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Home My WebLink AboutOrdinance - 2009-O0013 - Waterworks System Surplus Revenue Series 2009; Not To Exceed $67,000,000. - 02/26/20091S30460v.l LUB200/1 Ordinance Bo. 2009-00013 ORDINANCE relating to CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBUGATION SERIES 2009 Adopted: February 26, 2009 TABLE OF CONrENTS Page ARTICLE I DEFINITIONS AND OTIIER PRELIMINARY MATTERS Sec:tion 1. 0 1. Definitions ................................................................................................................. .2 Sec:::tion 1 .02. Findings. ........................................................................................................................................................... 41 ................................................................... 4 Section 1.03. Table of Contents, Titles, and Headings .................................................................. S Sec:tion 1.04. In.teipretation. .................................................................................................................................................................................................... S ARTICLE II SECURITY FOR THE CERTIFICATES; INTEREST AND SINKING FUND; PRIOR LIEN OBLIGATIONS Section 2.01. Paymm.t of the Cel'tificates ............................................................................................................................... S Section 2.02. Intere,st 811d Sin.king Fund ........................................................................................................... 6 ARTICLBID AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE CERTIFICATES Section 3 .. 01. Auth.o.rization. .................................................................................................................................................................. 6 Section 3.02. Date. Denomination, Maturities, and Interest .......................................................... 7 Section 3.03. Medium. M~ and Place of Paymeot. ................................................................ 7 Section 3.04. Execution and Registration of Certificates .............................................................. 8 Se<:tion 3.0S.. Own.ership ............................................................................................................................................................................. 9 Sec:tion 3.06. Registration, Transfer, and Exe~ .................................................................... 10 Section 3.07. Cancellation. .......................................................................................................... 10 Section 3.08. Tmiporary Certificates .......................................................................................... 11 Section 3.09. Replacement Certificates ....................................................................................... 11 Section 3.10. Book•Entry-Only System. ...................................................................................... 12 Section 3.11. Successor Securities Depository; Transfer Outside Book-Entry-Only System. .... 13 Section 3.12. Payments to Cede & Co ......................................................................................... 13 ARTICLE IV REDEMPTION OF CERTIFICATES BEFORE MATI.JRITY Section 4.01. Redemption. ........................................................................................................... 13 Section 4.02. Optional Redemption ............................................................................................. 14 Section 4.03. Mandatory Sinking Fund Reden1ption ................................................................... 14 Section 4.04. Partial Redemption. ................................................................................................ 14 Section 4.05. Notice of Redemption to Owners .......................................................................... 15 (i) l530460v.l LUB200/I Section 4.06. Paynient Upon Redemption ................................................................................... 15 Section 4.07. Effect of Redemption ............................................................................................. 16 Section 4.08. Lapse of Payment. .................................................................................................. 16 ARTICLEV PAYIN'G AGENT/REGISTRAR Section 5.01. Appointment of Initial Paying Agent/Registrar ..................................................... 16 Section 5.02. Qualifications .................................................................................................................................... 16 Section 5.03. Maintaining Paying Agent/Registrar ..................................................................... 16 Section S.04.. Termination. ................................................................................................................................................. 17 Section 5.05. Notice of Change to Owners ........................... ; ...................................................... 17 Section 5.06. Agreement to Perform Duties and Functions ......................................................... 17 Section 5.07. Delivery of Records to Successor .......................................................................... 17 ARTICLE VI FORM OF THE CERTIFICATES Section 6. 0 I. Form Generally ...................................................................................................... 17 Section 6.02. Form of the Certificates ......................................................................................... 18 Section 6.03. CUSJP Registration. ............................................................................................... 24 Section 6.04-. Legal Opinion.. ............................................................................................................ 24 Section 6.05. Bond Insurance ...................................................................................................... 24 ARTICLE VII SALE AND DELIVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS Section 7.01. Sale of Certificates; Official Statement ................................................................. 24 Section 7 .02. Control and Delivery of Certificates ...................................................................... 26 Section 7.03. Deposit of Proceeds ............................................................................................... 26 ARTICLEVIlI INVESTMENTS Section 8.01. Invesnnents ....................................................................................................... : .... 26 Section 8.02. Investnient Income ................................................................................................. 27 ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.01 . Payment of the Certificates .................................................................................... 27 Section 9.02. Other Representations and Covenants ................................................................... 27 Section 9.03. Provisions Concerning Federal Income Tax Exclusion ......................................... 27 IS30460v.l LUB200/t (ii) Section 9.04. No Private Use or Payment and No Private Loan Financing. ................................ 28 Section 9.0S. No Federal Guaranty .............................................................................................. 28 Section 9.06. Certificates Are Not Hedge Bonds ........................................................................ 28 Section 9.07. No-Arbitrage Covenant. ........................................................................................ .28 Section 9.08. Arbitrage Rebate .................................................................................................... 29 Section 9.09. Information Reporting. .......................................................................................... 29 Section 9 .10. Continuing Obligation ........................................................................................... 29 ARTICLEX DEFAULT ANDREMEDIBS Section 10.01. Events of Default. .................................................................................................. 30 Section 10.02. Remedies for Default. ............................................................................................ 30 Sec:tion 10.03. Remec:lies Not Ex.elusive ....... , ...................................................................................................... 30 ARTICLE XI DISCHARGE Section 11.01 . Discharge ............................................................................................................... 31 ARTICLE XII CONTINUING DISCLOSURE UNDERTAKJNG Section 12.01. Ann.11Al Reports. . ..................................................................................................... 31 Section 12.02. Material Event Notices .......................................................................................... 31 Section 12.03. Limitations, Disclaimers and Amendments ........................................................... 32 ARTICLEXIll AMENDMENTS; ATTORNEY GENERAL MODIFICATION Section 13.01. Amendments .......................................................................................................... 33 Section 13 .02. Attorney General Modification. ............................................................................. 34 ARTICLE XIV EFFECTIVE IMMEDIATELY Section 14.01. Effective lnlmediately ............................................................................................ 34 Exhibit A -Description of Annual Disclosure of Financial Infonnation ................................... A-1 Exhibit B -Sale Paraineters ......................................................................................................... B-1 (iii) IS30460v.l LUB200/l OJWIRAIICB Ho. 2009-00013 AN ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF LUBB~ TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2009 IN AN AMOUNT NOT TO EXCEED $67,000,000; LEVYING A TAX AND PLEDGING SURPLUS WATERWORKS SYSTEM REVENUES IN PAYMENT THEREOF; APPROVING THE OFF1CIAL STATEMENT; APPROVING EXECUTION OF A PURCHASE CONfRACT; 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 pmposes, and with the provisions set forth in Section 3.01 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 Certific~ and has found and determined that it is necessary and in the best interests of the City and its citizens that it authorize the issuance of the Certificates in accordance with the terms and provisions of this Ordinance at this time; WHEREAS, the City Council desires to delegate, pursuant to Chapter 1371, Texas Government Code, as amended, and the parameters of this Ordinance, to the Authorized Officer, the authority to approve the amount, the interest rate, the price and terms of the Certificates authorized hereby and to otherwise take such actions as are necessary and appropriate to effect the sale of the Certificates; 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 pwpose of said meeting was given as required by Chapter 5S1, Texas Government Code, as amended; therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CI'IY OF LUBBOCK: IS30460v.l LUB200/1 ARTICLE I DEFINTI1ONS AND OTHER PRELIMINARY MATTERS Section 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise in this ~ the following terms shall have the meanings specified below: "Authorized Officer" means each of the City Manager and the Chief Financial Officer. "Certificate" means any of the Certificates. "Certificate Date" means the date designated as the initial date of the Certificates by Section 3.02(a) of this Ordinance. "Certificates" means the certificates of obligation authorized to be issued by Section 3.01 of this Ordinance and designated as "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009." "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 Payment/I'ransfer Office" means (i) with respect to the initial Paying Agent/Registrar named in this Ordinance, the Designated Paymentlfransfer 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. "OTC" means The Depository Trust Company of New Yark, New York, or any successor securities depository. "OTC 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 OTC Participants . .. Event of Default" means any event of default as defined in Section 10.01 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. -2- IS30460v.l LUB200/I "Initial Certificate" means the initial certificate authorized by Section 3.04 of this Ordinance. "Interest and Sinking Fund" means the interest and sinking fund established by Section 2.02 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 lS of each year, commencing on the date set forth in the Pricing Certificate. "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. "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 cmying 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 detennining •~et Revenues." "Owner" means the person who is the registered owner of a Certificate or Certificate~ as shown in the Register. "Paying Agent/Registrar' means initially The Bank of New York: Mellon Trust Company, National Association, or any successor thereto as provided in this Ordinance. "Pricing Certificate" means a certificate or certificates to be signed by the Authorized Officer. "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 Swplus Revenues made for the Certificates. "Project" means the purposes for which the Certificates are issued as set forth in Section 3.01. -3- IS30460v.1 LUB200'I "Purchase Contract" means the purchase contract approved in Section 7.0l(b) of this Ordinance. "Record Date" means the last business day of the month next preceding an Interest Payment Date. "Register'" means the Register specified in Section 3.06(a) of this Ordinance. ''Representations Letter'' means the Blanket Letter of Representations between the City andDTC. "Representative" means the representative for the Underwriters named in the Purchase Contract. ''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. "Special Record Date" means the Special Record Date prescribed by Section 3.03(b). "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. "System" means the City's Waterworks System being all properties, facilities and plants currently o~ operated and maintained by the City for the supply, treatment, transrnissi.on and distribution of treated, potable water, together with all future extensions, improvem~ replacements and additions thereto. ''Term Certificates., has the meaning set forth in Section 4.03 hereof. "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. "Underwriten" means the underwriters named in the Purchase Contract. Section 1.02. Finding. The declarations. determinations, and findings declared, made, and found in the preamble to this Ordinance are hereby adopted, restated, and made a part of the operative provisions hereof. -4- IS30460v.l LUB200/l Section 1.03. 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 1.04. Intetpretation. (a) Unless the context requires otherwiM; 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 cOITelative words of the plural number and vice versa. (b) This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein. ARTICLE II SECURITY FOR THE CERTIFICATES; INTEREST AND SINKJNG FUND; PRIOR LIEN OBLIGATIONS Section 2.01. 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 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 Certificat~ being (i) the interest on the Certificates, and (ii) a sinking fund for their redemption at maturity or a sinking fund of two pereent per annum (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 therefroMt and all amounts on deposit in or required hereby to be deposited to the Interest and Sinking Ftmd 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 Swplus 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. -5 - 1530460v.l LUB200/l (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 aunu.a1 budget shall reflect (A) the amount of debt service requirements to become due on the Certificates in the next ensuing Fiscal Y eaJ' 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 OT 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. Section 2.02. 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 2009, 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 ID AUIHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE CERTIFICATES Section 3.01. Authorization. The City's certificates of obligation to be designated "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009" (the "Certificates"), are hereby authorized to be issued and delivered in accordance with the -6- IS30460v.l LUB200/I Constitution and laws of the State of Tex~ specifically Subchapter C, Chapter 271, Texas Local Government Code, as amended, Chapter 1371, Texas Govermnent Code, as amended, and Article vm of the City's Home-Rule Charter. The Certificates shall be issued in the aggregate principal amount designated in the Pricing Certificate, such amount not to exceed $67,000,000, for the purpose of paying contractual obligations to be incuned for the following purposes, to wit: (i) improvements to the City's Solid Waste Disposal System; (ii) improvements and renovations to the City's Municipal Drainage Utility System; (iii) improvements, replacements, relocations and extensions to the City's Waterworks System including anport water system improvements; (iv) improvements and extensions to City streets including sidewalks, street lighting, traffic signals/controllers, landscaping. utility improvements, extensions; relocations and acquisition of land and rights-of-way in connection therewith; (v) improvements and extensions to the City's Electric S~ including installation of distribution lines, renovations and relocations of existing distnbution lines; (vi) park and park facilities improvements and renovations; (vii) construction of a fire station at 63rd Street and Indiana Avenue; (viii) renovations and improvements to City Hall (collectively, with items (i)-(vii), the "Project'') and (ix) payment of professional services of attorneys, financial advisors and other professionals in connection with the Project and the issuance of the Certificates. Section 3.02. Date, Denomination, Maturities, and Interest. (a) The Certificates shall be dated the· date set forth in the Pricing Certificate (the "Certificate Date'1. 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. (b) The Certificates shall mature on February ts in the years and in the principal amounts set forth in the Pricing Certificate provided that the maximum maturity fot the Certificates shall not exceed twenty-five years. {c) Interest shall accrue and be paid on each Certificate respectively until its maturity or prior redemptio~ from the later of the Certificate Date or the most recent Interest Payment Date to which interest bas been paid or provided for at the rates per annum for each respective maturity specified in the Pricing Certificate. 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 3.03. 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; provided, however, in the event of nonpayment of interest on a scheduled Interest Payment Date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Datej shall be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received I.530460v.1 LUB200/1 from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date," which shall be IS days after the Special Reconi Date) shall be sent at least five business days prior to the Special Record Date by first.class United States mail, postage prepaid, to the address of each Owner of a Certificate appearing on the Register at the close of business on the last business day next preceding the date of mailing of such notice. ( 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 Registert or by such other customary banking amngement acceptable to the Paying Agent/Registrar and the Owner. provided, however, that the Owner shall bear all risk and expense of such alternative banking arrangement 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 datet 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/fransfer Office of the Paying Agent/Registrar is located are required or authorized by law or executive order to closet 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 3.02 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 Ownen 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 yeam 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 responstble to any Owners of such Certificates for any further payment of such unclaimed moneys or on account of any such Certificatest subject to Title 6 of the Texas Property Code. Section 3.04. Execution and Registration of Certificates. (a) The Certificates shall be executed on behalf of the City by the Mayor and the City Secretaryt 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 -8- 1S30460v.1 LUB200'1 each of said offic~ 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 f~simile 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 pwpose or be entitled to any security or benefit of this Ordinance unless and until there appears thereon the Certificate of Paying Agent/Registrar substantially in the form provided herein, duly authenticated by manual execution by an officer or duly authorized signatory of the Paying Agent/Registrar. It shall not be required that the same officer or authorized signatory of the Paying Agent/Registrar sign the Certificate of Paying Agent/Registrar on all of the 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 form provided herein, manually executed by the Comptroller of Public Accounts of the State of Texas, or by his duly authorized agent, which Certificate shall be evidence that the 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 reflecting the terms set forth in the Pricing Certificate and representing the entire principal amount of all Certificates, payable in stated installments to the Representative, or its designee, executed by the Mayor and City Secretary of the City by their manual or facsimile signatures, appmved by the Attomey General, and registered and rnanual1y signed by the Comptroller of Public Accounts. will be delivered to the Representative or its designee. Upon payment for the Initial Certificate, the Paying Agent/Registrar sba11 cancel the Initial Certificate and deliver a single registered, definitive Certificate for each maturity, in the aggregate principal amount thereo( to DTC on behalf of the Underwriters. Section 3.05. Ownershjp. (a) The City, the Paying Agent/Registrar, and any other penon may treat the petSOn 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 or Special Record Date, as applicable), and for all other purposes, whether or not such Certificate is ovenlue, 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. -9- I 530460v. I LUB200/1 Section 3.06. 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/fransfer Office a register (the "Registerj in which, subject to such reasonable regulations as it may prescn'be, 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 transfened only upon the presentation and surrender of the Certificate at the Designated Paymentrrransfer 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. (c) The Certificates shall be exchangeable upon the presentation and surrender thereof at the Designated Paymentrrransfer 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 comiection 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-five (45) calendar days after the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the Owner of the uncalled principal balance of a Certificate. Section 3.07. 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 mum such cancelled Certificates to the City or may in accordance with law destroy such cancelled Certificates and periodically fwnish the City with certificates of destruction of such Certificates. -10- 1 S30460v. l LU8200/l Section 3.08. 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 prin~ 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 form, such Certificates in temporary form shall be entitled to the benefit and security of this Onlinance. (c) The City, without unreasonable delay, shall prepare, execute and deliver to the 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 form surrendered. Such exchange shall be made without the making of any charge therefor to any Owner. · Section 3.09. Rca,lacement 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 amo1D1t, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Owner of such Certificate to pay a sum sufficient to cover any tax or other governmental charge that is authoriz.ed 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 ~ 11- l530460v.l LUB.200'1 (iv) satisfies any other reasonable requirements imposed by the City and the Paying Agent/Registrar. ( c) If, after the delivery of such replacement Certific~ 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 ftom 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 des1royed, or wrongfully taken Certificate has become or is about to become due and payable, the Paying Agent/Registrar, in its discretio~ 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 3.1 O. Book•Entry-Only System. (a) ~otwithstanding any other provision hereo( 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 pwpose of payment of principal of and interest on Certificates, for the pUtpOse of giving notices of redemption and other matters with respect to such Certificate, for the pwpose 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 -12· I S30460v.l LUB200'1 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, aa 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 ofDTC. (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. Section 3.11. Successor Secmities Depository; Transfer Outside Book-Entry-Only System. In the event that the City determines that it is in the best interest of the City and the beneficial owners of the Certificates that they be able to obtain certificated Certificates, or in the event DTC discontinues the services described herein, the City shall (i) appoint a successor securities depository, qualified to act as such under Section 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 OTC 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 OTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Ownen 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 OTC; all payments with respect to principal of and interest on such Certificates, and all notices with respect to such Certi.ficates shall be made and given, respectively, in the manner provided in the Representations Letter of the City to OTC. ARTICLE IV REDEMPTION OF CERTIFICATES BEFORE MATIJRITY Section 4.0 l. Redemption. The Certificates are subject to redemption before their scheduled maturity only as provided in this Article IV. -13 • 153°"60v.l LUB200/l Section 4.02. Optional Redemption. (a) The City reserves the option to redeem Certificates in the manner provided in the Form of Certificate set forth in Section 6.02 of this Ordinance with such changes as are required by the Pricing Certificate. (b) If less than all of the Certificates are to be redeemed pursuant to an optional redempti~ 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 thereo( within such maturity or maturities and in such principal amounts for redemption. (c) 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 4.03. Mandatory Sinking Fund Redemption. (a) Certificates deaignated u ''Term Certificates,» if any, in the Pricing Certificate are subject to scheduled mandatory redemption and will be redeemed by the City, in part at a price equal to the principal amount thereot without premium, plus accrued interest to the redemption date, out of moneys available for such purpose in the Interest and Sinking Fund, on the dates and in the respective principal amounts as set forth in the Pricing Certificate. (b) At least forty-five (4S) days prior to each scheduled mandatory redemption~ 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 Term Certificates to be redeemed, shall call such Term Certificates for redemption on such scheduled mandatory redemption date, and shall give notice of such redemption, as provided in Section 4.05. The principal amount of the Term Certificates required to be redeemed on any redemption date pmsuant to subparagraph ( a) of this Section 4.03 shall be reduced, at the option of the City, by the principal amount of any Term 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 Tenn Certificates plus accJUed interest to the date of purchase thcreot 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 4.04. Partial Redemption. {a) A portion of a single Certificate of a denomination greater than $S,000 may be redeemed, but only in a principal amount equal to $S,000 or any integral multiple thereof. If such a Certificate is to be partially redeemed, the Paying Agent/Registrar shall treat each $S,000 portion of the Certificate as though it were a single Certificate for purposes of selection for redemption. -14- J530460v. l LUB200/t (b) Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with Section 3.06 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 surrendered, such excbmge 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 4.05. 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 majljng such notice. (b) The notice shall state the redemption date, the redemption price, the place at which the Certificates are to be surrendered 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) The City reserves the right to give notice of its election or direction to redeem Certificates under Section 4.02 conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice. and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected Owners. Any Certificates subject to conditional redemption where redemption bas been rescinded shall remain Outstanding. and the rescission shall not constitute an event of default Further, in the case of a conditional redemption, the failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default (d) Any notice given as provided in this Section shall be conclusively presumed to have been duly given. whether or not the Owner receives such notice. Section 4.06. 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 arc received by the ~aying -15 - I 530460v. I LUB200/I AgenVRegistrar 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/Transfer 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 4.07. Effect of Redemption. (a) Notice of redemption having been given as provided in Section 4.05 of this Ordinance and subject to any conditions or rights reserved by the City under Section 4.0S(c), 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 suirendered 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 4.08. 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 3.03(f) hereof. ARTICLEV PA YING AGENT/REGISTRAR Section 5.0 I. Appointment of Initial Paying Agent/Registrar. The Bank of New York Mellon Trust Company, National Association, is hereby appointed as the initial Paying AgenVRegistrar for the Certificates. Section 5.02. 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 regis113r for the Certificates. Section 5.03. Maintaining Paying Agent/Registrar. (a) At all times while any Certificates are outstanding, the City will maintain a Paying Agent/Registrar that is qualified under Section 5.02 of this Ordinance. The Mayor is hereby authorized and directed to execute an agreement with the Paying Agent/Registrar 1530460v.l LUB200/i specifying the duties and responsibilities of the City and the Paying Agent/Registrar. The signature of the Mayor shall be attested by the City Secretary of the City. The form of the Paying Agent/Registrar Agreement presented at this meeting is hereby approved with such changes as may be approved by bond counsel to the City. (b) If the Paying Agent/Registrar resigns or otherwise ceases to serve as such, the City will promptly appoint a replacement. Section 5.04. Termination. The City, upon not less than sixty (60) days notice, reseives the right to terminate the appointment of any Paying Agent/Registrar by delivering to the entity whose appointment is to be tenninatc:d written notice of such termination. Section S.05. 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 5.06. 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 prescnl>ed thereby. Section S.07. 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 6.01. Fonn 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 Assignment form to appear on each of the Certific~ (i) shall be substantially in the form set forth in this Article, with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and the Pricing Certificate, and (ii) may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including any reproduction of an -17- 1S30460v.l LUB200'l 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 6.02. 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 Assignment 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 TAXANDWATERWORKSSYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES2009 REGISTERED $ ___ _ INTEREST RATE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: _% The City of Lubbock (the "City"), in the County of Lubbock, State of Texas, for value received, hereby promises to pay to or registered assigns, on the Maturity Date specified above, the sum of _________ DOLLARS 1 Information to be inserted ftom Pricing Cmificate. -18 • 1530460v.l LUB200'1 unless this Certificate shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount ftom 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 IS of each year, commencing ___ 2• All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this 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 Mellon Trust Company, National Association, or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/I'ransfer 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; provided, however, that in the event of nonpayment of interest on a scheduled payment date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date"') will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "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 fint-class United States mail, postage prepaid, to the address of each owner of a Certificate appearing in 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. 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 $. ___ 3 (herein referred to as the 2 Information to be inserted from Pricing Certificate. 3 Information to be inserted &om Pricing Certificate. 1S30460v.l LUB200'1 -19 - "Certificates''), issued pursuant to a certain ordinance of the City (the ''Ordinancej 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 advisots 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 or after February 1S __ in whole or in part, before their respective scheduled maturity dates, on ___ _, or on 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 thereo( within such maturity and in such principal amounts, for redemption. J4 · [Certificates maturing on February 1S in each of the years __ through --J inclusive (the '4Tcrm Certificates"), ·are subject to mandatoey sinking fund redemption prior to their scheduled maturity, and will be redeemed by the City, in part at a redemption price equal to the principal amount thereof, without premium, plus interest accrued to the redemption date, on the dates and in the principal amounts shown in the following schedule: Redemption Date Principal Amount The Paying Agent/Registrar will select by lot or by any other customary method that results in a random selection the specific Term Certificates (or with respect to Term Certificates having a denomination in excess of SS,000. each $5,000 portion thereof) to be redeemed by mandatory redemption. The principal amount of Term Certificates required to be redeemed on any redemption date pursuant to the foregoing maodatory sinking fimd redemption provisions hereof shall be reduced, at the option of the City, by the principal amount of any Certificates which, at least 4S days prior to the mandatory sinking tund 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 ~tion 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. In the Ordinance, the City reserves the right in the case of an optional redemption to give notice of its election or direction to redeem 4 Insert optional redemption provisions, if any. and revise as necessary to conform to the Pricing Certificate. ' losat mandatory siuking fund~ provisions, if any, mi conform u necessary to the Pricing Certificate. IS30460v.l LUB200ll Certificates conditioned upon the occUITe11Ce of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redempti~ with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or {ii} that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption noti~ and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected owners. Any Certificates subject to conditional redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an event of default Further, in the case of a conditional redemption, the failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default 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. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Certificate called for redemption where such redemption is scheduled to occur within forty five (4S} calendar days of the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Certificate. 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 or Special Record Date, as applicable) 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, 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 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 SUiplus Revenues, as defined in the Ordinance, derived by the City .from the operation of the WaterwOJks System in an amount limited to $1,000; that when so collected, such tax.es and Surplus Revenues shall be appropriated to such purposes; and that the total indebtedness of the City, including the Certificates, does not exceed any constitutional or statutory limitation. -21 • IS30460v.l LUB200l1 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, CityofLubbock, Texas [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 TIIE 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 of Texas, 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] 1530460v.J LUB200ll 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 PAYING AGENT/REGISTRAR The records of the Paying Agent/Registrar show that the Initial Certificate of this series of Certificates was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, and that this is one of the Certificates referred to in the within-mentioned Ordinance. Dated: (d) Form of As111gnmf!D.t The Bank of New York Mellon 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 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: -23 - 1S30460v.l LUB200'1 (i) immediately under the name of the Certificate the headings ~'INTEREST RATE" and "MATIJRITY DATE" shall both be completed with the words "As shown below"; and (ii) in the first paragraph of the Certificate, the words '"on the Maturity Date specified above0 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 the Pricing Certificate pursuant to Section 3.02 of this Ordinance) Section 6.03. 