HomeMy WebLinkAboutOrdinance - 2007-O0001A - $25,255,000 Tax And Waterworks System Surplus Revenue Certificates Of Obligation - 01/19/2007 (2)J
)
)
)
LUB200nl008
DaUas 120229t_l.DOC
Ordinance No. 2007-oOOOl
TRANSCRIPT OF PROCEEDINGS
pertaining to
$25,255,000
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
Delivered: January 19, 2007
Vinson &Elkins
ATTORNEYS AT LAW
VINSON & ELKINS L.C..P.
3700 TRAMMEU. CROW CEHTER
2001 ROSS AV£.NI.IE
DALLAS, TEXAS 75201·2975
TELEPHONE (214) 220-7700
VOICE MAIL (214) 220-7999
FAX (214) 221>-771$
~ /
)
)
)
$25,255,000
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE
CERTIFICATES OF OBLIGATION
SERIES 2007
TABLE OF DOCUMENTS
DOCUMENT
I. BOND DOCUMENTS
1.1 Certified Resolution Authorizing Publication of Notice of Intent to
Issue Certificates
1.2 Affidavit of Publication
1.3 Certified Ordinance Providing for the Issuance of the Certificates
1.4 Paying Agent/Registrar Agreement for the Certificates
1.5 Preliminary Official Statement
1.6 Official Statement
1.7 Bond Purchase Contract
1.8 Specimen Certificates
1.9 Insurance Commitment
1.10 Insurance Policy
II. CERTIFICATES. LETTERS AND RECEIPTS
2.1
2.2
2.3
2.4
2.5
2.6
2.7
LU8200nt007
Dallas 1208320v.l
General and No-Litigation Certificate
Attorney General/Comptroller Instruction Letter
Federal Tax Certificate
Form 8038-G and Evidence of Transmittal
Receipt and Delivery Certificate of Paying Agent/Registrar
Certificate of Insurer
Rating Letters
TAB NO.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
)
DOCUMENT TAB NO.
2.8 Certificate Pursuant to Bond Purchase Contract 18
Ill. OPINIONS
3.1 OpinionofBondCounsel 19
3.2 Supplemental Opinion of Bond Counsel 20
3.3 Opinions ofUnderwriters' Counsel 21
3.4 Opinion of Attorney General and Comptroller's Registration 22
Certificate
3.5 Opinion of Insurer's Counsel 23
3.6 Reliance Letter to Insurer 24
3. 7 Opinion of City Attorney 25
LUB200nt007
-2-
Dallas 1208320v.l
)
)
MINUTES AND CERTIFICATION PERTAINING TO
PAS SAGE OF A RESOLUTION
STATE OF TEXAS §
COUNTY OF LUBBOCK §
CITY OF LUBBOCK §
On the 7th day of December, 2006, 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:
David A. Miller, Mayor
Jim Gilbreath, Mayor Pro. Tern
Linda DeLeon
Floyd Price
Gary 0. Boren
Phyllis S. Jones
John Leonard
)
)
)
)
)
Members of
the Council
and all of said persons were present, thus constituting a quorum. Whereupon, among other
business, a written Resolution bearing the following caption was introduced:
A RESOLUTION AUTHORIZING PUBLICATION OF NOTICE
OF INTENTION TO ISSUE TAX AND WATERWORKS
SYSTEM SURPLUS REVENUE CERTIFICATES OF
OBLIGATION
The Resolution, a full, true and correct copy of which is attached hereto, was read and
reviewed by the City CounciL Thereupon, it was duly moved and seconded that the Resolution
be passed and adopted.
The Presiding Officer put the motion to a vote of the members of the City Council, and
the Resolution was passed and adopted by the following vote:
AYES: 7
NOES: 0
ABSTENTIONS: 0
LUB200nl007
1202354_l.DOC
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 Resolution 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 Jl.!k
day of ~(lvM'l , 2007.
City of Lubbock, Texas
[SEAL]
Signature Page to Minutes and Certification
)
A RESOLUTION AUTHORIZING PUBLICATION OF NOTICE OF
INTENTION TO ISSUE TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
WHEREAS, the City of Lubbock, Texas (the "City'}, pursuant to Subchapter C, Chapter
271, Texas Local Government Code, as amended, is authorized to issue its certificates of
obligation (the "Certificates'} for the purpose of paying contractual obligations to be incurred for
the purposes set forth in Exhibit A hereto;
WHEREAS, the City Council of the City has found and determined that a notice of
intention to issue certificates of obligation should be published in accordance with the
requirements of applicable law;
WHEREAS, the City desires to reimburse itself for the costs associated with the projects
listed on Exhibit A hereto (the "Certificate Projects") from the proceeds of the Certificates to be
issued subsequent to the date hereof; ·
NOW, THEREFORE, BE IT RESOLVED BY 1HE CITY COUNCIL OF THE CITY
OF LUBBOCK, TEXAS, THAT:
Section 1. The findings and determinations set forth in the preambles hereto are
hereby incorporated by reference for all purposes.
Section 2. The City Secretary of the City is hereby authorized and directed to issue a
notice of intention to issue the Certificates in substantially the form set forth in Exhibit A hereto
incorporated herein by reference for all purposes. The notice as set forth in Exhibit A shall be
published once a week for two consecutive weeks, the date of the first publication being not less
than the fourteenth (14th) day prior to the date set forth in the notice for passage of the ordinance
authorizing the Certificates. Such notice shall be published in a newspaper of general circulation
in the area of the City of Lubbock, Texas.
Section 3. The City reasonably expects to reimburse itself for all costs that have been
or will be paid subsequent to the date that is 60 days prior to the date hereof and that are to be
paid in connection with the Certificate Projects, from proceeds of the Certificates.
Section 5. The City reasonably expects that the maximum principal amount of the
Certificates issued to reimburse the City for the costs associated with the Certificate Projects will
not exceed $27,000,000.
Section 6. This resolution shall take effect from and after the date of its passage.
FINALLY PASSED, APPROVED AND EFFECTIVE this 7th day of December, 2006.
CITY OF LUBBOCK, TEXAS
Dallas I 18741Sv.l
Exhibit A
NOTICE OF INTENTION TO ISSUE CITY OF
LUBBOCK, TEXAS TAX AND WATERWORKS
SYSTEM SURPLUS REVENUE CERTIFICATES OF
OBLIGATION, SERIES 2007
NOTICE IS HEREBY GIVEN that on January 12, 2007, the City Council of the City of
Lubbock, Texas, at 7:30 am. at a regular meeting of the City Council to be held in the City
Council Chambers at the Municipal Complex, 1625 13th Street, Lubbock, Texas, the regular
meeting place of the City Council, intends to pass an ordinance authorizing the issuance of not to
exceed $27,000,000 principal amount of certificates of obligation for the purpose of paying
contractual obligations to be incurred for the following purposes, to wit: (i) designing,
developing, constructing, improving, extending and expanding streets, thoroughfares, freeways
and other public ways o.f the City and related utility relocation, right-of-way protection and
acquisition and stonn drainage improvements, including participation in joint projects with the
State through the Texas Department of Transportation relating to US 62/Marsha Sharp Freeway
(the "Project") and (ii) payment of professional services of attorneys, financial advisors and other
professionals in connection with the Project and the issuance of the Certificates. The Certificates
shall bear interest at a rate not to exceed fifteen percent (15%) per annum and shall have a
maximum maturity date of not later than forty ( 40) years after their date. Said Certificates shall
be payable from the levy of a direct and continuing ad valorem tax, levied within the limits
prescribed by law, against all taxable property within the City sufficient to pay the interest on
this series of Certificates as due and to provide for the payment of the principal thereof as the
same matures, as authorized by Subchapter C, Chapter 271, Texas Local Government Code, as
amended, and from all or a part of the surplus net revenues of the City's Waterworks System,
such pledge of surplus net revenues being limited to $1,000.
THIS NOTICE is given in accordance with law and as directed by the City Council of the
City of Lubbock, Texas.
GIVEN THIS December 7, 2006.
A-1
Dallas ll87415v.l
lsi Rebecca Garza
City Secretary
City of Lubbock, Texas
)
)
)
J
I
THE STATE OF TEXAS
.. COUNTY OF LUBBOCK
Before me Ashley C. McGaha a Notary Public in and for Lubbock County, Texas on this
day personally appeared ...;.IG..;.;.r:..;;.;is;.;t;;;;;a...;.R..;;.;a;.;.;;m=iti...;;.e.;;;;.'Z ________ _ of the Southwestern Newspaper
Corporation, publishers of the Lubbock Avalanch~Noumal -Moming, and Sunday, who being by me duly sworn
did dispose and say thatsaid newspaper has run continuously for more than fifty-two weeks prior to the first
insertion of this ...:L:.::e•g~a::.I..:.H.:.:o:::.;t::.ic:::e::..._ __________________________ _
No.
printed copy of the
LUBBOCK AVALANCHE-JOURNAL
Morris Communication Corporation
Subscribed and sworn to before me this
FORM58·10
in and for the State of Texas
my commission Expires 3/1512010
····-----····--
)
).
)
)
)
MINUTES AND CERTIFICATION PERTAINING TO
PASSAGE OF AN ORDINANCE
STATEOFTEXAS §
COUNTY OF LUBBOCK §
CITY OF LUBBOCK §
On the 12th day of January, 2007, 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:
David A. Miller, Mayor
Jim Gilbreath, Mayor Pro Tern
Linda DeLeon
Floyd Price
Gary 0. Boren
Phyllis S. Jones
John Leonard
)
)
)
)
}
Members of
the Council
and all of said persons were present, thus constituting a quorum. Whereupon, among other
business, a written Ordinance bearing the following caption was introduced:
AN ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF
LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE CERTIFICATES OF OBLIGATION, SERIES 2007;
LEVYING A TAX AND PLEDGfNG SURPLUS WATERWORKS
SYSTEM REVENUES IN PAYMENT THEREOF; APPROVING THE
OFFICIAL STATEMENT; APPROVING EXECUTION OF A
PURCHASE CONTRACT; AND ENACTING OTHER PROVISIONS
RELATING THERETO
The Ordinance, a full, true and correct copy of which is attached hereto, was read and
reviewed by the City Council. Thereupon, 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: 7
NOES: 0
ABSTENTIONS: 0
WB200nt007
l203960_1.DOC
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 12th
day of January, 2007.
) '£~· ·~c
City of Lubbock, Texas
[SEAL]
)
Signature Page to Minutes and Certification
)
Ordinance No. 2007-oOOOl
ORDINANCE
relating to
$25,255,000
CfiY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE
CERTIFICATES OF OBLIGATION
1201932v.2 LUB200171007
SERIES 2007
Dated: January 1, 2007
Adopted: January 12, 2007
'
)
)
Section 1.1
Section 1.2
Section 1.3
Section 1.4
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER PRELIMINARY MATTERS
Definitions ............................................................................................................... 1
Findings ................................................................................................................... 4
Table of Contents, Titles, and Headings ................................................................. 4
Interpretation ........................................................................................................... 4
ARTICLE II
SECURITY FOR THE CERTIFICATES; INTEREST AND SINKING FUND; PRIOR LIEN
OBLIGATIONS
Section 2.1 Payment of the Certificates ..................................................................................... 4
Section 2.2 Interest and Sinking Fund ....................................................................................... 6
ARTICLE III
AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE
CERTIFICATES
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 .1 0
Section 3.11
Section 3.12
Section 4.1
Section4.2
Section 4.3
Section4.4
Section4.5
Authorization ........................................................................................................... 6
Date, Denomination, Maturities, and Interest ......................................................... 6
Medium, Method, and Place of Payment ................................................................ 7
Execution and Registration of Certificates .............................................................. 8
Ownership ............................................................................................................... 9
Registration, Transfer, and Exchange ..................................................................... 9
Cancellation ........................................................................................................... 1 0
Temporary Certificates .......................................................................................... 10
Replacement Certificates ....................................................................................... 11
Book-Entry-Only System ...................................................................................... 12
Successor Securities Depository; Transfer Outside Book-Entry-Only System .... 13
Payments to Cede & Co ........................................................................................ 13
ARTICLE fV
REDEMPTION OF CERTIFICATES BEFORE MATURITY
Redemption ........................................................................................................... 13
Optional Redemption ............................................................................................ 13
Mandatory Sinking Fund Redemption .................................................................. 14
Partial Redemption ................................................................................................ 15
Notice of Redemption to Owners .......................................................................... 15
1201932v.2 LUB200171007
)
Section 4.6
Section4.7
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
Paytnent Upon Redeiilption .................................................................................. 16
Effect of Redeiilption ............................................................................................ 16
Lapse of Paytnent .................................................................................................. 16
ARTICLEV
PAYING AGENT/REGISTRAR
Appointment of Initial Paying Agent/Registrar .................................................... 16
Qualifications ........................................................................................................ 16
Maintaining Paying Agent/Registrar ..................................................................... 17
Termination ........................................................................................................... 17
Notice of Change to Owners ................................................................................. 17
Agreement to Perform Duties and Functions ........................................................ 17
Delivery of Records to Successor ......................................................................... 17
ARTICLE VI
FORM OF THE CERTIFICATES
Form General I y ..................................................................................................... 17
Form of the Certificates ......................................................................................... 18
CUSIP Registration ............................................................................................... 24
Legal Opinion ........................................................................................................ 24
Bond Insurance ...................................................................................................... 24
ARTICLE VII
SALE AND DELIVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS
Section 7.1
Section 7.2
Section 7.3
Section 8.1
Section 8.2
Section 9.1
Section 9.2
Section 9.3
Sale of Certificates; Official Statement.. ............................................................... 24
Control and Delivery of Certificates ..................................................................... 25
Deposit of Proceeds ............................................................................................... 26
ARTICLE VIII
INVESTMENTS
Investments ............................................................................................................ 26
Investment Income ................................................................................................ 26
ARTICLE IX
PARTICULAR REPRESENTATIONS AND COVENANTS
Payment of the Certificates ................................................................................... 26
Other Representations and Covenants ................................................................... 27
Provisions Concerning Federal Income Tax Exclusion ........................................ 27
1201932v.2 LUB200nt007
)
Section 9.4
Section 9.5
Section 9.6
Section 9.7
Section 9.8
Section 9.9
Section 9.10
No Private Use or Payment and No Private Loan Financing ................................ 27
No Federal Guaranty ............................................................................................. 28
Certificates Are Not Hedge Bonds ........................................................................ 28
No-Arbitrage Covenant ......................................................................................... 28
Arbitrage Rebate ................................................................................................... 28
Information Reporting ........................................................................................... 29
Continuing Obligation ........................................................................................... 29
ARTICLE X
DEFAULT AND REMEDIES
Section 10.1 Events of Default. .................................................................................................. 29
Section 1 0.2 Remedies for Default ............................................................................................ 29
Section 10.3 Remedies Not Exclusive ....................................................................................... 30
ARTICLE XI
DISCHARGE
Section 11.1 Discharge ............................................................................................................... 30
ARTICLE XII
CONTINUrNG DISCLOSURE UNDERTAKING
Section 12.1 A.nnual Reports ...................................................................................................... 3 0
Section 12.2 Material Event Notices .......................................................................................... 31
Section 12.3 Limitations, Disclaimers and Amendments .......................................................... 31
ARTICLE XIII
AMENDMENTS; ATTORNEY GENERAL MODIFICATION
Section 13.1 Amendments .......................................................................................................... 33
Section 13.2 Attorney General Modification ............................................................................. 3 3
ARTICLE XIV
INSURANCE PROVISIONS
Section 14.1 Municipal Bond Insurance .................................................................................... 33
ARTICLE XV
EFFECTIVE IMMEDIATELY
Section 15.1 Effective Immediately ........................................................................................... 34
I201932v.2 LUB2oonJ007
)
)
' I
Exhibit A -Description of Annual Disclosure of Financial Information .................................... A -1
1201932v.2 LUB200171007
)
)
)
)
AN ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF
LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS
REVENUE CERTIFICATES OF OBLIGATION, SERIES 2007;
LEVYING A TAX AND PLEDGING SURPLUS WATERWORKS
SYSTEM REVENUES IN PAYMENT THEREOF; APPROVING THE
OFFICIAL STATEMENT; APPROVING EXECUTION OF A
PURCHASE CONTRACT; AND ENACTING OTHER PROVISIONS
RELATING THERETO
WHEREAS, under the provisions of Subchapter C, Chapter 271, Texas Local
Government Code, as amended, the City of Lubbock, Texas (the "City"), after giving proper
notice, is authorized to issue and sell for cash its certificates of obligation (herein defined as the
"Certificates") that are secured by and payable from the ad valorem taxes and other revenues
specified in Article II of this Ordinance, and that are issued in the amount, for the purposes, and
with the provisions set forth in Section 3 .l of this Ordinance;
WHEREAS, pursuant to a resolution heretofore passed by the City Council, notice of
intention to issue the Certificates was published in a newspaper of general circulation in the City
in accordance with applicable law;
WHEREAS, no petition has been filed with the City Secretary, any member of the City
Council or any other official of the City, protesting the issuance of the Certificates;
WHEREAS, the City Council is now authorized and empowered to proceed with the
issuance and sale of the Certificates, and has found and determined that it is necessary and in the
best interests of the City and its citizens that it issue the Certificates in accordance with the terms
and provisions of this Ordinance; 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 MA TIERS
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:
"Certificate" means any of the Certificates.
"Certificate Date" means the date designated as the initial date of the Certificates by
Section 3.2(a) of this Ordinance.
l20l932v.2 LUB200!71007
)
"Certificates" means the certificates of obligation authorized to be issued by Section 3.1
of this Ordinance and designated as "City of Lubbock, Texas, Tax and Waterworks System
Surplus Revenue Certificates of Obligation, Series 2007."
"City" means the City of Lubbock, Texas.
"Closing Date" means the date of the initial delivery of and payment for the Certificates.
"Code" means the Internal Revenue Code of 1986, as amended, including applicable
regulations, published rulings, and court decisions.
"Designated Paymentffransfer Office" means (i) with respect to the initial Paying
) Agent/Registrar named in this Ordinance, the Designated Paymentffransfer 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 City and such successor.
)
)
''DTC" means The Depository Trust Company of New York, New York, or any
successor securities depository.
"DTC Participant" means 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.
"Event of Default" means any event of default as defined in Section 10.1 of this
Ordinance.
"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 Certificate" means the initial certificate authorized by Section 3.4 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 Certificates 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 August 15,2007.
"MSRB" means the Municipal Securities Rulemaking Board.
''NRMSIR" means each person whom the SEC or its staff has determined to be a
nationally recognized municipal securities information repository within the meaning of the Rule
from time to time.
-2-
1201932v.2 LUB200ni007
)
)
)
)
''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 costs of insurance, the purchase and carrying of stores, materials, and supplies,
the payment of salaries and labor, and other expends 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 the 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."
"Owner" means the person who is the registered owner of a Certificate or Certificates, as
shown in the Register.
"Paying Agent/Registrar" means initially The Bank of New York Trust Company,
National Association, or any successor thereto as provided in this Ordinance.
"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 first lien on and pledge of the Net Revenues of the System or by a lien on and
pledge of the Net Revenues subordinate to a first lien on and pledge of the Net Revenues but
superior to the lien on and pledge of the Surplus Revenues made for the Certificates.
"Project" means the purposes for which the Certificates are issued as set forth in
Section 3.1.
"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.
"Rule" means SEC Rule 15c2-12, as amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"SID" means any person designated by the State of Texas or an authorized department,
office or agency thereof, as and determined by the SEC or its staff to be a state information
depository within the meaning of the Rule from time to time.
"Surplus Revenues" means the Net Revenues of the System in an amount not to exceed
$1,000 remaining after payment of all debt service, reserve and other requirements in connection
with the City's Prior Lien Obligations.
1201932v.2 WB200171007
"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.
"Term Certificates" means the Certificates maturing in 2024, 2026, 2028 and 2031.
) "Unclaimed Payments" means money deposited with the Paying Agent/Registrar for the
payment of principal of or interest on the Certificates as the same come due and payable and
remaining unclaimed by the Owners of such Certificates after the applicable payment or
redemption date.
"Underwriters" means Morgan Keegan & Company, Inc., M.E. Allison & Co., Inc.,
Southwest Securities and Popular Securities, Inc.
Section 1.2 Findings.
The declarations, determinations, and findings declared, made, and found in the preamble
to this Ordinance are hereby adopted, restate, 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 Intemretation.
(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 number shall be construed to include correlative words of the plural
number and vice versa.
(b) This Ordinance and all the terms and provisions hereof shall be hoerally
construed to effectuate the purposes set forth herein.
ARTICLE II
SECURITY FOR THE CERTIFICATES; INTEREST AND SINKING FUND;
PRIOR LIEN OBLIGATIONS
Section 2.1 Payment of the Certificates.
(a) 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 Certificates or any interest thereon is outstanding and
-4-
1201932v.2 LUB200171007
)
)
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 Certificates, being (i) the interest on the Certificates, 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.
(b) 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.
(c) 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 Certificates when
and as due and payable in accordance with their terms and this Ordinance.
(d) The City hereby covenants and agrees that the Surplus Revenues are hereby
) irrevocably pledged equally and ratably to the payment of the principal of and interest on the
Certificates. The City reserves the right to issue Prior Lien Obligations for any lawful purpose,
at any time, in one or more installments.
)
(e) The amount of taxes to be assessed annually for the payment of debt service on
the Certificates shall be determined in the following manner:
(i) The City's annual budget shall reflect (A) the amount of debt
service requirements to become due on the Certificates in the next ensuing Fiscal
Year and (B) the amount on deposit in the Interest and Sinking Fund on the date
such budget is approved.
(ii) The amount required to be provided in the next succeeding Fiscal
Year from ad valorem taxes shall be the amount, if any, that the debt service
requirements on the Certificates to be paid during the next Fiscal Year exceeds
the amount then on deposit in the Interest and Sinking Fund.
(iii) Following approval of the City's annual budget, the City Council
shall, by ordinance, establish a tax rate that is sufficient to produce taxes in an
amount which, when added to the amount then on deposit in the Interest and
Sinking Fund, will be sufficient to pay debt service on the Certificates when due
during the next Fiscal Year.
(f) If the liens and provisions of this Ordinance shall be released in a manner
permitted by Article XI hereof, then the collection of such ad valorem tax may be suspended or
appropriately reduced, as the facts may permit, and further deposits to the Interest and Sinking
Fund may be suspended or appropriately reduced, as the facts may permit. In determining the
aggregate principal amount of outstanding Certificates, there shall be subtracted the amount of
any Certificates that have been duly called for redemption and for which money has been
deposited with the Paying Agent/Registrar for such redemption.
-5-
1201932v.2 LUB200n1007
)
)
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 Certificates of Obligation,
Series 2007, 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 Certificates when and as due and payable in accordance with their terms and this Ordinance.
ARTICLE III
AUTHORIZATION; GENERAL TERMS AND PROVISIONS
REGARDING THE CERTIFICATES
Section 3.1 Authorization.
The City's certificates of obligation to be designated "City of Lubbock, Texas, Tax and
Waterworks System Surplus Revenue Certificates of Obligation, Series 2007" (the
"Certificates"}, are hereby authorized to be issued and delivered in accordance with the
Constitution and laws of the State of Texas, specifically Subchapter C, Chapter 271, Texas Local
) Government Code, as amended, and Article VIII of the City's Home-Rule Charter. The
Certificates shall be issued in the aggregate principal amount of $25,255,000 for the purpose of
paying contractual obligations to be incurred for the following purposes, to wit: (i) designing,
developing, constructing, improving, extending and expanding streets, thoroughfares, freeways
and other public ways of the City and related utility relocation, right-of-way protection and
acquisition and storm drainage improvements, including participation in joint projects with the
State through the Texas Department of Transportation relating to US 62/Marsha Sharp Freeway
(the "Project") and (ii) payment of professional services of attorneys, financial advisors and other
professionals in coiUtection with the Project and the issuance of the Certificates.
Section 3.2 Date. Denomination. Maturities. and Interest.
(a) The Certificates shall be dated January 1, 2007. The Certificates 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 Certificate, which shall be
numbered T -1.
-6-
1201932v.2 LUB200171007
)
)
(b) The Certificates shall mature on February 15 in the years and in the principal
amounts set forth in the following schedule:
Serial Certificates
Principal Interest Principal Interest
Year Amount Rate Year Amount Rate
2008 $ 630,000 4.000% 2016 $ 865t000 4.000%
2009 655,000 4.000% 2017 900,000 4.000%
2010 680,000 4.000% 2018 940,000 4.000%
2011 710,000 4.000% 2019 975,000 4.000%
2012 740,000 4.000% 2020 1,015,000 4.125%
2013 770,000 4.000% 2021 1,060,000 4.125%
2014 800,000 4.000% 2022 l tl05,000 4.2500/o
2015 830,000 4.000%
Term Certificates
Principal Interest
Year Amount Rate
2024 $2,355,000 4.125%
2026 2,575,000 5.000%
2028 2,850,000 5.000%
2031 4,800,000 4.300%
(c) Interest shall accrue and be paid on each Certificate respectively until its maturity
or prior redemption, from the later of the Certificate Date or the most recent Interest Payment
Date to which interest has been paid or provided for at the rates per annum for each respective
maturity specified in the schedule contained in subsection (b) above. Such interest shall be
payable on each Interest Payment Date until maturity or prior redemption. Interest on the
Certificates shall be calculated on the basis of a three hundred sixty (360) day year composed of
twelve (12) months of thirty (30) days each.
Section 3.3 Medium. Method. and Place of Payment.
(a) The principal of and interest on the Certificates shall be paid in lawful money of
the United States of America.
(b) Interest on the Certificates shall be payable to the Owners as shown in the
Register at the close of business 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
1201932v.2 LUB2oontoo7
shall bear all risk and expense of such alternative banking arrangement. At the option of an
Owner of at least $1 ,000,000 principal amount of the Certificates, interest may be paid by wire
transfer to the bank account of such Owner on file with the Paying Agent/Registrar.
(d) The principal of each Certificate 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 Certificate at the Designated Payment/Transfer Office of the Paying
Agent/Registrar.
(e) If the date for the payment of the principal of or interest on the Certificates shall
be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the
Designated Payment/Transfer 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 purposes
be deemed to have been made on the due date thereof as specified in Section 3.2 of this
Ordinance.
(t) 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 Certificates
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
Certificates thereafter coming due; to the extent any such moneys remain three years after the
retirement of all outstanding Certificates, 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 Certificates for any further payment
of such unclaimed moneys or on account of any such Certificates, subject to Title 6 of the Texas
Property Code.
Section 3.4 Execution and Registration of Certificates.
(a) The Certificates shall be executed on behalf of the City by the Mayor and the City
Secretary or any Assistant 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 Certificates shall have the same effect as if each of the Certificates had been
signed manually and in person by each of said officers, and such facsimile seal on the
Certificates shall have the same effect as if the official seal of the City had been manually
impressed upon each of the Certificates.
(b) In the event that any officer of the City whose manual or facsimile signature
appears on the Certificates ceases to be such officer before the authentication of such Certificates
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 Certificate shall be valid or obligatory for any
purpose or be entitled to any security or benefit of this Ordinance unless and until there appears
-8-
1201932v.2 LUB200nt007
)
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 Certificates.
In lieu of the executed Certificate of Paying Agent/Registrar described above, the Initial
Certificate delivered at the Closing Date shall have attached thereto the Comptroller's
Registration Certificate substantially in the fonn 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 Certificate 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 of Texas.
(d) On the Closing Date, one Initial Certificate representing the entire principal
amount of all Certificates, payable in stated installments to the initial purchaser, or its designee,
executed ·by the Mayor and City Secretary or any Assistant City Secretary of the City by their
manual or facsimile signatures, approved by the Attorney General, and registered and manually
signed by the Comptroller of Public Accounts, will be delivered to the initial purchaser or its
designee. Upon payment for the Initial Certificate, the Paying Agent/Registrar shall cancel the
Initial Certificate and deliver a single registered, definitive Certificate for each maturity, in the
aggregate principal amount thereof, to DTC on behalf of the purchaser.
Section 3.5 Ownership.
(a) The City, the Paying Agent/Registrar, and any other person may treat the person
in whose name any Certificate is registered as the absolute owner of such Certificate for the
purpose of making and receiving payment as herein provided (except interest shall be paid to the
person in whose name such Certificate is registered on the Record Date), and for all other
purposes, whether or not such Certificate 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 Certificate shall be valid and effectual and
shall discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to
the extent of the sums paid.
Section 3.6 Registration. Transfer. and Exchange.
(a) So long as any Certificates 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 Certificates in accordance with this Ordinance.
(b) The ownership of a Certificate may be transferred only upon the presentation and
surrender of the Certificate at the Designated Paymentffransfer 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 Certificate shall be effective until entered in the
Register.
-9-
l20l932v.2 LUB20on1007
(c) The Certificates shall be exchangeable upon the presentation and surrender
thereof at the Designated Paymentffransfer Office of the Paying Agent/Registrar for a
Certificate or Certificates 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 Certificates presented for exchange. The Paying
Agent/Registrar is hereby authorized to authenticate and deliver Certificates exchanged for other
Certificates in accordance with this Section.
(d) Each exchange Certificate 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 Certificate or
Certificates in lieu of which such exchange Certificate is delivered.
(e) No service charge shall be made to the Owner for the initial registration,
subsequent transfer, or exchange for a different denomination of any of the Certificates. 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 Certificate.
(f) Neither the City nor the Paying Agent/Registrar shall be required to issue,
transfer, or exchange any Certificate called for redemption, in whole or in part, where such
redemption is scheduled to occur within forty-fi ve (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 Certificate.
Section 3. 7 Cancellation.
All Certificates paid or redeemed before scheduled maturity in accordance with this
Ordinance, and all Certificates in lieu of which exchange Certificates or replacement Certificates
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 Certificates to the City or may in accordance
with law destroy such cancelled Certificates and periodically furnish the City with certificates of
destruction of such Certificates.
Section 3.8 Temporary Certificates.
(a) Following the delivery and registration of the Initial Certificate and pending the
preparation of definitive Certificates, the City may execute and, upon the City's request, the
Paying Agent/Registrar shall authenticate and deliver, one or more temporary Certificates that
are printed, lithographed, typewritten, mimeographed, or otherwise produced, in any
denomination, substantially of the tenor of the definitive Certificates in lieu of which they are
delivered, without coupons, and with such appropriate insertions, omissions, substitutions, and
other variations as the officers of the City executing such temporary Certificates may determine,
as evidenced by their signing of such temporary Certificates.
(b) Until exchanged for Certificates in definitive fonn, such Certificates in temporary
form shall be entitled to the benefit and security of this Ordinance.
-10-
1201932v.2 LUB2oont007
(c) The City, without unreasonable delay, shall prepare, execute and deliver to the
J Paying Agent/Registrar; thereupon, upon the presentation and surrender of the Certificate or
Certificates in temporary form to the Paying Agent/Registrar, the Paying Agent/Registrar shall
authenticate and deliver in exchange therefor a Certificate or Certificates of the same maturity
and series, in definitive form, in the authorized denomination, and in the same aggregate
principal amount, as the Certificate or Certificates in temporary fonn surrendered. Such
) exchange shall be made without the making of any charge therefor to any Owner.
)
Section 3.9 Replacement Certificates.
(a) Upon the presentation and surrender to the Paying Agent/Registrar of a mutilated
Certificate, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a
replacement Certificate 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 Certificate to pay a swn sufficient to cover any tax or other governmental charge that is
authorized to be imposed in connection therewith and any other expenses connected therewith.
(b) In the event that any Certificate 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 Certificate has been acquired by a bona fide purchaser,
shall authenticate and deliver a replacement Certificate 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
Certificate;
(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 Certificate, a bona fide purchaser of the
original Certificate in lieu of which such replacement Certificate was issued presents for
payment such original Certificate, the City and the Paying Agent/Registrar shall be entitled to
recover such replacement Certificate from the person to whom it was delivered or any person
taking therefrom, 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 connection therewith.
(d) In the event that any such mutilated, lost, apparently destroyed, or wrongfully
taken Certificate has become or is about to become due and payable, the Paying Agent/Registrar,
-11-
120 1932v.2 LU8200/71 007
'
in its discretion, instead of issuing a replacement Certificate, may pay such Certificate when it
becomes due and payable.
(e) Each replacement Certificate 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 Certificate or Certificates in lieu
of which such replacement Certificate is delivered.
Section 3.10 Book-Entry-Only System.
(a) Notwithstanding any other provision hereof: upon initial issuance of the
Certificates, the Certificates shall be registered in the name of Cede & Co., as nominee of DTC.
The definitive Certificates shall be initially issued in the form of a single separate certificate for
each of the maturities thereof.
(b) With respect to Certificates 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 Certificates. 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 Certificates, (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 Certificates, 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 or interest on the
Certificates. 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
Certificate is registered in the Register as the absolute owner of such Certificate for the purpose
of payment of principal of and interest on Certificates, for the purpose of giving notices of
redemption and other matters with respect to such Certificate, for the purpose of registering
transfer with respect to such Certificate, and for all other purposes whatsoever. The Paying
Agent/Registrar shall pay all principal of and interest on the Certificates 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 interest
on the Certificates to the extent of the sum or sums so paid. No person other than an Owner, as
shown in the Register, shall receive a certificate 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 of DTC.
(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 Certificates.
-12-
1201932v.2 LUB200/71007
)
Section 3.11 Successor Securities Depository: Transfer Outside Book-Entrv-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 Certificates that they be able to obtain certificated Certificates, or in the
event DTC discontinues the services described herei~ the City shall (i) appoint a successor
securities depository, qualified to act as such under Section 17(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 Certificates to such successor
securities depository; or (ii) notify DTC and DTC Participants of the availability through DTC of
certificated Certificates and cause the Paying Agent/Registrar to transfer one or more separate
registered Certificates to DTC Participants having Certificates credited to their DTC accounts.
In such event, the Certificates 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 Certificates shall designate, in accordance with the provisions of this Ordinance.
Section 3.12 Payments to Cede & Co.
Notwithstanding any other provision of this Ordinance to the contrary, so long as the
Certificates are registered in the name of Cede & Co., as nominee of DTC, all payments with
respect to principal of and interest on such Certificates, and all notices with respect to such
Certificates shall be made and given, respectively, in the manner provided in the Representations
Letter of the City to DTC.
ARTICLE IV
REDEMPTION OF CERTIFICATES BEFORE MATURITY
Section 4.1 Redemption.
The Certificates are subject to redemption before their scheduled maturity only as
provided in this Article IV.
Section 4.2 Optional Redemption.
(a) The City reserves the option to redeem Certificates maturing on February 15 in
the years 2018 through 2028, inclusive, in whole or any part, before their respective scheduled
maturity dates, on February 15, 2017 or on any date thereafter, such redemption date or dates to
be fixed by the City, at a price equal to the principal amount of the Certificates called for
redemption plus accrued interest to the date fixed for redemption.
(b) The City reserves the option to redeem Certificates maturing on February 15,
2031, in whole or in part, before their scheduled maturity dates, on February 15,2012 or on any
date thereafter, such redemption date or dates to be fixed by the City, at a price equal to the
principal amount of the Certificates called for redemption plus accrued interest to the date fixed
for redemption.
-13-
1201932v.2 LUB200/71007
)
(c) If less than all of the Certificates 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 Certificates, or portions
thereof, within such maturity or maturities and in such principal amounts for redemption.
(d) The City, at least 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 Certificates to be redeemed.
Section 4.3 Mandatory Sinking Fund Redemption.
(a) The Tenn Certificates 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
following schedule:
Term Certificates Maturing February 15. 2024
Redemption Date
February 15, 2023
February 15, 2024 (maturity)
Principal Amount
$1 ,155,000
1,200,000
Term Certificates Maturing February 15. 2026
Redemption Date
February 15, 2025
February 15,2026 (maturity)
Principal Amount
$1,255,000
1,320,000
Term Certificates Maturing February 15. 2028
Redemption Date
February 15, 2027
February 15,2028 (maturity)
Principal Amount
$1,390,000
1,460,000
Term Certificates Maturing February 15. 2031
Redemption Date
February 15, 2029
February 15, 2030
February 15,2031 (maturity)
Principal Amount
$1,530,000
1,600,000
1,670,000
(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 Certificates equal to the aggregate
principal amount of such Tenn Certificates to be redeemed, shall call such Term Certificates for
-14-
1201932v.2 LUB200171007
redemption on such scheduled mandatory redemption date, and shall give notice of such
redemption, as provided in Section 4.5.
The principal amount of the Term Certificates 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 Tenn Certificates 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 Certificates 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.
Section 4.4 Partial Redemption.
(a) A portion of a single Certificate 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 Certificate is to be partially redeemed, the Paying Agent/Registrar shall treat each $5,000
portion of the Certificate as though it were a single Certificate for purposes of selection for
redemption.
(b) Upon sWTender of any Certificate for redemption in part, the Paying
Agent/Registrar, in accordance with Section 3.6 of this Ordinance, shall authenticate and deliver
an exchange Certificate or Certificates in an aggregate principal amount equal to the unredeemed
portion of the Certificate so sWTendered, 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 Certificate 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 Certificates by
sending notice by United States mail, first class postage prepaid, not less than 30 days before the
date fixed for redemption, to the Owner of each Certificate (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 Certificates are to be SWTendered for payment, and, if less than all the Certificates
outstanding are to be redeemed, an identification of the Certificates 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.
-15-
1201932v.2 LUB2ooni007
)
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 Certificates to be redeemed on such
date by setting aside and holding in trust such amounts 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 Certificates being redeemed.
(b) Upon presentation and surrender of any Certificate called for redemption at the
Designated Payment!fransfer Office on or after the date fixed for redemption, the Paying
Agent/Registrar shall pay the principal of and accrued interest on such Certificate to the date of
redemption from the money set aside for such purpose.
Section 4.7 Effect ofRedemption.
(a} Notice of redemption having been given as provided in Section 4.5 of this
Ordinance, the Certificates 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 Certificates or
portions thereof shall cease to bear interest from and after the date fixed for redemption, whether
or not such Certificates 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 Certificate or portion thereof called for redemption shall continue to
bear interest at the rate stated on the Certificate until due provision is made for the payment of
same by the City.
Section 4.8 Lapse of Payment.
Money set aside for the redemption of Certificates and remaining unclaimed by the
Owners of such Certificates shall be subject to the provisions of Section 3.3(£) hereof.
ARTICLEV
PAYING AGENT/REGISTRAR
Section 5.1 Appoinbnent of Initial Paying Agent/Registrar.
The Bank of New York Trust Company, National Association, is hereby appointed as the
initial Paying Agent/Registrar for the Certificates.
Section 5.2 Qualifications.
Each Paying Agent/Registrar shall be a commercial bank, a 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 and registrar for the Certificates.
-16-
1201932v.2 LUB200171007
)
)
Section 5.3 Maintaining Paving Agent/Registrar.
(a) At all times while any of the Certificates 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 form presented at this meeting, such form of agreement being hereby approved.
The signature of the Mayor shall be attested by the City Secretary or any Assistant City Secretary
oftheCity.
(b) If the Paying Agent/Registrar resigns or otherwise ceases to serve 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 terminate 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.
Section 5.6 Agreement to Perform Duties and Functions.
By accepting the appointment 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 Certificates to the successor Paying Agent/Registrar.
ARTICLE VI
FORM OF THE CERTIFICATES
Section 6.1 Form Generally.
(a) The Certificates, including the Registration Certificate of the Comptroller of
Public Accounts of the State of Texas) the Certificate of the Paying Agent/Registrar, and the
Assigrunent form to appear on each of the Certificates, (i) shall be substantially in the form set
1201932v.2 LUB200!71007
'
)
'
)
)
forth in this Article, with such appropriate insertions, omiSSions, substitutions, and other
variations as are permitted or required by this Ordinance, and (ii) may have such letters,
numbers, or other marks of identification (including identifying numbers and letters of the
Committee on Uniform Securities Identification Procedmes 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 Certificates, as evidenced by their execution thereof.
(b) Any portion of the text of any Certificates may be set forth on the reverse side
thereof, with an appropriate reference thereto on the face of the Certificates.
(c) The definitive Certificates, 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
Certificates, as evidenced by their execution thereof.
(d) The Initial Certificate submitted to the Attorney General of the State of Texas
may be typewritten and photocopied or otherwise reproduced.
Section 6.2 Form of the Certificates.
The form of the Certificates, 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 Assigrunent appearing on the Certificates, shall be substantially
as follows:
(a) Form of Certificate.
REGISTERED
No. __
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$ ___ _
INTEREST RATE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER:
__ % Januacy 1, 2007
The City of Lubbock (the "City''), in the County of Lubbock, State of Texas, for value
received, hereby promises to pay to
-18-
1201932v.2 LUB20oni007
)
'
)
)
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 Certificate 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
August 15,2007.
The principal of this Certificate shall be payable without exchange or collection charges
in lawful money of the United States of America upon presentation and surrender of this
Certificate at the corporate trust office in Dallas, Texas (the "Designated Payment!fransfer
Office"), ofThe Bank of New York Trust Company, National Association, or, with respect to a
successor Paying Agent/Registrar, at the Designated Paymentffransfer Office of such successor.
Interest on this Certificate 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. At the option of an Owner of at least $1,000,000 principal amount of the
Certificates, interest may be paid by wire transfer to the bank account of such Owner on file with
the Paying Agent/Registrar. For the purpose of the payment of interest on this Certificate, the
registered owner shall be the person in whose name this Certificate 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 Certificate 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 Certificate is one of a series of fully registered certificates specified in the title
hereof issued in the aggregate principal amount of $25,255,000 (herein referred to as the
"Certificates"), issued pursuant to a certain ordinance of the City (the "Ordinance") for the
purpose of paying contractual obligations to be incurred for authorized public improvements
(collectively, the "Project"), as described in the Ordinance, and to pay the contractual obligations
for professional services of attorneys, financial advisors and other professionals in connection
with the Project and the issuance of the Certificates.
The City has reserved the option to redeem the Certificates maturing on February 15 in
the years 2018 through 2028, inclusive, in whole or in part, before their respective scheduled
maturity dates, on February 15, 2017, or on any date thereafter, at a price equal to the principal
-19-
120!932v.2 LUB20017I007
)
)
amount of the Certificates so called for redemption plus accrued interest to the date fixed for
redemption. The City has reserved the option to redeem Certificates maturing on February 15,
2031, in whole or in part, before their scheduled maturity dates, on February 15, 2012, or any
date thereafter, at a price equal to the principal amount of the Certificates so called for
redemption plus accrued interest to the date fixed for redemption. If less than all of the
Certificates 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 or other
customary method that results in a random selection the Certificates, or portions thereof, within
such maturity and in such principal amounts, for redemption.
Certificates maturing on February 15 in each of the years 2024, 2026, 2028 and 2031 (the
"Term Certificates") 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:
Term Certificates Maturing Februazy 15. 2024
Redemption Date
February 15, 2023
February 15, 2024 (maturity)
Principal Amount
$1,155,000
1,200,000
Term Certificates Maturing February 15. 2026
Redemption Date
February 15,2025
February 15,2026 (maturity)
Principal Amount
$1,255,000
1,320,000
Term Certificates Maturing February 15, 2028
Redemption Date
February 15, 2027
February 15, 2028 (maturity)
Principal Amount
$1,390,000
1,460,000
Term Certificates Maturing February 15. 2031
Redemption Date
February 15,2029
February 15, 2030
February 15, 2031 (maturity)
Principal Amount
$1,530,000
1,600,000
1,670,000
The Paying Agent/Registrar will select by lot or by any other customary method that
results in a random selection the specific Certificates (or with respect to Certificates having a
denomination in excess of $5,000, each $5,000 portion thereof) to be redeemed by mandatory
redemption. The principal amount of Certificates required to be redeemed on any redemption
date pursuant to the foregoing mandatory sinking fund redemption provisions hereof shall be
-20-
1201932v.2 LUB200nt007
reduced, at the option of the City, by the principal amount of any Certificates 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 Certificates 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.
Notice of such redemption or redemptions shall be given by first class mail, postage
prepaid, not less than 30 days before the date fixed for redemption, to the registered owner of
each of the Certificates to be redeemed in whole or in part. Notice having been so given, the
Certificates 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 Certificates or portions thereof so called for redemption shall not have been surrendered for
payment, interest on such Certificates or portions thereof shall cease to accrue.
As provided in the Ordinance, and subject to certain limitations therein set forth, this
Certificate is transferable upon surrender of this Certificate 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 Certificates 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 Certificate 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 Certificate is
registered on the Record Date) and for all other purposes, whether or not this Certificate 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 Certificate 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 Certificates 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 Certificates 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 Certificates by pledging to such purpose Surplus Revenues, as
defined in the Ordinance, derived by the City from the operation of the Waterworks System in an
amount Limited to $1 ,000; that when so collected, such taxes and Surplus Revenues shall be
appropriated to such pwposes; and that the total indebtedness of the City, including the
Certificates, does not exceed any constitutional or statutory limitation.
-21-
1201932v.2 LUB200nt007
'
IN WITNESS WHEREOF, the City has caused this Certificate 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 Certificate .
...
Mayor, City of Lubbock, Texas
City Secretary,
City of Lubbock, T ex:as
[SEAL]
(b) Form of Comptroller's Registration Certificate. The following Comptroller's
Registration Certificate may be deleted from the definitive Certificates if such certificate on the
Initial Certificate 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 Certificate 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 ofTexas, and that it is a valid and binding obligation of the City of Lubbock, Texas;
and that this Certificate has this day been registered by me.
Witness my hand and seal of office at Austin, Texas, ______ __,
[SEAL]
l201932v.2 LUB200/71007
-22-
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 Certificate if the Comptroller's
Registration Certificate appears thereon. ·
CERTIFICATE OF PA YfNG AGENT/REGISTRAR
) The records of the Paying Agent/Registrar show that the Initial Certificate of this series
'I
)
of Certificates was approved by the Attorney General of the State ofTexas and registered by the
Comptroller of Public Accounts of the State of Texas, and that this is one of the Certificates
referred to in the within-mentioned Ordinance.
Dated:
(d) Form of Assignment.
The Bank of New York Trust Company,
National Association
as Paying Agent/Registrar
By:
Authorized Signatory
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or
typewrite name, address and Zip Code of transferee): ---------------
(Social Security or other identifying number: the within Certificate
and all rights hereunder and hereby irrevocably constitutes and appoints
---------attorney to transfer the within Certificate on the books kept for
registration hereof, with full power of substitution in the premises.
Dated:
Signature Guaranteed By:
Authorized Signatory
1201932v .2 LUB200/71 007
-23~
NOTICE: The signature on this Assignment
must correspond with the name of the
registered owner as it appears on the face of
the within Certificate in every particular and
must be guaranteed in a manner acceptable
to the Paying Agent/Registrar.
...
)
(e) The Initial Certificate shall be in the form set forth in paragraphs (a), (b) and (d)
of this Section, except for the following alterations:
(i) immediately under the name of the Certificate the headings
"INTEREST RATE" and "MATURITY DATE" shall both be completed with the
expression "As shown below"; and
(ii) in the first paragraph of the Certificate, 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:
Principal Installments Interest Rate
(Information to be inserted from schedule in Section 3.2 of the 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 Certificates. It is expressly
provided, however, that the presence or absence of CUSIP numbers on the Certificates shall be
of no significance or effect in regard to the legality thereof and neither the City nor the attorneys
approving said Certificates as to legality are to be held responsible for CUSIP numbers
incorrectly printed on the Certificates.
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 Certificate over the certification of the City Secretary of
the City, which may be executed in facsimile.
Section 6.5 Bond Insurance.
Information pertaining to bond insurance, if any, may be printed on each Certificate.
ARTICLE VII
SALE AND DELfVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS
Section 7.1 Sale of Certificates: Official Statement
(a) The Certificates are hereby officially sold and awarded and shall be delivered to
the Underwriters in accordance with the terms and provisions of that certain purchase contract
(the "Purchase Contract") relating to the Certificates between the City and the Underwriters and
dated the date of the passage of this Ordinance. The form and content of such Purchase Contract
-24-
1201932v.2 LUB2oonl007
)
)
)
are hereby approved, and the Mayor is hereby authorized and directed to execute and deliver
such Purchase Contract. It is hereby officially found, determined and declared that the tenns of
this sale are the most advantageous reasonably obtainable. The Certificates shall initially be
registered in the name of Morgan Keegan & Company, Inc., as representative for the
Underwriters, or their designee.
(b) The fonn and substance of the Preliminary Official Statement, dated January4,
2007, and any addenda, supplement or amendment thereto, are hereby in all respects approved
and adopted and 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
final Official Statement (the "Official Statement") presented to and considered at this meeting is
hereby in all respects approved and adopted and the Mayor and the City Secretary of the City are
hereby authorized and directed to execute the same and deliver appropriate numbers of executed
copies thereof to the Underwriters. The Official Statement as thus approved, executed and
delivered, with such appropriate variations as shall be approved by the Mayor, City Manager,
Deputy City Manager, any Assistant City Manager, Chief Financial Officer, Cash and Debt
Manager or City Secretary of the City and the Underwriters, 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 pennanent records of this meeting. The use and
distribution of the Preliminary Official Statement, and the preliminary public offering of the
Certificates by the Underwriters, is hereby ratified, approved and confirmed.
(c) All officers of the City are authorized to execute such documents, certificates and
receipts as they may deem appropriate in order to consununate the delivery of the Certificates in
accordance with the terms of sale therefor including, without limitation, the Purchase Contract.
(d) The obligation of the Underwriters identified in subsection (a) of this Section to
accept delivery of the Certificates 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 Deli very of Certificates.
(a) The Mayor of the City is hereby authorized to have control of the Initial
Certificate 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
Certificates shall be made to the initial purchasers thereof under and subject to the general
supervision and direction of the Mayor, against receipt by the City of all amounts due to the City
under the tenns of sale.
-25-
120J932v.2 LUB200nt007
)
)
)
)
Section 7.3 Deoosit of Proceeds.
(a) First: All amounts received on the Closing Date as accrued interest on the
Certificates from the Certificate Date to the Closing Date shall be deposited to the Interest and
Sinking Fund.
(b) Second: The remaining balance received on the Closing Date shall be deposited
to a special account of the City, such moneys to be dedicated and used solely for the remaining
purposes for which the Certificates are being issued as herein provided.
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.
(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.
(a) Interest and income derived from investment of the Interest and Sinking Fund
shall be credited to such fund.
(b) Interest and income derived from investment of the funds to be deposited pursuant
to Section 7.3(b) hereof shall be credited to the account where deposited until the acquisition or
construction of said projects is completed or shall be transferred to the Interest and Sinking Fund
as shall be determined by the City Council. Upon completion of the authorized projects, to the
extent such interest and income are present, such interest and income shall be deposited to the
Interest and Sinking Fund.
ARTICLE IX
PARTICULAR REPRESENT AT IONS AND COVENANTS
Section 9.1 Pavment of the Certificates.
On or before each Interest Payment Date while any of the Certificates 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 and interest on the
Certificates as will accrue or mature on the applicable Interest Payment Date or date of prior
redemption.
-26-
1201932v.2 LUB200nt007
)
'
)
' "
)
Section 9.2 Other Representations and Covenants.
(a) The City will faithfully perform, at all times, any and all covenants, undertakings,
stipulations, and provisions contained in this Ordinance; the City will promptly pay or cause to
be paid the principal of and interest on each Certificate on the dates and at the places and manner
prescribed in such Certificate; 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
Certificates; all action on its part for the creation and issuance of the Certificates has been duly
and effectively taken; and the Certificates in the hands of the Owners thereof are and will be
valid and enforceable obligations of the City in accordance with their terms.
Section 9.3 Provisions Concerning Federal Income Tax Exclusion.
The City intends that the interest on the Certificates shall be excludable from gross
income for purposes of federal income taxation pursuant to sections 1 03 and 141 through 150 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 Certificates 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 Certificates 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 Payment 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
Certificates are delivered, the proceeds of the Certificates will not be used in a manner that
would cause the Certificates 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 Certificates, including interest or other investment income derived from
Certificate 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 Certificates will
not be "private activity bonds" within the meaning of section 141 of the Code and the
Regulations.
-27-
1201932v.2 LUB200171007
'
)
Section 9.5 No Federal Guarantx.
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 Certificates to be
"federally guaranteed" within the meaning of section 149(b) of the Code and the Regulations,
except as permitted by section l49(b)(3) of the Code and the Regulations.
Section 9.6 Certificates Aie 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 Certificates 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
Certificates are delivered, the City will reasonably expect that the proceeds of the Certificates
will not be used in a manner that would cause the Certificates 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 Certificates including interest or other
investment income derived from Certificate proceeds, regulate investments of proceeds of the
) Certificates, and take such other and further action as may be required so that the Certificates
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 Certificates (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 Certificates as may be required to calculate the amount earned on the investment of the gross
proceeds of the Certificates 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 Certificates 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 Certificates
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 Certificates or on such other dates as may be
pennitted 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 Certificates
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
-28-
1201932v.2 LUB200171007
the arrangement had been at arm's length and had the yield on the issue not been relevant to
) either party.
Section 9.9 Infonnation Reporting.
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 Certificates are issued, an information statement concerning the Certificates,
all under and in accordance with section 149(e) of the Code and the Regulations.
Section 9.10 Continuing Obligation.
Notwithstanding any other provision of this Ordinance, t~e City's obligations under the
covenants and provisions of Sections 9.3 through 9.9 of this Article IX shall survive the
defe~ance and discharge of the Certificates.
ARTICLE X
DEFAULT AND REMEDIES
Section l 0.1 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 or interest on any of
the Certificates 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 accordance 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 pennitted 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 Certificates then outstanding.
-29-
1201932v.2 LUB200nt007
' "
)
)
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 cwnulative and shall be in addition to
every other remedy given hereunder or under the Certificates 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 Certificates shall not be available as a remedy under
this Ordinance.
(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 1 1. 1 Discharge.
The Certificates may be defeased, discharged or refunded in any manner pennitted 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 period, 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 document (including an official statement or other offering document, if it is
-30-
1201932v.2 LUB200nt007
)
)
available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or
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 Certificates, if such event is material
within the meaning of the federal securities laws:
(i) principal and interest payment delinquencies;
(ii) nonpayment related defaults;
{iii) unscheduled draws on debt service reserves reflecting financial
diffi~ulties;
(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 Certificates;
(vii) modifications to rights of Owners;
(viii) redemption calls;
( ix) defeasances;
(x) release, substitution, or sale of property securing repayment of the
Certificates; 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 Certificates 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."
-31-
1201932v.2 LUB200n1007
\
'
'
(b) The provisions of this Article are for the sole benefit of the Owners and beneficial
owners of the Certificates, 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 infonnatio~ 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 information that may be relevant or material to a complete
presentation of the City's financial results, condition, or prospects or hereby undertake to update
any infonnation provided in accordance with this Article or otherwise, except as expressly
provided herein. The City does not make any representation or warranty concerning such
infonnation or its usefulness to a decision to invest in or sell Certificates at any future date.
UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE OWNER
OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN
CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM
ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS
PART, OF ANY COVENANT SPECIFIED IN THIS 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 performing 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 Certificates in the primary offering of the Certificates in compliance with the Rule, taking
into account any amendments or interpretations of the Rule to the date of such amendment, as
) well as such changed circumstances, and (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 Certificates 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 Certificates. 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 information 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
-32-
1201932v.2 LUB200n I 007
deemed to have been filed with each NRMSIR and SID or MSRB as if such filing had been
made directly to such entity.
ARTICLE XIII
AMENDMENTS; ATTORNEY 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 Certificate remains outstanding
except as permitted in this Section. The City may, without consent of or notice to any Owners,
') from time 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
Certificates holding a majority in aggregate principal amount of the Certificates then
outstanding, amend, add to, or rescind any of the provisions of this Ordinance; provided that,
without the consent of all Owners of outstanding Certificates, no such amendment, addition, or
rescission shall (i) extend the time or times of payment of the principal of and interest on the
Certificates, reduce the principal amount thereof, the redemption price, or the rate of interest
thereon, or in any other way modify the terms of payment of the principal of or interest on the
Certificates, (ii) give any preference to any Certificate over any other Certificate, or (iii) reduce
the aggregate principal amount of Certificates required to be held by Owners for consent to any
such amendment, addition, or rescission.
"\ J
Section l3 .2 Attorney General Modification.
In order to obtain the approval of the Certificates 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 Certificates 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.
ARTICLE XIV
INSURANCE PROVISIONS
Section 14.1 Municipal Bond Insurance.
The Certificates have been sold with the principal and interest thereon being insured by
Financial Security Assurance Inc., or any successor or assigns thereto pursuant to an insurance
policy (the "Policy") issued by Financial Security Assurance Inc. guaranteeing the scheduled
payment of principal of and interest on the Certificates when due.
-33-
1201932v.2 LUB200ni007
ARTICLE XV
}
EFFECTIVE IMMEDIATELY
Section 15.1 Effective Immediately.
Notwithstanding the provisions of the City Charter, this Ordinance shall become effective
:'. immediately upon its adoption at this meeting pursuant to Section 1201.028, Texas Government
Code.
)
)
-34-
1201932v.2 LUB200ni007
)
'
PRESENTED, FINALLY PASSED AND APPROVED, AND EFFECTIVE on the 12th
day of January, 2007, at a regular meeting of the City Council of the City of Lubbock, Texas.
~ DAVIDAILLER, Mayor
ATTEST:
REdECCA GARZA, City Seer
[SEAL]
TO FORM:
By:
-32-
1201932v.l LUB200171007
)
)
)
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 1-6 and 8A-15 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.
A-1
120l932v.2 LUB200171007
}
)
)
PAYING AGENT/REGISTRAR AGREEMENT
between
CITY OF LUBBOCK, TEXAS
and
THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION
Pertaining to
CityofLubbock, Texas
Tax and Waterworks System Surplus Revenue Certificates of Obligation
Series 2007
January 1, 2007
1201970v.l LUB200171007
TABLE OF CONTENTS
) Page
ARTICLE I
APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR
Section 1.01. Appointment. ........................................................................................................... 1
Section 1.02. Compensation .......................................................................................................... 1
ARTICLE II
DEFINITIONS
Section 2.0 1. Definitions ............................................................................................................... 2
ARTICLE III
PAYING AGENT
Section 3.01. Duties of Paying Agent .................................. : ........................................................ 3
Section 3.02. Paytnent Dates ......................................................................................................... 3
ARTICLE IV
REGISTRAR
Section 4.01. Transfer and Exchange ............................................................................................ 4
Section 4.02. The Certificates ....................................................................................................... 4
Section 4.03. Form ofRegister ...................................................................................................... 4
Section 4.04. List of Owners ......................................................................................................... 5
Section 4.05. Cancellation ofCertificates ..................................................................................... 5
Section 4.06. Mutilated, Destroyed, Lost, or Stolen Certificates .................................................. 5
Section 4.07. Transaction Information to Issuer ........................................................................... 6
ARTICLEV
'\
THE BANK
Section 5.01. Duties of Bank ......................................................................................................... 6
Section 5.02. Reliance on Documents, Etc ................................................................................... 6
Section 5.03. Recitals of Issuer ..................................................................................................... 7
Section 5.04. May Hold Certificates ............................................................................................. 7
Section 5.05. Money Held by Bank .............................................................................................. 7
Section 5.06. Indemnification ....................................................................................................... 8
Section 5.07. Interpleader .............................................................................................................. 8
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.0 1. Amendment ............................................................................................................. 8
Section 6.02. Assignment. ............................................................................................................. 8
LUB200n lOOS
Dallas 1201970_l.DOC
120 1970v.l LUB200171 007
)
)
)
)
)
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. Cowtterparts ............................................................................................................ 9
Section 6.10. Termination ............................................................................................................. 9
Section 6.1 1. Governing Law ...................................................................................................... 10
Execution ....................................................................................................................................... 11
Annex A-Schedule of Fees for Service as Paying Agent/Registrar
LUB20017100S
Dallas 1201970_l.DOC
1201970v.l LUB200ni007
j
)
)
)
)
PAYING AGENT/REGISTRAR AGREEMENT
THIS PAYING AGENT/REGISTRAR AGREEMENT (the or this "Agreement"), dated
as of January 1, 2007, is by and between CITY OF LUBBOCK, TEXAS (the "Issuer''), and The
Bank of New York Trust Company, 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 Certificates of Obligation, Series 2007 (the "Certificates''),
dated January 1, 2007, to be issued as registered securities without coupons;
WHEREAS, all things necessary to make the Certificates the valid obligations of the
Issuer, in accordance with their tenns, will be taken upon the issuance and delivery thereof;
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 Certificates, in accordance
with the tenns thereof, and that the Bank act as Registrar for the Certificates; 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 terms, have been done;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I
APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR
Section 1.0 1. Appointment.
(a} The Issuer hereby appoints the Bank to act as Paying Agent with respect to the
Certificates in paying to the Owners of the Certificates the principal, redemption premium, if
any, and interest on all or any of the Certificates.
(b) The Issuer hereby appoints the Bank as Registrar with respect to the Certificates.
(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.
1201970v.I LUB200nt007
(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
DEFINITIONS
Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following terms have the
following meanings when used in this Agreement:
"Bank" means The Bank ofNew York Trust Company, 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.
"Certificate" or "Certificates" means any or all of the Issuer's Tax and Waterworks
System Surplus Revenue Certificates of Obligatio~ Series 2007, dated January I, 2007.
"Certificate Ordinance" means the ordinance of the City Council of the Issuer authorizing
the issuance and delivery of the Certificates.
"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 Certificate is registered in the Register.
"Paying Agent" means the Bank when it is performing the ftmctions 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 Certificatest' of any particular Certificate means every previous Certificate
evidencing all or a portion of the same obligation as that evidenced by such particular Certificate
(and, for the purposes of this definition, any Certificate registered and delivered under
Section 4.06 in lieu of a mutilated, lost, destroyed or stolen Certificate shall be deemed to
evidence the same obligation as the mutilated, lost, destroyed or stolen Certificate).
-2-
1201970v.l LUB200171007
"Record Date" means the last Business Day of the month next preceding an interest
) payment date established by the Certificate Ordinance.
)
)
)
"Register" means a register in which the Issuer shall provide for the registration and
transfer of Certificates.
"Responsible Officer" when used with respect to the Bank means the Chairman or Vice
Chainnan of the Board of Directors, the Chairman or Vice Chairman of the Executive
Committee of the Board of Directors, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier,
any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily
performing functions similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to whom such matter
is referred because of his knowledge of and familiarity with the particular subject.
"Stated Maturity" means the date or dates specified in the Certificate Ordinance as the
fixed date on which the principal of the Certificates is due and payable or the date fixed in
accordance with the tenns of the Certificate Ordinance for redemption of the Certificates, or any
portion thereof, prior to the fixed maturity date.
ARTICLE III
PAYING AGENT
Section 3. 0 I. 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 Certificate or Certificates so maturing at the
Bank Office, the principal amount of the Certificate or Certificates 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 B~ as Paying Agent and on behalf of the Issuer, shall pay interest when
due on the Certificates to each Owner of the Certificates (or their Predecessor Certificates) 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 funds 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
of, redemption premium, if any, and interest on the Certificates at the dates specified in the
Certificate Ordinance.
-3-
120 1970v .I LUB200171 007
)
)
)
)
)
)
)
)
ARTICLE IV
REGISTRAR
Section 4.0 1. 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 prescnoe, 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 Certificates. The Bank is hereby appointed "Registrar" for the
purpose of registering and transferring the Certificates 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 of Texas.
(b) The Bank as Registrar hereby agrees that at any time while any Certificate is
outstanding, the Owner may deliver such Certificate 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
Certificate 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 Certificate or Certificates
as provided in such instructions. The provisions of the Certificate 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 Certificate Ordinance.
(c) Every Certificate 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 docwnentation it feels necessary to effect a
re-registration.
Section 4.02. The Certificates. The Issuer shall provide an adequate inventory of
unregistered Certificates to facilitate transfers. The Bank covenants that it will maintain the
unregistered Certificates in safekeeping and will use reasonable care in maintaining such
unregistered Certificates 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 fonn 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.
1201970v.l LUB200nt007
)
)
)
)
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 Certificates. All Certificates 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 Certificates previously certified or registered and delivered which the
Issuer may have acquired in any marmer whatsoever, and all Certificates so delivered shall be
promptly cancelled by the Bank. All cancelled Certificates held by the Bank shall be disposed of
pursuant to the Securities Exchange Act of 1934.
Section 4.06. Mutilated. Destroyed. Losl or Stolen Certificates.
(a) Subject to the provisions of this Section 4.06, the Issuer hereby instructs the Bank
to deliver fully registered Certificates in exchange for or in lieu of mutilated, destroyed, lost, or
stolen Certificates as long as the same does not result in an overissuance.
(b) If (i) any mutilated Certificate is surrendered to the Bank, or the Issuer and the
Bank receives evidence to their satisfaction of the destruction, loss, or theft of any Certificate,
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 harmless, then in the absence of notice to the
Issuer or the Bank that such Certificate 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 Certificate, a new Certificate of the same stated
maturity and of like tenor and principal amount bearing a number not contemporaneously
outstanding.
(c) Every new Certificate issued pursuant to this Section in lieu of any mutilated,
destroyed, lost, or stolen Certificate shall constitute a replacement of the prior obligation of the
Issuer, whether or not the mutilated, destroyed, lost, or stolen Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of the Certificate Ordinance
equally and ratably with all other outstanding Certificates.
(d) Upon the satisfaction of the Bank and the Issuer that a Certificate 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 Certificate number on the
Certificate registered with a notation in the Register that said Certificate has been mutilated,
-5-
120 1970v .I LUB200171 007
)
)
destroyed, lost, or stolen; and a new Certificate 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 Certificate in lieu of or exchange for a mutilated, destroyed, lost, or stolen
Certificate.
(f) The Issuer hereby accepts the Bank's current blanket bond for lost, stolen, or
destroyed Certificates and any future substitute blanket bond for lost, stolen, or destroyed
Certificates 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 tenns 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 Certificates by the Bank is available for inspection by
the Issuer on request.
)
)
Section 4.07. Transaction Information to Issuer. The Bank will, within a reasonable
time after receipt of written request from the Issuer, furnish the Issuer information as to the
Certificates it has paid pursuant to Section 3.01; Certificates it has delivered upon the transfer or
exchange of any Certificates pursuant to Section 4.01; and Certificates it has delivered in
exchange for or in lieu of mutilated, destroyed, lost, or stolen Certificates pursuant to
Section 4.06 of this Agreement.
ARTICLEV
THE BANK
Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth
herein and in accordance with the Certificate Ordinance and agrees to use reasonable care in the
perfonnance 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 Certificates to pay the
Certificates as the same shall become due and further agrees to establish and maintain all
accounts and funds 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 correctness
of the opinions expressed therein, on certificates or opinions furnished to the Bank.
(b) The Bank shall not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the
pertinent facts.
(c) No provisions of this Agreement shall require the Bank to expend or risk its own
funds or otherwise incur any financial liability for perfonnance 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
-6-
1201970v.l LUB200171007
)
)
)
)
' .I
)
)
)
repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is
not assured to it.
(d) The Bank may rely and shall be protected in acting or refraining from acting upon
any ordinance, resolution, certificate, statement, instrument, 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
Certificates, but is protected in acting upon receipt of Certificates 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 counsel, and the written advice of such counsel or any
opinion of counsel shall be full and complete authorization and protection with respect to any
action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon.
(f) The Bank may exercise any of the powers hereunder and perform any duties
hereunder either directly or by or through agents or attorneys of the Bank.
Section 5.03. Recitals of Issuer.
(a) The recitals contained herein and in the Certificates 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 amoWlt due on any Certificate 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 Certificates. The Bank, in its individual or any other capacity,
may become the Owner or pledgee of Certificates 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 hereunder need not be segregated from any other funds
provided appropriate accounts are maintained.
(b)
hereunder.
The Bank shall be under no liability for interest on any money received by it
(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
Certificate and remaining unclaimed for three years after final maturity of the Certificate has
become due and payable will be paid by the Bank to the Issuer, and the Owner of such
Certificate shall thereafter look only to the Issuer for payment thereof, and all liability of the
Bank with respect to such monies shall thereupon cease.
-7-
120 1970v.l LUB200/71 007
(d) The Bank will comply with the reporting requirements of Chapter 74 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 Certificates, with such moneys in the
account that exceed the deposit insurance, available to the Issuer, provided by the Federal
Deposit Insurance Cotporation to be fully collateralized with securities or obligations that are
eligible under the laws of the State of Texas and to the extent practicable under the laws of the
United States of America to secure and be pledged as collateral for trust accounts until the
principal and interest on the Certificates 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 Certificates shall, at its own expense and risk, request such
other medium 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 hannless
against, any loss, liability, or expense incurred without negligence 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 Certificate Ordinance, including the cost and expense
(including its counsel fees) of defending itself against any claim or liability in connection with
the exercise or perfonnance of any of its powers or duties under this Agreement.
Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek
adjudication of any adverse claim, 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.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01. Amend.ment. 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 permitted hereby to be given or furnished to the Issuer or
the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses
shown below:
-8-
1201970v.l LUB2oon I 007
)
)
)
)
)
(a) if to the Issuer:
(b) if to the Banlc
City of Lubbock, Texas
1625 13th Street
Lubboc~ Texas 79457
Attention: Director of Fiscal Policy and
Strategic Planning
The Bank ofNew York Trust Company,
National Association
600 North Pearl Street
South Tower--Suite 420
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 affeet 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. Separability. 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 herein, express or implied, shall give to
any Person, other than the parties hereto and their successors hereunder, any benefit or any legal
or equitable right, remedy, or claim hereunder.
Section 6.08. Entire Agreement. This Agreement and the Certificate Ordinance
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 Certificate Ordinance,
the Certificate 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 terminate 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
Certificates.
(b) This Agreement may be earlier terminated upon sixty (60) days written notice by
either party; provided, that, no termination shall be effective until a successor has 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.
-9-
120 1970v .1 LUB20on 1 007
(c) The provisions of Section 1.02 and of Article Five shall survive and remain in full
) force and effect following the termination of this Agreement.
)
)
)
)
)
Section 6.11. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State ofTexas.
-10-
1201970v.l LUB200/71007
)
)
)
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first written above.
ATTEST:
cQ aO&R..c cz c '•~ ~ R:eb;bca Garza, City Secretary
CITY OF LUBBOCK, TEXAS
By:"J)~,/(-
David A.Mii1ef)Mayor
Signature Page for Paying Agent/Registrar Agreement
1201970v.l LUB200/7/007
)
1201970v.J LU8200171007
THE BANK OF NEW YORK TRUST
COMPANY, NATIONAL ASSOCIATION
~ By: ~
Title: Asslstallt treaSUtel
ANNEX"A"
SCHEDULE OF FEES FOR SERVICE AS PAYING AGENT/REGISTRAR
)
)
1201970v.l LUB200nt007
)
)
)
"\ J
%eBANK o.f NEW YORK~
City of Lubbock, Tax and Waterworks System Surplus Revenue Certificates of Obligation
Series 2007
Acceptance Fee: Waived
A one-time charge covering the Bank Officer's review of governing documents, communication with
members of the closing party, including representatives of the issuer, investment banker(s) and
attorney(s), establishment of procedures and controls, set-up of trust accounts and tickler suspense items
and the receipt and disbursement/investment of bond proceeds. This fee is payable on the closing date.
Annual Paying Agent Administration Fee: $500
An annual charge covering the normal paying agent duties related to account administration and
bondholder services. This fee is payable annually, in advance, on the closing date and each anniversary
thereafter.
Extraordinary Services I Miscellaneous Fees: By Appraisal
The charges for performing extraordinary or other services not contemplated at the time of the execution
of the transaction or not specifically covered elsewhere in this schedule will be determined by appraisal in
amounts commensurate with the service to be provided. If it is contemplated that the Trustee hold and/or
value collateral or enter into any investment contract, forward purchase or similar or other agreement,
additional acceptance, administration and counsel review fees will be applicable to the agreement
governing such services. If the bonds are converted to certificated form, additional annual fees will be
charged for any applicable tender agent and/or registrar/paying agent services. Additional information
will be provided at such time. Should this transaction terminate prior to closing, all out-of-pocket
expenses incurred, including legal fees, will be billed at cost. If all outstanding bonds of a series are
defeased or called in full prior to their maturity, a termination fee may be assessed at that time.
Miscellaneous fees may include, but are not necessarily limited to the following, if applicable: UCC filing
fees, money market sweep fees, auditor confumation fees, wire transfer fees, transaction fees to settle
third-party trades and reconcilement fees to balance trust account balances to third-party investment
provider statements.
Annual fees include one standard audit confirmation per year without charge. Standard audit
confirmations include the final maturity date, principal paid, principal outstanding, interest cycle, interest
paid, cash and asset information, interest rate, and asset statement information. Non-standard audit
confirmation requests may be assessed an additional fee.
Periodic tenders, sinking fund, optional or extraordinary call redemptions will be assessed an additional
charge of$300 per event.
The Bank of New York Trust Compmy, N.A.
601 Travis Floor 16• Houston • Texas n002
2
...
)
)
7heBANK o.f NEW YORK~
Terms and Disclosures
Terms of Proposal
Final acceptance of the appointment under the Indenture is subject to approval of authorized officers of
BNY and full review and execution of all documentation related hereto. Please note that if this
transaction does not close, you will be responsible for paying any expenses incurred, including counsel
fees. We reserve the right to terminate this offer if we do not enter into final written documents within
three months from the date this document is frrst transmitted to you. Fees may be subject to adjustment
during the life of the engagement.
Customer Notice Required by the USA Patriot Act
To help the US government fight the funding of terrorism and money laundering activities, US Federal
law requires all financial institutions to obtain, verify, and record information that identifies each person
(whether an individual or organization) for which a relationship is established.
What this means to you: When you establish a relationship with BNY, we will ask you to provide certain
information (and documents) that will help us to identify you. We will ask for your organization's name,
physical address, tax identification or other government registration number and other information that
will help us to identify you. We may also ask for a Certificate of Incorporation or similar document or
other pertinent identifying documentation for your type of organization.
We thank you for your assistance.
The Bank of New York Trust Company, N.A.
601 Travis Floor 16• Houston • Texas 77002
3
')
)
)
PRELIMI:"'AR\. OfflCIAL STATEME~T OATEO JAMJAIH' 4, 2007
This Preliminary Official Statement is subject to completion and amendment Upon Sllle of the Obligations described herein, the Official
Statement will be completed and delivered to the Underwriters (defined herein). Prospective purchasers must read the entire Official
Statement to make an infonned investment decision.
IN THE OPCNION Of BOND COUNSEl., INTEREST ON THE OBLIGATIONS IS EXCLUDABLE FROM GROSS INCOME FOR
FEDERAL INCOME TAX PURPOSES UNDER EXISTING LAW AND THE OBLIGATIONS ARE NOT PRIVATE ACTIVITY
BONDS. SEE "TAX MATTERS-TAX EXEMPTION" HERECN FOR A DISCUSSION OF THE OPINION OF BOND COUNSEL,
INCLUDING A DESCRIPTION OF ALTERNATIVE MINIMUM TAX FOR CORPORATIONS.
NEW ISSUES: BOOK-ENTRY ONLY RATINGS: Moody's lnveston Service Inc: "Aaa.,
Standard & Poor's fbtiogs Services "AAA"
Fitc:b lnveston Service" AAA"
See "OTHER INFORMATION -Rating" and
"Bond Iasuranc:e" herein
THE OBLIGATIONS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR
FINANCIAL INSTITUTIONS
$56,685,000*
CITY OF LUBBOCK, TEXAS
GENERAL OBLIGATION REFUNDING BONDS,
SERIES2007
$25,515,000*
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE
CERTIFICATES OF OBLIGATION,
SERIES 2007
Dated: January l, 2007* Due: February 15, as shown on the inside cover
Principal of and interest on the $56,685,000• City of Lubbock, T~us, General Obligation Refunding Bonds, Series 2007 (the "Bonds") and
the $25,515,000• City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2007 (the
"Certificates" and, collectively with the Bonds, the "'bligations} are payable by The Bank of New York Trust Company, National
Association, (the "Paying Agent/Registrar"). The Obligations are 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 ownen;hip of the Obligations
may be acquired in denominations of $5,000 or integral multiples thereof. No physiut delivery of the Obligations will be made to the
beneficial owners thereof. Principal of 8J1d interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which
will make distribution of the amounts so paid to th~ beneficial owners of the Obligations. See "THE OBLIGATIONS -Book-Entry-Only
System" herein. Interest on the Obligations will be calculated on the basis of a 360-day year consisting of twelve 3<klay months, will accrue
from January I, 2007•, and is payable on Febnwy 15 and August IS of each year, commencing Febnwy 15, 2007,• until maturity or earlier
redemption, to the registered owners (initially Cede & Co.) appearing on the registration books of the Paying Agent/Registrar on the last day
of the month preceding each interest payment date {the "Record Date"). (See "THE OBLIGATIONS-Description of the Obligations"). The
Obligations of either series are subject to redemption prior to their scheduled maturities at the option of the City. (See "THE
OBLIGATIONS -Optional Redemption").
The Bcmds are payable from the proceeds of a continuing. direct annual ad valorem tax, levied within the limits prescribed by law, against all
taxable property within the City of Lubbock, Tex.as (the "City"). The Cenific:ates are payable from a combinaticm of (i) the proceeds of a
continuing, direct annual ad valorem tax, levied 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 not to exceed $1,000. (See "THE OBLIGATIONS -Security and Source of
Payment'').
The Bonds are issued p~Usuant to the Constitution and general laws of the State of Texas, particularly Chapter 1207, TeMS Government
Code, as amended, and an ordinance adopted by the City Council on December 19, 2006 (the "Bond Ordinance''). The Certificates are
issued pursuant to the Constitution and genen~l laws of the State of Texas. particularly subchapter C of Chapter 271, Texas Local
Government Code, as amended, and an ordinance to be adopted by the City Council on January 12, 2007 (the "Certificate Ordinance" and.
together with the Bond Ordinance. the "Ordinances"). (See "THE OBLIGATIONS-Authority for lssuanc:ej.
Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding ad valorem tax supported indebtedness (the
"Refunded Obligations"). In addition, a ponion of the proceeds from the sale of the Bonds will be used to pay the costs of issuance of the
Bonds. Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations to be incuned for s~t
improvement and professional services rendered in connection therewith. In addition. a portion of the proceeds from the sale of the
Cenificates will be used to pay the costs of issuance of the Certificates. (See "THE OBLIGATIONS -Purpose"}.
The scheduled payment of principal of and interest on the Bcmds when due will be guaranteed under an insun~nce -~ .4l
policy to be issued concurrently with the delivery of the Bonds by F!NANCIAL SECURITY ASSURANCE INC. r ,I' ~
While the Bonds and Certificates are being offered under a common Official Statement, the Bonds and the Certificates are separate and
distinct securities offerings and each such offering is being issued and sold separate and apart from the other offering and should be reviewed
and analyzed independently, including, among other .matters, the kind and type of obligations being offered, their tenns for payment, the
security for their payment and the rights of the holders.
The Obligations are offered when, as and if issued, subject to the approving opinion of the Attorney General of the State of Texas and the
opinion of Vinson & Elkins L.L.P., Bond Counsel, Dallas, Texas. Certain legal matters will be passed upon for the Underwriters named
below (the "Underwriters") by their counsel, McCall, Parkhurst & HortOn L.L.P-. Dallas, Texas. See "OTHER INFORMATION -Legal
Maners." Delivery of the Bonds through The Depository Trust Company is ex.pected to be on or about February 7, 2007. Delivery of the
Certificates through The Depository Trust Company is expected to be on or about January 19,2007.
Morgan Keegan & Company, Inc. Southwest Securities, Inc.
Popular Securities, Inc. M.E. Allison & Co., Inc.
• Preliminary, subject to change.
c
PRINCIPAL AMOUNTS, MA TUR1TIES, INTEREST RATES AND PRICES
$56.685,000* General Obligation Refunding Bonds, Series 2007
(Due February 15)
Initial Initial c
Principal Interest Offering CUSIP Principal Interest Offering CUSIP
Maturity Amount• Rate Yield (a) Nos. (b) Maturity Amount• Rate Yield (a) Nos. (b)
2007 $920,000 % % 2021 (c) $4,325,000 % %
2008 1,835,000 % % 2022 (c) 4,510,000 % %
2009 1,810,000 % % 2023 (c) 3,340.000 % %
2010 180,000 % % 2024 (c) 1,550,000 % % c 2011 190,000 % % 2025 (c) 1,620,000 % %
2012 195,000 % % 2026 (c) 1,695,000 % %
2013 205,000 % % 2027 (c) 1,770,000 % %
2014 215,000 % % 2028 (c) 1,840,000 % %
2015 220,000 % % 2029 (c) 1,920,000 % %
2016 1,850,000 % % 2030 (c) 2,005,000 % %
2017 3,650,000 % % 2031 (c) 2,095,000 % % ,.
\._
2018 (c) 3,805,000 % % 2032 (c) 2,185,000 % %
2019 (c) 3,965,000 % % 2033 (c) 2,275,000 % %
2020 (c} 4,135,000 % % 2034 (c) 2,380,000 % %
$25,515,000* Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2007 c
(Due February 15)
Initial Initial
Principal Interest Offering CUSIP Principal Interest Offering CUSIP
Maturity Amount• Rate Yield (a) Nos. (b) Maturity Amount* Rate Yield (a) Nos. (b)
2008 $640,000 % % 2020 (c) $1,035,000 % % c
2009 665,000 % % 2021 (e) 1,080,000 % %
2010 695,000 % % 2022 (e) 1,125,000 % %
2011 720,000 % % 2023 (c) 1,175,000 % %
2012 750,000 % % 2024 (c) 1,225,000 % %
2013 785,000 % % 2025 (c) 1,280,000 % %
2014 815,000 % % 2026 (c) 1,335,000 % %
2015 850,000 % % 2027 (c) 1,390,000 % % c
2016 880,000 % % 2028 (c) 1,455,000 % %
2017 920,000 % % 2029 (c) 1,515,000 % %
2018 (c) 955,000 % % 2030 (c) 1,580,000 % %
2019 (c) 995,000 % % 2031 (c) 1,650,000 % %
(
(a) The inirial yields will be e~>tablishcd by and are lite sole ~ibility of the Underwriters, and may subsequently be changed.
(b) CUSIP numbers have been assigned to the Obligations by Standard and Poor's CUSIP Service Bureau, A Division of The McOraw-Hill
Companies, Inc., and are included solely for lite convenience of the registered owners of the Obligations. Neither the City, the Financial
Advisor, nor the Underwriters are responsible for the selection or correctness oftlte CUSIP numbers set fonh herein.
(c) The Obligations maturing on February 15, 2018• and thereafter, are subject to redemption, at the option of the City. at par value thereof
plus accrued interest on February IS, 20 t 7• or any dale thc:teafter (see "THE OBLIGATIONS-Optional Redemption").
* Preliminary, subject to change. (
(
(
)
)
)
USE OF INFORMATION IN OFFICIAL STATEMENT
No dealer, broker, salesman or other person has been authorized by the City to give any infonnation or to make any
representation other than those contained in this Official Statement, and. if given or made, such other infonnation or
representations must not be relied upon as having been authorized by the City.
This Official Statement is not to be used in an offer to sell or the solicitation of an offer to buy in any state in which such offer or
solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to
whom it is unlawful to make such offer or solicitation.
This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended as statements of
fact, and no representation is made as to the correctness of such estimates, assumptions or matters of opinion or as to the
likelihood that they will be realized. Any information and expressions of opinion herein contained are subject to change without
notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the condition of the City or other matters described herein since the dale hereof. See
"OTifER INFORMATION-Continuing Disclosure oflnfonnation" for a description of the City's undertaking to provide certain
infonnation or a continuing basis.
The information set forth or included in this Official Statement has been provided by the City and from other sources believed by
the City to be reliable. The infonnation and expressions of opinion herein are subject to change without notice, and neither the
delivery of this Official Statement nor any sale hereunder shall create any implication that there has been no change in the
financial condition or operations of the City described herein since the date hereof. This Official Statement contains, in part,
estimates and matters of opinion that are not intended as statements of fact, and no representation or warranty is made as to the
correctness of such estimates and opinions or that they will be realized.
The Underwriters have provided the following sentence for inclusion in this Official Statement The Underwriters have reviewed
the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under fedefal
securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guanmtee the accuracy or
completeness of such information.
NEITHER THE CITY. THE FINANCIAL ADVISOR, THE UNDERWRITERS NOR BOND COUNSEL MAKE ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THTS OFFICIAL
STATEMENT REGARDING DTC OR ITS BOOK-ENTRY-ONLY SYSTEM
THE COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY AND IS NOT INTENDED AS
A SUMMARY OF THIS OFFERING. INVESTORS SHOULD READ THIS ENTIRE OFFICIAL STATEMENT. INCLUDING THE
ATTACHED APPENDICES. TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT
DECISION
Other than with respect to information concerning Financial Security Assurance Inc. ("Financial Security") contained under the
caption "Bond Insurance" and Appendix. C specimen "Municipal Bond Insurance Policy" herein, none of the infonnation in this
Official Statement has been supplied or verified by Financial Security and Financial Security makes no representation or
warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the Bonds; or (iii) the
tax ex.empt status of the interest on the Bonds.
TABLE OF CONTENTS
fm
USE OF INFORMATION IN OFFICIAL STATEMENT. I
OFFICIAL STATEMENT SUMMARY ..... -···-·········-········3
CITY OFFICIALS, STAFF ANDCONSULTANTS ..• .--.. 6
INTRODUCTION ··-··-·········-·····-···· .. ······-···---··-·······-·· 7 DESCRIPTION OF THE CITY ...................................... 7
FINANCIAL AND MANAGEMENT
CHALLENGES ...................... ._ ............................ 7
THE OBLIGATIONS-··--· .. ···-···· .............................. --....... 7
DESCRIPTION OF THE OBLIGATIONS .................... 7
PURPOSE ........................................................................ 7
REFUNDED OBLIGATIONS ........................................ 8
AtrrHORITY FOR ISSUANCE .................................... 8
SECURITY AND SOURCE OF PAYMENT ................ 8
TAX RATE LIMITATION ....................................... -.... 8
OmONAL REDEMPTION .......................................... 8
NOTICE OF REDEMPTION .......................................... 8
AMENDMENTS ............................................................. 9
DEFEASANCE ................................................................ 9
BOOK-ENTRY-ONLY SYSTEM .................................. 9
USE OF CERTAIN TERMS IN OTHER SECTIONS
OF TillS OFFICIAL STATEMENT .................. II
EFFECT OF TERMINATION OF BOOK-ENTRY-
ONL Y SYSTEM .................................................. II
PAYING AGENT/REGISTRAR ...... -..................... _ II
TRANSFER, EXCHANGE AND REGISTRATION .. II
RECORD DATE FOR INTEREST PAYMENT .......... II
BONDHOLDERS' REMEDIE$ ................................... 12
BOND INSURANCE •... -... ····-·--... -... -............ ____ .. 14
Bond Insurance Policy ................................................... 14
Financial Security Assurance Inc .................................. 14
DISCUSSION OF RECENT FlNANCIAL AND
MANAGEMENT EVENTS-............ -.. -........ _ ... _ •.. 15
CAt.mON REGARDING FORWARD-LOOKING
STATEMENTS .................................................... I 5
FY 2003 FINANCIAL CONCERNS AND MID·
YEAR BUDGET AMENDMENTS ................... 16
PAST EVENTS RELATING TO LP&L AND WEST
TEXAS MUNlCIPAL POWER AGENCY ........ I6
FINANCIAL STAFF AND CITY MANAGEMENT
11JRNOVER ........................................................ 17
SEPTEMBER 30, 2003 FINANCIAL RESULTS ........ 17
FY 2003 AUDIT RESTATEMENTS,
RECLASSIFICATIONS AND INTERNAL
CONTROLS ISSUES .......................................... 18
CITY'S RESPONSES TO RECENT FINANCIAL
AND MANAGEMENT EVENTS ...................... 20
FY 2007 BUDGET ........................................................ 24
AD VALOREM TAX INFORMATION .. -•• -........ -....... -.26
AD VALOREM TAX LAW .............. -.................. __ 26
EFFECTIVE TAX RATE AND ROLLBACK TAX
RATE ................................................................... 27
PROPERTY ASSESSMENT AND TAX PAYMENT 27
PENAL TrES AND INTEREST ............ -...................... 28
CITY APPLICATION OF TAX CODE ....................... 28
TAX ABATEMENT POLICIES ................................... 28
TAX INCREMENT FINANCING ZONES ................. 29
TABLE 1-VALUATION. EXEMPTIONS AND
GENERAL OBLIGATION DEBT .... ·-··-.. -··-····· 30
TABLE 2-VALUATION TAXABLE ASSESSED
VALVA TION BY CATEGOR\' ...... -... -....... -... ·--32
TABLE 3A -VALUATION AND GENERAL
OBLIG." TION DEBT HlSTORY ..... --........... -....... 33
TABLE 3B-DERIVATION OF GENERAL PURPOSE
FUNDED TAX DEBT .... -.. -... -...................... -·-·-.. 33
TABLE 4-TAX RATE, LEVY AND COLLECTION
HISTORV .. __ , .. _ ........ _.,_,, .......................... -....... _,_ ... 33
TABLES-TEN LARGEST T AXPA YERS·-··--·-.. ··-·34
TABLE 6-TAX ADEQUACY -··-....... -.............. -............. 34
TABLE 7-ESTIMATED OVERLAPPING DEBT ..... -... 34
TABLE 8A • GENERAL OBLIGATION DEBT
SERVICE REQUIREMEI'ITS .......................... _ ........ JS
TABLE 8B-INTEREST AND SINKING FUND
BUDGETT ABLE 9-DIVISION OF GENERAL
OBLIGATION DEBT SERVICETABLE 10 -
SELF-sUPPORTED DEBT ....... --... -....... _, ___ ...... 35
TABLE 9 -DIVISION OF GENERAL OBLJGA TION
DEBTSERVICETABLE tO-SELF-SUPPORTED
DEBT .......................................................... -... _ .. ,, ........ 36
TABLE 10-SELF-SUPPORTED DEBT ... _ ............ -..... _ .• 37
TABLE II -AUTHORIZED BUT UNISSUED
GENERAL OBLIGA TTON BONDS .................. -.-.38
TABLE 12 -OTHER OBLIGA TIONS.-... ___ ....... -.......... 38
TABLE 13 -CHANGES IN NET ASSETS .. -··-·-........... 40
TABLE IJA -GENERAL FUND REVENUES AND
EXPENDITURES HISTORY ._ .......... ---........... -.... .41
FINANCIAL POLICTES ............................. -.-· .. ·--......... 43
INVESTMENTS .. _ ... _ .. _ .. _, .... -.. -.. -......................... _._44
LEGAL INVESTMENT$ .............................................. 44
INVESTMENT POLICIES ........................................... 45
ADDITIONAL PROVISIONS ...................................... 45
TAX MA TTERS.-........................... -...... -.-........................ 46
TAX EXEMPTION ....................................................... 46
ADDmONAL FEDERAL INCOME TAX
CONSIDERATIONS ........................................... 4 7
OTHER INFORMATION ... _ .... --........ .,_ .. _ .. _, .... -..... -.48
RATINGS .................................................... -................. 48
LITIGATION ................................................................. 48
REGISTRATION AND QUALIFICATION OF
OBLIGATIONS FOR SALE ............................... 49
LEGAL INVESTMENTS AND ELIGIBILITY TO
SECURE PUBLIC FUNDS IN TEXAS ............. 49
LEGAL MATTER$ ....................................................... 49
CONTINUING DISCLOSURE OF INFORMATION. 50
Annual Reports ............................................................... 50
Material Even.t Notices .............. _ ................................... 50
Availability ofinfonnation From NRMSIRS and SID .SO
Limitations and Amendments ........................................ 50
Compliance with Prior Undertakings ............................. 51
FINANCIAL ADVISOR ............................................... 5 I
VERIFICATION OF ARITHMETICAL AND
MATHEMATICAL COMPUTATIONS ............ 51
UNDERWRITING ......................................................... 51
FORWARD-LOOKING STATEMENTS
DISCLAIMER ...................................................... 52
MISCELLANEOUS ...................................................... 52
SCHEDULE I -Schedule of Rcfu11dcd Oblig.ations
APPENDICES
APPENDIX A-Excerpts From The Annual Financial
Report
APPENDIX B -Forms of Bond Counsel Opinion
APPENDIX C-Specimen of Bond Insurance Policy
c
c
c
c
c
(
c
(
(
(
)
)
OFFICIAL STATEMENT SUMMARY
This swnmary is subject in all respects to the more complete information and definitions contained or incorporated in this
Official Statement. The offering of the Obligations to potential investors is made only by means of this entire Official Statement.
No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official
Statement.
THE CITY ........................................... The City of Lubbock, Texas (the "City") is a political subdivision and municipal
corporation of the State, located in Lubbock County, Texas. The City covers
approximately 119.1 square miles and has an estimated 2006 population of 211,187 (see
"TNTRODUCilON. Description of the City").
THE BONDS ...................................... $56,685,000* General Obligation Refunding Bonds, Series 2007 (the "Bonds"), are dated
January I, 2007*, and mature on February IS in each of the years 2007* through 2034. *
THE CERTIFICATES ....................... S25,515,000* Tax and Waterworks System Surplus Revenue Certificates of Obligation,
Series 2007 (the "Certificates"), are dated January \, 2007*, and mature on February 15
in each of the years 2008* through 2031. •
PAYMENT OF INTEREST ............... Interest on the Obligations accrues from their respective dated dates, and is payable
February IS, 2007*, and each August 15 and February IS thereafter until maturity or
prior redemption (see "THE OBLIGATIONS • Description of the Obligations").
AUTHORITY FOR
ISSUANCE .......................................... The Bonds are issued pursuant to the general laws of the Sta~ particularly Chapter 1207,
Texas Government Code, as amended. 1lle Certificates are issued pursuant to th.e
Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter
271 of the Texas Local Government Code, as amended (see "THE OBLIGATIONS .
Authority for Issuance").
SECURITY FOR THE
BONDS ................................................ The Obligations constitute direct obligations of the City, payable from the levy and
collection of a direct and continuing ad valorem tax, within the limits prescn"bed by law,
on all taxable property within the City. (See "THE OBLIGATIONS -Security and
Source of Payment").
SECURITY FOR THE
CERTIFICATES ................................ The Certificates are payable from a combination of (i) the proceeds of a continuing,
direct annual ad valorem tax, levied 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 not to exceed S LOOO. (See ''THE OBLIGATIONS -Security and
Source of Payment").
REDEMmON ................................... The City reserves the right, at its option, to redeem Obligations of either series having
stated maturities on and after February 15, 2018,* in whole or in part in principal
amounts of$5,000 or any integral multiple thereof, on February 15, 2017,* or any date
thereafter, at the par value thereof plus accrued interest to the date of redemption (see
"THE OBLIGATIONS • Optional Redemption").
TAX EXEMPTION ............................ In the opinion of bond counsel interest on the Obligations is excludable from gross
income for federal income tax purposes under existing law and the Obligations are not
private activity obligations. See "TAX MA TIERS -Tax Exemption" herein for a
discussion of the opinion of bond counsel, including a description of alternative
minimum tax for corporations.
USE OF PROCEEDS ......................... Proceeds from the sale of the Bonds will be used to refund a portion of the City's
outstanding ad valorem tax supported indebtedness (the "Refunded Obligations"). (See
"Schedule I-Schedule of Refunded Obligations"). In addition, a portion of the proceeds
from the sale of the Bonds will be used to pay the costs of issuance of the Bonds.
Proceeds from the sale of the Certificates will be used for the purpose of paying
contractual obligations to be incurred for street improvement and professional services
rendered in connection therewith. In addition, a portion of the proceeds from the sale of
the Certificates will be used to pay the costs of issuance of the Certificates. (See "TilE
OBLIGATIONS-Use of Proceeds").
RATINGS ............................................ The Obligations have been rated "A.aa" by Moody's Investors Service, Inc. ("Moody's"),
"AAA" by Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies, Inc. ("S&P") and "AAA" by Fitch Ratings ("Fitch") by virtue of an inswanoe
policy issued by Financial Security Assurance, Inc. (see "Bond Insun~~~Ce"). The City's
presently outstanding ad valorem tax supported debt is rated "A I" 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
BOOK-ENTRY-ONLY
("Fitch~). The City also has ad valorem tax supported debt outstanding which is 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 Obligations
have been made to Moody's, S&P and Fitch (see "OTHER INFORMATION-Ratings").
SYSTEM .............................................. The definitive Obligations will be initially registered and delivered only to Cede & Co.,
the nominee of DTC pursuant to the Book-Entry-Only System described herein.
Beneficial ownership of the Obligations may be acquired in denominations of $5,000 or
integral multiples thereof. No physical delivery of the Obligations will be made to the
beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations
will be payable by the Paying Agent/Registrar to Cede & Co., which will make
distribution of the amounts so paid to the participating members of DTC for subsequent
payment to the beneficial owners of the Obligations (see "THE OBLIGATIONS • Book-
Entry-Only System").
PAYMENT RECORD ........................ The City bas never defaulted in payment of its general obligation tax debt
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
4
c
c
...
.....
c
(
(
(
(
<
-Selected Financial Information -
Fisul Per Capita General
Year Estimated Taxable Taxable Purpose
Ended City Assessed Assessed Funded
3D.Se2 Poeutatlon 1'1 Valuation Valuation Tax Debt!b1
) 2002 202,000 $ 6,909,309,707 s 34,204.50 s 63,115,346
2003 204,737 7,342,344,867 35,862.33 70,188,204
2004 206,290 7,921,590,380 38,400.26 70,16 1,218
2005 209,120 8,664,190,909 41,431.67 80,210,269
2006 211,187 9,365,239,925 44,345.72 87,231,945
2007 212,365 10,002,725,637 47,101.57 90,911,945 {<)
) 1'1 Soun:e: The City.
)
)
M Does 1101 include self-$Upported debt.
1'1 Prelimiaary, subject to chanae. Includes the Bonds 111d excludes the Refi.lnd.:d Obligations.
General Fund ConsoUdated Statement Summuy
U11audited
204)(; zoos 2004
Beginning Balance $ 17,376,420 $ 12,694,525 $ 9,417,346
Total Revenues 97,818,207 104,351,116 97,437,436
Total Expenditures 112,278,444 103,203,269 94,160,257
Ending Balance 19,924,711 17,376,420 12,694,525
Reserves & Designations
Undesignated Fund Balance $ 19,924,711 $ 17,376,420 s 12,694,525
For additional infonnation regarding the City, please contact:
Mr. Jeff Yates
Chief Finance Officer
City of Lubbock
P.O. Box 2000
Lubbock, TX 79457
Phone (806) 775-2 161
Fax (806) 775-2051
Andy Burcham
Director of Fiscal Policy &
Sttategic Planning
City of Lubbock
P.O. Box 2000
Lubbock, TX 79457
Phone (806) 775-2149
5
Per Capita
General Ratio
Purpose Tax Debt to
Funded Asse&Sed
Tax Debt~' Valuation M
s 312.45
342.82
340.11
383.56
413.06
428.09 (<)
2003
$ 16,598,252 $
91,753,809
98,934,715
9,417,346
$ 9,417,346 $
Mark Nircholas
RBC Capital Markets
tOOl Fannin, Suite 400
Houston, TX 77002
Phone(713)853-0823
Fax (713) 651-3347
0.91%
0.96%
0.89%
0.93%
0.93%
0.91%
1002
16,716,042
92,490,374
90,594,059
18,612,357
!1.255,041~
17,357,316
'Yo or
Total Tax Tax
Collections Year
99.41% 2001
98.78% 2002
99.69% 2003
100.08% 2004
99.71% 2005
(<) (In Proocs.s) 2006
c
CITY OFFICIALS, STAFF AND CONSULT ANTS
ELECTED 0Fl1ClALS
Date of Tenn c
Ci!,l:: Council Installation to Office Exeires Occueation
David Miller May, 2006 May, 2008 Business Owner
Mayor
Linda DeLeon May, 2004 May,2010 Business Owner
Council Member. District I c
Floyd Price May, 2004 May, 2008 Retired
Council Member. District 2
Gary Boren May, 2002 May, 2010 Business Owner, Personnel Services
Council Member. District 3
Phyllis Jones May, 2004 May,2008 Self-Employed c
Council Member. District 4
John W. Leonard, III May,2006 May.2010 Business Owner
Council Member, District 5
Jim Gilbreath May, 2003 May, 2008 Business Owner c Council Member, District 6
SELECTED ADMINISTRA. nvt: STAFF
Date of Erq>loyment Date of~loyment Total Govemrrw:nt ( Name Position in Current Position with City of Lubbock Service
Lee Ann Dumbald City Manager September, 2005 July,2004 20t
Tom Adams Deputy City Manager August, 2004 August, 2004 23
JeffYates O!ief Financial Officer September, 2005 November. 2004 5 " ...
Anita Burgess City Attorney De:ceni>er. 1995 December, 1995 ll
Rebecca Galza City Secretary January, 200 I August, 1996 9
Andy Burcham Oirectoc of Fiscal Policy September, 2005 November, 1998 7
and Strategic Planning , ...
CONSULT ANTS AND ADVISORS
Auditors ............................................................................................................................................... BKD, LLP
Little Rock, Arkansas
Bond Counsel ...................................................................................................................................... Vinson & Elkins L.LP.
Dallas, Texas (
Financial Advisor ................................................................................................................................ RBC Capital Markets
Houston, Texas
6
)
)
)
)
OFFICIAL STATEMENT
RELATING TO
CITY OF LUBBOCK, TEXAS
$56,685,000* GENERAL OBLIGATION REFUNDING BONDS, SERIES 2007
And
$25,515,000* TAX AND WATERWORKS SYSTEM SURPLUS REVENUE
CERTIFICATES OF OBLIGATION, SERIES 2007
INTRODUCDON
This Official Statement, which includes the Appendices hereto, provides certain infonnation regarding the issuance of
$56,685,000* City of lubbock, Texas General Obligation Refunding Bonds, Series 2007 (the "Bonds") and $25,515,000* City of
Lubbock, Texas Certificates of Obligations, Series 2007 (the "Certificates" and, collectively with the Bonds, the "Obligations/.
Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Ordinances authorizing
the issuance of the Bonds and Certificates, respectively, except as otherwise indicated herein.
There follows in this Official Statement descriptions of the Bonds, the Certificates and certain infonnation 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, RBC Capital Markets,
Houston, T e.xas.
DESCRimON OF THE CITY
The City is a political subdivision and municipal corporation of the State, duly organized and existing under the laws of the State,
including the City's Home Rule Charter. The City was incorporated in 1909, and first adopted its Home Rule Charter in 1917.
The City operates under a Council/Manager form of government with a City Council comprised of the Mayor and six
Councilmembers. The Mayor is elected at-large for a two-year term ending in an even-numbered year. Each of the six members
of the City Council is elected from a single-member district for a four-year tenn of office. The terms of three members of the City
Council expire in each even-numbered year. The City Manager is the chief administrative officer for the City. Some of the
services that the City provides are: public safety (police and fire protection), highways and streets, electric, water and sanitary
sewer utilities, airport, sanitation and solid waste disposal, health and social services. culture-recreation, public transportation,
public improvements, planning and zoning, and general administrative services. The 2000 Census population for the City was
199.564; the estimated 2006 population is 211,187. The City covers approximately 119.1 square miles.
FINANCIAL AND MANAGEMENT CHALLENGES
In recent years, the Ciry experienced a variety of financial and management challenges, and certain investigations and reports
conducted or prepared by the City or its consultants 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 Ciry is of the view that it has substantially addressed many of these conditions. Reference is made to "DISCUSSION OF
RECENT FfNANClAL AND MANAGEMENT EVENTS" for a discussion of these events and a description of how the City has
responded to these events.
THE OBLIGATIONS
DESCRIPTION OF THE OBLIGATIONS
The Obligations of each series are dated January I, 2007,"' 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 I 5, 2007,* and on each August 15 and Febnwy 15 thereafter until maturity or prior redemption. The
definitive Obligations will be issued only in fully registered form in any integral multiple of$5,000 for any one maturity and will
be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the
Book-Entry-Only System described herein. No physical delivery of tbe Obligations will be made to the owners thereof.
Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co.,
which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the
beneficial owners of the Obligations. See "THE OBLIGATIONS-Book-Entry-Only System" herein.
PURPOSE
Proceeds !Tom the sale of the Bonds will be used to refund a portion of the City's outstanding ad valorem tax supported
indebtedness (the "Refunded Obligations") listed on Schedule I for the purpose of achieving debt service savings. In addition, a
portion of the proceeds from the sale of the Bonds will be used to pay the costs of issuance of the Bonds. Proceeds !Tom the sale
of the Certificates will be used for the purpose of paying contractual obligations to be incun-ed for street improvements and
professional services rendered in connection therewith. In addition, a portion of the proceeds from the sale of the Certificates
will be used to pay the C<lsts of issuance of the Certificates.
• ~liminary, subject tO change.
7
REFUNDED OBLIGA TI01s ,.
Upon delivery of the Bondit the City will deposit proceeds from the sale of the Bonds with The Bank of New York Trust
Company, National Assocation (the "Escrl>w Agent"). The amount of Bond proceeds so deposited, when added to any other
lawfully available funds and the investment earnings thereon, will be sufficient to accomplish the discharge and final payment of
the Refunded Obligations. Such funds will be held by the Escrow Agent in a special escrow account (the "Escrow Fund") and
used to purchase dinxt obligations of the United States of America (the "Federal Securities"). Under the Escrow Agreement. the
Escrow Fund is irrevocably pledged to the payment of principal of and interest on the Refunded Obligations and amounts therein
will not be available to pay the Bonds. Grant Thornton LLP, Certified Public Accountants (the "Verification Agent"), will verify
at the time of delivery of the Bonds to the Underwriters that the Federal Securities will mature and pay interest in such amounts
which, together with uninvested funds, if any, in the Escrow Fund will besufficient to pay, on the scheduled interest payment
dates and redemption dates, the principal of and interest on the Refunded Obligations, and will issue a report to this effect (the
"Verification Report"). The arithmetical accuracy of certain computations included in the schedules provided by RBC Capital
Markets to the Verification Agent on behalf of the City relating to (a) computation of the sufficiency of the anticipated receipts
from the Federal Securities, together with the initial cash deposit, if any, to pay when due the principal, interest and early
redemption premium requirement, if any, of the Refunded Obligations and (b) computation of the yields on the Federal Securities
will be verified by the Verification Agent. Such computations will be completed using certain assumptions and information
provided by First Southwest Company on behalf of the City. The Verification Agent will restrict its procedures to recalculating
the arithmetical accuracy of certain computations and will not make any study or evaluation of the asswnptions and information
on which the computations are based, and accordingly, will not express an opinion on the data used, the reasonableness of the
assumptions, or the achievability of the forecasted outcome. By the deposit of Federal Securities and cash, if necessary, with the
Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of all of the Re(Unded Obligations
in accordance with Texas law. As a result of such defeasance. the Refunded Obligations will be outstanding only for the purpose
of receiving payments from the Federal Securities and any cash held for such purpose by the Escrow Agent and such Refunded
Obligations will not be deemed as being outstanding obligations of the City, and the obligations of the City to make payments in
support of the debt service on such Refunded Obligations will be extinguished.
