Chief Financial Officer, P.O. Box
2000,Lubbock, Texas, 79457.
34
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CITY OF LUBBOCK, TEXAS
') &sic
F~NANCIAL
f) s )TATEMENTS
0
CITY OF LUBBOCK, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2004
Prima~ Government 0 Governmental Business-Type Component
Activities Activities Total Units
ASSETS
Pooled cash and cash equivalents $ 30,797,510 25,309,543 56,107,053 1,519,082
Investments 7,503,969 6,077,077 13,581,046 494,689
Receivables. net 16,383,864 29,811,958 46,195,822 158,612
Internal balances (555,465} 555,465 0
Due from other governments 1,308,277 1,308.277
Due from others 1,470,831 1,119,160 2,589,991
Inventories 190,034 2,114.453 2,304.487 87,425
Investment in property 218,503 218,503
Prepaid expenses 897,648 897,648 25.229
Restricted assets:
Cash and cash equivalents 2,152,275 44,658,899 46,811,174 100,000 0
Incentives advances 9,164,684
Investments 6,723,257 63,543,690 70,266,947
Accounts receivable 1,013,813 1,013,813
Bond proceeds receivable 27,745,000 27,745,000
Mortgage receivables 5,653,444 5,653,444
Capital assets: 0 Non-depreciable 52,080,271 145,637,526 197,717,797 366,332
Depreciable 76,933,607 466.065,118 542,998,725 881,214
Deferred charges 3,751,695 3,751,695
Other assets 4,071 4,071
Total Assets 229,503,025 789,662.468 1,019,165,493 12,797,267
LIABILITIES 0 Accounts payable 5,758,795 17,892,025 23,650,820 462,805
Due to others 35,195 35,195 547,519
Due to ether governments 80,937
Accrued expenses 3,204,277 2,310,777 5,515,054 156,108
Accrued interest payable 387,855 1,611,164 1,999,019
Payable to escrow agent 22.620,000 22,620,000
Customer deposits 1,000,526 1,000,526 0
Deferred revenue 3,120,823 29,353 3,150,176 9,029,783
Noncurrent liabilities:
Due within one year:
Bonds payable 4,955,949 17,271,718 22,227,667
Compensated absences 5.475,861 2,143,563 7,619,424
Accrued insurance claims 2,354,536 1,184,210 3,538,746 0 Capital leases payable 826,018 622,442 1,448,460 2,085,606
Due in more than one year:
Bonds payable 65,265,268 292,082,188 357,347,456
Deferred premium on bonds 1,179,722 1,179,722
Compensated absences 9,442,647 2,016,571 11,459,218
Accrued insurance claims 5,252,644 5,252,644
Landfill closure and postclosure care 3,051,116 3,051,116 0 Capital leases payable 534,939 770,765 1 305 704 1.455,515
Total Liabilities 125,161,885 347.239,062 472,400,947 13.818,273
NET ASSETS
Invested in capital assets. net of related debt 74,433,159 355,816,406 430,249,565 1,247,546
Restricted for:
Capital projects 7,869,506 38,650,935 46,520,441 e
Debt service 2.223,003 1,050,347 3,273,350
Other purposes 10,246,203 5,715,380 15,961,583 100,000
Unrestricted (deficit) 9,569,269 41,190,338 50,759,607 ~2.368,552~
Total Net Assets $ 104,341,140 442,423.406 546,764,546 (1,021,006~
See accompanying Notes to Basic Financial Statements.
35 0
0
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Functions/Programs
Primary Government:
Governmental Activities:
Administration/Community Services
Street Ughting
Financial Services
Fire
General Government
Human Resources
Police
Planning and Transportation
Public Works
Interest on Long-Term Debt
Total Governmental Activities
Business-Type Activities:
Electric
Water
Sewer
Solid Waste
Stonnwater
Transit
Airport
Total Business-Type Activities
Total Primary Government
Component Units:
Civic Lubbock, Inc.
Market Lubbock, Inc.
Total Component Units
CITY OF LUBBOCK. TEXAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30. 2004
Program Revenues
Operating
Charges for Grants and
Ex(!enses Services Contributions
$ 22,313,139 2,912,165 6,041,287
2,471,382
2,387,188
21,998,241 10,600
20,563,083 3,516,980 1,972,229
777,035
33,248,228 5,424,232 1,629,923
10,788,596
3,078,122 849,147
4,593,150
122,218,164 12,713,124 9,643,439
110,591,149 105,433,133
27,879,343 31,907,893
17,020,092 18,889,095
17,661,438 11,641,316
5,356,649 6,019,490
10,565,159 2,893,507 5,336,794
6,852,874 4,626,270 1.402,003
195.926,704 181.410,704 6.738,797
318,144,868 194,123,828 16,382,236
1,609,630 1,731,625
5,721,854 127,826 6,707,783
$ 7,331,484 1,659,451 6,707,783
General revenues:
Taxes:
Property
Sales
OCOJpancy
Other
Franchise fees
Investment earnings
Miscellaneous
Transfers, net
Total general revenues and transfers
Change in net assets
Net assets -beginning of year
Net assets -end of year
See accompanying Notes to Basic Financial Statements.
36
0
0
Capital
Grants and
Contributions 0
0
0
1,849,662
2.642,778
3,203,482
0
1,573,384
9.269,306
9,269,306
0
0
0
0
G
Net (Expense) Revenue and
0 Chanses in Net Assets
Prima~ Government
Governmental Business-Type Component
Activities Activities Total Units
0
$ (13,359,687) (13,359,687)
(2,471,382) (2.471,382)
(2,387,188) (2,387,188)
(21,987 ,641) (21,987,641)
(15,073,87 4) (15,073,874)
0 (777,035) (n7.o35)
(26,194,073) (26,194,073)
(1 0,788,596) (10,788,596)
(2,228,975) (2,228,975)
~4.593, 150~ {4.593,150!
(99,861 ,601) (99,861,601)
(3,308,354) (3,308,354)
6,671,328 6,671,328
5,072,485 5,on.48s
(6,020,122) (6,020,122)
662,841 662,841
0 (2,334,858) (2,334,858)
748,783 748,783
1,492,103 1,492,103
(99,861,601) 1,492,103 (98,369,498)
~ 121,995 .._,
1,113,755
1,2351750
0 44,496,973 44,496,973
30,554,632 30,554,632
2,853,205 2,853,205
939,456 939,456
9,654,447 9,654,447
1,151,620 2,859,344 4,010,964 8,636
3,123,572 72,870 3,196,442
0 9,745,250 ~9.745,250l
102,519,155 !6.81 3,0362 95,706,119 8,636
2,657,554 (5,320,933) (2,663,379) 1,244,386
1 01,683,586 447,744,339 549,427,925 ~2.265,392!
$ 104,341,140 442,423,406 546,764,546 (1 ,021,006!
0
0 37
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0
0
0
0
0
0
0
0
0
0
CITY OF LUBBOCK, TEXAS
BALANCE SHEET
GOVERNMENTAL FUNDS
SEPTEMBER 30, 2004
Other Total
General Debt Service Governmental Governmental
Fund Fund Funds Funds
ASSETS
Pooled cash and cash equivalents $ 5.888,268 2.282,997 21,407,030 29,578,295
0 Investments 1,426,351 553,024 5,229,256 7,208,631
Taxes receivable (net) 6,864,967 533,715 90,102 7,488,784
Accounts receivable (net) 6,098,853 162,485 2,433,012 8,694,350
Interest receivable 79,463 2,119 20,146 101,728
Due from other funds 1,930.500 1,930,500
Due from other governments 13,637 1,294,640 1,308,277
0 Due from others 781,704 679,746 1,461,450
Investment in property 218,503 218,503
Inventory 120,880 120,880
Bonds proceeds receivable 22,620,000 5,125,000 27,745,000
Secured receivables 5,653,444 5,653,444
Advances to other funds 445,676 445,676
0 Total Assets 23,650,299 26,154,340 42,150.879 91,955,518
LIABILITIES
Accounts payable 1,836,027 418,017 3,131,290 5,385,334
Due to others 35,195 35,195
0 Due to other funds 1,480,500 1,480,500
Accrued liabilities 3,036,761 121,374 3,158,135
Payable to escrow agent 22,620,000 22,620,000
Advances from other funds 1,469,381 1,469,381
Deferred revenue 6,047,791 475,303 3,547,898 10,070,992
0 Total Liabilities 10,955,774 23,513,320 9,750,443 44,219,537
FUND BALANCES
Resel'\led for:
Prepaid items/inventory 120,880 120,880
Advances to other funds 445,676 445,676
Debt service 2,641,020 2,641,020 ~ Capital projects 24,870,961 24,870,961
Special revenue -grants 5,871,947 5,871,947
Unreserved, reported in
General Fund 12,127.969 12,127,969
Special revenue funds 1,734,312 1,734,312
Capital projects funds F6.784! l76,784~ C) Total fund balances 12,694,525 2,641,020 32,400,436 47,735,981
Total Liabilities and Fund Balances $ 23,650,299 26,154,340 42,150,879 91,955,518
See accompanying Notes to Basic Financial Statements.
39
0
CITY OF LUBBOCK, TEXAS
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET ASSETS
SEPTEMBER 30. 2004
Total fund balance -governmental funds $ 47,735,981 0
Amounts reported for governmental activities in the statement of net assets are
different because:
Capital assets used in governmental activities are not financial 0 resources and therefore are not reported in the funds. 129,013,878
Internal service funds (ISF's) are used by management to charge the costs of
certain activities, such as insurance and telecommunications, to individual
funds. The portion of the assets and liabilities of the ISF's primarily serving
governmental funds are included in governmental activities in the statement of 0 net assets as follows:
Net assets 8,953,624
Net book value of capital assets (included in captial assets above) (1,353,658)
Compensated absences 193,517
Amounts due from business-type ISFs for amounts overcharged 18,240
Certain liabilities are not due and payable in the current period 0
and therefore are not reported in the funds. Those liabilities are as
follows:
General obligation bonds (70,221 ,217)
Capital leases payable (1,360,957)
Compensated absences ( 14,918,508) 0 Accrued interest on general obligation bonds (387,855)
Bond premiums are recognized as an other financing source in the fund
statements but the premiums are amortized over the life of the bonds in the
government-wide statements. (1,179,722)
Actual City contributions to the fire fighter's pension trust fund is greater than 0
the actuarially determined required contribution. This will reduce future funding
requirements and is not recognized as an asset at the fund level but is a
prepaid expense in the Statement of Net Assets. 897.648
Revenue earned but unavailable in the funds is deferred. 6,950,169
9
Net assets of governmental activities $ 104,341,140
0
See accompanying Notes to Basic Financial Statements.
40 0
0
0
0
0
o·
a
"""
0
()
CITY OF LUBBOCK, TEXAS
STATEMENT OF REVENUES, EXPENDITURES. AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Other
General Debt Service Governmental
Fund Fund Funds
REVENUES
Taxes $ 74,381,814 7,943,630 5,373,390
Fees and fines 3,675,857
Licenses and permits 1,982,281
Intergovernmental 428,458 9.214,981
Charges for services 4,467,730 849,147
Interest 334,730 28,622 375,997
Miscellaneous 1.442,675 1,612,800
Total revenues 86,713,545 7.972.252 17,426,315
EXPENDITURES
Current:
Administration/Community Services 18,156,455
Electric -street lighting 2,185,286
Financial Services 2,333,469
Fire 20,613,077
General Government 5,633,469 16,992 13,650,037
Human Resources 754,225
Police 32,400,371
Planning and Transportation 7,180,843
Non-departmental 214,562
Public Works 3,012,987
Debt service:
Principal 4,498,304
Interest and other charges 4,749,272
Capital outlay 475,585 16,190,551
Total expenditures 89,947,342 9,264,568 32,853,575
Excess (deficiency) of revenues
over (under) expenditures (3,233, 797! ~1.292,316~ {15.427,260~
OTHER FINANCING SOURCES (USES)
Long-term debt issued 22,620,000 5,125,000
Due escrow agent (22,620,000)
Bond premium (discount) 1,179,722
Capital leases 1,535,075
Transfers in 10,723,891 20,715,403 6,120,514
Transfers out {4.212,915) !19,955,679l {3.871,880~
Total other financing sources (uses) 6,510,976 1,939,446 8,908,709
Net change in fund balances 3,277,179 647,130 (6,518,551)
Fund balances -beginning of year 9,417,346 1.993,890 38,918,987
Fund balances ·end of year $ 12,694,525 2,641,020 32,400,436
See accompanying Notes to Basic Financial Statements.
41
Total
Governmental
Funds
87,698,834
3,675,857
1,982,281
9,643,439
5,316,877
739,349
3,055,475
112,112,112
18,156,455
2,185,286
2,333,469
20,613,077
19,300,498
754.225
32,400,371
7,180,843
214,562
3,012,987
4,498,304
4,749,272
16,666,136
132,065,485
[19,953,373}
27,745,000
(22,620,000)
1,179,722
1,535,075
37,559,808
!28,040,474}
17,359,131
(2,594,242)
50,330,223
47,735,981
CITY OF LUBBOCK, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Net change in fund balances • total governmental funds $ {2,594,242)
Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the
cost of those assets is allocated over their estimated useful lives and reported as depreciation
expense. This is the amount by which capital outlays of $16,666,136 exceeded depredation of
$9,813,391 in the current period.
Bond proceeds provide current financial resources to governmental funds. but issuing debt increases
long-term liabilities in the Statement of Net Assets. Repayment of bond principal is an expenditure in
the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets.
This is the amount by which proceeds of $27,745,000 exceeded repayments and debt defeasance of
$27,118,304.
Capital lease transactions provide current financial resources to governmental funds and repayment of
principal is an expenditure. This is the amount by which proceeds of $1,535,075 exceeded repayments
of $1 , 170,595. ·
Bond premiums are recognized as an other financing source in the governmental funds, but are
considered deferred assets on the Statement of Net Assets. This amount will be amortized over the life
of the bonds.
Estimated long-term liabilities for compensated absences are recognized as expenses in the Statement
of Activities as earned, but are recognized when current financial resources are used in the
governmental funds. This amount is the net change in the estimated long-term liability for
compensated absences during the year.
Estimated long-term liabilities for rebatable arbitrage are recognized as expenses in the Statement of
Activities as earned, but are recognized when current financial resources are used in the governmental
funds. This amount is the net change in the estimated long-term liability for rebatable albitrage during
the year.
Property taxes levied and court fines and fees earned, but not available, are deferred in the
governmental funds, but are recognized when earned (net of estimated uncollectibles) in the Statement
of Activities. This amount is the net change in deferred property taxes and court fines and fees for the
year.
The difference between the par value of debt defeased which is greater than the par value of the new
debt is recognized as a contra expense in the Statement of Activities, but is a Note disclosure in the
fund statements.
Actual City contributions to the fire fighter's pension trust fund are greater than the actuarially
determined Net Pension Obligation (NPO). This amount is recognized as an expenditure at the fund
level but is accrued when overpaid and reduces expenses on the Statement of Activities
Internal service funds are used by management to charge the costs of certain activities, such as
insurance and telecommunications, to individual funds. The net revenue (expense) of certain internal
service funds is reported with governmental activities.
Accrued interest is recognized as expenses in the Statement of Activities as incurred, but is recognized
when current financial resources are used in the governmental funds. This amount is the net change in
the accrued interest this year.
The net effect of various miscellaneous transactions involving capital assets (e.g., sales and trade-ins)
is to increase net assets.
Change in net assets of governmental activities
See accompanying Notes to Basic Financial Statements. 42
6,852,745
(626,696)
(364,480)
(1 '179, 722)
(2,225,479)
122,984
2,537,988
213,682
15,025
(94,019)
{57,560)
57,328
$ 2,657,554
0
0
0
0
0
0
0
0
0
0
0
CITY OF LUBBOCK, TEXAS
BUDGETARY COMPARISON STATEMENT
GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2004
Variance with
0 Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
REVENUES
Taxes and fees $ 71,855,445 72,262,445 74,381,814 2,119,369
0 Fees and fines 3,288,500 3,288,500 3,675,857 387,357
Licenses and permits 1,823,721 1,807,550 1,982,281 174,731
Intergovernmental 372,192 455,907 428,458 (27,449)
Charges for services 4,541,034 4,325,642 4,467,730 142,088
Interest 236,689 164,118 334,730 170,612
0 Miscellaneous 935,379 1,125,711 1.442,675 316,964
Total Revenues 83,052.960 83,429,873 86,713,545 3.283,672
EXPENDITURES
Administration/Community Services 18,403,905 18,365,948 18,156,455 209,493
Electric -street lighting 2,302,033 2,210,784 2,185,286 25,498
Financial Services 1,873,928 2,185,455 2,333,469 (148,014)
Fire 21 ,026.400 20,775,537 20,613,077 162,460
General Government 5,435,697 5,507,366 5,633,469 (126,103)
Human Resources 714,338 801,863 754,225 47,638
Police 32,531 ,242 32,419,834 32,400,371 19,463
0 Planning and Transportation 7,659,089 7,664,495 7,180,843 483,652
Capital Outlay 53,000 502,136 475,585 26,551
Non-departmental 849,200 849,200 214,562 634,638
Total Expenditures 90,848,832 91,282,618 89,947,342 1,335,276
,..... Excess (deficiency) of revenues
OJ over (under) expenditures (7.795,872) (7,852,745) (3,233, 797) 4,618,948
OTHER FINANCING SOURCES (USES)
Transfers in 11,138,094 10,936,402 10,723,891 (212,511)
Transfers out ~3.342,222~ ~3,441,959~ {4,212,915) (770,956~
0 Total other financing sources (uses) 7,795,872 7,494,443 6,510,976 ~983,467~
Net change in fund balances (358,302) 3,277,179 3,635,481
Fund balances-beginning of year 9,417,346 9.4171346 9,417,346
Fund balances -end of year $ 9,417,346 9,059,044 12,694,525 3,635,481
0
0 See accompanying Notes to Basic Financial Statements.
43
0
CITY OF LUBBOCK, TEXAS
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
SEPTEMBER 30, 2004 0
Business-ty~e Activities-Enterprise Funds
West Texas
Municipal Power
Electric Water Sewer Agency ~WTMPA! 0 ASSETS
Current assets:
Pooled cash and cash equivalents $ 2.633,706 9,646,398 4,300,692 627,826
Investments 637,979 2,336,705 1,041,782
Receivables, net 13,392,448 3,935,759 2,356,470 6,892,959 0 Interest receivable 7,694 34,961 11,658
Due from others 28,081
Due from other funds 261,500
Inventories 321981 170.483
Total current assets 16,704,808 16.413.887 7,710.602 7.520.785
Noncurrent assets: 0
Restricted cash and cash equivalents 5,435,733 9,888,565 247,331 1,050,347
Restricted investments 5,017,600 12,590,121 572.230
Receivables, net 21,218,605
Restricted interest receivable 2,456 25.426 21,201
Deferred charges 3,344,444 407,251
Other assets 4,071 0
Advances to other funds
Capital assets:
Land 756,714 12,724,350 12,578,774
Construction in progress 9,488,738 45,999,985 5,227,618
Buildings 8,067,549 21,573.970 23,857,432
Improvements other than buildings 167,860,376 200,308,490 105,745,873 25,200 -Machinery and equipment 48,790,387 19.405,223 15,856,542 v
Less accumulated depreciation {94,090,505} {77.889,617} (53,936.873} (25.200}
Total capital assets 1401873.259 2221122.401 109,329.366
Total noncurrent assets 154.673.492 2441630,584 1101170,128 22,676,203
Total Assets $ 171.378,300 261.044.471 117,880,730 30,1961988 0
0
0
0
See accompanying Notes to Basic Financial Statements. 44
0
0
Business-type Activities-Enterprise Funds
Total Nonmajor Total Internal
Enterprise Proprietary Service
0 Stonnwater Funds Funds Funds
$ 938,663 5.826,657 23,973,942 2,554,816
227,378 1,509,702 5,753,546 618,869
705,599 2,226,503 29,509,738 309
0 7,264 29,257 90,834 9,381
1,091,079 1,119,160 13,148
261,500
467,557 671,021 1,5121586
1,878,904 11,150,755 61.379,741 4,709,109
0
22,394,882 4,990,434 44,007,292 2,803,882
22,785,586 10,306,990 51,272,527 18,994,420
21,218,605 150,686
23.277 28,282 100,642 45,603
3,751,695
0 4,071
1.023,705 1,023,705
115,669 5,500,647 31,676,154 65.343
43,053,522 9,493,563 113,263,426 1,632,378
64,580 41,756,630 95,320,161 1,608,618
8,158,852 91,972,033 574,070,824 313,341
2,766,404 43,677,838 130,496,394 8,178,213
(8,3681621 ~ !100,941 ,974) (335,252. 790) {8,315,760}
45,790,406 91,458,737 609,574,169 3,482,133
90,994,151 107,808,148 730.952,706 25.476,724
0 $ 92,873,055 118,9586903 792.332,447 30,1851833
0
() 45
0
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
SEPTEMBER 30, 2004 0
Business-type Activities-Enterprise Funds
West Texas
Municipal Power
Electric Water Sewer Agency (WTMPA! 0
LIABILITIES
Current liabilities:
Accounts payable $ 8,516,408 730,385 224,644 6,196,307
Accrued expenses 1,015,631 166,986 131,540
Accrued interest payable 602,093 700,818 122,246 129,608 0
Accrued insurance claims
Due to other funds
Customer deposits 969,689 24,715
lease payable 1,525,000 235,259
Bonds payable 3,653,385 5,908,680 4,015,748 1.525.000
Total current liabilities 16,282,206 7,531,584 4,729,437 7,850,915 0
Noncurrent liabilities:
Compensated absences 1,941,690 742,146 372,324
Deferred revenue
Accrued insurance claims
landfill closure and post closure care 0 Contracts/leases payable 18,679,792 422,232
Bonds payable 44,217,709 104,820,983 40,329,424 19,552.463
Total noncurrent liabilities 64,839,191 105,563,129 41,123,980 19,552,463
Total liabilities 81,121,397 113,094,713 45,853,417 27.403,378 0
NET ASSETS
Invested in capital assets, net of related debt 76,855,904 125,395,032 65,684,404
Restricted for:
Capital projects 6,394,802 8,476,392
Debt service 1,050,347 0
Other purposes
Unrestricted 7,006,197 14,078,334 6,342.909 1,743,263
Total Net Assets $ 90,256,903 147,949,758 72,027,313 2,793,610
0
0
See accompanying Notes to Basic Financial Statements. 46
0
0
Business-type Activities-Enterprise Funds
Total Nonmajor Total lntemat
Enterprise Proprietary Service
c Stormwater Funds Funds Funds
$ 54,385 1,157,219 16,879,348 1,386,138
471,617 405,685 2,191,459 165,460
56,399 1,611,164
3,538,746
711,500 711,500
6,122 1,000,526
387,183 2,147,442
1.281.550 887,355 17,271 ,718
1.807,552 3,611 463 41.813,157 5,090,344 ,... ..
71,659 626,968 3,754,787 598,864
29,353 29,353
5,252,644
3,051,116 3,051,116
348,533 19,450,557
71,801.015 11,360,594 292,082,188
71,872,674 15,416.564 318,368,001 5,851,508
73,680,226 19.028,027 360.181 ,158 10.941,852
0
5,504,853 82,376,213 355,816,406 3.482,133
12,383,463 11,396,278 38,650,935
1,050,347
10,089,636
1.304,513 6,158.385 36.633,601 5,672,212
$ 19,192,829 99,930,876 432,151 ,289 19,243,981
J
47
0
0
0
0
0
0
0
0
0
0
c
()
0
0
0
0
0
0
CITY OF LUBBOCK, TEXAS
RECONCILIATION OF THE STATEMENT OF NET ASSETS· PROPRIETARY FUNDS
TO THE STATEMENT OF NET ASSETS
SEPTEMBER 30, 2004
Total net assets • enterprise funds
Amounts reported for business-type activities in the Statement of Net Assets are
different because:
Internal service funds (ISFs) are used by management to charge the costs of
certain activities, such as insurance and telecommunications, to individual funds.
The portion of assets and liabilities of the ISFs primarily serving enterprise funds
are included in business-type activities in the Statement of Net Assets as follows:
Net assets of business-type ISFs
Amounts due to governmentaiiSFs for amounts overcharged
Net assets of business-type activities
See accompanying Notes to Basic Financial Statements.
49
$ 432,151 ,289
10,290,357
(18,240)
$ 442,423,406
0
CITY OF LUBBOCK
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
0 Business-T~~e Activities· Ente!:Erise Funds
West Texas
Municipal Power
Electric Water Sewer Age~ jWTMPA}
OPERATING REVENUES
Charges for seJVices $ 103,664,178 32,222,280 18,203,020 48,966,215
Provision for bad debts (2,312,477) (738,125) {301.780) 0 Charges for seJVices (net) 101,551,701 31,484,155 17,901,240 48,966,215
New taps and reconnects 423,738
Effluent water sales 754,970
Commodity sates 232.885
Landing fees
Parl<ing
Rentals
Concessions
Miscellaneous 0
Total Operating Revenues 101.551,701 31,907,893 18,889,095 48,966.215
OPERATING EXPENSES
Personal seJVices 8,294,785 5,274.209 3,522,215 331,148
Supplies 456,933 1,021 ,166 642.948
Maintenance 2,756,885 2,019,918 1,095,564 320,000 0 Purchase of fuel and power 73.969,427 48,936,216
Collection expense 1,850,565 346,446 158,619
Other seJVices and charges 3,758,830 6,138.536 4.070.608 1,685
Depreciation and amortization 9,033,112 5.958.903 5,075,034 133,274
Total Operating Expenses 98.269.972 22.263.297 14,752,815 49,880,942
Operating Income (Loss) 3,281.729 9.644.596 4,136,260 (914,727)
NON-OPERATING REVENUES (EXPENSES) 0
Interest income 129,257 588,435 68,789 1,006,104
Passenger facility charges/Federal grants
Disposition of assets {240,692) 88,773 (8,481) (2,825,018)
Miscellaneous 1,420,053 (137,795) (571,119)
Pass-through grant payments
Interest expense on bonds !3,353,899) !5,584,522) {2,188, 707! '1 .062.316) 0 Total non-operating revenues (expenses) !2,045,281! !5.045.109) !2.679.516) (2.881,230!
Income (loss) before contributions and transfers 1,236,448 4,599,487 1,456,762 (3,795,957)
Capital contributions 1,849,662 2,642,776 3,203,482
Transfers in 1,777,956 6,891,766 6,235,864 356,922
Transfers {out) (3,150.195! (1 1 .172,003! (8,032,942!
Change in net assets 1,713,871 2.962,028 2,863,166 (3,439,035)
Total net assets -beginning of year 88,543.032 144,987,730 69,164,147 6,232,645 0 Total net assets-ending $ 90,256.903 147,949,758 72,027,313 2,793,610
0
0
See accompanying Notes to Basic Financial Statements.
so 0
0
Business-T:£1!! Activities • Ente!}!rise Funds
Other Nonmajor Total lntemal
Enterprise Enterprise Service
Storm water Funds Funds Funds
$ 6,131,808 14,835,148 224,222,649 35,943,622
0 j112,318~ (439,776~ {3,904,476l
6,019,490 14,395,372 220,318,173 35,943,622
423,738
754,970
232,665
749,037 749,037
1,065,838 1,065,838
1,696,683 1,696,683
0 1,114,712 1,114,712
139,451 139,451 175.459
6.019,490 19,161,093 226.495,487 36.119,081
645.260 9,643,788 27,711,405 5,272,295
1,599,917 3,720,964 6,852,554
0 148.564 2,647,316 8,988,247 1,473,732
122,905,643
295,069 292.217 2,942,916
49,413 4,398,830 18,417,902 23,122,204
553,592 13,291,441 34,045,356 602,494
1,691,898 31.873,509 218.732,433 37,323,279
4.327.592 (12,712,416l 7,763,054 (1.204, 198!
0
594.120 320,356 2,727,061 544,554
6,738,797 6,738,797
(981,284) (3,966,702) (7,434)
(307,464) (334,780) 68,895 12.584
(1 ,568, 721} (1,568,721)
0 ~3.658.830~ (424.539! !16.272.613)
(3.372. 174) 3,749.829 {12,273,483) 549.704
955,418 (8,962,587) (4,510.429) (654,494)
1,573.384 9,269,306
4,307,251 1,874,760 21,444,519 225,916
(4,618,513) (4,216, 115l (31 '189,768!
644,156 (9,730,558) (4,986,372) (428,578)
18,548,673 1 09,661 ,434 437,137.661 19,672.559
$ 19.192.829 99.930.876 432,151,289 19,243,981
51
0
0
0
0
0
0
0
0
c
0
a
CITY OF LUBBOCK, TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN
FUND NET ASSETS OF PROPRIETARY FUNDS
TO THE STATEMENT OF ACTIVITIES
0 FOR THE YEAR ENDED SEPTEMBER 30, 2004
0
Net change in fund net assets • total enterprise funds
Amounts reported for business·type activities in the statement of activities are
different because:
Internal service funds (ISFs) are used by management to charge the costs of certain
activities such as fleet services. central warehousing activities, management
information activities, etc. to individual funds. The net revenue (expense) of certain
() ISFs is reported with business·type activities.
Change in net assets of business.type activities
0
0
0
0
0 See accompanying Notes to Basic Financial Statements. 53
$ (4,986,372)
(334,561)
$ (5,320,933)
0
CITY OF LUBBOCK, TEXAS
STATEMENT OF CASH FLOWS
PROPRlETARY FUNOS
FOR THE YEAR ENDEO SEPTEMBER 30, 2004
Business-Tltf:!! Activities • Ent!!]!rlse Funds
West Texas
Municipal Power 0
Electric Water Sewer Asen~~MPA!
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 101,626,637 32,863,422 19.074,799 47,218.295
Payments to suppliers (78,396,377) (11,220,827) (6.259,433) (47,864,595)
Payments to employees (7,891,004) (5.117,293) (3,401,569)
Other receipts (payments) 1,179.361 !49.0221 !579,6001 0 Net cash provided (used) by operating activities 16.518.617 16,476.280 8.834,197 !646,3001
CASH FLOWS FROM NONCAPITAL AND RELATED
FINANCING ACTIVITIES
Transfers in from other funds 1.777.956 6,691,766 6,235.864 356.922
Transfers out to other funds (3,1 50, 195) (11,172,003) (8,032,942)
Short-tenm interfund borrowings 3,678,500 5,909
Advances from (to) other funds 0 Operating grants
Payments received/(made) on advances (to)lfrom other funds !4.644.8651
Net cash provided (used) by noncapital
and related financing activities (6,017,104) (601,737) (1,791,1691 356,922
CASH FLOWS FROM CAPITAL ANO RELATED
FINANCING ACTMTIES
Purchases of capital assets (12,307,612) (11,663,809) (5,551 ,770}
Sale of capital assets 2,646,037 110,281 201,939 22,810,000 0 Receipts(payments) on leases (174,165} 2,580,495
Payments for bond issuance costs (30,085)
Principal paid on revenue bonds (4,413,300) (1,464,741) (1,525.000)
Interest paid on revenue bonds (3,353,899) (2,233,809) (1,070,799)
Principal peid on general obligation bonds and other debt (4,838,318) (3,654,354}
Interest paid on general obligation bonds (3,391,605) (2,345,232}
Issuance of revenue. C.O. bonds, and capital leases 647,923 (22.810,000)
Passenger facility Charges/capital grants 0 Contributed capital 1.849.662 2.672,324 3,090.696
Net caSh provided (used) for capital and related
financing activities (15.609, 1971 (20,161,7541 (8.432,8861 (15,304)
CASH FLOWS FROM INVESnNG ACTIVITIES
Proceeds from 531es and maturities of investments 932,430 10.219,927 2.665,663
Purchase of investments (6,588,009) (5,794.121) (626,508)
Interest eamings on cash and investments 52.369 571.337 86.012 17.005
Net casn provided by (used for) investing activities j5.603,210l 4.997.143 2.125.167 17,005 0 Net increase (decrease) in casn
and cash equivalents (10,710,694) 709,932 735,309 (287,677)
Cash and cash equivaleflts • beginning of year 18.780,333 18,825.031 3,812,714 1,965.850
Cash and cash equivalents • end of year 8.069,439 19,534,963 4,548,023 1,676.173
Reconciliation of operating Income {lose) to net cash provided
(used) by operating activities: 0 Operating inoome (loss) 3,281,729 9,644.596 4,136,280 (914,727)
Adjustments to reconcile operating income (loss}
to net caSil provided (used) by operating activities:
Depreciation and amortization 9,033,112 5,958,903 5,075.034 117,994
Other income (expense} 1,179,361 (49,022} (579.600}
Change in current assets and liabilities:
Accounts receivable 74,938 955,547 185.704 (1,599,301)
Inventory 4,000 (53.333}
Prepaid expenses 0 Due from other governments 18.286
Accounts payable 1.876,018 (172.499} (82,105) 1.724,455
Other accrued expenses 262,470 27.350 54,872 15,279
Customer <lepos~s 644,570 24.715
Increase (decrease) in compensated absences 162.421 121,737 44,012
Net cash provided (used) by operating activities 16.518.617 16.476.280 8,834,197 !646.3001
Supplemental cash flow infomtation: 0 Noncash capital improvements and other cnaoges $ 20.204,792 96,133 112,766
See accompanying Notes to Basic Financial Statements.
54 0
()
CITY OF LUBBOCK, TEXAS
STATEMENT OF CASH Ft.OWS
PROPRIETARY FUNDS
FOR THE YEAR ENOEO SEPTEMBER 30, 2004
G Buslneu·Tme ActivfUes • Enta!J!rlse Funde
Other Nonmajor lntemaJ
Enterpme Service
Stormwater Funds Totals Funds
CASH Ft.OWS FROM OPERAnNG AcnvmES
Receipts from eusiomers $ 6,047,ns 20,044,130 226,875,062 36,000,252
Payment~ to svppllel'$ {510,507} (8,079,833} (152,331,572) {31,042,646)
Payment~ to employees (670,189) (9,616,018) (26,696,073) (5,1 08,035)
0 Oihet teeeipts (payments} ~307,4164) !1.250,351l ~1,007,076l 19348
Net cash p~ {used) by operating activities 4,559,619 1,097,928 46.840,341 ~131,081~
CASH FLOWS FROM HONCAPITAL AND RELAl1:D
FINANCING ACTMTIES
T ransfetS in from otner funds 4,307,251 1,874,760 21,444,519 225,916
·Transfel's out to other ftJnds (4,618,513) (4.216,115) (31,169,768)
Short-tenn interfund bcxrowings (844,181) 3,040,228 1.611
('"' Advances from {to) other funds {1,036,740) (1,036,74C}
0p8f'lltlng gr<~~nts 3,788,073 3,766,073
Payment~ receivedl(made) on ecillanc:ou (to~ other runds
Net cash provided (used} by noneapital
1,045,135 ~,599,730l
and related financing activities (311,262) 790.932 (!,573,418) 227,527
CASH Ft.OWS FROM CAPITAL AND REI.Al1:D
FINANCING ACTMTIES
Purchases ol capital assets (3,447,008) . (3,928,747} (36,898,948) (823,430) 0 Sale of capitalaaset$ 225,164 25,993,421
ReceiJ)IS{payrnents) on leases 2,406,330
Payment~ fof bond issuance costs (373,851) (4C3,936)
Principal paid on revenue bonds (546,551) (7,949,592)
Interest paid on revenue bond$ (3,658,830) {10,317,337}
Principal paid on genetal obligation bonds and other debt (762,349) (9,255,021)
Interest paid on general obligation bonds (430,980) (6,167,817)
Issuance of 13118m.l8, G.O. bonds, and capital leases (22, 162.077)
0 Pa8S8nger faci!lty dlargeslcapital gr<~~ntl , 1,402,003 1,402,003
Con1ributed capital 1.573.364 9,186,066
Net cash provided (used) for capital and related
financing ectfvlties Q:,652,389l' !2.295,378l !54,186.9061 !823,430!
CASH FLOWS FROM INVESnNG AcnvrrtES
Proceeds from sales and maturities of investments 1,360,757 7,275,615 22,454,392 6,594,329
Purc:Mse of investment~ 332,322 (4,648,301) (17,324,617) (5,061,927}
Interest earnings on cash end Investment~ 569,120 291l48 1,587 589 511,156 0 Net cash piOIIIded by (used for) investing ac:tlllities 2,282,199 2.919,060 6,717,364 2,043,558 Net incruse {d~) in cash
and cash equivalent~ {1,141,833} 2,512,544 (8,182,619) 1,316,574 Cash and cash equivalent~. beginning of year 24,475,378 8.304.547 76,163,853 4.042.124 Cash and cash equivalent~. end of year 23,333.545 10,817,091 67,981,234 H 5.358,698
Reconc:lllatlon of operatJng Income (loaa• to net ~h P'O'Ifded
{j) (uaed) by opetdng ac:tillities:
Opetating income (loas) 4,327,592 (12.712,416) 7,763,054 (1,204,198) Adjustment~· to rea:mcile operating income (loss)
to net cash PfO\Iided (used) by opetatin9 activities:
O~n and amortization 553,592 13,291,441 34,030,076 802,494
Other income (elCPetlse) (307,464) {1,344,022) {1,100,747} 19,348 Change In current asset~ and liabilities:
Account~ receivable 28.289 883,037 ~.212 {118,829)
; lnii1Kitoly (41,924) (91,257} (114,330)
Prepaid expenses 12,087 12.097 Oue from other g0118mments {194,307) (176,021) Ac:x:ounts payable (11,800) 514,153 3,648,222 450,968 Other accrued expenses (35,352) 130,682 455,301 Customer deposit$ 150 869,435 470,655 lnCI'eaSe (decrease) in compensated absence& 4,762 559,037 891,969 !237,189! Net cash pi'O\Iided (used) by operating a<:tivilies 4,559,819 1,097,928 46.84C.341 (131,081!
""' Supplemental cash flow Information:
Noncash capital imp!OIIementa and other changes s 214n 20.435,188
See accompanying Notes to Sasic Financial Statamenta.
55
ASSETS
CITY OF LUBBOCK, TEXAS
STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
SEPTEMBER 30, 2004
Cash and cash equivalents $
Investments, at fair value:
Pools
Total assets
LIABILITIES
Accounts payable
Total liabilities
See accompanying Notes to Basic Financial Statements.
56
$
0
0
Agency 0
Fund
1,099 0
73
1,172
0
1,172
1,172
0
0
0
c
c
c
0
G
0
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Basic Financial Statements (BFS) of the City of Lubbock, Texas (City) have been prepared in conformity
with Accounting Principles Generally Accepted in the United States of America (GAAt>} as applied to
government units, including specialized industry practices as specified in the American Institute of Certified
Public Accountants audit and accounting guide titled Audits of State and Local Governmental Units (GASB 34
Edition). The Governmental Accounting Standards Board (GASB) is the acknowledged standard-setting body
lbr establishing governmental accounting and financial reporting prindple~. With re~pect to proprietary
activities related to business-type activities and enterprise funds, including component units, the City applies all
applicable GASB pronouncements as well as Financial Accounting Standards Board (F ASB) Statements and
Interpretations, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins of the
Committee on Accounting Procedure, issued on or betore November 30, 1989, unless those pronouncements
conflict with or contradict GASB pronouncements. The: more significant accounting policies are described
below.
A. REPORTING ENTITY
The: City is a municipal corporation governed by a Council-Manager form of government. The City,
incorporated in 1909, is located in the northwestc:m part of the: state. The City currently occupies a land area of
liS square miles and serves a population excc:eding 206,000. The City is empowered to levy a property ta.x on
both real and personal properties located within its boundaries. It is also empowered by state statute to extend
its corporate limits by annexation, which occurs periodically when deemed appropriate by the city council.
The City provides a full range of services, including police and fire protection; recreational activities and
cultural events; construction and maintenance of highways, streets, and other infrastructure; and sanitation
services. The: City also provides utilities for electricity, water, sewer, and stormwater as well as a public
transportation system.
The BFS present the City and its component units and include all activities. organizations, and functions for
which the City is considered to be financially accountable. The criteria considered in detcnnining activities to
be reported within the City's BFS are based upon and consistent with those set forth in the Codification of
Governmental Accounting Standards. Section 2100, "Defining the Financial Reporting Entity." The criteria
include whether:
• The organization is legally separate (can sue and be sued in its own name),
• The City holds the corporate powers of the organization,
• The City appoints a voting majority of the organization's board,
• The City is able to impose its will on the organization,
• The organization has the potential to impose a financial benefit or burden on the City, or
• There is fiscal dependency by the organization on the City.
As required by GAAP, the BFS present the reporting entity which consists of the City (the primary
government), organizations for which the City is financially accountable, and other organizations for which the
nature and significance of their relationship with the City arc such that exclusion could cause the City's BFS to
be misleading or incomplete.
BLENDED COMPONENT UNITS
The Urban Renewal Agency (URA) has been included in the City's financial reporting entity within the
primary government using the blended method because, although it is legally separate, its operations are so
intertwined with the City that it is, in substance, a part of the City. The URA was formed to provide urban
renewal services including rehabilitation of housing, acquisition ofhousing, and disposition of land. The URA
Board is composed of nine members appointed by the Mayor with the consent of the City Council, and acts
only in an advisory capacity to the City Council. All powers to govern the URA are held by the City Council.
There are no separate financial statements available for the URA.