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 6.04. 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 6.05. Bond Insurance. Information pertaining to bond insurance. if any, may be printed on each Certificate. ARTICLE VII SALE AND DELIVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS Section 7.01. Sale of Certificates; Official Statement. (a) The Certificates shall be sold at negotiated sale to the Underwriters in accordance with the terms of this Ordinance, including this Section 7.0l(a) and Exhibit B hereto, provided that all of the conditions set forth in Exhibit B can be satisfied. As authorized by Chapter 1371, Texas Government Code, as amended, the Authorized Officer is authorized to act on behalf of the City upon determining that the conditions set forth in Exhibit B can be satisfied, in selling and delivering the Certificates and carrying out the other procedures specified in this Ordinance, including determining whether to acquire bond insurance for the Certificates, the aggregate principal amount of the Certificates and price at which each of the Certificates will be sold, the 1S30460v.l LUB200/I number and designation of series of Certificates to be issued. the form in which the Certificates shall be issued. the years in which the Certificates will mature, the principal amount to mature in each of such years, the rate of interest to be borne by each such maturity, the first interest payment~ the dates, prices and terms upon and at which the Certificates shall be subject to redemption prior to maturity at the option of the City and shall be subject to mandatory ~inking fund redemption, and all other matters relating to the issuance, sale and delivery of the Certificates, all of which shall be specified in the Pricing Certificate. The authority granted to the Authorized Officer under this Section 7.0l(a) shall expire at 5:00 p.m .• August 26, 2009, unless otherwise extended by the City Council by separate action. Any finding or determination made by the Authorized Officer relating to the issuance and sale of the Certificates and the execution of the Purchase Contract in connection therewith shall have the same force and effect as a finding or determination made by the City Council. (b) The Authorized Officer is hereby authorized and directed to execute and deliver, and the City Secretary is hereby authorized and directed to attest, a certificate purchase contract (the ''Purchase Contractn) which Purchase Contract is hereby accepted, approved and authorized in substantially the form submitted to the City and upon completion of the terms of the Purchase Contract in accordance with the terms of the Pricing Certificate and this Ordinance, the Authorized Officer is authorized and directed to execute such Purchase Contract on behalf of the City and the Authorized Officer and all other oflicen, agents and representatives of the City are hereby authorized to do any and all things necessary or desirable to satisfy the conditions set out therein and to provide for the issuance and delivery of the Certificates. The Certificates shall initially be registered in the name the Representative. (c) The form and substance of the Preliminary Official Statement 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 (bXl) of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended. The Authorized Officer and City Secretary are hereby authorized and directed to cause to be prepared a final Official Statement (the "Official Statement'') incorporating applicable pricing information pertaining to the Certificates, and to execute the same by manual or facsimile signature and deliver appropriate numbers of executed copies thereof to the Underwriters. The Official Statement as thus approved, executed and delivered. with such appropiiate variations as shall be approved by the Authorized Officer 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 permanent records of this meeting. The use and distnbution of the Preliminary Official Statement, and the preliminary public offering of the Certificates by the Underwriten, is hereby ratified, approved and confirmed. (d) All officers of the City are authorized to execute such documents, certificates and receipts as they may deem appropriate in order to consummate the delivery of the Certificates in accordance with the terms of sale therefor includin& without limitation, the Purchase Contract -25 - 1530460v.l LUB200/l (e) The obligation of the Underwriters identified in subsection (a) of this Section to accept delivery of the Certificates ~ subject to the Underwriters being furnished with the ~ approving opinion of Vinson & Elkins L.L.P., bond counsel for the City, which opinion shall be dated and delivered the Closing Date. Section 7.02. Control and Delivery of Certificates. (a) The Authorized Officer 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 Underwriters thereof under and subject to the general supervision and direction of the Authorized Officer, against receipt by the City of all amounts due to the City under the terms of sale. (c) In the event the Mayor or City Secretary is absent or otheiwise unable to execute any document or take any action authorized herein, the Mayor Pro Tem and the Assistant City Secretary, respectively, shall be authorized to execute such documents and take such actions, and the performance of such duties by the Mayor Pro Tem and the Assistant City Secretary shall for the purposes of this Ordinance have the same force and effect as if such duties were performed by the Mayor and City Secretary, respectively. Section 7.03. Deposit 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 pwposes for which the Certificates are being issued as herein provided. Section 8.01. Investments. ARTICLEVm INVESTMENTS (a) Money in the Interest and Sinking Fund created by this Ordinance and the special acco\Ult provided for in Section 7.03(b), at the City's option, may be invested in such securities or obligations as permitted under applicable law. The City's Chief Financial Officer, and any other officer of the City authorized to make investments on behalf of the City, are hereby authorized and directed to execute and deliver, on behalf of the City, any and all investment agreements, guaranteed investment contracts or repurchase agreements in connection with the investment of moneys on deposit in the Interest and Sinking Fund and the special account -26- 1530460¥.1 LUB200/l provided for in Section 7.03(b), but only to the extent such investment agreements, guaranteed investment contracts or repurchase agreements are authorized investments under applicable law. (b) Any securities or obligations in which money in the Interest and Sinking Fund 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 8.02. 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 .03(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 REPRESENTATIONS AND COVENANTS Section 9.01. Payment 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 F~ money sufficient to pay such principal of and interest on the Certificates as will accrue or mature on the applicable Interest Payment Date or date of prior redemption. Section 9.02. 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 wil~ 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 .03. 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 103 and 141 through 150 of I S30460v. l LUB200/l the Internal Revenue Code of 1986, as amended (the "Codej, and the applicable regulations promulgated thereunder (the "Regulations"). The City covenants and agrees not to take any acti~ 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 thercofforpmposes of federal income taxation. In particular, the City covenants and agrees to comply with each req~t of Sections 9.03 through 9.09 of this Article IX; provided, however, that the City shall not be required to comply with any particular requirement of Sections 9.03 through 9.09 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 9.03 through 9.09 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 9.03 through 9.09 of this Article IX. Section 9.04. 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 estirnat.es known or reasonably expected to be in existence on the date the Certificates are deliver~ 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 0 private activity bonds" within the IJ'leaDing of section 141 of the Code and the Regulations. Section 9.05. No Federal Guaranty. The City covenants and agrees not to take any action, or knowingly omit to take any action within its control, that, if taken or omitted, respectively~ would cause the Certificates to be "federally guaranteed" within the meaning of section 149(b) of the Code and the Regulations, except as pemritted by section 149(b)(3) of the Code and the Regulations. Section 9.06. Certificates Are Not Hedge Bonds. The City covenants and agrees not to take any action, or knowingly omit to take any action, and has not knowingly omitted and will not knowingly omit to take any action, within its control. that, if taken or omitted, respectively, would cause the Certificates to be "hedge bonds" within the meaning of section 149(g) of the Code and the Regulations. Section 9.07. 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 -28- t530460v.l LUB200/1 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 9.08. Arbitrage Rebate. If the City does not qualify for an exception to the requirements of Section 148(f) of the Cod~ 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 accollllts 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 permitted under the Regulations, all amounts required to be rebated to the federal government Further, the City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the 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 the arrangement bad been at arm's length and had the yield on the issue not been relevant to either party. Section 9.09. Information 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, the City's obligations under the covenants and provisions of Sections 9.03 through 9.09 of this Article IX shall survive the defeasance and discharge of the Certificates. -29- IS30460v.l LUB200/1 ARTICLEX DEFAULT AND REMEDIES Section 10.01. Events of Default. Each of the following occunences 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 10.02. 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 puipose of protecting and enforcing the rights of the Owners under this Ordinance by mandamus or other suit, action or special proceeding in equity or at law in any court of competent jurisdiction for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Owners hereunder or any combination of such remedies. (b) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Owners of Certificates then outstanding. Section 10.03. Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the 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. -30- JS30460Y.l LUBl00/1 Section 11.01. Discharge. ARTICLE XI DISCHARGE The Certificates may be defeased, discharged or refunded in any manner pennitted by applicable law. ARTICLEXIl CONTINUING DISCLOSURE UNDERTAKING Section 12.01. Annual Reports. (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 descnbed 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 commissioQS 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 infonnation and operating data pmsuant 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 available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. Section 12.02. 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; -31 - IS30460v.J LUBlOO'l (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax-exempt status of the Certificates; (vii) modifications to rights of Owners; (viii) redemption calls; (ix) defeasances; (x) rele&Sey 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 12.01 of this Ordinance by the time required by such Section. Section 12.03. 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." (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 information, operating data, financial statemen~ and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other infonnation that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any 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 information or its usefulness to a decision to invest in or sell Certificates at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO mE OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT. FOR DAMAGES RESULTING IN WHOLE OR 1N PART FROM • 32 • IS30460Y.l LUB200'1 ANY BREACH BY THE CITY. WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART. OF ANY COVENANT SPECIFIED IN TillS 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 othetwise limit the duties of the City under federal and state secmities 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 Ownen 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 information or operating data next provided in accordance with Section 12.01 an explanation, in narrative forIDt of the reuons 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 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 .01. 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 pennitted in this Section. The City may, without consent of or notice to any Owners, ftom 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 -33- 1530460v.l LUB200fl omission herein. In addition, the City may, with the written consent of the Ownen 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. Section 13.02. 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 EFFECTIVE IMMEDIATELY Section 14.01. Effective Tmmediateiy, 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- IS30460v.l LUB200/1 PRESENTED, FINALLY PASSED AND APPROVED, AND EFFECTIVE on the 26th day of February, 2009, at a regular meeting of the City Council of the City of Lubbock, Texas. TOM MARTIN, Mayor ATTEST; ~~vk,-,1 ~ . REB CA GARZA, CilyS: '[S~AL] ' APPROVED AS TO CONTENT: By: A-J..i~ ANDY BURCHAM, Chief Financial Officer APPROVED AS TO FORM: By: Signature Page for Ordinance 1530460v.l LUB200/l EXHIBIT A DESCRIPIION OF ANNUAL DISCLOSURE OF FINANCIAL INFORMATION The following information is referred to in Article XII of this Ordinance. · . Annul Flaucial 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 u 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 u Appendix B, but for the most recently concluded fiscal year. 2. Statistical and financial data set forth in Tables 1-6 and SA-15 of the Official Statement. AcCOWlting 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. ExhibitA-1 IS3~.I LUB200/1 EXHIBITB SALE PARAMETERS In accordance with Section 7.0l(a) of the Ordinance, the following conditions with respect to the Certificates must be satisfied in order for the Authorized Officer to act on behalf of the City in selling and delivering the Certificates to the Underwriters: (a) the price to be paid for the Certificates shall be not less than 9S% of the aggregate principal amount of the Certificates; (b) the Certificates shall not bear interest at a rate greater than the maximum rate allowed by Chapter 1204, Texas Government Code, as amended; ( c) the aggregate principal amount of the Certificates shall produce proceeds in an amount sufficien4 as determined by the Authorized Officer, to fund the purposes described in Section 3.01 and such aggregate principal amount shall not exceed the maximum amount authorized in Section 3.01; ( d) the maximum maturity for the Certificates shall not exceed twenty.five yeaJS; and (e) the Certificates to be issued, prior to delivery, must have been rated by a nationally recognized rating agency for municipal securities in one of the four highest rating categories for long tenn obligations. ExhibitB-1 1530460v.l LUB200/l THE STATE OF TEXAS COUNTY OF LUBBOCK Before me Wendy J. Knox a Nof:ary printed copy of the Legal Notice is a true copy of the origins ahd was printed in the Lubbock Avalanch&.Joumal on the following dates: rV\Wb 11, JOfB ;'5/ a {l l0vd5:. Sitt~ Q¢ RECEIVED ~~~~-1,::J..~y,l,.J.+-l,,.....::;;;!~ilJ--~4--U,--Y2009 LIC in and for the State of Texas commission Expires 4/28/2012 LUBBOCK AV, Morris Communication Corporation Subscribed and sworn to before me this __ 'l..._l'\-v-___ day of M.o.JC,/A ~Ul) 9 FORM 56-10 ~M••t .. , /,~. WENDVJ.KNOX i iff 1"'1 * J NOTARY PUBLIC \ ~ Y, , State dTe,ru ~-;;~✓ Comm. Exp. 04-28-2012 ) ) .., ) ) Dallas I 540778v. I TRANSCRIPT OF PROCEEDINGS pertaining to $23,185,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2009 $58,705,000 CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 Dated: March I, 2009 Delivered: April 8, 2009 Vinson&Elklns ATTORNEYS AT LAW VltfSON & ELKINS L.LP. 3700 TRAMMELL CROW CENTER 2001 ROSS AVENUE DALLAS, TEXAS 75201-2975 Ta.EPHONE (214) 221H700 VOICE MAIL (214) 220-7999 FAX (214) 220-m& ) ) CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES2009 AND CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES2009 TABLE OF DOCUMENTS DOCUMENT TAB NO. I. BOND DOCUMENTS 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14 Dallas I 539809v.1 Certified Resolution Authorizing Publication of Notice of Intent to Issue Certificates and Bonds Affidavits of Publication Certified Ordinance Providing for the Issuance of the Certificates Pricing Certificate Relating to the Certificates Certified Ordinance Providing for the Issuance of the Bonds Pricing Certificate Relating to the Bonds Ordinances Authorizing Refunded Obligations Escrow Agreement for the Refunded Obligations Paying Agent/Registrar Agreement for the Certificates Paying Agent/Registrar Agreement for the Bonds Preliminary Official Statement Official Statement Purchase Contract Specimen Bonds and Certificates 1 2 3 4 5 6 7 8 9 10 11 12 13 14 ) DOCUMENT II. CERTIF1CATES, LETTERS AND RECEIPTS 2.1 General Certificate 2.2 Attorney General/Comptroller Instruction Letter 2.3 Federal Tax Certificate 2.4 Form 8038-G and Evidence of Transmittal 2.5 Receipt and Delivery Certificate of Paying Agent/Registrar 2.6 Rating Letters 2. 7 Certificate Pursuant to Purchase Contract 2.8 Paying Agent Sufficiency Certificate 2.9 Escrow Agent Incumbency Certificate III. OPINIONS TAB NO. 15 16 17 18 19 20 21 22 23 3.1 Opinion of Bond Counsel 24 3.2 Supplemental Opinion of Bond Counsel 25 3.3 Opinion of Underwriter's Counsel 26 3.4 Opinion of Attorney General and Comptroller's Registration 27 Certificates 3.5 Opinion of City Attorney 28 -2- Dallas 1539809v.l MINUTES AND CERTIFICATION PERTAfNING TO PASSAGE OF A RESOLUTION STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § On the 22nd day of January, 2009, 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: Tom Martin, Mayor Jim Gilbreath, Mayor Pro Tern Linda DeLeon Floyd Price Todd R. Klein Paul R. Beane John W. Leonard, III ) ) ) ) ) Members of the Council and all of said persons were present except (all present) . thus constituting a quorum. Whereupon, among other business, a written Resolution bearing the following caption was introduced: A RESOLUTION AUTHORIZING PUBLICATION OF NOTICES OF INTENTION TO ISSUE GENERAL OBLIGATION BONDS AND 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 ABSTENTION: 0 Dallas 1540768v.l 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 22nd day of January, 2009. [SEAL] Signature Page/or Certificate for Notice of Intent Resolution Dallas 1540768v.1 A RESOLUTION AUTHORIZING PUBLICATION OF NOTICES OF INTENTION TO ISSUE GENERAL OBLIGATION BONDS AND 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, in addition to the Certificates, the City intends to issue general obligation bonds (the "Bonds") to fund various public improvements and, if detennined to be in the best interests of the City, to refund outstanding obligations of the City to achieve debt service savings; WHEREAS, the City Council has found and detennined that a notice of intention to issue general obligation bonds should be published in accordance with the provisions of the City Charter; NOW, THEREFORE, BE IT RESOLVED BY IBE 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 day before the (30th) 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 Secretary of the City is hereby authorized and directed to issue a notice of intention to sell general obligation bonds in substantially the form set forth in Exhibit B hereto incorporated herein by reference for all purposes. The notice as set forth in Exhibit B shall be published once a week for a period of thirty (30) days prior to the date set forth in the notice for passage of the ordinance authorizing the Bonds. Such notice shall be published in a newspaper of general circulation in the area of the City of Lubbock, Texas. Section 4. This resolution shall take effect from and after the date of its passage. Dallas 1520 I 08v.1 ADOPTED THIS 22nd day of January, 2009, by the City Council of the City of Lubbock, Texas. CITY OF LUBBOCK, TEXAS Mayor, City of Lubbock, Texas ATTEST: APPROVED AS TO CONTENT: ~e~er, CityofLubbock, Texas APPROVED AS TO FORM: -2- Dallas 1520108v.1 Exhibit A NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION NOTICE IS HEREBY GIVEN that on February 26, 2009, the City Council of the City of Lubbock, Texas, at 7:30 a.m. 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 $67,000,000 principal amount of certificates of obligation for the purpose of paying contractual obligations to be incurred for the following purposes, to wit: (i) improvements to the City's Solid Waste Disposal System; (ii) improvements and renovations to the City's Municipal Drainage Utility System; (iii) improvements, replacements, relocations and extensions to the City's Waterworks System including airport water system improvements; (iv) improvements and extensions to City streets including sidewalks, street lighting, traffic signals/controllers, landscaping, utility improvements, extensions, relocations and acquisition of land and rights-of- way in connection therewith; (v) improvements and extensions to the City's Electric System, including installation of distribution lines, renovations and relocations of existing distribution lines; (vi) park and park facilities improvements and renovations; (vii) construction of a fire station at 63rd Street and Indiana Avenue; (viii) renovations and improvements to City Hall (collectively, with items (i)-(vii), the "Project") and (ix) 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 on January 22, 2009. A-1 Dallas 1520 I 08v. l ExhibitB NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION BONDS On the 26th day of February, 2009, during its regular meeting scheduled to begin at 7:30 a.m., the City Council of the City of Lubbock, Texas, plans to pass an ordinance authorizing the sale of (i) general obligation bonds in the maximum amount not to exceed $3,000,000 to fund various public improvements and (ii) general obligation bonds in a maximum amount to be determined by the City Council on such date to refund outstanding obligations of the City. The meeting will be held in the City Council Chambers at the Municipal Complex, 1625 13th Street, Lubbock, Texas. A complete description of the bonds being authorized may be obtained from the Division of Finance, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457; or from RBC Capital Markets, 2711 N. Haskell Avenue Cityplace, Suite 2500, Dallas, Texas 75204, Financial Advisors to the City. B-1 Dallas I 520108v.1 THL :TATE OF TEXAS ,.,.JUNTY OF LUBBOCK Before me Wendy J. Knox a Notary Public in and for Lubbock County. Texas on this day personally appeared Mary Elizabeth G80IJ18 of the Southwestern Newspaper Corporation, publishecs of the Lubbock Avalanche-Journal. Morning, and Sunday, who being by me duly sworn did dispose and say that said newspaper has run continuously for more than fifty-two weeks prior to the first insertion of this .;;L;;..;e..,ga~I .... N;.;;o;.;ti;.;·c;;;.;e;..._ ____________________________ _ No. _______________ at Lubbock County, Texas and the attached printed copy of the Legal Notice is a true copy of the original and was printed in the Lubbock AvalanchNOUmal on the fo~ing dates: ,'h hAMCI /yt & , 12 .j-20! ·i OCH I 2-l u}Drds ~ rj/ ';}.j;; ~ LUBBOCK AVALANCHE-JOURNAL Morris Communication Corporation Subscribed and sworn to before me this FORM 58-10 LIC in and for lhe State of Texas my commission Expires 4/28/2012 _'I n '¾'r---____ ..i.0:...,_\J _____ day of c)D09 . ,<~!:!.!:~~\ ENOV J. KNOX f ~-X'\ \ NOTARY PUBLIC ~ ~\~)*} State ot Texas \S;;~~-· comm. exp. 04-28-2012 ........... THE STATE OF TEXAS COUNTY OF LUBBOCK Before me Wendy J. Knox a Notary Public in and for Lubbock County, Texas on this day personally appeared Mary Elizabeth George of the Southwestern Newspaper Corporation, publishef's of the Lubbock Avalanche-Journal -Morning, and Sunday, who being by me duly sworn did di&po&e and &ay that said newspaper has run continuously for more than fifty-two weeks pnor to the l'lrst insertionofth~ ~·L_•.s.a_l_N~o_u_c~•---------------------------- No. _______________ at Lubbock County, Texas and the attached printed copy of the _L_eg_a_/_N_o_ti_·c_e ______ is a true copy of the original and was printed in the Lubbock Avalanche-Journal on the fo~ng dates: :;a .i1J { C{A,t,J ;6 1)·r j{) i 2-00 q 4 DI Ii -.nrds :;: B 9D,.) J. Announc LUBBOCK AVALANCHE-JOURNAL Morris Communication Corporation Subscribed and sworn to before me this FORM 58-10 NOTARY p BLIC in and for the State of Texas my commission Expires 4/28/2012 ___ 1-"-') DC....'~--__ day of {. Cu,1,;uQ/u, ,d{;l) q ...• .,;. KNOX ...-~~~~·. ··.. WENDY J. f1-:£{ \ NOTARY PUBLIC \ ~\ ~ _.:•1 State of Texas . .,;·• ,,, ~ . '" ••• ~~~--·· Comm. Exp. 04-28-2012 NOTICE OF INTENTION TO ISSUE CITY OF LUBSOCK,TEXASTAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBllGATlON NOTICE IS HEREBY GIVEN tt,CI,! Ofli F ebruc:iry 26, 2009, thf Citv Cour-cil of the Cih Of Lubbo<:I<, Texas, cit 7:.30 o.m. of o reg: .. ilar meeftni(il of the Cjfy Council to be held in the Citv Council Chambers ot the Mun iC iPOI CDmplex, l625 131h Str~et. Lubbock, Texcis, the regular me,elil"9 i:i-toce-of fhe City ~ ~grnc~~c ie" ~\r\dhSO ~?zr~:st i ~ issvonce of not to e)(ceed $67,COCl,CIOO D(incipal amounr Of cerlific:otes of obligoticn for the Pun::iose of paying contrac1ual obligotions to bl? l11c.urred for the following purposesj to wit: U l imc:irovernents to the City's Solid Wc-ste Ois,po~cl Sv:s1e-m; Oi) fmpro~ments on-d renovotioris to the City's Municip01 Dtain0'1e Ulill!y Svstem; (Iii) impt0vements, replocemenU,r relocction-s. and txtt:n'.iiOAS to the Citv·s Waterworks Sr.1tem i Including oir~ort water system , improvements; {iv] improvements ond ,extensi-or1's tci City s1reers lnclud.ing sioewo:it<,s, slreet 1H1111tin91 i,otfic Si~nalS/controllers, londscoping. utilitv imp.-ovemenrs1 exJens1ons, re-1ocat ions aoa oceiu:isitiDn ot land and rights•of•wov rn connection therewith; (v) improvemerits and exlens.ions to the Citv', Electric Sv'5otem, including insrolla1ion of Clistribution ll nes1 renovoti0ns a.l"d retocafions of existing dist.-fbution line-s,; (YI} park and pork tacilHies 1mpro-.,ement5 and nmovc1iom.i tvm constructior\ at o fite s ro tion ot ,6 3rd Street and Indiana A.venue; (viii) riPnovction, and improvements to Citv ttolt (collectivelv1 with iterns (0-(viil. the "Project·) and (ix) J:Jovment of professional 5erv ices ; of oftorneYs, flnonclo1 c:1dvPsors and other profenionoh in : f ~:~:;~::c:~r t~!e !e'r~ iii~~ f :s~ j The certiticares sholl beor interest -at o ro.te not to exceed HUeen percent (IS%) Per onnum i,.nd sholl hove o maximum moturitv date of not late-r thon tortv ( .d0) ve-ors; a Uer their dote, Said Cerlific0tes sholl be payable f-rom the levv ot o direct -ond contil"ulng. Cid votorem 1ox1 levie-o wifhfn lhe limits prescribed bv 10:w, cigoinst gfl tc,c:able .Propertv within tl'le City sufficient ra pav the interest on this serie, ot Cetrificotes os due anCI 10 provict:,e. far the pavment of tht princi9cl thereof as tne some mo lvre,., as authorized by Subchcpter C, Cho oter 211, Texo, L0co1 Government tode, as omende01 ond from 011 or 0 port of the surQlus net revenues o1 tl'le· C itv', wa1-erw0.-ks svstem, sucn pledge of 'Sl}rPlus nel reveAues beirt9 limited-to il.000. THIS NOTICE is gi ven i n accordQnce wi1h law ond QS directed bv 1he Citv Council or the City of Lubbock. Te:1Cas on Jonuo ,v 22, 2009. THE STATE OF TEXAS COUNlY OF LUBBOCK Before me Wendy J. Knox a Notary Public in and for Lubbock County. Texas on this day pe,sonally appeared Mary Elizabeth George of the Southwestern Newspaper Corporation, pubijshers of the Lubbodc.Avatanche-Joumal -Morning, and Sunday, who being by me duly sworn did dispo&e and say that said newspaper has run continuously for more than fifty-two weeks pnor to the first insertion of this _L_eg.-;;a;;..l.;;..;N;.;;;o;.;;;ti;.;;;-c:;..;;e ___________________________ _ No. at Lubbock County, Texas and the attached printed copy of the _L __ ega __ l_N_o_ti_·c ... •.....,,-____ is a true copy of the original and was pnnted in the Lubbock Ava'8nche-Joumal on the following dates: CjtJ[UJ lL·),v3 J ~r w: ~ 009 /Jl/,.uord,)-:.. 3L.{/. ~ ~ Announce LUBBOCK AVALANCHE-JOURNAL Morris Communication Corporation Subscribed and sworn to before me this FORM 58-10 I . BLIC in and for the Stale of Texas my commission Expires 4/28/2012 '?. ncfi.___ 1 11 dayof ---------------_ ... •;;·.~~·•.. WENDY J. KNOX //~" , NOTARY PUBLIC l,.. \.. ~) * J state onexas \ ~······-::.-".: C m Exp 04-28-2012 ·•.:'~-~ .. ..--om . · NOTICE OF INTENTION I TO ISSUE CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION BONDS On Ille Ulh Ooy of FebruorY, 2009, d1Jtin9 its regular meefio,g !iCl"ledule-d to beg ii'\ cit 7:30 o.m., the c ttv CouncH of n,e C itv of Lubbock, Texos. ptans 10 POiS on cfdin.ooce: cuthol'i1inir.i the sole of m generol obligation bonds in o,e moximvm o.mo-unt n01 to exceed $31000,000 to rund vcrious public im.oro\l'ements ond ( Hl general ot:itigcfion tlonds in o moximum amount to be determined by the City Coone i I on sucn dote to re-fund oulstond1ng Obligotio<-s of fhe cnv. Tl"le meetlng will be held tn the City Council Chombe,s ot Jhe Munic ipa I Complex. 1625 1 Jth Stritef, LutlbOCk, Texas, A complete descrii:,tiol\ of lhe bonds being authOrited mov 1)e obtained from the orvl!ian of Finance, City of Lub:::ock1 P.O. Box '2000. Lubbock. Texas 79•S7; or from R BC (opltol Mor~•'·· 1711 N. Hoske:I I Avenue CityplaCei Su tie 2~00, Dollos. Texos 15204, finonctol Advisors to tM City. ) MINUTES AND CERTIFICATION PERTAINING TO PASSAGE OF AN ORDINANCE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § On the 26th day of February, 2009, 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: Tom Martin, Mayor Jim Gilbreath, Mayor Pro Tern Linda DeLeon Floyd Price Todd R. Klein Paul R. Beane John W. Leonard, III ) ) ) ) ) Members of the Council and all of said persons were present except Floyd Price, 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 2009 IN AN AMOUNT NOT TO EXCEED $67,000,000; 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 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: 6 NOES: 0 ABSTENTIONS: 0 Dallas I 540765v. l MINUTES APPROVED AND CERTIFIED TO BE TRUE AND CORRECT, and to correctly reflect the duly constituted officers and members of the City Council of said City, and the attached and following copy of said Ordinance is hereby certified to be a true and correct copy of an official copy thereof on file among the official records of the City, all on this the 26th day of February, 2009. ;Q 8 0-IA" L , -9€' City ~cretary City of Lubbock, Texas [SEAL] Dallas I 540765v. l -2- ) ORDINANCE relating to CITY OF LUBBOCK, TEXAS TAX AND WATER WORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 Adopted: February 26, 2009 I 530460v. l LUB200/l ) TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section 1.01. Definitions ............................................................................................................... 2 Section 1.02. Findings ................................................................................................................... 4 Section 1.03. Table of Contents, Titles, and Headings ................................................................. 5 Section 1.04. Interpretation ........................................................................................................... 5 , ARTICLE II ') SECURITY FOR THE CERTIFICATES; INTEREST AND SINKING FUND; PRIOR LIEN OBLIGATIONS Section 2.01. Payment of the Certificates ..................................................................................... 5 Section 2.02. Interest and Sinking Fund ....................................................................................... 6 ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE CERTIFICATES Section 3.01. Authorization ........................................................................................................... 6 Section 3.02. Date, Denomination, Maturities, and Interest. ........................................................ 7 Section 3.03. Medium, Method, and Place of Payment. ............................................................... 7 Section 3.04. Execution and Registration of Certificates .............................................................. 8 Section 3.05. Ownership ............................................................................................................... 9 Section 3.06. Registration, Transfer, and Exchange ................................................................... 10 Section 3. 07. Cancel Jation ........................................................................................................... 10 Section 3.08. Temporary Certificates .......................................................................................... 11 Section 3.09. Replacement Certificates ....................................................................................... 11 Section 3.10. Book-Entry-Only System .............................. · ........................................................ 12 Section 3.11. Successor Securities Depository; Transfer Outside Book-Entry-Only System .... 13 Section 3.12. Payments to Cede & Co ........................................................................................ 13 ARTICLE IV REDEMPTION OF CERTIFICATES BEFORE MATURITY Section 4.01. Redemption ........................................................................................................... 13 Section 4.02. Optional Redemption ............................................................................................ 14 Section 4.03. Mandatory Sinking Fund Redemption .................................................................. 14 Section 4.04. Partial Redemption ................................................................................................ 14 Section 4.05. Notice of Redemption to Owners .......................................................................... 15 (i) 1530460v.l LUB200/171015 Section 4.06. Payment Upon Redemption .................................................................................. 15 Section 4.07. Effect of Redemption ............................................................................................ 16 Section 4.08. Lapse of Payment. ................................................................................................. 16 ARTICLE V PA YING AGENT/REGISTRAR ) Section 5.01. Appointment of Initial Paying Agent/Registrar .............................. : ..................... 16 Section 5.02. Qualifications ........................................................................................................ 16 Section 5.03. Maintaining Paying Agent/Registrar ..................................................................... 16 Section 5.04. Termination ........................................................................................................... 17 ., Section 5.05. Notice of Change to Owners ................................................................................. 17 Section 5.06. Agreement to Perform Duties and Functions ........................................................ 17 Section 5.07. Delivery of Records to Successor ......................................................................... 17 ARTICLE VI FORM OF THE CERTIFICATES Section 6.01. Form General1y ..................................................................................................... 17 Section 6.02. Form of the Certificates ......................................................................................... 18 Section 6.03. CUSIP Registration ............................................................................................... 24 Section 6.04. Legal Opinion ........................................................................................................ 24 Section 6.05. Bond Insurance ...................................................................................................... 24 ARTICLE VII SALE AND DELIVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS Section 7.01. Sale of Certificates; Official Statement. ................................................................ 24 Section 7.02. Control and Delivery of Certificates ..................................................................... 26 Section 7 .03. Deposit of Proceeds ............................................................................................... 26 ARTICLE VIII INVESTMENTS Section 8.01. Investments ............................................................................................................ 26 Section 8.02. Investment Income ................................................................................................ 27 ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.01. Payment of the Certificates ................................................................................... 27 Section 9.02. Other Representations and Covenants ................................................................... 27 Section 9.03. Provisions Concerning Federal Income Tax Exclusion ........................................ 27 (ii) 153046Ov.l LUB2OO/l71015 ) Section 9.04. No Private Use or Payment and No Private Loan Financing ................................ 28 Section 9.05. No Federal Guaranty ............................................................................................. 