AUTHORITY FOR ISSUANCE
The Bonds are issued pursuant to the general laws of the State, particularly Chapter 1207, Texas Government Code, as atnended.
The Certificates are issued pursuant to the Constitution and general taws of the State of Texas, particularly Subchapter C of
Chapter 271 of the Texas Local Government Code, as amended.
SECURITY AND SOURCE OF PAYMENT
The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing ad valorem
tax, within the limits prescribed by law, on all taxable property within the City.
The Certificates are payable from a combination of (i) the proceeds of a continuing, direct annual ad valorem tax, levied within
the limits prescribed by taw, on all taxable property within the City, and (ii) a pledge of surplus net revenues of the City's
Waterworks System not to exceed $1,000.
TAX RATE LIMITATION
All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad
valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits
prescribed by law. Article XI, SectionS, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem
tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the
constitutionally authorized maximum tax rate of$2.50 per $100 Taxable Assessed Valuation.
OPTIONALREDEM~ON
The City reserves the right. at its option, to redeem Obligations of either series having stated maturities on and after February IS,
2018,• in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2017,* or any date
thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Obligations are to be
redeemed, the City may select the maturities of Obligations to be redeemed. If less than all the Obligations of any maturity are to
be redeemed, the Paying Agent/Registrar (or DTC while the Obligations are in Book-Entry-Only form) shall detennine by lot the
Obligations, or portions thereof, within such maturity to be redeemed. If an Obligation (or any portion of the principal swn
thereof) shall have been called for redemption and notice of such redemption shall have been given, such Obligation (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 any Obligations, the City shall cause a notice of redemption to be sent by
United States mail, first class. postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at
• Preliminary, subject to cllange
8
(" ....
c
c
c
c
(
(
f
(
)
)
)
)
)
)
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 CONCLUS!VEL Y PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR
NOT THE REGISTERED OWNER RECEIVES SUCH NOTlCE. NOTICE HA VrNG BEEN SO GIVEN. THE OBUGATIONS
CALLED FOR REDEMPTION SHALL BECOME DUE AND PAY ABLE ON THE SPECIFIED REDEMPTION DATE, AND
NOTWmfSTANDfNG THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT,
INTEREST ON SUCH OBUGAITON OR PORTION THEREOF SHALL CEASE TO ACCRUE.
AMENDMENTS
The City may amend the Ordinances without the consent of or notice tO any registered owners in any manner not detrimental to
the interests of the registered owners, including the ewing 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 Certificates or
Bonds then outstanding, as applicable, amend, add tO, or rescind any of the provisions of the respective Ordinances. except that,
without the consent of the registered owners of all of the Certificates or Bonds, as applicable, 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 terms of their payment, (2) give any preference
to any Certificate or Bond, as applicable. over any other Certificate or Bond or (3) reduce the aggregate principal amount
required to be held by owners for consent to any amendment, addition or waiver.
DEFEASANCE
The Ordinances provide that the City may discharge its obligations 1o the registered owners of any or all of the Obligations to pay
principal, interest and redemption price thereon in any matter permitted 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 1o accrue on the Obligations 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
Obligations; 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) 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 Obligations shall no longer be regarded tO be
outstanding or unpaid. After finn banking and financial arrangements for the discharge and final payment or redemption of the
Obligations have been made as described above. all rights of the City tO initiate proceedings to call the Obligations for
redemption or to take any other action amending the terms of the Obligations are extinguished; provided however, the right to
call the Obligations for redemption is not extinguished if the City: (i) in the proceedings providing for the finn banking and
financial anangements, expressly reserves the right to call the Obligations for redemption; (ii} gives notice of the reservation of
that right tO the owners of the Obligations 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-ONLY SYSTEM
This section describes how ownership of the Obligations is to be transferred and how the principal of, premium. if any, and
interest on the Obligations are to be paid to and credited by The Depository Trust Company ("DTC"). New York. New York.
while the Obligations are registered in its nominee name. The informatwn in this section concerning DTC and the Book-Entry-
Only System has been provided by DTC for use in disclosure dccuments such as this Official Statement. The City believes the
source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof.
Tire City cannot and does not give any assurance that (I) DTC will distribute payments of debt service on the Obligations. or
redemption or other notices. to DTC Participants. (2) DTC Participants or others will distribute debt service payments paid to
DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices. to the Benefzcia/ Owners. or
that they will do so on a timely basis. or (J) DTC will serve and act in the m<U1ner described in this Official Statement. The
current rules applicable to DTC are on file wilh the Securities and Exchange Commission. and the current procedures of DTC to
be followed in dealing with DTC Participants are on fde with DTC.
DTC will act as securities depository for the Obligations. The Obligations will be issued as fully-registered securities registered
in the name of Cede & Co. (DTC's partnership nominee) 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 Obligations, 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
corporntion" within the meaning of the New York Uniform Commercial COOe, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million
9
issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85
oountries 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 computeriz:ed book-entf)'
transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities
Obligations. 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 tum, is owned by a nwnber 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 Exclwlge 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 indirectly
(~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 information about DTC can be found at www.dtcc.com.
Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for
the Obligations 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 [ndirect Participants' records. Beneficial Owners win not receive written confirmation 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 [ndirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the Obligations 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
certificates representing their ownership interests in Obligations, except in the event that use of the book~tf)' system for the
Obligations is discontinued.
To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC's
partnership nominee, Cede &: Co., or such other name as may be requested by an authorized representative of DTC. The deposit
of Obligations with DTC and their registration in the name of Cede&: Co. or such other DTC nominee do not effect any clwlge
in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC's records reflect only
the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial
Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect ParticipantS to Beneficial Owners will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Obligations may wish to
take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as
redemptions, tenders, defaults, and proposed amendments to the Bond docwnents. For example, Beneficial Owners of
Obligations may wish to ascertain that the nominee holding the Obligations 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 no1ices shall be sent to DTC. I£ less than all of the Obligations 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 DTC nominee) will consent or vote with respect to Obligations 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 & eo:s consenting or voting rights to those Direct
Participants to whose accounts Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Obligations will be made to 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 instru~tions 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 ofDTC) is the responsibility of the City
or ch.e Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and
disbursement of such payments to the Beneficiat Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Obligations 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,
Obligations 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, Obligations will be printed and delivered.
10
c
c
c
;
(
(
)
)
)
)
)
)
)
)
USE OF CERTAIN TERMS IN OrnER SECTIONS OF THlS OFF1CIAL STATEMENT
In reading this Official Statement it should be understood that while the Obligations are in the Book-Entry-Only System,
references in other sections of this Official Statement to registered owners should be read to include the person for which the
Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book-
Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the respective
Ordinances will be given only to DTC.
Infonnation 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-ENTRV-ONL V SYSTEM
In the event that the Book-Entry-Only System is disco.ntinued, printed Obligations will be issued to the holders and the
Obligations will be subject to transfer, exchange and registration provisions as set forth in the Ordinance and summarized under
''Transfer, Exchange and Registration" below.
PA VJNG AGENT/REGISTRAR
The initial Paying Agent/Registrar is The Bank of New York Trust Company, National Association, Dallas, Texas. In the
respective Ordinances, 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 or Certificates, as the case may be, 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 perfonn the duties and services of Paying Agent/Registrar for a series
of the Obligations. Upon any change in the Paying Agent/Registrar for the Obligations, the City agrees to promptly cause a
written notice thereof to be sent to each registered owner of the Obligations then outstanding and affected by such change by
United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar.
Interest on the Obligations 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 recoroed in the registration books of the
Paying Agent/Registrar or (ii) by such other method, acceptable to the Paying Agent/Registrar requested by, and at the risk and
expense of, the registered owner. Principal of the Obligations 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 Obligations 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 AND REGJSTRA TION
In the event the Book-Enlly-Only System should be discontinued with respect to a series of Obligations, printed certificates will
be issued to the registered owners of the Obligations affected and thereafter such obligations may be transferred and exchanged
on the registration books of the Paying Agent/Registrar only upon presentation and surrender of such printed certificates 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.
Obligations may be assigned by the execution of an assignment fonn on the respective Obligations or by other instrument of
transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying
Agent/Registrar, in lieu of the Obligations 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 Obligations issued in an exchange or transfer of Obligations 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 Obligations 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 fonn
satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in any
integral multiple of $5,000 for any one maturity and for a like series and a like aggregate principal amount as the Obligations
surrendered for exchange or transfer. See "THE OBLIGA TlONS -Book-Entry-Only System" herein for a description of the
system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying
Agent/Registrar shall be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45
days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the
registered owner of the uncalled balance of an Obligation.
RECORDDATEFORINTERESTPAYMENT
The record date ("Record Date") for the interest payable on the Obligations on any interest payment date means the close of
business on the last business day of the preceding month.
In the event of a non-payment of i.nterest on a scheduled payment date, and for 30 days thereafter, a new record date for such
intere$t payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the paymenl
of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the
past due interest ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five
II
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 or Certificate 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 respective Ordinances establish specific events of default with respect to the Obligations. If the City defaults in the payment
of principal of or interest on the Obligations when due, or if the City defaults in the observance or performance of any of the
covenants, conditions or obligations of the City, the failure to perform which materially, adversely affects the rights of the
owners, including but not limited to, their prospect or ability to be repaid in accordance with the respective Ordinances., and the
continuation thereof for a period of 60 days after notice of such default is given by any owner to the City, the Ordinances
provides that any owner is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the City to make such
payment or observe and perform such covenants, obligations, or conditions. The issuance of a writ of mandamus may be sought
if there is no other available remedy at law to compel performance of the Obligations or the Ordinance and the City's obligations
are not uncertain or disputed. The remedy of mandamus is controlled by equitable principles, so rests with the discretion of the
court. but may not be arbittarily n~fused. There is no acceleration of maturity of the Obligations in the event of default and,
consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinances do not provide for the
appointment of a trustee to represent the interests of the owners upon any failure of the City to perform in accordance with the
tenns of the respective Ordinances, or upon any other condition and accordingly all legal actions to enforce such remedies would
have to be undertaken at the initiative of, and be financed by. the registered owners.
On June 30, 2006, the Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex.2006), that a waiver of
sovereign immunity in a contractual dispute must be provided for by statute in "clear and unambiguous" language. Because it is
unclear whether the Texas legislature has effectively waived the City's sovereign immunity from a suit for money damages,
owners may not be able to bring such a suit against the City for breach of the Obligations or covenants in the Ordinances. Even if
a judgment against the City could be obtained, it could not be enforced by direct levy and execution against the City's property.
Further, the registered owners cannot themselves foreclose on property within the City or sell property within the City to enforce
the tax lien on taxable property to pay the principal of and interest on the Obligations. Furthermore, the City is eligible to seek
relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the
recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem 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 registered owners of an entity which has sought protection under Chapter 9. Therefore, should the
City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy
Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the
Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before
it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Obligations are qualified with
respect to the customary rights of debtors relative to their creditors and that all opinions relative to the enforceability of the
respective Ordinances and the Obligations are subject to bankruptcy and other laws affecting creditors rights or remedies
generally.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
12
(
c
(
,.
\,
(
(
(
USE OF PROCEEDS
The proceeds from the sale ofthe Bonds will be applied as follows:
Sources Of Funds:
Principal Amount of Bonds ................................................................................................ ..
Net Original issue Premiwn (Discount) .............................................................................. .
Accrued Interest .................................................................................................................. .
Total Sou~s of Funds ................................................................................................. ..
Uses Of Funds:
) Deposit to Escrow Fund ...................................................................................................... .
Accrued Interest & Additional Proceeds Deposit to Interest and Sinking Fund ................. ..
Underwriter Discount ........................................................................................................ ..
Cost oflssuance (Includes Bond Insurance Premium) ........................................................ ..
Total Uses of Funds ............................................................................................ .
The proceeds from the sale of the Certificates will be applied as follows:
Sources Of Funds:
Principal Amount of Certificates ......................................................................................... . )
Net Original Issue Premium (Discount) .............................................................................. .
Accrued Interest ...................................................................................................... : ........... .
Total Sources of Funds ................................................................................................. ..
Uses Of Foods:
)
Deposit to Construction Fund ............................................................................................. .
Accrued Interest & Additional Proceeds Deposiled to Interest & Sinking Fund ............... ..
Underwriter's Discount ..................................................................................................... ..
Cost oftssuance (Includes Bond Insurance Premium) ....................................................... ..
Total Uses of Funds ....................................................................................................... .
)
13
BOND INSURANCE
Bond Insurance Po1i4:y
Concurrently with the issuance of the Bonds, Financial Security Assurance Inc. ("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 an exhibit 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 Security Assurance lne.
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 September 30, 2006, Financial Security's combined policyholders' surplus and contingency reserves were approximately
$2,581.107,000 and its total net unearned premium reserve was approximately $1,992,163,000 in accordance with statutory
accounting principles. At September 30, 2006, Financial Security's consolidated shareholder's equity was approximately
$3,058,987,000 and its total net unearned premium reserve was approximately $1,590,538,000 in accordance with generally
accepted accounting principles.
The consolidated financial statements of Financial Security included in, or as exhibits to, the annual and quarterly reports filed
after December 31, 2005 by Holdings with the Securities and Exchange Commission are hereby incorporated by reference into
this Official Statement. All financial statements of Financial Security included in, or as exhibits to, documents filed by Holdings
pursuant to Section 13(a), 13(c), 14 or IS( d) of the Securities Exchange Act of 1934 after the date of this Official Statement and
before the tennination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement
Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance Inc.: 31 West 52nd
Street, New York, New York 10019, Attention: Communications Department (telephone (212) 826-0100).
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 REMArNDER OF THfS PAGE rNTENT!ONALl Y LEFT BLANK)
14
c
c
c
c
(
,.
\,
(
(
(
)
)
)
DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS
(n the 2002 and 2003 fiscal years (a fiscal year is refetTed to herein as "fY", with the year designation being the year in which the
fiscal year ends; each City fiscal year begins on October I and ends on September 30), the City e~tperienced a variety of financial
and management challenges. In response to the events and circwnstances that have created such challenges, the City has taken
actions to address and corr«t matters, and 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"). The following discussion includes an analysis of the events that have occufTed in the recent
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 nwtagement position.
CAUTION REGARDING FORWARD-LOOKING 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 staaements.
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 pwport to be comprehensive or definitive, and these matters
are subject to change subseql.lCnt to the date hereof. With respect to LP&L, t~ttensive information on the electric utility industty
is, and wilt 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 infofTOation.
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 Treasury, the Te~tas Commission on
Envirorunental Quality (the "TCEQ"), the Public Utility Commission of Te~tas (the "PUC") and the Southwest Power
Pool, lnc., with respect to:
changes in and compliance with environmental and safety laws and policies affecting the City's water,
sewer, stofTOwater 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;
pW'chased 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
sales talt revenues; and
ad valorem tax revenues;
> With respect to LP&L;
the implementation of or adjustments made to business strategies adopted 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 cufTent 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 contractual counterparties to meet their obligations to the City, aod with LP&L in
particular with respect to LP&L's fuel and power purchase arrangements;
> With respect to the City's financial performance in general:
legal and administrative proceedings and settlements; and
significant changes in critical accounting policies.
IS
FY 2003 FINANCIAL CONCERNS 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 el~tric 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 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 FfNANCIAL 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. Xce1 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. (n 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 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 effect on January I. 2002.
Prior to FY 2004, the City operated l.P&t 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 oosts such as legal and financial 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) (coll~tively, 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 City, a payment
designated for infrastructure use, a "gas tax" transfer, and a reimb~ement of the street lighting expense incurred by the City
(coll~rively, 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 L.P&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 staff 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 of 2003 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 for the General Fund (hereinafter referred to as the
"2003 Budget Adjustments"), which represented approximately 10.5% oftlte original FY 2003 General Fund budget. In addition
to the $7.7 million budget adjustment made to address the LP&L transfer reduction, the City Council determined to write off $2
million owed to the General Fund from the golf course enterprise fund.
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 commercial customers of LP&L. by $0.01 per kWh
effective May l, 2003 and, effective June I, 2003, the City increased the FCA for its two largest customers, which include Texas
T~h University ("Texas Tech"), and which account for approximately 10% of the energy sales ofLP&L. At the time of the May
1, 2003 FCA increase for residential and small commercial customers, the total electric cost energy for that class of LP&L's
customers was approximately 300/o 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
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 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 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 WTMPA was to engage in the generation. transmission, sale and exchange of electric energy to the Member Cities.
As described below, under the heading "DrSCUSSION OF RECENT FfNANCIAL AND MANAGEMENT EVENTS -City's
Responses to Recent Financial and Management Events -R~ent Measures taken to Address Financial and Management
Concerns at LP&l", the scope of WTMPA's activities has changed as a result of a series of related agreements reached among
WfMPA 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 oo-generation project {the "WTMP A Project"). The
16
c
c
c
c
(
(
(
)
WTMP A 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
Numerous issues, both operational and managerial, arose from the WTMPA Project. As a result, 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
in1emal 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.ci.lubbock.tx.us under the heading "West Texas Municipal Power Agency Audit". No
malfeasance was uncovered with respect to the administration ofLP&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 ftom LP&L. In April 2003, the WTMPA Member Cities (including the City) engaged Ernst & Young LLP
("E& Y") to conduct an audit of the reoords 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. Tile report noted that no evidence of misappropriation of
assets or intentional omissions of financial infolllla.tion 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 of
WTMPA, approximately 90".4. of the total amount
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 procee4s of this issue was used by
the City to acquire the WTMPA Project WTMPA used the proceeds received from the City to defease all of the outstanding
WTMP A Bonds. The City now owns and operates the WTMP A Project, as part of LP&L.
FINANCIAL STAFF AND CfiY 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 abnost 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 Assistant 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 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 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 or 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 JO. 2003 FINANCIAL RESULTS
The General Fund ... As hereafter described in "DISCUSSION OF RECENT FfNANCIAL 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 period 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
S 16.6 million. The restatement 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 of LP&L and the payment of the senior lien revenue bonds issued by the City
forLP&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 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 S4.8 million under the fund balance required under 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 ex_penditures. Reference is
made to the infonnation hereafter presented under the headings "DISCUSSION OF RECENT FfNANCIAL AND
MANAGEMENT EVENTS-General Fund and General Government Actions-General Fund Budgetary Actions" and"-FY
2006 Budget", for a discussion of the results for the General Fund and a summary of the City's planning for FY 2006.
The Electric FIUld ... With respect to 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 produce net revenues equal to I 00%
of its senior lien bonded indebtedness. ln 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
17
2003. Under the tenns 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 service reserve fund
under its senior lien revenue bond ordinances. Since 2003, LP&L has met the rate covenant, and the City has not made transfers
from the General Fund to LP&L.
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 FY 2003, to $88.5 million, as a result of a restatement of the
beginning fund balance. The restatement reflected the write off of a $4.48 million receivable recorded from WTMP A in FY 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 -
Re<:ent Measures taken to Address Financial and Management Concerns at LP&L", the WTMPA Settlements have resolved the
disputed receivable.
Qther Major Enterprise Funds: Water. Sewer. Solid Waste and Stoqnwater ... rn 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 FY 2003, as compared to $73.6 million for FY 2002. [n
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, Re<:lassitications and lntemal Controls Issues -Audit Restatements"). [n 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
depre<:iation expense for the City's landfills.
FY 1003 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 effe<:ted
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 infonnation;
instead, fund accounting was generatly 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 restritted and unrestricted net assets within each fund. For additional
infonnation regarding accounting policies that are applicable to the City, see Note I. "Summary of Significant Accounting
Policies" in the financial statements ofthe City attached as Appendix A.
The FY 2002 financial statements, and the City's financial statements dating to FY 1993, were audited by Robinson Burdette
Martin Seright & Burrows, l.L.P. (the "Fonner External Auditor"). {n 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 of2003, 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 Fonner 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. [n 2005, the City retained the services ofBKD, LLP, to prepare the City's financial
statements.
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 beginning 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 re<:eivable, which as of September 30, 2002 had ceased to be collectible. Also, as described above under
"Discussion of Re<:ent Financial and Management Events -September 30, 2003 Financial Results -The Ele<:tric Fund", 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 coll~ted by the City for new water and
sewer connections. 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 e<:onomic development
initiatives, which was restated from a beginning 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 refl~ted 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
Marl<et Lubbock, Inc., a component unit of the City that administers the grant agreement, retains certain recourse actions in the
event that the grant re<:ipient fails to satisfy its e<:onomic development initiative agreement. As a result, the receivable in the
18
c
(
c
c
(
(
)
'
community investment fund for the Sl 0 million amount was deleted as an asset of the fund ($6 million of the S!O million grant
had originally been funded through an interfund loan to the commwtity 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 WfMPA. a legally separate municipal corporation. In prior fiscal years, the former entity
had been acx;ounted 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 acx;ounting
tmltment of these entities was reconsidered, and each was added to the City's financial stalements as an entctprise 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 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
2002financial 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 tne 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 amoun.t 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 weaknesses 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 that a high turnover of staff within the City Manager'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 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 WfMPA, 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 (as
described above under "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS • September 30, 2003
Financial Results -The General Fund").
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEfT BLANKJ
19
CITY'S RESPONSES TO RECENT FINANCIAL AND MANAGEMENT EVENTS
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 ... The City has restored its General Fund balance within a 2-year period to roughly 20% of
operating revenues. For FY 2005, the General Fund balance ended with a surplus of $17,376,420. While no assurances can be
given as to future financial results, based on historic expenditure trends, an increase in the General Fund balance of an additional
$2.5 million is currently expected for FY 2006 year end City management also has implemented monthly assessments of the
budget.
> 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 the first municipalities nationwide that
has created an audit committee, taking its design in large part from the provisions of Sarba.nes-Oxley Public Company
Accounting Reform and Investor Protection Acl 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 perfonnances, internal fiscal controls, exposure and risk assessment The committee is appointed by the City
Council and infonnally reports to City Manager. 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; Kim Turner, the Director of Internal Audit at
Texas Tee~ and John Zwiacher, a member of Che Board of Directors of LP&L. Mr. Epps is the chair of the Audit Committee.
> City Management Changes ... As reflected in "City Officials, Staff and Consultants -Selected Administrative Staff', the City
has in place an experienced management team representing extensive government service experience. This management team has
implemented procedures that have addressed the general internal control weakness cited by KPMG in the 2003 Management
Letter.
Recent Measures taken to Address Financial and Management Concerns at LP&t
> 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 residential and commercial customers, which resulted in LP&L being approximately 30% higher in cost 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 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
pem1it LP&L to remain competitive and are not passed through, they become an unrecovered fuel expense. After losing almost
4,000 metered customers following the May 1. 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. Furthermore, while maintaining
its competitive position, LP&L has undertaken two recent FCA increases to offset increasing fuel costs, including an FCA
increase in November 2005 of approximately 14.7~10 and an FCA increase in February 2006 of approximately 11.76%. Fuel cost
will be continually evaluated and adjustments may be made as warranted.
> Establishment of Electric Utilities Board ... On February 5, 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 tbe 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 of LP&L's senior revenue debt seeking approval to amend each LP&L bond ordinance to provide for
the governance ofLP&L by the Electric Board. In accordance with the provisions of the bond ordinances, the City was obligated
20
c
(
c
c
(
c
(
)
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 of LP&L by the Electric Board in January 2005.
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 CoWlCil in adopting the LP&L Governance Ordinance was subject to repeal by subsequent City Councils.
The City Council 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 concain 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 percain to the establishment of financial reserves and restrictions on transfer of funds from l.P&L. In
addition, the charter amendment stipulates that the Electric Board shall determine 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 primary 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 (I) approve an annual budget and electric rate 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 firm 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 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 Boan:l. prior to appointing and/or removing the director of
LP&L. In accordance with the New LP&:l Governance Ordinance, the director of LP&l reports to the Board. While the City
Council retains substantial powers over the electric system, an additional goal of the City in escablishing 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 ftom LP&L ... As noted above, the LP&l Governance
Ordinance includes a provision that requires LP&L to escablish reserve funds. Such funds consist of (I) 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 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 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 Electric Board bas not deviated
from the flow of funds contemplated under the LP&L Governance Ordinance.
At the end of FY 2005, LP&L partially funded its electric utility development reserve fund by the amount of $2 million.
However, LP&L has not funded all of the reserves established under the LP&L Governance Ordinance, as net revenues have
been inadequate for a total funding of such accounts. Moreover, the mere establishment of the funds does not imply that such
reserves will be funded within any particular time frame. Nevertheless, 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 Ooerations and Revenues ... As a result of 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 Xcel contracts, and
restricted the generation of energy primarily to that produced at the W1MPA 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.
21
>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 WlMPA power resources and the costs
associated with such power resources, which consist of the WIMP A Project and certain power purchase agreements between
WTMPA and SPS; (2) resolving disputes regarding the composition and voting power of the WIMP A board; and (3) settling the
outstanding, disputed claims for costs incurred by the City on behalfofWTMPA.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 WIMP A Settlements repealed certain power sales agreements and operating agreements
entered into by the parties in connection with the issuance of the WTMP A Bonds that were associated with the operation of the
WIMP A Project. The WIMP A Settlements eliminated the position of WIMP A chairman, but the relative voting powers of the
Member Cities were not modified. Under the WIMP A rules and regulations, each Member City appoints two members to the
WTMPA Board, each of which bas an equal vote (certain actions of the WIMP 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 WIMP A
Board actions based upon the amount of net energy consumed by each Member City. As LP&L takes substantially all of the
energy from W"Th<WA resources, it has a veto over certain of the actions of the WIMP A 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 WIMP A 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 WIMP A Project and the defeasance o~ the WIMP A 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, WIMP A has been classified as an enterprise fund of the City,
which reflects the extensive associations between WIMP A and the City.
>New Full ReQuirements Energy Agreement ... In June 2004, WIMPA entered into a 15 year full requirements wholesale
power agreement (the "New Power Agreement") with SPS. The New Power Agreement became effective July l, 2004, and
replaced a series of existing agreements between WTMPA and SPS and the City and SPS. which bad expiration dates in 2004
and 2005. Under the New Power Agreement, SPS or its pennitted assigns is obligated to provide all energy ~uirements for each
of the Member Cities of WTMPA, including the City, during the term of the agreement, which terminates on June 30, 2019. As
in past WIMP A agreements, and in accordance with the WTMP A Settlements, LP&L will schedule energy purchased under the
agreement for each of the other WIMP A Member Cities. The New Power Agreement in<:ludes 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 fixed demand charge will increase incrementally, in
most years annually, during the term of the agreement based upon a predetermined schedule set forth in the New Power
Agreement SPS may terminate the agreement upon the occurrence of an adverse regulatory action under which SPS is required
to sell generation assets, and WIMP A 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 performance whenever there is a reasonable basis therefor.
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-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 older 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
past 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. In the event that gas prices should decline over the term of the Agreement, the City believes that
SPS has 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 personnel and maintenance costs as a result of the shift fi>om being an active electric generator to
being a passive generator (for SPS under the terms 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 WIMP 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 strocture changes implemented by both the City and SPS that require new
developments in the City to fund electric infrastrociUre through a development charge paid when the development is platted, new
22
c
c
c
c
,.
\.
(
(
)
i
)
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 sele<:ted LP&L as the electric distributor, which
positions the City as a distributor of energy 10 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 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 State, 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
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 strategies and other quantitative 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
tbat 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, and the City will receive an offset against its minimum gas transportation requirements from ConoooPhillips 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 Agreements ... As noted above, in connection 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 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, the City has dedicated generation capacity of 219 megawatts ("MW") to SPS under the Unit Contingency Agreements.
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 ofTexas 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 during the 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 June 30, 2019. Aside from the differences in units covered, the tenn 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 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 amowtt of the energy charge will depend upon the energy taken by SPS from the City's generation
wtits, if any, the Unit Contingency Agreements provide an annual minimum payment by SPS to the City of$6.3 million.
>Natural Gas Sale Agreemtnt ... Subsequent to its execution of the New Power Agreement, WTMPA 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 Corporation ("TMGC") at below-market prices and sell the gas to SPS in return
for a market-priced credit (reduced by nominal administrative and incentive fees) against payments due from WTMPA wtder the
New Power Agreement. The net savings, if any, will be applied proportionately to reduce the power charges of WfMPA'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 terms 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 TMGCs upstream gas provider, those suppliers offer to sell
such gas on terms 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 WTMP A's electric requirements. WTMP A's marketprice
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 has secured contracts with five suppliers (ConocoPhillps. 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 terms, to supply all or any portion of WTMP A's gas requirements under the New WTMP A
23
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. For these and other reasons, there
can be no assurance that WTMPA will be able to realize savings in any amount or. for any term 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 suppliel'1l 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 $3.8 million in gas
rebate income in the ele<:tric system's FY 2006 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 2006; City management is of the view,
however, that it is possible the rebate budgeted will be achieved
> Wholesale Enemv Agreement with Texas Tech ... As noted above, Texas Tech., a four year State institution of higher
education with a student enrollment of almost 29,000, is the largest customer of LP&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 10 produce steam which in the past bas been sold to the University. In addition, the City owns the
ele<:tric distribution system on the campus of Texas Tech. In response to mediation to resolve disputes under a prior agreement,
the City and Texas Tech executed a new contract on April 28,2005 (the "New Texas Tech Agreement"). 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 terms that are mutually beneficial for the parties.
>New Chjef Execytjve Officer for LP&L ... GaJY Zheng was appointed Chief Executive OfficeT of LP&L in September 2005.
Previously, he had served as the Superintendent of Electric Distributions at LP&L and subsequently, from March 2003 until his
recent appointment to CEO, as 11\e Chief Operating Officer of LP&L He bas more than 19 yean of engineering and management
experience in electrical utility business. Mr. Zheng, a registered Professional Engineer, is a graduate of the University of
Southern California with a MS in Electrical Engineering, a MS in Computer Engineering and a PhD in Electrical Engineering.
FV 2007 BUDGET
General Fund ... The City Council adopted the FY 2006-07 budget and five year forecast on September 13, 2006. The City's FY
2006..07 budget for the General Fund is balanced with $126.2 million in total revenues and expenses. The budget projects that
sales tax revenues will produce 54.9% of total tax revenues (tax revenues represent 62.4% of the General Fund's total operating
revenues), while ad valorem tax revenue is budgeted to produce 43.6% of total tax revenues. 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 2007 the City's total tax rate was set at $0.46\99 per $100 taxable assessed valuation, up from $0.4472 in FY 2006. The
City's tax roll increased $637.5 million, or 6.8%, from FY 2006 10 FY 2007. The City Council, on June 12, 2003, passed a
resolution affirming their support for truth-in-taxation. The goal of this resolution is to allow the citizens to be better informed
about the real needs of City government and if the increased revenue from increased appraisal values is truly necessary. The
resolution goes on to provide that each year the tax rate should be adopted based on the actual needs of government This goal
was affirmed in April 2004 in a resolution that stated the City Council has supported as well as taken action to provide tax relief
to property owners within the City, and that the City Council recognized the need for the City to be autonomous in its ability to
provide the public safety, health, and quality of life for its citizens. The FY 2006-07 Operating Budget was developed in
consideration of the goals of the resolutions and as a result, there was a $0.01479 increase in the adopted tax rate.
Total transfers to the General Fund from enterprise and internal service funds are budgeted to increase by $1.9 million, while
tnlnsfers out remain stable. On the expenditure side, administrative services, community services, cultural and recreation services
and public wor\cs budgets experienced increases in the 14-17% range mainly due to higher hea\thcare and energy costs.
Expenditures for public safety are $5.8 million greater than the amended FY 2005-06 budget, or an 8.2% increase. This increase
is due to the City Council goal of increasing public safety officers in Fire and Police. Ovenll. General Fund operating
expenditures are budgeted to increase by $12.9 million over the amended FY 2006 budget.
[THE REMAINDER OF TIUS PAGE INTENTIONALLY LEFT BLANK]
24
(
,.
I..
(
)
)
)
Enterprise Funds ... The following table (amounts in millions) illustrates the revenues, use or coniTibution of net appropriable
assets, and appropriation as approved in the City's FY 2006-07 adopted operating budget and five year forecast for the Solid
Waste, Wastewater. Water and Electric Funds:
Adopted
FY %006-07
Adopted Planned Use Adopted Change
FY 2006-07 (Contribution) F¥2006-07 from
Revenue Net Amts Aeeroeriation PriorY ear
Solid Waste $ 15,513,887 2,154,144 17,668,031 19.4%
Wastewater 21,957,000 1,547,857 23,504,857 6.6%
Water 42.348,055 2,610,518 45,320,226 11.9%
LP&l 250,577,301 231,256,484 18.0%
The increased budget in Solid Waste is a result of increased salaries, healthcare, fuel, master lease, billing office and equipment
maintenance costs. lnC"reases in these areas are as follows (in millions): healthcare costs, $0.3; fuel costs, $9.7; salary costs
related to an increase in salaries in the unpaved alleys program, $0.5; master lease, $.7; billing office, $0.2; and, equipment
maintenance costs, $0.6. The large increase in debt service was related to the acquisition of fleet through the City's Master lease
program to replace an aging inventory. An increase in the tipping fees and residential collection rates of$1.50 was budgeted.
The increased budget in Wastewater is a result of increased bealthcare, fuel, utility, debt service, and billing office costs.
Increases in these areas are as follows (in millions): healthcare costs, $0.2; fuel costs, $0.l; utility costs, $0.6; debt service, $1.8;
and, billing office costs, $0.1. The large increase in debt service is mainly related to the $15 million bond issue in FY 2005-06
for compaction repairs and lines ahead of the Marsha Sharp Freeway. No rate increase was needed in FY 2006-07.
The increased budget in Water is a result of increased healthcare, fuel, utility, debt service, billing office and Canadian River
Municipal Water Authority costs. Increases in these areas are as follows (in millions): healthcare costs, $0.3; fuel costs, $0.1;
utility costs, $0.8; debt service, $2.6; CRMWA costs, $1.1; and, billing office costs, $0.2. The large increase in debt service is
mainly related to the acquisition of water rights over the past two years. An II% rate increase was approved in the adopted
operating budget
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
25
AD VALOREM TAX INFORMATION
AD VALOREM TAX LAW
The appraisal of property within the City is the responsibility of the Lubbock County Central Appraisal District (the "Appraisal
District~). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal
District is required under the Property Tax Code (defined below) to appraise all property within the Appraisal District on the
basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property.
different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market
data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law
further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (I ) the market
value of the property, or (2) the sum of (a) I 0% of the appraised value of th.e property for the last year in which the property was
appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the
property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property.
The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of
three members appointed by the Board of Directors of the Appraisal District The Appraisal District is required to review the
value of property within the Appraisal District at least every three years. The City may require annual review at its own expense,
and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal
Review Board.
Reference is made to Title I of the Texas 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 purposes;
and tbe procedures and limitations applicable to the levy and collection of ad valorem taxes.
Article Vllf of the State Constitution ("Article VUI") and State law provide for certain exemptions from property taxes, the
valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad
valorem taxation.
Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (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; or (2) an exemption of up to 2001.> of the market
value of residence homesteads. The minimum exemption under this provision is $5,000.
In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be
levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if
cessation of the levy would impair the obligation of the contract by which the debt was created.
State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse
or children of a deceased veteran who died while on active duty in the anned forces; the exemption applies to either real or
personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of$12,000.
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
limitation. 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 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 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 VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section l·d-1), including
open-space land devoted to fann or ranch purposes or open-space land devoted to timber production. may elect to have such
property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both
Section 1-d and 1-d-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 pwpose of assembly. storage, manufacturing, processing or fabrication.
Decisions to continue to tax may be reversed in th.e future; decisions to exempt freeport property are not subject 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
26
c
(
c
(
c
c
; ...
(
(
")
of 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. See "Tax Increment Financing Zones" below.
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
incr~ value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a
period of up to 10 years. See "Tax Abatement Policies" below.
EFFECTIVE TAX RATE AND ROLLBACK TAX RATE
By each September I or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current
year. The City Council is required to adopt the annual tax rate for the City before the later of September 30 or the 60th day after
the date the certified appraisal roll is received by the City. If the City Council does not adopt a tax rate by such required date the
tax rate for that tax year is the lower of the "effective tax rate" calculated for that tax year or the tax rate adopted by the City for
the preceding tax year. The tax rate consists of two components: ( 1) a rate for funding of maintenance and operation expenditures
and (2) a rate for debt service.
Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". A tax
rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or the effective tax rate until two public
hearings are 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'intemet 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. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may
require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax
rate.
"Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values
(adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in
this year's taxable values.
"Rollback tax rate" means the rate that will produce last yeafs maintenance and operation tax levy (adjusted) from this year's
values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted)
divided by the anticipated tax collection rate.
The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize
an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the
rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year.
Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the
calculation of the various defined tax rates.
PROPERTY ASSESSMENT AND TAX PAYMENT
Property within the City is generally assessed as of January I of each year. Business inventory may, at the option of the taxpayer,
be assessed as of September. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the
daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February I
of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments
with the first due on February I of each year and the final installment due on August I.
[THE REMAINDER OF TinS PAGE INTENTIONALLY LEFT BLANK)
27
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 II
May 9 4 13
June 10 s IS
July 12 6 18
After July, the penalty remains at 12%, and interest increases at the rate of I% each month. In addition, if an account is
delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain
circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per
annum with no additional penalties or interest assessed. In general, property subject ro the City's lien may be sold, in whole or in
parcels, pursuant to court ordtT ro 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 crediwrs 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 bankmptcy court. In many
cases post-petition taxes a.-e paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court.
CllY APPLICA TJON 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 S I 0,000.
The City has not granted any part of the additional exemption of up to 20% of the masket 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 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 debt
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-<lption basis by the Property Tax Code.
Since 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 I, 2004.
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 has established three
enterprise zones, the north zone, of approximately 18.6 square miles, the south zone, ofapproltimately 15.7 square miles, and the
international airport zone, of approx.imately 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. In accordance with State law, the City has adopted
policies for granting tax abatements, which provide guid.elines 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. Althougl! 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 abaaernent, 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 roll,
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
28
c
c
c
c
(
(
')
)
recapture of the abated taxes if the business is discontinued during the tenn 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 General Obligation DebL"
TAX INCREMENT FINANCING ZONES
Chapter 311. 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 units. Together with other taxing units, the City participates in two TIFs, the Central Business District Reinvestment Zone
{the "Downtown TIF") and the Nonh 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,
at $105,858,251. In FY 2006, the Downtown TIF had a taxable value of$137,773,996 before taking into account tax abatements
and exemptions. After tax abatements and exemptions, the tax value in the Downtown TIF is $137,164,666. rn addition to the
City, the County, Lubbock 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 TlF, the City enacted an ordinance in 2001 establishing the North Overton TTF. 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 2006 represent approximately 53.1% of all taxes levied by all participating Taxing Units. The City
ordinance establishing the North Overton TIF provides that the TIF will terminate on December 31, 2031 or at an earlier time
designated by subsequent ordinance of the City Council. The North Ovenon 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. In FY 2006, the North Overton TIF had a taxable value of $185,442,083 before taking into account tax abatements
and exemptions. After tax abatements and exemptions, the tax value in the North Overton TIF is $185,284,602.
(THE REMA£NDER OF THIS PAGE rNTENTIONALL Y LEFT BLANK)
29
TABLE 1-VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT
2006 Market Valuation Established by Lubbock Central Appraisal District
Less ExefllXions'Reductions at 100'/o Market Value:
Resideatial Homestead Ex.en:ptions
~Cap ~I.IStm:I\1
Disabled Veterans
AgricultulaJI~Space Land Use Rt:du::tions
Pollution Exenptioos
HouseBill366
Freeport Exetrptions
Tax Abalernmt ~ODS ( 1)
Tax Freeu Adjustment
2006 Taxable Assessed Valuation
Oty Fl.l'lded Debt Payable from Ad Valorem Taxes:
Cleoeral Obligation Debt (as of 12-1.{)6) (2X3)
Plus: The Bonds
Plus: The Certificates
Less: Refunded Obligations
Tocal FuMed Debt Payable from Ad Valorem Taxes
Less: SelfSI.IJlPOl1ing Debt (as ofl2-1.{)6) (3X4)
~rks System General O>ligption Debt
Sev.er System GeneJal Obligation DeU
Solid Wasre Disposal System Ge:ne%al aHigation Debt
Drainage Utility System Geoe:ral Obligation Debt
Tax Incrermn FmancingGeneral Cbligatioo Debt
Electric light and Po'Wef System General Obligation Debt
Cerretay Gemal Obtigi!ition Debt
Gateway Geoeral O>ligation IXbt
Airport General Obligation Debt
The Certificates (5)
CieMal Purpose Funded Oebt Payable from .Ad Valorem Taxes
$ 219,946,523
62,042,.594
14,489,874
89,015,230
5,985,740
323,568
75,334,950
52,917,466
84,756,734
$ 447,275,000
56.685,000
25,515,000
53,005,000
$ 117,698,109
57,790,304
11,796,568
80,031,156
18,837,749
49,592,282
491,989
17,145,597
6,659,301
25,515,000
General <l>ligation Interest 3M Sinking Fund as of Sepferrber 30, 2006
Ratio Total FuMed Debt to Taxable Assessed Valuation
Ratio General Purpose Funded Debt to Taxable Assessed Valuation
2007 Estimated Population (6)
Per Capitl Taxable Assessed Valuation
Per Capitl Total FuMed Debt Payable from Ad Valorem Taxes
Per Capitl General Purpose FuOOed ~Payable from .Ad Valorem Taxes
(I) See above. "Ad Valorem Tax lnfonnation -Tax Abatement Policies.~
$10,607,538,316
604,812,679
$10,002,725,637
$ 476,470,000
385,558,055
$ 90,911,945
$ 3,087,649
4.76%
0.91%
212,365
$47,102
$2,244
$428
(2) The scatement of indebtedness does not include the City's outstanding Electric Light and Power System Revenue Bonds,
payable solely from the Net Revenues of the City's Eleclric Light and Power System.
(3) Preliminary, subject to change. Includes the Refunded Obligations.
(4) As a matter of policy, the City provides debt service on general obligation debt issued to fund improvements to its
30
c
c
c
(
I" '
(
(
'
}
Waterworks System. Sewer System, Solid Waste System, Tax Increment Finance Reinvestment Zone, Gateway Streets,
Airport, Cemetery, Electric Light and Power System and Drainage System from surplus revenues of these Systems (see
''Table 8A -General Obligation Debt Service Requirements," "Table 9 -Division of General Obligation Debt Service
Requirements," "Table 8B -Interest and Sinking Fund Budget Projection" and ''Table 10-Computation of Self-Supporting
Debt").
The City's Waterworks System General Obligation Debt has been issued 1o finan<:e or refinance Waterworks System
improvements, and is being paid, or is expected to be paid, from Waterworks System revenues. The City bas no outstanding
Waterworks System Revenue Bonds but has obligated revenues of the Waterworks System under water supply contracts.
The City's Sewer System General Obligation Debt has been issued to finance Sewer System improvements, and that is being
paid, or is expected to be paid, from Sewer System revenues. Tlte City has no outstanding Sewer System Revenue Bonds.
The City's Solid Waste Disposal System General Obligation Debt has been issued for Solid Waste System improvements,
and 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.
The City's Drainage Utility System General Obligation Debt bas been issued for Drainage System improvements, and is
being paid, or that is expected to be paid, from revenues derived from Drainage Utility System fees. The City bas no
outstanding Drainage Utility System Revenue Bonds.
The City's Tax Increment Financing General Obligation Debt has been issued for construction of improvements in the North
Overton TIP, 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. Tn FY 2007, based upon development projections
that the City believes to be reasonable, but which are dependent in part on future economic conditions 81\d other factors that
the City <:an 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 TIP. 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 TIP
has reached full build-out status.
The City's Electric Light and Power System General Obligation Debt has been issued to finance Electric Light and Power
System improvements, and is being paid, or that is expected to be paid, from revenues derived from th.e Electric Light and
Power System.
The City's Cemetery General Obligation Debt has been issued to finance Cemetery improvements, and is being paid, or that
is expected to be paid, from revenues derived from the Cemetery.
The City's Gateway General Obligation Debt has been issued for Gateway Streets improvements, and is being paid, or that is
expected to be paid, from franchise fees. The City has no outstanding Gateway Fund Revenue Bonds.
The City's Airport General Obligation Debt has been issued to finance Airport improvements, and is being paid, or that is
expected to be paid, from revenues derived from the Airport.
(5) Preliminary, subject to change. The Certifi<:ates will be paid, or that is expected to be paid, from franchise fees.
(6) Source: City of lubbock, Texas.
(THE REMAINDER Of THrS PAGE rNTENTIONAU. Y LEIT BLANK}
31
c
TABLE 2-VALUATION TAXABLE ASSESSED VALUATION BY CATEGORY
Tauble Appraised Value for Fiscal Year Eoded September 30, ,.
\,. 2001 2006 2005
%of %of %of
Cate&O!l: Amount Total Amount Total Amount Total
Real. Residential, Single-Family $ 5,889,9\8,\95 55.53% $ 5,517,769,306 55.55% $ 5,169,490,706 56.09%
Real. Residential, Multi-Family 873,394,391 8.23% 795,689,400 8.01% 615,453,250 6.68%
Real, Vacant Lotsrrracrs 186,939,508 1.76% 166,089,379 1.67% 137,41l,731 1.49% (
Real, Acfeage (Land Only) 104,443,417 0.98% 80,067,791 0.81% 64,532,486 0.70%
Real, Farm and Ranch ImprovemenTS 10,601,986 0.10% 11,038.895 0.11% 10,406,299 0.11%
Real, Commercial and Industrial I ,968,271,689 18.56% 1,827,901,763 18.40"/o 1,7\2,457,490 18.58%
Real. Oil, Gas and Other Mineral Reserves 28,446,050 0.27% 17,526,510 0.18% 12,167,754 0.13%
Real and Tangible Personal, Utilities 179,562,657 1.69% 117,838,907 1.79% 173,908,469 1.89%
Tangible Personal, Business 1,245,600.988 11.74% 1,228,428,632 12.37% 1,226,369,118 13.3\%
Tangible Personal, Other \3,940.265 0.13% 14,527,171 0.15% 15,465,413 0.17% c Real Property, Inventory 37,577,657 0.35% 26,685,491 0.27% 9,863,035 0.11%
Special Inventory 68,621,321 0.65% 67,329,545 0.68% 68,232,264 0.74%
Other/Adjustments 220,192 0.00% 1,499,6\6 0.02% 0.00%
Total Appraised Value Before Exemptions $ 10,607,538,3\6 100.00% s 9,932,392,406 100.00% $ 9,215,758,015 100.00%
Less: Total Exemptions/Reductions 1604,812,679! 1585,778,4552 1580,763,\531
Taxable Assessed Value s 10,002.725,637 s 9,346,6\3,951 s 8,634,994,S62 ,
\,
Tanble A22ralsed Value for Fiscal Year Eaded Se2tember 30z
2004 2003 2002
%of %of o/oof
Cateso!l: Amount Total Amount Total Amount Tow
Real. Residential, Single-Family s 4,690,158,161 55.50% $ 4,282,214,635 56.78% $ 3,935,486,660 53.59%
Real, Residential, Multi-Family 561,569.488 6.64% 455,993,262 6.05% 466,775,473 6.36% (
Real, Vacant Lots!l'racts 108,625,954 1.29"/o 93,413,144 1.24% 96,407,484 1.31%
Real, Acreage (Land Only) 65,880,410 0.78% 59,644,977 0.79% 60,171,506 0.82%
Real, flllm and Ranch ImprovementS !0,835,088 0.13% 11,391,782 0.15% 12,003,318 0.16%
Rca~ Commercial and Industrial 1,638.846, 765 19.39% 1,370,730,397 18.18% 1,445,748,160 19.69%
Real, Oil, Gas and Other Mineral Reserves 8,923,810 0.11% 7,909,460 0.10% 8,849,390 0.12%
Real and Tangible Personal, Utilities 185,761,346 2.20% 192,138,423 2.55% 185,588,935 2.53%
Tangible PCI'SOflal, Business 1,090,862,579 12.91% 974,534,729 12.92% 1,039,521,384 14.16% < Taugible Personal, Other 16,287,022 0.\9% 15,336,364 0.20% 15,296,446 0.21%
Real Property, Inventory 4,174,287 0.06% 1\,087,603 0.15% 10.279,056 0.14%
Special Inventory 68,663,514 0.81% 67.339,159 0.89% 67,429,634 0.92%
Total Appraised Value Before Exemptions $ 8.451,188,424 100.00% s 7,541,793,935 100.00% $ 7,343,557,446 100.00%
less: Total Ellemptions/Rcductions ~529.598,044! ~199,449,068! ~432,980~75!
TB.llable Assessed Value s 7,921,590,380 s 7,342,344,867 $ 6,9\0,5771171
(
NOTE: Valuations shown are certified tax.able assessed values report.ed by the Lubbock Central Appraisal District to the City for
pu~ of establishing and levying the City's annual ad valorem tax rate and to the State Comptroller of Public Accounts.
Certified values are subj~ to change throughout the year as contested values are resolved and the Appraisal District updates
records.
32
)
)
TABLE 3A ~VALUATION AND GENERAL OBLIGATION DEBT IDSTORY
Per Capita General Ratio
Fiscal Estimated Taxable Taxable Purpose Tax Debt to Funded
YearEnd Dish"it t Assessed Assessed Fuaded Assessed Debt
9/30 Poe•dation <•> Valuation Valuation Tax Debt (I>> Valuation (I>) PerCal!ita
2002 202,000 $ 6,909,309,707 $ 34,205 $ 63,115,346 0.9 1% $ 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% 34()
2005 209,120 8,664,190,909 41,432 80,210,269 0.93% 384
2006 211,187 9,365,239,925 44,346 87,231,945 0.93% 413
2007 212,365 10,002,725,637 47,102 90,911,945 (<) 0.9 1% (cl 428
(•) Source: The City.
1~1 Does not include sel f-suppor1ed debt.
C<l Preliminary, subject to chUJge. Includes the Bonds and e.Jtcludes the Refunded Obligations.
TABLE 38-DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT
The following table sets forth certain infonnation with respect tot the City's genera! purpose and self-supporting general
obligation debt. The City is revisi ng 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 lnfonnation-Capital Improvement Program and Anticipated
Issuance of General Obligation Debt"
Fisc:aJ
Year
Ended
30-Sep
2003
2004
2005
2006
2007 '·1
Funded Tax Debt
Outstanding at End
of Year
$ 295,935,000
285,885,000
388,595,000
447,275,000
476,470,000
Less:
Self-Supporting
Funded Tax
Debt
$ 225,746,796
215,723,783
308,384,731
360,043,055
385,558,055
General Purpose
Funded Tax Debt
Outstanding
at End of Year
$ 70, 188,204
70,161,217
80,210,269
87,231,945
90,911,945
<•l Preliminary, subject to change. Includes the Obligations and excludes cbc Rcfut\ded Bonds.
TABLE 4-TAX RATE, LEVY AND COLLECTION m STORY
Fiscal Tax Rate Distribution
YearEnd General Economic Interest and Tax Tax
09130 Fund Devel!!J!ment Sinki~Fund Rate Levy
2002 $ 0.42844 $ 0.03000 $ 0.11156 $0.57000 $ 39,351 ,225
2003 0.43204 0.03000 0.10796 0.57000 42,286.967
2004 0.41504 0.03000 0.10066 0.54570 43,659,111
2005 0.33474 0.03000 0.09496 0.45970 39,777,866
2006 0.35626 0.03000 0.06094 0.44720 41,775,367
2007 0.36074 0.03000 0.07125 0.46199 41,968,431
33
Pertent Colleded
Current Total
97.600/o 99.41%
97.25% 98.78%
97.02% 99.69%
97.53% 100.08%
98.15% 99.71%
(In process of Collection)
Tax
Year
2001
2002
2003
2004
2005
2006
Tax
Year
2001
2002
2003
2004
2005
2006
TABLE 5-TEN LARGEST TAXPAYERS
~
Macerich Lubbock Ltd.
SBC
Southwestern Public Services Co.
Fountains Club Lubbock Acquisitions LP
MC Canton Woods LC
Atmos Energy West Texas Division
United Supermarkets OFC
First Industrial Development Services Inc.
Jefferson Commons Lubbock LP
Lubbock Two Associates LLC
TABLE 6-TAX ADEQUACY
2006
Tuable
Assessed Valuation
s 114,964,054
60,604,718
43,334,050
30,692,329
30,481,548
29,375,670
28,959,459
28,278,989
27,235,977
26,971,428
$ 420,898,222
Average Annual Debt Service Requirements All General Obligation Debt (2007-2034):
$0.2539 per $100 A V against the 2006 Taxable A V, at 98.5% collection, prodU<:es
Maximum Annual Debt Service Requirements All General Obligation Debt (2008):
$0.4530 per $100 AV against the 2006 Taxable AV, at 98.5% collection, produces
<•I Preliminary. subject to change. Includes the Obligations and excludes !he Refunded Oblig.atioos.
TABLE 7-ESTIMATED OVERLAPPING DEBT
% ofTotaJ
Taxable
Al1essed Valuation
1.15%
0.61%
0.43%
0.31%
0.30%
0.29%
0.29%
0.28%
0.27%
0.27%
4.21%
$25,014,992 (6)
$25,015,967
$44,630,189 (l)
$44,632,662
Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities
on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures.
This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt~) was developed from information
contained in "Texas Municipal Reports~ published by the Municipal Advisory Council of Texas. Except for the amounts relating
to the City, the City has not independently verified the accuracy or completeness of sU<:h 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 hereof, and such entities may have programs requiring the 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. Gross Debt Estimated e;. Overlapping
Taxing Jurisdiction (As of Nov. 30) Overlapping Debt
Lubbock lSD $ 148,756,156 98.91% S 147,134,714
Lubbock County 86,460,000 84.36% 72,937,656
Lubbock County Hospital District
High Plains Underground Water Conservation Dist.
Friendship ISD
Idalou lSD
Lubbock-Cooper ISO
Roosevelt lSD
NewDeaiiSD
Estimated Overlapping Debt
The City $
Total Direct & Estimated Overlapping Debt
As a % of2006 Taxable Assessed Valuation
67,331,742
540,000
46,509,554
476,470,000 lol
Per Capita Total Direct & Estimated Overlapping Debt
84.80%
0.00%
64.44%
1.10%
15.30%
4.72%
0.03%
100.00%
<•l PA~liminary, 5U'bject to change. lllcludes !he Bonds and exclude$1he RefUnded Obligations and Self-Supported Ddlt.
34
43,388,575
5,940
7,115,962
s 270,582,846
4761470,000
s 747,052,846
7.47%
$ 3,518
(•l
c
,.. ......
c
(
(
(
(
' '
-TABLE 8A ·GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS FYE Oultludiq Debt(o) n.e C•!l!.!!caiU <» 311-Se---L PriDciiMt ID.Ierat ToW Priadl!!! IAtenot ToW Prlade! 2007 s 22,425,000 $ ll.m,l77 $ 43,980,177 s . $ 658,036 $ 651,036 s 920,000 2008 n.11o,ooo 19.343,6S9 43,053,659 640,000 I,IH4,?S8 1.68-4,75& 1,835,000 2009 23,735,000 18,377,898 42,112,191 66$,000 1,018,658 1,613,651 1,810,000 2010 23,700,000 17,397,611 41,097,618 695,000 991,4S8 1,686,458 180,000 2011 l4.32S,OOO !6,359,621 40,684,627 120,000 963,151 1,683,158 190,000 2.012 2.3, 795,000 15,286,819 39,011,819 730,000 933,758 1,683,758 195,000 2013 24,480,000 14,200,33& 33,680,338 785,000 903,058 1,688,058 205,000 2014 25,250,000 13,04*,161 31,298,161 815,000 871,058 1,686,058 215,000 2015 2.3,195,000 11,946,965 35,141,965 850,000 837,758 1,687,758 220,000 2016 23,120,000 10,869,794 33,919,794 880,000 803,1$8 1,613,151 1,850,000 2017 2.3.22$,000 9,742,541 32,96?,$41 920,000 767,158 1,617,lS8 3,650,000 20lt 24,215,000 1,$95,436 32,810,436 !}55,000 729,6S8 1,684,6SI 3,805,000 2019 23,285,000 7,400,815 30,685,88S 995,000 690,658 1,685,658 3,965,000 2020 21.230,000 6,311,179 27,541,179 1,035,000 649,540 1,684,540 4,135,000 2021 I9,71S,OOO 5,306,373 25,021,373 1,080,000 605,643 1,6&5,643 4,325,000 2022 11,100,000 4,406,286 21,506,286 1,12MOO SS9,338 1,6114,:na 4,510,000 20l3 16,250,000 3,594,239 19,144,239 1,175,000 j]0,744 1,685,744 3,340,000 2024 14,410,000 2,801,147 17,271,147 1,225,000 459,744 1.614,744 1,550,000 2025 13,485,000 2,12$,134 15,610,134 1,280,000 406,.Sil 1,686,513 1,620,000 2026 9,665,000 1,558,431 11,223.431 1,335,000 350,944 1.615,944 1,695,000 2027 3,595,000 1,233,100 4,82&,100 1,390,000 293,038 1,6&3,031 1,770,000 .... 2028 3,765,000 1,054,644 4,119,644 1,455,000 232,581 1,617,511 1,840,000 VI 2029 3,955,000 165,350 4,820,HO 1,SIS,OOO 169,469 1.614,469 1,920,000 2030 4,155,000 661,125 4,822,125 1,580,000 103,?00 1,683,700 2,005,000 2031 4,365,000 459,581 4,824,n1 1,650,000 35,063 1,685,063 2,095,000 2032 2,240,000 297,250 2,537,250 . . . 2,185,000 2033 2,350,000 182,500 2,532,500 . . . 2,275,000 2034 2,4,,000 61,11$ 2,536.175 . . . 2,380,000 s 447~751000 $ 21510491133 $ 662.3241133 $ 2515 JS,OOO $ IS1SI~640 s 4111o3164o s s616as1ooo A venae Au.ual Debt Sctvice Rcquiromlmu All Oeltcfal ObliJIIIion Debt (2007-2034): Maximum Amnal Debt Servi110 R.quirem=U All Ocaml Oblipd011 Debt (2008): W Doa aDI U.dudo leuo'pwcbuo obliptiou. liO Prollmiwy, oobjeot lo obocac. 1mm11 rote ol4.25% u.ted l'ct PllQ>OM ot iU.,tnotion. '1\o Ccni1!uta ,.;11 be paid. 0< lllat iJ ~ lo be ~id, fn>nl &ondl~ r-TABLE 8B ·INTEREST AND SINKING FUND BUDGET General Purpose General Obligation Debt Service Requirements, September 30 ,2007 Interest and Sinking Fund, September 30, 2006 $ lnlelest and Sinking Fund Tax Levy@ 9l.So/o Estimated Interest Eamiogs Projected Balance, September 30, 2007 3,087,649 7,020,038 $ 9,294,717 122,647 10,230,334 $ 935,617 v _} The Borub00 Leuhllmdtd Tet.l IAtc,...t Tot.! Bolltb DebtScmc. $ 1,444,371 s 2,364,378 s 2,473,691 s «.S28,899 2,277,393 4,112,393 4.220,620 44,630,1&9 1,204,493 4,014,49) 4,123,?45 43,617,303 2.164,693 2,344,693 2,452,995 42,675,773 1,157,293 2,347,293 2,UZ,995 42,262,082 1,149,$93 1,344,593 2,452,995 40,657,174 2,141,593 2,346,m 2,452,995 40,261,993 2,133,193 2,348,193 2,452,995 39,379,416 2,124,493 2,344,493 2,452,995 36,721,220 2,0&3,093 3,933,093 4,042,245 35,$63,799 1,973,093 5,62.3,093 5,?30,261 34,547,530 1,82.3,993 S,628,993 5,135,116 34,388,210 1,668,593 5,633,593 5,731,175 32.266,260 1,504,525 5,639,525 5,745,590 29,119,654 1,3:11,933 S,6S3,933 5,761,444 26,599,504 1,143,398 5,653.398 5,761,281 23,0&2,740 977,713 4,317,713 4,416,506 21,421,189 873,100 2,42.3,800 1,533,315 18,146,316 806,438 2,426.431 2,533,375 17,119,709 735,994 2,430,994 2,537,500 12,801,869 662,363 2,432,363 1.537,375 6,406,125 585,650 2,425,650 2,533,000 6,399,875 SOS,7.SO 2,425,750 2,534.125 6,396,444 422,344 2,427,344 2,S35,37S 6,397,794 335,219 2,430.219 2,536.$00 6,403,363 244,269 2,429.269 2,537,250 2,429,269 149,494 2,424,494 2,532,500 2,424,494 50,57$ 2,430,575 2,536.875 2,430,575 $ 361672~49 $ 931357~49 $ 9613651355 s 70014191766 $ 25,014,992 $ 44,630,189
TABLE 9 • DMSION OF GENERAL OBLIGATION DEBT SERVICE SolidWute Dl'tluge Tu llledrieLight Watctworks Sewer Dispoul Utility Increment & Power Gum I Total IIYE SJSietll System Sylltll System FiD•Ildl& SyJtem Ccmetary Gateway Airport Purpo.te G.O. 3~ Debt~<~ Debt Serviee DtbtSuvlee Debt Sei'Yice DebtServiu DebtSei'Yiee DebtSeniee DcbtServiu Delli Servkc Dellt Service DcbtSmkc 2007 $ 12,215,470 s 7,273,S79 s 1,120,834 $ S,43&,S14 $ 1,492,624 s 4,992,336 s 38,310 $ 1,354,4)1 $ 7S9,302 s 9,294,117 43,980,177 2001 11,!50,444 6,981,2&3 1,122,028 5,459,507 1,S06,SOI 4,942,0&4 39,536 1,36S,S40 751,667 9,021,069 43,053,659 2009 11,761,364 6,1S1,19! 987,448 5,460,275 1,509,131 4,162,794 39,Sl9 1,363,819 514,908 8,719,735 42,112,!98 2010 11,586,801 6,368,691 1,062,047 5,461,086 I,Sil,S99 4,786,137 39,S40 1,165,414 S79,7SO 1,336,SS1 41,097,618 2011 11,493,193 6,208,404 1,043,039 S,459,U2 I,S01,747 4,721,931 39,m 1,360,613 574,704 3,276,309 40,6&4,627 2012 10,609,246 5,969,960 1,033,147 5,457,704 I,S07,7S1 4,640,427 39,S21 1,364,337 569,80& 7,!89,911 39,011,119 2013 10,557,261 S,783,900 1,022,658 5,458,822 I,S06,338 4,571,39& 39,S37 1,361,924 S63,9S2 7,SI4,S48 3S,680,338 2014 IO,S17,474 5,618,884 1,006,631 S,4S4,913 I,S06,26S 4,492,432 39,527 1,364,345 SS7,004 7,740,636 38,298,161 2015 10,390,460 3,741,276 990,773 5,457,14() I,SOS,SSI 4,416,020 39,529 1,364,916 423,468 6,U2,12S 35,141,965 2016 10,317,339 2,941,171 1,011,36S 5,460,327 1,508,409 4,336,035 39,531 1,364,033 422,4&6 6,562,491 33,939,794 2017 10,303,S30 2,907,989 988,775 S,4S3,389 I,Sli,S69 4,257,075 39,521 1,362,063 42S,ISI 5,71&,479 32,967,541 2018 10,250,282 2,882,158 975,770 5,460,973 1,50S,S38 4,1&9,SSO 39,SOS 1,362,311 423,232 S,721,114 32,810,436 2019 9,902,671 2,849,1(17 781,761 S,453,217 I,SOS,IB9 2,648,230 39,S2S 1,360,916 421,221 5,120,902 30,685,18S ..... Q\ 2020 7,461,288 2,126,241 115,566 5,4S9,S10 I,.Sil,343 2,649,606 39,.S38 ls]63,683 423,036 5,731,366 27,541,179 2021 S,S67,189 2,126,093 768,274 5,453,726 I,S06,871 2,644,893 39,SI2 1,363,909 424,1S2 5,126,748 2S,02!,J73 2021 2,884,667 2,12S,487 634,104 5,467,266 I,S06,090 2,649,869 39,S3& 1,362,113 42S,036 4,412,046 21,506,286 2023 2,341,374 1,799,422 637,157 S,466,SI7 I,S07,211 2,644,600 39,SI7 1,362,184 425,056 3,621,131 19,844,239 2024 2,339,4SO 1,m,oss 634,740 5,467,663 1,5os,an 964,530 39,SIO 1,363,972 424,Sl3 2,735,842 17,271,147 202S 1,604,488 1,747,847 363,461 S,469,789 1,221,889 969,368 39,SI2 1,362,300 424,327 2,407,153 15,610,134 2026 l,liS,S49 1,170,653 363,513 5,417,117 506,649 4i&,l37 39,517 222,941 199,S43 1,436,742 11,223,431 2027 . . . 4,128,100 . . . . . . 4,828,100 2028 . . . 4,819,644 . . . . . . 4,819,644 2029 . . . 4,&20,350 . . . . . . 4,120,350 2030 . . . 4,822,125 . . . . . . 4,822,125 2031 . . . 4,824,SSI . . . . . . 4,824,581 2032 . . . 2,537,250 . . . . . . 2,537,250 2033 . . . 2,S32,500 . . . . . . 2,532,500 2034 . . . 2,536.875 . . . . . . 2,536,875 s 165,292,541 s 79, 1&4,700 s 17J2J,l41 $ 140,918,302 $ 21,853,157 s 70,167,452 s 789,297 $ 26, IIS,904 s 9,809,316 s 123,170,317 $ 662,124,133 !>I Pmiminaty, subject to change. Includes tile Ccmlie&tcS. Interest lite of 4.25% liSCICI fot 9UIJIOIC of iUumtion . ....... ' ,-, "' (\ (\ {\
)
)
TABLE 10-SELF-SUPPORTED DEBT
In addition to the enterprise funds shown in this Table 10, on September 8, 2005, the City Council of the City approved an
ordinance designating the City's Gateway Fund and Airport Fund as self-supporting enterprise funds of the City for FY 2006. In
the same ordinance, the City Council of the City approved the budget for the City's Tax Increment Financing Fund wherein it is
designated that debt relating to such fund shall be partially self-supported by tax increment revenues (i.e., in an amount equal to
at least IS% of debt service for FY 2006) and the remainder supported by a loan from the City's Solid Waste Fund. Furthermore,
the City Council of the City approved ordinances on March 23, 2006 and February 24, 2006 designating debt issued for the
Cemetery (a unit of the City's General Fund) to be supported by sales of crypts and niches at the City Cemetery. See also Table
9.
THEW ATERWORKS SYSTEM <a>
Net System Revenue Available. Fiscal Year Ended 9·30-06
Less: ltt<tuirtments for Rcvenuo Bonds. Fiscal Year Endod 9·30-07
Balance Available for Other Purposes
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30.07
Percentage of System General Obligation Debt Self ..Supporting
$
$
<•l Ea.ell fiscal Y e.v the City lnnsfets Net Rev•nues of the W•tcrwotlcs Enterprise Fund to tlle General Obligation lnteCC$1 aad Sinking fund
Fund in an amount equal to d~t service requirt"meniS on Waterworks S~tem ~:cncral obligation debt.
THE SEWER SYSTEM <al
Net System Revenue Available, Fiscal Year Ended 9-30.06
Less: Requirements for Revenue Bonds. fisal y._.r Ended 9-30.07
Balance Available for Other Purposes
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-07
Percentage of System General Obligation Debt Self·Supporring
(a> Each Fi.s<:al v ... r tbe City tr~nsfers Net Revenues oflhe Sewer Enterprise fund to tlte General Obligation lnteren and Sinking
fund in an amount cqualro debt suvice n:qoirements on Sewer Systtm gcntn~l obligation debt.
THE SOLID WASTE DISPOSAL SYSTEM Ia>
Net System Revenue Available. Fiscal Year Ended 9-30-06
l..e$$: Requirement$ for Revenue Bonds, Fiscal Y oar Endod 9·30-07
Balance Available for Other Purposes
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-07
Percentage of System General Obligation Debt Self-Supporting
(a) Eacb Fiscal Year dte City uansfers Net Revenues of lhe Solid Wlstt Enterpnse Fund to the General Obligation lz>tcresl aod Sinking
had in an amount equal to debt ~rvice requirtment> on Solid Waste S~tcm senetal obligation debt.
THE DRAINAGE SYSTEM <•l
Net System Revenue Available, Fiscal Yur Ended 9-30-06
l..e$$: llequircQ'Ienl$ for Revenue Bonds, Fiscal Year Endod 9-30.07
Balance Available for Other Purposes
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-07
Percentage of System General Obligation Debt Self-Supponing
<•> Each f"is.eal Y eat the City ~n~nsfers Net Revenues of tho 0111inage Entcfl>rise fund to the Genenl Obligation lnt=t and Sinking
Fund in lll amount equal to debt se<Viee requin:meats on Oninage System gene111l obligation debt.
THE ELECTRIC LIGHT AND POWER SYSTEM (•>
Net Electric Light and Power System Revenue Available, fiscal Year Ended 9·30-06
L.ess: Rcquimneats for ReveQue Bonds. fiseal Year Ending 9-30.07
Balance Available for Other Purposes
Requirements for Eleetric System General Obligation Debt, Fiscal Year Ending 9-30-07
Percentage of Electric System General Obligation Debt Self-Supponing
(aJ The City ttaQsfers Net Revenue$ of lite El¢etrie Light and Power EnteJPrise fund to the Gencn~l ObligatioQ lntetestaod Sinking
fund in an amount t11Wilto debt service rcquir«nents on Electric Light and l'ower System general obligation debt.
37
$
$
$
$
$
$
$
s
18,577,287
18,577,287
12,215,470
100.00%
8,852,831
8,852,831
7,273,579
100.00%
3,980,513
3,980,513
1,120,834
100.00%
6,569,761
6,569,761
5,438,574
100.00%
28,538,819
28,538,819
4,992,336
100.00%
TABLE 11 -AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS
Date Amouat 15511ed
PIU'JIOM Authorized Authorized To Date Unissued
Se-M:r System 512ln7 s 3,303,000 $ 2,175,000 $ 1,128,000
Waterworks System 10117/87 2,810,000 200,000 2,610,000
Street Improvements 5/1/93 10,170,000 10,166,000 4,000
Street Improvements 5115104 9,210,000 4,969,000 4,241,000
Ovic Center/Auditoriwn Renovation and l~ts 5115104 6,450,000 6,450,000
Parle l~ements 5/15/04 6,395,000 5,496,000 899,000
Police/Municipal Ccurt Facilities 5115/04 3,350,000 3,350,000
Librazy Improvema11S 5115104 2,145,000 2,145,000
Fire Stations 5/JS/04 1,405,000 1,405,000
Animal Shelter Renovations & Improvements 5115104 1,045,000 160,000 885,000
$ 46,2831000 $ 24,571 ,000 $21,712,000
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 future 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 2006-2007, the City Council
approved $77 million in total eltpenditures for capital projects for all general purpose projects, as well as projects for the electric
fund. water fund. sewer fund, solid waste fund, stormwater funds and airport fund (down from S!Ol.S million in FY 2005-2006).
The Capital Projects Fund budget for FY 2006-2007 also included an additional $406.9 million in fulUre improvements for all
City departments over the five succeeding fiscal years. The improvements included in the City's capital improvement plan are
genen~lly funded from a blend of bond proceeds, reseJVes or current year revenue sources.
As shown in Table II, the City has $21,712,000 of authorized but unissued bonds from the May IS, 2004 bond election. When
the 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, parks, libraries, civic centers and public safety
improvements. However, the City has incurred substantial unvoted tax supported debt to fund portions of the capital budget of
the Electric Fund, Water Fund, Sewer Fund, Solid Waste Fund. Storm Water Fund, Tax Increment Fund, Gateway Fund and
Airport Fund. As described elsewhere in this Official Statement, such enterprise fund indebtedness is generally anticipated to be
self-supporting from enterprise fund revenues.
The City does anticipate the issuance of general obligation debt within the ne~tt twelve months.
TABLE 12-OTHER OBLIGATIONS
Governmental Business-Type TobJ
Capital Lease Capital Lease Capital Lease
FYE Minimum Minimum Minimum
Jo..See Pa~ment Palment Payment
2007 $ 679,328 $ 461,618 $ 1,140,946
2008 679,328 130,124 809,452
2009 659,569 127,681 787,250
2010 530,413 127,681 658,094
2011-2015 639,898 639,898
Interest (400,932! ~76,620l (477,552)
$ 2,787,604 $ 770,484 $ 3,558,088
38
c
(
,.
\
{
)
)
On January 8th, 2004, the City entered into a note agreement with the Department of Housing and Urban Development ("HUD")
for loan guarantee assistance under Section 108 of title I of the Housing and Community Development Act of 1974, as amended,
in the amount of S 1,000,000. The Note was issued to aid in the establishment of a Housi11g Rehabilitation Program in order to
provide rehab options for low-to moderate income households on a citywide basis, pay professional services rendered in relation
to such project, and the financing thereof. Under the terms of the Note, the City will make annual principal payments on August
I, of each year beginni.ng in 2005 through 2012; interest payments are due semi-annually. The Note is a liability of the City's
Community Development Block Grant Program and debt service will be paid from this grant
FYE Contract Revenue Bonds
30-Sel! Prioc:iJ!al Interest Total
2007 s 125,000 s 32,825 $ 157,825
2008 125,000 28,300 153,300
2009 125,000 23,300 148,300
2010 125,000 17,900 142,900
2011 125,000 12,188 137,188
2012 125 000 6200 1311200 s 750,000 s 120,713 $ 870,713
PENSION FUND ... TEXAS MUNICIPAL RETIREMENT SYSTEM (ol(bl ••• All permanent, full-time City employees who are
not firefighters are covered by the Texas Municipal Retirement System ("TMRS"). TMR:S 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 cument, prior and anteoedent service credits, five year
vesting, updated service credit, occupational disability benefits and survivor benefits for the spouse of a vested employee. An
employee who retires receives an annuity based on the amount of the employees contributions over-matched two for one by the
City. 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 ro experience. Enabling statutes prohibit any member city from adopting
options which impose li.abilities that cannot be amortized over 25 years within a specified statutory rate.
On December 31 , 2005, the actuarial value of assets held by TMRS (not includins those of tile Supplemental Disability Fund,
which is "pooled"), for the City were S 195,046,632. Unfunded actuarial accrued liabilities on December 31, 2005 were
$66,383,476, which is being amortized over a 25-year period beginning January, 1997.
FIREMEN'S RELIEF AND RETIREMENT FUND <•• ••• City 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, consisting of 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 detennined 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 2006 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 TMR.S and FICA bears to the rate other employees pay into the TMRS and FICA. The City's
contribution rate for 2006 is 19.93%.
Actuarial reviews are perfonned eve!)' two years. As of December 31, 2004, unfunded pension benefit obligations were
$13,816,991 which is amortized with the excess of the assumed total contribution rate over the normal cost rate. The number of
years needed to amortize the unfunded pension obligation is detennined using an open, level percentage of payroll method,
assuming that the payroll will increase 4% per year, and was 24.7 years as of the December 31,2002 actuarial valuation and 20.6
years as of the December 31, 2004 actuarial valuation, both based on the plan provisions effective November I, 2003.
OTHER POST-EMPLOYMENT BENEFITS ... The City currently provides certain post-employment benefits to its
employees, as described in Note lli. K (Notes to the Basic Financial Statements) set forth in Appendix A. The City intends to
comply with the recjuirements of GASB No. 43 and 45, with respect to the reporting of post-employment benefits, in accordance
with the timelines set forth in GASB No. 43 and 45. As of the date of this Official Statement, the City has not retained the
services of an actuarial finn to prepare the calculations required under GASB No. 43 and 45, but intends to do so in anticipation
of implementing the requirements of GASB No. 43 and 45.
t•> For historical information concerning the retirement plans, see Appendix A, "Exc:etpts from the City's Annual Financial Report" -Note #III,
Subsection E. "Retirement Plans").
t\l Source: Texas Municipal Retirement System, Comprehensive Annual Finoncial ~n for Year fAded Decem/Hr 31. 1005.
39
c
TABLE 13 -CHANGES IN NET ASSETS
Flsul Year Ended Se~ember JO <•• ( l.Q.D.,2 lWM. lru!J. .1Ul
REV'ENl.JfS
Program Revenues
0\anges fur Services s 10,583 $ 12.713 $ 13,888 $ 9,369
Operating Gants and Contribution 13,296 9,643 12,137 7,007
General Revenues
Property Taxes 39,748 44,497 42,303 40,408 ( Sales Ta~s 41,803 30,555 29,092 28,903
OtherTa~s 4,242 3,793 3,712 3,681
Franchise Taxes 11,154 9,654 6,613 6,998
Grants/Contributions not restricte<: (25)
Other 5,742 4,274 3,834 6,227
Total Re~nues $ 12~568 s 115,129 s II 1.579 s 10§568
I" \,
EXPENDITUR.ES
Administrative/Comnunity Servies $ 23,355 $ 22.313 $ 21,793 $ 32.483
Electric 2,459 2,471 2,373 2,585
Financial Services 2,240 2,387 1,965 1,908
Fire 23,667 21,998 20,207 18,664
General Government 27,6(X) 20,562 21,009 23,436
Human Resources 776 777 786 883
Police 37,773 33,249 31,429 29,715
Streets 11,985 10,789 9,827 5,940
Public Works 2,699 3,078 9,856 4,322
Interest on Long-Tenn Debt 3,195 4,593 3.346 3 382
Total Eqlencltures $ 135,749 s 122.217 $ 122,591 $ 123,318
Olanges in net assets before special (
items & transfers (9,181) (7,088) (11,012) (20,7SQ)
Special items (687)
Transfers !5,469 9,745 2,554 15668
Olangcs in net assets 6,288 2,657 (8,458) (5,769)
Net Assets -beginning of year, as rest: 104,341 101,684 110,142 I 15,911 (
Net assets-end of year s 110,629 $ 104,341 $ 101,684 s 110,142
<•I Audited. Units are in OOOs.
Nore: Data shown in Table 13 reflects general governmental activities reported in accordance with GASB Stall:ment No. 34. The financial
statements include a management discussion and analysis of the operating results of such fiscal year, including restatements to beginning fund
balances and 11et assets. As of the date of this Official Statement, a copy of the FY2003 financial statement can be accessed through the Ciry's
website, llttp:/lwww.ci.lubbock.tx.us.
40
TABLE l3A-GENERAL FUND REVENUES AND EXPENDITURES HISTORY
F"ISCaiYear~~·ibeo 30"1
-1>0 1!.!!§(<1 1m! tel l!m(4 l!ml<!
REVElliUES
hi Valon:m Tax.es $ 75,<m,624 s 29,414,m s 33,233,274 s 32,194.~ s 29,885,252
Sales Taxes 38,319,.50 I 30,554,632 29,rn2,002 28,902,649
fraldi9e Taxes 8,(m,973 6,ffl3).00 9,654,447 6,612,822 6,998,00
!'.iscdlaneous T8lii:S 982,327 939,456 848,816 820,507
J...ioencJes ard Pmrils 2,250,635 1,953,666 1,982,281 1,875,118 1,475,451
~ GfR1 480,648 428,459 348,787 351,878
Olqes IOCSelviccs 4,781,043 4,070,642 4,467,733 4,945,591 4,472,004
Fus 3,981,978 4,015,402 3,675,&56 3,672,'$B 3.~,362
Msoellancous 1,465,215 1,.506,.315 1,442,677 1,532,346 1,058,237
limest 921,742 349,2.36 334,730 285,756 433,393
~TransiQs<dl 16,5651397 10,7231891 1(),3451945 15,0231466
) Tollll Rewuues aod 1'ransfCn s 97,818,207 $ 104,351,116 s 97,437,436 $ 91,753,809 s 92,490,374
EXPENIXltJRES
Golf:l3! GaYc:rrnm s $ 6,159,536 $ 5,633,469 $ 5,717,151 $ 5,596,868
Fuan:ial Services 2,139,492 2,333,469 1,969,413 1,958,051
OJIIlnl and Rfaalion 13,986,576
Ecoocmc&Eb!incss~ 1,146,267
~ 1,882,255 445,251 214,562 175,499 1,497,485
Mrirv'Coomnty Sernces 9,356,059 18,330,5W 18,156,455 17,837,076 17,997,152
Police 37,463,740 33,919,626 32,400,371 30,321,182 28,905,651
Fue 24,638,814 21,943,267 20,6l3P77 19,511,797 18,632,109
Heallh 3, 738, 7I.X)
OM FWic Safety 4,287,806
) ~ aui Transportatiaz 8,120,727 7,1!KI,843 6,610,394 6,51(),394
StreetU~ 7,439,045 2,214,291 2,185,286 z.oosw 2.168,620
Humm Resoon:es 740,826 754,225 780,529 895,311
I:llb Service Prirnpel 1,00),368
I:llb Service "*rest and Obfr Clmges 144,858
C!pi1al Qlllay 7,184,866 5,277,100 475,585 378,059 480,749
CfcraQng TlllllSm 3,912,645 4,21~915 13255.338 5!)51{~/J
Total~ s 112,218,444 $ I 03,203,26) s 94, I (J),257 s 98,934,715 s 90,594.059
fxoess~)ofRevelus
aiX1 Tmrwftrs CJVrr Expenditures (14,460,237) 1,147,847 3,277,179 (7,180,906) 1,896,315
Capitallea9e IS$Ild 5,119,980 3,534,048
T.lli!Sfi2" In 13,325,046
Tnn;ferQt (1,436,498)
Fum Balan:e 31 BeginningofYear 17,3!z420 1!z6941S25 9,417~ 16,598,252 (Q 16,71~042
Mol BalarK:e 31 ErdofYear 19,924,711 17,376,420 12,694,525 9,417,346 18,612,357
I..ess: Resero.es 800 Designations<<~ (1,255,041)
lkldesiptt:d FuM Balan:e $ 19,924,711 $ 17,376,420 $ 12.694,525 $ 9,417,346 $ 17,357,316
1*' Prior years have been RStated to ~fleet cum:nt organization.
~~ Unaudited.
(c) A uditcd.
(•l For fiscal year 2005106, the water, solid waste and waste water funds transferred an amount sufficient to co vee the pro rata share of the City's
general and adminisllative expenses and an amount representing a payment in lieu of ad valo~m taKes. The water, waste water and solid
waste funds transferred an amount ~presenting a ftanchise payment equal to 6% of gross rcoeipts. The Electric System wu not required to
malce IJ'UISfers to the Gene1111 Fund for any of the foregoing purposes during the fiscal year.
1•1 The City's finaocia\ policies target a General Fund undesignatcd balance of at least 20% ofGenera1 Fund revenues. The undesignated fund
balance is at 99"A of the targel es~ablished by the City's financial policies.
(I) The "fund Balance at Beginning of Year" was resutcd.
41
TABLE 14-MUNICIPAL SALES TAX HISTORY
The City has adopted the Municipal Sales and Use Tax Act, Chapter 321, Texas Tax Code, which grants the City the power to
impose and levy a I% 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 Chapter 323 Texas Tax Code, as amended.
Collection for the additional tax commenced in October, 1995 with the proceeds from the one-eighth cent sales tax designated for
the use and benefit of the City to replace property tax revenues lost as a result of the adoption of the tax. 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 (Article 5190.6, Texas Revised Civil Statutes), to be used for economic development in the City.
The City began to receive proceeds of these taxes in October 2004. Collections and enrorcemenls 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:
%of Equivalent or
FYE Total Ad Valorem Ad Valorem Per
30-Se2 Collected <•l TaxLe!l Tu:Race Ca2ita(b1
2002 $ 28,902,648 73.45% $ 0.4183 $ 143.08
2003 29,092,032 68.80% 0.3962 142.09
2004 30,554,632 69.98% 0.3857 148.11
2005 41,803,092 105.09% 0.4825 199.90
2006 41,778,534 100.01% 0.4177 197.83
2007 (In Process of Collections}
"1 Excludes bin go w receipts.
(bl Based on population estimates of the City.
Effective as of October I, 2006, 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
Cowlly Sales & Use Tax
State Sales & Usc Tax
Total
42
$ 1.000
0.375
0.125
0.500
6.250
$ 8.250
c
c
(
(
(
<
(
)
)
)
'I
)
FINANCIAL POLICIES
Basis q( Accountilf~ ... The accounting policies of lhe City conform to generally accepted accounting principles of lhe
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 JO, 1984 through Septembc:r 30, 2002 and September 30,
2004. The City will submit the City's 2005 report to GFOA to determine its eligibility for another certificate.
ComPrehensive Annual Financial Report fCAFRJ ... Beginning with the: year ended September 30, 2002, the City's CA.FR has
been presented under the Govem.mental Accounting Standard Board ("GASB") Statement No. 34, Basic Financial StaJements -
and Management's Discusswn and Analysis -for State and Local Governments, GASB Statement No. 37, Basic Financial
Statements -and Management's Discussion and Analysis -for State and Local Governments: Omnibus, and GASB Statement No.
38, Certain Financial Note Disclosures. For additional infonnation 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 A.
General Fund Balong ... The City's objective is to maintain an unreservedlundesignated fund balance a.1 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 cunently has an unreservedlundesignated fund balance that is at 99"1., of the target established by the
City's financial policies.
WaJer. Wastewater Storm Water. Sgfid Wgste and Airoort Enterprise Fund Balances ... (I is the policy of the City to maintain
appropriable net assets in the Water and WasteWater funds in an amount equal to 25% of operating revenues for unforeseen
contingencies. The City's goal of appropriable net assets in the Solid Waste:, Airport, and Storm Water funds is an amount equal
to 15% of regular operating revenues. With the exception of the Electric Enterprise Fund (as further described below), the City
cunently exceeds its policy on appropriable net assets for its various enterprise funds. Sci: "Discussion of Recent Financial and
Management Events-September 30, 2003 Financial Results.M According to audited numbers for FY 2005, the target net assets
by policy and current appropriable net assets for the Water, Wastewater, Storm Water and Airport enterprise funds are as follows:
~ntemrise Fua!l Tar£et Net Asse!! b:t: ~olig: AJU!roRriable Net Assets*
Water $9.5 million $13.7 million
Wastewater $5.3 million $9.2 million
Storm Water $.9million $11.3 million
Solid Waste $2. I million $3.8 million
All:lJOrt $.9 million $2.0 million
Electric Enterprise Fund Balance ... It is the policy of LP&L to maintain appropriable net assets set by the City Charter.
Ordinance No. 2004-00140 requires LP&L to restrict cash based on prior year's gross retail electric revenue (GRR) as
determined by the previous fiscal year of LP&L. The City's goal of appropriable net assets LP&L is an amount equal to three
months GRR reserved for operations, two months GRR reserved for rate stabilization, and one month GRR reserved for electric
utility development According to audited numbers for FY 2005, the total target net assets by oniinance and current appropriable
net assets for LP&L is as follows:
Eotemrise Fund
LP&L
Tamt Net Assets by Polic:t:
$53.3 million
Aouropriable Net A5sets•
$24.6 million
• Appropriable net assets are calculated on a budget basis. The calculation takes the audited FY 2004-05 current assets less
current liabilities and addslsubll3Cts FY 2005-06 adjusted budgeted revenues over/under expenditures and adds restricted cash
for debt service. Restricted cash for debt service is added to the calculation, as this is already included in the budgeted
expenditures for FY 2005-06.
Ent.emrise 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 determining self sufficiency, cost
recovery for each enterprise fund includes direct operating and maintenance expense, as well as indirect cost recovery, in-lieu of
transfers to the General Fund for property and franchise tax payments, capital expenditures and debt service payments, where
appropriate. Rate increases may be considered in future budgets as costs may warrant, including specifically the costs related to
fuel charges that may affect LP&L and the cost of providing service.
Debt Service Fund Balance ... A reasonable debt service fund balance is maintained in order to compensate for unexpected
contingencies.
Budgetary Procer1ures ..• 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 1. The operating budget includes proposed expenditures and the means of financing them.
2) Public hearings are conducted to obtain taxpayer comments.
43
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 transfer of
funds between departments 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 fund level.
5) Fonnal budgetary integra.tion 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 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.
7) Appropriations for the General Fund lapse at year-end. Unencumbered balances for the Capital Projects Funds
continue as authority for subsequent period expenditures.
8) Budgetary comparison is presented for the General Fund in the combined financial statement section of the
Comprehensive Annual Financial Report. The City bas received the Distinguished Budget Presentation Award from the GFOA
for the following budget years beginning October I, 1983-88 and 1990-05.
Insurance an4 Risk Mgaagemi!nt ... The City is self-insured for public entity liability and health benefits coverage. Risk
management purchases a S I 0,000,000 excess insurance policy for liability claims in excess of $500,000, per occurrence. Airport
liability insurance and workers' compensation is insured under guaranteed cost policies. The Health Benefits are covered by a
self insured program with a $18,845,756 cap and a $175,000 individual cap. The City maintains insurance policies with large
deductibles for fire and extended property coverage and boiler and machinery coverage.
An Insurance Fund bas been established in the Internal Service Fund to account for insurance programs and budgeted transfers
are made to this fund based upon estimated payments for claim losses.
At September 30, 2005 the total Net Assets ofthese insurance funds were as follows:
Self-insurance-health$ 2,050,874
Self-insurance-risk management$ I ,688,257
The City obtains an actuarial study of its risk management fund (the "Risk Fund") every year. In FY 2005, 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 2005 actuarial review reconunended that the liabilities of the Risk
Fund be increased to $6,479,000 from $6,437,000 to the minimum expected confidence level of the Government Accounting
Standard Board Statement Nwnber 10 ("GASB 10"), which requires maintenance of risk management assets at a level
representing at least a 50"/o confidence level that all liabilities, if presented for payment immediately, could be paid. The Risk
Fund has net assets restricted for insurance claims of$1,688,000 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, including specifically the Public Funds Investment
Act (Chapter 22.56, Texas Government Code, and referred to herein as the "PFIA''), 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 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 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 se<:urity for which is
guaranteed by an agency or instrumentality of the United States, ( 4) other obligations, the principal of and interest on which are
unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their
respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of
any state rated as to investment quality by a nationally recognized investment rating finn not Jess than A or its equivalent. (6)
bonds issued. assumed, or guaranteed by the State of Israel, (7) certificates of deposit meeting the requirements of the PFIA that
are issued by or through an institution that either has its main office or a branch in Texas, and 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 (6) or in any other manner and amount provided by law for City deposits, (8)
fully coll.ateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in
clause (l), 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 of270 days or less, if the short-term obligations of the accepting bank
or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10)
conunercial paper that is rated at least A-I or P-1 or tbe equivalent by either (a) two nationally recognized credit rating agencies
or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a
U.S. or state bank, (II} no-load money market mutual funds regulated by the S~urities and Exchange Commission that have a
dollar weighted average portfolio maturity of 90 days or less and include in their investment obj~tives the maintenance of a
stable net asset value of Sl for each share, (12) no-load mutual funds registered with the Securities and Exchange Commission
that: have an average weighted maturity of less than two years; invests exclusively in obligations described in the preceding
44
c
c
<
(
(
(
)
)
)
)
clauses; and are continuously rated as to investment quality by at least one nationally recognized investment rating finn of not
less than AAA or its equivalent, and (13) guaranteed investment contracts secured by obligations of the United States of America
or its agencies and instrumentalities, other than the prohibited obligations described in the next succeeding paragraph.
The City may invest in such obligations directly or through government investment pools that invest solely in such obligations
provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating
service. The City is specifically prohibited from investing in: (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 cash flow from the underlying mortgage-backed security and bears no interest;
(3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage
obligations the interest rate of which is detennined by an index that adjusts opposite to the changes in a market index.
Governmental bodies in the State such as the City 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 tennination 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 tess than "A~ or its equivalent, or (c) cash invested in obligations that are described in clauses (I)
through (6) and (10) through (12) 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 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 tenn 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 fonnally adopted "Investment Strategy Statement" that specifically addresses each funds'
investment. Each Investment Strategy Statement will describe its objectives concerning: (I) suitability of investment type, (2)
preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6)
yield.
Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of
prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for
investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment
officers of the City shall submit an investment report detailing: (I) the investment position of the City; (2) that all investment
officers jointly prepared and signed the report; (3) the beginning market value, any additions and changes to market value and the
ending value of each pooled fund group; ( 4) the book value and market value of each separately listed asset at the beginning and
end of the reporting period; (5) the maturity date of each separately invested asset; (6) the account or fund or pooled fund group
for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted
investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City
Council.
ADDmONAL PROVISIONS
Under Texas law. the City is additionally required to: (I) annually review its adopted policies and strategies; (2) require any
investment officers' with personal business relationships or relatives with finns 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 finns seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that
reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written
statement attesting to these requirements; (4) perfonn an annual audit of the management controls on investments and adherence
to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief financial Officer and investment
officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase
agreement funds to no greater than the tenn of the reverse repurchase agreement; (7) restrict its investment in mutual funds in the
aggregate to no more than 15 peroent of its monthly average fund balance, excluding bond proceeds and reserves Estimated Fair
Book Value Market Value 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.
45
TABLEIS-CURRENTINVESTMENTS
As of October 3 I. 2006, the City's investable funds were invested in the following categories:
Book Val~ Esdmated Market Value t•l
Par %of Total %of Total
T~ee Value Value Book. Value Value Market Value
United States Agency Obligations s 65,567,000 s 65,083,859 25.13% s 65,o93,695 25.14%
Money Market Mutual Funds C'l 1,726.971 1,726,971 0.67% 1,726.971 0.67%
Local Government Investment Pools l<l 192.134,732 192,134,732 74.20% 192,134,732 74.20%
$2591428,703 $258,945,562 100.00"/o 258,955,398 100.00%
101 Market prices are obcaincd from Advent's interl'xe with FT Interactive Data. No funds ~ inv~tcd in 11101tgage back $CCW'iries. The City
holds all investments to maturity which minimizes the risk of market price volatility.
!bl Money Market Funds are held at Wells Fargo Bank. Texas N.A.
l•l Local government investment pools consist of entities whose investment objectives are preservation and safety of principal, liquidity and yield.
The pools seek to maintain aS 1.00 value per share as required by the Texas Public Funds Investment Acr. 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 SCTVice and martering for the pool. TexSTAR currently maintains an "AAAff rating
!Tom Standard & Poor's and lias an investment objective of achieving and main.taining a stable net asset valu.e of $1.00 per sh&Je. Daily
itwestments or redemptions of funds are allowed by the panicipants. First Southwest Company is a Financial Advisor for the City in
connection with the iMuance of City debt.
TAXMATfERS
TAX EXEMPTION
In the opinion of Vinson & Elkins L.L.P., Bond Counsel, (i) interest on each series of the Obligations is excludable from gross
income for federal income tax purposes under existing law and (ii) interest on both series of the Obligations is not subject to the
alternative minimwn tax on individuals and corporations, except as described below in the discussion regarding the adjusted
CUITCllt earnings adjustment for corporations.
The Internal Revenue Code of I 986, as amended (the "Codeff), imposes a nwnber of requirements that must be satisfied for
interest on state or local obligations, such as the Obligations. 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 requirement that the issuer file an information report with the Internal
Revenue Service. The City bas covenanted in the Ordinances that it wiU comply with these requirements.
Bond Counsel's opinion will assume continuing compliance with the covenants of the Ordinances pertaining to those sections of
the Code that affect the exclusion from gross income of interest on the Obligations for federal income tax purposes and, in
addition, will rely on representations by the City, the City's Financial Advisor and the UndeTwriters with respect to matters solely
within the knowledge of the City, the City's Financial Advisor and the Underwriters, respectively, which Bond Counsel has not
independently verified. With regard to the Bonds, Bond Counsel will further rely on the report of Grant Thomton LLP, certified
public accountants, regarding the mathematical accuracy of certain computations. If the Issuer should fait 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 Obligations could become taxable from the date of delivery of the Obligations, regardless of the date on which the
event causing such taxability occurs.
The Code also imposes a 20% alternative minimum tax on the "altemative 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 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 Obligations, is included in a corporation's "adjusted
current earnings," ownersflip of the Obligations 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
reeeipt or accrual of interest on, or acquisition, ownership or disposition of, the Obligations.
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 asswnes 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 OCQJr or become effective. Moreover, Bond Counsel's opinions are not a guanntee 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 rela1e 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 Obligations. 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 bave a right to participate in such
audit. Public awareness of any future audit of the Obligations could adversely affect the value and liquidity of the Obligations
46
(
(
(
(
,
(
<
,
\
)
)
)
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 Obligations 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, cer1ain S
corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits,
taxpayers who 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 qualitying 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 Obligations. These
categories of prospective purchasers should consult their own tax advisors as to the applicability of these consequences.
Prospective purchasers of the Obligations 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 Obligations, received or accrued during the year.
Tax Accounting Treatment of Original Issue Premium
The issue price of all or a portion of the Obligations may exceed the stated redemption price payable at maturity of such
Obligations. Such Obligations (the "Premium Obligations") are considered for federal income tax purposes to have "bond
premium" equal to the amount of such excess. The basis of a Premium Obligation in the ands of an initial owner is reduced by
the amount of such excess that is amortized during the period such initial owner holds such Premium Obligation 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 Obligation 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 Obligation that is amortizable each year (or shorter
period in the event of a sale or disposition of a Premium Obligation) is determined using the yield to maturity on the Premium
Obligation based on the initial offering price of such Bond.
The federal i~tcome tax consequences of the purchase, ownership and redemption, sale or other disposition of Premium
Obligations 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 Obligations should consult their own tax advisors with respect to the
determination for federal, state, and local income tax purposes of amortized bond premiwn upon the redemption, sale or other
disposition of a Premium Obligation and with respect to the federal, state, local, and foreign tax consequences of the purchase,
ownership, and sale, redemption or other disposition of such Premium Obligations.
Tu: Accounting Treatment o( Original Issue Discount Obligations
The issue price of all or a portion of the Obligations may be less than the stated redemption price payable at maturity of such
Obligations (the "Original Issue Discount Obligations"). In such case, the difference between (i) the amount payable at the
maturity of each Original Issue Discount Obligation, and (ii) the initial offering price to the public of such Original Issue
Discount Obligation constitutes original issue discount with respect to such Original Issue Discount Obligation in the hands of
any owner who has purchased such Original Issue Discount Obligation in the initial public offering of the Obligations. 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 Obligation equal to that portion of the amount of such original issue discount allocable to
the period that such Original Issue Discount Obligation 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 Obligations under the captions ftT AX
EXEMPTTOW and ftT AX MA TrERS -Collateral Tax Consequences" gene111lly 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 Obligations prior to stated
maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Obligations 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 Disco lUll Obligation was held by such initial owner) is includable in gross income.
The foregoing discussion assumes that (a) the Underwriters have purchased the Obligations for contemporaneous sale to the
public and (b) all of the Original Issue Discount Obligations 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 stated on the cover page of this Official Statement. Neither the
City nor Bond Counsel has made any investigation or offers any comfort that the Original Issue Discount Obligations will be
offered and sold in accordance with such assumptions.
Under existing law, the original issue discount on each Original Issue Discount Obligation 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 Obligations and ratably within each such six-month period) and the accrued amount is added
to an initial owner's basis for such Original Issue Discount Obligation for purposes of determi.ning the amount of gain or loss
recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each
accrual period is equal lo (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
47
properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period
on such Obligation.
The federal income tax consequences of the purchase, ownership, and redemption, sale or other disposition of Original Issue
Discount Obligations which are not purchased in the initial offering at the initial offering price may be detennined according to
rules which differ from those described above. All owners of Original Issue Discount Obligations should consult their own tax
advisors with respect to the detennination for federal, state, and local income tax purposes of interest accrued upon redemption,
sale or other disposition of such Original Issue Discount Obligations and with respect to the federal, state, local and foreign tax
consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Obligations.
OTHER INFORMATION
RATINGS
The Obligations have been rated "Aaa" by Moody's Investors Service, Inc. ("Moody's"), "AAA" by Standard & Poor's Ratings
Services, a Division of The McGraw-Hill Companies, Inc. ("S&P") and "AAA" by Fitch Ratings ("Fitch") by virtue of an
insurance policy issued by Financial Security Assurance, Inc. (see "Bond Insurance"). The City's underlying ratings are "A I" by
Moody's. "AA-" by S&P and "AA·" by 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, circumstances so warrant Any such downward revision or withdrawal of such ratings may
have an adverse effect on the market price of the Obligations. The City has made applications to municipal bond insurance
companies to have the payment of the principal of and interest on the Obligations ins~ by municipal bond guaranty policies.
LITIGATION
The City is involved in various legal proceedings related to alleged personal and property damages, breach of contract and civil
rights cases. wme 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.
The City has been sued by a contractor who was not awarded the bid on a 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 and re-filed the case in federal court. The federal court dismissed the contractor's Section 1983 claims, and the contractor
filed a Notice of Appeal. The Fifth Circuit court of appeals reversed the District Court and the District Court has reinstated the
federal and state claims. The City Attomey 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 sixty-two plaintiffs who allege that the City and or Lubbock County failed to properly record
infonnation in its cemetery records that would show where their relatives were buried. The City asserted a defense under statutes
of limitations, that the City was not the owner of the property during portions of the time in question, and/or that the allegations
fail to state a claim upon which relief can be granted The District Court ruled in favor of the City and the Plaintiff may have
missed their deadline to file an appeal. The City Attorney assesses the potential for liability as remote. There is no insurance
coverage for these claims.
The City, its police chief, and two police officers have been sued for violation of a citizen's first amendment rights when the
plaintiffs film from his camera was confiscated by the police while the individual was photographing a children's basketball
game. The matter has been dismissed on a plea to the jurisdiction and the plaintiff is appealing the court's decision. City
Attorney believes there is insurance for any potential damages.
The City has been sued by an employee of the City alleging age discrimination and violation of the Texas Whistleblower
Protection Act and retaliation. The parties are engaged in discovery with regard to the facts of the case and the matter is being
vigorously defended by the City of Lubbock. There is insurance coverage for the claim.
The City of Lubbock and a police officer have been sued by an individual on behalf of himself and his children rising out of the
death of the plaintiffs teenage daughter and injuries to his son from an automobile accident with the police officer. Tile plaintiff
alleges that the officer was operating the vehicle in a negligent manner and was speeding at the time of the automobile collision.
The defendants have asserted that the driver of the vehicle carrying the plaintiffs children was negligent in failing to yield the
right-of-way to the police officer. The City tiled a motion for swnmary judgment which was granted based on the fact the
plaintiff did not file a claim with the City. The matter has been appealed to the Court of Appeals. The Cir:y Attorney believes
there is insurance covering the claims.
The City has been sued by a plaintiff for injuries arising from an automobile accident with the City of Lubbock driver who was
exiting an alley. The plaintiff has had medical treatment, including a back surgery. The parties are engaged in settlement
discussions. The City Attorney believes there is insurance coverage for this claim.
The City and a former police officer have been sued by a plaintiff as a result of allegations of inappropriate sexual conduct after a
police stop by the police officer. The City sent a reservation of rights letter to the officer. The officer filed a motion to dismiss
under the Tort Claims Act citing provisions holding that the plaintiff cannot sue both the entity and the individual officer under
the act, and the officer was dismissed from the case. The City filed a motion for summary judgment, which was granted and the
plaintiff appealed the decision which has been set for hearing later this month at lhe Court of Appeals. The City Attomey is of
Ute opinion that insurance is available for the claim.
48
c
(
c
(
;
(
)
)
)
)
)
)
Plaintiffs have sued the City of Lubbock and a police officer and Taser International as a result of an incident where a police
officer tased a citizen while making an arrest. The citizen subsequently died The City filed a plea to the jurisdiction which was
denied and the City is appealing the trial court denial of the plea. A federal cause of action under Se<:tion 1983 has been filed in
the Amarillo District of the Northern Division of Texas alleging federal civil rights violations involving the same facts. The City
Attorney is of the opinion that insurance is available for the claims.
The City was sued by a firefighter under the Civil Service Act alleging he was wrongfully denied a promotion as a result of being
charged with a OWl. The trial court ruled in the City's favor and the plaintiff has appealed the case arguing that the plaintiff
should have been allowed to have his case heard by a third party hearing examiner. The City Attorney does not believe insurance
is available for this claim; however, it is doubtful the allegation might result in substantial damages.
A lawsuit was filed against the City of Lubbock and three Lubbock police officers regarding an incident when a suspect was
lased by one of the Lubbock police officers. The plaintiff has alleged civil rights violations as well as Texas Tort Claims Act
violations. The City Attorney is of the opinion that insurance is available for the claim and that there have not been any
significant injuries to the plaintiff.
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 ava.ilable sources for payment of any sucb 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 Obligations to the Underwriters, the City will execute and deliver to the Underwriters a certificate
to the effect that, except as disclosed herein, no significaJit litigation of any nature has been filed or is pending, as of thai date, to
resttain or enjoin the issuance or delivery of the Obligations or which would affe<:t the provisions for their payment or security or
in any manner question the validity of the Obligations.
REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE
The sale of the Obligations has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the
exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act ofTexas
in reliance upon various exemptions contained therein; nor have the Obligations been qualified under the securities acts of any
jurisdiction. The City assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction
in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility
for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard
to the availability of any exemption from securities registration provisions.