57
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY (CONTINUED)
West Texas Municipal Power Agency (WTMPA) is a legally separate municipal curpur..Ltion, a political
~ubdivision of Tcl\as, and body politic and corporate, formed in 1983, governed by a Board of eight directors
who serve without compensation. WTMPA has no employees and instead contracts with the City for general
operations. WTMPA may engage in the business of generation, transmission, sale, and exchange of electric
energy to the four participating public entities: Lubbock, Tulia, Brownfield, and Floydada. WTMPA may also
participate in power pooling and power e-xchange agreements with other entities. WTMPA provides electricity
to its four member cities with the City having an 88.5% interest in its operntions. EDch member city appoints
two members to the WTMPA board, however an allirrnative vote of the "majority in interest" is required to
approve:: the operating budget, approve capital projects, approve debt issuance, and approve any amendments to
WTMPA rules and n:gulations. The City mnintuins the "majority in interest" vote based on Kilowutt purchases.
and consequently has majority voting control. As the City purchases approximately 88.5% of the electricity
brokered. WTMPA provides services almost exclusively to the City and is therefore presented as a blended
enterprise lund. Their separate audited financial statements may be obtained through the City.
DISCRHEL V PRESENTED COMPONENT UNITS
The linanci:ll data for the Component Units are shown in the Government-Wide Finane in I Statements. They are
reported in a separate column to emphasize that they arc legally separate from the City. The following
Component Units arc included in the reporting c:ntity because the primDry government is financially
accountabt.:, is able to impose its will on the organi.zation, or can signiticantly influence operations and/or
activities of the organization.
Civic Lubbock, Inc. is a legally separate entity that was organized to foster and promote the presentation of
wholesome educational. cultural, and entertainment programs lor the general moral. intellectual, physical
improvement.. and welfare of the citizens of Lubbock and its surrounding area. The seven-member board is
appointed by the City Council. City Council approves the annual budget. Separate financial statements for
Civic Lubbock may be obtained from them at I SO I 6'b Street, Lubbock, Texas.
Market Lubbock Economic Development Corporation, db::1. Market Lubbock, is a legally separate entity
that was formed on October I 0, 1995 by the City Council to create, manage. operate. and supervise programs
and activities to promote, assist, and enhance economic development within and around the City. The City
Council appoints the seven-member board and its operations are funded primarily through budget.:d allocations
of the City's property and hotel occupancy taxes. Separnte financial statements may be obtained from Market
Lubbock at 1301 Broadway. Suite 200, Lubbock, Texas.
58
0
0
0
0
0
0
0
0
0
0
c
0
G
0
n
0
0
0
0
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY (CONTINUED>
RELATED ORGANIZATIONS
The City Council is responsible for appointing the members or the boards of other organir.mions but the City's
account;lbility tor th~'Sc organizations docs not extend beyond making board appointments. The City Council is
not able to impose its will on thc:sc entities and there is no linancial benefit or burden relationship. Bonds
issued by these organizations do not constitute indebtedness of the City. The following Related Organizations
arc not included in the reporting entity:
The Housing Authority of the City of Lubbock (Authority) is a legally separate entity. The Mayor appoints
the five-member board.
The Lubbock Health Facilities Development Corporation promotes health facilities development City
Council appoints the seven-member board.
The Lubbock Housing t'inance Corporation, Jnc. was formed pursuant to the T exa:s Housing finance
Corporation Act, to finance the cost of decent, safe, and at'fordnble residential housing. The Mayor appoints the
seven·member board.
North & East Lubbock Community Development Corporation (CDC) was formed ti·om the recommendation
of the mayor's commission formed in May 2002 to examine the condition of North & East Lubbock.
Incorporated in February 2004, the CDC began work to effectuate change in North and East Lubbock. The
North & East Lubbock Community Development Corporation is a local entity that drives social change;
promotes autonomy and empowerment by increasing the supply of quality and affordable housing, generating
economic activity, and coordinating the efficient delivery of soda! services. The City Council appoints two
members or an eleven-member board. The City Council is not able to impose its will on the entity and there is
no financial benefit/burden relationship.
The Lubbock Education Facilities Authority, lnc. is a non-prolit corporation and instrumentality of the City
and was created pursuant to the Higher Education Authority Act. Chapter S3 Texas Education Code for the
purpose of aiding institutions of higher education, secondary school. and primary schools in providing
educational facilities, housing facilities. The seven-member Board is appointed by the City Council.
The Lubbock Firemen's Retirement and Relief Fund (Pension Trust Fund) operates under provisions of the
1:-'iremen's Rdief and Retirement Laws of the State ofTcxas for purposes of providing retirement benefits for
the City's firefighters. The Mayor's designee, the Cash & Debt Manager, three firetighters elected by members
of the Pension Trust Fund and two at-large members elected by the Board. govern its a!fairs. It is funded by
contributions from the firelighters and City matching contributions. As provided by enabling legislation, the
City's responsibility to the Pension Trust Fund is limited to matching monthly contributions made by the
members. Title to assets is vested in the Pension Trust Fund and not in the City. The State Firemen's Pension
Commission is the governing body over the Pension Trust Fund and the City cannot significantly influence its
o~rations. Their separate audited financial statements may be obtained through the City.
59
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
8. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
The City's financial statements are prepared using the reporting model spcciticd in GASB Statement No. 34-
Basic Finandal Su1tements-and Manageme11t's Discussion and Analysis ·for State and Local Govemrnent:r.
GASB Statement No. 37 -Basic Financial Statements -and Managenumt's Discussion and .4na/ysi:r -For
State and Lom/ Governments -Omnibus. GASB Statement No. 38 -Certain Financial Statements Note
Disclosures, and GASB Interpretation No. 6 -Recognition and Measurement of Certain Liabilities and
Expenditures in Governmental Fund Financial Statements. As specified by Statement No. 34. the Basic
Financial Statements (DFS) include both Government-Wide and Fund Financial Statements.
The Government-Wide Financial Statements (GWFS) (i.e., the Statement of Net Assets and the Statement of
Aetivith:s} report inforrn:uion on all of the non-fiduciary activities of the City and its blended component units
as a whole. The discretely presented component units are also aggregatdy presented within these statements.
The clfcct of inh:rfund activity has been removed from these statements by allocation of the activities of the
various intemal service funds to the governmental and business-type activities on a fund basis based on the
predominant users of the services. Governmental activitie$, which are primarily supported by taxes and
intergovernmental revenues, are reported separately from business-type activities, which rely to a significant
extent on tees and charges for support. All activities. both governmental and business-type. are reported in the
GWFS using the economic resources m.:asurement locus and the accrual basis of accounting, which includes
long-tenn assets and receivables as well as long-term debt and obligations. The GWFS locus more on the
sustainability of the City as an entity and the change in aggregate financial position resulting from the activities
of the Jiscal period.
The Government-Wide Statement of Net Assets reports all financial and capital resources of the City, excluding
those reported in the fiduciary fund. II is displayed in the lonnat of assets less liabilities equals net assets, with
the assets and liabilities shown in order of their relative liquidity. Net assets are required to be displayed in
three components: (I) invested in capital assets net of related debt, (2) restricted. and (3) unrestricted. Invested
in capital assets net of related debt equals capital assets net of accumulated depreciation and reduced by
outstanding balances of any bonds, mortgages, notes. or other borrowings that are attributable to the
acquisition, construction, or improvement of those a.'>seL~. Re~'tricted net assets are those with constraints
placed on their use by either: (I) externally imposed by creditors (such as through debt covenants), grantors,
contributors. or laws or regulations of oth1..'t governments: or {2) imposed by law through constitutional
provisions or enabling legislation. All net assets not otherwise classit1ed as invested in capital assets net of
related debt or restricted, are shown as unrestricted. Reservations or designations of net assets imposed by lhe
City, whether by administrative policy or legislative actions of the City Council that does not otherwise meet
the delinition of restricted net assets, are not shown in the GWFS.
The Government-Wide Statement of Activities demonstrates the degree to which the direct expenses for a given
function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with
a specific function or segment. Program revenues include, (I) charges to customers or applicants who purchase,
use. or directly benefit from goods, services, or privileges provided by a given function or segment: and (2)
gr,mts and contributions that are restricted to meeting the operational or capital requirements of a particular
function or segment Taxes and other items not properly included among program revenues nre reported instead
as general revenues. The general revenues support th~ net costs of the functions and segments not covered by
program revenues.
Also part of the BFS are Fund Financial Statements (FFS) for governmental funds. proprietary funds, and the
fiduciary fund, even though the latter is excluded from the GWFS. The focus of the FFS is on major funds, as
defined by GASB Statement No. 34. Although GASB Statement No. 34 sets forth minimum criteria for
detennination of major funds, i.e .• a percentage of assets, liabilities, revenue. or expenditures/expenses of fund
category and of the governmental and enterprise funds combined. It also gives governments the option of
displaying other funds as major funds. The City can elect to add some funds as major funds because of
outstanding debt or community focus. Major individual governmental lunds and major individual enterprise
funds are reported as separate columns in the FFS. Other non-m~jor funds are combined in a single column in
the appropriate FFS.
60
0
0
0
0
0
0
0
0
0
0
0
Q
0
0
0
0
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAl STA T£MENT
PRESENTATION
Fund Financial Statements
The GWFS are reported using the economic resources measurement focus and the accrual basis of accounting,
as are the proprietary FFS. The City's tiduciary FFS includes only an agc:ncy fund that uses the accrual basi~ of
accounting. However, because agency funds report only assets and liabilities, this fund docs not have a
measurement focus. Revenues are recorded when earned and e:<~nscs are recorded when a liability is incurred.
regardless of the timing of related cash flows. Property ta:~es are recognized as revenues in the year tbr which
they arc levied. Grants and similar items are recogni7.ed as revenue as soon as all c:ligibility requirements have
been met.
Because the enterprise funds ar.: combined into a single business-type activities column on the GWFS. certain
intcrfund activities between these funds are eliminated in the consolidation for the GWFS, but are included in
the fund columns in the proprietary FFS. The effect of inter-fund activity has been eliminated from the GWFS.
Exceptions to this general rule are payment~·in-lieu of taxes and other charges between the City's electric, water
and .sewer functions and various other functions of the government. Elimination of these charges would distort
the direct costs and program revenues reported for the various functions concerned. For instance, 88.5% of the
operations of WTMPA representing transactions between WTMPA and Lubbock Power & Light have been
eliminated for the GWFS presentation and for the electric BTA.
Governmental FF'S are reported using the current financial resources measurement focus and the modified
accrual basis of accounting. This is the traditional basis of accounting for governmental funds. This presentation
is necessary, (I) to demonstrate legal and covenant compliance, (2) to demonstr.tte the sources and uses of
liquid resources. and (3) to demonstrate how the City's actual revenues and expenditures contbrrn to the annual
budget. Revenues arc recognized as soon as they are both measurable and available. Revenues are considered to
be available when they are collectible within the current period or soon enough thereafter to pay liabilities of
the current period. For this purpose. the government considers revenues to be available. generally, if they are
collected within 45 days of the end of the current tiscal period. with the exception of sales taxes which are
considered to be available if they are collected within 60 days of year end. The City considers the grant
availability period to be one year for revenue recognition. Expenditures generally are recorded when a liability
is incurred, as under accrual accounting. However. debt service expenditures, as well as expenditures related to
compensated absences, and claims and judgments are recorded only when the liability has matured. Because
the governmental FFS are presented on a different basis of accounting than the GWFS, a reconciliation is
provided immediately tbllowing e-.tch fund statement. These reconciliations explain the adjustments necessary
to convert the FFS intu the governmemnl activities column of the GWFS.
Property taxes, sales taxes. franchise ta.xes, occupancy taxes, grants, I icenses, co~rt fines, and interest associated
with the current fiscal period are all considered to be susceptible to accrual and have been recognized as
revenues of the current tiscal period. Only the portion of special assessments receivable due within the current
fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items
are considered to be measurable and available only when the City receives cash.
Fund Accounting
The City uses funds to report its financial position and the results of its operations. Fund accounting segregates
funds according to their intended purpose and is designed to demonstrate legal compliance and to aid financial
management by segregating transactions related to certain governmental functions or activities. A fund is a
separate nccounting entity with a self-balancing set of accounts, which includes assets, liabilities, fund
balance/net assets, revenues and expenditures/expenses.
Governmental funds are those through which most of the governmental functions of the City are financed. The
City reports two major governmental funds:
The General Fund. The General Fund ;IS the City's primary operating fund accounts for all financial resources
of the general government, except those required to be accounted for in another fund.
The Debt Servic:e Fund is used to account for the accumulation of resources for, and the payment of, general
long-term obligation principal and interest (other than debt service payments made by proprietary funds).
61
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT
PRESENTATION (CONTINUED)
Enterprise Funds arc used to account for operations. (I) that are linanced and opero~ted in a manner simil:lr to
private business enterpriscs where the: intent of the gnveming body is that the costs (expenses, including
depredation) t>f providing goods or services to the general public on a continuing basis be tinanccd or
recovered through user charges; or (2) where the governing body has decided that periodic detennination of
revenues e:unc:d, expenses incurred. and/or net income is appropriate lor capital maintenance. public policy.
management control, accountability, or other purposes. The City reports the following majnr enterprise funds:
The Electric Fund accounts for the activities of Lubbock Power & Light (LP&L). the City-owned electric
production and distribution system.
The Water l<'und accounts for the activities of the City's water system.
The Sewer Fund accounts for the activities of the City's sanitary sewer system.
The West Texas Municipal Power Agency (WTMPA) Fund accounts for the activities of power
generation and power brokcring to member cities. Member cities include Lubbock with 88.5%
ownership, and Tulia, Brownfield. and floyd:~da comprising the remaining II.So/o ownership.
Tbe Stormwaler Fund accounts for the activities of the stonnw;:ner utility, which provides stormwatcr
drainage for the City.
The City reports the following non-major funds;
Governmental Funds
Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than
special assessments or major capital projects) that are legally restricted to expenditures for specified
purposes.
Capital Projects Funds are used to account for financial resources to be used for the acquisition or
construction of major capital improvements (other tlla.n those recorded in the proprietary funds).
The Permanent Fund is used to report resources that are legally restricted to the extent that only
earnings, and not principal, may be used for purpose of perpetual care for the cemetery grounds.
Proprietary Funds distinguish operating revenues and expenses from non-operating items. Operating
revenues and expenses generally result from providing services and producing nnd delivering goods in
connection with a proprietary lund's principal ongoing operations. The principal operating revenues of the
City's tmlerprise funds and of the City's internal service funds are charges to customers for sales and
services. Operating expenses for enterprise funds and internal service tilnds include the cost of sales and
services, administrative expenses, and depreciation on capital asset.<>. All revenues and expenses not
meeting this definition are reported as non-opcr.tting revenues and expenses.
Internal Service Funds are used to account for services provided to other departments, agencies of
the departments or to other governments on a cost reimbursement basis (i.e., O~:et maintenance,
central warehouse, print shop, self-insurance, etc.).
Enterprise Funds are used to account for services to outside users where the full cost of providing
services, including capital, is to be recovered through fees and charges, e.g., Lubbock Preston Smith
International Airport (airport lund), Citibus, and the solid waste lund.
Fiduciary Funds include an Agency Fund that is used to account for assets held by the City as an
agent for private organizations.
62
0
0
0
0
0
0
0
0
0
c
c
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G
0
0
0
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
D. BUDGETARY ACCOUNTING
The City Manager submits a proposed operating budget and capital improvement plan to the City Council
annually for the upcoming tiscal year. Public hearings are conducted to obtain taxpayer comments, and the
budget is legally enacted through passage of an ordinance by City Council. City Council action is also required
for the approval of any supplemental appropriations. All budget amounts presented in the budget comparison
statement ret1ect the original budget and the amended budget, which have been adjusted for legally authorized
supplemental appropriations to the annual budgets during the fiscal year. The operating budget is adopted on a
basis consistent with GAAP lor the General fund. Budgetary control is maintained at the department level in
the following expenditure categories: personnel services, supplies, other charges, and capital outlay.
Management may make administr.1tive transten; and increa<:e:; or decrea.-;es in accounts within categories, as
long as expenditures do not exceed budgeted appropriations at the fund level, the legal level of control. All
annual operating appropriations lnpsc at the end of the fiscal year. Capital budgets do not lapse at liscal year
end but remain in effect until the project is completed and closed.
In addition to the tax levy lor general oper.1tions. in accordan~e with State lnw, the City Council SCI$ an ad
valorem tax levy tor a sinking fund {General Obligation Debt Service) which, with cash and investments in the
fund, is sullicient to pay all debt service due during the fiscal year.
E. ENCUMBRANCES
At the end of the fiscal year, encumbrances for goods and services that have not been received are canceled. At
the beginning of the next fiscal year. management reviews all open c:ncumbrances. During the budget revision
process, encumbrances may be re-established. On October I, 2004, the General Fund had no significant
amounts of open encumbrances.
F. ASSETS. LIABILITIES AND FUND BALANCE/NET ASSETS
Equity in Pooled Cash and Investments • The City pools the resources of the various funds in order to
facilitate the management of cash and enhance investment earnings. Records are maintained which reflect each
fund'!! equity in the pooled account. The City's investments are stated at fair value, except for repurchase
agreements with maturities, when purchased, of one year or less. Fair value is based on quoted market prices as
of the valuation date.
Cash Equivnlents -Cash equivalents are defined as short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three months or less when purchased
which present an insignificant risk of changes in value because of changes in interest rates.
Property Tax Receivable-The value of all real and business property located in the City is assessed annually
on January 1 in conformity with Subtitle E of the Texas Property Code. Property taxes are levied on October 1
on those assessed values and the taxes are due on receipt of the tax bill. On the lollowing January I, a tox lien
attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. The taxes arc
considered delinquent if not paid belon: February 1. Therefore, at fiscal year end all property taxes receivable
are delinquent, but are secured by a tax lien.
At the GWFS level property tax revenue is recognized upon levy. In governmental tunds, the City records
property taxes receivable upon levy and defers tax revenue until the taxes are collected or available. For each
fiscal year, the City recognizes revenue in the amount of taxes collected during the year plus an estimate of
taxes to be collected in the subsequent 45 days. The City allocates property tax revenue between the General,
certain Special Revenue, and Debt Service funds based on tax rates adopted for the year of levy. The Lubbock
Centml Appraisal District assesses property values. bills, collects, and remits the property taxes to the City. The
City adjusts the allowance for uncollectible taxes and deterred tax revenue at fiscal year end based upon
historical collection experience. To write otf property taxes receivable, the City eliminates the receivable and
reduces the allowance for uncollectible accounts.
Enterprise Funds Receivables -Within the Electric, Water, Sewer, and WTMPA Enterprise Funds, services
rendered but not billed as of the close of the lis cal year are accrued and this amount is reflected in the accounts
receivable balances of each fund. Amounts billed are reflected as accounts receivable net of an allowance for
uncollectible accounts.
63
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
f'. ASSETS. LIABILITIES. AND FUND BALANCE/NET ASSETS !CONTINUED>
Inventories -Inventories consist of expendable supplies held for consumption. Inventories are valued at cost
using the average cost method of valuation, and arc accounted for using the consumption method of accounting,
i.e., inventory is expensed when used rather than when purchased.
Prepaid Items -Prepaid items are accounted for under the consumption method.
Restricted Assets -Certain enterprise fund and governmental activities assets are restricted for construction;
consequc:ntly. net assets have been restricted tor these amounts. The excess of' other restricted assets over
related liabilitic..-s are included as restricted net assets for capital projects. rate stabilization, economic
development. nnd bond indentures.
Mortgnge Receivables -Mortgage receivables consist of loans made to Lubbock residents under the City's
Community Development loan program. These loans were originally funded primarily through grants received
from the U.S. Department of! lousing and Urban Development.
Capital Assets and Depreciation -Capital assets, including public domain infrastructure (streets, bridges,
sidewalks and other assets that are immovable and of value only to the City) are defined as assds with an initial,
individual cost of more th:m $5,000 and an estimated useful life in e.-.cess of one year. These capital assets are
reportc:d in the GWFS and the proprietary FFS. Capital assets are recorded at cost or estimated historical cost if
purchased or constructed. Donated assets arc recorded at the estimated fair value on the date of donation.
Major outlays for capital assets and improvements are capitalized as the projects are constructed. The cost of
nonnal maintennnce and repairs that do not add to the value of the asset or materially extend the asset lives are
not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the
related capital assets.
Depreciation is computed using the straight-line method over the estimated useful lives as follows:
In frastructure/1 mprovemcnts
Buildings
Equipment
Water righi.S
10-50 years
15-50 years
3-15 years
85 years
Interest Capitalization -Because the City issues general-purpose capital improvement bonds, which are
recorded within the proprietary funds, the City capitalizes interest costs for business-type activities and
enterprise funds according to the Financial Accounting Standards Board (F ASB) Statement No. 34
Capitali::ation of Interest Cost and FASB Statement No. 62 Capitalization of lnteresl Cost~'. The City
capitalized interest of approximately $457,000, net of interest earned, lor the business-type activities and the
enterprise funds during the current fiscal year.
Advances to Other Funds -Amounts owed to one fund by another that are not due within one year are
recorded as advances to other funds.
Use of Estimates -The preparation of financial statements in confonnity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses/expenditures during the reporting period.
Actual results could ditTer from those estimates.
64
0
0
0
0
0
0
0
0
0
0
0
Q
9
()
0
G
(:)
')
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
G. REVENUES, EXPENSES AND EXPENDITURES
Interest Income on pooled cash and investments is allocated monthly based on the percentage of a fund's six·
month rolling average monthly balance in pooled cash and investments to the total citywide six-month rolling
avernge monthly balance in pooled cash and investments, except for certain Fiduciary Funds. certain Special
Revenue Funds, Capital Project Funds, and certain Internal Service Funds. The interest income on pooled cash
and investments of these funds is reported in the General Fund or the Debt Service Fund.
Sales Tax Revenue for the City results from an allocation of 1.125% of the total sales tax levy of 7.875o/o,
which is collected by the State of Texas and remitted to the City monthly. The tax is collected by the vendor
and is required to be remined to the State by the 20th of the month following collection. The tax is then paid to
the City by the lOth of the next month.
Grant Revenue from federal and state grants is recognizet.l a.'i revc:nue as .soon as all eligibility requirements
have been met. The availability period for grants is considered to be one year.
Inter-fund Transactions are accounted for a-; rc:vc:nues, expenditures, expt:nses, or other tinancing sources or
uses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made trom 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. In addition, transfers are made
between funds to shift. resources from a fund legally authorized to receive revenue to a fund authorized to
e.xpend the revenue.
Compensated Absences consists of vacation leave and sick leave. Vacation leave of 10·20 days is granted to
all regular employees dependent upon the date employed. years of service, and civil service status. Currently,
up to 40 hours of vacation leave may be "carried over'' to the next calendar year. The City is obligated to make
payment upon retirement or termination for any available, unused vacation leave.
Sick leave for employees is accrued at 1-Y. days per month with a maximum accrual status of200 days. After
15 years of continuous full time service for non-civil service personnel, vested sick leave is paid on retirement
or termination at the current hourly rate for up to 90 days. Upon retirement or termination, Civil Service
Personnel (Police) are paid for up to 90 days accrued sick !eave after one year of employment. Civil Service
Personnel (Firelighters) are paid for up to 135 days of accrued sick leave upon retirement or termination. The
Texas Civil Service Jaws dictate cenain benefits and personnel policies above and beyond those policies of the
City.
The liability for the accumulated vacation and sick leave is recorded in the GWFS and in the fFS for
proprietary fund employees when earned. The liability is recorded in the governmental FFS to the extent it is
due and payable.
Post Employment Benefits for retirees of the City of Lubbock include the option to purchase health and life
insurance benefits at their own expense. Amounts to cover premiums and administrative costs. with an
incremental charge for reserve funding, are determined by the City's he<~lth care administrator. Employer
contributions are funded on a pay·as·you-go basis and approximated $1.3 million for fiscal 2004. These
contributions are included in the amount of insurance expense reflected in the financial activity reponed in the
He<~lth Insurance Internal Service Fund.
65
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
A. NET ASSET/FUND BALANCE DEFICITS
The dclicit of $76,784 in the General Capital Projects F'und is due to timing dilferences of incurring capital
outlay expenditures for an internally financed project. The fund balance should be positive by the end of li~al
year 200412005 with the: tinal internal payback from the Special Revenue Funds.
The deficit of $6,700 in the Investment Pool Internal Service Fund is the result of not recovering actual cost
with the allocation of interest earnings to this fund. This also represents a timing difference.
The deficit of $1,864,119 in Market Lubbock Inc. (MLI) is due to long-term commitments for incentive and
special project contracts and tentative open convention offers. MLI management expects future receipts of
funding from the City of Lubbock to pay these long-term commitments.
No other funds of the City had deficits in either total fund balances or total net assets.
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
A. POOLED CASH AND INVESTMENTS
The City's investment polices are governed by State statute and City ordinances. The following are authorized
investments for the City and all are authorized and further defined by the Public Funds Investment Act (Chapter
2256) ("PFIA"):
• Obligations of the United States or its agencies and instrumentalities, which have a liquid market with
a readily determinable market value.
• Direct obligations of this state or its agencies and instrumentalities.
• Other obligations. the principal and interest of which are unconditionally guaranteed or insured by, or
backed by the full faith and credit of, this state or the United States or their respective agencies and
instrumentalities.
• Obligations of states, agencies. counties, cities, and other political subdivisions of any state rated as to
investment quality by a nationally recognized investment rating firm not less than A or its equivalent.
• Fully collateralized certificates of deposit issued by a state or national bank doing business in Texas
and guaranteed, or insured by the Federal Deposit Insurance Corporation or its successor, secured by
obligations authorized by this subchapter, or secured in any other manner and amount provided by
law for deposits of the investing entity.
• Fully collateralized repurchase agreements with a detined termination date; and secured by
obligations authorized by the Act; such collateral pledged to the City, held in the City's name, and
deposited at the time the investment is made with the City or with an independent third party ~lcctcd
and approved by the City. Repurchase agreements must be purchased through a primary government
securities dealer, as defined by the federal Reserve, or a bank doing business in this state. The term
of any reverse repurchase agreements may not exceed 90 days after the date the reverse security
repurchase agr¢ement is delivered. Money received by the Cicy under the terms of a reverse security
repurchase agreement shall be used to acquire additional authorized investments, but the term of the
authorized investments acquired must mature not later than the expiration date stated in the reverse
security repurchase agreement.
• Bankers' acceptances with a stated maturity of 270 days or fewer from the date of its issuance; and
liquidated in full at maturity; and eligible for collateral for borrowing from a Federal Reserve Bank;
and accepted by a bank organized and existing under the Jaws of the United States or any state. if the
short-term obligations of the bank. or of a bank holding company of which the bank is the largest
subsidiary, are rated not less than A-1 or P-l or an equivalent rating by at least one nationally
recognized credit rating agency.
• Commercial paper with a stated maturity of 270 days or fewer from the date of its issuance, and rated
not less than A-I or P-1 or an equivalent rating by at least two nationally recognized credit rating
agencies.
66
0
0
0
0
0
0
0
0
0
0
0
0
0
G
")
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septennber30,2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
A. POOL. ED CASH AND INVESTMENTS <CONTINUED)
• No-load money market mutual funds regulated by the Securities and Exchange Commission, and with
a dollar-weighted average stated maturity of 90 days or fewer, and whose investment objectives
include the maintenance of a stable net asset value of $1 for each share.
• AM-rated, constant dollar, investment pools authorized by the City Council and as further tlelined
by the Act. which invests in eligible securities as authorized by the PFIA. Government Pool
investments as of September 30, 2004, were invested in TexPool and Tex.ST AR.
TexPool. The Comptroller of Public Accounts (the "Comptroller"} is the sole otliccr. director and
shareholder of the Texas Treasury Salekeeping Trust Company (the ''Trust Company"} which is authorized to
operate TcxPool. Pursuant to the TexPool Participation Agreement, administrative and investment services to
T ex Pool arc provided by Lehman Brothers Inc. and federated Investors, Inc. ("Lehman and Federated"),
under an agreement with the Comptroller. acting on behalf of the Trust Company. The Comptroller
muintains oversight of the services provided to Tc:xPool by Lehman and Federated. Jn addition, the TexPool
Advisory Board advises on TexPool's Investment Policy and approves any fee increases. As required by the
PFIA, the Advisory Board is composed equally of participants in TexPool and other persons who do not have
a business relationship with TexPool who are qualified to advise TexPool. TexPool is currently rated AAAm
by Standard and Poor's. An explanation of the significance of such rating may be obtained from Standard &
Poor's at 1221 Avenue of the Americas, New York, New York 10020.
TexSTAR. Texas Short Term Asset Reserve Program ("TEXSTAR'') has been organized in conformity with
the lnterlocal Cooperation Act, Chapter 791 of the Texas Government Code, and the Public Funds
Investment Act. Chapter 2256 of the Texas Government Code. JPMorgan Fleming Asset Management
{USA), Inc. ("JPMF AM'') and First Southwest Asset Management, Inc. ("FSAM'') serve as co-administrators
!br TEXST AR under an agreement with the TEXST AR board of directors (the "Board"). JPMF AM provides
investment services, and FSAM provides participant services and marketing. Custodial, transfer agency.
fund accounting and depository services are provided by JPMorgan Chase Bank and/or its subsidiary J.P.
Morgan Investor Services Co. Finally, TEXSTAR is currently rated AAAm by Standard and Poor's. An
explanation of the significance of such rating may be obtained from Standard & Poor's at 1221 Avenue of the
Americas, New York, New York 10020.
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 custodial credit risk assumed by the
City at September 30, 2004.
INVESTMENT CATEGORY OF CUSTODIAL CREDIT RISK
(I) Insured, registered. or securities held by the City or its agent in the City's name.
(2) Uninsured and unregistered, with securities held by the counterparty's agent or trust department in
the City's name.
(3) Uninsured and unregistered, with securities held by the counterparty or by the trust department or
agent but not in the City'$ name.
DEPOSIT CATEGORY OF CUSTODIAL CREDIT RISK
(I) Insured or collateralized with securities held by the City or by its agent in the City's name.
(2) Collateralized with securities held by the pledging financial institution's trust department or agent
in the City's name.
{3) Uncollateralized.
Amounts invested in investment pools and money market funds are nQl categorized, because they do not
represent securities that exist in physical fonn.
67
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septemaber30,2004
NOTE m. DETAa NOTES ON ALL ACTIVITIES AND FUNDS
A. POOLED CASH AND INVESTMENTSJCONTINUEDl
The following table is a schedule of the City's pooled cash and investments at September 30, 2004:
Investments
Primaxy Government
U.S. Treasuries
Agency Obligations
Investment Pools
Money Market Mutual Fund
T ot:U Primary Government
Agency Funds
Investment Pools
Total Agency Funds
Total Investments
Cash and
Bank Deposits
Primary Government
Agency Funds
Total
(1)
$ 3,998,817
36,658,090
Categety
(A) (B)
$ 95,899,156
1,099
$ 95,900,255
Category
(2) j3)
Balik
Balance
95,899,156
1,099
95,900,255
Carrying
Amount
3,998,817
36,658,090
47,41:),743
2,796,-414
90,867,064
73
73
90,867,137
Canyiag
Amount
95,899,156
1,099
95,900,255
Cash and investments listed above include investment pools and money market mutual funds (mmmt).
The table below categorizes the investment pools and mmmfs as cash and equivalents in unrestricted
funds. Restricted funds include investment pool and mmmf balances. The difference in total investment
balances between the table above and the table below totals $7,019,071, which is due to the different
reporting methods used in each table. Cash and investments are reported in the Statement of Net Assets
as:
Cash and Equiv:Uents -Unrestricted
Cash and Equivalents -Restricted
Total Cash and Equivalents
Investments -Unrestricted
Investments -Restricted
Tow Investments
Total Cash and Investments
68
Total
Primary
Govc.mmcnt
$ 56,107,053
46,811,174
102,918,227
13,581,046
70,266,947
83,847,993
186,766,220
Total
Agency
Funds
1,099
1,099
73
73
1,172
Total
56,107,053
46,812,273
1(}2,91 9,326
13,581,046
70,267,020
83,848,066
186,767,392
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
a
0
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
B. INTERFUND TRANSACTIONS
lnterfund balances, specifically the due to and due from other funds, are short·tcnn loans to cover
temporary cash defic:its in various funds. This oc:casionally occurs prior to bond sales or grant
reimbursements. These outstanding balances are repaid within the following fiscal year.
lnterfund balances, spccific:ally advances to and from other funds, are longer-term loans to cover Council
directed internal financing of certain projects. At September 30, 2004 the City bas nearly $1 .S million of
this type of intemal financing. These balances are assessed an interest charge and are repaid over time
through operations and transfers.
Net interfund receivables and payables between governmental activities and business-type activities in the
amount of $SSS,465, are included in lhe government-wide financial sta!emcnts. The following amounts
due to other funds or due from other funds, including advances, are included in the fund financial
statements (all amounts in thousands):
Interfund Payables:
Govemmental Funds:
Nonm:1jor Govemmental
Proprietary Funds:
Electric
NoJUDajor Proprietary
Totals
Governmental
Funds
General
1,930
446
$ 2;376
Intedund Receivables
Proprietary Funds
Water Sewer Solid Waste
1,024
261
261 1,024
Net transfers of$9,745,250 from business-type activities to governmental a.<:tivities, up from $2.6 million
during the prior year, on the government-wide statement of activities is primarily the result of 1) debt
service payments made from the debt service fund, but funded from an operating fund; 2) subsidy transfers
from unrestricted general funds; and 3) transfers to move indirect cost allocations, payments in lieu of
taxes (PILOT), and franchise fees to the general fund or other funds as appropriate. The following
interfund transfeTS are reflected in the fund financial statements (all amoWlts in thousands):
Intcrfund Tra.aefc:rs Out:
Govemmmtal
Funds
Debt NON'ftajor
Proprieta.ry Funds
Stotm· Non.majot Inlml
Totals
2,954
707
3,661
lntc:tfund Genetal Service Gov. Electcic Water Sewer: Water &lccrprise Service Totds
T ranefers In:
Governmental Funds:
Genenl Fund $
Debt Service Fund
Nonmajor Governmental 3,221
Proprietary Funds:
Electric
Wacet
Sewer
Stonnw:lter
WTMPA
Nonmajor Enterprise
Internal Service Funds
Tow
9 1,679
93 6,799
6,236
4,307
849 935
41
$ 4,213 19,956
1,483
760
1,449
91
1,068
1,679
357
3,997
6,799
33()
1,751
6,236
46 46 46
311
4,307
3,872 3,150 11,172 s.o.u 4,619
69
2,114
935
1,121
46
4,216
10,724
20,715
6,121
1,778
6,892
6,236
4,307
357
1,875
226
59,230
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE IlL DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
c. DEFERRED CHARGES
The total deferred charges of$3,344,444 in the Electric Enterprise Fund represents an advertising conttact
with the United Spirit Arena. The advertising (and amortization) began with the opening of the sports
arena in fiscal year 2000 and will continue for 30 years.
The total deferred charges of $407,251 in the West Texas MunicipaJ Power Agency Fund represents
unamortized bond issuance cost.s related to the bonds issued to build the JRM8 cogeneration facility.
D. CAPITAL ASSETS
Capital asset activity for the year ended September 30, 2004, was as follows:
Primary Government:
Govemmenw Activities
Begilmiag Endiag
Balanc:c Increases Decreases Balances
Capital Assets not being depreciated:
Land $ 7,996,406 611,84:) 8,608,249
Construction in Progress 36,155,69() 14,140,550 6,824,218 43,472,022
Tow Capital Assets not being depreciated 44,152,096 14,752,393 6,824,218 52.080.271
Capital Assets being depreciated:
Buildings 51,475,936 6,864 28.,522 51,454,278
Improvements Other than Buildings 125,742,157 3,908,958 129,651,115
M2chinery and Equipment 48.896,000 5,585,646 1,526,973 52,954,673
Total Capital Assets being depreciated 226,114,093 9,501,468 1,555,495 234,060,066
ws Accumulated Depreciation for.
Buildings 25 ,87:>,452 t,8t5.260 28,522 27,660,190
lmpcovemcnts Other than Buildings 88,642,271 3,826,069 92,468,340
Machinety and Equipment 34,01S,JU 4,426,516 1,443,900 36,997,929
Total Accumulated Depreciation 148,531,0:)6 10,067,845 1,472,422 157,126,459
Total Capital Assets being depreciated. net 77,583,057 !S66,37Z2 83,073 76,933,607
Governmental Activities Capital Assets, net $ 121,735,15:) 14,186,016 6,907,291 129,013,878
Depreciation expense was charged to functions/programs of the govemmentaJ activities as follows:
Governmental activiric::r.
General Government $ 325,447
Financial Services 5,279
Human Rcsoum:s 4,636
Admi.n.isuation/Community Services 3,646,365
Fire 841,694
Police 1,339,872
Streets 3,364,002
Electric 286,096
Internal Service Funds 162,702
Total depreciation expeDlie -governmental activities 9,976,093
T cans fer in to accumulated depreciation -governmental activities 91,752
lncresc in accumulated depreciation -governmental actWities $ 10,067,845
70
0
0
0
0
0
0
0
0
0
0
0
0
G
0
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0
0
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial St2tements
September 30, 2004
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
D. CAPITAL ASSETS (CONTINUED)
Business-Type Acrivities
Beg:izmiDg
BaJaace Increases Decreases
Capital Assets not being depreciated:
Land $ 31,676,155
Consttuction in Progress 104,689,207 28,965,883 19,693,719
Total Capital Assets not being depreciated 136,365,362 28,965,883 19,693,719
Capital Assets being depreciated:
Buildings 96,941,635 6,034 18,891
Improvements Otha th:ul Buildings 555,982,769 20,441,780 2,065,581
Machinery and Equipment 137,992,381 25,692,500 30,927,318
Total Capital Assets being depreciated 790,916,785 46,140,314 33,011,790
Less Accumulated Depreciation foe:
Buildings 26,180,634 2,465,313 18,891
Improvement:! Otha than Buildings 225,416,823 19,574,185 1,473,470
Machinety and Equipment 58,219,321 12,838,270 5,221,994
Total Accumulated Depreciation 309,816,778 34,877,768 6,714,355
Total Capital Assets being depreciated, net 481,100,007 11,262,546 26,297,435
Businesv Type Activities Capital Assets, net $ 617,465,369 40,228,429 45,991,154
Depreciation expense was charged to functions/programs of the business-type activities as follows:
Business-Type Activities:
Elecuic
Water
Sewa
Stonnwater
Solid Waste
A.izport
Tra.osit
Internal Service Funds
Total depreciation expense-business-type activities
Transfa in to accumulated depredation-business-type activities
lncrese in accumulated depreciation -business-type activities
71
EndiDg
BaJaaces
31,676,155
113,961,371
145,637,526
96,928,778
574,358,968
132,757,563
804,045,309
28,627,056
243,517,538
65,835,597
3:)7,980,191
466,065,118
611,702,644
$ 9,121,124
5,958,903
5,075,034
553,592
8,016,067
3,255,401
2,019,973
439,792
34,439,886
4l7,882
s 34,877,768
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
0. CAPITAL ASSETS <CONTINUED}
Construction Commitments
The City had many construction projects in progress at fiscal year end. Public Safety projects include
construction of a tire pump test pit Park projects include park irrigation and lighting systems. Street
projects include the widening of 98111 street from Slide to Frankford. A security upgrade of Police
Headquarters was also underway.
Electric projects included the final touches on a new substation. Water projects included a new project to
develop water wells south of Loop 289. Sewer projects included construction of sewer lines ahead of the
Marsha Sharp Freeway. Airport projects included an extension of the airport's taxiways. Two large
Stormwater projects are underway. The first project provides for the construction of an outfall storm sewer
from Clapp Park to Yellowhouse Canyon and a series of upstream storm sewers that will provide various
protections around four playa lakes. The second project provides for the consttuction of a flood relief
project for south Lubbock's chain of playa lakes.
Original Rem aiDing
Projects Commitments • SJ?f!nt-to-Date Commitimco.ts . Public Safety $ 9,371,433 7,799~79 1~71,SS4
Parle Improvements 13,078,502 7,481,061 5,597,441
Stteet Improvements 25,866,652 15,479,352 10,387,300
Permanent Street Mainteaance 1,788,000 1,626,990 161,01.0
Genetal. Capital Projects 355,171 285,505 69,666
General Facilities and System Improvements 10,062,864 7,773,968 2,288,896
Tax Increment Fund Capital Projects 3,800,000 1,198~97 2,601,403
Grant Terrorism Lab 1,179,000 892,540 286,400
Electric 14,650,111 9,488,738 5,161,373
Water 70,435,418 45,999,985 24,435,433
Sewer 11,001,937 5,.227,618 5,774,319
Solid Waste 9,591,700 5,950,400 3,641,300
Aitpon 16,058,200 3,339,364 12,718,836
Transit 203,799 203,799
Stormwatec 79,900,000 43,053,522 36,846,478
lntemal Service Fuod 2,956,000 1,632,378 1,323,622
Total $ 270,298,787 157,433,396 112,865,391
72
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
E. RETIREMENT PLANS
Each qualified ~:mployee is included in one of two retirement plans in which the City of Lubbock
participates. These are the Texas Municipal Retirement System (TMRS) and the Lubbock firemen's
Relief and Retirement Fund (LFRRF). The City does not maintain the accounting records, hold the 0 investments or administer either retirement plan.
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Summary of signilicant data for each retirement plan follows:
TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS)
Plan Description
The City provides pension benefits for all of its ti1ll-time employees (with the exception of firefighters)
through a non-traditional, joint contributory, hybrid defined benefit plan in the state-wide TMRS, one of
794 administered by TMRS. an agent multiple-employer public employee retirement system.