28 Section 9.06. Certificates Are Not Hedge Bonds ........................................................................ 28 Section 9.07. No-Arbitrage Covenant. ........................................................................................ 28 Section 9.08. Arbitrage Rebate ................................................................................................... 29 Section 9.09. Information Reporting ........................................................................................... 29 Section 9.10. Continuing Obligation ........................................................................................... 29 ) ARTICLEX DEFAULT AND REMEDIES Section 10.01. Events ofDefault. .................................................................................................. 30 Section 10.02. Remedies for Default. ........................................................................................... 30 Section I 0.03. Remedies Not Exclusive ....................................................................................... 30 ARTICLE XI DISCHARGE Section 11.0 I. Discharge ............................................................................................................... 31 ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12.01. Annual Reports ...................................................................................................... 31 Section 12. 02. Material Event Notices .......................................................................................... 31 Section 12.03. Limitations, Disclaimers and Amendments .......................................................... 32 ARTICLE XIII AMENDMENTS; ATTORNEY GENERAL MODIFICATION Section 13.01. Amendments .......................................................................................................... 33 Section 13.02. Attorney General Modification ............................................................................. 34 ARTICLE XIV EFFECTIVE IMMEDIATELY Section 14.01. Effective Immediately ........................................................................................... 34 Exhibit A -Description of Annual Disclosure of Financial Information .................................... A-1 Exhibit B -Sale Parameters ........................................................................................................ B-1 (iii) 1530460v. l LUB200/l 71015 ) AN ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2009 IN AN AMOUNT NOT TO EXCEED $67,000,000; 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 prov1s10ns 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 se11 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 3.01 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 detennined that it is necessary and in the best interests of the City and its citizens that it authorize the issuance of the Certificates in accordance with the tenns and provisions of this Ordinance at this time; WHEREAS, the City Council desires to delegate, pursuant to Chapter 1371, Texas Government Code, as amended, and the parameters of this Ordinance, to the Authorized Officer, the authority to approve the amount, the interest rate, the price and tenns of the Certificates authorized hereby and to otherwise take such actions as are necessary and appropriate to effect the sale of the Certificates; 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: I S30460v. I LUB200/1 ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise in this Ordinance, the following terms shall have the meanings specified below: "Authorized Officer" means each of the City Manager and the Chief Financial Officer. "Certificate" means any of the Certificates. "Certificate Date" means the date designated as the initial date of the Certificates by Section 3.02(a) of this Ordinance. '"Certificates" means the certificates of obligation authorized to be issued by Section 3.01 of this Ordinance and designated as "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009." "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 Payment/Transfer Office" means (i) with respect to the initial Paying Agent/Registrar named in this Ordinance, the Designated Payment/Transfer 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. "OTC 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 10.01 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. -2- I 530460v. I LUB200/J ) ... "Initial Certificate" means the initial certificate authorized by Section 3.04 of this Ordinance. "Interest and Sinking Fund" means the interest and sinking fund established by Section 2.02 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 on the date set forth in the Pricing Certificate. "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. "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 Mellon Trust Company, National Association, or any successor thereto as provided in this Ordinance. "Pricing Certificate" means a certificate or certificates to be signed by the Authorized Officer. "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 m Section 3.01. -3 - I 530460v. l LUB200/I ) "Purchase Contract" means the purchase contract approved in Section 7.0l(b) of this Ordinance. "Record Date" means the last business day of the month next preceding an Interest Payment Date. "Register" ineans the Register specified in Section 3.06(a) of this Ordinance. "Representations Letter" means the Blanket Letter of Representations between the City andDTC. "Representative" means the representative for the Underwriters named in the Purchase Contract. "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. "Special Record Date" means the Special Record Date prescribed by Section 3.03(b). "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. "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" has the meaning set forth in Section 4.03 hereof. "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 the underwriters named in the Purchase Contract. Section 1.02. Findings. The declarations, determinations, and findings declared, made, and found in the preamble to this Ordinance are hereby adopted, restated, and made a part of the operative provisions hereof -4- I 530460v. l LU8200/l ) Section 1.03. 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 1.04. Interpretation. (a) Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular 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 liberally construed to effectuate the pmposes set forth herein. ARTICLE Il SECURITY FOR THE CERTIFICATES; INTEREST AND SINKING FUND; PRIOR LIEN OBLIGATIONS Section 2.01. 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 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 annum (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 tenns 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. -5 - I 530460v. I LUB200/l ) ) (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 amoW1t 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 amoW1t 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. Section 2.02. 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 2009, 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 Ord~nance. ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE CERTIFICATES Section 3.01. Authorization. The City's certificates of obligation to be designated "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009" (the "Certificates"), are hereby authorized to be issued and delivered in accordance with the -6 - 1530460v. l LUB200/1 ) '\ ) Constitution and laws of the State of Texas, specifically Subchapter C, Chapter 271, Texas Local Government Code, as amended, Chapter 1371, Texas Government Code, as amended, and Article VIII of the City's Home-Rule Charter. The Certificates shall be issued in the aggregate principal amount designated in the Pricing Certificate, such amount not to exceed $67,000,000, for the purpose of paying contractual obligations to be incurred for the following purposes, to wit: (i) improvements to the City's Solid Waste Disposal System; (ii) improvements and renovations to the City's Municipal Drainage Utility System; (iii) improvements, replacements, relocations and extensions to the City's Waterworks System including airport water system improvements; (iv) improvements and extensions to City streets including sidewalks, street lighting, traffic signals/controllers, landscaping, utility improvements, extensions, relocations and acquisition of land and rights-of-way in connection therewith; (v) improvements and extensions to the City's Electric System, including installation of distribution lines, renovations and relocations of existing distribution lines; (vi) park and park facilities improvements and renovations; (vii) construction of a fire station at 63rd Street and Indiana Avenue; (viii) renovations and improvements to City Hall (collectively, with items (i)-(vii), the "Project") and (ix) payment of professional services of attorneys, financial advisors and other professionals in connection with the Project and the issuance of the Certificates. Section 3.02. Date, Denomination, Maturities. and Interest. (a) The Certificates shall be dated the date set forth in the Pricing Certificate (the "Certificate Date"). 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. (b) The Certificates shall mature on February 15 in the years and in the principal amounts set forth in the Pricing Certificate provided that the maximum maturity for the Certificates shall not exceed twenty-five years. (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 Pricing Certificate. 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 3.03. 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; provided, however, in the event of nonpayment of interest on a scheduled Interest Payment Date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") shall be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received -7 - 1530460v. l LUB20O/\ ) ., from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "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 first-class United States mail, postage prepaid, to the address of each Owner of a Certificate appearing on the Register at the close of business on the last business day next preceding the date of mailing of such notice. ( c) Interest shall be paid by check, dated as of the Interest Payment Date, and sent United States mail, first class postage prepaid, by the Paying Agent/Registrar to each Owner, at the address thereof as it appears in the Register, or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the Owner; provided, however, that the Owner shall bear all risk and expense of such alternative banking arrangement. 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 Paymentlfransfer 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 3.02 of this Ordinance. (f) Unclaimed Payments shaII 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 corning 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 3.04. Execution and Registration of Certificates. (a) The Certificates shall be executed on behalf of the City by the Mayor and the City Secretary, by their manual or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Certificates shall have the same effect as if each of the Certificates had been signed manually and in person by 1530460v. 1 LU B200/1 'i ) ) ) 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 thereon the Certificate of Paying Agent/Registrar substantially in the fonn 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 form provided herein, manually executed by the Comptroller of Public Accounts of the State of Texas, or by his duly authorized agent, which Certificate shall be evidence that the 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 reflecting the terms set forth in the Pricing Certificate and representing the entire principal amount of all Certificates, payable in stated installments to the Representative, or its designee, executed by the Mayor and 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 Representative 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 Underwriters. Section 3.05. 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 or Special Record Date, as applicable), 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. -9 - 1530460v.l LUB200/I ') ) Section 3.06. 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 Payment/Transfer 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. (c) The Certificates shall be exchangeable upon the presentation and surrender thereof at the Designated Payment/Transfer 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-five (45) calendar days after the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the Owner of the uncalled principal balance of a Certificate. Section 3.07. Cancel1ation. 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. -10 - I 530460v. I LUB200/I ) ) ) .., ) ) \ Section 3.08. 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 form, such Certificates in temporary form shall be entitled to the benefit and security of this Ordinance . (c) The City, without unreasonable delay, shall prepare, execute and deliver to the 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 form surrendered. Such exchange shall be made without the making of any charge therefor to any Owner. Section 3.09. 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 sum 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 -11 - 1530460v.l LUB200/1 ) ) ) (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, 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 OTC. 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 OTC Participant or to any person on behalf of whom such a OTC 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 OTC, Cede & Co. or any OTC Participant with respect to any ownership interest in the Certificates, (ii) the delivery to any OTC 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 OTC 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 -12 - 1530460v.l LUB200/1 ) ) 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 OTC as securities depository, is hereby ratified and approved for the Certificates. Section 3.11. Successor Securities Oepositozy: Transfer Outside Book-Entry-Only System. In the event that the City determines that it is in the best interest of the City and the beneficial owners of the Certificates that they be able to obtain certificated Certificates, or in the event DTC discontinues the services described herein, the City shall (i} appoint a successor securities depository, qualified to act as such under Section l 7(a) of the Securities and Exchange Act of 1934, as amended, notify OTC and OTC 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 ofDTC, 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 OTC, 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 4.01. Redemption. The Certificates are subject to redemption before their scheduled maturity only as provided in this Article IV. -13 - I 530460v. I LUB200/I ) , ) Section 4.02. Optional Redemption. (a) The City reserves the option to redeem Certificates in the manner provided in the Form of Certificate set forth in Section 6.02 ofthis Ordinance with such changes as are required by the Pricing Certificate. (b) 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. (c) 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 4.03. Mandatory Sinking Fund Redemption. (a) Certificates designated as "Term Certificates," if any, in the Pricing Certificate are subject to scheduled mandatory redemption and will be redeemed by the City, in part at a price equal to the principal amount thereof, without premium, plus accrued interest to the redemption date, out of moneys available for such purpose in the Interest and Sinking Fund, on the dates and in the respective principal amounts as set forth in the Pricing Certificate. (b) At least forty-five (45) days prior to each scheduled mandatory redemption date, the Paying Agent/Registrar shall select for redemption by lot, or by any other customary method that results in a random selection, a principal amount of Term Certificates equal to the aggregate principal amount of such Term Certificates to be redeemed, shall call such Term Certificates for redemption on such scheduled mandatory redemption date, and shall give notice of such redemption, as provided in Section 4.05. The principal amount of the Term Certificates required to be redeemed on any redemption date pursuant to subparagraph (a) of this Section 4.03 shall be reduced, at the option of the City, by the principal amount of any Term Certificates which, at least 45 days prior to the mandatory sinking fund redemption date (i) sha11 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 4.04. 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. -14 - I 530460v. l LUB200/ I ) 1 ) (b} Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with Section 3.06 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 surrendered, such exchange being without charge. (c) The Paying Agent/Registrar shall promptly notify the City in writing of the principal amount to be redeemed of any Certificate as to which only a portion thereof is to be redeemed. Section 4.05. 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 surrendered 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) The City reserves the right to give notice of its election or direction to redeem Certificates under Section 4.02 conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected Owners. Any Certificates subject to conditional redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an event of default. Further, in the case of a conditional redemption, the failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default. (d) Any notice given as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Owner receives such notice. Section 4.06. 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 tmst such amounts as are received by the Paying -15 - 1530460v.l LUB200/l J ) 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/Transfer 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 4.07. Effect of Redemption. (a) Notice of redemption having been given as provided in Section 4.05 of this Ordinance and subject to any conditions or rights reserved by the City under Section 4.05(c), 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 4.08. 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 3.03(f) hereof. ARTICLEV PA YING AGENT/REGISTRAR Section 5.01. Appointment oflnitial Paying Agent/Registrar. The Bank of New York Mellon Trust Company, National Association, is hereby appointed as the initial Paying Agent/Registrar for the Certificates. Section 5.02. 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. Section 5.03. Maintaining Paying Agent/Registrar. (a) At all times while any Certificates are outstanding. the City will maintain a Paying Agent/Registrar that is qualified under Section 5.02 of this Ordinance. The Mayor is hereby authorized and directed to execute an agreement with the Paying Agent/Registrar -16- \530460v.l LUB200/1 ) ) ) specifying the duties and responsibilities of the City and the Paying Agent/Registrar. The signature of the Mayor shall be attested by the City Secretary of the City. The form of the Paying Agent/Registrar Agreement presented at this meeting is hereby approved with such changes as may be approved by bond counsel to the City. (b) If the Paying Agent/Registrar resigns or otherwise ceases to serve as such, the City will promptly appoint a replacement. Section 5.04. Termination. The City, upon not less than sixty (60) days notice, reserves the right to tenninate the appointment of any Paying Agent/Registrar by delivering to the entity whose appointment is to be terminated written notice of such termination. Section 5.05. 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 5.06. 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 wi11 perform the duties and functions of Paying Agent/Registrar prescribed thereby. Section 5.07. 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 6.01. 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 Assignment form to appear on each of the Certificates, (i) sha11 be substantially in the fonn set forth in this Article, with such appropriate insertions, omissions, substitutions, and other variations as are pennitted or required by this Ordinance and the Pricing Certificate, and (ii) may have such letters, numbers, or other marks of identification (including identifying nwnbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including any reproduction of an -17 - l 530460v. l LUB200/1 ) 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 6.02. 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 Assignment 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 2009 REGISTERED $. ____ _ INTEREST RA TE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: __ % The City of Lubbock (the "City"), in the County of Lubbock, State of Texas, for value received, hereby promises to pay to or registered assigns, on the Maturity Date specified above, the sum of _________ DOLLARS 1 Information to be inserted from Pricing Certificate. -18 - l 530460v. l LUB200/1 ) ) unless this Certificate shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, 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 ____ 2• All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this 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 Da1las, Texas (the "Designated Payment/Transfer Office"), of The Bank of New York Mellon 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 putpose 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; provided, however, that in the event of nonpayment of interest on a scheduled payment date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "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 first-cJass United States mail, postage prepaid, to the address of each owner of a Certificate appearing in 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. 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 $. ____ 3 (herein referred to as the 2 Information to be inserted from Pricing Certificate. 3 Information to be inserted from Pricing Certificate. 1530460v. 1 LUB200/J -19 - ) ) ) "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 or after February 15 __ _, in whole or in part, before their respective scheduled maturity dates, on ___ __, or on 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 detennine 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.]4 [Certificates maturing on February 15 in each of the years __ through __. inclusive (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: Redemption Date Principal Amount The Paying Agent/Registrar will select by lot or by any other customary method that results in a random selection the specific Term Certificates (or with respect to Term Certificates having a denomination in excess of $5,000, each $5,000 portion thereof) to be redeemed by mandatory redemption. The principal amount of Term Certificates required to be redeemed on any redemption date pursuant to the foregoing mandatory sinking fund redemption provisions hereof shall be reduced, at the option of the City, by the principal amount of any 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. ]5 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. In the Ordinance, the City reserves the right in the case of an optional redemption to give notice of its election or direction to redeem 4 Insert optional redemption provisions, if any, and revise as necessary to conform to the Pricing Certificate. 5 Insert mandatory sinking fund redemption provisions, if any, and conform as necessary to the Pricing Certificate. -20 - 1530460v. I LUB200/1 ) ) ) ) Certificates conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected owners. Any Certificates subject to conditional redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an event of default. Further, in the case of a conditional redemption, the failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default. 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. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Certificate called for redemption where such redemption is scheduled to occur within forty five (45) calendar days of the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Certificate. 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 or Special Record Date, as applicable) 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, 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 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 purposes; and that the total indebtedness of the City, including the Certificates, does not exceed any constitutional or statutory limitation. -21 - 1530460v. I LUB200/l ) .., ) 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, Texas [SEAL] (b) Form of ComptrolJer's Registration Certificate. The fol1owing 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 ofrecord 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 of Texas, 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] I 530460v. l LUB200/1 -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 YING AGENT/REGISTRAR The records of the Paying Agent/Registrar show that the Initial Certificate of this series of Certificates was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, and that this is one of the Certificates referred to in the within-mentioned Ordinance. Dated: (d) Fonn of Assignment. The Bank of New York Mellon 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 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: -23 - 1530460v.l LUB200/\ ) (i) immediately under the name of the Certificate the headings "INTEREST RA TE" and "MATURITY DA TE" shall both be completed with the words "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 the Pricing Certificate pursuant to Section 3.02 of this Ordinance) Section 6.03. 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 6.04. 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 6.05. Bond Insurance. Information pertaining to bond insurance, if any, may be printed on each Certificate. ARTICLE VII SALE AND DELIVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS Section 7.01. Sale of Certificates; Official Statement. (a) The Certificates shall be sold at negotiated sale to the Underwriters in accordance with the terms of this Ordinance, including this Section 7.0l(a} and Exhibit B hereto, provided that all of the conditions set forth in Exhibit B can be satisfied. As authorized by Chapter 1371, Texas Government Code, as amended, the Authorized Officer is authorized to act on behalf of the City upon detennining that the conditions set forth in Exhibit B can be satisfied, in selling and delivering the Certificates and carrying out the other procedures specified in this Ordinance, including determining whether to acquire bond insurance for the Certificates, the aggregate principal amount of the Certificates and price at which each of the Certificates will be sold, the -24 - l 530460v.1 LUB200/l ) number and designation of series of Certificates to be issued, the form in which the Certificates shall be issued, the years in which the Certificates will mature, the principal amount to mature in each of such years, the rate of interest to be borne by each such maturity, the first interest payment date, the dates, prices and terms upon and at which the Certificates shall be subject to redemption prior to maturity at the option of the City and shall be subject to mandatory sinking fund redemption, and all other matters relating to the issuance, sale and delivery of the Certificates, all of which shall be specified in the Pricing Certificate. The authority granted to the Authorized Officer under this Section 7.0l(a) shall expire at 5:00 p.m., August 26, 2009, unless otherwise extended by the City Council by separate action. Any finding or determination made by the Authorized Officer relating to the issuance and sale of the Certificates and the execution of the Purchase Contract in connection therewith shall have the same force and effect as a finding or determination made by the City Council. (b) The Authorized Officer is hereby authorized and directed to execute and deliver, and the City Secretary is hereby authorized and directed to attest, a certificate purchase contract (the "Purchase Contract") which Purchase Contract is hereby accepted, approved and authorized i.n substantially the form submitted to the City and upon completion of the terms of the Purchase Contract in accordance with the tenns of the Pricing Certificate and this Ordinance, the Authorized Officer is authorized and directed to execute such Purchase Contract on behalf of the City and the Authorized Officer and all other officers, agents and representatives of the City are hereby authorized to do any and all things necessary or desirable to satisfy the conditions set out therein and to provide for the issuance and delivery of the Certificates. The Certificates shall initially be registered in the name the Representative. (c) The form and substance of the Preliminary Official Statement 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 )(1) of Rule l 5c2-12 under the Securities Exchange Act of 1934, as amended. The Authorized Officer and City Secretary are hereby authorized and directed to cause to be prepared a final Official Statement (the "Official Statement") incorporating applicable pricing information pertaining to the Certificates, and to execute the same by manual or facsimile signature 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 Authorized Officer 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 permanent 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. (d) All officers of the City are authorized to execute such documents, certificates and receipts as they may deem appropriate in order to consummate the delivery of the Certificates in accordance with the tenns of sale therefor including, without limitation, the Purchase Contract. -25 - I 530460v. I LUB200/ I ) (e) The obligation of the Underwriters identified in subsection (a) of this Section to accept delivery of the Certificates is subject to the Underwriters 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 .02. Control and Delivery of Certificates. (a) The Authorized Officer 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 Underwriters thereof under and subject to the general supervision and direction of the Authorized Officer, against receipt by the City of all amounts due to the City under the terms of sale. (c) In the event the Mayor or City Secretary is absent or otherwise unable to execute any document or take any action authorized herein, the Mayor Pro Tern and the Assistant City Secretary, respectively, shall be authorized to execute such docwnents and take such actions, and the performance of such duties by the Mayor Pro Tern and the Assistant City Secretary shall for the purposes of this Ordinance have the same force and effect as if such duties were performed by the Mayor and City Secretary, respectively. Section 7.03. Deposit 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. Section 8.01. Investments. ARTICLE VIII INVESTMENTS (a) Money in the Interest and Sinking Fund created by this Ordinance and the special account provided for in Section 7.03(b), at the City's option, may be invested in such securities or obligations as permitted under applicable law. The City's Chief Financial Officer, and any other officer of the City authorized to make investments on behalf of the City, are hereby authorized and directed to execute and deliver, on behalf of the City, any and all investment agreements, guaranteed investment contracts or repurchase agreements in connection with the investment of moneys on deposit in the Interest and Sinking Fund and the special account -26 - I 530460v.1 LUB200/ I provided for in Section 7 .03(b ), but only to the extent such investment agreements, guaranteed investment contracts or repurchase agreements are authorized investments under applicable law. (b) Any securities or obligations in which money in the Interest and Sinking Fund 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 pa:yments required to be made from the fund from which the investment was made. Section 8.02. 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 7.03(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 REPRESENTATIONS AND COVENANTS Section 9.01. Payment of the Certificates. On or before each Interest Pa:yment 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 principal of and interest on the Certificates as will accrue or mature on the applicable Interest Payment Date or date of prior redemption. Section 9.02. 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 tenns. Section 9.03. 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 103 and 141 through 150 of -27 - I 530460v.1 LU8200/l ) 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 9.03 through 9.09 of this Article IX; provided, however, that the City shall not be required to comply with any particular requirement of Sections 9.03 through 9.09 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 9.03 through 9.09 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 9.03 through 9.09 of this Article IX. Section 9.04. 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. Section 9.05. No Federal Guaranty. The City covenants and agrees not to take any action, or knowingly omit to take any action within its control, that, if taken or omitted, respectively, would cause the Certificates to be "federally guaranteed" within the meaning of section 149(b) of the Code and the Regulations, except as pennitted by section 149(b)(3) of the Code and the Regulations. Section 9.06. Certificates Are Not Hedge Bonds. The City covenants and agrees not to take any action, or knowingly omit to take any action, and has not knowingly omitted and will not knowingly omit to take any action, within its control, that, if taken or omitted, respectively, would cause the Certificates to be "hedge bonds" within the meaning of section 149(g) of the Code and the Regulations. Section 9.07. 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 -28 - I 530460v. I LU8200/l ") "\ ) 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 9.08. 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 permitted under the Regulations, all amounts required to be rebated to the federal government. Further, the City wil1 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 the arrangement had been at arm's length and had the yield on the issue not been relevant to either party. Section 9.09. Information 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, the City's obligations under the covenants and provisions of Sections 9.03 through 9.09 of this Article IX shall survive the defeasance and discharge of the Certificates. -29- 1530460v.l LUB200/I ) ) ARTICLEX DEF AULT AND REMEDIES Section 10.01. 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) defauJt 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 10.02. Remedies for Default. (a) Upon the happening of any Event of Default, then any Owner or an authorized representative thereof, including but not limited to a trustee or trustees therefor, may proceed against the City for the purpose of protecting and enforcing the rights of the Owners under this Ordinance by mandamus or other suit, action or special proceeding in equity or at law in any court of competent jurisdiction for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Owners hereunder or any combination of such remedies. (b) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Owners of Certificates then outstanding. Section 10.03. Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the 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. -30- 1530460v. I LU8200/I ) ) ) Section 11.01. Discharge. ARTICLE XI DISCHARGE The Certificates may be defeased, discharged or refunded in any manner permitted by applicable law. ARTICLE XII CONTINUING DISCLOSURE UNDERTAKrNG Section 12.01. Annual Reports. (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 available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. Section 12.02. 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; -31 - 1530460v. l LU8200/I J ) ) (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax-exempt status of the 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 12.01 of this Ordinance by the time required by such Section. Section 12.03. 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 cal1s and any defeasances that cause the City to be no longer an "obligated person." (b) The provisions of this Article are for the sole benefit of the Owners and beneficial owners of the 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 information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell 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 -32 - 1530460v.l LUB200/l "') ... '\ 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, talcing 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 information or operating data next provided in accordance with Section 12.01 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 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 13.01. 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 -33 - 1530460v.l LUB200/I 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. Section 13.02. 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 EFFECTIVE IMMEDIATELY Section 14.01. 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- l 530460v.1 LUB200/J ) PRESENTED, FINALLY PASSED AND APPROVED, AND EFFECTIVE on the 26th day of February, 2009, at a regular meeting of the City Council of the City of Lubbock, Texas. TOM MARTIN, Mayor ATTEST: ~t~~-~~ REB CCAGARZA, CitySecretatS [SEAL] APPROVED AS TO CONTENT: By: b~ ANDYBCHAM,ChiefFinancial Officer APPROVED AS TO FORM: By: Signature Page for Ordinance 1530460v.1 LUB200/l 0 0 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 ref erred to in Paragraph 1 above. Exhibit A-1 1530460v.1 LUB200/171015 '.) ) EXHIBITB SALE PARAMETERS In accordance with Section 7.0l(a) of the Ordinance, the following conditions with respect to the Certificates must be satisfied in order for the Authorized Officer to act on behalf of the City in selling and delivering the Certificates to the Underwriters: (a) the price to be paid for the Certificates shall be not less than 95% of the aggregate principal amount of the Certificates; (b) the Certificates shall not bear interest at a rate greater than the maximum rate allowed by Chapter 1204, Texas Government Code, as amended; (c) the aggregate principal amount of the Certificates shall produce proceeds in an amount sufficient, as determined by the Authorized Officer, to fund the purposes described in Section 3.01 and such aggregate principal amount shall not exceed the maximum amount authorized in Section 3.01; (d) the maximum maturity for the Certificates shall not exceed twenty-five years; and (e) the Certificates to be issued, prior to delivery, must have been rated by a nationally recognized rating agency for municipal securities in one of the four highest rating categories for long term obligations. Exhibit B-1 I S304o0v. I LUB200/ l ') ) ) PRICING CERTIFICATE Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 Re: $58,705,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (the "Certificates") I, the undersigned officer of the City of Lubbock, Texas (the "City"), do hereby make and execute this Pricing Certificate pursuant to an ordinance adopted by the City Council of the City on February 26, 2009 (the "Ordinance") authorizing the issuance of the Certificates. Capitalized terms used in this Pricing Certificate shall have the meanings given such terms in the Ordinance. 