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS
Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations
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 Obligations by municipalities or other
political subdivisions or public agencies of the State of Texas, the PFIA, requires that the Obligations be assigned a rating of"A"
or its equivalent as to investment quality by a national rating agency. See "OTHER lNFORMATION -Ratings" herein. In
addition. various provisions of the Texas Finance Code provide thac, subject to a prudent investor standard, the Obligations are
legal investments for state banks, savings banks, trust companies with ac capital of one million dollars or more, and savings and
loan associations. The Obligations are eligible to se<:ure 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 marlcet value. No review by the City has been made of
the laws in other states to determine whether the Obligations are legal investments for various institutions in those states.
LEGAL MA1TERS
The delivery of the Obligations is subject to the approval of the Attorney General of Texas to the effect that such Obligations are
valid and legally binding obligations of the City payable from sources and in the manner described herein and in the Bond
Ordinance and the approving legal opinion of Bond Counsel, to like effect and to the effect that the interest on the Obligations
will be excludable from gross income for federal income tax purposes under Section l 03(a) of the Code, subject to the matters
described under "TAX MA 1TERS" herein, including the alternative minimum tax on corporations. The form of Bond a>unsel's
opinion is attached hereto in Appendix B. The legal fee to be paid Bond a>unsel for services rendered in connection with the
issuance of the Obligations is contingent upon the sale and delivery of the Obligations. The legal opinion of Bond Counsel will
accompany the Obligations deposited with DTC or will be printed on the definitive Obligations in the event of the discontinuance
of the Book-Entty-Only System. Certain legal matters will be passed upon for the Underwriters by McCall, Parthurst & Horton
LL.P. Dallas, Texas, Counsel for the Underwriters. The legal fee of such firm is contingent upon the sale and delivery of the
Obligations.
Bond a>unsel was engaged by, and only represents. the City. Except as noted below. Bond Counsel 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 herein except that in its capacity as Bond Counsel, such firm has
reviewed the information appearing in this Official Statement under the captions "THE OBLIGATIONS" (exclusive of the
information under the subcaptions "Book-Entry Only System," "USE OF BOND PROCEEDS" ) and "TAX MATTERS" and
under the subcaptions "Legal Opinions," "Legal Investments and Eligibility to Secure Public Funds in Texas" and "Continuing
Disclosure of Information" under the caption "OTHER INFORMA TrON" and such firm is of the opinion that such descriptions
present a fair and accurate summary of the provisions of the laws and instruments therein described and, with respect to the
49
Obligations, such information confonns to the Ordinance.
The legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the
attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does
not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future
peTformance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that
may arise out of the transaction.
CONTINUING DISCLOSURE OF INFORMATION
In the Ordinance the City has made the following agreement for the benefit of the holders and beneficial owners of the
Obligations. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the
Obligations. 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 infonnation from the vendors.
Annpl Reports
The City will provide certain updated financial information and operating data to certain infonnation vertdors 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 BA through 15 and in Appendix A. The City will
update and provide this information within six months after the end of each fiscal year. 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.
The City may provide updated information in full text or may incorporate by reference certain other publicly available
documents, as permitted by SEC Rule 15c2-12 (the "Rule"). 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 s~tements will be prepared in a~rdance with the accounting principles described in Appendix A or such other
acoounting 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 (the ftMAC") has been designated by the State of Texas and approved by the SEC staff
as a qualified SID. The address of the MAC is 600 West 8th Street, P.O. Box 2177, Austin, Texas 78768-2177, and its telephone
number is 512/476-6947. The MAC has also received SEC approval to operate, and has begun to operate, a "central post office"
for information filings made by municipal issuers, such as the City. A municipal issuer may submit its information filings with
the central post office, which then transmits such information to the NRMSIRs and the appropriate SID for filing. This central
post office can be accessed and utilized at www.DisclosureUSA.org ("DisclosureUSA"). The City may utilize DisclosureUSA for
the filing of infonnation relating to the Obligations.
Material Event Notim
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 Obligations, if such event is material to a decision to purchase or sell Obligations: (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 perform; (6) adverse tax opinions or events affecting the lax<xempt status of the
Obligations; (7) modifications to rights of holden of the Obligations; (8) early redemption of the Obligations; (9) defeasances;
(10) release, substitution, or sale of property securing repayment of the Obligations; and (ll) rating changes. (Neither the
Obligations nor Ordinance make any provision for debt service reserves or liquidity enhan<:ement.) In addition, the City will
provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its
agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and
to either each NRMSlR or the Municipal Securities Rulemaking Board ("MSRB").
Awilability of Information From NBMSJBS and SID
Th.e City has agreed to provide the foregoing information only to NRMSlRs, the MSRB and the SID, as described above. The
information will be available to holders of Obligations only if the holders comply with the procedutes and pay the charges
established by such information vendors or obtain the information through securities brokers who do so.
Limitations apd Amendments
The City has agreed to update information and to provide notices of material events only as described above. The City has not
agreed to provide other information that may be relevant or material to a complete presentation of its financial results of
operations, condition, or prospects or agreed to update any infonnation that is provided, ex.cept as described above. The City
makes no representation or warranty concerning such infonnation or concerning its usefulness to a decision to invest in or sell
Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from
any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of
50
c
c
c
(
c
,.
(
)
)
)
Obligations may seek a writ of mandamus to compel the City to comply with its agreement
The City may amend its continuing disclosure agreement ftom time to time to adapt to changed circumstances that arise ftom a
change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i)
the agreement, as amended, would have pennitted an underwriter to purchase or sell Obligations, 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 Obligations consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized
bond counsel) detennines that the amendment will not materially impair the interests of the holders and beneficial owners of the
Obligations. 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 Rule or a coul1 of final jurisdiction enters judgment that such provisions of the Rule are
invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter ftom lawfully
purchasing or selling the Obligations in the primary offering of such Obligations.
ff 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 fonn, of the reasons for the
amendment and of the impact of any change in the type of financial information and operating data so provided.
Compllaace with Prior Undertakinp
The City became obligated to file annual reports and financial statements with the state information depository ("SlD") and each
nationally recognized municipal securities information repository ("NRMSTR") 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 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 filing. The
City has implemented procedures to ensure timely filing 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 defaults." 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 NRMSfRs in March 2004, it filed unaudited 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 Fund"). Because there was an uocertainty as to an amount by which the rate
covenant would fail to be met, which was not finally detennined 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
RBC Capital Markets is employed as Financial Advisor to the City in connection with the issuance of the Obligations. RBC
Capital Markets is the name under which RBC Dain Rauscher Inc., a broker dealer, conducts investment banking business. The
Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and
delivery of the Obligations. RBC Capital Markets, in its capacity as Financial Advisor, does not assume any responsibility for the
infonnation, covenants and representations contained in any of the legal documents with respect to the federal income tax status
of the Obligations, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies.
The Financial Advisor to the City has provided the following sentence for inClusion in this Official Statement. The Financial
Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City
and, as applicable, to investors under the federal securities Jaws as applied to the facts and circumstances of this transaction, but
the Financial Advisor does not guarantee the accuracy or completeness of such information.
VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS
The arithmetical accuracy of certain computations included in the schedules provided by RBC Capital Markets on behalf of the
City relating to (a) computation of forecasted receipts of principal and interest on the Federal Securities and the forecasted
payments of principal and interest to redeem the Refunded Obligations and (b) computation of the yields of the Bonds and the
restricted Federal Securities were verified by Grant Thornton LLP, certified public accountants. Such computations were based
solely on assumptions and information supplied by RBC Capital Markets on behalf of the City. Grant Thornton LLP has
restricted its procedures to verifying the arithmetical accuracy of certain computations and has not made any study or evaluation
of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the
data used, the reasonableness of the assumptions, or tile acbievability of the forecasted outcome.
UNDERWRITING
A syndicate led by (the "Underwriters") has agreed to purchase the Bonds, subject to certain conditions, and has agreed
to pay a purchase price reflecting the par amount of the Bonds, plus a net original issue premium (discount) of$ __ , less an
Underwriters' discount of$ __ , plus accrued interest
The Underwriters have agreed to purchase the Certificates, subject to certain conditions, and has agreed to pay a purchase price
reflecting the par amount of the Certificates, plus a net original issue premium (discount) of$ ___ , less an Underwriters'
discount of$ __ , plus accrued interest
The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their
51
responsibilities to investors under federal securities laws as applied to the facts and circumstances of this traSlSaction, but the
Underwriters do not guarantee the accuracy or completeness of such infonnation.
FORWARD-LOOKING STATEMENTS DISCLAIMER
The statements contained in this Official Statement, and in any ocher infonnation 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 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 govemmental authorities and officials. Assumptions related
to the foregoing involve judgments 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 aa:urately 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
swements included in this Official Statement will prove to be accurate.
MISCELLANEOUS
'The financial data and other infol1Jlation contained herein have been obtained from the City's records, audited financial
stalements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates
contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official
Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not pUJl)Ort
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.
Each Ordinance authorizing the issuance of the Obligations 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 Obligations by the
Underwriters.
ATIEST:
lsi REBECCA GARZA
City Secretary
City of Lubbock, Texas
52
Is/DAVID M[LLER
Mayor
City of Lubbock, Texas
c
(
(
c
c
(
SCHEDULE!
SCHEDULE OF REFUNDED OBLIGATIONS
Maturity IW\nded CaD
Series Date Obliptions(~ Date
00 Refunding Bona;, Series I'm 11!512008 s 1,645,000 001 I Sf}JXJ7
211512009 1,630,000
Sublobl s l,27S,OOO
00 BoOOs, Series 2002 2l!Yl()17 $ 590,000 0011512012
2115/2018 620,000
2/15/2()19 655,000 ) 211.512020 695,000
211512021 735,000
211512022 T15,0CIJ
~s 4,070,G00
Tax& WWS~Smplus ~0'0, Series 2002 2/1512017 s 405,000 0011512012
) 2/1512018 425,000
2/1512019 450,000
2!1Sf2I111) 475,000
2/1512021 505,000
2115f2I112 530,000
SullColal $ 2,790,000
00 Bonds, Series 2003 2/1512016 s 615,000 0011512012
2/1512017 645,00)
2/1512018 680,000
211512019 715,00)
2/1512020 745,000
2/151202\ 785,000
211512022 820,00)
211512023 865,000
&.dltotal s 5,870,000
53
c
Mlturity Rtlunded Call
Series Date Boods'") Date (
Tax & Mmicipal Drainage Sys Rev C'O, Series 2003 2/1512016 $ 1,015,000 0211512012
2/1512017 1,065,000
2/1512018 1,120,000
211512019 1,175,000
211512020 1,235,000 ~ \..
211$'202\ 1,.300,000
2/lsam:J. 1,365,000
2/\S/2023 1,430,000
2/1512024 1,500,000
211512025 1,575,000
2/1.512026 1,660,000 ,
2/1512027 1,745,000 I,
2/1512028 1,830,000
2/1512029 1,925,000
2/1512030 2,025,000
2/1512031 2,130,000
2/1512032 2,240,00>
2/IS'2.003 2,350,000 (
2/1512034 2,475,000
Subtoa.l s JJ,lfiO,OOO
Tax & Elec l&P Sys Surplus RevOO. Series 2003 411512011 $ m.ooo 0411512012
411512018 755,000
4/1512019 790,000
411512020 830,000 (
411.512021 870,000
4115!2022 915,000
411.512023 960,000
Subtoal $ 5,tWO,OOO
Total S 53,005,000
<•l Preliminary. subjCICI to chan~.
54
)
)
APPENDIX A
CITY OF LUBBOCK, TEXAS
EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE
YEAR ENDED SEPTEMBER 30, 2005
Comprehensive Annual Financial Report
City of Lubbock, Texas
For the Fiscal Year Ended September 30, 2005
c
c
c
(
(
(
'
Comprehensive Annual Financial Report
City of Lubbock, Texas
List of Elected and Appointed Officials
For the Fiscal Year Ended September 30, 2005
Mayor
Council Member-District 1
Council Member-District 2
Council Member-District 3
Council Member -District 4
Council Member-District 5
Council Member -District 6
City Manager
City Attorney
Deputy City Manager
Assistant City Manager
City Secretary
Chief Financial Officer
Director of Fiscal Operations
Director of Fiscal Policy
Chief Accountant
Senior Accountant
Senior Accountant
Senior Accountant
Senior Accountant
Senior Accountant
LP&L
Accountant
Accountant
i
Marc McDougal
Linda DeLeon
Floyd Price
Gary 0. Boren
Phyllis S. Jones
Tom Martin
Jim Gilbreath
Lee Ann Dumbauld
Anita Burgess
Tom Adams
Quincy White
Rebecca Garza
Jeff Yates
Jeffery Snyder, CPA
Andy Burcham
Pamela Moon, CPA
Brack Bullock
Linda Cuellar, CPA
Veronica Valderaz
Lawrence Jones, CPA
Dorothy Lewis. CPA
Damian Pantoya, CPA
Randall Brown
Rhonda Gentry
City of Lubbock, Texas
Comprehensive Annual Financial Report
Year Ended September 30, 2005
TABLE OF CONTENTS
Page
Title Page .......................................................................................................... !
Table of Contents .................................................................................................... ii
INTRODUCTORY SEcriON
Letter of Transmittal ............................................................................................... !
Certificate of Achievement in Financial Reporting ................................... 15
Organizational C.hart ............................................................................................. 16
FiNANCIAL SECfiON
Independent Accountants' Report on Financial Statements and
Supplementary Information .......................................................................... 17
Management's Discussion and Analysis .............................................................. 19
Basic Financial Statements:
Govemment-wide Financial Statements:
Statement of Net Assets .................................................................................... .35
Statement of Activities ....................................................................................... 36
Fund FinancUzl Statements:
Governmental Fund Financial Statements
Balance Sheet-GovernJllental Funds ............................................................... 38
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets .................................................................. .39
Statement of Revenues, Expenditures, and Changes in
Fund Balances ~ Governmental Funds ..................................................... 40
Reconciliation of the StatementofRevenues, Expenditures,
and Changes in Fund Balances of Governmental Funds to the
Statement of Activities ............................................................................... 41
Budgetary Comparison Statement~ General Fund .................................... -...... .43
Proprietary Fund Financial Statements .
Statement of Net Assets -Proprietary Funds ..................................................... 44
Reconciliation of the Statement ofNet Assets~ Proprietary Funds to
the Statement of Net Assets -Business-Type Activities ..................... -, ... 49
Statement of Revenues, Expenses, and Changes in Fund Net Assets -
Proprietary Funds ..................................................................................... 50
Reconciliation of the Statement of Revenues, Expenses and Changes
in Fund Net Assets of Proprietary Funds to the Statement
of Activities ................................................................................................ 53
Statement of Cash Flows -Proprietary Funds ................................................... ,54
Fiduciary Fund Financial Statements
Statement of Fiduciary Net Assets ...................................................................... 56
Notes to the Basic Financial Statenu!nts ............................................... 57
11
(
(
(
)
Combining Fund Statements and Sch.edules:
No~VMaior Governmental Funds
Combining Balance Sheet-Non-Major Governmental Funds .................. 98
Combining Statement of Revenues, Expenditures, and Changes in Fund
Balances-Non-Major Governmental Funds ............................................. 1 04
Non-Major Entemrise Funds
Combining Statement of Net Assets-Non-Major Enterprise Funds ............. 112
Combining Statement of Revenues, Expenses, and Changes in Fund Net
Assets -Non-Major Enterprise Funds ......................................................... 114
Combining Statement of Cash Plows -Non.-Maj or Enterprise Funds ........... 115
Internal Service Funds
Combining Statement of Net Assets -Internal Service Funds ...................... 118
Combining Statement of Revenues, Expenses, and
Changes in Fund Net Assets -Internal Service Funds ............................... 126
Combining Statement of Cash Plows -Internal Service Funds .................... 129
Fiduciarv Funds
Statement of Fiduciary Net Assets ................................................................. l33
Statement of Changes in Fiduciary Net Assets -Fiduciary Funds
Agency Fund ............................................................................................... 134
Non-Major Component Units
Combining Statement ofNet Assets Non-Major Component Units .............. I37
Combining Statement of Activities Non-Major Component Units ............... 138
Capital As9.ets
Capital Assets Used in the Operation of Government Funds:
Schedule of Governmental Capital Assets ..................................................... 141
Schedule by Function and Activity ................................................................ 142
Schedule of Changes by Function and Activity ............................................ .l44
STATISTICAL SECTION (unaudited)
Government-with In(ormation:
Table A: Government-wide Expenses by Function .............................. 148
Table B: Government-wide Revenues by Function .............................. 149
Fund Information:
Table C: General Governmental Expenditures by Function ...•............... ISO
TableD: Revenues and Other FinancingSowces (Uses) ....................... 15l
Table E: Tax Revenues by Source .................................................. 152
Table F: Property Tax Levies and Collections ..................................... 153
Table G: Assessed and Estimated Actual Value of Property ......................... 153
Table H: Property Tax Rates-Direct and Overlapping Governments ......... 154
Table I: Principal Taxpayers ........................................................................... 155
Table J: Special Assessment Billings and Callection.r .................................. 155
Table K: Computation of Legal Debt Margjn ...... , ............................................ 156
Table L: Ratio of Net General Obligation Bonded Debt to Assessed
Value and Net General Ob/igatzon Bonded Debt Per Capita .......... IS6
Table M: Ratio of Annual Debt Service Expenditures for General
Obligation Bonded Debt to Total General Go'Vernmental
Expenditures ................................................................................... 157
iii
Fund Information:
Table N: Computation of Direct and Overlapping Bonded Debt-
General Obligation Bonds .. : ........................................................... 157
Table 0: Revenue Bond Coverage-Electric. Water and Airport Bonds ...... 158
Table P: Demographic Statistics ............................................... " ................. 159
Table Q: Construction and Bank Deposits ....................................... ······" ..... 159
Table R: Miscellaneous Statistics .................................................................. 160
(
c
(
iv
)
' ,
INlRODUCTION
SECTION
February 13, 2006
Honorable Mayor, City Co~cil, and Ci.ti.zens of the City o(LubbQck., Tex~:
We are pleased to 5Ubmit the Comprehensive Annual Financial Report (CAFR) of the City of
Lubbock, Texas (City) for the fiscal year ended September 30, 2005. The purpose of this report
is. to provide the City Council, .c~tizens, representatives of fmancial institutions, and others with
detailed information concerning the financial condition and performance of the City of Lubbock.
In addition, the report pro:vides assurance that the City presented fairly, in all material respects,
irs. financial position as verified by independent auditors.
Tirls report consists. of management's representations concerning the finances of the City.
Consequently, management -assumes full respon~ibility for the completeness and reliability of all
of the information presented in this report. To provide a reasonable basis for making these
representations, management of the City has established a comprehensive internal control
framework that is designed both to protect the City's assets from loss, theft, or misuse and to
compile sufficient reliable information for the preparation of the City's financial statements in
conformity with generally accepted accounting principles (GAAP). Because the cost of internal
controls should not outweigh their benefits, the City's comprehensive framework of internal
controls has been design®. to provide reasonable, rather than absolute, .assurance that the
financial statements will be free from material misstatement. ~ management, we assert that, to
the best of our knowledge and belief, this financial repor:t is C(:)mplete and reliable in all material
respects.
The Citrs financial statements have been audited by BKD; LLP, a firm of licensed certified
public accountants. The gQ.a). of the independent audit was to provide reasonable -assurance that
the financial statements of the City for the fiscal year ended September 30. 2005, are free of
material misstatement. The independent audit involved examining, on a test basis, evidence
supporting the alnDunts and disclosures in the financial statements; assessing the accounting
principles used and .significant estimates. made by management; and evaluating the overall
financial statement presentation. The independent auditor concluded, based upon the audit, that
there was a reasonable basis for rendering an unqualified opinion that the City's financial
·statements for the (i~cal year ende<l.September 30, 2005~ are fairly presented in ronfonnity with
(
(
c
(
(
(
(
(
(
Honorable Mayor, City Council,
And Citizens of the City of Lubbock, Texas
February 13, 2006
GAAP. The independent auditor's report is presented as the first component of the financial
section of this report.
The independent audit of the fmancial statements of the City was part of a broader, federally
mandated "Single Audit" designed to meet the special needs of federal glantor agencies. The
standards governing Single Audit engagements require the independent auditor to report not only
on the fair presentation of the financial statements, but also on the audited government's internal
controls and compliance with legal requirements, with special emphasis on internal controls and
legal requirements involving the administration of federal awards. These reports are a\l'ailable in
the City's separately issued Single Audit Report.
OAAP require that management provide a narrative introduction, overview, and analysis to
accompany the basic financial statements in the form of Management's Discussion artd Analysis
(MD&A). This letter of transmittal is designed to complement MD&A and should be read in
conjunction with it. The City's MD&A can be found immediately following the report of the ·
independent auditors.
THE CITY AND ITS ORGANIZATION
Population and Location
The City is located in the northwestern part of the state commonly known as the South Plains of
Texas. The City currently occupies a land area of 119.1 ~~miles and setves a population of
211,187 (2006 estimated population). Lubbock is the 11 largest city in the State of Texas and
the 13lll largest Metropolitan Statistical Area (MSA). The Lubbock MSA includes .Lubbock and
Crosby Counties.
Form of Government and City Services
The City was incorporated in 1909. The City is empowered to levy a property tax 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 has operated under the council-manager form of government since 1917. Policy-
making and legislative authority are vested in a city council consisting of the mayor and six other
.members. The City Council is responsible, among other things, for passing ordinan~es, adopting
the budget, appointing committees, and hiring the City Manager. City Attorney, and City
Secretary. The City Manager is responsible for carrying out the policies and ordinances of the
City Council, for overseeing the day-to-day operations of the City, and for appointing the heads.
of the various departments. The City Council is elected on a non-partisan basis. Council
members serve four·year staggered terms, with three council members elected every two years.
The mayor is elected to serve a two~year term. Six of the coun-cil members are elected by
district The mayor is elected at large.
2
Honorable Mayor, City Council,
And Citizens of the City ofLubboclc, Texas
February 13, 2006
The City provides a full range of services that include public safety, the construction and
maintenance of highways, streets, and other infrastructure, solid waste services, and recreational
activities and cultural events. The City also provides utilities for electricity, water, wastewater,
and storm water as well as a public transportation system.
Public safety includes police protection and fire protection. Police protection is provided
through the Police Department, which includes 359 sworn police officers. The City's Fire
Department operates 15 fire stations and has 319 total personnel including administration, fire
prevention, maintenance, training, and communications.
Electric service in the City is provided by Lubbock Power and Light {LP&L), Xcel Energy and
South Plains Electric Cooperative. LP&L, the municipal electric company, has 66,172 meters in
the City with an average daily consumption of3,956,904 kwh. LP&L has 14 substations, 1005
miles of distribution lines, and 85 miles of transmission lines. Natural gas service is provided
by Atntos En~rgy.
Currently, the City obtains 75% to 85% of its drinking water supply from the Canadian River
Municipal Water Authority (CRMWA). The CRMWA combines swface water from Lake
Meredith and ground water from Roberts County to meet the water demands of Lubbock and the
.other 10 member cities of CRMW A. Lubbock secures the remaining 15% to 25% of its water
.from its groundwater rights in Bailey and Lamb Counties. The City provides water service to
'75, 700 .meters as well as the City of Shallowater, City of Ransom Canyon, Buffalo Springs Lake,
and Lubbock Reese Redevelopment Authority. The capacity of the City water transmission
system is 81 million gallons per day with an average utilization of 39 million gallons per day.
The City has 1,341 miles of distribution lines and 146 active water wells with 83,265 acres of
water rights. The CRMW A allocates more than 11 billion gallons of water to the City annually.
Lake Alan Henry, built by the City in 1993, is considered a third water supply for future use. In
order for the City to utilize water from Lake Alan Henry, future construction is required for
pump stations, a pipeline to carry the water to Lubbock, and a new treatment plant.
For the p$t several years, the City has been planning for future water needs. In March 2003,
the City contracted with W aterTexas, lnc. to evaluate and make recommendations on how the
City could optimize existing and potential water supplies on a short-, mid-, and long-term basis.
In a report titled City of Lubbock Strategic Water Plan, WaterTexas reported that the City has
adequate water supply and will continue to do so provided that it takes steps to address its
maximum day capacity limitations; addresses its ability to respond readily to drought conditions
at Lake Meredith; and strategically develops additional supplies giving due consideration to
de~d. cost, opportunity, and competing budgetary needs. To strategically develop additional
water supplies, the City Council established the Lubbock Water Advisory Commission in July
2003. The primary objective of this Commission is to assist in the development of a 1 00-year
water supply plan.
The CRMWA has secured an additional 180,000 acres of groundwater rights in the Northern
Panhandle. The total of groundwater rights now stands at over 220,000 acres with an estimated
15 million -acre feet of water within those rights. Conservative projections using current secured
water rights indi~te the CRMW A member city water demands can be fully met through 2097.
3
c
c
(
(
c
(
(
)
Honorable Mayor, City Council,
And Citizens of the City of Lubbock, Texas
February 13, 2006
Wastewater collection and treatment is provided within the city limits to residential, commerCial,
and industrial customers. The collection system consists of 940 miles of sanitary sewer as of
January I, 2005. The wastewater treatment plant has a capacity of 31 .5 million gallons per day
(permitted capacity) and an average utilization of approximately 23 million gallons per day.
The peak utilization of the wastewater treatment plant is 27 million gallons per day.
The City of Lubbock's drainage is primarily conveyed through the City's street system that
discharges into more than 115 playa lakes. The subsurface <hainag~ via storm sewer pipes with
curb inlets, conveys water to two small intermittent sfreams (Blackwater Draw and Yellowhouse
Draw) which both converge at the upper reaches of the North Fork of the Double Mountain Forie.
of the Brazos River. The City's municipal separate stonn sewer system (MS4) is made up of
1,076 linear miles of paved and unpaved streets, 530 linear miles of paved and unpaved alleys,
1,188 miles of storm sewer inlets, 70 miles of subsurface storm sewer pipe, tlrree detention
basins, 115 playa lakes, and one pump station. Maintenance of aU of the storm sewers and street
cleaning was funded from the StolUl Water Fund during FY 2005.
During FY 2005 the primary focus of the storm water fund was the construction of die South
Lubbock Drainage P.roject -Pbase I Main Trunk Line and the completion of the pne mile portion
of stoi'IIl sewer between University Avenue and Indiana Avenue as part of the street widening
project. The design of the drainage-channel north-Of Andrews Park Lake was also completed this
fiscal year. Work was completed on the Maxey Park Feasibility Study and work began on a
Federal Emergency Management Agency (FEMA) Restudy of two of the playa lake systems.
The other focus was on the submission of the City's application for the Texas Pollution
Discharge Elimination System (TPDES) MS4 permit for the City's storm water quality activities.
Until the new permit is issued, the City will continue to comply with the existing MS4 permit
from the Environmental Protection Agency. The eleven different programs that are part of the
existing permit were continued during FY 2005.
The City also provides garbage collection and disposal services. The City provides services to
63,1 03 residential customers and 2,930 commercial customers. The City has two landfill sites.
One site is designated as Lubbock Landfill and is a transfer station only. The second site is
Lubbock's premier landfill, the West Texas Regional Disposal Facility. The West Texas
Regional Disposal Facility opened in 1999 and is currently the largest landfill in the State of
Texas. With 1,260 acres it is expected to serve the region for the next 100 years.
Citibus is the public transportation provider for the City. Citibus provides three primary types of
services. They include a Fixed Route Service, CitiAccess (paratransit system), and Special
Services. Citibus has also expanded service later into the evenings. The Citibus Evening
Service is designed to meet the needs of both CitiAccess and fixed route passengers who are
transit dependent and who would have no other means of transportation in the evenings if the
Evening Service were not provided. A majority of Evening Service passengers work at night and
use the service for transportation to and from job sites. Citibus is professionally manag~ by
Mci)(mald Transit Associates, Inc.
4
Honorable Mayor, City Council,
And Citizens of the City of Lubbock, Texas
February 13,2006
The City has an aggressive housing and community development program implemented and
administered ~ugh funding from the Federal Community Development Block Grant program,
HOME Investment Partnership Program, and Emergency Shelter Grant program. This year the
City completed work on over 823 houses, assisted over 25,888 individuals, and created 6 jobs
through an economic development loan program.
Community enrichment and cultural services are also major programs of the City. The City
owns and operates four libraries with over 388,220 volumes. The City also owns and maintains
76 parks and 55 playgrounds. Extensive recreational facilities include 4 swimming pools, 60
tennis courts, 31 baseball and softball fields, 5 recreation centetS and 5 senior centers. To further
enhance quality of life and to provide support to the tourism industry, the City also operates the
Civic Center (convention center), a coliseum, an auditorium for performing arts, the Buddy
Holly Center, and the Silent W'mgs Museum.
The City is responsible for the construction and maintenance of highways and streets. Currently
the City has 1003.8 miles of paved streets. A new fund was established .after the City Council
passed a resolution in 2004 stating that 40% of the franchise fee revenue and telecom line
charges would be devoted to funding street projects. This fund is called the Gateway Street
Fund. The funding will be used to fund the debt service on street projects as determined by the
City Council. The FY 2005-06 budget for the Gateway Street Fund includes the widening of
Milwaukee Avenue from 34th to 98th Street, construction of a T-2 thoroughfare street on Erskine
from Frankford to Salem, construction of a T -2 thoroughfare street on Slide Road from Loop 289
to Erskine, and widening Loop 289 just north of 4lh Street to just south of Erskine and rebuilding
the interchange. These projects support substantial commm;ial and residential development on
the west side of the City.
Other major road construction in the City includes construction on 98th Street from Slide Road to
Frankford Avenue and construction of the Marsha Sharp Freeway by the Texas Department of
Transportation (TXDOT). This freeway will run from West Loop 289 east to link up with
Interstate 27. The first phase of the project is completed and included widening Loop 289 from
four to six lanes from 34th street to Slide Road and rebuilding the frontage road system Wlder the
main lanes -three lanes on each side. It also included building the 50th Street overpass and
extending som Street to Frankford A venue. TXDOT awarded the bid for the second phase of
the Marsha Sharp Freeway that began construction in May 2005. The Marsha Shalp Freeway
will benefit the City by providing a western connection to West Loop 289 ensuring a more
efficient flow of traffic throughout the City. It will also reduce the congestion on north/south
and east/west major arterials and give faster access to all points in Lubbock, specificaJiy Texas
Tech University, the central business district. education centers, and medical facilities. The
entire project is expected to cost $256 million and be completed sometime after 2010.
One of the key components of the City's transportation system is the Lubbock Preston Smith
International Airport, located 7 miles north of the City's central business district on 3,000 acres
of land adjacent to Interstate 27. It is operated as a department of the City. The airport operates
a 220,000 square foot passenger terminal and has three runways; 11,500' x 150'; 8,000' x 150';
2869' x 75'. Air traffic control services include a 24-hour Federal Aviation Administration
control tower and a full range of instrument approaches. The airport is currently served by three
major passenger airlines and two major cargo airlines having over 80 commercial flights per day.
5
c
c
c
c
(
(
Honorable Mayor, City Council,
And Citizens of the City of lubbock. Texas
February 13, 2006
The City is financially accountable for a legally separate civic services corporation and an
economic development corporation, both of which are reported separately within the City's
financial statements as discretely presented component units. Additional information on these
legally separate entities can be found in the notes to the financial statements.
Annual Budget Process
The annual budget serves as the foundation for the City's financial planning and control. All
departments of the City are required to submit requests for appropriation to the City Manager in
June of each year. The City Manager uses these requests as the starting point for developing a
proposed budget. The City Manager then presents this proposed budget to the City Council for
review· prior to August 31. The City Council is required to hold public hearings .on the proposed
budget and to adopt a final budget by no later than September 30, the close of the City's fiscal
year. The appropri~ted budget is prepared by fund and department. Department directors may
request transfers of appropriations within a department. Transfers of appropriations between
~ however, require the approval of the City Council Budget ... to-actual comparisons are
provided in this report for the General Fund, as part of the basic financial statements.
ECONOMIC CONDITION AND OliTLOOK
The information presented in the financial statements is perhaps best understood when it is
considered within the context of the City,s local economy. The following information is
provided to highlight a broad range of economic forces that support the City's operations.
Local Economy
The City has a stable economy that has historically shown slow, steady growth and it has
continued that growth through October 2005. The City's economy is agriculturally based but has
diversified over the past 20 years which minimizes the affects of business cycles experienced by
individual sectors.
The South Plains is one Qf the United States' most productive agricultural areas. Almost
eighteen percent of the nation's cotton crop and fifty-<>ne percent of the state's cotton crop is
planted by fanners in the South Plains. Production on the Southern High Plains is estimated to
total4.1 million bales for 2005, up fourteen percent from last year's production.
The City has strong manufacturing, wholesale and retail trade, services, and government sectors.
The manufacturers are a diverse group of employers who support approximately 5,400 workers.
A central location and access to transportation have contributed to the City's development as a
regional warehousing and distribution center. The City also serves .as the major retail trade
center and health-care provider for a region of more than a half a million people. A breakdown
of the percent of employment base by industry category has been provided below, which gives a
"snapshot" of the industry base of the City.
6
Honorable Mayor, City Council,
And Citizens of the City of Lubbock. Texas
February 13, 2006
!PERCENT EMPLOYMENT BASE BY INDUSTRY CATEGORY)
Tt<~nsf), WarehousinG &
Ulilies.
2.9~
Fl'nancial Aotlvitie$
S,~
ProfusioQlll &. 8u$lneu
'S~ici!S
8.l'~
Educatio~~al & liealth
SetVIces
14.G%
and Hospitality
11.1%
Two major components of the loc.al economy are education and health care services. Lubbock
is home to three wriversities and one community college; Texas Tech University, Lubbock
Christian University, Wayland Baptist University -Lubbock Center and South Plains College.
Enrollment increased steadily through Fall 2003, but because of increased tuition costs decreased
slightly in Fall2004 and 2005. The availability of the schools in Lubbock is an added advantage
for our industries as they prov.ide a ready source of labor for their successful operation.
The healthcare and social services sector is also a vital component of the Lubbock economy.
This sector employs almost 18,000 people, whose payroll of almost $580 million and related
contributions provide a substantial impact to the Lubbock area.
(Source: 2003 County Business Patterns)
Other current and trend information has been provided below, which gives a picture of the
overall city economy.
Lubbock Economic Index.
The Lubbock Economic Inde~ is designed to represent the general condition of the Lubbock
economy by tracking local economic growth rates. It is based at 1.00.0 in January 1996. The
economic index for October 2005 was 124.6, which is .4% improved over the index for October
2004.
The Lubbock economy continues to be "high, but flat", with most sect9rs posting solid numbers,
but with little growth sector by sector, or in the overall Lubbock economy.
(Source: Lubbock Economic lnclcx October 2005)
7
c
c
(
(
(
)
Honorable Mayor, City CollilCil,
And Citizens of the City of Lubbock, Texas
February 13, 2006
Lubbock Economic Index
January 1996 to October 2005
100~~--~----~----~-----r----~----~----~~----~----~---J
Jan-96 Jan·97 Jan-98 Jan-99 Jan-00 Jan.01 Jan-02 Jan-03 Ja~04 Jao.05
Building Pemrit Valuations.
Construction continues to make a strong contribution to the Lubbock economy, with the value of
all building pennits issued so far in 2005 up by 5.2% from last year's total through October.
The $388 million in building pennits issued through the first ten months of 2005 continues the
upward trend that has set records for the City for the last several years.
(Source: Economie and Demographic Overview: Building Valuations-10-Year Trend I Original Source of Data:
Suilding Inspection Statistical Report)
Total B.uilding Permit Valuations
'$4.50.0 $417.3$408.7
$400.0 -l--------------J~!!!!IIL
$350.0 +---------------t:>Q~r~L.l!t:!i~---
$300.0t----.;;;:.,;;;;---:::=:-:::-=-=£::;;.-4.,..~~---
Ill 5 $2.50.0 +-------::~lk-----::~~ot::-'--------------
~ $200.0 f-::r-........ -..~.........;~~""'--------------
$150.0 +--=---.:::l~--------------------
$100,0 +-------------------------
$50.0 +----------------------
~~ ~--~-~-r---~-~~~~--~--~-~
1995 19a6 t997 1996 1999 2.000 2001 2002 2003 2004
8
Honorable Mayor, City Council,
And Citiuns of the City of Lubbock, Texas
February 13, 2006
Total new residential pennits decreased by 28.3% through October 2005 when compared to the
same period in 2004. The $184 million in residential building permits issued for the first 10
months of 2005 is slightly down from the record setting levels that have been seen in the City
over the last few years. Average home sale price yeac~to-date through October 2005 has
increased by .01% from October 2004 to October 2005.
(Source: Economic and Demographic Ovecview: Building Valuations -10-Year Trend I Original Source of Data: Building
Inspection Statistieal Report and The Real Estate Center at Texas A & M University, Lubbock Residential Housing Ac:tivity
Report)
Sales Tax Collections
Sales tax collections for October 2005 were 10.86% improved over the October 2004 sales tax
collected. Year-to-date sales tax collections through October 2005 were 35.91% improved over
the same period in 2004. A portion of this increase is due to the increase in the sales tax rate
from 7.875 to 8.25% in October 2004. (Counted in the month the sales tax was collected, not
the month it was paid)
(Soun:e: Economic and Demographic Overview; Monthly Sales Tax Collc:Qion.s-calendar Year-City of Lubbock. I Original
Source ofData: State Comptroller o! Public Acoounts-Allocation Historical SUmmary)
Tourism/VISitor Related Indicators
Lodging tax receipts increased from $2.6 million in October 2004 to $2.8 million in October
2005. This is a year~to-date increase through October 2005 of 8.6%. Airline hoardings at
Lubbock Preston Smith International Aizport also increased in 2005 by 1.5% over the same
period last year.
(SoW'ce: Lubbock Economic Index)
Employment
The total non-agricultural employment estimate for October 2005 was 126,100. This was .4%
improved over October of last year. There were 500 more people employed in October 2005
than in the same period of2004. The unemployment rate for the Lubbock MSA in October 2005
was 3.6%, 3rd lowest in the State of Texas. Historically Lubbock has a low rate of
unemployment that is generally 1% -2% below the national rate and about 1% below the rate for
Texas.
(Source: Lubbock EconDmic and Demographic Overview and 2004 Population and Economics Report I Original Source of data:
Texas Workforce Commission)
9
c
c
c
(
(
(
(
(
)
)
)
Honorabfe Mayor; Gity Connell,
And Citizens oftbe City ofLubbock. Texas
February t3, 2006
Unemployment Rates -Lubbock MSA
J99s 1996 1997 1998 1999 2000 20.01 zoot 1003 2004
Note: The methodology for calculating dle unemployment rate was changed in 200:5 and the last five ~
was recalculated based on the new method. The Lubbock MSA also changed in 2005 to include both
Lubbock and CI'O$by Counties.
Economic Development
Economic development is a priority for the City of Lubbock. In 1995, the City Council .created
Market Lubbock, Inc., a non-profit corporation. to oversee economic development for the City.
Market Lubbock, Inc. is funded with 3 cents of the property tax allocation. In October 2004 the
Lubbock Economic Development Alliance (LEDA). an economic development sales tax
corporation, assumed the responsibility for economic developm-ent in the City of l;.ubb®k.
LEDA program strategies include business retention, business recruitment. w.orkforoe
development, foreign trade zone, and the bioscience initiati:ve. LEDA is funded by a 118. CJmt
economic development sales tax. Total estimated revenues for LEDA for FY 2005~06 are
3,487,455. Over the last year, through their business retention. e~pansion, and attraction
programs, LEDA assisted eleven companies in the creation of 355 new Jobs with an estimate<l
annual payroll of$12.4 million and capital investment of$52.3 million.
The City's Business Development Department works closely with LEDA to provide the support
needed to assist in their economic development projects. Business Development is ~pol;lSible
for tracking arid maintaining economic and demographic infot:mation fur the Cicy, assisting with
city-related business issues, the enterprise zone and tax abatement pro.grams, the two Tax
Increment Financing Reinvestment Zones, and all Public Improvement Districts. ~ess
Development also works with retail and commercial projects that do not fit the ctiteria required
by the 'Stat'e for economic development sales tax corporations.
10
Honorable Mayor, City Council.
And Citizens of the City of Lubbock, Texas
February 13,2006
Development Initiatives
Overton Park.
Overton Park is a 300+-acre revitalization project that is underway in the heart of the City. It
has been called the largest privately funded revitalization project in the United States. Overton
Park is the complete revitalization of a blighted area in the City called North Overton.
The North Overton area was established in 1907 and over the next twenty years developed as a
middle class neighborhood, with home ownership predominating. Then. in 1925, Texas Tech
University (Texas Technological College) was established along the western botmdary of the
neighborhood. Following World War II, the growth of Texas Tech University stimulate(i a need
for student housing. This need was provided by many non-confonning apartments, converted
garages, and subdivided houses, reducing home ownership in the area considerably. Continued
growth of Texas Tech encouraged development of apartment buildings~ further destroying ~e
stability of the area By the 1980s, the Lubbock City Council recognized that the passage of
time, market trends, and land use changes had created severe pressures on North Overton.
Through the 1990s, the situation in North Overton continued to stagnate. Population was
declining, vacancies were high, owner occupancy was only 7.3% of the properties compared to
51.5% in the City as a whole. Crime was high in the area and many properties in the area were
in poor condition, abandoned vehicles and weeds were prevalent, and there was little to attract
residents to this neighborhood other than extremely low values and rents.
A local developer approached the City to discuss plans to redevelop the North Overton area. The
developer planned to purchase and redevelop about 9()0/o of the North Overton area. The
developer and other property owners submitted a petition to the City and asked that the City
establish a Tax Increment Financing Reinvestment Zone (fiRZ) to provide the public funds for
constructing public improvements in the proposed district. In response, the City created the
North Overton TIRZ with participation from the City, County, High Plains Underground Water
District and Lubbock County Hospital District This public/private partnership provides for a
significantly enhanced redevelopment of the North Overton area by using public funds for
upgraded intersections, additional right-of-way landscaping, improved street lighting, park
improvements, and street and utilities replacement and reconstruction. These ~ture
projects are designed to replace 70-year old utilities. provide new street lighting and
signalization, upgrade existing Pioneer Park; and provide for enhanced right-of-way landscaping,
wider sidewalks, and street furniture. The plans called for street closures to allow for larger
development projects, student housing, a variety of well-planned housing developments, retail to
support the neighborhood and the Tech student population, and for the entire developm$m,t to. be
pedestrian oriented. The City has approved site design guidelines for the development in
Overton Park in order to ensure the high quality of this development project.
It is anticipated that build-out of this public/private partnership will occur over a seven-year
period. It is expected that the North Overton TIRZ planned expenditure of approximately $.72.7
million for public infrastructure improvements will result in future development/redevelopment
in the North Overton TIRZ, which will increase the taxable value by approximately $44S million
over the zone's 30-year life.
11
c
(
c
(
(
(
c
)
Honorable Mayor, City Counci~
And Citizens of the City ofLubbock, Texas
February 13, 2006
At this time, three student-oriented apartment complexes have been completed. The Centre, a
$26 million, 618,000 square foot project that includes the construction of a multi-story apartment
complex built over an upscale retail shopping center and more than 226,000 square feet of
parking, is completed. City Bank has also completed their new 10,000 square foot bank facility.
The new Starbucks has also been completed. Walrnart has broken ground ()n their new 200,000
square foot plus store that will be built near the southwest comer of 4lh Street and Avenue Q.
Also in 2005, construction began on the condominiums in Overton Park and it is expected that
ground will be broken on the first single-family houses in early 200.6. The project, as a whole, is
running about three years ahead of schedule, with much of the construction now expected to be
completed by the end of2007.
Central Lubbock Stabilization and Revitalization Master Plan
The Central Lubbock Stabilization and Revitalization Master Plan is a comprehensive guide for
future growth and prosperity for the Central Lubbock Area. The plan was developed with the
assistance of Gould Evans Affiliates through a public process bringing together local residents,
local employers, city start: and major stakeholders. This plan is intended to provide a framework
for future development in Cen1ral Lubbock and to be a "living document" evolving to address
any unforeseen future concerns or strategies. As a result of the plan, the 34th Street Business
Association, made up of business owners on 34th Street, was formed in 2005.
North & East Lubbock Community Development Corporation
During the last 50 years, while Lubbock grew, North and East Lubbock experienced an out-
migration of people. From 1960 to 2000, the area's population decreased by 47%. Concluding
that portions of northern and eastern Lubbock were in serious disrepair, the City and the North &
East Lubbock Development Advisory Committee decided to take action. A comprehensive
master plan for the area was completed in October 2004. The City created the North & East
Lubbock Commtmity Development Corporation (CDC) to oversee and promote development in
the area and committed to providing funding to the CDC for four years. The North & East
Lubbock CDC is working on its first project, a new single-family housing project called Kings
Dominion. Construction of the first houses should begin in early 2006.
Central Business District Tax Increment Reinvestment Zone
The City of Lubbock Central Business District (CBD) has been typically developed over the
years with office, retail~ and governmental agency uses. Like many cities in the last ten to
twenty years, retail has moved to shopping areas and other areas outside the CBD and office
development has stagnated. In an effort to reverse that trend and to stimulate further
development downtown, the City established a new CBD T.ax Increment Finance Reinvestment
Zone (TIRZ) on December 3, 2001. The Board of the CBD TIRZ created a project plan that
includes projects that will assist redevelopment in the CBD. It is expected that the CBD TIRZ
planned expenditure of almost $8.4 million for public infrastructure improvements will result in
future development and redevelopment in the CBD TIRZ which will increase the taxable value
by approximately $106 million over the zone's 20-year life.
12
Honorable Mayor, City Council,
And Citizens of the City of Lubbock, Texas
February l3, 2006
Downtown Redevelopment Commission
The City Council created the Downtown Redevelopment Commission in May 2005 to develop
an action plan for the redevelopment of the downtown area. The Commission is composed of
eleven members that are citizens of Lubbock and stakeholders in the downtown area. Since its
creation in May, the Commission members have been working on gathering information on what
is available and what is needed in the downtown area. Although there were no fiscal activities
during FY 2005, the Commission members have started their fund raising efforts and have begun
the process of searching for a consultant to prepare a Downtown Master Plan.
FINANCIAL INFORMATION
Long-term fmancial planning.
The City uses IO·year rate models for long-range planning in the General Fund and all
enterprise funds. These models are based on current projects and policies. The models are
driven by the idea that the rate should be annually adjusted to reflect the service needs ofthe
citizens. Because of this philosophy, the rates in the models are annually trimmed to leave as
little excess as possible, after allowing for financially sound working capital and rate
stabilization reserves. The models~ in association with the City's "5-year Forecast", provide
anticipated trends given current policies. These forward looking models provide a basis for
budget discussion and policy decision-making.
During fiscal year 2003 the City formed the Citizens Advisory Committee to survey City-wide
infrastructure needs and priorities. The committee developed a six-year program for future
capital needs for which general obligation bonds have been or will be issued. The bond
issuance was approved by the citizens of Lubbock in a bond election held in May 2004.
Cash management polities and practices.
Cash temporarily idle during the year was invested in certificates of deposit, obligations of the
U.S. Treasury, U.S. Agencies, money market mutual funds, and state investment pools. The
maturities of the investments range from 1 day to 3-1/2 years, with an average maturity of
approximately 7-1/2 months. The average yield on investments was 2.68 percent for the City's
operating funds and 2.71 percent for the City's bond funds. Investment income is offset by
decreases in the fair value of investments. Decreases in fair value during the current year,
however, do not necessarily represent trends that will continue; nor is it always possible to
realize such amounts, especially in the case of temporary changes in the wr value of investments
that the City intends to hold to maturity.
Risk management.
During 2005, the City continued its use of third party workers~ compensation coverage. The
current coverage provides for coverage to begin with the initial dollar of claims. The City is
primanly self-insmed for medical and dental coverage. Stop loss coverage of $150,000, per
insured per year, is currently maintained with a third party insurer to mitigate risk associated
with medical coverage. Additional information on the City's risk management activities can be
found in the notes to the financial statements.
Pension benefits.
The City sponsors a multiple-employer hybrid defined benefit pension plan for its employees
other than firefighters. Each year, an independent actuary engaged by the plan calculates the
amount of the annual contribution that the City must make to the plan to ensure that the plan will
13
(
(
c
(
(
(
(
'I
Honorable Mayor, City Council,
And Citizens of the City ofLubbO<:k, Texas
February 13,2006
be able to fully meet its obligations to retired employees on a timely basis. As a matter of policy,
the City fully funds each year's annual required contribution to the pension plan as determined by
the actuary. As a result of the City's conservative funding policy, the City has succeeded as of
December 31, 2004, in funding 75 percent of the present value of the projected benefits earned
by employees. The remaining unfunded amount is being systematically funded over 25 years as
part of the annual required contribution calculated by the actuary.
The City also provides benefits for its firefighters. These benefits are provided through a single-
employer defined benefit pension plan, the Lubbock Firemen's Relief and Retirement Fund
(LFRRF), which is administered by the Board ofTrustees of the LFRRF. The City contributes
an amount that is determined by formula and is anticipated to average 19.9 percent of
firefighter's pay annually.
The City does provide 25% -60% of post retirement health and dental care benefits for retirees
or their dependents.
Additional information on the City's pension arrangements and post employment benefits ~ be
found in the notes to the financial statements.
AWARDS AND ACKNOWLEDGEMENTS
The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement
for Excellence in Financial Reporting to the City of Lubbock, Te~ for its comprehensive
annual financial report for the Fiscal Year Ended September 30, 2004. The City reapplied for
this prestigious award last year after a one-year lapse in applying for the award. In order to be
awarded a Certificate of Achievement, a govermnental unit must publish an easily readable and
efficiently organized comprehensive annual financial report, whose contents confonn to program
standards. Such reports must satisfy both generally accepted accounting principles and
applicable legal requirements.
A Certificate of Achievement is valid for a period of one-year only. We believe our current
report continues to conform to the Certificate of Achievement Program requirements and we are
submitting it to the GFOA to detennine its eligibility for another certificate.
The preparation of this report would not have been possible without the efficient and dedicated
services of the entire staff of the Finance Division. Exceptional and tireless effort was invested
by the Accounting Department. We would particularly like to thank Jeffery Snyder, Pamela
Moo14 the Senior Accountantst and Accountants for their countless hours of work on this
financial report. We would like to express out appreciation to all members of the departments
who assisted with and contributed to the preparation of this report. Credit is also given to City
Council and the Audit Committee for their interest and support in planning and conducting the.
operations of the City of Lubbock in a responsible and progressive manner.
Respectfully submitted,
~~
Lee Ann Dwnbauld
City Manager
14
Jeff Yates
ChiefFinancial Officer
(
Certificate of ,. ....
Achievement
for Excellence ,..
in Financial ....
Reporting
Presented to (
City of Lubbock,
Texas
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
September 30, 2004
A Certificate of Achievement for Exceiience in Financial
ReportiDg is presented by the Gtlvemment Finance Officers
Association of the United States and Canada to
go.vcmment unitS and public employee retiremem
systems whose comprchcDsive annual financial
reports {CAFRs) ~ve the highest (
standaros in govemment accouuting
and financial rcportiug.
~~ ' President
~/.~
Executive Director
·.
15
-0\ ....,. 80116$18~ ColomWions Bft'tdi.,. Sep!emw 22. 2005 ... , LP4LBoud City ol Lubbock, Texas· Orpni~onal Chart CicyCouncil I Municipal Co11rt ludgc I Lbe""" lllllnl>...W --------------------------------~ AudiiColDa>illoo I 16 .I .I
FINANCIAL
SECTION
c
c
c
,. ...
(
c
(
'
(
(
)
)
)
Independent Accountants' Report on Financial Statements
and Supplementary lnfonnation
The Honorable May()r and City Council
City of Lubbock, Texas
We have audited the accompanying financial .statements of the governmental activities, the business~type
activities, the aggregate diSCFetely ~ted component units, each major fund, and the aggregate
remaining fund infonnatjon of the City of Lubbock, Texas, as of and for the year ended September 30.
2005, which collectively comprise the City's basic fmancial statements as listed in the table C)[ contents.
Titese financial statements are the respQnsibility of the City's management. Our responsibility is to
express opinions on these financial statements based on our audtt. We did not audit the financial
statements. of CiviG Lubbock, Inc., Market LubboCk .Ebonomic Development Corporation d/b/a Market
Lubbock and Lubbock Economic-Development Alliance, w.hicb:comprise the aggregate discretely
presented component units. In-addition, we did not audit the fmancial statements of the major fund West
Texas Municipal Power Agency, whi~h statements reflect total assets and total revenues of$14~059,0:H
and $158,128,217, respectively, and represent two percent and thirty-eight percent of the business-type
activities' total assets and operating revenues, respectively. The financial statements of these entities
were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar
as it relates to the amounts included for such entities, is based solely on the reports of the other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards .applicable-to financial audits contained in Government A.uditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The financial statements of the component units Civic Lubbo.ck, Inc.; Market Lubbock
Economic Development Cor:poration d/b/a Market Lubbock; Lubbeck Economic Development Alliance
and the major fund W-est Texas Municipal Power Agency, were not audited in accordance with
Government Auditing Standal'd$. 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 pre$erttat:ion. We believe that om audit and the reports of the other auditors provide a
reasonable basis for our opinions.
6000 Rogers Avenue. Suite 700
For! Smilh. AR 72903--2019
-479~-1041) Fax479452~
40.0 W. capite~ A~~enue. Suite 2SQO
P.O. 8ox 36'61
Utile Rode, t.R 72203-3667
So1372-1040 'Ftir 501 372-12SQ
........... NuiUerS
-·-17
The Honorable Mayor and City Council
Page 2
In our opinion, based on our audit and the reports of the 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 discretely presented component units, each major
fund, and the aggregate remaining fund information of the City of Lubbock, Texas, as of September 30,
2005, and the respective changes in financial position and cash flows, where applicable, thereof for the
year then ended in conformity ~ith accounting principles generally accepted in the United States of
America.
In accordance with Governmem Auditing Standards, we have also issued our report dated January 6,
2006, on our consideration of the City'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.
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 perfonned in
accordance with Government Auditing Standards and should be considered in assessing the results of our
audit.
The accompanying management's discussion and analysis as listed in the table of contents is not a
required part of the basic financial statements but is supplementary information required by the
Governmental Accounting Standards Board. 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 forming opinions on the financial statements that collectively
comprise the City's basic financial statements. The accompanying supplementary infonnation is
presented for purposes of additional analysis and is not a required part of the basic financial statements.
Such information has been subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial
statements taken as a whole.
The accompanying information in the introductory and statistical sections as listed in the table of contents
has not been subjected to the procedures applied in the audit of the basic financial statements and,
accordingly, we express no opinion on it.
January 6, 2006
18
c
(
c
(
I ...
(
'
)
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
As management of the City of Lubbock, Texas (City), we offer readers this narrative overview and
analysis of the fmancial activities of the City for the f1SCal year ended September 30,2005.
We encourage readers of these financial statements to consider the information included in the
traosmittal 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 fmancial highlights sununarize the City's financial position and operations as presented in
more detail. in the Basic Financial Statements (BFS), as listed in the accompanying Table of Contents.
• The a/iSets of the City exceeded its liabilities at September 30, 2005 by $545.5 million (net
assets). Of this amount, $64.9 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 $1.3 million as a result of operations during the
fiSCal year.
• The ending unreserved fund balance for the General Fund was $17.3 million or approximately
17.4% of total General Fwtd expenditures, or 19.?010 of total General Fund revenues; an increase
of$5.2 million over the prior year amount.
·• AU of the City's governmental funds reported combined ending fund balances of $85.2 million.
Of this total amount, $25.9 million is available fonpendingatthe City's discretion
• All of the City1s business-type activities reported combined ending net assets of$429.7 million.
Of this total amount, $42.0 million is available for spending at the City's discretion.
• The City's proprietary funds net assets decreased by $2.4 million from $432.1 million to $429.7
million.
• During FY 200S, the City issued $75.3 million in debt for various capital projects and issued
$112.2 million in debt to refund $114.0 miUion in outsWlding debt.
• In 2002, the City entered into an interest rate swap agreement to protect against the risk of rising
interest rates between March 28, 2002 and May 1, 2005. On August 15, 2005, the City of
Lubbock chose to terminate the swap and issue bonds in the amount of $43.1 million to retire
$4l.8 million bonds. The combined refunding and swap termination agreement resulted in an
economic break-even transaction with negligible present value savings; yet the swap termination
-and related expenses resulted in an accounting loss of $6.6 million. This is recorded as a special
item in the Water Enterprise Fund fmancial statements.
Overview of the FinAncial Statements
Basic Financial Statements. Management's Discussion and Analysis (MD&A) is intended to serve
as ao introduction to the City's BFS. The BFS ar:e comprised of three components: 1) Government-
Wide Fmancial Statements (GWFS), 2) Fund Financial Statements (FFS), and 3) Notes to Basic
Financial Statements (Notes). This CAFR also contains other supplementary infonnation in addition
tothe.BFS.
19
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
Government· Wide Fhaancial Statements. The GWFS, shown on pages 35-37 of this report.
contain the statement of net assets and the statement of activitiu, described below:
The statement of net assets presents information on all of the City's assets and liabilities
(including capital assets and short-and 1ong·tenn liabilities), with the difference between the
two reported as net assets lising the accruaJ 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 "activitiesu). 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 geneml 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 govemmen~ 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.
Component Uoits. The GWFS include not only the City itself (the «primary government''),
but also three legally separate entities (the "component units): Market Lubbock Economic
Development Corporation, dlb/a Market Lubbock, Inc., Lubbock Economic Development
Alliance, 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 ftnancial information. None of these component units
are considered major component units.
Fund Financial Statements. A .fund is defmed as a fiscal and accounting entity with a self-
balancing set of accounts recording cash and other financial resources, together with aJl
related liabilities and residual equities or balances, and changes therein, which are segregated
for tbe purpose of carrying on specific activities or attaining certain objectives in accordance
with special reguJations, restrictions, or limitations. The principal role of funds in the new
fmancial 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.
20
c
(
c
(
c
(
(
)
)
'
City of Lubbock, Texas
Management's Discussjon and Analysis
For the Year Ended September 30, 2005
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. Nonrnajor funds are aggregated and shown
in a single column in the. appropriate financial statements. Combining schedules of norunajor
funds are included in the CAFR following the BFS. All of the funds of the Cey can be
divided into three categories: governmental fonds, 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 balance-s 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 vers~ economic
resources), it is useful to compare the information prosented for govemmenfal funds with
similar infonnation 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.
The City maintains 29 individual governmental funds. Information 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 Genera) Fund is
considered to be a major fund. Data from the other govenunental 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 38-41 of this report.
Proprietary FFS. The City maintains two different 1ypes of proprietary funds. Enterprise
fonds are used to report the same functions presented as business-type activities in the GWFS.
Enterprise FFS provide the same type of infonnation 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 1bree activities are considered nomnajor funds bythe 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 infonnation systems, risk management. print shop, and
central warehouse activities among others. The secvices provided by the internal service
fu~ds benefit both governmental and business-type activities, and accordingly, they have
been included within governmental activities and business-type activities, as appropriate, in
21
City of Lubbock, Texas
Management's Discussion and Analysis
For tbe Year Ended September 30,2005
the GWFS. All intemaJ 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 oo pages 44-55 of this report.
Fiduciluy FFS. Fiduciary funds are used to accotmt 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 Statement&. 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 57-93 of this report.
Required Supplementary lnformatioo Other ThaD 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 fmancial position. For the City,
assets exceeded liabilities by $545.5 million (net assets) at the close of the fiScal year. This ~ompared
to assets exceeding liabilities by $546.7 million (net assets) at the end of the prior fiscal year. As a
result of operations, total net assets decreased by $1.2 million during the period.
By far the largest portion of the City's net assets, 81. 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 reJated 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.
22
c
,..
\..
(
I' I.
I' ...
c
)
)
City of Lubbock, Texas
Managemeotts Discussion and Analysis
For the Year Ended September 30, 2005
City of Lubbock Net~
September 30
(inOOO's)
Govenmlt:n1al .Bud~J.CSS--'l)pe
Ac:tivilics AdMtia Total
21105 200C 200S 281M 2005 2004
Olrrent and other essets s 116,021 $ 100,489 $ 170,945 $ 171,959 $ 286,966 $ 278,448
Capila1 assets l3MI4 1291014 637~ 611,703 776,058 740,717
Tobll. asseCs 254,635 229,5(}3 0,3&9 7'l9l162 1,063,024 110191165
anent liabilities 16,837 48.739 2S,SOS ~.JS6 42,342 92,&95
Nlncurrent liabilities 127,169 76,423 343,036 303~173 475,205' 379,.596
Total liabilities 144,006 125,162 373,541 347~29 517,547 472,491
Net assets:
Inv5cd in capital assets.
net of related debt 82.,330 74,433 363,127 355~816 445,557 43(),249
Restricted 8,770 20,339 26):16 45,417 35,046 65,756
Uvestrictcd 19,529 9J.69 45.345 41.190 64.874 501159
TO(af net assets $ 110,629 $ 104,341 $ .t34,34a s 442.423 $ 545,417 $ 546,164
An additional portion of the City's net assets, 10%, represents resources that are subject to external
restrictions on how they may be used. The remaining balance of unrestricted net assets of $64.9
million may be used to meet the City's ongoing obligations to citizens and creditors.
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 &Gtivitie.s, and business-type activities.
The City's governmental activities ex.perienced an increase in net assets of $6.3 million, while net
assets increased by $2.7 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 third year in a row that
the City Council has been able to cut property tax rates while streamlihlng City operations.
The City's business-type activities experienced a decrease in net assets of $7.6 million during the
current fiscal year as compared to a decrease of $5.3 million during the prior fiscal year. This
decrease in net assets resulted primarily from the $6.6 miUion accxnmting loss reco_rded in the Water
Fund for the bond refunding and associated swap tennination fee. This transaction generated
negligible present value savings.
Changes iu Net Assets. Details of the following summarized infonnation can be found on pages 36-
3 7 of this report
23
c
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
c
City of Labbock Changes lll Net Assets
For the Year Elided September 34)
(in OOO's)
Business-
Goverumeatal Type
Activities Activities Tobds ( &vaues! 2005 l004 2005 1004 2005 2004
Program Revenues:
Olarges fur services s 10,583 $ 12,713 $ 212,902 $ 181,411 $ 283,485 $ 194,124
Operating grants and contributions 13,296 9,643 8,156 6.739 21,452 16,3'82
Capital grants and contributions 5,206 9,269 5,206 9,269
General Revenues:
Property taxes 39,748 44,497 39,748 44,497 c Sales taxes 41,803 30,555 41,803 30,SSS
Other taxes 4,242 3,793 4,242 3,793
Franchise fees 11,154 9,654 11,154 9,654
Other 5,742 4zE4 5zl46 ~932 101888 7;1.06
Total revenues 126,568 [ 15,129 291!410 2001351 4171978 31-5,48()
Expenses:
Administrab~Conwnunity Services 23.,355 22,313 ':23,355 22,313 ,. ... Street Lighting 2,459 2,471 2,459 2,471
Financial Services 2,240 2.387 2,240 2,387
Fire 23,667 21,998 23,667 21,998
General Government 27,600 20,562 27,600 20,562
Human Resources 776 m 776 771
Police 37,m 33,249 37,773 33,249
Planning and Transportation 11,985 10,789 11,985 10,789 (
Public Works 2,699 3,078 2,699 3,078
Interest on long-term debt 3,195 4,593 3,195 4,593
Etectrie 192,902 110,591 192,902 110,591
Water 28,738 n,m 28,738 27,879
Sewer 17,804 17,020 17,804 17,020
Solid Waste 14,695 17,662 14,695 17,662
Stormwater S,S86 5,351 5,586 5,357 (
T~lt 9,003 10,565 9,003 10,565
Airport 8,151 6,853 81151 61853
Total Expenses 135,749 122,217 276,879 195,927 412,628 318,144
Change in net assets before
special itea:m and transfets (9,181) (7,088) 14,531 4,424 5,350 {2,664}
Special items (6,637) (6,637)
( Transfers 15£469 91745 {151469} (9174~
<hinge in net assets 6,288 2,651 (7,575) (S,32l) (1,287) (2,664)
Net assets-beginning of year 1~41 101~ 44~423 44¥44 546,764 549,428
Net assets -end of year $ 11;29 $ 104 I 4~4.8U s 44 4~ s ~3 .. 477 ~ ~li.7~
(
24
)
)
)
)
)
City of Lubbock, Texas
Management's Discussion and Analysis
For theY ear Ended September 30, 2005
Governmental activities. Governmental activities increased the City's net assets by nearly $6.3
million. Key elements of the increase follow:
• Tnmsfers to/from business-type activities during·the fiscal year increased governmental activities
net assets by $15.4 million. During the prior fiscal year these transfers increased governmental
activities net assets by approximately $9.7 miUjon. This is a net increase of $5.7 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~es. franchise fees. and
indirect costs of operations for centralized services such as payroll and pUl"Chasing.
• Total expenses increased by nearly $13.5 million from .the prior year due ~ly to incre.ased
spending iri several of the functional categories including general government $7 milli~ pGiice
$4.5 million, and fire $1.7 million. The general govenunent increase was due to the creation of
the vote.r·approved Lubbock Economic Development Alliance (LEDA) and the corresponding
$3.5 million· sales tax payment plus increased spending in the hotel motel fund to promote
tourism and :the start up operations for new special revenue funds: $. 7 million for Municipal
Court Futtd, Donations Fund, North Overton Public Improvement District. and Abandoned Motor
Vehicle Fund. The increase in public safety spending of $6.3 million is a result of the City
Council~s continued commitment to increased public safety.
• Revenues :increased by approximately $11.4 million. The key factors impacting this increase
include a voter approved increase in sales taxes of $11.2 million, which corresponds to the voter
approved decrease in property tax of $4.7 million. Also contributing is increases in franchise fees
of$1.5 million due to growth and implementation of the 5% franchise fee.
'
25
-;-c. C> e. i "' 0 e <
City of Lubboc~ Texas
Management's Distussioil and Analysis
For the Year Ended September 30, 2005
This graph depicts the ·expeoses artd program revenues generated through the City's varioU$
governmental activities.
Expenses and Program Revenues -Governmental Activities
s:t~.oo.o
$30~000
SlS,OOO
$20,000
$15,000
$10,000
$S,QOO
$0
26
c
c
c
I' ....
(
(
(
(
)
'
)
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
The following graph reflects the source of the revenue and the percentage each source t~ts of the
total.
Revenues by Source-Governrnental Attivitits
Charges for
Services
8.4%
Operating' gi'anu· &
C~uttibutions
10.5%
Franc: his& Fees
8 .. 8%
Other Taxes
3.4%
33%
Pro~rty Taxes
31.4%
Business-type activities. Business-type activities decreased the City'·s net asse~ by $7.6 ~lijon ~
rtsuft <Sf operations. K-ey elements of this increase foll'O'YI,:
• Charges for services for business-type activities increased by $91.5 million. .Duririg 1M. current
fiscal year the Lubbock Power and Light (LP&L) and West TeiiCa'S Municipal Power AgeDJ;y
(WTMP A) began selling natural gas (gas swap sales) to a third party which brought iiJ::re~ues
of $6,.2 .million. Revenues were also up slightly in all of the city•s other enterprise fuhdS.
Because of the inter-fund activity between LP&L and WTMPA, approximately une third of the
revenue wasel.i.minated for the entity wide statements.
• Operating grants. capital grants, and contributions continue to be asignifi'cant.~ue s.o~ for
LP&.L. Airport, Water. and Sewer Funds during the current fiscal year, ~ing nearly $13..4.
1llillien in revenue. This is a slight decrease in prior fiscal year's suppOrt of'.$-i~Jinwti:()n.. Th~
27
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
contnO.utions came primarily from federal grants and from water and sewer lines and taps that
were funded by property owners.
• Expenses increased in total by $81.0 million ove.r the prior fiscal year. This increase is primarily
due to lhe cost of fuel for the new gas swap sales contract of $62.1 million and the 1ncreased cost
of operations for electric operations. Increases in the nation's fuel and energy costs have also
affected both LP&L's and WTMPA's cost of power.
The follewing graph reflects the revenue sources generated by the business-type activities. As noted
earlier, these activities include LP&L, Water, Sewer, Solid Waste, Transit, WTMPA, Airport, and
Stormwater Drainage.
~venues by Source -Business-type Activities
Captial Grants &
Contributions
1.8%
Operating GAnt$
(
c
(
(
&Conndbutions (
Charges for
Services
93.70/o
Financial Analysis of the City's Funds
2.8%
Govemme~JIAJ funds. The focus of the City's governmental funds is to provide infonnation on near-
terin inflpws, 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
btthe.City's.resources.g;vailable for spending at the end of the fiscal year.
28
c
(
)
)
)
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 3~, 2005
At the end of the fiscal year, the City's governmental ftmds reported combined ending fund balances
of$85.2 million. This compared to $47.7 million at the end of the prior fisc~ year. 'This increase is
primarily the result of debt issuance for capital projects including the Gateway Streets projects, parks
projects, tax increment financing projects, and street projects. This resulted in an increase of fund
balance of $37.9 million. Also affecting this increase was the result of qpe:rations of the General
Fund where fimd balance increased by $4.7 million. Of the ending governmental fund balance, $2.5.9
.million or 30.4%, constituted unreserved fund balance which is available for spending at the City's
discretion. This ·compared to $:13.8 million or 28.9% at the end of the prior fiscal year. The
remainder of the fund balance is reserved to indicate it has already been corranitted to, 1) pay debt
service, 2) use in consmrction of approved capital projects, or 3) is restricted for.other putpo~.
The General Fund is the chief operating fund of the City. At the end of the fiscal year, um:eserved
fund balance in the General Fund was approximately $17.3 mil.ion compared to $12.1 million in the
previous fiscal year, representing an. increase of approximately. .$5.1 million. Total ftmd balance
(reserved and unreserved) approximated $17.4 million at the end of the fiscal year compared to $12.7
million at the end of the prior fiscal year. As a measure of the Gel?.eral.Fund•s liquidity, it is useful to
compare both tmreServed fund balance and total fund balance tO total fund expenditures. Unreserved
fund balance represented 17.4% of total General Fund expenditures compared to 13.4% of total
Gmeral Fund expenditures in the prior year. Total fund balance represented 17'.5% of total General
Fund expenditures compared to 14.1% 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. rt also has a transfer from
the ltisk Management Fund.
Pf'()prietluy funds. The. City's proprietary funds provide essentially the same type of information
found in the GWFS, but in more detail. ·
Unrestricted net assets of the major proprietaly funds at the end of September 30 are shown next with
amounts presented in OOOs:
Electric Fund $
Wan:rFund
Sewer Fund
WTMPA
Stonnwater
$
zoos
14,151
6,818
5,964
1,314
7,420
35,667
$ 7,006
14,078
6,343
1,743
1,305
$ 30,475
The LP&L Fund increased unrestricted net assets by $7.1 million compared to an increase of $4.6
million during the prior year. This is mainly due to the results ,of o~ons, a restructuring of the
capital funding method for existing proj.ec1S, and a decision by City Council n« to .. c~ for
payments in lieu of taxes and franchise fees until adequate cash reserveS are established.
29
City ofLubbock, Texas
Management's Discussion and Allalysis
For the Year Ended September 30, 2005
TheW~ Fund reflected a current year decrease in unrestricted net assets of nearly $7.3 million
compared to a decrease of $1.5 million during the prior year. This is due primarily to the accounting
loss for the termination of an interest rate swap payment of $6.6 million and a scheduled increase in
interest payments of nearly $1 million. This was offset by increases in water sales due in part to a
raise of approximately 3% in water rates.
The Sewer Fund reflected a current year decrease in unrestricted net assets of approx.i.mately $.3
million compared to a $2.1 million increase during the prior year. Changes to debt covenant
requirements and cbaoged methods of capital funding contributed to the cb~.
The WTMP A Fund reflected a decrease in unrestricted net assets of nearly .$:.4 million primarily as a
result of operations. The prior fiscal year•s change was an increase in unrestricted net assets of $.4
million.
The Stormwater Fund experienced an increase i.n unrestricted net assets of $6.1 million during the
fiscal year compared to a $.4 million increase in the prior fiscal year. The increase is a result of
changed methods for capital funding.
General Fund Budgetary Highlights
Differences between the original budget and the fmal amended budget were approximately $3.6
million in increases to expenditures. The main reason for the increase was for the street seal coating
program, which was moved from a Capital Project Fund to the General Fund.
The General Fund ended the fiscal year with expenditures more than $3.6 million more than
budgeted. This mainly resulted from the implementation of a master lease prognun for obtaining
vehicles and equipment as adopted by the City Council. The annual operating lease payments are
budgeted; however, the lease proceeds and related capital expenditures 1m not budgeted items. This
was a result of budgeting for the total amount of Lease payments which is a :true cash outflow instead
of budgeting for the full cost of the vehicles leased which is required by generally accepted
accounting principals (GAAP).
Due to stronger than anticipated growth in new construction and better than expected sales tax
revenue, actual revenues were nearly $2.1 miliion more than budgeted for the fiscal year.
Capital Assets and Debt Administration
Capital assets. The City's invesbnent in capital assets for its governmental and blJSiness...ty~
activities at September 30, 2005 amounted to $776.1 million, net of accumulated depreciation. This
was a $35.4 million increase over the prior fiscal year's balance of$740.7 miJlion, net of accumulated
depreciation. This investment in capital assets includes land, buildings and improvements,
equipment, construction in progress, and infrastructure.
30
c
(
(
(
,.
c
)
)
)
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended Septembe~ 30, 2005
Major capital asset events during the fiscal year included the following:
• Work continued in the Water Fund with another $3.1 million expended on the construction of
water lines and $1.8 miUion on sewer lines ahead of the Marsha Sharp Freeway.
• A large street project began with the construction of a T·2 thoroughfare street with $6.S million
expended on Milwaukee Avenue from 34th Street to 98th Street. This project is in the Gateway
Streets Fund which was established in FY 2004-05. The fund is supported by 2% of the ~.10
franchise f~.
• Schedul~ improvements to LP&Vs distribution infrastructure amount to $2.8 million. Another
$1.6 million was spent.on overhead distribution infrastructure.
• The City continues work on a flood ·relief project linking "South Lubbock~s chain of playa lakes
wifh an wtderground drainage system, spending $8.5 million during the fiscal year. Expenditures
to date on the project total $13 million.
At the end of the fisCal year, the City has construction commitments of$112.5 million.
City of Lubbock Capital Assets
(Net of Accumulated Depreciatioa)
September 30
(in ooo•s)
Business·
Governmental T7pe
Activities Activities Totals
2005 2004 2005 2004 2085 2004
Land $ 8,9SJ $ 8,608 $ 31,949 $ 31,676 $ 40,900 $ 40,284
Buildings 28,146 23,794 65,951 68,302 94,097 92,096
Improvements other
than 'buildin~ 43,89S 37,183 347,393 330,842 391,288 368,025
Machinery and equipment 19,829 15,951 63,719 66,922 83,548 82,879
Construction in progress 37,793 43!472 1282432 1131961 166,225 157,433
Total $ 1382614 s 129,014 $ 637,444 s 6tl,703 $ 776,058 $ 7401717
Additional infunnation abo~Jt the City's capita( assets can be found on pages 70..72 ofthis report.
31
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
Long*term debt. A summaiy of the City's total outstanding debt follows:
General obligation bonds
Revenue bonds
To cal
City of Lubbock Oatstudlng Debt
Gea.eral Obligation a.td Revea.ae Boads
September 30
Goven~mental
Actlvilies
(iuOOO's)
Baslness~
Type
Activities
2005 2004 2005 2004
S I 02,720 $ 70,221 $ 286.750 $ 215,664
42.800 94,605
$ 102,720 s 70,221 s
Totals
2005
$ 389,470 $
42.800
$ 432.270 s
2004
285,885
9.4,605
380,490
There is no direct debt limitation in the City Charter or under State law. The City operates under a
Rome Rule Charter that limits the maximum tax rate for all City purposes to $2.50 per $100 of
assessed 'Valuation. The Attorney General ofthe State ofTexas permits an allocation of$150 of the
$2.50 maximum tax rate for general obligation bonds debt service. The current interest and sinking
fund 1ax rate per $100 of assessed valuation is $0.09496, which is significantly below the maximum
allowable tax rate.
As of September 30, 2005, the City's total outstanding debt has increased by $50.7 million or 13.3%
over the prior fiscal yeu. The increase in outstanding debt is attributed to the issuance of $187.5
million in debt, offset by the payment of scheduled debt service totaling $22.4 million and a reduction
in outstanding debt of $114.3 million as a result of refunding existing obligations.
During the fiscal year, the City issued the following oonds and certificates:
• $7.3 million of General Obligation Bonds, Series 2005 were issued to fund the current capital
improvements plan. This issuance was the second installment of the $30 million capital
improvement debt issuance approved by voters in 2004.
• $46·.5 million of Tax and Waterworks System Surplus Revenue Certificates of Obligation,
Series 2005 were issued to finance projects in Water, Sewer, Airport, North Overton Tax
Increment Financing Zone, Lubbock Power & Light, and Gateway Streets; as well as Parks
and Streets projects throughout the City.
• $23.1 million of Tax & Electric Light & Power Swplus Revenue CO, Series 2005 were
issued to finance distnbution projects and to refund $19.8 million of contract debt previously
issued by West Texas Municipal Power Agency.
• $49.6 million of General Obligation Refunding B.onds, Series 2005 were issued to defease
$50.4 tmllion in outstanding bonds in order to achieve .interest savings.
• $43.1 million of Tax & Waterworks System Surplus Revenue Ref. CO, Series 2005 were
issued to defease $43.74 million in outstanding bonds originally held by Brazos River
Authority for the acquisition and construction of the lake and reservoir at Lalce Alan Henry.
32
(
c
(
(
(
(
(
)
)
City of Lubbock, Texas
Management's Discussion and Analysis
For theY ear Ended September 30, 2005
• $17.9 million in bonds were issued as Lubbock's share of the $48.1 million Canadian
Municipal Water Authority Contract Revenue Bonds, Series 2005 (Conjunctive Use
Groundwater Supply Project) for the purchase of water rights. The City of Lubbock is
contractually obligated to pay the debt service on these bonds over a 20 year period.
All bonds issued during tbe fiscal year were insured to provide a lower ·cost of interest expense (Qr 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.
On November 22, 2005, the City of Lubbock received a rating outlook upgrade from "stable" to
"poSitive" from Moody's Investors Service. The City currently maintains an "AA-.. rating from
Standard & Poors and Fitch Ratings, Inc. and an "Al" rating from Moody's Investors Service far
general obligation debt On December 21, 2005, LP&L received a rating upgrade from '~BB-" to
"BBB" from Standard & Poor's. The LP&L revenue bonds are currently rated "BBB" by Standard &
Poor's, "BBB+,.byFitch Ratings, Inc., and "A3" by Moody's Investors Service.
Additi~ information about the City's long:-term debt can be found on pages 81-86 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 3.8 percent
This is a de(:rease from a rate of 4.3 percent from the same month one year earlier. ·nus
compares favorably to the state's unemployment rate of 5.3 percent and the national rate of 4.8
percent for September 2005.
• Retail sales figures are only available through the third quarter ofFY 2004-05. Total retail sales
reflected a 4.9 percent increase for that period over the same period in 2004.
• The number of building permits for new constrUction decreased from 2, 796 during FY 2003-04 to
2,222 in FY 2004-05, or about a 20.5 percent decrease. This compares to a 2.9 percent decrease
during the prior period. Building permit values for new construction decreased from $389A
million in FY 2003..04 to $388.4 million in FY 2004-05, or about a 2 peroent decrease.
• Total·occupancy in local hotels and motels improved and the local occupancy tax totaled nearly
$3.3 million, a 14 percent increase over last fiscal year.
• City COuncil again decided to support the operations ofLP&L by forgoing transfers for paym¢nts
in lieu of taxes and franchise fees for the upcoming fxscal year. The City Council intends to
continue this support until such time as LP&L has adequate monetary reserves as set by City
ordinance.
All of these factors were considered in preparing the City of Lubbock's budget for FY 2005-06.
During the just ended fiscal year. unreserved fund balance in the General Fund increased by nearly
$5.1 million to $17.2 million compared to $12.1 million at the end of the prior fiscal year. It is
intended that the unreserved undesignated fimd balance be equal to 20% of operating revenues, which.
equates to approximately $17.6 million. The City ended the year nearly$ .4 million under this target.
City Management anticipates meeting this goal in the next fiscal year.
33
City of Lubboc~ Texas
Management's Discussion au.d Analysis
For the Year Ended September 30, 2005
LP&L increased rates in May 2005 as follows; 15.5% for the larger commercial consumers, 12.3%
for residential customers, and 13.00/o for small commercial consumers as a result of higher than
anticipated costs of power.
Both the Water and Sewer Funds rates were increased for FY 2003-04 and FY 2004-05. Water rates
were increased by 3 percent and sewer rates were increased by 5 percent for all customers each year.
The water and sewer rates affected both residential and commercial consumers by the same
percentage. These rate increases were necessary to cover increased operating costs due to expanded
capital replacement projects and the acquisition of additional water rights.
Requests for Information
This financial report .is designed to provide a general overview of the City of Lubbock's finances.
Questions eonceming any of the information provided in the report or requests for additional finaneial
information should be addressed to the Chief Financial Officer, P.O. Box 2000, Lubbock, Texas,
79457.
34
(
(
(
(
(
)
BASIC
FINANCIAL
STATEMENTS
r ....
City of Lubbock, Texas
Statement of Net Assets
September 30, 200S
Primary Gov4:mmcnt
Governmental Bu11iaus-type Component
Activities Activities Total Units c
ASSETS
Cash and cash eq uiwlcnts s 20,720,923 $ 44,471,841 $ 65,192,764 $ 3,123,029
lnl'eStments 5,24!,795 5,892,115 11,133,910 706,422
Receivables (net of allowance for uncolb:tibles) 13,835,367 25,648,568 39,483,935 796,745
Internal balltlCC 6,076,822 (6,076,822) (
Duo fimn otlla' goYe1111110111S 6,009,023 6,009,023
Due froiD odlcn 1,897,124 1,513,965 3,411,089
IIIYCIItofies 181,358 2,596,308 2.717,666 93,821
~in property 210,853 210,853
Prepaid expenses 909,112 909.112 59,814
Restrieted ancts:
,.
'I.
cash IJid cash equivalents 26,276,557 26,276,557 100,000
~~~~ 55,003,853 67,320,433 122,3:2.4,286
~receivable 91,.358 91,358 8_.120,768
Mortpce RlCilivables 5,934,866 5,934,866
Clpilalusets (net of ac.cuatulated deJneillion): (
N~iablc 46,744,528 160,380,890 207,125,418 366,932
Deptcciable 91,869,623 477,062,701 568,932,.324 829,750
Defemd cbarps 3,211,110 3,211,110
TGQJ mecs 254,635J47 808,389,024 1,063,0241211 14,197~81
LIABILITfES
McouniS payable 8,016,664 17,436,412 25,453,076 l,l85j9S6 c
Acavedupeases 4,581,439 2.772,051 7,353,490 157,798
Acaucd interest payable 1,081,814 2,976,994 4,058,808
Custamer deposits 200 2,304,900 2,305,100
Unc&niOCI ~CIIIlC 3,156,602 14,697 3,171,299 8j008,853
Nollcurret~C liabilities dliC within one year.
Bonds payable 5,789,101 17,625,899 23,415,000 ..
Ccmper~~a~ absences 5,723,349 2,207,245 7,930,594
Acuucd Ins~ Glairm 2,340,260 1,603,601 3,943,861
Capitallraes p&yab(e/Contraets ~~~ 936,250 456,625 1,392.875 1,643,412
Not1curralt liabilities due in more than one year:
Bonds p8)'Sbfe 96,931,168 314,479,.280 411,410,448 (
DeCemd pcemiwn on bonds 1,865,984 1,865,984
Co~absCN:I:S 10,565,016 2,793,520 13,358.,536
Acc:ruec1 insurance claims 4,898,297 4,898,297
Landfill ciOIUn: ud posaclosure care 3,073,391 3,013,391
Clpillllcaes payablefeontraets .,.yable 3,018,635 897,951 3,916,586 11195,168
TOialliabilila 144,006,482 373,5401863 517,547,345 12,211!187 (
NET ASSETS
lavemd in capiQI wets, net of relmd debt &2,330,195 363,226,855 445,557,050 1,196,682
lteslricled for;
Pusenser r.cility dlarscs 4,359,610 4,359,61(>
Debt 'IICIVice 2,624,3Ml 21,916,947 24,541,287
Grtnt prg&JaliiS 6,145,719 6,145,719
Primlll)l ~qJeeii!Cill 100,000
tllll'eSiric:fed 192528,511 45.344.749 64,373,260 .689!412
ToWuetU$11U $ 110,628,765 s 434,348,161 $ 545,476,926 $ 1,986,094
See atc:OrOpanying Notes to Basic FUlllll.tlial Staxements 35
')
City of Lubbock, Texas
Statement of Activities
For the Year Ended September 30, 2005
Primary government:
GQvemmental activities:
AdminiStration/Community Services
Street Lighting
Financial Services
Fire
Gcnml Government
Human Resources
Police
Planning and Transportation
Public Works
Interest on Long-Tenn Debt
Total governmental activities
Business-type activities:
Electric
Water
Sewer
Solid Waste
Stonnwater
Transit
Airport
Total business-type activities
Total primaJy government
Compoocnt units:
Civic Lubbocl<., Inc.
Market Lubbock. Inc.
Lubbock Economic Development Alliance
Total component units
Expenses
$ .23,355,816
2,459,025
2,240,424
23,666,709
27,600,270
776,128
37,772.,$6.0
11,985,323
2,"698,517
3,195.182
13S,7S0,260
192,902,041
28,737,866
17,804,487
14,695,193
5,585,571
9,003,610
8&150,815
276.879,58'9
$ 412.629,849
$ 1,888,596
2,608,975
3,031,818
$ 72529,389
General revenues:
Property taxes
Sales taxes
Oc~pancy taxes
Other Taxes
Ftar~chise Fees
lnvcstmCllt Earnings
Miscellaneous
$
Charges for
Services
2,5?1,376
300
3,866,182
4,024,650
120,646
10,583,154
192,568,012
33,306,786
19,829,430
12,420,499
6,239,436
3·,144,015
5,394,314
272,902,492
$ 283,485,646
$ [,615,361
78,632
$ 1,693~993
Tennination of interest ra1e swap
Transfecs, net
Program Revenues
Operatiag
Grants and
Contributions
$ 6,792,134
5,965,621
517,857
19,970
13,295,582
6,964,325
1,191,690
8,156,015
$ 21,451,597
$
5,320,871
3,483,960
$ 8,804,831
Total genereal revenues. special items, and transfers
Ciwlge:in net assets
Net assets -beginning
Net assets -endi.lig
See accompanying Notes to Basic FinanciafStatements
36
Capital
·Grantsaad
Co11tributions
$
33,306
1,814,011
2,374,233
983,991
5,205,541
$ 5,20S,S4J
$
$
c
Net (ExpeMes) Revenues and
Cbanges in Net Assets I" \,.
Primary Govemmeat
Gcwer11meobl Busioess-type
Attivities Activities Total Compooent Uoits
$ (13,992,306) $ s (13,992,306) $ (
(2,459,025) (2,459,025)
(2.240,424) (2.246,424)
(23,666,409) (23,666,409)
( 17,768,467) {17,76$,467)
(176,128) (776,128) (
(33,230,359) (33,230~59)
(11,985,323) (11,985,32~)
(2,557,901) (2,557,901)
Q,1951182) Q.l95,182}
{111,871 ,524} (11 1.871,5242 ,.
1..
(300,723) (300,723)
6,382,931 6,382,931
4,399,176 4,!99,176
(2,274,694) (2,274,694)
653,859 653,859
1,104,730 1,104,730
~580,8202 {580,820}
9,384,459 92384,459
(111,871,524) 9,384,459 (102,487 ,065)
(
(273,235)
2,790,528
452,142
2,969,435
39,748,464 39,748,464 (
41,803,092 41,80l,092
3,260,040 3,260,040
982,327 982,327
11,153,641 11,153,641
1,633,312 3,758,240 5,391,552 10,529
4,109,474 1,387,914 5,497,388
(6,637,093} (6,637,093)
15,468,765 ~151468,7652
ll8tt59,115 (161959,704~ 101,199,411 10,529
6,.287,591 (7,575,245) (1..287,654) 2,979,964
104,341,174 442,423,406 546,764,580 {993,870)
$ 110,628,765 $ 434,848,161 5 545,476,92<) s 1,986,094
37
""'
City ofLubboek, Texas
Balance Sheet
Governmental Funds
) September 30, 2005
Non-Major Total
Governmental Govemmeabl
General Fund Funds Puads
ASSETS
Cash and cash cquiV11fcnts $ 5,747,399 s 12,430,465 $ 18,177,164
Investments 1,513,176 3,330,647 4,843,823
Taxes receivable (net) 8,903,379 561,325 9,464,704
Accounts receivable (net) 4,190,603 6,024 4,196,627
) Interest receivable 32,727 21,945 54,672
Due ftom other fUnds 7,087,923 4,202,414 11,290,337
Due from other governments 6,009,023 6,009,023
Due from othm 722,145 1,148,131 1,870,276
I~MSUJU:nt in property 210,853 210,853
lnventocy 107,830 107,830
Rcscrieted inveSimcllts 50,584,201 50,584,201
Mortgage n:c:eivablcs 5,934,866 5,934,866
Tocal assets $ 28,305,182 $ 84.439,894 s 112,745,076
LIABILITIES
Accoums payable $ 1,326,745 $ 6,262,025 $ 7,588,770
Due to other funds 5,992,151 5,992,151
Aa:rucd liabilities 4,150,068 392,727 4,542,795
Accrued interest payable 491,204 491,204
DelcJTed I'C'Vetlues 5,451,949 3,477,453 8,929,402
Total liabilities 10,928,762 16,615,560 27,544,322
FOND BALANCES
Reserved for:
Prepaid l~mventory 107,828 107,828
Debt service 2,624,340 2,624,340
Capital projects 50,391,187 50,391,187
Special revenue • grants 6,145,719 6,145,719
Unreserved, reported in
Geocral fund 17,268,592 17,268,592
Special revenue funds 8,663,088 8,663,088
Total fund balance 17,376,420 67.824,334 85,200,754
Total liabilities and fulld balances $ 28,305,182 $ 84,439,894 s 112,7451076
'See accompan)'ing Noles to'Basic Financial Statements
38
City of Lubbock, Texas
Reconciliation of the Balance Sheet of Governmental Funds
To the Statement of Net Assets
September 30, 2005
Total fund balance " governmental funds
Amounts reported for govcmmc:ntalactiviti~ in the statement of net assets are different
because:
Capital asscu used in govanmenllll activities ~ not financ:Jal
resources and therefore are not reported in the funds.
Internal S«Vice funds (lSFs) arc ~ by management to charge the costs of certain activities,
sucb as insurance and telecommunications, to individual funds. The p011ion of the assets and
liabilities of the ISf's primarily serving govet11mental funds are included in governmental
activities in the stalemellt of net assets as follows:
Net assets
Net b®lc value of capital assets
Compensated absences
Amounts due from business-type ISFs for amounts undercharged
Certain liabilities are not due and payable in the curta~t period
and thelefore are not reported iD tbD funds. Tbosc liabilities ~as
follows:
General obligation bonds
Capital leases payable
Compensated absences
AccNed interest on general obligation bonds
Bond premiums~ recognized as an other financing SOUL'CC in the fund statements but the
premiums are amortized over the life of the bonds in the govcmmeot-widc Slatements.
Actual City contributions to the fire fighter's pension ttust fund is ~ than the actuarially
determined required eontribution. This will reduce future funding requirements and is not
recognized as an asset at the fund level but is a prepaid expense in tbe Statement of Net
Assets.
Revenue earned but unavailable in the funds is deferred.
Net assets of govemmenlal activities
See accompanying Notes to Basic Financial Statements.
39
$ 85,200,754
138,614,151
5,636,774
(l,012,813)
214,828
773,274
(102,720,269)
(3,954,887)
(16,288,365)
(590,610)
(1,865,984)
909,112
5,772,800
s l L0,628,76S
,..
'-
(
c
c
c
(
(
City of Lubbock, Texas
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
) For the Year Ended September 30, 2005
Non-Major Total
Governmental Governme~at.al
General Fund FUDds Funds
REVENUES ') Taxes $ 68,716,601 $ 11~197,455 $ 86_,514,056
Franchise Fees 6,~93,209 4,460,432 1 I,lS3,641
Fees and fines 4,015,402 4,015,402
Licenses and permits 1,953,606 1,953,~6
Intergovernmental 480,648 12.814,933 13,295~81
Charges for services 4,070,642 543.440 4,614,082
Interest 349,236 805,103 1,154,339
Miscellaneous 1.506,3'15 3~68,281 4,774,596
Total revenues 87,785,719 39,689,644 t2i,47S,363
EXPENDITURES
Administratiolllcommunity services 18,330,508 18$330,508
Stn:et lighting 2,214,291 2,214,291
Financial services 2,139,492 2,139,492
Fire 21,943,267 21,943,267
General government 6;159,536 20,3~8,995 26,518,531
" Human resources 740,826 740,826
.I Police 33,919,626 33,919,626
Planning and transportttion 8,120,727 8,120.727
Non-departmeatal 445,251 445,251
Public works 2,657,218 2,657~218
Debt service:
Principal 6,336,016 6,.336,036
Interest and f!SC8l charges 3,031,751 3,031,75'1
Capital outlay 5,277,100 16,438.,438 2127l5,538
Total expenditures 99~90,624. 48,822,433 143,1 13z062
&cess (deficiMcy) of revenues
over (under) expenditures (1.1,504,905) (9,132~794) (20.637,699)
OTHER FINANCING SOURCES (USES)
Long-«nn debt issued 45,110,000 45,110,000
· Retimnent .of refunded debt (7,215,000) (7.215,000)
Bond premium (discount) 125,586 125,586
Capital leases issued 3,534,.016 3,534,016
Transfers in 16,565,397 6,122,612 22,688,009
TtanSfers out {3,912,645.} !2.327,526) !6z740117Q
Net other financing sou~«S (uses) 16,186,768 ·4li9lS~672 58,102,440
Net change in fund balances 4,681t863 32,782,878 37,464,1'41
Fund balances at beginning of year 12,694,551 35,041,456 47,736,013
Fund balances at end of year $ 17,376,420 $ 67,824,334 $ 85,200,754
See accompaning Notes to Basic Financial State!Milts
40
City of Lubbock, Texas
Ruonciliation of the Statement of Revenues, Expenditures and Cbanges
In Fuod Balances of Governmental Funds
To the Statement of A~vities
For the Year Ended September 30,2005
Net cbaage in fund balances -total govm~~~~CI~tal funds
Amounts reported for so~tal activitic:os in ~statement of activitic:os are different bec.iluse:
~ fimds r~:pon capilal outlays as cxpendituJU However. in the Statement of Aaivitic:os the coot
of those assets is allocated over their estimated uscfilllivc:os and n:ported as dep~iation expense. This is the
amount by wtricb capital outlays of$21,702,858 ex~ depreciation of$11,595,992 ill !he cum:r1t period.
Bond proceeds provide 00rm1t financial resOUI"CtS to govet'lliiiCil!al fullds, but issuing debt increases long·
term liabiliti(IS iA tile StatementofNet Assets. Repayment of bond principal is an expeu.dilllre in the
govcl"liiiiCiltal funds, but the repayment reduus long-tenn liabilities ill lhe Statement of Net Assets. This is the
amount by which -prooecds ofS4S,l10,000 excccdod repayments IIIIi debt defeasen~:e of $12.619,948.
~ita! tease transactioas provide cum:nt t'imulcial t"aOurces to gOYCnUIICIItal funGs end repayment of
principal is an expmditure. This is the amount by which proceeds of$3,534,0 16 exceeded repayments of
$940,086.
Bond premiums are recognized as an olber financing soarce in tbe govemmeatal funds, but are c:o~
ddem:d assets on the Statement of Net Assets. Premiums ar:c amortized over the life of the bonds. This is lhe
amount by which bood pruniwn issued of $72S,S86 exceeded amortization of$39,.324.
Estimated loog·tcnu liabilities for c:ompeosated a.bsen<:es are recognized. as expenses in lbc Stetcmem of
Activities as earned, but are recognized when ew:ra~t fmancial rc:sourccs are used in the governmental funds.
This arnowlt is the DCt change in the estimated lodg-tcnn liability for compensated abseaccs during the year.
Pn!perty W<cs levied and court fUleS and f~ earned, but llt.lt available, ate dcfened in the governmenlal
funds, but are r~:cognizcd when earned (net of estimated uccoll~les) in the Stateme.at of Activities. This
amouot is 'the net change in defemd property taxes and court fines and fces for tile year.
Aaual City contributions to the flfC fighters pension trust fund are greater thm the actuari.ally determined Net
Peasion Obligation (NPO). This amount is recogni2:ed as a.n expenditure at the fund lcvd but is accrued when
overpaid and ceduces expense$ on lhe Statement of Activities
Intcmal service funds are used by managerrlellt 1o charge lhe c:osts of ccnain activities, such as insurance and
tc1cconun11Dications, to individual fi.ulds. The net revenue (e~q~e.nse) of cedaio internal SClVice funds is
reported wilh go~ activities.
Accrued interest is recognized as expenses in the Statcmeut of Activities as iDC'IImld, but is recogniztd wheu
cum:nt financial resoum:s are used in lhe governmental funds. This amount is lhc net change in the acttUed
interest this year.
Tile net effect of various miscellaoeous tran.sac#ons involving capital assets (e.g.. sales a.nd ttad~ins) is to
demlasc net assets.
Cba.nge in net assets of governmental activitic:os
See acc:ompa.llying Now to Basic FinaDCial Statemc:utl..
41
c
(
$ 37,464,741
,. ..._
10,106,866
(
{32,499.052)
(2,593,930.) c
(686,262)
(1 ,348,546)
(1,177,369}
tt,464
(
(2,561,821)
,
1,
(202,7SS)
(225,745)
$ 6.287.591
)
"\ J
City of Lubbock, Texas
Budget Comparison Statement
·General Fund
For the Year Ended September 30, 2005
Original Badget
REVENUES
Taxes $ 67,662,817
Francruse Fees 6,490,916
Fees and fines 3,67.5,500
Licenses and permits 1,954,759
Intergovernmental 385,304
Charges for services 4.597,064
Interest. 264,230
Miscellaneous 1!063,50!
Total reftllues 86,094,098
EXPENDITURES
Administration/community services 18,339,305
Street lighting 2,270,937
Financial scnices 2,288,879
Fire 21,862,118
General govemUlcnt 5,960,400
Human reso\Jl'Ces 722,083
Police 33,783,644
Planning and transportation 7,7&2,461
Non-departmental ( 1,.391 ,429)
Capital outlay 473,141
Total experutitu~ 92,091,539
Excess-(deficiency.) ofreve.nues
over(Wlder) expenditures (5,997,441)
O'llBR FINANCING SOURCES (USES)
Capital leases
Transfers in 11,925,222
Transfers out {5,927,782}
Net other financing sou«:eS (uses) 5,9971440
Net change in fund balances (1)
fund balance&.t beginning of year 12,694,557
Fund balances at end of year $ 12,694,556
See accompaning Notes to Basic Financial Statements
43
$
$
Final B11d;et Actual Amounts
67,662,817 s 68,716,601
6,490.916 6,693,209
3,675,500 4_,015,402
l,954,759 1,953,666
391,664 480,648
4,179,364 4,070,642
264,230 349,236
1,063,508 1.506,315
85,682,758 87,785,719
18,311,655 18,330,508
2,270,937 2,214,291
2,288,879 2,13.9,492
21,935,828 21,943,267
6,070,400 .6,159,536
792,083 740,826
34,171,843 33,919,626
8,146,42f 8,120,727
(689,562) 445.251
2,381,141 5!277,100
95,6791625 99,290,624
(9,996,867) (11,5041905)
3,!S34,016
16,520,075 16,565,397
{318031251} p,9l!z645)
l2,7f61824 16,186,768
2,719,957 4,681,863
12,694,557 12,694,557
1514141514 s 17,376,420
Variante with
Final 811dget-
Positive
(Negative)
$ 1,053,784
202,293
339,902
(1,093)
88,984
(108,722)
85,006
442z807
2,102,961
(18,853)
56,646
149,387
(7,439)
(89,136)
51,257
252,217
25,694
(1,134,813)
Q1895,959)
~3,610,9992
(1,508,038)
33534,016
45,322
{109,394)
3,469,944
1,961,906
$ 1,961,906
r '-
c
r I.
c
c
(
(
(
)
)
)
)
City ofLubboek, Texas
Statement of Net Assets
Proprietary Funds
September 30, 2005
ASSETS
Current assets:
Cash and cash equivalents
rnvescrnents
Accounts receivable
Intet.cst receivable
Due &om othelS
Due from other funds
Inventories
Total cu~tasscts
NonCI.IJ'l'ent assets:
Restricted c:ash and c:asb equivalents
~ctcd investments
Re$tricted interest receivable
Restricted accounts m:~vable
Dc&rrcd charges
eap;tat assets:
Land
Construction in progress
Buildings
Irnproveme.nt$ other than buildings
Machinery and equipment
Less accumulated depreciation
Total capital assets
Total noncurrent assets
Total Assets
$
$
.Sec ac:companying Notes to Basic Financial Statements
LP&L
11,629,589
3,094,617
15,203,375
19,267
255,509
30,2021417
5,588,827
4,583,485
3,211,110
756,714
12,248,738
8,054,811
169,337,586
49,137,805
{l00,389181Sl
139,145,839
152,529,261
182,731,678
44
Enterprise Fonds
Water Sewet' WTMPA
$ 5,205 • .156 $ 3,834,508 $ 1,663,523
186,781 1,027,426
4,113,761 2,324,999 1,096,068
l9,769 9,131
42,444
11,299,440
215,806
9,783,717 7,1961064 14,059,031
7,781,030 3,312,987
14,106,757 7,999,160
472
22,179 26,164
12,724,350 12,578,774
50,601,987 6,893,669
21,570,924 23,862,871
222,40 1,68 ( 109,746,495 25,200
20,304,008 16,075,017
{83,351,900~ !58,9t0,186l (2S,200l
244,2511050 110,246,640
266,161,488 12l,S84,95 I
$ 275,945,205 $ 128,781,015 $ 14,059,031
c
(
Ente!:2rise F 1111ds
Non-MajGr
Enterprise Total Enterprise Internal
Stonuwater Funds Funds Service Fund' ,.. ....
s 12,208,148 $ 8,041,256 $ 42,582,180 s 4,432,716
454,334 765,249 5,528,467 761,620
656,534 2,184,286 25,579,023 1,818
5,902 12,667 66,736 8,078 c
1,471,521 1,513,965 26,848
51,814 11,351,254 5,361
608!445 11079,760 1,590,076
13,324,918 13,135,238 87,7011385 6,826,523
4,548,392 5,045,321 26,276,557
25,629,786 6,825,808 59,144,996 12,.595,089
10,856 16,243 27,S7l 20,656
48,343 107,063
3,211,110 " ...
283,337 5,605,535 31,948,710 65,343
51,964,007 6,059,823 127,768,224 1,100,.582
64,5W 41,865,343 95,418,529 1,608,6l8
8,158,852 95,430,523 605,100,337 628,868 c 2,766,421 48,457,729 136,740,980 7,898,666
{8,915,041} {109,764,554~ !361,356!69~ !8,405, 774)
54,322,156 87,654,399 635,620,084 2,896,303
84,511,190 99,541,771 724,328,661 15,619,111
$ 97,836,108 $ 112,677,009 s 81~0301046 $ 22,445,634 (
(
45
)
)
)
'I
City of Lubbock, Texas
Statement of Net Assets
Proprietary Funds
September 30, 2005
LIABILITIES
Current liabilities:
Accounts payable
Accrued liabilities
A~ed interest payable
Due to other funds
CustOmer deposits
Compensated absences
Lease payable
Bonds payable
Total current liabilities
Noncurrent liabilities:
Compensated absences
Deferred revenues
Acaued Insurance Claims
Landfill closure and post closure care
Contracts and leases payable
Bonds payable
Total noncurrent liabilities
Total Liabilities
NET ASSETS
Jnvested in capital assets, net of related debt
Restricted for:
Passenger facility charges
Debt service
Unrestricted
Total Net Assets
$
$
See accompanying Notes to Basic Financial Statements
LP&L
809,810
1,304,102
1,.236,712
11,299,440
2,268,773
1,038,245
8,780
5,425,000
23,390,862
1,305,704
81,239
64,701,763
66,088,706
89,479,568
73,512,542
5,588,827
1411501741
93.252.110
46
Enterprise Funds
Water Sewer WTMPA
$ 882,.905 $ 364,840 $ 12,745,213
112,906 108,770
986,739 248,821
29,3SS
403,463 192,771
195,525
5,911,004 3,932,162
8,386,372 5,042,889 12,745,213
513A98 245,345
222,387
l22,319,849 4318751658
122,833,347 44,343,390
131,219,719 49,386,279 12,745,2-13
130,126,954 70,118,103
7,781,030 3,312,987
6,817,502 5.963..641 1,31-3.8.18
$ 144,725 .. 486 $ 79,394.736 $ 1.313.813
Stonnwater
$ 880,091 $
23,318
429,758
4,500,000
·36,290
1,35S,OOO
7,224,457
46,188
10J:.96l> 17
70,343,005
77,567A62
8,300,125
4,548,392
7.420,129
$ 20,268,646 s
Enterprise Fuuds
Non-Major
Enterprise
Funds
901,608
1,064,084
74,964
855,367
6,772
347,141
252,320
1,002,733
4,504,989
44l,815
14,697
3,073,391
594,325
13,2851193
17,409,421
21,914,410
79,345,636
4,359,610
685,711
6,371,642
90,762,599
c
c
Total Enterprise Interaal
Funds Service Funds (
$ 16,584,467 $ 1.279,836
2,673,180 t37,Sl5 c
2,976,994
16,654,807
2,304,900 200
2,017,910 264,524
456,625 c 17162St899
61,294,782 1,682,075
2,552,550 380,609
14,697 (
8,842,158
3,073,391
897,951
314,4791280
321,017,869 9,222,767 c
382,3121651 10,904,842
361,403,365 2,896,303 (
4,359,610
21,916,947
42,037.473 8,644,489
$ 429,717,395 $ ll ,540, 792 (
47
)
)
City of Lubbock, Texas
Reconciliation of the Statement of Net Assets-Proprietary Funds
To the Statement of Net Assets
September 30, 2005
Total net assets • proprictuy funds
Amounts reported for business-type activities in the Statement of Net Assets .arc different because:
lntcmal service funds (ISFs) arc used by management to cbarge the costs of certain activities, such
as insurance and teleoommunications, to individual funds. The portion of asselS and liabilities of
the ISFs primarily serving enterprise funds are included in business-type activities in Che Statement
of Net Assets as follows:
Net assets of business-type lSFs
Amounts due to govemmentaiiSFs for amounts overcharged
Net assets of business-type activities
See accompanying Notes to Basic Financial Statements.