Benefits depend upon the sum of the employee's contributions to the plan. with interest. and the City-
financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for
service rendered before the plan began of a theoretical amount equal to two times what would have been
contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service
since the plan began are a percent (I 00%, 150%, or 200%) of the employee's accumulated contributions.
In addition, the City can grant, as often as annually, another type of monetary credit referred to as an
updated service credit which is a theoretical amount which, when added to the employee's accumulated
contributions and the monetary credits for service since the plan began, would be the total monetary credits
and employee contributions accumulated with interest if the current employee contribution rate and City
matching percent had always been in existence and if the employee's salary had always been the average of
his salary in the last three years that are one year before the effective date. At retirement, the benefit is
calculated as if the sum of the employee's accumulated contributions with interest and the employer-
tinanced monetary credits with interest were used to purchase an annuity.
Members can retire at ages 60 and above with 5 or more years of service or with 20 years of service
regardless of age. A member is vested after 5 years. The plan provisions are adopted by the governing
body of the City, within the options available in the state statutes governing TMRS and within the actuarial
constraints also in the statutes.
Contributions
The contribution rate for the employees is 7% and the City matching ratio is currently 2 to I, both as
adopted by the governing body of the City. Under the stale law governing TMRS, the actuary annually
determines the City contribution rate and the prior service cost contribution rate, both of which are
calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the
currently accruing monetary credits due to the City matching percent, which are the obligation of the City
as of an employee's retirement date, not at the time the employee's contributions are made. The normal
cost contribution rate is the actuarially determined percent of payroll necessary to satisfY the obligation of
the City to each employee at the time his/her retirement becomes effective. The prior service contribution
rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 25-ycar
amortization period. The unit credit actuarial cost method is used for determining the City contribution
rote. Both the employees and the City make contributions monthly. Since the City needs to know its
contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial
valuation that serves as the basis for the rate and the calendar year when the rate goes into effect (i.e.
December 31, 2003 valuation is effective for rates beginning January 2005).
73
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30. 2004
NOTE III. DET All-NOTES ON ALL ACTIVITffiS AND FUNDS
E. RETIREMENT PLANS (CONTINUED>
Actuarial Assumptions
The actuarial assumptions for the December 31, 2003 valuations are as follows:
Actuarial cost method:
Amortization method:
Remaining amortization period:
Asset valuation method:
Investment rate of return:
Projected salary increases:
Includes inflation at:
Cost of Living adjustments:
Unit credit
Level percent of payroll
25 years-open period
Amortized cost
~A.
None
None
None
Asof Aaaual Pensioa Contributian
September 30 Cost Made
2001 $ 8,398,884 8,398,884
2002 8,803,613 8,803,613
2003 8,708,867 8,708,867
TEXAS MUNICIPAL RETIREMENT SYSTEM
THREE-YEAR HISTORICAL SCHEDULE OF ACTUARIAL LIABILITIES
AND FUNDING PROGRESS REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
Unfunded
Actuarial
Achlarial Accrued
Atof Athlarial Value of Accrued Percentage Liability
December31 Assets Liability Funded (UAAL)
2001 $ 172,510,622 215,584,035 80.0% 43,073,413
2002 181,191,012 228,372,843 79.3% 47,181,831
2003 182,884,183 239,809,434 76.3% 56,925,251
UAALasa%
Asof Annual Covered Of Covered
December 31 Payroll Payroll
2001 $ 58,173,019 74.0".4
2002 60,285,077 78.3%
2003 57,577,743 98.9%
The City ofLubbock is one of794 municipalities having the benefit plan administered by TMRS. Each of
the municipalities has an annual, individual actuarial valuation performed. All assumptions for the
December 31, 2003 valuations are contained in the 2003 TMRS Comprehensive Annual Financial Report,
a copy of which may be obtained by writing to P.O. Box 149153, Austin. Texas 78714~9153.
74
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
E. RETIREMENT PLANS!CONTINUED)
LUBBOCK FlREFlGHTER'S RELIEF AND RETIREMENT FUND (LFRRF)
Plan Description
The Board of Trustcx:s of the LFRRF is the administrator of a single-employer detined benefit pension
plan. It is reported by the City as a related organization and is not considered to be a part of the City
financial reporting entity. Firelighters in the Lubbock Fire Department are covered by the LFRRF.
The LFRRF provides service retirement, death, disability and withdrawal benetits. These benefits fully
ve~t alh:r 20 years of credited service. A partially vested Benefit is provided for firefighters who tenninate
employment with at least 10 but less than 20 years of service. Employees may retire at age 50 with 20
years of service. A reduced early service retirement benefit is provided for employees who tenninate
employment with 20 or more years of Sl:rvice. The LFRRF Plan effective November I, 2003 provides a
monthly normal service retirement benefit, payable in a Joint and Two-Thirds to Spouse fonn of annuity.
equal to 68.92% of tinal 48-month average salary plus $335.05 per month for each year of service in
excess of20 years.
A firelighter has th~ option to participate in a Retroactive Deferred Retirement Option Plan (RETRO
DROP) which provides a Jump sum benefit and a reduced annuity upon termination of employment.
Firefighters must be at least S I with 21 years of service at the selected "RETRO DROP benefit calculation
date'' (which is prior ro date of employment tennination). Early RETRO DROP with benefit reductions is
available at age SO with 20 years of service for the selected "early RETRO DROP benefit calculation
date". A Partial Lump Sum option is also available where a reduced monthly benefit is detennined based
on an elected lump sum amount such that the combined present value of the benefits under the option is
actuarially equivalent to that of the nonnal tbnn of the monthly benefit. Optional fonns are also available
at varying levels of surviving spouse benefits instead of the standard two-thirds form.
There is no provision for automatic postretirement benefit increases. LFRRF has the authority to provide.
and has periodically provided for in the past, ad hoc postretirement benefit increases. The benefit
provisions of this plan are authori:~:ed by the Texas Local Fire Fighter's Retirement Act (TLFFRA).
TLFFRA provides the authority and procedure to amend benefit provisions.
Contributions Required and Contributions Made
The contribution provisions of this plan are authorized by TLFFRA. TLFFRA provides the authority and
procedure to change the amount of contributions dctennined as a percentage of pay by each firefighter and
a percentage of payroll by the City.
State law requires that each plan of benefits adopted by LFRRF 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 t.he entry age actuarial cost method, LFRRF's normal cost contribution rate
is detennined as a percentage of payroll. The excess of the total contribution rate over the normal cost
contribution rate is used to amortize LFRRF's unfunded actuarial accrued liability {UAAL), if any, and the
number of years needed to amortize LFRRF's unfunded actuarial liability, if any, is detennined using a
level percentage of payroll method.
The costs of administering the plan are financed by LFRRF.
75
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
E. RETIREMENT PLANS<CONTJNUED)
Annual Pension Cost
For the fiscal year ended September 30, 2004, the City of Lubbock's Annual Pension Cost (APC) lor the
Lubbock Fire Fund w~ equal to $2.5&2,713 as described below in item 4 in the tahle below. Rased on the
resulls of the December 31, 2002 actuarial valuation of the Plan Eflectivc November I. 2003, the Board's
actuary found that the fund had an adequate financing arrangement. as described in the paragraph below,
based on the tixed level of the firefighter contribution rates and on the as~umed level of City contribution
rates. Based on the Plan Effective November I, 2003, LFRRP's funding policy requires contributions
equal to 12.43% of pay by the firefighters. Contribution~ by the City are based on a formula. which caus~
the City's contribution rate to tluctunte from year to year. Thc December 31, 2002 actuarial valuation
(most recent available) retlecting the Plan Effective November I, 2003 assumes that the City's
contributions will average 18.67% of payroll in the luture.
Therefore, based on the December 31, 2002 actuarial valuation of the Plan J:::ffective November I. 2003,
the Annual Required Contributions (ARC) arc not actuarially determined but are equal to the City's actual
contributions b~ginning January I, 2003. Prior to January I, 2003, the ARC was based on the D~cember
3 I, 2000 actuarial valuation and was actuarially determined as described below.
The following shows the development ofthc Net Pension Obligation (NPO) as of September 30.2004:
I. Annual Required Contributions (ARC)
2. Interest on NPO
3. Adjustment to ARC
4. Annual Pension Cost (APC)
S. Actual City Contributions made
6. Increase (Decrease) in NPO/(asset)
7. NPO/(asset) at October I, 2002
8. NPO/(asset) at September 30, 2003
$2,597,738
(70,609)
55.584
2,582,713
(2.597, 738)
( 15,025)
(882.623)
The ARC for the period October I, 2002 through September 30. 2004 was based on the December 31,
2002 actuarial valuation. The entry age actuarial cost method was used with the normal cost calculated as
a level percentage of payroll. The actuarial value of assets was market value smoothed by a five-year
deferred recognition method, with the actuarial value not more than I 10% or less than 90% of the market
value of assets. The actuarial assumptions included in an investment return assumption of 8% per year
(net of expenses), projected salary increases including promotion and longevity averaging 6% per year
over a 25-year career, and no postKtirement cost·of·living adjustments. An intlation assumption of 4%
per year was included in the investment return and salary increase assumptions. The UAAL is amortized
with the excess of the assumed total contribution rate over the normal cost rate. The number of years
needed to amortize the UAAL is detennined using an open, level percentage of payroll method, assuming
that the payroll will increase 4% per year, and was 25 years as of the December 31, 2002 actuarial
valuation based on the plan provisions effective November 1, 2003.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
SepteDJber30,2004
NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
E. RETIREMENT PLANS <CONTINUED)
Further details concerning the financial position of the LFRRF and th.e latest actuarial valuation are
available by contacting the Board ofTrustees, LFRRF, City of Lubbock, P.O. Box 2000, Lubbock, Texas
79457. A stand-alone financial report is available by contacting the LFRRF.
Trend Information
Fiseal Year Ended
Annual Pension Cost
(APC)
Percentage of APC
Contributed
Net Pension
Obligation
(Asset)
9/30/02
9/30/03
9/30/04
$ 1,379,564
1,964,788
2,582,713
148%
111
101
(660,692)
(882,623)
(897,648)
ANALYIS OF FUNDING PROGRESS
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
Aet11arial Actuarial Entry Age Unfunded Funded Annual UAAU
Val .. tio• Value of Actuarial AAL Ratio (alb) Covered Fuoding
Date Assets (a) Accrued (UAAL) Payroll E1cess as a
Liability /Funding (c) Percentage of
(AAL) (b) excess
(b-a)
12131198 1,2 s 90,364,681 97,533,314 7,168,633 92.7%. 10,290,190
12131/00 1,3 119,660,788 114,675,049 (4,985,739) 104.3 12,243,913
12131/02 1,4 111,261,775 127,850,414 16,588,639 87.0 13,521,366
I. Economic and demographic assumptions were revised.
2. Reflects changes in plan benefit provisions effective November J, 1999.
3. Reflects changes in plan benefit provisions effective December 1, 2001.
4. Reflects changes in plan benefit provisions effective November I, 2003.
5. The covered payroll is based on estimated annualized saJaries used in the valuation.
F. PEFERRED COMPENSATION
The City offers its employees two deferred compensation plans in accordance with Internal Revenue Code
("IRC") Section 457. The plans, available to all City employees, pennit lhem 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. The plans' assets are held in trust for the exclusive benefits
of the participants and their beneficiaries.
The City does not provide administrative services or have any fiduciary responsibilities for these plans;
therefore, they are not presented in the BFS.
77
Covered
Payroll
{{b-a}{c2
69:10/o
(40.7)
122.7
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
C. 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 of Lubbock. The budget, financing, and operations (lf the Di~trict arc 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 Septcmb<:r 30, 2004, the Board was
comprised of 18 members. two of which represented the City.
The City contracted with the CRMWA to rcimbur$e it tor a portion of the cost of the Canadian River Dam
and aqueduct system in exchange for surface water. Prior to fiscal year 1998-99, such payments were
made solely from water system revenues and were not considered general obligations of the City. The
City's pro rata share of annual fixed and variable operating and reserve assessments are recorded as an
expense of obtaining surface water.
Prior to fiscal year 1998-99, long-term debt was owed to the U.S. Bureau of Reclamation for the cost of
construction of the facility, which was completed in 1969. The City's allocation of project costs was
$32,905,862. During the year ended September 30, 1999, bonds in the principal amount of$12,300,000
were issued to pay otfthe construction obligation owed to the U.S. Bureau of Reclamation via CRMWA in
the amount of $20,809,067. The difference of $8,509,067 was a discount in the remaining principal
provided by the U.S. Bureau of Reclamation to the member cities. This discount has been recorded as a
deferred gain on refunding and is being amortized over the life of the refunding bonds. At September 30,
2004, $5,904,703 remains unamortized. Tlte annual principal and interest payments are included in the
disclosures for other City related long-term debt. The above cost for the rights are recorded as capital
assets and arc being amortized over 85 years. The cost and debt are recorded in the Water Enterprise
Fund.
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, 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 opt:rating costs, management fees of 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 $515,005 was paid to the BRA for maintenance and operating costs during the t1scal year.
The BRA issued $16,970,000 in revenue bonds in 1989 and $39,685,000 in revenue bonds in 1991. These
bonds were refunded July 1995. Construction of the dam and lake facilities began in 1989. The City is
obligated to provide sufficient funds over the remaining life of the bonds to service the debt requirement.
The asset, Lake Alan Henry dam and facilities, are recorded as capital assets and are being depreciated
over 50 years. The financial activity. along with the related obligation, is accounted for in the Water
Enterprise fund.
In order to protect against the risk of interest rate changes between March 28, 2002 and May I, 2005, the
City entered into an interest rate swap agreement with JPMorgan Chase (herein referred to as the "Swap
Provider"') rated A+ by Standard & Poor's and Aa.3 by Moody's Investors Service with a notational dollar
amount of $40,465,000. The City entered into an interest rate swap in order to achieve lower borrowing
costs associated with an anticipative borrowing in 2005. This borrowing will prepay and refund the
obligation of the City to pay debt service on Special Facilities (Lake Alan Henry) Revenue Refunding
Bonds, Series I 995 issued by the BRA to finance or refinance the construction of surface water supply
facilities known a.s Lake Alan Henry pursuant to a Water Supply Agreement, dated as of May II, 1989, as
amended, between the BRA and the City; and under this agreement commencing Each August I, starting
78
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS ·
G. SURFACE WATER SUPPLY (CONTINUED)
Augu~t I, 2003 up to and including August 1. 2005 the Swap Provider pays a premium of $280.000 to the
City and in addition beginning May I, 2005, the swap Provider will pay the City of Lubbock interest on
the notational amount or the swap based on the Bond Market Association (BMA) Municipal Bond Index
on a monthly (actual/actual) basis. On a monthly (30/360) basis. the City of Lubbock pays the Swap
Provider interest at the tixed rate of 5.260%. Additionally, the Swap Provider has the right but, not the
obligation, to terminate the transaction in whole when the 180 day weighted average of the Municipal
Bond Index is more than 6.SOo/o, but with no market value cost to the City. The notational amount of the
swap reduces annually; the reductions begin on August I, 2006 and mature on August I, 2022. As of
December 10, 2004, rates were as lbllows:
Fixed payment
Variable payment
Fixed 5.260%
SMA 1.450%
At December 10. 2004 the swap agreement had a negative fair value of $6,075,000. The lair value was
developed by using the zero coupon method. This method calculates the future net settlement payments
required by the agreement assuming that the current forward rates implied by the yield curve correctly
anticipate tbture spot interest rates. These payments are then discounted using the spot rates implied by the
current yield curve for hypothetical zero-coupon bonds due on the date of each future net settlement on the
swap.
At December 10, 2004, the City was not exposed to credit risk because the swap had a negative fair value.
However, should interest rates change and the fair value of the swap become positive, the City could be
exposed to credit risk in the amount of the derivative's positive fair value. Should the swap have a
positive fair value at some point the Swap Provider may be required to collateralize a percentage of their
exposure. Since inception no impairments in respect to the Provider's ratings have occurred.
The City's derivative contract uses the International Swap Dealers Association Master Agreement. The
swap agreements include standard termination events, such as failure to pay, credit rating downgrades, and
bankruptcy. Although the City has obtained provisions to avoid an unwanted early termination event, the
result of such an occurrence could result in the City being required to make an unanticipated tennination
payment.
79
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statemen1S
September 30, 2004
NOTE 01. DETA.a NOTES ON ALL ACTIVITIES AND FUNDS 0
H. LONC.TERM DEBT
GENERAL OBLIGATION BONDS AND CERTIFICATES OF OBLIGATION:
Average Final Balance
Interest Issue Maturity Amount Oubtandiog 0 Rate Date Date Issued 9-30-04
9.01 05-15-91 02-15-11 $1,085,000 370.000
5.50 05-15-92 02-1 5-()4 34,520,000 1,725,000
3.97 05-01-93 02-15-15 14,425,000 725,000
5.39 10-01-93 02-15-14 3,625,000 1,825,000
5.39 10-01-93 02-15-14 2,550,000 1,300,000
5.20 10-01-93 02-15-14 1,470,000 225,000 0 5.14 10-01-93 02-15-14 19,215,000 2,895,000
5.50 05-15-95 02-15-15 4,690,000 235,000
5.07 12-15-95 02-15-16 6,505,000 650,000
5.07 12-15-95 02-15-16 10,000,000 1,000,000
4.91 01-15-97 02-15-09 17,530,000 9,190,000
4.61 01-01-98 02-15-08 1,330,000 610,000
4.71 01-01-98 02-15-18 10,260,000 7,200,000 0 4.36 01-15-99 02-15-14 20,835,000 18,870,000
4.58 01-15-99 02-15-19 15,355,000 11,505,000
4.77 04-01-99 02-15-19 6,100,000 4,575,000
4.71 04-01-99 02-15-19 12,300,000 9,300,000
5.37 09-15-99 02-15-20 24,800,000 21,600,000
5.54 03-15-00 02-15-20 7,000,000 2,430,000
4.90 02-01-01 02-15-21 9,100,000 8,410,000 0 4.81 02-01-01 02-15-21 2, 770,000 2,350,000
5.25 06-01-01 02-15-31 35,000,000 33,715,000
4.68 02-15-02 02-15-22 9,400,000 9,095,000
4.71 02-15-02 02-15-22 6,450,000 6,235,000
4.70 02-15-02 02-15-22 1,545,000 1,490,000
4.62 07-01-02 02-15-22 2,605,000 2,440,000
3.18 07-01-02 02-15-10 10,810,000 7,865,000 ,.....
4.42 07-15-03 02-15-23 11,855,000 11,255,000 v
4.47 07-15-03 02-15-24 9,765,000 9,765,000
4.48 07-15-03 02-IS-24 680,000 680,000
4.47 07-15-03 02-15-24 3,590,000 3,590,000
4.87 07-15-03 02-15-34 40,135,000 40,135,000
4.47 07-15-03 02-15-24 3,795,000 3,795,000
4.60 08-15-03 04-15-23 8,900,000 8,465,000 0 4.60 08-15-03 04-15-23 13,270,000 12,625,000
4.09 09-28-04 02-15-24 2,025,000 2,025,000
4.08 09-28-()4 02-15-24 3,100,000 3,100,000
3.58 09-28-()4 02-15-20 22,620,000 22,620,000
Total $411,010,000 285,885,00()(A)
(A) Excludes net deferred gains and losses on advance refundings, prior year bond discounts of
$4,993,103 ($3,813,381 business-type and $1,179,722 governmental). Additionally, this
amount includes $215,663,783 of bonds used to finance enterprise fund activities.
At September 30, 2004, management of the City believes that it was in compliance with all financial bond
covenants on outstanding general obligation bonded debt, certificates of obligation, and water revenue
bonded debt. 0
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE TIL DETAR. NOTES ON ALL ACTIVITIES AND FUNDS
H. LONG-TERM DEBT (CONTINUED)
Interest Rate(%)
3.80 to 5.50
4.25 to 6.25
4.05 to 5.00
3.!0 to 5.00
4.00 to 5.25
Total
ELECTRIC REVENUE BONDS
wueDate
6-15-95
1..01-98
5..01-98
t-15-99
7..01-0l
Final
Maturity Date
4-15..08
4-15-18
2-15-18
4-JS-19
4-15-21
Amount
Issued
$ 13,560,000
9,170,000
28,910,000
14,975,000
9,200,000
s 75,815,000
• Balance outstanding excludes ($595,420) of discount on bonds sold.
Interest Rate
3.80 to 5.500/o
WATER REVENUE BONDS
Issue Date
Final
Maturi!f Date
8-15-21
Amount
Issued
$58,170,000
Balance
Outstanding
9--30-04
4,360,000
6,440,000
21,285,000
9,185,000
7,820,000
49,090,000 •
Balance
Outstanding
9-3G-04
45,515,000 •
• Balance outstanding excludes ($4, 132,838) discount and deferred losses on bonds sold or
refunded.
The annual requirements to amortize all outstanding debt of the City as of September 30, 2004 are as
follows:
Govemmcntal Activities Bwiness-Type Activities
Fiscal General Obligation Bonds GeDetal Obligation Bonds Reveuue Bonds
Year Principal Interest Princi~ Interest Princi2al Interest
2004-05 s 4,955,949 2,975,462 11,104,051 9,824,743 6,265,000 4,784,861
2005-06 4,479,101 2,867,175 10,845,899 9,380,451 6,305,000 4,475,173
2006-07 4,685,492 2,674,605 11,329,508 8,916,898 6,370,000 4,176,228
2007-08 4,514,994 2,491,285 11,035,006 8,444,872 6,115,000 3,869,100
2008-09 4,468,654 2,298,592 10,861,346 7,974,453 5,415,000 3,571,735
2009-14 21,145,278 8,592,662 53,604,722 32,762,481 27,995,000 13,717,183
2014-19 15,776,749 4,246,685 44,128,251 21,506,908 29,750,000 6,206,365
2019-24 10,195,000 896,451 29,230,000 11,982,075 6,390,000 527,850
2024-29 17,900,000 6,371,230
2029--34 15,625,000 1,695,013
Totals s 70,221,217 27,042,917 215,663,783 118,859,124 94,605,000 41,328,494
The annual .requirements on capital leases ofthe City as of September 30,2004, including interest payments
of$106,232 are as follows:
Governmental Business-Type Total
Capital Lease Capital Lease Capital Lease
Fiscal Minimum Minimum Minimum
Year PaEeat Pal!!!eot Pal!!! cot
2004-05 s 854,159 666,220 1,520,379
2005-06 545,380 418,741 964,121
2006-07 353,694 353,694
2007-08 22,202 22,202
Less:
Intc:re:>t (38,582~ ~67,650~ ~106,232l
Total $ 1,360,957 1,393,207 2,754,164
81
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
H. LONG· TERM DEBT (CONTINUED)
The canying values on the leased assets of the City as of September 30. 2004 arc as follows:
Accumulated Net Book
Gross Value D~reciation Value
Governmental Activities $ 3,558,489 1,441,188 2,117,301
Business-Type Activities 3,404,477 1,064,892 2,339,585
Total Leased Assets $ 6,962,966 2,506,080 4,456,886
Long·tenn obligations (net of discounts and premiums) for governmental and business-type activities for
the year ended September 30, 2004 are as follows:
Debt Payable Debt Payable
9/30/2003 Additions Deletions 9/30/2004
Governmental activities:
Tax-Supported·
Obligation Bonds $ 69,808,204 27,745,000 27,331,987 70,221,217
Rebatable A'bitrage 122,984 122,984
Capital Leases 996,477 1,535,075 1,170,595 1,360,957
Compensated Absences 12,636,967 7,918,589 5,637,048 14,918,508
Insurance Claim Payable 2.720,897 14,328,384 14,694,745 2,354,536
Bond Discounts/Premiums 1,179,722 1,179,722
Tow Governmental activities 86,285,529 52,706,770 48,957,359 90,034,940
Business· Type activities:
Self-Suppotted ·
Obligation Bonds 226,126,796 10,463,013 215,663,783
Revenue Bonds 101,295,000 6,690,000 94,605,000
Capitlll Loses 1,941,223 1,844,606 2,392,622 1,393,207
Rebatable Arlliuage 119.152 119,152
Closure/Post Closure 2,690,001 361,115 3,051,116
Compensated Absences 3,695,242 2,849,947 2,385,047 4,160,142
lnsw::a.nce Cbim Payable 6,000,000 5,904,528 5,467,674 6,436,854
Bond Discounts/Premiums ~1 ,496,398~ 2,796,962 2,215,441 ~914,87:!2
Tow Business· Type activities $ 340,371,016 13,757,158 29,732,949 324,395,225
Payments on bonds payable and arbitrage payable for governmental activities are made in the Debt Service
Fund. Accrued c9mpensated absences that pertain to governmental activities will be liquidated by the
General Fund and Special Revenue funds. The Risk Management Internal Service Fund will liquidate
insurance claims payable that pertain to governmental activities. Payments for the capital leases that
pertain to the governmental activities will be liquidated by the general fund.
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Due in
ooe year
0
4,955,949
826,018
5,475,861
2,354,536
0
tMt2,364
11,104,051
6,265,000 0
622,442
2,143,563
1,184,210
~97 ,3332 0 21,221,933
0
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0
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
H. LONG-TERM DEBT (CONTINUED>
The total long-term debt is reconciled to the total annual requirements to amonize long-h:nn debt as
follows:
J.onp:·!c:rm Jcht · Covcmmcnrol Acrivitics
J.ong-tcrm ~kbt • Busin<:ss-typc Acriviti<:s
loltCf<:$!
Total amuunt <>f dd.>t
N~:t g:sin~/losscs, prcmiums/&•count:s
Lcs:1: Rdntablc arbitrage
l..<.".>s: Capital l<:as<.'S
Less: Insurance claims payabl<:
Less: Compensated abscns<.".>
I .CS$: Cl(>surc/ post closure
Total other debt
Total future bonded debt r<.-quircm<.-nt:i
s 90,034.940
324,395,225
187,230,535
(264,845)
(2,754,164)
(8,791 ,390)
(19,078,650)
(3,051,1 16)
601,660,700
(33.940.165)
s 567,720,535
The City Council called an election for May IS, 2004 to seek voter approval to issue general-purpose tax-
supponed bonds in the amount of $30,000,000, which represents the City's current six-year general·
purpose debt plan. The following seven propositions were approved by the voters: street improvements.
$9,210,000; civic center/auditorium renovations and improvements, $6,450,000; park improvements,
$6,395,000; police/municipal coun facilities, $3,350,000; library improvements, $2,145,000; fire stations,
$1,40S,OOO and animal shelter renovations and improvements, $1,045,000. The City previously issued a
capital improvement plan to voters in 1999, when voters in the City approved a $37,385,000 capital
improvement plan. In September 2004, the City issued $2,025,000 General Obligation Bonds. Series 2004.
This issuance was the t1rst installment of the capital improvement debt issuance approved by the voters in
2004. The Obligations were issued at a net discount of $23,332. After paying issuance costs of $50,000,
the net proceeds were $1,951,668. The proceeds from the sale of the Obligations will be used to fund the
tollowing projects: Fire station improvements, $80.000; animal shelter improvements, $154,000: park
improvements, $181,000; street improvements, $1,420,000; traffic control improvements, $100,000; and
costs associated with issuance of the bonds.
In September 2004, the City issued $3, I 00,000 Tax and Waterworks System Surplus Revenue Ceniticates
of Obligation, Series 2004. The Certificates were issued at a net discount of $36,042. After paying
issuance costs of $58,000, the net proceeds were $3,005,958. Proceeds ti·om the sale of these Certitie<:~tes
will be used for street improvements, including drainage, streetlights, and traffic signali231ion and the
acquisition of land and necessary rights-of· way; and costs associated with the issuance of the Cenificates.
83
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
I. ADVANCED REFUNDING
On September 28. 2004, the City issued General Obligation Refunding Bonds, Series 2004 ("Refunding
Bonds'") with a par value of $22,620,000 and a net interest cost of 3.7855% to refund $23,205,000 of
outstanding bonds. These bonds were issued to refund a ponion of the City's outstanding tax-supported
debt to lower the debt service requirements on such indebtedness.
The Rcrunding Bonds were issued at a net premium of $1,815,646. After paying issuance costS of
$304.179, the net proceeds were $14,214,912. The net proceeds from the issuance of the Refunding
Bonds were deposited with the Escrow Agent (JPMorgan Chase Bank, Dallas, Texas) in an amount
necessary to nc:complish the discharge and final payment of the Refunded Oonds on their scheduled
redemption date. These funds will be held by the Escrow Agent in a special escrow fund and used to
purchase direct obligations of the United State of America. Under the escrow agreement, between the City
and JPMorgan Chase Bank, the escrow fund is irrevocably pledged to the payment of principal and interest
on the Refunded Bonds. The Refunded Bonds were removed from the City's basic financial statements.
As a result of the refunding, the City decreased its total debt service requirements by $874,031, which
result~d in an economic gain of $836,3 12 and an accounting loss of $1 ,019,912. The net premium and
bond issuance costs are allm.:ated to both the governmental funds and the enterprise funds based on the
fund type which will be responsible for servicing the debt.
J. CONDUIT DEBT
The City issued Housing Finance Corporation Bonds, Health Facilities Development Corporation Bonds.
and Education Facilities Authority Bonds to provide financial assistance to private sector entities for the
acquisition and construction of facilities deemed to be in the public interest. The bonds are secured by the
property financed. Upon repayment of the bonds, ownership of the acquired facilities transfers to the
private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision
thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reponed as
liabilities in the accompanying financial statements.
As of September 30, 2004, there were seven series of Lubbock Health Facilities Development Corporation
Bonds outstanding with an aggregate principal amount payable of $338,358,912. The bonds were issued
between 1993 and 2002. Also as of September 30, 2004, there was one series of Lubbock Education
Faciliti.:s Authority Inc. Bonds outstanding with an aggregate principal amount payable of S I 1,000,000.
The bonds were issued in 1999.
K. RISK MANAGEMENT
The Risk Management Fund was established to account for liability claims, worker's compensation claims,
and premiums for property/casualty insurance coverage. The Risk Management Fund generates its revenue
through charges to other departments, which are based on costs.
In April 1999, the City purchased worker's compensation coverage, with no deductible, from a third party.
Prior to April 1999 the City was self insured for worker's compensation claims. Any claims outstanding
prior to April \999 continue to be the responsibility of the City.
The City's self insurance liability program is on a cash flow basis, which means that the servicing
contractor processes, adjusts and pays claims from a deposit provided by the City. The City accounts for
the liability program by charging premiums based upon losses, administrative fees and reserve
requirements. In order to control the risks associated with liability claims, the City purchased excess
liability coverage in September 1999 which is renewed annually. The policy has a $10 million annual
aggregate limit and is subject to a $250,000 deductible per claim.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
K. RISK MANAGEMENT (CONTINUED)
For self-insured coverage, the Risk Management Fund establishes claim liabilities based on estimates of
the ultimate cost of claims (including future claim adjustment expenses} that have been reported but not
seu!ed, and of claims that have been incurred but not reported (IBNR}. The length of time for which such
costs must be estimat.c:d varies depending on the coverage involved. Because actual claim costs depend on
such complex factors as inflation, changes in doctrines of legal liability, and damage awards, the proci:Ss
used in computing claim liabilities dOI:S not necessarily result in an exact amount, particularly for liabilily
coveruge. Claim liabilities are recomputed periodically using a variety of actuarial and statistical
techniques to produce current estimates that reflect n:cent settlements. claim frequency, and other
economic and social factors. Adjustments to claim liabilities are charged or credited to expense in the
period in which they are incurred.
Additionally, property and boiler coverage is accounted for in the Risk Management Fund. The property
insurance policy was purchased from an outside insurance carrier. The policy has a $250,000 deductible
per occurrence, lllld the boiler coverage insurance deductible is up to $250,000 dependent upon the unit.
Premiums are charged to funds based upon estimated premiums for the upcoming year.
Other small insurance po!icic:s, such as surety bond coverage and miscellaneous floaters, are also
accounted for in the Risk Managem~:nt Fund. Funds are charged based on premium amounts and
administrative charges. The City has had no significant reductions in insurance coverage during the fiscal
y-ear. Settlements in the current year and preceding two years have not exceeded insurance coverage. The
City accounts for all insurance activity in Internal Service Funds.
L. HEALTHINSURANCE
The City provides medical and dental insurance for all full-time employees that are accounted for in the
Health Insurance Fund. Revenue for the health insurance premiums are generated from each cost center
based upon the number of active full-time employees. The City's plan is self-insured under an
Administrative Services Only (ASO} Agreement. The ASO Agreement provides excess coverage of
$150,000 per covered individunl annually and an aggregate cap of $12,546,913. The insurance vendor
based on medical trend, claims history, and utilization detenninc:s the aggregate deductible. The contract
requirc:s an IBNR reserve of approximately S2.3 mill ion.
The City also provides full-time employees basic term life insurance and long-term disability insurance.
Revenues for the life insurance premiums and long-term disability premiums are also generated from each
cost center based upon the number of active employees. The life insurance policy has a face value of
$10,000 per employee. The City will discontinue providing long-tenn disability insurance as an employer
paid benefit during fiscal year 20()4.05. Long-teim disability premiums are set at a rate per $100 of annual
salary.
Full-time employees may elect to purchase medical and dental insurance for eligible dependents and the
City subsidizes dependent premiums to reduce rhe cost to employees. Employees may also elect to
participate in several voluntary insuran~ programs such as a cancer income policy, voluntary life, and
personal accident insurance. Voluntary insurance products are fully paid by the employee.
Retiring City employees may elect to retain medical and dental insurance and a reduced amount of life
insurance on themselves and eligible dependents. The retiree pays a portion of the premium costs, but the
City subsidies retiree premiums by about $1.3 million annually. The life insurance is fully paid by the
retiree.
85
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE DI. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
M. ACCRUED INSURANCE CLAIMS
N.
The Self-Insurance Funds establish 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 Self-Insurance Funds during the past
two years ended September 30:
2004 2003
WorketS' Compensation and Liability Reserves at
beginning of fiscal yetr $ 6,000,000 6,000,000
Claims Expenses 5,467,674 4,561,925
Claims Payments ~5,030,820~ ~ 4,561,9252
Workers' Compen$ation and Liability Resaves at end of
fiscal yeu 6,436,854 6,000,000
Medical and Dental Claims Liability at beginning of fiscal
yeat 2,720,897 2,685,925
Claims Expenses 14,328,334 13,148,048
Claims Payments ~14,694,745~ !13,113,076}
Medical and Denw Cbi.ms Liability at end of tisca1 yeu 2,354,536 2,720,897
Total Self-Insurance Liability at end of fiscal yeas 8,791,390 8,720,897
Total Assets to pay cla.ims at end of fiSCal yeu 18,920,469 19,741,497
Accrued insur:wce claims payable from restricted assecs -
current 3,538,746 4,220,897
Accrued insurance claims pay:able -noncurrent 5,252,644 4,500,000
Total :accrued insUta.Oce claims $ 8,791,390 8,720.897
LANDFILL CLOS!!RE AND POST~LOSURE CARE COST
State and federal laws and regulations require the City to place final covers on its landfill sites when they
stop accepting waste and to perform certain maintenance and monitoring functions at the sites for thirty
years after closure. Although c:losure and postclosure care costs will be paid only near or after the date that
the landfills stop accepting waste, the City reports a portion of these closure and postclosure costs as
operating expenses (and recognizing a corresponding liability) in each period based on landfill capacity
used as of each balance sheet date.
The $3,051,(16 included in landfill closure and postclosure care liability at September 30, 2004,
represents the cumulative amount expensed by the City to date for its two landfills that are registered under
TCEQ permit numbers 69 (Landfill 69) and 2252 (Landfill 2252), less amounts that have been paid. Over
92 percent of the estimated capacity of Landfill 69 has been used to date, with $753,669 remaining to be
recognized over the remaining closure period, which is estimated at three years. Approximately 2.2
percent of the estimated capacity of Landfill 2252 has been used to date, with $22,867,597 remaining to be
recognized over the remaining closure period, which is estimated at over 80 years. Postclosure care costs
are based on prior estimates and have been adjusted for inflation. Actual costs may be different due to
inflation, deflation, 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 landfills. The City is in compliance with these requirements and bas chosen the Local
Govenunent Financial Test mechanism for providing this assurance. The City expects to finance costs
through normal operations.
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)
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
Septe~ber30,2004
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS
0. DISAGREGATION OF ACCOUNTS
Awoums ReceiYahle Summaty
a-t Propcny
Fines ~ TxOOr Pa•ioa Grams
Govanm::n!aJ. activities;
Gcnexa1 Fund $ 4,537,134 551,155 472,281 403,300
Del:lt Service
NooMajor 2,433,012
Totd $ 4,537,134 551,155 472,281 403,300 2,433,012
Al:couats Rccemble ~!~
Gc:nc:.-.al From Credit ~at
Consumer Others Card Msc. 9/YJ/04
Business-type Activities
Electtic 14,192,556 3S)JJJ 14,227,763
Warer 4,181,134 452 7,559 4,189,145
Sewa: 2,380,864 89,104 11,875 2,481,843
Stoanwater 768,042 768,042
WI'MPA 7,568,176 7,568,176
Noo-Major 2,.331,690 2,580 ..0,726 ?:J}4~~
Totll $ 31,422,462. 89,556 2,580 95,.367 31,609,965
Misc.
385,908
162,485
5,938
554,331
AUowance fOC' DoubtM Accounts Summ~
Balance at
Accounts Taxes 9/30/04
Governmental
Genc:nl Fund $ 250,925 1,202,795 1,453,720
Debt Service Fund 438,808 438,808
Non-Major 5,938 5,938
Business-Type
Electric 835,314 835,314
Water 253,386 253,386
Sewer 125,372 125,372
Stonnwater 62,443 62,443
wrMPA 675,217 675,217
Non-Major 148,493 148,493
Total $ 2,357,088 1,641,603 3,998,691
87
Balance at
9/?J}/04
6,.349,778
162,485
.2,438,950
8,951,213
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
SepteDlber30,2004
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUND
o. DISAGREGATION OF ACCOUNTS (CONTINUED)
Accounts Payable Summary
Vouc:hers Accounts Investments MiS(:cllaneous
Governmental
General Fund $ 454,395 1,287,984 93,648
Debt Service 167,374 250,643
Non-Major 349,943 z,:m,925 174,987 234,437
Business-Type
Electric 679,$90 7,644,824 3,410 188,584
Water 78,964 580,589 1,462 69,370
Sewer 163,982. 23,978 2,344 34,340
Storm water 1,172 53,213
wrMPA 6,196,307
Non-Major 183,429 795,927 3,639 174,224
Total $ 1,911,475 19,122,12.1 436,485 794,603
P. DISAGREGATION OF ACCOUNTS-GOVERNMENT-WIDE
Net Receivables
Accounts Interest Tues Internal Service
Receivable Receivable Reclei'nlble Fu.dds Receivables
Government:ll
Activities $ 8,694,350 101,728 7,488,784 99,002
Business· Type
Activities 29,m,738 191.476 110,744
Tot:ll $ 38,204,088 293,204 7,488,784 209,746
Accoun., Payable
AccouniB Intemal Service Balance at
P~able Funds P~ables 9/30/04
Goveromental
Activities $ 5,385,334 373,461 5,758,795
Business-Type
Activities 16,879,348 t,012,6TI 17,892,025
Total s 22,264,682 1,386,138 23,650,820
Q. FUND CLOSUBES
Bai&Dce at
9/30/04
1,836,027
418,017
3,n1,292
8,516,4{)8
730,385
224,644
54,385
6,196,307
1,157,219
22,264,684
Balance at
9/30/04
16,383,864
29,811,958
46,195,822
In fiscal year 2004, management streamlined the accounting process and closed the following funds:
Information Technology Improvements and Community Improvements.
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CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September 30, 2004
NOTE IV. CONTINGENT LIABILITIES
A. FEDERAL GRANTS
In the normal course of operations, the City receives grant funds from various Federal and state agencies.
The grant programs are subject to audits by agents of the granting authority to ensure compliance with
conditions precedent to the granting of funds. Any liability for reimbursement which may arise as the result
of audits of gr.mts is not believed to be significant.
B. LITlGA TJON
The City is currently involved in the following lawsuits which could have an impact on the financial
position if the City is found liable.
Adams, et al v. City of Lubbock:
The City has been sued by numerous firefighters employed by the City of Lubbock. They claim that the
City did not properly pay its firefighters for "move-up" pay pursuant to the Civil Service Act. Pursuant t(l
the Civil Service Act firefighters can move-up and perform temporary duties in higher classifications.
When they perform these duties they are entitled to the pay of the higher classification. While the City has
paid them this higher pay, the plaintitfs assert they are also entitled to the "seniority pay" which they've
earned at the lower classification. Their basis for this assertion is that the statute says that they are entitled
to the base pay of the higher classitication plus any "longevity or seniority pay".
Both sides filed Motions for Summary Judgment in the trial court and the court ruled in favor of the
plaintiffs. The City's Motion for Summary Judgment was denied. Plaintiffs were awarded damages,
collectively, in the amount of $688,000 for damages through July 12, 2002, which includes pre-judgment
interest. Plaintiffs were denied attorney's fees.
The City of Lubbock appealed the trial court's decision to the appellate court. On October 7, 2004, the
Appeals Court reversed the judgment of the trial court and rendered a decision in favor of the City, holding
that the City paid its employees properly under the Civil Service Act. The Plaintiffs filed a Motion for
Rehearing, which was denied. Plaintiffs have indicated they will attempt to have the Texas Supreme Court
review the case.