1. As authorized by Section 7.01 of the Ordinance, I have acted on behalf of the City in selling the Certificates to the Underwriters pursuant to the terms of a purchase contract in substantially the form accepted, approved and authorized pursuant to Section 7.01 of the Ordinance, for the sum of $60,525,857.81 (representing the principal amount of $58,705,000, plus net original issue premium of $2,175,876.95 and less an underwriters' discount of$354,989.14), plus accrued interest in the amount of$287,400.07, and having the following terms, conditions and provisions, all as authorized pursuant to Section 7.01 of the Ordinance: A. The Certificates shall be issued in the aggregate principal amount of $58,705,000, shall be dated March 1, 2009 (the "Certificate Date") and bear interest from such date, shall mature on February 15 in the years and in the principal amounts and shall bear interest payable on February 15 and August 15 of each year, commencing February 15, 2010, at the rates set forth in the following schedule: Serial Certificates Principal Principal Years Installments Interest Rate Years Installments Interest Rate 2010 $1,510,000 4.000% 2020 $2,275,000 5.250% 2011 2,575,000 4.000% 2021 2,400,000 5.250% 2012 2,695,000 5.000% 2022 2,530,000 5.250% 2013 2,835,000 5.000% 2023 2,665,000 5.250% 2014 2,980,000 5.000% 2024 2,810,000 5.250% 2015 3,135,000 5.000% 2025 2,960,000 5.250% 2016 3,265,000 3.500% 2026 3,120,000 5.250% 2017 3,390,000 3.750% 2027 3,285,000 5.000% 2018 3,525,000 4.000% 2028 3,450,000 5.000% 2019 3,675,000 4.500% 2029 3,625,000 5.000% B. In accordance with the parameters contained in Section 7.01 and Exhibit B of the Ordinance, the undersigned does hereby find, certify and represent that the foregoing terms of 1540917v.1 LUB200/71015 0 the Certificates satisfy the following requirements and parameters contained within such Section 7.01 and Exhibit B: (i) the price to be paid by the Underwriters for the Certificates shall be 103.102% of the aggregate principal amount of the Certificates, which is not less than 95% of the aggregate principal amount of the Certificates; (ii) the Certificates do not bear interest at a rate greater than the maximum rate allowed by Chapter 1204, Texas Government Code, as amended; (iii) the aggregate principal amount of the Certificates produces proceeds sufficient to fund the purposes described in Section 3.01 of the Ordinance and such aggregate principal amount does not exceed the maximum amount authorized in Section 3.01 of the Ordinance; (iv) the maximum maturity for the Certificates is 2029 which does not exceed twenty-five years; (v) the Certificates have been rated, or will be rated prior to delivery, by a nationally recognized rating agency for municipal securities in one of the four highest rating categories for long term obligations. 2. The proceeds of the Certificates shall be applied as set forth in Section 7.03 of the Ordinance. 3. The Certificates shall be issued substantially in the form attached hereto as Exhibit A. -2- 1540917v.1 LUB200/71015 J ) Executed as of the 13th day of March, 2009. 1540928v.l LUB200/71015 Andycham Chief Financial Officer City of Lubbock, Texas Signature Page for Pricing Certificate ') EXHIBIT A 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 Assignment 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 WATER WORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 REGISTERED $ ___ _ INTEREST RATE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: __ % February t 5, __ March 1, 2009 The City of Lubbock (the "City"), in the County of Lubbock, State of Texas, for value received, hereby promises to pay to or registered assigns, on the Maturity Date specified above, the sum of _________ DOLLARS unless this Certificate shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon Trust Company, National Association, or, with A-1 1540917v.l LUB200/71015 0 0 0 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. 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 $58,705,000 (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 or after February 15, 2020, in whole or in part, before their respective scheduled maturity dates, on February 15, 2019, or on 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 detennine 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. 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. In the Ordinance, the City reserves the right in the case of an optional redemption to give notice of its election or direction to redeem Certificates conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if A-2 1540917v.l LUB200/71015 ) ) ... ) the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected owners. Any Certificates subject to conditional redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an event of default. Further, in the case of a conditional redemption, the failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default. 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. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Certificate called for redemption where such redemption is scheduled to occur within forty-five (45) calendar days of the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Certificate. 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 purposes; and that the total indebtedness of the City, including the Certificates, does not exceed any constitutional or statutory limitation . A-3 IS40917v.l LUB200/710!5 ) 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, Texas [SEAL] A-4 1540917v.l LUB200/710!5 0 ' (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 of Texas, 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) 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 PAYING AGENT/REGISTRAR The records of the Paying Agent/Registrar show that the Initial Certificate of this series of certificates was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, and that this is one of the Certificates referred to in the within-mentioned Ordinance. Dated: A-5 1540917v. I LUB200/71015 The Bank of New York Mellon Trust Company, National Association as Paying Agent/Registrar By: Authorized Signatory 0 0 j (d) Form of Assignment. ASS[GNMENT 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: ---------J 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: 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 (e) The Initial Certificate shall be in the fonn set forth in paragraphs (a), (b) and (d) of this Section, except for the following alterations: (A) immediately under the name of the Certificate the headings "INTEREST RA TE" and "MATURITY DATE" shall both be completed with the expression "As shown below" and the heading "CUSIP NO." shall be deleted; and (B) 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: 15409I7v.l LUB200nl015 Principal Installments Interest Rate (Information to be inserted from the Pricing Certificate pursuant to Section 3.02 of the Ordinance) A-6 ..., ; MINUTES AND CERTIFICATION PERTAINING TO PASSAGE OF AN ORDINANCE ST ATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § On the 26th day of February, 2009, 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: Tom Martin, Mayor Jim Gilbreath, Mayor Pro Tern Linda DeLeon Floyd Price Todd R. Klein Paul R. Beane John W. Leonard, III ) ) ) ) ) Members of the Council and all of said persons were present except Floyd Price, 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, GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2009 IN AN AMOUNT NOT TO EXCEED $28,000,000; LEVYING A TAX IN PAYMENT THEREOF; APPROVING THE OFFICIAL STATEMENT; APPROVING EXECUTION OF A PURCHASE CONTRACT AND ESCROW AGREEMENT; 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: NOES: 6 0 ABSTENTIONS: 0 Dallas 1540763v.J 'i MINUTES APPROVED AND CERTIFIED TO BE TRUE AND CORRECT, and to correctly reflect the duly constituted officers and members of the City Council of said City, and the attached and following copy of said Ordinance is hereby certified to be a true and correct copy of an official copy thereof on file among the official records of the City, all on this the 26th day of February, 2009. City Se~etary City of Lubbock, Texas [SEAL] Dallas 1540763v. l -2- ) .... ORDINANCE relating to CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2009 Adopted: February 261 2009 1530988v.1 LUB200/l TABLE OF CONTENTS ) Page Parties .............................................................................................................................................. 1 ARTICLE I , DEFrNITIONS AND OTHER PRELIMINARY MATTERS Section 1.01. Definitions ............................................................................................................... 2 Section 1.02. Findings ................................................................................................................... 5 Section 1.03. Table of Contents, Titles and Headings .................................................................. 5 Section 1.04. Interpretation ........................................................................................................... 5 ARTICLE II SECURITY FOR THE BONDS; INTEREST AND SINKING FUND ) Section 2.01. Tax Levy ................................................................................................................. 5 Section 2.02. Interest and Sinking Fund ....................................................................................... 6 ARTICLE III ) AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE BONDS Section 3.01. Authorization ........................................................................................................... 6 Section 3. 02. Date, Denomination, Maturities and Interest. ......................................................... 7 Section 3.03. Medium, Method and Place of Payment. ................................................................ 7 i Section 3.04. Execution and Registration of Bonds ...................................................................... 8 Section 3.05. Ownership ............................................................................................................... 9 Section 3.06. Registration, Transfer and Exchange ...................................................................... 9 Section 3.07. Cancellation ........................................................................................................... 1 O Section 3.08. Temporary Bonds .................................................................................................. 10 Section 3.09. Replacement Bonds ............................................................................................... 11 Section 3.10. Book Entry Only System ....................................................................................... 12 Section 3.11. Successor Securities Depository; Transfer Outside Book Entry Only System ..... 12 Section 3.12. Payments to Cede & Co ........................................................................................ 13 ARTICLEN REDEMPTION OF BONDS BEFORE MATURITY Section 4.01. Limitation on Redemption .................................................................................... 13 Section 4.02. Optional Redemption ............................................................................•............... 13 .., Section 4.03. Mandatory Sinking Fund Redemption .................................................................. 13 Section 4.04. Partial Redemption ................................................................................................ 14 Section 4.05. Notice of Redemption to Owners .......................................................................... 14 (i) 1530988v.l LUB200/I ) ') ) ) ) Section 4.06. Payment Upon Redemption .................................................................................. 15 Section 4.07. Effect of Redemption ............................................................................................ 15 Section 4.08. Lapse of Payment. ................................................................................................. 15 ARTICLE V PAYING AGENT/REGISTRAR Section 5.01. Appointment of Initial Paying Agent/Registrar .................................................... 16 Section 5.02. Qualifications ........................................................................................................ 16 Section 5.03. Maintaining Paying Agent/Registrar ..................................................................... 16 Section 5.04. Termination ........................................................................................................... 16 Section 5.05. Notice of Change to Owners ................................................................................. 16 Section 5 .06. Agreement to Perfonn Duties and Functions ........................................................ 16 Section 5.07. Delivery of Records to Successor. ........................................................................ 17 ARTICLE VI FORM OF THE BONDS Section 6.01. Form Generally ..................................................................................................... 17 Section 6.02. Form of the Bonds ................................................................................................. 17 Section 6.03. CUSIP Registration ............................................................................................... 23 Section 6.04. Legal Opinion ........................................................................................................ 24 Section 6.05. Statement of Insurance .......................................................................................... 24 ARTICLE VII SALE AND DELNERY OF BONDS; DEPOSIT OF PROCEEDS Section 7.01. SaleofBonds; Official Staternent. ........................................................................ 24 Section 7.02. Control and Delivery of Bonds ............................................................................. 25 Section 7.03. Deposit of Proceeds ............................................................................................... 26 ARTICLE VIII INVES1MENTS Section 8. 0 I. Investments ............................................................................................................ 26 Section 8.02. Investment Income ................................................................................................ 26 ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.01. Payinent of the Bonds ........................................................................................... 27 Section 9.02. Other Representations and Covenants ................................................................... 27 Section 9.03. Provisions Concerning Federal Income Tax Exclusion ........................................ 27 (ii) IS30988v.1 LUB200/1 ) Section 9.04. No Private Use or Payment and No Private Loan Financing ................................ 28 Section 9.05. No Federal Guaranty ............................................................................................. 28 Section 9.06. Bonds are not Hedge Bonds .................................................................................. 28 Section 9.07. No Arbitrage Covenant. ........................................................................................ 28 Section 9 .08. Arbitrage Rebate ................................................................................................... 28 Section 9. 09. Information Reporting ........................................................................................... 29 Section 9 .10. Continuing Obligation ........................................................................................... 29 ARTICLEX DEFAULT AND REMEDIES Section 10.01. Events of Default. .................................................................................................. 29 Section I 0.02. Remedies for Default. ........................................................................................... 30 Section I 0.03. Remedies Not Exclusive ....................................................................................... 30 ARTICLE XI DISCHARGE Section 11.01. Discharge ............................................................................................................... 30 ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12.01. Annual Reports ...................................................................................................... 30 Section 12.02. Material Event Notices ................................ '. ......................................................... 31 Section 12.03. Limitations, Disclaimers and Amendments .......................................................... 32 ARTICLE XIII AMENDMENTS; ATTORNEY GENERAL MODIFICATION Section 13.01. Amendments .......................................................................................................... 33 Section 13.02. Attorney General Modification ............................................................................. 33 ARTICLE XIV REDEMPTION OF REFUNDED OBLIGATIONS; APPROVAL OF ESCROW AGREEMENT; PURCHASE OF ESCROWED SECURITIES Section 14.01. Redemption of Refunded Obligations ................................................................... 34 Section 14.02. Subscription of Federal Securities ......................................................................... 34 Section 14.03. Approval of Escrow Agreement. ........................................................................... 34 Section 14.04. Notice of Redemption ........................................................................................... 34 (iii) l530988v.1 LUB200/l ) ARTICLE XV EFFECTNE IMMEDIATELY Section 15.01. Effective Immediately ........................................................................................... 35 Signatures ...................................................................................................................................... 3 6 Schedule I -Refunded Obligation Candidates Exhibit A -Description of Annual Disclosure of Financial Information .................................... A-1 Exhibit B -Sale Parameters ........................................................................................................ B-1 (iv) 1530988v.l LUB200/I ) ) AN ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2009 IN AN AMOUNT NOT TO EXCEED $28,000,000; LEVYING A TAX IN PAYMENT THEREOF; APPROVING THE OFFICIAL STATEMENT; APPROVING EXECUTION OF A PURCHASE CONTRACT AND ESCROW AGREEMENT; AND ENACTING OTHER PROVISIONS RELATING THERETO WHEREAS, a portion of the bonds hereinafter authorized were duly and favorably voted, as required by the Constitution and laws of the State of Texas, at an election held in the City of Lubbock, Texas (the "City"), on May 15, 2004; WHEREAS, at said election the following are among the purposes and amounts of the bonds which were authorized, reflecting any amount previously issued pursuant to each voted authorization, the amount therefrom being authorized pursuant to this Ordinance, and the balance that remains unissued after the issuance of the bonds herein authorized, to wit: { amounts in thousands} Amount Amount Election Amount Previously Being Unissued Puroose Date Voted Issued Issued Balance Parks 05/15/04 $ 6,395 $6,395 $ -0-$ -0- Streets 05/15/04 9,210 7,369 1,395 446 Libraries 05/15/04 2,145 -0-250 1,895 Animal Shelter 05/15/04 1,045 160 -0-885 Fire 05/15/04 1,405 1,405 -0--0- Police/Municipal Court 05/15/04 3,350 -0-500 2,850 Civic Center/ Auditorium 05/15/04 6,450 -0-500 5,950 Total $30.0QQ ~15.322 ~2.~~ ~l~.g,~ WHEREAS, pursuant to a resolution heretofore passed by the City Council, notice of intention to issue the bonds was published in a newspaper of general circulation in the City in accordance with the City's Home-Rule Charter; WHEREAS, there are presently outstanding certain obligations of the City, described on Schedule I attached hereto ( collectively, the "Refunded Obligation Candidates"); WHEREAS, the City now desires to refund all or a portion of such Refunded Obligation Candidates (such refunded obligations to be hereinafter referred to as the "Refunded Obligations"); WHEREAS, Chapter 1207, Texas Government Code, as amended ("Chapter 1207'') authorizes the City to issue refunding bonds and to deposit the proceeds from the sale thereof, and any other available funds or resources, directly with the paying agent for any of the Refunded Obligations, and such deposit, if made before such payment dates, shall constitute the l530988v.l LUB200/l ) ) ) making of firm banking and financial arrangements for the discharge and final payment of the Refunded Obligations; WHEREAS, Chapter 1207 further authorizes the City to enter into an escrow agreement with the paying agent for any of the Refunded Obligations with respect to the safekeeping, investment, reinvestment, administration and disposition of any such deposit; WHEREAS, The Bank of New York Mellon Trust Company, National Association, is the paying agent for the Refunded Obligations and the Escrow Agreement hereinafter authorized constitutes an escrow agreement of the kind authorized and permitted by said Chapter 1207; WHEREAS, the City Council hereby finds and determines that the refunding contemplated in this Ordinance will benefit the City by providing a present value savings of debt service payable by the City in an amount to be certified in the Pricing Certificate, and that such benefit is sufficient consideration for the refunding of the Refunded Obligations; WHEREAS, the City Council has found and determined that it is necessary and in the best interest of the City and its citizens that it authorize by this Ordinance the issuance and delivery of an amount of bonds in or more series at this time, the proceeds of which will be sufficient to (i) pay costs of issuance of such bonds, (ii) fund the amounts listed in the table above under "Amount Being Issued" for the related projects and (iii) refund the Refunded Obligations; WHEREAS, the City Council desires to delegate, pursuant to Chapters 1207 and 1371, Texas Government Code, as amended, and the parameters of this Ordinance, to the Authorized Officer, the authority to approve the amount, the interest rate, the number of series, the price and terms of the Bonds authorized hereby and to otherwise take such actions as are necessary and appropriate to effect the sale of the Bonds and to select the specific maturities or series of Refunded Obligation Candidates to be refunded; 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 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise in this Ordinance, the following tenns shall have the meanings specified below: "Authorized Officer'' means each of the City Manager and the Chief Financial Officer. "Bond" means any of the Bonds. -2- 1530988v.l LUB200/I ) "Bond Date" means the date designated as the initial date of the Bonds by Section 3.02(a) of this Ordinance. "Bond Purchase Contract" means the bond purchase contract approved in Section 7.0l(b) of this Ordinance. "Bonds" means the City's bonds authorized to be issued by Section 3.01 of this Ordinance and designated as "City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009." "City'' means the City of Lubbock, Texas. "Closing Date" means the date of the initial delivery of and payment for the Bonds. ''Code" means the Internal Revenue Code of 1986, as amended, including applicable regulations, published rulings and court decisions. "Designated Payment/Transfer Office" means (i) with respect to the initial Paying Agent/Registrar named in this Ordinance, the Designated Payment/Transfer 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. "Escrow Agent" means The Bank of New York Mellon Trust Company, National Association, as escrow agent under the terms of the Escrow Agreement. "Escrow Agreement" means that certain Escrow Agreement between the City and the Escrow Agent pertaining to the defeasance of the Refunded Obligations. "Escrow Fund" means the fund by that name established in the Escrow Agreement. "Event of Default" means any event of default as defined in Section 10.01 of this Ordinance. "Initial Bond'' means the initial bond or bonds authorized by Section 3.04 of this Ordinance. "Interest and Sinking Fund" means the interest and sinking fund or funds established by Section 2.02 of this Ordinance. -3- I 530988v. I LUB200/l ) .., ) "Interest Payment Date" means the date or dates on which interest on the Bonds is scheduled to be paid until their respective dates of maturity or prior redemption, such dates being February 15 and August 15 of each year, commencing on the date set forth in the Pricing Certificate. "MSRB" means the Municipal Securities 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. "Owner'' means the person who is the registered owner of a Bond or Bonds, as shown in the Register . "Paying Agent/Registrar" means initially The Bank of New York Mellon Trust Company, National Association, or any successor thereto as provided in this Ordinance. "Pricing Certificate" means a certificate or certificates to be signed by the Authorized Officer. "Record Date" means the last business day of the month next preceding an Interest Payment Date. "Refunded Obligation Candidates" means the obligations of the City described in Schedule I attached hereto which are authorized to be designated as Refunded Obligations in the Pricing Certificate. "Refunded Obligations" means those obligations of the City to be designated in the Pricing Certificate from the Refunded Obligation Candidates described in Schedule I attached hereto. "Register'' means the Register specified in Section 3.06(a) of this Ordinance. "Representation Letter" means the Blanket Letter of Representations between the City andDTC. "Representative" means the representative for the Underwriters named in the Bond Purchase Contract. "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. "Special Record Date" means the Special Record Date prescribed by Section 3.03(b). -4- 1530988v.1 LUB200/l ) ) "Tenn Bonds" has the meaning set forth in Section 4.03 hereof. "Unclaimed Payments" means money deposited with the Paying Agent/Registrar for the payment of principal of or interest on the Bonds as the same come due and payable and remaining unclaimed by the Owners of such Bonds after the applicable payment or redemption date. "Underwriters'' means the Underwriters named in the Bond Purchase Contract. Section 1.02. Findings. The declarations, determinations and findings declared, made and found in the preamble to this Ordinance are hereby adopted, restated and made a part of the operative provisions hereof. Section I. 03. 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 tenns 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 1.04. Interpretation. (a) Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular 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 liberally construed to effectuate the purposes set forth herein. ARTICLE II SECURITY FOR THE BONDS; INTEREST AND SINKING FUND Section 2.01. Tax Levy. (a) Pursuant to the authority granted by the Texas Constitution and the laws of the State of Texas, there shall be levied and there is hereby levied for the current year and for each succeeding year hereafter while any of the Bonds or any interest thereon is outstanding and unpaid, an ad valorem tax on each one hundred dollars valuation of taxable property within the City, at a rate sufficient, within the limit prescribed by law, to pay the debt service requirements of the Bonds, being (i) the interest on the Bonds, and (ii) a sinking fund for their redemption at maturity or a sinking fund of two percent (2%) per annum (whichever amount is greater), when due and payable, full allowance being made for delinquencies and costs of collection. I 530988v. l LUB200/l ') ) ) (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 Bonds when and as due and payable in accordance with their terms and this Ordinance. ( d) If the lien 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 pennit, and further deposits to the Interest and Sinking Fund may be suspended or appropriately reduced, as the facts may pennit. In detennining the aggregate principal amount of outstanding Bonds, there shall be subtracted the amount of any Bonds that have been duly called for redemption and for which money has been deposited with the Paying Agent/Registrar for such redemption. Section 2.02. Interest and Sinking Fund. (a) The City hereby establishes a special fund or account to be designated the "City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009, Interest and Sinking Fund," or such other designation as is set forth in the Pricing Certificate, for each series of Bonds, said fund or funds to be maintained at an official depository bank of the City separate and apart from all other funds and accounts of the City. (b) Money on deposit in or required by this Ordinance to be deposited to the Interest and Sinking Fund shall be used solely for the purpose of paying the interest on and principal of the Bonds when and as due and payable in accordance with their tenns and this Ordinance. ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE BONDS Section 3.01. Authorization. The City's bonds, to be designated "City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009," or such other designation or designations as set forth in the Pricing Certificate, are hereby authorized to be issued and delivered in accordance with the Constitution and laws of the State of Texas, including specifically Chapters 1207, 1331 and 1371, Texas Government Code, as amended, and Article VIII of the Charter of the City. The Bonds shall be issued in the number of series and aggregate principal amount designated in the Pricing Certificate, such amount not to exceed $28,000,000, for the pwpose of providing funds for refunding the Refunded Obligations, paying the costs of issuing the Bonds and for permanent public improvements, to wit: (i) $1,395,000 for street improvements including drainage, curbs, gutters, landscaping, sidewalks, curb ramps, utility line relocation and traffic signalization and the acquisition of land and rights-of-way therefore, (ii) $500,000 for renovations and improvements to the City's civic center/auditorium, (iii) $500,000 for constructing, renovating, -6 - l530988v.1 LUB200/1 ) ) ) improving and equipping police/municipal court facilities and (iv) $250,000 for constructing, renovating, improving and equipping library facilities. Section 3.02. Date, Denomination, Maturities and Interest. (a) The Bonds shall be dated the date set forth in the Pricing Certificate. The Bonds shall be in fully registered form, without coupons, in the denomination of$5,000 or any integral multiple thereof, and shall be numbered separately from one upward, except the Initial Bond, which shall be numbered T-1. (b) The Bonds shall mature on February 15 in the years and in the principal amounts set forth in the Pricing Certificate provided that the maximum maturity for the Bonds shall not exceed twenty-five years. (c) Interest shall accrue and be paid on each Bond respectively until its maturity or prior redemption, from the later of the Bond Date or the most recent Interest Payment Date to which interest has been paid or provided for at the rates per annum for each respective maturity specified in the Pricing Certificate. Such interest shall be payable on each Interest Payment Date until maturity or prior redemption. Interest on the Bonds shall be calculated on the basis of a three hundred sixty (360) day year composed of twelve (12) months of thirty (30) days each. Section 3.03. Medium, Method and Place of Payment. (a) The principal of and interest on the Bonds shall be paid in lawful money of the United States of America. (b) Interest on the Bonds shall be payable to each Owner as shown in the Register at the close of business on the Record Date; provided, however, in the event of nonpayment of interest on a scheduled Interest Payment Date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date'') shall 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 (the "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 first-class United States mail, postage prepaid, to the address of each Owner of a Bond appearing on the Register at the close of business on the last business day next preceding the date of mailing of such notice. (c) Interest shall be paid by check, dated as of the Interest Payment Date, and sent by the Paying Agent/Registrar to each Owner by United States mail, first class postage prepaid, to the address of each Owner as it appears in the Register, or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the Owner; provided, however, the Owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond shall be paid to the Owner thereof on the due date (whether at the maturity date or the date of prior redemption thereof) upon presentation and - 7 - 1530988v.l LUB20O/l ) surrender of such Bond 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 Bonds 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 have the same force and effect as if made on the original date payment was due and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. (f) Unclaimed Payments shall be segregated in a special escrow account and held in trust, uninvested by the Paying Agent/Registrar, for the accounts of the Owners of the Bonds to which the Unclaimed Payments pertain. Subject to Title 6 of the Texas Property Code, Unclaimed Payments remaining unclaimed by the Owners entitled thereto for three years after the applicable payment or redemption date shall be applied to the next payment or payments on the Bonds thereafter coming due and, to the extent any such money remains three years after the retirement of all outstanding Bonds, 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 holders of such Bonds for any further payment of such unclaimed monies or on account of any such Bonds, subject to Title 6 of the Texas Property Code. Section 3.04. Execution and Registration of Bonds. (a) The Bonds shall be executed on behalf of the City by the Mayor and the City Secretary, by their manual or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Bonds shall have the same effect as if each of the Bonds had been signed manually and in person by each of said officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of the City had been manually impressed upon each of the Bonds. (b) In the event that any officer of the City whose manual or facsimile signature appears on the Bonds ceases to be such officer before the authentication of such Bonds or before the delivery thereof, such manual or facsimile signature nevertheless shall be valid and sufficient for all purposes as if such officer had remained in such office. (c) Except as provided below, no Bond shall be valid or obligatory for any pwpose or be entitled to any security or benefit of this Ordinance unless and until there appears thereon the Certificate of Paying Agent/Registrar substantially in the form provided herein, duly authenticated by manual execution by an officer or duly authorized signatory of the Paying Agent/Registrar. It shall not be required that the same officer or authorized signatory of the Paying Agent/Registrar sign the Certificate of Paying Agent/Registrar on all of the Bonds. In lieu of the executed Certificate of Paying Agent/Registrar described above, the Initial Bond delivered at the Closing Date shall have attached thereto the Comptroller's Registration Certificate substantially in the form provided herein, manually executed by the Comptroller of - 8 - IS30988v. l LUB200/l ) '\ ) ) ) Public Accounts of the State of Texas, or by his duly authorized agent, which Certificate shall be evidence that the Bond has been duly approved by the Attorney General of the State of Texas, that it is a valid and binding obligation of the City and that it has been registered by the Comptroller of Public Accounts of the State of Texas. ( d) On the Closing Date, one Initial Bond of each series representing the entire principal amount of all Bonds of such series and the tenns set forth in the Pricing Certificate, payable in stated installments to the Representative, or its designee, executed by the Mayor and 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 Representative or its designee. Upon payment for the Initial Bond, the Paying Agent/Registrar shall cancel the Initial Bond and deliver a single registered, definitive Bond for each maturity, in the aggregate principal amount thereof, to DTC on behalf of the Underwriters. Section 3.05. Ownership. (a) The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Bond is registered as the absolute owner of such Bond for the purpose of making and receiving payment as provided herein (except interest shall be paid to the person in whose name such Bond is registered on the Record Date or Special Record Date, as applicable), and for all other purposes, whether or not such Bond is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. (b) All payments made to the Owner of a Bond shall be valid and effectual and shall discharge the liability of the City and the Paying Agent/Registrar upon such Bond to the extent of the sums paid. Section 3.06. Registration. Transfer and Exchange. (a) So long as any Bonds remain outstanding, the City shall cause the Paying Agent/Registrar to keep at the Designated Payment/transfer Office a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of Bonds in accordance with this Ordinance. (b) The O"'.nership of a Bond may be transferred only upon the presentation and surrender of the Bond at the Designated Payment/Transfer Office of the Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar. No transfer of