49
c
$ 429,717,395
c
5,904,~1& c
(773,252)
$ 434,8481161
,
\.
(
c
c
(
<
City of Lubbock, Texas
Statement of Revenues, Expenses and Changes in Fund Net Assets
) Proprietary Funds
For Fiscal Year Ended September 30, 2005
Enterprise Fands
LPAL Water Selftl' WTMPA
) OPERATING REVENUES
ChargeS for ser:viccs $ 180,549;258 $ 33,500,269 $ 19,929,559 $ 158,128,217
Provision for bad dobts ' p89;632~ ~193,483} ~1002129)
Charges for Strv.iccs (net) 179,759,626 33,306,786 )9,829,430 158,128,217
Miscellaneous
) Total operating revenues 179,759~626 33,306,786 19,829,430 158,128,217
OPERATING EXPENSES
Personal Services 9,921,315 5,423,288 3,537,6.39 405,974
lnsuranee
Supplies 585,433 992,173 724,106
Materials
Maintenance 1,575,709 2,171,179 1,137,176
Pw-chase of fuel and power l46,980, 186 157,9&,087
Collection expense 1,460,411 910,539
Other services and charges 5,007,907 7,572,617 4,555,055 26l,9l0
Depreciation and amortization 91192,618 St950,475 5!096,596 614,787
Total operating ClCpCTise5 173,263,168 23,570,143 15,961,111 159,246,768
Operating in<:omc (loss) 6,496,458 9,736.643 3,868,319 (1,118,551)
NON OPERATING REVI:NUES (EXPENSES)
Interest earnings 348,637 788,431 165,758 .537,249
Passenger facility cbarges1Fe4eml grants
Disposition of assets (1,372,588) (174,325) (10,636)
Miscellaneous 1,396,843 269,718 222,528
hss-thtough grant payments
Interest expense on bonds Q,828,762} (41632,649} ~1~747,91Q (1,205,246~
Net non~ng m'ellues (expenses) Q,4S.5,8.70) (3,748,825) 0.370,26]) (667,997)
Income (loss) before contributions and transfers 4,040,588 5,987,818 2,498.058 (1,786,548)
capital con.tributions 33,306 1,814,01 I 2.374,233
Operating transfers in 25,000 147,802 5,000,000 306,759.
Owating transfers out {l,l03168!l (4,536,812) (2,504,867)
Change in net assets before special item 2,995,207 3,412,819 7,367,424 (1,479,792)
Tennination ofmterest rate sWip ~6.637,093l
Change in oet assets after special ill:m 2,995,207 (3,224,274) 7,367~424 (t,479,m)
) Total net 8.5SdS -beginning 90,256~03 147,949,760 72,027,312 2,793,610
Total net assets -ending $ 93,252,110 $ J 44,725,486 s 79,394,736 $ 1,313,813
See ae<:ompanying Notes to Basic Financial Statements. 50
c
.... 1...
Entererise Fands
Non-mlljor Total Eaterprise Internal Serv~
Stonmvater Enter2rise Fonds Fuads Funds
c
$ 6,322,447 $ 20,951,536 $ 419,381,286 s 38,242,434
~83,0112 ~126,243l {11292,498l
6,239,436 20,825,293 4t8,088,78a 38,242.434
133,535 133,535 180,580
6,23!>,436 20,958,828 4 t 8,222,323 38,423,014 c
757~308 10,880,055 30,925,579 5,061,567
22.091,005
2,368,452 4,670,164 112,811
~.087,476
, 1..
168,618 3,270,121 8,322,803 1,959,390
304,944,273
500,514 490,271 3,361;735
288,721 5,073,375 22,759,595 4,457,031
546,314 9,470,382 301871,172 350,833 (
2,261,475 31,552,656 405,855,321 42,120,113
3,971,961 (10,593,~28) 12,367,002 (3,697,099)
(
1,163,013 517,347 3,520,435 716,718
8,156,015 8,156,015
417,181 (1,140,368) (79,618)
(1,985) 925.,084 2.812,188 10,448
(1,334,955) (1,334,955)
p,200,695l {47019.56) (14,0861219) (2,307) (
(2,039,667) 8,209,716 (2,072,904) 645,301
1,938,294 (2,384,112) 10,294,098 (3,051, 798)
983,991 5,205,541
128,586 1,564,299 7,172,443 206,711 (
~991,066l ~9,3321451) (181468,889l (4,858, 103)
1,075,814 (9,168,279) 4,203,193 (7,703,190)
(61637,093~
1,075,814 (9' 168,279) (2,433,900} (7,703,190)
19,192,832 991930,878 432,151,295 19,243,982 (
$ 20,268,646 $ 90,762,599 s 429,717,395 $ 11.540.792
51
')
)
)
)
)
)
City of Lubbock, Tens
R«<nciliation of tbe Statement of Revenues, Expenses, and Changes in
Fund Net Assets -Proprietary Funds
To the Statement of Activities
For the Year Ended September 30, 2005
Net cbange in fund net assets -total entetprise funds
Amounts reported for business-type activities in the Slattment of activities arc diffetcnt because:
Internal service funds (ISFs) are used by management to clwge the costs of certain
activities such as fleet services, central warebouslng activities, management
information activities, etc.. to individual fuDCl$. The !let revenue (expense) of certain
ISF s is .rejl(lrted with business-type uti vi ties.
'Change in net L'!sets of business-type activities
Sec GCOmpanying Notes to Basic Financial Scalements.
53
c
s (2,433,900)
c
{5,141,34·5)
$ (7.575.245) (
I'
(
(
(
)
City OfLabbod<, Texas
Statement of Cash Flows
Proprietary FlUids
For the Year E11ded September 30, 2005
) WatT-
Maldpal .........
Ll'&t. wa• Sewer Aesr;~MP~
CASH PLOWS nt.OM OHRATtNG AcnvmES
~from-s tn,94s,~ $ 33_.l,2S,1114 $ 19.860,.901 $ 19.;D5,763
hysnenlS co supplieR (14~.oss.m) (12.,26.758). (7.292.188) (78,733,170)
~10 CCIIployoca ~.SI$,196) (S).t.4,701) (3,40l,S76)
Otllu re«:ipcs ~) l4.2SS 9:5~ 2111892
)Itt wb lll'0\'*1(.-1) 111 ~ IIIXivitioa t9,:WS1866 ts.~no 9J19l129 s.;s93
C.UU PLOWS PltDM NONCU'tTALAl~D ltltl.At£11
FI'NANCING ACTMTlU
T,_rm ill &oln 011>« fllllds 2S,OOO 141,802 s.ooo,ooo ·306,7SO
TnRsfUs oat to odule Mid$ (1,103,6$7) (4,S36,S12) (2,504,367)
Sbott-tam~~ 26l,SOO
,y._ &.. (CO)ot&et fimds
()peallirw pitS
~ rcceiw.!l(raado.) OA~ (co)l'tiono otbor t-!f
Mot eMit ~(I!Md)by~lal
ad rdaliad finmciaJ liCii'filiN {l,07Mm (41ll7~IO~ ;•9:5.133 .306i756
CASH JLOWS PROM CAJ>lfAl.AND Ql.A.YED
IJ'INA.N'(':ING AC'TlVtnE$
l'llrcllaecsof e~~~llll-(9,790,539) (2t,86J,.6S4) .(6,1S1,n6}
Sale or .::a,~~~~-2,32S,:UI 1,447,.21S 5,14,140
~)Oil rea-(20,.204,?92) (2)9,.579) 162,~
~paid C)CI ~wodletdebt (3,170,000) (72.tl62..S 19) (H ,SS6,800) (1,009,562)
Boad isluanoc COlt peid (940,l81) •(2.897,..W) • (412,$15)
Intcn:a paid aD-bends (2.194,143) o,asl,060) (631,740)
~1*1 OQ ._.-otila' doll< (2,.493,668} (1,621)36)
.~ ofR~VC~~~tte, G.O. boock. Ind.~!~ 21,055,869 92,*1,132 1S,~130
P-..faoilily~.-,
T Gl'lllialtioa of'-nil> swap (6.637,093),
~elpilal 33.306 •• 1$3~~ ~98
~-~(used) for Qj)iW aaclcd.-s
~Ktivilies (1,435,1 39,) (19,70,6n). (2,025, 438) (88S,81'0)
CASH FLOW$ FROM INVESTING ACTIVlTJES
l'rooocd$ &-oaks ltld 1l1al1l:l'irics af;--. 4,.S6S,-'26 1,401,002
~of~ (6,S88,009) (767,114) (7,41l,S74)
bl!mift --~Gel .:ash and in~ 339,S20 s.b6J98 l63J22 21811
Not cash pco\'idt4 b)' (.-If«)~ ot:tmcia: !1a6831063l U391686 '7~.aEl zun
we~~<~>•cas~~
aad.:..b~ 9,14t,977 {6,548,.717) 2,599,412 {14,6SO)
Celbllllf.:..b·oqoa~-~OfYfJtllt 8..069,439 19,534,963 4~8,023 !~78,113
OMI!aod~~-eodof~ $ fi¢t8.4l6 s 12,986.1116 i 7,147,49$ $ t:MJm
~oaafepentra&iaco-(141111)1n.C~
;rmw (-t)ll1.....-..lldMciet:
~ illcoaao(loa) s 6,496,458 • ?.m;.64J $ 3,863,319 $ (I.Jli,SSt)
~ con:coacileppcnliasiac>ome(loa)
co""" c:oolhpnMclod(...s)~opo:Riias~
~alld~ 9,192,618 5.950,41$ 5.096..596 614,787
Olbt:r ~(eocpe-) 24,2SS 95_:m 21!,893
a-se•-r-•~
AcooiLolt rocoiwblo (UIO,m) (17l.C)Ol) 31,471 (S,S02.,549)
(IMtltGCy (222,s21) (45.,323)'
~~
Due fnlln oClw:l' ~ 11,299,440 (1~)63)
~payabk> (7,706..S~ 1$2,$.20 140,196 6.£33,138
Otbet~~ 288,471 $,.920 (3S;23'n 415,668
c.r-dcposib 1.299.~ ···~ a-(clecnuc) in COIIIpCCISIIied ~ 53S~ 174,111.S .6Sa192
~-~(.-J)byoptnt;q~ s 19,395.866 .'$ f5;!&2.118 $. 9,m.wo s· m93
Sop~ as& ftowldlmtalloa:
~~Implg•ea-aaclcdwlr~ s s 660,614 s 351134 s
Soe~'NOIOIU!Besie~~
54
c
. ....,... ........
OliocrN-J« ........... ,.. ._""" .semc.. \..
~,.......... ,_.. Tetalo Vwads
s 6)SI,SOt s 21,00 1,()46 s 317,503,694 s 38,389,571
(169,004} (ll.S0l,l29) (2S8,8n,64l) (36,750,900}
(721,111) (10,65\,579) {l9,S\4,S33) (S,061,)81)
{1,931~ !.414,704 1,144,265 11192
S,3191llS 260~1 S0,&50,-48S (3,410,12S) c
123,S&6 f,S64,299 7,172,443 157,611
(991,066) (9,332.4S7) (11,46&,189) (4,109,030)
4,500,000 143,867 4,905,367 (13,402)
(5,367)
( .S,619,l70 5,629,370
1,m,100 1 023 706
3,637.520 (911,21S) 26\997 (4,670,16!)
(9,0116.984) (6,m,7S4) (60,669,737) (38,8&4)
1.920 1,106,740 S,402,9S6 194,264
(19,681,173)
(1~191,350} (3,714,091) (104,214,322)
(8$1,393) 223,181 (4,17!,631)
(3,.200,696) (7 ,886,64:5)
(4S2,390) (4,$67,394)
11,522,(103 S,641,1J\ l52.,12S,$4S
1,191,690 1,191,690
(6,637 ,093) " 983991 4174092 \,
(I). 709,500) {1,791,152) (4.S,641,412) ISS.310
l,36U,7.S7 4,532.,944 11,&60,129 7,(170,785
(4,4H,91l) (307,309) (19,S07,SI9) (814,206)
1,17~796 545976 J,OS3,8l3 743044 ,.
{I,~) c,7?1.61l (4,S9l.S6!2 6,999,623 '
(6,$77 ,OOS} 2.,269,436 877,503 (92S,983)
~ ll.333~S" tl7S6~ I 19.,&17,091
13.~S77 s 67.981~
!J8S!a7l1
.S13S8,699 s 4,48716
.$ 3,977,961 s (lO,S93,128) $ 12,367,002 s (3,697 ,099)
540,314 9,470,38.2 30JI71,112 350,&3.3
(1,914) 1,342,264 1,671,&21 11.892
49,06S 42.211 (7 ,368,125) (JJ,44S)
(I .CO, SIS) (-'01,739) (S,996)
(432,2$6) 10,1$2,&21
12S,106 (2SS,606) (710,544) (106,30.2)
(18,S41) 658,.399 1,314,680 37,299
6SO ~,304,174
JOBU 169~ 956,618 31,223 s 5,389,.332 $ 260.941 s SO,JS0,410 s (3,.10,&2S)
$ s s 1,031,-448 $
55
)
)
City of Lubbock, Texas
Statement of Fiduciary Net Assets
Fiduciary Funds
September 30, 2005
ASSETS
Cash aud taSh equivalents
Investment$, at fair value:
:rota! A$SetS
LIABILmES
Accounts payable
Total Li{lbilities
See accompanying Notes to Basic Financial Statements.
Agency
Fund
$ 1,099
73
$ 1,.172
$ 1,172
$ 1.172
56
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLicms
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 (GAAP) as applied to
government units, including specialized industry practices as specified in 1he American Institute of Certified
Public Accountants audit and accountiDg guide tided State and Local Governments. 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 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 before November 30, 1989, unless those pronouncements contlict with or
contradict GASB pronouncements. The more significant accounting poUcies are described below.
A. REPORTING ENTITY
The City is a m.unicipaJ corporation gDvemed by a Council-Manager form of govenunent. The City,
incorporated in 1909, is located in the northwestern part of the state. The City currently occupies a land area
of 119.1 square miles and serves a population exceeding 211,000. The City is empowered to levy a property
tax 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 OOOllS periodicalJy when deemed appropriate by the city
counciL
The City provides a twl nmge of services, including police and fire protection; recreational activities and
cultural events; construction and maintettaooe of highways, streets, and other infrastructure; and sanitation
services. The City also provides utilities for elcc:tricic.y, 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 detennining activities
to be reported within the City's BFS are based upon and consistent with those set forth in the Codification of
Goyemmental 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 buroen on the City, or
• 'I'f:!.ere 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 are such that exclusion could cause the City's
BFS to be misleading or incomplete.
57
c
i ....
,..
\.
c
(
,
' "
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNlFICANT ACCOUNTING POLICIES (Continued)
A. REPORTING ENTITY (Continued)
BLENDED COMPONENT UNITS
The Urban Renewal Agency (URA) bas ~ included in the City's financial reporting entity within 1he
primary govenunent 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 of housing, and disposition of land. The
URA Board is <:Omposed of oine members appointed by the Mayor with the consent of the City Council, and
acts only in an advisory capacity to the City CounciL AU powers to govern the URA are held by the City
CounciL There ~no separate financial statements available for1he URA.
W~t Texas M~nicipal Power Aeency (WTMPA) is a legally separate municipal corporation, a. polit.im
'subdivision of Texas,_ a~d body politic and COlJ!Orate, formed in 1983, governed by a Board of eight <lirectors
who.-s:erve without compensation. WTMPA has no employees and instead contracts with the City :fur g~eral
operations. WTMPA may engage in the b11Siness of generation, transmission, sale, and exchange of electric
energy to tbe four participating public entities: Lubbock, Tulia, Brownfield, and Floydada. WTMPA may
also participate in power pooling and power exchange agreements with other entities. WTMP A provides
elecui.city to its four member cities with the City having an 88.S% interest in its operations. Each member
eity appoints two members to the WTMP A 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 })rokered, 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 Govemrnent-Wide Financial Statements. They
are reported in a separate column to emphasize that they are legally separate from the City. The following
Component Units are included in the reporting entity because the primary government is financially
aocoun~Je, 'is able to impose its will on the organization, or can significantly influence operations and/or
activities of tile organization.
Civic Lubbockt Inc:. is a legally separate entity that was organized to foster and promote the presentation of
wholesome educational, cultural, and entertainment 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 1501 (1h Street, Lubbock, Texas.
Market Lubbock Economic Development CorpoTatioo, dba Market Lubbock, is a legally separate entity
that was fonned on October 10, 1995 by the City (A)Wt.Cil to create, manage, operate, and supervise programs
and activities 1o promote, assist, and enhance economic development within and around the City. The City
Co.uncil appoints the seven-member board and its operations are funded primarily through budgeted
aUocations of '!he City's p~perty and ho~l occupancy taxes. Separate financial statements may be obtained
from Muket I:.ubbock ar 1301 Broadway. Suite 200, Lubbock, Texas.
58
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Coutinued)
A. REPORTING ENTITY (Continued)
Lubbock Eeonomie Development Alliance is a legally separnte entity that was formed on June 1, 2004 by
the Cily of Lubbock to create, manage and supervise pro~ and activities to promote, assist, and enhance
economic development within and around the City. The City Councfl appoints the five. (5)-member board and
its operatioos are funded primarily through budgeted allocations of the City's sales and use taxes. Separate
financial statements may be obtained from Market Lubbock at 1301 Broadway, Suite 200, Lubbock, Texas..
RELATED ORGANIZATIONS
The City Council is responsible for appointing the members of the boards of other organizations 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 financial benefit or burden relationslti_p.
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 or Lubbock (Authority) is a legally separate entity. The Mayor
appoints the five-member board.
The Lubboek Health Facilities Development Corporation promotes health facilities development. Ci~
Council appoints the seven-member board.
The Lubbock Housing 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 and East Lubbock Commnuity Development Corporation (CDC) was formed from the
recommendation of1he 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 social services. The City Council
appoints two members of an el~member board. The City Council is not able to Impose its will on the
entity and there is no financial benefitlbar.den relationship.
The Lltbboek Edueation Fuitities 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. Tb.e seven-member Board is appointed by the City Council.
The Lltbbock Firemen's Reti~meat and Relief Fund (Pension Trut Fund) operates under provisions of
the Firemen's Relief and Retirement Laws of the State of Texas for pwposes of providing retirement benefits
for the City's firefigbteri. The Mayor's designee, the Cash and Debt Manager, 1hree firefighters elected by
members of the Pension Trust Fund aad two at-large members elected by the Board, govern its affairs. It is
funded by contributions from the firefigb~ and City matching contributions. As provided by enabliDg
legislation. the City's respoosibility to the Pcmion Trust Fund is limited to matching monthly contiibutions
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 goveniing body over the Pension Trust Fund and 1he Ciry cannot
significantly influence its operations. Their separate audited financial statements may be obtained through the
City.
59
c
c
c
(
c
(
,
I,
(
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
The City's financial statements are p~ed using the reporting model specified in GASB Statement No. 34-
Basic Financial SlaJemenzs -and Managemmt's DisCNS8ion and Analysis -/Of Stale and Local
Governments, GASB Statement No. 37-Bmic Financial Statement.s-an4 Management':s Dist:IIS3ion and
Analysis -For Slate and Local GovernmenJ: -Omnibus, GASB Statement No. 38 -Cmaln Financial
StatemenJ Note Disdo.tiUV!S, and GASB Interpretation No. 6 -Reoognition and Measuremml of Certain
Liabilities and ExpendiJures in GrJVernmental Fund Financial Statements. As specified by Statement No. 34,
the Basic Financial Statements (BFS) include both Government-Wide and Fund Financial Statements. In FY
2005 the City adopted the provisions of GASB Statement No. 40 -Deposit and Investment Ris/c Disclosures.
This new standard revises the existing requirements regarding disclosure of custodial credit .risk and
establishes requirements for disclosures regarding credit risk, concentration of credit risk, interest rate risk
and foreign CUITency risk. Adoption of GASB Starem~t No. 40 had no efrect on net assets and change in net
assets in the prior or cl.lm:llt year.
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 activities 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 ofinterfund activity has been removed from these statements by allocation ofthe activities ofthe
various internal service funds to the governmental and business-type activities on a fund basis based on the
predominant users of the services. Governmental activities, which are primarily supported by taXes .and
intergovernmental revenues, are reported separately from business-type activities, wbicb 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
in¢ludes Jong-tenn assets and receivables as well as long-tenn debt and obligations. The GWFS foeti$ more
on the sustainability of the City as an entity and the change in aggregate financial ~ition resulting from the
activities of the fiscal period.
The Gownunent-Wide Statement of Net Assets repons all financial and capital resources of the City,
excluding those reported in the fiduciary fund. It is displayed in tbe fonnat 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)
unrestricmd. 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 atlributabJe to !he acquisition, construction, or improvement of those assets. .Restrieted net assets are
those wilh constraints placed on their use by either: (1) externally imposed by creditors (such as through debt
covenants), grantors, contributors, or laws or reguJations 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. Reservations or de3ignations of net
assets imposed by the City, whether by administrative policy or legislative actions of the City Council that do
not otherwise meet the definition of restricted net assets, are considered unrestricted in the GWFS.
The Government-Wide Statement of Activities demonstrates the degree to which the direct expenses for a
given function or segment is offset by program revenues. Direct expenses are those that are clearly
identifiable with a specific function or segJnent Program revenues include, (1) ch~ 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 ftmction or segment. Taxes and other items not propedy included amoog
program reven-ues are reported instead as general revenues. The general revenues support the net~ aftbe
fimctions and segments not covered by program revenues.
60
City of Lubbock, Texas
Notes tG Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued}
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. 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. However, 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 enterpri~.
funds are reported as separate columns in the FFS. Other non-major. funds are combined in a single column
in the appropriate FFS.
C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING. AND FINANCIAL STATEMENT
PRESENTATION
Fund Financial Statements
The GWFS are reported using the economic resources measurement f<X:us and the aocraal basis of
accounting, as are the proprietary FFS. The City's fiduciary FFS includes .only an agency fi.m.d that uses lite
accrual basis of accounting. However, because agency funds report only assets and liabilities, 1bis fund does
not have a measurement foeas. Revenues are recorded when earned and expenses are recorded when .a
liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues
in the year for which lhey are levied. Grants and similar items are recognized as revenue as soon as ail
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
lite fund colwnns 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 disf.()rt the direct costs and program revenues reported for dte various functions concerned.
For instance, 88.5% of the operations of WIMP A representing transactions between WTMPA and Lubbock
Power & Light have been eliminated for the GWFS presentation and for the electric BT A.
Govenunental FFS are reported using the cWTeOt financial reso'tl.lCeS measurement focus and the modified
accrual basis of ~ounting. This is the traditional basis of accowttirig for governmental tunds. This
presentation is necessary, (I) to demonstrate legal and coverumt compliance, {2) to demonstrate the so~es
and uses of liquid resources, and (3) to demonstrate how the City's actual ~venues and expenditures conform
to lhe annual budget. Revenues are recognized as soon as they are both measurable and available. Revenues
are considered to be available when they are collectible within the cwrent period or soon enough thereafter to
pay liabilities of the cwrent period. For this purpose, the government considers revenues to be available,
geaerally, if they are collected within 45 days of the end of the current fiscal 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
:reeorded when a liability is incurred~ as under accrual accounting. However, debt service expendi~ as
well as expenditures related to compensated absences, and claims and judgments are recorded. only when: ~e
liability has matured. Bec::ause the governmental FFS are presented on a different basis of accounting than the
.QWPS, reconciliation is provided immediately following each fund stat.emenL These· reconciliations explain
the adjustments necessary to convert the FFS into the governmental activities column of the GWFS.
61
(
(
(
c
(
c
c
(
(
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. MEASUREM]l;NT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT
PRESENTATION (Continued}
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 tbe 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 cummt period. AU
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 ~gating transattions related to certain governmental functions or activities.
A fund is a separate accounting entity with a self4>alancing set of accounts, which includes assets, liabilities,
fund balanceloet assets, revenues and expen(litw:eslexpenses.
Governmental funds are those through which most ofthe governmental funCtions of the City are fmanced.
The City reports one major govenunental fund:
The General Fund. The General Fund, as the Cir.y•s primary operating fund, accounts for aU financial
resources of the general government, except those n:quired to be accounted for in another fund.
Enterprise Funds are used to account for operations: (1) 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 Eledrie 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 tbe activities of power
generation and power brokering to .member cities. Member cities include Lubbock with 88.5%
ownership, and Tulia, Brownfield, and Floydada comprising the remaining ll.S% ownership.
The Stormwater Fuud accowtt$ for the activities of the stonnwater utility, which provides stonnwater
drainage for the City.
62
City of Lubbock, Texas
Notes to Basie Financial Statements
September 30, 2005
NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POUCIES (Contillued)
C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING. AND FINANCIAL STATEMENT
PRESENTATION <Contiauedl
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.
The Debt Service Fund is used to account for the accumulation of resolU'CeS for. and the payment of,
generallong·tenn obligation principal and interest (other than debt service payments made by proprietary
funds).
Capital Projects Funds are used to account for financial resources to be used for the acquisition or
construction of major capital improvements (other than tOOse recorded in the proprietary funds).
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 proprietaly fimd'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 fi.mds include the cost of sales and services,
administrative expenses, and depreciation on capital assets. All revenues and expenses oot 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 Fund,
Central Warehouse Fund, Print Shop Fund, SelMnsurance Fund, etc.).
Eater prise Funds are used to account for services to outside users where the fuU cost of providing
services, including capital, is to be recovered through fees and charges, e.g., Lubbock Preston Smith
International Airport (Airport Fund), Cit.ibus, and the Solid Waste Fund.
Fiduciary Funds include an Agency Faad that is used to accouat for IISSets held by the City as an agent
for private organizations.
D. BUDGETARY ACCOQN11NG
The City Manager submits a proposed operating budget and capital improvement plan to the City Council
annually for the upcoming fiscal year. Public hearings are conducted to obtain taXpayer comments, and the
budget is legally enacted through passage of an ordinance by City Council. City Council action is also
required for the approval of any supplemental appropriations. All budget amounts presented in the budget
comparison statemem reflect the original budget and the amended budget. which have been adjusted for
legally authorized supplemental appropriations to the annual budget during the fiscal year. The operating
budget is adopted on a basis consistent with GAAP for the Genetal Fund Budgetary control is II}aintained at
the. department level in the following expendiQ!re categories: personnel services, supplies, other charges, and
63
c
(
c
(
c
(
')
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICmS (Continued)
D. BUDGETARY ACCOUNTING (Continued)
capital outlay. Management may make administrative transfers and increases Qr decreases in accounts wiJhin
categories. as long as expenditures do not exceed budgeted appropriations at dle fund level, the legal level of
control. AU annual operating appropriations lapse at the eod of the fiscal year. Capital budgets do not lapse
at fiscal year end but remain in effect until the project is completed and closed.
rn addition to the tax "levy for general operations, in accordance with State law, the City COlmcil sets an ad
valorem tax levy for a sinking fund (General Obligation Debt Service) which, with cash and investmen& 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 the beginning of the. next fiscal year, management revi~ all open encumbrances. During 1ho h~~
revision process, encumbrances may be re-establishe4. On October 1, 2005, the General Fund had no
significant amounts of open encumbrances.
F. ASSETS. LIABU..lTIES AND FUND BALANCE/NET ASSETS
Equity in Casb 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
equity in the· pOoled account. The City's investments are stated at fair value, which is based on quoted market-
prices as of the v~uation date.
.Casb 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 Jess when purc:hased
which present an insignificant risk of changes in value because of changes in mterest rates.
Investments -Investments include securities in the Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation. and Federal National Mortgage Association. Restricted investments include cash
equivalents and investments that have been restricted for bond financed capital projects and money restricted
for claims in· the Risk and Health Insurance Funds.
Property Tax Receivable -The value of aU real and business property located in the Cit¥ is ~·
annually on January 1 in conformity with Subtitle E of the Texas Property Code. Property taxes are levi~~
October 1 on those assessed values and the taxes are due on receipt of the tax bill. On the foUowmg 1anw ·
1, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imp~
The taxes are considered delinquent if not paid before February 1. Therefore, at fiscal year end.aU 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 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 coflected in the subsequent 45 days. The City allocates property tax revenue between the Gen~
certain Special Revenue, and Debt Service Funds based on tax rates adopted for the year of levy. 1he
Lubbock Central Appraisal District assesses property values, bills, colleets, and remits the pi:Operty ~es, 10
the City. The City adjusts the atlo~ce for uncoUectjb1e taxes and deferred tax reyenue at ~l:y~·~4
based upon historical collection experience. To write. off' property taxes receivable, the ~ty .~ th~:
receivable and reduces .the allowance for uncollectible aocounts.
64
City of Lubbock. Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
F. ASSETS. LIABU..ITIES, AND FUND BALANCE/NET ASSETS <Continued)
Enterprise Funds Receivables-Wdhin the Electric, Water, Sewer, and WTMPA Enterprise Funds, services
rend= but not billed as of the close of the fiscal year are accrued and this amount is retleeted in the
accounts receivable balances of each fund, Amounts billed are reflected as accounts receivable net of an
allowance for un!»llectible accounts.
Inventories -Inventories consist of exp.endable supplies held for oonsumption. Inventories are valued at cost
using the average cost method of valuation. and are accounted for using the consumption method of
acconnting. 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 ente[Jl{isc fUnd aod governmental activities assets are restricted for construction
and debt; consequently, net assets have .been restricted for these amounts. The excess of other restricted
assets over related liabilities are included as restricted net assets for bond proceeds, bond indentures
requirements, and passeng~ facility cbarges.
Mortgage Receivables -Mortgage receivables consist of loans made to Lubbock residents under the Cif¥s
Community Development loan program. These loans were originally funded primarily through grants
received from the U.S. Department of Housing and Urban Development.
Capital Assets aad Depreciation -Capital assets. including public domain infrastructure (streets, bridges,
sidewalk$ 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 $5,000 and an estimated useful life in excess of one year. These capital
assets are reported in the GWFS and the proprietary funds. Capital assets are recorded at cost or estimated
historical cost if purchased or constructed. Donated assets are recorded at the estimated fair value on the date
of donation.
Major outlays for capital assets and improvements are capitalized as the project; are constructed. The cost of
norriJal maintenance 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 1he estimated useful lives as follows:
Jn(C15tnJctutt/Improvements
Buildill&!
Equipmcnt
WBtwrights
10-SO years
15-SO years
3-15 ytaJS
8Syears
Interest Capitalization -Because 1he 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 (FASB) Statement No. 34
Capitalization of Interest Cost and FASB Statement No. 62 Capitalization of Interest Costs. The City
capitalized interest of approximately SS40,000 net of interest earned, for the business-type activities and the
enterprise funds during the current fiscal year.
Advaaees to Other Fnnds • Amounts owed to one fund by another that are not due within one year are
recorded as advances to other funds.
65
c
r ....
c
c
c
c
r "
(
(
)
..,
J
'
City ofLubb~ Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POUCIES (Continued)
F. ASSETS, LIABILITIES, AND FUND BALANCE/NET ASSETS (Continued)
Use of Estimates -The preparation of financial statements in confOrmity with acoounting principles
generally accepted in the United States of AmetU:lr requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of oontingent assets and liabi6ties at
the date of the financial statements and reported am()UntS of revenue'S and expenses/expeoditw:es daring the
reporting period. Actual results could differ from those estimates.
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 tolal citywide six-montb rolling
average monthly balance in pooled cash and investments, except fur certain Fiduciary Funds, certain Special
Revenue Funds, Capital Project Funds, and certain Internal SeJVice Fwtds. The interest iooome on pooled
cash and investments of these funds is reported in tbe Genetal F1md or the Debt Service Fund.
Sales Tax :R.eveaue for the City results from an aJ!ocation of 1.5% of the total sales tax levy of8.25%, which
is collected by the State of Texas and remitted to tbe City 'mOnthly. The tax is collected by the vendor an4 is.
required to be remitted to the State by the 20th of the month following oollection. The tax is. then paid to the
City by the 1Oth 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.
lnterfuod Transactions are accounted for as revenues, expenditures, expenses, or other financing soun:es or
uses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from
that fund U. are propedy applicable to another fund, are recorded as expenditures/expenses in the
reimbursing fund and as reductions of expenditures/expenses in the fund that is reimb~ed. In addition,
transfers are made between funds to shift resources from a fund legally authorized to receive revenue to a
fimd 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 "caaied over" to the next calendar year. The City is
obligated to make payment upon retirement or tennination for any avaiJabJe, unused vacation leave.
Sick leave for employees is accrued at l-Y4 days per month witb a maxDmun. accrual status of200 days. After
15 years of continuous fuU time service for non-civil service personnel. vested sick~ is paid on retirement
or tennination at the current hourly rate for up to 90 days. Upon retirement or termination, Civil Sef1{ice
Personnel (Police) are paid for up to 90 days accrued sick Leave. after one year of emplo)'lllent. Civil Service
Personnel (Ytrefigbtecs) are paid for up to 90 days of a.caued sick leave upon reti.remeut or tennination. The
Texas Civil Service laws dictate cer1ain benefib and personnel policies above and beyond those. policies of
the City.
The liability for the accumulated v~ation and sick leave is recorded in the GWFS and in the FFS for
proprietary fund emp1oyees when earned. The liability is recorded in tbe govermnental FFS to the extent it is
due and payable.
66
City of Lubbock, Texas
Notes to Basi( Financial Statements
September 30, 2005
NOTE l. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cootioued)
G. REVENUES, EXPENSES AND EXPENDll'URES (Continued)
Post Employment Benefits for retirees of the City of Lubbock include the option to purchase health and life
insurannc benefits at their CJwn expense. Howevcc, employees that retire with 15 years of service or Civil
Service employees that retire who have a balance in excess of 90 days will be able to elect to continue
~iving medieal coverage in full30-day periods for the term ofthe balance of their sick leave. Amounts to
eover premiwns and administrative costs, with an incremental charge for reserve funding, are determined by
the City's health care administrator. Employee contributions are funded on a pay-as-you-go basis and
approximated $1.4 million for fiscal 2005. These contributions are included in the amount of insurance
expense reflected in the financial activity reported in the Health Insurance fntemal Service Fund.
NOTE n. STEWARDSB:Dt, COMPLIANCE AND ACCOUNTABILITY
A. RESTRICTED NET ASSETS
Restricted net assets are only used for their intended purpose. For projects funded by tax exempt debt
prCJcecds, the debt proceeds are used first, then lllll'e.Str1cted resources are used.
B. NET ASSET/FUND BALANCE DEFICIT
The deficit of $1~,403 in the Permaocnt Street Maintenance Capital ProjectS Fund is due to timing differences of
iocurring capital oll!lay expenditures for an intemally financed project. When remaining capital projects are complete in
the Permanent Street Maintenance Capirat ProjeclS Fund, a traDSfer wiD be recommended to cover the deficit. No other
funds of the City had deficits in either total fund balances or total net 3SSC(S.
NOTE m DETAIL NOTES ON ALL ACfiVITIES AND FUNDS
A.. CASH AND INVESTMENTS
Deposits
Custodial credit risk is the risk that in the event of a bank failure, a government's deposits may not be
returned to it The City's deposit policy for custodial credit risk requires compliance with the provisions of
state law ..
State law requires collateralization of all deposits with federal depository inslll'81lce, eligible securities, or a
surety bond having an aggregate value at least equal to the amount of the deposits. The City's Investment
Policy requires the minimum collateral level to be I 02% of market value of principal and accrued inten:st.
Citibus and American State Bank are not in compliance with the City's investment policy, the Public Funds
Invt;Stment Act and the Public FWids CoUateraLAct.
At September 30, 2005, $1,973,078 of bank balances of $2,373,078 was exposed to custodial credit risk as
follows:
Uninsured and uncollatctalizcd
Uninsured and collateral held by pledging fmancial institutioo
Uninsured and collateral beld by pledging financial institution's lnlSt departmeflt or agent in other
than the City's name
67
s 36t.3n
1,6Il,701
Sl.9J3.078
c
c
c
c
(
c
)
City of Lubbock, Texas
Notes to Basie Financial Statements
SeptMnber30,2005
NOTE m. DETAD., NOTES ON ALL ACfiVITIE'S AND FUNDS (Contioued)
A. CASH AND INVESTMENTS (Continued>
lavestments
At September 30, 2005, the City had ·the fOllowing investments and maturities:
September 30, ZOOS
Maturities ill Years
Less 1-5 TII!e FalrValue Tbanl
Repurchase agreements • $ 1,382,123 $ 1,382,123 $
Federa.l Home Loan Banks (FHLB) 13,836,400 7,931,400 S,90S,OOO
Federal Home Loan Morf&&gC
Corporaliou (FHLMC) 1,915,600 1,975,600
Federal National Mortpgc
Association (FNMA) 7,917,000 7,917,000
Money martcet mutual funds •• 98,931,041 98,931,041
State Investment Pools •• 101,07~003 101,07S,003
$ ~~ 111.167 $ 212-~l~l~:Z $~~~11QQ
*Considered cash. equivalent for financial reporting. •• Money nwlcet mutual funds aod Sta1c Jnvcstmeot Pools are
considered cash equivalents for fiR!UlCial reporting. unless restricted for bond financed capital projects and claims for
Risk and Health Insurance Funds.
Interest Rate Risk~ As a means of limiting its exposure to .fair valua losses arising:·ftom rising interest rates,
the City's investment policy timits .inYestmeats to those that caa be held to maturity and by limiting final
maturity to no more than five (5) years. Tbtnnoney nwket mutual funds and investment pools are presented
as an investment with a maturity of Jess than one year because they are redeemable in full immediately.
Credit Risk-Credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its
obligations. The City's policy allows 'investment in direct obligations of and other obligations guaranteed as
to principal of the U.S. Treasury and U.S. agencies and instrumentalities with the exception of mortgage
backed securities. It allows obligations of investment in the State of Texas or its agencies and obligations of
states, agencies, counties, cities. and other political subdivisions rated not less than A or its equivalent. It may
also invest in fully collateralized repun;hase agreements, fully collateralized certificates of deposit,
commercial paper and bank acceptances with a stated maturity of270 days or fewer from the date of issuance.
AAA-cated, n~load money market mntual fimds regulated by the Securities and Exchange Commission, and
AAA-nted, constant dollar AAA~rated investments pools authorized by the City CounciL At SeptembeT 30,
2005,. Standard & Poor"s rated the investnu:nt pqols AAAm. and Moody's rated the mooey market mutual
funds Aaaa. The senior unsecured debt for ..investments in FNMA and Fm...MC are rated AAA by Standard &
Poor's and Moody's.
Custodial Credit Risk~ For an investment, custodial credit risk is the risk that, in the event of the failure of the
counterparty, the City will not be able to recover the value of its investment or collateral securities that are in
the possession of an outside party. The City required that deposits and repurchase agreements be held in an
institution that has a minimwn collateral level of 102% of the market value. FHLB, FHLMC, and FNMA
investments are held in the c~·s name in third party safekeeping by a Federal Reserve member financ~l
institution designated as a City depository. The City Shall maintain a. USt of autllorized broker/dealer$ and
financial institutions, which are approved by the Audit Conuniltee for inveslment purposes.
68
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Coatiaued)
A. CASH AND INVESTMENTS (Continued)
Concentration of Credit Risk -The City places limits on the amount that may be invested in any one issuer
with the exception of United States TreasUJY obtigations. At September 30, 2005, the City's investments
constituted the following percentages of total investments: repurchase agreements -0.6%, "FHLMC • 0.9%,
and FNMA-3.5%.
Foreign Currency Risk -This risk relates to adverse affects on the fair value of an investment from changes in
exchange rates. The City has no foreign currency risk.
B. INTERFUND TRANSACTIONS
lnterfund balances, specifically the due to and due from other funds., are sbotHenn loans to cover temporary
cash deficits in various funds. This occasionally occurs prior to bond sales or grant reimbw:sements. These
outstanding balances are repaid within the foltowing fiscal year.
Interfund balances, specifically advances to and from other funds, are longer-term loans to cover Council
directed internal financing of certain. projects. At September 30, 2005 the City has nearly $22.6 million of
this type of internal financing. These balances are assessed an interest charge and are repaid over time
through operations and transfers.
Net inlerfund receivabJes and i>i'Yables between governmental activities and business-type activities in the
amount of $6,076,822, are included in the government-wide financial statements. The foUowing amounts due
to other funds or due from other funds, including advances, ate included in the fund finueial statements (all
amounu in thousands):
laterf"nd Receivllbles (Thouuads)
Governmental Fuacls Proprietary Funds
laterfoad Payables (Thousands) Non--Major Noa-Major Internal
General Govcra1111ent WTMPA Enterprise Service Totals
Governmeatal Funds:
Non-Major Governmental $ 1,738 $ 4,202 $ $ 52 $ S,992
Proprietary Funds:
Electric 11,299 11,299
Stonnwater 4,500 4,500
Non-Major Enterprise 850 s 8SS
Tocals $ 7,088 $ 4,202 s 11,299 $ st $ 5 s 22,646
Net transfers of $15,468,165 from business-type acti:vities to governmental activities, up $5.8 million from
the prior year, on the government-wide statement of activities is primarily the result of I) debt service
payments made from the debt service fund, bot funded from an operating fimd; 2) subSidy 1rallsfers from
unrestricted funds; and 3) transfers to move indirect cost allocations, payments in lieu of taxes (PIL01), and
franehise fees to the general fund or other funds as appropria~. The following interfunCI transfers are reflected
.in the fimd fmancial statements (alJ amounts in thousands):
69
c
c
c
(
r ..
(
(
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
B. INTERFUND TRANSACfiONS (Continued)
lnhrfund Tl"IUisfers Oat: (Tboasands~
Govemmental
Funds Proprie&i!:z Fancb
Nomnajor Storm-Nonmajor lnteral.
lnterfund TraDSfers General Gov. Electric Water Sewer Water Enterprise Service T~s
In: (Thousands)
Governmental Funds:
General Fund $ -$ 872 $ 797 $ 4,531 $ 2,505 $ 991 s 2,865 s 3,998 $ 16,565
Nonrnajor Gov~ental 3,053 1,016 1,219 835 6,123
PAprietary Funds!
Electric 2S 2S
Water 147 147
Sewer 5,000 .s,ooo
Stonnwater 129 129
WTMPA 307 307
Nonmajor Enterprise &49 664 51 1,564
Intetml Servi«: Funds 10 197 207
Total s 3,912 $ 2,828 $ 1,104 $ 4,S37 S 2,SOS s 991 $ 9,332 $ 4,858 $ 30,067
C. DEFERRED CHARGES
The wtal deferred charges of$3,211,110 in the LP&L Enterprise Fund repi'CSCilts an advertising contract with
the United Spirit Arena. The advertising (and amortization) began with the opening of the sports arena in
fillcal year 2000 and will continue for 30 years.
D. CAfiTAL ASSETS
Capital asset activity for the year ended September 30, 2005, was as follows:
70
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVI1'IES AND FUNDS (Continued)
D. CAPITAL ASSETS (OJntirtued)
Primary Government:
Governmental Activities
Begiaaing Ending
Balance lacreases Deereases Balances
Capital Assets Not Depreciated:
Land $ 8,608,249 s 496,946 s 154,095 $ 8,951,100
Construction in Progress 43,472,022 15,626,731 21,305,325 37,793,428
Total Capital Assets Not Depreciated 52,080,271 16,123,677 21,459,420 46,744,528
Ctpital Assets Depreciated:
Buildings 51,454,278 6,181,112 29,345 57,606,045
Improvements Other than Buildings 129,651,115 11,345,076 4,597,201 136,398,990
Machinery and Equipment 52,954,673 9,8512_76 2,563,173 60,242,876
Total Capital Assets Depreciated 234,060,066 27,377,564 7,189,719 254,247,911
Leu Accumulated Depreciation:
Buildings 27,660,190 1,811,465 11,782 29,459,873
Improvements Other than Buildings 92,468,340 4,195,013 4,159,593 92,503,760
Machinery and Equipment 36,997,929 5,917,503 2,500,777 40,414,655
Total Aa:umulated Depreciation 157,126,459 11,923,981 6,672,152 162,378,288
Total Capital Assets Depreciated. Net 76,933,607 15,453,583 517,567 91,869,623
Governmental Activities Capital Assets, Net $ 129,013,878 $ 31,577,260 $ 21,976!987 $ 138,614,15 l
Depreciation expense was charged .to functions/programs of the governmental activities as foUows:
Governmental activities:
General Government
F"manciaJ Suvices
Human Resources
Administnltion!Communlty Services
Fire
Police
Streets
Electric
Internal Service Funds
Total depreciation expense -go'Yet'IU11elltal activities
Transfer in to accumulated depreciation -governmental activities
Increase in w;umulabld depreciation-governmental activities
71
$ 357,216
5,279
4,636
4,284,.580
985,657
2,199,601
3,514,289
244,734
107,670
ll,703,662
220,319
$ 11,923,981
c
(
(
c
c
(
c
(
(
')
...
)
)
City of Lubbock, Tens
Notes to Basic Financial Statemenu
September 30, 2005
NOTE ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
D. CAPITAL ASSETS {Continued}
Buiness-Type Activities
Begirtlli ag Ending
Balartce Ia creases Decreases Balances
Capital Assets Not l)epreciated:
.Land $ 31,676,155 $ 361,678 $ 89,122 s 31,948,711
Construction in Progress 113,961,371 33,298,426 18,827,618 128,432,179
Total Capital Assets Not Depreciated 145,637,526 33,6·60,104 18,916,740 160,380,890
Capital Assdl Depreciated:
Buildings 96,928,778 114,152 15,184 97,()127,146
Improvements Other than Buildings 574,358,968 35,064,830 4,011,628 605,412,170
Machinay and Equipment 132,757,563 9,450,490 3,537.365 138,670,688
Total Capital Assets Depreciated 804,045,309 44,629,472 7,564,m 841,110,004
Less Accumulated Depreciation:
Buildings 28,627,056 2,459,327 10,691 31,075,692
Improvements Other than Bnildings 243,517,538 16,291,923 1,790;1.71 258,019,184
Machincey B.Dd Equipment 65,835,597 12,083,156 2,966,326 74,952,427
Total Accumulated Depreciation 337,980,191 30,834,406 4,767,294 364,047,303
Total Capital Assets Depreciated, Net 466,065,118 13,795,066 2t797,483 477,062,701
Business-Type Activities capital AssCIS, Net $ 611 '702,644 $ 47,455,170 $ 21,714,223 $ 637,443,591
Depreciation expense was charged to functions/programs of the business-type activities as follows:
Business-Type .Activities:
Elecuic
waur
Sewer
Stonnwate.r
Solid Waste
Airport
Transit
loternal Service Funds
Total depreciation expense-business-type aaivities
Transfer in to ~J~XUmulated de~ation-business-type activities
Increase in accumulated depreciation -business-type ac:civities
72
$ 9,059,285
5,950,475
5,096.,596
546,314
4,930,067
3,211,033
1,329,282
243,163
30,366,215
468,191
$ 30,834,406
City ofLubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m DETAll.. NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
D. CAPITAL ASSETS (Continued)
Construction Commitments
The City had many construction projects in progress at fiscal year end. The Parks Department continues, to
wort on updating inigation and park lighting. A large street project involving 'Milwaukee Avenue, 34111 Street
to 98th Street is under way. The project falls under the Gateway Street Projects Fund.
Electric projects included upgrades to their infrastructure. Water projects included expanding water lines to
new areas of town to increase water availability. Sewer projects included construction of sewer fines ahead
.of the Marsba-SJwp Freeway. Solid Waste projects include the construction and site development for a new
recycling drop off center and the upgrade of existing sites. Work on Airport taxiways comprises the majority
of the Airport's spent to date number. Two of the City's largest construction project3 are related to
Stonnwater. The first project provides for the construction of an outfall storm sewec from Clapp Parle: to
Yellowhouse Canyon and a series of upstream storm sewers that will provide various protections aro!Jlld four
playa Jakes. The second project provides for the construction of a flood relief project for sOuth Lubbock's
chain of playa lakes.
Original Remaining
.Projects Commitments Spent-to-Date CommitimenC$
Public Safety $ 1,801,772 $ 184,051 $ 1,617,721
Park.Jmprovcments 20,200,528 7,126,221 Jl,074,307
Street Improvements 26,171,525 15,511,742 10,659,783
Oenecal CapiW Projects 1,093,426 114,198 979,228
General Facilities Improvements 5,693,276 4,352,183 1,341,093
Tax Increment Fund Capital Projects 15,023,670 2,665,317 12,358,353'
Gateway Street Projects 9,000,000 6,405,700 2,594,300
.Electric 17,417,727 12,248,740 5,168,987
Water 61,381,231 50,610,861 10,770,370
Sewer 9,855.482 6,893,671 2,961,811
Solid Waste 3,668,680 1,296,565 2,372,115
Airport 29,667,471 4,763,256 24,904,215
Stormwaler 75,353,518 51,964,009 23,389,509
Internal Service Fund 1.450,000 1,100,582 349,418
Total $ 277,778,306 l 165,237,096 $ 112,541,210
73
c
c
c
c
(
c
(
(
<
)
)
)
)
City of Lubbock, Texas
Notes to Basie Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
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 {TMR.S) 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 (ll'etighters)
through a non-traditional, joint contributory, hybrid defined ben~fit pJan in the state-wide TMRS, one of 801
administered by TMRS, an agent multiple-employer public employee retirement system.
Benefits depend upon the swn of the employee's contributions to.tbe 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 e4ual to two times what would have been contributed
by the employee, with interest,. prior to establishment of the plan. Monetary credits for service since the plan
began are a percent (100%, 150%, or 200%) oflhe employee's ~ated 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 accwnulated with interest if the current employee contribution rare and City matching percent
bad always been in existence and if the employee's saJary had always been tbe average of his salary in the last
dtree years that are one year before the eff~tive 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 pw-chase an annuity.
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. Members can retire at ages
60 and above with 5 or more years of service or with 2(). years of service regardless of age. A member is
vested after 5 years.
Contributions
The contribution rate for the employees is 7% and the City matching ratio is currently 2 to 1'1 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
pen:ent 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 (he obligation of the City as of an employee's
retirement date, not at th.e time the employee's contributions are made. The normal cost contribution rate is
the actuarially determined pe~t of payroll necessary to satis4' ·the obligation of the City to each employee
at the time his/her retirement becomes effective. The prior service contribution rate. amOrtizes the unfunded
(over.fullded) 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 contnoution rate. Both the employees and 1be
City make contributions monthly. Since the City needs to .know its contribution rate in advance for budgetary
74
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m DETAIL NOTES ON ALL AC11VITIES AND FUNDS (Contin11ed)
E. RETIREMENT PLANS CCoatiDuedl
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 3 J, 2004 valuation is effective for rates beginning
January 2006).
Actuarial Assumptions
The actuarial assumptions for the December 31, 2004 valuations ate as follows:
Ac::tuarlal cost method: UnitCRdit
Amortization method:
Remaining amortization period:
Level percent of payroll
25 years-open period
Amortized cost Asset valuation method:
Investment rate of return:
Projected salary increases:
lDcludes inflation at:.
Cost of Living adjustments:
As of
September 30
2003
2004
2005
7%
None
3.5%
None
Annual Pension
Cost
s 8,803,613
8,708,867
9,933,373
Contribution
Made
8,803.613
8,708;867
9,933,373
TEXAS MUNICIPAL RETIREMENT SYSTEM
TIIREE-YEAR HISTORICAL SCHEDULE OF AC11JARIAL LIABJLmES
AND FUNDING PROGRESS REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
As of Aetvarial Value of
Detemberll Assm
2002 $ 181,191,012
2003 182,8&4,183
2004 186,398,545
As of Annual Covend
Deeember31 Payroll
2002 $ 60,2SS,077
2003 57,577,743
2004 61,931,003
Actuarial
Acm~ed
Liability
22&,372,843
239,809,434
243,432.807
UAALasa%
Of Covered
Payroll
78.3%
98.9%
100.2%
Percentage
Fun !fed
79.3%
76.3%
15.0%
Ua&adcd
Actuarial
Accrued
Liability
(UAAL)
47,181,831
S6,925,2Sl
62,034,262
The City of Lubbock Is one of 801 municipalities having the benefit plan administered by TMRS. Bach of
the municipalities has an annual, individual actuarial valuation perfonned. AU assumptions for tbe December
3'1.. 2004 valuations are contained in the 2004 TMRS·Comprehensive Annual Financial Report, a copy of
which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153.
75
c
c
c
c
c
" ..
(
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
E. RETIREMENT PLANS (Continued)
LUBBOCK FIREFIGHTER'S RELmF AND RETIREMENT FUND (LFRRF)
Plan Desc:ription
The IJoard of Trustees of" the LFRRF is the administrator of a single-employer defined benefit pert$ion plan.
This pension fund is a .trust fund. 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 are covered by
theLFRRF.
The LFRRF provides service retirement, death, disability and withdrawal benefits. These benefits fully vest
aftec 20 years of credited service. A parliaUy vested benefit is provided for firefighters who terminate
employment with at least 10 but less tban 20 years of service. Employees may retire at age 50 with 20 years
of service. A redut:ed early service retirement benefit is provided for employees who terminate employment
with 20 or more years of service. The LFRRF Plan effective November 1, 2003 pr.ovides a monthly nonnal
service retirement benefit, payable in a Joint and Two-Thirds to Spouse fonn of annuity, equal to 68.92% of
final 48-montb average salary plus $33S.OS per month for each year of service in excess of20 years.
A firefighter has the option to parti.cipJte in a Retroactive Deferred Retirement Option Plan (RETRO D~OP)
which provides a lump sum benefit and ·a reduced annuity upon termination of employment. Firefighters must
be at least S l years of age with 21 years of service at the selected "RETRO DROP b.enefit calculation date"
(which is prior to date of employment termination). Early REfR.O DROP with benefit reductions is available
at ·age 50 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 benefrts under the option is actuarially equivalent to
that of the nonnal form of the monthly benefit Optional forms are atso 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 autbor:ized 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 Jaw requires that each pJan of benefits adopted by LFRRF be .approved by ail eligible act:uazy. The
actuaxy certifies that the contribution commitmen* by the firefighters and ·the City provides an adequate
financing arrangement Using the entry age actuarial cost method, LF'RRFs normal, .cost contributi®, rate is
determined as a percentage of payroll. The .excess of the total conttib.:ution rate over the .nonnal cost
contribution rate is used to amortize LFRRFS unfunded actuarial accrued liability (UAAL), if any, and the
number of years needed to· amortize LFRRFs unfunded actuarial liability, if any, is determined using a level
percentage of payrol1 me1hod. ·
The costs of administering the plan are financed by LF'RRF.
76
City of Lubbock, Texas
Notes to Basic Financial Stat~ments
September 30, 2005
NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
E. RETIREMENT PLANS <Continued)
Annual Pension Cost
For the fiscal year ended September lO, 2005, the City of Lubbock's Annual Pension Cost (APC) for the
Lubbock Fire Fund was equaJ to $3,016,942 as described in item 4 in the table below. Based on tbe results of
the December 31, 2004 actuarial valuation of the Plan Effective November 1, 2003, the most recent biennial
actuarial valuation, the Board's actuaty found that the fund had an adequate financing arrangement, as
described in the paragraph below, based on the fixed level of the firefighter contributi<m rates and on the
assumed level of City contribution rates. Based on the Plan Effective November l, 2003, LFRRF's funding
policy -requires contributions equal to 12.43% of pay by the firefighters. Contributions by the City are based
on a fonnula, which causes the City's contribution rate to fluctuate from year to year. The December 31,
2004 actuarial valuation assumes tbat the City's contributions will average 19% of payroll in the future.
Therefore, based on the December 31, 2004 aetuarial valuation of the Plan Effective NoYCmber t, 201)3, the
Annual Required Contributions (ARC) are net actuarially determined but are equal to the City's actual
contributions beginning January 1. 2005. This actuarial valuation satisfied the pananeters of the
Govemmental Accounting Standards Board (GASB) Statement No. 21. Prior to January 1, 2005, the ARC
were not actuarially determined but, based on the December 31, 2002 actuarial valuation, were equal to the
City's actual contributions in calondar year 2004. This actuarial valuation also satisfied the parameters of
GASB Statement No. 27.
The following shows the development of the Net Pension Obligation (NPO) as of September 30, 2005:
1. Annual Required Contributions (ARC)
2. lnterest on NPO
3. Adjustment tn ARC
4. Amlual Pension Cost (APC)
5. Actual City cootn"butions made
6. Increase (Decrease) in NPO/(asset)
7. NPO/(asset) at Oqober I, 2004
8. NPO/(~t) at September 30, 2005
$3,028,406
(71,812)
60,348
3,016,942
(3,028,400)
(11,464}
(897,648)
($909,112)
The ARC for the periad October '1, .2004 through September 30, 2005 was based on the December 31, 2002
and the December 31, 2004 actuarial valuations. 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 11 0% or less
tbaa 90% of the market value of assets. Tho actuarial assumptions included in an investment retam
assumption of 8% per year (net of expenses), projected salary increases including promotion and longevity
averaging 5.7% per year over a 3()..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 nonnal cost rate. The
nwnber of years needed to amortize the UAAL is determined using an open, level percentage of payroll
method,. assUming that the payroll will increase4o/e per year, and was 24.7 years as of the December 31, 2002
actuarial valuation and '20.6 years as of December 31, 2004 actuarial valuation, both based on the plan
provisions effective November 1, 2003.
77
c
c
c
,.
\,
<
)
)
)
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m DETAn.. NOTES ON ALL AcriVITIES AND FUNDS (Continued)
E. RETIREMENT PLANS (Continued)
Futther details concerning the financial position ofth.eLFRRF and the latest actuarial valuation are available
by contacting the Board of Trustees, LFRRF, City of Lubbock, P .0. Box 2000,. Lubbock, Texas 79457. A
stand~alone financial report is available by contacting the LFRRF.
Fiscal Year Ended
9130/03
9/30/04
9130105
Trend Information
Annual Pensioa Cost
(APC)
s 1,964,788
2,582,713
3,016,942
Percentage of.APC
Contributed
111%
101
100
Analysis of Fuading Pro&ress
Net Pensioo ObUgation
(Asset)
(882,623)
(897,648)
(909,112)
Reqoired Supplementary Iaformatioa (Uaaudited)
Actuarial
Valutio11
Date
12131/00 1,2
12131/0'l 1,3
12131/04 s
Aduarial
Value of
Assets (a)
$119,660,788
1 J 1,261,775
130,174,984
EDtryAge
Ac:tutrial
Ac:craed
Liability
(AAL)(b)
114,675,049
127,850,414
143,991,975
Uafueded
AAL
(UAAL) ·
/Funding
excess (b-!)
(4,985,739)
16,588,639
13,816,991
I. Economic and demographic asswnptions were revised.
hnded
Ratio (alb)
104.3%
87.0
90.4
2. Reflects cb.anges in plan benefit provisions effective December I, 2001.
3. Retlects changes in plan benefit provisions effective November 1, 2003.
Aua•al
C.overed
~yroll (c:) 4
12,243,913
13,521,366
14,711,366
4. The covered payroll is based on estimated annualized salaries used in the valuatioo.
S. Demographic assumption was revised.
F. DEFERRED COMPENSATION
UAAU
F~ucrrac
Exeessas a
Pereentage..of
Covered
Payroll
((b--a)fe)
(40.7)%
122.7
93.9
The City offers its employees two deferred compensation plans in accordanc.e with rntemat Revenue Code
("lRC") Section 4S7. The plans, available to all City employees, permit them to defer a portion of their
salaJy until future years. The deferred compensation is not available to employees until termination,
teti.remellt, death, or unforeseeable emergency. The plans' assets are held in trust for the exclusive-benefits of
the participants and their beneficiaries.
Tho City does not provide administrative se~Vices or have any fiduciary responsibilities .for the$o pJaDS;
therefore, they are not presented in the BFS.
78
City of Lubboc~ Texas
Notes to Basie Financial S~tements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITI&S AND FUNDS (Continued)
G. SURFACE WATER SUPPLY
Canadian River Municipal Water Authority
The Canadian River Municipal Water Authority (CRMWA) is a Conservation and Reclamation Distri:ct
established by the Texas Legislature to construct a dam, water reservoir, and aqueduct system for the purpose
of supplying water to surrounding cities. Th.e DisniGt was created in 1953 and comprises eleven cities,
including the City of Lubbock. The budget, financing, and operations of the District are governed by a Board
of Directors selected by the governing bodies of each of the member cities, each city being entitled to one or
two members dependent upon population. At September 30, 200S, the Board was comprised of 18 members,
two of which represented the City.
The City contracted with lite CRMW A to reimburse it far a portion of the cost of the Canadian River Dam
and aquedr.«<t system in exchange for surface water. 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 FY 1999,long-tenn 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
FY 1999, bonds' in the prineipal amount of $12,300,000 were issued to pay off the constiUction obligation
owed to the U.S. Bureau of Reclamation via CRMWA in the amount of $20,809,067. The difference of
$8,509,061 was a discount in the remaining principal provided by the U.S. Bureau of Reclamation to the
member cities. This discount bas been recorded as a defecred gain on refunding and is being amortized over
the life of the refunding bonds. At September 30, 2005, $5,454,761 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.
The Canadian River Munictpal Authority issued a new Contract Revenue Bond, Series 2005 on April 29,
2005, in the amount of $48,125,000. The City of Lubbock shared in that issue for $17,960,000 and other
costs ot: $850,296, and received depreciable assets (water rights) valued at $18,810,296. These assets and
liabilities are recorded in the Wakr 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 lmown 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 ofa dam and lake facilities on the South Fork of the Double Mountain Fork
of the Brazos River. The BRA issued $16,970,000 in revenue bonds in 1989 and $39,685,000 in revenue
bonds in 199.1, which were refi.mded in July 1995. The asset, Lake AJan Henry dam and facilities, are
recorded as ca.Pital assets and are being depreciated over 50 years. The financial activity, along with related
obligation, is accounted for in the Water Enterprise Fund.
Special Item
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 JP Morgan Chase. The forward starting swap was fashioned
to aUow the City to issue variable rate, tax-exempt bonds in a current refunding on the call date in August
2005. The variable rate bonds could then be swapped for a fixed rate of 5.26%.
79
c
c
,.
c
(
(
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30) 2005
NOTE m. DETAR. NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
G. SURFACE WATER SUPPLY (Continued)
On August 15, 2005, the Ci~ chose to terminate the SW(lp and issue Tax & Watetworks. Revenue Refunding
Bonds, series 2005 in the amount of$43,080,000 to retire the Brazos River Authority Bonds of 1995 in the
amount of$43, 740,000. The new issue bas an avenge coupon rate of 4.84%, payable throusJt FY 2021.
On the date of the bond issuance and swap termination, the swap had a negative fair value of·$6;612,000.
The fair value was developed by using the zero coupon method. This method calculates the future net
settlement payments required by the agreement a~ that the cutrent fOrward rates implied by the jield
curve correctly anticipate firtttre spot interest rates. These paymc:nts are then ~omrted using the spot rates
implied by the current yield curve for hypothetical zero.conpon bond$ due m1 the date of each {\lture net
settlement on the swap.
While the net present value of the combined refunding and swap termination agreement resulted in an
economic break ..even transaction, the swap tennination and related expenses resulted in an accounting loss of
$6,637,093.
80
City ofLubbock, Texas
Notes to Basic Financial Statements
September 30, lOOS
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
H. LONG-TERM DEBT
GENERAL OBLIGATION BONDS AND CERTIFICATES OF OBLIGATION:
Interut Issue Maturity Amount Oatstaadiug
Rate% Dllte Date Issued ~
s:39 10-01-93 02-15-14 3,625,000 1,645,000
5.39 10-01-93 02-15-14 2.550,000 1,170,000
5.20 IO.Q1-93 02-ts-14 1,470,000 225,000
5.14 10-01-93 02-15-14 19,21S,OOO 2,895,000
5.07 12-15-95 02-15-16 6,505,000 325,000
5.01 12-15-95 02-LS-16 10,000,000 500,000
4.91 01 -15-97 02-15.09 17,530,000 7,{95,000
4.61 01..01-98 02-15-08 1,330,000 470,000
4.71 01~01-.98 02-15-18 10,260,000 3,0&5,000
4.36 01-15-99 02-lS-14 20,835,000 18,650,000
4-.58 01-15-99 02-tS-19 15,355,000 3,08(},000
4.71 04-01-99 02-15-19 6,100,000 1,220,000
4.71 04-0l-99 02-15-19 12,300,000 8,680,000
5.37 09-15-99 02-15-20 24,800,000 4,035,000
5.54 03-15-00 02-15-20 7,000,000 1,135,000
4.90 02-01-01 02-IS-21 9,100,000 1,910,000
4.81 02-01..01 02-15-21 2,770,000 700,000
S.2S 06-01-01 02-15-31 35,000,000 22,360,000
4.68 02-15-02 02-l.S-22 9,400,000 8,790,000
4.71 02-15-02 02-15-22 6,450,000 6,025,000
4.70 02-15-02 02-lS-22 1,545,000 ),441),000
4.62 07-01-02 02-15-22 2,605,000 2,345,000
3.18 01-01-02 02-15-10 10,810,000 6,240,000
4.42 OH5..03 02-15-23 11,885,000 10,840,000
4.47 07-15-03 02-15-24 9,775,000 9,455,000
4.48 07-15-03 02-15-24 685,000 660,000
4.47 07-lS-03 02-15-24 3,595,000 3,475,000
4.87 07-15-<13 02-15-34 40,135,000 39,430,000
4.47 07-15-03 02-15-24 3,800,000 3,675,000
4.60 08-15-03 04-15-23 8,900,000 8,140,000
4.60 08-15-03 04-15-23 13,270,000 12,145,000
4.37 06-3().04 08-01-12 1,000,000 875,000
4.09 09-28-04 02-15-24 2,025,000 1,80S,OOO
4.08 09-28-04 02-15-24 3,100,000 2,690,000
3.58 09-28-o4 02-15-20 22,620,000 22,620,000
4.63 02-15-05 04-15-25 23,055,000 23,055,000
4.90 06-IS·OS 02-15-21 49,615,000 49,615,000
4;84 08-15-05 02-15-25 46,525,000 46,525,000
4.84 07-15-05 02-15-25 7,265,000 7,265,000
4.84 01-15.()5 02-15-21 43,080,000 43,080,000
Total $526,885,000 389,470,000(A)
(A) Excludes ($4,075,761) net deferred losses on advance rcfundings, net bond premiums and. discounts, and
bond issuance costs -($2,209,777) business-type and {$1,865,984) governmen1al. Additiotl8lly. this
amouo.t includes $286,749,731 of bonds used to finance enterprise fund activities.
81
c
c
c
(
c
c
,
\.
<
)
)
)
)
)
City of Lubboek, Texas
Notes to Basic Finaneial ~tatements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
H. LONG-TERM DEBT (Continued)
At September 30, 20(lS; management of the City believes that it was in compliance with all finanoia1 bond
covenants on outstanding gen~ obligation bonded debt. certificates of obligation, and water revenue
bonded debt.
LP&L REVENUE BONDS
Balanc.e
Final Amount Outsf.1Uidi11g
Interest Rate(%} Issue Date Maturity Date Issued 9-~S
3.80toS.SO 6-15-95 4--IS-08 $ 13,560,000 $ 3,150,000 .us to 6.25 1..0[-98 4-15·18 9,110,000 5,980,000
3.10toS.OO 1.15.-99 4-JS-l9 14,97S,OOO 8,;350,000
4.00to 5.25 7-01-01 +1S..21 9~001000 71360,000
Total $ 46,905,000 $.24,840,()()0 •.
~ Balanc.e outstanding excludes $374,792 of net defem::d losses on advance refundings, bond
premiums and discounts, and bond issuance c:osts.
Interest Rate
5.25%
Issue Date
OTHER REVENUE BONDS
Final
Maturitt Date
09-30-15
Amount
Issued
17,960,000
Balance
Outstancliag
9-36-0S
17,960,000
$17,960,000 $17,960,000 •
• Bal.ance outstanding excludes ($720,463) discount and deferred losses on bonds sold or
refunded.
The annual requiroments to -amortize all outstanding debt of the City as of September 30, 2005 are as follows:
Governmen(al Adivities Business-Type Activities
Fiseal General Obl~gation Bonds General Obligation Bonds Revenae Bond$
Year Prindpal late rest Principal lllterest Priaciel Internt
20Q6 $ 5,789,10·1 $ 5,611,663 s 14,695,899 $ 12,216,667 $ 2,930,000 $ 2,0J3,S60
.20C11 (i,O.S.492 5,341,816 1~,654,508 11,218,843 3,515,000 1,869,050
'2008 5,909,994 5,278,407 ts,46S,006 10,423,992 3,175,000 1,71~,716
20.09 S,9\3,6S4 4,842,203 1.5,376,346 9,988,235 2,390,000 1,574,105
2010 5,694,419 4,512,158 !S,4SO,S82 9,375,175 2,410,000 1,467,770
20'11~2015 28,S87,609. 13,482,794 76,877,390 42,179,667 Jl,060,000 5,816,184
2016-20'io 25;215;000 7,700,2SS 68,560,000 24,627,964 10,405,000 3,lSJ,711
202I-2o2S 19,505,000 2,031,801 l4,36S,OOO JJ,S42,337 6,905,000 877.081
2020.2030 18,850,000 S,425.Sl3
2031-2035 11,455,000 1,008,015
Totals $ 102,720,269 $ 48,861,697 $ 286,749,731 $ 138,006,408 $ 42,800,000 $ 18,483,237
82
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m DETAIL NOTES ON AU. ACI1VITIES AND FUNDS (Continlled)
H. LONG-TERM DEBT CContiaued)
Capital leases were used to acquire equipment and vehicles. The interest rate on the leases ranged from 2.0%
to 4.4%. The 8JU1ual requirements on capital leases ofthe City as of September 30,2005, including interest
payments of$477,552 are as follows:
Govern.neatal Busineu-Type Total
Capital Lean Capital Lease Capital Lease
Fitcal Minim am Minimum Minimum
Year Parment Payment Payment
2006 $ 1,161,281 $ 584,092 $ 1,751,373
2007 679,.328 461,618 1,140,946
2008 679,.328 JJO,I24 BQ9,4S2
2009 659,569 127,68\ 787,250
2010 530,413 117,681 658,094
2011-2015 639,898 639,898
Less:
Interest !400,932~ (76,620) ~477,552)
Total $ 3,954.,885 $ 1,354,576 $ 5,309,461
The carrying values on the leased assets of the City as of September 30, 2005 are as follows:
Accumulated NetBoolt
Gross Value Def!edation Value
Govcmmeotal Activities $ 7,190,820 s 2,601,612 $ 4,589,208
Busjnc:ss.. Type Activities 4,017,069 1,572,105 2,444,964
Total Leased Assets s 11,207,889 $ 4,173,717 $ 7,034,172
83
c
c
c
c
,. ...
(
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAll. NOTES ON ALL ACTIVITIES AND FUNDS (Contiaued)
H. LONG-TERM DEBT (Continued)
Long..tenn obligations (net of discounts and premiums) for govemmenlal and business-type activities for the
year ended September 30, 2005 are as follows:
Governmental activities:
Tax-Supported -
Obligation Bonds
,Capital Leases
Compensated Absences
~Claim Payable
Bond Discounts/Premiums
Total Gcveram~tal actiYitles
Bulness-Type activities:
Self-Supp«ted-
Obligation Bonds
Revenue Bo.nds
capital Leases
Closure/Post Closure
Compeusated Absences
II'ISIIJ'C\oe Claim Payable
Bond Discounta!Premi~
Total BuiaeiS-Type activities
Debt Payable
9/3012004 Additions
$ 70,221,217
1,360,957
14,918,S08
2,354,536
1,1'19,722
$ 45,110,000 $
3,534,016
7,178,748
17,824,861
725,586
$ 90,034,940 $ 74,373,211 $
215,663,783 125,430,000
~.605,000 17,960,000
1,393,207 1,706,563
3,051,116 22.215
4,160,142 2,891,912
6,436,854 4,423,757
(914,817} (404,924)
Debt Payable
Deletions 9130/l00S
12,610,948 $ 102,720,269
940,088 3,954,885
5,808,891 16,288,365
17,839,137 2.,3<$0,260
39,324 1,865;984
37,238,388 $ 127,169,763
54,344,052 286,749,731
69.165,000 42,800,000
1,745,194 1,354,576
3,07.3,391
2,057,349 5,000,165
4,358,713 6,501,898
(3,875,249) 2,555,448
s 324,395,225 $ 152,035,643 $ 128,395,059 $ 348.,035,809
$
$
Due in
one year
5,789,101
936,250
5,123,.349
2,340,260
14,788,960
14;695,899
2,930,000
456,625
2,207,245
1,-603,601
$ 21,393,37(}
Payments on bonds payable for governmental activities are made in the Debt Service Fund. Accrued
compensated 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 insW1lllce claims payable
that pertain to. governmental activities. Payments for the capital leases that pertain to the governmental
activities wiU be liquidamd by the General Fund and Capital Projects Funds.
84
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE W. DETAIL NOTES ON ALL ACfiVITIES AND FUNDS (Continued)
H. LONG-TERM DEBT (Continued)
The total long-term debt is reconciled to the total annual requirements to amortize long-tenn debt as follows:
I..ong-tetm debt -Govetomental Activities $ 127,169,763
l.ong-cmD debt-Busiaes~~-ty.pe Activities 348,035,809
In~ 205,828,894
Totlllllli.Oilot of debt 631,034,466
Net gains/losecs, ~/discount\! (4,:421,432)
Less: Capital leases (5,787 .0 13)
l.e$s: lnsoJ:II1Ce cbims payable (8,842.,158)
Less: Compeosaced 2bsell$es (21 ,289, t 30)
Less: Ciosum/po5t doam:: $ (3,073,.391)
Total otbet debt (43,413,124)
Tow tutw:c bolldcd debt teqUirancnt$ 637,621,.342
New Bon.d Issuanca
The City Council called an election for May 15, 2004 to seek voter aPProval to issue general-purpose tax-
supported bonds io 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;
civiccenter/auditorium renovations and improvements, $6,450,000; park improvements, $6,395,000;
police/municipal court facilities, $3,350,000; library improvements, $2, 145,000; f1re stations. $1,405,000 and
animal shelter renovations and improvements, $1,045,000. The City previously issued a capital improvement
plan to voters in 1999, when voters iD the City approved a S37,385,000 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 issuance approved by the voters in 2004. The second
iostaJ!ment was in September 2005, for $7,265,000, General Obligation Bonds Series 2005. The certificates
wee issued at a discount of $91,805 and had bond issuance costs of $95,000. The net proceeds after
discounts and costs were $7,075',000. The identified projects are: Fire Stations 12 and 8 $1,325,000; MLK
little league complex $I,,S4r,OOO; NE Lubbock residential infrastructure $475,000; paving and streets
$330,000; curbs and ramps $440,000; ti'Bffic signals $50,000; signal systems $113,000; Midwest little league
complex $1,664,000; and Phase I SW Lubbock soccer $1,130,000. The proceeds of the debt are recorded in
various Capital Projects Funds.
In September 2005, the City issued $46,525,000 Tax and Waterworks System Surplus Revenue Certificates
of Obligation, Series 2005. The Certificates were issued at a premium of$1,581,752. After paying issuance
costs of $325,139, the net proceeds were $47,780,720. Proceeds from the sale of these certificates will be
used for street improvements, including drainage. streetlights, and traffic sigoalization and the acquisition of
land and necessary rights-of-way; and costs associated with the issuance of the Certificates. The proceeds of
the debt are recorded in various Enterprise Funds and Capital Projects Funds.
The Canadian River Municipal Authority issued a new Contract Revenue Bond, Series 2005 in April 2005 in
the amount of $48,125,000. The City of Lubbock shan:d in tbat issue for $17,960,000 and othel' 'lOSts of
$850,296, and received depreciable ·assets (water rights) valued at $18,810,.296. These assets and liabilities
are recorded in the Water Enterprise Fund.
85
c
c
~ \,
c
(
<
')
)
)
)
)
)
City of Lubboek, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
H. LONG-TERM DEBT (Continued)
Current Refunding
In August 2005, the City issued TllX and Waterworks System Surplus Revenue Refunding Bonds, Series 2005
("the Bonds} with a par value of $43,080,000 with the purpose to lower debt service requirements on
indebtedness. The Bonds refunded .$43,750,000 outstanding bonds: They were issued at a net premium of
$2.638,737 and had issuance costs of $332,358. This bond issuance also paid for the tennination of interest
rate swap agreement in the amount of$6,637,093. The refunding resulted in a legal defeasance of debt and
resulted in a net present value· saving$ $621 ,296. The reacquisition price exceeded the net carrying value of
old debt by $4,51 I ,666. Tbis accounting loss is netted against the new debt and amortized over the remaining
life of the refunded debt The various transactions are recorded in the Water Entezprise Fund.
Advanced Refundings
The City issued two advance refundings to retire a portion of the City's outstanding debt to lower the: debt
service requirements on such indebtedness. In both advance refundings the net procee,ds from the issuance of
the Refunding Bonds were deposited with the Escrow Agent {1P Morgan 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 ~tate of America. Under the escrow agreements, between the City
and JP Morgan Chase Bank, the ~ow funds are irrevocabty·pledged to the-payment of principal and interest
on the Refunded Bonds. The Refunded Bonds were removed from the City's basic financial statements.
In March 2005, the City issued a combination Tax and Electric Light and Po~ System Surplus Revenue
Certificate of Obligation, Series 2005 in the amount of$23,055,000, which included $19,500,000 of refunded
debt and $3,555,000 of new capital funds. This debt refunded $19,760,000 ofWTMPA long-term debt and
dissolved the lease between WTMPA and the Electric Funds. The refunding bonds wen; issued at a net
premium of $981,819. Issuance costs were $209,894 and net proceeds for electric capital projects were
$3,600,000. The refunding resulted in a net present value savings of $557,722. The reacquisition price
exceeded the net carrying amount of the old debt by $679,280. This accounting loss is netted against the new
debt and amortized over the remaining life of the reftmded debt The various transactions are recorded in the
WTMP A and the Electric Enterprise Funds.
In July 2005, the City issued General Obligation Refunding Bonds, Series 2005 (''Refunding Bonds") with a
par-value of$49,615,000. The Refunding Bonds refunded $50,455,000 outstanding bonds. They were issued
at a net premium of $3,836,536 and had $351,200 issuance costs. A:i a result of the refunding, the City
decreased its total debt service requirements by $2,205.662, which resulted in an e<:onomic gain of
$1,886,563 and an accounting Joss of$4,140,288. The debt transactions are recorded in various Enterprise
Funds and the Debt Service Fund.
L CONDUIT DEBT
The City issued Housing Finance Corporation Bonds. Health Facilities Development Corporation Bonds. and
Education Facilities Authority Bonds to provide financial assistance to private sector entities. for the
acquisition and construction of facilities deemed to be in the public interest. The bonds are secured by ~e
property financed. Upon n;payment of the bonds, ownership ofdle acquired facilities transfers to the private~
sector entity served by the bond iSsuance. Neither the City, the State, nor any political subdivision th.e.~f is
obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported 8$ Jiabiliti~ in
the accompanying financial statements.
86
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
(. CONDUIT DEBT (Continued)
As of September 30, 2005, there were seven series of Lubbcx:lc Health Facilities Development Corporation
Bonds outstanding with an aggregate principal amount payable of $278,537,343. The bonds were issued
between 1993 and 2002. Also as of September 30, 2005, there was one serle$ of Lubbock Edlleation
Facilities Authority rnc. Bonds outstanding with an aggregate principal amount payable of S 10,500,000. The
bonds were issued in 1999.
J. RISK MANAGEMENT
The Risk Management Fund was established to account for liability claims, worker's ~mpensation claims.
and premiums for property/casualty insurance coverage. The Risk Management Fund generates its revenue
through charges to otber departments, which are based on costs.
rn April 1999, the City purchased workers' compensation coverage, with no deductible, from a third party.
Prior to April 1999 the City was self insured for worker's compensation claims. Any (:!aims outstanding p,rior;
to April 1999 continue to be the responsibility oftlte City.
The City's self insurance liability program is on a cash flow basis, which means that the servicing ~ontracto.r
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 esscx:iated with liability claims, the City purchased excess liability ~verage 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.
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 settled,
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 coverage involved. Because actual claim costs depend on such complex
factors as inflation, changes in doctrines of legal liability, and damage awards, the process lm!d 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 produce current
estimates that reOect recent settlements, elaim 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 $500,000 deductible per
occurrence, and the boiler coverage insurance deductible is up to $500,000 dependent upon the unit
Premiums are charged to funds based upon estimated premiums for the upcoming year.
Other small insurance policies, such as surety bond ~verage and miscellaneous floaters, are aJso accounted
for in the Risk Management Fund. Funds are charged based on premium amounts and administtative charges.
The City has had no significant reductions in insurance ~verage dwing tbe 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.
87
c
c
c
c
c
c
c
c
c
c
c
)
)
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE In. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
K. HEALTH INSURANCE
The City provides medical and dental insurance for all full·time employees that are accounted for in the
Health Benefits Fund. Revenue for the health insmance 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 $175,000 per covered
individual annoaUy and an aggregate cap of $18,845,757. The insurance vendor based on medical trend,
cl.abns history, and utili2ation determines the aggregate deductible. The contract requires an IBNR reserve of
approximately $2..3 million.
The City also provides full-time employees basic tenn life insurance.. Revenues for the life insurance
premiums are also generated from each cost center based upon the number of active employees. The life
insurance policy has a tau value of$10,000 per employee.
Full-time employees may elect to purchase medical and de:ntal 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 U)surance 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 ins~ and a reduced amount of life
insurance on themselves and eUgible dependents. The retiree pays a portion of the premium costs, but the
City subsidies retiree premiums by -about.$1.3 miUion annually. The life insurance is fully paid by the retiree.
L. ACCRUED INSURANCE CLAIMS
The Self-Insurance Funds establish a liability for self-insurance for both reported and unreported insured
events, which includes estimates of both future payments of losses and related claim adjnstment expenses.
The following represents changes in those aggregate liabilities for the Self-Insurance Funds during the past
two years ended September 30:
88
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
L. ACCRUED INSURANCE CLAIMS {Continued)
Workers' Cotnpeosatiao and Uability Reserves at
beginning of fi$C8.1 year s 6,436,854 $ 6,000,000
Claims Expcoses 4,658,359 5,467,674
Claims Payments
Workers' Compensation and Liability Reserves at eod of
~4.593,31~ (5,030,820)
fiscal year 6,501,898 6,436,854
Medical and Dental Claims Uability at beginning of
fiscal year 2,354,536 2,721),897
Claims Expenses 17,432,646 14,328,384
Claims Payment.s ~17,446,922) (14,694,745)
Medical and Dental Claims Liability at end of fiscal )'eiJ1' 2,340,260 2,354,536
Total Self..Insuranoe Uability at end of fiscal )'eat 8',842,158 8,791,390
Total Assets to pay claims at end of fisl;al year 12,646,638 18,920,469
Accrued insurance claims payable fiom restricted asseas •
CW'I'alt 3,943,&61 3,538,746
Accrued insurance claims payable -noncurrent 4,898,297 5,252,644
Total at(:Ned insurance claims $ 8_,842,158 $ 8,791,390
M. LANDFILL CLOSURE AND POSTCLOSUR£ CAllE COST
State and federal laws and regulations require the City to place fina1 covers on its landfill sites wben they stop
accepting waste and to perform certain maintenance and monitoring functions at the sites for thirty years after
closure. Although closure 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 postclOSUTe costs as operating expenses
(and recogn.iz.ing a correspondhtg liability) in each period based on landfill eapacity usod as of each balance
sheet date.
The $3,073,391 included in landfiU closure and postelosurc care liability at September 30, 2005, represents
the cumulative amount expensed by the City to date for its two landfills that are registered under TCEQ
pennit numbers 69 (Landfill 69) and 2252 (Landfill 2252), less amounts that bave been paid. Around 92
percent of the estimated capacity of Landfill 69 has been used to date, with $814,035 remaining to be
recognized over the remaining closure period, which Is estimated at two years. Approximately 2.3 percent of
the estimated capacity of Landfill 2252 has been used to date, with $23,356,052 remaining to be recognized over the
remaining closure period, which is estimated at OV« 80 years. PO$b:losure care costs are based oo prior estimates and
have been adjusted for inflation. Actual costs may be different due to inflation, deflation. changes in tcdmology, or
changes in .regulations.
89
r '-
c
c
c
c
,..
.....
c
c
c
c
c
)
)
)
)
City of Labboc~ Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
M. Lt\NI)FU..LCLOSURE AND POSICWSURE CARE COST (Continued)
The City is required by state and fedtral laws and regul.atioos to provide assurance that financial resources
will .bQ available to provide for closure, postclosure care, and remediation or containment of environmental
hazards at its iandfiUs. The City is in compliance with these requirements and bas chosen the L«aa
Government Financial Test mechanism for providing this assurance. The City expects to .fuWlce costs
through normal operations.
N. DISAGREGATION OF ACCOUNTS
Aceoa.ats Reeeivable Sumnta!I
Co art Property Balaaceat
Fines Damal! Pavia& Gt'Mis 9130105
Governmental Activities:
General Fulld $ 4,079,900 $ 230,337 $ 192,944 $ -'$ 4,503,181
NoD-Major 6,024 ~024
Total s 4,079,900 $ 230,337 $ 192,944 s 6,024 '$ 4,509;205
Accovats Receivable Summuy
General Fro at Credit Balance at
Consumer Others Cant Misc. ~J30105
Business-type Activities:
LP&L $ 16,291,858 $ -$ -$ 32,753 $ 16,324;611
Water 4,535,594 4,535,594
Sewer 2.422.918 88,562 4,375 2,515,855
Storm water 741,677 741,677
WI"MPA 1,171.285 1,771,285.
Non-Major 2,429,764 8,429 2,438,193
lntemal Service 1,818 1,818
TotaJ S 2811942914 $ 88,562 $ 8,429 $ 37,128 $ 28J29,033
AUowanc:e for Doubttill Aecouats Summarl:
Balance at
Al:counts T.u.es 9130/0S
Governmental
General Fund $ 312,578 $ 1,065,047 s 1,377,625
Non-Major 456,158 456,158
Business-Type
LP&L 1,121,236 1,121,216
Water 421,833 421,833
Sewer 190.856 190,856
Stonnwater 85,143 85,143
WTMPA 67$,217 675,217
Non· Major 2531907 253,907
Thtal $ 3£060.770 s t,sztaos $ 4zS8ll275
90
,..
~
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, ZOOS ,..
~
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUND (Continued)
N. DISAGRECATION OF ACCOUNTS (Continued)
A«<UDU P&able Son~ma!I
Balance at ,. .._
Vo'lldlen A ceo a au Ill vestments Mlsedbmeous 9/30105
Goveramel\tal:
Geru:ral Fund $ 549,520 s 777,225 s $ $ 1,326,745
Non-Major 776,893 4,756,291 215,387 513,454 6,262,025
Business-Type:
LP&L 317,873 272,898 2,144 216,895 809,810 c Wat.er 167,320 628,733 4,022 82,830 882,905
Sewer 312,368 25,054 1,603 25,8lS 364,840
Stonnwater 61,636 818,455 880,091
WTMPA 12.745,213 12,745,213
Non-Major 20~426 5951677 103,505 9011608
Total $ 2,388,036 $ 20,619!546 $ 223,156 $ 942,499 $ 24,173,237 c
0. DISAGREGATION OF ACCOUNTS-GOVERNMENT ~WIDE
Net Receivables
Accounts Iaterest Taxes laternal Service Balance at c
Receivable Receivable Receivable Re«tvables 9130/05
Govenuaental
Ac:ttv ities $ 4,196,627 $ 54,672 $ 9,464,704 $ ll9,364 $ 13,835,367
Business-Type
Activities 25,627,366 94,307 18,246 25,739,919
Total s 29,823,993 $ 148,979 $ 9;464,704 s 137,610 $ 39~515,286 c
Accouts Payable
AcconCs IDterual Service Balaaceat c
Payable Payables 9130/0S
Gove"'meetal
AdMties $ 7,588,773 $ 427,891 $ 8,016,664
Busi.aess.-Type
Activities 16,584,467 851,945 17,436,412
Total s 24,173,240 $ 1,279,836 $ 25,453,076 c
c
91
(
)
)
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
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 contpliaru:e with conditions
prec;edent TO the gran.t:iDg of funds. Any liability for reimbursement which may arise as the result of audits of
grants is not believed to be significant
B. 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 aJ v. City of Lubbodc:
The City of Lubbock has been sued by namerous firefighters employed by the City of Lubbock. They are
claiming that the City of Lubbock did not properly pay its firefighters for "move-upa pay pursuant to the Civil
Service Act. Pursuant to the Civil Service Act, firefighters can move-up and perform temponu:y 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 plaintiftS assert they are also entitled to the "seniority payu
which they've earned at the lower classification. Their basis for 1his 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. coOectively, 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 tbe 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 of
Lubbock, holding that the City paid its employees properly under the Civil Service Act.
Plaintiffs have appealed to the Texas Supreme Court and the Texas Supreme Court has requested full briefing
on the issues. The Court has not made a detennination as to whether or n:ot it will hear the case.
Barnard Construction CompanY. IDe. v. City ofLubboclc
Plaintiff is. a construction company suing the City of Lubbock for breach of contract. Plaintiff aUeges the City
owes it almost $2,400,000 for rock it excavated on a drainage-project. They assert they are owed $204,000
for rock excavated on Line A 1 and assert they are owed almost Slt200,000 for rock ext:.avated on other lines
on the project.
The City has agreed to pay for approximately $176,000 of rock excavated on LineAl. H()wever, the City has
denied that it owes Barnard any compensation for I'O(;k excavated on the other Unes. The City filed a Motion
for Summary Judgment as to this issue aod a Trial Cowt ruled in the City's favor 011 September 28, 2005.
Barnard bas appeaJed this case to the F"'tftb Circuit Court of Appeals. Oral arguments '8re set for Match.
Jeanette Livingston. et al v. City of Lubbock:
Six (6) Plaintiffs filed suit against the City of Lubbock in 2004 alleging 1hat the City and/or County faUed to
properly record iofonnation in its cemetery records that would indicate whe@ their relatives were buried.
Fifty-six additional Plaintiffs were added to the suit in November 200S. The City believes it has located
where twenty-one (21) of such ~ons were interred. As to others, many were iotmed before the City owned
tbe portion of the cemetery. The City acquired portions of the current cemetery between 1948 and 1959 and
92
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE IV. CONTINGENT LIABILITIES (Continued)
B. LITIGATION Ceontiauedl
many of the deceased were clearly buried when other entities owned the cemetery. The Ci.ty will assert it bas
no Ha.bility for their negligence in not recording the burial locations properly. The City will also assert that
the Plaintiffs have no evidence that the City was negligent and didn't maintain records that showed where
such persons were buried.
For those persons who were buried while the City owned the cemetezy and the City failed to properly record
the burial location, there are a number of defenses. First, the City will assert that the statute of limitations has
run. Second, the City will assert that this is a contiactual issue and not a tort issue, thus giving standing only
to those who were parties to the contract Third, the City will assert that, if this is a tort issue, that this is a
negligent infliction of emotional distress case and such cause of action was nullified by the Texas Supreme
Court in 1993. Lastly, for those buried after l970, the City has other defenses it will assert under the Texas
Tort Claims Act
At this time, damages are diffiaJlt to ascertain but, coUectively, they would meet the $200,000 materiality
definition for damages.
Marvia Rodriguez v. Lf&L:
Plaintitf"sued LP&.L for negligently maintaining a line. Plaintift: an employee of Atmos Energy, was working
around an LP&L line and suffered second degree burns over 5% of his body. He alleges that LP&L was
negligent in not de-energizing the line since it was oo longer in use.
The City will assert that the Plaintiff was negligent fur failing to contact LP&L and as to whether the line was
energized. It is our understanding that Plaintiff was suspended by bis own company for his negligent conduct.
While we do not believe this suit bas a potential exposure of over $200,000, we are including it in this
d~losure as Plaintitrs demand was $325,000.
C. SITE REltQDIATION
The City has identified specific locatiollS requiring site remediation relative to underground fuel storage Wlks
and historical fire training sites.
As of September 30, 2005 the City identified three locations that posed a probable liability. The City
·recorded the liabilities for the three locations as follows: LP&L Plant l ($236,000), LP&L Cooke Plant
($326,000) and WesT ex Aircraft ($300,000).
Tbe potential exposure for the remaining tocations is not readily detenninable as of September 30, 2005. In
lhe opinion of management, the ultimate liability for these locations will not have a materially adverse effect
on the City's financial position.
93
c
c
c
c
c
c
c
c
'
c
)
)
)
APPENDIXB
FORMS OF BOND COUNSEL OPINION
[Closing Date]
$. ___ _
CITY OF LUBBOCK, TEXAS
GENERAL OBLIGATION REFUNDING BONDS
SERIES 2007
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 GENERAL OBLIGATION REFUNDING
BONDS, SERIES 2007, dated January 'l, 2007, 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 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 ACI1Y 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; an escrow agreement (the "Escrow Agreement") between the City and The Bank of New
York Trust Company, National Association, as escrow agent (the "Escrow Agenf'); a report (the
"Report") of Grant Thornton LLP, Certified Public Accountants (the "Verification Agent").
verifying the sufficiency of the deposits made with the Escrow Agent for defeasance of the
obligations being refunded (the "Refunded Obligations") and the mathematical accuracy of
certain computations of the yield on the Bonds and obligations acquired with the proceeds of the
Bonds; and 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. 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;
(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; and
(C) Finn banking and financial arrangements have been made for the
discharge and ftnal payment of the Refunded Obligations pursuant to the Escrow
Agreement, and therefore, the Refunded Obligations are deemed to be fully paid
and no longer outstanding except for the purpose of being paid from the funds
provided therefor in such Escrow Agreement.
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 pennit
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 COipOration, regulated
investment company, REIT, REMIC or FASin 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
income of interest on the Bonds for federal income tax purposes. We have further relied on the
Report of the Verification Agent regarding the mathematical accuracy of certain computations.
If such representations or the Report 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.
c
c
c
c
c
c
c
c
)
)
)
)
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.
Owners 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
who may be deemed to have incurred or continued indebtedness to purchase or carry tax -exempt
obligations, taxpayers owning an interest in a F ASIT 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).
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.
[Form of Opinion of Bond Counsel]
[Closing Date]
$. ______ _
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE
CERTIFICATES OF OBLIGATION
SERIES2007
WE HAVE represented the City of Lubbock, Texas (the "City"), as its Bond Counsel in
connection with an issue of certificates of obligation (the "Certificates") described as follows:
CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2007,
dated January 1, 2007, issued in the principal amount of$ _____ ""'"'
The Certificates mature, bear interest, are subject to redemption prior to maturity and
may be transferred and exchanged as set out in the Certificates and in the ordinance adopted by
the City Council of the City authorizing their issuance (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 Certificates under the Constitution and
laws of the State of Texas and with respect to the exclusion of interest on the Certificates 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 Certificates. Our role in connection with the City's Official
Statement prepared for use in connection with the sale of the Certificates 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 Certificates, 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
Certificates. We have also examined executed Certificate 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 Certificates in full compliance with the
Constitution and laws of the State of Texas presently effective and, therefore, the
Certificates 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 Certificates, has been
c
c
c
c
c
c
c
c
c
)
)
levied and pledged irrevocably for such purposes, within the limit prescribed by
law, and the total indebtedness of the City, including the Certificates, does not
exceed any constitutional, statutory or other limitations. In addition, the
Certificates are further secured by a limited pledge (not to exceed $1,000) of the
surplus net revenues of the City's Waterworks System, as described in the
Ordinance.
THE RIGHTS OF THE OWNERS of the Certificates 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 Certificates is excludable from gross income for
federal income tax purposes under existing law; and
(2) The Certificates are not ''private activity bonds" within the
meaning of the Internal Revenue Code of 1986, as amended (the "Code"), and
interest on the Certificates is not subject to the alternative minimum tax on
individuals and corporations, except that interest on the Certificates 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 Certificates with respect to matters solely within the
knowledge of the City, the City's fmancial 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
income of interest on the Certificates 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 Certificates 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 Certificates.
Owners of the Bonds should be aware that the ownership of tax-exempt obligations may
result in collateral federal income tax consequences to fmancial 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
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 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).
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 Certificates. 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 Certificates as includable in gross income for federal income tax
purposes.
c
c
c
c
c
(
APPENDIXC
() SPECIMEN OF BOND INSURANCE POLICY
0
')
~: •. ,; 1j . . '
,,
), ·: ~ ' . .. ~
"\--"•.; ' .... '
,. \. ' '.: •• t-
•, I
. ·. (
I • ' ....
.... ;
' . . ~ .
, ... ~
' . ; ' . (
. . . . ~.
~.
:... " .. ... o ~ ' ,. T
. . .
, ~ • j -~ ~~ ·.~
• I j •• ~: t
IS~UER:
BONDS:
FINANCIAL.
.SECURITY
ASSURANCFA
' ... . "
< . . . . . . '
. • ANANCIAL SECURITY ASSURANCE INC. ("F
hereby Ut:-JCONOJTIONALLY AND IRREVOCABLY ag
: paying agent (the •paying Agent") (as set forth · e
-. securing . the Bonds) tor the Bonds, for the t o
Security, directly to each Owner, subject nly to t
., ~ndof'Sement hereto). that portion of.-· the pri al of
· tor paymel;!t but $hall .be unpaid by "" Nonpay e , . .
MUNICIPAL BO
INSURANCE ..,.. __
\ :
I •
... ~ )._
... '1
~
I > ~
. -.. . ' ....... ,_,.
) ., -.. t ~-\
...... ..,. :;,.
) 0 't ... -.:-;.
~ ..... ' "t -;.'•.
rec:Q' on. a g~en
t:AJliiNISSIO "·, otherwfse,~it.wUI • .~ .... lilt !
~ ~
;
} ··-'" • . · ' ~-~
.• '
\"' ' l
IIN'M'lnl~~e t ivecf.oy . .finariiat •
Fin•ncta I ~urity, kif purpo~es . . ,
'
.. . . ~ .. _, \
Trustee, PaYing Agent or
~rt>CJ~ent. · upon disbursement iA ·-~ . ·'·!
. d; apy app1,1~n~cpupoll to ... •
in st on the Bond and shall be fully • . 1 r'S ~9 t to receive payments under the Bonet, <
fletr~t~UJ~r. Pa9ment~b~ financial SecuriJY to: Jh~ •.
~~II. t(\ th~ e~ent ther~t. discha~ tr'~ -' , , . '
r. "' \ ot ,.. ' . ·. ... . . .
ressly 111 ifi endorsement hereto, th~ follow.ing terms,shall,have ' .
ed tor 1 purposes f this Policy. "Business Day• mean~ any day other than '{a) a
da or lb) a ay on h banking institutions in the State of New Yor1< or the Insurer's
a horized requi by law or executive order to re'!lain cfosed. •oue for. Payment"
r erring to he cipal of a Bond, payable on the stated maturity date thereof 9r th~
e me s I ve been duty' called for mandatory sinking fund redemption and: does
ier date on which payment is due by reason of call for redemption (atne.r; than by
~~ 'ng . d redemption), ~cceleration or other advancement of; rt1ah}~ unl~ss financi~
I ect in its sole discretion, to pay such principal due upon such acceleration 'togeltler with
in . t to the date of acceleration and (b) when referring1o interest on a BOna, payabre~on "
. ~
i
t or paytpent of interest. "Nonpayment" means, in respect-: of a Bond, .the,failure pf .Jhe
r: to ve provided sufficient}uri,ds to the Trustee or, if th~re is. no TruStee. to th~ Pay!ng Agef')1 for
men ri full of all principal and interest that is Due for Payment on such Bond. · •Nonpaym~nt• sliall
lude.t 1!\ r~spect ·of a, Bond, any payment of principal o,: ~~~re~t that Js , Due .far f?aY.rflent
' ' ' .
' • ' , ' ' . ., .... '1 . ~ < .. . ·~ .. . , '· ~ ~ . ' ' . , ' < j , . I .. . ... •. ... : ~ >! ' '
::··· ' ' . : ~~ ' -i· •. 'I. ... -·. I · ... \., ' i '"\., ·• ~ • ~. ' ; ~ ~ ; ') '• ..... .. . . ·' . I . '
·~ >; \ . . . . .. '?' ~· ·: ., < ' . ( ,, ~. . . t ... -· \ .,..{ t", '-~ ~ --: -: -' . \ .• . ..
~ ........ 0 \ ..
) < +
. .
'1•'
'.
::>
'
~ ~
' .. .. (
' I' • .... ...
. ' ~ .. ~ '
I .,
' 1~
w .., ..
<I
'
.... , (, \ .
-i ... .. ..:.._.>
c
c
c
c
c
,...
'-
c
c
c
___________________________________________________________________ (
' : '
...
...
' I
..
~ ' ~
l ·.
~· .,
' •
~ ~ . ...
'
< -
' ' <
.
' ' . :·< .
) . .
r
'·
, .. ·'
'· ..
-• t
4 • \ ' ...
\ . ' ..
• ' • l .,.
. !
. . '
\ ..
\ .. r.
t•
'\ ·.
. ~
Page2of 2
Policy No.-
!.'' ..
. •. • > l <
·' 1
J -t {,:.,\
J \ 7'\ ;
, ... -. ; '>: .....
1,~:~~ ·:
·r ,
• : I ...
an ;all not ~ modifi.ed, altered or .
· nor amendment thereto. Except e~ to, a) an pr~mium paid in resp'ect of thi~Policy •. \
r·wovision being made for payment, of, ~ . n eled or revoked. THIS POLICY IS NOT ' ~ nl"\l',....~;;otQ· ECURIJY FUNO SPECIFIE[} IN ARTICLE 76 •,. ~
URANCE INC. bas caused tbls Policy to be el:(ecuted:. \
. . ....
... 't. " . .
\-~t
~ . .., •),
\ ) :i
t· ~., \
l~J
FINANC{AL SECURITY ASSURANCE INC. • .. 4 .. I • ' . '
... j
' ·!> I
' . Authort_zed Officer ' ·"! ' '! ~. "\ ~
By
: ' .,
-~ ~ f ' ' .....
inanci~I.,Sec!Jrity· Assurance Holclings Ltd.
d Street, New York, N:Y. 10019
• J ~
: ; (212) 82Q-0100 ' ' ·~
\ .... ~ .. ...
\ :~ .
I •
f,~.~ ~
\:.A
l •,
< \ r ;. ~ ...
,. ~ • ... ' \ ::-; ~
f:~/\
~ "'d
.
~
' .... ... ' .. '
p;J, t "' ~ . ....
\ ... ' . ( . " •. : .. ., i "' .. '
' . ~
... ' ·.
; ... ., ' ) •.; ..~
.. ~ \ f':'i t -~
~ , . ,_ . . ...,~ -· "
~ ·;.~~-~I : ~ ·~. f"" ,, ·-·.·1<, t:.SA
~ ·-,, ~ -.;,;.l \::0 '. : .,. ,;'
c
c
(
(
10
CO
0
OFFICIAL STATEMENT DATED JANUARY 12,2007
IN THE OPINION OF BOND COUNSEL, INTEREST ON THE OBLIGATIONS IS EXCLUDABLE FROM GROSS INCOME FOR
FEDERAL INCOME TAX PURPOSES UNDER EXISTING LAW AND THE OBLIGATIONS ARE NOT PRJ VA TE ACflVJTY
BONDS. SEE "TAX MATTERS-TAX EXEMPTION" HEREIN FOR A DISCUSSION OF THE OPINION OF BOND COUNSEL,
INCLUDING A DESCRIPTION OF ALTERNATIVE MINIMUM TAX FOR CORPORATIONS.
NEW ISSUES: BOOK-ENTRY ONLY RATINGS: Moody's Investors Service IDe "Au"
Standard & Poor's Ratings Services "AAA"
Fitch Investors Service "AAA"
See "OTHER INFORMATION -Ratings" and
"BOND INSURANCE" herein
THE OBLIGATIONS WILL NOT BE DESIGNATED AS ''QUALIFIED TA,X-EXEMPT OBUGATIONS"
FOR FINANCIAL 1NSTITU1JONS
$54,020,000
CITY OF LUBBOCK, TEXAS
GENERAL OBLIGATION REFUNDING BONDS,
SERIES2007
SZ5,255,000
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE
CERTIFICATES OF OBLIGATION,
SERIES2007
Dated: January I, 2007 Due: February 15, as shown on the inside cover
Principal of and interest on the $54,020,000 City of Lubbock, Texas, General Obligation Refunding Bonds, Series 2007 (the ''Bonds") and
the $25,255,000 City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2007 (the
"Certificates" and, collectively with the Bonds, the "Obligations") are payable by The Bank of New Yort Trust Company, National
Association, (the "Paying Agent/Registrar"). The Obligations are 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 Obligations
may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of tbe Obligations will be made to the
benefn:ial owners thereof. Principal of and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which
will make distribution of the amounts so paid to the beneficial owners of the Obligations. See "THE OBUOATIONS -Book-Entry-Only
System" herein. Interest on the Obligations will be calculated on the basis of a 360·day year consisting of twelve 30-day months, will accrue
from January 1, 2007, and is payable on February 15 and August 15 of each year, commencing February 15,2007 for the Bonds and August
15, 2007 for the Certificates, until maturity or earlier redemption, to the registered owners (initially Cede & Co.) appearing on the
registration books of the Paying Agent/Registrar on the last day of the month preceding each Interest payment date (the "Record Date"). (See
"THE OBLIGATIONS -Description of the Obligations"). The Obligations of either series are subject to optional and mandatory
redemption prior to their scheduled maturities. (See "THE OBLJGA TIONS-Redemption.,).