Barnard Construction Company, Inc. v. City of Lubbock:
The Plaintiff is a construction company suing the City for breach of contract. The plaintiff alleges the City
owes it nearly $2,400.000 for rock it excavated on a drainage project. They assert that they are owed
$204,000 for rock excavated on Line A I and assert they are owed nearly $2,200,000 for rock excavated on
other lines on the project.
The City haS agreed to pay for approximately $176,000 of rock excavated on Line A I. However, the City
denied that it owes Barnard any compensation for rock excavated on the other Lines. The City tiled a
Motion for Summary Judgment as to this issue and a Trial Court ruled in the City's favor on September 28,
2004. Barnard has indicated it will appeal. ·
Jeanette Livingston, et al v. City of Lubbock:
Six Plaintiffs filed suit against the City alleging that the City and/or County failed to properly record
information in its cemetery records that would indicate where their relatives were buried. The Plaintiffs'
attorneys have indicated that he has approximately eighty other clients in the same or similar position. The
City asserts it is not responsible for the improper recordation by the prior entities. The City also asserts that
the Plaintitfs hnve no physical injuries and there is no cause of action in Texas for the negligent infliction
of emotional distress. The City is also asserting defenses under the statute of limitations. At this time,
damages are difficult to ascertain but, collectively, they would meet the $200,000 materiality definition for
damages.
89
CITY OF LUBBOCK, TEXAS
Notes to Basic Financial Statements
September30,2004
NOTE IV. CONTINGENT LIABILITIES
B. LITIGATION (CONTINUED)
Marcie T:mner 11. City of Lubbock;
The Plaintiff sued the City tor racial discrimination, pursuant to 42 U.S.C. § 1981, after she was
terminated from her employment with the City of Lubbock. The City ;c;scrts that she was b:rminntcd
because she sent duplicate mileage reimbursement requests to both the City her employer, and Texas Tech
University.
The Plaintiff also sued Texas Tech, but Texas Tech was dismissed. The City does not believe the potential
damages are above $200,000.
C. SITE REMEDIATION
The City has identified specific locations requiring site remediation relative to underground fuel storage
tanks and historical fire training sites. The potential exposure is not readily determinable as of September
30, 2004. In the opiniun of management, the ultimate liability will not have a materially adverse effect on
the City's financial position.
NOTE V. SUBSEQlffiNT EVENTS
A. VOTER APPROVED CHARTER AMENDMENT
The voters of the City of Lubbock on November 2, 2004, voted to amend the Charter of the City of
Lubbock providing for an Electric Utility Board composed of nine Lubbock citizens and eligible voters
appointed by City Council be created to govern, manage, and operate the City's electric utility. The City
Council appointed the nine members of the new Electric Utility Board on November 12,2004 pursuant to
the Charter Amendment passed by the voters of the City of Lubbock on November 2, 2004. The purpose of
the change is to give closer scrutiny to LP&.L 's competitive position and long term financial viability.
B. LUBBOCK ECONOMIC DEVELOPMENT ALLIANCE. INC. CLEDA)
Lubbock Economic Development Alliance, Inc. (LEDA) is a SOIC-4 Corporation created by the Lubbock
City Council to take the lead in economic development for the City. LEDA is led by a five member Board
appointed by the City Council and is funded by a 1/8 cent increase in the sales tax .. The sales tax increase
was approved by the voters for economic development activities in November 2003. LEOA will be
considered a component unit of the City when it begins collecting funds from operations during the fiscal
year 2004-05.
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APPf:NOIX C
FORM OF BOND COUNSEL'S OPINION
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IVinson~lkinsl
[FORM OF BOND COUNSEL OPINIONJ
[Closing Date]
$43,080,000
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE REFUNDING BONDS
SERIES 2005
WE HAVE represented the City of Lubbock. Texas (the "City"), as its Bond Counsel in
connection with an issue of bonds (the "Bonds") described as follows:
CITY OF LUBBOCK, TEXAS TAX AND WATER WORKS SYSTEM
SURPLUS REVENUE REFUNDING BONDS, SERIES 2005, dated July I,
2005, issued in the principal amount of$43,080,000.
The Bonds mature, bear interest, are subject to redemption prior to maturity and may be
transferred and exchanged as set out in the Bonds and in the ordinance adopted by the City
Council of the City authorizing their issuance (the "Ordinance") and the Pricing Certificate
executed pursuant to the Ordinance.
WE HAVE represented the City as its Bond Counsel for the sole purpose of rendering an
opinion with respect to the legality and validity of the Bonds under the Constitution and laws of
the State of Texas and with respect to the exclusion of interest on the Bonds from gross income
for federal income tax purposes. We have not investigated or verified original proceedings,
records, data or other material, but have relied solely upon the transcript of proceedings
described in the following paragraph. We have not assumed any responsibility with respect to
the financial condition or capabilities of the City or the disclosure thereof in connection with the
sale of the Bonds. Our role in connection with the City's Official Statement prepared for use in
connection with the sale of the Bonds has been limited as described therein.
IN OUR CAPACITY as Bond Counsel, we have participated in the preparation of and
have examined a transcript of certified proceedings pertaining to the Bonds, on which we have
relied in giving our opinion. The transcript contains certified copies of certain proceedings of the
City, customary certificates of officers, agents and representatives of the City, and other public
officials and other certified showings relating to the authorization and issuance of the Bonds. In
Vinson & Elldna U..P AUO!'MY$ at Law Austin Setjing Oallu
OUI>ai Houston London MO$C»W New YCfk TokyO wastlingtOft
Trammell Crow Cenllet. 2001 Ross Avenue. Suite 3700
Dallas. Texa5 75201-2975 Tal214.22o.noo Fax 214.220.7716
www.velaw.com
addition, we have examined a resolution of the Brazos River Authority ("BRA") approved in
connection with the defeasance by the Brazos River Authority of its Special Facilities (Lake
Alan Henry) Revenue Refunding Bonds, Series 1995 (the "Refunded Bonds") with a portion of
the proceeds of the Bonds. We have also examined executed Bond No. I of this issue.
BASED ON SUCH EXAMINATION, IT IS OUR OPINION THAT:
(A) The transcript of certified proceedings evidences complete legal
authority for the issuance of the Bonds in full compliance with the Constitution
and laws of the State of Texas presently effective and, therefore, the Bonds
constitute valid and legally binding obligations of the City; and
(B) A continuing ad valorem tax upon all taxable property within the
City, necessary to pay the interest on and principal of the Bonds, has been levied
and pledged irrevocably for such purposes, within the limit prescribed by law, and
the total indebtedness of the City, including the Bonds, does not exceed any
constitutional, statutory or other limitations. In addition, the Bonds are further
secured by a subordinate lien on and pledge of the Net Revenues (as defined in
the Ordinance) of the City's Waterworks System in the manner and to the extent
provided in the Ordinance.
THE RlGHTS OF THE OWNERS of the Bonds are subject to the applicable provisions
of the federal bankruptcy laws and any other similar laws affecting the rights of creditors of
political subdivisions generally, and may be limited by general principles of equity which permit
the exercise of judicial discretion.
IT IS OUR FURTHER OPINION THAT:
(I) Interest on the Bonds is excludable from gross income for federal
income tax purposes under existing law; and
(2) The Bonds are not "private activity bonds" within the meaning of
the Internal Revenue Code of 1986, as amended (the "Code," and interest on the
Bonds is not subject to the alternative minimum tax on individuals and
corporations, except that interest on the Bonds will be included in the "adjusted
current earnings" of a corporation (other than an S corporation, regulated
investment company, REIT, REMIC or FASIT) for purposes of computing its
alternative minimum tax liability.
In providing such opinions, we have relied on representations of the City, the City's
financial advisor and the underwriters of the Bonds with respect to matters solely within the
knowledge of the City, the City's financial advisor and the underwriters respectively, which we
have not independently verified, and have assumed continuing compliance with the covenants in
the Ordinance pertaining to those sections of the Code that affect the exclusion from gross
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income of interest on the Bonds for federal income tax purposes. lf such representations are
determined to be inaccurate or incomplete or the City fails to comply with the foregoing
provisions of the Ordinance, interest on the Bonds could become includable in gross income
from the date of original delivery, regardless of the date on which the event causing such
inclusion occurs.
Except as stated above, we express no opinion as to any federal, state or local tax
consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or
disposition of, the Bonds.
The opinions set forth above are based on existing law, which is subject to change. Such
opinions are further based on our knowledge of facts as of the date hereof. We assume no duty
to update or supplement these opinions to reflect any facts or circumstances that may hereafter
come to our attention or to reflect any changes in any law that may hereafter occur or become
effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal
Revenue Service (the "Service"); rather, such opinions represent our legal judgment based upon
our review of existing law and in reliance upon the representations and covenants referenced
above that we deem relevant to such opinions. The Service has an ongoing audit program to
determine compliance with rules that relate to whether interest on state or local obligations is
includable in gross income for federal income tax purposes. No assurance can be given whether
or not the Service will commence an audit of the Bonds. If an audit is commenced, in
accordance with its current published procedures the Service is likely to treat the City as the
taxpayer. We observe that the City has covenanted in the Ordinance not to take any action, or
omit to take any action within its control, that if taken or omitted, respectively, may result in the
treatment of interest on the Bonds as includable in gross income for federal income tax purposes.
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APPENDIX D
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
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ISSUER:
BONDS:
FINANCIAL
SECURfiY ASSURANCE.
MUNICIPAL
INSURAN
FINANCIAL SECURITY 1'\i:)i~urV'!.I'JIJc
hereby UNCONDITIONALLY AND
agent (the "Paying Agent") (as set
the Bonds) tor the Bonds, for the
each Owner, subject only to ..... ~ .. '""''"
portion of the of
unpaid by reason of nufnA,r~t
ntAM..c:MI~•n Due for
Owner's
ltort .. UICIUil vest in
~u'"""'""'" Day if it is
llltndV.as~u n will be deemed received t=Jr,,...,,...,, Security is incomplete, it
~.~..,~,,::. of the preceding sentence
or Owner, as appropriate, who
<JS:1:1Jr¥1me1nt in respect of a Bond, Financial
lDI:IJr1telliarlooe<>•uccm to the Bond or right to receipt of
subrogated to the rights of the Owner,
me..eona. to the extent of any payment by Financial
Trustee or Paying Agent for the benefit of the
lbiiga!lion of Financial Security under this Policy.
ex~~re~;s" m~!AIIIJ~ by an endorsement hereto, the following terms shall have
this Policy. "Business Day" means any day other than (a) a
banking institutions in the State of New York or the Insurer's
reallft'E!d by law or executive order to remain closed. "Due for Payment"
...,..-~.,.;..,<>1 of a Bond, payable on the stated maturity date thereof or the date
I'IB1....,04Mm called for mandatory sinking fund redemption and does not refer
payment due by reason of call for redemption (other than by mandatory
acceleration or other advancement of maturity unless Financial Security shall
discreotio111. to pay such principal due upon such acceleration together with any accrued
of acceleration and (b) when referring to interest on a Bond, payable on the stated date
rest. "Nonpayment• means, in respect of a Bond, the failure of the Issuer to have
funds to the Trustee or. if there is no Trustee, to the Paying Agent for payment in full of
nm~in,;al and interest that is Due lor Payment on such Bond. 'Nonpayment," shall also include, in
of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on
of the Issuer which has been recovered from such Owner pursuant to the
Unite<! States Bankruptcy Code by a trustee in bankruptcy in accordance with
of a court having competent jurisdiction. "Notice" means telephonic or t.§H!ICI>~~d
confirmed in a signed writing, or written notice by registered or certifie<l
or the Paying Agent to Financial Security which notice shall
claim, (b) the Policy Number, (c) the claimed amount and {d)
for Payment. •Owner" means, in respect of a Bond, the nersl'lt~r elltlttvl'lvho
is entitled under the tenns of such Bond to payment •r ............. .
Issuer or any person or entity whose direct or indirect Jllt'i~rll.rtn.....:c::~~r.•
Bonds.
Financial Security may appoint a IYI't~lgei"J
Policy by giving written notice to the
address of the Insurer's FISCal Agent. Frnrrl~~nd
the Paying Agent, (a) copies of all no1Jceslr4~autirei:Rto
Policy shall be simultaneously aeiMied
not be deemed received until grc~e~vt~a
Security under this Policy
behaH of Financial
Insurer's Fiscal
any fail4re of Fin:~nci>al .,.,....,LmJV
under this o-•·-.. ,.
Fin~ll(:lalllSetu•~. and shall not be modified,
inilnlrTtertt modification or amendment
sut18p11aty of Financial Security Assurance Holdings Ltd.
Avenue, New York, N.Y. 10022·6022
{a} any premium paid in
payment, or provision being
not be canceled or revoked.
INSURANCE SECURITY FUND
FINANCIAL SECURITY ASSURANCE INC.
BY------~~~~~--------Authorized Officer
(212) 826-0100
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Financial Advisory Services
Provided By r I First Southwest Company
~ Investment Bankers Since 1946
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BOND PURCHASE AGREEMENT
$43,080,000
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE
REFUNDING BONDS, SERIES 2005
The Honorable Mayor
and Members of the City Council
City of Lubbock
P.O. Box 2000
Lubbock, Texas 79457
Ladies and Gentlemen:
July 1, 2005
The undersigned, RBC Dain Rauscher Inc. (the "Representative"), acting on its own behalf and on behalf of the
other underwriters listed on Schedule I hereto (collectively, the "Underwriters"), and not acting as fiduciary or
agent for you, offers to enter into the following agreement (this "Agreement") with the City of Lubbock, Texas
(the "Issuer') which, upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon
the Underwriters. This offer is made subject to the Issuer's written acceptance hereof on or before 5:00p.m.,
Lubbock, Texas time, on July 1 2005, and, if not so accepted, will be subject to withdrawal by the Underwriters
upon notice delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Tenns not otherwise
defined in this Agreement shall have the same meanings set forth in the Bond Ordinance (as defined herein) or in
the Official Statement (as defined herein).
1. Purchase and Sale of the Bonds. Subject to the terms and conditions and in reliance upon the
representations, warranties and agreements set forth herein, the Underwriters hereby agree to purchase from the
Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriters, all, but not less than all, of the Issuer's
Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 2005, in the aggregate principal amount
of$43,080,000 (the "Bonds"). Inasmuch as this purchase and sale represents a negotiated transaction, the Issuer
understands, and hereby confirms, that the Underwriters are not acting as a fiduciary of the Issuer, but rather are
acting solely in their capacity as Underwriters for their own account. The Representative has been duly
authorized to execute this Agreement and to act hereunder.
The principal amount of the Bonds to be issued, the dated date therefor, the maturities, sinking fund and optional
redemption provisions and interest rates per annum are set forth in Schedule II hereto. The Bonds shall be as
described in, and shall be issued and secured under and pursuant to the provisions of the ordinance adopted by the
Issuer on May 26, 2005 (the "Bond Ordinance"). In the Ordinance, the City Council of the Issuer delegated the
authority to the Chief Financial Officer/ Assistant City Manager of the Issuer to establish the pricing tenns for the
Bonds through the execution of a Pricing Certificate dated the date hereof (the "Pricing Certificate").
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The p~hase price for the Bonds shall be $45,718,737.20 (representing the principal amount of the
Bonds, plus original issue premium on the Bonds in the amount of $2,930,321.05, and less an Underwriters'
discount on the Bonds of $291,583.85) plus accrued interest from their dated date to the date of the payment for
and delivery of the Bonds .
Delivered to the Issuer herewith as a good faith deposit is a check payable to the order of the Issuer in
clearing house funds in the amount of $430,000. In the event you accept this offer, such check shall be held
uncashed by you until the time of Closing, at which time such check shall be returned uncashed to the
Representative. In the event that the Issuer does not accept this Agreement, such check will be immediately
returned to the Representative. Should the Issuer fail to deliver the Bonds at the Closing, or should the Issuer be
unable to satisfy the conditions of the obligations of the UnderwTiters to purchase, accept delivery of and pay for
the Bonds, as set forth in this Agreement (unless waived by the Underwriters), or should such obligations of the
Underwriters be tenninated for any reason permitted by this Agreement, such check shall immediately be returned
to the Representative. In the event that the Underwriters fail (other than for a reason permitted hereunder) to
purchase, accept delivery of and pay for the Bonds at the Closing as herein provided, such check shall be cashed
and the amount thereof retained by the Issuer as and for fully liquidated damages for such failure of the
Underwriters, and, except as set forth in Sections 8 and 10 hereof, no party shall have any further rights against
the other hereunder. The Underwriters and the Issuer understand that in such event the Issuer's actual damages
may be greater or may be less than such amount Accordingly, the Underwriters hereby waive any right to claim
that thelssuer's actual damages are less than such amount, and the Issuer's acceptance of this offer shall constitute
a waiver of any right the Issuer may have to additional damages from the Underwriters.
2. Public Offering. The UndeJWTiters agree to make a bona fide public offering of all of the Bonds
at a price not to exceed the public offering price set forth on the cover of the Official Statement and may
subsequently change such offering price without any requirement of prior notice. The Underwriters may offer
and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices
lower than the public offering price stated on the cover of the Official Statement.
3. The Official Statement. (a) Attached hereto as Exhibit A is either a draft of the final Official
Statement or a copy of the Preliminary Official Statement dated June 28, 2005 (the "Preliminary Official
Statement"), including the cover page and Appendices thereto, of the Issuer relating to the Bonds. Such draft of
the final Official Statement or copy of the Preliminary Official Statement, as amended to reflect the changes
marked or otherwise indicated on Exhibit A hereto, is hereinafter called the "Official Statement. "
(b) The Preliminary Official Statement has been prepared for use by the Underwriters in connection
with the public offering, sale and distribution of the Bonds. The Issuer hereby represents and warrants
that the Preliminary Official Statement was deemed final by the Issuer as of its date, except for the
omission of such information which is dependent upon the final pricing of the Bonds for completion, all
as permitted to be excluded by Section (b)(l) of Rule 15c2-12 under the Securities Exchange Act of 1934
(the "Rule").
(c) The Issuer hereby authorizes the Official Statement and the information therein contained to be
used by the Underwriters in connection with the public offering and the sale of the Bonds. The Issuer
consents to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement in
connection with the public offering of the Bonds. The Issuer shall provide, or cause to be provided, to the
Underwriters as soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any
event, not later than within seven business days after the Issuer's acceptance of this Agreement and in
sufficient time to accompany any confirmation that requests payment from any customer) copies of the
Official Statement which is complete as of the date of its delivery to the Underwriters in such quantity as
the Representative shall request in order for the Underwriters to comply with Section (b)( 4) of the Rule
and the rules of the Municipal Securities Rulemaking Board.
(d) If, after the date of this Agreement to and including the date the UndeJWTiters are no longer
required to provide an Official Statement to potential customers wbo request the same pursuant to the
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Rule (the earlier of (i) 90 days from the "end of the underwriting period" (as defined in the Rule) and (ii)
the time when the Official Statement is available to any person from a nationally recognized municipal
securities repository, but in no case less than 25 days after the "end of the underwriting period" for the
Bonds), the Issuer becomes aware of any fact or event which might or would cause the Official
Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit
to state a material fact required to be stated therein or necessary to make the statements therein not
misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the
Issuer will notify the Representative (and for the purposes of this clause provide the Representative with
such information as it may from time to time request), and if, in the opinion of the Representative, such
fact or event requires preparation and publication of a supplement or amendment to the Official
Statement, the Issuer will forthwith prepare and fwnish, at the Issuer's own expense (in a form and
manner approved by the Representative), a reasonable number of copies of either amendments or
supplements to the Official Statement so that the statements in the Official Statement as so amended and
supplemented will not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not misleading or so that the
Official Statement will comply with law. If such notification shall be subsequent to the Closing, the
Issuer shall furnish such legal opinions, certificates, instruments and other documents as the
Representative may deem necessary to evidence the truth and accuracy of such supplement or amendment
to the Official Statement.
(e) The Representative hereby agrees to file the Official Statement with a nationally recognized
municipal securities information repository. Unless otherwise notified in writing by the Representative,
the Issuer can assume that the "end of the underwriting period" for purposes of the Rule is the date of the
Closing.
4. Representations, Warranties, and Covenants of the Issuer. The Issuer hereby represents and
warrants to and covenants with the Underwriters that:
(a) The Issuer is a hom~rule municipality of the State ofTexas (the "State") duly created, organized
and existing under the laws of the State, and as of the date of this Agreement has full legal right, power
and authority under Chapter 1207, Texas Government Code (the "Act"), and at the date of the Closing
will have full legal right, power and authority under the Act and the Bond Ordinance (i) to enter into,
execute and deliver this Agreement, the Bond Ordinance, the deposit agreement (the "Deposit
Agreement") relating to the refunding of the obligation of the lssuer to pay debt service on the
outstanding Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Refunding Bonds,
Series 1995 (the "BRA Bonds.,), issued with respect to the construction of Lake Alan Henry, the
Continuing Disclosure Undertaking (the "Undertaking") as defmed in Section 6(iX3) hereof and all
documents required hereunder and thereunder to be executed and delivered by the Issuer (this Agreement,
the Bond Ordinance, the Deposit Agreement, the Undertaking and the other documents referred to in this
clause are hereinafter referred to as the "Issuer Documents"), (ii) to sell, issue and deliver the Bonds to
the Underwriters as provided herein, and (iii) to carry out and consununate the transactions contemplated
by the Issuer Documents and the Official Statement, and the Issuer has complied, and will at the Closing
be in compliance in all respects, with the tenns of the Act and the Issuer Documents as they pertain to
such transactions;
(b) By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof,
the Issuer has duly authorized all necessary action to be taken by it for (i) the adoption of the Bond
Ordinance and the issuance and sale of the Bonds, (ii) the approval, execution and delivery of, and the
performance by the Issuer of the obligations on its part, contained in the Bonds and the Issuer Documents
and (iii) the consummation by it of all other transactions contemplated by the Official Statement, and the
Issuer Documents and any and all such other agreements and documents as may be required to be
executed, delivered and/or received by the Issuer in order to carry out, give effect to, and consummate the
transactions contemplated herein and in the Official Statement;
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(c) The Issuer Documents constitute legal, valid and binding obligations of the Issuer, enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and
other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; the
Bonds, when issued, delivered and paid for, in accordance with the Bond Ordinance and this Agreement,
will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Bond
Ordinance and enforceable in accordance with their tenns, subject to banbuptcy, insolvency,
reorganization, moratorium and other similar laws and principles of equity relating to or affecting the
enforcement of creditors' rights; upon the issuance, authentication and delivery of the Bonds as aforesaid,
the Bond Ordinance will provide, for the benefit of the holders, from time to time, of the Bonds, the
legally valid and binding pledge of and lien it purports to create in the security granted to the owners of
the Bonds as set forth in the Bond Ordinance;
(d) The Issuer is not in breach of or default in any material respect under any applicable
constitutional provision, law or administrative regulation of the State or the United States or any
applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or
other instrument to which the Issuer is a party or to which the Issuer is or any of its property or assets are
otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of
time or the giving of notice, or both, would constitute a default or event of default by the Issuer under any
of the foregoing; and the execution and delivery of the Bonds, the Issuer Documents and the adoption of
the Bond Ordinance and compliance with the provisions on the Issuer's part contained therein, will not
conflict with or constitute a breach of or default under any constitutional provision, administrative
regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other
instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets
are otherwise subject nor will any such execution, delivery, adoption or compliance result in the creation
or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon
any of the property or assets of the Issuer to be pledged to secure the Bonds or under the terms of any
such law, regulation or instrument, except as provided by the Bonds and the Bond Ordinance;
(e) All authorizations, approvals, licenses, permits, consents and orders of any governmental
authority, legislative body, board, agency or commission having jurisdiction of the matter which are
required for the due authorization of, which would constitute a condition precedent to, or the absence of
which would materially adversely affect the due performance by the Issuer of its obligations under the
Issuer Documents, the Bonds and with respect to the operation of Lake Alan Henry by the City upon the
defeasance of the BRA Bonds have been duly obtained, except for such approvals, consents and orders as
may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering
and sale of the Bonds;
(f) The Bonds conform to the descriptions thereof contained in the Official Statement under the
caption "THE BONDS"; the Bond Ordinance conforms to the description thereof contained in the Official
Statement under the caption "THE BONDS"; the proceeds of the sale of the Bonds will be applied
generally as described in the Official Statement under the captions "THE BONDS -Purpose", "TilE
BONDS-Defeasance of the BRA Bonds", "The BONDS-Interest Rate Hedge Agreement Termination
Payment", and "THE BONDS-Use of Bond Proceeds", and the Undertaking conforms to the description
thereof contained in the Official Statement under the caption "OTHER INFORMATION -Continuing
Disclosure of Information";
(g) There is no legislation, action, suit, proceeding, inquiry or investigation, at law or in equity,
before or by any court, government agency, public board or body, pending or, to the best knowledge of
the Issuer after due inquiry, threatened against the Issuer, affecting the existence of the Issuer or the titles
of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale,
issuance or delivery of the Bonds or the collection of taxes and Net Revenues (as defined in the Bond
Ordinance) pledged to the payment of principal of and interest on the Bonds pursuant to the Bond
Ordinance or in any way contesting or affecting the validity or enforceability of the Bonds) the Issuer
Documents, or contesting the exclusion from gross income of interest on the Bonds for federal income tax
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purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or
the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or
any authority for the issuance of the Bonds, the adoption of the Bond Ordinance or the execution and
delivery of the Issuer Documents, nor, to the best knowledge of the Issuer, is there any basis therefor,
wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or
enforceability of the Bonds or the Issuer Documents;
(h) As of the date thereof, the Preliminary Official Statement did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading;
(i) At the time of the Issuer's acceptance hereof and (unless the Official Statement is amended or
supplemented pursuant to paragraph (d) of Section 3 of this Agreement) at all times subsequent thereto
during the period up to and including the date of Closing, the Official Statement does not and will not
contain any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading;
(j) If the Official Statement is supplemented or amended pursuant to paragraph (d) of Section 3 of
this Agreement, at the time of each supplement or amendment thereto and (unless subsequently again
supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period
up to and including the date of Closing the Official Statement as so supplemented or amended will not
contain any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which made, not
misleading;
(k) The Issuer will apply, or cause to be applied, the proceeds from the sale of the Bonds as provided
in and subject to all of the terms and provisions of the Bond Ordinance and not to take or omit to take any
action which action or omission will adversely affect the exclusion from gross income for federal income
tax purposes of the interest on the Bonds;
(l) The Issuer will furnish such infonnation and execute such instruments and take such action in
cooperation with the Underwriters as the Representative may reasonably request {A) to (y) qualify the
Bonds for offer and sale under the Blue Slcy or other securities laws and regulations of such states and
other jurisdictions in the United States as the Representative may designate and (z) determine the
eligibility of the Bonds for investment under the laws of such states and other jurisdictions and (B) to
continue such qualifications in effect so long as required for the distribution of the Bonds (provided,
however, that the Issuer will not be required to qualify as a foreign corporation or to file any general or
special consents to service of process under the laws of any jurisdiction) and will advise the
Representative immediately of receipt by the Issuer of any notification with respect to the suspension of
the qualification of the Bonds for sale in any jurisdiction or the initiation or threat of any proceeding for
that purpose;
(m) The financial statements of, and other financial infonnation regarding the Issuer, in the Official
Statement fairly present the financial position and results of the Issuer as of the dates and for the periods
therein set forth. Prior to the Closing, there will be no adverse change of a material nature in such
financial position, results of operations or condition, financial or otherwise, of the Issuer. The Issuer is
not a party to any litigation or other proceeding pending or, to its knowledge, threatened which, if decided
adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer;
(n) Except for the following obligations of the Issuer that the Issuer has advised the Underwriters will
or may be sold prior to Closing, to--wit, the Issuer's General Obligation Refunding Bonds, Series 2005,
General Obligation Bonds, Series 2005, and Tax and Waterworks System Surplus Revenue Certificates of
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Obligation, Series 2005, prior to the Closing the Issuer will not offer or issue any bonds, notes or other
obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or
secured by any of the revenues or assets which will secure the Bonds without the prior approval of the
Representative; and
5. Closing.
(a) At 10 a.m., Lubbock, Texas time, on August 15,2005, or at such other time and date as shall have
been mutually agreed upon by the Issuer and the Representative (the "Closing"}, the Issuer will, subject
to the tenns and conditions hereof, deliver the Bonds to the Underwriters duly executed and
authenticated, together with the other documents hereinafter mentioned, and the Underwriters will,
subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Bonds
as set forth in Section 1 of this Agreement by a certified or bank cashier's check or checks or wire transfer
payable in immediately available funds to the order of the Issuer. Payment for the Bonds as aforesaid
shall be made at the offices of Bond Counsel, or such other place as shall have been mutually agreed upon
by the Issuer and the Representative.
(b) Delivery of the Bonds shall be made to The Depository Trust Company, New York, New York
( "DTC"). The Bonds shall be delivered in definitive fully registered form, bearing CUSIP numbers
without coupons, with one Bond for each maturity of the Bonds, registered in the name of Cede & Co., all
as provided in the Bond Ordinance, and shall be made available to the Representative at least one
business day before the Closing for pwposes of inspection.
6. Closing Conditions. The Underwriters have entered into this Agreement in reliance upon the
representations, warranties and agreements of the Issuer contained herein, and in reliance upon the
representations, warranties and agreements to be contained in the documents and instruments to be delivered at
the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as
of the date of the Closing. Accordingly, the Underwriters' obligations under this Agreement to purchase. to
accept delivery of and to pay for the Bonds shall be conditioned upon the perfonnance by the Issuer of its
obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and
shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents
as are enumerated herein, in form and substance reasonably satisfactory to the Representative:
(a) The representations and warranties of the Issuer contained herein shall be true, complete and
correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing;
(b} The Issuer shall have performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing;
(c) At the time of the Closing, (i) the Issuer Documents and the Bonds shall be in full force and effect
in the form heretofore approved by the Representative and shall not have been amended. modified or
supplemented, and the Official Statement shall not have been supplemented or amended. except in any
such case as may have been agreed to by the Representative; and (ii) all actions of the Issuer required to
be taken by the Issuer shall be performed in order for Bond Counsel and the City Attorney of the Issuer to
deliver their respective opinions referred to hereafter;
(d) At or prior to the Closing, the Bond Ordinance shall have been duly executed and delivered by
the Issuer and the Issuer shall have duly executed and delivered and the Bonds shall have been duly
authenticated;
(e) At or prior to the Closing, the municipal bond insurance policy with respect to the Bonds, shall
have been duly executed. issued and delivered by Financial Security Assurance (the "Bond Insurer");
6
)
(t) At the time of the Closing, there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or in the revenues or operations of
the Issuer, from that set forth in the Official Statement that in the judgment of the Representative, is
material and adverse and that makes it. in the judgment of the Representative, impracticable to market the
Bonds on the tenns and in the manner contemplated in the Official Statement;
(g) The Issuer shall not have failed to pay principal or interest when due on any of its outstanding
obligations for borrowed money;
(h) All steps to be taken and all instruments and other documents to be executed, and all other legal
matters in coMection with the transactions contemplated by this Agreement shall be reasonably
satisfactory in legal form and effect to the Representative;
(i) At or prior to the Closing, the Underwriters shall have received copies of each of the fo11owing
documents:
(1) The Official Statement, and each supplement or amendment thereto, if any, executed on
behalf of the Issuer by a duly authorized official, or such other official as may have been agreed
to by the Representative, and the reports and audits referred to or appearing in the Official
Statement;
(2) The Bond Ordinance with such supplements or amendments as may have been agreed to
by the Representative;
(3) the Pricing Certificate, having been duly executed on behalf of the Issuer;
(4) The Undertaking of the Issuer which satisfies the requirements of section (b)(S)(i) of the
Rule;
(5) the approving opinion of Bond Counsel with respect to the Bonds, in substantially the
form attached to the Official Statement;
(6) a supplemental opinion of Bond Counsel addressed to the Underwriters, substantially to
the effect that:
(i) the Bond Ordinance has been duly adopted and is in full force and effect;
(ii) the Bonds are exempted securities under the Securities Act of 1933, as amended
(the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act") and it is not necessary, in connection with the offering and sale of the Bonds, to
register the Bonds under the 1933 Act or to qualify the Bond Ordinance undet the Trust
Indenture Act; and
(iii) the statements and information contained in the Official Statement under the
captions "THE BONDS" (exclusive of the infonnation under the subcaption "Book-
Entry-Only System"), "TAX MATTERS", the subcaptions "Registration and
Qualification of Bonds for Sale", "Legal Investments and Eligibility to Secure Public
Funds in Texas''. "Legal Opinions" and "Continuing Disclosure of Infonnation" (except
the information under the heading "Compliance with Prior Undertakings") under the
caption "OTHER INFORMATION". and Appendix C to the Official Statement, fairly
and accurately summarized the matters purported to be summarized therein and are
correct as to matters of law; and
7
(7) An opinion, dated the date of the Closing and addressed to the Underwriters, of McCall,
Parkhurst & Horton L.L.P., counsel for the Underwriters, in substantially the fonn attached hereto
as Exhibit B.
(8) An opinion of City Attorney of the Issuer, addressed to the UndeiWriters, to the effect
that:
(i) The Issuer is a home-rule municipality of the State duly created, organized and
existing under the laws of the State, and has full legal right, power and authority under
the Act and the Bond Ordinance (A) to enter into, execute and deliver the Issuer
Documents and all documents required hereunder and thereunder to be executed and
delivered by the Issuer, (B) to sell, issue and deliver the Bonds to the Underwriters as
provided herein for the purposes described in the Bond Ordinance and the Official
Statement, and (C) to carry out and consununate the transactions contemplated by the
Issuer Documents and the Official Statement, and to operate Lake Alan Henry upon the
defeasance of the BRA Bonds, and the Issuer has complied, and will at the Closing be in
compliance in all respects, with the tenns of the Act and the Issuer Documents as they
pertain to such transactions;
{ii) By aU necessary official action of the Issuer prior to or concurrently with the
acceptance hereof, the Issuer has duly authorized all necessary action to be taken by it for
(A) the adoption of the Bond Ordinance and the issuance and sale of the Bonds, (B) the
approval, execution and delivery of, and the performance by the Issuer of the obligations
on its part, contained in the Bonds, the Issuer Documents, and (C) the consummation by
it of all other transactions contemplated by the Official Statement, the Issuer Documents
and any and all such other agreements and documents as may be required to be executed,
delivered and/or received by the Issuer in order to carry out, give effect to, and
conswnmate the transactions contemplated herein and in the Official Statement;
(iii) The Bond Ordinance was duly and validly adopted by the Issuer and is in full
force and effect; the Bond Ordinance and all other proceedings pertinent to the validity
and enforceability of the Bonds and all actions necessary to levy and collect taxes and to
charge, assess and collect the rates producing Net Revenues pledged to pay principal of
and interest on the Bonds have been duly and validly adopted or undertaken in
compliance with all applicable procedural requirements of the Issuer and in compliance
with the Constitution and laws of the State, including the Act;
(iv) The Issuer Documents have been duly authorized, executed and delivered by the
Issuer, and constitute legal, valid and binding obligations of the Issuer enforceable
against the Issuer in accordance with their respective terms, except to the extent limited
by bankruptcy, insolvency, reorganization, moratorium or other similar Jaws and
equitable principles of general application relating to or affecting the enforcement of
creditors' rights; and the Bonds, when issued, delivered and paid for. in accordance with
the Bond Ordinance and this Agreement, wiU constitute legal, valid and binding
obligations of the Issuer entitled to the benefits of the Bond Ordinance and enforceable in
accordance with their tenns, subject to bankruptcy. insolvency, reorganization.
moratorium and other similar laws and principles of equity relating to or affecting the
enforcement of creditors' rights; upon the issuance, authentication and delivery of the
Bonds as aforesaid, the Bond Ordinance will provide, for the benefit of the holders, from
time to time, of the Bonds, the legally valid and binding pledge of and lien on the secwity
for the Bonds it purports to create as set forth in the Bond Ordinance;
(v) The distribution of the Preliminary Official Statement and the Official Statement
has been duly authorized by the Issuer;
8
(vi) All authorizations, approvals, licenses, permits, consents and orders of any
governmental authority, legislative body, board. agency or commission having
jurisdiction of the matter which are required for the due authorization of, which would
constitute a condition precedent to, or the absence of which would materially adversely
affect the due performance by the Issuer of its obligations under the Issuer Documents
and the Bonds;
(vii) There is no legislation, action, suit, proceeding, inquiry or investigation, at law
or in equity, before or by any court, government agency, public board or body, pending
or, to the best knowledge of the Issuer, after due inquiry threatened against the Issuer,
affecting the corporate existence of the Issuer or the titles of its officers to their respective
offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery
of the Bonds, the collection of taxes and Net Revenues pledged to the payment of
principal of and interest on the Bonds, or in any way contesting or affecting the validity
or enforceability of the Bonds, the Issuer Documents, or contesting the exclusion from
gross income of interest on the Bonds for federal income tax purposes, or contesting in
any way the completeness or accuracy of the Preliminary Official Statement or the
Official Statement or any supplement or amendment thereto, or contesting the powers of
the Issuer or any authority for the issuance of the Bonds, the adoption of the Bond
Ordinance or the execution and delivery of the Issuer Documents, nor, to the best
knowledge of the Issuer, is there any basis therefor, wherein an unfavorable decision,
ruling or ftnding would materially adversely affect the validity or enforceability of the
Bonds, or the Issuer Docwnents;
(viii) The execution and delivery of the Issuer Documents and compliance by the
Issuer with the provisions hereof and thereo~ under the circumstances contemplated
herein and therein, will not conflict with or constitute on the part of the Issuer a material
breach of or a default under any agreement or instrument to which the Issuer is a party, or
violate any existing law, administrative regulation, court order, or consent decree to
which the Issuer is subject; and
(ix) Based on the examination which such counsel has caused to be made and its
participation at conferences at which the Preliminary Official Statement and the Official
Statement were discussed, such counsel has no reason to believe that the Official
Statement as of its date and as of the date hereof contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements therein, in
light of the circwnstances under which they were made, not misleading in any material
respect {except for any financial forecast, technical and statistical data included in the
Official Statement and except for infonnation regarding DTC and its book--entry system
and information regarding the Bond Insurer, in each case as to which no view need be
expressed).
{9) A certificate, dated the date of Closing, executed by authorized officials of the Issuer to
the effect that (i) the representations and warranties of the Issuer contained herein are true and
correct in all material respects on and as of the date of Closing as if made on the date of Closing;
(ii) no litigation or proceeding or tax challenge against it is pending or, to its knowledge,
threatened in any court or administrative body nor is there a basis for litigation which would {a)
contest the right of the members or officials of the Issuer to hold and exercise their respective
positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the
validity, due authorization and execution of the Bonds or the [ssuer Documents or (d) attempt to
limit, enjoin or otherwise restrict or prevent the Issuer from functioning and collecting revenues,
including payments on the Bonds, pursuant to the Bond Ordinance, or the levy or collection of the
taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the anticipated
receipt of Net Revenues pledged or to be pledged to pay the principal of and interest on the
9
Bonds, or the pledge of such taxes and Net Revenues; (iii) the resolutions of the Issuer
authorizing the execution, delivery and/or perfonnance of the Official Statement, the Bonds and
Issuer Documents have been duly adopted by the Issuer, are in full force and effect and have not
been modified, amended or repealed; and (iv) to the best of his, her or their knowledge, no event
affecting the Issuer has occurred since the date of the Official Statement which should be
disclosed in the Official Statement for the purpose for which it is to be used or which it is
necessary to disclose therein in order to make the statements and information therein, in light of
the circumstances under which made, not misleading in any respect as of the time of Closing. and
the information contained in the Official Statement is correct in all material respects and, as of the
date of the Official Statement did not, and as of the date of the Closing does not, contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances under which they
were made, not misleading;
( 10) A certificate executed by an authorized official of the Issuer in form and substance
satisfactory to Bond Counsel and counsel to the Underwriters (a) setting forth the facts, estimates
and circumstances in existence on the date of the Closing, which establish that it is not expected
that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be
"arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as
amended (the "Code"), and any applicable regulations (whether final, temporary or proposed),
issued pursuant to the Code, and (b) certifying that to the best of the knowledge and belief of the
Issuer there are no other facts, estimates or circumstances that would materially change the
conclusions, representations and expectations contained in such certificate;
(11) Any other certificates and opinions required by the Bond Ordinance for the issuance
thereunder of the Bonds;
(12) Evidence of the rating on the Bonds, which shall be "AMi" by Moody's Investors
Service, Inc. ("Moody's"), "AAA" by Standard and Poor's Corporation, a division of the
McGraw·Hill Companies, Inc. ("S&P"), and "AAA" by Fitch Ratings ("Fitch"), as a result of the
issuance of the municipal bond insurance policy by the Bond Insurer, and that all such ratings are
in effect as of the date of Closing;
(13) A copy of the municipal bond insurance policy together with an opinion of counsel to
Bond Insurer in form and substance satisfactory to the Representative;
(14) A certificate of the Bond Insurer with respect to the accuracy of statements contained in
the Official Statement regarding the municipal bond insurance policy and the due authorization,
issuance, execution and delivery of the municipal bond insurance policy;
(15) Such legal opinions, certificates, instruments and other documents as Bond Counsel or
counsel to the Underwriters may reasonably request to evidence that the defeasance of the BRA
Bonds has been lawfully established and that moneys sufficient to effectuate the refunding of the
BRA Bonds have been deposited with the Paying Agent for the BRA Bonds;
(16) Such legal opinions, certificates, instruments and other documents as Bond Counsel or
counsel to the Underwriters may reasonably request to evidence that the amount of the termation
payment with respect to the Swap Agreement has been agreed upon by the Issuer and the
counterparty under the Swap Agreement, that payment of such termination payment has been
made by the Issuer and accepted by said counterparty, and that the Issuer has no remaining
obligations under the tenns of the Swap Agreement upon payment of such termination payment;
and
10
)
( 17) Such additional legal opinions, certificates, instruments and other documents as the
Representative or counsel to the Underwriters may reasonably request to evidence the truth and
accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's representations
and warranties contained herein and of the statements and information contained in the Official
Statement and the due performance or satisfaction by the Issuer on or prior to the date of the
Closing of all the respective agreements then to be perfonned and conditions then to be satisfied
by the Issuer.