any Bond shall be effective until entered in the Register. (c) The Bonds shall be exchangeable upon the presentation and surrender thereof at the Designated Payment/Transfer Office of the Paying Agent/Registrar for a Bond or Bonds of the same maturity and interest rate and in any denomination or denominations of any integral multiple of $5,000 and in an aggregate principal amount equal to the unpaid principal amount of the Bonds presented for exchange. The Paying Agent/Registrar is hereby authorized to authenticate and deliver Bonds exchanged for other Bonds in accordance with this Section. ( d) Each exchange Bond delivered by the Paying Agent/ Registrar in accordance with this Section shall constitute an original contractual obligation of the City and shall be entitled to -9- 1530988v.l LUB200/l ) ) ) the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such exchange Bond is delivered. (e) No service charge shall be made to the Owner for the initial registration, subsequent transfer, or exchange for any different denomination of any of the Bonds. The Paying Agent/Registrar, however, may require the Owner to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection with the registration, transfer or exchange of a Bond. (f) Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer, or exchange any Bond called for redemption, in whole or in part, where such redemption is scheduled to occur within forty five (45) calendar days after the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the Owner of the uncalled principal balance of a Bond. Section 3.07. Cancellation. All Bonds paid or redeemed before scheduled maturity in accordance with this Ordinance, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and . delivered in accordance with this Ordinance, shall be cancelled and proper records shall be made regarding such payment, redemption, exchange or replacement. The Paying Agent/Registrar shall then return such cancelled Bonds to the City or may in accordance with law destroy such cancelled Bonds and periodically furnish the City with certificates of destruction of such Bonds. Section 3.08. Temporary Bonds. (a) Following the delivery and registration of the Initial Bond and pending the preparation of definitive Bonds, the proper officers of the City may execute and, upon the City's request, the Paying Agent/Registrar shall authenticate and deliver, one or more temporary Bonds that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Bonds in lieu of which they are delivered, without coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers of the City executing such temporary Bon~ may determine, as evidenced by their signing of such temporary Bonds. (b) Until exchanged for Bonds in definitive form, such Bonds in temporary form shall be entitled to the benefit and security of this Ordinance. (c) The City, without unreasonable delay, shall prepare, execute and deliver to the Paying Agent/Registrar the Bonds in definitive form; thereupon, upon the presentation and surrender of the Bonds in temporary form to the Paying Agent/Registrar, the Paying Agent/Registrar shall cancel the Bonds in temporary form and shall authenticate and deliver in exchange therefor Bonds of the same maturity and series, in definitive form, in the authorized denomination, and in the same aggregate principal amount, as the Bonds in temporary form surrendered. Such exchange shall be made without the making of any charge therefor to any Owner. -10- I 530988v.J LUB200/I Section 3.09. Re.placement Bonds. (a) Upon the presentation and surrender to the Paying Agent/Registrar of a mutilated Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Owner of such Bond to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection therewith and any other expenses connected therewith. (b) In the event that any Bond is lost, apparently destroyed or wrongfully taken, the Paying Agent/Registrar, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall authenticate and deliver a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding, provided that the Owner first: (i) furnishes to the Paying Agent/Registrar satisfactory evidence of his or her ownership of and the circumstances of the loss, destruction or theft of such Bond; (ii) furnishes such security or indemnity as may be required by the Paying Agent/Registrar to save it and the City harmless; (iii) pays all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that is authorized to be imposed; and (iv) satisfies any other reasonable requirements imposed by the City and the Paying Agent/Registrar. (c) If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond in lieu of which such replacement Bond was issued presents for payment such original Bond, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom, 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 Bond has become or is about to become due and payable, the Paying Agent/Registrar, in its discretion, instead of issuing a replacement Bond, may pay such Bond if it has become due and payable or may pay such Bond when it becomes due and payable. (e) Each replacement Bond delivered in accordance with this Section shall constitute an original additional contractual obligation of the City and shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such replacement Bond is delivered. -11 - I 530988v. I LUB200/l ' Section 3.10. Book Entry Only System. Notwithstanding any other provision hereof, upon initial issuance of the Bonds, the ownership of the Bonds shall be registered in the name of Cede & Co., as nominee of DTC. The definitive Bonds shall be initially issued in the fonn of a single separate fully registered certificate for each of the maturities thereof. With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than an Owner, as shown on the Register, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than a Bondholder, as shown in the Register of any amount with respect to principal of or interest on the Bonds. Notwithstanding any other provision of this Ordinance to the contrary, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Register as the absolute owner of such Bond for the purpose of payment of principal of and interest on such Bonds, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfer with respect to such Bond, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Bonds only to or upon the order of the respective owners, as shown in the Register as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of principal of and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the Register, shall receive a 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 detennined to substitute a new nominee in place of Cede & Co., the word "Cede & Co." in this Ordinance shall refer to such new nominee ofDTC. The Representation Letter previously executed and delivered by the City, and applicable to the City's obligations delivered in book-entry-only fonn to OTC as securities depository is hereby ratified and approved for the Bonds. Section 3.11. Successor Securities Depository; Transfer Outside Book Entry Only System. In the event that the City or the Paying Agent/Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the Representations Letter of the City to DTC, or in the event DTC discontinues the services described herein, the City or the Paying Agent/Registrar shall (i) appoint a successor securities depository, qualified to act as such under Section l 7(a) of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants -12- 1530988v. I LUB200/I of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Bondholders transferring or exchanging Bonds 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 any Bonds are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of and interest on such Bonds, and all notices with respect to such Bonds, shall be made and given, respectively, in the manner provided in the Representation Letter. ARTICLE IV REDEMPTION OF BONDS BEFORE MATURITY Section 4.01. Limitation on Redemption. The Bonds shall be subject to redemption before scheduled maturity only as provided in this Article IV. Section 4.02. Optional Redemption. (a) The City reserves the option to redeem Bonds in the manner provided in the Form of Bond set forth in Section 6.02 of this Ordinance with such changes as are required by the Pricing Certificate. (b) If less than all of the Bonds are to be redeemed pursuant to an optional redemption, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot the Bonds, or portions thereof, within such maturity or maturities and in such principal amounts for redemption. (c) 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 Bonds to be redeemed. Section 4.03. Mandatory Sinking Fund Redemption. (a) Bonds designated as "Tenn Bonds," if any, in the Pricing Certificate are subject to scheduled mandatory redemption and will be redeemed by the City, in part at a price equal to the principal amount thereof, without premium, plus accrued interest to the redemption date, out of moneys available for such purpose in the Interest and Sinking Fund, on the dates and in the respective principal amounts as set forth in the Pricing Certificate. (b) At least forty-five (45) days prior to each scheduled mandatory redemption date, the Paying Agent/Registrar shall select for redemption by lot, or by any other customary method -13 - 1530988v. l LUB200/l that results in a random selection, a principal amount of Term Bonds equal to the aggregate principal amount of such Tenn Bonds to be redeemed, shall call such Term Bonds for redemption on such scheduled mandatory redemption date, and shall give notice of such redemption, as provided in Section 4.05. The principal amount of the Tenn Bonds required to be redeemed on any redemption date pursuant to subparagraph (a) of this Section 4.03 shall be reduced, at the option of the City, by the principal amount of any Term Bonds which, at least 45 days prior to the mandatory sinking fund redemption date (i) shall have been acquired by the City at a price not exceeding the principal amount of such Tenn Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (ii) shall have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to a mandatory sinking fund redemption. Section 4.04. Partial Redemption. (a) A portion of a single Bond of a denomination greater than $5,000 may be redeemed, but only in a principal amount equal to $5,000 or any integral multiple thereof. If such a Bond is to be partially redeem~ the Paying Agent/Registrar shall treat each $5,000 portion of the Bond as though it were a single Bond for purposes of selection for redemption. (b) Upon surrender of any Bond for redemption in part, the Paying Agent/Registrar, in accordance with Section 3.06 of this Ordinance, shall authenticate and deliver an exchange Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered, such exchange being without charge. ( c) The Paying Agent/Registrar shall promptly notify the City in writing of the principal amount to be redeemed of any Bond as to which only a portion thereof is to be redeemed. Section 4.05. Notice of Redemption to Owners. (a) The Paying Agent/Registrar shall give notice of any redemption of Bonds by sending notice by United States mail, first class postage prepaid, not less than thirty (30) days before the date fixed for redemption, to the Owner of each Bond ( or part thereof) to be redeemed, at the address shown on the Register at the close of business on the business day next preceding the date of mailing such notice. (b) The notice shall state the redemption date, the redemption price, the place at which the Bonds are to be surrendered for payment, and, if less than all the Bonds outstanding are to be redeemed, an identification of the Bonds or portions thereof to be redeemed. (c) The City reserves the right to give notice of its election or direction to redeem Bonds under Section 4.02 conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled -14- l53098&v.1 LUB200/I ) ) redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected Owners. Any Bonds subject to conditional redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an event of default. Further, in the case of a conditional redemption, the failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default. ( d) Any notice given as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Owner receives such notice. Section 4.06. Payment Upon Redemption. (a) Before or on each redemption date, the City shall deposit with the Paying Agent/Registrar money sufficient to pay all amounts due on the redemption date and the Paying Agent/Registrar shall make provision for the payment of the Bonds to be redeemed on such date by setting aside and holding in trust such 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 Bonds being redeemed. (b) Upon presentation and surrender of any Bond 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 Bond to the date of redemption from the money set aside for such purpose. Section 4.07. Effect of Redemption. (a) Notice of redemption having been given as provided in Section 4.05 of this Ordinance and subject to any conditions or rights reserved by the City under Section 4.05(c), the Bonds or portions thereof called for redemption shall become due and payable on the date fixed for redemption and, unless the City defaults in its obligation to make provision for the payment of the principal thereof, or accrued interest thereon, such Bonds or portions thereof shall cease to bear interest from and after the date fixed for redemption, whether or not such Bonds are presented and surrendered for payment on such date. (b) If the City shall fail to make provision for payment of all sums due on a redemption date, then any Bond or portion thereof called for redemption shall continue to bear interest at the rate stated on the Bond until due provision is made for the payment of same by the City. Section 4.08. Lapse of Payment. Money set aside for the redemption of Bonds and remaining unclaimed by the Owners of such Bonds shall be subject to the provisions of Section 3.03(f) hereof. -15 - 1530988v.l LUB200/1 J ARTICLEV PA YING AGENT/REGISTRAR Section 5.01. Appointment of Initial Paying Agent/Registrar. The Bank of New York Mellon Trust Company, National Association, is hereby appointed as the initial Paying Agent/Registrar for the Bonds. Section 5.02. Qualifications. Each Paying Agent/Registrar shall be a commercial bank, a trust company organized under the laws of the State of Texas, or any other entity duly qualified and legally authorized to serve as and perform the duties and services of paying agent and registrar for the Bonds. Section 5.03. Maintaining Paying Agent/Registrar. (a) At all times while any Bonds are outstanding, the City will maintain a Paying Agent/Registrar that is qualified under Section 5.02 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. The signature of the Mayor shall be attested by the City Secretary of the City. The form of the Paying Agent/Registrar Agreement presented at this meeting is hereby approved with such changes as may be approved by bond coWISel to the City. (b) If the Paying Agent/Registrar resigns or otherwise ceases to serve as such, the City will promptly appoint a replacement. Section 5.04. Tennination. 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 5.05. 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 in the Register thereof, stating the effective date of the change and the name and mailing address of the replacement Paying Agent/Registrar. Section 5.06. Agreement to Perfonn 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. -16 - I S30988v.1 LUB200/l ) Section 5.07. Delivery of Records to Successor. If a Paying Agent/Registrar is replaced, such Paying Agent/Registrar, promptly upon the appointment of the successor, will deliver the Register ( or a copy thereof) and all other pertinent books and records relating to the Bonds to the successor Paying Agent/Registrar. ARTICLE VI FORM OF THE BONDS Section 6.01. Fonn Generally. (a) The Bonds, including the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Certificate of the Paying Agent/Registrar, and the Assignment form to appear on each of the Bonds, (i) shall be substantially in the fonn set forth in this Article, with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and the Pricing Certificate, and (ii) may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including any reproduction of an opinion of counsel) thereon as, consistently herewith, may be determined by the City or by the officers executing such Bonds, as evidenced by their execution thereof. (b) Any portion of the text of any Bonds may be set forth on the reverse side thereof, with an appropriate reference thereto on the face of the Bonds. (c) The definitive Bonds shall be typewritten, photocopied, printed, lithographed, or engraved, and may be produced by any combination of these methods or produced in any other similar manner, all as determined by the officers executing such Bonds, as evidenced by their execution thereof. (d) The Initial Bond submitted to the Attorney General of the State of Texas may be typewritten and photocopied or otherwise reproduced. Section 6.02. Fonn of the Bonds. The form of the Bond, including the form of the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the form of Certificate of the Paying Agent/ Registrar and the form of Assignment appearing on the Bonds, shall be substantially as follows: -17 - 1530988v.l LUB200/l ' } (a) Fonn of Bond. REGISTERED No. __ United States of America State of Texas County of Lubbock CITY OF LUBBOCK. TEXAS REGISTERED $. __ _ GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RATE: MATURITY DATE: __ % BOND DATE: CUSIP NUMBER: The City of Lubbock (the "City"), in the County of Lubbock, State of Texas, for value received, hereby promises to pay to or registered assigns, on the Maturity Date specified above, the sum of _________ DOLLARS unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing ____ 2• All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the .. Designated Payment/Transfer Office") of The Banlc of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking 1 Information to be inserted from Pricing Certificate. 2 Information to be inserted from Pricing Certificate. l530988v. l LUB200/I -18 - ) ' arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record Date,,. which shall be the last business day of the month next preceding such interest payment date; provided, however, that in the event of nonpayment of interest on a scheduled payment date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "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 first-class United States mail, postage prepaid, to the address of each owner of a Bond appearing in 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. If the date for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated Payment/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 which 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 and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. This Bond is one of a series of fully registered bonds specified in the title hereof issued in the aggregate principal amount of $. _____ 3 (herein referred to as the "Bonds"), issued pursuant to a certain ordinance of the City (the "Ordinance'') for the purpose of providing funds with which to make various permanent public improvements for the City, to refund certain outstanding obligations of the City, and to pay the costs of issuing the Bonds. [The City has reserved the option to redeem the Bonds maturing on or after February 15, ___ before their respective scheduled maturities in whole or in part in integral multiples of $5,000 on February 15, ___. or on any date thereafter, at a redemption price of par, plus accrued interest to the date fixed for redemption. If less than all of the Bonds are to be redeemed, the City shall detennine 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 of the Bonds, or portions thereof, within such maturity or maturities and in such principal amounts, for redemption. J4 [Bonds maturing on February 15 in each of the years __ through __ inclusive (the "Term Bonds"), are subject to mandatory sinking fund redemption prior to their scheduled maturity, and will be redeemed by the City, in part at a redemption price equal to the principal amount thereof, without premium, plus interest accrued to the redemption date, on the dates and in the principal amounts shown in the following schedule: 3 Information to be inserted from Pricing Certificate. 4 Insert optional redemption provisions, if any, and revise as necessary to conform to the Pricing Certificate. -19 - 1530988v.l LUB200/1 ) Redemption Date Principal Amount The Paying Agent/Registrar will select by lot or by any other customary method that results in a random selection the specific Term Bonds (or with respect to Term Bonds having a denomination in excess of $5,000, each $5,000 portion thereof) to be redeemed by mandatory redemption. The principal amount of Term Bonds required to be redeemed on any redemption date pursuant to the foregoing mandatory sinking fund redemption provisions hereof shall be reduced, at the option of the City, by the principal amount of any Bonds which, at least 45 days prior to the mandatory sinking fund redemption date (i) shall have been acquired by the City at a price not exceeding the principal amount of such Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (ii) shall have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to a mandatory sinking fund redemption. Notice of such redemption or redemptions shall be given by first class mail, postage prepaid, not less than thirty (30) days before the date fixed for redemption, to the registered owner of each of the Bonds to be redeemed in whole or in part. In the Ordinance, the City reserves the right in the case of an optional redemption to give notice of its election or direction to redeem Bonds conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected owners. Any Bonds subject to conditional redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an event of default. Further, in the case of a conditional redemption, the failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default. ]5 As provided in the Ordinance, and subject to certain limitations therein set forth, this Bond is transferable upon surrender of this Bond for transfer at the Designated Paymentffransfer Office of the Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar; thereupon, one or more new fully registered Bonds of the same stated maturity, of authorized denominations, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Bond called for redemption where such redemption is scheduled to occur within forty five (45) calendar days of the transfer or exchange date; provided, however, such limitation 5 Insert mandatory sinking fund redemption provisions, if any, and conform as necessary to the Pricing Certificate. -20- I 530988v.1 LUB200/l ) shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Bond. The City, the Paying Agent/Registrar, and any other person may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided ( except interest shall be paid to the person in whose name this Bond is registered on the Record Date or Special Record Date, as applicable) and for all other purposes, whether or not this Bond be overdue, and neither the City nor the Paying Agent/Registrar shall be affected by notice to the contrary. IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Bond and the series of which it is a part is duly authorized by law; that all acts, conditions and things required to be done precedent to and in the issuance of the Bonds have been properly done and performed and have happened in regular and due time, form and manner, as required by law; and that ad valorem taxes upon all taxable property in the City have been levied for and pledged to the payment of the debt service requirements of the Bonds, within the limit prescribed by law; and that the total indebtedness of the City, including the Bonds, does not exceed any constitutional or statutory limitation. IN WITNESS WHEREOF, the City has caused this Bond to be executed by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Secretary, and the official seal of the City has been duly impressed or placed in facsimile on this Bond. City Secretary, City of Lubbock, Texas [SEAL] 1530988v. I LUB200/l Mayor, City of Lubbock, Texas -21 - (b) Form of Comptroller's Registration Certificate. The following Comptroller's Registration Certificate may be deleted from the definitive Bonds if such certificate on the Initial Bond is fully executed. OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS OFTHESTATEOFTEXAS § § § REGISTER NO. ___ _ I hereby certify that there is on file and of record in my office a certificate of the Attorney General of the State of Texas to the effect that this Bond has been examined by him as required by law, that he finds that it has been issued in conformity with the Constitution and laws of the State of Texas, and that it is a valid and binding obligation of the City of Lubbock, Texas, and that this Bond has this day been registered by me. Witness my hand and seal of office at Austi~ Texas, ______ ____ [SEAL] Comptroller of Public Accounts of the State of Texas (c) Form of Certificate of Paying Agent/Registrar. The following Certificate of Paying Agent/Registrar may be deleted from the Initial Bond if the Comptroller's Registration Certificate appears thereon. CERTIFICATE OF PA YING AGENT/REGISTRAR The records of the Paying Agent/Registrar show that the Initial Bond of this series of Bonds was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, and that this is one of the Bonds referred to in the within mentioned Ordinance. Dated: I 530988v. I LUB200/i The Bank of New York Mellon Trust Company, National Association as Paying Agent/Registrar By: Authorized Signatory -22- '\ ) (d) Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or typewrite name, address and Zip Code of transferee): (Social Security or other identifying number: _______ ___, the within Bond and all rights hereunder and hereby irrevocably constitutes and appoints _______ _ attorney to transfer the within Bond on the books kept for registration hereof, with full power of substitution in the premises. Dated: ___________ _ Signature Guaranteed By: Authorized Signatory NOTICE: The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular and must be guaranteed in a manner acceptable to the Paying Agent/Registrar. (e) The Initial Bond shall be in the form set forth in paragraphs (a), (b) and (d) of this Section, except for the following alterations: (i) immediately under the name of the Bond, the headings "INTEREST RATE" and "MATURITY DATE" shall both be completed with the words "As shown below"; and (ii) in the first paragraph of the Bond, the words "on the Maturity Date specified above" shall be deleted and the following will be inserted: "on February 15 in each of the years, in the principal installments and bearing interest at the per annum rates in accordance with the following schedule: Principal Installments Interest Rate (Information to be inserted from the Pricing Certificate pursuant to Section 3.02 of this Ordinance) Section 6.03. CUSIP Registration. The City may secure identification numbers through the CUSIP Service Bureau Division of Standard & Poor's, A Division of the McGraw-Hill Companies, New York, New York, and may authorize the printing of such numbers on the face of the Bonds. It is expressly provided, however, that the presence or absence of CUSIP numbers on the Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor the attorneys approving said Bonds as to legality are to be held responsible for CUSIP numbers incorrectly printed on the Bonds. -23- 1530988v.l LUB200/l Section 6.04. Legal Opinion. The approving legal opinion of Vinson & Elkins L.L.P., Bond Counsel, may be attached to or printed on the reverse side of each Bond over the certification of the City Secretary of the City, which may be executed in facsimile. Section 6.05. Statement of Insurance. A statement relating to a municipal bond insurance policy, if any, to be issued for the Bonds may be printed on or attached to each Bond. ARTICLE VII SALE AND DELIVERY OF BONDS; DEPOSIT OF PROCEEDS Section 7.01. Sale of Bonds; Official Statement. (a) The Bonds shall be sold at negotiated sale to the Underwriters in accordance with the terms of this Ordinance, including this Section 7.0l(a) and Exhibit B hereto, provided that all of the conditions set forth in Exhibit B can be satisfied. As authorized by Chapters 1207 and 1371, Texas Government Code, as amended, the Authorized Officer is authorized to act on behalf of the City upon determining that the conditions set forth in Exhibit B can be satisfied, in selling and delivering the Bonds and carrying out the other procedures specified in this Ordinance, including determining whether to acquire bond insurance for the Bonds, the aggregate principal amount of the Bonds and price at which each of the Bonds will be sold, the aggregate principal amount of the Refunded Obligations and their redemption dates, the number and designation of series of Bonds to be issued, the form in which the Bonds shall be issued, the years in which the Bonds will mature, the principal amount to mature in each of such years, the rate of interest to be borne by each such maturity, the first interest payment date, the dates, prices and terms upon and at which the Bonds shall be subject to redemption prior to maturity at the option of the City and shall be subject to mandatory sinking fund redemption, and all other matters relating to the issuance, sale and delivery of the Bonds and the refunding of the Refunded Obligations, all of which shall be specified in the Pricing Certificate. The authority granted to the Authorized Officer under this Section 7.0l(a) shall expire at 5:00 p.m., August 26, 2009, unless otherwise extended by the City Council by separate action. Any finding or detennination made by the Authorized Officer relating to the issuance and sale of the Bonds and the execution of the Bond Purchase Contract in connection therewith shall have the same force and effect as a finding or determination made by the City Council. (b) The Authorized Officer is hereby authorized and directed to execute and deliver, and the City Secretary is hereby authorized and directed to attest, a bond purchase contract (the "Bond Purchase Contract") which Bond Purchase Contract is hereby accepted, approved and authorized in substantially the form submitted to the City and upon completion of the tenns of the Bond Purchase Contract in accordance with the terms of the Pricing Certificate and this Ordinance, the Authorized Officer is authorized and directed to execute such Bond Purchase Contract on behalf of the City and the Authorized Officer and all other officers, agents and -24- IS30988v.l LUB200/I ) representatives of the City are hereby authorized to do any and all things necessary or desirable to satisfy the conditions set out therein and to provide for the issuance and delivery of the Bonds. The Bonds shall initially be registered in the name of the Representative. (c) The form and substance of the Preliminary Official Statement 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 )(1) of Rule 1Sc2-12 under the Securities Exchange Act of 1934, as amended. The Authorized Officer and City Secretary are hereby authorized and directed to cause to be prepared a final Official Statement (the "Official Statement") incorporating applicable pricing information pertaining to the Bonds, and to execute the same by manual or facsimile signature and deliver appropriate numbers of executed copies thereof to the Underwriters. The Official Statement as thus approved, executed and delivered, with such appropriate variations as shall be approved by the Authorized Officer 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 Bonds by the Underwriters, is hereby ratified, approved and confirmed. ( d) All officers of the City are authorized to execute such documents, certificates and receipts as they may deem appropriate in order to consummate the delivery of the Bonds in accordance with the terms of sale therefor including, without limitation, the Purchase Contract. (e) The obligation of the Underwriters identified in subsection (a) of th.is Section to accept delivery of the Bonds is subject to the Underwriters 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 7.02. Control and Delivery of Bonds. (a) The Authorized Officer of the City is hereby authorized to have control of the Initial Bond and all necessary records and proceedings pertaining thereto pending investigation, examination, and approval of the Attorney General of the State of Texas, registration by the Comptroller of Public Accounts of the State of Texas and registration with, and initial exchange or transfer by, the Paying Agent/Registrar. (b) After registration by the Comptroller of Public Accounts, delivery of the Bonds shall be made to the Underwriters thereof under and subject to the general supervision and direction of the Authorized Officer, against receipt by the City of all amounts due to the City under the terms of sale. (c) In the event the Mayor or City Secretary is absent or otherwise unable to execute any document or take any action authorized herein, the Mayor Pro Tern and the Assistant City Secretary, respectively, shall be authorized to execute such documents and take such actions, and the P,erformance of such duties by the Mayor Pro Tern and the Assistant City Secretary shall for -25- 1530988v.1 LUB200/I ) the purposes of this Ordinance have the same force and effect as if such duties were performed by the Mayor and City Secretary, respectively. Section 7.03. Deposit of Proceeds. (a) First: All amounts received on the Closing Date as accrued interest on the Bonds from the Bond Date to the Closing Date shall be deposited to the Interest and Sinking Fund. (b) Second, a portion of the proceeds from the sale of the Bonds, funds transferred from the interest and sinking funds for the Refunded Obligations, and other funds of the City, if any, as set forth in the Pricing Certificate shall be applied to establish an Escrow Fund to refund the Refunded Obligations and, to the extent not otherwise provided for, to pay all expenses arising in connection with the establishment of such Escrow Fund and the refunding of the Refunded Obligations. (c) Third: The remaining balance received on the Closing Date shall be deposited to special accounts of the City, as set forth in the Pricing Certificate, such moneys to be dedicated and used solely for the additional purposes for which the Bonds are being issued as herein provided. ARTICLE VIII INVESTMENTS Section 8.01. Investments. (a) Money in the Interest and Sinking Fund created by this Ordinance and accounts provided for in Section 7.03(c), at the City's option, may be invested in such securities or obligations as pennitted under applicable law. The City's Chief Financial Officer, and any other officer of the City authorized to make investments on behalf of the City, are hereby authorized and directed to execute and deliver, on behalf of the City, any and all investment agreements, guaranteed investment contracts or repurchase agreements in connection with the investment of moneys on deposit in the Interest and Sinking Fund and the accounts provided for in Section 7.03(c), but only to the extent such investment agreements, guaranteed investment contracts or repurchase agreements are authorized inves1ments under applicable law. (b) Any securities or obligations in which money in the Interest and Sinking Fund 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 8.02. 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 the investment of the funds deposited pursuant to Section 7.03(c) hereof shall be credited to the fund or account where deposited until the -26- l530988v.l LUB200/I ) ) construction of the projects for which the Bonds are issued is completed or shall be transferred to the Interest and Sinking Fund as shall be determined by the City Council. Upon completion of the projects, to the extent such interest and income are present, such interest and income shall be deposited to the Interest and Sinking Fund. (c) The investment and application of money in the Escrow Fund shall be in accordance with the provisions of the Escrow Agreement. ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.01. Payment of the Bonds. On or before each Interest Payment Date and while any of the Bonds are outstanding and unpaid, there shall be made available to the Paying Agent/Registrar, out of the Interest and Sinking Fund, money sufficient to pay such interest on and principal of the Bonds as will accrue or mature on the applicable Interest Payment Date or date of prior redemption. Section 9.02. Other Representations and Covenants. (a) The City will faithfully perfomi 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 Bond on the dates and at the places and manner prescribed in such Bond; and the City will, at the times and in the manner prescribed by this Ordinance, deposit or cause to be deposited the amounts of money specified by this Ordinance. (b) The City is duly authorized under the laws of the State of Texas to issue the Bonds; all action on its part for the creation and issuance of the Bonds has been duly and effectively taken; and the Bonds in the hands of the Owners thereof are and will be valid and enforceable obligations of the City in accordance with their terms. Section 9.03. Provisions Concerning Federal Income Tax Exclusion. The City intends that the interest on the Bonds shall be excludable from gross income for purposes of federal income taxation pursuant to sections l 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 Bonds to be includable in the gross income, as defined in section 61 of the Code, of the holders thereof for purposes of federal income taxation. In particular, the City covenants and agrees to comply with each requirement of Sections 9.03 through 9.09 of this Article IX; provided, however, that the City shall not be required to comply with any particular requirement of Sections 9.03 through 9.09 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 pwposes of interest on the Bonds or if the City has received a Counsel's Opinion to the effect that compliance with some other requirement set forth in this Article IX will satisfy the applicable requirements of the -27- 1530988v.1 LUB200/l ) 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 9.03 through 9.09 of this Article IX. Section 9.04. 