The Bonds are payable from the pro<:eeds of a continuing, direct annual ad valorem tax, levied within the limits prescribed by law, against all
taxable property within the City of Lubbock, Texas (the "City"). The Certificates are payable from a combination of (i) the proceeds of a
continuing, direct annual ad valorem tax, levied within the limits prescribed by Jaw, on all taxable property within the City, and (ii) a pledge
of surplus net revenues of the City's Waterworks System not to exceed $1,000. (See "THE OBLIGATIONS -Security and Source of
Payment"').
The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapter 1207, Texas Government
Code, as amended, and an ordinance adopted by the City Council on December 19, 2006 (the "Bond Ordinance"). The Certificates are
issued pursuant to the Constitution and general Jaws of the State of Texas, particularly subchapter C of Chapter 271, Texas Local
Government Code, as amended, and an ordinance adopted by the City Council on January 12, 2007 (the "Certificate Ordinance" and,
together with the Bond Ordinance, the "Ordinances"). (See "THE OBLIGATIONS-Authority for Issuance").
Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding ad valorem tax suppoJted indebtedness (the
"Refunded Obligations"). Jn addition, a portion of the proceeds from the sale of the Bonds will be used to pay the costs of issuance of the
Bonds. Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations to be incurred for street
improvement and professional services rendered in connection therewith. In addition, a portion of the proceeds from the sale of the
Certificates will be used to pay the costs of issuance of the Certificates. (See "THE OBLJGA TIONS -Purpose").
The scheduled payment of principal of and interest on the Obligations when due will be guaranteed under an -FS' .&
insurance policy to be issued concurrently with the delivery of the Obligations by FINANCIAL SECURITY r !t1l.
ASSURANCE INC.
While the Bonds and Certificates are being offered under a common Official Statement, the Bonds and the Certificates are separate and
distinct securities offerings and each such offering is being issued and sold separate and apart from the other offering and should be reviewed
and analyzed independently, including, among other matters, the kind and type of obligations being offered, their terms for payment, the
security for their payment and the rights of the holders.
The Obligations are offered when, as and if issued, subject to the approving opinion of the Attorney General of the State of Texas and the
opinion of Vinson & Elkins l.L.P., Bond Counsel, Dallas, Texas. Certain legal matters will be passed upon for the Underwriters named
below (the ''Underwriters") by their counsel, McCall, Parkhurst & Horton l.L.P., Dallas, Texas. See "OTHER INFORMATION-Legal
Matters." Delivery of the Certificates through The Depository Trust Company is expected to be on or about January 19, 2007. Delivery of
the Bonds through The Depository Trust Company is expected to be on or about February 7, 2007.
Morgan Keegan & Company, Inc. Southwest Securities, Inc.
Popular Securities, Inc. M.E. Allison & Co., Inc.
CITY OFFICIALS, STAFF AND CONSULTANTS
ELECTED OmoALs
Date of Tenn
Ci!l::Council Installation to Office Exeires Occu2ation
David Miller May, 2006 May, 2008 Business Owner
Mayor
Linda DeLeon May, 2004 May, 2010 Business Owner
Council Member, District I
Floyd Price May, 2004 May, 2008 Retired
Council Member, District 2
Gary Boren May, 2002 May, 2010 Bosiness Owner, Personnel Services
Council Member, District 3
Phyllis Jones May, 2004 May, 2008 Self-Employed
Council Member, District 4
John W. Leonard, III May, 2006 May, 2010 Business Owner
Council Member, District 5
Jim Gilbreath May, 2003 May, 2008 Business Owner 0
Council Member, District 6
SELECTED ADMINISTRATIVE STAFF
Date of~loyment Date of Employment Total Government 0
Name Position in Current Position with City of Lubbock Service
Lee Ann Dwnbauld City Manager September, 2005 July, 2004 2()+
Tom Adams Deputy City Manager August, 2004 August, 2004 23
Jeff Yates Chief financial Officer September, 2005 November, 2004 5
Anita Burgess City Attorney December, 1995 December, 1995 11
Rebecca Garza City Secretary January, 2001 August, 1996 9
Andy Bw-cham Director of fiscal Policy September, 2005 November, 1998 7 I D
and Strategic Planning
CONSULT ANTS AND ADVJSORS
Auditors ............................................................................................................................................... BKD, LLP
Little Rock, Arkansas D
Bond Counsel ...................................................................................................................................... Vinson & Elkins L.L.P.
Dallas, Texas
Financial Advisor ................................................................................................................................ RBC Capital Markets
Houston, Texas
6 0
-
OFFICIAL STATEMENT
RELATING TO
CITY OF LUBBOCK, TEXAS
$54,020,000 GENERAL OBLIGATION REFUNDING BONDS, SERIES 2007
And
$25,255,000 TAX AND WATERWORKS SYSTEM SURPLUS REVENUE
CERTIFICATES OF OBLIGATION, SERIES 2007
INTRODUCTION
This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of
$54,020,000 City of Lubbock, Texas General Obligation Refunding Bonds, Series 2007 (the "Bonds") and $25,255,000 City of
Lubbock, Texas Certificates of Obligations, Series 2007 (the "Certificates" and, collectively with the Bonds, the "Obligations").
Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Ordinances authorizing
the issuance of the Bonds and Certificates, respectively, except as otherwise indicated herein.
There follows in this Official Statement descriptions of the Bonds, the Certificates and certain information regarding the City and
its finances. AH 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, RBC Capital Markets,
Houston, Texas.
DESCRIPTION OF TilE CIT\'
The City is a political subdivision and municipal corporation of the State, duly organized and existing under the laws of the State,
including the City's Home Rule Charter. The City was incorporated in 1909, and first adopted its Home Rule Charter in 1917.
The City operates under a Council/Manager form of government with a City Council comprised of the Mayor and six
Councilmembers. The Mayor is elected at-large for a two-year term ending in an even-numbered year. Each of the six members
of the City Council is elected from a single-member district for a four-year term of office. The terms of three members of the City
Council expire in each even-numbered year. The City Manager is the chief administrative officer for the City. Some of the
services that the City provides are: public safety (police and fire protection), highways and streets, electric, water and sanitary
sewer utilities, airport, sanitation and solid waste disposal, health and social services, culture-recreation, public transportation,
public improvements, planning and zoning, and general administrative services. The 2000 Census population for the City was
199,564; the estimated 2006 population is 21 t ,187. The City covers approximately 119.1 square miles.
FINANCIAL AND MANAGEMENT CHALLENGES
In recent years, the City experienced a variety of financial and management challenges, and certain investigations and reports
conducted or prepared by the City or its consultants 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 OBLIGATIONS
DESCRIPTION OF THE OBLIGATIONS
The Obligations of each series are dated January I, 2007, 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-<lay year of twelve 30-day months, and is
payable on February IS and August 15 of each year, commencing February 15,2007 for the Bonds and August 15,2007 for the
Certificates, until maturity or earlier redemption. The definitive Obligations will be issued only in fully registered form in any
integral multiple of$5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of
The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. No physical delivery of the
Obligations wiJJ be made to the owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable
by the Paying Agent/Registrar to Cede & Co., which wilt make distribution of the amounts so paid to the participating members
of DTC for subsequent payment to the beneficial owners of the Obligations. See "THE OBLIGATIONS -Book-Entry-Only
System'' herein.
PURPOSE
Proceeds ftom the sale of the Bonds will be used to refund a portion of the City's outstanding ad valorem tax supported
indebtedness (the "Refunded Obligations") listed on Schedule I for the purpose of achieving debt service savings. In addition, a
portion of the proceeds from the sale of the Bonds will be used to pay the costs of issuance of the Bonds. Proceeds from the sale
of the CertifiCates will be used for the purpose of paying contractual obligations to be incurred for street improvements and
professional services rendered in connection therewith. In addition, a portion of the proceeds from the sale of the Certificates
will be used to pay the costs of issuance of the Certificates.
7
REFUNDED OBLIGATIONS
Upon delivery of the Bonds, the City will deposit proceeds from the sale of the Bonds with The Bank of New York Trust
Company, National Assocation (the "Escrow Agent"). The amount of Bond proceeds so deposited, when added to any other
lawfully available funds and the investment earnings thereon, wlll be sufficient to accompllsh the discharge and final payment of
the Refunded Obligations. Such funds will be held by the Escrow Agent in a special escrow account (the ''Escrow Fund") and
used to purchase direct obligations of the United States of America (the Hfederal Securities"). Under the Escrow Agreement, the
Escrow Fund is irrevocably pledged to the payment of principal of and interest on the Refunded Obligations and amounts therein
will not be available to pay the Bonds. Grant Thornton LLP, Certified Public Accountants (the "Verification Agent"), will verify
at the time of delivery of the Bonds to the Underwriters that the Federal Securities will mature and pay interest in such amounts
which, together with uninvested funds, if any, in the Escrow fund will besufficient to pay, on the scheduled interest payment
dates and redemption dates, the principal of and interest on the Refunded Obligations, and will issue a report to this effect (the
"Verification Report"). The arithmetical accuracy of certain computations included in the schedules provided by RBC Capital
Markets to the Verification Agent on behalf of the City relating to (a) computation of the sufficiency of the anticipated receipts
from the Federal Securities, together with the initial cash deposit, if any, to pay when due the principal, interest and early
redemption premium requirement, if any, of the Refunded Obligations and (b) computation of the yields on the federal Securities
will be verified by the Verification Agent. Such computations will be completed using certain assumptions and information
provided by First Southwest Company on behalf of the City. The Verification Agent will restrict its procedures to recalculating
the arithmetical accuracy of certain computations and will not make any study or evaluation of the assumptions and information
on which the computations are based, and accordingly, will not express an opinion on the data used, the reasonableness of the
assumptions, or the achievability of the forecasted outcome. By the deposit of Federal Securities and cash, if necessary, with the
Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of all of the Refunded Obligations
in accordance with Texas law. As a result of such defeasance, the Refunded Obligations will be outstanding only for the purpose
of receiving payments from the Federal Securities and any cash held for such purpose by the Escrow Agent and such Refunded
Obligations will not be deemed as being outstanding obligations of the City, and the obligations of the City to make payments in
support of the debt service on such Refunded Obligations will be extinguished.
AUTHORITY FOR ISSUANCE
The Bonds are issued pursuant to the general Jaws of the State, particularly Chapter 1207, Texas Government Code, as amended.
The Certificates are issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of
Chapter 271 of the Texas Local Government Code, as amended.
SECURITY AND SOURCE OF PAYMENT
The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing ad valorem
tax, within the limits prescribed by law, on all taxable property within the City.
The Certificates are payable from a combination of (i) the proceeds of a continuing, direct annual ad valorem tax, levied 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 not to exceed $1,000.
TAX RATE UMITATION
All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad
valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits
prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem
tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the
constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation.
REDEMPTION
Optional R•demption
Except as described below, the City reserves the right, at its option, to redeem Obligations of either series having stated
maturities on and after February 15, 2018, in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on
February 15, 2017, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. The City '
reserves the right, at its option, to redeem the Certificates maturing February 15, 2031, in whole or in part in principal amounts of
$5,000 or any integral multiple thereof, on February 15,2012, or any date thereafter, at the par value thereof plus accrued interest
to the date of redemption. If less than all of the Obligations are to be redeemed, the City may select the maturities of Obligations
to be redeemed lfless than all the Obligations of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the
ObJigations are in Book-Entry-Only form) shall determine by lot the Obligations, or portions thereof, within such maturity to be
redeemed. If an Obligation (or any portion of the principal sum thereof) shall have been called for redemption and notice of such
redemption shall have been given, such Obligation (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.
8
0
0
0
0
0
0
D
')
Mandatory Redemption
The Bonds maturing on February 15 in each of the years 2024, 2028 and 2034 are being issued as term bonds (the "Term
Bonds"), and are subject to mandatory redemption prior to maturity in the following amounts (subject to reduction as hereinafter
provided), on the following dates, at a price equal to the principal amount redeemed plus accrued interest to each Mandatory
Redemption Date, subject to the conditions set forth below:
$4.820.000 TERM BOND DUE FEBRUARY 15. 2024
Mandatory Redemption Date Princioal Amount
February 15, 2023 $3,295,000
February 15, 2024 (maturity) $1,525,000
$6.860.000TERM BOND DUE FEBRUARY 15.2028
Mandatory Redemption Date Principal Amount
February 15, 2025 $1 ,600,000
February 15, 2026 $1,675,000
February 15,2027 $1,755,000
February 15, 2028 (maturity) $1 ,830,000
$12.900.000 TERM BOND DUE FEBRUARY 15.2034
Mandatory Redemptjon Date Principal Amount
February 15, 2029 $I ,915,000
February 15, 2030 $2,005,000
February 15,2031 $2,095,000
February 15, 2032 $2,195,000
February 15,2033 $2,290,000
February 15, 2034 (maturity) $2,400,000
The Certificates maturing on February 15 in each of the years 2024, 2026, 2028 and 2031 are being issued as term certificates
(the "Term Certificates"), and are subject to mandatory redemption prior to maturity in the following amounts (subject to
reduction as hereinafter provided), on the following dates, at a price equal to the principal amount redeemed plus accrued interest
to each Mandatory Redemption Date, subject to the conditions set forth below;
$2.355.000 TERM CERTIFICATE DUE FEBRUARY 15,2024
Mandatory Redemption Date Princioal Amount
February 15,2023 $1,155,000
February 15, 2024(maturity) $1,200,000
$2.575.000TERM CERTIFICATE DUE FEBRUARY 15.2026
Mandatory Redemption Date Principal Amount
February 15,2025 $1,255,000
February 15, 2026 (maturity) $1,320,000
$2.850.000TERM CERTIFICATE DUE FEBRUARY 15.2028
Mandatorv Redemption Date Principal Amount
February 15, 2027 $1,390,000
February 15,2028 (maturity) $1,460,000
$4.800.000 TERM CERTIFICATE DUE FEBRUARY 15.2031
Mandatory Redemption Date Principal Amount
February 15, 2029 $1 ,530,000
February 15, 2030 $1,600,000
February 15, 2031 (maturity) $1,670,000
At least forty-five (45) days prior to each redemption date specified ab<>ve the Term Bonds or Term Certificates, as they case may
be, are to be mandatorily redeemed, the Paying Agent/Registrar shall select by lot the numbers of the Term Bonds or Term
Certificates, as they case may be, to be redeemed on the next following February 15 from moneys set aside for that purpose in the
interest and sinking fund maintained for the payment of such series of Obligations. Any Term Bond or Term Certificate not
selected for prior redemption shall be paid on the date of its stated maturity.
The principal amount of the Term Bonds or Term Certificates, as they case may be, of a stated maturity required to be redeemed
pursuant to the operation of such mandatory redemption provisions may be reduced, at the option of the City, by the principal
amount of Term Bonds or Term Certificates, as they case may be, of such stated maturity which, at least forty-five ( 45) days
prior to a mandatory redemption date, (I) shall have been acquired by the City at a price not exceeding the principal amount of
such Term Bonds or Term Certificates, as they case may be, plus accrued interest to the date of purchase thereof, and delivered to
the Paying Agent/Registrar for cancellation or (2) shall have been redeemed pursuant to the optional redemption provisions and
not theretofore credited against a mandatory redemption requirement.
9
NOTICE OF REDEMPTION
Not less than 30 days prior to a redemption date for any Obligations, the City shall cause a notice of redemption to be sent by
United States mail, first class, postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at
the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on
the business day next preceding the date of mailing such notice.
ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR
NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE OBLIGATIONS
CALLED FOR REDEMPTION SHALL BECOME DUE AND PAY ABLE ON THE SPECIFIED REDEMPTION DATE, AND
NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT,
INTEREST ON SUCH OBLIGAITON OR PORTION THEREOF SHALL CEASE TO ACCRUE.
AMENDMENTS
The Oty may amend the Ordinances without the consent of or notice to any registered owners in any manner not detrimental to
the interests of the registered owners, including the curing of any ambiguity, inconsistency, formal defect or omission therein. In
addition, the City may, with the written consent of the holders of a majority in aggregate principal amount of the Certificates or
Bonds then outstanding, as applicable, amend, add to, or rescind any of the provisions of the respective Ordinances, except that,
without the consent of the registered owners of all of the Certificates or Bonds, as applicable, 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 Certificate or Bond, as applicable, over any other Certificate or Bond or (3) reduce the aggregate principal amount
required to be held by owners for consent to any amendment, addition or waiver.
DEFEASANCE
The Ordinances provide that the City may discharge its obligations to the registered owners of any or all of the Obligations to pay
principal, interest and redemption price thereon in any matter permitted by law. Under current Texas Jaw, 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 Obligations 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
Obligations; provided that such deposits may be invested and reinvested only in (a) dire<:t, noncallable obligations of the United
States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable
obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally
guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized
investment rating firm not less than AAA or its equivalent, and (c) noncallable obligations of a state or an agency or a county,
municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a
nationally recognized investment rating firm not less than AAA or its equivalent.
Under current Texas Jaw, upon the making of a deposit as described above, such Obligations 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
Obligations have been made as described above, all rights of the City to initiate proceedings to call the Obligations for
redemption or to take any other action amending the terms of the Obligations are extinguished; provided however, the right to
call the Obligations for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and
financial arrangements, expressly reserves the right to call the Obligations for redemption; (ii) gives notice of the reservation of
that right to the owners of the Obligations immediately following the making ofthe firm banking and financial 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 Obligations is to be transfe"ed and how the principal of. premium, if any, and
interest on the Obligations are to be paid to and credited by 17re Depository Trust Company ("DTC"), New York, New York.
while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-
Only System has been provided by DTC for use in disclosure documents such as this Official Statement. 17ze City believes the
source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof
The Ciry cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or
redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to
DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or
that the.v -..,.jlJ do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The
current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to
be followed in dealing with DTC Participants are on file with DTC.
DTC will act as securities depository for the Obligations. The Obligations will be issued as fully-registered securities registered
in the name of Cede & Co. (DTC's partnership nominee) 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 Obligations, in the aggregate principal amount of each
such maturity, and win be deposited with DTC.
10
0
0
0
0
0
0
0
0
0
-'-
0
0
0
0
0
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 Uniform Commercial Code, and a "clearing agency" reg1stered 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
Obligations. 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 tum, 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 wen 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 indirectly
("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 information about DTC can be found at www.dtcc.com.
Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for
the Obligations 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. 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 Obligations 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
certificates representing their ownership interests in Obligations, except in the event that use of the book-entry system for the
Obligations is discontinued.
To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC's
partnershi p nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit
of Obligations 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 Obligations; DTC's records reflect only
the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial
Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Obligations may wish to
take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as
redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of
Obligations may wish to ascertain that the nominee holding the Obligations 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 ofche Obligations 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 DTC nominee) will consent or vote with respect to Obligations 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 Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Obligations will be made to 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/Reg1strar, 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 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 ofDTC) is the responsibility of the City
or the Paying Agent/Reg1strar, 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 Obligations 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,
Obligations are required to be printed and delivered.
II
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, Obligations will be printed and delivered.
USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT
In reading this Official Statement it should be understood that while the Obligations are in the Book-Entry-Only System,
references in other sections of this Official Statement to registered owners should be read to include the person for which the
Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book·
Entry-Only System, and (ii} except as described above, notices that are to be given to registered owners under the respective
Ordinances will be given only to DTC.
lnfonnation 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 Obligations will be issued to the holders and the
Obligations will be subject to transfer, exchange and registration provisions as set forth in the Ordinance and summarized under
"Transfer, Exchange and Registration'' below.
PAYING AGENT/REGISTRAR
The initial Paying Agent/Registrar is The Bank of New York Trust Company, National Association, Dallas, Texas. In the
respective Ordinances, 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 or Certificates, as the case may be, 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 a series
of the Obligations. Upon any change in the Paying Agent/Registrar for the Obligations. the City agrees to promptly cause a
written notice thereof to be sent to each registered owner of the Obligations then outstanding and affected by such change by
United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar.
Interest on the Obligations 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/Registra.r or (ii) by such other method, acceptable to the Paying Agent/Registrar requested by, and at the risk and
expense of, the registered owner. Principal of the Obligations 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 Obligations 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 AND REGISTRATION
In the event the Book-Entry-Only System should be discontinued with respect to a series of Obligations, printed certificates will
be issued to the registered owners of the Obligations affected and thereafter such obligations may be transferred and exchanged
on the registration books of the Paying Agent/Registrar only upon presentation and surrender of such printed certificates 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.
Obligat1ons may be assigned by the execution of an assignment form on the respective Obligations or by other instrument of
transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying
Agent/Registrar, in lieu of the Obligations 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 Obligations issued in an exchange or transfer of Obligations wlll be delivered to the registered owner or assignee of the
registered owner in not more than three business days after the receipt of the Obligations 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 Obligat1ons 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 series and a like aggregate principal amount as the Obligations
surrendered for exchange or transfer. See ''THE OBLIGATIONS -Book-Entry-Only System" herein for a description of the
system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying
Agent/Registrar shall be required to transfer or exchange any Obligation 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 an Obligation.
12
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
RECORD DATE FOR INTEREST PAYMENT
The record date ("Record Date") for the interest payable on the Obligations on any interest payment date means the close of
business on the last business day of the preceding month.
In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such
interest payment (a "Special Record Date") wilt be established by the Paying Agent/Registrar, if and when funds for the payment
of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the
past due interest ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five
business days prior to the Special Record Date by United States mail, first class, postage prepaid. to the address of each Holder of
a Bond or Certificate 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 respective Ordinances establish specific events of default with respect to the Obligations. If the City defaults in the payment
of principal of or interest on the Obligations when due, or if the City defaults in the observance or performance of any of the
covenants, conditions or obligations of the City, the failure to perform which materially, adversely affects the rights of the
owners, including but not limited to, their prospect or ability to be repaid in accordance with the respective Ordinances, and the
continuation thereof for a period of 60 days after notice of such default is given by any owner to the City, the Ordinances
provides that any owner is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the City to make such
payment or observe and perform such covenants, obligations, or conditions. The issuance of a writ of mandamus may be sought
if there is no other available remedy at law to compel perfonnance of the Obligations or the Ordinance and the City's obligations
are not uncertain or disputed. The remedy of mandamus is controlled by equitable principles, so rests with the discretion of the
court, but may not be arbitrarily refused. There is no acceleration of maturity of the Obligations in the event of default and,
consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinances do not provide for the
appointment of a trustee to represent the interests of the owners upon any failure of the City to perform in accordance with the
tenns of the respective Ordinances, or upon any other condition and accordingly all legal actions to enforce such remedies would
have to be undertaken at the initiative of, and be financed by, the registered owners.
On June 30, 2006, the Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex.2006), that a waiver of
sovereign immunity in a contractual dispute must be provided for by statute in "clear and unambiguous" language. Because it is
unclear whether the Texas legislature has effectively waived the City's sovereign immunity from a suit for money damages,
owners may not be able to bring such a suit against the City for breach of the Obligations or covenants in the Ordinances. Even if
a judgment against the City could be obtained. it could not be enforced by direct levy and execution against the City's property.
Further, the registered owners cannot themselves foreclose on property within the City or sell property within the City to enforce
the tax lien on taxable property to pay the principal of and interest on the Obligations. Furthermore, the City is eligible to seek
relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the
recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem 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 registered owners of an entity which has sought protection under Chapter 9. Therefore, should the
City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy
Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the
Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before
it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Obligations are qualified with
respect to the customary rights of debtors relative to their creditors and that all opinions relative to the enforceability of the
respective Ordinances and the Obligations are subject to bankruptcy and other laws affecting creditors rights or remedies
generally.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
13
USE OF PROCEEDS
The proceeds from the sale of the Bonds will be applied as follows:
Sources of Funds:
Principal Amount of Bonds ................................................................................................. . 0 $54,020,000.00
Net Original Issue Premium .............................................................................................. .. 1,781,052.10
Accrued Interest .................................................................................................................. . 251,363.75
Transfer from Prior Debt Service Fund ............................................................................... . 335,00Q.QQ
Total Sources of Funds ................................................................................................. .. $56,387,415.85
Uses of Funds:
Deposit to Escrow Fund ...................................................................................................... .
Accrued Interest & Additional Proceeds Deposit to Interest and Sinking Fund ................. ..
Underwriters' Discount ..................................................................................................... ..
$55,521,379.39 01 253,831.95
283,441.25
Cost of Issuance (Includes Bond Insurance Premium) ........................................................ . 328.123.26
Total Uses of Funds ........................................................................................... .. $56,387,415.85
The proceeds from the sale ofthe Certificates will be applied as follows:
Sources of Funds: 0
Principal Amount of Certificates ......................................................................................... . $25,255,000.00
Net Original Issue Premium (Discount) ............................................................................. .. 133,737.30
Accrued Interest .................................................................................................................. . ~4,375.5Q
Total Sources of Funds .................................................................................................. . $25,443,094.80
Uses of Funds:
Deposit to Construction Fund ............................................................................................. . $25,000,000.00 0
Accrued Interest & Additional Proceeds Deposited to Interest & Sinking Fund ............... .. 54,530.18
Underwriters' Discount ...................................................................................................... . 194,067.86
Cost of Issuance (Includes Bond Insurance Premium) ....................................................... .. l2~.422.76
Total Uses of Funds ....................................................................................................... . $25,443,094.80
0
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
0
0
0
0
14 0
0
G
0
0
G
0
BOND INSURANCE
BOND INSURANCE POLICY
Concurrently with the issuance of the Bonds, Financial Security Assurance Inc. ("Financial Security") will issue its Municipal
Bond Insurance Policy for each series of Obligations (the "Policy"}. The Policy guarantees the scheduled payment of principal of
and interest on the Bonds when due as set forth in the fonn ofthe Policy included as an exhibit to this Official Statement.
The Policy is not covered by any insurance security or guaranty fund established under New York, California, CoMecticut or
Florida insurance law.
FINANCIAL SECURITY 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 September 30, 2006, Financial Security's combined policyholders' surplus and contingency reserves were approximately
$2,581, I 07,000 and its total net unearned premium reserve was approximately $1 ,992,163,000 in accordance with statutory
accounting principles. At September 30, 2006, Financial Security's consolidated shareholder's equity was approximately
$3,058,987,000 and its total net unearned premium reserve was approximately $1,590,538,000 in accordance with generally
accepted accounting principles.
The consolidated financial statements of Financial Security included in, or as exhibits to, the annual and quarterly reports filed
after December 31, 2005 by Holdings with the Securities and Exchange Commission are hereby incorporated by reference into
this Official Statement. All financial statements of Financial Security included in, or as exhibits to, documents filed by Holdings
pursuant to Section 13(a), 13(c), 14 or IS( d) of the Securities Exchange Act of 1934 after the date of this Official Statement and
before the tennination of the offering of the Obligations shall be deemed incorporated by reference into this Official Statement.
Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance Inc.: 31 West 52nd
Street, New York, New York 10019, Attention: Communications Department (telephone (212} 826-0100).
The Policy does not protect investors against changes in market value of the Obligations, 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 Obligations or the advisability of investing in the Obligations. 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 City the information presented under this caption for inclusion in the Official Statement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS
In the 2002 and 2003 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 I and ends on September 30), the City experienced a variety of financial
and management challenges. In response to the events and circumstances that have created such challenges, the City has taken
actions to address and oorrect matters, and 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"). The following discussion includes an analysis of the events that have occurred in the recent
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-LOOKING 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 oonsiderations 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 oondition 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
purchasers 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 Treasury, the Texas Commission on
Environmental Quality (the "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 affecting the City's water,
sewer, storrnwater 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
sales tax revenues; and
ad valorem tax revenues;
> With respect to LP&L:
the implementation of or adjustments made to bus.iness strategies adopted by LP&L;
competition for retail and wholesale customers by LP&L, particularly competition with Xce\ (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 contractual coonterparties to meet their obligations to the City, and with LP&L in
particular with respect to LP&L's fuel and power purchase arrangements;
>With respect to the City's financial performance in general:
legal and administrative proceedings and settlements; and
significant changes in critical accounting policies.
16
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
FY 2003 FINANCIAL CONCERNS AND MID·Yl:AR 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 compared 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 ("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 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 effect on January I, 2002.
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 financial 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
reqlrired to annually transfer to the General Fund amounts to support economic development incentives in the City, a payment
designated for infrastructure use, a "gas tax" transfer, 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 ofLP&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 staff 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 of 2003 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 for the General Fund (hereinafter referred to as the
''2003 Budget Adjustments"), which represented approximately 10.5% 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 City Council determined to write off $2
million owed to the General Fund from the golf course enterprise fund.
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 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 largest customers, which include Texas
Tech University (''Texas Tech"), and which account for approximately I 00/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 seJf.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 of borrowing for, and outstanding debt attributed directly to, LP&L.
PAST EVENTS RELATING TO LP&L AND WEST TEXAS MUNJCIPAL 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 \983. The original
purpose of WTMPA was to engage in the generation, transmission, sale and exchange of electric energy to the Member Cities.
As described below, under 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 WTMPA'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"). WfMPA 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
17
WTMPA Project consists of a 40 MW combustion turbine generator (the "Massengale Unit 8 turbine") and there-powering of an
existing 22 MW generation unit, each located at the City's J.R. Massengale Plant.
Numerous issues, both operational and managerial, arose from the WTMPA Project. As a result, 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 oontrols 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.tx.us under the heading "West Texas Municipal Power Agency Audit". No
malfeasance was uncovered 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 LP&L. In April 2003, the WTMPA Member Cities (including the City) engaged Emst & Young LLP
("E&Y") to oonduct an audit of the records of WTMPA and LP&L. The final report of E&Y was delivered in May 2003, and
included findings of misallocation of oosts among the Member Cities. The report noted that no evidence of misappropriation of
assets or intentional omissions of financial information was disoovered. 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 of
WTMPA, approximately 90% of the total amount.
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 was 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. The City now owns and operates the WTMPA Project, as part ofLP&L.
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 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 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 that capacity since
1998. Also, in late summer of 2002, the City's Chief Accountant died during the implementation of Governmental Acoounting
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 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 the reporting entity and prior period 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
$I 6.6 million. The restatement 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 of LP&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 fe.es and indirect oosts 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 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 -General Fund and General Government Actions-General Fund Budgetary Actions" and "-FY
2006 Budget", for a discussion of the results for the General Fund and a summary of the City's planning for FY 2006.
The Electric Fund ... With respect to 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 Joss 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 produce net revenues equal to I 00%
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 03 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
18
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2003. Under the tenns 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 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. Since 2003, LP&L has met the rate covenant, and the City has not made transfers
from the General Fund to LP&L.
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 FY 2003, to $88.5 million, as a result of a restatement of the
beginning 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 Enternrise Funds: Water. Sewer. Solid Waste and Stonnwater ... 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
stonnwater 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 ofGASB 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 A.
The FY 2002 financial statements, and the City's financial statements dating to FY 1993, were audited by Robinson Burdette
Martin Seright & Burrows, L.L.P. (the "Former External Auditor"). In keeping with the overal1 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 K' 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. In 2005, the City retained the services of BKD, LLP, to prepare the City's financial
statements.
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 baJances
restated to a higher figure, while other funds were restated to decrease their beginning 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 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 connections. 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 beginning 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 detennined 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 certa.in recourse actions in the
event that the grant recipient fails to satisfy its economic development initiative agreement. As a result, the receivable in the
19
community investment fund for the $10 million amount was deleted as an asset of the fund ($6 million of the $10 million grant
had originally been funded through an interfund Joan 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 corporation. 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 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 $12.3 million for the new transit fund,
and $3.2 million for the new WTMP A 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 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
2002financial 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).
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 weaknesses 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 that a high turnover of staff within the City Manager'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 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 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 (as
described above under "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -September 30, 2003
Financial Results -The General Fund").
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
20
0
0
0
0
0
0
0
0
0
0
0
0
0
a
0
0
0
0
CITY'S RESPONSES TO RECENT FINANCIAL AND MANAGEMENT EVENTS
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 Genenl Government Actions
>General Fund Budgetarv Actions ... The City has restored its General Fund balance within a 2-year period to roughly 20% of
operating revenues. For FY 2005, the General Fund balance ended with a surplus of $17,376,420. While no assurances can be
given as to future financial results, based on historic expenditure trends, an increase in the General Fund balance of an additional
$2.5 million is currently expected for FY 2006 year end. City management also has implemented monthly assessments of the
budget.
> 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 the first 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. The committee is appointed by the City
Council and informally reports to City Manager. The establishment of the Audit Committee is designed to serve as an additional
check on the preparation of the City's financia1 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; Kim Turner, the Director of Internal Audit at
Texas Tech; and John Zwiacher, a member of the Board of Directors of LP&L. Mr. Epps is the chair of the Audit Committee.
> City Management Changes ... As reflected in ''City Officials, Staff and Consultants -Selected Administrative Staff", the City
has in place an experienced management team representing extensive government service experience. This management team has
implemented procedures that have addressed the general internal control weakness cited by I<PMG in the 2003 Management
Letter.
Recent Measures taken to Address Financial and Management Concerns at LP&L
> 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 SO.Ol per kWh, an average increase of 12.5% for
both residential and commercia] customers, which resulted in LP&L being approximately 30% higher in cost 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 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
ovenll 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. 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. Furthermore, while maintaining
its competitive position, LP&L has undertaken two recent FCA increases to offset increasing fuel costs, including an FCA
increase in November 2005 of approximately 14.78% and an FCA increase in February 2006 of approximately I I. 76%. Fuel cost
will be continually evaluated and adjustments may be made as warranted.
> Establishment of Electric Utilities Board ... On February 5, 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 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 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
21
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 of LP&L by the Electric Board in January 2005.
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 City Council 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 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 primary 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 responsibillty to(!) approve an annual budget and electric rate schedule for submiss1on 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 firm for that purpose; and (3) subject to applicable
Jaw, 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 Board prior to appointing and/or removing the director of
LP&L. In accordance with the New LP&L Governance Ordinance, the director of LP&L reports to the Board. 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 focus by the City on the operation of LP&L than has
occurred in the recent past.
> Establishment of Reserve Funcls 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 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 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 Electric Board has not deviated
from the flow of funds contemplated under the LP&L Governance Ordinance.
At the end of FY 2005, LP&L partially funded its electric utility development reserve fund by the amount of $2 million.
However, LP&L has not funded all of the reserves established under the LP&L Governance Ordinance, as net revenues have
been inadequate for a total funding of such accounts. Moreover, the mere establishment of the funds does not imply that such
reserves will be funded within any particular time frame. Nevertheless, 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 ... As a result of 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 subs1diaries. 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 Xcel 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.
22
0
0
0
0
c
c
0
0
0
0
0
0
0
0
0
0
0
0
>The WTMPA Settlement Agreement ... Jn 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 City on behalf of WTMP A. 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 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 ofWTMPA chainnan, 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
WTMPA Board, each of which has an equal vote (certain actions of the WTMPA Board require a six vote "super majority"), but,
in addition to the affinnative 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 the
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 maMer 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 WTMP A 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 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 15 year full requirements wholesale
power agreement (the "New Power Agreement") with SPS. The New Power Agreement became effective July I, 2004, and
replaced 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 penni ned assigns is obligated to provide all energy requirements for each
of the Member Cities of WTMPA, 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 terms 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 predetennined schedule set forth in the New Power
Agreement. 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
tennination 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.
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 frequendy 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 detennines to match its FCA to changes in SPS's fuel adjustment, as it has generally done in the
past. According to infonnation 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 detenninarion to approve the New
Power Agreement by WTMPA. In the event that gas prices should decline over the tenn of the Agreement, the City believes that
SPS has the flexibility to switch a larger portion of its generation to gas, including through the use ofthe 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 terms 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 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 require new
developments in the City to fund electric infrastructure through a development charge paid when the development is platted. new
23
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 pennit 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 State, 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
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 strategies and other quantitative and qualitative measures that could affect the ability of the counterparty to
perfonn 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 irrespective of whether the City purchases gas. That
contract, between the City and ConocoPhiHips, 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, 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 Agreements ... As noted above, in connection 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 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, the City has dedicated generation capacity of 219 megawatts ("MW") to SPS under the Unit Contingency Agreements.
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 during the 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 June 30, 20 J 9. 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 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 rrom 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 A&reement ... Subsequent to its execution of the New Power Agreement, WTMPA and other parties entered
into a series of agreements (collectively, the "New WfMPA Gas Agreements") under which WTMPA may acquire natural gas
and effectively exchange it for 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
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 WfMPA's
Member Cities, includi ng 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 terms 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 terms 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 marketprice
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 has secured contracts with five suppliers (ConocoPhillps, 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 terms, to supply all or any portion ofWTMPA's gas requirements under the New WfMPA
24
0
0
0
0
0
0
0
0
0
c
G
0
0
0
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. For these and other reasons, there
can be no assurance that WTMPA will be able to realize savings in any amount or for any term 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 discount will continue to hold. Accordingly, the City has included $3.8 million in gas
rebate income in the electric system's FY 2006 operating budget. That amount assumes that the maximum quantities of gas will
be acquired and credited by SPS under the New WTMPA Gas Agreements in FY 2006; City management is of the view,
however, that it is possible 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 of almost 29,000, is the largest customer of LP&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. In response to mediation to resolve disputes under a prior agreement,
the City and Texas Tech executed a new contract on Apri128, 2005 (the "New Texas Tech Agreement"). In general tenns, 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
terminate 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 terms that are mutually beneficial for the parties.
>New Chief Executive Officer for LP&L ... Gary Zheng was appointed Chief Executive Officer of LP&L in September 2005.
Previously, he had served as the Superintendent of Electric Distributions at LP&L and subsequently, from March 2003 until his
recent appointment to CEO, as the Chief Operating Officer of LP&L. He has more than 19 years of engineering and management
experience in electrical utility business. Mr. Zheng, a registered Professional Engineer, is a graduate of the University of
Southern California with a MS in Electrical Engineering, a MS in Computer Engineering and a PhD in Electrical Engineering.
FY 2007 BUDGET
General Fund ... The City Council adopted the FY 2006-07 budget and five year forecast on September 13, 2006. The City's FY
2006-07 budget for the General Fund is balanced with $126.2 million in total revenues and expenses. The budget projects that
sales tax revenues will produce 54.9% of total tax revenues (tax revenues represent 62.4% of the General Fund's total operating
revenues), while ad valorem tax revenue is budgeted to produce 43.6% of total tax revenues.
In FY 2007 the City's total tax rate was set at $0.46 I 99 per $I 00 taxable assessed valuation, up from $0.4472 in FY 2006. The
City's tax roll increased $637.5 million, or 6.8o/o, from FY 2006 to FY 2007. The City Council, on June 12, 2003, passed a
resolution affirming their support for truth-in-taxation. The goal of this resolution is to allow the citizens to be better informed
about the real needs of City government and if the increased revenue from increased appraisal values is truly necessary. The
resolution goes on to provide that each year the tax rate should be adopted based on the actual needs of government. This goal
was affirmed in April 2004 in a resolution that stated the City Council has supported as well as taken action to provide tax relief
to property owners within the City, and that the City Council recognized the need for the City to be autonomous in its ability to
provide the public safety, health, and quality of life for its citizens. The FY 2006-07 Operating Budget was developed in
consideration of the goals of the resolutions and as a result, there was a $0.01479 increase in the adopted tax rate.
Total transfers to the General Fund from enterprise and internal service funds are budgeted to increase by $1.9 million, while
transfers out remain stable. On the expenditure side, administrative services, community services, cultural and recreation services
and public works budgets experienced increases in the 14-17% range mainly due to higher healthcare and energy costs.
Expenditures for public safety are $5.8 million greater than the amended FY 2005-06 budget, or an 8.2o/o increase. This increase
is due to the City Council goal of increasing public safety officers in Fire and Police. Overall, General Fund operating
expenditures are budgeted to increase by $12.9 million over the amended FY 2006 budget.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANKJ
25
Enternrise Funds ... The following table (amounts in millions) illustrates the revenues, use or contribution of net appropriable
assets, and appropriation as approved in the City's FY 2006-07 adopted operating budget and five year forecast for the Solid
Waste, Wastewater, Water and Electric Funds:
Adopted
FY2006-07
Adopted Planned Use Adopted Chan.ge
FY 2006-07 (Contribution) FY 2006-07 from
Revenue Net Assets A}!~roJ!riation Prior Year
Solid Waste $ 15,513,887 2,154,144 17,668,031 19.4%
Wastewater 21,957,000 1,547,857 23,504,857 6.6%
Water 42,348,055 2,610,518 45,320,226 11.9%
LP&L 250,577,30 I 231,256,484 18.00/o
The increased budget in Solid Waste is a result of increased salaries, healthcare, fuel, master lease, billing office and equipment
maintenance costs. Increases in these areas are as follows (in millions): healthcare costs, $0.3; fuel costs, $0.7; salary costs
related to an increase in salaries in the unpaved alleys program, $0.5; master lease, $.7; billing office, $0.2; and, equipment
maintenance costs, $0.6. The large increase in debt service was related to the acquisition of fleet through the City's Master Lease
program to replace an aging inventory. An increase in the tipping fees and residential collection rates of$1.50 was budgeted.
The increased budget in Wastewater is a result of increased healthcare, fuel, utility, debt service, and billing office costs.
Increases in these areas are as follows (in millions): healthcare costs, $0.2; fuel costs, $0.1; utility costs, $0.6; debt service, $1.8;
and, billing office costs, $0.1. The large increase in debt service is mainly related to the $15 million bond issue in FY 2005-06
for compaction repairs and lines ahead of the Marsha Sharp Freeway. No rate increase was needed in FY 2006-07.
The increased budget in Water is a result of increased healthcare, fuel, utility, debt service, billing office and Canadian River
Municipal Water Authority costs. Increases in these areas are as follows (in millions): healthcare costs, $0.3; fuel costs, $0.1;
utility costs, $0.8; debt service, $2.6; CRMW A costs, $1.1; and, billing office costs, $0.2. The large increase in debt service is
mainly related to the acquisition of water rights over the past two years. An II% rate increase was approved in the adopted
operating budget.
(THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
26
0
0
0
0
0
0
0
c
c
c
0
0
0
AD VALOREM TAX INFORMATION
AD VALOREM TAX LAW
The appraisal of property within the City is the responsibility of the Lubbock County Central Appraisal District (the "Appraisal
District"). Excluding agricultural and open·space land, which may be taxed on the basis of productive capacity, the Appraisal
District is required under the Property Tax Code (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 determining market value of property,
different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market
data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law
further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market
value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was
appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the
property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property.
The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of
three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the
value of property within the Appraisal District at least every three years. The City may require annual review at its own expense,
and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal
Review Board.
Reference is made to Title I of the Texas 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 purposes;
and the procedures and limitations applicable to the levy and collection of ad valorem taxes.
Article Vlll of the State Constitution (''Article VIII") and State law provide for certain exemptions from property taxes, the
valuation of agricultural and open·space lands at productivity value, and the exemption of certain personal property from ad
valorem taxation.
Under Section 1-b, Article Vlll, and State law, the governing body of a political subdivision, at its option, may grant: (I) an
exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the
disabled from all ad valorem taxes thereafter levied by the political subdivision; or (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 Jaw 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 total amount of ad valorem taxes levied on the residence homestead of a disabled person or pe.rsons
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
college 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 55 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 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 VIII provides that eligible owners of both agricultural land (Section I -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-<1 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 J.j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined
as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication.
Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal.
The City 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 pa.rt
27
of 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. See "Tax Increment Financing Zones" below.
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. See "Tax Abatement Policies" below.
EFFECTIVE TAX RATE AND ROLLBACK TAX RATE
By each September I or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current
year. The City Council is required to adopt the annual tax rate for the City before the later of September 30 or the 60th day after
the date the certified appraisal roll is received by the City. If the City Council does not adopt a tax rate by such required date the
tax rate for that tax year is the lower of the "effective tax rate" calculated for that tax year or the tax rate adopted by the City for
the preceding tax year. The tax rate consists of two components: (I) a rate for funding of maintenance and operation expenditures
and (2) a rate for debt service.
Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". A tax
rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or the effective tax rate until two public
hearings are 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 has otherwise complied with the legal requirements for the
adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may
require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax
rate.
"Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values
(adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in
this year's taxable values.
"Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's
values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted)
divided by the anticipated tax collection rate.
The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize
an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the
rollback tax rate calculations are required to .be.Qffset by the revenue that will be generated by the sales tax in the current year.
Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the
calculation of the various defined tax rates.
PROPERTY ASSESSMENT AND TAX PAYMENT
Property within the City is generally assessed as of January 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 I
of the following year. Taxpayers 65 years old or older are permitted by State Jaw 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 .
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
28
0
0
0
0
0
0
0
c
c
0
C>
0
0
0
0
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 10 5 15
July 12 6 18
After July, the penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is
delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain
circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per
annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in
parcels, pursuant to court order to collect the amounts due. Federal Jaw 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.
CITY APPLICATION OF TAX CODE
The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older of $16,600; the
disabled are also granted an exemption of$1 0,000.
The City has not 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 $5,000.
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 va lue 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 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.
Since 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 I, 2004.
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 has established three
enterprise zones, the north zone, of approximately 18.6 square miles, the south zone, of approximately 15.7 square miles, and the
international airport zone, of approximately 1 0.3 squ are miles. At present, there are 20 active enterprise projects and tax
abatements, principally in the 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 ( 1 00%) 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 amount of real or personal property to be added to the tax roll,
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
29
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 General Obligation Debt."
TAX INCREMENT FINANCING ZONES
Chapter 311, 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 units. Together with other taxing units, the City participates in two Tlfs, 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,
at $105,858,251. In FY 2006, the Downtown TIF had a taxable value of$137,773,996 before taking into account tax abatements
and exemptions. After tax abatements and exemptions, the tax value in the Downtown TIF is $137,164,666. In addition to the
City, the County, Lubbock 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
TaKing Units in the Downtown TIF a.lso participate in the North Overton TIF. As is the case with the Downtown TIF, the ta1tes
levied by the City in the FY 2006 represent approKimately 53. I% of all taxes levied by all participating Taxing Units. The City
ordinance establishing the North Overton TIF provides that the TIF will terminate 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 1, 2002 at
$26,940,604. In FY 2006, the North Overton TIF had a taxable value of $185,442,083 before taking into account tax abatements
and exemptions. After tax abatements and exemptions, the tax value in the North Overton TIF is $185,284,602.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
30
u
0
0
0
0
0
c
0
0
0
c
G
0
0
0
0
0
TABLE 1-VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT
2006l'v1arket Valuation Established by Lubbock Centrn1 Appraisal District $10,607,538,316
Less E.xerqJriom/Reductions at 1000/o Market Value:
Residential Homestead ExeJl'l)tions $ 219,946,523
Homestead Cap Adjustmert 62,042,594
Disabled Veterans 14,489,874
Agriculturali~Space Land Use Reductions 89,015,230
Pollution Exetl1'(ions 5,985,740
House Bill 366 323,568
Freeport ExeTq)tions 75,334,950
Tax Abaterrett Reductions (I) 52,917,466
Tax Freeze Adjl.IStrrent 84,756,734 604,812,679
2006 Taxable Assessed Valuation $10,002,725,637
City Funded Debt Payable from Ad Valorem Taxes:
General ())ligation Debt (as of 12-1-06) (2X3) $ 447 ,275,0CIJ
Plus: The Bonds 54,020,0CIJ
PI~: The Certificates 25,255,0CIJ
Less: Refunded <l>ligations 53,005,0CIJ
Total Fwxled Debt Payable from Ad Valorem Taxes $ 473,545,0CIJ
Less: SelfSupporting Debt(as of12-1-06) (3X4)
Waler'.\orks System General ())ligation Debt $ 117,698,109
Se\\er System General Obligation nett 57,790,304
Solid Waste Disposal System Genera] Obligation Debt 11,796,568
Drainage Utility System General <l>ligation Debt 80,031,156
Tax Increment Financing General Obligation Debt 18,837,749
Electric Light and Power System General Obligation Debt 49,592,282
Cemetery General Obligation Debt 491,989
Gateway General Obligation Debt 17,145,597
Airport General Obligation Debt 6,659,301
The Certificates (5) 25,255,0CIJ 385,298,055
General Pwpose Ftmded Debt Payable from Ad Valorem Taxes $ 88,246,945
General <l>ligation Interest and Sinking Fund as of Septeniler 30, 2006 $ 3,087,649
Ratio Total Funded Debt to Taxable Assessed Valuation 4.73%
Ratio General Purpose Funded Debt to Taxable Assessed Valuation 0.88%
2007 Estimated Population (6) 212,365
Per Capita Taxable Assessed Valuation $47,102
Per Capita Total Funded Debt Payable from Ad Valorem Taxes $2,230
Per Capita General Purpose Funded Debt Payable from Ad Valorem Taxes $416
(I) See above, "Ad Valorem Tax Information-Tax Abatement Policies."
(2) The statement of indebtedness does not include the City's outstanding Electric Light and Power System Revenue Bonds,
payable solely from the Net Revenues of the City's Electric Light and Power System.
(3) Includes the Refunded Obligations.
(4) As a matter of policy, the City provides debt service on general obligation debt issued to fund improvements to its
31
Waterworks System, ~ewer System, Solid Waste System, Tax Increment Finance Reinvestment Zone, Gateway Streets,
Airport, Cemetery, Electric Light and Power System and Drainage System from surplus revenues of these Systems (see
"Table SA -General Obligation Debt Service Requirements," "Table 9 -Division of General Obligation Debt Service
Requirements," "Table SB -Interest and Sinking Fund Budget Projection" and "Table I 0 -Computation of Self-Supporting
Debt").
The City's Waterworks System General Obligation Debt has been issued to finance or refinance Waterworks System
improvements, and is being paid, or is expected to be paid, from Waterworks System revenues. The City has no outstanding
Waterworks System Revenue Bonds but has obligated revenues of the Waterworks System under water supply contracts.
The City's Sewer System General Obligation Debt has been issued to finance Sewer System improvements, and that is being
paid, or is expected to be paid, from Sewer System revenues. The City has no outstanding Sewer System Revenue Bonds.
The City's Solid Waste Disposal System General Obligation Debt has been issued for Solid Waste System improvements,
and 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.
The City's Drainage Utility System General Obligation Debt has been issued for Drainage System improvements, and 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.
The City's Tax Increment Financing General Obligation Debt has been issued for construction of improvements in the Nonh
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. In FY 2007, based upon development projections
that the City believes to be reasonable, but which are dependent in pan 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 oover 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
has reached full build-out status.
The City's Electric Light and Power System General Obligation Debt has been issued to finance Electric Light and Power
System improvements, and is being paid, or that is expected to be paid, from revenues derived from the Electric Light and
Power System.
The City's Cemetery General Obligation Debt has been issued to finance Cemetery improvements, and is being paid, or that
is expected to be paid, from revenues derived from the Cemetery.
The City's Gateway General Obligation Debt has been issued for Gateway Streets improvements, and is being paid, or that is
expected to be paid, from franchise fees. The City has no outstanding Gateway Fund Revenue Bonds.
The City's Airport General Obligation Debt has been issued to finance Airport improvemenls, and is being paid, or that is
expected to be paid, from revenues derived from the Airport.
(5) The Certificates will be paid, or that is expected to be paid, from franchise fees.
(6) Source: City of Lubbock, Texas.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
32
0
0
0
0
0
0
0
0
0
c
0
TABLE 2-VALUATION TAXABLE ASSESSED VALUATION BY CATEGORY
0 Taxable A(!2nised Value for Fiscal Ytar Ended Seetember 301
2007 2006 2005
%of %of %of
Catea2!l: Amount Total Amount Total Amount Total
Real, Residential, Single-Family s 5,889,918,195 55.53% s 5,517' 769,306 55.55% s 5,169,490,706 56.09%
Real, Residential, Multi-Family 873,394,391 8.23% 795,689,400 8.01% 615,453,250 6.68%
0 Real, Vacant LotsfTracts 186,939,508 1.76% 166,089,379 1.67% 137,411,73 1 1.490/o
Real, Acreage (Land Only) 104,443,417 0.98% 80,067,791 0.81% 64,532,486 0.70%
Real, Farm and Ranch Improvements 10,601,986 0.10% 11,038,895 0.11% 10,406,299 0.11 %
Real, Commercial and Industrial I ,968,271,689 18.56% 1,827,901,763 18.40% 1,712,457,490 18.58%
Real, Oil, Gas and Other Mineral Reserves 28,446,050 0.27% 17,526,510 0.18% 12,167,754 0.13%
Real and Tangible Personal, Utilities 179,562,657 1.69% 177,838,907 1.79% I 73,908,469 1.89%
Tangible Personal, Business I ,245,600,988 11.74% I ,228,428,632 12.37% 1,226,369,118 13.31%
Tangible Personal, Other 13,940,265 0.13% 14,527,171 0.15% 15,465,413 0.17%
Real Property, Inventory 37,577,657 0.35% 26,685,491 0.27% 9,863,035 0.11%
Special inventory 68,621,321 0.65% 67,329,545 0.68% 68,232,264 0.74%
Other/ Adjustments 220,192 0.00% I 499,616 0.02% 0.000/o
Total Appraised Value Before Exemptions s 10,607,538,316 100.00% $ 9,932,392.406 100.00% $ 9,215,758,015 100.00%
Less: Total Exemptions/Reductions {604181216792 {5851 778,455~ (580176311 53~
T1001ble Assessed Value $ I 0,002, 7251637 $ 9,346:6131951 s 8,634,994,862
0
Taxable A21!raised Value Cor Fiscal Year Ended Seetember 30,
2004 2003 2002
%of %of %of
Cate~!l: Amount Total Amount Total Amount Total
Real, Residential, Single-Family s 4,690,158,161 55 .50% $ 4,282,2 I 4,635 56.78% s 3,935,486,660 53 .59%
0 Real, Residential, Multi-Family 56 I ,569,488 6.64% 455,993,262 6.05% %6,775,473 6.36%
Real, Vacant Lots/Tracts 108,625,954 1.29% 93,473,144 1.24% 96,407,484 1.31%
Real, Acreage (Land Only) 65,880,410 0.78% 59,644,977 0.790/o 60,171,506 0.82%
Real, Farm and Ranch Improvements 10,835,088 0.13% I 1,391,782 0.15% 12,003,318 0.16%
Real, Commercial and Industrial I ,638,846,765 19.39% 1,370,730,397 18.18% 1,445,748,160 19.69%
Real, Oil, Gas and Other Mineral Reserves 8,923,810 0.11% 7,909,460 0.10% 8,849,390 0.12%
Real and Tangible Personal, Utilities 185,761,346 2.20% 192,138,423 2.55% I 85,588,935 2.53%
0 Tangible Personal, Business I ,090,862,579 12.91% 974,534,729 12.92% 1,039,521,384 14.16%
Tangible Personal, Other 16,287,022 0.19% 15,336,364 0.20% 15,296,446 0.21%
Real Property, Inventory 4,774,287 0.06% 11,087,603 0.15% 10,279,056 0. 14o/o
Special Inventory 68,663,514 0.81% 67,339,159 0.89% 67,429,634 0.92%
Total Appraised Value Before Exemptions s 8,45 I, I 88,424 100.00% $ 7,541,793,935 100.00% $ 7,343,557,446 100.00%
Less: Total Exemptions/Reductions (529,598,0442 ( 199!449,068~ ! 432,980,275~
T1001ble Assessed Value $ 7,921,590,380 $ 7,342,344186 7 $ 6,910,577,171
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.
()
33
TABLE 3A -VALUATION AND GENERAL OBLIGATION DEBT HISTORY
Per Capita General Ratio
Fiscal Estimated Taxable Taxable Purpose Tax Debt to Funded
YearEnd District Assessed Assessed Funded Assessed Debt
9/30 Poeulation <•> Valuation Valuation Tax Debt(b) Valuation (bJ Per Caeita
2002 202,000 s 6,909,309,707 s 34,205 $ 63,1 15,346 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 70,161,2 18 0.89% 340
2005 209,120 8,664,190,909 41,432 80,210,269 0.93% 384
2006 211,187 9,365,239,925 44,346 87,231,945 0.93% 413
2007 212,365 10,002,725,637 47,102 88,246,945 (c) 0.88% (c) 416
<•l Source: The City.
!bl Does not include self-supponed debL
<<l Includes the Bonds and excludes the Refunded Obligations.
TABLE JB-DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT
The following table sets forth certain information with respect tot 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 Information-Capital Improvement Program and Anticipated
Issuance of General Obligation Debr."
Fiscal
Year
Ended
30-Sep
2003
2004
2005
2006
2007 ''1
Funded Tax Debt
Outstanding at End
of Year
$ 295,935,000
285,885,000
388,595,000
447,275,000
473,545,000
Less:
Self-Supporting
Funded Tax
Debt
$ 225,746,796
215,723,783
308,384,73 I
360,043,055
385,558,055
C•) Includes the Obligations and excludes the Refunded Bonds.
General Purpose
Funded Tax Debt
Outstanding
at End of Year
$ 70, 188,204
70,161,217
80,210,269
87,231,945
87,986,945
TABLE 4 -TAX RATE, LEVY AND COLLECTION HISTORY
Fiscal Tax Rate Distribution
YearEnd General Economic Interest and Tax Tax
09/30 Fund DevelOJ!ment Sinking Fund Rate Le!l:
2002 $ 0.42844 $ 0.03000 $ 0.11156 $ 0.57000 $ 39,351,225
2003 0.43204 0.03000 0.10796 0.57000 42,286,967
2004 0.41504 0.03000 0.10066 0.54570 43,659,111
2005 0.33474 0.03000 0.09496 0.45970 39,777,866
2006 0.35626 0.03000 0.06094 0.44720 41,775,367
2007 0.36074 0.03000 0.071 25 0.46199 41,968,431
34
Percent Collected
CuJTent Total
97.60% 99.41%
97.25% 98.78%
97.02%
97.53%
99.69%
100.08%
98.15% 99.71%
(In process of Collection)
:J
0
Tax
Year
2001
2002
2003
2004
2005 0
2006
0
0
0
Tax
Year
2001
2002 c
2003
2004
2005
2006
0
c
c
0
0
0
0
0
0
0
TABLE 5-TEN LARGEST TAXPAYERS
Name
Macerich Lubbock Ltd.
SBC
Southwestern Public Services Co.
Fountains Club Lubbock Acquisitions LP
MC Canton Woods LC
Atmos Energy West Texas Division
United Supennarkets OFC
First Industrial Development Services Inc.
Jefferson Commons Lubbock LP
Lubbock Two Associates LLC
TABLE6-TAXADEQUACY
2006
Taxable
Assessed Valuation
$ 114,964,054
60,604,718
43,334,050
30,692,329
30,481,548
29,375,670
28,959,459
28,278,989
27,235,977
26,971,428
$ 420,898,222
Average Annual Debt Service Requirements All General Obligation Debt (2007-2034):
$0.2543 per S I 00 A V against the 2006 Taxable AV, at 98.5% collection, produces
Maximum Annual Debt Service Requirements All General Obligation Debt {2008):
$0.4535 per $100 AV against the 2006 Taxable AV, at 98.5% collection, produces
1"1 Includes the Obligations and excludes the Refunded Obligations.
TABLE 7-ESTIMATED OVERLAPPING DEBT
%of Total
Taxable
Assessed Valuation
1.15%
0.61%
0.43%
0.31%
0.30%
0.29%
0.29%
0.28%
0.27%
0.27%
4.21%
$25,051,207 lo)
$25,055,377
$44,673,627 (I)
$44,681,925
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 infonnation
contained 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 infonnation, and no person should rely
upon such infonnation as being accurate or complete. Furthermore, certain of the entities listed may have issued additional Tax
Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax
Debt, the amount of which cannot be detennined. The following table reflects the estimated share of overlapping Tax Debt of the
City. Gross Debt Estimated % Overlapping
Taxing Jurisdiction (As of Nov. 30) Overlapping Debt
Lubbock ISO $ 148,756,156 98.91% $ 147,134,714
Lubbock County 86,460,000 84.36% 72,937,656
Lubbock County Hospital District
High Plains Underground Water Conservation Dist.
Friendship lSD
Idalou lSD
Lubbock-Cooper lSD
Roosevelt lSD
New Deal lSD
Estimated Overlapping Debt
The City $
Total Direct & Estimated Overlapping Debt
As a% of2006 Taxable Assessed Valuation
67,331 ,742
540,000
46,509,554
473,545,000 ''1
Per Capita Total Direct & Estimated Overlapping Debt
"1 Includes the Bonds and excludes the Refunded Obligations and Self-Supported ~bt.
35
84.80%
0.00%
64.44%
1.10%
15.30%
4.72%
0.03%
100.00%
$
$
$
43,388,575
5,940
7,115,962
270,582,846
473,54spoo "1
744,127,846
7.44%
3,504
TABLE SA· GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS FYE Outstandlo& Debt"' The Certificates '" The Bond• Less Refunded Total 30-Sep PrlndP!!I Intertsl Total Principal Interest Total Principal Interest Total Bonds Debt Service 2007 $ 22.425,000 $ 21.555.177 s 43,980.177 $ $ 676,449 $ 676,449 $ 845,000 s 1,547,141 s 2.392.141 $ 2,473.691 $ 44.575,075 2008 23.710,000 19.343.659 43,053.659 630.000 1,074,550 1,704.550 1,690,000 2,446,038 4,136,038 4,220,620 44,673,627 2009 23.735.000 18,377,898 42.112,898 655,000 1.048,850 1.703,850 1,665,000 2,378,938 4,043.938 4,123,745 43,736,941 2010 23.700.000 17.397,618 41,097,618 680.000 1.022,150 1.702.150 2,345.638 2,345.638 2,452.995 42,692.411 2011 24.325.000 16.359.627 40.684.627 710.000 994.350 1,704,350 2,345,638 2,345.638 2,452,995 42,281,619 2012 23.795.000 15.286,819 39.081.819 740,000 965,350 1,705,350 2,345,638 2,345,638 2,452,995 40,679,811 2013 24,480,000 14,200,338 38,680.338 770,000 935,150 1,705,150 2,345,638 2,345,638 2.452,995 40,278,131 2014 25,250,000 13.048,161 38.298.161 800.000 903.750 1,703,750 -2,345,638 2,345,638 2,452.995 39,894,554 ;!015 23,195,000 11,946,965 35,141,965 830,000 871,150 1,701,150 2,345,638 2,345,638 2,452,995 36.735,758 2016 23,120.000 10,869.794 33,989.794 865,000 837,.250 1,702,250 1,645,000 2,312,738 3,957,738 4,042,245 35,607.536 2017 23.225.000 9,742,541 32,967,541 900,000 801,950 1.701,950 3,455,000 2,193,463 5,648,463 5,730,261 34,587,693 2018 24.215,000 8.595.436 32.810.436 940.000 765,150 1,705,150 3,640,000 2,016,088 5,656,088 5,735,876 34,435,798 2019 23.285,000 7,400,885 )0,685,885 975,000 726,850 1,701,850 3,825,000 1,829,463 .5.654,463 5,738,875 32,303,323 2020 21,230.000 6,311,179 27,541,179 1,015,000 686,416 1,701,416 4,015,000 1,648,519 5,663,519 5,745,590 29,160,523 2021 19,715,000 5,306,373 25,021.373 1,060,000 643,619 1,703,619 4,220,000 1,457,700 5,677,700 5,761,444 26,641,248 2022 17.100.000 4,406,286 21,506,286 1,105,000 598,275 1,703,275 4,440,000 \,241,200 5,681.200 5,761,281 23,129,480 2023 16,250,000 3.594.239 19,844.239 1,155,000 550,911 1,705,912 3,295,000 1,047,825 4,342,825 4,426,506 21,466,529 2024 14,470.000 2.801.147 17,271.147 1.200.000 502,400 1,702,400 1,525.000 927,325 2,452,325 2,533,375 18,892,497 2025 13.485,000 2.125,134 15,610,134 1,255,000 446,27S 1,701,275 1.600,000 853,200 2,453,200 2,533,375 17,231.234 .... 2026 9.665.000 1.558,431 11.223.431 1.320,000 381,900 1.701,900 1,675,000 779.513 2,454,513 2,537,500 12,842.344 ~ 2027 3,595,000 1.233,100 4,828,100 1,390,000 314,150 1,704,150 1,755,000 702,338 2.,457.338 2,537.375 6,452,213 2028 3.765.000 1.054.644 4,819.644 1.460,000 242,900 1,702,900 1,830,000 621,675 2,451,675 :1.,533,000 6,441,219 2029 3.955,000 865,350 4,820,350 1,530,000 173,505 1,703,.S<lS 1,915,000 537.413 2,452,413 2,534,125 6,442,143 2030 4,155.000 667.125 4,822,125 1.600.000 106,210 1,706,210 2,005,000 449,213 2,454,213 2,535,375 6,447,173 2031 4.365,000 459,581 4,824,581 ),670,000 35,905 1,705,905 2,095,000 356,963 2.451,963 2,536,500 6,445.949 2032 2.240.000 297.250 2,537.250 -2,195,000 260,438 2,455,438 2,537,250 2,455,438 2033 2.350,000 182,500 2,532,500 -2.290.000 159,525 2,449.525 2,532.500 2,449.525 2034 2,475.000 61.875 2,536.875 2,400,000 54,000 2,454,000 2.536,875 2,454.000 $ 447.275,000 $ 215.049,133 s 662.324,133 $ 25.255,000 s 16.305,475 s 41,560,475 s 54,020,000 $ 39,894,535 $ 93,914.535 s 96.365.355 $ 701,433.788 Average Annual Debt Serv«:e Requirements All General Obligation Debt (2007-2034): s 25,051,207 Maximum Annual Debt Service Requirements AU General Obligation Debt (2008): s 44,673.627 "1 Does not 1 nclud<: lenselpurth•$e <ll>lir.atto.n•. ,,. Tbe Certifor.ues will bt p;~id. or that os txp«ttd to bt paid. ft<lm fmncbue fus. TABLE 8B-INTEREST AND SINKING FUND BUDGET General Purpose General Obligation Debt Service Requirements, September 30 ,2007 s 9,294,717 lnteresl and Sinking Fund, September 30, 2006 $ 3,087,649 lnteresl and Sinking Fund Tax Levy@ 98.5% 7,020,038 Estimaled Interest Earnings 122,647 10,230.334 Projected Balance, Seplember 30, 2007 $ 935,617 (l () () 0 0 0 0 0 0 0 c
) G 0 0 0 0 0 TABLE 9 -DIVISION OF GENERAL OBLIGATION DEBT SERVICE Solid Waste Drainage Tax Eledrlc Llgbt Waterworks Sewer Disposal Ullllty hu:reme11t &: Power Genet81 Total FYE System System System System Fln~~nclng System Cmetary Gateway Airport Pvpose G.O. 30-Sep Debt Slen'lce 1"1 Debt Service Debt Serv1Qe Debt Servtee Debt Servtee Debt Servlee Debt Servtce DebtSemce Debt Service Debt Service Debt Servtee 2007 s 12.21~.470 s 7.213.579 s 1.120.834 s 5,438.574 s 1,492,624 s 4.992,336 s 38.310 s 1,354,431 s 759,302 s 9.294,717 43.980,177 2008 11,850.444 6,988,283 1,122,028 5,459,507 1,506,501 4,942,084 39,.536 1,365,540 758,667 9,021,069 43,053.659 2009 11.761,364 6.753,898 987,448 5,460.275 1,509,138 4,862,794 39 • .519 1.363,819 584,908 8,789,735 42,112,898 2010 11,586,801 6,.\68.691 1.062,047 5,461,086 1,511.599 4,786,137 39,540 1,365,414 579,750 8.336,553 41,097.618 2011 11,493.193 6,208.404 1.043,039 5,459,152 1,507.747 4,721,931 39,535 1,360,613 574,704 8,276,309 40,684,627 2012 10,609,246 5,969,960 1,033,147 5,457,704 1 • .507,751 4,640,427 39.528 1,364,337 569,808 7,889,911 39,081,819 2013 10,557.261 5,783,900 1,022,658 5,458.822 1,506,338 4,571,398 39.537 1.361,924 563,952 7,814,548 38,680,338 2014 10,517,474 5,618,884 1,006,681 5.4.54,913 1,5o6,26S 4.492,432 39,527 I ,364,345 557,004 7,740,636 38,298,161 2015 10,390,460 3,741.276 990,773 5,457.140 1,505,558 4,416,020 39,529 1,364,916 423,468 6,812,825 35,141,96.5 2016 10.337,339 l,947,771 1.011,365 5,460,327 1,508,409 4,336,035 39,538 1,364,033 422,486 6,562,491 33,989,794 2017 10.303,530 2.907,989 988,775 5,453,389 1,511,569 4,257,075 39,521 1.362,Q63 425,151 5,718,479 32,967,541 2018 10,250,2112 2,882.158 975.770 5,460,973 1,505,538 4,189,550 39,508 1,362,311 423,232 5,721,114 32.810,436 2019 9,902,677 2,849,107 781,761 5.453,287 1,508,189 2,648,230 39.525 1,360,986 421,221 5,720,902 30,685.885 2020 7,461,288 2,126,243 775,566 5.459,510 1.511,343 2,649,606 39,538 1,363,683 423,036 5,731,366 27,541.179 2021 .5,567.189 2,126,093 768,274 5,453.726 I,S06,R77 2,644,893 39,512 1,363,909 424.152 5,1~6.748 25,021,373 2022 2,884,667 2,125,487 634,104 5.467,266 1,506,090 2,649,869 39,538 1,362,183 425,036 4,412.046 21.506.286 2023 2.341,374 1.799,422 637,1!17 5,466,581 1.507,211 2.644,600 39,517 1,362.184 425,056 3,621,131 19,844,239 <..> 2024 2,.\39.450 1,795.055 6.14,740 5,467,663 1,505,872 964,530 39,510 1,363,972 424,513 2,735,842 17,271,147 -..1 2025 1,604,488 1,747,847 363,461 5,469,789 1,221,889 969,368 39.512 1,362,300 424,327 2,407,153 15,610,134 2026 1.318,549 1,170,653 363,513 5,477,187 506,649 488,137 39.517 222,941 199,543 1,436,742 11,223,431 2027 4.828,100 4,828,100 2028 4,819,644 . . 4,819,644 2029 . 4,820,350 4,820,350 2030 4,822,125 . 4,822,125 2031 4,824,581 . . 4,824.581 2032 2,537,250 . 2,.537,250 2033 2.532,500 -2,532.500 2034 . -2,536,875 2,536,875 s 165,292.547 s 79,184,700 s 11,323.141 s 140,918,302 s 28,853,157 s 70.867,452 s 789,297 s 26,115,904 s 9,809,316 s _!23.170,317 _j 662,324,133 ~~ Includes lhe Ctrdlicnles.
TABLE 10 -SELF-SUPPORTED DEBT
In addition to the enterprise funds shown in this Table 10, on September 8, 2005, the City Council of the City approved an
ordinance designating the City's Gateway Fund and Airport Fund as self-supporting enterprise funds of the City for FY 2006. In
the same ordinance, the City Council of the City approved the budget for the City's Tax Increment Financing Fund wherein it is
designated that debt relating to such fund shall be partially self-supported by tax increment revenues (i.e., in an amount equal to
at least 15% of debt service for FY 2006) and the remainder supported by a loan from the City's Solid Waste Fund. Furthermore,
the City Council of the City approved ordinances on March 23, 2006 and February 24, 2006 designating debt issued for the
Cemetery (a unit of the City's General Fund) to be supported by sales of crypts and niches at the City Cemetery. See also Table
9.
THE WATERWORKS SYSTEM <•>
Net System Revenue Available, Fiscal Year Ended 9-30-06
less: Requirements for Reve11ue Bonds, Fiscal Ye~r Ended 9-30..07
Balance Available for Other Purposes
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-07
Percentage of System General Obligation Debt Self-Supporting
~
$
(I) Each Fiscal Year the City transfers Net Revenues of the Waterworks Enterprise Fund to tile General Obliganon Interest aod Sinking Fund
Fwod in an amount equal to debt ser~ice requirements on Waterworks System general obligation debt.
THE SEWER SYSTEM 1"1
Net System Revenue Available, Fiscal Year Ended 9-30-06
less: Requnements for Revenue Bonds, Fiscal Year Ended 9-30·07
Balance Available for Other Purposes
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-07
Percentage of System General Obligation Debt Self-Supporting
(I) Eaeh Fiscal Year the City transfers Ntt Revenues of the Se'Net Enterpme FUDd to the General Obligauon lntere5l aod Sinking
Fund in an amount equal to debt service requirements on Sewer System general obligation debt.
THE SOLID WASTE DISPOSAL SYSTEM <•I
Net System Revenue Available, Fiscal Year Ended 9-30-06
less: Requirements for Reveoue Bonds. Ftscal Year Ended 9-30..07
Balance Available for Other Purposes
Requirements for System General Obligation Debt. Fiscal Year Ending 9-30-07
Percentage of System General Obligation Debt Self-Supporting
<•l Each fiscal Year the City transfers Net Revenues oftbe Sohd Waste En.terprise Fund to the General Obligotion lntetest and Sonking
Fwnd in an amount equal to debt service rcqu~rementS on Sohd W~ste System general obllgation debt.
THE DRAINAGE SYSTEM <•>
Net System Revenue Available, Fiscal Year Ended 9-30-06
Less: RequirementS for Revenue Bonds. fiscal Year Ended 9-30-07
Balance Available for Olher Purposes
Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-07
Percentage of System General Obligation Debt Self-Supporting
<•> Each Fiscal Year tbe Cuy transfers Net Revenues of the Drainage Enterprise fund to tbe Gcneml Obligation lnterest and Sinking
Fund in an amount equal to debt service requirements on Drain~s.e System general obligation debt.
THE ELECTRIC LIGHT AND POWER SYSTEM <•t
Net Electric Light and Power System Revenue Available, Fiscal Year Ended 9-30-06
Less: RcquiremeniS for Revenue Bonds. Fiscal Year Endmg 9-30-07
Balance Available for Other Purposes
Requirements for Electric System General Obligation Debt, Fiscal Year Ending 9-30-07
Percentage of Electric System General Obligation Debt Self-Supporting
(o) The City transfers Net Revenues of the Eleetrlc Ltt.bt and Power Enterprose Fund to the General Obligauon Interest and Sinking
Fund in an amount equal to debt service requirements on Elecorte Lt$bt and Power System general oblig.acion debt.
38
$
$
s
$
$
$
18,577,287
18,577,287
12,215,470
100.00%
8,852,831
8,852,831
7,273,579
100.00%
3,980,513
3,980,513
1,120,834
100.00%
6,569,761
6,569,76 I
5,438,574
100.00%
28,538,819
28,538,819
4,992,336
I 00.00%
0
0
0
0
0
0
0
c
,....
'-
0
0
0
0
0
0
0
0
TABLE 11 -AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS
Date Amount Issued
Purpose Authorized Authorized To Date Unissued
Sewer System s121n1 $ 3,303,000 $ 2.175,000 $ 1,128,000
Waterworks System 10/17187 2,810,000 200,000 2,610,000
Street J~rovements 5/1/93 10,170,000 10,166,000 4,000
Street l~rovements 5/1 5104 9,210,000 4,969,000 4,241,000
Civic Center/Auditoriwn Renovation and l~rovements 5115104 6,450,000 6,450,000
Pari< Improvements 5115104 6,395,000 5,496,000 899,000
Police/Municipal Court Facilities 5115104 3,350,000 3,350,000
Ubrary J~rovements 5/IS/04 2,145,000 2,145,000
Fire Stations 5/15/04 1,405,000 1,405,000
Animal Shelter Renovations & Improvements 5/15/04 1,045,000 160,000 885!000
$ 461283,000 $ 24,571,000 $21,712,000
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 future 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 2006-2007, the City Council
approved $77 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, stormwater funds and airport fund (down from $101.5 million in FY 2005-2006).
The Capital Projects Fund budget for FY 2006-2007 also included an additional $406.9 million in future improvements for all
City departments over the five 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 S2 I, 712,000 of authorized but unissued bonds from the May 15, 2004 bond election. When
the 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, parks, libraries, civic centers and public safety
improvements. However, the City has incurred substantial unvoted tax supported debt to fund portions of the capital budget of
the Electric Fund, Water Fund, Sewer Fund, Solid Waste Fund, Storm Water Fund, Tax Increment Fund, Gateway Fund and
Airport Fund As described elsewhere in this Official Statement, such enterprise fund indebtedness is generally anticipated to be
self-supporting from enterprise fund revenues.
The City does anticipate the issuance of general obligation debt within the next twelve months.
TABLE 12-OTHER OBLIGATIONS
Governmental Business-Type Total
Capital Lease Capital Lease Capital Lease
FYE Minimum Minimum Minimum
Jo-See Pa~ment Pal:ment Pal:ment
2007 $ 679,328 $ %1,618 $ 1,140,946
2008 679,328 130,124 809,452
2009 659,569 127,681 787,250
2010 530,413 127,681 658,094
2011-2015 639,898 639,898
Interest ~400,932) {76,620~ ~477,5522
$ 2,787,604 $ 770,484 $ 3,558,088
39
On January 8th, 2004, the City entered into a note agreement with the Department of Housing and Urban Development ("HUD")
for Joan guarantee assistance under Section 108 of title 1 of the Housing and Community Development Act of 1974, as amended,
in the amount of $1,000,000. The Note was issued to aid in the establishment of a Housing Rehabilitation Program in order to
provide rehab options for low-to moderate income households on a citywide basis, pay professional services rendered in relation
to such project, and the financing thereof. Under the terms of the Note, the City will make annual principal payments on August
I, of each year beginning in 2005 through 2012; interest payments are due semi-annually. The Note is a liability of the City's
Community Development Block Grant Program and debt service will be paid from this grant.
FYE Contract Revenue Bonds
30-Sep Principal Interest Total
2007 $ 125,000 $ 32,825 $ 157,825
2008 125,000 28,300 153,300
2009 125,000 23,300 148,300
2010 125,000 17,900 142,900
2011 125,000 12,188 137,188
2012 125,000 6,200 131,200
$ 750,000 $ 120,713 $ 870,713
PENSION FUND ... TEXAS MUNICIPAL RETIREMENT SYSTEM ta)(~) ••• All permanent, full-time City employees who are
not firefighters are covered by the Texas Municipal Retirement System ("TMRS"). TMRS is an agent, multiple-employer, public
employee retirement system which is covered by a State statute and is administered by six trustees appointed by the Governor of
Texas. TMRS operates independently of its member cities.
The City joined TMRS in 1950 to supplement Social Security. A\1 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 credit, occupational disability benefits and survivor benefits for the spouse of a vested employee. An
employee who retires receives an annuity based on the amount of the employees contributions over-matched two for one by the
City. Since October 11, 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. 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, 2005, the actuarial value of assets held by TMRS (not including those of the Supplemental Disability Fund,
which is "pooled"), for the City were $195,046,632. Unfunded actuarial accrued liabilities on December 31, 2005 were
$66,383,4 76, which is being amortized over a 25-year period beginning January, 1997.
FIREMEN'S RELIEF AND RETIREMENT FUND ''> ... City 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, consisting of 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 2006 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
contribullon rate for 2006 is 19.93%.
Actuarial reviews are performed every two years. As of December 31, 2004, unfunded pension benefit obligations were
$13,816,991 which is amortized with the excess of the assumed total contribution rate over the normal cost rate. The number of
years needed to amortize the unfunded pension obligation is determined using an open, level percentage of payroll method,
assuming that the payroll will increase 4% per year, and was 24.7 years as of the December 3 I, 2002 actuarial valuation and 20.6
years as of the December 3 I, 2004 actuaria1 valuation, both based on the plan provisions effective November I, 2003.
OTHER POST-EMPLOYMENT BENEFITS ... The City currently provides certain post-employment benefits to its
employees, as described in Note Ill. K (Notes to the Basic Financial Statements) set forth in Appendix A. The City intends to
comply with the requirements of GASB No. 43 and 45, with respect to the reporting of post-employment benefits, in accordance
with the timelines set forth in GASB No. 43 and 45. As of the date of this Official Statement, the City has not retained the
services of an actuarial firm to prepare the calculations required under GASB No. 43 and 45, but intends to do so in anticipation
of implementing the requirements of GASB No. 43 and 45.
••> For historical information concerning the retirement plans, see Appendix A, "Excerpts from the City's Annual Financial Report"-Note #Ill,
Subsection E, "Retirement Plans").
'~1 Source: Texas Municipal Retirement System, Comprehensive Annual Financial Report for Year Ended December 31. 2005.
40
0
0
0
0
0
0
0
c
c
c
0
0
0
0
0
0
0
TABLE 13-CHANGES IN NET ASSETS
Fiscal Year Ended Se~mber 30 C•>
~ 2004 2003 2002
REVENUES
Program Revenues
Olanges for Services $ 10,583 $ 12,713 $ 13,888 s 9,369
Operating Gants and Contribution 13,296 9,643 12,137 7,007
General Revenues
Property Ta:xes 39,748 44,497 42,303 40,408
Sales Taxes 41,803 30,555 29,fYJ2 28,903
Other Taxes 4,242 3,793 3,712 3,681
Franchise Taxes 11,154 9,654 6,613 6,998
Gants/Contributions not ~strictec (25)
Other 5,742 4,274 3,834 6'1Z7
Total Re'\enues s 126,568 $ 115,129 $ 111,579 s 102,568
EXPFNI>rrl.IUS
Adrninistrative/Corrmmity Servies $ 23,355 $ 22,313 $ 21,793 $ 32,483
Electric 2,459 2,471 2,373 2,585
Financial Services 2,240 2,387 1,965 1,908
Fire 23,667 21,998 20,207 18,664
General Government Zl.~ 20,562 21,009 23,436
Humm Resources 776 777 786 883
Police 37,773 33,249 31,429 29,715
Streets Jl,985 10,789 9,827 5,940
Public Works 2,699 3,078 9,856 4,322
Interest on Long-Term Debt 3,195 4,593 3,346 3,382
Total txpenditures s 135,749 s 122,217 s 122,591 s 123,.318
Changes in net assets before special
items & transfers (9,181) (7,088) (11,012) (20,750)
Special item; (687)
Transfers 15,469 9,745 2,554 15,668
Olanges in net assets 6,288 2,657 (8,458) (5,769)
Net Assets-beginning ofyear, as rest: 104,341 101,684 110,142 115,911
Net assets -end of year $ 110,629 $ 104,341 $ 101,684 $ 110,142
1'1 Audited. Units are in OOOs.
Note: Data shown in Table 13 reflects general governmental activities reponed in accordance will\ GASB Statement No. 34. The 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 FY2003 financial statement can be accessed through the City's
website, http://www.ci.lubbock.tx.us.
41
u
TABLE 13A -GENERAL FUND REVENUES AND EXPENDITURES HISTORY
Flscal Year Ended ~esmer 30 '01
2()06!b) zoos to) 2004'<1 2003"1 ~·c)
0 .REVENJES
Ad Valomn Taxes s 75,1HJ,624 s 29,414,m s 33,233,274 s 32, 194,00 s 29,885,.252
Sales Taxes 38,319,501 30,554,632 29,CIJ2,CJ32 28,902,649
Franchise Taxes 8,008,973 6,693,209 9,654,447 6,612,822 6,998,085
Mscellaneous Taxes 982,327 939,456 848,816 820,507
Iioenses and PenriiS 2,250,635 1,953,666 1,982,281 1,875,118 1,475,451
~...enrmDI 4(JB,W7 480,648 428,4.59 348,787 351,878 0
~for Services 4,781,043 4,070,642 4,467,733 4,945,591 4,472,094
Fines 3,981,978 4,015,402 3,675,856 3,672,509 3,069,362
Mscellaneous 1,465,215 1,506,315 1,442,677 1,532,346 1,058,237
lrterest 921,742 349,236 334,730 285,756 433,393
~Transfers'" 16,565,397 10,723,891 10,345,945 15,023,466
Total ReYenues and 1"r'amfers $ 97,818,207 s 104,351,116 s 97,437,436 s 91,753,809 s 92,490,374 0
EXPENDfiURES
General~ $ $ 6,159,536 $ 5,633,469 $ 5,717,151 $ 5,596,868
~a] Services 2,139,492 2,.333,469 1,969,413 1,958,051
rutu'al m Recreation 13,986,576
famrric & Business De-.eiqllrent 1,146,267 "' ~ 1,882,255 445,251 214,562 175,499 1,497,485 v
Adrrin!Corrmrity Services 9,356,059 18,330$)8 18,156,455 17,'637,076 17,997,152
Police 37,463,740 33,919,626 32,400)71 30,321,182 28,905,651
Fire 24,638,814 21,943,267 20,613,077 19,511,797 18,632,109
Heallh 3,738,790
Qher Ptblic Safety 4,287,806
Plamng and Tra.lSpO!tation 8,120,m 7,180,843 6,610,394 6,510,394 0
Street ughting 7,439,045 2,214,291 2,185,286 2,078).77 2,168,620
lbmn Resoo.rces 740,826 754,225 780,529 &95,311
~Service Principal 1,009,368
ll:bt Service Interest ard Olher Chlrges 144,858
Capital Otlay 7,184,866 5,277,100 475,585 378,059 480,749
Qlerating Tl'lln'ifers 3,912,645 4,212,915 13,555,338 5,951,669 0 Total Expetditures $ 112,278,444 s I 03,203,269 $ 94,1ffi,257 $ 98,934,715 $ 90,594!059
E'.xces$ (nmcien::y) of R.e-.mJes
ard Transfers mer~ (14,460,231) 1,147,847 3,277,179 (7,180,906) 1,896,315
Capital Lease Issued 5,119,980 3,534,048 ,...,
Transfer In 13,325,046 ....
TransferOi (1,436,498)
Fund 8alan:e at Begiming ofYear 17,376,420 12,694,525 9,417,346 16,598,252 •n 16,716,042
FuOO Balmxe at Em of Year 19,924,711 17,376,420 12,694,525 9,417,346 18,612,357
Less: Rcierves and I:esignations .. , (1,255,041)
lb:lesigrmd Furl Balance $ 19,924,711 s 17,376,420 s 12,694,525 s 9,417,346 $ 17,357,316 c
t•l Prior years have been restated to reflect current organizarion.
•N Unaudited.
1'1 Audited.
ldl For fiscal year 2005/06, the water, solid waste and waste water funds transferred an amount sufficiem 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, waste water and solid
waste funds transferred an amount representing a franchise payment equal to 6% of gross receipts. The Electric System was not required to c
make transfers to the General Fund for any of the foregoing purposes during the fiscal year.
1'1 The City's financial policies target a General Fund undesignated balance of at least 20% of General Fund revenues. The undesignated fund
balance is at99% of the target established by the City's financial policies.
10 The "Fund Balance at Beginning of Year" was restated.
42 c
0
0
0
0
0
0
0
TABLE 14-MUNICIPAL SALES TAX HISTORY
The City has adopted the Municipal Sales and Use Tax Act, Chapter 321, Texas Tax Code, which grants the City the power to
impose and levy a I% 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 Chapter 323 Texas Tax Code, as amended.
Collection for the additional tax commenced in October, 1995 with the proceeds from the one-eighth cent sales tax designated for
the use and benefit of the City to replace property tax revenues lost as a result of the adoption of the tax. 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 (Article 5190.6, Texas Revised Civil Statutes), 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:
0/o of Equivalent of
FYE Total Ad Valorem Ad Valorem Per
30-Sef! Collected <•> TaxLe!l: Tax Rate Cal!ita (b)
2002 $ 28,902,648 73.45% $ 0.4183 $ 143.08
2003 29,092,032 68.80% 0.3962 142.09
2004 30,554,632 69.98% 0.3857 148.11
2005 41,803,092 105.09% 0.4825 199.90
2006 41,778,534 100.01% 0.4177 197.83
2007 (In Process of Collections)
l•l Excludes bingo tax receipts.
<b) Based on population estimates of the City.
Effective as of October I, 2006, 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
43
$
$
1.000
0.375
0.125
0.500
6.250
8.250
FINANCIAL POLICIES
Basis of Accounting . . . The accounting policies of the City conform to generally accepted accounting principles of the
Governmental Accounting Standards Board and program standards adopted by the Government Finance Officer's Association of
the United States and Canada ("GFOA"). The GFOA has awarded a Certificate of Achievement for Excellence in Financial
Reporting to the City for each of the fiscal years ended September 30, 1984 through September 30, 2002 and September 30,
2004. The City will submit the City's 2005 report to GFOA to determine its eligibility for another certificate.
Comprelzensive Annual Financial Report CCAFRJ ... 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 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 A.
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 990!. of the target established by the
City's financial policies.
Water. Wasrewarer, Storm Wqter, Solid Waste and Airport Enterprise Fund Balances ... It is the policy of the City to maintain
appropriable net assets in the Water and Wastewater funds in an amount equal to 25% of operating revenues for unforeseen
contingencies. The City's goal of appropriable net assets in the Solid Waste, Airport, and Storm Water funds is an amount equal
to 15% of regular operating revenues. With the exception of the Electric Enterprise Fund (as further described below), the City
currently exceeds its policy on appropriable net assets for its various enterprise funds. See "Discussion of Recent Financial and
Management Events -September 30, 2003 Financial Results." According to audited numbers for FY 2005, the target net assets
by policy and current appropriable net assets for the Water, Wastewater, Storm Water and Airport enterprise funds are as follows:
EnterJ!rise Fund Tara:et Net Assets bl: Policx AJ!J!rOI!riable Net Assets*
Water $9.5 million $13.7 million
Wastewater $5.3 million $9.2 million
Storm Water $.9 million $11.3 million
Solid Waste $2.1 million $3.8 million
Airport $.9 million $2.0 million
Electric Enrerprise Fund Bglance ... It is the policy of LP&L to maintain appropriable net assets set by the City Charter.
Ordinance No. 2004-00140 requires LP&L to restrict cash based on prior year's gross retail electric revenue (GRR) as
determined by the previous fiscal year of LP&L. The City's goal of appropriable net assets LP&L is an amount equal to three
months GRR reserved for operations, two months GRR reserved for rate stabilization, and one month ORR reserved for electric
utility development. According to audited numbers for FY 2005, the total target net assets by ordinance and current appropriable
net assets for LP&L is as follows:
Enterprise Fund
LP&L
Target Net Assets bl: Policl:
$53.3 million
Appropriable Net Assets*
$24.6 million
* Appropriable net assets are calculated on a budget basis. The calculation takes the audited FY 2004-05 current assets less
current liabilities and adds/subtracts FY 2005-06 adjusted budgeted revenues over/under expenditures and adds restricted cash
for debt service. Restricted cash for debt service is added to the calculation, as this is already included in the budgeted
expenditures for FY 2005-06.
Enterprise Fund Revenues ... It is the policy of the City that each of the Electric, Water, Sohd 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. Rate increases may be considered in future budgets as costs may warrant, including specifically the costs related to
fuel charges that may affect LP&L and the cost of providing service.
Debt Seryice Fund Balance ... A reasonable debt service fund balance is maintained in order to compensate for unexpected
contingencies.
Budgetarv 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.
44
0
0
0
0
0
0
c
c
0
0
0
0
0
3) Prior to October I the budget is legally enacled through passage of an ordinance.
4) The City Manager is authorized to transfer budgeted amounts between accounts below the department level. Any transfer of
funds between departments 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 fund level.
5) Formal budgetary integration is employed as a management control device during the year for the Convention and Tourism,
Criminal Investigation, and Capital Projects Funds. Budgets are adopted on an annual basis. Formal budgetary integration is not
employed for Debt Service funds because effective budgetary control is alternatively achieved through general obligation bond
indenture and other contract provisions.
6) The Budget for the General Fund is adopted on a basis consistent with generally accepted accounting principles.
7) Appropriations for the General Fund lapse at year-end. Unencumbered balances for the Capital Projects Funds
continue as authority for subsequent period expenditures.
8) Budgetary comparison is presented for the General Fund in the combined financial statement section of the
Comprehensive Annual Financial Report. The City has received the Distinguished Budget Presentation Award from the GFOA
for the following budget years beginning October I, 1983-88 and 1990-05.
Insurance and Risk 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 $500,000, per occurrence. Airport
liability insurance and workers' compensation is insured under guaranteed cost policies. The Health Benefits are covered by a
self insured program with a $18,845,756 cap and a $175,000 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, 2005 the total Net Assets of these insurance funds were as follows:
Self-insurance-health $ 2,050,874
Self-insurance-risk management$ 1,688,257
The City obtains an actuarial study of its risk management fund (the "Risk Fund") every year. In FY 2005, 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 2005 actuarial review recommended that the liabilities of the Risk
Fund be increased to $6,479,000 from $6,437,000 to the minimum expected confidence level of the Government Accounting
Standard Board Statement Number 10 ("GASB 10"), 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 insurance claims of $1,688,000 over the recommended funding level. Given the risk net assets
balance, the City exceeds the minimum GASB I 0 requirement.
INVESTMENTS
The City invests its investable funds in investments authorized by Texas Jaw, including specifically the Public Funds Investment
Act (Chapter 2256, Texas Government Code, and referred to herein as the "PFIA"), in accordance with investment policies
approved by the City Council of the City. Both state Jaw and the City's investment policies are subject to change.
LEGAL 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 State of Texas or its agencies and instrumentalities, (3) collateralized mongage
obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is
guaranteed by an agency or instrumentality of the United States, ( 4) other obligations, the principal of and interest on which are
unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their
respective agendes and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of
any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6)
bonds issued, assumed, or guaranteed by the State of Israel, (7) cenificates of deposit meeting the requirements of the PFIA that
are issued by or through an institution that either has its main office or a branch in Texas, and 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 (6) or in any other manner and amount provided by law for City deposits, (8)
fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in
clause (I), 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 of270 days or Jess, ifthe short-term obligations of the accepting bank
or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10)
commercial paper that is rated at least A-I or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies
or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable Jetter of credit issued by a
U.S. or state bank, ( 11) no-load money market mutual funds regulated by the Securities and Exchange Commission that have a
dollar weighted average ponfolio 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, (I 2) no-load mutual funds registered with the Securities and Exchange Commission
that: have an average weighted maturity of less than two years; invests exclusively in obligations described in the preceding
45
clauses; and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not
less than AAA or its equivalent, and ( 13) guaranteed investment contracts secured by obligations of the United States of America
or its agencies and instrumentalities, other than the prohibited obligations described in the next succeeding paragraph.
The City may invest in such obligations directly or through government investment pools that invest solely in such obligations
provided that the pools are rated no tower than 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 principal stream of cash flow from the underlying mortgage-backed security and bears no interest;
(3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage
obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index.
Governmental bodies in the State such as the City 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 (1) 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 firm not Jess than "A" or its equivalent, or (c) cash invested in obligations that are described in clauses (1)
through (6) and ( 10) through ( 12) 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 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 Jist of authorized investments for City funds, maximum allowable stated maturity of any
individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups. All City funds must
be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds'
investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2)
preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification ofthe 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
officers jointly prepared and signed the report; (3) the beginning market value, any additions and changes to market value and the
ending value of each pooled fund group; ( 4) the book value and market value of each separately listed asset at the beginning and
end of the reporting period; (5) the maturity date of each separately invested asset; (6) the account or fund or pooled fund group
for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted
investment strategy statements and (b) state Jaw. 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' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose
the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal
of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that
reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written
statement attesting to these requirements; (4) perform an annual audit of the management controls on investments and adherence
to the City's investment policy; {5) provide specific investment training for the Treasurer, Chief Financial Officer and investment
officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase
agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict its investment in mutual funds in the
aggregate to no more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves Estimated Fair
Book Value Market Value and other funds held for debt service, and to invest no portion of bond proceeds, reserves and funds
held for debt service, in mutual funds; and (8) require local government investment pools to conform to the new disclosure,
rating, net asset value, yield calculation, and advisory board requirements.
46
0
0
0
0
0
0
0
0
0
c
G
0
0
0
0
0
0
0
TABLElS-CURRENTRfVESTMENTS
As of October 31,2006, the City's investable funds were invested in the following categories:
1'1 Market prices are obtained from Advent's interface with FT Interactive Daca. No funds are invested in mortgage back securities. The City
holds all investments to maturity which minimizes the risk of market price volatility.
(l>J Money Market Funds are held at Wells Fargo Bank, Texas N.A.
<<I Local government inveslment pools consist of entities whose investment objectives are preservation and safety of principal, Liquidity and yield.
The pools seek to maintain a $1.00 value per share as required by the Texas Public Funds Investment Act. The investment pools used by the
City include TexPool and TexST AR. 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 currently maintains an "AAA" rating
from Standard & Poor's and has an investment objective of achieving and maincaining a stable net asset value of $1.00 per share. Daily
investments or redemptions of funds are allowed by the participants. First Southwest Company is a Financial Advisor for the City in
connection with the issuance of City debt.
TAXMA1TERS
TAX EXEMPTION
In the opinion of Vinson & Elkins L.L.P., Bond Counsel, (i) interest on each series of the Obligations is excludable from gross
income for federal income tax purposes under existing law and (ii) interest on both series of the Obligations 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 Obligations, 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 requirement that the issuer file an information report with the Internal
Revenue Service. The City has covenanted in the Ordinances that it will comply with these requirements.
Bond Counsel's opinion will assume continuing compliance with the covenants of the Ordinances pertaining to those sections of
the Code that affect the exclusion from gross income of interest on the Obligations for federal income tax purposes and, in
addition, will rely on representations by the City, the City's Financial Advisor and the Underwriters with respect to matters solely
within the knowledge of the City, the City's Financial Advisor and the Underwriters, respectively, which Bond Counsel has not
independently verified. With regard to the Bond~ Bond Counsel will further rely on the report of Grant Thornton LLP, certified
public accountants, regarding the mathematical accuracy of certain computations. If the Issuer should fail to comply with the
covenants in the Ordinance or if the foregoing representations or report should be detennined to be inaccurate or incomplete,
interest on the Obligations could become taxable from the date of delivery of the Obligations, 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. Generally, the
alternative minimum taxable income of a corporation (other than any S corporation, regulated investment company, REIT,
REMIC or FASin, includes 75% of the amount by which its "adjusted current earnings" exceeds its other "alternative minimum
taxable income." Because interest on tax~xempt obligations, such as the Obligations, is included in a corporation's "adjusted
current earning~" ownership ofthe Obligations 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 Obligations.
Bond Counsel's opinions are based on existing Jaw, 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 &nd 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 Obligations. 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 Obligations could adversely affect the value and liquidity of the Obligations
during the pendency of the audit regardless of the ultimate outcome of the audit.
47
ADDITIONAL FEDERAL INCOME TAX CONSIDERATIONS
CoiJateral Tax Consequences
Prospective purchasers of the Obligations 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, certainS
corporations with Subchapter C earnings and profits, individual recipients of S<>cial Security or Railroad Retirement benefits,
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 ASIT 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 Obligations. These
categories of prospective purchasers should consult their own tax advisors as to the applicability of these consequences.
Prospective purchasers of the Obligations 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 Obligations. received or accrued during the year.
Tax Accounting Treatment of Original Issue Premium
The issue price of all or a portion of the Obligations may exceed the stated redemption price payable at maturity of such
Obligations. Such Obligations {the "Premium Obligations") are considered for federal income tax purposes to have "bond
premium" equal to the amount of such excess. The basis of a Premium Obligation in the ands of an initial owner is reduced by
the amount of such excess that is amortized during the period such initial owner holds such Premium Obligation in determining
gain or Joss 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 Obligation 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 Obligation that is amortizable each year (or shorter
period in the event of a sale or disposition of a Premium Obligation) is determined using the yield to maturity on the Premium
Obligation 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
Obligations 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 Obligations 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 Obligation and with respect to the federal, state, local, and foreign tax consequences of the purchase,
ownership, and sale, redemption or other disposition of such Premium Obligations.
Tax Accounting Treatment of Original Issue Discount Obligations
The issue price of all or a portion of the Obligations may be less than the stated redemption price payable at maturity of such
Obligations (the "Original Issue Discount Obligations"). In such case, the difference between (i) the amount payable at the
maturity of each Original Issue Discount Obligation, and (ii) the initial offering price to the public of such Original Issue
Discount Obligation constitutes original issue discount with respect to such Original Issue Discount Obligation in the hands of
any owner who has purchased such Original Issue Discount Obligation in the initial public offering of the Obligations. 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 Obligation equal to that portion of the amount of such original issue discount allocable to
the period that such Original Issue Discount Obligation 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 Obligations under the captions "TAX
EXEMPTION" and "TAX MA TIERS ~Collateral Tax Consequences" generally applies, and should be considered in connection
with the discussion in this portion ofthe Official Statement.
In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Obligations prior to stated
maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Obligations 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 Obligation was held by such initial owner) is includable in gross income.
The foregoing discussion assumes that (a) the Underwriters have purchased the Obligations for contemporaneous sale to the
public and (b) all of the Original Issue Discount Obligations have been initially offered, and a substantial amount of each
maturity thereof has been sold, to the general public in arm's-length transactions for a price (and with no other consideration
being included) not more than the initial offering prices thereof stated on the cover page of this Official Statement. Neither the
City nor Bond Counsel has made any investigation or offers any comfort that the Original Issue Discount Obligations will be
offered and sold in accordance with such assumptions.
Under existing law, the original issue discount on each Original Issue Discount Obligation 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 Obligations and ratably within each such six-month period) and the accrued amount is added
to an initial owner's basis for such Original Issue Discount Obligation for purposes of determining the amount of gain or loss
recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each
accrua1 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) Jess (b) the amounts payable as current interest during such accrual period
on such Obligation.
48
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
G
0
The federal income tax consequences of the purchase, ownership, and redemption, sale or other disposition of Original Issue
Discount Obligations 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 Obligations 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 Obligations and with respect to the federal, state, local and foreign tax
consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Obligations.
OTHER INFORMATION
RATINGS
The Obligations have been rated "Aaa" by Moody's Investors Service, Inc. ("Moody's"), "AAA" by Standard & Poor's Ratings
Services, a Division of The McGraw-Hill Companies, Inc. (''S&P") and "AAA" by Fitch Ratings ("Fitch") by virtue of an
insurance policy issued by Financial Security Assurance, Inc. (see "Bond Insurance"). The City's underlying ratings are "A 1" by
Moody's. "AA-" by S&P and "AA-" by 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, circumstances so warrant. Any such downward revision or withdrawal of such ratings may
have an adverse effect on the market price of the Obligations. The City has made applications to municipal bond insurance
companies to have the payment of the principal of and interest on the Obligations insured by municipal bond guaranty policies.
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 liability for
personal injury at $250,000/$500,000 and property damage at $1 00,000 per claim. The following represents the significant
litigation against the City at this time.
The City has been sued by a contractor who was not awarded the bid on a portion of the stormwater 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 dismissed the contractor's Section 1983 claims, and the contractor
filed a Notice of Appeal. The Fifth Circuit court of appeals reversed the District Court and the District Court has reinstated the
federal and state claims. 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 sixty-two 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 City asserted a defense under statutes
of limitations, that the City was not the owner of the property during portions of the time in question, and/or that the allegations
fail to state a claim upon which relief can be granted. The District Court ruled in favor of the City and the Plaintiff may have
missed their deadline to file an appeal. The City Attorney assesses the potential for liability as remote. There is no insurance
coverage for these claims.
The City, its police chief, and two police officers have been sued for violation of a citizen's first amendment rights when the
plaintiff's film from his camera was confiscated by the police while the individual was photographing a children's basketball
game. The matter has been dismissed on a plea to the jurisdiction and the plaintiff is appealing the court's decision. City
Attorney believes there is insurance for any potential damages.
The City has been sued by an employee of the City alleging age discrimination and violation of the Texas Whistleblower
Protection Act and retaliation. The parties are engaged in discovery with regard to the facts of the case and the matter is being
vigorously defended by the City of Lubbock. There is insurance coverage for the claim.
The City of Lubbock and a police officer have been sued by an individual on behalf of himself and his children rising out of the
death of the plaintiff's teenage daughter and injuries to his son from an automobile accident with the police officer. The plaintiff
alleges that the officer was operating the vehicle in a negligent manner and was speeding at the time of the automobile collision.
The defendants have asserted that the driver of the vehicle carrying the plaintiff's children was negligent in failing to yield the
right-of-way to the police officer. The City filed a motion for summary judgment which was granted based on the fact the
plaintiff did not file a claim with the City. The matter has been appealed to the Court of Appeals. The City Attorney believes
there is insurance covering the claims.
The City has been sued by a plaintiff for injuries arising from an automobile accident with the City of Lubbock driver who was
exiting an alley. The plaintiff has had medical treatment, including a back surgery. The parties are engaged in settlement
discussions .. The City Attorney believes there is insurance coverage for this claim.
The City and a former police officer have been sued by a plaintiff as a result of allegations of inappropriate sexual conduct after a
police stop by the police officer. The City sent a reservation of rights letter to the officer. The officer filed a motion to dismiss
under the Tort Claims Act citing provisions holding that the plaintiff cannot sue both the entity and the individual officer under
the act, and the officer was dismissed from the case. The City filed a motion for summary judgment, which was granted and the
plaintiff appealed the decision which has been set for hearing later this month at the Court of Appeals. The City Attorney is of
the opinion that insurance is available for the claim.
Plaintiffs have sued the City of Lubbock and a police officer and Taser International as a result of an incident where a police
officer tased a citizen while making an arrest. The citizen subsequently died The City filed a plea to the jurisdiction which was
49
denied and the City is appealing the trial court denial of the plea. A federal cause of action under Section 1983 has been filed in
the Amarillo District of the Northern Division of Texas alleging federal civil rights violations involving the same facts. The City
Attorney is of the opinion that insurance is available for the claims.
The City was sued by a firefighter under the Civil Service Act alleging he was wrongfully denied a promotion as a result of being
charged with a OWl. The trial court ruled in the City's favor and the plaintiff has appealed the case arguing that the plaintiff
should have been allowed to have his case heard by a third party hearing examiner. The City Attorney does not believe insurance
is available for this claim; however, it is doubtful the allegation might result in substantial damages.
A lawsuit was filed against the City of Lubbock and three Lubbock police officers regarding an incident when a suspect was
tased by one of the Lubbock police officers. The plaintiff has alleged civil rights violations as well as Texas Tort Claims Act
violations. The City Attorney is of the opinion that insurance is available for the claim and that there have not been any
significant injuries to the plaintiff.
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 Obligations to the Underwriters, the City will execute and deliver to the Underwriters a certificate
to the effect that, except as disclosed herein, no significant litigation of any nature has been filed or is pending, as of that date, to
restrain or enjoin the issuance or delivery ofthe Obligations or which would affect the provisions for their payment or security or
in any manner question the validity of the Obligations.
REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE
The sale of the Obligations has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the
exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas
in reliance upon various exemptions contained therein; nor have the Obligations been qualified under the securities acts of any
jurisdiction. The City assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction
in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility
for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard
to the availability of any exemption from securities registration provisions.
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS
Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations
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 Obligations by municipalities or other
political subdivisions or public agencies of the State of Texas, the PFIA, requires that the Obligations 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 Obligations are
legal investments for state banks, savings banks, trust companies with at capital of one million dollars or more, and savings and
loan associations. The Obligations 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 Obligations are legal investments for various institutions in those states.
LEGAL MATIERS
The delivery of the Obligations is subject to the approval of the Attorney General of Texas to the effect that such Obligations are
valid and legally binding obligations of the City payable from sources and in the manner described herein and in the Bond
Ordinance and the approving legal opinion of Bond Counsel, to like effect and to the effect that the interest on the Obligations
will be excludable from gross income for federal income tax purposes under Section I 03(a) of the Code, subject to the matters
described under ''TAX MA TIERS" herein, including the alternative minimum tax on corporations. The form of Bond Counsel's
opinion is attached hereto in Appendix B. The legal fee to be paid Bond Counsel for services rendered in connection with the
issuance of the Obligations is contingent upon the sale and delivery of the Obligations. The legal opinion of Bond Counsel will
accompany the Obligations deposited with DTC or will be printed on the definitive Obligations 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 for the Underwriters. The legal fee of such firm is contingent upon the sale and delivery of the
Obligations.
Bond Counsel was engaged by, and only represents, the City. Except as noted below, Bond Counsel 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 herein except that in its capacity as Bond Counsel, such firm has
reviewed the information appearing in this Official Statement under the captions "THE OBLIGATIONS" (exclusive of the
information under the subcaptions "Book-Entry Only System," "USE OF BOND PROCEEDS") and "TAX MATTERS" and
under the subcaptions "Legal Opinions," "Legal investments and Eligibility to Secure Public Funds in Texas" and "Continuing
Disclosure of Information" under the caption "OTHER INFORMATION" and such firm is of the opinion that such descriptions
present a fair and accurate summary of the provisions of the Jaws and instruments therein described and, with respect to the
Obligations, such information conforms to the Ordinance.
50
ol
I
ol
0
0
0
0
c
0
0
0
0
0
[)
The legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the
attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does
not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future
performance ofthe parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that
may arise out of the transaction.
CONTINUING DISCLOSURE OF INFORMATION
In the Ordinance the City has made the following agreement for the benefit of the holders and beneficial owners of the
Obligations. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the
Obligations. 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 infonnation 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 15 and in Appendix A. The City will
update and provide this information within six months after the end of each fiscal year. 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.
The City may provide updated information in full text or may incorporate by reference certain other publicly available
documents, as pennitted by SEC Rule 15c2-12 (the "Rule"). 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 accordance with the accounting principles described in Appendix A 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 (the "MAC") has been designated by the State of Texas and approved by the SEC staff
as a qualified SID. The address of the MAC is 600 West 8th Street, P.O. Box 2177, Austin, Texas 78768-2177, and its telephone
number is 5121476-6947. The MAC has also received SEC approval to operate, and has begun to operate, a "central post office"
for infonnation filings made by municipal issuers, such as the City. A municipal issuer may submit its information filings with
the central post office, which then transmits such information to the NRMSIRs and the appropriate SID for filing. This central
post office can be accessed and utilized at www.DisclosureUSA.org (''DisclosureUSA''). The City may utilize DisclosureUSA for
the filing of information relating to the Obligations.
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 Obligations, if such event is material to a decision to purchase or sell Obligations: (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 perform; (6) adverse tax opinions or events affecting the tax-exempt status of the
Obligations; (7) modifications to rights of holders of the Obligations; (8) early redemption of the Obligations; (9) defeasances;
(10) release, substitution, or sale of property securing repayment of the Obligations; and (I I) rating changes. (Neither the
Obligations nor Ordinance make any provision for debt service reserves or liquidity enhancement.) In addition, the City will
provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its
agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and
to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB").
Availability of Information From NRMSIRS and SID
The City has agreed to provide the foregoing information only to NRMSIRs, the MSRB and the SID, as described above. The
information will be available to holders of Obligations only if the holders comply with the procedures and pay the charges
established by such information vendors or obtain the infonnation through securities brokers who do so.
Limitations and Amendments
The City has agreed to update information and to provide notices of material events only as described above. The City bas not
agreed to provide other infonnation that may be relevant or material to a complete presentation of its financial results of
operations, condition, or prospects or agreed to update any infonnation that is provided, except as described above. The City
makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell
Obligations at any future date. The City disclaims any contractual or ton liability for damages resulting in whole or in part from
any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of
Obligations may seek a writ of mandamus to compel the City to comply with its agreement.
51
The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a
change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i)
the agreement, as amended, would have pennitted an underwriter to purchase or sell Obligations, 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 Obligations 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
Obligations. 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 Rule or a coun of final jurisdiction enters judgment that such provisions of the Rule 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 the Obligations in the primary offering of such Obligations.
If the City so amends the agreemen" it has agreed to include with the next financial infonnation and operating data provided in
accordance with its agreement described above under "Annual Reports" an explanation, in narrative fonn, of the reasons for the
amendment and of the impact of any change in the type of financial information and operating data so provided.
Compliance with Prior Undertakings
The City became obligated to file annual repons and financial statements with the state information depository ("SID") and each
nationally recognized municipal securities infonnation repository ("NRMSIR") 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 NRMSIR; however,
due to an administrative oversigh" 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 filing. The
City has implemented procedures to ensure timely filing of all future financial infonnation. 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 NRMSlR or the MSRB upon the occurrence of any "non-payment related defaults." 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 NRMS!Rs in March 2004, it filed unaudited financial statements in accordance w1th 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 Fund"). Because there was an uncertainty as to an amount by which the rate
covenant would fail to be met, which was not finally 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 u.ntil
September 2004 to make its event filing of non-compliance with its LP&L rate covenant
FINANCIAL ADVISOR
RBC Capital Markets is employed as Financial Advisor to the City in connection with the issuance of the Obligations. RBC
Capital Markets is the name under which RBC Dain Rauscher Inc., a broker dealer, conducts investment banking business. The
Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and
delivery of the Obligations. ·RBC Capital Markets, in its capacity as Financial Advisor, does not assume any responsibility for the
information, covenants and representations contained in any of the legal documents with respect to the federal income tax status
of the Obligations, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies.
The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial
Advisor has reviewed the information in this Official Statement in accordance with, and as pan of, its responsibilities to the City
and, as applicable, to investors under the federal securities Jaws as applied to the facts and circumstances of this transaction, but
the Financial Advisor does not guarantee the accuracy or completeness of such infonnation.
VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS
The arithmetical accuracy of certain computations included in the schedules provided by RBC Capital Markets on behalf of the
City relating to (a) computation of forecasted receipts of principal and interest on the Federal Securities and the forecasted
payments of principal and interest to redeem the Refunded Obligations and (b) computation of the yields of the Bonds and the
restricted Federal Securities were verified by Grant Thornton LLP, certified public accountants. Such computations were based
solely on assumptions and information supplied by RBC Capital Markets on behalf of the City. Grant Thornton LLP has
restricted its procedures to verifying the arithmetical accuracy of cenain computations and has not made any study or evaluation
of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the
data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome.
UNDERWRITING
A syndicate led by Morgan Keegan & Company, Inc. (the "Underwriters") has agreed to purchase the Bonds, subject to certain
conditions, and has agreed to pay a purchase price reflecting the par amount of the Bonds, plus a net original issue premium of
$1,781,052. 10, less an Underwriters' discount of $283,441.25, plus accrued interest.
The Underwriters have agreed to purchase the Certificates, subject to certain conditions, and has agreed to pay a purchase price
reflecting the par amount of the Certificates, plus a net original issue premium of $133,737.30, less an Underwriters' discount of
$194,067.86, plus accrued interest
The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their
responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the
Underwriters do not guarantee the accuracy or completeness of such information.
52
0
0
0
0
c
c
c
c
c
c
(]
•0
I .
FORWARD-LOOKING STATEMENTS DISCLAIMER
The statements contained in this Official Statement, and in any other infonnation provided by the City, that are not purely
historical, are forward-looking statements, including statements re~rding 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 infonnation 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 judgments 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 fiom 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 contained in this Official
Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport
to be complete statements of such provisions and reference is made to such documents for further infonnation. Reference is made
to original documents in all respects.
Each Ordinance authorizing the issuance of the Obligations 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 Obligations by the
Underwriters.
ATTEST:
lsi REBECCA GARZA
City Secretary
City oflubbock, Texas
53
lsi DAVID MILLER
Mayor
City of Lubbock, Texas
0
(THIS PAGE INTENTIONALLY LEFT BLANK)
()1
0
0
•
0
0
Comprehensive Annual Financial Report
City of Lubbock, Texas
For the Fiscal Year Ended September 30, 2005
u
c
0
(THIS PAGE INTENTIONALLY LEFT BLANK)
0
0
0
0
0
0
0
0
0
0
G
0
Comprehensive Annual Financial Report
City of Lubbock, Texas
List of Elected and Appointed Officials
For the Fiscal Year Ended September 30,2005
Mayor
Council Member-District 1
Council Member-District 2
Council Member-District 3
Council Member-District 4
Council Member-District 5
Council Member-District 6
City Manager
City Attorney
Deputy City Manager
Assistant City Manager
City Secretary
Chief Financial Officer
Director of Fiscal Operations
Director of Fiscal Policy
Chief Accountant
Senior Accountant
Senior Accountant
Senior Accountant
Senior Accountant
Senior Accountant
LP&L
Accountant
Accountant
1
Marc McDougal
Linda DeLeon
Floyd Price
Gary 0. Boren
Phyllis S. Jones
Tom Martin
Jim Gilbreath
Lee Ann Dumbauld
Anita Burgess
Tom Adams
Quincy Whlte
Rebecca Garza
Jeff Yates
Jeffery Snyder, CPA
Andy Burcham
Pamela Moon, CPA
Brack Bullock
Linda Cuellar, CPA
Veronica V alderaz
Lawrence Jones, CPA
Dorothy Lewis, CPA
Damian Pantoya, CPA
Randall Brown
Rhonda Gentry
City of Lubbock, Texas
Comprehensive Annual Financial Report
Year Ended September 30, 200S
TABLE OF CONTENTS
Page
Title Page .......................................................................................................... 1
Table of Contents .................................................................................................... ii
INTRODUCTORY SECTION
Letter ofTranslll.ittal ............................................................................................... !
Certificate of Achievement in Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15
Organizational Chart ............................................................................................. 16
FINANCIAL SECI'ION
Independent Accountants' Report on Financial Statements and
Supplementary Information .......................................................................... 17
Management's Discussion and Analysis ............................................................. .19
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets ..................................................................................... 35
Statement of Activities ....................................................................................... 36
Fund Financial Statements:
Governmental Fund Financial Statements
Balance Sheet -GoveiDlilental Funds ............................................................... 3 8
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets ................................................................... 39
Statement of Revenues, Expenditures, and Changes in
Fund Balances -Governmental Funds .................................................... .40
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds to the
Statement of Activities ............................................................................... 41
Budgetary Comparison Statement-General Fund ............................................ .43
Proprietary Fund Financial Statements
Statement of Net Assets -Proprietary Funds ..................................................... 44
Reconciliation of the Statement of Net Assets-Proprietary Funds to
the Statement of Net Assets-Business-Type Activities ........................... 49
Statement of Revenues, Expenses, and Changes in Fund Net Assets -
Proprietary Funds ..................................................................................... 50
Reconciliation of the Statement of Revenues, Expenses and Changes
in Fund Net Assets of Proprietary Funds to the Statement
of Activities ................................................................................................ 53
Statement of Cash Flows -Proprietary Funds ............................ , ...................... .54
Fiduciary Fund Financial Statements
Statement of Fiduciary Net Assets ...................................................................... 56
Notes to the Basic Financial Statements .............................................. .57
ii
0
0
0
c
0
0
0
0
0
0
0
0
Combining Fund Statements and Schedules:
Non-Major Governmental Funds
Combining Balance Sheet-Non-Major Governmental Funds .................. 98
Combining Statement of Revenues, Expenditures, and Changes in Fund
Balances-Non-Major Governmental Funds ............................................. 104
Non-Major Enterorise Funds
Combining Statement ofNet Assets-Non-Major Enterprise Funds ............ .112
Combining Statement of Revenues, Expenses, and Changes in Fund Net
Assets w Non-Major Enterprise Funds ......................................................... 114
Combining Statement of Cash Flows -Non-Major Enterprise Funds ........... 115
Internal Service Funds
Combining Statement of Net Assets-Internal Service Funds ...................... 118
Combining Statement of Revenues, Expenses, and
Changes in Fund Net Assets-Internal Service Funds ............................... 126
Combining Statement of Cash Flows-Internal Service Funds .................... 129
Fiduciary Funds
Statement of Fiduciary Net Assets ................................................................. 133
Statement of Changes in Fiduciary Net Assets -Fiduciary Funds
Agency Fund ............................................................................................... 134
Non-Major Component Units
Combining Statement of Net Assets Non-Major Component Units ............. .l37
Combining Statement of Activities Non-Major Component Units ............... 138
Capital Assets
Capital Assets Used in the Operation of Government Funds:
Schedule of Governmental Capital Assets ..................................................... 141
Schedule by Function and Activity ................................................................ 142
Schedule of Changes by Function and Activity ............................................. 144
STATISTICAL SECTION (unaudited)
Government-wide InfOrmation:
Table A: Government-wide Expenses by Function .............................. 148
Table B: Government-wide Revenues by Function .............................. 149
Fund Information:
Table C: General Governmental Expenditures by Function ...........•....... 150
TableD: Revenues and Other Financing Sources (Uses) ....................... 151
Table E: Tax Revenues by Source .................................................. 152
Table F: Property Tax Levies and Collections ..................................... 153
Table G: Assessed and Estimated Actual Value of Property ........................ .153
Table H: Property Tax Rates-Direct and Overlapping Govemments ......... 154
Table I: Principal Taxpayers ........................................................................ 155
Table J: Special Assessment Billings and Collections .................................. 155
Table K: Computation of Legal Debt Margin ............................................... .} 56
Table L: Ratio of Net General Obligation Bonded Debt to Assessed
Value and Net General Obligation Bonded Debt Per Capita ......... .156
Table M: Ratio of Annual Debt Service Expenditures for General
Obligation Bonded Debt to Total General Governmental
Expenditures ................................................................................... 157
iii
Fund lnformatiom
Table N: Computation of Direct and Overlapping Bonded Debt-
General Obligation Bonds .............................................................. 157 0
Table 0: Revenue Bond Coverage-Elect1'ic, Water and Airport Bonds ...... l58
Table P: Demographic Statistics .................................................................. 159
Table Q: Construction and Bank Deposits .................................................... 159
Table R: Miscellaneous Statistics .................................................................. 160
0
0
0
0
c
c
c
c
c
lV
0
0 INTRODUCTION
SECTION
0
0
0
(THIS PAGE INTENTIONALLY LEFT BLANK)
0
0
c
c
c
c
c
0
0
0
0
0
Honorable Mayor, City Council, and Citizens of the City of Lubbock, Texas:
We are pleased to submit the Comprehensive Annual Financial Report (CAFR) of the City of
Lubbock, Texas (City) for the fiscal year ended September 30, 2005. The purpose of this report
is to provide the City Council, citizens, representatives of financial institutions, and others with
detailed information concerning the financial condition and performance of the City of Lubbock.
In addition, the report provides assurance that the City presented fairly, in all material respects,
its financial position as verified by independent auditors.
This report consists of management's representations concerning the finances of the City.
Consequently, management assumes full responsibility for the completeness and reliability of all
of the infonnation presented in this report. To provide a reasonable basis for making these
representations, management of the City has established a comprehensive internal control
framework that is designed both to protect the City's assets from loss, theft, or misuse and to
compile sufficient reliable information for the preparation of the City's financial statements in
conformity with generally accepted accounting principles (GAAP). Because the cost of internal
controls should not outweigh their benefits, the City's comprehensive framework of internal
controls has been designed to provide reasonable, rather than absolute, assurance that the
fmancial statements will be free from material misstatement. As management, we assert that, to
the best of our knowledge and belief, this financial report is complete and reliable in all material
respects.
The City's financial statements have been audited by BKD, LLP, a firm of licensed certified
public accountants. The goal of the independent audit was to provide reasonable assurance that
the financial statements of the City for the fiscal year ended September 30, 2005, are free of
material misstatement. The independent audit involved examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements; assessing the accounting
principles used and significant estimates made by management; and evaluating the overall
financial statement presentation. The independent auditor concluded, based upon the audit, that
there was a reasonable basis for rendering an unqualified opinion that the City's financial
statements for the fiscal year ended September 30, 2005, are fairly presented in conformity with
1
Honorable Mayor, City Council,
And Citizens ofthe City of Lubbock, Texas
February 13, 2006
GAAP. The independent auditor's report is presented as the first component of the financial
section of this report. 0
The independent audit of the fmancial statements of the City was part of a broader, federally
mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The
standards governing Single Audit engagements require the independent auditor to report not only
on the fair presentation of the financial statements, but also on the audited government's internal 0 controls and compliance with legal requirements, with special emphasis on internal controls and
legal requirements involving the administration of federal awards. These reports are available in
the City's separately issued Single Audit Report.
GAAP require that management provide a narrative introduction, overview, and analysis to
accompany the basic financial statements in the form of Management's Discussion and Analysis 0
(MD&A). This letter of transmittal is designed to complement MD&A and should be read in
conjunction with it. The City's MD&A can be found immediately following the report of the
independent auditors.
THE CITY AND ITS ORGANIZATION 0
Population and Location
The City is located in the northwestern part of the state commonly known as the South Plains of
Texas. The City currently occupies a land area of 119.1 s~uare miles and serves a population of
211,187 (2006 estimated population). Lubbock is the 11 largest city in the State of Texas and
the 13th largest Metropolitan Statistical Area (MSA). The Lubbock MSA .includes Lubbock and
Crosby Counties.
Form of Government and City Services
0
The City was incorporated in 1909. The City is empowered to levy a property tax on both real c
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 has operated under the council~manager form of government since 1917. Policy-
making and legislative authority are vested in a city council consisting of the mayor and six other C
members. The City Council is responsible) among other things, for passing ordinances, adopting
the budget, appointing committees, and hiring the City Manager, City Attorney, and City
Secretary. The City Manager is responsible for carrying out the policies and ordinances of the
City Council, for overseeing the day-to-day operations of the City, and for appointing the heads
of the various departments. The City Council is elected on a non-partisan basis. Council C
members serve four-year staggered terms, with three council members elected every two years.
The mayor is elected to serve a two-year term. Six of the council members are elected by
district. The mayor is elected at large.
c
c
2
0
0
0
0
0
0
0
0
0
Honorable Mayor, City Council,
And Citizens oftbe City of Lubbock, Texas
February 13, 2006
The City provides a full range of services that include public safety, the construction and
maintenance of highways, streets, and other infrastructure, solid waste services, and recreational
activities and cultural events. The City also provides utilities for electricity, water, wastewater,
and storm water as well as a public transportation system.
Public safety includes police protection and fire protection. Police protection is provided
through the Police Department, which includes 359 sworn police officers. The City's Fire
Department operates 15 fire stations and has 319 total personnel including administration, fire
prevention, maintenance, training, and communications.
Electric service in the City is provided by Lubbock Power and Light (LP&L), Xcel Energy and
South Plains Electric Cooperative. LP&L, the municipal electric company, has 66,172 meters in
the City with an average daily consumption of3,956,904 kwh. LP&L has 14 substations,.1005
miles of distribution lines, and 85 miles of transmission lines. Natural gas service is provided
by Atmos Energy.
Currently, the City obtains 75% to 85% of its drinking water supply from the Canadian River
Municipal Water Authority (CRMWA). The CRMWA combines surface water from Lake
Meredith and ground water from Roberts County to meet the water demands of Lubbock and the
other I 0 member cities of CRMW A. Lubbock secures the remaining 15% to 25% of its water
from its groundwater rights in Bailey and Lamb Counties. The City provides water service to
75,700 meters as well as the City of Shallowater, City of Ransom Canyon, Buffalo Springs Lake,
and Lubbock Reese Redevelopment Authority. The capacity of the City water transmission
system is 81 million gallons per day with an average utilization of 39 million gallons per day.
The City has I ,341 miles of distribution lines and 146 active water wells with 83,265 acres of
water rights. The CRMWA allocates more than 11 billion gallons of water to the City annually.
Lake Alan Henry, built by the City in 1993, is considered a third water supply for future use. In
order for the City to utilize water from Lake Alan Henry, future construction is required for
pump stations, a pipeline to carry the water to Lubbock, and a new treatment plant.
For the past several years, the City has been planning for future water needs. In March 2003,
the City contracted with WaterTexas, fuc. to evaluate and make recommendations on how the
City could optimize existing and potential water supplies on a short-, mid-, and long-term basis.
In a report titled City of Lubbock Strategic Water Plan, WaterTexas reported that the City has
adequate water supply and will continue to do so provided that it takes steps to address its
maximum day capacity limitations; addresses its ability to respond readily to drought conditions
at Lake Meredith; and strategically develops additional supplies giving due consideration to
demand, cost, opportunity, and competing budgetary needs. To strategically develop additional
water supplies, the City Council established the Lubbock Water Advisory Commission in July
2003. The primary objective of this Commission is to assist in the development of a 100-year
water supply plan.
The CRMW A has secured an additional 180,000 acres of groundwater rights in the Northern
Panhandle. The total of groundwater rights now stands at over 220,000 acres with an estimated
15 million acre feet of water within those rights. Conservative projections using current secured
water rights indicate the CRMW A member city water demands can be fully met through 2097.
3
Honorable Mayor, City Council,
And Citizens of the City of Lubbock, Texas
February 13,2006
Wastewater collection and treatment is provided within the city limits to residential, commercial,
and industrial customers. The collection system consists of 940 miles of sanitary sewer as of
January 1, 2005. The wastewater treatment plant has a capacity of 31.5 million gallons per day
(permitted capacity) and an average utilization of approximately 23 million gallons per day.
The peak utilization ofthe wastewater treatment plant is 27 million gallons per day.
The City of Lubbock's drainage is primarily conveyed through the City's street system that
discharges into more than 115 playa lakes. The subsurface drainage, via storm sewer pipes with
curb inlets, conveys water to two small intermittent streams (Blackwater Draw and Yellowhouse
Draw) which both converge at the upper reaches of the North Fork of the Double Mountain Fork
of the Brazos River. The City's municipal separate storm sewer system (MS4) is made up of
1,076 linear miles of paved and unpaved streets, 530 linear miles of paved and unpaved alleys,
1,188 miles of storm sewer inlets, 70 miles of subsurface storm sewer pipe, three detention
basins, 115 playa lakes, and one pump station. Maintenance of all of the storm sewers and street
cleaning was funded from the Storm Water Fund during FY 2005.
During FY 2005 the primary focus of the storm water fund was the construction of the South
Lubbock Drainage Project-Phase I Main Trunk Line and the completion of the one mile portion
of storm sewer between University Avenue and Indiana Avenue as part of the street widening
project. The design of the drainage channel north of Andrews Park Lake was also completed this
fiscal year. Work was completed on the Maxey Park Feasibility Study and work began on a
Federal Emergency Management Agency (FEMA) Restudy of two of the playa lake systems.
The other focus was on the submission of the City's application for the Texas Pollution
Discharge Elimination System (lPDES) MS4 permit for the City's storm water quality activities.
Until the new permit is issued, the City will continue to comply with the existing MS4 permit
from the Environmental Protection Agency. The eleven different programs that are part of the
existing permit were continued during FY 2005.
The City also provides garbage collection and disposal services. The City provides services to
63,103 residential customers and 2,930 commercial customers. The City has two landfill sites.
One site is designated as Lubbock Landfill and is a transfer station only. The second site is
Lubbock's premier landfill, the West Texas Regional Disposal Facility. The West Texas
Regional Disposal Facility opened in 1999 and is currently the largest landfill in the State of
Texas. With 1,260 acres it is expected to serve the region for the next 100 years.
Citibus is the public transportation provider for the City. Citibus provides three primary types of
services. They include a Fixed Route Service, CitiAccess (paratransit system), and Special
Services. Citibus has also expanded service later into the evenings. The Citibus Evening
Service is designed to meet the needs of both CitiAccess and fixed route passengers who are
transit dependent and who would have no other means of transportation in the evenings if the
Evening Service were not provided. A majority of Evening Service passengers work at night and
use the service for transportation to and from job sites. Citibus is professionally managed by
McDonald Transit Associates, Inc.
4
0
0
0
oj
0
0
0
0
G
0
0
0
0
0
0
0
0
Honorable Mayor, City Council,
And Citizens of the City ofLubbock, Texas
Febroary 13,2006
The City has an aggressive housing and community development program implemented and
administered through ftmding from the Federal Community Development Block Grant program,
HOME Investment Partnership Program, and Emergency Shelter Grant program. This year the
City completed work on over 823 houses~ assisted over 25,888 individuals, and created 6 jobs
through an economic development loan program.
Community enrichment and cultural services are also major programs of the City. The City
owns and operates fom libraries with over 388,220 volumes. The City also owns and maintains
76 parks and 55 playgrounds. Extensive recreational facilities include 4 swimming pools, 60
tennis courts, 31 baseball and softball fields, 5 recreation centers and 5 senior centers. To further
enhance quality of life and to provide support to the tourism industry, the City also operates the
Civic Center (convention center), a coliseum, an auditorium for performing arts, the Buddy
Holly Center, and the Silent Wings Museum.
The City is responsible for the construction and maintenance of highways .and streets. CWTently
the City has 1003.8 miles of paved streets. A new fund was established after the City Council
passed a resolution in 2004 stating that 40% of the franchise fee revenue and telecom line
charges would be devoted to funding street projects. This fund is called the Gateway Street
Fund. The funding will be used to fund the debt service on street projects as determined by the
City Council The FY 2005-06 budget for the Gateway S1reet Fund includes the widening of
Milwaukee A venue from 34th to 98th Street, construction of a T -2 thoroughfare street on Erskine
from Frankford to Salem, construction of a T·2 thoroughfare street on Slide Road from Loop 289
to Erskine> and widening Loop 289 just north of 4th Street to just south of Erskine and rebuilding
the interchange. These projects support substantial commercial and residential development on
the west side of the City.
Other major road construction in the City includes construction on 98th Street from Slide Road to
Frankford Avenue and construction of the Marsha Sharp Freeway by the Texas Department of
Transportation (fXDOT). This freeway will run from West Loop 289 east to link up with
Interstate 27. The first phase of the project is completed and included widening Loop 289 from
four to six lanes from 34th street to Slide Road and rebuilding the frontage road system under the
main lanes-three lanes on each side. It also included building the 50th Street overpass and
extending 50th Street to Frankford A venue. TXDOT awarded the bid for the second phase of
the Marsha Sharp Freeway that began construction in May 2005. The Marsha Sharp Freeway
will benefit the City by providing a western connection to West Loop 289 ensuring a more
efficient flow of traffic throughout the City. It will also reduce the congestion on north/south
and east/west major arterials and give faster access to all points in Lubbock, specifically Texas
Tech University, the central business distric~ education centers, and medical facilities. The
entire project is expected to cost $256 million and be completed sometime after 2010.
One of the key components of the City's transportation system is the Lubbock Preston Smith
International Airport, located 7 miles north of the City's central business district on 3,000 acres
of land adjacent to Interstate 27. It is operated as a department of the City. The airport operates
a 220,000 square foot passenger terminal and has three runways; 11,500' x 150'; 8,000' x 150';
2869' x 75'. Air traffic control services include a 24-hour Federal Aviation Administration
control tower and a full range of instrument approaches. The airport is currently served by three
major passenger airlines and two major cargo airlines having over 80 commercial flights per day.
5
Honorable Mayor, City Cowtci~
And Citizens of the City ofLubbock, Texas
February 13, 2006
0
The City is financially accountable for a legally separate civic services corporation and an
economic development corporation, both of which are reported separately within the City's 0
financial statements as discretely presented component units. Additional information on these
legally separate entities can be found in the notes to the financial statements.
Annual Budget Process
The annual budget serves as the foundation for the City's financial planning and control. All
departments of the City are required to submit requests for appropriation to the City Manager in
June of each year. The City Manager uses these requests as the starting point for developing a
proposed budget. The City Manager then presents this proposed budget to the City Council for
review prior to August 31. The City Council is required to hold public hearings on the proposed
budget and to adopt a final budget by no later than September 30, the close of the City's fiscal
year. The appropriated budget is prepared by fund and department. Department directors may
request transfers of appropriations within a department. Transfers of appropriations between
funds, however, require the approval of the City Council. Budget-to-actual comparisons are
provided in this report for the General Fund, as part of the basic financial statements.
ECONOMIC CONDITION AND OUTLOOK
The information presented in the financial statements is perhaps best understood when it is
considered within the context of the City's local economy. The following infonnation is
0
0
0
provided to highlight a broad range of economic forces that support the City's operations. 0
Local Economy
The City has a stable economy that has historically shown slow, steady growth and it has
continued that growth through October 2005. The City's economy is agriculturally based but has
diversified over the past 20 years which minimizes the affects of business cycles experienced by
individual sectors.
The South Plains is one of the United States' most productive agricultural areas. Almost
eighteen percent of the nation's cotton crop and fifty-one percent of the state's cotton crop is
planted by fanners in the South Plains. Production on the Southern High Plains is estimated to
tota14.1 million bales for 2005, up fourteen percent from last year's production.
The City has strong manufacturing, wholesale and retail trade, services, and government sectors.
The manufacturers are a diverse group of employers who support approximately 5,400 workers.
A central location and access to transportation have contributed to the City's development as a
regional warehousing and distribution center. The City also serves as the major retail trade
center and health-care provider for a region of more than a half a million people. A breakdown
of the percent of employment base by industry category has been provided below, which gives a
"snapshot'' of the industry base of the City.
6
0
0
0
0
0
0
0
0
0
0
0
0
Honorable Mayor, City Council,
And Citizens of the City of Lubbock, Texas
February 13, 2006
!PERCENT EMPLOYMENT BASE BY INDUSTRY CATEGORYI
Natural Resources.
Mining & Consttuc:t!onJ
4.5%
Financial ActMties
5.5%
P~fessionel & Business
Services
8.7%
Educauonal & Health
Services
14.6%
and Hospitality
11.1%
Two major components of the local economy are education and health care services. Lubbock
is home to three universities and one community college; Texas Tech University, Lubbock
Christian University, Wayland Baptist University -Lubbock Center and South Plains College.
Enrollment increased steadily through Fal12003, but because of increased tuition costs decreased
slightly in Fal12004 and 2005. The availability of the schools in Lubbock is an added advantage
for our industries as they provide a ready source of labor for their successful operation.
The healthcare and social services sector is also a vital component of the Lubbock economy.
This sector employs almost 18,000 people, whose payroll of abnost $580 million and related
contributions provide a substantial impact to the Lubbock area.
(Source: 2003 County Business Patterns)
Other current and trend information has been provided below, which gives a picture of the
overall city economy.
Lubbock Economic Index.
The Lubbock Economic Index is designed to represent the general condition of the Lubbock
economy by tracking local economic growth rates. It is based at 100.0 in January 1996. The
economic index for October 2005 was 124.6) which is .4% improved over the index for October
2004.
The Lubbock economy continues to be ''high, but flat", with most sectors posting solid numbers,
but with little growth sector by sector, or in the overall Lubbock economy.
(Source: Lubbock Economic Index October 2005)
7
Honorable Mayor, City Council,
And Citizens ofthe City ofLubbock, Texas
February 13, 2006
Lubbock Economic Index
January 1996 to October 2005
100~~--~----~----~----~-----r----~----~----~----~--~
Jan-96 Jan-!17 Jan-98 Jan-99 Jan-00 Jan-01 Jan~2 Jan-03 Jan-04 Jan-05
Building Permit Valuations.
Construction continues to make a strong contribution to the Lubbock economy, with the value of
all building permits issued so far in 2005 up by 5.2% from last year's total through October.
The $388 million in building permits issued through the first ten months of 2005 continues the
upward trend that has set records for the City for the last several years.
(Source: Economic and Demographic Overview: Building Valuations-10-Year Trend I Original Source of Data:
Building Inspection Statistical Report)
Total Building Penn it Valuations
$450.0 $417.3$408.7
$400.0 .1----------------,J/t.~._
$350.0 +-----------~t?Qjl~o.U!il'#------
$300.0 +----~:ft""ft--:-:-:-~=-:i~iJIIII .... ~:...._ ___ _
Ill
8 $2so.o +------::ok----.:_,J~---------
~ $200.0 +---..;..:..:...~l.l..:Jo~___::""~l!::.------------
$150.0 ~~~£_ __ _.:!:____ __________ _
$100.0 +---------------------
$50.0 +--------------------
$0.0 +----r---r---.---...,.-__.....,.---"T--...,..----.---,--......,
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
8
0
i
0
0
ol
0
0
0
Honorable Mayor, City Council,
And Citizens ofthe City of Lubbock, Texas
February 13, 2006
Total new residential permits decreased by 28.3% through October 2005 when compared to the
0 same period in 2004. The $184 million in residential building permits issued for the first 10
months of 2005 is slightly down from the record setting levels that have been seen in the City
over the last few years. Average home sale price year-to-date through October 2005 has
increased by .01% from October 2004 to October 2005.
(Source: Economic and Demographic Overview: Building Valuations-10-Year Trend I Original Sow-ce of Data: Building
0 lnspedion Statistical Report and The Real Estate Center at Texas A & M University, Lubbock Residential Housing Activity
Report)
0
Sales Tax Collections
Sales tax collections for October 2005 were 10.86% improved over the October 2004 sales tax
collected. Year-to-date sales tax collections through October 2005 were 35.9% improved over
the same period in 2004. A portion of this increase is due to the increase in the sales tax mte
from 7.875 to 8.25% in October 2004. (Counted in the month the sales tax was collected, not
the month it was paid)
(Source: Economic and Demographic Overview; Monthly Sales Tax Collections-Calendar Year-City of Lubbock. I Original
0 Source of Data: State. Comptroller of Public Accounts-Allocation Historic:al Summary)
0
0
TourismNisitor Related Indicators
Lodging tax receipts increased from $2.6 million in October 2004 to $2.8 million in October
2005. This is a year-to-date increase through October 2005 of 8.6%. Airline hoardings at
Lubbock Preston Smith International Airport also increased in 2005 by 1.5% over the same
period last year.
(Source: Lubbock Economic Index)
Employment
The total non-agricultural employment estimate for October 2005 was 126,100. This was .4%
improved over October of last year. There were 500 more people employed in October 2005
than in the same period of2004. The unemployment rate for the Lubbock MSA in October 2005
was 3.6%, 3ro lowest in the State of Texas. Historically Lubbock has a low rate of
0 unemployment that is generally 1% -2% below the national rate and about 1% below the rate for
Texas.
(Source: Lubbock &onomic and Demographic Overview and 2004 Population and Economics Report I Original Source of data:
Texas Workforce Conunission)
0
0
0
9
Honorable Mayor, City Council,
And Citiuns of the City of Lubbock, Texas
February 13, 2006
Unemployment Rates -Lubbock MSA
4%
4%
3%
3%
2%
2~o
l'Yo
1%
0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Note: The methodology for calculating the unemployment rate was changed in 2005 and the last five years
was recalculated based on the new method. The Lubbock MSA also changed in 2005 to include both
Lubba<:k and Crosby Counties.
Economic Development
Economic development is a priority for the City of Lubbock. In 1995, the City Council created
Market Lubbock, Inc., a non-profit corporation, to oversee economic development for the City.
Market Lubbock, Inc. is funded with 3 cents of the property tax allocation. In October 2004 the
Lubbock Economic Development Alliance (LEDA), an economic development sales tax
corporation, asswned the responsibility for economic development in the City of Lubbock.
LEDA program strategies include business retention, business recruitment, workforce
development, foreign trade zone, and the bioscience initiative. LEDA is funded by a 1/8 cent
economic development sales tax. Total estimated revenues for LEDA for FY 2005-06 are
3,487 ,455. Over the last year, through their business retention, expansion, and attraction
programs, LEDA assisted eleven companies in the creation of 355 new jobs with an estimated
annual payroll of $12.4 million and capital investment of $52.5 million.
The City's Business Development Department works closely with LEDA to provide the support
needed to assist in their economic development projects. Business Development is responsible
for tracking and maintaining economic and demographic infonnation for the City, assisting with
city-related business issues, the enterprise zone and tax abatement programs, the two Tax
Increment Financing Reinvestment Zones~ and all Public Improvement Districts. Business
Development also works with retail and commercial projects that do not fit the criteria required
by the state for economic development sales tax corporations.
10
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Honorable Mayor, City Council,
And Citizens ofthe City ofLubbock, Texas
February 13, 2006
Development Initiatives
Overton Park.
Overton Park is a 300+-acre revitalization project that is underway in the heart of the City. It
has been called the largest privately funded revitalization project in the United States. Overton
Park is the complete revitalization of a blighted area in the City called North Overton.
The North Overton area was established in 1907 and over the next twenty years developed as a
middle class neighborhood, with home ownership predominating. Then, in 1925, Texas Tech
University (Texas Technological College) was established along the western boundary of the
neighborhood. Following World War II, the growth of Texas Tech University stimulated a need
for student housing. This need was provided by many non-conforming apartments, converted
garages, and subdivided houses, reducing home ownership in the area considerably. Continued
growth of Texas Tech encouraged development of apartment buildings, further destroying the
stability of the area. By the 1980s, the Lubbock City Council recognized that the passage of
time, market trends, and land use changes had created severe pressures on North Overton.
Through the 1990s, the situation in North Overton continued to stagnate. Population was
declining, vacancies were high, owner occupancy was only 7.3% of the properties compared to
51.5% in the City as a whole. Crime was high in the area and many properties in the area were
in poor condition, abandoned vehicles and weeds were prevalen4 and there was little to attract
residents to this neighborhood other than extremely low values and rents.
A local developer approached the City to discuss plans to redevelop the North Overton area. The
developer planned to purchase and redevelop about 90% of the North Overton area. The
developer and other property owners submitted a petition to the City and asked that the City
establish a Tax Increment Financing Reinvestment Zone (TIRZ) to provide the public funds for
constructing public improvements in the proposed district. In response, the City created the
North Overton TIRZ with participation from the City, County, High Plains Underground Water
District and Lubbock County Hospital District. This public/private partnership provides for a
significantly enhanced redevelopment of the North Overton area by using public funds for
upgraded intersections, additional right-of-way landscaping, improved street lighting, park
improvements, and street and utilities replacement and reconstruction. These infrastructure
projects are designed to replace 70-year old utilities, provide new street lighting and
signalization, upgrade existing Pioneer Park; and provide for enhanced right-of-way landscaping,
wider sidewalks, and street furniture. The plans called for street closures to allow for larger
development projects, student housing, a variety of well-planned housing developments, retail to
support the neighborhood and the Tech student population, and for the entire development to be
pedestrian oriented. The City has approved site design guidelines for the development in
Overton Park in order to ensure the high quality of this development project.
It is anticipated that build-out of this public/private partnership will occur over a seven-year
period. It is expected that the North Overton TIRZ planned expenditme of approximately $72.7
miJlion for public infrastructure improvements will result in future development/redevelopment
in the North Overton TIRZ, which will increase the taxable value by approximately $445 million
over the zone's 30-year life.
11
Honorable Mayor, City Council,
And Citizens of the City of Lubbock, Texas
February 13,2006
At this time, three studentMoriented apartment complexes have been completed. The Centre, a
$26 million, 618,000 square foot project that includes the construction of a multi-story apartment
complex built over an upscale retail shopping center and more than 226,000 square feet of
parking, is completed. City Bank has also completed their new 10,000 square foot bank facility.
The new Starbucks has also been completed. Walmart has broken ground on their new 200,000
square foot plus store that wi1l be built near the southwest comer of 4th Street and Avenue Q.
Also in 2005, construction began on the condominiums in Overton Park and it is expected that
ground will be broken on the first single-family houses in early 2006. The project, as a whole, is
running about three years ahead of schedule, with much of the construction now expected to be
completed by the end of 2007.
Central Lubbock Stabilization and Revitalization Master Plan
The Central Lubbock Stabilization and Revitalization Master Plan is a comprehensive guide for
future growth and prosperity for the Central Lubbock Area. The plan was developed with the
assistance of Gould Evans Affiliates through a public process bringing together local residents,
local employers, city staff, and major stakeholders. This plan is intended to provide a framework
for future development in Central Lubbock and to be a "living documenf' evolving to address
any unforeseen future concerns or strategies. As a result of the plan, the 34th Street Business
Association, made up of business owners on 34th Street, was formed in 2005.
North & East Lubbock Community Development Corooratiqn
During the last 50 years, while Lubbock grew, North and East Lubbock experienced an out-
migration of people. From 1960 to 2000, the area's population decreased by 47%. Concluding
that portions of northern and eastern Lubbock were in serious disrepair, the City and the North &
East Lubbock Development Advisory Committee decided to take action. A comprehensive
master plan for the area was completed in October 2004. The City created the North & East
Lubbock Community Development Corporation (CDC) to oversee and promote development in
the area and committed to providing funding to the CDC for four years. The North & East
Lubbock CDC is working on its first project, a new single-family housing project called Kings
Dominion. Construction of the first houses should begin in early 2006.
Central Business District Tax Increment Reinvestment Zone
The City of Lubbock Central Business District (CBD) has been typically developed over the
years with office, retail, and governmental agency uses. Like many cities in the last ten to
twenty years, retail has moved to shopping areas and other areas outside the CBD and office
development has stagnated. In an effort to reverse that trend and to stimulate further
development downtovv.n, the City established a new CBD Tax Increment Finance Reinvesunent
Zone (TIRZ) on December 3, 2001. The Board of the CBD TIRZ created a project plan that
includes projects that will assist redevelopment in the CBD. It is expected that the CBD TIRZ
planned expenditure of almost $8.4 million for public infrastructure improvements will result in
future development and redevelopment in the CBD TIRZ which will increase the taxable value
by approximately $106 million over the zone's 2~year life.
12
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Honorable Mayor, City Council,
And Citizens of the City of Lubbock, Texas
February 13, 2006
Downtown Redevelopment Commission
The City Council created the Downtown Redevelopment Commission in May 2005 to develop
an action plan for the redevelopment of the downtown area. The Commission is composed of
eleven members that are citizens of Lubbock and stakeholders in the downtown area. Since its
creation in May, the Commission members have been working on gathering information on what
is available and what is needed in the downtown area Although there were no fiscal activities
during FY 2005, the Commission members have started their fund raising efforts and have begun
the process of searching for a consultant to prepare a Downtown Master Plan.
FINANCIAL INFORMATION
Long-term fmancial planning.
The City uses 10-year rate models for long-range planning in the General Fund and all
enterprise funds. These models are based on current projects and policies. The models are
driven by the idea that the rate should be annually adjusted to reflect the service needs of the
citizens. Because of this philosophy, the rates in the models are annually trimmed to leave as
little excess as possible, after allowing for financially sound working capital and rate
stabilization reserves. The models, in association with the City's "5-year Forecast11, provide
anticipated trends given current policies. These forward looking models provide a basis for
budget discussion and policy decision-making.
During fiscal year 2003 the City formed the Citizens Advisory Committee to survey City-wide
infrastructure needs and priorities. The committee developed a six-year program for future
capital needs for which general obligation bonds have been or will be issued. The bond
issuance was approved by the ci1izens of Lubbock in a bond election held in May 2004.
Cash management oolicies and practices.
Cash temporarily idle during the year was invested in certificates of deposit, obligations of the
U.S. Treasury, U.S. Agencies, money market mutual funds, and state investment pools. The
maturities of the investments range from 1 day to 3-1/2 years, with an average maturity of
approximately 7-1/2 months. The average yield on investments was 2.68 percent for the City's
operating funds and 2.71 percent for the City's bond fimds. Investment income is offset by
decreases in the fair value of investments. Decreases in fair value during the current year,
however, do not necessarily represent trends that will continue; nor is it always possible to
realize such amounts, especially in the case of temporary changes in the fair value of investments
that the City intends to hold to maturity.
Risk management.
During 2005, the City continued its use of third party workers' compensation coverage. The
current coverage provides for coverage to begin with the initial dollar of claims. The City is
primarily self~insured for medical and dental coverage. Stop loss coverage of $150,000, per
insured per year, is currently maintained with a third party insurer to mitigate risk associated
with medical coverage. Additional information on the City's risk management activities can be
found in the notes to the financial statements.
Pension benefits.
The City sponsors a multiple-employer hybrid defined benefit pension plan for its employees
other than firefighters. Each year, an independent actuary engaged by the plan calculates the
amount of the annual contribution that the City must make to the plan to ensure that the plan will
13
Honorable Mayor, City Council.
And Citizens of the City of Lubbock, Texas
February 13,2006
be able to fully meet its obligations to retired employees on a timely basis. As a matter of policy,
the City fully funds each year's annual required contribution to the pension plan as detennined by 0
the actuary. As a result of the City's conservative funding policy, the City has succeeded as of
December 31, 2004, in funding 75 percent of the present value ofthe projected benefits earned
by employees. The remaining unfunded amount is being systematically funded over 25 years as
part of the annual required contribution calculated by the actuary.
The City also provides benefits for its firefighters. These benefits are provided through a single-0 1 employer defined benefit pension plan, the Lubbock Firemen's Relief and Retirement Fund
(LFRRF), which is administered by the Board of Trustees of the LFRRF. The City contributes
an amount that is determined by formula and is anticipated to average 19.9 percent of
firefighter's pay annually.
The City does provide 25% • 60% of post retirement health and dental care benefits for retirees 0
or their dependents.
Additional information on the City's pension arrangements and post employment benefits can be
found in the notes to the financial statements.
AWARDS AND ACKNOWLEDGEMENTS
The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement
for Excellence in Financial Reporting to the City of Lubbock, Texas, for its comprehensive
annual financial report for the Fiscal Year Ended September 30, 2004. The City reapplied for
this prestigious award last year after a one-year lapse in applying for the award. In order to be
awarded a Certificate of Achievement, a governmental unit must publish an easily readable and
efficiently organized comprehensive annual financial report, whose contents conform to program
standards. Such reports must satisfy both generally accepted accounting principles and
applicable legal requirements.
A Certificate of Achievement is valid for a period of one-year only. We believe our current
report continues to conform to the Certificate of Achievement Program requirements and we are
submitting it to the GFOA to determine its eligibility for another certificate.
The preparation of this report would not have been possible without the efficient and dedicated
services of the entire staff of the Finance Division. Exceptional and tireless effort was invested
by the Accounting Department. We would particularly like to thank Jeffery Snyder, Pamela
Moon, the Senior Accountants, and Accountants for their countless hours of work on this
financial report. We would like to express our appreciation to all members of the departments
who assisted with and contributed to the preparation of this report. Credit is also given to City
Council and the Audit Committee for their interest and support in planning and conducting the
operations of the City of Lubbock in a responsible and progressive manner.
Respectfully submitted,
Lee Ann Dumbauld
City Manager
14
Jeff Yates
Chief Financial Officer
0
0
0
-v
0
0
0
)
)
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Lubbock,
Texas
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
Sepbrr.nber30,2004
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government unitS and public employee retirement
systems whose oomprehensive annual financial
report! (CAFR.s) achieve the highest
standards in goveminent accounting
and financial reporting.
President
~/~
Executive Director
15
...... 0\ ,...., Bowlun~ CGDlrissio"' Effective September 22, 20DS ,., r~ \.P&L Soard r"\ r' City of Lubbock, TClW Organiutional Chart City Council I Mutticipal Court Judge I Leo AM O.n>b&uW --------------------------------1 AwlitCoiMiitt= 1 16 ' (' r1 ,.-, (") r
)
)
)
)
..,
'
FINANCIAL
SECTION
(THIS PAGE INTENTIONALLY LEFT BLANK)
c
c
c
(
,.. ...
I' ...
(
(
(
(
)
)
Independent Accountants' Report on Financial Statements
and Supplementary Information
The Honorable Mayor and 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,
2005, 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's management. Our responsibility is to
express opinions on these financial statements based on our audit. We did not audit the financial
statements of Civic Lubbock, Inc., Market Lubbock Economic Development Corporation d/b/a Market
Lubbock and Lubbock Economic Development Alliance, which comprise the aggregate discretely
presented component units. In addition, we did not audit the financial statements of the major fund West
Texas Municipal Power Agency, which statements reflect total assets and total revenues of $14,059,031
and $158,128,217, respectively, and represent two percent and thirty-eight percent ofthe business-type
activities' total assets and operating revenues, respectively. The financial statements of these entities
were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar
as it relates to the amounts included for such entities, is based solely 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 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 ~ free of material
misstatement The financial statements of the component units Civic Lubbock, Inc.; Market Lubbock
Economic Development Corporation d/b/a Market Lubbock.; Lubbock Economic Development Alliance
and the major fund West Texas Municipal Power Agency, 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 and the reports of the other auditors provide a
reasonable basis for our opinions.
5000 Rogers A't'enue, Suile 700
Fort Smith. AR 729~2079
479 452·1040 Fax 479 452·5542
bkd.oom
400 w. Capitol Avenue, Suite 2500
P.O. Box 3667
L1nte Rock, AR 72203-.3667
501 372·1040 Fax sot 372·1250
Berond Your Numbers 17
200 E. 11!11 Avenue
P.O. Box 8306
Pine Bluff, AR 71611-a306
870 534-9172 Fax 870 534-2146
M~-c1a ~~-'!5F
The Honorable Mayor and City Council
Page2
In our opinion, based on our audit and the reports of the 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 discretely presented component units, each major
fund, and the aggregate remaining fund infonnation of the City of Lubbock, Texas, as of September 30,
2005, and the respective changes in financial position and cash flows, where applicable, thereof for the
year then ended in confonnity with accounting principles generally accepted in the United States of
America.
In accordance with Government Auditing Standards, we have also issued our report dated January 6,
2006, on our consideration of the City's internal control over financial reporting and our tests of its
compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters.
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 accompanying management's discussion and analysis as listed in the table of contents is not a
required part of the basic fmancial statements but is supplementary information required by the
Governmental Accounting Standards Board. 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 forming opinions on the financial statements that collectively
comprise the City's basic financial statements. The accompanying supplementary information is
presented for purposes of additional analysis and is not a required part of the basic fmancial statements.
Such infonnation has been subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial
statements taken as a whole.
The accompanying information in the introductory and statistical sections as listed in the table of contents
has not been subjected to the procedures applied in the audit of the basic financial statements and,
accordingly, we express no opinion on it.
January 6, 2006
18
c
(
c
c
c
c
c
c
c
c
c
)
)
)
)
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
As management of the City of Lubbock, Texas (City). we offer readers this narrative overview and
analysis of the fmancial activities of the City for the fiscal year ended September 30, 2005.
We encourage readers of these fmancial statements to consider the infonnation included in the
transmittal letter and in the other sections of the Comprehensive AnnuaJ 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 position 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, 2005 by $545.5 million (net
assets). Of this amount, $64.9 million (unrestricted net assets) may be used to meet the Cityts
ongoing obligations to citizens and creditors.
• The City's total net assets decreased by nearly $1.3 million as a result of operations during the
fiscal year.
• The ending unreserved fund balance for the General Fund was $17.3 miJlion or approximately
17.4% of total General Fund expenditures, or 19.7% of total General Fund revenues; an increase
of $5.2 million over the prior year amount.
• All of the City's governmental funds reported combined ending fund balances of $85.2 million.
Of this total amoun4 $25.9 million is available for spending at the Cityts discretion.
• All of the City's business-type activities reported combined ending net assets of$429.7 million.
Of this total amount, $42.0 miJlion is available for spending at the City) s discretion.
• The City's proprietary funds net assets decreased by $2.4 million :from $432.1 million to $429.7
million.
• During FY 2005, the City issued $75.3 million in debt for various capital projects and issued
$112.2 million in debt to refund $114.0 million in outstanding debt.
• In 2002, the City entered into an interest rate swap agreement to protect against the risk of rising
interest rates between March 28, 2002 and May 1, 2005. On August 15, 2005, the City of
Lubbock chose to terminate the swap and issue bonds in the amount of $43.1 million to retire
$43.8 million bonds. The combined refunding and swap termination agreement resulted in an
economic break-even transaction with.negligibJe present value savings; yet the swap termination
and related expenses resulted in an accounting loss of $6.6 miJJion. This is recorded as a special
item in the Water Enterprise Fund fmancial statements.
Overview of the Finaneial 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 m:e comprised of three components: 1) Government-
Wide Financial Statements (GWFS), 2) Fund Financial Statements (FFS), and 3) Notes to Basic
Financial Statements (Notes). This CAFR also contains other supplementary infonnation in addition
totheBFS.
19
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2005
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 seJf.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 uncoJlected
taxes and earned but unused vacation leave.
Component Units. The GWFS include not only the City itself (the '<primary government")~
but also three legally separate entities (the "component units): Market Lubbock Economic
Development Corporation, dlb/a Market Lubbock, Inc., Lubbock Economic Development
Alliance, and Civic Lubboc~ Inc., for which the City is financially accountable. These
entities provide economic development services and arts and cultural activities for the City.
Financial infonnation for these component units is reported separately in the GWFS in order
to differentiate them from the City's fmancial information. None of these component units
are considered major component units.
Fund Financial Statements. A fund is defmed 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 seyegated
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 Jegal requirements.
20
(
(
c
c
c
c
c
c
(
c
c
"' .l
)
)
)
)
)
City of Lubbock, Texas
Management's Discussion and Analysis
For theY ear Ended September 30, 2005
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: govemmental funds, proprietary funds, and fiduciary fonds.
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-tenn 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.
The City maintains 29 individual governmental funds. Information 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 budgetazy 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 governmentaJ FFS
can be found on pages 38-41 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
Municjpal Power Agency {WfMPA), 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
21
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
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-SS 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 Basie Finaneial 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 57-93 of this report.
(
Required Supplementary Information Other Than MD&A. The City has presented required C
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 $545.5 million (net assets) at the close of the fiscal year. This compared
to assets exceeding liabilities by $546.7 million (net assets) at the end of the prior fiscal year. As a
result of operations~ total net .assets decreased by $1.2 million during the period.
By far the largest portion of the City's net assets, 81. 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 capita] 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.
22
c
c
c
c
c
.,
"")
)
)
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
City of Lubbock Net Assets
September 30
(inooo•s)
~vermnental Bushtt.SS-Type
Ac:tmties Adirities Total
2005 2004 lOOS 1004 2005 2004
CUrrent and other assets $ 116,021 $ 100,489 $ 170,945 $ 171.f)S9 $ 286,966 $ 278,448
Capital assets 138,614 1291014 637!444 611,703 776,058 740,717
Total assds 254,635 2291503 808,389 789,662 1,0631024 110191165
O:urent liabilities 16,837 48,739 2S,SOS 44,156 42,342 92,&95
NonCUITellt liabilities 127,169 76,423 348.036 303,173 415,205 379,596
Total liabilities 144,006 125,162 373,541 347,329 517,547 472,491
Net assets:
Invested in capital assets,
net of related debt 82,330 74,433 363,227 355,816 445,551 430,249
Restricted 8,710 20,339 26).76 45,411 35,046 65,156
Unrestricted 19,529 92_69 45,345 41,190 64,874 50:159
Total net assets $ 110,629 $ 104,341 $ 434,848 .$ 442,423 $ 545,477 $ 546,764
An additional portion of the City's net assets, 10%, represents resources that are subject to external
restrictions on how they may be used. The remaining balance of unrestricted net assets of $64.9
milJion may be used to meet the City's ongoing obligations to citizens and creditors.
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 Cityss governmental activities experienced an increase in net assets of $6.3 million, while net
assets increased by $2.7 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 third 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 $7.6 million during the
current fiscal year as compared to a decrease of $5.3 million during the prior fiscal year. This
decrease in net assets resulted primarily from the $6.6 million accounting loss recorded in the Water
Fund for the bond refunding and associated swap termination fee. This transaction generated
negligible present value savings.
Changes in Net Assets. Details of the following summarized information can be found on pages 36-
37 of this report.
23
City of Lubbock, Texas
Management's Distussion and Analysis
For the Year Ended September 30, 2005
City of Lubbock Changes in Net Assets
For the Year Ended September 3()
(inOOO's)
Business-
Governmental Type
Activities Aetivities
Revenues: 2005 2004 2005 2004
Program Revenues:
Cbarges fur services $ 10,583 $ 12,713 $ 272,902 $ 181,411
Operating grants and contributions 13,296 9,643 8,156 6,739
Capital grants and contributions 5,206 9,269
Genetal Revenues:
Property taxes 39,748 44,497
SaJestaxes 41,803 30,555
Other taxes 4,242 3,793
Franchise fees J 1,154 9,654
Other 5,742 4,274 51146 aa932
Total revenues 126,568 115,129 291!410 200,351
Expeoses:
Administrative/Conununity Services 23,355 22,313
Street Lighting 2,459 2,471
Financial Services 2,240 2,387
Fire 23,667 21,998
General Government 27,600 20,562
Hwnan Resources 776 777
Police 37,773 33,249
Plarunng and Transportation 11,985 10,789
Public Works 2,699 3,078
Interest on rong·tenn debt 3,J9S 4,593
Electric 192,902 110,591
Water 28,738 27,879
Sewer 17,804 17,020
Solid Waste 14,695 17,662
Stormwater 5,586 5,.357
Transit 9,003 10,565
Airport 81151 6t853
Total Expenses 135,749 122,217 276,879 195,927
Change in net assets before
special items and transfers (9,181) (7,088) 14,531 4,424
Special items (6,637)
Transfers 15~469 91745 !1St469} {91745}
Change in net assets 6,288 2,657 (7,575) (5,321)
Net assets· beginning of year
Net assets • end of year $ 104~1 Ito:--9 s 1011684 104.~41 $ 442&423 4~4J4~ $ 44~744 44 4~
24
Tobtls
2005
$ 283,485 $
21.452
5,206
39,748
41,803
4,242
11,154
10,888
4172978
23,355
2,459
2,240
23,667
27,600
776
37,773
11,.985
2,699
3,19S
192,902
28,738
17,804
14,695
5,586
9,003
8tl51
412!628
5,350
(6,637)
(1,287)
$
546,164
3i3,47'1 s
2004
194,124
16,332
9,269
44,497
30,555
3,793
9,654
7,206
315,480
22,313
2,471
2,387
21,998
20,562 m
33,249
10,789
3,078
4,593
110,591
Z'/,879
17,020
17,662
5,351
10,565
61853
3181144
(2,664}
(2,664)
549,428 54~,7i>4
'-
(
c
(
(
c
r .....
(
c
r .....
)
)
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, ZOOS
Governmental activities. Governmental activities increased the City's net assets by nearly $6.3
million. Key elements of the increase follow:
• Transfers to/from business-type activities during the fiscal year increased governmental activities
net assets by $15.4 million. During the prior fiscal year these transfers increased governmental
activities net assets by approximately $9.7 million. This is a net increase of $5.7 million in
resotn'ces 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 ptn'Chasing.
• Total expenses increased by nearly $13.5 million from the prior year due primarily to increased
spending in several of the functional categories including general government $7 million, police
$4.5 million. and fire $1.7 million. The general government increase was due to the creation of
the voter approved Lubbock Economic Development Alliance (LEDA) and the corresponding
$3.5 million sales tax payment plus increased spending in the hotel motel fund to promote
tourism and the start up operations for new special revenue funds: $. 7 million for Mmricipal
Cotn't Fund, Donations Fund, North Overton Public Improvement District, and Abandoned Motor
Vehicle Fund. The increase in public safety spending of $6.3 million is a result of the City
Council's continued commitment to increased public safety.
• Revenues increased by approximately $11.4 million. The key factors impacting this increase
include a voter approved increase in sales taxes of $11.2 million, which corresponds to the voter
approved decrease in property tax of $4.7 million. Also contributing is increases in franchise fees
of$1.5 million due to growth and implementation of the 5% franchise fee.
25
..... 0 0 e c ::I 0 s <
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
This graph depicts the expenses and program revenues generated through the City's various
governmental activities.
Expenses and Program Revenues • Governmental Activities
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
26
c
r I.
c
c
c
c
,..
'-
'
)
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
The following graph reflects the source of the revenue and the percentage each source represents of the
total.
Charges for
Services
8.4%
Operating grants &
Contributions
10.5%
Franchise Fees
8.8%
3.4%
Revenues by Source -Governmental Activities
Miscellaneous
4.5%
33%
Property Taxes
31.4%
Business-type activities. Business-type activities decreased the City's net assets by $7.6 million as a
result of operations. Key elements of this increase follow:
• Charges for services for business-type activities increased by $91.5 million. During the current
fiscal year the Lubbock Power and Light (LP&L) and West Texas Municipal Power Agency
{WTMPA) began selling natural gas (gas swap sales) to a third party which brought in revenues
of $65.2 million. Revenues were also up slightly in all of the City's other enterprise funds.
Because of the inter-fund activity between LP&L and WTMPA, approximately one third of the
revenue was eliminated for the entity wide statements.
• Operating grants, capital grants, and contributions continue to be a significant revenue source for
LP&L, Airport, Water, and Sewer Funds during the current fiscal year, producing nearly $13.4
million in revenue. This is a slight decrease in prior fiscal year's support of$16.0 million. These
27
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
contributions came primarily from federal grants and from water and sewer lines and taps that
were funded by property owners.
• Expenses increased in total by $81.0 million over the prior fiscal year. This increase is primarily
due to the cost of fuel for the new gas swap sales contract of $62.1 million and the increased cost
of operations for electric operations. Increases in the nation's fuel and energy costs have also
affected both LP&L's and WIMP A's cost of power.
The following graph reflects the revenue sources generated by the business-type activities. As noted
earlier, these activities include LP&L, Water, Sewer, Solid Waste, Transit, W1MPA, Airport, and
c
(
Stonnwater Drainage. C
Revenues by Source -Business-type Activities
Captial Grants &
Contributions
1.8%
Operating Grants"
& Contributions
2.8%
Charges for
Services
93.7%
Financial Analysis of the City's Funds
Governmental funds. The focus of the City's governmental funds is to provide information on near-
tenn inflows, outflows, and balances of spendable resources. Such infonnation 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.
28
(
(
(
r
)
)
)
)
)
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
At the end of the fiscal year, the City's governmental funds reported combined ending fund balances
of$85.2 million. This compared to $47.7 million at the end of the prior fiscal year. This increase is
primarily the result of debt issuance for capital projects including the Gateway Streets projects, parks
projects, tax increment financing projects, and street projects. This resulted in an increase of fimd
balance of $37.9 million. Also affecting this increase was the result of operations of the General
Fund where fund balance increased by $4.7 million. Of the ending governmental fund balance; $25.9
nullion or 30.4%, constituted unreserved fund balance which is available for spending at the City's
discretion. This compared to $13.8 million or 28.9% 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) is restricted for other purposes.
The General Fund is the chief operating fund of the City. At the end of the fiscal year, umeserved
fund balance in the General Fund was approximately $17.3 million compared to $12:1 million in the
previous fiScal year, representing an increase of approximately $5.1 million. Total fund balance
(reserved and unreserved) approximated $17.4 million at the end of the fiscal year compared to $12.7
million at the end of the prior fiscal year. As a measure of the General Fundss liquidity, it is useful to
compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved
fund balance represented 17.4% of total General Fund expenditures compared to 13.4% of total
General Fund expenditures in the prior year. Total fund balance represented 17.5% of total General
Fund expenditures compared to 14.1% 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. It also has a transfer from
the Risk Management Fund.
Proprietary funds. The City's proprietary funds provide essentially the same type of information
found in the GWFS, but in more detail.
Unrestricted net assets of the major proprieta:ry funds at the end of September 30 are shown next with
amounts presented in OOOs:
Electric Fund
Water Fund
Sewer Fund
W1MPA
Stormwater
$
$
zoos
14,151
6,818
5,964
1,314
7,420
35,667
$
$
2004
7,006
14,078
6,343
1,743
1,305
30,475
The LP&L Fund increased unrestricted net assets by $7.1 million compared to an increase of $4.6
million during the prior year. This is mainly due to the results of operations, a restructuring of the
capital funding method for existing projects, and a decision by City Council not to charge for
payments in lieu of taxes and franchise fees until adequate cash reserves are established.
29
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30,2005
The Water Fund reflected a current year decrease in unrestricted net assets of nearly $7.3 mii1ion
compared to a decrease of $1.5 million during the prior year. This is due primarily to the accounting
loss for the tennination of an interest rate swap payment of $6.6 million and a scheduled increase in
interest payments of nearly $1 million. This was offset by increases in water sales due in part to a
raise of approximately 3% in water rates.
The Sewer Fund reflected a current year decrease in unrestricted net assets of approximately $.3
mi11ion compared to a $2.1 million increase during the prior year. Changes to debt covenant
requirements and changed methods of capital funding contributed to the change.
c
c
The WTMP A Fund reflected a decrease in unrestricted net assets of nearly $.4 million primarily as a C
result of operations. The prior fiscal year•s change was an increase in unrestricted net assets of $.4
million.
The Stormwater Fund experienced an increase in unrestricted net assets of $6.1 miiJion during the
fiscal year compared to a $.4 million increase in the prior fiscal year. The increase is a result of
changed methods for capital funding. C
General Fund Budgetary Highlights
Differences between the original budget and the fmal amended budget were approximately $3.6
milJion in increases to expenditures. The main reason for the increase was for the street seal coating
program, which was moved from a Capital Project Fund to the General Fund.
The General Fund ended the fiscal year with expenditures more than $3.6 million more than
budgeted. This mainly resulted from the implementation of a master lease program for obtaining
vehicles and equipment as adopted by the City Council. The annual operating lease payments are
budgeted; however, the lease proceeds and related capital expenditures are not budgeted items. This
was a result of budgeting for the total amount of lease payments which is a true cash outflow instead
of budgeting for the fuU cost of the vehicles leased which is required by generally accepted
accounting principals (GAAP).
Due to stronger than anticipated growth in new construction and better than expected sales tax
revenue, actual revenues were nearly $2.1 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, 2005 amounted to $776.1 million, net of accumulated depreciation. This
was a $35.4 million increase over the prior fiscal year's balance of$740.7 rniJlion, net of accumulated
depreciation. This investment in capital assets includes land, buildings and improvements,
equipment, construction in progress, and infrastructure.
30
(
c
(
(
(
(
)
)
City ofLubboek, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
Major capital asset events during the fiscal year included the foJlowing:
• Work continued in the Water Fund with another $3.1 million expended on the construction of
water lines and $1.8 miJlion on sewer lines ahead of the Marsha Sharp Freeway.
• A large street project began with the construction of a T-2 thoroughfare street with $6.5 million
expended on Milwaukee A venue from 34th Street to 98th Street . This project is in the Gateway
Streets Fund which was established in FY 2004..05. The fund is supported by 2% of the 5%
franchise fees.
• Scheduled improvements to LP&L's distribution infrastructure amowtt to $2.8 million. Another
$1.6 million was spent on overhead distribution infrastructure.
• The City continues work on a flood reliefproject linking South Lubbock's chain of playa lakes
with an underground drainage system, spending $8.5 miiJion during the fiscal year. Expenditures
to date on the project total $13 million.
At the end of the fiscal year, the City has construction commitments of$112.5 million.
City of Lubbock Capital Assets
(Net of Accumulated Depreciatioa)
September 30
(ia OOO's)
Business-
Governmental Type
Activities Activities Totals
2005 2004 2005 2004 2005 2004
Land $ 8,9SJ $ 8,608 $ 31,949 $ 31,676 $ 40,900 $ 40,284
Buildings 28,146 23,794 6S,9SI 68,302 94,097 92,096
Improvements other
than buildings 43,895 37,183 347,393 330,842 391,288 368,025
Machinery and equipment 19,829 15,951 63,719 66,922 83,548 82,879
Construction in progress 371793 431472 1281432 1131961 1661225 157,433
Total $ 138~614 $ 129,014 $ 637,444 s 611,703 $ 7761058 $ 740,717
Additional infonnation about the City's capital assets can be found on pages 70-72 of this report.
31
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
Long-term debt. A summary of the City's total outstanding debt follows:
General obligation bonds
Revenue bonds
Total
City of Lubbock Outstanding Debt
Gener2l Obligation ud Revenue Bonds
September 30
(in OOO's)
Basi ness-
Governmental Type
Activities Ac:tivities
2005 2004 2005 2004 s 102,720 $ 70,221 $ 286,750 s 215,664
42,800 941605
$ 102,720 s 701221 s 329,550 $ 3101269
Totals
2005 2004
$ 389,470 $ 285,885
421800 941605
$ 4321270 s 380,490
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 $100 of
assessed valuation. The Attorney General of the State of Texas pennits an allocation of$ I .50 of the
$2.50 maximum tax rate for general obligation bonds debt service. 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.
As of September 30,2005, the City's total outstanding debt has increased by $50.7 million or 13.3%
over the prior fiscal year. The increase in outstanding debt is attributed to the issuance of $187.5
million in debt, offset by the payment of scheduled debt service totaling $22.4 million and a reduction
in outstanding debt of$ I 14.3 million as a result of reftmding existing obligations.
During the fiscal year, the City issued the following bonds and certificates:
• $7.3 million of General Obligation Bonds, Series 2005 were issued to fund the current capital
improvements plan. This issuance was the second instalhnent of the $30 million capital
improvement debt issuance approved by voters in 2004.
• $46.5 million of Tax and Waterworks System Surplus Revenue Certificates of Obligation,
Series 2005 were issued to finance projects in Water, Sewer, Aiiport, North Overton Tax
hlcrement Financing Zone, Lubbock Power & Light, and Gateway Streets; as well as Parks
and Streets projects throughout the City.
• $23.1 million of Tax & Electric Light & Power Surplus Revenue CO, Series 2005 were
issued to finance distribution projects and to refund $19.8 million of contract debt previously
issued by West Texas Municipal Power Agency.
• $49.6 million of General Obligation Reftmding Bonds, Series 2005 were issued to defease
$50.4 million in outstanding bonds in order to achieve interest savings.
• $43.1 million of Tax & Waterworks System Surplus Revenue Ref. CO, Series 2005 were
issued to defease $43.74 million in outstanding bonds originally held by Brazos River
Authority for the acquisition and construction of the lake and reservoir at Lake Alan Henry.
32
c
c
c
c
(
,
(
(
)
)
')
)
)
)
City of Lubbock, Texas
Management's Discussion and ·Analysis
For the Year Ended September 30, 2005
• $17.9 million in bonds were issued as Lubbock's share of the $48.1 million Canadian
Municipal Water Authority Contract Revenue Bonds, Series 2005 (ConjWlctive Use
Groundwater Supply Project) for the purchase of water rights. The City of Lubbock is
contractually obligated to pay the debt service on these bonds over a 20 year period.
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.
On November 22, 2005, the City of Lubbock received a rating outlook upgrade from "stable,. to
"poSitive" from Moody's Investors Service. The City currently 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. On December 21, 2005, LP&L received a rating upgrade from ''"BBB-" to
"BBBn from Standard & Poor's. The LP&L revenue bonds are currently rated ''"BBB" by S~dard &
Poor's, ('BBB+uby Fitch Ratings, Inc., and "A3" by Moody's Investors Service.
Additional infonnation about the City's long-tenn debt can be found on pages 81-86 of this report.
Economic Factors and the Next Fiscal Year's Budget and Rates
• At the end of the City's fiscal year the Wlemployment rate for the Lubbock area was 3.8 percent.
This is a decrease from a rate of 4.3 percent from the same month one year earlier. This
compares favorably to the state's unemployment rate of 5.3 percent and the national rate of 4.8
percent for September 2005.
• Retail sales figures-are only available through the third quarter of FY 2004-05. Total retail sales
reflected a 4.9 percent increase for that period over the same period in 2004.
• The nwnber of building pennits for new construction decreased from 2,796 during FY 2003-04 to
2,222 in FY 2004-05, or about a 20.5 percent decrease. This compares to a 2.9 percent decrease
during the prior period. Building permit values for new construction decreased from $389.4
million in FY 2003-04 to $388.4 million in FY 2004-05, or about a 2 percent decrease.
• Total occupancy in local hotels and motels improved and the local occupancy tax totaled nearly
$3.3 million, a 14 percent increase over last fiscal year.
• City Council again decided to support the operations of LP &L 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 LP&L has adequate monetary reserves as set by City
ordinance.
All of these factors were considered in preparing the City of Lubbock's budget for FY 2005-06.
During the just ended fiscal year, unreserved fund balance in the General Fund increased by nearly
$5.1 million to $17.2 million compared to $12.1 million at the end of the prior fiscal year. It is
intended that the unreserved undesignated fund balance be equal to 20% of operating revenues~ which
equates to approximately $17.6 million. The City ended the year nearly$ .4 million under this target
City Management anticipates meeting this goal in the next fiscal year.
33
City of Lubbock, Texas
Management's Discussion and Analysis
For the Year Ended September 30, 2005
LP&L increased rates in May 2005 as follows; 15.5% for the larger commercial consumers, 12.3%
for residential customers, and 13.0% for small commercial consumers as a result of higher than
anticipated costs of power.
Both the Water and Sewer Funds rates were increased for FY 2003-04 and FY 2004-05. Water rates
were increased by 3 percent and sewer rates were increased by 5 percent for all customers each year.
The water and sewer rates affected both residential and commercial consumers by the same
percentage. These rate increases were necessary to cover increased operating costs due to expanded
capital replacement projects and the acquisition of additional water rights.
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
infonnation should be addressed to the Chief Financial Officer, P.O. Box 2000, Lubbock, Texas,
79457.
...
34
c
c
c
(
(
(
(
c
(
(
)
)
..,
;
)
)
'
BASIC
FINANCIAL
STATEMENTS
c
(
c
c
(THIS PAGE INTENTIONALLY LEFT BLANK)
(
(
c
(
(
(
City ofLubbock, Texas
Statement of Net Assets
September 30, 2005
Primary Govtmmc•t
) Governmental Business--type Component
Adivities Activities Total Units
ASSETS
Cash and cash equi981ents $ 20,120,923 $ 44,471,841 $ 65,192,764 $ 3,123,029
Investments 5,241,795 5,892,115 11,133,910 706,422
Receivables (net of allowa~ for uncolleetibles) 13,835,367 25,648,568 39,483,935 196,145
) Jntcmal balance 6,076,822 (6,076,822)
Due from other governments 6,009,023 6,009,023
Due from others 1,897,124 1,513,965 3,411,089
Inventories 181,358 2,596,308 2,777,666 93,821
Investment in property 210,853 210,853
) Prepaid expenses 909,112 909,112 59,814
Restricted assets:
Cash and cash equivalents 26;216,557 U;276,S51 100,000
Investments 55,003,853 67,320,433 122,324,286
Accounl$ receivable 91,358 91,358 8,120,768
Morteage receivables 5,934,866 5,934,866
) Capital assets (net of accumulated depreciation):
Non-depreciable 46,744,528 160,380,890 207,125,418 366,932
Depreciable 91,869,623 477,062,701 568,932,324 829,150
Deferred charges 3,211,110 3;211,110
Total assets 254,635~47 808~89,024 1,063,024;271 14,197,281
") IJABJLJTIES
Accounts payable 8,016,664 17,436,412 25,453,076 1,185,956
Accrued expenses 4,581,439 2,172,051 7,353,490 157,798
Accrued interest payable 1,081,814 2,976,994 4,058,808
Customer deposits 200 2,304,900 2,305,100
Unearned revenue 3,156,602 14,697 3,171;299 8,028,853
NoncWTent llllbilltlcs due within one year.
Bonds payable 5,789,101 17,625,899 23,415,000
Compensated absences 5,723,349 2,207,245 7,930,594
A«<'Ued ii'IISUI'IInce <:laims 2,340,260 1,603,601 3,943,861
Capilli! leases payable/Contracts payable 936,.250 456,625 1,392,875 1,643,412
Nonwrrcnt liabilities due in more than one year:
8omb payable 96,931,168 314,479,280 411,410,448
Deferred premium on bonds 1,865,.984 1,865,984
Compen$1ted absences 10,565,016 2,793,520 13,358,536
Ac:.:rued insllt'8llc:e <:!aims 4,898,297 4,898,297
Landfill closure and po6tdOSW'e care 3,073,391 3,073,391
) C3pitalleaset payablefContracts payable 3,018,635 897,951 3,916,586 1,195,168
Toltllliabilities 144,006,482 373,5401863 517,547,.345 12;2lltl87
NET ASSETS
Invested in capital assets, net of related debt 82,330,195 363;226,855 445,551,050 1,196,682
Restricted for:
Passenger facility cllargcs 4,359,610 4,359,610
) Debt service 2,624,340 21,916,947 24,541,287
Grant programs 6,145,719 6,145.719
Primary government 1greement 100,000
Unrestricted 192528,511 45,344,749 64,873,260 689t412
Total net as~cs $ 110,628,765 $ 434t848,161 $ 545,416,926 $ 1,986,094
See acooropanying Notes to Basic Financial Statements
35
City of Lubbock, Texas
Statement of Activities
For the Year Ended September 30,2005
Primary government:
Governmental activities:
Administration/Community Services
Street Lighting
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
Stormwater
Transit
Airport
Total business-type activities
Total primary government
Component units:
Civic Lubbock, Inc.
Marl<et Lubbock, Inc.
Lubbock Economic Development Alliance
Total component units
Expenses
$ 23,355,816
2,459,025
2,240,424
23,666,709
27,600,270
776,128
37,772,866
11,985,323
2,698,517
3,195,182
135,750,260
192,902,041
28,737,866
17,804,487
14,695,193
5,585,517
9,003,610
8~150,815
276,879,589
s 412,6291849
$ 1,888,596
2,608,975
3,031 ,8 18
$ 7,529,389
General revenues:
Property taxes
Sales taxes
Occupancy taxes
Other Taxes
Franchise Fees
Investment Earnings
Miscellaneous
Charges for
Services
$ 2,571,376
300
3,866,182
4,024,650
120,646
10,583,1.54
192,568,012
33,306,786
19,829,430
12,420,499
6,239,436
3,144,015
5,394,314
272,902.492 s 283,485,646
$ 1,615,361
78,632
s 1,693,993
Termination of interest rate swap
Transfers, net
Program Revenues
Operating
Grants and
Contributions
$ 6,792,134
5,965,621
517,857
19,970
13,295,582
6,964,325
1,191,690
8,156,015
$ 21,451,597
$
5,320,871
3,483,960
$ 8,804,831
Total genereal revenues, special items, and transfer.>
Change in net assets
Net assets-beginning
Net assets-ending
See accompanying Notes to Basic Financial Statements
36
c
/"' .....
Capital
Grants and
Contributions
$ ~
"-
c
33,306
1,814,011
2,374,233
r '-
9832991
5,2052541
$ 5,205,541 ,..
.....
$
$ ~ '-
,..
\...
)
)
)
)
)
)
Governmental
Adivities
$ (13,992,306)
(2,459,025)
(2,240,424)
(23,666,409)
(17,768,467)
(176,128)
(33,230,359)
(11,985,323)
(2,557,901)
(3,195,182}
(111,871,524)
(ll 1,871,524)
39,748,464
41,803,092
3,260,040
982,327
11,153,641
1,633,312
4,109,474
15,468,765
118,159,115
6,287,591
104z34l,l74
$ 110,628,765
Net (Expenses) Revenues and
Changes in Net Assets
Primary Government
Business~type
A<:tivities Total
$ $ (13,992,306)
(2,459,025)
(2,240,424)
(23,666,409)
(17,768,467)
(776,128)
(33,230,359)
{11,985,323)
(2,557,901)
~3,195~1822
(111,871,524)
{300,723) (300,723)
6,382,931 6,382,931
4,399,176 4,399,176
(2,274,694) (2,274,694)
653,859 653,859
1,104,730 1,104,730
{580,820} ~580,820}
9,384,459 91384,459
9,384,459 (1 02,487,065)
39,748,464
41,803,092
3,260,040
982,327
l1 ,153,641
3,758,240 5,391,552
1,387,914 5,497,388
(6,637,093) (6,637,093)
(15,468,765}
(16,959,704~ 101,199,411
(7,575,245) (J ,287 ,654)
442,423,406 546,164,580
$ 434,848,161 $ 545,476,926
Component Units
$
(273,235)
2,790,528
452!142
2,969,435
10,529
10,529
2,979,964
(993,870l
$ 1~86,094
37
--------------~~~---! ____ _
c
City of Lubbock, Texas
Balance Sheet
Governmental Funds
September 30, 2005 ,. ...
Non-Major Total
Governmental Governmental
General Fund Funds Funds
ASS.ETS ,..
Cash and cash equivalents $ 5,747,399 $ 12,430,465 $ 18,177,864 .....
Investments 1,513,176 3,330,647 4,843,823
Taxes receivable (net) 8,903,379 561,325 9,464,704
Accounts receivable (net) 4,190,603 6,024 4,196,627
Interest receivable 32,727 21,945 54,612
Due from other fimds 7,087,923 4,202,414 11,290,337 c
Due from other governments 6,009,023 6,009,023
Due from others 722,145 1,148,131 1,870,276
Investment in property 210,853 210,853
Inventory 107,830 107,830
Restricted investments 50,584,201 50,584,201
Mortgage receivables 5,934,866 5,934,866
Total assets $ 28,305,182 $ 84,439,894 $ 112,745,076
LIABILITIES c
Accounts payable $ 1,326,745 $ 6,262,025 $ 7,588,770
Due to other funds 5,992,151 5,992,151
Accrued liabilities 4,150,068 392,727 4,542,795
Accrued interest payable 491,204 491,204
Deferred revenues 5,451,949 3,477,453 8,929,402 ~ ....
Total liabilities 10,928,762 16,615,560 27,544,322
FUND BALANCES
Reserved for: ...
Prepaid items/inventory 107,828 107,&28 ...
Debt service 2,624,340 2,624,340
Capital projects 50,391 ,1 87 50,391,187
Special revenue • grants 6,145,719 6,145,719
Unreserved, reported in c General fund 17,268,592 17,268,592
Special revenue funds 8,663,088 8,663,088
Total fund balance 17,376,420 67,824,334 85,200,754
Total liabilities and fund balances $ 281305,182 $ 84,439,894 $ 11217451076 c
See accompanying Notes to Basic Financial Statements
38
)
)
' i1
)
City of Lubbock, Texas
ReconciHation of the Balance Sheet of Governmental Funds
To the Statement of Net Assets
September 30, 2005
Total fund balance-governmental funds
Amounts reported for governmental activities in the statement of net assets are different
because:
Capital assets used in governmental activities are not finandaf
resources and therefore are not reported in the funds.
Internal service funds (ISF's) are used by management to charge the costs of certain activities,
such as insurance and telCC<~mmunications, to individual funds. The portion of the assets and
liabilities of the ISFs prjmarlly serving governmental funds are included in governmental
activities in the statement of net assets as follows:
Net assets
Net book value of capital assets
Compensated absences
Amounts due from business-type ISFs for amounts undercharged
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
Capital leases payable
Compensated absences
Accrued interest on general obligation bonds
Bond premiums are recognized as an other financing source io the fund statements but the
premiums are amortized over the life of the bonds in the government-wide statements.
Actual City contributions to the fire fighter's pension trust fund is greater than the actllarially
detennined required contribution. This wilt 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.
Revenue earned but unavailable in the funds is deferred.
Net assets of governmental activities
Sec accompanying Notes to Basic Financial Statements.
39
$ 85,200,754
138,614,151
5,636,174
(1,072,813)
214,828
773,274
{1 02, 720,269)
{3,954,887)
(16,288,365)
(590,610)
(1,865,984)
909,112
5,772,800
$ 110,628,765
(
City of Lubbock, Texas
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
For the Year Ended September 30, 2005 ,..
I..
Non~Major Total
Governmental Governmental
General Fund Funds Funds
REVENUES
Taxes $ 68,716,601 $ 17,797,455 $ 86,514,056 ,..
\..
Franchise Fees 6,693,209 4,460,432 11,153,641
Fees and tines 4,015,402 4,015,402
Licenses and permits 1,953,666 1,953,666
Intergovernmental 480,648 12,814,933 13,295,581
Charges for services 4,070,642 543,440 4,614,082 ( Interest 349,236 805,103 1,154,339
Miscellaneous 1,506,315 3,268,281 4,774,596
Total revenues 87,785,719 39,689,644 127,475,363
EXPENDITURES
Administration/community services 18,330,508 18,330,508 (
Street lighting 2,214,291 2,214,291
Financial services 2,139,492 2,139,492
Fire 21,943,267 21,943,267
General government 6,159,536 20,358,995 26,518,531
Human resources 740,826 740,826 (
Police 33,919,626 33,919,626
Planning and transportation 8,120,727 8,120,727
NoD-departmental 445,251 445,251
Public works 2,657,218 2,657,218
Debt service: (
Principal 6,336,036 6,336,036
Interest and fiscal charges 3,031,751 3,031,751
Capital outlay 5,277tl00 16!438,438 21!715,538
Total expenditu!"e3 992290,624 48,822,438 148,113.062
Excess (deficiency) of revenues
over (under) expenditures (11 ,504,905) (9,132,794) (20,637,699)
OTHER FINANCING SOURCES (USES)
Long~tenn debt issued 45,110,000 45,110,000
Retirement of refunded debt (7,215,000) (7,215,000)
Bond premium (discount) 725,586 725,586
Capital leases issued 3,534,016 3,534,016
Transfers in 16,565,397 6,122,612 22,688,009
Transfers out (3,912,645} {2,827,526) {6,740,1712
Net other financing sources (uses) 16,186,768 4119151672 58,102,440
Net change in fund balances 4,681,863 32,782,878 37,464,741
Fund balances at beginning of year 12,694,557 35,041,456 47,736,013
Fuod balances at end of year $ 17,376,420 $ 67,824,334 s 85,200,754
See accompaning Notes lo Basic Financial Statements
40
)
)
'
'
'
)
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, 2005
Net change iD fuad balances -total govenamcntal fuods
Amounts repomd for govermnentaJ activities in the statement ofaclivities are dilfen:ut because:
Governmental filnds report capital outlays as expenditures. However, in the Statement of Activities the cost
of those assets is allocated O\'U their estimated useful lives and reported as depreciation expense. This is the
amount bywhieb capital outlays of$21 ,702,858 exceeded depreciation of$ll,S9S,992 in the current period.
Bond proceeds provide a.mmt f1llllllcial resources to governmental fUnds, but issuing debt incceases loog-
tenn liabilities in the Statement of Net A$$cts. Repayment of bond principal is an expenditure in the
governmental funds, but the repayment reduces long-tenn liabilities in the Statement ofNet Assets. This is the
amount bywhkh proceeds of$45,110,000 exceeded repayments and debtdefeascm:e of$12,619,948.
Capital lease tranSactions provide current financial resources to govQDIJICI'Ital funds and ICptymeot of
principal is an expenditure. This is tbe amount by which proceeds of$3,534,016 exceeded repayments of
$940,086.
Bond premiums are recognized as an other financing source in lhe governmental funds. but are considered
deferred assets on 1ha Statement ofNet Asset&. Premiums are amortW:d over the li& of the bonds. This is the
amount by whlch bond preorlu.m issued of$725,586 exceeded IUJiortization of$39,324.
Estimated long-term liabilities for compeGsatcd absences are recognized as expenses in the Statement of
Activities as earned, but are recognized when current fulaa.cial resources are used in 1bc: govemmeotal funds.
This amount is the net change in the estimated loog-term liability for comperuated absences during the year.
Property taxes liMed and court nnes ~1nd fees earned, but oot available, arc defc:m:d in the govenupe~~taJ
funds, but are recognized wben earned (net of estimated Ullcollectibles) in the Statement of Activities. This
amouot is the net change in deferred property taxes and tOW1 fines and fees for the year.
Actual City contributions t.o the fire fighter's pcnsioo trust fUnd are greater than the IOO!arially determined Net
Pension Obligatjon (NPO). This amount is recognized as an expeuditure at the fund level but is accrued when
overpaid and reduces elCpeosts on the Statement of Activities
Internal service fun& arc used by management to charge the costs of certain activities, such as insurance and
telecommunications, to individual funds. The net revenue (expense) of certai11 internal service fimds is
reported with governmental ac:tivjties.
Accrued interest is rccopized as expenses in the Statement of Activities as ineum:d, but is recognjled wbeo
CUirel1t financial resources are used in the governmental funds. This IUJiount is the net chaD.ge in the acc:rucd
interest this year.
lbenct effect of various miseellaueous transactions involving capital assets (e.g., sales and tndc-ins) is to
decrease net a~~Scts.
Cbange in net assets of governmental activities
See accompanying Notes to Basic Financial Statements.
41
$ 37,464,741
10,106,866
(32,499,052)
(2,593,930)
(686,262)
(1,348,5~)
(1,177,369)
11,464
(2,561,821)
(202,755)
(225,745)
$ 61287~91
. .
~-· 42
c
c
c
(
c
(
(
,. ...
(
(
(
)
)
)
)
)
~
)
City of Lubbock, Texas
Budget Comparison Statement
General Fund
For the Year Ended September 30, 2005
Original Budget
REVENUES
Taxes $ 67,662,817
Franchise Fees 6,490,916
Fees and fines 3,675,500
Licenses and permits 1,954,759
Intergovernmental 385,304
Charges for services 4,597,064
Interest 264,230
Miscellaneous ll063z508
Total revenues 86,094,098
EXPENDITURES
Administration/community services 18,339,305
Street lighting 2,270,937
Financial services 2,288,879
Fire 21,862,118
General government 5,960,400
Human resources 722,083
Police 33,783,644
Planning and transportation 7,782,461
Non-departmental (1,391,429)
Capital outlay 473,141
Total expenditures 92,091,539
Excess (deficiency) of revenues
over (under) expenditures ~5~997,44Q
OTHER FINANCING SOURCES (USES)
Capital leases
Transfers in 11,925,222
Transfers out ~5,927,782}
Net other financing sources (uses) 5,997,440
Net change in fund balances (1}
Fund balances at beginning of year 12,694,557
Fund balances at end of year $ 12,694,556
See accompaning Notes to Basic Financial Statemeots
43
$
$
Variance with
Final Budget-
Positive
Final Budget Adual Amounts (Negative)
67,662,817 $ 68,716,601 $ 1,053,784
6,490,916 6,693,209 202,293
3,675,500 4,015,402 339~02
1,954,759 1,953,666 (1,093)
391,664 480,648 88,984
4,179,364 4,070,642 {108,722)
264,230 349,236 85,006
1,063,508 1~506,315 442,807
85,682,758 87,785,719 2,102,961
18,311,655 18,330,508 (18,853)
2,270,937 2,214,291 56,646
2,288,879 2,139,492 149,387
21,935,828 21,943,267 (7,439)
6,070,400 6,159,536 {89,136)
792,083 740.826 51,257
34,171,843 33,919,626 252,217
8,146.421 8,120,727 25,694
(689,562) 445,251 (1,134,8'13)
2,381,141 5,271,100 ~2~895,959}
95,679~625 99,290,624 ~3,610,999~
(9,996,867} {11,504~905} {1,508,038!
3.534,016 3,534,016
16,520,075 16,565,397 45,322
~3~803~5Q ~3,912,645) {109,394~
12,716,824 16,186,768 3.469,944
2,719,957 4,681,863 1,961,906
12,694,557 12,694,557
15!414!514 s 17,376,420 $ 1!961,906
City of Lubbock, Texas
Statement of Net Assets
Proprietary Funds
September 30, 2005
ASSETS
Current assets:
Cash and cash equivalents
Investments
Accounts receivable
Interest receivable
Due from others
Due from other funds
Inventories
Total current assets
Noncurrent assets:
Restricted cash and cash equivalents
Restricted investments
Restricted interest receivable
Restricted accounts receivable
Deferred charges
Capital assets:
Land
Construction in progress
Buildings
Improvements other than buildings
Machinery and equipment
Less accumulated depreciation
Total capital assets
Total noncurrent assets
Total Assets
$
$
See accompanying Notes to Basic Financial Statements
LP&L
11,629,589
3,094,677
15,203,375
19,267
255,509
30,202,417
5,588,827
4,583,485
3,211,110
756,714
12,248,738
8,054,811
169,337,586
49,137,805
~100,389,815~
139,145,839
152,529!261
182,731 ,678
44
c
c
EnteTprise Funds
Water Sewer WTMPA c
$ 5,205,156 $ 3,834,508 $ 1,663,523
186,781 1,027,426
4,113,761 2,324,999 1,096,068
19,769 9,131 (
42,444
11,299,440
215,806
9,783,717 7,196,064 14,0.59,03 1
(
7,781,030 3,312,981
14,106,757 7,999,160
472
22,179 26,164 c
12,724,350 12,578,774
50,601,987 6,893,669
21,570,924 23,862,871
222,401,681 109,746,495 25,200
20,304,008 16,075,017
{83,35 1 ,900~ !58,910,186) {25,200}
244,251 !050 110,246,640
266,161,488 121,584,951 , ...
$ 275,945,205 $ 128,781,015 $ 14,059,031
(
c
(
)
Enterprise Funds
Non-Major
Enterprise Total Enterprise Internal
') Stormwater Funds Funds Service Funds
$ 12,208,148 $ 8,041,256 s 42,582,180 $ 4,432,716
454,334 765,249 5,528,467 761,620
656,534 2,184,286 25,579,023 1,818
) 5,902 12,667 66,736 8,078
1,471,521 1,513,965 26,848
51,814 11,351,254 5,367
608~445 1,079,760 1,590,076
13,324,918 13,135,238 87,701,385 6,826,523
4,548,392 5,045,321 26,276,557
25,629,786 6,825,808 59,144,996 12,595,089
10,856 16,243 27,571 20,656
48,343 107,063
3,211,110
283,337 5,605,535 31,948,710 65,343
51,964,007 6,059,823 127,768,224 1,100,582
64,580 41,865,343 95,418,529 1,608,618
8,158,852 95,430,523 605,100,337 628,868
2,766,421 48,457,729 136,740,980 7,898,666
(8,915,041} ~109,764,5542 {361,356,696) (8,405,114!
54,322,156 87,654,399 635,620,084 2,896,303
84,511,190 99,541,771 724,328,661 15,619,111
$ 97,836,108 $ 112,677,009 $ 812~0302046 $ 22,445,634
)
45
City of Lubbock, Texas
Statement of Net Assets
Proprietary Funds
September 30, 2005
LIABll.ITIES
Current liabilities:
Accounts payable
Accrued liabilities
Accrued interest payable
Due to other funds
Customer deposits
Compensated absences
Lease payable
Bonds payable
Total current liabilities
Noncurrent liabilities:
Compensated absences
Deferred revenues
Accrued Insurance Claims
Landfill closure and post closure care
Conllacts and leases payable
Bonds payable
To1al noncurrent liabilities
Total Liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restrjcted for:
Passenger facWty charges
Debt service
Unrestricted
Total Net Assets
$
$
See accompanying Notes to Basic Financial Statements
LP&L
809,810
1,304,102
1,236,712
11,299,440
2,268,773
1,038,245
8,780
5.425,000
23,390,862
1,305,704
81,239
64,701,763
66,088,706
89,479,568
73,512,542
5,588,827
14,150,741
93,252t110
46
c
Enterprise Funds
Water Sewer WTMPA ,..
'-
$ 882,905 $ 364,840 $ 12,745,213
172,906 108,770 (
986,739 248,821
29,355
403,463 192,771
195,525 c
5,911,004 3!932,162
8,386,372 5,042,889 12,745,213
513,498 245,345 (
222,387
122,319,849 4318751658 ,.
' 122,833,347 44,343,390
131,219,719 49,386,279 12&745,213
(
130,126,954 70,118,103
7,781,030 3,312,987
6,817,502 5,963,641 1,313,818 (
$ 144,725~486 $ 79,394,736 $ 1,313~818
c
(
Storm water
$ 880,091 $
23,318
429,758
4,500,000
36,290
)
1,355,000
7,224,457
) 46,188
701296~817
70,343,005
77,567,462
)
8,300,125
4,548,392
7,420,129
$ 20,268,646 $
)
Enterprise Funds
Non-Major
Enterprise
Funds
901,608
1,064,084
74,964
855,361
6,772
347,141
252,320
1,002,733
4,504,989
441,815
14,697
3,073,391
594,325
13,285,193
17,409,421
21,914,410
79,345,636
4,359,610
685,711
6,371,642
90,762,599
Total Enterprise Internal
Funds Service Funds
$ 16,584,467 $ 1,279,836
2,673,180 137,515
2,976,994
16,654,807
2,304,900 200
2,017,910 264,524
456,625
1726251899
61,294,782 126821075
2,552,550 380,609
14,697
8,842,158
3,073,391
897,951
314,479,280
321,017,869 9,222,767
382,312,651 10,904,842
361,403,365 2,896,303
4,359,610
21,916,947
42,037,473 8,644,489
$ 429,717,395 $ 11,540,792
47
_______________________ ! ______ __
l r \. .~
I
c
c
c
(
c
c
c
c
·"'
c
c
__________ -Ll~:~i1 __ z_ ______________________________ ~c \ 48
)
)
)
)
)
)
)
)
City of Lubbock, Te.xas
Reeonciliation of the Statement of Net Assets-Proprietary Funds
To the Statement of Net Assets
September 30, 2005
Total net assets· proprietary 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 activitie~ 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 foltows:
Net assets of business-type ISFs
Amounts due to governmental ISFs for amounts overcharged
Net assets of business-type activities
See accompanying Notes to Basic Financial Statements.
49
$ 429,717,395
5,904,018
(773.252)
$ 434,848,161
c
City of Lubbock, Texas
Statement of Revenues, Expenses and Cbanges in Fund Net Assets
Proprietary Funds
For Fiseal Year Ended September 30, 2005 ,. ....
Enterprue Funds
LP&L Water Sewer WTMPA
OPERATING REVENUES ,.
\..
Charges for services $ 180,549,258 $ 33,500,269 $ 19,929,559 $ 158,128,217
Provision for bad debts (789,632l (193,483} !100,129)
Charges for Services (net) 179,759,626 33,306,786 19,829,430 158,128,217
Miscellaneous
Total operating revenues 179,759,626 33,306,786 19,829,430 158,128,217 (
OPERATING EXPENSES
Personal Services 9,921,315 5,423,288 3,537,639 405,974
Insurance
Supplies 585,433 992,173 724,106 r \,.
Materials
Maintenance 1,575,709 2,171,179 1,137,176
Purchase of fuel and power 146,980,186 157,964,087
Collection expense 1,460,411 910,539
Other services and charges 5,007,907 7,572,617 4,555,055 261,920 ,.
1...
Depreciation and amortization 9,192,618 5,950!475 5,096,596 614,787
Total operating expenses 173,263,168 23,570,143 15,961,111 159,246,768
Operating income (loss) 6,496,458 9,736,643 3!8681319 {11118,551}
c
NONOPERATING REVENUES (EXPENSES)
Interest earnings 348,637 788,431 165,758 537,249
Passenger facility charges/Federal grants
Disposition of assets (t .372,588) (174,325} (10,636)
Miscellaneous 1,396,843 269,718 222,528 ,..
\,.
Pass-through grant payments
Interest expense on bonds ~,828,762) {4z632,649~ (1,747,91Q ~1.205,246)
Net non-operating revenues (expenses) (2,455,870) (3,748,825) (1,370,261) !667,997)
Income (loss) before contributions and transfers 4,040,588 5,987,818 2,498,058 (1,786,548) c
Capital contributions 33,306 1,814,011 2,374,233
Operating transfers in 25,000 147,802 5,000,000 306,756
Operating transfers out ~1,103,682) (4,536,812} (215041867)
Change in net assets before special item 2,995,207 3,412,819 7;367,424 (1,479,792)
Termination of interest rate swap (6,637,093} c
Change in net assets after special item 2,995,207 (3,224,274) 7,367,424 (1,479,792)
Total net assets -beginning 90,256,903 147,949,760 72,027,312 2,793,610
Total net assets-ending $ 93,252,110 $ 144,725,486 $ 79,394,736 $ 1,313,818
c
See accompanying Notes to Basic Financial Statements. 50
)
)
Enterprise Funds
Non·major Total Enterprise Internal Serviu
Sturm water Ellterprise Funds Funds Funds
" ~ $ 6,322,447 $ 20,951,536 $ 419,381.286 $ 38,242,434
(83101 Q {126,243~ (1,292,498}
6,239,436 20,825,293 418,088,788 38,242,434
133l535 133,535 180,580
6,2392436 20,958,828 418,222,323 381423,014
757,308 10,880,055 30,925,579 5,061,567
22,091,005
2,368,452 4,670,164 112,811
8,087,476
168,618 3,270,121 8,322,803 1,959.390
304,944,273
500,514 490,271 3,361,735
288,721 5,073,375 22,159,595 4.457,031
546!314 9,470,382 301871,172 350,833
22261,475 31,552,656 405,855,321 42,120,113
3,9771961 (10,593,828) 12,3671002 ~3,697,099)
)
1,163,013 517,347 3,520,435 716,778
8,156,015 8,156,015
417,181 (1,140,368) (79,618)
) (1,985) 925,084 2,812,188 10,448
(1,334,955) (1,334,955)
(3,200!695} (470,956~ ( 14,086,219~ ~2,307l
(2,039,667) 8,209,716 (2,072,904) 645,301
1,938,294 (2,384,112) 10,294,098 (3,051,798)
983,991 5,205,541
128,586 1,564,299 7,172,443 206,7ll
(991,066} ~9,3321457l ~18.468,889~ ~4,858,1032
1,075,814 (9,168,279) 4,203,193 (7,703,190)
(6,637,093~
1,075,814 (9,168,279) (2,433,900) (7,703,190)
19,1921832 99,930,878 432,1511295 19,243,982
$ 20,268,646 $ 90,762.599 $ 429,7171395 $ 11,5401792
51
(
c
(
(
( ,
,
/ y
(
(
(;
(
(
52
)
)
)
)
)
)
)
City of Lubbock, Texas
Reconciliation of the Statement of Revenues, Expenses, and Changes in
Fund Net Assets -Proprietary Funds
To the Statement of Activities
For the Year Ended September 30, 2005
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
$ (2,433,900)
(5,141,345)
$ (7 ,575,245)
c
City OfLubbotk, Texas
Statement of Cash Flows
Proprietary Fuuds
For tlte Year Ended September 30, ZOOS
WatT-r ....
MldlieipaiP-
U'I<L Warer Sewv "l!'!SI CWTMP Al
CASH PLOW'S FROM Ol'~T.ING ACTJVmES
RocolfUhcn-s 117,948,699 s 33,128,784 s 19,860,901 s 79)75,763
Payme111110 llllpJI!ien (149,058,292) (12,126,758) (7.292,188) (78,733,170)
P.,...nto~ (9,518,796) (5,214,701) (3,401,576) ,..
Otht:r l'tCcipts (payments) 24~5 9S.;!9S 2111892 "-
}jet wh provided (-.eel)~~ IC!Miicc 19395,866 15,8&2,720 9J:!il129 54~593
CASH FLOWS PROM HONCAPITAL AND RilLA TED
lrni.ANCJNG AC'l'IVlTIES
Tnnsttn in ftom oilier lilluD 2S,OOO 147,801 5,000,000 306,756
1nosftn-ttl 0111« fimds (1,103,611} ( 4,536,812) (2,504,867)
Shcirt-tc:rm iD1aibnd 1lonvwiDp 261,500 ( ~&an (to) oNr !\melt
C)pontiDs fi"IIUS
~ rccoiYCdl(.-l&)on ..._. (to)l&om otber r--
Net c»>l pnwidcd (aoed) by oadCIIpilal
and~~ ICiiYicia (1,078,68:!l ,4,127,510} ~495,133 306,7$6
CASH fLOWS JlltOM CAPITAL AM) RELA.nD
FINANCING ACTMTIIS
PIII'CUaofcapjcal-(9,790,539) (Z8.861,6S4) (6.JS7,716)
Sale of Clpicll-2,.325,)41 1,447)15 514,740
Recei~D) on lfttes (20,204, 792) (239,579) 762,498
Principal !)lid calxwb IDOl w.cr dtbt (3,170,000) (72,062.S I 9) (11,556,800) (1,009,562)
Bood~-""id (940,181) (2,897,423) (412,81S)
lna~U~ paid 0r.1 n:wD1IC boods (2,194, 143) (1, 8S3 ,060) (638,746)
1-nt paid on bonds ad oilier debt (2,493,668) ( 1,621 ,336)
I~ ofrm:aue, O.O.Ixlodl, Pdcapital14a.!oa 27,055,869 92,461,132 15,444,730
( ~r.cilliy~llllp!ll
TCI"IIIiMtion ofic~a"e$~,..._ S1I'&JI (6,637,093)
c-bwed capital 33 306 1,153,397 2,003,398
Nee cash pro'tided (used) lbr e.pital_, Nt.!ed
"-m& ~witits p,4&5,139l {19,743,673l a,.025,438} (88~810}
CASH fLOWS FROM LWI:STJNG ACTIVJnES
Prt>C><Itld:s &ora sales lftd 111~rics of..,_ 4,S6S,426 1,401,002
~ol'a.--(6,S38,009) (767,714) (7,412,574) '-lll1aal anic1p on c:uh 11\d imesbtl..u 339,520 806,398 16.3322 21,811
Net .-11 prii'Yide4 by (ulcd fOr) invutias ICiivitics !1 ,683,063) 1,439,616 {7.a19dS2} 21 811
Net iD=ac (decreue);, eMil
IN!casboqWvalenu 9,148,977 (6,548,777) '2,599,472 {14,650)
C.ab ... d wb oquival•nts • bcsionina or~ 8,069,439 19,534,963 4,548,023 1,678,113
Cash &Dd call CC~IIivale~~~a-Clld of~ s 17~18!416 $ 12,986,186 s 714749S s t166§1s23
,
'-._,.iiU.Ii011 of epe..ali~c ~o ....... (lou) eo 11tl _._
prorilltil (URCI) by •per•lilo& adMriel:
Op.nliDs in-(lose) s 6,496,458 $ 9,736,643 $ 3,86S,319 s (1,118,SSI)
M.;u-s 10 ,_jje opcnlina u..-. (la.o)
co oe1 cash providocl (Uied) by ...OoslldM!its:
Dcpncillioa 1M. ~lion 9,192,618 5,950,415 5,096,596 614,787
Oilier inc:ocM c...-) 24,2SS 95,393 211,893
Clwote in cumolf -c. ond liobili1ia: ,..