All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere
in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in fonn
and substance satisfactory to the Underwriters.
If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase, to
accept delivery of and to pay for the Bonds contained in this Agreement, or if the obligations of the Underwriters
to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this
Agreement, this Agreement shall texminate and neither the Underwriters nor the Issuer shall be under any further
obligation hereunder, except that the respective obligations of the Issuer and the Underwriters set forth in Sections
4 and 8( c) hereof shall continue in full force and effect.
7. Termination. The Underwriters shall have the right to cancel their obligation to purchase the
Bonds if, between the date of this Agreement and the Closing, the market price or marketability of the Bonds shall
be materially adversely affected, in the sole judgment of the Representative, by the occw-rence of any of the
following:
(a) legislation shall be enacted by or introduced in the Congress of the United States or
reconunended to the Congress for passage by the President of the United States, or the Treaswy
Department of the United States or the Internal Revenue Service or any member of the Congress or
favorably reported for passage to either House of the Congress by any committee of such House to which
such legislation has been referred for consideration, a decision by a court of the United States or of the
State or the United States Tax Court shall be rendered, or an order, ruling, regulation (fmal, temporary or
proposed), press release, statement or other form of notice by or on behalf of the Treaswy Department of
the United States, the Internal Revenue Service or other governmental agency shall be made or proposed,
the effect of any or all of which would be to impose, directly or indirectly, federal income taxation upon
interest received on obligations of the general character of the Bonds of the interest on the Bonds as
described in the Official Statement, or other action or events shall have transpired which may have the
purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the
transactions contemplated herein;
(b} legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree, or
injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary.
or proposed), press release or other fom1 of notice issued or made by or on behalf of the Securities and
Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the
effect that obligations of the general character of the Bonds, including any or all underlying arrangements,
are not exempt from registration under or other requirements of the 1933 Act, or that the Bond Ordinance
is not exempt from qualification under or other requirements of the Trust Indenture Act, or that the
issuance, offering, or sale of obligations of the general character of the Bonds, including any or all
underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would
be in violation of the federal securities law as amended and then in effect;
(c) any state blue sky or securities commission or other governmental agency or body shall have
withheld registration, exemption or clearance of the offering of the Bonds as described herein, or issued a
stop order or similar ruling relating thereto;
11
)
(d) a general suspension of trading in securities on the New York Stock Exchange or the American
Stock Exchange, the establishment of minimum prices on either such exchange, the establishment of
material restrictions (not in force as of the date hereof) upon trading securities generally by any
governmental authority or any national securities exchange, a general banking moratorium declared by
federal, State of New York, or State officials authorized to do so;
(e) the New York Stock Exchange or other national securities exchange or any governmental
authority, shall impose, as to the Bonds or as to obligations of the general character of the Bonds, any
material restrictions not now in force, or increase materially those now in force, with respect to the
extension of credit by, or the charge to the net capital requirements of, Underwriters;
(f) any amendment to the federal or state Constitution or action by any federal or state court.
legislative body, regulatory body, or other authority materially adversely affecting the tax status of the
Issuer, its property, income securities (or interest thereon), or the validity or enforceability of the
assessments or the levy of taxes or the charges and collections of Net Revenues to pay principal of and
interest on the Bonds;
(g) any event occurring, or infonnation becoming known which, in the judgment of the
Representative, makes untrue in any material respect any statement or infonnation contained in the
Official Statement, or has the effect that the Official Statement contains any untrue statement of material
fact or omits to state a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading;
{h) there shall have occurred since the date of this Agreement any materially adverse change in the
affairs or financial condition of the Issuer;
(i) the United States shall have become engaged in hostilities which have resulted in a declaration of
war or a national emergency or there shall have occurred any other outbrealc or escalation of hostilities or
a national or international calamity or crisis, financial or otherwise;
(j) any fact or event shall exist or have existed that, in the Representative's judgment, requires or has
required an amendment of or supplement to the Official Statement;
(k) there shall have occurred any downgrading, or any notice shall have been given of any intended
or potential downgrading;
(I) the purchase of and payment for the Bonds by the Underwriters, or the resale of the Bonds by the
Underwriters, on the terms and conditions herein provided shall be prohibited by any applicable law,
governmental authority, board. agency or commission; and
S.Expenses. (a) The Underwriters shall be under no obligation to pay, and the Issuer shall pay, any
expenses incident to the performance of the Issuer's obligations hereunder, including, but not limited to
(i) the cost of preparation and printing of the Bonds, (ii) the fees and disbursements of Bond Counsel and
counsel to the Issuer; (iii) the fees and disbursements of the Financial Advisor to the Issuer; (iv) the fees
and disbursements of any other engineers, accountants, and other experts, consultants or advisers retained
by the Issuer, and (v) the fees for bond ratings and fees or premiums of the Bond Insurer.
(b) The Underwriters shall pay (i) the cost of preparation and printing of this Agreement; (ii) all
advertising expenses in connection with the public offering of the Bonds; and (iii) aU other expenses
incurred by them in connection with the public offering of the Bonds, including the fees and
disbursements of counsel retained by the Underwriters.
12
(c) If this Agreement shall be terminated by the Underwriters because of any failure or refusal on the
part of the Issuer to comply with the terms or to fulfiU any of the conditions of this Agreement, or if for
any reason the Issuer shall be unable to perform its obligations under this Agreement, the Issuer will
reimburse the Underwriters for all out-of-pocket expenses (including the fees and disbursements of
counsel to the Underwriters) reasonably incWTed by the Underwriters in connection with this Agreement
or the offering contemplated hereunder.
9. Notices. Any notice or other communication to be given to the Issuer under this Agreement may
be given by delivering the same in writing at the address for the Issuer set forth above and any notice or other
communication to be given to the Underwriters under this Agreement may be given by delivering the same in
writing to RBC Dain Rauscher Inc., 1001 Fannin, Suite 400, Houston, Texas 77002, Attention: Mark Nitcholas.
10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement
between us and is made solely for the benefit of the Issuer and the Underwriters (including successors or assigns
of the Underwriters) and no other person shall acquire or have any right hereunder or by virtue hereof. This
AgTeement may not be assigned by the Issuer. All of the Issuer's representations, warranties and agreements
contained in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigations
made by or on behalf of any of the Underwriters; (ii) delivery of and payment for the Bonds pW"Suant to this
AgTeement; and (iii) any termination of this Agreement.
11. Effectiveness. This Agreement shall become effective upon the acceptance hereof by the Issuer
and shall be valid and enforceable at the time of such acceptance.
12. Choice of Law. This Agreement shall be governed by and construed in accordance with the law
of the State.
13. Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be
invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions because it conflicts with any provisions of any Constitution, statute, rule of public policy, or any
other reason, such circumstances shall not have the effect of rendering the provision in question invalid,
inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions
of this Agreement invalid, inoperative or unenforceable to any extent whatever.
14. Business Day. For purposes of this Agreement, "business day" means any day on which the New
York Stock Exchange is open for trading.
15. Section Headings. Section headings have been inserted in this Agreement as a matter of
convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and
will not be used in the interpretation of any provisions of this Agreement
16. Counterparts. This Agreement may be executed in several counterparts each of which shall be
regarded as an original (with the same effect as if the signatures thereto and hereto were upon the same document)
and all of which shall constitute one and the same document
13
If you agree with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the
Underwriters. This Agreement shall become a binding agreement between you and the Underwriters when at
least the counterpart of this Agreement shall have been signed by or on behalf of each of the parties hereto.
ACCEPTANCE
ACCEPTED this 1st day of July .2005.
City of Lubbock., Texas
By~~
Narne~L=e=e~An==n~Dumba~~~u=l~d~---------------
Title CFO/ACM
14
SCHEDULE II
Schedule of Maturities, Interest Rates, Yields and Redemption Provisions
$43,080,000
City of lubbock, Texas
Tax and Waterworks System Surplus Revenue Refunding Bonds,
Series 2005
Maturity
(February 15)
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Principal
Amount
$1,700,000
2,030,000
2,135,000
2,240,000
2,340,000
2.465,000
2,585,000
2,715,000
2,865,000
3,015,000
3,190,000
3,370,000
3,560,000
3,775,000
2.480,000
2,615,000
Interest Rate
(%)
3.250
5.000
4.000
5.000
4.000
5.000
4.000
5.000
4.000
5.000
5.000
5.000
5.000
5.000
5.000
5.000
Yield
(%)
2.590
2.750
2.890
3.040
3.170
3.300
3.410
3.520
3.610
3.710
3.780
3.840
3.900
3.950
4.000
4.050
The Issuer reserves the right, at its option, to redeem Bonds having stated maturities on and
after February 15, 2016, in whole or in part in principal amounts of $5,000 or any integral
muftiple thereof, on February 15, 2015, or any date thereafter, at the par value thereof plus
accrued interest to the date of redemption.
)
EXHIBIT A
OFFCIAL STATEMENT
EXHIBITB
PROPOSED FORM OF UNDERWRITERS' COUNSEL OPINION OF
RBC Dain Raucher Inc.
Merrill Lynch & Co.
Piper Jaffray & Co.
c/o RBC Dain Rauscher Inc.
1001 Fannin, Suite 400
Houston, Texas 77002
MCCALL, PARKHURST & HORTON L.L.P.
August 15, 2005
Re: $43,080,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue
Refunding Bonds, Series lOOS
Ladies and Gentlemen:
We have acted as counsel for you as the underwriters of the Bonds described above, issued under
and pursuant to a Bond Ordinance of the City of Lubbock, Texas (the "Issuer"), authorizing the issuance
of the Bonds, which Bonds you are purchasing pursuant to a Bond Purchase Agreement, dated July 1,
2005. All capitalized undefined terms used herein shall have the meaning set forth in the Bond Purchase
Agreement
In connection with this opinion letter, we have considered such matters of law and of fact, and
have relied upon such Bonds and other information furnished to us, as we have deemed appropriate as a
basis for our opinion set forth below. We are not expressing any opinion or views herein on the
authorization, issuance, delivery, validity of the Bonds and we have assumed, but not independently
verified, that the signatures on all documents and Bonds that we have examined are genuine.
Based on and subject to the foregoing, we are of the opinion that, under existing laws, the Bonds
are not subject to the registration requirements of the Securities Act of 1933, as amended, and the
Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as amended.
Because the primary purpose of our professional engagement as your counsel was not to
establish factual matters, and because of the wholly or partially nonlegal character of many of the
determinations involved in the preparation of the Official Statement dated July 1, 2005 (the "Official
Statement") and because the infonnation in the Official Statement under the headings "TilE BONDS -
Book-Entry-Only System," "TAX MATIERS," "OTHER INFORMATION-Continuing Disclosure of
Information -Compliance with Prior Undertakings" and Appendices A. B, and C thereto were prepared
by others who have been engaged to review or provide such infonnation, we are not passing on and do
not assume any responsibility for, except as set forth in the last sentence of this paragraph, the accuracy,
completeness or fairness of the statements contained in the Official Statement (including any
appendices, schedules and exhibits thereto) and we make no representation that we have independently
verified the accuracy, completeness or fairness of such statements. In the course of our review of the
Official Statement, we had discussions with representatives of the City regarding the contents of the
Official Statement. In the course of our participation in the preparation of the Official Statement as your
counsel, we had discussions with representatives of the Issuer, including its City Attorney, Bond
Counsel and Financial Advisor, regarding the contents of the Official Statement. In the course of such
activities, no facts came to our attention that would lead us to believe that the Official Statement (except
for the financial statements and other financial and statistical data contained therein, the infonnation set
forth under the headings "THE BONDS-Book-Entry-Only System," "TAX MATTERS," "OTIIER
INFORMATION-Continuing Disclosure of Information-Compliance with Prior Undertakings" and
Appendices A, B, and C thereto, as to which we express no opinion), as of its date contained any untrue
statement of a material fact or omitted to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading.
This opinion letter may be relied upon by only you and only in connection with the transaction to
which reference is made above and may not be used or relied upon by any other person for any purposes
whatsoever without our prior written consent
Respectfully,
2
DEPOSIT AGREEMENT AND RECEIPT FOR DEPOSIT
JPMorgan Chase Bank, National Association (the "Paying Agent"), being the successor
paying agent/registrar for the Brazos River Authority Special Facilities (Lake Alan Henry)
Revenue Refunding Bonds, Series 1995 (the "Bonds") issued pW'Suant to a bond resolution (the
"Resolution') adopted by the Brazos River Authority (the "Authority') on May 24, 1995, hereby
agrees with the Authority and the City of Lubbock, Texas (the "City') for the benefit of the
Authority, the City and the owners of the Bonds maturing on August 15 in each of the years
2006 through 2015 and 2021 (collectively, the "Refunded Bonds''), as follows:
1.1 The Paying Agent acknowledges that the total amount of principal and interest
due on the Refunded Bonds on August 16, 2005 (the "Redemption Date") is $43,746,592.67,
representing principal in the amount of$43,740,000 plus accrued interest on the Refunded Bonds
of $6,592.67.
1.2 The City and the Authority acknowledge that funds in payment of such principal
and interest (the "Deposit") will be irrevocably deposited with the Paying Agent on August 15,
2005, composed of$38,999,297.69 from the proceeds of the City's Tax and Waterworks SyStem
Surplus Revenue Refunding Bonds, Series 2005 (the ''Refunding Bonds'') plus $4,747,294.98 of
debt service and reserve funds held for the benefit of the owners of the Bonds under the
Resolution. The Paying Agent acknowledges receipt of the Deposit and certifies that the Deposit
is equal to the principal of and interest on the Refunded Bonds due on the Redemption Date and
that, pursuant to Article XII of the Resolution, such Refunded Bonds are deemed not to be
outstanding. If for any reason the Deposit shall be insufficient to pay the principal of and interest
on the Refunded Bonds on the Redemption Date, the City shall timely deposit additional funds
with the Paying Agent in the amount required to make such payment. Notice of any such
insufficiency shall be immediately given by the Paying Agent to the City by the fastest means
possible, but the Paying Agent shall in no manner be responsible for the City's failure to make
such additional deposit.
1.3 The Deposit shall be irrevocably held by the Paying Agent in trust for the benefit
of the owners of the Refunded Bonds pW'Suant to Article XII of the Resolution for the purpose of
paying the principal of the Refunded Bonds on the Redemption Date, together with all interest
due thereon to the Redemption Date, and, immediately following the receipt of the Deposit, the
Paying Agent agrees to hold the Deposit uninvested in a separate account and to apply and
disbW'Se the Deposit solely for the payment of the principal of and interest on the Refunded
Bonds on the Redemption Date. ·
1.4 Any portion of the Deposit that is not required to be used by the Paying Agent for
the payment of principal of and interest on the Refunded Bonds shall be delivered by the Paying
Agent to the City.
LUB200171000
Dallas 982026_3.DOC
,.
EXECUTED THIS ;J" I'! l..f., ,_oo S"
BRAZOS RIVER AUTHORITY
By:
Name:
Title:
Signature Page for Deposit Agreement
LUB200nt000
Dallas 982026 _2.DOC
Signature Page for Deposit Agreement
LUB200171000
Dallas 982026_3.DOC
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
By:
Name:
Title: ~ Assistant VICe President
LUB200n1000
Signature Page for Deposit Agreement
Dallas 982026_3.DOC
)
REGISTERED
No.1
INTEREST RATE:
3.250%
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
MATURITY DATE: BOND DATE:
February 15,2006 July 1, 2005
REGISTERED
$1,700,000
CUSIP NUMBER:
549187 P22
The City of Lubbock (the "City"), in the County of Lubb -"2..-~-.c.<A exas, for value
received, hereby promises to pay to
ONE MIL
l
and to pay interest on su ~ pal amount from the later of the Bond Date specified above or
the most recent interest payment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment!fransfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentlfransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
)
REGISTERED
No.2
INTEREST RATE:
5.000%
United States of America
State ofTexas
County of Lubbock
CTIY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
MATURITY DATE: BOND DATE:
February 15,2007 July 1, 2005
The City of Lubbock (the "City"), in the County of L:ul"~~~
received, hereby promises to pay to
or registered assigns, on
REGISTERED
$2,030,000
CUSIP NUMBER:
549187 P30
and to pay interest on su principal amount from the later of the Bond Date specified above or
the most recent interest payment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August IS of each year, commencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and swrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment!fransfer Office''), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment!fransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying AgentJR.egistrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
)
REGISTERED
No.3
INTEREST RATE:
4.000%
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAXANDWATERWORKSSYSTEMSURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
MATURITY DATE: BOND DATE:
February 15,2008 July I, 2005
The City of Lubbock (the "City''), in the County of Lubbock,
received, hereby promises to pay to
TWOM
.~ ..
REGISTERED
$2,135,000
CUSIP NUMBER:
549187 P48
of Texas, for value
-s-·· and to pay interest n pal amount from the later of the Bond Date specified above or
the most recent int payment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized tenns used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office''), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentffransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the ''Record Date," which shall be the last business
day of the month next preceding such interest payment date.
)
REGISTERED
No.4
INTEREST RATE:
5.000%
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES2005
MATURITY DATE: BOND DATE:
February 15, 2009 July 1, 2005
The City of Lubbock (the "City''), in the County of Lubbock, S
received, hereby promises to pay to
or registered assigns, on
REGISTERED
$2,240,000
CUSIP NUMBER:
549187 P55
f Texas, for value
and to pay interest on uc ·· ci amount from the later of the Bond Date specified above or
the most recent in · ayment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized tenns used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentffransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the ''Record Date," which shall be the last business
day of the month next preceding such interest payment date.
)
)
REGISTERED
No.5
INTEREST RATE:
4.000%
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
MATURITY DATE: BOND DATE:
February IS, 2010 July 1, 2005
REGISTERED
$2,340,000
CUSIP NUMBER:
549187 P63
The City of Lubbock (the "City"), in the County of Lubbock, State of Texas, for value
received, hereby promises to pay to
or registered assigns, on the Ma _.,...,,_..,.
and to pay interest t m the later of the Bond Date specified above or
the most recent · t a te to which interest has been paid or provided for m1til
payment of such p . amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close ofbusiness on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
)
)
REGISTERED
No.6
INTEREST RATE:
5.000%
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
MATURTIY DATE: BOND DATE:
February 15,2011 July 1, 2005
The City of Lubbock (the "City"), in the County of LWlD~
received, hereby promises to pay to
REGISTERED
$2,465,000
CUSIP NUMBER:
549187 P71
te of Texas, for value
and to pay interest .. principal amount from the later of the Bond Date specified above or
the most recent interest payment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360·day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office''), of
IPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentlrransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the putpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
)
)
>
REGISTERED
No.7
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES2005
INTEREST RATE: MATURITY DATE: BOND DATE:
4.000% February 15,2012 July l, 2005
REGISTERED
$2t585,000
CUSIP NUMBER:
549187 P89
The City of Lubbock (the "City''), in the County of Lubbock, State of Texas, for value
received, hereby promises to pay to
<;.
and to pay interest on net ount from the later of the Bond Date specified above or
the most recent int t . · ent date to which interest has been paid or provided for until
payment of such prin pat amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized tenns used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentrrransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking ammgement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
)
)
)
REGISTERED
No.8
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
INTEREST RATE: MA TIJRI1Y DATE: BOND DATE:
5.000% February 15,2013 July 1, 2005
REGISTERED
$2,715,000
CUSIP NUMBER:
549187 P97
The City of Lubbock (the "City,), in the County of Lubbock, State of Texas, for value
received, hereby promises to pay to
TWO
~ and to pay interest ch P. . · al amount from the later of the Bond Date specified above or
the most recent · · ayment date to which interest has been paid or provided for until
payment of such ncipal amount has been paid or provided for, at the per annwn rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the ''Record Date/' which shall be the last business
day of the month next preceding such interest payment date.
)
)
)
)
REGISTERED
No.9
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
INTEREST RATE: MA TUR11Y DATE: BOND DATE:
4.000% February 15,2014 July 1, 2005
The City of Lubbock (the "City"), in the County of Lubbock, Stat
received, hereby promises to pay to
TWOMILLI
REGISTERED
$2,865,000
CUSIP NUMBER:
549187 Q21
Texas, for value
and to pay interest on p amowtt from the later of the Bond Date specified above or
the most recent interes • yment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the ''Designated Payment!fransfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentffransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date,,. which shall be the last business
day of the month next preceding such interest payment date.
\
J
)
>
J
)
)
)
REGISTERED
No. 10
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES2005
INTEREST RATE: MATIJRITY DATE: BOND DATE:
5.000% February 15,2015 July 1, 2005
REGISTERED
$3,015,000
CUSIP NUMBER:
549187 Q39
The City of Lubbock (the "Ci~'), in the County of Lubbock, State of Texas, for value
received, hereby promises to pay to
. ~ ·~, ..
ch ~ · · · · al amount from the later of the Bond Date specified above or
the most recent · . ayment date to which interest has been paid or provided for until
payment of such nncipal amount has been paid or provided for, at the per annwn rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and sUITender of this Bond at
the COipOrate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymenttrransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
)
)
)
REGISTERED REGISTERED
No. 11 $3,190,000
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
INTEREST RATE: MATURITY DATE: BOND DATE: CUSIP NUMBER:
5.000% February 15, 2016 July 1, 2005 549187 Q47
The City of Lubbock (the "City''), in the County of Lubbock, of Texas, for value
received, hereby promises to pay to
and to pay interest · n pal amount from the later of the Bond Date specified above or
the most recent in payment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30..day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized tenns used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Paymentlfransfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment!fransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered o'WD.er shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
)
)
REGISTERED
No.12
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WA TERWORK.S SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES2005
INTEREST RATE: MATURITY DATE: BOND DATE:
5.000% February 15, 2017 July 1, 2005
The City of Lubbock (the "City"), in the County of Lubbock, S
received, hereby promises to pay to
THREE MIL
REGISTERED
$3,370,000
CUSIP NUMBER:
549187 Q54
fTexas, for value
and to pay interest on . uc ci amount from the later of the Bond Date specified above or
the most recent inter · payment date to which interest has been paid or provided for until
payment of such principal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized tenns used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and SWTender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
AgentJR.egistrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying AgentJR.egistrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
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REGISTERED
No.13
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES2005
INTEREST RATE: MATURITY DATE: BOND DATE:
5.000% February 15, 2018 July 1, 2005
REGISTERED
$3,560,000
CUSlP NUMBER:
549187Q62
The City of Lubbock (the "City"), in the Cowtty of Lubbock, State of Texas, for value
received, hereby promises to pay to
TH
t
ch P. i" 'al ~ount :from the later of the Bond Date specified above or
the most recent ,_~ . ayment date to which interest has been paid or provided for until
payment of such nncipal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30·day months, such interest
to be paid semiannually on February 15 and August 15 of each year, conunencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Paymentlfransfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentlfransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
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REGISTERED REGISTERED
No.14 $3,775,000
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WA TERWORK.S SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES2005
INTEREST RATE: MA TURI1Y DATE: BOND DATE: CUSIP NUMBER:
5.000% February 15,2019 July 1, 2005 549187Q70
The City of Lubbock (the "City"), in the County of Lubbock, State of Texas, for value
received, hereby promises to pay to
THREE
...
ch P. • · al amowtt from the later of the Bond Date specified above or
the most recent . · ayment date to which interest has been paid or provided for wttil
payment of such nncipal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 36Q.day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized terms used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Paymentlfransfer Office"), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement For the pmpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
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REGISTERED
No.l5
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
INTEREST RATE: MATURITY DATE: BOND DATE:
5.000% February 15,2020 July 1, 2005
The City of Lubbock (the "City"), in the County of Lub~~ _,~,
received, hereby promises to pay to ·· ··
or registered assigns, .
TWOM • 0 ,~ ~
REGISTERED
$2,480,000
CUSIP NUMBER:
549187 Q88
of Texas, for value
and to pay interest o , nncipal amount from the later of the Bond Date specified above or
the most recent interest payment date to which interest has been paid or provided for until
payment of such principal amount bas been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360·day year of twelve 3Q..day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized tenns used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office''), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentlfransfer Office of 8uch successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
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REGISTERED
No. 16
United States of America
State of Texas
CoWlty of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE REFUNDING BONDS
SERIES 2005
INTEREST RATE: MATURITY DATE: BOND DATE:
5.000% February 15, 2021 July 1, 2005
REGISTERED
$2,615,000
CUSIP NUMBER:
549187 Q96
The City of Lubbock (the "City''), in the County of Lubbock, State of Texas, for value
received, hereby promises to pay to
and to pay interest o amount from the later of the Bond Date specified above or
the most recent · yment date to which interest has been paid or provided for until
payment of such p · cipal amount has been paid or provided for, at the per annum rate of interest
specified above, computed on the basis of a 360-day year of twelve 30-day months, such interest
to be paid semiannually on February 15 and August 15 of each year, commencing February 15,
2006. All capitalized tenns used herein but not defined shall have the meaning assigned to them
in the Ordinance (defined below).
The principal of this Bond shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Bond at
the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office,), of
JPMorgan Chase Bank, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentrrransfer Office of such successor. Interest on this
Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying
Agent/Registrar to the registered owner at the address shown on the registration books kept by
the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the
Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall
bear all risk and expenses of such customary banking arrangement. For the purpose of the
payment of interest on this Bond, the registered owner shall be the person in whose name this
Bond is registered at the close of business on the "Record Date," which shall be the last business
day of the month next preceding such interest payment date.
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If the date for the payment of the principal of or interest on this Bond shall be a Saturday,
Sunday, legal holiday, or day on which banking institutions in the city where the Designated
) Paymentrrransfer Office of the Paying Agent/Registrar is located are required or authorized by
law or executive order to close, the date for such payment shall be the next succeeding day that is
not a Saturday, Sunday, legal holiday, or day on which banking instituti _ are required or
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authorized to close, and payment on such date shall have the same · ,., d · ect as if made on
the original date payment was due. ~: •.
in the aggregate principal ~iPI~
pursuant to a certain ord · --,,,
outstanding obligations
? , title hereof issued
nfft+•<IIJdlllf e · the "Bonds"), issued
e purpose of refunding certain
o on to redeem the Bonds maturing on or after Febrwuy 15,
2016 before their "' e scheduled maturities in whole or in part in integral multiples of
$5,000 on February 15, 2015, or on any date thereafter, at a redemption price of par, plus accrued
interest to the date fixed for redemption. If less than all of the Bonds are to be redeemed, the
City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall
direct the Paying Agent/Registrar to call by lot Bonds, or portions thereof within such maturity
or maturities and in such amounts, for redemption.
Notice of such redemption or redemptions shall be given by United States mail, first class
postage prepaid, not less than 30 days before the date fixed for redemption, to the registered
owner of each of the Bonds to be redeemed in whole or in part. Notice having been so given, the
Bonds or portions thereof designated for redemption shall become due and payable on the
redemption date specified in such notice; from and after such date, notwithstanding that any of
the Bonds or portions thereof so called for redemption shall not have been surrendered for
payment, interest on such Bonds or portions thereof shall cease to accrue.
As provided in the Ordinance, and subject to certain limitations therein set forth, this
Bond is transferable upon surrender of this Bond for transfer at the designated office of the
Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to
the Paying Agent/Registrar; thereupon, one or more new fully registered Bonds of the same
stated maturity, of authorized denominations, bearing the same rate of interest, and for the same
aggregate principal amount will be issued to the designated transferee or transferees.
· The City, the Paying Agent/Registrar, and any other person may treat the person in whose
name this Bond is registered as the owner hereof for the purpose of receiving payment as herein
provided (except interest shall be paid to the person in whose name this Bond is registered on the
Record Date) and for all other purposes, whether or not this Bond be overdue, and neither the
City nor the Paying AgentJR.egistrar shall be affected by notice to the contrary.
IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Bond and the
series of which it is a part is duly authorized by law; that all acts, conditions, and things to be
done precedent to and in the issuance of the Bonds have been properly done and performed and
have happened in regular and due time, form, and manner as required by law; that ad valorem
taxes upon all taxable property in the City have been levied for and pledged to the payment of
LUB200n1ooo
Dallas 997S38_l.DOC
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the debt service requirements of the Bonds within the limit prescribed by law; that, in addition to
said taxes, further provisions have been made for the payment of the debt service requirements of
the Bonds to be additionally payable from and secured by a lien on and pledge of the Net
Revenues (as defined in the Ordinance) of the City's Waterworks System (the "System"), such
lien and pledge, however, being (i) junior and subordinate to the · .. o · d pledge of the Net
Revenues of the System securing the payment of Prio .~ · _ · b .. ti (as defined in the
Ordinance) currently outstanding and hereafter·.. by ~ e ~ i _,. n parity with the lien
on and pledge of the Net Revenues th ' · th p t the Previously Issued
Obligations (as defined · -ati ns (as defined in the
Ordinance) hereafter· ·· e . i es and retains the right to issue
Prior Lien Obligatio , e o g without limitation as to principal amoWlt
or subject to any .~ nditi _ r · ctions other than as may be required by law or
otherwise, as well th . t 1ssue Additional Obligations payable from and, together with
the Bonds and the P ' ously Issued Obligations, equally and ratably secured by a parity lien on
and pledge of the Net Revenues of the System; and that the total indebtedness of the City,
including the Bonds, does not exceed any constitutional or statutory limitation.
LUB200nl000
Dallas 997538_1.DOC
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IN WITNESS WHEREOF, the City has caused this Bond to be executed by the manual or
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facsimile signature of the Mayor of the City and countersigned by th anual or facsimile
signature of the City Secretary, and the official seal of the duly impressed or
placed in facsimile on this Bond.
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LUB200n&OOO
Dallas 997538_l.DOC
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CERTIFICATE OF PAYING AGENT/REGISTRAR
The records of the Paying Agent/Registrar show that the Initial Bo d of this series of
Bonds was approved by the Attorney General of the State of • · d registered by the
Comptroller of Public Accowtts of the State of Texas, and . ~ fthe Bonds referred
to in the within-mentioned Ordinance. ~
e ational Association
··gent/Registrar
Dated: By:
Authorized Signatory
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LUB200nt000
Dallas 997S38_1.DOC
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or
typewrite name, address and Zip Code of transferee): ----------:-------
(Social Secmity or oth.~4l~~'ng
rights hereunder and ; lite~~~~~ appoints --------
attorney to transfer th Jl~~!fi.K~f1((ept for registration hereof, with full power of
substitution in the pr
Dated:
Signature Guaranteed By:
Authorized Signatory
LUB200niOOO
Dallas 997S38_1.DOC
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NOTICE: The signature on this Assignment
must correspond with the name of the
registered owner as it appears on the face of
the within Bond in every particular and must
be guaranteed in a manner acceptable to the
Paying Agent/Registrar.
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STATEMENT OF INSURANCE
Financial Security Assurance Inc. ("Financial S ..... ,. ·-··,
delivered its municipal bond insurance poli . · ' res '
ork, New York. has
e c . ed payments due of
tio;... l Association, Dallas,
lJh.,,.tR .... J •• "" gent"). Said Policy is on
,fticflo:.f»el'laying Agent and a copy thereof
principal of and interest on this B • o h
Texas, or its successor, g
file and available folffi'l ___ tll" :)d(JltJ.()U
may be obtained fro s. in ~
FINANCIA S~~""-' -.#-...
WB200n1001
Dallas 997Sl3_1.DOC
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MUNICIPAL BOND INSURANCE COMMITMENT
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security" or "FSA") hereby commits to issue its Municipal Bond
Insurance Policy (the "Policy") relating to whole maturities of the debt obligations described in Exhibit A attached hereto (the
"Bonds"), subject to the terms and conditions set forth in this Commitment, of which Commitment Exhibit A is an integrated
part, or added hereto (the ·commitment"). To keep this Commitment in effect after the Expiration Date set forth in Exhibit A
attached hereto, a request for renewal must be submitted to Financial Security prior to such Expiration Date. Financial
Security reserves the right to refuse wholly or in part to grant a renewal.
THE MUNICIPAL BOND INSURANCE POLICY SHALL BE ISSUED IF THE FOLLOWING CONDITIONS ARE SATISFIED:
1. The documents to be executed and delivered In connection with the issuance and sale of the Bonds shall not contain
any untrue or misleading statement of a material fact and shall not fail to state a material fact necessary in order to make the
information contained therein not misleading.
2. No event shall occur which would permit any underwriter or purchaser of the Bonds, otherwise required, not to be
required to underwrite or pun::hase the Bonds on the date scheduled for the issuance and delivery thereof (~Closing Date~).
3. There shall be no material change in or affecting the Bonds (including, without limitation, the security for the Bonds) or
the financing documents or the Official Statement (or any similar disclosure documents) to be executed and delivered in
connection with the issuance and sale of the Bonds from the descriptions or forms thereof approved by Financial Security.
4. The Bonds shall contain no reference to Financial Security, the Policy or the insurance evidenced thereby except as
may be approved by Financial Security. BOND PROOFS SHALL HAVE BEEN APPROVED BY RNANCIAL SECURITY
PRIOR TO PAINTING. The Bonds shall bear a Statement of Insurance in the form provided by Financial Security.
5. Financial Security shall be provided with:
(a) Executed copies of all financing documents, any disclosure document (the "Official Statement") and the
various legal opinions deUvered in connection with the issuance and sale of the Bonds (which shall be dated the Closing Date
and which, except for the opinions of counsel relating to the adequacy of disclosure, shall be addressed to Financial Security
or accompanied by a letter of such counsel permitting Financial Security to rely on such opinion as if such opinion were
addressed to Anancial Security), induding, without limitation, the approving opinion of bond counsel. Each of the foregoing
shall be in form and substance acceptable to Financial Security. Copies of all drafts of such documents prepared subsequent
to the date of the Commitment (blacldined to reflect all revisions from previously reviewed drafts) shall be furnished to Financial
Security for review and approval. Final drafts of such documents shall be provided to Anancial Security at least three (3)
business days prior to the Issuance of the Policy, unless Anancial Security shall agree to some shorter period.
(b) Evidence of wire transfer in federal funds of an amount equal to the insurance premium, unless alternative
arrangements for the payment of such amount acceptable to Financial Security have been made prior to the delivery date of
the Bonds.
(c) Standard & Poor's Credit Market Services, Moody's Investors Service Inc. and Fitch IBCA, Inc. will
separately present bills for their respective tees relating to the Bonds. Payment of such bills should be made directly to such
rating agency. Payment of the rating fee is not a condition to release of the Policy by Financial Security.
6. Promptly after the closing of the Bonds, Financial Security shall receive three completed sets of executed documents
(one original and either (i) two photocopies (each unbound) or (ii} three compact discs).
7. The Official Statement shall contain the language provkled by Anancial Security and only such other references to
Financial Security or otherwise as Anancial Security shall supply or approve. FINANCIAL SECURITY SHALL BE PROVIDED
WITH SIX PAINTED COPIES OF THE OFFICIAL STATEMENT.
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08/08/05 14:25 FAX 1 806 767 2051 CITY OF LUBBOCK
lsauer! Cllyofl.Ubboelk, WlbookCauntv. Tt!CU
mQ~el A1r1oun1 riBands I~ Not to Exaeed $43,3Ati.IXICI
Heme ofDandiiiiSUte(l: 'nile and~~~~ I'Wwllhl ~ lSN1el7005
Tha ~ CIJII'll<'ft (II 8ancl Counsel ......... lilngaage lg lhe lfl'liiC( "-1M IJGnds: -~ from •
ectllbilllllfon r:l (i) the levy 1nC1 cclildDn r:111 dirac% and c:liiiiNI~ ad .aloNm -. "''Attll\ ftc: linlblftaU._. bJ IIW,
an •ft ....,.. ~..,..,the-.., ..,.. (i} • P.dF of~ Nat~,_ tile._.,.& W ....
~
"To ~e~p Ole CUnrnamert In t11reat ID ~ ElcpindiQn Date aet Jclfll ebowe. ~ ~ mu&t Mlllllll8 • auplic;lle
d1hla UIIIDitA .-oulad byM adholfad ~ brthB earlercf1tii!IMIII an which h 01110111 Sial$: sliM~
dlllcloeuroe ~~~:taut I"Mnccaa sea.tly IS~ and t.n • fnlm lie DIIIIB fsf Colh1 ilOII..,..
Thll uncMislgnod "'P''I•Ihlt I the BarlCII.-e .....,lrta P1J14' ol~ ~ ~.lllllh...._ l!t\111
beprawided bJ f"l'liUDII ~In ~wlh ._._of.,_COwwMittiML
ClTY OFLU880CK, LUB80CK COUNTY. 'mAS
~002
.,_ •• ; ~ In the event the Insurer is unable· to fUlfill its contractual obligation under this policy or contract or
! · · ~ 1 • application or certificate or evidence of coverage, the policyhol~er or ce~ificateholder is not
) •. pr,otected by an insurance guaranty fund or other solvency protection arrangement.
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· •_p FINANCIAL I SECURITY -.<
ASSURANCE®-,. -"·
MUNICIPAL BOND
INSURANC~ ·po~ICY
:-·(\~ ...:~. f·· ~:.. ~ 'l ~· ... ., ; . .
ISSUER: I City of lubbock, ~~~boc~g~unty.~lexas ·:~ -~ Polipy No.: ?Q952q..N l I. < '1-, , ,
t· .'0:' BONDS:
~-~·~.ra \t~:. ~
,$43,089,000~in,aggr~g~!~·P.finc.!p~,amo!Jnt of ~·~:.:it
~ T~""an~.~~e""¥oJ:k~ Sy,stern. Sut!:JllU§ vo..• . ·/ 1-.t.: ~ Revenue•Refuntilng·Bor\'d~/Senes·2G057 • 1 5 -
~·;, ~ff~tiye Date::;.~ug~~~1r· ~~s~~
~ :.., ,. \· t... ,'pre[Ylitlf!_l: $.1 0.7.,657ar6~ ,~ .. • •. ' •• 't \, ••• '$ .......
':l~~·,._y ~:r:~~>~ , .. ,.~ .,t/:~;,i \'; ...... ~· ·t:,ib::i \:;~~~-.~~ ':.~:~~-.~ \·f~,.~~ ~·--~·~ '~..,~~ \~,~t!l '~~~~ \·~~~ 'r~~ .. ~
~-,"'Si~ f S ~ '."~ ·"' FJNA~CIAL::;SECU~I"'f},Y ~S~~~GE. IN<:;.; (\Fi~,t~~!al ~ecur,ity");~<lt c~n~jderatloq :[ec~~~~<!s. ~,'~~' 1 ,.. • ~~~~y ~~~~fn~~t~f~~~~t~Po~Yn~~~~~~!t:t;~~~~~~,~~~~e:~:l!~~~~;t~?~!~:~i
?S i\_ r ~ thp Bonds) for ther&mds, f~ tbe benefit of;the Owners or, a~ the eleetion of-Financial Seculitx; directlY,· to
each Own'er, subr'ect only to :t~e !~1 o! ~rs:Poliey (wttich' includes eacl1 endorsement 'he~to~i t~at '"i...i Y, podtbn of '~it prinbipal of and nterest,on ,tfre_Bonds that shall becom~ D'ue:. for ~yment'~but shaii,~.E:f
FS. \. ~ ~~ unpaid by reason ol Nonpay~e.~t ~y f~~.lstu,~r-~
\"'):1 \ j 0~:~ the later of the day on ~njch ~suet( principal aod interest becomesJDue for Payment Or the
• ~.., 11 , Business Day next following the Busin~s .0~ on wbicJ: Financial ~curity..shafl have received NotiCe of .t" . ., • .:~ ~-• Nonpayment, Financial Security wilf'disburse to or "ror the benefit of each ..()wner of a BOnd-the;face
'V . ..,.;£ y amo~t ofl'prlncipa•ot and 1{\t~rest E>rN~ BoQ<I that is"lhen Du~or Pa~enbbut ·s then unp'~icfsby r~sofii
of Nonpayment by the lss1..1er, b.,u1.only ~pon ~elpt by Final")cial Sec.urity, in ,a form reasonably
satisfactory .to it, df \a}-'\evidenee ol t'he\OYJnefs rtghl'-to rec:elve payment ot th9-'prit>1clpal or interast:tfren
Due~ PeyqJent and (b) evidEt"CEiil~cludlng,any approp~e instr~ents ~asslgpment, that~ll of~t,lE{
Owner's rights with respect to paYrr~Efnt of such principal or interes't that is oJe for Payment snail
F~~ r:
'\'::.;.1 \"
F1~.\ ~1·: th~reupon est. in Financiai":,Seculifi .... )_A VNbtlee of~Nonpayment .will be deemed recejved on· a :b~ien
" 7_;_r:t_ ~· .~ Bu_sif!,ess DaY. if it is eceive~.p.rior-to~1;po,~rn-(N~Y9rk time) on sttcjl Busi~ess DI!Y; ot'ie"':"~e. -tt Will
-• ' · ' be delmed received ~ tHe next 'Business 'Day. If any ~otrce of Nonpayment received by Financial' f' ~ . ., F~ ./\ sec.urity is incomplete .. it s~~!l JS~ ~~!i):l~d ~o.go,hav~r.t?een receive~f(?y F.inan'Gi.a:l Security fo'r putpo~es-.ot
v~ ,~ .,. '!"' ~ th~, P.!~edifW sent~~~ a~d:,fJra'lJial~e£u~~ s~fl P.~om~tl¥ .so a(j_vi~e tbtt 'rus~e~ P~yin9. AgEWl or
• ·...-:,J, l ·" ·· Owner:• as'appi-opnate~ wfio· may slilim1t an··amended•Noltce ·of ~onpayment. Upon 'drsbursemeht in-
F~·i1 .. \ fS :-1 r~~-of _a~~~d.~F~!)l~.[lcif{t_~,eful}~·~h,.~lf P,~t:S~ejt~9 :o._wn~l p~the-~ftd. ~OY;!:IPP~.Artanant poqpon to lhe . . , , , . v Bond. or, right .to. re.cetpt of payment of prmcrpal of or tnterest .on the\eonc'i aQ!'J ~hall be fully subr9gated to
,_.., '~< 't "'! ·~theriglits oflh~ <Nmer~ incluaing th~oWn~'r's ·iigh~toYreceiVe•p1ym-9nts1untfer·fhe eonal to~tie extlnr ol
FS :\ ~> any p~ment,by F.iru~pciai1Security;·he~u!lder~~ Paymept by€Finan~1~ Security.Jo the, "Frustee Q! Payiog
t.·, ~ ·' AgE!~t forltif ben,.efit,'?f th,e/O~n~~~.-s~al~.tl>the~extent {h':'reof, disc~arQe the &bljgation of Financiar ~ , .1. ; SecuritY under thist'ohcy. ~ "':. \ ~/.~ ·, ~ '1 •
. _, .... . ' .