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 Bonds are delivered, and that the proceeds of the Refunded Obligations have not been used and the proceeds of the Bonds will not be used in a manner that would cause the Bonds to be ''private activity bonds" within the meaning of section 141 of the Code and the Regulations. The City covenants and agrees that it will make such use of the proceeds of the Bonds and the Refunded Obligations, including interest or other investment income derived from Bond proceeds, regulate the use of property financed, directly or indirectly, with such proceeds, and take such other and further action as may be required so that the bonds will not be ''private activity bonds" within the meaning of section 141 of the Code and the Regulations. Section 9.05. No Federal Guaranty. The City covenants and agrees not to take any action, or knowingly omit to talce any action within its control, that, if taken or omitted, respectively, would cause the Bonds to be "federally guaranteed" within the meaning of section l 49(b) of the Code and the Regulations, except as permitted by section 149(b)(3) of the Code and the Regulations. Section 9.06. Bonds are not Hedge Bonds. The City covenants and agrees not to take any action, or knowingly omit to take any actio~ and has not knowingly omitted and will not knowingly omit to take any action, within its control, that, if taken or omitted, respectively, would cause the Bonds to be "hedge bonds" within the meaning of section l 49(g) of the Code and the Regulations. Section 9.07. No Arbitrage Covenant. The City shall certify, through an authorized officer, employee or agent, that, based upon all facts and estimates known or reasonably expected to be in existence on the date the Bonds are delivered, the City will reasonably expect that the proceeds of the Bonds will not be used in a manner that would cause the Bonds to be "arbitrage bonds" within the meaning of section 148(a) of the Code and the Regulations. Moreover, the City covenants and agrees that it will make such use of the proceeds of the Bonds including interest or other investment income derived from Bond proceeds, regulate investments of proceeds of the Bonds, and take such other and further action as may be required so that the Bonds will not be "arbitrage bonds" within the meaning of section 148(a) of the Code and the Regulations. Section 9.08. Arbitrage Rebate. If the City does not qualify for an exception to the requirements of Section 148(f) of the Code, the City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the "gross proceeds" of the Bonds (within the meaning -28 - 1530988v.l LUB200/1 of section 148(f)(6)(B) of the Code), be rebated to the federal government. Specifically, the City will (i) maintain records regarding the investment of the gross proceeds of the Bonds as may be required to calculate the amount earned on the investment of the gross proceeds of the Bonds separately from records of amounts on deposit in the funds and accounts of the City allocable to other bond issues of the City or moneys which do not represent gross proceeds of any bonds of the City, (ii) calculate at such times as are required by the Regulations, the amount earned from the investment of the gross proceeds of the Bonds which is required to be rebated to the federal government, and (iii) pay, not less often than every fifth anniversary date of the delivery of the Bonds or on such other dates as may be 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 Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in a smaller profit or a larger loss than would have resulted if the arrangement had been at arm's length and had the yield on the issue not been relevant to either party. Section 9.09. Information 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 Bonds are issued, an information statement concerning the Bonds, 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, the City's obligations under the covenants and provisions of Sections 9.03 through 9.09 of this Article IX shall survive the defeasance and discharge of the Bonds. ARTICLEX DEFAULT AND REMEDIES Section 10.01. 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 Bonds when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the City, which default materially and adversely affects the rights of the Owners, including but not limited to, their prospect or ability to be repaid in 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. -29- l530988v.l LUB200/I ) ) Section 10.02. Remedies for Default. (a) Upon the happening of any Event of Default, then any Owner or an authorized representative thereof, including but not limited to, a trustee or trustees therefor, may proceed against the City for the purpose of protecting and enforcing the rights of the Owners under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Owners hereunder or any combination of such remedies. (b) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Owners of Bonds then outstanding. Section 10.03. Remedies Not Exclusive. ( a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cwnulative and shall be in addition to every other remedy given hereunder or under the Bonds or now ot hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Ordinance. (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. ARTICLE XI DISCHARGE Section 11.01. Discharge. The Bonds may be defeased, discharged or refunded in any manner permitted by applicable law. ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12.01. Annual Reports. (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 -30- l530988v.1 LUB200/l ) ) ) ) ) ) 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 infonnation and operating data pursuant to this Section. (c) The financial infonnation 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 available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. Section 12.02. Material Event Notices. (a) The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Bonds, if such event is material within the meaning of the federal securities laws: (i) (ii) (iii) principal and interest payment delinquencies; nonpayment related defaults; unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; Bonds; and (v) (vi) substitution of credit or liquidity providers, or their failure to perform; adverse tax opinions or events affecting the tax exempt status of the (vii) modifications to rights of Owners; (viii) redemption calls; (ix) defeasances; (x) release, substitution, or sale of property securing repayment of the Bonds; (xi) rating changes. -31 - 1530988v.l LUB200/1 '\ ) (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 infonnation or operating data in accordance with Section 12.01 of this Ordinance by the time required by such Section. Section 12.03. Limitations. Disclaimers and Amendments. (a) The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the City in any event will give notice of any Bond calls and any defeasances that cause the City to be no longer an "obligated person." (b) The provisions of this Article are for the sole benefit of the Owners and beneficial owners of the Bonds, and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this 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 Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE OWNER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN TIIIS 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 Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (A) the Owners of a majority in aggregate principal amount ( or any greater amount required by any other provisions of this Ordinance that authorizes -32 - 1530988v.1 LUB200/l ) ) such an amendment) of the outstanding Bonds consent to such amendment or (B) an entity or individual person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Owners and beneficial owners of the Bonds. If the City so amends the provisions of this Article, it shall include with any amended financial information or operating data next provided in accordance with Section 12.01 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 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 13.01. Amendments. This Ordinance shall constitute a contract with the Owners, be binding on the City, and shall not be amended or repealed by the City so long as any Bond remains outstanding except as 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 Bonds holding a majority in aggregate principal amount of the Bonds then outstanding, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Owners of outstanding Bonds, no such amendment, addition, or rescission shall (i) extend the time or times of payment of the principal of, premium, if any, and interest on the Bonds, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, or interest on the Bonds, (ii) give any preference to any Bond over any other Bond, or (iii) reduce the aggregate principal amount of Bonds required to be held by Owners for consent to any such amendment, addition, or rescission. Section 13.02. Attorney General Modification. In order to obtain the approval of the Bonds by the Attorney General of the State of Texas, any provision of this Ordinance may be modified, altered or amended after the date of its adoption if required by the Attorney General in connection with the Attorney General's examination as to the legality of the Bonds and approval thereof in accordance with the applicable law. Such changes, if any, shall be provided to the City Secretary and the City Secretary shall insert such changes into this Ordinance as if approved on the date hereof. -33 - l 530988v.1 LUB200/l ) ARTICLE XIV REDEMPTION OF REFUNDED OBLIGATIONS; APPROVAL OF ESCROW AGREEMENT; PURCHASE OF ESCROWED SECURITIES Section 14.01. Redemption of Refunded Obligations. (a) The City hereby calls the Refunded Obligations for redemption prior to maturity on the dates and at the prices set forth in the Pricing Certificate. (b) The Chief Financial Officer is hereby authorized and directed to cause a copy of this Ordinance to be delivered to each paying agent/registrar for the Refunded Obligations, the delivery of which shall constitute notice of redemption and notice of defeasance to such paying agent/registrar. Section 14.02. Subscription of Federal Securities. The Mayor and the Chief Financial Officer, either or both, are hereby authorized to make necessary arrangements for the purchase of the Federal Securities referenced in the Escrow Agreement, as may be necessary for the Escrow Fund and the application for the acquisition of the Federal Securities is hereby approved and ratified. Following the deposits to the Escrow Fund as specified herein and in the Pricing Certificate, the Refunded Obligations shall be payable solely from and secured by such deposits. Section 14.03. Approval of Escrow Agreement. The discharge and defeasance of the Refunded Obligations shall be effectuated pursuant to the terms and provisions of an Escrow Agreement (the "Escrow Agreement") to be entered into by and between the City and the Escrow Agent, which shall be substantially in the form presented at this meeting, the terms and provisions of which are hereby approved, subject to such insertions, additions and modifications as shall be necessary (a) to carry out the program designed for the City, (b) to minimize the City's costs of refunding, (c) to comply with all applicable laws and regulations relating to the refunding of the Refunded Obligations, ( d) to carry out the other intents and purposes of this Ordinance and (e) to comply with the terms set forth in the Pricing Certificate. The Chief Financial Officer is hereby authorized to execute and deliver such Escrow Agreement on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City's seal. Section 14.04. Notice of Redemption. Each paying agent/registrar for the Refunded Obligations is hereby authorized and directed to give notice of redemption and deposit with respect to the Refunded Obligations as required under the ordinance pursuant to which the Refunded Obligations were issued. -34- I 530988v. l LUB200/l ARTICLE XV EFFECTNE IMMEDIATELY Section 15.01. 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. -35 - l5309.88v. l LUB200/l PRESENTED, FINALLY PASSED AND APPROVED, AND EFFECTIVE on the 26th day of February, 2009, at a regular meeting of the City Council of the City of Lubbock, Texas. TOM MARTIN, Mayor ATTEST: [SEAL] APPROVED AS TO CONTENT: By: A~ ANDBlJRCHAM, Chief Financial Officer APPROVED AS TO FORM: By: Signature Page for Ordinance I 530988v.1 LUB200/l ) SCHEDULE I REFUNDED OBLIGATION CANDIDATES All of the City's outstanding obligations of the following series: Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1993 General Obligation Bonds, Series 1993 Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1998 General Obligation Refunding Bonds, Series 1999 Tax and Waterworks System Swplus Revenue Refunding Bonds, Series 1999 Schedule 1-1 1530988v.l LUB200/I ' ) 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 SA-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. Exhibit A-1 l530988v.l LUB200/1 ) EXHIBITB SALE PARAMETERS In accordance with Section 7.0l(a) of the Ordinance, the following conditions with respect to the Bonds must be satisfied in order for the Authorized Officer to act on behalf of the City in selling and delivering the Bonds to the Underwriters: ( a) the price to be paid for the Bonds shall be not less than 95% of the aggregate principal amount of the Bonds; (b) the Bonds shall not bear interest at a rate greater than the maximwn rate allowed by Chapter 1204, Texas Government Code, as amended; (c) the aggregate principal amount of the Bonds shall produce proceeds in an amount sufficient to fund the purposes described in Section 3.01 and such aggregate principal amount shall not exceed the maximum amount authorized in Section 3.01; (e) the refunding of the Refunded Obligations shall result in a net present value savings of at least 2%; and (d) the maximum maturity for the Bonds shall not exceed twenty-five years; and (e) the Bonds to be issued, prior to delivery, must have been rated by a nationally recognized rating agency for municipal securities in one of the four highest rating categories for long term obligations. Exhibit B-1 1530988v.l LUB200/l .., PRICING CERTIFICATE General Obligation Refunding and Improvement Bonds, Series 2009 Re: $23,185,000 City of Lubbock, Texas General Obligation Refunding and Improvement Bonds, Series 2009 (the .. Bonds") I, the undersigned officer of the City of Lubbock, Texas (the "City"), do hereby make and execute this Pricing Certificate pursuant to an ordinance adopted by the City Council of the City on February 26, 2009 (the "Ordinance'') authorizing the issuance of the Bonds. Capitalized terms used in this Pricing Certificate shall have the meanings given such tenns in the Ordinance. 1. As authorized by Section 7.01 of the Ordinance, I have acted on behalf of the City in selling the Bonds to the Underwriters pursuant to the tenns of a bond purchase contract in substantially the form accepted, approved and authorized pursuant to Section 7 .01 of the Ordinance, for the swn of $24,315,479.27 (representing the principal amount of $23,185,000, plus net original issue premium of $1,243,042.45 and le.ss an underwriters' discount of$112,563.18), plus accrued interest in the amount of $112,660.50, and having the following terms, conditions and provisions, all as authorized pursuant to Section 7.01 of the Ordinance: A. The Bonds shall be issued in the aggregate principal amount of $23,185,000, shall be dated March I, 2009 (the "Bond Date") and bear interest from such date, shall mature on February 15 in the years and in the principal amounts and shall bear interest payable on February 15 and August 15 of each year, commencing February 15, 2010, at the rates set forth in the following schedule: Serial Bonds Principal Principal Years Installments Interest Rate Years Installments Interest Rate 2010 $3,065,000 5.000% 2020 $130,000 4.125% 2011 3,525,000 5.000% 2021 135,000 4.250% 2012 3,440,000 5.000% 2022 145,000 4.375% 2013 3,360,000 5.000% 2023 150,000 4.500% 2014 3,370,000 5.000% 2024 155,000 5.250% 2015 665,000 3.250% 2025 165,000 5.250% 2016 1,170,000 3.500% 2026 175,000 5.000% 2017 1,160,000 3.750% 2027 185,000 5.000% 2018 1,160,000 4.000% 2028 190,000 5.000% 2019 640,000 4.250% 2029 200,000 5.000% 1540928v.l LUB2oon!015 "" .I B. In accordance with the parameters contained in Section 7.01 and Exhibit B of the Ordinance, the undersigned does hereby find, certify and represent that the foregoing terms of the Bonds satisfy the following requirements and parameters contained within such Section 7.01 and Exhibit B: (i) the price to be paid by the Underwriters for the Bonds shall be 104.876% of the aggregate principal amount of the Bonds, which is not less than 95% of the aggregate principal amount of the Bonds; (ii) the Bonds do not bear interest at a rate greater than the maximum rate allowed by Chapter 1204, Texas Government Code, as amended; (iii) the aggregate principal amount of the Bonds produces proceeds in an amount sufficient to fund the purposes described in Section 3.01 of the Ordinance and such aggregate principal amonnt does not exceed the maximum amount authorized in Section 3.01 of the Ordinance; (iv) the refunding of the Refunded Obligations shall result in a net present value savings of3.945% which is greater than 2%; and (v) the maximum maturity for the Bonds is 2029 which does not exceed twenty-five years; (vi) the Bonds have been rated, or will be rated prior to delivery, by a nationally recognized rating agency for municipal securities in one of the four highest rating categories for long term obligations. 2. The proceeds of the Bonds shall be applied as set forth in Section 7 .03 of the Ordinance. Specifically, (i) premium in the amount of $234,938.63 shall be used to pay costs of issuance and widerwriter's discount, (ii) proceeds in the amount of $21,548,103.82 shall be deposited to the Escrow Fwid plus $580,000 in funds transferred from the debt service funds for the Refunded Obligations and (iii) proceeds in the amount of $2,645,000 shall be used to pay costs of the permanent public improvements identified in Section 3.01 of the Ordinance. 3. The Bonds shall be issued substantially in the form attached hereto as Exhibit A. 4. The Refunded Obligations to be refunded through the issuance of the Bonds are listed on Exhibit B attached hereto. The Refunded Obligations are hereby irrevocably called for redemption prior to maturity on the redemption dates set forth on Exhibit B, at a price of 100% of par, plus accrued interest to the date fixed for redemption, and notice of such redemption shall be given in accordance with the ordinances authorizing the issuance of such obligations. -2- 1540928v. I LUB200nI O I 5 ) Executed as of the 13th day of March, 2009. 1540917v.1 LUB200/710J5 Chief Financial Officer City of Lubbock, Texas Signature Page for Pricing Certificate ) ) ) EXHIBIT A The fonn of the Bonds, including the fonn of the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the form of Certificate of the Paying Agent/Registrar and the form of Assignment appearing on the Bonds, shall be substantially as follows: (a) Form of Bond. REGISTERED No. __ United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $ ___ _ GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: MATURITY DATE: BOND DATE: CUSIP NUMBER: __ % February 15, __ March 1, 2009 The City of Lubbock (the "City''), in the County of Lubbock, State of Texas, for value received, hereby promises to pay to or registered assigns, on the Maturity Date specified above, the sum of _________ DOLLARS unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized tenns used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). The principal. of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will A-1 l540928v.1 LUB200nI0I5 ) ') "\ "\ 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 expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record Date," which shall be the last business day of the month next preceding such interest payment date. · If the date for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated Payment/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 which 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 and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. This Bond is one of a series of fully registered bonds specified in the title hereof issued in the aggregate principal amount of $23,185,000 (herein referred to as the "Bonds"), issued pursuant to a certain ordinance of the City (the "Ordinance'') for the purpose of providing funds with which to make various pennanent public improvements for the City, to refund certain outstanding obligations of the City, and to pay the costs of issuing the Bonds. The City has reserved the option to redeem the Bonds maturing on February 15, 2020 in whole or in part, before their scheduled maturity date on February 15, 2019, or on any date thereafter, at a redemption price of par, plus accrued interest to the date fixed for redemption. If less than all of the Bonds are to be redeemed, the City shall detennine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot or other customary method that results in a random selection the Bonds, or portions thereof, within such maturity and in such principal amounts, for redemption. Notice of such redemption or redemptions shall be given by first class mail, postage prepaid, not less than thirty (30) days before the date fixed for redemption, to the registered owner of each of the Bonds to be redeemed in whole or in part. In the Ordinance, the City reserves the right in the case of an optional redemption to give notice of its election or direction to redeem Bonds conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such A-2 1540928v.l LUB20onl015 ) ) ) ., rescission of a conditional notice of redemption to the affected owners. Any Bonds subject to conditional redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an event of default. Further, in the case of a conditional redemption, the failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default.As provided in the Ordinance, and subject to certain limitations therein set forth, this Bond is transferable upon surrender of this Bond for transfer at the Designated Payment/f ransfer Office of the Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar; thereupon, one or more new fully registered Bonds of the same stated maturity, of authorized denominations, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Bond called for redemption where such redemption is scheduled to occur within forty-five ( 45) calendar days of the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Bond. The City, the Paying Agent/Registrar, and any other person may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided ( except interest shall be paid to the person in whose name this Bond is registered on the Record Date) and for all other purposes, whether or not this Bond be overdue, and neither the City nor the Paying Agent/Registrar shall be affected by notice to the contrary. IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Bond and the series of which it is a part is duly authorized by law; and has been authorized by a vote of the properly qualified electors of the City; that all acts, conditions and things required to be done precedent to and in the issuance of the Bonds have been properly done and performed and have happened in regular and due time, form and manner, as required by law; and that ad valorem taxes upon all taxable property in the City have been levied for and pledged to the payment of the debt service requirements of the Bonds within the limit prescribed by law. IN WITNESS WHEREOF, the City has caused this Bond to be executed by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Secretary, and the official seal of the City has been duly impressed or placed in facsimile on this Bond . Mayor, City of Lubbock, Texas City Secretary, City of Lubbock, Texas [SEAL] A-3 1540928v.l LUB200/7l015 ) ) (b) Form of Comptroller's Registration Certificate. The following Comptroller's Registration Certificate may be delete,d from the definitive Bonds if such certificate on the Initial Bond is fully execute.d. OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS OF THE STATE OF TEXAS § § § REGISTER NO. __ _ I hereby certify that there is on file and ofrecord in my office a certificate of the Attorney General of the State of Texas to the effect that this Bond has been examined by him as required by law, that he finds that it has been issued in conformity with the Constitution and laws of the State of Texas, and that it is a valid and binding obligation of the City of Lubbock, Texas; and that this Bond has this day been registered by me. Witness my hand and seal of office at Austin, Texas, _______ __ [SEAL] Comptroller of Public Accounts of the State of Texas (c) Form of Certificate of Paying Agent/Registrar. The following Certificate of Paying Agent/Registrar may be deleted from the Initial Bond if the Comptroller's Registration Certificate appears thereon. CERTIFICATE OF PAYING AGENT/REGISTRAR The records of the Paying Agent/Registrar show that the Initial Bond of this series of bonds was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, and that this is one of the Bonds referred to in the within-mentioned Ordinance. Dated: A-4 1540928v.l LUB2O0nlO15 The Bank ofNew York Mellon Trust Company, National Association as Paying Agent/Registrar By: Authorized Signatory ) (d) Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or typewrite name, address and Zip Code of transferee): ______________ _ (Social Security or other identifying number: ________ -., the within Bond and all rights hereunder and hereby irrevocably constitutes and appoints ________ _ attorney to transfer the within Bond on the books kept for registration hereof, with full power of substitution in the premises. Dated: NOTICE: The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular and must be guaranteed in a manner acceptable to the Paying Agent/Registrar. Signature Guaranteed By: Authorized Signatory (e) The Initial Bond shall be in the form set forth in paragraphs (a), (b) and (d) of this Section, except for the following alterations: (A) immediately under the name of the Bond the headings "INTEREST RATE" and "MATURITY DATE" shall both be completed with the expression "As shown below" and the heading "CUSIP NO." shall be deleted; and (B) in the first paragraph of the Bond, the words "on the maturity date specified above" shall be deleted and the following will be inserted: "on February 15 in each of the years, in the principal installments and bearing interest at the per annum rates set forth in the following schedule: I 540928v. I LUB200n IO 15 Principal Installments Interest Rate (Information to be inserted from the Pricing Certificate pursuant to Section 3.02 of the Ordinance) A-5 EXHIBITB (See Attached Schedule.} "\ ) B-1 1540928v.l LU8200/71015 SCHEDULE OF REFUNDED OBLIGATIONS Maturity Refunded Call Serles Date Obligations Date Tax & Waterworks System {Limited Pledge) 02/15/2012 $ 75,000 05/12/2009 Revenue Certificates of Obi igation, Series 1993 02/15/2013 75,000 02/15/2014 75,000 s 225,000 Genera! Obligation Bonds, Series 1993 02/15/2012 $ %5,000 05/12/2009 02/15/2013 965,000 02/15/2014 965,000 s 2,895,000 Tax & Waterworks System (Limited Pledge) 02/\5/2016 $ 515,000 05/12/2009 Revenue Certificates of Obligation, Series 1998 02/15/2017 515,000 02/15/2018 515,000 s 1,545,000 General Obligation Refunding Bonds, Series I 999 02/15/2010 $ 2,960,000 05/12/2009 02/15/201 I 2,930,000 02/15/2012 1,785,000 02/15/2013 1,685,000 02/15/2014 1,670,000 ) $ 11,030,000 Tax: & Waterworks System Surplus Revenue 02/15/2010 s 620,000 05/12/2009 Refunding Bonds, Series 1999 02/15/201 I 620,000 02/15/2012 620,000 02/15/2013 620,000 02/15/2014 620,000 ) 02/!5/20 I 6 1,240,000 02/1 5/2019 1,860,000 $ 6,200,000 ) ) f ( : 'i \ 1 f ! !' 'f ./ { / I , ( ,·'' ! ORDINANCE NO, 9661 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCl<, TEXAS, TAX AND WATERWORXS 51STEM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION, SERIES 1993"; levying an ad valorem tax upon all ta.xable property in the City and providing for a li•ited pledge of the Net Revenues of th~ City's Waterworks System for the payment of said Certificates; prescribing the terms and details of such Certificates and resolving other matters incident and related to the issuance, sale, security, payment and delivery of said certificates, including the approval of a Paying Agent/Registrar Agreement and the approval and distribution of an Official Statement pertaining thereto; and providing an effective date. WHEREAS, notice of the City council's intention to issue certificates of obligation in the maximum principal amount of $1,470,000 for the purpose of paying contractual obligations to be incurred for (i) Civic Center and street improvements to provide iaprovGd access and utilization for persons with disabilities and (ii) professional services rendered in connection therewith, bas been duly published in the Lubbock. Avalanche-Journal, a newspaper hereby found and determined to be a newspaper devoting not less than twenty-five per cent (25%) of its total column lineage to the carrying of items of general interest, published not less frequently than once each week, entered as second-class postal matter in the county where published, and having been published regularly and continuously for not less than twelve (12) months prior to the making of the publications stated in this paragraph, and of general circulation in the City of Lubbock, Texas, on September 12, 1993 and,septellber 19, 1993, the date of the first publication of such notice being not less than fifteen (15) days prior to the tentative date stated therein for the passage of the ordinance authorizing the issuance of such certificates; and WHEREAS, no petition, protesting the issuance of sueh certificates and bearing valid petition signatures of at least st of the qualified voters of the City, has been filed with the City Secretary, any member of the council or any other official of the City on or prior to the date of the passage of this ordinance; and WHEREAS, the Council hereby finds and deteniines that all of the certificates of obligation described in such notice should be issued and sold at this time; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION 1: Authorization-Designation-Principal Amount-Purpose. Certificates of obligation of the City shall be and are hereby authorize~ to be issued in the aggregate principal amount of $1,470, ooo to be designated and bear the title "CITY OF LUBBOCK, TEXAS, TAX ANO WATERWORKS SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION, SERIES 1993• (the "Certificates"), for the purpose of paying contractual obligations to be incurred for ( i) Civic Center and street improvements to provide improved access and utilization for persons with disabilities and (ii) professional services rendered in connection therewith, pursuant to authority conferred by and in conformity with the Constitution a.nd laws of the state of Texas, including V.T.C.A., Local Government Code, Subchapter c of Chapter 271. SECTION 2: Fully Registered Obligations -Authorized Denominatioos-stated Maturities-Date. The Certificates are issuable in fully registered form only; shall be dated October 1, 1993 (the "Certifi c3~e Date") and shall~~ in denomi nations of $5,0oo or ant integr.tl multiple the1:eoi and the Certifi cates shall become due and payaule or. Fabruary 15 in each of the years and in principal amounts (the "Stated Maturities") and bear interest at the per annWII rate(s) in accordance with the followiA9 schedule: ----,.....---... --------------.--::·.-~----------- I ... I \. Year of Principal Interest l;iti:!,:te!;) Msttuz:ity: Amoynt E~t~ 1995 $70,000 6.00% 1996 70,000 6.00% 1997 70,000 6.00% 1998 70,000 6.00% 1999 70,000 6.00t 2000 70,000 6.00t 2001 75,000 6.00% 2002 75,000 6.00% 2003 75,000 6.00% 2004 75,000 4.50% 2005 75,000 4.50% 2006 75,000 4.50% 2007 75,000 4.75% 2008 75,000 4.751 2009 75,000 4.90% 2010 75,000 s.oot 2011 75,000 5.00% 2012 75,000 4.00\ 2013 75,000 4.00-I 201.4 75,000 4.00% Interest on the Certificates sna.11 accrue from certificate Date at the per annum rate (s) shown above in Section, and such interest shall be calculated on the basis 360-day year of twelve 30-day •onths. rnterest on Certificates shall be payable on February 15 and August 15 in year, commencing August 15, 1994. the this of a the each SECTION 3: Terms of Pavment.-Payinq Agent/Registrar. The principal of, premium, if any, and. the interest on the Certificates, due and payable by reason of maturity or redemption or otherwise, shall be payable only to the registered owners or holders of the Certificates (hereinafter called the "Holders") appearing on the registration and transfer books (the •security Register") maintained by the Paying Agent/Registrar and the payment thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without exchange or collection charges to the Holders. The selection and appointment of NationsBank of Texas, N.A., Dallas, Texas to serve as Paying Agent/Registrar for the Certificates is hereby approved and confirmed and the City agrees and covenants to be kept and maintained at the principal office of the Paying Agent/Registrar books and records for the registration, payment and transfer of the Certificates (the "Security Register"), all as provided herein, in accordance with the terms and provisions of a "Paying Agent/Registrar Agreement" substantially in the form attached hereto as Exhibit A and such reasonable rules and regulations as the Paying Agent/Registrar and City may prescribe; and the Mayor and City Secretary are authorized to execute and deliver such Agreement in connection with the delivery of the Certificates. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Certificates are paid and discharged, and any successor Paying Agent/Registrar shall be a commercial bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice thereof to be sent to each Holder by United States Hail, first class postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. 0121405 -2- t i -----~~=_,,.......,..,,.,,,,..,,,,.,..~.· ~·-·-·-·····-·-,---- Principal of and premium, if any, on the Certificates shall be payable at the Stated Maturities or the redemption thereof only upon presentation and surrender of the Certificates to the Paying Agent/Registrar at its principal office. Interest on the Certificates shall be paid by the Paying Agent/Registrar to the Holders whose name appears in the Security Register at the close of business on the Record Date (the last business day of the month next preceding each interest payment date) and payment of such interest shall be (i) by check sent United States Hail, first class postage prepaid, to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder. If the date for the payment of the principal of or interest on the Certificates shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day when banJting institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. In the event of a nonpayment of interest on a scheduled payment date, and for thirty (JO) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/ Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the ~st due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United states Mail, first class postage prepaid, to the address of each Holder appearing on the security Register at the close of business on the last business next preceding the date of mailing of such notice. SECTION 4: Redemption. (a) Optional Redemption. The Certificates having stated Maturities on and after February 15, 2004, shall be subject to redemption prior to maturity, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2003 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. (b) Exercise of Redemption option. At least forty-five (45) days prior to a redemption date for the Certificates (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the City shall notify the Paying Agent/Registrar of the decision to redeem certificates, the principal amount of each Stated Maturity to be redeemed, and the date of redemption therefor. The decision of the City to exercise the right to redeem. Certificates shall be entered in the minutes of the governing body ot the City. (c) Selection of Certificates for Redemption. If less than ct.ll Outstandinq Certificates of the same Stated Ma.turity are to be redeeaed on a redemption date, the ~aying Agent/Registrar shall treat such Certificates as representing the nwnber of Certificates outstanding which is obtained by dividing the principal amount of such Certificates by $5,000 and shall select the Certificates, or principal amount thereof, to be redeemed within such stated Maturity by lot. (d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the certificates, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the City and at the City's expense, to each Holder of a certificate to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next 0121405 -3- ' -- . ' 7.