\.. Accouats naivable {1,810,927) (178,002) 31,471 (.S.,S02,549)
lnvmtory (222,528) (45,323)
Prcp.W exptriU$
0\lc ftom other eovcmmenll 11.299,440 (14,363)
Accow>ts payeble (7 ,706,598) 152,520 140,196 6,133,238
Other--*~ 288,471 5,920 (35,237) 4\S,668
Clls1olner deposils 1,299,0U 4,640
rn..._ (clecrc:m)illco,.~wl ~ 535.593 174815 65192 ,.
Net_. P!">vidocl (used) lly ope...n. .Wviti .. s 19.;!95,866 s 15,882.718 $ 9,379,030 s 542J93 \,.
S.pp .. _al -~~ ll-l•f0naetl011:
Nontah capilli! impro~omenu ond Oilier c._.,. $ s 660,614 $ 370,834 s
Soc ~Nolc.s 10 Basic Fdi.IDCial S-1111.
c
54
b!!!l!riet .i111Dcla
Odlcr Ne!IIINI)or llntrul
) Eti!UpriM 8u'lllu
SIIWIIIWIIM J'llllds Tomh Pamis
s 6,288,501 $ 21,001,046 s 337,S03,694 $ 38,389,571
(169,004) (ll,S03,229) (258,882,641) (36,750,900)
(7'28,181) (10,651,579) (29,514,833) (5,061,388)
) ~1.981~ 11414.704 1,744,265 111892
S,3&9,33S 260,942 S0.,8S().,48S {3,410,815)
128,586 t,S64,m 7,172,443 1S1,638
(991,066) (9.,332,451) (18,468,8&9) (4,809,030)
4,500,000 143,867 4,905,367 (13,402)
(5,367)
5,629,310 5,629,370
110231706 1,023.706
M31.S'JJJ (971,215) 261,997 (41670,161)
(9,086,984) (6,7n,734) (60,669,737) (38,884)
8,920 1,106,740 5,402,956 194,264
(19,6tU,873)
(12,101,350) (3,714,091) (104,214,322)
{8S1,393) 223,181 (4,878,631)
{),200..696) (7,886,64S)
(4S2,390) (4,s67 ,394)
1),522,003 S,641,811 152,125,545
1,191,690 1,191,690
(6,637,093)
983~1 411741092
{13,709,500) (11791,852) (45,641,412) 155,380
) 1)60..757 4,532,944 11,860,129 1,010,1&5
(4,431,913} (307,309) (19,507,519) (814,206)
1.1761796 545976 l.osJ.m 7431044
!11894~60} 417111611 {4.5931567) 6.tm.623
(6,571,005) 2,269,486 811,503 (925,983)
$
2313331545
16.756SQ s 10,817.091
13,086,577
" "
s 6719811234
68,858,737 s 5,358,699
4,4321716
s 3,977,961 $ (10,593,828) $ 12,367,00.2 s (3,697,099)
546,314 9,410,382 30,871,172 350,833
(1,984) 1,342,264 1,671,&21 Jl,892
49,065 42,217 (1,363,125) (33,44S)
(140,888) (<408,739) (S,996)
(432,256) )0,852,821
825,706 (255,606) (710.544) (106,302)
{l8,541) 6S8,399 1,314,680 31,299
6SO !.304.374
10811 169607 956618 31993 s 5,389,332 s 260.941 s 50,850,480 s (3,410,825)
$ s $ 1,031,448 s
55
City of Lubbock, Texas
Statement of Fiduciary Net Assets
Fiduciary Funds
September 30, 2005
ASSETS
Cash and cash equivalents
Investments, at fair value:
Total Assets
LIABfi..mES
Accounts payable
Total Liabilities
See accompanying Notes to Basic Financial Statements.
c
(
Agenc:y ,.
' Fund
$ 1,099
13
$ 1,172 c
$ 1,172
$ 1,172
(
(
(
c
(
(
(
56
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. Su:MMARY OF SIGNDi'ICANT 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 (GAAP) as applied to
govenunent units, including specialized industry practices as specified in the American Institute of Certified
Public Accountants audit and accounting guide titled State and Local Governments. The Governmental
Accounting Standards Board (GASB) is the acJmowledged standard-setting body for establishing
governmental accounting and financial reporting principles. With respect to proprietary activities related to
business-type activities and enterprise funds, including component units, the City applies aU 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 before 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 mwtieipal corporation governed by a Council-Manager form of government. The City,
incorporated in 1909, is Located In the northwestern pan of the state. The City currently occupies a land area
of 119.1 square miles and serves a population exceeding 211,000. The City is empowered to levy a property
tax 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 periodicaUy 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 stonnwater 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 financia1ly 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, "Defming the F1nancial 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
• 'fl:lere 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 are such that exclusion could cause the City's
BFS to be misleading or incomplete.
57
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A. REPORTING ENTITY (Continued)
BLENDED COMPONENT UNITS
The Urban Renewal A&ency (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 foiD\ed to provide urban
renewal services including rehabilitation of housing, acquisition of housing, 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. AU powers to govern the URA are held by the City
Council. There are no separate financial statements available for the URA.
West Texas Municipal Power A"eney (WTMPA) is a legally separate municipal corporation, a political
subdivision of Texas, and body politic and corporate, formed in 19'83, governed by a Board of eight directors
who serve without compensation. WTMP A has no employees and instead contracts with the City for general
operations. WTMP A 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. WT.MPA 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 affi.nnative vote of the "majority in interest" is
required to approve the operating budget, approve capital projects, approve debt issuance, and approve any
amendments to WTMP A 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 througb
the City.
DISCRETELY PRESENTED COMPONENT UNITS
The financial data for the Component Units are shown in the Government-Wide Financial Statements. They
are reported in a separate column to emphasize that they are legally separate from the City. The following
Component Units are included in the reporting entity because the primary govenunent is financially
accountable, is able to impose its will on the organization, or can significantly influence operations and/or
activities ofthe organization.
Civic: Lubbock, Inc:. is a legally separale entity that was organized to foster and promote the presentation of
wholesome educational, cultural, and entertainment 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 1501 6tb Street, Lubbock, Texas.
Market Lnbboek Economic Development Corporation, dba Market Lubbock, is a legally separate entity
that was fonned 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.
58
c
(
(
c
c
c
(
(
(
(
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contillued)
A. REPORTING ENTITY (Continued)
Lubbock Economic Development AUiance is a legally separate entity that was fanned on June l, 2004 by
the City of Lubbock to create, manage and supervise programs and activities to promote, assist, and enhance
economic development within and around the City. The City Council appoints the five (5}-member board and
its operations are funded primarily through budgeted allocations of the City's sales and use taxes. Separate
financial statements may be obtained from Market Lubbock at 130 I Broadway, Suite 200, Lubbock, Texas.
RELATED ORGANIZATIONS
The City Council is responsible for appointing the members of the boards of other organizations 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 financial benefit or burden relationship.
Bonds issued by these organizations do not constitute indebtedness of the City. The following Related
Organizatioos are 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 Finance Corporation, Ine. was formed pursuant to the Texas Housing Finance
Corporation Act, to fmance the cost of decent. safe, and affordable residential housing. The Mayor appoints
the seven-member board.
North and East Lubbock Community Development Corporation (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 wor.k 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 empowennent 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 wm on the
entity and there is no financial benefit/burden relationship.
The Lubbock Education Facilities Authority, lne. is a non-profit corporation and instrumentality of the
City and was created pursuant to the Higber 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 faciUties, 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 tbe City's firefighters. The Mayor's designee, the Cash and Debt Manager, three firefighters elected by
members of the Pension Trust Fund and two at-large members elected by the Board, govern its affairs. It is
funded by contributions from the faefigbters and City matching contributions. As provided by enabling
legislation, the City's responsibility to the Pension Trust Fund is limited to matching monthly con1ributions
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 operations. Their separate audited financial statements may be obtained through the
City.
59
City of Lubbo(!k, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
The City's financial statements are prepared using the rep<>rting model specified in GASB Statement No. 34 -
Basic Financial Statements -and Management's Discussion and Analysis -for State and Local
Governments) GASB Statement No. 31 -Basic Financial Statements -and Management's Discussion and
Analysis-For StaLe and Local Governments -Omnibus, GASB Statement No. 38 -Certain Financial
Statement Note Disclos~~res, and GASB Interpretation No. 6 -Recognition and Measurement of Certain
Liabilities and Expenditures in GQVernmental Fund Financial Statements. As specified by Statement No. 34,
the Basic Financial Statements (BFS) include both Government-Wide and Fund Financial Statements. In FY
2005 the City adopted the provisions of GASB Statement No. 40 -Deposit and Investment Rislc Disclosures.
This new standard revises the existing requirements regarding disclosw-e of custodial credit risk and
estabUshes requirements for disclosures regarding credit risk, concentration of credit risk, interest rate risk
and foreign currency risk. Adoption ofGASB Statement No. 40 had no effect on net assets and change in net
assets in the prior or clllTent year.
The Government-Wide Financial Statements (GWFS) (i.e., the Statement of Net Assets and the Statement of
Activities) report information on an of the non-fiduciary activities 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 based on the
predominant users of the services. Governmental activities, which arc primarily supported by taxes and
intergoverwnentaJ revenues, are reported separately from business-type activities, which rely to a significant
extent on fees and charges for support. AJl 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 weD 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 rep<>rts 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 ordec of their relative liquidity. Net assets are required to be
displayed in three components: (1) 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 use by either: (1) 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. Reservations or designations of net
assets imposed by the City, whether by administrative policy or legislative actions of the City Council that do
not otherwise meet the definition of restricted net assets, are considered unrestricted in the GWFS.
The Government-Wide Statement of Activities demonstrates the degree to which the direct expenses for a
given function or segment is offset by program revenues. Direct expenses are those that are clearly
identifiable with a specific function or segment. Program revenues include, (1) 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 genera] revenues. The general revenues support the net costs of the
functions and segments not covered by program revenues.
60
c
(
(
(
(
(
(
(
(
)
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued)
Also part of the BFS are l"und 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. 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. However, it also gives governments the option of
displaying other funds as major funds. The City can eJect 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 coltm111S in the FFS. Other non-major funds are combined in a single column
in the appropriate FFS.
C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT
PRESENTATION .
Fund Financial Statements
The GWFS are reported using the economic resow-ces measurement focus and the accrual basis of
accountin& 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 are re(orded when earned and expenses are recorded when a
liability is incurred, regardless of the timing of related eash flows. Property taxes are re(ognized as revenues
in the year for which they are levied. Grants and similar items are recognized 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 WTMP A representing transactions between WTMP A 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 the traditional basis of accounting for governmental funds. This
presentation is necessary, (1) to demonstrate legal and covenant compliance> (2) to demonstrate the sources
and uses of liquid resources, and (3) to demonstrate how the City's actual revenues and expenditures confonn
to the annual budget. Revenues are 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 cUITent fiscal period, with the exception of
sales taxes which are considered to be available if they are coUe(ted 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 marured. Because the governmental FFS are presented on a different basis of accounting than the
GWFS, reconciliation is provided inunediately following each fund statement. These reconciliations explain
the adjustments necessary to convert the FFS into the governmental activities column of the GWFS.
61
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING. AND FINANCIAL STATEMENT
PRESENTATION (Continued}
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 one major governmental fund:
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.
Enterprise Funds are used to account for operations: (1) 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 determination 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 Fond accounts for tbe 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 accoWits for the activities of the City's sanitary sewer system.
The West Texas Municipal Power Agency (WTMP A) Fund accounts for the activities of power
generation and power brokering to member cities. Member cities include Lubbock with 88.5%
ownership, and TuJia, Brownfield, and Floydada comprising the remaining 11.5% ownership.
The Stormwater Fund accounts for the activities of the stonnwater utility, which provides stonnwater
drainage for the City.
62
(
(
c
(
c
c
t'
(
(
<
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT
PRESENTATION (Continued)
The City reports tbe 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 legaJly restricted to expenditures for specified
purposes.
The Debt Servke Fund is used to account for the accumulation of resources for, and the payment of,
general Jong-tenn obligation principal and interest (other than debt service payments made by proprietary
funds).
Capital Projeds 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).
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
defmition are reported as non-operating revenues and expenses.
D.
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 Fun~
Central Warehouse Fund, Print Shop Fund, Self-Insurance Fund, 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.
BUDGETARY ACCOUNTING
The City Manager submits a proposed operating budget and capita] improvement plan to the City Council
annuaUy for the upcoming fiscal year. Public hearings are conducted to obtain taxpayer comments> and the
budget is legally enacted through passage of an ordinance by 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 budget during the fiscal year. The operating
budget is adopted on a basis consistent with GAAP for the General Fund. Budgetary control is maintained at
the department level in the following expenditure categories: personnel services, supplies, other charges, and
63
City ofLubboek, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE L SUMMARY OF SIGNIF1CANT ACCOUNTING POLICIES (Continued)
D. BUDGETARY ACCOUNTING (Continued)
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) whlch, 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, encmnbrances for goods and services that have not been received are canceled.
At the beginning of the next fiscal year, management reviews all open encumbrances. During the budget
revision process, encumbrances may be re-established. On October 1, 2005, the General Fund had no
significant amounts of open encumbrances.
F. ASSETS, LIABILITIES AND FUND BALANCE/NET ASSETS
Equity in 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
equity in the pooled account. The City's investments are stated at fair value, whlcb is based on quoted market
prices as of the valuation date.
Casb Equivalents -Cash equivalents are deimed 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.
Investments -Investments include securities in the Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation, and Federal National Mortgage Association. Restricted investments include cash
equivalents and investments that have been restricted for bond financed capital projects and money restricted
for claims in the Risk and Health Insurance Funds.
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 I on those assessed values and the taxes are due on receipt oftbe tax bill. On the following January
1, 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 I. Therefore, at fiscal year end all property
taxes receivable are delinquent, but are secured by a tax Jien.
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 45 days. The City a11ocates 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.
64
(
r ....
c
(
(
(
(
"' ...
)
...
J
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
F. ASSETS. LIABILITIES. AND FUND BALANCE/NET ASSETS (Continued)
Enterpr.lse 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 re:flected in the
accounts receivable balances of each fund. Amounts billed are reflected as accounts receivable net of an
allowance for uncoJlectible accounts.
Inventories -Inventories consist of expendable supplies held for conswnption. Inventories are valued at cost
using the average cost method of valuation, and are accounted for using the conswnption 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
and debt; consequently, net assets have been restricted for these amounts. The excess of other restricted
assets over related liabilities are included as restticted net assets for bond proceeds, bond indentures
requirements, and passenger facility charges.
Mortgage Reeeivables -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 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 $5,000 and an estimated useful life in excess of one year. These capital
assets are reported in the GWFS and the proprietary funds. Capital assets are recorded at cost or estimated
historical cost if purchased or constructed. Donated assets are 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
normal maintenance 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 Jives as follows:
Infras~turtl!mprovements
Buildings
Equipment
Water rights
10..50 years
l5-50years
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 (FASB) Statement No. 34
Capitalization of Interest Cost and F ASB Statement No. 62 Capitalization of Interest Costs. The City
capitalized interest of approximately $540,000 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.
65
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
F. ASSETS, UABILITIES, AND FUND BALANCE/NET ASSETS (Continued)
Use of Estimates -The preparation of financial statements in conformity 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.
G. REVENJ1ES. 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
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 reported in the Genera] Fund or the Debt Service Fund.
Sales Tax Revenue for tbe City results from an allocation of 1.5% of the total sales tax levy of 8.25%, 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 ofthe next month.
Grant Reveoue from federal and state grants is recognized as revenue as soon as aJI eligibility requirements
have been met. The availability period for grants is considered to be one year.
Interfund Transactions are accounted for as revenues, expenditures, expenses, or other fin~cing 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 J-11. 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 leave after one year of employment. Civil Service
Personnel (Firefighters) are paid for up to 90 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.
66
I "
(
(
c
(
c
(
{
(
(
)
)
' ;;1
)
City of Lubbock, Texas
Notes to Basic Financial Statemeots
September 30, 2005
NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
G. REVENUES, EXPENSES AND EXPENDITURES (Continued)
Post Employment Benefits for retirees of the City of Lubbock include the option to purchase health and life
insurance benefits at their own expense. However, employees that retire with 15 years of service or Civil
Service employees that retire who have a balance in excess of 90 days will be able to elect to continue
receiving medical coverage in fu)) 30-day periods for the term of the balance of their sick leave. Amounts to
cover premiwns and administrative costs, with an incremental charge for reserve ftmding. are determined by
the City's health care administrator. Employer contributions are funded on a pay-as-you-go basis and
approximated $1.4 million for fiscal 2005. These contributions are included in the amount of insurance
expense reflected in the financial activity reported in the Health Insurance Internal Service Fund.
NOTE D. STEWARDSBJP, COMPLIANCE AND ACCOUNTABILITY
A. RESTRICTED NET ASSETS
Restricted net assets are only used for their intended purpose. For projects funded by tax exempt debt
proceeds, the debt proceeds are used fll'St, then unrestricted resources are used.
B. NET ASSET/FUND BALANCE DEFICIT
The deficit of $185,403 in the Pennanent Street Maintenance Capital Projects Fund is due to timing differences of
incurring capital outlay expenditures for an internally financed projeQ. When remaining capital projects are complete in
the Permanent Street Maintenance Capital Projects Fund, a transfer will be recommended to cover the deficit. No otber
funds of the City had deficits in either total fund balances or total net assets.
NOTE ill. DETAH.. NOTES ON ALL ACTMTIES AND FUNDS
A. CASH AND INVESTMENTS
Deposits
Custodial credit risk is the risk that in the event of a bank failure, a government's deposits may not be
returned to it. The City's deposit policy for custodial credit risk requires compliance with the provisions of
state Jaw ..
State law requires collateraJization of all deposits with federal depository insurance, eligible securities, or a
surety bond having an aggregate value at least equal to the amount of the deposits. The City's Investment
Policy requires the minimum collateral level to be 102% of market value of principal and accrued interest.
Citibus and American State Bank are not in compliance with the City's investment policyt the Public Funds
Inve,stment Act and the Public Funds Collateral Act.
At September 30, 2005, $1,973,078 of bank balances of $2,373,078 was exposed to custodial credit risk as
foJJows:
Uninsured and uncollateralized
Uninsured and collateral held by pledging financial institution
Uninsured and ooJlateraJ held by pledging financial institution's trust department or agent in other
than the City's name
67
$ 361,377
1,611,701
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
A. CASH AND INVESTMENTS {Continued)
lnvesbnents
At September 30, 2005, the City bad the following investments and maturities:
September 30, ZOOS
Maturities iu Years
Less 1-5 Tfi!e Fair Value Than 1
Repurchase agreements • $ 1,382,123 $ 1,382,123 $
Federal Home Loan Banks (FHLB) 13,836,400 7,931,400 S,90S,OOO
Federal Home Loan Mortgage
Corporation (FHLMC) 1,975,600 1,975,600
Federal National Mortgage
Association (FNMA) 7,917,000 7,917,000
Money market mutual funds •• 98,931,041 98,931,041
State Investment Pools •• lQI,QZS,OO;l IQI,QZM2l
S22S,ll1.167 s 212 21~ I~Z $5.905 000
•considered cash equivalent for financial reporting. •• Money market mutual funds aod State Investment Pools are
considered cash equivalents for financial reporting, unless restricted for bond fmanced capital projects and chums for
Risk and Health Insurance Funds.
Interest Rate Risk -As a means of limiting its exposure to fair value losses arising from rising interest rates,
the City's investment policy limits investments to those that can be held to maturity and by limiting final
maturity to no more than five (5) years. The money market mutual funds and investment pools are presented
as an investment with a maturity of less than one year because they are redeemable in full immediately.
Credit Risk -Credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its
obligations. The City's policy allows investment in direct obligations of and other obligations guaranteed as
to principal of the U.S. Treasury and U.S. agencies and instrumentalities with the exception of mortgage
backed securities. It allows obligations of investment in the State of Texas or its agencies and obligations of
states, agencies, counties, cities, and other political subdivisions rated not less than A or its equivalent. It may
also invest in fully collateralized repurchase agreements, fully collateralized certificates of deposit,
commercial paper and bank acceptances with a stated matwity of270 days or fewer from the date of issuance,
AAA-rated, no-load money market mutual funds regulated by the Securities and Exchange Commission, and
AAA-rated, constant dollar AAA-rated investments pools authorized by the City Council. At September 30,
2005, Standard & Poor's rated the investment pools AAAm and Moody's rated the money mar.ket mutual
funds Aaaa. The senior unsecured debt for investments in FNM.A and FHLMC are rated AAA by Standard &
Poor's and Moody's.
Custodial Credit Risk-For an investment, custodial credit risk is the risk that, in the event of the failure of the
counterparty, the City will not be able to recover the value of its investment or collateral securities that are in
the possession of an outside party. The City required that deposits and repurchase agreements be held in an
institution that has a minimum collateral level of I 02% of the market value. FlaB, FHLMC, and FNMA
investments are held in the City's name in third party safekeeping by a Federal Reserve member fmancial
instimtion designated as a City depository. The City shall maintain a list of authorized broker/dealers and
financial institutions, which are approved by the Audit Committee for investment purposes.
68
(
(
(
<
(
(
(
(
)
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE ill. DETA.ll.. NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
A. CASH AND INVESTMENTS (Continued)
Concentration of Credit Risk -The City plaoes limits on the amount that may be invested in any one issuer
with the exoeption of United States Treaswy obligations. At September 30, 2005, the City)s investments
constituted the foJiowing percentages of total investments: repurchase agreements -0.6%, FHLMC • 0.9%,
and FNMA -3.5%. ·
Foreign CWTency Risk -This risk relates to adverse affects on the fair value of an invesunent from changes in
exchange rates. The City has no foreign currency risk.
B. INTERFUND TRANSACTIONS
Interfund 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 are repaid within the following fiscal year.
Inte.rfund balances, specifically advances to and from other funds, are longer-tenn loans to cover Council
directed internal financing of certain projects. At September 30, 2005 the City bas nearly $22.6 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 $6,076,822, are included in the government-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):
lnterfund Reeeivables (Thousands)
Governmental Funds Proprietary Funds
lnterfund Payables (Thousands) Non-Major Non-Major Internal
General Government WTMPA Enterprise Service Totals
Governmental Funds:
Non-Major Governmental $ 1,738 $ 4,202 $ $ 52 $ 5,992
Proprietary Funds:
Electric 11,299 11,299
Stormwater 4,500 4,500
Non-Major Enterprise 850 s 855
Totals $ 7,088 $ 4,202 $ ll,299 s 52 $ 5 $ 22,646
Net transfers of$15,468,765 from business-type activities to governmental activities, up $5.8 million from
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 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 interfuna transfers are reflected
in the fund financial statements (all amounts in thousands):
69
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Cootioued)
B. INTERE'UND TRANSACTIONS <Continued)
lnterfund Traasfers Oat: ~ousands)
Governmental
Funds Pro~rietary Fuuds
Nonmajor Storm-Non major lnteral
Interlund Transfers General Gov. Electric Water Sewer Water Enterprise SeiVice Totals
In: (Tbou..ands)
Governmental Funds:
General Fund $ -$ 872 $ 797 $ 4,537 $ 2,505 $ 991 $ 2,865 $ 3,998 $ 16,565
Nonmajor Governmental 3,053 1,016 1,219 835 6,123
Proprietary Fnnds;
Electric 25 25
Water 147 147
Sewer 5,000 5,000
Stormwaler 129 129
WTMPA 307 307
Nonmajor En1trprise 849 664 51 1...564
lntemal Service Funds 10 197 207
Total s 3,912 $ 2,828 s 1,104 $ 4,537 s 2,505 s 991 $ 9,332 $ 4,858 $ 30,067
C. DEFERRED CHARGES
The total deferred charges of $3,211, II 0 in the LP&L Enterprise Fund represents an advertising contract with
the United Spirit Arena. The advertising (and amortization) began with the opening of the sports arena in
fiscal year 2000 and wm continue for 30 years.
D. CAPlTAL ASSETS
Capital asset activity for the year ended September 30, 2005, was as follows:
70
(
,. ...
I' ....
(
(
(
(
(
)
)
'\
"
)
...
'
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAll. NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
D. CAPITAL ASSETS (Continued)
Primary Government:
Governmental Activities
Beginning Ending
Balance Increases Decrease$ Balances
Capital Assets Not Depreciated:
Land $ 8,608,249 $ 496,946 $ 154,095 $ 8,951,100
Construction in Progress 43,472,022 15,626,731 21,305,325 37,793,428
Total Capital Assets Not Depreciated 52,080,271 16,123,677 21,459,420 46,744,528
Capital Assets Depreciated:
Buildings 51,454;278 6,181,112 29,345 57,606,045
Improvements Other than Buildings 129,651,115 11,345,076 4,597,201 136,398,990
Machinery and Equipment 52,954,673 9,851,376 2,563,173 60,242,876
TotaJ Capital Assets Depreciated 234,060,066 27,377,564 7,189,719 254,247,911
Less Accumulated Depreciation;
Buildings 27,660,190 1,811,465 11,782 29,459,873
Improvements Other than Buildings 92,468,340 4,195,013 4,159,593 92,503,760
Machinery and Equipment 36,997,929 5,917,503 2,500,777 40,414,655
Total Accumulated Depreciation 157,126,459 11,923,981 6,672,152 162,378,288
Total Capital Assets Depreciated, Net 76,933,607 15,453,583 517,567 91,869,623
Governmental Activities Capital Assets, Net $129,013,878 $ 31,577,260 $ 21,976,987 $ 138,614,151
Depreciation expense was charged to functions/programs of the govermnenta1 activities as follows:
Governmental activities:
General Government
Financial Services
Human Resources
Administration/Community Services
Fire
Poli~
Streets
Electric
Internal Service Funds
Total depreciation expense-governmental activities
Transfer in to accumulated depreciation ~ governmental activities
Increase in accumulated depreciation ·governmental activities
71
$ 357,216
5;219
4,636
4,284,580
985,651
2,199,601
3,514,289
244,734
107,670
11,703,662
220,319
$ 11,923,981
City of Lubbock, Te:s:as
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
D. CAflT AL ASSETS (Continued}
Business-Type Activities
Beginning Ending
BalRnte Increases Decreases Balances
Capibl Assets Not Depreciated:
Land $ 31,676,155 $ 361,678 $. 89,122 $ 31,948,711
Construction in Progress 113,961,371 33,298,426 18,827,618 128,432,179
Total Capital Assets Not Depreciated 145,637,526 33,660,104 18,916,740 160,380,890
Capital Assets Depreciated:
Buildings 96,928,778 114,152 15,784 97,027,146
Improvements Other than Buildings 574,358,968 35,064,830 4,011,628 605,412,170
Machinery and Equipment 132,757,563 9,450,490 3,537,365 138,670,688
Total Capital Assets Depreciated 804,045,309 44,629,472 7,564,777 841,110,004
Less Accumulated Depretiltion:
Buildings 28,627,056 2,459,327 10,691 31,075,692
Improvements Other than Buildings 243,517,538 16,291,923 1,790,277 258,019,184
Machinery and Equipment 65,835,597 12,083,156 2,966,326 74,952,427
Total Accumulated Depreciation 337,980,191 30,834,406 4,767,294 364,047,303
Tota1 Capital Assets Depreciated, Net 466,065,118 13,795,066 2,797,483 477,062,701
Business-Type Activities Capital Assets, Net $611,702,644 $ 47,455,170 $ 21,714,223 $ 637,443,591
Depreciation expense was charged to functions/programs of the business-type activities as follows:
Business-Type Activities:
Electric
Water
Sewer
Stonnwater
Solid Waste
Airport
Transit
Internal Service Funds
Total depreciation expense-business-type activities
Transfer in to accumulated deprecialion-business-type activities
Increase in accumulated depreciation-business-type activities
72
$ 9,059,285
5,950,415
5,096,596
546,314
4,930,067
3,211,033
1,329,282
243,163
30,366,215
468,191
$ 30,834,406
(
c
(
(
(
(
(
(
(
,
'
)
)
)
)
)
City of Lubbock, Texas
Notes to Basic Finan(ial Statements
September 30, 2005
NOTE m. DETAR. NOTES ON ALL ACTIVITIES AND FUNDS-(Contfnued)
D. CAPITAL ASSETS (Continued)
Construction Commitments
The City bad many construction projects in progress at fiscal year end. The Parks Department continues to
work on updating irrigation and park lighting. A large street project involving Milwaukee Avenue, 34lh Street
to 98111 Street is under way. The project falls under the Gateway Street Projects Fund.
Electric projects included upgrades to their infrastructure. Water projects included expanding water lines to
new areas of town to increase water availability. Sewer projects included construction of sewer lines ahead
of the Marsha Sharp Freeway. Solid Waste projects include the construction and site development for a new
recycling drop off center and the upgrade of existing sites. Work on Airport taxiways comprises the majority
of the Airport's spent to date nwnber. Two of the City's largest construction projects are related to
Stormwater. The first project provides for the construction of an outfall storm sewer from Clapp Park to
YeJlowhouse 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
Projects Commitments Spent.to-Date Commitiments
Public Safety $ 1,801,772 $ 184,051 $ 1,617,721
Park Improvements 20,200,528 7,126,221 13,074,307
Street Improvements 26,171,525 15,511,742 10,659,783
General Capital Projects 1,093,426 114,198 979,228
General Facilities Improvements 5,693,276 4,352,183 1,341,093
Tax Increment Fund Capital Projects 15,023,670 2,665,317 12,358,353
Gateway Street Projects 9,000,000 6,405,700 2,594,300
Electric 17,417,727 12,248,740 5,168,987
Water 61,381,231 50,610,861 10,770,370
Sewer 9,855,482 6,893,671 2,961,811
Solid Waste 3,668,680 1,296,565 2,372,115
Airport 29,667,471 4,163,256 24,904,215
Stonnwater 75,353,518 51,964,009 23,389,509
Internal Service Fund 1,450,000 1,100,582 349,418
Total $ 277,778,306 $ 165,237,096 $ 112,541,210
73
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAR.. NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
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 foJiows:
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 pJan in the state-wide TMRS, one of 80 1
administered by TMRS, an agent multiple-employer public employee retirement system.
Benefits depend upon the sum of the employee's contributions to the plan, with interest. and the City-financed
monetary credits, with interest At the date the plan began, the City granted monetary credits for service
rendered before the plan began of a theoretical amount equal to two times what would have been contributed
by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan
began are a percent (100%, 1500/o, or 2000/o) of the employee's accumulated contributions. In addition, the
City can grant, as often as annually, another type of monetary credit referred to as an updated service credit
which is a theoretical amount which, when added to the employee's accumulated contributions and the
monetary credits for service since the plan began, would be the total monetary credits and employee
contributions accumulated with interest if the current employee contribution rate and City matching percent
had always been in existence and if the employee's salary had always been the average of his salary in the last
three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of
the employee's accumulated contributions with interest and the employer-financed monetary credits with
interest were used to purchase an annuity.
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. 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.
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 annuaUy 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 nonnal 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 nonnal 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
(over:funded) 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
74
c
c
<
,.
I.
(
(
<
c
c
)
)
)
)
)
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAD... NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
E. RETIREMENT PLANS (Continued)
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, 2004 valuation is effective for rates beginning
January 2006).
Actuarial Assumptions
The actuarial assumptions for the December 31, 2004 valuations are as follows:
Actuarial cost method: Unit credit
Amortization method:
Remaining amortization period:
Level percent of payroll
25 years-open period
Amortized cost Asset valuation method:
Investtnent rate of return:
Projected salary increases:
Includes inflation at;
Cost of Living adjusbnents:
As of
September 30
2003
2004
2005
7%
None
3.5%
None
Annual Pension
Cost
$ 8,803,613
8,708,867
9,933,373
Contribution
Made
8,803,613
8,708,867
9,933,373
TEXAS MUNICIPAL RETIREMENT SYSTEM
THREE-YEAR HISTORICAL SCHEDULE OF ACTUARIAL LIABlLmES
AND FUNDING PROGRESS REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
As of Actuarial Value of
December 31 Assets
2002 $ J 81, 191,0!2
2003 182,884,183
2004 186,398,545
Asof Annual Covered
December31 Payroll
2002 $ 60,285,077
2003 57,577,743
2004 61,931,003
Actuarial
Accrued
Liability
228,372,843
239,809,434
248,432,807
UAALasa%
Of Covered
Payroll
78.3%
98.9%
100.2%
Percentage
Funded
79.3%
76.3%
75.0%
Unfunded
Aduarial
Accrued
Liability
(UAAL)
47,181,831
56,925,251
62,034,262
The City of Lubbock is one of 801 municipalities having the benefit plan administered by TMRS. Each of
the municipalities has an annual, individual actuarial valuation performed. AU assumptions for the December
31, 2004 valuations are contained in the 2004 TMRS Comprehensive AMual Financial Report, a copy of
which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153.
75
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
E. RETm.EMENT 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.
This pension fund is a trust fund 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 are covered by
theLFRRF.
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 I, 2003 provides a monthly nonnal
service retirement benefit, payable in a Joint and Two-Thirds to Spouse fonn of annuity, equal to 68.92% of
final 48-montb average salary plus $335.05 per month for each year of service in excess of20 years.
A frrefighter 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 tennination of employment Firefighters must
be at least 51 years of age with 21 years of service at the selected "RETRO DROP benefit calcu!ation date"
(which is prior to date of employment tennination). Early RETRO DROP with benefit reductions is available
at age 50 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 fonn 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 TI..FFRA. TI..FFRA provides the authority and
procedure to change the amount of contributions detennined as a percentage of pay by each firefighter and a
percentage of payroll by the City.
State Jaw requires that each plan of benefits adopted by LFRRF be approved by an eligible actuary. Tbe
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
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 Wlfunded actuarial liability, if any. is determined using a level
percentage ofpayro11 method.
The costs ofadrnlltistering the plan are financed by LFRRF.
76
c
c
(
(
(
(
(
(
' \
)
)
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m DETAD.. NOTES ON ALL ACTMTIES AND FUNDS (Continued)
E. RETIREMENT PLANS (Continued)
Annual Pension Cost
For the fiscal year ended September 30, 2005, the City of Lubbock's Annual Pension Cost (APC) for the
Lubbock Fire Fund was equal to $3,016,942 as described in item 4 in the table below. Based on the results of
the December 31, 2004 actuarial valuation of the Plan Effective November 1, 2003, the most recent biennial
actuarial valuation, the Board's a~tuary 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 1, 2003, LFRRF's funding
policy requires contributions equal to 12.43% of pay by the firefighters. Contributions by the City art based
on a formula, which causes the City's contribution rate to fluctuate fiom year to year. The December 31,
2004 actuarial valuation assumes that the City's contributions will average 19% of payroll in the future.
Therefore, based on the December 31, 2004 actuarial valuation ofthe 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 1, 2005. This actuarial vaJuation satisfied the parameter& of the
Governmental Accounting Standards Board (GASB) Sta1ement No. 27. Prior to January 1, 2005, the ARC
were not actuarially determined but, based on the December 31, 2002 actuarial valuation, were equal to the
City's actual contributions in calendar year 2004. This actuarial valuation also satisfied the parameters of
GASB Statement No. 27.
The following shows the development ofthe Net Pension Obligation {NPO) as ofSeptember30, 2005:
I. Annual Required Contributions (ARC)
2. lnterest 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, 2004
8. NPO/(asset) at September 30, 2005
$ 3,028,4t)6
(71,812)
60.348
3,016,.942
(3,028,406}
(11,464)
(897,648)
($909,112)
The ARC for the period October I, 2004 through September 30, 2005 was based on the December 3 I, 2002
and the December 31, 2004 actuarial valuations. The entry age actuarial cost method was used with the
normal cost calculated as a level percentage of payro11. The actuarial value of assets was market value
smoothed by a five-year deferred recognition method, with the actuarial value not more than 11 0% or less
than 90% of the market value of assets. The actuarial assumptions included in an investment return
asswnption of 8% per year (net of expenses), projected salary increases including promotion and longevity
averaging 5.7% per year over a 30-year career, and no postretirement cost-of.living adjustments. An inflation
asswnption of 4% per year was included in the invesbnent return and salary increase assumptions. The
UAAL is amortized with the excess of the assumed total contribution rate over the nonnal cost rate. The
number of years needed to amortize the UAAL is determined using an open, level percentage of payroll
method, asswning that the payroll will increase 4% per year, and was 24.7 years as of the December 31,2002
actuarial valuation and 20.6 years as of December 31, 2004 actuarial valuation, both based on the plan
provisions effective November I, 2003.
77
City ofLubboek, Texas
Notes to Basie Financial Statements
September 30, 2005
NOTE m. DETAlL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
E. RETm.EMENT PLANS (Continued)
Further details concerning the fmanciat position of the LFRRF and the latest actuarial valuation are available
by contacting the Board of Trustees, LFRRF, City of Lubbock, P.O. Box 2000, Lubbock, Texas 794S7. A
stand·alone financial report is available by contacting the LFRRF.
Fiscal Year Ended
9/30/03
9/30/04
9/30/05
Trend Information
Annual Pension Cost
(APC)
$ 1,964,788
2,582,713
3,016,942
Percentage of APC
Contributed
111%
101
100
Analysis of Funding Progress
Net Pension Obligation
(Asset)
(882,623)
(897,648)
(909,112)
Required Supplementary Information {Unaudited)
Entry Age Unfunded
Actuarial AAL
Actuarial Aduarial Accrued (UAAL) · Annual
Valuation Value of Liability /Funding Funded Covered
Date Assets {a} {AAL}{b} excess (baa} Ratio{alb} Pa;troU{c}4
1213l/OO 1,2 $119,660,788 J 14,675,049 (4,985,739) 104.3% 12,243,913
12/31/02 1,3 111,261,775 127,850,414 16,588,639 87.0 13,521,366
12131/04 5 130,174,984 143,991,975 13,816,991 90.4 14,711,366
I. Economic and demographic asswnptions were revised.
2. Reflects changes in plan benefit provisions effective December 1, 2001.
3. Reflects changes in plan benefit provisions effective November 1, 2003.
4. The covered payroll is based on estimated annualized salaries used in the valuation.
S. Demographic assumption was revised.
F. DEFERRED COMPENSATION
UAAU
Funding
Excess as a
Percentage of
Covered
Payroll
{!b-a}tc}
(40.7)%
122.7
93.9
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, 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 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 BPS.
78
c
c
(
c
(
c
c
c
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE 10. DE TAll, NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
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 SWTounding cities. The District was created in 1953 and comprises eleven cities,
including the City of Lubbock. The budget, financing, and operations of the District are governed by a Board
of Directors selected by the governing bodies of each of the member cities, each city being entitled to one or
two members dependent upon population. At September 30, 2005, 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. The City's pro rata share of annual fixed and variable
operating and reserve assessments are recorded as an expense of obtaining swface water.
Prior to FY 1999, long-tenn 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 aJlocation of project costs was $32,905,862. During
FY 1999, bonds in the principal amount of$12,300,000 were issued to pay offtbe 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, 2005, $5,454,761 remains unamortized. The annual
principal and interest payments are included in the disclosures for other City related long-term debt. The
above cost for the rights are recorded as capita] assets and are being amortized over 85 years. The cost and
debt are recorded in the Water Enterprise Fund.
The Canadian River Municipal Authority issued a new Contract Revenue Bond, Series 2005 on April 20,
2005, in the amount of $48,125,000. The City of Lubbock shared in that issue for $17,960,000 and other
costs of $850,296, and received depreciable assets (water rights) valued at $18,810,296. These assets and
liabilities 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 tile Brazos River Basin,
issued bonds for the construction of a dam and lake f.tcilities on the South FOJk of the Double Mountain Fork
of the Brazos River. The BRA issued $16,970,000 in revenue bonds in 1989 and $39,685,000 in revenue
bonds in 1991, which were refunded in July 1995. 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 related
obligation, is accounted for in the Water Enterprise Fund.
Special Item
In order to protect against the risk of interest rate changes between March 28, 2002 and May 1, 2005, the City
entered into an interest rate swap agreement with JP Morgan Chase. The forward starting swap was fashioned
to allow the City to issue variable rate, tax-exempt bonds in a current refunding on the call date in August
2005. The variable rate bonds couJd then be swapped for a fixed rate of 5.26%.
79
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE ID. DETAIL NOTES ON ALL ACTMTIES AND FUNDS (Continued)
G. SURFACE WATER SUPPLY <Continued)
On August 15, 2005, tbe City chose to tenninate the swap and issue Tax & Waterworks Revenue Refunding
Bonds, series 2005 in the amount of$43,080,000 to retire the Brazos River Authority Bonds of 1995 in the
amount of$43,740,000. The new issue bas an average coupon rate of4.84%, payable through FY 2021.
On the date of the bond issuance and swap termination, the swap had a negative fair value of $6,612,000.
The fair value was developed by using the zero coupon method. This method calculates the future net
settlement payments required by tbe 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 cwve for hypothetical zero-coupon bonds due on the date of each future net
settlement on the swap.
While the net present value of the combined refunding and swap termination agreement resulted in an
economic break-even transaction, the swap termination and related expenses resulted in an accounting loss of
$6,637,093.
80
<.
(
(
,
<
(
<
(
(
0
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
0
NOTE m DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
H. LONG-TERM DEBT
GENERAL OBLIGATION BONDS AND CERTIFICATES OF OBLIGATION:
0
lntere~t Issue Maturity Amount Outstanding
Rate% Date Date Issued 9-30-05
5.39 JQ..Ol-93 02-15-14 3,625,000 1,64.5,000
.5.39 1()..()1-93 02-15-14 2,5.50,000 1,170,000
5.20 1()..()1-93 02-IS-14 1,470,000 225,000
0 5.14 10-01-93 02-15-14 19,215,000 2,895,000
5.07 12-15-95 02-15-16 6,505,000 325,000
S.o7 12-15-95 02-15-16 10,000,000 500,000
4.91 Ot-15-97 02-15-09 17,530,000 7,195,000
4.61 01-0J-98 02-1.5-08 1,330,000 470,000
4.71 01-01-98 02-15-18 10,260,000 3,085,000
4.36 01·15·99 02-15-14 20,835,000 18,650,000
0 4 . .58 01-15·99 02·15-19 15,355,000 3,080,000
4.77 04-01-99 02-1.5-19 6,100,000 1,220,000
4.71 04-01-99 02-1.5-19 12,300,000 8,680,000
5.31 09-15-99 02-15-20 24,800,000 4,035,000
.5.54 03-15-00 02-15-20 7,000,000 1,13.5,000
4.90 02-01-01 02--J 5-21 9,100,000 1,910,000
4.81 02-01-01 02-1.5-21 2,770,000 700,000
0 5.25 06-01-01 02-15-3 1 3.5,000,000 22,360,000
4.68 02·1.5-02 02-15·22 9,400,000 8,790,000
4.71 02-15-02 02-1.5-22 6,450,000 6.025,000
4.70 02-15-02 02-15-22 1,.54.5,000 1,440,000
4.62 07-01-02 02-15-22 2,605,000 2,345,000
3.18 07-0J-02 02-15-10 10,810,000 6,240,000
4.42 07-15-03 02-1.5-23 J 1,885,000 10,840,000
0 4.47 07-15-03 02-15-24 9,775,000 9,455,000
4.48 07-1.5-03 02-15-24 685,000 660,000
4.47 07-1.5-03 ~15-24 3,595,000 3,475,000
4.87 07-15-03 02-15-34 40,135,000 39,430,000
4.47 07-15-03 02-15-24 3,800,000 3,675,000
4.60 08-15·03 04-15·23 8,900,000 8,140,000
4.60 08-15-03 04-15-23 13,270,000 12,145,000 0 4.37 06-30-04 08-01-12 1,000,000 875,000
4.09 09-28-04 02-15·24 2,025,000 1,805,000
4.08 09-28-04 02-15-24 3,100,000 2,690,000
3.58 09-28-04 02-15-20 22,620,000 22,620,000
4.63 02-15-05 04-15-25 23,055,000 23,055,000
4.90 06-15-05 02-15-21 49,61.5,000 49,615,000
0 4.84 08-15-05 02-15-25 46,525,000 46,525,000
4.84 07-15-05 02-15-25 7,265,000 7,26.5,000
4.84 07-ts-os 02-15-21 43!080,000 43,0SO,OOO
Total $526,885,000 389,470,000(A)
0 (A) Excludes ($4,075,761) net deferred losses on advance refuodings, net bond premiums and discounts, and
bond issuance costs • ($2,209,7n) business-type and ($1,865,984) governmental. Additionally, this
amount includes $286,749,731 ofbonds used to finance enterprise fund activities.
81
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m. DETAIL NOTES ON ALL ACTMTIES AND FUNDS (Continued)
H. LONG-TERM DEBT (Continued}
u
0
At September 30, 2005, management of the City believes that it was in compliance with all fmancial bond O
covenants on outstanding general obligation bonded debt, certificates of obligation, and water revenue
bonded debt.
LP&L REVENUE BONDS
Balance
Final Amount Outstanding
Interest Rat~%} Issue Date Maturi~ Date Issued 9..30-05
3.80 to 5.50 6-15-95 4-15-08 $ 13,560,000 $ 3,150,000
4.25 to6.25 1-01-98 4-15-18 9,170,000 5,980,000
3.10to5.00 1-15-99 4-15-19 14,975,000 8.350,000
4.00 to 5.25 7-01-01 4-15-21 91200!000 7,360.000
Total $ 46,9051000 $ 24,840,000 •
• Balance outstanding excludes $374,792 of net deferred losses on advance refundin~. bond
premiums aod discounts, and bond issuance costs.
Interest Rate
5.25%
lssue Date
09-30-05
OTHER REVENUE BONDS
Final
Maturitt Date
09-30-25
Amount
bsued
17,960,000
Balance
Outstanding
9..30-0S
17,960,000
$17,960,000 $17,960,000 •
• Balance outstanding excludes ($720,463) discount and deferred losses on bonds sold or
refunded.
The annual requirements to amortize all outstanding debt of the City as of September 30,2005 are as follows:
Governmental Activities Business-Type Activities
Fiscal General Obligation Bonds General Obligatioa Bonds Reveuue Bonds
Year Principal Interest Princi~al Interest PrinciEal Interest
2006 $ 5,789,101 $ 5,611,663 s 14,695,899 $ 12,216,667 $ 2,930,000 $ 2,013,560
2007 6,045,492 5,341,816 15,654,508 11,218,843 3,525,000 1,869,050
2008 5,909,994 5,278,407 15,465,006 10,423,992 3,175,000 1,713,716
2009 5,913,654 4,842,203 15,376,346 9,988,235 2,390,000 1,574,105
2010 5,694,419 4,512,158 15,450,582 9,375,175 2,410,000 1,467,770
201 I-2015 28,587,609 13,482,794 76,877,390 42,179,667 11,060,000 5,816,184
2016-2020 25,275,000 7,700,255 68,560,000 24,627,964 10,405,000 3,151,771
2021-2025 19,505,000 2,031,801 34,365,000 I 1,542,337 6,905,000 877,081
2026-2030 18,850,000 5,425,513
2031-2035 ) 1,455,000 1,008,015
Totals $ 102,720,269 $ 48,861,697 $ 286,749,731 $ 138,006,408 s 42,800,000 $ 18,483,237
82
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
City of Lubbock~ Texas
Notes to Basie Financial Statements
September 30, 2005
NOTE ID. DET All.. NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
H. LONG-TERM DEBT (Continued}
Capital leases were used to acquire equipment and vehicles. The interest rate on the leases ranged from 2.0%
to 4.4%. The annual requirements on capital leases of the City as of September 30, 2005, including interest
payments of$477,5.52 are as follows:
Governmental Business-Type Total
Capital Lease Capital Lease Capital Lease
Fiscal Minimum Minimum Minimum
YeRr Palment Payment Payment
2006 $ 1,167,281 $ 584,092 s 1,751,373
2007 679,328 461,618 1,140,946
2008 679,328 130,124 809,452
2009 659,569 127,681 787,250
2010 530,413 127,681 658,094
2011-2015 639,898 639,898
Less:
Interest ~400,932} (76,620) (477,552)
Total $ 3,954,885 $ 1,354,576 $ 5,309,461
The carrying values on the leased assets of the City as of September 30, 2005 are as follows:
Auumulated Net Book
Gross Value Depredation Value
Governmental Activities s 7,190,820 $ 2,601,612 s 4,589,208
Business-Type Activities 4,017,069 1,572,105 2,444,964
Total Leased Assets $ t 1,207,889 $ 4,l73,717 $ 7,034,172
83
City of Lubbock, Texa.s
Notes to Basic Financial Statements
September 30, 2005
NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
H. LONG-TERM DEBT (Continued}
Long-tenn obligations (net of discounts and premiwns) for governmental and business-type activities for the
year ended September 30, 2005 are as follows:
Debt Payable Debt Payable Due in
9/30/2004 Additions Deletions 913012005 one lear
Governmental activities:
Tax-Supported~
Obligation Bonds $ 70,221,217 $ 45,110,000 $ 12,610,948 $ 102,720,269 $ 5,789,101
Capital Leases 1,360,957 3,534,016 940,088 3,954,885 936,250
Compensated Absences 14,9l8,S08 7,178,748 5,808,891 16,288,365 5,723,349
Insurance Claim Payable 2,354,536 17,824,861 17,839,137 2,340,260 2,340,260
Bond Discounts/Premiums 1,179,722 725,586 39,324 1,865,984
Total Governmeatal activities $ 90,034,940 $ 74,373,211 s 37,238,388 $ 127,169,763 s 14,788,960
Business-Type activities:
Self-Supported -
Obligation Bonds 215,663,783 125,430,000 54,344,052 286,749,731 14,695,899
Revenue Bonds 94,605,000 17,960,000 69,765,000 42,800,000 2,930,000
Capital Leases 1,393,207 1,706,563 1,745,194 1,354,576 456,625
Closure/Post Closure 3,051,116 22,275 3,073,391
Compensated Absences 4,160,142 2,897,972 2,057,349 5,000,765 2,207,245
Insurance Claim Payable 6,436,854 4,423,757 4,358,713 6,501,898 1,603,601
Bond Discounts/Premiums (914,877) (404,924) (3,875,249) 2,555,448
Total Business-Type activities $ 324,395,225 $ 152,035,643 $ 128,395,059 $ 348,035,809 $ 21,893,370
Payments on bonds payable for governmental activities are made in the Debt Service Fund. Accrued
compensated 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 and Capital Projects Funds.
84
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE m DETAll.. NOTES ON ALL ACTIVITIES AND FUNDS (Coutinued)
H. LONG-TERM DEBT (Continued)
The total long-tenn debt is reconciled to the total annual requirements to amortize long-term debt as foUows:
Long-t£tm debt· Governmental Activities $ 127,169,763
Long-tum debt-Business-type Activities 348,035,809
Interest 205,828,894
Totlll amount of debt 681,034,466
Net gains/1osses, premium~/ diKouna (4,421,432)
Less: Capitallea:.-es (5,787,013)
Less: lllsuraoce claims payable (8,842,158)
Less: Compensated absenses (21,289,130)
Less: Closure/post closure ~ (3,073,391)
Total other debt ~43,413,124)
Tow future bonded dc:bt ~uitemenC$ 637,621,342
New Bond Issuances
The City C<mncH caUed an election for May 15, 2004 to 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;
civiccenter/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, S 1,405,000 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
first installment of the capital improvement debt issuance approved by the voters in 2004. The second
installment was in September 2005, for $7,265,000, General Obligation Bonds Series 2005. The certificates
wee issued at a discount of $91,805 and had bond issuance costs of $95,000. The net proceeds after
discounts and costs were $7,075,000. The identified projects are: Fire Stations 12 and 8 $1,325,000; MLK
little league complex $1,548,000; NE Lubbock residential infrastructure $475,000; paving and streets
$330,000; curbs and ramps $440,000; traffic signals $50,000; signal systems $113,000; Midwest little league
complex $1,664,000; and Phase I SW Lubbock soccer $1,130,000. The proceeds ofthe debt are recorded in
various Capital Projects Funds.
In September 2005, the City issued $46,525,000 Tax and Waterworks System Surplus Revenue Certificates
ofObJigation, Series 2005. The Certificates were issued at a premium of$1,581,752. After paying issuance
costs of $325,139, the net proceeds were $47,780,720. Proceeds from the sale of these certificates will be
used for street improvements, mcluding drainage, streetlights, and traffic signali2ation and the acquisition of
land and necessary rights.-of-way; and costs associated with the issuance of the Certificates. The proceeds of
the debt are recorded in various Enterprise Funds and Capital Projeds Funds.
The Canadian River Municipal Authority issued a new Contract Revenue Bond, Series 2005 in April 2005 in
the amount of $48,125,000. The City of Lubbock shared in that issue for $17,960,000 and other costs of
$850,296, and received depreciable assets (water rights) valued at $18,810,296. These assets and liabilities
are recorded in the Water Enterprise Fund.
85
City ofLubboek, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE ID. DETAIL NOTES ON ALL ACTMTIES AND FUNDS (Continued)
H. LONG-TERM DEBT (Continued)
Current Refunding
In August 2005, the City issued Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 2005
C'the Bonds") with a par value of $43,080,000 with the purpose to lower debt service requirements on
indebtedness. The Bonds refunded $43,750,000 outstanding bonds. They were issued at a net premium of
$2,638,737 and bad issuance costs of$332,358. This bond issuance also paid for the termination of interest
rate swap agreement in the amount of $6,637,093. The refunding resulted in a legal defeasance of debt and
resulted in a net present value savings $621,296. The reacquisition price exceeded the net carrying value of
old debt by $4,511,666. This accounting loss is netted against the new debt and amortized over the remaining
life of the refunded debt. The various transactions are recorded in the Water Enterprise Fund.
Advanced Refundings
The City issued two advance refundings to retire a portion of the City's outstanding debt to lower the debt
service requirements on such indebtedness. In both advance refundings the net proceeds from the issuance of
the Refunding Bonds were deposited with the Escrow Agent (JP Morgan 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 agreements, between the City
and JP Morgan Chase Bank, the escrow funds are 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.
In March 2005, the City issued a combination Tax and Electric Light and Power System Surplus Revenue
Certificate of Obligation, Series 2005 in the amount of$23,055,000, which included $19,500,000 of refunded
debt and $3,555,000 of new capital funds. This debt refunded $19,760,000 ofWTMPA long-tenn debt and
dissolved the lease between WfMPA and the Electric Funds. The refunding bonds were issued at a net
premium of $981 ,819. Isst1ance costs were $209,894 and net proceeds for electric capital projects were
$3,600,000. The refunding resulted in a net present value savings of $557,722. The reacquisition price
exceeded the net carrying amount of the old debt by $679,280. This accounting loss is netted against the new
debt and amortized over the remaining Jife of the refunded debt. The various transactions are recorded in the
WTMP A and the Electric Enterprise Funds.
In July 2005, the City issued General Obligation Refunding Bonds, Series 2005 ("Refunding Bonds") with a
par value of $49,615,000. The Refunding Bonds refunded $50,455,000 outstanding bonds. They were issued
at a net premium of $3,836,536 and had $3 S I ,200 issuance costs. As a result of the refunding, the City
decreased its total debt service requirements by $2,205.662, which resulted in an economic gain of
$1,886,563 and an accounting Joss of $4,140,288. The debt transactions are recorded in various Enterprise
Funds and the Debt Service Fund.
I. 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 fmanced. Upon repayment of the bonds, ownership ofthe 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.
86
0
0
0
0
0
0
0
0
0
0
0
)
)
)
)
)
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
I. CONDUIT DEBT (Continued)
As of September 30, 2005, there were seven series of Lubbock Health Facilities Development Corporation
Bonds outstanding with an aggregate principal amount payable of $278,537,343. The bonds were issued
between 1993 and 2002. Also as of September 30, 2005, there was one series of Lubbock Education
Facilities Authority Inc. Bonds outstanding with an aggregate principal amount payable of $10,500,000. The
bonds were issued in 1999.
J. 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 1'999, the City purchased workers' 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 1999 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, whkh is renewed annually. The policy has a $10 million aMual aggregate limit and is subject to a
$250,000 deductible per claim.
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 settled,
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 coverage 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 produce current
estimates that reflect recent settlements, claim .frequency, and other economic and social factors. Adjustments
to claim liabilities are charged or credited to expense in the period in which they are incurred.
Additionally, property and boiler coverage is accounted for in the Risk Management Fund. The property
insurance policy was purchased from an outside insurance carrier. The policy has a $500,000 deductible per
occurrence, and the boiler coverage insurance deductible is up to $500,000 dependent upon the unit.
Premiums are 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 lntemal Service Funds.
87
City of Lubboek, Texas
Notes to Basie Financial Statements
September 30, 2005
NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
K. HEALTH INSURANCE
The City provides medical and dental insurance for all fuliMtbne employees that are accounted for in the
Health Benefits 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 $175,000 per covered
individual annually and an aggregate cap of $18,845,757. The insurance vendor based on medical trend,
claims history, and utilization detennines 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. Revenues for the life insurance
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.
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 poticy, 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.
L. ACCRUED INSURANCE CLAIMS
The SeJf.Jnsurance 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:
88
c
(
c
(
(
(
r \.
(
c
c
)
)
)
)
)
'\
)
City of Lubbock, Texas
Notes to Basic Financial Statements
September 3(), 2005
NOTE m. DETAn. NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
L ACCRUED INSURANCE CLAIMS (Continued)
Workers' Compensation and Liability Reserves at
beginning of fiscal year $ 6,436,854 $ 6,000,000
Claims Expenses 4,658,359 5,467,674
Claims Payments ~ 4,593,315} {5,030,8202
Workers' Compensation and Liability Reserves at end of
fiscal year 6,501,898 6,436,854
Medical and Denial Claims Liability at beginning of
fiscal year 2,354,536 2,720,897
Claims Expenses 17,432,646 14,328,384
Claims Payments (17 ,446,922) (14,694,745)
Medical and Dental Claims Liability at end of fiscal year 2,340,260 2,354,536
Total Self-Insurance Liability at end of fiscal year 8,842,158 8,791,390
Total Assets to pay claims at end of fiscal year 12,646,638 18,920,469
Accrued insurance claims payable from restricted assets •
current 3,943,861 3,538,746
Accrued insurance claims payable -noncurrent 4,898,297 5,252,644
Total accrued insurance claims $ 8,842,158 $ 8,791,390
M. LANDFILL CLOSURE 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 perfonn certain maintenance and monitoring functions at the sites for thirty years after
closure. Although closure 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 $3,073,391 included in landfill closure and postclosw-e care liability at September 30, 2005, represents
the cumulative amount expensed by the City to date for its two landfitJs that are registered under TCEQ
permit numbers 69 (Landfill 69) and 2252 (Landfill 2252), less amounts that have been paid. Around 92
percent of the estimated capacity of Landfill 69 has been used to date, with $814,035 remaining to be
recognized over the remaining closure period, which is estimated at two years. Approximately 2.3 percent of
the estimated capacity of Landfill 22S2 has been used to date, with $23,356,052 remaining to be recognized over the
remaining closure period, which is estimated at over 80 ye81'S. Postclosure care oosts are based on prior estimates and
have been adjusted for inflation. Actual oosts may be different due to inflation, deflation, changes in technology, or
changes in regulations.
89
City of Lubboek, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued)
M. LANDFILL CLOSURE AND POSTCLOSURE CARE COST (Continued)
The City is required by state and federal Jaws and regulations to provide assurance that financial resources
will be availab)e 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 has chosen the Local
Government Financial Test mechanism for providing this assurance. The City expects to finance costs
through normal operations.
N. DISAGREGATION OF ACCOUNTS
Accounts Receivable Summa!1
Court Property Balance at
Fines Damase Pavin1 Grants 9/30/05
Governmental Activities:
Geneml Fund $ 4,079,900 $ 230,337 $ 192,944 $ a s 4,503,181
Non-Major 6,024 6,024
Total s 41079,900 $ 230!337 $ 1921944 $ 6,024 $ 4,5091205
Ac:c:ouots Rei:eivable Summary
General From Credit Balance at
Consumer Others Card Mise:. 9130105
Businessatype Activities:
LP&L $ 16,291,858 $ -$ -$ 32,753 $ 16,324,6ll
Water 4,535,594 4,535,594
Sewer 2,422,918 88,562 4,375 2,515,855
Stonnwatcr 741,677 741,677
WJ"MPA 1,771,285 1,771,285
Non-Major 2,429,764 8,429 2,438,193
Internal Service 1 818 1,818
Total $ 2811941914 $ 88!562 $ 8,429 $ 37,128 $ 28,329z033
Allowance for Doubtful AeeountJ Summary
Balan~ at
Accounts Taxes 9130/05
Governmental
General Fund $ 312,578 $ 1,065,047 $ 1,377,625
NonaMajor 456,158 456,158
Businessa Type
LP&L 1,121,236 1,121,236
Water 421,833 421,833
Sewer 190,856 190,856
Stonnwater 85,143 85,143
WIMP A 675,217 675,217
Non-Major 253,907 253,907
Total $ 3,0601770 $ 1~21aos $ 4,5811975
90
c
(
(
(
(
(
(
(
(
c
c
")
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
)
NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUND (Continued)
N. DISAGREGATION OF ACCOUNTS {Continued)
A~ounts Payable Summary
) Bal~~at
Vouclaers Accounts Investments Miscellaneous 9/30/0S
Governmental:
General FUnd $ 549,520 $ 777,225 $ $ $ 1,326,745
Non-Major 776,893 4,756,291 215,387 513,454 6,262,025
Business-Type:
LP&L 317,873 272,898 2,144 216,895 809,810
Water 167,320 628,733 4,022 82,830 882,905
Sewer 312,368 25,054 1,603 25,815 364,840
Stormwater 61,636 818,455 880,091
WTMPA 12,745,213 12,745,213
Non-Major 202t426 5951677 103,505 901,608
Total $ 2,388,036 $ 20,619,546 $ 223,156 s 942,499 $ 24,173,237
0. DISAGREGATION OF ACCOUNTS-GOVERNMENT-WIDE
) Net Receivables
Accounts Interest Taxes Internal Servite Balance at
Receivable Receivable Receivable Receivables 9/30105
Governmental
Activities $ 4,196,627 $ 54,672 $ 9,464,704 s 119,364 s 13,835,367
Business-Type
Activities 25,627,366 94,307 18,246 25,739,919
Total s 29,823,993 $ 148,979 $ 9,464,704 $ 137,610 $ 39,575,286
) Aa:ouu Payable
Accounts l•terul Service Baloceat
Payable Payables 9/30/05
Gover~~ mental
Activities s 7,588,773 $ 427,891 $ 8,016,664
) Business-Type
Activities 16,584,467 851,945 17,436,412
Total s 24,173,240 $ 1,279,836 $ 25,453,076
)
91
City of Lubbock, Texas
Notes to Basic Financial Statements
September 30, 2005
NOTE IV. CONTINGENT LIABU..ITIES
A. FEDERAL GRANTS
In the nonnal 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.
B. LITIGATION
The City is currently involved in the following lawsuits which could bave an impact on the financial position
if the City is found liable.
Adams, et al v. Citv of Lubbock:
The City of Lubbock has been sued by numerous firefighters employed by the City of Lubbock. They are
claiming that the City of Lubbock did not properly pay its fm:fighte~ for "move-up" pay pursuant to the Civil
Service Act. Pursuant to the Civil Service Act, firefighters can move-up and perfonn temporary duties in
higher classifications. When they perfonn 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 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 classification plus any "longevity or seniority pay".
Both sides filed Motions for Summary Judgment in the triaJ court and the court ruled in favor of the plaintiffs.
The City's Motion for Swnmary 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 of
Lubbock, holding that the City paid its employees properly under the Civil Service Act.
Plaintiff's have appealed to the Texas Supreme Court and the Texas Supreme Court has requested full briefing
on the issues. The Court has not made a detennination as to whether or not it will hear the case.
Barnard Construction Companv. Inc. v. City of Lubbock!
Plaintiff is a construction company suing the City of Lubbock for breach of contract. Plaintiff alleges the City
owes it almost $2,400,000 for rock it excavated on a drainage project. They assert they are owed $204,000
for rock excavated on Line AI and assert they are owed abnost $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 has
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, 2005.
Barnard has appealed this case to the Fifth Circuit Court of Appeals. Oral arguments are set for March.
Jeanette Livingston. et al v. City of Lubbock:
Six (6) Plaintiffs filed suit against the City of Lubbock in 2004 alleging that the City and/or County failed to
properly record information in its cemetery records that would indicate where their relatives were buried.
Fifty-six additional Plaintiffs were added to the suit in November 2005. The City believes it has located
where twenty-one (21) of such persons were interred. As to othe~, many were interred before the City owned
the portion of the cemetery. The City acquired portions of the current cemetery between 1948 and I 959 and
92
c
c
c
(
(
(
(
(
(
(
c
)
)
)
)
)
)
City of Lubboek, Texas
Notes to Basic:: Financial Statements
September 30t 2005
NOTE IV. CONTINGENT LIABILITmS (Continued)
B. LITIGATION (Continued)
many of the deceased were clearly buried when other entities owned the cemetery. The City will assert it has
no liability for their negligence in not recording the burial locations properly. The City will also assert that
the Plaintiffs have no evidence that the City was negligent and didn't maintain records that showed where
such persons were buried.
For those persons who were buried while the City owned the cemetery and the City failed to properly record
the burial location, there are a number of defenses. First, the City will assert that the statute of Limitations bas
run. Second, the City will assert that this is a contractual issue and not a tort issue, thus giving standing only
to those who were parties to the contract Third, the City will assert that, if this is a tort issue, that this is a
negligent jnfliction of emotional distress case and such cause of action was nullified by the Texas Supreme
Court in 1993. Lastly, for those buried after 1970, the City has other .defenses it will assert under the Texas
Tort Claims Act
At this time, damages are difficult to ascertain but, collectively, they would meet the $200,000 materiality
definition for damages.
Marvin Rodriguez v. LP&L:
Plaintiff sued LP&L for negligently maintaining a line. Plaintiff, an employee of Atmos Energy, was working
around an LP&L line and suffered second degree bums over 5% of his body. He alleges that LP&L was
negligent in not de-energizing the line since it was no longer in use.
The City wiJJ assert that the Plaintiff was negligent for failing to contact LP&L and as to whether the line was
energized. It is our understanding that Plaintiff was suspended by his own company for his negligent conduct.
While we do not believe this suit has a potential exposure of over $200,000, we are including it in this
disclosure as Plaintiffs demand was $325.000.
C. SITE REMEDIATION
The City bas identified specific locations requiring site remediation relative to underground fuel storage tanks
and historical fire training sites.
As of September 30, 2005 the City identified three locations that posed a probable liability. The City
recorded the liabilities for the three locations as follows: LP&L Plant I ($236,000), LP&L Cooke Plant
($326,000) and WesT ex Aircraft ($300,000).
The potential exposure for the remaining locations is not readily detenninable as of September 30, 2005. In
the opinion of management, the ultimate liability for these locations will not have a materially adverse effect
on the City's financial position.
93
(THJS PAGE INTENTIONALLY LEFT BLANK)
c.
c
,.
\,
(
c
(
(
(
(
, ...
)
)
)
APPENDIXB
FORMS OF BOND COUNSEL OPINION
[Closing Date]
$54~020,000
CITY OF LUBBOCKt TEXAS
GENERAL OBLIGATION REFUNDING BONDS
SER1ES2007
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 GENERAL OBLIGATION REFUNDING
BONDS, SERIES 2007, dated January I, 2007, issued in the principal amount of
$54,020,000.
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 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; an escrow agreement (the "Escrow Agreement") between the City and The Bank of New
York Trust Company, National Association, as escrow agent (the "Escrow Agent"); a report (the
"Report") of Grant Thornton LLP, Certified Public Accountants (the "Verification Agent"),
verifying the sufficiency of the deposits made with the Escrow Agent for defeasance of the
obligations being refunded (the "Refunded Obligations") and the mathematical accuracy of
certain computations of the yield on the Bonds and obligations acquired with the proceeds of the
Bonds; and 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. 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;
(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; and
(C) Finn banking and financial arrangements have been made for the
discharge and final payment of the Refunded Obligations pursuant to the Escrow
Agreement, and therefore, the Refunded Obligations are deemed to be fully paid
and no longer outstanding except for the purpose of being paid from the funds
provided therefor in such Escrow Agreement.
THE RJGHTS 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
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. We have further relied on the
Report of the Verification Agent regarding the mathematical accuracy of certain computations.
If such representations or the Report are detennined 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.
c
c
c
(
(
(
, ....
,. ...
,
....
)
)
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.
Owners 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
who 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).
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 ~urrent 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.
[Form of Opinion of Bond Counsel)
[Closing Date]
$25,255,000
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE
CERTIFICATES OF OBLIGATION
SERIES 2007
WE HAVE represented the City of Lubbock, Texas (the "City"), as its Bond Counsel in
connection with an issue of certificates of obligation {the "Certificates") described as follows:
CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2007,
dated January 1, 2007, issued in the principal amount of$25,255,000.
The Certificates mature, bear interest, are subject to redemption prior to maturity and
may be transferred and exchanged as set out in the Certificates and in the ordinance adopted by
the City Council of the City authorizing their issuance (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 Certificates under the Constitution and
laws of the State of Texas and with respect to the exclusion of interest on the Certificates 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 Certificates. Our role in connection with the City's Official
Statement prepared for use in connection with the sale of the Certificates 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 Certificates, 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
Certificates. We have also examined executed Certificate 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 Certificates in full compliance with the
Constitution and laws of the State of Texas presently effective and, therefore, the
Certificates 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 Certificates, has been
(
c
c
c
c
c
(
c
c
levied and pledged irrevocably for such purposes, within the limit prescribed by
law, and the total indebtedness of the City, including the Certificates, does not
exceed any constitutional, statutory or other limitations. In addition, the
Certificates are further secured by a limited pledge (not to exceed $1,000) of the
surplus net revenues of the City's Waterworks System, as described in the
Ordinance.
THE RlGHTS OF THE OWNERS of the Certificates 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 pennit the exercise of judicial discretion.
IT IS OUR FURTHER OPINION THAT:
(1) Interest on the Certificates is excludable from gross income for
federal income tax purposes under existing law; and
(2) The Certificates are not "private activity bonds'' within the
meaning of the Internal Revenue Code of 1986, as amended (the "Code"), and
interest on the Certificates is not subject to the alternative minimum tax on
individuals and corporations, except that interest on the Certificates 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 Certificates 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
income of interest on the Certificates 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 Certificates 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 Certificates.
Owners 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
who 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).
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 Certificates. 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 Certificates as includable in gross income for federal income tax
purposes.
c
c
c
c
c
c
c
c
c
c
0
APPENDIXC
SPECIMEN OF BOND INSURANCE POLICY
0
0
0
,6
0
0
0
0
----------------~----1 ____ _
0
0
0
0
(THIS PAGE INTENTIONALLY LEFT BLANK)
0
0
0
0
0
0
t: .. :,_ I "" . : ' . .
~· .
'
: • I
FINANCIAL
SECURITY
· ASSURANCE®
MUNICIPAL BO
INSURANCE~
· • ISSUER:
'• '
' -
i '
BONDS:
1 ' l
FINANCIAL. SECURITY ASSURANCE INC. ("A
hereby UNCONOITlONALlY AND IRREVOCABLY ag
p~ying agent (the "Paying Agent") (a~ set forth e d
securing the· Bonds) for the Bonds, for th t o
Security, directly ·to each Owner', subject nly to th
en9orsec.nent hereto), that portion of the t>ri ipal of n
for Payment but sftall be unpaid by re n Nonpa
ressly m ifi n endorsement hereto, the following terms shaH· h3ve
ed for I purposes f this Policy. "Business Day" means any day other than (a) a
or (b) a ay on wh h banking institutions in the State of New York or the Insurer's
a horized r requir. by law or executive order to remain closed. "Due for Payment"
erring to he cipal of a Bond, payable on the stated maturity date thereof or the
he arne sh I ve been duly called for mandatory sinking fund redemption and does
n e ier date on which payment is due by reason .of call for redempf!on (other than by
n ing nd redemption), acceleration or other advancement of maturity unless Financial
I ect in its sole discretion, to pay such principal due upon such acceleration together with
y accru in r. t to the date of acceleration and (b) when referring to interest on a Bond, payable on
t stated ~t or payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the
I uer to ave provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for
-. ·' .
n full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shan
ude, in re&pect of a Bond, any payment of principal or interest that is Due for Payment
. .
••
"t . ~.,
I I .
. .
;
' . ..
,
}
< ' .
)
'
,, '
..
..
. '
<
'
. . . . -
.... ;. -1\
.. ; ..
"\ .
. .. ~ .
. . . : •
•
' '
; '
. .
, I
.. '
an all not be modified, altered or '
n an od 1 · n or amendment thereto. Except
er to, a) an premium paid in respect of this Policy
e r provision being made for payment, of
nceled or revoked. THIS POLICY IS NOT
ECURITY FUND SPECIFIED IN ARTICLE 76
SURANCE INC. has caused this Policy to be executed
FINANCIAL SECURITY ASSURANCE INC.
By ------~~.-~~---------Authorized Officer
(212) 826-0100
c
(
;
PURCHASE CONTRACT
RELATING TO
S25,25S,OOO
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE
CERTIFICATES OF OBLIGATION, SERIES 2007
January 12, 2007
The Honorable Mayor and Members of the City Council
City of Lubbock
P.O. Box 2000
Lubbock, Texas 79457
Dear Mayor and Members of the City Council:
MORGAN KEEGAN & COMPANY, INC, as representative (the "Representative") of the
underwriters identified herein (collectively, the "Underwriter''), offers to enter into this Purchase
Contract (the "Purchase Contract") with the CtTYOFLUBBOCK, TEXAS(the "City") for the purchase
by the Underwriter of the City's Tax and Waterworks System Surplus Revenue Certificates of
Obligation, Series 2007 (the "Certificates"). 'This offer is made subject to the City's acceptance of
this Purchase Contract on or before 10:00 p.m. Central Time on January 12,2007.
1. Purchase and Sale of the Certificates. Upon the terms and conditions and upon the
basis of the representations set forth herein, the Underwriter agrees to purchase from the City, and
the City hereby agrees to sell and deliver to the Underwriter the Certificates in an aggregate
principal amount of $25,255,000 (representing the original aggregate principal amount of the
Certificates). The Certificates shall have the maturities, interest rates and be subject to redemption
in accordance with the provisions of Exhibit A hereto and shall be issued and secured under the
provisions of the Ordinance (as defined below).
The purchase price for the Certificates shall be $25,194,669.44 (representing the principal
amount of the Certificates, plus net original issue premium on the Certificates in the amount of
$133,737.30, and less an Underwriter's discount on the Certificates of $194,067.86) plus accrued
interest from their dated date to the date of the payment for and delivery of the Certificates.
2. Ordinance. The Certificates shall be as described in and shall be issued and secured
under the provisions of an ordinance adopted by the City on January 12, 2007, authorizing the
issuance and sale of the Certificates (the "Ordinance"). The Certificates shall be secured and
payable as provided in the Ordinance.
)
)
)
3. Public Offering. It shall be a condition ofthe obligations of the City to sell and
deliver the Certificates to the Underwriter, and of the obligations of the Underwriter to purchase and
accept delivery of the Certificates, that the entire principal amount of the Certificates authorized by
the Ordinance shall be sold and delivered by the City and accepted and paid for by the Underwriter
at the Closing. The Underwriter agrees to make a bona fide public offering of all ofthe Certificates,
at not in excess of the initial public offering prices, as set forth in the Official Statement; provided,
however, at least ten percent (10%) of the principal amount of the Certificates of each maturity
thereof shall be sold to the "public" (exclusive of dealers, brokers and investment bankers, etc.) at
the initial offering price set forth in the Official Statement.
4. Official Statement. The Official Statement, including the cover pages and
Appendices thereto, of the City, dated January 12,2007, with respect to the Certificates, as further
amended only in the manner herein provided, is hereinafter called the "Official Statement." The
City hereby authorizes the Ordinance and the Official Statement and the information therein
contained to be used by the Underwriter in connection with the public offering and sale of the
Certificates. The City confums its consent to the use by the Underwriter prior to the date hereof of
the Preliminary Official Statement, relative to the Certificates, dated January 4, 2007 (the
"Preliminary Official Statement"), in connection with the preliminary public offering and sale of the
Certificates, and it is "deemed fmal" as ofits date, within the meaning, and for the pwposes, ofRule
15c2-12 promulgated under authority granted by the federal Secwities and Exchange Act of 1934
(the "Rule"). The City agrees to cooperate with the Underwriter to provide a supply of final Official
Statements within seven business days of the date hereof in sufficient quantities to comply with the
Underwriter's obligations wtder the Rule and the applicable rules of the Municipal Securities
Rulemaking Board. The Underwriter will use its best efforts to assist the City in the preparation of
the final Official Statement in order to ensure compliance with the aforementioned rules.
If at any time after the date of this Purchase Contract but before the frrst to occur of {i) the
date upon which the Underwriter notifies the City that the period of the initial public offering of the
Certificates has expired or (ii) the date that is 90 days after the date hereo~ any event shall occur that
might or would cause the Official Statement to contain any untrue statement of a material fact or to
omit to state a material fact required to be stated therein or necessary to make the statements therein,
in the light of the circwnstances wtder which they were made, not misleading, the City shall notify
the Underwriter, and i~ in the opinion of the Underwriter, such event requires the preparation and
publication of a supplement or amendment to the Official Statement. the City will at its expense
supplement or amend the Official Statement in the form and in a manner approved by the
Underwriter and furnish to the Underwriter a reasonable number of copies requested by the
Underwriter in order to enable the Underwriter to comply with the Rule.
To the best knowledge and belief of the City, the Official Statement contains information,
including financial information or operating data, as required by the Rule. Except as disclosed in the
Official Statement, the City has not failed to comply with any undertaking specified in paragraph
(b)(5)(i) of the Rule within the last five years.
2
)
)
)
5. Representations, Warranties and Agreements of the City. On the date hereof, the
City represents, warrants and agrees as follows:
(a) The City is a home rule municipality and a political subdivision of the State
of Texas and a body politic and corporate, and has full legal right, power and authority to
enter into this Purchase Contract, to adopt the Ordinance, to sell the Certificates, and to issue
and deliver the Certificates to the Underwriter as provided herein and to carry out and
conswnmate aU other transactions contemplated by the Ordinance, and this Purchase
Contract;
(b) By official action of the City prior to or concurrently with the acceptance
hereof, the City has duly adopted the Ordinance, has duly authorized and approved the
execution and delivery of, and the performance by the City of the obligations contained in
the Certificates and this Purchase Contract and has duly authorized and approved the
performance by the City of its obligations contained in the Ordinance, including, without
limitation, the submission of a transcript of proceedings to the Public Finance Division of
the Office of the Attorney General ofTexas (the u Attorney General") for the approval of the
Certificates; and the Ordinance and this Purchase Contract constitute legal, valid and binding
agreements of the City, enforceable in accordance with their respective tenns, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles
of equity relating to or affecting the enforcement of creditors' rights or by general principles
of equity which permit the exercise of judicial discretion;
(c) The City is not in breach of or default under any law or administrative
regulation of the State ofTexas or the United States (including regulations of its agencies)
applicable to the issuance of the Certificates or any applicable judgment or decree or any
loan agreement, note, order, agreement or other instrument, except as may be disclosed in
the Official Statement, to which the City is a party or to the knowledge of the City it is
otherwise subject, that would have a material and adverse effect upon the business or
fmancial condition of the City; and the execution and delivery of the Certificates and this
Purchase Contract by the City and the adoption of the Ordinance by the City and compliance
with the provisions of each thereof will not violate or constitute a breach of or default under
any existing law or administrative regulation, or any judgment, decree or agreement or other
instrument to which the City is a party or, to the knowledge of the City, is otherwise subject;
(d) All approvals, consents and orders of any governmental authority or agency
having jurisdiction of any matter that would constitute a condition precedent to the
performance by the City of its obligations to sell and deliver the Certificates hereunder will
have been obtained prior to the Closing, except for the approval of the Certificates by the
Attorney General and registration of the Certificates by the Office of the Comptroller of the
State (the 11Comptroller"), and the City shall timely cause a transcript of proceedings to be
filed with the Attorney General in fonn and substance consistent with the administrative
rules of the Public Finance Division of the Attorney General, which will pennit the review
of such transcript and the approval of the Certificates by the Attorney General, and the
3
registration of the Certificates by the Comptroller on or before the Closing, as required by
Paragraph 7(e)(5} hereof, but subject to the discretion of the Attorney General with respect
to the issuance of his approving opinion;
(e) At the time of the City•s acceptance hereof and at the time of the Closing, the
Official Statement does not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading;
(f) Between the date of this Purchase Contract and the Closing, the City will not,
without the prior written consent of the Underwriter, sell or issue any additional bonds, notes
or other obligations for borrowed money payable in whole or in part from ad valorem taxes
except the City's General Obligation Refunding Bonds, Series 2007, and the City will not
incur any material liabilities, direct or contingent, nor will there be any adverse change of
a material nature in the financial position of the City;
(g) Except as described in the Official Statemen4 no litigation is pending or, to
the knowledge of the City, threatened in any court affecting the corporate existence of the
City, the title of its officers to their respective offices, or seeking to restrain or enjoin the
issuance or delivery of the Certificates, the levy, collection or application of the ad valorem
taxes or the surplus net revenues (the "Pledged Revenues") of the City's Waterworks System
pledged or to be pledged to pay the principal of and interest on the Certificates, or in any
way contesting or affecting the issuance, execution, delivery, payment, security or validity
of the Certificates, or in any way contesting or affecting the validity or enforceability of the
Ordinance, or contesting the powers of the City, or any authority for the Certificates, the
Ordinance or this Purchase Contract or contesting in any way the completeness, accuracy
or fairness of the Preliminary Official Statement or the Official Statement;
(h) The City will cooperate with the Underwriter in arranging for the
qualification of the Certificates for sale and the detennination of their eligibility for
investment under the laws of such jurisdictions as the Underwriter designates, and will use
its best efforts to continue such qualifications in effect so long as required for distribution
of the Certificates; provided, however, that the City will not be required to execute a consent
to service of process or to qualify to do business in connection with any such qualification
in any jurisdiction;
(i) The descriptions of the Certificates and the Ordinance contained in the
Official Statement accurately summarize certain provisions of such instruments, and the
Certificates, when validly executed, authenticated and delivered in accordance with the
Ordinance and sold to the Underwriter as provided herein, will constitute legal, valid and
binding agreements of the City entitled to the benefits of the 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;
4
)
)
(j) If prior to the Closing an event occurs affecting the City that is materially
adverse for the purpose for which the Official Statement is to be used and is not disclosed
in the Official Statement, the City shall notify the Underwriter, and if in the opinion of the
City and the Underwriter such event requires a supplement or amendment to the Official
Statement, the City will supplement or amend the Official Statement in a form and in a
manner approved by the Underwriter;
(k) The financial statements contained in the Official Statement present fairly the
financial position of the City as of the date and for the period covered thereby and are stated
on a basis substantially consistent with that of the prior year's audited financial statements;
(1) Any certificate signed by any official of the City and delivered to the
Underwriter shall be deemed a representation and warranty by the City to the Underwriter
as to the truth of the statements therein contained;
(m) The City has not been notified of any listing or proposed listing by the
Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications
may not be relied upon; and
(n) The City will not knowingly take or omit to take any action, which action or
omission will in any way cause the proceeds from the sale of the Certificates to be applied
in a manner other than as provided in the Ordinance or that would cause the interest of the
Certificates to be includable in gross income of the holders thereof for federal income tax
purposes.
6. Closing. At 10:00 A.M .• Central Time, on January 19, 2007 (the "Closing"), the
City will deliver the initial securities certificates of the Certificates (as provided for in the
Ordinance) to the Underwriter and the City shall take appropriate steps to provide DTC with one
definite securities certificate for each year of maturity of the Certificates, and to provide the
Underwriter with the other documents hereinafter mentioned. On or prior to the date of Closing, the
Underwriter shall make arrangements with The Depository Trust Company ("DTC") for the
Certificates to be immobilized and thereafter traded as book-entry only securities and on the date
of Closing the Underwriter will accept such delivery and pay the purchase price of the Certificates
as set forth in Paragraph 1 hereof in immediately available funds. Delivery and payment as
aforesaid shall be made at the office of the paying agent/registrar for the Certificates, as identified
in the Official Statement, or such other place as shall have been mutually agreed upon by the City
and the Underwriter.
In addition, the City and the Underwriter agree that there shall be a preliminary closing held
at such place as the City and the Underwriter shall mutually agree, conunencing at least 24 hours
prior to the Closing; provided, however, in lieu of this preliminary closing Bond Counsel, as defined
below, may provide the counsel to the Underwriter with a complete Transcript of Proceedings on
the business day preceding the Closing. Drafts of all documents to be delivered at the Closing shall
5
)
)
be prepared and distributed to all parties and their counsel for review at least three business days
prior to the Closing.
7. Conditions. The Undetwriter has entered into this Purchase Contract in reliance
upon the representations and warranties of the City contained herein and to be contained in the
documents and instruments to be delivered at the Closing, and upon the perfonnance by the City of
its obligations hereunder, both as of the date hereof and as of the date of Closing. Accordingly, the
Undetwriter's obligations under this Purchase Contract to purchase and pay for the Certificates shall
be subject to the performance by the City of its obligations to be performed hereunder and under
such documents and instruments at or prior to the Closing, and shall also be subject to the following
conditions:
(a) The representations and warranties of the City contained herein shall be true,
complete and correct in all material respects on the date hereof and on and as of the date of
Closing, as if made on the date of Closing;
(b) At the time of the Closing, (i) the Ordinance shall be in full force and effect,
and the Ordinance shall not have been amended, modified or supplemented and the Official
Statement shall not have been amended, modified or supplemented, except as may have been
agreed to by the Undetwriter; and (ii) the net proceeds of the sale of the Certificates shall be
deposited and applied as described in the Official Statement and in the Ordinance;
(c) At the time of the Closing, all official action of the City related to the
Ordinance shall be in full force and effect and shall not have been amended, modified or
supplemented;
(d) The City shall not have failed to pay principal or interest when due on any
of its outstanding obligations for borrowed money;
(e) At or prior to the Closing, the Undeawriter shall have received each of the
following documents:
( 1) The Official Statement of the City executed on behalf of the City by
the Mayor and City Secretary, or a conformed copy thereof;
(2) The Ordinance, certified by the City Secretary under the seal of the
City as having been duly adopted by the City and as being in effect, with such
changes or amendments as may have been agreed to by the Undetwriter, and the
Ordinance shall contain the agreement of the City, in form satisfactory to the
UndeJWriter, that is described under the caption "Other Information-Continuing
Disclosure of Information" in the Preliminary Official Statement;
6
)
)
)
(3) the Paying Agent/Registrar Agreement, having been duly executed
on behalf of the City and The Bank of New York Trust Company, National
Association, as Paying Agent/Registrar;
( 4) The opinion pertaining to the Certificates, dated the date of Closing,
ofVinson & Elkins L. L.P. ("Bond Counsel") in substantially the form and substance
set forth in Appendix C to the Official Statement;
( 5) An opinion or certificate with respect to the Certificates, dated on or
prior to the date of Closing, of the Attorney General of Texas, approving the
Certificates as required by law and the registration certificate of the Comptroller of
Public Accounts of the State ofTexas;
(6) The supplemental opinion, dated the date of Closing, of Bond
Counsel, addressed to the City and the Underwriter, which provides that the
Underwriter may rely upon the opinion of Bond CoWlSel delivered in accordance
with the provisions of paragraph 7(e)(4) hereof: and opining to the effect that (a) the
Purchase Contract has been duly authorized, executed and delivered by the City and
(assuming due authorization by the Undetwriter) constitutes a binding and
enforceable agreement of the City in accordance with its terms; (b) in its capacity as
Bond Counsel, such firm has reviewed the information in the Official Statement
under the captions or subcaptions "The Obligations11 (exclusive of the infonnation
under the subcaption "Book-Entry-Only System"}, "Tax Matters" and the
subcaptions "Legal Investments and Eligibility to Secure Public Funds in Texas,"
"Legal Matters" and "Continuing Disclosure of Information11 (exclusive of the
information under the subcaption .. Compliance with Prior Undertakings") under the
caption "Other Information" in the Official Statement, and such fum is of the opinion
that such descriptions present a fair and accurate summary of the provisions of the
laws and instruments therein described and, with respect to the Certificates) such
information confonns to the Ordinanee; and {c) the Certificates are exempt from
registration pursuant to the Securities Act of 1933, as amended, and the Ordinance
is exempt from qualification as an indenture pursuant to the Trust Indenture Act of
1939) as amended;
(7) An opinion of McCall, Parkhurst & Horton L.L.P., Undetwriter's
Counsel, addressed to the Underwriter, and dated the date of Closing in substantially
the form attached hereto as Exhibit B;
(8) A certificate, dated the date of Closing, signed by the Mayor and
Chief Financial Officer of the City, to the effect that (i) the representations and
warranties of the City contained herein are true and correct in all material respects
on and as of the date of Closing as if made on the date of Closing; (ii) except to the
extent disclosed in the Official Statement> no litigation is pending or, to the
knowledge of such persons, threatened in any court to restrain or enjoin the issuance
7
\
)
or delivery of the Certificates, or the levy, collection or application of the ad valorem
taxes or the Pledged Revenues pledged or to be pledged to pay the principal of and
interest on the Certificates, or the pledge thereof: or in any way contesting or
affecting the validity of the Certificates or the Ordinance or contesting the powers
of the City or the authorization of the Certificates or the Ordinance, or contesting in
any way the accuracy, completeness or fairness of the Official Statement (but in lieu
of or in conjwtction with such certificate, the Underwriter may, in its sole discretion,
accept certificates or opinions of the City Attorney that, in the opinion thereof, the
issues raised in any such pending or threatened litigation are without substance or
that the contentions of all plaintiffs therein are without merit); (iii) to the best of their
know ledge, no event affecting the City has occurred since the date of the Official
Statement that should be disclosed in the Official Statement for the purpose for
which it is to be used or that it is necessary to disclose therein in order to make the
statements and information therein not misleading in any respect; and (iv) that there
has not been any material and adverse change in the affairs or financial condition of
the City since September 30, 2005, the latest date as to which audited financial
information is available;
(9) An opinion of the City Attorney addressed to the Underwriter and
dated the date of Closing substantially in the form and substance of Exhibit C hereto;
( 1 0) A certificate, dated the date of the Closing, of an appropriate officer
of the City to the effect that, on the basis of the facts, estimates and circumstances
in effect on the date of delivery of the Certificates, it is not expected that the
proceeds of the Certificates will be used in a manner that would cause the
Certificates to be "arbitrage bonds" within the meaning ofSection 148 of the Internal
Revenue Code of 1986, as amended;
( 11) Evidence of the ratings on the Certificates shall be delivered in a form
acceptable to the Underwriter, which shall be "Aaa" 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 described in clause
(14) below;
( 12) A copy of the policy of municipal bond insurance issued by Financial
Security Assurance Inc. with respect to the Certificates;
(13) Such additional legal opinions, certificates, instruments and other
documents as Bond Cowtsel or the Underwriter may reasonably request to evidence
the truth, accuracy and completeness, as of the date hereof and as of the date of
Closing, of the City's representations and warranties contained herein and of the
statements and information contained in the Official Statement and the due
8
)
)
)
)
)
performance and satisfaction by the City at or prior to the date of Closing of all
agreements then to be performed and all conditions then to be satisfied by the City.
All of the opinions, letters, certificates, instruments and other documents mentioned above
or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions
hereof if, but only if, they are satisfactory to the Underwriter.
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to
purchase, to accept deli very of and to pay for the Certificates as set forth in this Purchase Contract,
or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the
Certificates shall be tenninated for any reason pennitted by this Purchase Contract, this Purchase
Contract shall tenninate and neither the Underwriter nor the City shall be under further obligation
hereunder, except that the respective obligations of the City and the Unde:rwriter set forth in
Paragraphs 9 and ll hereof shall continue in full force and effect.
8. Termination. The Underwriter may terminate its obligation to purchase at any time
before the Closing if any of the following should occur:
(a) (i) Legislation shall have been enacted by the Congress of the United States,
or recommended to the Congress for passage by the President of the United States or
favorably reported for passage to either House of the Congress by any Committee of such
House; or (ii) a decision shall have been rendered by a court established under Article ill of
the Constitution of the United States or by the United States Tax Court; or (iii) an order,
ruling or regulation shall have been issued or proposed by or on behalf of the Treasury
Department of the United States or the Internal Revenue Service or any other agency of the
United States; or (iv) a release or official statement shall have been issued by the President
of the United States or by the Treasury Department of the United States or by the Internal
Revenue Service, the effect of which, in any such case described in clause (i), (ii), (iii), or
(iv), would be to impose, directly or indirectly, federal income taxation upon interest
received on obligations of the general character of the Certificates or upon income of the
general character to be derived by the City, other than any imposition of federal income
taxes upon interest received on obligations of the general character as the Certificates on the
date hereof and other than as disclosed in the Official Statement, in such a manner as in the
judgment of the Underwriter would materially impair the marketability or materially reduce
the market price of obligations of the general character of the Certificates.
(b) Any action shall have been taken by the Securities and Exchange Commission
or by a court that would require registration of any security under the Securities Act of 1933,
as amended, or qualification of any indenture under the Trust Indenture Act of 1939, as
amended, in connection with the public offering of the Certificates, or any action shall have
been taken by any court or by any governmental authority suspending the use of the
Preliminary Official Statement or the Official Statement or any amendment or supplement
thereto, or any proceeding for that pwpose shall have been initiated or threatened in any such
court or by any such authority.
9
)
)
)
}
(c) (i) The Constirution of the State of Texas shall be amended or an amendment .
shall be proposed, or (ii) legislation shall be enacted, or (iii) a decision shall have been
rendered as to matters of Texas law, or (iv) any order, ruling or regulation shall have been
issued or proposed by or on behalf of the State of Texas by an official, agency or department
thereof, affecting the tax status of the City, its property or income, its securities (including
the Certificates) or the interest thereon, that in the judgment of the Underwriter would
materially affect the market price of the Certificates.
(d) A general suspension of trading in securities shall have occurred on theN ew
York Stock Exchange.
(e) A material disruption in securities clearance, payment or settlement services
in the United States shall have occurred.
(f) There shall have occurred any (i) material outbreak of hostilities (including,
without limitation, an escalation of hostilities that existed prior to the date hereof or an act
of terrorism) or (ii) material other national or international calamity or crisis, or any material
adverse change in the financial, political or economic conditions affecting the United States,
the effect of which on U.S. financial markets of such an event described in clauses (i) or (ii)
shall make it, in the reasonable judgment of the Underwriter, impractical or inadvisable to
proceed with the offering or delivery of the Certificates as contemplated by the final Official
Statement (exclusive of any amendment or supplement thereto).
(g) An event described in Paragraph 5G) hereof occurs that, in the reasonable
judgment of the Underwriter, requires a supplement or amendment to the Official Statement
that is deemed by them, in their discretion, to adversely affect the market for the Certificates.
(h) A general banking moratorium shall have been declared by authorities of the
United States, the State of New York or the State of Texas.
(i) A lowering of the ratings of["Aaa," "AAA" and" A.AA,"] initially assigned
to the Certificates by Moody's, S&P and Fitch, respectively, shall occur prior to the Closing.
9. Expenses. (a) The City shall pay all expenses incident to the issuance ofthe
Certificates, including but not limited to: (i) the cost of the preparation, printing and distribution of
the Preliminary Official Statement and the Official Statement; (ii) the cost of the preparation and
printing of the Certificates; (iii) the fees and expenses of Bond Counsel to the City; (iv) the fees and
disbursements of the City's accountants, advisors, and of any other experts or consultants retained
by the City; (v) the fees for the bond ratings and any travel or other expenses incurred incident
thereto; and (vi) the premium, if any, for municipal bond insurance policy pertaining to the
Certificates.
(b) The Underwriter shall pay (i) all advertising expenses in connection with the offering
of the Certificates; (ii) the cost of the preparation and printing of all the underwriting documents;
10
)
and (iii) the fee of McCall, Parkhurst & Horton L.L.P., Underwriter's Counsel, for such finn's
opinion required by Paragraph 7(e)(7) hereof.
10. Notices. Any notice or other communication to be given to the City under this
Purchase Contract may be given by delivering the same in writing at the address for the City set
forth above, and any notice or other communication to be given to the Underwriter under this
Purchase Contract may be given by delivering the same in writing to Morgan Keegan & Company,
Inc., 4400 Post Oak Parkway, Suite 2670, Houston, Texas 77027, Attention: Ms. Debi Jones.
11. Parties in Interest. This Purchase Contract is made solely for the benefit of the City
and the Underwriter (including the successors or assigns of any Underwriter) and no other person
shall acquire or have any right under this contract. The City's representations, warranties and
agreements contained in this Purchase Contract that exist as of the Closing, and without regard to
any change in fact or circumstance occurring subsequent to the Closing, shall remain operative and
in full force and effect, regardless of(i) any investigations made by or on behalf of the Underwriter,
and (ii) delivery of any payment for the Certificates hereunder, and the City's representations and
warranties contained in Paragraph 5 of this Purchase Contract shall remain operative and in full
force and effect, regardless of any termination of this Purchase Contract.
12. Severability. If any provision of this Purchase Contract shall be held or deemed to
be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any
jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any
constitution, statute, rule 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 circumstances, or of rendering any other provision inoperative or unenforceable to any extent
whatever.
13. Cboice of Law. This Purchase Contract shall be governed by and construed in
accordance with the laws of the State ofTexas.
14. Execution in Counterparts. This Purchase Contract may be executed in any number
of counterparts, all of which taken together shall constitute one and the same instrument, and any
of the parties hereto may execute this Purchase Contract by signing any such counterpart.
15. Section Headings. Section headings have been inserted in this Contract as a matter
of convenience of reference only, and it is agreed that such section headings are not a part of this
Contract and will not be used in the interpretation of any provisions of this Contract.
16. Status of tbe Underwriter. The City acknowledges that in cormection with the
offering of the Certificates and the discussions and negotiations relating to the terms of the
Certificates set forth in this Contract: (a) the Underwriter has acted at arm's length, is not an agent
of or advisor to, and owes no fiduciary duties to, the City or any other person; (b) the Underwriter's
duties and obligations to the City shall be limited to those contractual duties and obligations set forth
in this Contract; and (c) the Underwriter may have interests that differ from those of the City. The
11
)
)
City waives to the full extent permitted by applicable law any· claims it may have against the
Underwriter arising from an alleged breach of fiduciary duty in connection with the offering of the
Certificates.
[Signature page follows.]
12
)
)
If you agree with the foregoing, please sign the enclosed counterpart of this Purchase
Contract and return it to the Underwriter. This Purchase Contract shall become a binding agreement
between you and the Underwriter when at least the counterpart of this Purchase Contract shall have
been signed by or on behalf of each of the parties hereto.
Very truly yours,
THE UNDERWRITER
Morgan Keegan & Company, Inc.
Southwest Securities, Inc.
Popular Securities, Inc.
M.E. Allison & Co., Inc.
Morgan Keegan & Company, Inc.
(as Representative of the Underwriter)
~~: --~--f:>..;::.. -e..=.s::.a.~..u=;.u-....;:!v::::\~<-:....;:;::.;;~;.;....=~.s.-d\ """"o~-----..---
ACCEPTANCE
ACCEPTED pursuant to a motion adopted by the City Council of the City ofLubboc.k:, Texas
on the 12th day of January, 2007.
By:
~ayor ·
City of Lubbock, Texas
)
)
)
EXHIBIT A
Schedule of Maturities, Interest Rates, Yields and Redemption Provisions
$25,255,000
City of Lubbock, Texas
Tax and Waterworks System Surplus Revenue
Certificates of Obligation, Series 2007
Maturity Principal Interest Rate Yield
(Februaa 15} Amount (%} (%)
2008 $ 630,000 4.000 3.570
2009 655,000 4.000 3.620
2010 680,000 4.000 3.650
2011 710,000 4.000 3.670
2012 740,000 4.000 3.700
2013 770,000 4.000 3.730
2014 800,000 4.000 3.770
2015 830,000 4.000 3.780
2016 865,000 4.000 3.860
2017 900,000 4.000 3.920
2018 940,000 4.000 4.070
2019 975,000 4.000 4.170
2020 1,015,000 4.125 4.250
2021 1,060,000 4.125 4.320
2022 1,105,000 4.250 4.360
*** *** *** ***
2024 2,355,000 4.125 4.400
*** *** *** ***
2026 2,575,000 5.000 4.190
*** *** *** ***
2028 2,850,000 5.000 4.220
*** *** *** ***
2031 4,800,000 4.300 4.520
The City reserves the righ~ at its option, to redeem Certificates having stated maturities on February
15,2018 through February 15,2022, inclusive, February 15,2024, February 15,2026 and February
15, 2028 in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on
February 15, 2017, or any date thereafter, at the par value thereof plus accrued interest to the date
of redemption.
The City additionally reserves the right, at its option, to redeem the Certificates having a stated
maturity of February 15,2031, in whole or in part in principal amounts of$5,000 or any integral
multiple thereof, on February 15,2012, or any date thereafter, at the par value thereof plus accrued
interest to the date of redemption.
A-1
'\
)
The Certificates maturing on February 15 in the years 2024, 2026, 2028 and 2031
(collectively, the "Term Certificates") are subject to mandatory redemption prior to maturity in part
by lot, at a price equal to the principal amount thereof plus accrued interest to the date of
redemption, on February 15 in the respective years and principal amounts shown below:
TERM CERTIFICATES MATURING
FEBRUARY 15,2024
REDEMPTION
DATE
February 15, 2023
February 15, 2024 cmltllritr)
REDEMPTION
AMOUNT
$1,155,000
1,200,000
TERM CERTIFICATES MATURING
FEBRUARY 15, 2028
REDEMPTION
DATE
February 15, 2027
February 15,2028 CIIIOillrityl
REDEMPTION
AMOUNT
$1,390,000
1,460,000
A-2
TERM CERTIFICATES MATURING
FEBRUARY 15, 2026
REDEMPTION
DATE
February 15, 2025
February 15, 2026 (lllMUrlty)
REDEMPTION
AMOUNT
$1,255,000
1,320,000
TERM CERTIFICATES MATURING
FEBRUARY 15, 2031
REDEMPTION
DATE
February 15,2029
February 15, 2030
February 15, 2031 c-.itrl
REDEMPTION
AMOUNT
$1,530,000
1,600,000
1,670,000
)
)
EXHIBITB
Proposed Form of Underwriter's Counsel Opinion of
McCall, Parkhurst & Horton L.L.P.
Morgan Keegan & Company, Inc.
Southwest Securities, Inc.
Popular Securities, Inc.
M.E. Allison & Co., Inc.
c/o Morgan Keegan & Company, Inc.
4400 Post Oak Parkway
Suite 2670
Houston, Texas 77027
January 19,2007
RE: $25,255,000 TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES
OF 0BLIGA TION, SERIES 2007
Ladies and Gentlemen:
We have acted as counsel for you as the underwriters of the Certificates described above,
issued under and pursuant to an Ordinance of the City ofLubbock, Texas (the "Issuer"), authorizing
the issuance of the Certificates, which Certificates you are purchasing pursuant to a Purchase
Contract, dated January 12, 2007. All capitalized undefined terms used herein shall have the
meaning set forth in the Purchase Contract.
In connection with this opinion letter, we have considered such matters of law and of fact,
and have relied upon such Certificates and other infonnation furnished to us, as we have deemed
appropriate as a basis for our opinion set forth below. We are not expressing any opinion or views
herein on the authorization, issuance, delivery, validity of the Certificates and we have assumed, but
not independently verified, that the signatures on all documents and Certificates that we have
examined are genuine.
Based on and subject to the foregoing, we are of the opinion that under existing laws, the
Certificates are not subject to the registration requirements of the Securities Act of 1933, as
amended, and the Ordinance is not required to be qualified under the Trust Indenture Act of 1939,
as amended.
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
detenninations involved in the preparation of the Official Statement dated January 12, 2007 (the
"Official Statement") and because the information in the Official Statement under the headings
B-3
'I
)
"THE OBLIGATIONS -Book-Entry-Only System," "TAX MATTERS," and "OTHER
INFORMATION -Continuing Disclosure of Infonnation-Compliance with Prior Undertakings"
and Appendices A, 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 Statemen~
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 fmancial statements and other financial and statistical data contained therein, the information set
forth under the headings 11THE OBLIGATIONS -Book-Entry-Only System," "TAX MA TIERS,"
and "OTHER INFORMATION -Continuing Disclosure oflnfonnation-Compliance with Prior
Undertakings" and Appendices A, Band 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 circwnstances 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,
B-4
)
EXHIBITC
Proposed Form of Opinion of the City Attorney
Morgan Keegan & Company, Inc.
Southwest Securities, Inc.
Popular Securities, Inc.
M.E. Allison & Co., Inc.
c/o Morgan Keegan & Company, Inc.
4400 Post Oak Parkway
Suite 2670
Houston, Texas 77027
January 19, 2007
RE: $25,255,000T AX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES
OF OBLIGATION, SERIES 2007
Ladies and Gentlemen:
I am the City Attorney for the City of Lubbock, Texas (the 11City") at the time of the issuance
of the above referenced Certificates (the "Certificates"), pursuant to the provisions of the Ordinance
duly adopted by the City Council of the City on January 12, 2007. Capitalized tenns not otherwise
defmed in this opinion have the meanings assigned in the Purchase Contract.
In my capacity as City Attorney to the City, I have reviewed such agreements, documents,
certificates, opinions, letters, and other papers as I have deemed necessary or appropriate in
rendering the opinions set forth below.
In making my review, I have assumed the authenticity of all documents and agreements
submitted to me as originals, 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 statement contained in such documents.