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..... ~'~~ !·;:.. ~ EXcept to the extent· expressly mqdifiE;!d by an endorsement hereto, the following terms shalt
have the mean'ings specified1for.all'ptlrposes'of fhis Policy. "Business Day" means any day other tha:n (a)
a Saturday or Sunday or (b) a day.on ~hicJ1 banking in.stitutions in the State of New York or tha Insurer's
Fiscal Agent are authorized or requi'fei:! bX law' or ~xecutive ord'er to re'tnain closed. "Due for Payment:
means (a) w.hen referring to .the prin~ipal of a Bond, payable on the stated maturity date thereof or the
date on which the same shall have _beep d!_Jfy called for mandatory sinkipg fund redemption and does not
refer to any earlier date on which·payment is due by reason of call for redemption (other than by
mandatory sinking fund red!"rryltion);'j~cc~ler~tion-or other adva~ement of maturity unless Finan(lial
Security shall elect, in its sole discretio.n, t9 pay such principal due upon such acceleration together with
any accrued interest to the date of at:celeration and (b) when referring to interest on'S Bond, payable on
the stated date for payment of"interest; "Nonpayment' means, In respect of a Bond, the failure of the
Issuer to have provided suffici~ht fun~s-to .. tpe Trustee or, if there is no Trustee, to the Paying Agent for
payment in full of all principal and'lnterest~thahis Due for Payment on such Bond. "Nonpayment• shall
also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to
an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the
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Policy No. 205525-N
United States Bankruptcy Code ~y a trustee in ban.krupt9y in a~ordance with a final, nonappealable
order of a court· having competent juri.sdiction. "Notice•. means telephonic or te.lecopied notice,
subs.eguently confirm,ed in a signed writing, or w.ritten notice.;by r~gistered or c~rtified mail, ·from Bf!
Owner; the Trustee or the Paying Agent to Fina·ncial Security Which notice shall specify (a) the person·or
entity making the 'cl~m. (b) the Pplicy.Num.ber, (c)'the claimed amo.unt a!'lct (d) tt:!Et•date ~uch cl~im.ed
amo~:~nt be_came D,!.!e fc;>r Payr:n~nt. ., "O~ner• mctans, i~ feSP,ect of a,~~nq, t~e .P~TSO~ pr entiN .~~o, at !he
time of' Nonpayment, is-entitled under the temrs of such Bortd rto payment'thefeof~ except that ;·owner•
, shall, !let tnclu~e tM l~su~r or aryy person ·or• entity wJtose dh:ect~ or, Indirect obligation constitutes·the
• . § un~~il~mg _s~curity f~ ~e Bo.!'~s. • . . ~ . , . .
: ~. ~ i ., • ¥•~..jpanciai~S51cu!i.ty.ll1ay P.PPOint a fj_seal ag@nJ {th._e<;l!l~ure~s lfiscal .f\~enrHor pyrp.C?ses of lhjs ' ~ .
. . PQii.£Y by :gi~ng ~r.il'l-'ln n~ . a· to ._the Trt~.s1fe~ "anp , p;t~ PaYfng: Ag~nt ;~p{qi.fYin,g Jhe qarqe' ~l)d IJO!iC~
'-· • add~es$ ofl tb-e•lnsu rer's F1 ent. 'From..:and a'fter·fue\dateiof'~"ricelpt otSoch 'notice by the· Triistee
. : a'l.d~t-the P@YJ!lg Ageot!'-(a)~eqp,i~s gf~!i1111noljc~:req~ to:_P~tdeli\(~~d,.to fiq~QCi'li:§,E;Curiw,l?u,rsu~t ~Q .....
• • : th!S ~~!lcy·~!i,a~ b~ ~lrdult~JJ~'Osly ~eli¥er~d,!O~the " wrers.fi~c~ ~~~'nt 'ap~ to ~i'1anc;:lat-Security_ ~nq
' :· · ~ sliall"o.ot b-e-,d~eme.~ .:recet~ unttl''!received • by 'llloihi a riG :(b). arv pa~m~fS ~.r.equlr.edl to ~ba made "b~ ~~ ;.,. . ~
, ~. ,_ Fi~Cf.!al ~~~t;tritv .uf.l_d~r t~~P~!icy_ Qlqy bt(!la,de f!i~~ly ~Yif.inan..c1_al .~e¢.~:~t!,~,or ~)!_tfte.lrJ_~~r~ ~-;iscal . ,,_ J ~Agent on behalf of Fm·ancral SecuritY:· <lfhe lnsc.ref's·F1scat P\g~t rs·th$ adent of F•nanetai"SGcunty only ·
. • f anp ~ti lnl?4r~r's F,i$9al Agent.!haU· il} QO ev~~t]be\li@PI~ to;ci~~Own~l:•for 'Shy_ ~ct .Qf1\b.i lrisQ~er.s FJ~~} .. , ·
, . Aqe.nt Lor ao.y: failure .of Fit;~(\ncjal Security ,to depop~ ,or cause ,to be .deposited sufficie!lt funds to !ll.ake , ...
""' \ payments:dife'undef'thls Potrcy. .. "-_, " .., "' · "'~~. ' ..,, ' i ·· '!; ~·"' , ; ~ !-. -. .. ~ '\ • ·
'• ; ;,''\t ·~ ··~~ •. ~ ~ <-.., P.. t ~_; t "':~~~~ . · I ... ·~ i ~ .. .,, ... : -. ~ ... ; \ ... · .. _.; ~ . r ~ ~
',· . . ~ .. ~ 1o 'he f41!e~t eJ<lFP! petr.n!ttFd by ~eptilaJ>JE\ law, J:1~an9•~l ~ecyr!ty ,agrr.e$ pot !o_ asse~. an~ \ hereb-y;.waives.~only fonthe b'enefitfot~e·ach ,Q'wner, alrrightsl(~ethe'r by'COilnterelalm~setoff or•otherw~se} 1 -.. •
~. i..; ·f. and ;;pefens~.;(including. ~~ithquhlimit{ltion,~,!he dpf,pse \of~f~ud),,wpether._ acqlill~d~by~ s~brog@tio.nr · · .; 1
• a~igii_me~\, o~ ott!_~FWi~e. tc!.'tl1e .~~~rit t~~t suc~)i_gt{ts _a,~~~Ctef'-1'!~4fs ~a}i'tJe a~l!ilable to Finan~i~l
, ·~ ~ Sed.tirity to· avoid paynfent!of ita.ob.llgattons under thl!hPollcyJn accol't1aflce~wi.th"the'iexpi:ess provisiens.pf · ··
7.. <~ ~ this !?:olicy ~ . • , '-; . . _ , l: :,. -r .,_. ~.. , . -\.. .... 1 ·..,._. • ~ · .•. i ... _' ~-1 ,_ ~~ ~ ( ~. :4 ' • "·'~ ~ .., . ~ ,..., ... ~ • "
• •· , .. ;-., , 1'Tl;lis Polioy'set~ fQrtt'l in.'fulf\.the ut;~d~rt{lk,!J)lg.of.Fin~nci~l Securitv..!and sijall not·be:modified, ~ -
al~r~~1 or-~ff~cte~: ~y.~any, ether .a!:t~~ment .~r i~~lru]"e~t,, ir;'plu~ill!J .f"Y., ~qdifi~al!_OI'J or ·"ffijnd~~!"t . · \; .:.: thereto. Except to tf\e< extent ~xpressly rliooifted b~an endorsem'enf-'fleretd;--(a) any prem1um pa1d 1ui · ·
;--.., '\ re~P.~! of~thi~~folicYl i~ n~r:~r~Nnda~le,tor f(~Y ·~eafO~'-' _\'fhatsO'~~er,J!'l91udin'9 ~ayment~ O! P!O'!ision ip~!JJ9 ~ ;·:
. . • ma_d.e for P..~yrl!ent, 9f !he.&pnCis P)lQr ,to !ll~tu,rity~ ap(:J.(b )._ th1s ,Polj9y. f!!ay,_np t be ._Qanc.elep. or revp~ed:
,. .. , ~ Tl.!fiS'~·POt.:ICY..~IS ~OT> Cl!l'lEREO 8¥ THE'PROPeRTY/CASUAI!.:l-Y-INSUMNCE'SECllJRITiY FUND "' '
~ ~ -:, S~EJ~~IE,P<lN.J.ARTI~4F 7,~ Q~ Th}E-.f'J~W Y9 RK IN~.LlRA~~~LAYJ.-'I _!
-:; '·, .; ' •ln'wltn~ss whereof, 'FINANCIAL SECURii'iY.ASStJAANCE>INC ~· as .caused7this Policy to be
. exfii!~~tfd ~r:t,its bepalf ~Y its .~uthofiZ~d Offic~r .:-. r • \ . ! ••
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A sut?stdiaty.of Finpncial Security AssJ,Jrance·Holdings Ltd.
31 West52nd Street. New York, N.Y. 10019 .._. .!" ·.. .. ..
Form ~00f\!Y,(5/90)
(212) 826·010p
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GENERAL CERTIFICATE
We, the undersigned, Mayor, City Secretary and Chief Financial Officer/ Assistant City
Manager, respectively, of the City of Lubbock, Texas (the "City"), do hereby certify the
following information:
1. This certificate relates to the City of Lubbock, Texas, Tax and Watetworks
System Surplus Revenue Refunding Bonds, Series 2005 (the "Bonds"), dated July 1, 2005.
Capitalized terms used herein and not othe:IWise defined shall have the meaning assigned thereto
in the ordinance authorizing the issuance of the Bonds (the "Ordinance").
2. The total tax supported debt of the City, after giving effect to the issuance of the
proposed Bonds, is $334,805,000.
3. The assessed value of property for the purpose of taxation in the City of Lubbock,
Texas, as shown by its official tax rolls for the year 2004, being its latest approved official
assessment rolls is $8,664,190,909, which amount is net of the amount of any exemptions to
which property otherwise subject to taxation was entitled pursuant to applicable provisions of the
Constitution and laws of the State of Texas.
4. Upon the issuance of the Certificates, none of the City's debts or obligations will
be secured by a first lien on and pledge of the revenues or income of the waterworks system (the
"System").
5. The revenues and expenses of the System are set forth in Table 18-Wate:IWorks
System Condensed Statement of Operations, page 53, in the City's Official Statement, such
Table 18 being incorporated herein by reference for all purposes as if set forth in full herein. The
water rates charged for the System are set forth in Table 16 ·Monthly Water Rates on page 52,
in the City's Official Statement, such Table 16 being incorporated herein by reference for all
purposes as if set forth in full herein.
6. A true and correct copy of the debt service schedule for the Bonds and all other
outstanding indebtedness of the City payable from ad valorem taxes is set forth in the table
entitled "General Obligation Debt Service Requirements" on page 36 of the City's Official
Statement under the heading "DEBT INFORMATION," such debt service schedule being
incorporated herein by reference for all purposes.
7. The City of Lubbock, Texas, is a duly incorporated Home Rule City, and is
operating and existing under the Constitution and laws of the State of Texas and the duly adopted
Home Rule Charter of the City. The Home Rule Charter was last amended at an election held in
the City on November 2, 2004.
LUBl00-71000
Dallas 99SS53_l.DOC
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8. The following are duly qualified and acting, elected or appointed officials of the
CityofLubbock, Texas:
Marc McDougal, Mayor
Tom Martin, Mayor Pro Tern
Lou Fox, City Manager
Lee Ann Dumbauld, Chief Financial
Officer/ Assistant City Manager
Becky Garza, City Secretary
Linda DeLeon
Floyd Price
Gary 0. Boren
Phyllis S. Jones
Jim Gilbreath
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) Membersof
) the Council
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9. No litigation of any nature has been filed or is now pending to restrain or enjoin
the issuance or delivery of the Bonds or which would affect the provisions made for their
payment or security, or in any manner questioning the proceedings or authority concerning the
issuance of the Bonds, and so far as we know and beJieve, no such litigation is threatened.
1 o. Neither the corporate existence nor the boundaries of the City, nor the title of its
present officers to their respective offices is being contested, and so far as we know and believe
no litigation is threatened regarding such matters, and no authority or proceedings for the
issuance of the Bonds have been repealed, revoked or rescinded.
11. There has not been filed or presented to the City Secretary or the City Council any
petition protesting, challenging or otherwise questioning the issuance of the Bonds.
12. The City is not in default in the payment of principal and interest on its debt
obligations.
13. The descriptions and statements of or pertaining to the City contained in its
Official Statement pertaining to the Bonds (the "Official Statement"), and any addenda,
supplement or amendment with respect to such descriptions or statements thereto, on the date of
such Official Statement, on the date of sale of the Bonds and on the date of the delivery, were
and are true and correct in all material respects.
14. Insofar as the City and its affairs, including its financial affairs, are concerned,
such Official Statement did not and does not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading_
15. Insofar as the descriptions and statements, including financial data, of or
pertaining to entities other than the City and their activities contained in such Official Statement
are concerned, such statements and data have been obtained from sources which the City
believes to be reliable and the City has no reason to believe that they are untrue in any material
respect.
16. There has been no material adverse change in the financial condition and affairs
of the City since the date of the Official Statement
LUB2oon!OOO
Dallas 995553_l.DOC
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17. The undersigned Mayor and City Secretary officially executed and signed the
Bonds, including the Initial Bond delivered to the initial purchaser of the Bonds, by manually
executing the Bonds or by causing facsimiles of our manual signatures to be imprinted or copied
on each of the Bonds, and we hereby adopt said manual or facsimile signatures as our own,
respectively, and declare that said facsimile signatures constitute our signatures the same as if we
had manually signed each of the Bonds.
18. The Bonds, including the Initial Bond delivered to the initial purchasers of the
Bonds, are substantially in the fonn, and have been duly executed and signed in the manner,
prescribed in the ordinance authorizing the issuance of the Bonds.
19. At the time we so executed and signed the Bonds we were, and at the time of
executing this certificate we are, the duly chosen, qualified, and acting officers indicated therein,
and authorized to execute the same.
20. We have caused the official seal of the City to be impressed, or printed, or copied
on each of the Bonds; and said seal on the Bonds has been duly adopted as, and is hereby
declared to be, the official seal of the City.
[EXECUTION PAGE FOLLOWS]
WB200nl000
Dallas 99SSS3_1.DOC
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EXECUTED AND DELIVERED tbis ___ A_U_G_t_5_20_0_5 _.
STATE OF TEXAS §
§
COUNTY OF LUBBOCK §
OFFICIAL TITLES
Mayor, City of Lubbock, Texas
Chief Financial Officer/Assistant City Manger
City of Lubbock, Texas
City Secretary, City of Lubbock, Texas
Before me, the undersigned authority, on this day personally appeared Marc McDougal,
Mayor, Rebecca Garza, City Secretary, and Lee Ann Durnbauld, Chief Financial
Officer/ Assistant City Manager of the City of Lubbock, Texas, each known to me to be such
person who signed the above and foregoing certificate in my presence and each acknowledged to
me that such person executed the above and foregoing certificate for the purposes therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE THIS £/liD 'f fZ-4J d~
-e PATKIDO
~afY Pu~ic. State ol Texas
"'' ccmrnission Expil'e$ ro-28-2009 Of
[SEAL]
LUB200niOOO
Dallas 995SS3_l.OOC
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SIGNATURE IDENTIFICATION AND AUTHORITY
CERTIFICATE OF PAYING AGENT/REGISTRAR AND ESCROW AGENT
1, the undersigned officer of JPMorgan Chase Bank, N.A, (the "Bank"), which is the
Escrow Agent and Paying Agent appointed by City of Lubbock, Texas (issuer), organized and
existing under the Constitution and laws of the State of Texas, (the "Issuer"), in connection with the
issuance, sale, execution and delivery of its Tax & Waterworks System Surplus Revenue Refunding
Bonds, Series 2005, (the "Bonds'), and the execution and delivery of an Escrow Deposit
Agreement (the "Escrow Agr_eement") and Paying Agent I Registrar Agreement (the "Paying Agent
Agreement") dated as of July 1, 2005 and betvveen the Issuer and the Bank hereby certify as
follows:
1. JPMorgan Chase Bank is a national banking association duly and validly existing
under the laws of the United States of America, is duly authorized to transact business as a national
banking association, and is authorized to act in all fiduciary capacities pursuant to 12 U.S.C. 92a.
and has full power and authority to enter into and perform the obligations of the Escrow Agent
under Escrow Agreement and the Paying Agent/Registrar under the Paying Agent/Registrar
Agreement.
2. The Escrow Agreement and the Paying Agent/Registrar Agreement have been duly
executed on behalf of the Bank by one or more of the persons named below whose offices appear
set opposite their names; said persons were at the time of executing the Escrow Agreement and the
Paying Agent/Registrar Agreement, and are now, duly elected, qualified and acting incumbents of
their respective offices; and the signatures appearing after each of said persons' names is the true
and correct specimen of such person's genuine signature:
Signature __ _ _/
---··-~/ ~-
Assistant Vice President ~--;~-~ 3. The foregoing officers of the Bank, by virtue of the authority delegated to them as
Israel Lugo
set forth in Exhibit A, are authorized to execute and deliver on behalf of the Escrow Agreement and
the Paying Agent/Registrar Agreement, and such other and further documents as may be necessary
or incidental to the acceptance and performance of the duties set forth within.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corP.orate
seal of the Bank as of the 9th day of August, 2005
(BANK SEAL]
Exhibit A-Evidence of Delegation of Authority
JPMORGAN CHASE BANK, N.A.
Dallas, Texas as Escrow Agent and as
PayingA ent
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JPMORGAN CHASE BANK
SECRETARY'S CERTIFICATE
I, Susan E. Gross, Assistant Corporate Secretary of JPMorgan Chase Bank, National Association,
hereby certify that the following is a true and correct copy of resolutions adopted at a meeting of the
Board of Directors of Chemical Bank, now known as JPMorgan Chase Bank, National Association
(this "Bank"), a national banking association, on the l9th day of March 1996, which meeting was
properly called and held and at which a quorum was present and voted in favor of said resolutions,
I further certify that the said resolutions, at the date hereof, are still in full force and effect.
RESOLVED that for the purposes of the following resolutions the following words,
when used therein, shall have the meaning ascribed to them as follows:
''Officer" shall mean the Chairman of the Board, the Chief Executive Officer, the
President, a Vice Chairman of the Board, a Vice Chairman, any member of the Policy Co unci I, any
Executive Vice President, the Chief Financial Officer, the Chief Credit Officer, the Secretary, any
Senior Vice President, any Vice President, any Managing Director, the Controller, the Deputy
Controller, any Vice President, any Assistant Vice President, any Assistant Treasurer, any
Assistant Corporate Secretary, any Senior Investment Officer, any Investment Officer, any
Assistant Investment Officer, any Senior Trust Officer, any Trust Officer, any Assistant Trust
Officer other than any Special Assistant Trust Officer, any Manager or Assistant Manager of any
branch office, division or department of this Bank, or any other Officers having functional titles,
the approvals of which the Office of the Chairman, on the authority of the Board, has delegated
to the Secretary.
"Special Assistant Trust Officer" shall mean any employee so appointed and specially
authorized by the Chairman of the Board, the Chief Executive Officer, the President, a Vice
Chairman of the Board, a Vice Chairman, any member of the Policy Council, any Executive Vice
President, the Chief Financial Officer and the Chief Credit Officer to use the designation
"Authorized Officer" or "Authorized Signature".
RESOLVED that agreements, indentures, mortgages, deeds, releases, conveyances,
transfers, assigrunents, leases, demands, proofs of debt, claims, discharges, satisfactions,
settlements, petitions, affidavits, receipts, equipment trust certificates, records, bonds, undertakings
and proxies or other instruments or docwnents in connection with the exercise of any of the
fiduciary or agency powers of this Bank may be signed, executed, acknowledged, verified,
delivered or accepted on behalf of this Bank, manually or in facsimile by the Chairman of the
Board, the Chief Executive Officer, the President, a Vice Chairman of the Board, a Vice Chairman,
any member of the Executive Committee, any Executive Vice President, the Chief Financial
Officer, the Chief Credit Officer, the Secretary, any Senior Vice President, any Managing Director,
any Vice President, any Assistant Vice President, any Associate, any Senior Trust Officer, any
Senior Investment Officer, any Trust Officer, or any Investment Officer, and the seal of this Bank
may be affixed or a facsimile thereof imprinted on any document or instrument thereof and attested
by the Secretary, any Assistant Secretary, any Senior Trust Officer, any Senior Investment Officer,
any Trust Officer, any Investment Officer, any Assistant Trust Officer or any Assistant Investment
Officer.
C:IDocuments and Scttings\E027752\My DocumtntS\CERTif!CATE n9 ·FIDUCIARY OR AGENCY CAPACITY.do<:
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RESOLVED that certifications, declarations, accounts, schedules or requisitions in
connection with the exercise of any of the fiduciary or agency powers of this Bank may be
signed, countersigned, executed, delivered, acknowledged or verified by the Chairman of the
Board, the Chief Executive Officer, the President, a Vice Chairman of the Board, a Vice Chairman,
any member of the Policy Council, any Executive Vice President, the Chief Financial Officer, the
Chief Credit Officer, the Secretary, any Senior Vice President, any Managing Director, any Vice
President, any Assistant Vice President, any Assistant Treasurer, any Senior Investment Officer,
any Investment Officer, any Assistant Investment Officer, any Senior Trust Officer, any Trust
Officer, any Assistant Trust Officer, or any Assistant Corporate Secretary.
RESOLVED that in addition to other Officers so authorized, any Vice President may
affix the seal of this Bank to any instrument made, executed or delivered on behalf of this Bank
and that such Vice President, or the Secretary, or any Assistant Corporate Secretary may attest
the same.
EXECUTED effective as of the __ day of _______ , 2005, Dallas, Texas.
JPMorgan Chase Bank
By.4~~
Susan E. Gross
Assistant Corporate Secretary
C:\Oocuments and ~ints1E0277521My DocumentsiCERTlflCATE 119 ·FIDUCIARY OR AGENCY CAPACJTY.doc
City of Lubbock, Texas
July 1, 2005
JPMorgan Chase Bank, National Association
2001 Bryan Stree4 8th Floor
Dallas, Texas 75201
Re: City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Refunding
Bonds, Series 2005
> Ladies and Gentlemen:
)
The Issuer and the Underwriters of the captioned series of Bonds have designated your
bank as the place, and as their agent, for the delivery and payment of the captioned Bonds. The
initial Bond for the above captioned series (the "Initial Bond") is being delivered to you and you
are hereby authorized and directed to hold the Initial Bond for safekeeping pending said delivery
and payment.
Upon your receipt of the final unqualified legal opinion of Vinson & Elkins L.L.P ., as to
the validity of the Bonds, and upon receipt of payment therefor from the UndeiWriters thereof,
you are authorized and directed to cancel the Initial Bond and to deliver the definitive Bonds to
DTC on behalf of the Underwriters thereof.
You are further authorized and directed to remit all of the aforesaid proceeds received
from the delivery and payment of the Bonds as further directed by the Chief Financial Officer of
the City.
Sincerely,
LUB200171000
Dallas 99SS03_l.DOC
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The Attorney General of Texas
William P. Clements Building
300 West 15th Street, 9th Floor
Austin, Texas 78701
Attention: Public Finance Division
Comptroller of Public Accounts
Thomas Jefferson Rusk Building
208 East 1Oth Street, Room 448
Austin, Texas 78701-2407
City of Lubbock, Texas
July I, 2005
Attention: Economic Analysis Center
Re: City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Refunding Bonds,
Series 2005
To the Attorney General:
The executed Initial Bond for the captioned series has been or soon will be delivered to
you for examination and approval. In connection therewith, enclosed is a General Certificate
executed and completed except as to date. When the Initial Bond has received your approval and
is ready for delivery to the Comptroller of Public Accounts for registration, this letter will serve
as your authority to insert the date of your approval in the General Certificate and deliver the
Initial Bond to the Comptroller.
Should litigation in any way affecting such Bonds develop the undersigned will notify
you at once by telephone and telecommunication. You may be assured, therefore, that there is
no such litigation at the time the Initial Bond is finally approved by you, unless you have been
advised otherwise.
To the Comptroller:
The approved Initial Bond for the captioned series will be delivered to you by the
Attorney General ofTexas. You are hereby requested to register the Initial Bond as required by
law and by the proceedings authorizing such Initial Bond.
Following registration, you are hereby authorized and directed to notify and deliver the
Initial Bond to Vinson & Elkins L.L.P., Dallas, Texas, which has been instructed to pick up same
at your office.
LUB200nt000
Dallas 995540_1.00C
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Please also deliver to Vinson & Elkins L.L.P., Dallas, Texas, five copies of each of the
following:
1. Attorney General's approving opinion; and
2. Comptroller's signature certificate.
Very truly yours,
CITY OF LUBBOCK, TEXAS
By:
LUB200niOOO
Dallas 99SS40_l.DOC
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Copy
of
Advertisement
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City and County of New York, ss.:-
Barbara Conti, being duly sworn, says that she is the Billing
Coordinator of the BOND BUYER, a daily newspaper printed and
published at One State Street Plaza, in the City of New York, County of
New York, State of New York; and the notice, of which the annexed is a
printed copy, was regularly published in said BOND BUYER on
/. ~r
Subscribed and sworn to before me chis
:rf1oJ
Dawn Brown
Notary Public, State ofNew York
No. 01BR5021063
Qualified in Kings County
Commission Expires December 6, 2005
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NRMSIRs, SICs, And Other Parties Specified By SEC Rule 15c2·12
Official Confirmation of SEC Required Notifications to Depositories,
:uer: Brazos River Authority
:ue Title: Special Facilities (Lake Alan Henry) Revenue Refunding Bonds. Series 1995
tion Date: 08/16/2005 o Date: 07/15/2005
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om berg
C Data Inc.
: NRMSIA
Redemption
:1dard & Poors
e of New York
and County of New York:
Date Sent
07114/2005
07/14/2005
07/14/2005
07/14/2005
07/14/2005
07/14/2005
07/1 4/2005
07/14/2005
Representative
Karen Peterson; Martha Straite
Charlotte Emmons; Dan Black
Ken Fay; Gabriela Samynek
Tom Cavagnetto; Jackie Jarrett; Kathy Caziarc
Peter Schmiditt; Britt Alamo
Joan Donovan; Eileen Donnelly
Andreas McCfamb; Don Hardie
Nina Cavallo; Liz Taro
ic June, being duly sworn according to law, depose and say that
the Data Base Manager of Fiduciary Communications Company and that the above described notice
sent to the above listed organizations. acting through their duly designated representatives shown above.
~June
·Director
Date: 7/26/2005
orn to before me this 26 day of July, 2005 . . . _ ..
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.... Autllotity _ . .
Special Fa·ctt~ff$ ()Jike .Ail~H&PIJ):Revenue Refunding Bonds, Series 19~·
· .. · · Dateii·June 1, 1995
NoncE IS.im.REBY·GIVEN th~t the bonds of the above senes mat-.ltii1'6.'oo'·~t~
and afte.r Aqgilst 15~:~006-an~ aggrega~g in principal amount .....,.v·,·-~-.... v·"'·
been call.~ .fvt red~'ti~. c;jn.August )6, 2005 at the redemption ~!'Cl'Ued Interest 'to th~ date offe<:lempnon, prpvi4ed lhat such_.redte,.mp~c,n l'il'"'"<."~'l'l'f.">
tioned ~· th~ be~g. ~oifiqen~ fun~~-01\ deP9!>it. to pay the ... ""'"" ... '"" bpnds b~Qlg mo~ p~cularly Ciescn~ ·a~ follows:
Year of ftJtiiifi · 'Prmcipaf "A~Dftnllo be Redeeated cusrr ••• , :. :· · · "2®8 .,._,... 0, '': ' $1·855,000 1059~~.Ji"?f; •J~ ~.": ~®1~.· .'-. · ·· . · f.j~SO,()()O 105912 ~W8 .:ir~ ::• .... ~ $2,065,000 1()5~1~8,~~ : ...
2'009 $2,175,000 1~912iBY4 .• ~
2010 $2;2®,000 105912.8?.1 E: •
2of1 ,• $2;430,000 fQS~12'J1:.~".~ .
2Q12 • · • · · s2;sss.ooo t<159'121cB:!l·~ · . · ..
2013. -·,' $;1,720,000 t$)2~00, . .. :~
id14. -~.890,000 1~12.€00-~
2015 •.$3,070,000 1~9'f2);t~
'2o21 . . $,9:7~.000 1Q5~12"~~~;
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FEDERAL TAX CERTIFICATE
I, the undersigned officer of the City of Lubbock, Texas (the "Citf'), make this
certification for the benefit of all persons interested in the exclusion from gross income for
federal income tax purposes of the interest to be paid on the City's Tax and Waterworks System
Surplus Revenue Refimding Bonds, Series 2005 (the "Bonds''), which are being issued in the
aggregate principal amount of $43,080,000 and delivered simultaneously with the delivery of
this certificate. I do hereby certify as follows in good faith on the date of issue of the Bonds:
1. Responsible Officer. I am the duly chosen, qualified and acting officer of the City
for the office shown below my signature; as such, I am familiar with the facts herein certified
and I am duly authorized to execute and deliver this certificate on behalf of the City. I am the
officer of the City charged, along with other officers of the City, with responsibility for issuing
the Bonds.
2. Code and Regulations. 1 am aware of the provisions of sections 141, 148, 149 and
150 of the Internal Revenue Code of 1986, as amended (the "Code''), and the Treasury
Regulations (the "Regulations") heretofore promulgated under sections 141, 148, 149 and 150 of
the Code. This certificate is being executed and delivered pursuant to sections 1.141-1 through
1.141 -15, 1.148-0 through 1.148-11, 1.149(b)-1, 1.149(d)-1, 1.149(g)-l, 1.150-1 and 1.150-2 of
the Regulations.
3. Definitions. The capitalized terms used in this certificate (unless otherwise
defined) that are defined in the Ordinance authorizing the issuance of the Bonds adopted May 26,
2005 and the Pricing Certificate dated July 1, 2005 (collectively, the "Ordinance") shall for all
pmposes hereof have the meanings therein specified. All such terms defined in the Code or
Regulations shall for all purposes hereof have the same meanings as given to those terms in the
Code and Regulations unless the context clearly requires otherwise.
4. Reasonable Expectations. The facts and estimates that are set forth in this
certificate are accurate. The expectations that are set forth in this certificate are reasonable in
light of such facts and estimates. There are no other facts or estimates that would materially
change such expectations. In connection with this certificate, the undersigned has to the extent
necessary reviewed the certifications set forth herein with other representatives of the City as to
such accuracy and reasonableness. The undersigned has also relied, to the extent appropriate, on
representations set forth in the certificate of RBC Dain Rauscher Inc., the manager of the group
of undClWI'iters that have purchased the Bonds (the "Underwriters"), attached hereto as Exhibit
A, the certificate of First Southwest Company, the City's financial advisor, attached hereto as
Exhibit B. The undersigned is aware of no fact, estimate or circumstance that would create any
doubt regarding the accuracy or reasonableness of all or any portion of such documents.
5. Description of Governmental Pumose. The City is issuing the Bonds pursuant to
the Ordinance (a) to provide funds that will be used to refimd currently and redeem the entire
outstanding principal amount of the Brazos River Authority's Special Facilities (Lake Alan
Henry) Revenue Refunding Bonds, Series 1995 (the "Refunded Bonds"), pursuant to the Escrow
Agreement dated July 1, 2005 between the City, the Brazos River Authority (the "BRA") and
JPMorgan Chase Bank, National Association (the "Escrow Agent'')and (b) to pay a portion of
the tennination payment owed by the City in connection with the termination of a qualified
hedge as described below and (c) to pay the costs of issuance of the Bonds. The Refunded
Bonds are being defeased in connection with the acquisition by the City of the surface water
supply facilities known as Lake Alan Henry (the "Project"). The Bonds are a current refunding
of the Refunded Bonds.
The City entered into an interest rate hedge agreement (the "Hedge") with JPMorgan
Chase Bank (the "Counterparty'') on Aprilll, 2002, in connection with the anticipated issuance
of variable rate water revenue bonds to refund the Refunded Bonds. The Hedge was identified
as a "qualified hedge" as defined in section 1.148-4(h)(2) of the Regulations. In connection with
the issuance of the Bonds, the City will terminate the Hedge and pay the termination payment
owed to the Counterparty pursuant to the Hedge. As set forth in the Certificate of First
Southwest Company, the Financial Advisor to the City of Lubbock, Texas regarding the Swap
Transaction entered into between the Counterparty and City of Lubbock, Texas dated April 11,
2002, a copy of which is attached as Exhibit C to this Certificate, a portion of the tennination
payment is allocable to the Counterparty Termination Option described in Exhibit C hereto. The
amount of not more than $812,000 which is allocable to the Counterparty Tennination Option
will be paid from funds of the City other than the proceeds of the Bonds. An amount that is not
less than $5,880,000 is properly allocable to the termination of the qualified hedge portion of the
Hedge (the "Qualified Hedge").
6. The Refunded Bonds. No portion of the purchase price of any of the Refunded
Bonds was provided by the issuance of any other issue of obligations. All of the original and
investment proceeds allocable to the Refunded Bonds have been expended. No portion of the
proceeds of the Refunded Bonds was used to pay the principal of, or interest on, any other issue
of governmental obligations. In addition, other than to the extent of preliminary expenditures
(i.e., architectural, engineering, surveying, soil testing, reimbursement bond issuance, and similar
costs that are incurred prior to commencement of acquisition, construction, or rehabilitation of a
project, other than land acquisition, site preparation, and similar costs incident to commencement
of construction), no portion of the proceeds of the Refunded Bonds was used to reimburse the
City for any expenditures made by the City prior to the issuance date of the Refunded Bonds.
BRA has maintained a debt service reserve fund for the Refunded Bonds (the ''Prior Debt
Service Reserve Fund'') and has on hand in such Prior Debt Service Reserve Fund the amount of
$4,241,406.14 that was used to secure the payment of debt service on the Refunded Bonds (the
"Reserve Fund Amount"), and which will be deposited with the Escrow Agent pursuant to the
Escrow Agreement.
BRA also has maintained a Repair and Replacement Reserve Fund for the Project, and
has on hand the amount of not more than $505,888.84, which is allocable to the Refunded Bonds
(the ''Repair and Replacement Reserve Fund Amount) and which will be deposited with the
Escrow Agent pursuant to the Escrow Agreement
7. Use of Amounts Allocable to Refunded Bonds. Other than amounts described in
paragraph 6 above, there are no amounts on hand that represent proceeds of the Refunded Bonds,
replacement proceeds of the Refunded Bonds or accumulated earnings on such proceeds. The
Reserve Fund Amount and the Repair and Replacement Reserve Fund Amount will be deposited
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l001876J.DOC
in the escrow fund established pursuant to the Escrow Agreement (the "Escrow Fund") and used
on the date hereof to pay the principal of, and interest and redemption premium, if any, on, the
Refunded Bonds.
The City will fund a new Repair and Replacement Reserve Fund for the benefit of the
Bonds using available funds of the City that are not proceeds of any obligation.
8. Expenditure of Proceeds of the Bonds. The sale proceeds from the issuance of the
Bonds will be $46,010,321.05. Such amount represents the stated redemption price at maturity
(excluding accrued interest for those Bonds the interest on which is paid at least once annually)
of the Bonds, equal to $43,080,000, plus original issue premium in the amount of $2,930,321.05.
No portion of the purchase price of any of the Bonds is provided by the issuance of any other
issue of obligations. The sale proceeds will be expended as follows:
(a) The amount of $38,999,297.69 will be deposited in the escrow fund established
pursuant to the Escrow Agreement (the "Escrow Fund'') and used to pay the principal of, and
interest and redemption premium, if any, on, the Refunded Bonds. No portion of the proceeds of
the Bonds is expected to be used to pay any interest on, or principal of, any issue of
govenunental obligations other than the Bonds and the Refunded Bonds.
(b) The amount of$291,583.85 will be allocated on the date of issuance of the Bonds
to the Underwriters' discount or compensation.
(c) The amount of$225,000.00 will be disbursed to pay other costs of issuance on the
Bonds (including any rating agency fees charged to the City by the Bond insurer).
(d) The amount of $107,657.63 will be disbursed to pay the insurance premium on
the Bonds (net of any rating agency fees).
(e) The amount of$506,781.88 will be deposited in the Debt Service and used to pay
the principal of the Bonds on February 15,2006.
(f) The amount of $5,880,000 will be used to make a termination payment and
related expenses for the Qualified Hedge as described in paragraph 5 above.
9. Pre-issuance Accrued Interest. The City will also receive from the Underwriters
on the issuance date of the Bonds the amount of $247,500.00, representing accrued interest on
the Bonds from July 1, 2005, through the date of delivery. Such amount will be deposited in the
Debt Service Fund, and will be disbursed on February 15, 2006, to pay interest on the Bonds.
10. Investment Proceeds. The amounts described in paragraphs 8(b), 8(d) and 8(f)
will not be invested. Except for earnings on the amounts described in paragraphs 8(c) and 8(e),
all amounts received by the City, such as interest and dividends, resulting from the investment of
any original proceeds or investment proceeds of the Bonds will be deposited in the Escrow Fund
for the Refunded Bonds and used to pay the principal of, and interest and redemption premium,
if any, on, the Refunded Bonds. Earnings on the amounts described in paragraphs 8(c) and 8(e)
will be used for one of the purposes described in such paragraphs.
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1001876~-DOC
11. Transferred Proceeds. There are no transferred proceeds with respect to the
Bonds because all of the proceeds of Refunded Bonds have been or will be expended prior to the
first dates on which amounts are disbursed from the Escrow Fund to pay principal of the
Refunded Bonds.
12. No Replacement Proceeds. Other than amounts described herei~ there are no
amounts that have a sufficiently direct nexus to the Bonds or to the governmental purposes of the
Bonds, including the expected use of amounts to pay debt service on the Refunded Bonds, that
the amounts would have been used for such purpose if the proceeds of the Bonds were not used
or to be used for such purpose.
(a) No Sinking Funds. Other than to the extent of the Debt Service Fund, there is no
debt service fund, redemption fund, reserve fund, replacement fund, or similar fund reasonably
expected to be used directly or indirectly to pay principal or interest on the Bonds.
(b) No Pledged Funds. Other than amounts in the Debt Service Fund, there is no
amount that is directly or indirectly, other than solely by reason of the mere availability or
preliminary earmarking, pledged to pay principal or interest on the Bonds, or to a guarantor of
part or all of the Bonds, such that such pledge provides reasonable assurance that such amount
will be available to pay principal or interest on the Bonds if the City encounters financial
difficulty. For purposes of this certifiCation, an amount is treated as so pledged if it is held under
an agreement to maintain the amount at a particular level for the direct or indirect benefit of the
holders or the guarantor of the Bonds.
(c) No Other Replacement Proceeds. There are no other replacement proceeds
allocable to the Bonds because the City reasonably expects that the tenn of the Bonds will not be
longer than is reasonably necessary for the governmental purposes of the Bonds. The Bonds
would be issued to achieve a debt service savings independent of any arbitrage benefit as
evidenced by the expectation that the Bonds reasonably would have been issued if the interest on
the Bonds were not excludable from gross income (assuming that the hypothetical taxable
interest rate would be the same as the actual tax-exempt interest rate). Furthennore, even if the
Bonds were outstanding longer than necessary for the purpose of the Bonds, no replacement
proceeds will arise because the City reasonably expects that no amounts will become available
during the period that the Bonds remain outstanding longer than necessary based on the
reasonable expectations of the City as to the amounts and timing of future revenues.
(d) Weighted Average Maturity. The weighted average maturity of the Bonds does
not exceed the remaining weighted average maturity of the Refunded Bonds and the weighted
average maturity of the Refunded Bonds is not greater than 120 percent of the weighted average
estimated economic life of the portion of the project financed by the Refunded Bonds,
determined in accordance with section 147(b) of the Code. Such weighted average estimated
economic life is determined in accordance with the following assumptions: (a) The weighted
average was determined by taking into account the respective costs of each of the assets financed
by the Refunded Bonds; (b) the reasonably expected economic life of an asset was determined as
of the later of the date hereof or the date on which such asset is expected to be placed in service
(i.e., available for use for the intended pmposes of such asset); (c) the economic lives used in
making this determination are not greater than the useful lives used for depreciation under
1001876..-l.DOC
section 167 of the Code prior to the enactment of the current system of depreciation in effect
under section 168 of the Code (i.e., the "mid-point lives") under the asset depreciation range
("ADR") system of section 167(m) of the Code, as set forth in Revenue Procedure 83-35, 1983-1
C.B. 745, where applicable, and the "guideline lives" under Revenue Procedure 62-21, 1962-2
C.B. 418, in the case of structures; and (d) land or any interest therein has not been taken into
account in determining the average reasonably expected economic life of such Project, unless 25
percent or more of the net proceeds of any issue is to be used to finance land.
13. Yield on the Bonds. For the purposes of this certificate, the yield on the Bonds is
the discount rate that, when used in computing the present value as of the issue date of the
Bonds, of all unconditionally payable payments of principal, interest and fees for qualified
guarantees on the Bonds, produces an amount equal to the present value, using the same discount
rate, of the aggregate issue price. of the Bonds as of the issue date. For purposes of determining
the yield on the Bonds, the issue price of the Bonds is the sum of the issue prices for each group
of substantially identical Bonds. For each group of substantially identical Bonds, the issue price
is the first price at which a substantial amount (i.e., ten percent) is sold to the public (excluding
bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters
and wholesalers). Based upon the representations of the Underwriters set forth in Exhibit A
hereto, the issue price (including accrued interest to the date of issue only) of the Bonds
aggregated $46,257,821.05.
As set forth in paragraph 8( d) above, proceeds of the Bonds will be used to make a
payment to Financial Security Assurance Inc. (the "Insurer') for municipal bond insurance for
the Bonds. The fee paid to the Insurer is a qualified guarantee fee because:
(a) As of the date hereof, the present value of the fees paid to the Insurer will be less
than the present value of the expected interest savings on the Bonds as a result of the guarantee,
computed using the yield on the Bonds (detennined with regard to such guarantee payments) as
the discount rate;
(b) The guarantee creates a guarantee in substance because it imposes a secondary
liability on the Insurer that unconditionally (except for reasonable procedural or administrative
requirements) shifts substantially all of the credit risk for all or part of the payments on the
Bonds;
(c) The Insurer is not a co-obligor and does not expect to make any payments other
than payments for which the Insurer will be reimbursed immediately;
(d) The Insurer and any related parties will not use more than ten percent of the gross
proceeds of the Bonds that are guaranteed by the Insurer;
(e) The fees paid or to be paid to the Insurer do not exceed a reasonable ann's length
charge for the transfer of credit risk;
(f) The fees paid or to be paid to the Insurer do not include any payment for any
direct or indirect services other than the transfer of credit risk (including fees for the Insurer's
overhead and other costs relating to the transfer of credit risk);
-5-
1001876..).00C
(g) The fees paid or to be paid to the Insurer do not include any payments for the
costs of Wlderwriting or remarketing the Bonds or for the cost of insurance for casualty to the
City's property; and
(h) No portion of the fees paid or to be paid to the Insurer is refundable upon
redemption of the Bonds before the final maturity date in an amount that would exceed the
portion of such fees that had not been earned.
The yield with respect to that portion of the Bonds subject to optional redemption (other
than the Bonds scheduled to mature in the years 2016 through 2021 (the "Yield·to-Call Bonds"))
is computed by treating such Bonds as retired at the stated redemption price at the final maturity
date because (a) the City has no present intention to redeem prior to maturity the Bonds which
are subject to optional redemption; (b) no Bond is subject to optional redemption at any time for
a price less than the retirement price at final maturity plus accrued interest; (c) no Bond is subject
to optional redemption within five years of the issue date of the Bonds; (d) no Bond subject to
optional redemption is issued at an issue price that exceeds the stated redemption price at
maturity of such Bond by more than one-fourth of one percent multiplied by the product of the
stated redemption price at maturity of such Bond and the number of complete years to the first
optional redemption date for such Bond; and (e) no Bond subject to optional redemption bears
interest at a rate that increases during the term of the Bond. No Bond is subject to mandatory
early redemption.
Yield with respect to the Yield-to-Call Bonds is computed by treating such Bonds as
retired at the stated redemption price on the dates that produce the lowest combined yield on the
Bonds because the Underwriters have represented that such portion of the Bonds is issued at an
issue price that exceeds the stated redemption price at maturity of each such Bond by more than
one-fourth of one percent multiplied by the product of the stated redemption price at maturity of
each such Bond and the number of complete years to the first optional redemption date for each
such Bond. Such lowest yield determination is made separately for each individual group of
Bonds.
The yield on the Bonds calculated in this manner, as shown in Exhibit B, is 3.7410
percent.
The City has not entered into a hedging transaction with respect to the Bonds. The City
will not enter into a hedging transaction with respect to the Bonds unless there is first received an
opinion of nationally recognized bond counsel to the effect that such hedging transaction will not
adversely affect the exclusion of interest on the Bonds from gross income for federal income tax
pwposes.
14. Temporary Periods and Yield Restriction.
(a) Pre-issuance Accrued Interest. The amount described in paragraph 9 represents
accrued interest on the Bonds for a period not in excess of one year and will be expended within
one year, therefore, such amount may be invested at an unrestricted yield.
(b) Uninvested Amounts. The amounts described in paragraphs 8(b), 8(d) and 8(£)
will not be invested and, therefore, are not subject to yield restriction.
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1001876..).DOC
(c) Issuance Costs. It is expected that the amount described in paragraph 8(c) will be
disbursed within 90 days of the date hereof for costs of issuing the Bonds; therefore, such
amount will be invested for an allowable temporary period. To the extent any portion of the
amount described in paragraph 8( c) is not expended as described herein, the City will take steps
to restrict the investment of such amounts to a yield which is not materially higher than the yield
on the Bonds.
(d) Rounding Amount The amount described in paragraph 8( e) will be invested at a
yield that is not lrigher than the yield on the Bonds.
(e) Current Refunding. The amount described in paragraph 8(a) will be disbursed
within 90 days of the date hereof to pay principal of and interest on the Refunded Bonds.
Therefore, such amount may be invested for an allowable temporary period.
15. Funds.
(a) Debt Service Fund. Pursuant to the Ordinance, the City has created the debt
service fund designated the "City of Lubbock, Texas, Tax and Waterworks System Surplus
Revenue Refunding Bonds, Series 2005, Interest and Sinking Fund" (i.e., the Debt Service Fund)
which will be used primarily to achieve a proper matching of revenues and debt service on the
Bonds, within each Bond Year. The revenues are anticipated to be sufficient to pay debt service
each year on the Bonds. The Debt Service Fund will be depleted at least once each year except
for a reasonable carryover amount not to exceed the greater of (a) one year's earnings on the
Debt Service Fund or (b) one-twelfth of annual debt service. The City reasonably expects that
any such revenues deposited in the Debt Service Fund will be disbursed within 13 months of the
date of receipt of such revenues by the City. Any such amount not expended within such period
will be invested at a yield not "materially higher" than the yield on the Bonds, except as set forth
in paragraph 16 below.
16. Minor Portion. All gross proceeds will be invested in accordance with paragraphs
14 and 15 above. To the extent such amounts remain on hand following the periods set forth in
paragraphs 14 and 15 above or exceed the limits set forth in paragraph 15 above, the City will
invest such amounts at a restricted yield as set forth in such paragraphs; provided, however, that
a portion of such amounts, not to exceed in the aggregate the lesser of $1 00,000 or five percent
of the sale proceeds of the Bonds (the "Minor Portion"), may be invested at a yield which is
higher than the Yield on the Bonds.
17. Issue. There are no other obligations which (a) are sold at substantially the same
time as the Bonds (i.e., within 15 days), (b) are sold pursuant to the same plan of financing with
the Bonds, and (c) will be paid out of substantially the same source of funds as the Bonds.
18. Compliance With Rebate Requirements. The City has covenanted in the
Ordinance that it will take all necessary steps to comply with the requirement that ''rebatable
arbitrage earnings" on the investment of the "gross proceeds" of the Bonds, within the meaning
of section 148( f) of the Code be rebated to the federal government. Specifically, the City will (a)
maintain records regarding the investment of the "gross proceeds" of the Bonds as may be
required to calculate such "rebatable arbitrage earnings" separately from records of amounts on
~7-
1001876-'.DOC
deposit in the funds and accounts of the City which are allocable to other bond issues of the City
or moneys which do not represent "gross proceeds" of any bonds of the City, (b) calculate at
such intervals as may be required by applicable Regulations, the amount of "rebatable arbitrage
earnings," if any, earned from the investment ofthe "gross proceeds" of the Bonds and (c) pay,
not less often than every fifth anniversary date of the delivery of the Bonds and within 60 days
following the final maturity of the Bonds, or on such other dates required or pennitted by
applicable Regulations, all amounts required to be rebated to the federal government. The City
will maintain a copy of any such calculations, and all documentation necessary to produce such
calculations or necessary to establish qualification for an exemption from the need to produce
such calculations, for at least six years after the close of the final calendar year during which any
Bond is outstanding. Further, the City will not indirectly pay any amount otherwise payable to
the federal goverrunent pursuant to the foregoing requirements to any person other than the
federal government by entering into any investment arrangement with respect to the "gross
proceeds" of the Bonds that might result in a reduction in the amount required to be paid to the
federal government because such arrangement results in a smaller profit or a larger loss than
would have resulted if the arrangement had been at ann 's-length and had the yield on the issue
not been relevant to either party.
19. Not an Abusive Transaction.
(a) General. No action taken in connection with the issuance of the Bonds is or will
have the effect of (a) enabling the City to exploit, other than during an allowable temporary
period, the difference between tax-exempt and taxable interest rates to obtain a material financial
advantage (including as a result of an investment of any portion of the gross proceeds of the
Bonds over any period of time, notwithstanding that, in the aggregate, the gross proceeds of the
Bonds are not invested in higher yielding investments over the term of the Bonds), and (b)
overburdening the tax-exempt bond market by issuing more bonds, issuing bonds earlier, or
allowing bonds to remain outstanding longer than is othetWise reasonably necessary to
accomplish the governmental purposes of the Bonds, based on all the facts and circwnstances.
Specifically, (i) the primary purpose of each transaction undertaken in connection with the
issuance of the Bonds is a bona fide governmental purpose; (ii) each action taken in connection
with the issuance of the Bonds would reasonably be taken to accomplish the governmental
purposes of the Bonds if the interest on the Bonds were not excludable from gross income for
federal income tax purposes (assuming the hypothetical taxable interest rate would be the same
as the actual tax-exempt interest rate on the Bonds); (iii) the proceeds of the Bon4s will not ·~
exceed by more than a minor portion the amount necessary to accomplish the governmental
purposes of the Bonds and will in fact not be substantially in excess of the amount of proceeds
allocated to expenditures for the governmental purposes of the Bonds.
(b) No Re-refunding. No portion of the Refunded Bonds has been refunded or
defeased other than by reason of the issuance of the Bonds.
(c) No Sinking Fund. No portion of the Bonds has a tenn that has been lengthened
primarily for the purpose of creating a sinking fund or similar fUnd with respect to the Bonds and
thereby eliminating significant amounts of negative arbitrage in the Escrow Fund.
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l001876J.DOC
(d) No Noncallable Bonds. The Refunded Bonds do not include any noncallable
Refunded Bonds that have been refunded in order to invest proceeds in the Escrow FWld
allocable to the noncallable Refunded Bonds at a yield that is higher than the yield on the Bonds
and thereby eliminate significant amounts of negative arbitrage in the Escrow Fund.
(e) No Window Refunding. No portion of the Bonds has been structured with
maturity dates the primary purpose of which is to make available released revenues that will
enable the City to avoid transferred proceeds or to make available revenues that may be invested
to be ultimately used to pay debt service on another issue of obligations.
(f) No Sale of Conduit Loan. No portion of the gross proceeds of the Refunded
Bonds or the Bonds has been or will be used to acquire, finance, or refinance any conduit loan.
20. No Arbitrage. On the basis of the foregoing facts, estimates and circwnstances, it
is expected that the gross proceeds of the Bonds will not be used in a manner that would cause
any of the Bonds to be an "arbitrage bond" within the meaning of section 148 of the Code and
the Regulations. To the best of the knowledge and belief of the undersigned, there are no other
facts, estimates or circumstances that would materially change such expectations.
21. No Private Use. Payments or Loan Financing.
(a) General. The City reasonably expects, as of the date hereof, that no action or
event during the entire stated term of the Bonds will cause either the ''private business tests" or
the ''private loan financing test," as such terms are defined in the Regulations, to be met.
(i) No portion of the procOOds of the Bonds will be used and no portion of the
proceeds of the Refunded Bonds has been used in a trade or business of a nongovernmental
person. For pmposes of determining use, the City will apply rules set forth in applicable
Regulations and Revenue Procedures promulgated by the Internal Revenue Service, including,
among others, the following rules: (A) Any activity carried on by a person other than a natural
person or a state or local governmental unit will be treated as a trade or business of a
nongovernmental person; (B) the use of all or any portion of the project financed by the
Refunded Bonds (the "Project") is treated as the direct use of proceeds; (C) a nongovernmental
person will be treated as a private business user of proceeds of the Bonds or the Refunded Bonds
as a result of ownership, actual or beneficial use of the proceeds pursuant to a lease, or a
management or incentive payment contract, or certain other arrangements such as a take-or-pay
or other output-type contract; and (D) the private business use test is met if a nongovernmental
person has special legal entitlements to use directly or indirectly the Project.
(ii) The City has not taken and will not take any deliberate action that would
cause or permit the use of any portion of the Project to change such that such portion will be
deemed to be used in the trade or business of a nongovernmental person for so long as any of the
Bonds remains outstanding (or until an opinion of nationally recognized bond counsel is received
to the effect that such change in use will not adversely affect the excludability from gross income
for federal income tax pwposes of interest payable on the Bonds). For this purpose any action
within the control of the City is treated as a deliberate action. A deliberate action occurs on the
-9-
I 001876_:2.DOC
date the City enters into a binding contract with a nongovernmental person for use of the Project
that is not subject to any material contingencies.
(iii) No portion of the proceeds of the Bonds will be directly or indirectly used
to make or finance a loan to any person other than a state or local governmental unit. Except to
the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the
City shall not use gross proceeds of the Bonds to make or finance loans to any person or entity
other than a state or local government. For purposes of the foregoing covenant, gross proceeds
are considered to be "loaned" to a person or entity if (1) property acquired, constructed or
improved with 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 such property are otherwise transferred in a transaction which is the economic
equivalent of a loan.
(b) Dispositions of Personal Propertv in the Ordinarv Course. The City does not
reasonably expect that it will sell or otherwise dispose of personal property components of the
Project financed with the Bonds other than in the ordinary course of an established governmental
program that satisfies the following requirements:
(i) The weighted average maturity of the portion of the Bonds financing
personal property is not greater than 120 percent of the reasonably expected actual use of such
personal property for governmental purposes;
(ii) The reasonably expected fair market value of such personal property on
the date of disposition will be not greater than 25 percent of its cost;
(iii) Such personal property will no longer be suitable for its governmental
purposes on the date of disposition; and
(iv) The City is required to deposit amounts received from such disposition in
a commingled fund with substantial tax or other governmental revenues and the City reasonably
expects to spend such amounts on governmental programs within 6 months from the date of
commingling.
Furthermore, the City will not sell or otherwise dispose of all or any portion of the
Project in circumstances in which the foregoing requirements are not satisfied unless it has
received an opinion of nationally recognized bond counsel to the effect that such disposition will
not adversely affect the treatment of interest on the Bonds as excludable from gross income for
federal income tax purposes.
(c) Other Agreements. The City will not enter into any agreement with any
nongovernmental person regarding the use of all or any portion of the Project during the stated
term of the Bonds unless it has received in each and every case an opinion of nationally
recognized bond counsel to the effect that such agreement will not adversely affect the treatment
of interest on the Bonds as excludable from gross income for federal income tax purposes.
-10~
IOOI876_.2.DOC
22. Weighted Average Maturity. The Weighted Average Maturity of the Bonds set
forth on Exhibit B attached to this Certificate is the sum of the products of the Issue Price of each
group of identical Bonds and the number of years to maturity ( detennined separately for each
group of identical Bonds and taking into account mandatory redemptions), divided by the
aggregate Sale Proceeds of the Bonds.
23. Bonds are not Hedge Bonds. The City represents that not more than 50 percent of
the proceeds of the Refimded Bonds was invested in nonpurpose investments (as defined in
section 148(f)(6)(A) of the Code) having a substantially guaranteed yield for four years or more
within the meaning of section 149(g)(3)(A)(ii) of the Code, and the City reasonably expected at
the time the Refunded Bonds were issued that at least 85 percent of the spendable proceeds of
each such issue would be used to carry out the governmental purposes of such issue within the
three-year period beginning on the date of issue of such Refunded Bonds.
EXECUTION PAGE FOLLOWS
-11-
1001876,.:Z.DOC
WITNESS MY HAND, this lSth day of August, 2005.
CITY OF LUBBOCK, TEXAS
By: ;/ut~
Title: Chief Financial Officer/ Assistant City Manager
1001876_2.DOC
)
)
EXHIBIT A
CERTIFICATE OF UNDERWRITERS
RBC Dain Rauscher Inc. has acted as manager (the "Manager") of the group of
underwriters (the "Underwriters") in connection with the sale and delivery of the City of
Lubbock, Texas (the "City") of its Tax and Waterworks System Surplus Revenue Refunding
Bonds, Series 2005 in the aggregate principal amount of $43,080,000 (the "Bonds"). I, the
undersigned, hereby certify as follows on behalf of the Underwriters:
1. I am the duly chosen, qualified and acting officer of the Manager for the
office shown below my signature; as such, I am familiar with the facts herein certified
and I am duly authorized to execute and deliver this certificate on behalf of the Manager
and the Underwriters. I am the officer of the Manager charged, along with other officers
of the Manager, with responsibility for the Bonds.
2. The Underwriters have purchased the Bonds from the City pursuant to a
Bond Purchase Agreement dated July 1, 2005, for an aggregate purchase price of
$45,966,237.20, which price includes accrued interest in the amount of$247,500.00. The
Underwriters have made a bona fide public offering to the public of all of the Bonds of
each maturity at the issue prices to the public set out in the on the inside cover of the
Official Statement. The issue prices set forth in the Official Statement were determined
on the date the Bonds were purchased by the Underwriters based on the reasonable
expectations regarding the initial public offering prices. The issue price for each maturity
of the Bonds, as set forth in the Official Statement, represents the first price (including
original issue premium and discount and accrued interest to the issue date only) of the
Bonds at which a substantial amount (at least 10 percent) of each such maturity was sold
to the public. The aggregate of such issue prices of all of the Bonds is $46,257,821.05.
The initial public offering prices described above do not exceed the fair market value for
the Bonds on the sale date. The term "public," as used herein, does not include
bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity
of underwriters or wholesalers.
The Underwriters hereby authorize the City to rely on the statements made herein in connection
with making the representations set forth in the Federal Tax Certificate to which this certificate is
attached and in its efforts to comply with the conditions imposed by the Code on the exclusion of
interest on the Bonds from the gross income of their owners. The Underwriters hereby authorize
Vinson & Elkins L.L.P. to rely on this certificate for purposes of its opinion regarding the
treatment of interest on the Bonds as excludable from gross income for federal income tax
purposes. Capitalized terms used herein and not otherwise defined have the meaning ascribed to
such terms in the Federal Tax Certificate to which this certificate is attached.
RBC DAIN RAUSCHER INC.
By:~~ .l~cn
Title: £\ \] ?
A-I
Tax Certiticate.DOC
EXHffiiTB
CERTIFICATE OF FINANCIAL ADVISOR
First Southwest Company has acted as financial advisor to the City of Lubbock, Texas
(the "CitY'), in cormection with the sale and delivery of the Tax and Waterworks System Surplus
Revenue Refunding Bonds, Series 2005, in the aggregate amount of$43,080,000 (the "Bonds").
I, the undersign~ hereby certify as follows:
1. I am the duly chosen, qualified and acting officer of the Financial Advisor
for the office shown below my signature; as such, I am familiar with the facts herein
certified and I am duly authorized to execute and deliver this certificate on behalf of the
Financial Advisor. I am the officer of the Financial Advisor charged, along with other
officers of the Financial Advisor, with responsibility for issuing the Bonds.
2. The Financial Advisor computed the Weighted Average Maturity of the
Bonds to be 8.794 years as set forth in paragraph 22 of the Federal Tax Certificate.
3. I have worked closely with representatives of the City in structuring the
financial terms of the Bonds and the refunding of the Refunded Bonds. I hereby
represent that to the best of my knowledge the statements set forth in paragraph 19 of the
Federal Tax Certificate to which this certificate is attached, are true.
4. The amount of $107,657.63 of the cost of insurance for the Bonds is set
forth in Insurer's commitment and does not include any payment for any direct or indirect
services other than the transfer of credit risk, unless the compensation for those other
services is separately stated, reasonable, and excluded from such fee. Such fee does not
exceed a reasonable, arm's length charge for the transfer of credit risk. The present value
of the debt service savings expected to be realized as a result of such insurance exceeds
the amount of the fee set forth above. For this purpose, present value is computed using
the yield on the Bonds, detennined by taking into account the amount of the fee set forth
above, as the discount rate. No portion of the fee payable to the Insurer is refundable
upon redemption of any of the Bonds in an amount which would exceed the portion of
such fee that had not been earned.
5. The yield on the Bonds, based on the Issue Price set forth in Exhibit A
(including Pre-Issuance Accrued Interest) is not less than 3.7410 percent (the ''Yield").
For purposes of this certificate, the term "yield" means that yield which is computed as
described in paragraph 13 of the Federal Tax Certificate.
The Financial Advisor hereby authorizes the City to rely on the statements made herein in
connection with making the representations set forth in the Federal Tax Certificate to which this
certificate is attached and in its efforts to comply with the conditions imposed by the Code on the
exclusion of interest on the Bonds from the gross income of their owners. The Financial Advisor
hereby authorizes Vinson & Elkins L.L.P. to rely on this certificate for purposes of its opinion
regarding the treatment of interest on the Bonds as excludable from gross income for federal
income tax purposes. Capitalized terms used herein and not otherwise defined have the meaning
ascribed to such tenns in the Federal Tax Certificate to which this certificate is attached.
B-1
1001876-.J.DOC
•
FIRST SOUTHWEST COMPANY
By: c::;s:~ ~
Title: t1<-€ r&es,'PcR.vr
B-2
Tax Certificate.DOC
EXIDBIT C
Certificate of First Southwest Company ("FSC"), the Financial Advisor to the City of Lubbock, Texas
regarding the Swap Transaction entered into between JP Morgan Chase Bank-New York
(''Counterparty") and City of Lubbock, Texas ("City") dated April 11, 2002
FSC served as financial advisor to the City with respect to the above-described Swap Transaction
involving a notional dollar amount of $40,465,000. The City entered into the Swap Transaction in
connection with an anticipative borrowing in 2005, to prepay and refund the obligation of the City to
pay debt service on Special Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series 1995 issued
by the Brazos River Authority (herein referred to as the ''Authority") to finance or refinance the
construction of surface water supply facilities known as Lake Alan Henry pursuant to a Water Supply
Agreement, dated as of May 11, 1989, as amended, between the Authority and the City. Under the
Swap Transaction, on each August 1, starting August I, 2003 up to and including August 1, 2005, the
Counterparty agreed to pay a premium of $280,000 to the City (the "Option Purchase Payments").
Additionally, the Counterparty was given the right, but not the obligation, to terminate the transaction in
whole at any time when the daily weighted average of the BMA Municipal Swap Index for any
immediately preceding rolling consecutive 180-day period was more than 6.50% per annum, with no
market value cost to the City (the "Counterparty Termination Option"). FSC is advised that the City has
determined to terminate the 2002 Swap Transaction with the Counterparty effective as of June 30, 2005 .
In determining the amount of the payment to be made by the City to the Counterparty in regards
to the termination of the Swap Transaction, the Counterparty has represented that in arm's length
transactions in an open market, involving non-affiliated willing buyers and non-affiliated willing sellers,
$812,000 (the "Option Buy-Out Amount"), of the total termination amount of $6,692,000 is properly
allocable to the Counterparty Termination Option.
In our analysis of the termination of the Swap Transaction, FSC did not undertake to determine
the specific fair market value of the Counterparty Termination Option. For the purpose of issuing this
certificate, we conducted no independent review or analysis of the U.S. municipal bond and interest rate
swap markets specific to this transaction, nor did we review, for purposes of this opinion, specific
comparable transactions with similar actual or perceived credit quality to those of the City and/or the
Counterparty. We did not make an independent inquiry into the creditworthiness of the Counterparty or
make any determinations or projections concerning the likelihood that the Counterparty Termination
Option would or could be exercised in any particular time period. Instead, the views expressed in this
certificate are based solely upon FSC's general knowledge of and experience in the U.S. municipal bond
and interest rate swap markets as same may be applicable to the Swap Transaction.
United States interest rate swap transactions are normally not conducted on exchange-type
markets with easily accessible quotation systems and procedures. Nonnally dealers establish their price
and other terms for a transaction directly with a counterparty. Major inconsistencies and wide variations
between bids and offers, based on credit and forward rate expectations, are common in this marketplace.
Inconsistencies in comparisons can also result from the fact that fixed rates in swap transactions
generally take into account highly variable costs associated with implementing, executing, hedging,
enhancing credit and monitoring of the transaction. Additionally, it is common for interest rate swaps to
be customized and tailored to an entity's specific asset or liability needs and, therefore, perfonning a
stand-alone pricing and comparative analysis may not result in an accurate evaluation of the actual terms
I
and conditions that would be achieved in any particular transaction under any particular structure.
Similarly, valuation of separate terms and provisions contained with a swap transaction can vary widely,
based upon a number of factors, including the financial condition of the parties involved, the goals of the
parties in entering into the transaction, general economic conditions and the projections and expectations
of the respective parties to the transaction. Other factors may affect the swap market generally, such as
market liquidity, availability of collateral, changes in tax status, required regulatory reserves of swap
counterparties, volatility in interest rates, rating agency changes or reviews of swap counterparties, and
other significant world events, causing deviations from the projected outcome of swap transactions,
which deviations may be material.
Subject to all the foregoing, FSC is of the view that the Option Buy-Out Amount is comparable
to, and not lower than, the amount that would have been paid in an arm's length transaction in an open
market, involving a non-affiliated willing buyer and a non-affiliated willing seller. Likewise, FSC
believes that the difference between the total termination amount to be paid by the City and the Option
Buy-Out Amount (i.e., $5,880,000) is not greater than the amount that would have been paid for the
termination of a swap transaction in an arm's length transaction, under circumstances where the swap
transaction did not include the Counterparty Termination Option and the Option Purchase Payments.
The information set forth herein speaks as of the date hereof, is limited to the matters expressly set forth
herein and is solely for the benefit of the City and may not be relied upon in any manner whatsoever by
any other person, except for the agents and representatives of the City in conducting the affairs of the
City. Further, this information may not be disclosed publicly without the prior written consent ofFSC.
Dated: June 30, 2005
FIRST SOUTHWEST COMPANY
By (\1\~r»-fi
Name: Michael J. Marz
Title: Vice Chairman
2
)
Vinson &Elkins
Julie Wllfiema j\\fliamsOvelaw.oom
Tel713.758.3878 Fax 713.815.5059
August 19,2005
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
7003 1680 0000 6477 0072
District Director
Internal Revenue Service
Ogden, UT 84201
Re: $43,080,000 City of Lubbock, Texas Tax and Waterworks System Surplus
Revenue Refunding Bonds, Series 2005
Dear Sir:
Enclosed please find an originally executed Form 8038-G (Information Return for Tax-
Exempt Governmental Obligations) for the above-captioned bond issue.
Please acknowledge receipt of the Fonn 8038-G by stamping and returning the copy of
the Form 8038-G attached to the self-addressed, postage-paid envelope that we have provided.
cc: JenniferTaffe/
94S155_l.DOC
VInson A Elkins U.P Attorney$ It LJrw Austin Beijing Dallas
0\bai Houston l.onclon Moscow New Yorll Tokyo Washington
Very truly yours,
First City Tower, 1001 Fannin Street, Suite 2300, Houston. Texas 77002~780
Te17t3.758.2222 Fax 713.758.2346 www.vetaw.com
Form8038-G Information Return for Tax-Exempt Governmental Obligations
~ under lnll!mal Awafale.Code -=t1on 149(e)
~ See ... alelnstructlons.
Caution: If the issue price is undiJr $100,000, use Fonn 8038-GC.
Education •••........•..•.......•••••.....•....•...•••.•••••••..•.•.....•.•••
Health and hospital ......••.•.............•.....••...........•.....•...•......
Transportation .......•.••.•.......•••.......................................
14 Public safety .••...............•..........••....•••.........•................
Environment (including sewage bonds) ....•.........•.............................
0 Housing , ................................................................. .
Iii Utilities . . . . . • • . • . . . . . . • • • . . . . . . . . . . • • . . • . • . . . • • • • . . . . . . . . . . . . . . . . . . . . . . . . . .
0 Other. Describe~-------------------------
11 obligations are TANs or RANs. check box~ 0 If obligations are BANs, check box ..... .
If are in the form of a lease or installment check box ................ .
22 Proceeds used for accrued interest ..........•.......................•...............
23 Issue price of entire Issue (enter amount from line 21. column (b)) ......................... .
Proceeds used for bond issuance costs (including underwriters' discount)
Proceeds used for credit enhancement .......•.•.................
Proceeds allocated to reasonably required reserve or replacement fund ..
Proceeds used to currently refund prior issues ..............•......
Proceeds used to advance refund prior issues ......•......•.......
Total (add lines 24 through 28) ..•.....•.................•....•....•................
"'"'"'""'""~ of the issue line 29 from line 23 and enter amount
01\AB No. 1545.()720
31 Enter the remaining weighted average maturity of the bonds to be currenUy refunded. . . . . . . . . . . ..,.. ___ ___,j9~.3"'1ul~Y..;;.ea;;..rs..;;.
32 Enter the remaining weighted average maturity of the bonds to be advance refunded . . . . . . . . . . . ..,.. ____ __....:CuOu.l..Lyea.::..;::;;rs..;;.
33 Enter the last date on which the refunded bonds will be called •..........•••.....••...•... ..,.. 8/1612005
Enter the the refunded bonds were issued
35 Enter the amount of the state volume cap allocated to the issue under section 141{b)(5) ....•....
36a Enter the amount cl gross proceeds invested or to be invested in a guararteecl investment cont~ (see instructions) . • . •
b Enter the final maturity date of the guaranteed Investment contract..,. ----------
37 Pooled financings: a Proceeds of this issue thai are to be used tom~ loclls to other governmental 111its .•..•••.•..
b If this issue is a loan made from the proceeds of another tax-exempt issue, check box ..,.. 0 and enter the name of the ·
issuer..,.. and the date of the issue..,..-------
38 If the issuer has designated the issue under section 265(b)(3)(B){i)(lll) (small issuer exception), check box ............ ..,.. 0
39 If the issuer has elected to pay a penalty in lieu ofarbitrage rebate, check box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..,.. 0
40 If the issuer has identified a hedge, check box ..••.... : .......•.........•......................•......... ~
Undet penaltie$ ol perjury; I del(:lare that I haw elCIIITlined tflla return end acoompanylng schedules and stalemelltS, and to lhe best of myknowtedge and belief,
SHelgn lh~.ey ar~e, : ~~~-/) ~ • JD • 0. 5
re -L ~ ~ Lee Ann Dumbauld; CFO/ACM
Sl ~-·s authorized representallve Date , T)1le or Pflnt name and title
Fer Paperwork Reduction Act Notice, see page 2 of the Instructions. ISA Fonn 8038-G (Rev. 11·2000)
S1F FE00403F
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CERTIFIED MAIL-RECEIPT
(Domestic Mail On/ :No /n'i 1 ance Coverage Pro~tded)
City of Lubbock. Texas Tax and
WaterWOrks System Swplus
Revenue RefuDdiDg Boods ...... 1--------1
c.tledfee
AIUn fll!!:lept Fee (Endol-11 Recjuhd)
~~Fee (811101•••11 A1qi1nc0
1-------1
1-------1
T<*l ~&Fe. $ o....:.. _____ _,
0
District Director
I:Dla'Dal R.evcaue Service CeDtcr
()cdcD, ur 84201
. · ..
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RECEIPT AND CERTIFICATE OF DELIVERY
OF PAYING/AGENT REGISTRAR
The undersigned, authorized representative of JPMorgan Chase Bank, as Paying
Agent/Registrar, hereby makes the following acknowledgments and certifications in connection
with the issuance and delivery of $43,080,000 principal amount of City of Lubbock, Texas, Tax
and Waterworks System Surplus Revenue Refunding Bonds, Series 2005 (the "Bonds").
Capitalized terms used herein and not otherwise defined shall have the meanings assigned
thereto in the Ordinance authorizing the issuance thereof adopted by the City Council of the City
of Lubbock, Texas (the "Issuer''). The undersigned hereby:
1. Acknowledges receipt of (i) $45,966,237.20 from RBC Dain Rauscher Inc. (the
'Vnderwriter"), representing the principal amount of the Bonds plus a premium of$2,930,321.05
plus accrued interest of $247,500.00 and less underwriters' discount of $291,583.85; (ii)
$4,747,294.98 from the Brazos River Authority, representing reserve funds held in connection
with the Brazos River Authority Special Facilities (Lake Alan Hemy) Revenue Refunding
Bonds, Series 2005, being refunded by the Bonds and (iii) $812,000 from the City representing
the City's equity contribution.
2. Acknowledges and certifies the application of amounts described in paragraph 1
hereof as required by and in accordance with the Closing Instructions attached hereto as
Exhibit A prepared by First Southwest Company, the Issuer's Financial Advisor.
4. Certifies that the Initial Bond for the Bonds, registered by the Comptroller of
Public Accounts of the State of Texas and representing the aggregate principal amount of the
Bonds, was delivered to or upon order of the Underwriter and was duly canceled this date upon
delivery of the definitive Bonds to the Underwriter through The Depository Trust Company.
DATED: August 15,2005.
By:
Title: ~President
LUB200/16000
Dallas 1003019_t.DOC
~ j First Southwest Comoam' := Investment Bankers Since-,946
1 001 Main Street
Suite 802
Lubbock, Texas 79401
806.749.3792 Direct
806.790.5191 Cell
806.749.3792 Fax
August 11 , 2005
City of Lubbock
Ms. L8e Ann Dumbauld
P. 0 . Box 2000
Lubbock, Texas 79457
Phone: (806} 775-2016
Fax: (806) 775-2051
City of Lubbock
Mr. Andy Burcham
P .0 . Box 2000
Lubbock, Texas 79457
Phone: (806) 775-2149
Fax: (806) 775-3273
JPMorgan Chase Bank
Mr. Israel Lugo
2001 Bryan Street -a" Aoor
Dallas, Texas 75201
Phone : (21 4) 468-51 05
Fax: (214)~322
Mccall, Parkhurst & Horton L.L.P.
Mr. Jeff Leuschel
717 North Harwood, Ninth Floor
Dallas, Texas 75201
Phone: (214)7~9200
Fax: (214) 754-9250
Vinson & Elkins LL.P.
Ms. Jennifer W. Taffe
3700 Trammell Crow Center
2201 Ross Avenue
Dallas, Texas 75201
Phone: (214) 220-7922
Fax: (214) 999-7922
Brazos River Authority
Mr. Bill Trussell
P.O. Box 7555
VVaoo,Texas 76714
Phone: (254)761~100
Fax: (254) 761-3215
Vince Vlallle
Vice President
vviaille@firstsw.com
ABC Dain Rauscher
Ms. Brenda Davis
2711 N. Haskell Ave., Suite 2400
Dallas, Texas 75204
Phone: (214) 989-1153
Fax: (214) 989-1158
Financial Security Assurance
Ms.UIIie Santana
350 Park Avenue
New York, NY 10022
Phone: (21 2)~3537
Fax: (212)339~872
Re: Closing Instructions for the $43,080,000 City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue
Refunding Bonds, Series 2005 (the •Bonds")
Payment for the above referenced Bonds is scheduled to occur at 10:00 AM, COT, on Monday, August 15,2005, and
payment therefor is to occur at the offices of JPMorgan Chase Bank (" JPMotgan").
SOURCES OF FUNDS
Par Amount of Bonds ............................................................................................. $ 43,080,000.00
Aeoffering Premium................................................................................................ 2,930,321.05
Planned Issuer Equity Contribution ........................................................................ 812,000.00
Transfers from Prior Issue Debt Service Reserve Funds ............................. .......... 4,241 ,406.14
Transfers from Prior Issue Repa ir & Replacement Fund........................................ 505,888.84
Accrued Interest (07/01105 to 08/15105) ................................................................. 247,500.00
Less: Underwriters Discount.................................................................................. (291 ,583.85)
TOTAL FUNDS AVAILABLE AT CLOSING............................................................... _$ ___ 5..;..~1 ... 52-5...,,532==.1=8=
USES OF FUNDS
Refunding BRA Bonds............................................................................................ $ 43,746,592.67
Deposit to Interest & Sinking Fund ........................................................................ 754,281.88
Gross Bond Insurance Fee ..................................................................... ,............... 107,657.63
Termination Value of Swap .................................................................................... 5,805,000.00
Termination of Upfront Payment............................................................................. 807,000.00
Paying Agent/Registrar Fee ............................ ......... .............................................. 300.00
Expenses for Swap Termination............................................................................. 75,000.00
Expenses for Option Termination........................................................................... 5,000.00
Costs of Issuance................................................................................................... 224.700.00
TOTAL USES OF FUNDS ......................................................................................... -$~_..5,.1 ... 525-=-,5•32•.1=8...,
(A} On Monday, August 15, 2005, the City of Lubbock, shall wire $812,000 in immediately available funds to the
paying agent bank, JPMorgan, prior to 10:00 AM, COT, (Planned Issuer Equity Contribution). See wiring instructions
below.
(B) On Monday, August 15, 2005, the Brazos River Authority, shall wire $4,747,294.98 in immediately available
funds to the paying agent bank, JPMorgan, prior to 10:00 AM, COT, (Transfer from Prior Issue Debt Service Reserve
Fund and Prior Issue Repair Fund}. See wiring instructions below.
(C) On Monday, August 15,2005, the Underwriters, represented by RBC Dain Rauscher, shall wire $45,966,237.20
in immediately available funds to the paying agent bank, JPMorgan, prior to 10:00 AM, COT, for the account of the
City of Lubbock, in payment for the purchase price of the Bonds. See wiring instructions below.
Wiring Instructions for JPMorgan are as follows:
JPMorgan Chase
ABA: 113000609
Credit A/C #: 00103237013
FFC: City of Lubbock, BRA Refunding Bonds, Series 2005
Attn: Issuer Administrative Services /Israel Lugo
(D) On Monday, August 15, 2005, JPMorgan shall wire or transfer immediately available funds, promptly upon
receipt of the wire from RBC Dain Rauscher, and in no event later than 11 :00 AM, COT, as follows:
(1) Transmit by wire or transfer to The Bank of New Yor1<
ABA: 021000018,
Acct. Name: Financial Security Assurance Inc.
Account No.: 8900297263
For the City of Lubbock, Texas Policy# 205525-N ........................................................ $
(2) Retain in payment to defease the Brazos River Authority
Special Facilities (Lake Alan Henry) Revenue Refunding Bonds, Series 1995
Current Refunding due .................................................................................................. .
(3) Transmit by wire or transfer to JPMorgan Chase Bank NA, New York, NY
BIC: CHASUS33XXX
A/C: 099997979
JPMCB NA-New YOtk,. Columbus
BIC: CHASUS33xxx
Ref: Swaps
Tennination of Swap ..................................................................................................... .
{4) Transmit by wire to Wells Fargo Bank, N.A., San Francisco, CA
ABA #121000248, Attn: Ms. Teena Blasdell
Phone {806) 788-2632, depository bank for City of Lubbock for
credit to City of lubbock Master Account #4000047951 (I&S Fund) ............................. .
(5) Retain In payment of services to be rendered as Paying Agent/Registrar .................... .
(6) Transmit by wire to Bank One, Texas
ABA #111000614, Attn: Jack Addams
Account #1822155345 for client# 0336.037
107,657.63
43,7 46,592.67
6,692,000.00
754,281.88
300.00
for credit to Rrst Southwest Company for costs of issuance .......................................... ___ .s.221!0.:4:!:,a..7~0~0~.oo~
Total Disbursement of Funds....................................................................................................... i 51 525 532 18
The cooperation of the addressees with the above instructions is greatly appreciated. If you have any questions or
cannot comply with any portion of the instructions, please contact us immediately at (806) 749-3792.
Sincerely yours,
Vince Viallle
Vice President
cc: First Southwest Company
Mr. Jack Addams
Ms. Mary Ann Ounda
Mr. Joe Brawner
2
DISCLOSUREs NO DEFAULT AND TAX CERTIFICATE OF
FINANCIAL SECURITY ASSURANCE INC.