Based upon the foregoing, and subject to the qualifications and exceptions hereinafter set
forth, I am of the opinion that under the applicable laws of the United States of America and the
State of Texas in force and effect on the date hereof:
1. Based on reasonable inquiry made of the responsible City employees and public officials,
the City is not, to the best of my lmowledge, in breach of or in default under any applicable
law or administrative regulation of the State ofTexas or the United States, or any applicable
judgment or decree or any trust agreement, loan agreement, bond, note, resolution,
ordinance, agreement or other instrument to which the City is party or is otherwise subject
and, to the best of my lmowledge after due inquiry, no event has occurred and is continuing
C-1
... I
)
)
2.
that, with the passage of time or the giving of notice, or both, would constitute such a default
by the City under any of the foregoing; and the execution and delivery of the Purchase
Contrac~ the Certificates, and the adoption of the Ordinance and compliance with the
provisions of each of such agreements or instruments does not constitute a breach of or
default under any applicable law or administrative regulation of the State of Texas or the
United States or any applicable judgment or decree or, to the best of my knowledge, any
trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other
instnunent to which the City is a party or is otherwise subject; and
Except as disclosed in the Official Statement, no litigation is pending, or, to my .knowledge,
threatened, in any court in any way; (a) challenging the titles of the Mayor or any of the
other members of the City Council to their respective offices; (b) seeking to restrain or
enjoin the issuance, sale or delivery of any of the Certificates, or the levy, collection or
application of the ad valorem taxes or the Pledged Revenues pledged or to be pledged to pay
the principal of and interest on the Certificates; (c) contesting or affecting the validity or
enforceability of the Certificates, the Ordinance or the Purchase Contract; (d) contesting the
powers of the City or any authority for the issuance of the Certificates, or the adoption of the
Ordinance; or (e) that would have a material and adverse effect on the financial condition
oftheCity.
3. I have reviewed the information in the Official Statement contained under the caption "Other
Information--Litigation" and such information in all material respects accurately and fairly
summarizes the matters described therein.
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,
C-2
REGISTERED
No.1
United States of America
State ofTexas
Cotmty of Lubbock
CITY OF LUBBOCK, TEXAS
TAXANDWATERWORKSSYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$630,000
INTEREST RATE: MA TIJRITY DATE: CUSIP NUMBER:
4.000% February 15, 2008 5491874Q2
The City of Lubbock (the "City''), in
received, hereby promises to pay to
TY THOUSAND DOLLARS
and to pay interest on amount from the later of the Certificate 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Paymentrrransfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
· Agent/Registrar, at the Designated Payment!fransfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$655,000
INTEREST RATE: MATURITY DATE: CUSIP NUMBER:
and to pay interest on such principal amount from the later of the Certificate 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentrrransfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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
United States of America
State ofTexas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$680,000
INTEREST RATE: MATURITY DATE: CUSIP NUMBER:
4.000% February 15,2010 5491874S8
The City of Lubbock (the "City>'),
received, hereby promises to pay to
and to pay interest on such principal amount from the later of the Certificate 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of Ameri~a upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Paymentffransfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Certificate 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 At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$710,000
INTEREST RATE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER:
4.000% 5491874T6
or registered assigns, on the M ·
-~ ~ '• ~:... .~·
and to pay interest on such principal amount from the later of the Certificate 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment!fransfer Officett), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment!fransfer Office of such successor. Interest on this
Certificate 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, howevert such registered
owner shall bear all risk and expenses of such customary banking arrangement. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificatet the registered owner shall be the person in
whose name this Certificate 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
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007 .
REGISTERED
$740,000
INTEREST RATE: MATURITY DATE: CUSIP NUMBER:
4.000% February 15,2012 5491874U3
SEVEN HUNDRED FORTY THOUSAND DOLLARS
and to pay interest on such principal amount from the later of the Certificate 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 semiarmually on February 15 and August 15 of each year, commencing
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Certificate 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 ~cceptable
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. At the option of
an Owner of at least $1~000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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.6
United States of America
State ofTexas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$770,000
INTEREST RATE: MATURITY DATE: CUSIP NUMBER:
4.000%
The City of Lubbock
received, hereby promises
SEVEN HUNDRED SEVENTY THOUSAND DOLLARS
5491874Vl
and to pay interest on such principal amount from the later of the Certificate Date specified
above or the most recent interest payment date to which interest has been paid or provided for
Wltil payment of such principal 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The
Bank of New York Trust Company, National Association. or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment!Transfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank accoWlt of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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 CERTIFICATES OF OBLIGATION
SERIES 2007
INTEREST RATE: MATURITY DATE:
4.000% February 15,2014
The City of Lubbock (the "City"), in,.\~ ,
received, hereby promises to pay to '~ "i.
or registered assigns, on ti.~M~fied :ve, the sum of E~RED THOUSAND DOLLARS
REGISTERED
$800,000
and to pay interest on such principal amount from the later of the Certificate 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
August 15,2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate is registered at the close of bcsiness 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 ofTexas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$830,000
INTEREST RATE: MATIJRITY DATE: CERTIFICATE DATE: CUSIP NUMBER:
and to pay interest on such cipal amount from the later of the Certificate 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 3 0-day months, such
interest to be paid semiannually on February 15 and August 15 of each year, commencing
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Paymentrrransfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment!fransfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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 ofTexas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$865,000
INTEREST RATE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER:
4.000% February 15,2016 January I, 20 . 5491874Y5
received, hereby promises to pay to ~
E&·'
EIGHT~H. ' · D S TY-FIVE THOUSAND DOLLARS
and to pay interest on sucli principal amount from the later of the Certificate Date specified
above or the most recent interest pa}111ent 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Pa}111ent/Transfer Office of such successor. Interest on this
Certificate 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 At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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. 10
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$900,000
INTEREST RATE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER:
4.0000/o February 15,2017 January 1, 2007 5491874Z2
The City of Lubbock (the. ".City"), .in the Co:a,:-~te of Texas, for value
received, hereby promises to pay to -_., c~t) "~ \ ~
or registered assigns, on the ·~~U).!ve, the sum of
·~H~D THOUSAND DOLLARS
and to pay interest on such principal amount from the later of the Certificate 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, conunencing
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas {the "Designated Paymenttrransfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment!fransfer Office of such successor. Interest on this
Certificate 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 At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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. 11
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$940,000
INTEREST RATE: MATURITY DATE: CUSIP NUMBER:
4.000% February 15,2018 5491875A6
The City of Lubbock (the "City''}, in State of Texas, for value
received, hereby promises to pay to
NINE ._
[·"?l:~ .......
and to pay interest on such principal amount from the later of the Certificate 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-<lay year of twelve 30-day months, such
interest to be paid semiannually on February 15 and August 15 of each year, commencing
August 15,2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentffransfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1 ,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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.l2
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$975,000
INTEREST RATE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER:
4.000% February 15,2019 5491875B4
and to pay interest on such principal amount from the later of the Certificate 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment!fransfer Office~'), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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.l3
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
INTEREST RATE: MATURITY DATE:
or registered assigns, on the
FIFTEEN THOUSAND DOLLARS
REGISTERED
$1,015,000
and to pay interest on such principal amount from the later of the Certificate 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment!fransfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentrrransfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1 ~000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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.l4
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
INTEREST RATE: MATURITY DATE:
4.125% February 15, 2021
The City of Lubbock (the "City"), in the
received, hereby promises to pay to
SIXTY THOUSAND DOLLARS
REGISTERED
$1,060,000
and to pay interest on such principal amount from the later of the Certificate 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Paymentffraasfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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. 15
United States of America
State ofTexas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$1,105,000
INTEREST RATE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER:
4.250"/o february 15,2022 January; " : ~5491875ES
receiv~ hereby promises to
0
pa~ :~ . ~,
or registered assigns, on the M a:eEed above, the swn of
'(;:.
ONE MilLION E HUNDRED FIVE THOUSAND DOLLARS
and to pay interest on such principal amount from the later of the Certificate 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, conunencing
August 15,2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the ·'Designated Paymentffransfer Office"), of The
Bank ofNew York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment!Transfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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.l6
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
INTEREST RATE: MATURITY DATE: CERTIFICATE DATE:
4.125% February 15, 2024
REGISTERED
$2,355,000
and to pay interest on such principal amount from the later of the Certificate 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas {the "Designated Paymentffransfer Office"}, of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Certificate 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. At the' option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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.l7
United States of America
State of Texas
County of Lubbock
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
INTEREST RATE: MATURITY DATE:
5.000% February 15, 2026
The City of Lubbock (the "City"), in the Coun~
received, hereby promises to pay to
REGISTERED
$2,575,000
i
cE . · .•.
or registered assigns, on the Ma,ty-9 CI ave, the sum of
TWO MILLION FIVE H~~ EVENTY -FIVE THOUSAND DOLLARS
and to pay interest on such principal amount from the later of the Certificate 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The
Bank ofNew York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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. 18 $2,850,000
United States of America
State ofTexas
County of Lubbock
CITY OF LUBBOCK, TEXAS
) TAXANDWATERWORKS SYSTEM
)
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
INTEREST RATE: MATURITY DATE:
5.000% February 15, 2028
or registered assigns, on the Matupty~Da ~ :
't). ..
TWO MILLION EIGHJ:.~<
"0
4
and to pay interest on such principal amount from the later of the Certificate 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 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
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment!fransfer Office"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment!fransfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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. 19
United States of America
State of Texas
County of Lubbock
CI1Y OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION
SERIES 2007
REGISTERED
$4,800,000
INTEREST RATE: MATURlTY DATE: CERTIFICATE DATE: CUSIP NUMBER:
the sum of or registered assigns, on the~~~ .... ~--, ·
~ .
FOUR MILLI€>N ?~ · THOUSAND DOLLARS
and to pay interest on such p~~ amount from the later of the Certificate 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 semiarmually on February 15 and August 15 of each year, commencing
August 15, 2007.
The principal of this Certificate shall be payable without exchange or collection charges in
lawful money of the United States of America upon presentation and surrender of this Certificate
at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office'"), of The
Bank of New York Trust Company, National Association, or, with respect to a successor Paying
Agent/Registrar, at the Designated Payment!fransfer Office of such successor. Interest on this
Certificate 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. At the option of
an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by
wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the
purpose of the payment of interest on this Certificate, the registered owner shall be the person in
whose name this Certificate 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 Certificate shall be a
Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the
Designated Payment/Transfer 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 Certificate is one of a series of fully registered certificates specified in the title
hereof issued in the aggregate principal amount of $25,255,000 (herein referred to as the
"Certificates,), issued pursuant to a certain ordinance of the City (the "Ordinance") for the
purpose of paying contractual obligations to be incurred for authoriz~blic improvements
{collectively, the "Project''), as described in the Ordinance, and.~o· -~ .. ~ _ tractual obligations fo~ professi~nal servic~ of attorneys, fin~cial advisors ~· ~r~ als in connection
wtth the Project and the 1ssuance of the Certificates. ~' :5~~~---._·. ·.,
The City has reserved the option to ~~ .... tes·maturing on February 15 in
the years 2018 through 2028, inclusi .. v~le o~~-tn.'i~~. before their respective scheduled
maturity dates, on February 15,201 \~.t<{ eieafter, at a price equal to the principal
amount of the Certificates so . ti t-.. "plus accrued interest to the date fixed for
redemption. The City has s .. , '·_ · op , ·• o redeem Certificates maturing on February 15,
2031, in whole or in part, befQi.atk~. scheduled maturity dates, on February 15, 2012, or any
date thereafter, at a price eq~al~ the principal amount of the Certificates so called for
redemption plus accrued intere1fto the date fixed for redemption. If less than all of the
Certificates 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 or other
customary method that results in a random selection the Certificates, or portions thereof, within
such maturity and in such principal amounts, for redemption.
Certificates maturing on February 15 in each of the years 2024, 2026, 2028 and 2031 (the
"Term Certificates") 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:
Term Certificates Maturing February 15. 2024
Redemption Date
February 15, 2023
February 15, 2024 (maturity)
Principal Amount
$1,155,000
1,200,000
Tenn Certificates Maturing February 15. 2026
Redemption Date
February 15, 2025
February 15, 2026 (maturity)
-2-
Principal Amount
$1,255,000
1,320,000
)
Term Certificates Maturing February 15. 2028
Redemption Date
February 15, 2027
February 15, 2028 (maturity)
Principal Amount
$1,390,000
1,460,000
Term Certificates Maturing February 15. 2031
Redemption Date Principal Amount
February 15, 2029 $1,530,000
February 15, 2030 1,600,000
February 15,2031 (maturity) 1,670,~\..
The Paying Agent/Registrar will select by lot .. • ~mary method that
results in a random selection the specific Certificat . ~lo Certificates having a
denomination in excess of $5,000, each $5,00 e redeemed by mandatory
redemption. The principal amount of C e redeemed on any redemption
date pursuant to the foregoing man .. edemption provisions hereof shall be
reduced, at the option of the City, · .. "' · ount of any Certificates whic~ at least 45
days prior to the mandatory sinking~ r ption date (i) shall have been acquired by the
City at a price not exceeding ihe prin . amount of such Certificates plus accrued interest to the
date of purchase thereof, and deliveJe to the Paying Agent/Registrar for cancellation, or (ii)
shall have been redeemed pursmfui to the optional redemption provisions hereof and not
previously credited to a mandatory sinking fund redemption.
Notice of such redemption or redemptions shall be given by first class mail, postage
prepaid, not less than 30 days before the date fixed for redemption, to the registered owner of
each of the Certificates to be redeemed in whole or in part. Notice having been so given, the
Certificates 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 Certificates or portions thereof so called for redemption shall not have been surrendered for
payment, interest on such Certificates or portions thereof shall cease to accrue.
As provided in the Ordinance, and subject to certain limitations therein set fo~ this
Certificate is transferable upon surrender of this Certificate 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 Certificates 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 Certificate 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 Certificate is
registered on the Record Date) and for all other purposes, whether or not this Certificate be
overdue, and neither the City nor the Paying Agent/Registrar shall be affected by notice to the
contrary.
-3-
)
)
IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Certificate 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 Certificates 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 Certificates within the li ·t prescribed by law;
that,. in addition to said taxes, further provisions have been made , ent of the debt
service requirements of the Certificates by pledging to s~uch os _ ~. Ius Revenues, as
defined in the Ordinance, derived by the City from the o a_, . -System in an
amount _limited to $1 ,000; that when so collected, s~· -.-~lus ~ev~ues ~hall be
appr?pnated to such purposes; and _th~t the~~ . Of the C1ty, mcludmg the
Certificates, does not exceed ·:.~nsnrur(;~ . ~on.
\ ... , .. .
...... ---
_,_ '·' ~·--~
-4-
)
fN WITNESS WHEREOF, the City has caused this Certificate 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 Certificate.
~~
City Secretary, . ...:~
City of Lubbock, Te~
-5-
CERTIFICATE OF PAYING AGENT/REGISTRAR
Dated:
Authorized Signatory
)
;
-6-
\
)
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or
typewrite name, address and Zip Code of transferee): ------.....---------
(Social Security or other identifying number: the within Certificate
and all rights hereunder and hereby irrevocabl .. ~nsti appoints
---------attorney to tr~:'th~~ith6 ificate on the books kept for
registration hereof, with full powe;;~~~~~~e premises.
Dated: :'( V -------------
~ NOTICE: The signature on this Assignment
must correspond with the name of the
registered owner as it appears on the face of
the within Certificate in every particular and
must be guaranteed in a manner acceptable
to the Paying Agent/Registrar.
Signature Guaranteed By:
Authorized Signatory
'
)
STATEMENT OF INSURANCE
Financial Security Assurance Inc. (''Financial Security") i.e York, New York, has
delivered its municipal bond insurance policy with respect to th~.,s. c .. uled payments due of
principal of and interest on this Certificate to The Bank of NevC;<{ • ·. t Company, National
Association, Dallas, Texas, or its successor, as paying 11~< · f~t 'ficates (the "Paying
Agent"). Said Policy is on file and available for inspitf~~.· e priPcipal office of the Paying
Agent and a copy thereof may be obtained from Fin~··, • · .-. ~(the Paying Agent .
.tfl.":> : .•
FINANCIAL}:~~~-~ ·. .. NCE INC .
. ~-:r-~~: ............ ~
12065:!3v.l lUB:!OOni007
··-·;.J ~ A6 . ,_\t'~ ~ ..,\:;:~ -<~-. .~):! ~.~.
-8-
EXHIBIT A
TERM SHEET FOR MUNICIPAL BONO INSURANCE COMMITMENT
Issuer: City of Lubbock, Texas
Principal Amount of Bonds Insured: Not to Exceed $25,515,000
Name of Bonds Insured: Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2007
Date of Commitment: December 28, 2006 Expiration Date: Friday, March 2, 2007'
Premium: .16% of total debt service on the Bonds Insured
Bond Counsel Opinion·-Language Requirements:
The approving opinion of Bond Counsel shall include language to the effect that the Bonds are a full faith and credit
obligation of the Issuer, the payment for which the Issuer is obligated to exercise its ad valorem taxing power, within
the limits prescribed by law, upon all taxable property within the Issuer. The Bonds are also payable from and
secured by a lien on and pledge of the Net Revenues of the Issuer's combined Waterworks and Sewer System.
Additional Conditions: None.
FINANCIAL SECURITY ASSURANCE INC.
Authorized Officer
*To keep the Commitment in effect to the Expiration Date set forth above, Financial Security must receive a duplicate
of this Exhibit A executed by an authorized officer by the eartier of the date on which the Official Statement containing
disclosure language about Financial Security is circulated and ten days from the Date of CommitmenL
The undersigned agrees that if the Bonds are insured by a policy of municipal bond insurance, such insurance shall
be provided by Financial Security in accordance wiltl the tenns of the Commitment.
l:\I..EGAL\MUNIS\STATES\TX\97017 _C.doc
.. ~ ~ ·-·
·. -
In the event the Insurer is unable to fulfill its contractual obligation under this policy or contract or
application or certificate or evidence of coverage, the policyholder or certiflcateholder is not
protected by an insurance guaranty fund or other solvency protection arrangement.
FINANCIAL
SECURITY
ASSURANCE®
ISSUER: City of Lubbock, Texas
BONDS: $25,255,000 in aggregate principal amount of
Tax and Waterworks System Surplus -Revenue
Certificates··or 9~1,igation, Series 2007 ·. -
MUNICIPAL BOND
INSURANCE POLICY
Policy No.: 208028·N
Effective Date: January 19, 2007
Premium: $66,496.76
FINANC{Al ·sECU~jTv ::A$SUAANGE INC. ("Financial SecuritY")·. for consideration received,
hereby UNCONOITfONAU.YAND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying
agent (the "flaying Agent"} .<:as se! {~~h il) the documentation proyiding for ~he issuance of and se~uring
the Bonds) for the Bonds, for the benefit of the Owners or, at the election of Financial Security, directly' to eac~ Owner~-~ubje9't_gnly:J9.Jhe·te.nns of .lhi$ Policy (which include~. each encforsement hereto), ·tt:-at
portion of the. principal of .. ~nd intere~t o~ the Bonds that ~hall beco~e Due for Payment but shall be ..
unp·aid by reason: or Nonpayment by·tne Issuer. :· · · · · " '-· · ·· · . ~ .... • ·i.; -· \} \; :"1 \ f -~ .
·. On,. the later 'of the:·aay on'wllich such principal and interest becomes Due for Payment. or 'ihe
Business Day· neXt followin{j' tne BuSiness' Day on: which Financial Security shall have received Notice of
Nonpayment, Financial Seeun)y wilf, disburse to or .for the benefit of each, Owner of a Bond' lhe face
amount of principal of and inter est ~n the Bond that is then Due for Payment but is_ then unpaid by reason
of Nonpayment by· t6e ls"Stler, but. ·only upon receipt by Financial Security, in a . form reasonably
satisfactory to it, of (ii) evj9~n~e ~f t!'t~ O~er's right to receive p~yrne.nt o,f the principal or interest t~en
D_ue for Payment and-(b} .. ~vidimc~, ihcludi~g any appropriate instrufT\ents ~f assignment, that all orthe
Owner's rights with respect to payment of such principal or interest that: ~s Due for Payment shall
thereupon v~st in Financial. Security.' A Notice· of .Nonpayment wi~l be deemed received on a given
Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will
be deemed .received on :the he~ ~usiness qay. ·If any Notice of Nonpayment received by Financial
Security is incgmplete, it shall be dee~ed not to have been received by Financial Security tor purposes of
the preceding sentence and Financial' Security shall promptly so advise lhe Trustee, Paying Agent or
Owner, as appropriate, who may·submit an amended Notice of Nonpayment. Upon disbursement in
respect of a Bond, Financial.: Security shall. become the owne! of the Bond, any appurtenant coupon to the
Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to
the rights of the Owner, ii)Ciuding. the Owner's right to receive payments under the Bond, to the extent ~f
any payment by FinanciaJ. Security ~ereuhder. ~?yment by Financial Security to the Trustee or Paying
Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of Financial
Security under this· Policy.~ :
.. . : ...
. Ex~ept to !h~ eXt~"ot ·expre_s~y m<?.dified by an endorsem~nt hereto: the following terms shall
have the meanings specified for all purposes of this Policy:-~Business Day• means any day other than·(a)
a Saturday or Su~day ,or (b) ,a_ day Of\.whi~h banking instit!Jtions in the State of New York or the Insurer's
Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment"
means (a} when referring -to tlie principal' of a Bond, payable on the stated maturity date thereof or the
dat~ on which the same shall have been duly called for mandatory sinking fund redemption and does not
refer to any earlier ~te on ymich paymenf'is due by reason of call for' redemption (other than by
mandatory sinking fund re<:lemption), acceleration ·or other advancement of maturity unless Financial
Security shall elect, in its.~Q!e,discr!tion, to pay s.uch prin<?ipal due _upon su~h acceleration together with
any accrued interest to the date of aceeleration and (b) when referring to interest on a Bond, payable on
the stated date for payment of intere_~t. "Nonpayment• means, in respect of a Bond, the failure of the
Issuer to have provided sufficient fun~s to the Trustee or, if there is no Trustee, to the Paying Agent for
payment in full of all principal and interest that is 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
... · ';
. :• ·-··-.
.• ': ... -:;_
. ' ·~'"
~-:.
Page 2 of 2
Policy No. 208028-N
United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable
order .of a court having competent jurisdiction. "Notice• means telephonic or telecopied notice,
subseque.ntly confirmed in a signed writing, or written notice by registered or certified mail, from an
Owner, the Trustee or the Paying Agent to Financial Security which notice shall specify (a) the person or
entity making the claim, (b) the Policy Number, (c) the claimed amount and {d) the date such claimed
amount became Due for Payment. "Owner• means, in respect of a Bond, the person or entity who, at the tiifte· of Nonpaym~nt, is ent.itled under the terms of such Bond to payment thereof, except that "Ownet·
· shall not include the Issuer_ or any person or entity whose direct or indirect oblig~tion constitutes the
underlying security for the Bonds. .
. , __ · F!nancial Security may appoint a fiscal agent {the "Insurer's Fiscal Agent"). for purpo~es of this
Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice
-. ~ address ofth~ Insurer's F:iscal Agent. From and after the date of receipt of suet) notice by the Truste~ -
·; a~_q'the PaY.ing Agent, (a) copies of all. notices required to be delivered to Financial Secuiiw p~:~rsuant to
' :. thiS: Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to Financial Security and
. ._ I· :; ~ sh·atl ,J.Iot;b~ ~ee!'fled received until received by both and (b) all payments. required to. be made by
· • _ Firiac:tcial Security under this Policy may be made. directly by Financial Security or by .the ln~urer's Fiscal
" ."' .~. Agent on '6enalf of FinanCial' Security. The Insurer's F-iscal Agent is the agent ot Fin~'ncial Sl:tciurity only . ,·
;:, ·r'• af,l~~~e h~!i~.r~r's fi~~l Agert.,shall in,no ev~!'lt ~~liable to any Owner for_any acto( t~e lnS!Jr~r's,Fiscal
. · ~ Ag~Qt :or ,any ~ailure of Financial Security to dep~it or cause to be deposited sufficie_nt funds to make
.. :: !. payments:aue under this Policy. -· ···. · · · ' .'-· : t;
:· '".. ~ ",., ,i1 f. (~ · ~ ,-.. ·· :~ -' '-... · , r "'.. -·_, ' · .. · -~ -; .~ .To _the. fullest e~en~ permitted ,by appli9able law, Financial Security agrees nor. to assert. and ·.· '::··~1 hereby. wai\tes,. only' for the benefit of each Owner, ·an rights (whether by counterclaim:··setoff'or otherwise)
·. : , arad. d_efenses (inchj ding., without limitation, the .9efense·. of fraud), wheth~r acquired bY,· . .$Ubrogatio!l.
:.· •• a~sign'ment ... or otherWise; to the eXtent that'such rights and defenses may be available· fo Financial
'' ~:' :·?. S'ecurilY to av.oid payment of its obligations 'under this Policy in· aceordance with the e~ress proVisions of
this Policy~ J ""' .. :. ,._•
~: ~· ., ·· This Policy sets forth in full the undertaking of Financial Security, and shall. not be modified,
alt~.re~ or affected by any other agreement or instrument, including any. modification or amendment
thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in
resp~t of this Policy i_s nonrefundable for any .reason whatsoever, including payment, or provision being
made for .p~yment, of the.Bonds prior to maturity and (b) this Policy may not be canceled or revoked.
THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUAL TV INSURANCE SECURITY FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. ~, · ~ . In witness whereof, FINANCIAL ~ECURITY ASSURANC~z· as caused this Policy to be
;'·-. e~ecuted on its behalf by its At;rthorize~ Office~. ( · ....
_, • • /~CUAI~SUAANCE
,_../.By I l/f; ~ ·
\ AuthoriZed qtti~ .. .
•. •. A s~b~idi~rfot Financial Security Assurance Holding~ Ltd. v12} 82S-0100
31 West 52nd Street, New York, N.Y. ·10019
Form ·sooNY (5190)
' -
• .
:·_
,; ·'~ . ~ .
~· ~ .. :
.. ·~ ~. ~· t
.• :
·-.
··•. '
GENERAL CERTIFICATE
We, the undersigned, Mayor, City Secretary and Chief Financial Officer, 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, Combination Tax and
Waterworks System Surplus Revenue Certificates of Obligation, Series 2007 (the "Certificatesu).
Capitalized terms used herein and not otherwise defmed shall have the meaning assigned thereto
in the ordinance ("Ordinance'') of the City Council authorizing the issuance of the Certificates.
2. The total tax supported debt of the City, after giving effect to the issuance of the
proposed Certificates, is $473,545,000.
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 2006, being its latest approved official
assessment rolls is $10,002,725,637, 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 ofTexas.
4. A true and correct copy of the debt service schedule for the Certificates 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" of the City's Official Statement, such
debt service schedule being incorporated herein by reference for all purposes.
5. 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.
6. The following are duly qualified and acting, elected or appointed officials of the
City of Lubbock, Texas:
David A. Miller, Mayor
Jim Gilbreath, Mayor Pro Tern
Lee Ann Dumbauld, City Manager
Jeffrey A. Yates, Chief Financial Officer
Rebecca Garza, City Secretary
Tommy Combs, Deputy City Secretary
Linda DeLeon )
Floyd Price )
Gary 0. Boren )
Phyllis S. Jones )
John Leonard )
)
Members of
the Council
7. No litigation of any nature has been filed or is now pending to restrain or enjoin
the issuance or delivery of the Certificates 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 Certificates, and so far as we know and believe, no such litigation is threatened.
8. 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 Certificates have been repealed, revoked or rescinded.
1201980v.I LUB200171007
)
'
9. 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 Certificates.
10. A true and correct statement of the revenues and expenses of the Waterworks
System for fiscal years 2004, 2005 and 2006, together with a true and correct statement of
current rates and charges for the services of the System, is attached hereto as Exhibit A.
11. Except for the pledge of income and revenues of the System to the payment of: (i)
water supply contracts with the Canadian River Municipal Water Authority, (ii) the Certificates,
and (ii) the Certificates set forth in Exhibit B hereto, none of the City's debts or Certificates will
be secured by a lien on and pledge of the revenues or income of the System.
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 Certificates (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 Certificates 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.
17. The undersigned Mayor and City Secretary officially executed and signed the
Certificates, including the Initial Certificates delivered to the initial purchasers of the
Certificates, by manually executing the Certificates or by causing facsimiles of our manual
signatures to be imprinted or copied on each of the Certificates, 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
Certificates.
18. The Certificates, including the Initial Certificate delivered to the initial purchasers
of the Certificates, are substantially in the fonn, and have been duly executed and signed in the
manner, prescribed in the Ordinance.
-2-
120J980v.J LUB200/71007
19. At the time we so executed and signed the Certificates 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 Certificates; and said seal on the Certificates has been duly adopted as, and is
hereby declared to be, the official seal of the City.
[EXECUTION PAGE FOLLOWS]
-3-
1201980v.l LUB200171007
EXECUTED AND DELIVERED this JAN 1 9 2007
MANUAL SIGNATURE OFFICIAL TITLES
STATEOFTEXAS §
§
COUNTY OF LUBBOCK §
Mayor, City of Lubbock, Texas
Before me, the undersigned authority, on this day personally appeared David A. Miller,
) Mayor 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.
GNEN UNDER MY HAND AND SEAL OF OFFICE THIS cr ""~ ~ 1iJO 7
)
Notary Public,
In and for the State of Texas
[SEAL]
Signature Page for General Certificate
1201980v.J LUB200171007
)
)
.,
EXECUTED AND DELIVERED this ___ J_A_N_l_9_20_0_7 _
MANUAL SIGNATURE OFFICIAL TITLES
Chief Financial Officer, City of Lubbock,
Texas
STATEOFTEXAS §
§
COUNTY OF LUBBOCK §
Before me, the undersigned authority, on this day personally appeared Jeffrey A. Yates,
Chief Financial Officer 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 ,,.:~d!lf~~ 6007
® CELIA WEBB ·
Nollry Pubfic, Slale d Texas (;
My~ Expires 0$01-2010 ~·
[SEAL]
Signature Page for General Certificate
) 1201980v.l LUB200/71007
EXECUTED AND DELIVERED this ____ JA_N_l _9_2_00_7_
MANUAL SIGNATURE OFFICIAL TITLES
) City Secretary, City of Lubbock, Texas
) STATEOFTEXAS §
)
)
§
COUNTY OF LUBBOCK §
Before me, the undersigned authority, on this day personally appeared Rebecca Garza,
City Secretary 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 ~~1~·
GNEN UNDER MY HAND AND SEAL OF OFFICE THIS /7,; ~ :J.J){)l
® CEUAWEBB ~~ Nay Nllic, Stale of Texas ~
MyCotmission &pi'es 03-0t-2010 Notary Pubhc,
In and for the State of Texas
[SEAL]
Signature Page for General Certificate
120 1980v.l LUB200!7l 007
EXHIBIT A
CITY OF LUBBOCK, TEXAS
Includes unaudited infoonation from the fiscal year ended September 30, 2006
Table 18-Waterworks System Condensed Statement of Operations
Fiscal Year Ended September 30,
2006 2005 2004 2003 2002
REVENUE
Operating Revenues $ 37,330,953 33,306,786 31,907,893 32,770,781 32,727,UJ7
Non-Operating Revenues 1,618,760 883,824 539,413 1,337,330 1,313,649
Gross Revenues 38,949,713 34,190,610 32,447,306 34,108,111 34,040,856
EXPENSE
Operating Expense (I) 20!720295 20,550,379 20,137,448 19,596z079 20,194,590
)
Net Revenues $18~9,318 13,640,231 12,309,858 14,512,032 13,846,266
)
'
)
)
)
I First Reading
! August 31, 2006
! !tea Ro. 4.3
Second Reading
September 13» 2006
Ite. No. 6.7
ORDINANCE NO. 2006-<>0097
AN ORDINANCE AMENDING CHAPTER 28 OF THE CODE OF
ORDINANCES OF THE CITY OF LUBBOCK, TEXAS, BY AMENDING SECTIONS
28-52 AND 28-53 OF THE CODE OF ORDINANCES OF THE CITY OF LUBBOCK
BY REVISING WATER RATES AS CONTAINED THEREIN: PROVIDING A
SAVING CLAUSE AND PROVIDING FOR PUBLICATION.
WHEREAS, the City Council of the City of Lubbock deems it to be in the best
interest of the citizens of the City of Lubbock to adjust water rates within the City of
Lubbock to reflect the cost of service; NOW THEREFORE:
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK;
SECTION 1: THAT Section 28-52 of the Code of Ordinances, City of Lubbock,
Texas, is hereby amended to read as follows:
Section 28-52. Base Rate.
The basic monthly rates for water which shall be charged to all customers based
upon classification of usage shall be as follows:
Three-quarter inch
(3/4'') meter
One inch ( 1 ") single
family residence meter
One inch (1")
inigation meter
One inch ( 1 ") meter,
other than a single
family residence
One and one half inch
( 1.5") meter
Two inch (2'') meter
Three inch (3") meter
Four inch ( 4") meter
Six inch (6") meter
Eight (8") meter
Ten ( 1 0") meter
$11.11
$14.14
$13.21
$23.71
$44.71
$70.07
$151.80
$396.37
$787.72
$999.49
$1,994.13
SECTION 2. THAT Section 28·53 of the Code of Ordinances, City of Lubbock,
Texas, is hereby amended to read as follow:
)
)
)
Section 28-53. Rate Generally.
The City, through its water department, shall charge to and collect from every
1 consumer and every consumer shall pay for water furnished by the City to the conswner,
in addition to the base rate, to meter readings for all billing cycles, the rate in addition to
the base rate, which shall be as follows:
Single Family Residence
Multiple Family
Commercial
Schools
Irrigation
(per thousand gallons)
$2.03
$1.73
$1.88
$1.92
$2.38
SECTION 3: THAT the City Council finds and declares that sufficient written
notice ofthe date, hour, place and subject of this meeting of the Council was posted at a
designated place convenient to the public at the City Hall for the time required by law
preceding this meeting, that such place of posting was readily accessible at all times to
the general public, and that all of the foregoing was done as required by law at all times.
SECTION 4. THAT should any paragraph, section, sentence, phrase, clause or
word of this Ordinance be declared unconstitutional or invalid for any reason, the
remainder of this Ordinance shall not be affected thereby.
SECTION 5. THAT the City Secretary is hereby authorized and directed to cause
publication of the descriptive caption of this Ordinance as an alternative method of
publication provided by law.
AND IT IS SO ORDERED.
Passed by the City Council on first reading this list day of August , 2006.
Passed by the City Council on second reading this ll'!lday of September , 2006.
-'-~~4~
DAVID A. MILLE~ MAYOR
ATTEST:
Rebecca Garza, City Secretary
2
)
)
)
)
APPROVED AS TO CONTENT:
APPROVED AS TO FORM:
ttomey of Counsel (/\.~
DDord/WaterRateOrd06
August 2S, 2006
3
)
Exhibit B
Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 2006, dated April 15,
2006, issued in the original principal amount of$76,950,000
Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2005, dated
August 15, 2005, issued in the principal amount of $46,525,000
Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 2005, dated July 1,
2005, issued in the original principal amount of$43,080,000
Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2004, dated
September 15,2004, issued in the original principal amount of$3,100,000
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
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
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
Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 1999, dated Aprill,
1999, issued in the original principal amount of $12,300,000
Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1999,
dated January 15, 1999, issued in the original principal amount of$15,355,000
Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1998,
dated October 1, 1998, issued in the original principal amount of$10,260,000
Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1993,
dated October 1, 1993, issued in the original principal amount of$1,470,000
Signature Page for General Certificate
1201980v.l LUB200171007
)
>
The Attorney General of Texas
William P. Clements Building
300 West 15th Street, 9th Floor
Austin, Texas 7870 l
Attention: Public Finance Division
Comptroller of Public Accounts
Thomas Jefferson Rusk Building
208 East lOth Street, Room 448
Austin, Texas 78701-2407
City of Lubbock, Texas
January 12, 2007
Attention: Economic Analysis Center
Re: City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of
Obligation, Series 2007 (the "Obligations")
To the Attorney General:
The executed Initial Obligation 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 Obligation has received yom
approval and is ready for delivery to the Comptroller of Public Accounts for registration, this
letter will serve as yom authority to insert the date of your approval in the General Certificate
and deliver the Initial Obligation to the Comptroller.
Should litigation in any way affecting such Obligations 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 Obligation is finally approved by you, unless you
have been advised otherwise.
To the Comptroller:
The approved Initial Obligation for the captioned series of Obligations will be delivered
to you by the Attorney General of Texas. You are hereby requested to register the Initial
Obligation as required by law and by the proceedings authorizing such Initial Obligation.
Following registration, you are hereby authorized and directed to notify and deliver the
Initial Obligation to Vinson & Elkins L.L.P ., Dallas, Texas, which has been instructed to pick up
same at your office.
l201966v.l LUB200171007
-Please also deliver to Vinson & Elkins L.L.P., Dallas, Texas, three copies of each of the
following:
I. Attorney General's approving opinion; and
2. Comptroller's signature certificate.
Very truly yours,
CITY OF LUBBOCK, TEXAS
) By: ~#JttA-
David A. Miller, Mayor
-2-
1201966v.l LUB200171 007
FEDERAL TAX CERTIFICATE
I, the undersigned officer of the City of Lubbock, Texas (the "Issuer"}, 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 Issuer's Tax and Waterworks
System Surplus Revenue Certificates of Obligation, Series 2007 (the "Certificates of
Obligation'') which are being issued and delivered simultaneously with the delivery of this
Certificate. I do hereby certify as follows in good faith as of the date hereof(the "Issue Date"}:
I. Definitions. Each capitalized term used in this Certificate has the meaning or is
the amount, as the case may be, specified for such term in this Certificate or in Exhibits to this
Certificate and shall for all purposes hereof have the meaning or be the amount therein specified.
All such terms defined in the Code or Regulations shall for all purposes hereof have the same
meanings as given to those tenns in the Code and Regulations unless the context clearly requires
otherwise.
2. Resoonsible Officer. I am the duly chosen, qualified and acting officer of the
Issuer 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 Issuer.
I am the officer of the Issuer charged, along with other officers of the Issuer, with responsibility
for issuing the Certificates of Obligation.
3. Code and Regulations. I 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 1 SO 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)-l, l.l49(d)-l, l.l49(g)-l , 1.150-1 and 1.150-2 of
the Regulations.
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 Issuer as to
such accuracy and reasonableness. The undersigned has also relied, to the extent appropriate, on
representations set forth in the Issue Price Certificate of Morgan Keegan & Company, Inc. (the
"Underwriters"), attached as Exluoit A to this Certificate, and the certificate of RBC Dain
Rauscher Inc. d/b/a RBC Capital Markets (the "Financial Advisor"), attached as Exhibit B to this
Certificate. 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 Purpose. The Issuer is issuing the Certificates of
Obligation pursuant to the resolution, order or ordinance, as the case may be, adopted by the
Issuer for purposes of authorizing the issuance of the Certificates of Obligation (the "Certificate
of Obligation Document"} for the purposes of funding (a) the Project as described more fully in
the Official Statement prepared in connection with the offering of the Certificates of Obligation
and (b) the costs of issuance of the Certificates of Obligation. The primary purpose of each
transaction undertaken in connection with the issuance of the Certificates of Obligation is a bona
fide governmental purpose. The Project is described as follows: paying contractual obligations
to be incurred for street improvements and professional services rendered in connection
therewith.
6. Amount and Expenditure of Sale Proceeds of the Certificates of Obligation.
(a) Amount of Sale Proceeds. The Issuer sold the Certificates of Obligation to the
Underwriters for $25,194,669.44, which price does not include Pre-Issuance Accrued Interest.
The Sale Proceeds from the issuance of the Certificates of Obligation is $25,388,737.30, based
on the amount set forth on Exhibit A hereto. Such amount represents the Stated Redemption
Price at Maturity (excluding Pre-Issuance Accrued Interest for those Certificates of Obligation
the interest on which is paid at least once annually) of the Certificates of Obligation, plus any
Original Issue Premium, less any Original Issue Discount. No portion of the purchase price of
any of the Certificates of Obligation is provided by the issuance of any other issue of obligations.
(b) Expenditure of Sale Proceeds. The Sale Proceeds of the Certificates of Obligation
will be expended as follows:
(i) The amount of$194,067.86 will be allocated on the date of issuance of the
Certificates of Obligation to the payment of Underwriters' discount or compensation.
(ii) The amount of$128,000.00 will be disbursed to pay other Issuance Costs
on the Certificates of Obligation (including any rating agency fees charged to the Issuer
by the Certificate of Obligation insurer).
(iii) The amount of$66,496.76 will be allocated on the date of issuance of the
Certificates of Obligation to the payment of Bond Insurance Premium on the Certificates
of Obligation (net of any rating agency fees).
(iv) The amount of $25,000,000.00 will be deposited in the Construction or
Project Fund and is expected to be disbursed to pay or reimburse the costs of acquisition
and construction of the Project. The aggregate amount of the costs of acquisition and
construction of the Project is anticipated to be not less than such amount. Any costs of
the Project not financed out of original or investment proceeds of the Certificates of
Obligation will be financed out of the Issuer's available funds.
(v) The amount of $172.68 represents a rounding amount, which will be used
to pay debt service on the Certificates of Obligation.
(c) Reimbursement. Other than to the extent of preliminary expenditures (i.e.,
architectural, engineering, surveying, soil testing, Certificate of Obligation issuance, and similar
costs that are incurred prior to commencement of acquisition, construction, or rehabilitation of
the Project, other than land acquisition, site preparation, and similar costs incident to
commencement of construction), no portion of the amount described in paragraph 6(b) above
will be disbursed to reimburse the Issuer for any expenditures made by the Issuer prior to the
date that is 60 days before the earlier of the Issue Date or the date the Issuer adopted a resolution
(the 11Declaration"), if any, describing the Project, stating the maximum principal amount of
-2-
)
)
)
obligations expected to be issued for the Project, and stating the Issuer's reasonable expectation
on that date that it would reimburse expenditures for costs of the Project with proceeds of an
obligation. The Declaration, if any, is not an official intent to reimburse that was declared as a
matter of course, or in an amount substantially in excess of the amount expected to be necessary
for the Project. The Issuer has not engaged in a pattern of failure to reimburse original
expenditures covered by official intents. Such reimbursed portion will be treated as spent for
purposes of paragraphs ll(b) and 15 below. Any such Declaration is attached hereto as Exhibit
c.
(d) No Working Capital. Except for an amount that does not exceed 5 percent of the
Sale Proceeds of the Certificates of Obligation (and that is directly related to capital expenditures
financed by the Certificates of Obligation), the Issuer will only expend proceeds of the
Certificates of Obligation for (i) costs that would be chargeable to the capital accounts of the
Project if the Issuer's income were subject to federal income taxation and (ii) interest on the
Certificates of Obligation in an amount that does not cause the aggregate amount of interest paid
on all of the Certificates of Obligation to exceed that amount of interest on the Certificates of
Obligation that is attributable to the period that commences on the date hereof and ends on the
later of {A) the date that is three years from the Issue Date of the Certificates of Obligation or (B)
the date that is one year after the date on which the Project is placed in service.
(e) No Sale of Conduit Loan. No portion of the sale proceeds of the Certificates of
Obligation has been or will be used to acquire, finance, or refinance any conduit loan.
(f) No Overissuance. The proceeds of the Certificates of Obligation will not exceed
by more than a minor portion (as defined in paragraph 13 below) the amount necessary to
accomplish the governmental purposes of the Certificates of Obligation and, in fact, are not
expected to exceed by any amount the amount of proceeds allocated to expenditures for the
govenunental purposes of the Certificates of Obligation.
(g) Allocations and Accounting. The proceeds of the Certificates of Obligation will
be allocated to expenditures not later than 18 months after the later of the date the expenditure is
made or the date the Project is placed in service, but in no event later than the date that is 60 days
after the fifth anniversary of the date hereof or the retirement of the last Certificate of Obligation,
if earlier. The allocation of proceeds will be made by consistently employing the direct-tracing
method of accounting. No proceeds of the Certificates of Obligation will be allocated to any
expenditures to which proceeds of any other obligations have heretofore been allocated. The
Issuer will maintain records and documentation regarding the allocation of expenditures to
proceeds of the Certificates of Obligation and the investment of gross proceeds of the
Certificates of Obligation for at least six years after the close of the final calendar year during
which any Certificate of Obligation is outstanding.
7. Pre-Issuance Accrued Interest. The Issuer will also receive from the Underwriters
on the Issue Date of the Certificates of Obligation Pre-Issuance Accrued Interest from the Dated
Date through the Issue Date in the amount of$54,357.50. Such amount will be deposited in the
Debt Service Fund, and will be disbursed on the first interest payment date for the Certificates of
Obligation.
-3-
'
)
)
8. Expendirure of Investment Proceeds. The best estimate of the Issuer is that
Investment Proceeds resulting from the investment of any proceeds of the Certificates of
Obligation pending expenditure of such proceeds for costs of the Project will be retained in the
Construction Fund and disbursed to pay or reimburse Project costs in addition to those described
in paragraph 6 above.
9. No Replacement Proceeds. Other than amounts described herein, there are no
amounts that have a sufficiently direct nexus to the Certificates of Obligation or to the
governmental purposes of the Certificates of Obligation, other than solely by reason of the mere
availability or preliminary earmarking. that the amounts would have been used for such purpose
if the proceeds of the Certificates of Obligation were not used or to be used for such purpose.
(a) No Sinking Funds. Other than to the extent described herein, there is no debt
service fund, redemption fund, resetve fund, replacement fund, or similar fund reasonably
expected to be used directly or indirectly to pay principal or interest on the Certificates of
Obligation. ·
(b) No Pledged Funds. Other than amounts described herein, there is no amount that
is directly or indirectly pledged to pay principal or interest on the Certificates of Obligation, or to
a guarantor of part or all of the Certificates of Obligation, such that such pledge provides
reasonable assurance that such amount will be available to pay principal or interest on the
Certificates of Obligation if the Issuer 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
Certificates of Obligation.
(c) No Other Rm>lacement Proceeds. There are no other replacement proceeds
allocable to the Certificates of Obligation because the Issuer reasonably expects that the term of
the Certificates of Obligation will not be longer than is reasonably necessary for the
governmental purposes of the Certificates of Obligation. The Certificates of Obligation would
be issued to achieve the governmental purpose of the Certificates of Obligation independent of
any arbitrage benefit as evidenced by the expectation that the Certificates of Obligation
reasonably would have been issued if the interest on the Certificates of Obligation were not
excludable from gross income (assuming that the hypothetical taxable interest rate would be the
same as the actual tax-exempt interest rate).
(d) Weighted Average Economic Life. The Weighted Average Maturity of the
Certificates of Obligation will not be greater than 120 percent of the weighted average estimated
economic life of the portion of the Project financed, 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 asset financed by the Certificates of Obligation, (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 purposes of such asset); (c) the economic lives used in making this detennination are
not greater than the useful lives used for depreciation under 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
-4-
)
)
••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
11guideline 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 the Certificates of Obligation is to be used to finance land.
10. Yield on the Certificates of Obligation. For the purposes of this Certificate, the
Yield on the Certificates of Obligation is the discount rate that, when used in computing the
present value as of the Issue Date of the Certificates of Obligation, of all unconditionally payable
payments of principal, interest and fees for qualified guarantees on the Certificates of Obligation,
produces an amount equal to the present value, using the same discount rate, of the aggregate
Issue Price of the Certificates of Obligation as of the Issue Date. For purposes of detennining
the yield on the Certificates of Obligation, the Issue Price of the Certificates of Obligation is the
sum of the issue prices for each group of substantially identical Certificates of Obligation, plus
Pre-Issuance Accrued Interest. For each group of substantially identical Certificates of
Obligation, 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). The Issue Price is based upon the representations
of the Underwriters set forth in Exhibit A hereto. No Underwriters' discount, issuance costs, or
costs of carrying or repaying the Certificates of Obligation is taken into account for purposes of
computing the yield on the Certificates of Obligation~ except the cost of the Bond Insurance
Premium.
As set forth in paragraph 6(b )(iii) above, proceeds of the Certificates of Obligation will
be allocated on the date of issuance of the Certificates of Obligation to the payment to the Insurer
for municipal bond insurance for the Certificates of Obligation. The Bond Insurance Premium
paid to the Insurer is a qualified guarantee fee because:
(a) As of the date hereof, the present value of the Bond Insurance Premium paid to
the Insurer will be less than the present value of the expected interest savings on the Certificates
of Obligation as a result of the guarantee, computed using the Yield on the Certificates of
Obligation (determined 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
Certificates of Obligation;
(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 inunediately;
{d) The Insurer and any related parties will not use more than ten percent of the gross
proceeds of the Certificates of Obligation that are guaranteed by the Insurer;
(e) The Bond Insurance Premium paid or to be paid to the Insurer does not exceed a
reasonable ann's length charge for the transfer of credit risk;
-5-
)
)
(f) The Bond Insurance Premium paid or to be paid to the Insurer does 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};
(g) The Bond Insurance Premium paid or to be paid to the Insurer does not include
any payments for the costs of underwriting or remarketing the Certificates of Obligation or for
the cost of insurance for casualty to the Issuer's property;
(h) No portion of the Bond Insurance Premium paid or to be paid to the Insurer is
refundable upon redemption of the Certificates of Obligation before the final maturity date in an
amount that would exceed the portion of such Bond Insurance Premium that had not been
earned; and
(i} The Insurer is reasonably assured that the Certificates of Obligation will be repaid
if the Project is not completed.
The Yield with respect to that portion of the Certificates of Obligation, if any, subject to
optional redemption (other than the Certificates of Obligation scheduled to mature on February
15, 2026 and February 15, 2028 (the "Yield-to-Call Certificates of Obligation")) is computed by
treating such Certificates of Obligation as retired at the stated redemption price at the final
maturity date because (a) the Issuer has no present intention to redeem prior to maturity the
Certificates of Obligation that are subject to optional redemption; (b) no Certificate of Obligation
is subject to optional redemption at any time for a price less than the retirement price at final
maturity plus accrued interest; (c) no Certificate of Obligation is subject to optional redemption
within five years of the Issue Date of the Certificates of Obligation; {d) no Certificate of
Obligation subject to optional redemption is issued at an issue price that exceeds the stated
redemption price at maturity of such Certificate of Obligation by more than one-fourth of one
percent multiplied by the product of the stated redemption price at maturity of such Certificate of
Obligation and the number of complete years to the first optional redemption date for such
Certificate of Obligation; and (e) no Certificate of Obligation subject to optional redemption
bears interest at a rate that increases during the term of the Certificate of Obligation.
Yield with respect to the Yield-to-Call Certificates of Obligation is computed by treating
such Certificates of Obligation as retired at the stated redemption price on the dates that produce
the lowest combined yield on the Certificates of Obligation because the Underwriters have
represented that such portion of the Certificates of Obligation is issued at an issue price that
exceeds the stated redemption price at maturity of each such Certificate of Obligation by more
than one-fourth of one percent multiplied by the product of the stated redemption price at
maturity of each such Certificate of Obligation and the number of complete years to the first
optional redemption date for each such Certificate of Obligation. Such lowest yield
detennination is made separately for each individual group of Certificates of Obligation.
In the case of that portion of the Certificates of Obligation maturing February 15, 2024
and February 15, 2031 subject to mandatory redemption, the yield on the Certificates of
Obligation is calculated by treating the outstanding stated principal amounts payable on the
mandatory redemption dates as payments on such dates because the Underwriters have
represented that the stated redemption price at maturity of such Certificates of Obligation does
-6-
)
)
not exceed the issue price of such Certificates of Obligation by more than one-fourth of one
percent multiplied by the product of the stated redemption price at maturity and the number of
years to the date of the weighted average maturity (determined by taking into account the
mandatory redemption schedule) of such Certificates of Obligation.
The Yield on the Certificates of Obligation is calculated in the manner set forth above.
The Issuer has not entered into a hedging transaction with respect to the Certificates of
Obligation. The Issuer will not enter into a hedging transaction with respect to the Certificates of
Obligation 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
Certificates of Obligation from gross income for federal income tax purposes.
11. Temporary Periods and Yield Restriction.
(a) Pre-Issuance Accrued Interest. The amount described in paragraph 7 represents
Pre-Issuance Accrued Interest on the Certificates of Obligation 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) Project. The Issuer has incurred or will incur within six months of the date hereof
a binding obligation to a third party which is not subject to any contingencies within the control
of the Issuer or a related party pursuant to which the Issuer is obligated to expend at least five
percent of the sale proceeds of the Certificates of Obligation on the Project. The Issuer
reasonably expects that work on or acquisition of the Project will proceed with due diligence to
completion and that the proceeds of the Certificates of Obligation will be expended on the
Project with reasonable dispatch. The Issuer reasonably expects that 85 percent of the Sale
Proceeds of the Certificates of Obligation will have been expended on the Project prior to the
date that is three years after the Issue Date. Any Sale Proceeds not expended prior to the date
that is three years after the Issue Date, will be invested at a yield not "materially higheru than the
Yield on the Certificates of Obligation, except as set forth in paragraph 13 below. The Issuer
reasonably expects that any amount derived from the investment of moneys received from the
sale ofthe Certificates of Obligation and from the investment of such investment income will not
be commingled with substantial other receipts or revenues of the Issuer and will be expended
prior to the date that is three years after the Issue Date, or one year after receipt of such
investment income, whichever is later. Any such investment proceeds not expended prior to
such date will be invested at a yield not "materially higher" than the Yield on the Certificates of
Obligatio~ except as set forth in paragraph 13 below.
12. Debt Service Fund. Pursuant to the Certificate of Obligation Document, the
Issuer has created or continu~ as the case may be, a debt service fund (the "Debt Service
Fund11
) and the proceeds from all taxes levied, assessed and collected for and on account of the
Certificates of Obligation are to be deposited in such Fund. The Issuer expects that taxes levied,
assessed and collected for and on account of the Certificates of Obligation will be sufficient each
year to pay such debt service. All amounts which will be depleted at least once each bond year,
except for a reasonable carryover amount not in excess of the greater of the earnings on such
portion of the Fund for the inunediately preceding bond year or one-twelfth of the principal and
-7-
)
)
interest payments on the Certificates of Obligation for the immediately preceding bond year, will
constitute a bona fide debt service fund component of the Debt Service Fund (the "Bona Fide
Portion"). Such Bona Fide Portion of the Debt Service Fund will be used primarily to achieve a
proper matching of revenues and principal and interest payments on the Certificates of
Obligation within each bond year. Amounts held in the Bona Fide Portion of the Debt Service
Fund will be invested at an unrestricted yield because such amounts will be expended within 13
months of the date such amounts are received. The remaining portion of the Debt Service Fund
(the "Reserve Portion"), if any, will be treated separately for purposes of this Certificate.
AmoWlts on deposit from time to time in the Bona Fide Portion and the Reserve Portion are
allocable between the Certificates of Obligation and any other obligations of the Issuer secured
by the Debt Service Fund on the basis of one of the methods set forth in section 1.148-6(e)(6) of
the Regulations. The portion of the Reserve Portion allocable to the Certificates of Obligation
will not exceed at any time the least of (a) ten percent of the stated principal amount of the
Certificates of Obligation (or sale proceeds in the event that the amount of original issue discount
exceeds two percent multiplied by the stated redemption price at maturity of the Certificates of
Obligation}, (b) the maximum annual principal and interest requirements of the Certificates of
Obligation, and (c) 125 percent of average arumal principal and interest requirements of the
Certificates of Obligation. Therefore, all amounts therein may be invested at an unrestricted
yield. Any amounts held in the Bona Fide Portion for longer than 13 months or held in the
Reserve Portion in excess of the least of the amounts described above, will be invested in
obligations the yield on which is not in excess of the Yield on the Certificates of Obligation,
except as set forth in paragraph 13 below.
13. Minor Portion. All gross proceeds will be invested in accordance with paragraphs
11 and 12 above. To the extent such amounts remain on hand following the periods set forth in
paragraphs 11 and 12 above or exceed the limits set forth in paragraph 12 above, the Issuer 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 $100,000 or five percent
of the sale proceeds of the Certificates of Obligation (the "Minor Portion"), may be invested at a
yield which is higher than the Yield on the Certificates of Obligation.
14. Issue. There are no other obligations that (a) are sold at substantially the same
time as the Certificates of Obligation (i.e., within 15 days), (b) are sold pursuant to the same plan
of financing with the Certificates of Obligation, and ( c} will be paid out of substantially the same
source of funds as the Certificates of Obligation.
15. Compliance With Rebate Requirements.
(a) General. The Issuer has covenanted in the Certificate of Obligation Docwnent
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 Certificates of Obligation, within the
meaning of section 148(f) of the Code be rebated to the federal government. Specifically, the
Issuer will (a) maintain records regarding the investment of the "gross proceeds" of the
Certificates of Obligation as may be required to calculate such "rebatable arbitrage earnings"
separately from records of amounts on deposit in the funds and accounts of the Issuer which are
allocable to other bond issues of the Issuer or moneys which do not represent "gross proceeds" of
any Certificates of Obligation of the Issuer, (b) calculate at such intervals as may be required by
-8-
)
)
applicable Regulations, the amount of "rebatable arbitrage earnings," if any, earned from the
investment of the "gross· proceeds" of the Certificates of Obligation and (c) pay, not less often
than every fifth anniversary date of the delivery of the Certificates of Obligation and within 60
days following the final maturity of the Certificates of Obligation, or on such other dates
required or pennitted by applicable Regulations, all amounts required to be rebated to the federal
government. The Issuer 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 Certificate of Obligation is outstanding. Further, the Issuer 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 Certificates of Obligation that
might result in a reduction in the amount required to be paid to the federal goverrunent 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.
(b) Two-Year Spending Exception. The Issuer hereby makes the elections, if any, set
forth below for purposes of the two-year spending exception from arbitrage rebate:
ELECT
~
D
D
D
DO NOT
ELECT
D
N/A TI
D
D
D
1. To use actual facts to apply the provtstons of
paragraphs (e) through (m) of section 1.148-7 of the
Regulations. Section 1.148-7( f)(2) of the Regulations.
2. To exclude earnings on a reasonably required
reserve or replacement fund from the definition of
"available construction proceeds" for purposes of the
spending requirements. Section 1.148-7{i)(2) of the
Regulations.
3. To treat the portion of the Tax-Exempt Certificates
of Obligation that is not a refunding issue as two, and only
two, separate issues, one of which (a} meets the definition of
a construction issue and (b) is reasonably expected as of the
date hereof to finance all of the construction expenditures to
be financed by the Tax-Exempt Certificates of Obligation.
Section 1.148-7(j)( 1) of the Regulations.
4. To pay a penalty (the "1-1/2% penalty") to the
United States in lieu of the obligation to pay arbitrage rebate
on available construction proceeds in the event that the Tax-
Exempt Certificates of Obligation fail to satisfy any of the
semiannual spending requirements for the two-year rebate
exception. Section 1.148-7(k)(l) of the Regulations.
-9-
)
The Issuer reasonably expects that at least 75 percent of the "available construction proceeds" of
the Certificates of Obligation, within the meaning of section 1.148-7{i) of the Regulations, will
be allocated to Hconstruction expenditures," within the meaning of section 1.148-7(g) of the
Regulations, for property owned by the Issuer.
16. Not an Abusive Transaction.
(a) General. No action taken in connection with the issuance of the Certificates of
Obligation will enable the Issuer to (i) 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
Certificates of Obligation over any period of time, notwithstanding that, in the aggregate, the
gross proceeds of the Certificates of Obligation are not invested in higher yielding investments
over the term of the Certificates of Obligation), and (ii) issue more bonds, issue bonds earlier, or
allow bonds to remain outstanding longer than is otherwise reasonably necessary to accomplish
the govenunental purposes of the Certificates of Obligation. To the best of our knowledge, no
actions have been taken in connection with the issuance of the Certificates of Obligation other
than actions that would have been taken to accomplish the governmental purposes of the
Certificates of Obligation if the interest on the Certificates of Obligation 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 Certificates of Obligation).
(b) No Sinking Fund. No portion of the Certificates of Obligation has a term that has
been lengthened primarily for the purpose of creating a sinking fund or similar fund with respect
to the Certificates of Obligation.
(c) No Window. No portion of the Certificates of Obligation has been structured
with maturity dates the primary purpose of which is to make available released revenues that will
enable the Issuer 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.
17. No Arbitrage. On the basis of the foregoing facts, estimates and circwnstances, it
is expected that the gross proceeds of the Certificates of Obligation will not be used in a manner
that would cause any of the Certificates of Obligation to be an ftarbitrage 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.
18. No Private Use. Payments or Loan Financing.
(a) General. The Issuer reasonably expects, as of the date hereof, that no action or
event during the entire stated term of the Certificates of Obligation will cause either the "private
business tests" or the "private loan financing test," as such tenns are defined in the Regulations,
to be met.
(i) No portion of the proceeds of the Certificates of Obligation will be used in
a trade or business of a nongovernmental person. For purposes of determining use, the
Issuer will apply rules set forth in applicable Regulations and Revenue Procedures
-10-
)
)
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 is treated as the direct use of
proceeds; (C) a nongovernmental person will be treated as a private business user of
proceeds of the Certificates of Obligation as a result of ownership, actual or beneficial
use 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 Issuer 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 nongoverrunental person for so long as
any of the Certificates of Obligation 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 Certificates of Obligation). For this purpose, any action within
the control of the Issuer is treated as a deliberate action. A deliberate action occurs on the
date the Issuer enters into a binding contract with a nongovernmental person for use of
the Project that is not subject to any material contingencies.
(iii) All payments of the debt service on the Certificates of Obligation will be
paid from and secured by a generally applicable tax. For this purpose, a generally
applicable tax is a tax (A) that is an enforced contribution exacted pursuant to legislative
authority in the exercise of the taxing power that is imposed and collected for the purpose
of raising revenue to be used for goverrunental purposes and (B) that has a uniform tax
rate that is applied to all persons of the same classification in the appropriate jurisdiction
using a generally applicable manner of detennination and collection. No portion of the
payment of the debt service on the Certificates of Obligation will be directly or indirectly
derived from payments (whether or not to the Issuer or any related party) in respect of
property, or borrowed money, used or to be used for a private business use. Furthennore,
no portion of the payment of the debt service on the Certificates of Obligation will be
directly or indirectly secured by any interest in property used or to be used for a private
business use or payments in respect of property used or to be used for a private business
use.
(iv) No portion of the proceeds of the Certificates of Obligation 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 Issuer shall not use gross proceeds of the
Certificates of Obligation 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
-11-
' )
)
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 Property in the Ordinary Course. The Issuer does not
reasonably expect that it will sell or otherwise dispose of personal property components of the
Project financed with the Certificates of Obligation 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 Certificates of
Obligation 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 Issuer is required to deposit amounts received from such disposition
in a commingled fund with substantial tax or other governmental revenues and the Issuer
reasonably expects to spend such amounts on governmental programs within 6 months
from the date of commingling.
Furthermore, the Issuer 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 Certificates of Obligation as excludable from
gross income for federal income tax purposes.
(c) Other Agreements. The Issuer 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 Certificates of Obligation 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 Certificates of Obligation as excludable from gross income for
federal income tax purposes.
19. Weighted Average Maturity. The Weighted Average Maturity of the Certificates
of Obligation set forth on Exhibit B attached to this Certificate is the sum of the products of the
Issue Price of each group of identical Certificates of Obligation and the number of years to
maturity (determined separately for each group of identical Certificates of Obligation and taking
into account mandatory redemptions), divided by the aggregate Sale Proceeds of the Certificates
of Obligation.
20. Certificates of Obligation are Not Hedge Bonds. Not more than 50 percent of the
proceeds of the Certificates of Obligation will be 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. Further, the Issuer reasonably
-12-
'
)
' 1
expects that at least 85 percent of the spendable proceeds of the Certificates of Obligation will be
used to carry out the governmental purposes of the Certificates of Obligation within the three-
year period beginning on the date the Certificates of Obligation are issued.
(Execution Page Follows]
-13-
)
Attachments:
Exhibit A:
Exhibit B:
)
Issue Price Certificate
Certificate of Financial Advisor
-14-
Date: January 19, 2007
}
)
' I
EXHIBIT A
CERTIFICATE OF UNDERWRITERS
I, the undersigned officer of Morgan Keegan & Company, Inc. (the "Representative"),
acting on behalf of the Underwriters, make this certification for the benefit of all persons
interested in the exclusion from gross income for federal income tax purposes of the interest on
the Certificates of Obligation: Each capitalized term used herein has the meaning or is the
amount, as the case may be, specified for such tenn in the Federal Tax Certificate to which this
Exhibit A is attached (the "Federal Tax Certificate"). I hereby certify as follows in good faith as
of the Issue Date:
l. I am the duly chosen, qualified and acting officer of the Representative 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 Undezwriters. I am the
officer of the Representative charged, along with other officers of the Underwriters, with
responsibility for the Certificates of Obligation.
2. The Underwriters have made a bona fide public offering to the public of the
Certificates of Obligation at the issue prices to the public set out on the cover of the Official
Statement. The issue prices set forth on the cover of the Official Statement were determined on
the date the Certificates of Obligation were purchased by the Underwriters based on the
reasonable expectations regarding the initial public offering prices. The issue price for each
maturity of the Certificates of Obligation, represents the first price (including original issue
premium and discount and accrued interest to the Issue Date only) of the Certificates of
Obligation 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 Certificates of Obligation is
$25,443,094.80 (the "Issue Price"), which price includes Pre-Issuance Accrued Interest in the
amount of $54,357.50. The initial public offering price described above does not exceed the fair
market value for the Certificates of Obligation 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.
3. The Issuer may rely on the statements made herein in connection with making the
representations set forth in the Federal Tax Certificate and in its efforts to comply with the
conditions imposed by the Code on the exclusion of interest on the Certificates of Obligation
from the gross income of their owners. Vinson & Elkins L.L.P. also may rely on this certificate
for purposes of its opinion regarding the treatment of interest on the Certificates of Obligation as
excludable from gross income for federal income tax purposes.
[Execution Page Follows]
Exhibit A-I
)
By.: __ ~~~~~~~~~
Title: ___.t!!...4-l.~~--=.:::=:.__.!....!..!::=~..:....!--
Date: \ -~ R -0 1
Exlubit A-2
EXHIBITB
CERTIFICATE OF FINANCIAL ADVISOR
I, the undersigned officer of the Financial Advisor, make this certificate for the benefit of
all persons interested in the exclusion from gross income for federal income tax purposes of the
interest on the Certificates of Obligation. Each capitalized term used herein has the meaning or
is the amount, as the case may be, specified for such term in the Federal Tax Certificate to which
this Exhibit B is attached (the "Federal Tax Certificate"). I hereby certify as follows as of the
Issue Date:
l. 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 who has worked with representatives of the Issuer in
structuring the financial terms of the Certificates of Obligation.
2. The Issue Price (including Pre-Issuance Accrued Interest) of the Certificates of
Obligation based on the representations set forth in Exhibit A to the Certificate to which this
Exhibit is attached is not more than $25,443,094.80. The yield on the Certificates of Obligation,
based on such Issue Price (including Pre-Issuance Accrued Interest) is not less than 4.2915077
percent (the "Yield"). For purposes of this certificate, the term "yield" means that yield which is
computed as described in paragraph 10 of the Federal Tax Certificate. The purchase price of the
Certificates of Obligation and the Bond Insurance Premium, if any, used in computing yield on
the Certificates of Obligation is based solely on the Issue Price Certificate of the Underwriters
attached as Exhibit A to the Federal Tax Certificate.
3. The Financial Advisor computed the Weighted Average Maturity of the
Certificates of Obligation to be 14.616 years, as set forth in paragraph 19 of the Federal Tax
Certificate.
4. To the best of my knowledge the statements set forth in paragraph 16 of the
Federal Tax Certificate are true.
5. The amount of $66A96.76 of the cost of insurance for the Certificates of
Obligation 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 inswance exceeds the amount of the
fee set forth above. For this purpose, present value is computed using the yield on the
Certificates of Obligation, determined 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 Certificates of Obligation in an amount which would exceed the portion
of such fee that had not been earned.
Exhibit B~l
)
)
)
)
6. The Issuer may rely on the statements made herein in connection with making the
representations set forth in the Federal Tax Certificate and in its efforts to comply with the
conditions imposed by the Code on the exclusion of interest on the Certificates of Obligation
from the gross income of their owners. Vinson & Elkins L.L.P. also may rely on this certificate
for purposes of its opinion regarding the treatment of interest on the Certificates of Obligation as
excludable from gross income for federal income tax purposes.
Dallas 12081 89v .l
Vinson &Elkins
Julie Williams }willlarnsOvelaw.com
Tel713.758.3878 Fax 713.615.5059
March 2, 2007
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
7002 0860 0003 5319 8868
District Director
Internal Revenue Service
Ogden, UT 84201
Re; $25,255,000 City of Lubbock, Texas Tax and Waterworks System Surplus
Revenue Certificates of Obligation, Series 2007
Dear Sir:
Enclosed please find an originally executed Fonn 8038-G (lnfonnation 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 Fonn 8038-G attached to the self-addressed, postage-paid envelope that we have provided.
cc: Jennifer Taffe/
945755_1.DOC
Vinson & Elldns LlP Attorneys at laW Austin Beijing Dallas
Duba.i Houston London M~w New Volt\ Tollyo WaShington
Very truly yours,
....
Arsl City Tower, 1001 Fannin Street. Suite 2300, Houston, Texas n002~760
Tel 713.758.2222 Fax 713.758.2348 www.vel-.com
)
)
)
)
Form 8038-G Information Return for Tax-Exempt Governmental Obligations
._ Under Internal Revenue Code section 149(e) 0~ No. 1545.0720 (Re-I. NQ\IIImbotr 2000) ._ See aepwate lnsttuetlORS.
Dcpa~menl oltle Trea,vry CautiOn: If the Issue prie9 is und6f $100,000. use Form 8038-GC. Wet~~aJ Re..nue SeMe4
I Part II Reporting Authority If Amended Return, check here .. 0
1 Issuer's name 2 ~·employer Identification number
Citv of Lubbock Texas 75-6000590
3 Number and $1reet (or P.O. bOx If mail Is not delllll!lfed to weet aelcltess) Roo~ite • Report number
P.O. Box 2000 3 01
$ City. town. « post o!fi~e. 111ate. and ZIP ~ode 6 Date of issue
Lubbock, Texas 79457 January 19,2007
1 Name of Issue a CUSIP 11\1!1\l)et
Tax and Waterworks Svstem Surolus Revenue Certificates of Oblieation. Series 2007 5491875P3
11 Name and title ol officer or legal repr~ntali,... \llltlom Ill& IRS may call lot m«elnformal!on 10 'lillepllcne numbe< ol office< or f• tep!etentali.e
Jeffrey A. Yates. Chief Finance Officer (806) 775-2161
JPartUI Type of Issue (check applicable box(es) and enter the issue price) See instructions and attach schedule
11 0 Education ...........•..................•...........•............•.........• 11
12 0 Health and hospital .......•...............................••.................. 12
13 Iii Transportation ....................•..•..........•................•.......... 13 25 388 73 7.00
14 0 Public safety .•.•.....•...........•••••....••••..••..••...•...•.•.........•.. 14
15 0 Environment (int;luding sewage bonds} ..•.•...•. : .•......•..•..•.•..............•. 15
16 0 Housing ....•.............................................................. 16
17 O Utilities .............•.........•..•......•..•............................... 17
18 0 Other. Describe • 18
19 If obligations are TANs or AANs, check box.-0 If obligations are BANs. check box . . . . . . .. 0 : ..
20 If obligations are in the form of a lease or installment sale, check box . • • • • . • . • . . . . . . . . .-0
I Part 1111 Description of Obligations. (Complete for the entire issue for which this form is being filed.)
(a) Anal maturtly elate (b} ISsue priee {c) Slated redemption (d) Weigtltad {e) Yield !)flee at maturity avetage matutity
21 2/15/2031 $ 25 388,737.00 $ 2~.25~.000.00 14.616_y_ears 4.2915%
I Part lVI Uses of Proceeds of Bond Issue (Including underwriters' discount)
22 Proceeds used for accrued interest. .••...••...•....•.....•.•.•.•...•..•............. 22 54 358.00
23 Issue price of entire issue (enter amount from line 21, column (b)) ...•...................... 23 25 388 737.00
24 Proceeds used for bond issuance costs (including underwriters' discount) 24 322 068.00
25 Ptoceeds used for credit enhancement. ....•....••............... 25 66 497.00
26 Proceeds allocated to reasonably required reserve or replacement fund .. 26
27 Proceeds used to currently refund prior issues ..................... :a
28 Proceeds used to advance refund prior issues ............•........ 28
29 Total (add lines 24 through 28) .....................•............................... 29 388 565.00
30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here) ........ 30 25_,000 172.00
I Part VI Description of Refunded Bonds (Complete this part only for refunding bonds.)
31 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . . . . . . . . . .. ______ y~ea~rs
32 Enter the remaining weighted average maturity of the bonds to be advance refunded • • . • . . . . . • • • ___ ....:.... __ y~e;;;;a.;.;;.rs
33 Enter the last date on which the refunded bonds will be called . • . . . . . • . . . . . . • . . . . . • . . . . . . . .-
34 Enter the date(s) the refunded bonds were issued.---------
!Part VII Miscellaneous
35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) ......... 35 0
36a Enter the amoont of !JOSS proceeds invested or to be ~eel in a guaranteed inveslmtJit cootract (see instructions) . . . . 36a 0
b Enter the final maturity date of the guaranteed investment contract ~
37 Pooled financings: a Proceeds of this issue that are to be used to make l~ms to other governmental un~s ..........• 37a 0 .. b If th1s 1ssue 1s a loan made from the prooeeds 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 . . . . . . . • . . . . .-O
39 If the issuer has elected to pay a penalty in lieu of amitrage rebate, check box . . . . . . • • • • . . • . . • . . . . • . . • . . . . . . . . . . .-0
40 If the issuer has identified a hedge, check box • . • . . • . • • • • . • . . . • • • . . • • • • . . . . . . . . . • . . . • . . . • . . . . . • • . . . . . . . . •
Sign
Here
for Paperwork
$TF f'EC6403!'
return and ac~mpanytng sdledules and statements. and to 1M besl ol my knov.ledge and belief.
Jeffrey A. Yates
~ Chief Finance Officer
, Type or l)flllt name and tille
Form 8038-G (Rev. 11·2000}
"~·') I .. ~. .J District Director Internal Revenue Service Center Ogden, UT 84201 J 0 ~xp~Man 3. Service 'Type ~C~rtlii~MaU 0 Registered . ' 0 ln~ured Mali· 0 Return Receipt for Me~handise CIC.O.D. 2. Article Nymber . -rrr~nster trom•selvice 'h 7 0 0 2 D e b D 0 D 0 3 5 319 : · PS fprtn 3811, August 2001' ·· '' '~ .. ::.o9me'stlc Return Reeelpt"· c • ·; ... '·-:.1 ............................... _ ......................... .. .............................. ~····-········ -.•H 'lfiUilliOd ··~-.. +<liZ 'Bl•IS '~!~ IOZtoll .Ln 'U3pltQ 110 ~~)U:;>:) :;>:l!.U:;>S :lnU:;>AOlf \I!W:;>)UI !~f~ JO):JOJ!O l'J!J)S!O 1....1 ....1 ~~ .J'IS Q c::J CJCJ $l .. ~ ., .e .. •od 1~0.1 ru ru (llou1n~ lU8UIHJOpu3) flll.:l NOf.IIVO p81Q~IS9U CJ CJ . oa oa {pe.ltnb&IJ ~opll3) rr rr H . .:1\dj8Qel:l UJRIII:t t:J CJ ••:t P81111J8:> Cc::J Cc::J OI!PiiiOd C.P IJJ,l.tJ UO!id!lqQ JO s:J)'Ir.)!J!l.l~;) ~nU:lAOlf U"'l/1 sn1wns w~1s-'s Sl\lo.....nlllfi\ 1,./JliJ Pllll ~tt.L Slll(l),l. 'Jt:>OqqiT}JO .<lf:) ~ ~ (pap1110Jd ,-,61!JiMO:J <J:JUCJ/ISU/ ON fA/UO 1/I!W :JJISaUJOQ) .ldi303H 11'111\1 031.:U!H30 u:)!I'.J6S iClSOd 'S'n Q:J:aa ~0:. rr·a--Q:I 0:. DYes 102595·02·M•1035
...
)
)
)
)
RECEIPT AND CERTIFICATE OF DELIVERY
OF PAYING/ AGENT REGISTRAR
The undersigned, authorized representative of The Bank of New York Trust Company,
National Association, as Paying Agent/Registrar, hereby makes the following acknowledgments
and certifications in connection with the issuance and delivery of $25,255,000 principal amount
of City of Lubbock, Texas, Tax and Waterworks System Swplus Revenue Certificates of
Obligation, Series 2007 (the "Certificates"). Capitalized tenns 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) $25,249,026.94 from Morgan Keegan & Co., Inc ..
(the "Underwriters"), representing the principal amount of the Certificates plus accrued interest
of $54,357.50 and plus a net premium of $133,737.30 and less underwriters' discount of
$194,067.86.
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 Certificate for the Certificates, registered by the
Comptroller of Public Accounts of the State of Texas and representing the aggregate principal
amount of the Certificates, was delivered to or upon order of the Underwriter and was du1y
canceled this date upon delivery of the definitive Certificates to the Underwriter through The
Depository Trust Company.
DATED: January 19,2007.
WB200ni007
Dallas 1210764_1.DOC
THE BANK OF NEW YORK TRUST
COMPANY, NATIONAL ASSOCIATION,
as Paying Agent/Registrar
By:~
Title: AsststantTreasurer
Exhibit A
'
)
'
LUB200n 1007
Dallas 1210764_1.DOC
)
)
I RBC
Capital
.Markets
Ms. Elizabeth Power
January 17, 2007
The Bank of New York Trust Company, National Association
2001 Bryan Street, gtn Floor
Dallas, TX 75201
Mark Nitcholas
Director
Public Finance
Phone (713) 853-0823
Fax (713) 651-3347
Re: $25,255,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue
Certificates of Obligation, Series 2007
Dear Elizabeth:
The delivery of the above captioned certificates (the "Certificates") is scheduled for Friday, January 19, 2007, at 10:00 am.
Central Standard Time at your bank {the "Bank") at the above captioned address. Jennifer Taffe of Vmson & Elkins L.L.P.,
DaUas, Texas, Bond Counsel, will be handling legal matters for the City of Lubbock, Texas (the "City'') relating to the closing.
At or prior to closing, The Bank will receive $25,249,026.94 from Morgan Keegan & Company, Inc. ("Morgan Keegan") in
immediately available funds calculated as follows:
Principal Amount of the Certificates
Plus: Premium on the Certificates
Less: Underwriter's Discount
Plus: Accrued. Interest
Morgan Keegan will wire the funds to the Bank as follows:
The Bank of New York Trust Compauy, N.A.
ABA#: 021 000 018
For Credit to GLA# 211065
FFC: TAS#-428495
Ref: Certificates of Obligation, Series 2007
Attn: Liz Power(214) 468-(;019
$25,255,000.00
133,737.30
(194,067.86)
54.357.50
$25,249,026.94
At closing, the Bank will disburse the total amount of$25,249,026.94 from Morgan Keegan as follows:
I. $66,496.76 shall be wired. to Financial Security Assurance Inc. ("FSA") for the Bond Insurance Premium on the
Certificates as follows:
The Bank of New York
ABA#: 021 000 013
Account Name: Financial Security Assurance Inc.
Account No. 8900297263
Transaction Number: 94948
Attn: Lillie Santana (212) 339-3537
)
Janwuy 17, 2007
Page2
The Bank shall notify Bond Counsel of its receipt of the Morgan Keegan wire and provide Bond Counsel with the federal
reference number related to the wire sent to FSA. Upon notification from Bond Cowtsel that FSA has released its policy, the Bank
shall proceed with releasing the Certificates through DTC and proceed with the following distribution.
2. $25,127,500.00 (representing capital projects of $25,000,000.00 and C05t of issuance of $127,500.00) shall be wired to
the City's Capital Projects Fund as follows:
WeDs Fargo, N.A.
ABA#: 121000248
Acct#:4000047951
Name: City of Lubbock Master Account
Attn: Raine Young (806) 767-7473
Ref: Capital Proje.::ts Fund -Certificates of Obligation, Series 2007
3. $54,530.18 (representing accrued interest of$54,357.50 and aroundi~ amount of$172.68) shall be wired to the City's
Debt Service Fund as follows:
Wells Fargo, N.A.
ABA#: 121000248
Acct#:40000479Sl
Name: City of Lubbock Master Account
Attn: Raine Young (806) 767-7473
Ref: Debt Service Fund -Certificates of Obligation, Series 2007
4. $500.00 shall be retained by the Bank from the proceeds of the Certificates and credit such sum to its account as the
Paying Agent Annual Administration Fee for the Certificates.
Please contact the undersigned should you have any questions regarding this matter, or if I may be of any further assistance.
cc: Jeff Yates, City of Lubbock
Andy Burcham, City of Lubbock
Brandon Inman, City of Lubbock
Jennifer Taffe, Vinson & Elkins L.L.P.
Sincerely,
Mark Nitcholas
Director
Jeff Leuschel, McCall, Parkhurst & Horton L.L.P.
Noel Valdez, McCall, Parkhurst & Horton L.L.P.
Debi Jones, Morgan Keegan & Company, Inc.
Michael Walker, Morgan Keegan & Company, Inc.
Buddy Kempf, Morgan Keegan & Company, Inc.
Mike Caldiero, Financial Security Assurance Inc.
Lillie Santana, Financial Security Assurance Inc.
Chris Onns, RBC Dain Rauscher
DISCLOSURE, NO DEFAULT AND TAX CERnACATE 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. 208095-N (the "Policy') in respect of the $54,020,000 In
aggregate principal amount of City of Lubbock, Texas General Obligation Refunding Bonds, Series 2007 (the
"Bonds") that:
(i) the infofTTlation set forth under the caption "BOND INSURANCE -Financial Security Assurance Inc.~ in the
official statement dated January 12, 2007, 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 ol 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 $150,263.26 (the 'Premium") is a charge for the transfer of credit risk and was
detennined in ann'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 rat.ings, which, together with all other ovemead
expenses of Financial Security, are taken into accoont in the fonnulation 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,
(i)() the Issuer is not entitled to a refund ot 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(1) of the Income Tax Regulations.
FINANCIAL SECURITY ASSURANCE INC.
By: --------------------------Authorized Officer
Dated: February 7, 2007
'
)
)
)
Financial Security Assurance, Inc
31 West 52nd Street
New York, NY 10019
To Whom It May Concern:
Moody's Investors Service
99 Church Street
New York, NY
January 18, 2007
Moody's Investors Service has assigned the rating of A!! (Financial Security
Assurance, Inc Insured -Policy No. 208028-N) to the $25,255,000.00, City of
lubbock, Texas-Tax and Waterworks System Surplus Revenue Certificates of
Obligation, Series 2007, dated January 1, 2007 which sold through negotiation on
January 1 0, 2007. The rating is based upon an insurance policy provided by Financial
Security Assurance, Inc.
Should you have any questions regarding the above. please do not hesitate to contact
Karen Malkowski at (201) 395-6370.
Sincere!}' yours,
Joann Hempel
Vice President I Senior Credit
Officer
JH/PS
)
)
STANDARD
&POOltS
January 18, 2007
Financial Security Assurance Inc
Financial Guaranty Group
31 West 52nd Street
New York, NY 10019
Attention: Mr. Richard Bauerfeld, Managing Director
55 Water Slreet, 38th Floor
New York, NY 10041-ooo3
tel212 438-2074
re1eten0e no.: 809308
Re: $25,255,000 City of Lubbock, Texos, Tax and Waterworks System Surplus Revenue
Certificates of Obligation, Series 2007, dated: January 1, 2007, due: February 15,2008-
2022, Term Bonds due: February 15,2024, February 15,2026, February 15,2028,
February 15,2031, (POL/CY#208028-N)
Dear Mr. Bauerfeld:
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 your
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 assigrunent 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 securities 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.
This letter constitutes Standard & Poor's pennission to you to disseminate the above-assigned
rating to interested parties. Standard & Poor's reserves the right to infonn 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 fmancial 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 fmal. If any
subsequent changes were made in the fmal documents, you must notify us of such changes by
sending us the revised final documents with the changes clearly marked
SL\:--.0,.\HD
r? •. llOOlr~.
)
... J
Mr. Richard Bauerfeld
Page2
January 18. 2007
Standard & Poor's is pleased to be of service to you. For more information please visit our
website at www .standardandpoors.com. If we can be of help in any other way, please contact us.
'Thank you for choosing Standard & Poor's and we look forward to working with you again.
Sincerely yours,
Standard & Poor's Ratings Services
a division ofThe McGraw-Hill Companies, Inc.
~~a.J~/1/j{}
aw
\ l \ '\ [ 1 \~C>
•• Jl< )< 'R "
)
0 1/18 /2007 09 :18 FAX 7547995 FITCH • liLL IE a oo21oo3
Fitch Ratings
January 18, 2007
Mr. Robert P. Cochran
l 201 fest 7rl1 Street
Pow~ll. WY R?ll.~fl
Chainnan & Chief Executive Officer
Financial Security Assurance Inc. (FSA)
31 West 52nd Street
New York. NY 10019
Re: Lubboek (TX) I Pofiey I# 208028-N
o • ..-Mr. Cochran:
T 3m 754 2017. I 1!00 85 FITCH
\'!I.VW.iltcllrMlllgS.CC'll
Frteh Ratings has assigned one or more ratings andfor otherwise taken rating action(s), as detailed
on the attaChed Notlee of Rating Action.
Ratings assigned by Fitch are based 01'1 documents anel information provided tQ us by issuers,
obfigoru, and/or their •xper'I.S and agents, and are subject to receipt ot the final elosing documents. Frtctl
dON not audit or verify the truth or accuracy of such infoflllatic;rn.
It iS important that Fitch be Pf"OVided with all information that may be material to its ratings so that
lhey continue to accurately reflect the status of the rated issues. Ratings may be ¢h&ngad, wilhdrawn,
suspended or placed on Aating Watch dJ.Ae to changes in, additions to or the ioadeqtJecy of information.
Ratings are not recommendations to buy. sell 01' hold securities. Ratings do not comment on the
adequacy of market price, the suitability of any security tor a particl11ar investor, or tho tax-exempt naUJre
or taXability of payments mad• in respect o1sny security.
The assignment of a rating by Filch shall not constitute a C011$el'lt by Fitch to use its name as an
e;~r~rt in oonnection with any registration statement or other filing under U.S., U.K., or any other rel&vant
securfties laws.
We are pleased to have had the opportunity to be of service to you. If we can be of furuler
assistance, please feel tree 10 eontaet us at any time.
OLS/bs
Enc: Notice of Rating Aetion
(Doc 10; 64286)
~~~
Dey Lynn Stebner
Insured Ratings Manager
U.S. Publie Flnanoe
)
)
)
)
)
)
01/18/2007 09:18 FAX 7547995 FITCH + LilliE ~ 009/003
Notice of Rating Action
Rating Type Actiotl
U.tlboti< (TX) tax & wttwb sys surplus rev cit, ot oblig longTenn
ser 20<11 \onaured: Financial Security Aslurance InC.
RO:~ 18-Jan-2007
(FSA))
Key; AO: Rating Ou11oolc. A \IV: Rating Watch: Pos: POIIilive, Neg: Negative, SUl: Stable, E~~a: Evolving
1M tating i• based SOlely on cndit enhancement provided by a bOnd insuranct policy issued by Anand a! S.CUrity
1\ssuNIIIOI Inc., wllich has an tncur~N Financial Strongth rati11g of 'AAA".
(Doc ID: 64286} Page 1 of 1
'
)
)
)
)
)
CLOSING CERTIFICATE
(as required by Paragraph 7(e)(8) of the Purchase Contract)
THESTATEOFTEXAS §
COUNTY OF LUBBOCK §
CITY OF LUBBOCK §
We are the Mayor and Chief Financial Officer of the CITY OF LUBBOCK, TEXAS (the
"Issuert•), and we hereby certify as follows:
1. This Certificate is executed and delivered for and on behalf of the Issuer with
reference to the issuance of the "CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM
SURPLUS .REVENUE CERTIFICATES OF OBLIGATION, SERIES 2007" in the original aggregate
principal amount of $25,255,000 (the ttCertificatesn), as required by and in satisfaction of the
requirements set forth in paragraph 7(e)(8) of the Purchase Contract, dated January 12, 2006 (the
nPurchase Contract"), by and between the Issuer and the Underwriter of the Certificates. Capitalized
terms used and not defined in this Certificate shall have the meanings assigned to them in the
Purchase Contract
2. The representations and warranties of the City contained in the Purchase Contract are
true and correct in all material respects on and as of the date of Closing as if made on the date of
Closing.
3. Except to the extent disclosed in the Official Statement, no litigation is pending or,
to our knowledge, threatened in any court to restrain or enjoin the issuance or delivery of the
Certificates, or the levy, collection or application of the ad valorem taxes or the Pledged Revenues
pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge
thereof, or in any way contesting or affecting the validity of the Certificates or the Ordinance or
contesting the powers of the City or the authorization of the Certificates or the Ordinance, or
contesting in any way the accuracy) completeness or fairness of the Official Statement.
4. 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 purpose for which
it is to be used or that it is necessary to disclose therein in order to make the statements and
information therein not misleading in any respect.
5. There has not been any material and adverse change in the affairs or financial
condition of the City since September 30, 2005, the latest date as to which audited financial
infonnation is available.
---EXECUTED this JG.ovw1 \ c\ loo7.
~/?~& ·~~~-
Mayor
City of Lubbock, Texas
)
)
)
[SIGNATURE PAGE TO THE CLOSING CERTIFICATE)
'
)
)
Vinson &Elkins
January 19,2007
$25,255,000
CITY OF LUBBOCK, TEXAS
TAX AND WATERWORKS SYSTEM SURPLUS REVENUE
CERTIFICATES OF OBLIGATION
SERIES 2007
WE HAVE represented the City of Lubbock, Texas (the "City"), as its Bond Counsel in
connection with an issue of certificates of obligation (the "Certificates") described as follows:
CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM
SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2007,
dated January I, 2007, issued in the principal amount of$25,255,000.
The Certificates mature, bear interest, are subject to redemption prior to maturity and
may be transferred and exchanged as set out in the Certificates and in the ordinance adopted by
the City Council of the City authorizing their issuance (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 Certificates under the Constitution and
laws of the State of Texas and with respect to the exclusion of interest on the Certificates 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 Certificates. Our role in connection with the City's Official
Statement prepared for use in connection with the sale of the Certificates 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 Certificates, 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
VInson & Elkins LLP Attorneys at L-Austin Beijing Dallas
Oubai Houston London Moscow NewYork Tokyo Washington
Dallas 1201430v.l
Trammell Crcm Center, 2001 Ross Avenue, Suite 3700
Dallas, Texas 75201·2975 Tel214.220.noo Fax 214.220.n16
www.velaw.com
V&E
public officials, and other certified showings relating to the authorization and issuance of the
Certificates. We have also examined executed Certificate 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 Certificates in full compliance with the
Constitution and laws of the State of Texas presently effective and, therefore, the
Certificates 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 Certificates, has been
levied and pledged irrevocably for such purposes, within the limit prescribed by
law, and the total indebtedness of the City, including the Certificates, does not
exceed any constitutional, statutory or other limitations. In addition, the
Certificates are further secured by a limited pledge (not to exceed $1,000) of the
surplus net revenues of the City's Waterworks System, as described in the
Ordinance.
THE RIGHTS OF THE OWNERS of the Certificates 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 pennit the exercise of judicial discretion.
IT IS OUR FURTHER OPINION THAT:
(1) Interest on the Certificates is excludable from gross income for
federal income tax purposes under existing law; and
(2) The Certificates are not "private activity bonds" within the
meaning of the Internal Revenue Code of 1986, as amended (the "Code"), and
interest on the Certificates is not subject to the alternative minimum tax on
individuals and corporations, except that interest on the Certificates will be
included in the "adjusted current earnings" of a corporation (other than an S
corporation, regulated investment company, REIT, REMIC or F ASIT) 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 Certificates 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
income of interest on the Certificates for federal income tax purposes. If such representations are
determined to be inaccurate or incomplete or the City fails to comply with the foregoing
-2-
Dallas 1201430v.l
)
)
..,
'
'
V&E
provisions of the Ordinance, interest on the Certificates 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 Certificates.
Owners 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
who 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).
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 asswne no duty
to update or supplement these opinions to reflect any facts or circwnstances 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 Certificates. 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 Certificates as includable in gross income for federal income tax
purposes.
-3-
Dallas 1201430v.l
0
0
0
0
0
0
0
Vinson &Elkins
City of Lubbock, Texas
P.O. Box 2000
Lubbock, Texas 79457
Morgan Keegan & Company, Inc.
M.E. Allison & Co., Inc.
Popular Securities, Inc.
Southwest Securities, Inc.
c/o Morgan Keegan & Company, Inc.
4400 Post Oak Parkway, Suite 2670
Houston, Texas 77027
January 19, 2007
City of Lubbock, Texas
Tax and Waterworks System Surplus Revenue Certificates of Obligation
Series 2007
Ladies and Gentlemen:
We have served as Bond Counsel to the City of Lubbock, Texas (the "Issuer") in
connection with the issuance of its $25,255,000 City of Lubbock, Texas Tax and Waterworks
System Surplus Revenue Certificates of Obligation, Series 2007 (the "Certificates"), issued
pursuant to the provisions of an ordinance duly adopted by the City Council of the Issuer on
January 12, 2007 (the "Ordinance"). This opinion is delivered pursuant to the provisions of
Section 7(e)(6) of the Purchase Contract (hereinafter defined). Capitalized terms not
otherwise defined in this opinion have the meanings assigned in the hereinafter defined
Purchase Contract.
In our capacity as Bond Counsel to the Issuer, we have reviewed the following:
(a) a certified copy of the Ordinance;
(b) an executed counterpart of the Purchase Contract dated January 12, 2007 (the
"Purchase Contract") between the Issuer and the Underwriters named in such
Purchase Contract;
(c) a copy of the Official Statement dated January 12, 2007; and
(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.
Vinson & Elkins LLP Attorneys at Law
Austin Beijing Dallas Dubal Hong Kong Houston
London Moscow NewYork Shanghai Tokyo Washington
Dallas 1208324v.1
Trammell Crow Center, 2001 Ross Avenue, Suite 3700
Dallas, TX 75201·2975
Tel214.220.7700 Fax 214.220.n16 www.velaw.com
V&£
')
)
J
)
"''
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 documents.
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:
1. The Certificates 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
Certificates to register the Certificates under the 1933 Act or to qualify the Ordinance
under the Trust Indenture Act.
2.
3.
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
Obligations" (except for the subcaptions "Book-Entry-Only System" and "Use of
Proceeds") and "Tax Matters" and the subcaptions "Continuing Disclosure of
Information" {exclusive of the information under the subcaption "Compliance with
Prior Undertakings"), "Legal Investments and Eligibility to Secure Public Funds in
Texas" and "Legal Matters" under the caption "Other Information," and we are of the
opinion that such statements and information present a fair and accurate swnmary of
the provisions of the laws and instruments therein described and, with respect to the
Certificates, such information conforms to the Ordinance.
The Purchase Contract has been duly authorized, executed and delivered by the City
and {assuming due authorization by the Underwriters) constitutes a binding and
enforceable agreement of the City in accordance with its terms.
The addressees may rely on our opinion, dated as of the date hereof, delivered in
connection with the issuance of the Certificates to the same extent as if such opinion 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,
-2-
Dallas 1208324v.l
\
)
)
LAW Of",-IC£5
M~CALL, PARKHURST & HORTON L.L.P.
600 CONGRESS AVENUE
1250 ONE AMERICAN CENTER
AUSTIN, TEXAS 78701·3248
Tt:lEPHONt": 51<! 478·3805
FAC;$1MM:: 512 472·0$71
Morgan Keegan & Company, Inc.
Southwest Securities, Inc.
Popular Securities, Inc.
M.E. Allison & Co., Inc.
c/o Morgan Keegan & Company, Inc.
4400 Post Oak Parkway
Suite 2670
Houston, Texas 77027
717 NORTH HARWOOD
NINTH FLOOR
DAL.LAS, TEXAS 75201·6587
T£LEPHON£: 214 ?54· 9200
FACSIMILE: 214 754·9250
January 19, 2007
700 N. ST. MARY'S STREET
1525 ONE RIVERWALK PLACE
SAN ANTONIO, TEXAs 78205·3503
Te:LEPHONE: 210 225·2800
FACSIMILE! 210 1!25 • 2984
RE: $25,255,000TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES
OF OBLIGATION, SERIES 2007
Ladies and Gentlemen:
We have acted as counsel for you as the undeJWriters of the Certificates described above,
issued under and pursuant to an Ordinance of the City ofLubbock, Texas (the "Issuer"), authorizing
the issuance of the Certificates, which Certificates you are purchasing pursuant to a Purchase
Contract, dated January 12, 2007. All capitalized undefined terms used herein shall have the meaning
set forth in the Purchase Contract.
In connection with this opinion letter, we have considered such matters oflaw and offact, and
have relied upon such Certificates and other information furnished to us, as we have deemed
appropriate as a basis for our opinion set forth below. We are not expressing any opinion or views
herein on the authorization, issuance, delivery, validity of the Certificates and we have assumed, but
not independently verified, that the signatures on all documents and Certificates that we have
examined are genuine.
Based on and subject to the foregoing, we are of the opinion that, under existing laws, the
Certificates are not subject to the registration requirements of the Securities Act of 1933, as amended,
and the Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as amended.
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 January 12, 2007 (the
"Official Statement") and because the information in the Official Statement under the headings "THE
OBLIGATIONS-Book-Entry-Only System", "TAX MATTERS", and "OTHER INFORMATION
-Continuing Disclosure oflnformation -Compliance with Prior Undertakings" and Appendices A,
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 City regarding the contents of the Official Statement. In the course of our
participation in the preparation of the Official Statement as your counsel, we had discussions with
representatives of the Issuer, including its City Attorney, Bond Counsel and Financial Advisor,
regarding the contents of the Official Statement. In the course of such activities, no facts came to
our attention that would lead us to believe that the Official Statement (except for the financial
statements and other financial and statistical data contained therein, the information set forth under
theheadings "THEOBLIGATIONS-Book-Entry-OnlySystem","TA.XMATTERS",and "OTHER
INFORMATION-Continuing Disclosure of Information-Compliance with Prior Undertakings"
and Appendices A, Band 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,
j
)
)
ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
January 18,2007
THIS IS TO CERTIFY that the City of Lubbock, Texas (the "Issuer") has
submitted to me City of Lubbock, Texas, Tax and Waterworks System Surplus
Revenue Certificate of Obligation. Series 2007 (the ~~certificate"), in the principal
amount of $25,255,000, for approval. The Certificate is dated January 1, 2007,
numbered T -1, and was authorized by an Ordinance of the Issuer passed on January
12, 2007 (the "Ordinance11).
I have examined the law and such certified proceedings and other papers as I deem
necessary to render this opinion.
As to questions of fact material to my opinion, I have relied upon representations of the
Issuer contained in the certified proceedings and other certifications of public officials furnished to
me without undertaking to verify the same by independent investigation.
I express no opinion relating to the official statement or any other offering material relating
to the Certificate.
Based on my examination, I am of the opinion, as ofthe date hereof and under existing law,
as follows (capitalized terms, except as herein defined, have the meanings given to them in the
Ordinance):
No.4S912
(1) The Certificate is been issued in accordance with law and is a valid and binding
obligation of the Issuer.
(2) The Certificate is payable from the proceeds of an ad valorem tax levied, within the
limits prescribed by law, upon all taxable property in the Issuer and is further
payable from and secured by a limited pledge of the Surplus Revenues derived by
the Issuer from the operation of the System in an amount not to exceed $1,000.
Therefore, the Certificate is approved.
Book No. 2007 A
MAA
l'osT Ol'l'tCI' Box 12548, AUSTJ~. Tr.x.u 78711-2548 TEI.:(St2)463-2t00 W\~·w.oAG .STA·m.-rx.us
An II'111•I t;mpld.JIIWtf OpporiNNii.J t;mpi"JtT • Prinltd •• Rt!J<Iul l'uptr
)
OFFICE OF COMPTROLLER
OF THE STATE OF TEXAS
I, SUSAN COMBS, 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
Certificate of Obligation. Series 2007
numbered T -1. of the denomination of $ 25.255.000, dated January 1. 2007, 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 18th day of January, 2007, under Registration Number
72404.
Given under my hand and seal of office, at Austin, Texas, the 18th day of
January. 2007.
SUSAN COMBS
Comptroller of Public Accounts
of the State of Texas
)
)
OFFICE OF COMPTROLLER
OF THE STATE OF TEXAS
I, Melissa Mora, D Bond Clerk IX] 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 18th day of January. 2007, 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 Certificate of Obligation.
Series 2007,
following signature:
I, Susan Combs, 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 72404.
GIVEN under my hand and seal of office at Austin, Texas, this the 18th day of January. 2007.
~~
SUSAN COMBS
Comptroller of Public Accounts
of the State of Texas
)
)
)
)
)
)
)
)
)
)
PFSA
February 7, 2007
Municipal Bond Insurance Policy No. 208095-N With Resoect to
$54.020.000 in Agareoate Principal Amount of
CjW~Lubbock.Jexas
General Ob!jaation Refunding Bonds. Series 2007
ladies and Gentlemen:
I am Associate General Counsel of Financial Security Assurance Inc., a New Yor1< 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 Jaws of the State of New York and authorized 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 tenns, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, rehat:lililalion, moratorium and other similar laws affecting the
enforceability of credlt.ors' 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 "BONO
INSURANCE -Bond Insurance Policy" in the official statement relating to the above-referenced Bonds dated January
12, 2007 (the "Official Statement"). There has not come to my anention 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 information 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,
162513ttl Street,
lubbock, Texas 79457..()()()1.
Morgan Keegan & Co. Inc.,
as Representative of the Underwriters,
·4400 Post Oak Parkway, Suite 2670,
Houston, Texas n021.
F'.waneial Seeurity Amttanee.
31 We6t swtf ~et ·New Yorlc. New York 10019 ·'lhl: .8lll.8s6.oJOO ·Fax: 2l2.688.3101
N~ York· Dallas • San Francisco • loodon • Madr.id • Pam • Singapore • Sydney· Thlcyo
Very truly yours,
Associate General Counsel
)
)
)
)
)
)
)
)
Vinson &Elkins
Financial Security Assurance
31 West 52nd Street
New York, New York 10019
January 19, 2007
Re: City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates
of Obligation, Series 2007
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 Dubai Hong Kong Houston
Very truly yours,
Trammell Crow Center, 2001 Ross Avenue, Suite 3700
Dallas. TX 75201-2975
London Moscow New YolK Shanghai Tokyo Washington Tel214.220.noo Fax 214.220.7716 -.velaw.com
Dallas 1208272v.1
'
)
)
P.O. Box 2000 • 1625 13th Street
Lubbock. Texas 7945 7
(806) 775-2222 • Fax (806) 775-3307
Morgan Keegan & Company, Inc.
Southwest Securities, Inc.
Popular Securities, Inc.
M.E. Allison & Co., Inc.
January 19, 2007
c/o Morgan Keegan & Company, Inc.
4400 Post Oak Parkway
Suite 2670
Houston, Texas 77027
Office of the City Attorney
Re: $25,255,000 Tax and Waterworks System Surplus Revenue
Certificates of Obligation, Series 2007
Ladies and Gentlemen:
I am the City Attorney for the City of Lubbock, Texas (the "City") at the time of
the issuance of the above referenced Certificates (the "Certificates"), pursuant to the
provisions of the Ordinance duly adopted by the City Council of the City on January 12,
2007. Capitalized terms not otherwise defined in this opinion have the meanings
assigned in the Purchase Contract.
In my capacity as City Attorney to the City, I have reviewed such agreements,
documents, certificates, opinions, letters, and other papers as I have deemed necessary or
appropriate in rendering the opinions set forth below.
In making my review, I have assumed the authenticity of all documents and
agreements submitted to me as originals, conformity to the originals of all documents and
agreements submitted to me as certified or photostatic CQpies, the authenticity of the
originals of such latter documents and agreements, and the accuracy of the statement
contained in such documents.
Based upon the foregoing, and subject to the qualifications and exceptions
hereinafter set forth, I am of the opinion that under the applicable laws of the United
States of America and the State ofTexas in force and effect on the date hereof:
)
)
1. Based on reasonable inquiry made of the responsible City employees and public
officials, the City is not, to the best of my knowledge, in breach of or in default under any
applicable law or administrative regulation of the State of Texas or the United States, or
any applicable judgment or decree or any trust agreement, loan agreement, bond, note,
resolution, ordinance, agreement or other instrument to which the City is party or is
otherwise subject and, to the best of my knowledge after due inquiry, no event has
occurred and is continuing that, with the passage of time or the giving of notice, or both,
would constitute such a default by the City under any of the foregoing; and the execution
and delivery of the Purchase Contract, the Certificates, and the adoption of the Ordinance
and compliance with the provisions of each of such agreements or instruments does not
constitute a breach of or default under any applicable law or administrative regulation of
the State of Texas or the United States or any applicable judgment or decree or, to the
best of my knowledge, any trust agreement, loan agreement, bond, note, resolution,
ordinance, agreement or other instrument to which the City is a party or is otherwise
subject; and
2. Except as disclosed in the Official Statement, no litigation is pending, or, to my
knowledge, threatened, in any court in any way; (a) challenging the titles of the Mayor or
any of the other members of the City Council to their respective offices; (b) seeking to
restrain or enjoin the issuance, sale or delivery of any of the Certificates, or the levy,
collection or application of the ad valorem taxes or the Pledged Revenues pledged or to
be pledged to pay the principal of and interest on the Certificates; (c) contesting or
affecting the validity or enforceability of the Certificates, the Ordinance or the Purchase
Contract; (d) contesting the powers of the City or any authority for the issuance of the
Certificates, or the adoption of the Ordinance; or (e) that would have a material and
adverse effect on the fmancial condition of the City.
3. I have reviewed the information in the Official Statement contained under the
caption "Other Information--Litigation" and such information in all material respects
accurately and fairly summarizes the matters described therein.
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,
rl: l ~).~to·.
Anita E. Burgess
City Attorney