The undersigned hereby certifies on behalf of Financial Security Assurance Inc. ("Financial Security"), in
connection with the issuance by Financial Security of its Policy No. 205525-N (the "Policy") in respect of
the $43,080,000 in aggregate principal amount of City of Lubbock, Lubbock County, Texas Tax and
Waterworks System Surplus Revenue Refunding Bonds, Series 2005 (the •Bonds") that:
(i) the information set forth under the caption "BOND INSURANCE -Financial Security Assurance Inc."
in the official statement dated July 1, 2005, relating to the Bonds is true and correct,
(ii) Financial Security is not currently in default nor has Financial Security ever been in default under any
policy or obligation guaranteeing the payment of principal of or interest on an obligation,
(iii) the Policy is an unconditional and recourse obligation of Financial Security {enforceable by or on
behalf of the holders of the Bonds) to pay the scheduled principal of and interest on the Bonds in the
event of Nonpayment by the Issuer (as set forth in the Policy},
(iv) the insurance premium of $107,657.64 (the "Premium") is a charge for the transfer of credit risk and
was determined in arm's length negotiations and is required to be paid to Financial Security as a
condition to the issuance of the Policy,
(v) no portion of such Premium represents an indirect payment of costs of issuance, including rating
agency fees, other than fees paid by Financial Security to maintain its ratings, which, together with all
other overhead expenses of Financial Security, are taken into account in the formulation of its rate
structure, or for the provision of additional services by us, nor the direct or indirect payment for a
cost, risk or other element that is not customarily borne by insurers of tax-exempt bonds (in
transactions in which the guarantor has no involvement other than as a guarantor),
(vi) Financial Security is not providing any services in connection with the Bonds other than providing the
Policy, and except for the Premium, Financial Security will not use any portion of the Bond proceeds,
(vii) except for payments under the Policy in the case of Nonpayment by the Issuer, there is no obligation
to pay any amount of principal or interest on the Bonds by Financial Security,
(viii) Financial Security does not expect that a claim will be made on the Policy,
(ix) the Issuer is not entitled to a refund of the premium for the Policy in the event a Bond is retired before
the final maturity date, and
(x) for Bonds which are secured by a debt service reserve, Financial Security would not have issued the
Policy unless the authorizing or security agreement for the Bonds provided for a debt service reserve
account or fund funded and maintained in an amount at least equal to, as of any particular date of
computation, the reserve requirement as set forth in such agreement.
Financial Security makes no representation as to the nature of the interest to be paid on the Bonds or the
treatment of the Policy under Section 1.148-4(f) of the Income Tax Regulations.
FINANCIAL SECURITY ASSURANCE INC.
By: __ f-_____:....f _ _/-----.. ____ _
Authorized Officer
Dated: August 15, 2005
08/12/05 FRI 08:13 FAX 307 754 7995 FITCH IBCA I1J 002
FitchRatings
August 12, 2005
Mr. Robert P. Cochran
120 l East 7th Street
Powell. WY 82435
Chalnnan & Chief Executive Oftlcer
F"mandar Security Assurance. Inc.
350 P8ltt Avenue
New York, NY 10022
Re: Lubbock (TX) I Polley#
Dear Mr. Cochran:
T 307 754 2012 1800 85 FITCH
'NWW.flt!:hr<otings.com
Fitch Ratings has aSSigned one or more ratings and/or otherwise taken rating action(s), as detaled
on the attached Notloe of Rating Action.
Ratings assigned by Frtch are based on documents and Information provided to us by Issuers,
obligors, and/or their experts end agents, and are subject to receipt of the final dosing documents. Fitch
does not audit or verffy the truth or accuracy of such Information.
rt is important that Fitch be provided *fth afllnfonnatlon that may be material to its ratings so that
they continue to acc:urately reftact the status d the rated Issues. Ratings may be changed, wtthdrawn,
suspended or placed on Rating Watch due to changes In, additions to or the Inadequacy of Information.
Ratings are not reccmmendations to buy, sell or hold securities. Ratings do not comment on lhe
adequacy of market pric», the suitability of any security for a particular Investor, or the tax-exempt nature
or taxability of payments made In respect of any security.
The assignment of a rating by Atch shaJI not constitute a consent by Fdch to use its name as an
expert In connection wiCh any reglstraUon statement or other tiling under U.S., U.K., or any other relevant
securities laws. l
We are pleased to have had the opponunlty to be of servtce to you. tf we can be of further
assistance, please feel free to contact us at any time.
DLSijw
Enc: Notice of Rating Action
(Doc 10: 14063)
Sinc&rely, ~~~
Dey Lynn Stebner
Insured Ratings Manager
08/12/05 FRI 08 :13 FAI 307 754 7995 FITCH IBCA
tal 003
Notice of Rating Action
Outloolcl
Bond Desctlp!on Rdns ~ Eft o.t.e
AM RO:Sta 12-Aucl-2005
Notes
1
!!!!!.
1 The rd1g is based IOiely on credit •lhancenwnt pnMded by • bond II'IIUJWtee pollc:y Issued by FNncl8l Secutly
AsNance Inc., M*lh has., ......... Atancial StrenQih ~ cA 'AAA:.
(Doc 10: 14063) Page 1 of1
No Text
)
Financial Security Assurance
31 West 52nd Street
New Yortc, NY 10019
To Whom It May Concem:
Moody*s Investors Service
99 Church Street
New York, NY
August 12, 2005
Moody's Investors Service has assigned the rating of Aaa (Financial Security Assurance
Insured -Policy No. 205525-N) to the $43,080,000.00, City of Lubbock, Lubbock
County, Texas-Tax and Waterworks System Surplus Revenue Refunding Bonds,
Series 2005, dated July 1, 2005 which sold through negotiation on June 30, 2005. The
rating is based upon an insurance policy provided by Financial Security Assurance.
Should you have any questions regarding the above, please do not hesitate to contact
the assigned analyst, Margaret Kessler at (212) 553-7884.
Sincerely yours,
Margaret L. Kessler
Vice President/Senior Analyst
MLK/PS
No Text
STANDARD
&POOR'S
August 12, 2005
Financial Security Assurance Inc
Financial Guaranty Group
31 West 52nd Street
New York:, NY 10019
VlncentS.Orgo
Admlnlsntlve Officer
55 Wiler S1reet, 38th Roor
New VOI'fr. NY 10041.ooo3
tel212 43&-2(J14
vlncent_«go0standardandpoor$.eom
refecence no.: 727343
Attention: Mr. Richard Baueifeld, Managing Director
Malachy fallon
Managing Director
500 Horth AlumS Street
Uncoln Plam, Suite 3200
Dallas, TX 75201
~ 214 871-1402
m•LfallonOstandardandpoors.eom
Re: $43,080,000 City of Lubbock, Lubbock County, Texas, Tax and Waterworks System
Surplus Revenue Refunding Bonds, Series 2005, dated: July 1, 2005, due: February 15,
2006-2021,(JPOLIC1r#205525-~
Dear Mr. Baueifeld:
Standard & Poor's has reviewed the rating on the above-referenced obligations. After such
review, we have changed the rating to "AAA" from "AA-". The rating reflects our assessment of
the likelihood of repayment of principal and interest based on the bOnd insurance policy yQur
company is providing. Therefore, rating adjustments may result from changes in the financial
position of your company or from alterations in the documents governing the issue.
The rating is not investment, financial, or other advice and you should not and cannot rely upon
the rating as such. The rating is based on information supplied to us by you but does not represent
an audit. We undertake no duty of due diligence or independent verification of any information.
The assignment of a rating does not create a fiduciary relationship between us and you or between
us and other recipients of the rating. We have not consented to and will not consent to being
named an "expert" under the applicable secwities laws, including without limitation, Section 7 of
the Securities Act of 1933. The rating is not a "market rating, nor is it a recommendation to buy,
hold, or sell the obligations.
1bis letter constitutes Standard & Poor's permission to you to disseminate the above-assigned
rating to interested parties. Standard & Poor's reserves the right to inform its own clients,
subscribers) and the public of the rating.
Standard & Poor's relies on the issuer and its counsel, accountants, and other experts for the
accuracy and completeness of the information submitted in connection with the rating. This rating
is based on financial information and documents we received prior to the issuance of this letter.
Standard & Poor's assumes that the documents you have provided to us are final. If any
subsequent changes were made in the final documents, you must notify us of such changes by
sending us the revised final documents with the changes clearly marked.
~-i:\:..: D:\RD
.: P()(lR;.
Mr. Richard Bauerfeld
Page2
August 12,2005
Standard & Poor's is pleased to be of setvice to you. For more info:rmation please visit our
website at www.standardandooors.com. If we can be of help in any other way, please contact us.
Thank you for choosing Standard & Poor's and we look fOiward to working with you again.
Sincerely yours,
Standard & Poor's Ratings Services
a division of The McGraw-Hill Companies, Inc.
By: Vincent S. Orgo
Administrative Officer
aw
s·t ~ :\:\ 11.'\ R D
: P(. ~(~R''-
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CERTIFICATE PURSUANT TO BOND PURCHASE AGREEMENT
We, the undersigned officials of the City of Lubbock, Texas (the "Issuer''), acting in our
official capacity, in connection with the issuance and delivery by the Issuer of its City of
Lubbock, Texas, Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 2005
(the "Bonds"), hereby certify that:
1. This Certificate is delivered pursuant to the Pmchase Agreement, dated July 1,
2005 (the "PW"chase Agreement"), between the Issuer and RBC Dain Rauscher Inc., Merill
Lynch & Co. and Piper Jaffray & Co. (the "Underwriters"). Capitalized words used herein as
defined terms and not otherwise defined herein have the respective meanings assigned to them in
the Purchase Agreement
2. The representations and warranties of the Issuer contained in the Purchase
Agreement are true and correct in all material respects on and as of the date hereof as though
made on and as of the date hereof.
3. Except to the extent disclosed in the Official Statement, no litigation or
proceeding or tax challenge is pending or, to our knowledge, threatened in any court or
administrative body which would (a) contest the right of the members or officials of the Issuer to
hold and exercise their respective positions, (b) contest the due organization and valid existence
of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer
Docwnents or (d) attempt to limit, enjoin or otherwise restrict or prevent the Issuer from
functioning and collecting revenues, including payment on the Bonds, pursuant to the Bond
Ordinance, or the levy or collection of the taxes pledged or to be pledged to pay the principal of
and interest on the Bonds, or the anticipated receipt of Net Revenues pledged or to be pledges to
pay the principal of and interest on the Bonds or the pledge of such taxes and Net Revenues.
4. The resolutions of the Issuer authorizing the execution, delivery and/or
performance of the Official Statement, the Bonds and the Issuer Documents have been duly
adopted by the Issuer, are in full force and effect and have not been amended, modified or
repealed.
5. To the best of our knowledge, no event affecting the City has occurred since the
date of the Official Statement that should be disclosed in the Official Statement for the putpose
for which it is to be used or that it is necessary to disclose therein in order to make the statements
and information therein not misleading in any respect and the information contained in the
Official Statement did not, and does not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not misleading.
6. There has not been any material and adverse change in the affairs or financial
condition of the City since September 30, 2004, the latest date as to which audited financial
information is available.
LUB200niOOO
Dallas 99SS73_l.DOC
DATED: __ A_U_G-=1:....::5::.....:2=00=~_, 2005.
)
.rvtayor
City of Lubbock,
...
)
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Signature Page for Certificate Pursuant to Purchase Agreement
....
.,.,JPMorgan
Termination of an Interest Rate Swap Transaction
The purpose of this letter agreement is to confiilll the total termination of the Swaption Transaction entered
into between:
JPMORGAN CHASE BANK N.A.
('JPMorgan')
and
CITY OF LUBBOCK, TEXAS
(the 'Counte.rparty')
The particular Swap Transaction to which this Confumatioo relates is a Swaption, the terms of which are as
follows:
A. TRANSACTION DETAILS
JPMorgan Deal Number(s):
Notional Amount:
Trade Date:
Original Termination Date:
Early Termination Date:
Amount payable from Counterparty for
termination of JPMorgan's Optional
Termination rights under the Swap
Transaction
Amount payable from Counterparty for
termination of Interest Rate Swap and
Fixed Premium Amounts (not including
JPMorgan's Optional Termination
Rights in the Swap Transaction)
Total Payment Amount:
Payment Date:
0500000513615
USD 40,465,000, amortizing
April II, 2002
August I, 2022
June 30, 2005
USD 812,000.00
USD 5,880,000.00
USD 6,692,000.00
August 15, 2005
In connection with the transaction described herein, at the request of the Counterparty, JPMorgan will pay the
following fees at closing:
(i) an advisory fee in the amount ofUSD 40,000 to First Southwest Company
(ii) a legal fee in the amount ofUSD 40,000 to Vinson & Elkins L.L.P.
Our Ref: 050000051 3615cs Sent: I July 2005 19:33 Page I of4
)
Effective upoa the payment of the Total Payment Amount on the Payment Date, the rights, obligations
and liabilities of JPMorgan and the Counterparty under tbe Swaption shall be terminated and
discharged. Each party hereto acknowledges that, except as provided herein, no payments or other
amounts are owed to it by the other party hereto under or with respect to the tennination and
discharge affected her-eby.
B. ACCOUNT DETAILS
Payments to JPMorgan in USD:
C. OFFICES
JPMorgan:
Counterparty:
D. GOVERNING LAW
JPMORGAN CHASE NEW YORK
JPMORGAN CHASE BANK N.A.
BIC:C~US33XJCX
AC No: 099997979
NEW YORK
TEXAS
This Confirmation shall be governed by and construed in accordance with the Jaws of the State ofNew
York (without reference to choice of law doctrine)
Our Ref: 0500000513615cs Sent: 1 July 2005 19:33 Page2of4
No Text
)
JPMORGAN CHASE BANK N.A., NEW YORK
c/o 500 Stanton Christiana Road, 2/0PS2, Newark DE 19713
NA Derivative Operations Contact List
CONFIRMATIONS
Single and Cross Currency Swaps, FRAs and Interest Rate Options
Telephone Facsimile
Return executed confirmations I Send your confumations to:
4928/4929/4930
(302) 634-
Discrepancies with Confum: (302) 634-4960
If you did not receive our Confumation: (302) 634-4916/4922
4928/4929/4930
RATE RESET ADVICES
(302) 634-4930/4931
(302) 634-
(Single and Cross Currency Swaps, FRAs and Interest Rate Options)
JPMorgan Chase Bank, N.A. New York Branch
If you did not receive a
Rate Reset Advice: (302) 634-4378/4382/4376 (302) 634-
4862
PAYMENTS
(Single and Cross Currency Swaps, FRAs and Interest Rate Options)
JPMorgan Chase Bank, N.A. New York Branch
Pre-Settlement:
Customer Service:
(302) 634-4733/4738/4734
(302) 634-4920
Email: ny.oost.customer .service@jpmorgan.com
(302) 634-4840
(302) 634-4838
JPMorgan Chase BankN.A., New York S.W.I.F.T BIC (CHASUS33) Telex 420120 CMB UW
Our Ref: OS00000513615cs Sent 1 July 2005 19:33 Page 4of4
)
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Vinson &Elkins
August 15, 2005
$43,080,000
CI1Y OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE REFUNDING BONDS
SERIES 2005
WE HAVE represented the City of Lubbock, Texas (the "City''), as its Bond Counsel in
connection with an issue ofbonds (the "Bonds") described as follows:
CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE REFUNDING BONDS, SERIES 2005, dated July 1,
2005, issued in the principal amount of$43,080,000.
The Bonds mature, bear interest, are subject to redemption prior to maturity and may be
transferred and exchanged as set out in the Bonds and in the ordinance adopted by the City
Council of the City authorizing their issuance (the "Ordinance'') and the Pricing Certificate
executed pursuant to the Ordinance.
WE HAVE represented the City as its Bond Counsel for the sole purpose of rendering an
opinion with respect to the legality and validity of the Bonds under the Constitution and laws of
the State of Texas and with respect to the exclusion of interest on the Bonds from gross income
for federal income tax pwposes. We have not investigated or verified original proceedings,
records, data or other material, but have relied solely upon the transcript of proceedings
described in the following paragraph. We have not assumed any responsibility with respect to
the financial condition or capabilities of the City or the disclosure thereof in connection with the
sale of the Bonds. Our role in connection with the City's Official Statement prepared for use in
connection with the sale of the Bonds has been limited as described therein .
IN OUR CAP ACilY as Bond Counsel, we have participated in the preparation of and
have examined a transcript of certified proceedings pertaining to the Bonds, on which we have
relied in giving our opinion. The transcript contains certified copies of certain proceedings of the
City, customary certificates of officers, agents and representatives of the City, and other public
officials and other certified showings relating to the authorization and issuance of the Bonds. In
VInson & Elkin• LLP Attorneys at Law Austin Beijing Dallas
Dtbal Houston London Moscow NewYork Tokyo Washington
Trammell Crow Centar, 2001 Ross Avenue, Suite 3700
DQllas, Texas 75201·2975 Tel214.220.noo fax 214.220.n16
-.velaw.com
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addition, we have examined a resolution of the Brazos River Authority ("BRA") approved in
connection with the defeasance by the Brazos River Authority of its Special Facilities (Lake
Alan Henry) Revenue Refunding Bonds, Series 1995 (the "Refunded Bonds") with a portion of
the proceeds of the Bonds. We have also examined executed Bond No. 1 of this issue.
BASED ON SUCH EXAMINATION, IT IS OUR OPINION THAT:
(A) The transcript of certified proceedings evidences complete legal
authority for the issuance of the Bonds in full compliance with the Constitution
and laws of the State of Texas presently effective and, therefore, the Bonds
constitute valid and legally binding obligations of the City; and
(B) A continuing ad valorem tax upon all taxable property within the
City, necessary to pay the interest on and principal of the Bonds, has been levied
and pledged irrevocably for such purposes, within the limit prescribed by law, and
the total indebtedness of the City, including the Bonds, does not exceed any
constitutional, statutory or other limitations. In addition, the Bonds are further
secured by a subordinate lien on and pledge of the Net Revenues (as defined in
the Ordinance) of the City's Waterworks System in the manner and to the extent
provided in the Ordinance.
THE RIGHTS OF THE OWNERS of the Bonds are subject to the applicable provisions
of the federal bankruptcy laws and any other similar laws affecting the rights of creditors of
political subdivisions generally, and may be limited by general principles of equity which permit
the exercise of judicial discretion.
IT IS OUR FURTHER OPINION THAT:
(I) Interest on the Bonds is excludable from gross income for federal
income tax pwposes under existing law; and
(2) The Bonds are not ']>rivate activity bonds" within the meaning of
the Internal Revenue Code of 1986, as amended (the "Code," and interest on the
Bonds is not subject to the alternative minimum tax on individuals and
coxporations, except that interest on the Bonds will be included in the "adjusted
current earnings" of a coxporation (other than an S corporation, regulated
investment company, REIT, REMIC or FASIT) for pwposes of computing its
alternative minimum tax liability.
In providing such opinions, we have relied on representations of the City, the City's
financial advisor and the underwriters of the Bonds with respect to matters solely within the
knowledge of the City, the City's financial advisor and the underwriters respectively, which we
have not independently verified, and have assumed continuing compliance with the covenants in
the Ordinance pertaining to those sections of the Code that affect the exclusion from gross
1001829_l.DOC
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income of interest on the Bonds for federal income tax purposes. If such representations are
determined to be inaccurate or incomplete or the City fails to comply with the foregoing
provisions of the Ordinance, interest on the Bonds could become includable in gross income
from the date of original delivery, regardless of the date on which the event causing such
inclusion occurs.
Except as stated above, we express no opinion as to any federal, state or local tax
consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or
disposition of, the Bonds.
The opinions set forth above are based on existing law, which is subject to change. Such
opinions are further based on our knowledge of facts as of the date hereof. We assume no duty
to update or supplement these opinions to reflect any facts or circumstances that may hereafter
come to our attention or to reflect any changes in any law that may hereafter occur or become
effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal
Revenue Service (the "Service''); rather, such opinions represent our legal judgment based upon
our review of existing law and in reliance upon the representations and covenants referenced
above that we deem relevant to such opinions. The Service has an ongoing audit program to
detennine compliance with rules that relate to whether interest on state or local obligations is
includable in gross income for federal income tax purposes. No assurance can be given whether
or not the Service will commence an audit of the Bonds. If an audit is commenced, in
accordance with its current published procedures the Service is likely to treat the City as the
taxpayer. We observe that the City bas covenanted in the Ordinance not to take any action, or
omit to take any action within its control, that if taken or omitted, respectively, may result in the
treatment of interest on the Bonds as includable in gross income for federal income tax purposes.
1001829_l.DOC
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Vinson &Elkins
August 15, 2005
City of Lubbock, Texas
P.O. Box 2000
Lubbock, Texas 79457
RBC Dain Rauscher Inc.
Piper Jaffray & Co.
Merrill Lynch & Co.
c/o RBC Dain Rauscher Inc.
1001 Fannin, Suite 400
Houston, Texas 77002
City of Lubbock, Texas,
Tax and Waterworks System Surplus Revenue Refunding Bonds
Series 2005
Ladies and Gentlemen:
We have served as Bond Counsel to the City of Lubbock, Texas (the "Issuer'') in
connection with the issuance of its $43,080,000 City of Lubbock, Texas, Tax and Waterworks
System Surplus Revenue Refunding Bonds, Series 2005 (the "Bonds"), issued pursuant to the
provisions of an ordinance duly adopted by the City Council of the Issuer on May 26, 2005 (the
"Ordinance'') and a pricing certificate (the "Pricing Certificate'') authorized thereby and executed
on July 1, 2005. This opinion is delivered pursuant to the provisions of Section 6(i)(6) of the
Purchase Agreement (hereinafter defined). Capitalized tenns not otherwise defined in this
opinion have the meanings assigned in the hereinafter defined Purchase Agreement.
In our capacity as Bond Counsel to the Issuer, we have reviewed the following:
(a) a certified copy of the Ordinance;
(b) an executed copy of the Pricing Certificate;
(b) an executed counterpart of the Purchase Agreement dated July 1, 2005 (the
"Purchase Agreement'') between the Issuer and the Underwriters named in such Purchase
Agreement;
(c) a copy of the Official Statement dated July 1, 2005; and
Vlnaon & Elkins UP Attomeys 8t lAw Aus11n Beijing Dallas
Dubai Houston London Mosc:ow New YolK Tokyo WasHngton
Trammell Crow Center, 2001 Ross Avenue, Suite 3700
Dallas, Texas 75201-2975 Tel214.220.7700 Fa 214.220.n16
www.vel-.com
)
V&E
(d) such other agreements, documents, certificates, opinions, letters, and other papers
as we have deemed necessary or appropriate in rendering the opinions set forth below.
In making our review, we have assumed the authenticity of all documents and agreements
submitted to us as originals, conformity to the originals of all documents and agreements
submitted to us as certified or photostatic copies, the authenticity of the originals of such latter
documents and agreements, and the accuracy of the statements contained in such docwnents.
Based upon the foregoing, and subject to the qualifications and exceptions hereinafter set
forth, we are of the opinion that under the applicable laws of the United States of America and
the State of Texas in force and effect on the date hereof:
I. The Bonds are exempted securities within the meaning of Section 3(a)(2) of the
Securities Act of 1933, as amended (the "1933 Acf') and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and it is not necessary in connection with
the offering and sale of the Bonds to register the Bonds under the 1933 Act, or to qualify
the Ordinance under the Trust Indenture Act, as amended.
2. Except as to the extent noted herein, we have not verified and are not passing upon and
do not assume any responsibility for the accuracy, completeness or fairness of the
information contained in the Official Statement. We have, however, reviewed the
statements and information in the Official Statement under the captions "The Bonds"
(except for the subcaption "Book-Entry-Only System,.) and ''Tax Matters" and the
subcaptions "Registration and Qualification of Bonds for Sale," "Continuing Disclosure
of Information," ''Legal Investments and Eligibility to Secure Public Funds in Texas" and
"Legal Opinions" Wlder the caption "Other Information" and Appendix C, and we are of
the opinion that such information fairly and accurately sununarized the matters purported
to be summarized therein and is correct as to matters oflaw.
3. The Bond Ordinance has been duly adopted and is in full force and effect.
The addressees may rely on our opinion, dated as of the date hereof, delivered in
connection with the issuance of the Bonds to the same extent as if such opinions were
specifically addressed to them.
This opinion is furnished solely for your benefit and may be relied upon only by the
addresses hereof or anyone to whom specific permission is given in writing by us.
Very truly yours~
l00216l_t.DOC
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ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
August 12,2005
THIS. IS TO CERTIFY that the City of Lubbock, Texas (the "Issuer") has
submitted to me City of Lubbock, Texas Tax and Waterworks System Sumlus
Revenue Refunding Bond. Series 2005 (the "Bond'') in the principal amount of
$43,080,000, for approval. The Bond is dated July I, 2005, numbered T -1, and was
authorized by an Ordinance of the Issuer passed on May 26,2005 (the "Ordinance").
I have examined the law and such certified proceedings and other papers as I deem
necessary to render this opinion.
As to questions of fact material to my opinion, I have relied upon representations of the
Issuer contained in the certified proceedings and other certifications of public officials furnished to
me without undertaking to verify the same by independent investigation.
I express no opinion relating to the official statement or any other offering material relating
to the Bond.
Based on my examination, I am of the opinion, as of the date hereof and under existing law,
as follows (capitalized terms, except as herein defined, have the meanings given to them in the
Ordinance):
(1) The Bond has been issued in accordance with law and is a valid and binding
obligation of the Issuer.
(2) In accordance with the provisions of the law, firm banking arrangements have been
made for the discharge and final payment or redemption of the obligations being
refunded upon deposit of an amount sufficient to pay said obligations when due.
(3) The Bond is payable from the proceeds of an ad valorem tax levied, within the limits
prescribed by law, upon all taxable property in the Issuer and is additionally payable
from and secured by a lien on and pledge of the Net Revenues of the Issuer's
Waterworks System, such lien and pledge, however, being (i) junior and subordinate
to the lien on and pledge of the Net Revenues of the System securing the payment of
Prior Lien Obligations currently outstanding and hereafter issued by the Issuer and
(ii) on parity with the lien on and pledge of the Net Revenues of the System securing
the payment of the Previously Issued Obligations and any Additional Obligations
hereafter issued.
P OST 01'1'1CE Box 12548, AUSTIN, TI!XAS 78711-2548 TEL:(51 2)463-2 l00 WW\V.OAC.S'I'ATE.TX.US
A~ F.911ol F.~~tf>IIJIIURI Opporl••iiJ Employtr · f>tiMti M Rtff<ltrl PoJm
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City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Refunding Bond, Series
2005 -$43,080,000
Pa e2
Therefore, the Bond is approved.
The Comptroller is instructed that she may register the Bond without the cancellation of the
underlying obligations being refunded thereby.
No. 43788
Book No. 2005-C
DFH
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OFFICE OF COMPTROLLER
OF THE STATE OF TEXAS
I, Melissa Mora , D Bond Clerk [KI Assistant Bond Clerk in the office of the Comptroller of the
State of Texas, do hereby certify that. acting under the direction and authority of the Comptroller on
the 12th day of August. 2005, I signed the name of the Comptroller to the certificate of registration
endorsed upon the:
City of Lubbock. Texas Tax and Waterworks System Surplus Revenue Refunding Bond. Series
2005,
I, Carole Keeton Strayhorn, Comptroller of Public Accounts of the State of Texas, certify that
the person who has signed the above certificate was duly designated and appointed by me under
authority vested in me by Chapter 403, Subchapter H. Government Code, with authority to sign my
name to all certificates of registration, and/or cancellation of bonds required by law to be registered
and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and
that the bonds/certificates described in this certificate have been duly registered in the office of the
Comptroller, under Registration Number 70366.
GIVEN under my hand and seal of office at Austin, Texas, this the 12th day of August. 2005.
CAROLE KEETON STRAYHORN
Comptroller of Public Accounts
of the State of Texas
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OFFICE OF COMPTROLLER
OF THE STATE OF TEXAS
I, CAROLE KEETON STRAYHORN, Comptroller of Public Accounts of the
State of Texas, do hereby certify that the attachment is a true and correct copy of
the opinion of the Attorney General approving the:
City of Lubbock. Texas Tax and Waterworks System Surplus Revenue
Refunding Bond. Series 2005
numbered T-1. of the denomination of $ 43.080.000, dated July 1. 2005, as
authorized by issuer, interest various percent, under and by authority of which
said bonds/certificates were registered electronically in the office of the
Comptroller, on the 12th day of August. 2005, under Registration Number 70366.
Given under my hand and seal of office, at Austin, Texas, the 12th day of
August. 2005.
CAROLE KEETON STRAYHORN
Comptroller of Public Accounts
of the State of Texas
, tfJFSA
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A Dexi.a Compon.y
Municipal Bond Insurance Policy No. 205525-N with Resoect to
$43.080.000 In Aggregate Principal Amount of
City of lubbock. lubbock Countv. Texas
August 15, 2005
Tax and Waterworks Svstem Surplus Revenue Refunding Bonds. Series 2005
Ladies and Gentlemen:
I am Associate General Counsel of Financial Security Assurance Inc., a New York stock insurance company
('Financial Security"). You have requested my opinion In such capacity as to the matters set forth below in
connection with the issuance by Financial Security of its above-referenced policy (the 'Policy"). In that regard, and
for purposes of this opinion, I have examined such corporate records, documents and proceedings as I have
deemed necessary and appropriate.
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly organized and validly existing under
the laws of the State of New York and au1horized to transact financial guaranty insurance
business therein.
2. The Policy has been duly authorized, executed and delivered by Financial Security.
3. The Policy constitutes the valid and binding obligation of Financial Security, enforceable
in accordance with its terms, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, rehabilitation, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles of equity.
In addition, please be advised that I have reviewed the description of the Policy under the caption 'BOND
INSURANCE -Bond Insurance Policy' in the official statement relating to the above-referenced Bonds dated July 1,
2005 (the 'Official Statement'). There has not come to my attention any information which would cause me to
believe that the description of the Policy referred to above, as of the date of the Official Statement or as of the date
of this opinion, contains any untrue statement of a material fact or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were made, not misleading. Please be
advised that I express no opinion with respect to any infonnation contained in, referred to or omitted from under the
caption "BOND INSURANCE -Financial Security Assurance Inc.'
I am a member of the Bar of the State of New York, and do not express any opinion as to any law other than
the laws of the State of New York.
City of Lubbock,
1625 13th Street,
Lubbock, Texas 79457-0001.
RBC Dain Rauscher Inc.,
as Representative of the Underwriters,
First City Tower, Suite 400,
Houston, Texas n002.
Financial Security Aaaurance
Very truly yours,
Associate General Counsel
) 31 West smd Street· New York. New York 10019 ·Tel: 2u.826.o1oo • Fax: 21.2.688.3101
New York· Dallas • San Francisco • London · Madrid ·Paris • Singapore • Sydney ·Tokyo
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LAW OFFICES
MCCALL, PARKHURST & HORTON L.L.P.
600 CONGRESS AVENUE
1250 ONE AMERICAN CENTER
AUSTIN, TEXAS 78701·324a
TEU:PHONE: $1.2 4?8·3805
F-'CSI~Il£: 1512 47.2-0871
RBC Dain Raucher Inc.
Merrill Lynch & Co.
Piper Jaffray & Co.
do RBC Dain Rauscher Inc.
1001 Fannin, Suite 400
Houston, Texas 77002
717 NORTH HARWOOO
NINTH FLOOR
DALLAS, TEXAS 75201-6587
TELEPHONE: .214 76<4 ·9.200
FACSINIUJ:: 2 14 ?54-9250
August 15, 2005
700 N. ST. MARY'S STREET
1525 ONE RIVERWALK PLACE
SAN ANTONIO, TEXAS 78205-3503
TELEPHONE: 210 .225-l!eoo
FACSIMILE: 210 2.25-2984
Re: $43,080,000 City of Lubbock, Texas Tax and Waterworks
System Surplus Revenue Refunding Bonds, Series 2005
Ladies and Gentlemen:
We have acted as counsel for you as the underwriters of the Bonds described
above, issued under and pursuant to a Bond Ordinance of the City of Lubbock, Texas (the
"Issuer"), authorizing the issuance of the Bonds, which Bonds you are purchasing
pursuant to a Bond Purchase Agreement, dated July 1, 2005 _ All capitalized undefined
tenns used herein shall have the meaning set forth in the Bond Purchase Agreement.
In connection with this opinion letter, we have considered such matters of law and
of fact, and have relied upon such Bonds and other information furnished to us, as we
have deemed appropriate as a basis for our opinion set forth below. We are not
expressing any opinion or views herein on the authorization, issuance, delivery, validity
of the Bonds and we have assumed, but not independently verified, that the signatures on
all documents and Bonds that we have examined are genuine.
Based on and subject to the foregoing, we are of the opinion that, under existing
laws, the Bonds are not subject to the registration requirements of the Securities Act of
1933, as amended, and the Ordinance is not required to be qualified under the Trust
Indenture Act of 1939, as amended.
Because the primary purpose of our professional engagement as your counsel was
not to establish factual matters, and because of the wholly or partially nonlegal character
of many of the determinations invo 1 ved in the preparation of the Official Statement dated
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July I, 2005 (the "Official Statement") and because the information in the Official
Statement under the headings "THE BONDS -Book-Entry-Only System," 'TAX
MATTERS," "OTHER INFORMATION -Continuing Disclosure of Information -
Compliance with Prior Undertakings" and Appendices ~ B, and C thereto were prepared
by others who have been engaged to review or provide such information, we are not
passing on and do not assume any responsibility for, except as set forth in the last
sentence of this paragraph, the accuracy, completeness or fairness of the statements
contained in the Official Statement (including any appendices, schedules and exhibits
thereto) and we make no representation that we have independently verified the accuracy,
completeness or fairness of such statements. In the course of our review of the Official
Statement, we had discussions with representatives of the Issuer regarding the contents of
the Official Statement. In the course of our participation in the preparation of the Official
Statement as your counsel, we had discussions with representatives of the Issuer,
including its City Attorney, Bond Counsel and Financial Advisor, regarding the contents
of the Official Statement. In the course of such activities, no facts came to our attention
that would lead us to believe that the Official Statement (except for the financial
statements and other financial and statistical data contained therein, the information set
forth under the headings "THE BONDS -Book-Entry-Only System," "TAX
MATTERS,'' "OTHER INFORMATION -Continuing Disclosure of Information -
Compliance with Prior Undertakings" and Appendices ~ B, and C thereto, as to which
we express no opinion), as of its date contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
This opinion letter may be relied upon by only you and only in connection with
the transaction to which reference is made above and may not be used or relied upon by
any other person for any purposes whatsoever without our prior written consent.
Respectfully,
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P.O. Box 2000 • 1625 13th Street
Lubbock. Texas 79457
(806) 775-2222 • Fax (806) 775-3307
RBC Dain Raucher Inc.
Merrill Lynch & Co.
Piper Jaffray & Co.
c/o RBC Dain Rauscher Inc.
1001 Fannin, Suite 400
Houston, Texas 77002
Office of the City Attorney
August 15, 2005
RE: $43,080,000 CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE REFUNDING BONDS, SERIES 2005
Ladies and Gentlemen:
I am the City Attorney for the City of Lubbock, Texas (the "Issuer") at the time of the
issuance of the above referenced Bonds (the "Bonds"), pursuant to the provisions of the Ordinance
duly adopted by the City Council of the Issuer on May 26, 2005. Capitalized terms not otherwise
defined in this opinion have the meanings assigned in the Purchase Contract, dated July 1, 2005,
between the Issuer and RBC Dain Raucher Inc., Merrill Lynch & Co. and Piper Jaffray & Co.
In my capacity as City Attorney to the Issuer, I have reviewed such agreements, documents,
certificates, opinions, letters, and other papers as I have deemed necessary or appropriate in rendering
the opinions set forth below.
In making my review, I have assumed the authenticity of all documents and agreements
submitted to me as originals, confonnity to the originals of all documents and agreements submitted
to me as certified or photostatic copies, the authenticity of the originals of such latter documents and
agreements, and the accuracy of the statements contained in such docuinents.
Based upon the foregoing, and subject to the qualifications and exceptions hereinafter set
forth, I am of the opinion that under the applicable laws of the United States of America and the
State of Texas in force and effect on the date hereof:
(1) The Issuer is a home-rule municipality of the State duly created, organized and
existing under the laws of the State, and has full legal right, power and authority under Chapter 1207,
Texas Govenunent Code (the "Act") and the Bond Ordinance (A) to enter into, execute and deliver
the Issuer Documents and all documents required thereunder to be executed and delivered by the
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Issuer, (B) to sell, issue and deliver the Bonds to the Underwriters as provided in the Purchase
Contract for the purposes described in the Bond Ordinance and the Official Statement, and (C) to
carry out and consummate the transactions contemplated by the Issuer Docwnents and the Official
Statement, and to operate Lake Alan Henry upon the defeasance of the BRA Bonds, and the Issuer
has complied, and will at the Closing be in compliance in all respects, with the terms of the Act and
the Issuer Docwnents as they pertain to such transactions.
(2) By all necessary official action of the Issuer prior to or concurrently with the
acceptance hereof, the Issuer has duly authorized all necessary action to be taken by it for (A) the
adoption of the Bond Ordinance and the issuance and sale of the Bonds, (B) the approval, execution
and delivery of, and the performance by the Issuer of the obligations on its part, contained in the
Bonds and the Issuer Documents, and (C) the consummation by it of all other transactions
contemplated by the Official Statement, the Issuer Documents and any and all such other agreements
and documents as may be required to be executed, delivered and/or received by the Issuer in order to
carry out, give effect to, and consummate the transactions contemplated in the Purchase Contract and
in the Official Statement.
(3) The Bond Ordinance was duly and validly adopted by the Issuer and is in full force
and effect; the Bond Ordinance and all other proceedings pertinent to the validity and enforceability
of the Bonds and all actions necessary to levy and collect taxes and to charge, assess and collect the
rates producing Net Revenues (as defined in the Bond Ordinance) pledged to pay principal of and
interest on the Bonds have been duly and validly adopted or undertaken in compliance with all
applicable procedural requirements of the Issuer and in compliance with the Constitution and laws of
the State, including the Act.
( 4) The Issuer Documents have been duly authorized, executed and delivered by the
Issuer, and constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer
in accordance with their respective terms, except to the extent limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws and equitable principles of general application
relating to or affecting the enforcement of creditors' rights; and the Bonds, when issued, delivered
and paid for, in accordance with the Bond Ordinance and the Purchase Contract, will constitute legal,
valid and binding obligations of the Issuer entitled to the benefits of the Bond Ordinance and
enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws and principles of equity relating to or affecting the enforcement of
creditors' rights; upon the issuance, authentication and delivery of the Bonds as aforesaid, the Bond
Ordinance will provide, for the benefit of the holders, from time to time, of the Bonds, the legally
valid and binding pledge of and lien on the security for the Bonds it purports to create as set forth in
the Bond Ordinance.
(5) The distribution of the Preliminary Official Statement and the Official Statement has
been duly authorized by the Issuer.
(6) All authorizations, approvals, licenses, permits, consents and orders of any
governmental authority, legislative body, board, agency or commission having jurisdiction of the
matter which are required for the due authorization of, which would constitute a condition precedent
to, or the absence of which would materially adversely affect the due performance by the Issuer of its
obligations under the Issuer Documents and the Bonds, have been obtained.
(7) There is no litigation, action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, government agency, public board or body, pending or, to the best
knowledge of the Issuer, after due inquiry threatened against the Issuer, affecting the corporate
existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to
prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds, the collection of taxes and Net
Revenues pledged to the payment of principal of and interest on the Bonds, or in any way contesting
or affecting the validity or enforceability of the Bonds, the Issuer Documents, or contesting the
exclusion from gross income of interest on the Bonds for federal income tax purposes, or contesting
in any way the completeness or accuracy of the Preliminary Official Statement or the Official
Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any
authority for the issuance of the Bonds, the adoption of the Bond Ordinance or the execution and
delivery of the Issuer Documents, nor, to the best knowledge of the Issuer, is there any basis therefor,
wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or
enforceability of the Bonds, or the Issuer Documents.
(8) The execution and delivery of the Issuer Documents and compliance by the Issuer
with the provisions thereof, under the circumstances contemplated therein, will not conflict with or
constitute on the part of the Issuer a material breach of or a default under any agreement or
instrument to which the Issuer is a party, or violate any existing law, administrative regulation, court
order, or consent decree to which the Issuer is subject.
(9) Based on the examination which such counsel has caused to be made and its
participation at conferences at which the Preliminary Official Statement and the Official Statement
were discussed, such counsel has no reason to believe that the Official Statement as of its date and as
of the date hereof contains any untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading in any material respect (except for any financial forecast, technical and statistical data
included in the Official Statement and except for information regarding DTC and its book-entry
system and information regarding the Bond Insurer, in each case as to which no view is expressed).
This opinion is furnished solely for your benefit and may be relied upon only by the addresses
hereof or anyone to whom specific permission is given in writing by me.
Very truly yours,
(t_ L t' J LL--r-c
Anita E. Burgess
City Attorney
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Vinson &Elkins
August 15, 2005
Financial Security Assurance
350 Park Avenue
New York, New York 10022
Re: City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Refunding
Bonds, Series 2005
Ladies and Gentlemen:
You are hereby authorized to rely on our opinion dated the date hereof and delivered in
connection with the issuance of the captioned obligations as if such opinion were specifically
addressed to you. This letter is delivered to you at the request of our client, the City of
Lubbock, Texas.
VInson & Elkins LLP Attorneys at law Austin Beijing Dallas
Dubal Houston London Moscow NewYolk Tokyo Washington
Very truly yours,
Trammell Crow Center, 2001 Ross Avenue, Suite 3700
Dallas. Texas 75201 ·2975 Tel214.220.7700 Fax 214.220.7716
www.velaw.com