\. -~---. • • __ , 7 - preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemption shall ( i) specify the date of redemption for the certificates, (ii) identify the Cert if ica tes to be redeeaed and, in the case of a porti on of the principal amount to be redeemed, the principal aaount thereof to be redeemed, (iii) state the redemption price, (iv) state that the Certiticates, or the portion of the principal amount thereof to be redeeaed, shall become due and payable on the redeaption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue frOlll and after the redemption date, and (v) specify that payment of the redemption price for the Certificates, or the principal amount thereof to be redeemed, shall be made at the principal office of the Paying Agent/Registrar only upon presentation and surrender the.reof by the Holder. If a Certificate is subject by its tenas to prior redeaption and has been called for redemption and notice of redemption thereof has been duly given as hereinabove provided, such certificate (or the principal amount thereof to be redeemed) shall becone due and payable and interest thereon shall cease to accrue fro• and after the red .. ption date therefor; provided J10neye sutf icient for the payment of aucb Certificate (or of the principal U\OUnt thereof to be redeemed) at the tben applicable redeaption price are held for the purpose of such payaent by the Paying Agent/Registrar. SECTION 5: Registration Transfer -Exchange of certificates-Predecessor Certificates. A security Register relating to the registration, payment, and transfer or exchange of the Certificates shall at all ti1D8s be kept and maintained by the City at the principal office of the Paying Agent/Registrar, as provided herein and in accordance vith the provisions of an agreeaent with the Paying Agent/Registrar and such rules and regulations as the Paying Agent/Registrar and the City may prescribe. The Paying Agent/Registrar Shall obtain, record, and maintain in tbe Security Register the naae and address of each and every owner of the Certificates issued under and pursuant to the proviaions of this Ordinance, or if appropriate, the nominee thereof. Any Certificate may be transferred or exchanged for Certificates of other authorized den011inations by the Holder, in person or by his duly authorized agent, upon surrender of such Certificate to the Paying Agent/Registrar for cancellation, accOlllpanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. upon surrender of any certificate for transfer at the principal office of the Paying Agent/Registrar, the Paying Agent/Registrar shall register and deliver, in the name of the designated transferee or transferees, one or more new Certificates of authorized de,iominations and having the same Stated Maturity and of a like aggregate principal amount as the certificate or Certificates surrendered for transfer. At the option of the Holder, Certificates lllilY be exchanged for other certificates of authorized denoainations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Certificates surrendered for exchange, upon surrender of the Certificates to be exchanged at the principal office of the Paying Agent/ Registrar. Whenever any Certificates are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new certificates to the Ho1der requesting the exchange. All certificates issued in any transfer or exchange of Certificates shall be delivered to the Holders at the principal office of the Paying Agent/Registrar or sent by United States Mail, first class, postage prepaid to the Holders, and, upon the G121405 -4- registration and delivery thereof, the same shall be the valid obligations of the City, evidencing the same obligation to pay, and entitled t0 the same benefits under this Ordinance, as the certificates surrendered in such transfer or exchange. All transfers or exchanges of Certificates pursuant to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. Certificates canceled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be "Predecessor Certificates," evidencing all or a portion, as the case may be, of the same obligation to pay evidenced by the new Certificate or certificates registered and delivered in the exchange or transfer therefor. Additionally, the term "Predecessor Certificates" shall include any mutilated, lost, destroyed, or stolen Certificate for which a replacement Certificate has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 28 hereof and such new replacement Certificate shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Certificate. Neither the City nor the Paying Agent/Registrar shall be required to issue or transfer to an assignee of a Holder any Certificate called for redemption, in whole or in part, within 45 days of the date fixed for the redemption of such certificate; provided, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a certificate called for redemption in part. SECTION 6: Book-Entry only Transfers and Transactions. Notwithstanding the provisions contained in Sections J and 5 hereof relating to the payment, and transfer/exchange of the Certificates, the City hereby approves and authorizes the use of "Book-Entry Only" securities clearance, settlement and transfer system provided by The Depository Trust Company (OTC), a li111ited purpose trust company organized under the laws of the State of New York, in accordance with the requirements and procedures identified. in the Letter of Representation, by and between the City, the Paying Agent/Registrar and DTC (the "Depository Agreement") relating to the Certificates. Pursuant to the Depository Agreement and the rules of OTC, the certificates shall be deposited with OTC who shall hold said Certificates for its participants (the •DTc Participants"). While the certificates are held by OTC under the Depository Agreement, the Holder of the Certificates on the Security Register for all purposes, including payment and notices, shall be Cede & Co., as nominee of DTC, notwithstanding the ownership of each actual purchaser or owner of each Certificate {the "Beneficial OWners") being recorded in the records of OTC and DTC Participants. In the event DTC determines to discontinue serving as securities depository for the Certificates or otherwise ceases to provide book-entry clearance and sett1ement of securities transactions in general or the City determines that DTC is incapable of properly discharging its duties as securities depository for the Certificates, the City covenants and agrees with the Holders of the Certificates to cause certificates to be printed in definitive form and provide for the certificates to be issued and delivered to DTC Participants and Beneficial Owners, as the case may be. Thereafter, the Certificates in definitive form shall be assigned, transferred and exchanged on the security Register maintained by the Paying Agent/Registrar and payment of 0121405 -s- ,.•,.-. ~--~._ .......... ~ .. --.-~--_.,,s,... . .!~=-A-t~-:"".~~·-,-.-----,-..,-----, ....... -,-.•,_....., ...... _~-·~·=··~-----~~-- such certificates shall be made in accordance with the provisions of Sections 3 and 5 hereof. SECTION 7: Execution -Registration. The certificates shall be executed on behalf of the City by the Mayor under its seal reproduced or impressed thereon and countersigned by the City secretary. The signature ot said officers on the Certificates may be manual or facsi111ile. Certificates bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the Certificate Date shall be deemed to be duly executed on behalf of the City, notwithstanding that one or more of the individuals executing the same shall cease to be such officer at the time of delivery of the Certificates to the initial purchaser(s) and with respect to certificates delivered in subsequent exchanges and transfers, all as authorized and provided in the Bond Procedures Act of 1981, as amended. No Certificate shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Certificate either a certificate of registration substantially in the fora provided in Section 9C, manually executed by the Comptroller of Public Accounts of the state of Texas, or his duly authorized agent, or a certificate of registration substantially in the fona provided in Section 9D, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar, and either such certificate duly signed upon any Certificate shall be conclusive evidence, and the only evidence, that such certificate has been duly certified, registered and delivered. SEcrroN a: Initial certifioateCs}. The certificates herein authorized shall be initially issued either (i) as a single fully registered certificate in the total principal amount of $1,470,000 with principal installaents to beco•e due and payable as provided in Section 2 hereof and numbered T-1, or (ii) as twenty (20) fully registered certificates, being one certificate for each year of maturity in the applicable principal amount and denomination~.ancl to be nwabered consecutively from. T-1 and upward (hereinafter called the •tnitial c.ertificate(s)") and, in either case, the Initial Certificate(&} shall be registered in the na11e of the initial purchaser(s) or the designee thereof. The rnitial Certificate(&) shall be the Certificates submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any time after the delivery of the Initial certificate(s), the Paying Agent/Registrar, pursuant to writt.n instructions from the initial purchaser(s), or the designea thereof, shall cancel the Initial Certificate(s) delivered hereunder and exchange therefor definitive certificates of authorized denominations, Stated Maturities, principal allounts and bearing applicable interest rates for transfer and delivery to the Holders named at1the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser (s), or the designee thereof, and such other information and docllllentation as the Paying Agent/Registrar nay reasonably require. SECTrON 9: ,[QDu. A. Forms Generally. The Certificates, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Registration Certificate of Paying Agent/Registrar, and the form of Assignment to be printed on each of the Certificates, shall be substantially in tb.e forms set forth in this Section with such appropriate in~ertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, nwabers, or other marks of identification (including identifying numbers and letters of the comm.ittee on Uniform Securities Identification Procedures of the Alllerican Bankers Association) and such legends and endorsements (including insurance legends in the 0121~~ -6- ) event the Certificates, or any maturities thereof, are purchased with insurance and any reproduction of an opinion of counsel} thereon as may, consistently herewith, be established by the city or determined by the officers executing such Certificates as evidenced by their execution. Any portion of the text of any Certificates may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. The definitive certificates shall be printed, lithographed, or engraved or produced in any other similar manner, all as determined by the officers executing such Certificates as evidenced by their execution, but the Initial certificate(s) submitted to the Attorney General of Texas may be typewritten or photocopied or otherwise reproduced. The City may provide (i) for issuance of one fully registered certificate for each Stated Maturity in the aggregate principal amount of each Stated Maturity and (ii) for registration of such Certificates in the name of a securities depository, or the n0l1linee thereof. The Letter of Representations by and among the City, the Paying Agent/Registrar, and the initial securities depository (Depository Trust Company) a form of which is attached hereto as Exhibit B, is approved and may be executed by the Mayor and City Secretary on behalf of the city. Tbe execution of a Letter of Representations may occur either before or after delivery of the Certificates to the initial purchasers but shall not affect the City's obligation to pay the registered owners the principal of and interest on the Certificates as the same become due. While any Certificate is registered in the na111e of a securities depository or its nominee, references herein and in the Certificates to the holder or owner of such Certificate shall mean the securities depository or its nominee and shall not mean any other person. B. Form of certificates. REGISTERED NO. __ UNITED STATES OF AMERICA STATE OF TEXAS CITY OF LUBBOCJI:, TEXAS, REGISTERED $ ____ _ TAX AND WATERWORKS SYS'l!EM (LIMITED PLEDGE) REVENUE CERTIFICATE OF OBLIGATION, Certificate Date: October 1., l.993 Registered owner: Principal Amount: SERIES 1993 Interest Rate: stated Maturity: ______ t CUSIP NO: DOLLARS The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, state of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered owner named above, or the registered assigns thereof, the Principal Amount stated above, on the Stated Maturity date specified above (or so much thereof as shall not have been paid upon prior redemption) and to pay interest (computed on the basis of a 360-day year of twelve JO-day months) on the unpaid Principal Amount hereof from the Certificate Date at the per annum rate of interest specified above; such interest being payable on February 15 and August 15 of each year, co111111encing August 15, 19 94 • Principal of this Certificate is payable at its Stated Maturity or redemption to the registered owner hereof, upon presentation and 0121405 -7- ... ,we r surrender, at the principal office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor. Interest is payable to the registered owner of this Certificate (or one or more Predecessor certificates, as defined in the ordinance hereinafter referenced) whose name appears on the MSecurity Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date and interest •hall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the security Register on the Record Date or by such other method, a.cceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. If the date for the payment of the principal of or interest on the Certificates shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such paY'JD@nt shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day when banking institutions are authorized to close; and payment on such date shall have the sue force and effect as if made on the original date pA}'llent was due. All payments of principal of, premium, if any, and interest on this Certificate shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America Which at the time of payment is legal tender for the payment of public and private debts. This Certificate is one of the series specified in its title issued in the aggregate principal amount of $1,470,000 (herein re.ferred to as the "Certificates") for th.e purpose of paying contractual obligations to be incurred for (i) civic Center and street improvements to provide improved access and utilization for persons with disabilities and (ii) professional services rendered in connection therewith, under and in strict conformity with the constitution and laws of the State of Texas, particularly V.T.C.A., Loc«l Government Code, subchapter c of Chapter 271, and pursuant to an Ordinance adopted by the governing body of the City (herein referred to as the "Ordinance"), The Certificates maturing on and after February 15, 2004, may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral aultiple thereof (and if within a stated Maturity by lot by the Paying Agent/Registrar), on Feb,:uary 15, 2003, or on any date thereafter, at the redemption price of par, together with accrued interest to the date of redemption and upon 30 days prior written notice being sent by United States Mail, first class postage prepaid, to the registered owners of the certificates to be redeoed, and subject to the terms and provisions relating thereto contained in the Ordinance. If this Certificate (or any portion of the principal SWII hereof) shall have been duly called for redemption and notice of such redemption duly given, then upon such redemption ·date this Certificate (or the portion of the principal sum hereof to be redeemed) shall become due and payable, and interest thereon shall cease to accrue frol'll and after the redemption date therefor, provided moneys for the payment of the redemption price and the interest on the principal amount to be redeeaed to the date of redemption are held for the purpose of such paY111ent by the Paying Agent/Registrar. In the event of a partial redemption of the principal amount of this Certificate, payment of the redemption price of such principal amount shall be made to the registered owner only upon presentation and surrender of this Certificate to the Paying Agent/Registrar at its principal office and there shall be issued, without charge therefor to the registered owner hereof, a new certificate or certificates of like maturity and interest rate in any authorized denominations provided by the Ordinance for the then unredeemed balance of the principal SWII hereof. If this 0t2140S -s- ' ,-:v~~-1~·~··-~~--· .. --·--····~~-.. -~.,---........... -.;.----- ) r \' Certificate is selected for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer this Certificate to an assignee of the registered owner within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the registered owner of the unredeemed balance hereof in the event of its redemption in part. The certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and are additionally payable from and secured by a lien on and limited pledge of the Net Revenues (as defined in the Ordinance) of the city's Waterworks system (the "System"), such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of "Prior Lien Obligations" (as defined in the ordinance) hereafter issued by the city. In the ordinance, the City reserves and retains the right to issue Prior Lien Obligations while the certificates are outstanding without limitation as to principal amount but subject to any terms, conditions or restrictions as may be applicable thereto under law or otherwise. Reference is hereby made to the Ordinance, a copy of which is on file in the principal office of the Paying Agent/Registrar, and to all the provisions of which the Holder hereof by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the tax levied for the payment of the Certificates; the properties constituting the systea; the Net Revenues pledged to the payment of the principal of and interest on the Certificates; the nature and extent and manner of enforcement of the pledge; the terms and conditions relating to the transfer of this certificate; the conditions upon which the ordinance may be amended or supplemented with or without the consent of the Holders of the Certificates; t.he rights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which the tax levy and the liens, pledges, charges and covenants made therein uy be discharged at or prior to the maturity of this Certificate, and this certificate deemed to be no longer outstanding thereunder; and for the other terms and provisions contained therein. Capitalized terms used herein have the meanings assigned in the Ordinance. This Certificate, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only upon its presentation and surrender at the principal office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent. When a transfer on the Security Register occurs, one or more fully registered Certificates of authorized denominations and of the same ag9Z"egate principal amount will be iasued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, may treat the registered owner hereof whose name appears on the security Register ( i) on the Record Date as the owner entitled to payment of interest hereon, (ii) on the date of surrender of this Certificate as the owner entitled to payment of principal hereof at its stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty (30) days thereafter, a new record date fqr such interest payment (a "Special Record Date") will be established by the Paying Agent/~egistrar, 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 0121405 -9- ~-----~-' --··~ .;.;,---c_,:-C:,.-._-.---..,s .. __ , .. __ , ..... ---·~•----.. -----····•-,,.-,---,--,,,,,,.,,~----.. -' ) scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. It is hereby certified, recited, represented and covenanted that the City is a body corporate and political subdivision duly organized and legally existing under and by virtue of the constitution and laws of the State of Texas; that the issuance of the Certificates is duly authorized by law; that all acts, conditions and things required to exist and be done precedent to and in the issuance of the Certificates to render the same lawful and valid obligations of the City have been properly done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Certificates do not exceed any constitutional or statutory limitation; and that due provision has been made for the payment of the principal of and interest on the Certificates by the levy of a tax and a pledge of the Net Revenues of the System as aforestated. In case any provision in this Certificate or any applit:4tion thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications shall not in any way be affected or impaired. thereby. The terms and provisions of this Certificate and the Ordinance shall be construed in accordance with and shall be governed by the laws of the State of Texas. IN WITNESS WHEREOF, the City Council of the City has caused this Certificate to be duly executed under the official seal of the City as of the Certificate Date. COUNTERSIGNED: City Secretary (SEAL) CITY OF LUBBOCK, TEXAS Mayor C. * Form of Registration certificate of C0111ptroller of Public Accounts to Appear on Initial certificatets) only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS ' THE STATE OF TEXAS s s s s REGISTER NO. I HEREBY CERTIFY that this certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this (SEAL) Comptroller of Public Accounts of the state of Texas •NOTE TO PRINTER: Do not print on definitive certificates 0121405 -10- o. Form of Certificate of Paying Agent/Registrar to Appear on Certificates (other than a single fully registered certificate). ) REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR ' This Certificate has been duly issued and registered under the provisions of the. within-mentioned Ordinance; the certificate or certificates of the above entitled and designated series originally delivered having been approved by the Attorney General of the state of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. For purposes of this Bond, the principal office of the Paying Agent/Registrar means its principal office in Dallas, Texas. NATIONSBANK OF TEXAS, N.A., Dallas, Texas as Paying Agent/Registrar Registration Date: By--------------Authorized Signature E. Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee:) ••••••••••••.•••••••••••.•••.••••••••••••• . . . . . . .. . . . .. . . . . . . . .. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . • • • • • • . . . • . {Social security or other identifying number: ••••.••..••..•••••••••••••••• ) the within Certificate and all rights thereunder, and berehy irrevocably constitutes and appoints attorney to transfer the within certificate on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature guaranteed: NOTICE: The signature on this assignment must correspond with the name of the registered owner as it appears on the face of the within Certificate in every particular. F. The Initial Certificatels} shall be in the form set forth in paragraph B of this Section. except that the form of a single fully registered Initial Certificate shall be modified as, follows: (i) immediately under the name of the certificate the headings "Interest Rate ____ " and "Stated Maturity __ "shall both be omitted; (ii) paragraph one shall read as follows: Registered owner: Principal Amount: Dollars The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered owner named above, or the registered assigns thereof, the Principal Amount hereinabove stated, on February 15 in each of the years and 0121405 -11- ) ) ) in principal installments in accordance with the following schedule: PRINCIPAL INSTALLMENTS (Information to be inserted from schedule in Section 2 hereof). INTEREST RATE (or so mu.ch principal thereof as shall not have been prepaid prior to maturity) and to pay interest on the unpaid Principal Amount hereof from the Certificate Date at the per annum rates of interest specified above computed on the basis of a 360-day year of twelve JO-day months; such interest being payable on February 15 and August 15 of each year, commencing August 15, 1994. Principal installments of this Certificate are payable in the year of maturity or on a prepayment date to the registered owner hereof, upon its presentation and surrender at the principal office in Dallas, Texas of NationsBank of Texas, N.A., Dallas, Texas (the "Paying Agent/Registrar"). Interest is payable to the registered owner of this Certificate whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date hereof and interest shall be paid by the Paying Agent/Registrar by checic sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/ Registrar, requested by, and at the risk and expense of, the registered owner. If the date for the payment of the principal of or interest on the certificates shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day wben banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. All payments of principal of, premium., if any, and interest on this certificate shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. SECTION 10; Definitions. That for purposes of this Ordinance and for clarity with respect to the issuance of the Certificates, and the levy of taxes and appropriation of Net Revenues therefor, the following words or terms, whenever the same appear herein without qualifying language, are defined to mean as follows: 0121~05 (a) Th~ term "Additional Certificates" shall mean combination tax and revenue certificates of obligation hereafter issued under and pursuant to the provisions of V.T.C.A,, Local Government Code, Subchapter C of Chapter 271, or similar law hereafter enacted and payable from ad valorem taxes and additionally payable from and secured by a parity lien on and pledge of the Net Revenues of the System of equal rank and dignity with the lien and pledge securing the payment of the Certificates. (b) The term "Certificates" shall mean $1,470,000 "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION, SERIES 1993" authorized by this Ordinance. -12- ' 0121,os (c) The term "certificate Fund" shall mean the special Fund created and established under the provisions of section 11 of this ordinance. (d) The term "Collection Date" shall mean, when reference is being made to the levy and collection of annual ad valorem taxes, the date annual ad valorem taxes levied each year by the City become delinquent. (e) The term "Fiscal lt'ear" shall mean the annual financial accounting period used with respect to the operations of the System now ending on September 30th of each year; provided, however, the city council may change, by ordinance duly passed, such annual financial accounting period to end on another date if such change is found and determined to be necessary for budgetary or other fiscal purposes. (f) The tenn "Gover-nment Securities" shall mean direct obligations of the United States of America, including obligations the principal of and interest on whieh are unconditionally guaranteed by the United States of America, and the United States Treasury obligations such as its State and Local Governaent Series in book-entry fora. (g) The term "Gross Revenues" shall mean all income, receipts and revenues of every nature derived or received from the operation and ownership (excluding gifts and grant moneys, federal or state) of the System, including earnings and income derived from tb.e investment or deposit of moneys in any special funds or accounts created and established for the payment and security of the Prior Lien Obligations and other obligations payable in whole or in part from and secured by a lien on and pledge of the Net Revenues. (h) The term "Net Revenues" sh.all mean the Gross Revenues of the System, with respect to any period, after deducting the System's Operating and Maintenance Expenses during such period. (i) The term "Operating and Maintenance Expenses" shall mean all reasonable and necessary expenses directly related and attributable to the operation and maintenance of the system, including, but not limited to, tbe cost of insurance, the purchase and carrying of stores, materials, and supplies, the payment of salaries, labor and other expenses reasonably and properly charged, under generally accepted accounting principles, to the operation and maintenance of the System. Depreciation charges on equipment, machinery, plants and pther 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 determinincJ "Net Revenues". (j) The term "Outstanding" when used in this Ordinance with respect to Certificates means, as of the date of determination, all Certificates theretofore issued and delivered under this ordinance, except: (1) those Certificates canceled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Certificates deemed to be duly paid by the City in accordance with the provisions of Section 24 hereof by the -13- ---~~-,--=, .. , .,,_.-,,~ ... -= ... ,-.,;. ... c,,.,,:.,r.C'C. -----,-.-,~-----~.-=:-=a~...,.,.,_-,-,•-·~~-----~ ' irrevocable deposit with the Paying Agent/Registrar, or an authorized escrov agent, of money or Government securities, or both, in the amount necessary to fully pay the principal of, premium, if any, and interest thereon to uturity or redemption, as the case may be, provided that, if such certificates are to be redeeJDed, notice of redemption thereof shall have been duly given pursuant to this Ordinance or irrevocably provided to be given to the satisfaction of the Paying Agent/Registrar or waived; and (3) those Certificates that have been mutilated, destroyed, lost, or stolen and replacement Certificates have been registered and delivered in lieu thereof as provided in Section 28 hereof. (k) The term "Prior Lien Obligations" shall mean all bonds or other similar obligations hereafter issued that are payable in Whole or in part from and secured by a lien on and pledge of the Net Revenues of the Syste11 and such lien and pledge securing the payaent thereof ls prior and superior in claim, rank and dignity to the lien and pledge of the Net Revenues securing the pa}'11lent of the certificates. (1) The ter11 "System" shall mean the City's Waterworks Syatem, being all properties, facilities, and plants currently owned, operated, and maintained by the City for the supply, treatment, and transmission of treated potable water, together with all future extensions, ~roveaents, replac-ents and additions thereto. SECTION 11: Certificate Fund. That, fer the purpose of paying the interest on and to provide a sinking fund for the payment and retireaent of the Certificates, there shall be and is hereby created a special Fund to be designated "SPECIAL 1993 CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATE OF OBLIGATION FOND•, which Fund shall be kept and maintained at the City• s depository bank, and moneys deposited in said Fund shall be used for no other purpose. Proper officers of the City are hereby authorized and directed to cause to be transferred to the Paying Agent for the certificates, from funds on deposit in the Certificate Fund, amounts sufficient to fully pay and discharge promptly each installment of interest and principal of the Certificates as the same accrues or matures or comes due by reason of redemption prior to maturity; such transfers of funds to be made in such manner as will cause immediately available funds to be deposited with the Paying Agent for the Certific4tes at the close of business on the last business day next preceding each interest and/or principal payment date for the certificates. Pending the transfer of funds to the Paying Agent/Registrar, money in the Certificate Fund may, at the option of the City, be invested in obligations identified in, and in accordance with the provisions of the "Public Funds Invest.ment Act of 1987" relating to the investment of "bond proceeds"; provided that all such investments shall be nade in such a aanner that the 11.oney required to be expended fr01D said Fund will be available at the proper time or times. All interest and income derived from deposits and investments in said Certificate Fund shall be credited to, and any losses debited to, the said Certificate Fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Certificates. 01Z1405 -14- ) ) SECTION 12: Tax Levy. That to provide for the payment of tpe "Debt Service Requirements" on the Certificates being (i) the interest on said Certificates and (ii) a sinking fund for their redemption at maturity or a sinking fund of 2% (whichever amount shall be the greater), there shall be and there is hereby levied for the current year and each succeeding year thereafter while said Certificates or any interest thereon shall remain outstanding, a sufficient tax on each one hundred dollars' valuation of taxable property in said city, adequate to pay such Debt Service Requirements, full allowance being made for delinquencies and costs of collection; said tax shall be assessed and collected each year and applied to the paYJD.ent of the Debt service Requirements, and the same shall not be diverted to any other purpose. The taxes so levied and collected shall be deposited into the certificate Fund. This governing body hereby declares its purpose and intent to provide and levy a tax legally and fully sufficient to pay the said Debt service Requirements, it having been deteniined that the existing and available taxing authority of the City for such purpose is adequate to perm.it a legally sufficient tax in consideration of all other outstanding indebtedness. · The amount of taxes to be provided annually for the payment of the principal of and interest on the Certificates herein authorized to be issued shall be deteniined and accoaplished in the following manner: (a) Prior to the date the City Council establishes the annual tax rate and passes an ordinance levying ad valorem taxes each year, the City Council shall deter111ine: (l) The amount on deposit in the Certificate Fund after (a) deducting therefrom the total amount of Debt Service Requirements to become due on Certificates prior to the Collection Date for the ad valorem taxes to be levied and (b) adding thereto the amount of Net Revenues of the System appropriated and allocated to pay such Debt Service Requirements prior to the Collection Date ~or the ad valorem taxes to be levied. (2) The amount of Net Revenues if any, appropriated and to be set aside for the payment of the Debt Service Requirements on the Certificates between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year. ( J) The amount of Debt Service Requirements to become due and payable on the Certificates between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year. ! (b) The amount of taxes to be levied annually each year to pay the Debt Service Requirements on the Certificates shall be the amount established in paragraph (J) above less the sum total of the amounts established in paragraphs (l)and (2), after taking into consideration delinquencies and costs of collecting such annual taxes. Provided, however, in regard to the payments to become due on the Bonds on August 15, 1994, sufficient current funds will be available and are hereby appropriated to make such payments; and proper officials of the City are hereby authorized and directed to transfer and deposit to the credit of the Interest and Sinking FUnd, such current funds which, together with the accrued interest received from the purchaser, will be sufficient to pay the amount of the payments due on the Bonds on August 15, 1994. 0121405 -15- -~~rn••-~•-c---~-----------•--------------.... -. - ) ) ) SECTION 13: Limited Pledge of Net Revenues, The City hereby covenants and agrees that, subject to a prior lien on and pledge of the Net Revenues of the system for the payment and security of Prior Lien Obligations, the Net Revenues of the system, with the e>eception of those in excess of the amounts required to be deposited to the Certificate Fund as hereafter provided, are hereby irrevocably pledged, equally and ratably, to the payment of the principal of and interest on the City's Combination Tax and waterworks system subordinate Lien Revenue Certificates of Obligations, Series 1991 (the flPreviously Issued Certificatesfl), the certificates (within the limitation of a total amount of $2,500 pledged to the Certificates during the time the Certificates or interest thereon remain outstanding and unpaid) and Additional Certificates, if issued, as herein provided, and the pledge of the Net Revenues of the System herein made for the payment of the Certificates shall constitute a lien on the Net Revenues of the System in accordance with the terms and provisions hereof and be valid and binding without further action by the City and without any filing or recording except for the filing of this Ordinance in the records of the City. SECTION 14: System Fund. The City hereby covenants and agrees that all Gross Revenues (excluding earnings from the investment of •oney held in any special funds or accounts created for the payment and security of Prior Lien Obligations) shall be deposited from day to day as collected into a "City of Lu.bbock, Texas, Waterworks System Operating Fund" (hereinafter called "System Fund") which Fund shall be kept and maintained at an official depository bank of the City. All moneys deposited in the System Fund shall be pledged and appropriated to the extent required for the following purposes and in the order of priority shown, to wit: .f.in.t.: To the payment of all necessary and reasonable Operating and Maintenance Expenses of the System as defined herein or required by statute to be a first charge on and claim against the Gross Revenues. second: To the payment of the amounts required to be deposited in the special Funds created and established for the payment, security and benefit of Prior Lien Obligations in accordance with the terms and provisions of the ordinances authorizing the issuance of Prior Lien Obligations; and ~: To the payment of the amounts required to be deposited in the special funds and accounts created and established for the payment of the Previously Issued Certificates, the Certificates, and Additional certificates. Any Net Revenues remaining in the System Fund after satisfying the I foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other City purpose now or hereafter permitted by law. SECTION 15: Deposits to certificate Fund. covenants and agrees to cause to be deposited in Fund from the pledged Net Revenues in the system equal to $2,500. The City hereby the Certificate Fund, an amount The City covenants and agrees that the amount of pledged Net Revenues ($2,500), together with ad valorem taxes levied, collected, and deposited in the Certificate Fund for and on behalf of the certificates, will be an amount equal to one hundred percent (100%) of the amount required to fully pay the interest and principal due and payable on the Certificates. In addition, any surplus proceeds from the sale of the Certificatces not expended for authorized purposes shall be deposited in the 0121405 -16- ) r \. Certificate Fund, and such amounts so deposited shall reduce the sums otherwise required to be deposited in said Fund from ad valorem taxes and the Net Revenues. SECTION 16: security of Funds. All moneys on deposit in the Funds for which this Ordinance makes provision (except any portion thereof as may be at any time properly invested) shall be secured in the manner and to the fullest extent required by the laws of Texas for the security of public funds, and moneys on deposit in such Funds shall be used only for the purposes permitted by this Ordinance. SECTION 17: Maintenance of System -Insurance. While the Certificates remain outstanding, the City covenants and agrees to maintain and operate the System with all possible efficiency and to maintain casualty and other insurance on the properties of the system and its operations of a kind and in such amounts customarily carried by municipal corporations in the State of Texas engaged in a similar type business; and that it will faithfully and punctually perform all duties with reference to the System required by the Constitution and laws of the State of Texas. SECTXON 18: Rates and Charges. The city hereby covenants and agrees that rates and charges for services provided by the System will be established and maintained, on the basis of all available information and experience and with due allowance for contingencies, that are reasonably expected to provide Gross Revenues to pay: (a) Operating and Maintenance Expenses of the System; (b) the interest on and principal of Prior Lien Obligations and the amounts required to be deposited into any special Funds created and established for the payment and security of the Prior Lien Obligations; (c) the amounts required to be deposited in the special Funds or Accounts created for the payment of the Previously Issued Certificates, Certificates, and Additional Certificates; (dl any other legally incurred indebtedness payable from the revenues of the system and/or secured by a lien on the System or the revenues thereof. SECTION 19: Records and Accounts -Annual Audit. The City further covenants and agrees that while any Certificates remain Outstanding, it will keep and maintain accurate and complete records and accounts pertaining to the ownership, operation and maintenance of the system. The Holders of tbe Certificates or any duly authorized ,agent or agents of such Holders shall have the right to inspect the System and all properties comprising the same. The City further agrees that following the close of each Fiscal Year, it will cause an audit of such books and accounts to be made by an independent firm of Certified PUblic Accountants. copies of each annual audit shall be furnished to the Executive Director of the Municipal Advisory Council of Texas at his office in Austin, Texas and upon written request, to the initial purchaser of the Certificates and any subsequent Holder of 101 or more in principal amount of the Certificates outstanding. SECTXON 20: Remedies in Event of Default. In addition to a~l the rights and remedies provided by the laws of the state of Texas, the City covenants and agrees particularly that in the event the City {a) defaults in the payments to be made to the Certificate Fund, or (b) defaults in the observance or performance of any other of the covenants, conditions or obligations set forth in this Ordinance, the owner or owners of any of the Certificates • 0121405 -17- ) ') ) ) f ... I shall be entitled to a writ of mandamus issued by a court of proper jurisdiction compelling and requiring the governing body of the City and other officers of the City to observe and perform any covenant, condition or obligation prescribed in this ordinance. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power, or shall be construed to be a waiver of any such default or acquiescence therein, and every such right and power may be exercised from time to time and as often as may be deemed expedient. The specific remedies herein provided shall be cumulative of all other existing remedies and the specification of such remedies shall not be deemed to be exclusive. SECTION 21: Special covenants. covenants as follows: The City hereby further (a) It has the lawful power to pledge the Net Revenues of the System supporting this issue of Certificates and has lawfully exercised said powers under the Constitution and laws of the State of Texas, including said power existing under V.T.C.A., Local Government Code, Subchapter c of Chapter 271. (b) Other than for the payment of the Previously Issued Certificates and the Certificates, the Net Revenues of the System have not in any manner been pledged to the payment of any debt or obligation of the City or of the system. SECTION 22: Issuance of Prior Lien Obligations aQd Additional certifioates. The City hereby expressly reserves the right to hereafter issue Prior Lien Obligations, without limitation as to principal amount or any other limitation or restriction. In addition, the City reserves the right to issue Additional Certificates, without limitation or any restriction or condition being applicable to their issuance under the terms of this Ordinance, payable from and secured by a lien on and pledge of the Net Revenues of the system of equal rank and dignity, and on a parity in all respects, with the lien thereon and pledge thereof securing the payment of the Certificates. SECTION 23: Subordinate to Prior Lien Obligations Covenants and Agreements. It is the intention of this governing body and accordingly hereby recognized and stipulated that the provisions, agreements and covenants contained herein bearing upon the management and operations of the system and the administering and application of revenues derived from the operation thereof, shall to the extent possible be harmoniaed with like provisions, agreements and covenants contained in ordinances authorizing the issuance of Pri(ilr Lien Obligations, and to the extent of any irreconcilable conflict between the provisions contained herein and in ordinances authorizing the issuance of Prior Lien Obligations, the provisions, agreements and covenants contained therein shall prevail to the extent of such conflict and be applicable to this Ordinance but in all respects subject to the priority of rights and benefits, if any, conferred thereby to the holders or owners of the Prior Lien Obligations. Notwithstanding the above, any change or modification affecting the application of revenues derived from the operation of the System shall not impair the obligation of contract with respect to the pledge of revenues herein made for the payment and security of the Certificates. SECTION 24: Satisfaction of Obligations of City. If the City shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the pr incipa 1 of, premium, if any, and interest on the Certificates, at tile times and in the manner stipulated in this Ordinance, then the pledge of taxes levied and 0121405 -18- ~--···-····•·: ·.·.··-""" ------:~------~---~--.••---.......,._~~----• ) ) C t : the lien on and pledge of the Net Revenues of the System under this ordinance and all covenants, agreements, and other obligations of the City to the Holders shall thereupon cease, tenainate, and be discharged and satisfied. Certificates shall be deemed to have been paid within the muning and with the effect expressed above in this Section when (il money sufficient to pay in full such Certificates or the principal amount(s) thereof at maturity or (if notice of redemption has been duly given or waived or if irrevocable arrangeaents therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Govermaent Securities shal 1 have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Gover1111ent securities have been certified by an independent accounting .firm to mature as to principal and interest in such amounts and at such tiMes as will insure the availability, without reinvestment, of sufficient money, together with any aoneys deposited therewith, if any, to pay when due the principal of and interest on such certificates, or the principal amount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of redU11Ption has been duly given or waived or if irrevocable arrangeaents therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or Govern•ent securities will be made under this Section and no use made of any such deposit which would cause the Certificates to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/ Registrar and all inc011e fro• Government Securities held in trust by the Paying Agent/Registrar, or an authorized escrow agent, pursuant to this section which is not required for the payment of the Certificates, or any principal aaount(s) thereof, or interest thereon with respect to which such lllOneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any aoney held by the Paying Agent/Registrar for the pa~ent of the principal of and interest on the Certificates and remaining unclaimed for a period of four (4) years after the maturity, or applicable redemption date, of the certificates for which such aoneys were deposited and are held in trust to pay, shall upon the request of the City be remitted to the City against a written receipt therefor. Notwithstanding the above and foregoing, any re•ittance of funds from the Paying Agent/Registrar to the City shall be subject to any applicable unclaimed property laws of the state of Texas. SECTION 25: Ordinance a Contract -Amendments. This ordinance shall constitute a contract with the Holders from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate re11ains outstanding except as permitted in this Section. The City, may, without the consent of or notice to any Holders of the certificates, froa time to time and at any tiae, amend this Ordinance in any manner not detrimental to the interests of the Holders of the Certificates, including the curing of any a:m.biCJUity, inconsistency, or fooal defect or 011ission herein. In addition, the City •ay, with the written consent of Holders of the certificates holding a majority in aggregate principal amount of the Certificates then outstanding affected thereby, amend, add to, or rescind any of the provisions of this ordinance; provided that, without the consent of all Holders of Outstanding Certificates, no such amendment, addition, or rescission shall (1) extend the time or tines of payment of the principal of, premiUJD., if any, and -19- -----~·--·-----·---- 0 u 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 ten,.s ot payment of the princ:ipal of, premium, if any, or interest on the Certificates, (2) give any preference to any Certificate over any other certificate, or (3) reduce the aggregate principal amount of Certificates required to be held by Holders for consent to any such amendment, addition, or rescission. SECTION 26: Notices to Holders -Waivers. Wherever this Ordinance provides for notice to Holders of any event, such notice shall be s ufficiently given (unless otherwise herein expressly provided) if in writing and sent by United States Mail, firs t class postage prepaid, to the address of each Holder appearing in the Security Register at the close of business on the business day next preceding the mailing of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so sailed, shall affect the sufficiency of such notice with respect to all other certificates. Where this ordi nance provides for notice in any manner, such notice may be waived in writing by the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holder& shall be filed with the Paying Agent/Registrar, but such f iling shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 27; cancellation. certificates surrendered for pa)'Jllent, redemption, transfer, or exchange, if surrendered to the Paying Agent/Registrar, shall be promptly canceled by it and, if surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already canceled, shall be proaptly canceled by the Paying Agent/Registrar. The City may at any ti.lie deliver to the Paying Agent/Registrar for cancellation any Certificates previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Certificates so delivered shall be proaptly ca.nceled by the Paying Agent/Registrar. All canceled Certificates held by the Paying Agent/Registrar shall be returned to the City. SECTION 28: Mutilated, Destroyed. Lost and Stolen Certificates. In case a.ny certificate shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar may execute and deliver a replacement Certificate of like form and tenor, and in the same denomination and bearing a number not conte•poraneously outstanding, in exchange and sUbstitution for such mutilated Certificate, or in lieu of and in substitution for suoh destroyed, lost or stolen certificate, only upon the approval of the City and after (i) the filing by the Holder thereof with the Paying Agent/Registrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such certificate, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar ot indemnification in an amount satisfactory to hold the City and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Certificate shall be borne by the Holder of the Certificate mutilated, or destroyed, lost or stolen. Every replacelllent Certificate issued pursuant to this section shall be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Certificates; notwithstanding the enforceability of payment by anyone of the destroyed, lost or stolen certificates. 0121405 -20- -. 0 l , The prov1.s1ons of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement and payment of mutilated, destroyed, lost, or stolen Certificates. SECTION 29: covenants to Maintain Tax-Exempt status. A. Definitions. When used in this section, the following terms have the following meanings: "Closing Date" means the date on which the certificates are first authenticated and delivered to the initial purchasers against payment therefor . •code~ means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. "Computation Date" has the JDeaning set forth in Section 1.148-l(b) of the Regulations. •Gross Proceeds• 1118ans any proceeds as defined in Section 1.148-l(b) of the Regulations, and any replacement proceeds as defined in Section 1. 148-1 (c) of the Regulations, of the certificates. •InvestmentH has the meaning set forth in Section 1.148-l(b) of the Regulations. "Nonpurpose Investlllent• means any investment property, as defined in section l48(b) of the Code, in which Gross Proceeds of the Certificates are invested and which is not acquired to carry out the governnaental purposes of the certificates. • Rebate Amount• has the meaning set forth in Section 1.148-l(b) of the Regulations. "Regulations• means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the certificates. llrlY reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. ,.Yield• of (1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (2) the certificates has the •eaning set forth in section 1.148-4 of the Regulations. B. Not to cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner vhicb if •ade or omitted, respectively, would cause the interest on any certificate to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposea. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that 0121405 -21- --~-----· ..... :-:-~ --.,,...... ) ) j D ) l failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Certificate, the City shall comply with each of the specific covenants in this Section. c. No Private Use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulin9s thereunder, the City shall at all times prior to the last Stated Maturity of Certificates: (1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Certificates, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the united states or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (2) not directly or indirectly impose or accept any charge or other pa}')llent by any person or entity who is treated as using Gross Proceeds of the Certificates or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. o. No Private Loan. Except to the extent per111itted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Certificates to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. E. Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the . final stated Maturity of the Certificates directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the certificates. F. Not Federally Guaranteed. Except to the extent permitted by section 149 (b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any 4ction which would cause the Certificates to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. 0121405 -22- • • --:-~-, .. ,-,:-,.:;., -.,_>"7,·C::,:. '7." •. ----•-•~•---••"'-•• ) D f ' L ..• G. Infontation Report. The City shall timely file the information required by section 149 (e) of the Code with the secretary of the Treasury on Form 8038-G or such other form and in such place as the secretary may prescribe. H. Rebate of Arbitrage Profits. otherwise provided in section 148(f) ReCNlations and rulings thereunder: Except to the extent of the Code and the 012140S (1) The city shall account for all Gross Proceeds (including all r eceipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last outstanding Certificate is discharged. However, to the extent permitted by law, the City may co111J11.ingle Gross Proceeds of the certificates with other money of the City, provided that the City separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the certificates until six years after the final Computation Date. (3) As additional consideration for the purchase of the Certificates by the Purcbaaers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal incoae tax purposes, the City shall pay to the United States out of the Certificate· Fund or its general fund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General ot the State of Texas, the amount that when added to the future value of previous rebate payments made for the Cert:ific:ates ~als (i) in the case of a Final Computation Date as defined in Section l.148-3{e)(2} of the Regulations, one hundred percent (lOOt) of the Rebate Alllount on such date; and (ii} in the case of any other CO'llputation Date, ninety percent (90\) of the Rebate Amount on such date. In all eases, the rebate payments shall be aade at the times, in the install~ents, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied by Fora 8038-'l' or such other foras and information as is or may be required by Section 148(f) of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable U11ount of tiae thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section l.14B-3(h) of the Regulations. -23- ---•-.,-•---~--- 0 ... .:1 0 I. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the city shall not, at any time prior to the earlier of the Stated Maturity or final payment of the certificates, enter into any transaction that reduces the amount required to be paid to the United States pursuant to subsection H of this section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Certificates not been relevant to either party. J. Elections. The City hereby directs and authorizes -the Mayor, City secretary, City Manager, and Assistant City Manager for Financial Services, either or any combination of them, to make elections penitted or required pursuant to the provisions of the Code or the Regulations, as they deem necessary or appropriate in connection with the certificates, in the Certificate as to Tax Bxeaption or similar or other appropriate certificate, fona or document. SECTION Jo: Sale of the certificates. The sale of the Certificates to Southwest securities Incorporated and Kidder Peabody, Inc. (herein referred. to as the •Purchasers•) at the price of par and accrued interest to the date of delivery p1us a pramiWll of $-o-is hereby approved and continied. The Council finds tbat the bid of the purchaser(&) was the highest and best bid received. Delivery of the Certificates to the Purchasers shall occur as soon as possible upon payment being made therefor in accordance with the terms of sale. SECTION 31: Pr009ec;ts of sale. The proceeds of sale of the certificates, excluding the accrued interest received from the Purchasers, shall be deposited in a construction fund aaintained at the City's depository bank. Pending expenditure for authorized projects and purposes, •ucb proceeds of sale may be invested in authorized investments pursuant to the Public Funds Investaent Act of 1987 and any investaent earnings realized aay be expended for such authorized projects and purposes or deposited in the Certificate Fund as shall be determined by the City Council. All surplus proceeds of sale of the Certificates, including investment earnings, remaining after c01Dpletion of all authorized projects or purposes shall be deposited to the credit of the certificate Fund. SECTION 32: Control and Custody of Certificates. The Mayor of the City shall be and is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the state of Texas, including the printing of the Certificates, and shall take and have charge and control of the Certificates pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers. Furthermore, the Mayor, City secretary, City Manager, and Assistant City Manager for Financial Services, any one or more of said officials, are hereby authorized and directed to furnish and execute such docwaents and certifications relating to the City and the issuance of the Certificates, including a certification as to facts, estimates, circuastanees and reasonable expectations pertaining to the use and expenditure and investment of the proceeds of the Certificates as may be necessary for the approval of the Attorney General, registration by the Comptroller of Public Accounts and delivery of the Certificates to the purchasers thereof and, together with the City's financial advisor, bond counsel and the Paying Agent/ Registrar, make the necessary arrange111ents for the delivery of the Initial Certificate to the purchasers. SECTION 33: Official Statement. The Official Statement prepared in the initial offering and sale of the certificates by the City, together with all addendas, supplements and amendments thereto issued on behalf of the City, is hereby approved as to 0121405 -24- .. ':• 0 0 0 r L ~ form and content, and the City Council hereby finds that the infor111ation and data contained in said Official Statement pertaining to the City and its financial affairs is true and correct in all material respects and no material facts have been omitted therefro111 which are necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The use of such Official Statement in the reoffering of the Certificates by the Purchasers is hereby approved and authorized. SECTION 34: Printed Opinion. The Purchaser's obligation to accept delivery of the certificates is subject to being furnished a final opinion of Fulbright & Jaworski L. L. P. , Attorneys, approving such certificates as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for the Certificates. Printing of a true and correct reproduction of said opinion on the reverse side of each of the definitive certificates is hereby approved and authorized. SECTION 35: Ct[SIP Nymbers. That CUSIP numbers may be printed or typed on the definitive Certificates. It is expressly provided, however, that the presence or absence of ctJSIP numbers on the definitive Certificates shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving said Certificates as to legality are to be held responsible for CUSIP numbers incorrectly printed or typed on the definitive Certificates. SECTION 36: Benefits of ordinance. Nothing in this Ordinance, expressed or iD11plied, is intended or shall be construed to confer upon any person other than the city, the Paying Agent/Registra.r and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this ordinance or any provision hereof, this Ordinance and all its provisions being intended to be and being for tbe sole and exclusive benefit of the City, the Paying Agent/Registrar and the Holders. SECTION 37: Inconsistent Provisions. All ordinances, orders or resolutions, or parts thereof, vbieh are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to the extent of such conflict and the provisions of this ordinance shall be and remain controlling as to the matters contained herein. SECTION 38: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the unite~ States of America. SECTION 39: severability. If any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other circumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 40: Effect of Headings. The section headings herein are for convenience only and shall not affect the construction hereof. SECTION 41: Construction of Terms. If appropriate in the context of this ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to include the singular, and words of the masculine, fe111inine or neuter gender shall be considered to include the other genders. SECTION 42: Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this ordinance, was given, all as 012140S -25- 0 0 ) .., 0 required by Article 6252-17, Vernon's Texas Civil Statutes, as amended. SECTION 4l: Effective Date. This ordinance shall take effect and be in force iuediately from and after its passage on second and final reading, and IT IS SO ORDAINED, PASSED AND ADOPTED ON FIRST READING, this 14th day of October, 1993. PASSED ANO ADOPTED ON SECOND AND FINAL READING, this 15th day of ootober, 1993. ATTEST: (City Seal) 0121405 -26- _____ ._,... __ ...,....,,.,....,,,.~ .. -..,.,,.,.,,.,.-..,,.,.---~. -..;.:_.•-•· _______ . .....,..,,,..-=~-~--....-~------- No Text ) I · , ,1 '° l 111.·· {( • 'J, l '. '·( ( 1· '" \ ·' I ,' '. l ' • r V .r • .' ' ( I ), \ i ' ·, \ I I ) ORDINANCE NO. 9660 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS, SERIES l99J"; specifying the terms and features of said bonds; levying a continuing direct annual ad valorem tax for the payment of said bonds; and resolving other matters incident and related to the issuance, sale, payment and delivery of said bonds, including the approval of a Paying Agent/Registrar Agreement and the approval and distribution of an Official Statement pertaining thereto; and providing an effective date. WHEREAS, the City Council of the City of Lubbock, Texas, hereby finds and determines that $19,215,000 in principal amount of general obligation bonds approved and authorized to be issued at elections held on November 21, 1981, October 17, 1987, and May 1, 1993 (as shown below}, should be issued and sold at this time; a swnmary of the general obligation bonds authorized at elections previously held, the principal amount authorized, a~ounts heretofore issued and being issued pursuant to this ordinance and amounts remaining to be issued subsequent hereto being as follows: Principal Amounts Oare Amount Heretofore Amounts UniSsued ~ Auttlorized ~utho!Yed ~!.!~ Being 1~!,!ed ~ Wateiwori<s System 11-21-81 5,226,000 5,000,000 226,000 .(). WatefWOl'ks System 10-17-$7 2,810,000 200,000 .Q. 2,610,000 Waterworks Syscem 5-1-93 1,415,000 -0-1,415,000 -0- Sewer System 5-21-77 3,303,000 2,175,000 -0-1,128,000 Sewer System 5-1-93 1,835,000 -0-1,835,000 -0- Street Improvements 1~17-87 13,275.000 9,227,000 4,048,000 -0- Street Improvements 5-1-93 10,170,000 -0-5,156,000 5,014,000 Aifport System 5-1-93 2.550,000 -0--0-2,550,000 Libl'aty 5-1-93 2,780,000 -0-100,000 2.680,000 ParkS 5-t-93 5,385,000 -0-2.350,000 3,035,000 Coliseum 5-1·93 3,585,000 -0-3,585.000 -0- Fire Department" 5-1-93 470,000 -0--0-470,000 Animal Control 5-1-93 500,000 .....__:2; SQQ,000 ___=2: $53,304,000 $16.602000 $19,215,000 $17.487,000 *Enle.rgency traffic control system improvements. ANO WHEREAS, the City Council hereby reserves and retains the right to issue the balance of unissued bonds approved at s aid elections in one or more installments when, in the judgment of the Council, funds are needed to accomplish the purposes for which such bonds were voted; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION l: Authorization -Designation-Principal All\ount- Purpose. General obligation bonds of the City shall be and are hereby authorized to be issued in the aggregate principal amount of $19,215,000, to be designated and bear the title "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGJ>.TION BONDS, SERIES 1993" (hereinafter referred to as the "Bonds"), for the purpose of making-permaner.t public improve111ents, to wit: constructing improvements and extensions to the City• s waterworks system, including acquis ition of water supply: waterworks improvements and extensions; improvements and extensions to the City's sanitary sewer syste111; constructing street improvements in and tor said City, including signalization, lighting and acquisition of rights- of-way; construction of street improvements, including signalization, lighting and rights-of-way; improving and equipping library facilities in and for said City: park improvements, including neighborhood parks, athletic fields and swiIOJ11ing pools; improvements to coliseum, including heating, ventilation, and air conditioning, roofing, stadiWll sealing, and lighting; construction of and improvements to animal control facilities, all in ___________ ..,..,, __ ~"=-· ---- n 1 ') ) accordance ~ith authority conferred at the aforesaid elections and under and in strict conformi ty with the Constitution and laws of the State of Texas, including Article VIII Section 1 of the City Charter of the City of Lubbock, Texas. SECTION 2: Fully Registered Obligations -Bond Date - Authorized Denominations-Stated Maturities-Interest Rates. The Bonds shall be issued as fully registered obligations only, shall be dated October l, 1993 (the "Bond Date"), shall be in denominations of $5,000 or any integral multiple (within a stated Maturity) thereof, and shall become due and payable on February 15 in each of the years and in principal amounts (the "Stated Maturities") in accordance with the following schedule: Year of Stated Maturity l.995 1996 1997 1998 l.999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201.2 2013 2014 Principal Amount $960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 965,000 965,000 965,000 Interest Rate 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6 .0M 5 .80% 4.50% 4.50% 4.60% 4.70% 4.80% 4.90% 4.90% 4.00\ 4.00.\ 4.00% 4.00% The Bonds shall bear interest on the unpaid principal amounts from the Bond Date at the per annum rates shown above (computed on the basis of a 360-day year of twelve JO-day months); such interest shall be payable on February 15 and August 15 in each year, comaencing August 15, 1994. SECTION 3: Terms of payment-Paying Agent/Registrar . The principal of, premium, if any, and the interest on the Bonds, due and payable by reason of maturity, redemption or otherwise, shall be payable only to the registered owners or holders of the Bonds (hereinafter called the "Holders") appearing on the registration and transfer books (the "Security Register") maintained by the Paying Agent/Registrar and the pa}'lDent thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without e.xchange or collection charges to the Holders. The selection and appointment of NationsBank of Texas, N.A., Dallas, Texas to serve as Paying Agent/Registrar for the Bonds is hereby approved and confirmed and the City agrees and covenants to be kept and maintained at the principal office of the Paying Agent/Registrar books and records for the registration, payment and transfer of the Bonds (the "Security Register"), all as provided herein, in accordance with the terms and provisions of a ••Paying Agent/Registrar Agreement" substantially in the form attached hereto as Exhibit A and such reasonable rules and regulations as the Paying Agent/Registrar and City may prescribe; and the Mayor and City Secretary are authorized to execute and deliver such Agreement in connection with the delivery of the Bonds. The City covenants to maintain and provide a Paying OIZ1399 -2- -----··••··-........... -...... -•·-~--......-~-·--.. - ) Agent/Registrar at all times until the Bonds are paid and discharged, and any successor Paying Agent/Registrar shall be a commercial bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Bonds, the city agrees to promptly cause a written notice thereof to be sent to each Holder by United States Mail, first class postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Principal of and premiWII, if any, on the Bonds shall be payable at the stated Maturities or the redemption thereof, only upon presentation and surrender of the Bonds to the Paying Agent/Registrar at its principal office. Interest on the Bonds shall be paid to the Holders whose name appears in the Security Register at the close of business on the Record Date (the last business day of the month next preceding each interest payment date) and shall be paid by the Paying Agent/Registrar (i) by check sent United States Mail, first class postage prepaid, to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder. If the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. In the event of a nonpayment of interest on a scheduled payment date, and for thirty {30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Hail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. SECTION 4: Redemetion. (a) optional Redemption. The Bonds having Stated Maturities on and after February 15, 2004, shall be subject to redemption prior to maturity, at the option of the city, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2003 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. (b) Exercise of Redemption Option. At least forty-five (45) days prior to a redemption date for the Bonds (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the City shall notify the Paying Agent/Registrar of the decision to redeem Bonds, the principal a.mount of each Stated Maturity to be redeemed, and the date of redemption therefor. The decision of the city to exercise the right to redeem Bonds shall be entered in the minutes of the governing body of the City. (c) Selection of Bonds tor Redemption. If less than all outstanding Bonds of the same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Bonds as representing the nullber of Bonds outstanding which is obtained by dividing the principal amount of such Bonds by $5,000 012119'1 -3- -·--·~-----~-·-···"•~~-.,-,,,..--~-----·-· -·-.. ·----- and shall select the Bonds, or principal amount thereof, to be redeemed within such Stated Maturity by lot. (d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Bonds, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the City and at the City's expense, to each Holder of a Bond to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presUllled to have been duly given irrespective of whether received by the Holder. All notices of redemption shall ( i) specify the date of redemption for the Bonds, (ii) identify the Bonds to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, (iv) state that the Bonds, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue fr0111. and after the redemption date, and (v) specify that payment of the redemption price for the Bonds, or the principal amount thereof to be redeemed, shall be made at the principal office of the Paying Agent/Registrar only upon presentation and surrender thereof by the Holder. If a Bond is subject by its terms to prior redemption and has been called for redemption and notice of redemption thereof ha s been duly given as hereinabove provided, such Bond (or the principal amount thereof to be redeemed) shall become due and payable and interest thereon shall cease to accrue from and after the redemption date therefor; provided moneys sufficient for the payment of such Bond (or of the principal amount thereof to be redeemed) at the then applicable redemption price are held for the purpose of such payiaent by the Paying Agent/Registrar. SECTION 5: Registration -TransferExchange of Bonds- Predece§sor Bonds. A Security Register relating to the registration, paya,.ent, and transfer or exchange of the B<>nds shall at all times be kept and maintained by the City at the principal office of the Paying Agent/Registrar, as provided herein and in accordance with the provisions of an agreement with the Paying Agent/Registrar and such rules and regulations as the Paying Agent/Registrar and the City may prescribe. The Paying Agent/Registrar shall obtain, record, and maintain in the Security Register the name and address of each and every owner of the Bonds issued under and pursuant to the provisions of this Ordinance, or if appropriate, the nominee thereof. Any Bond may be transferred or exchanged for Bonds of other authorized denominations by the Holder, in person or by his duly authorized agent, upon surrender of such Bond to the Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Regis trar. Upon surrender of any Bond for transfer at the principal office of the Paying Agent/Registrar, the Paying Agent/Registrar shall register and deliver, in the name of the designated transferee or transferees, one or more new Bonds of authorized denominations and having the same stated Maturity and of a like aggregate principal amount as the Bond or Bonds surrendered for transfer. At the option of the Holder, Bonds may be exchanged for other Bonds of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Bonds surrendered for exchange, upon surrender of the Bonds to be exchanged at the principal office of the Paying Agent/Registrar. Whenever any Bonds are surrendered 0121399 -4- --------·----....... ,---.--~,~ .. ---------------·-·~· .. ,·--··-·-"·" ·-~ for exchange, the Paying Agent/Registrar shall register and deliver new Bonds to the Holder requesting the exchange. All Bonds issued in any transfer or exchange of Bonds shall be delivered to the Holders at the principal office of the Paying Agent/Registrar or sent by United States Mail, first class, postage prepaid to the Holders, and, upon the registration and delivery thereof, the same shall be the valid obligations of the city, evidencing the same obligation to pay, and entitled to the same benefits under this Ordinance, as the Bonds surrendered in such transfer or exchange. All transfers or exchanges of Bonds pursuant to this section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. Bonds canceled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be "Predecessor Bonds,'' evidencing a1l or a portion, as the case may be, of the same obligation to pay evidenced by the new Bond or Bonds registered and delivered in the exchange or transfer therefor. Additionally, the term "Predecessor Bonds" shall include any mutilated, lost, destroyed, or stolen Bond for which a replacement Bond has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 11 hereof and such new replacement Bond shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Bond. Neither the City nor the Paying Agent/Registrar shall be required to issue or transfer to an assignee of a Holder any Bond called for redemption, in whole or in part, within 45 days of the date fixed for the redemption of such Bond; provided, however, such limitation on transferability shall not be applicable to an e.xchanqe by the Holder of the unredeemed balance of a Bond called for redemption in part. SECTION 6: .Qook-Entry Only Transfers and Transactions. Notwithstanding the provisions contained in Sections 3 and 5 hereof relating to the payment, and transfer/exchange of the Bonds, the City here by approves and authorizes the use of "Book-Entry only" securities clearance, settlement and transfer system provided by The Depository Trust company (OTC), a limited purpose trust company organized under the laws of the State of New York, in accordance with the requir ements and procedures identified in the Letter of Representation, by and between the City, the Paying Agent/Registrar and OTC (the •oepository Agreement") relating to the Bonds. Pursuant to the Depository Agreement and the rules of DTC, the Bonds shall be deposited with OTC who shall hold said Bonds for its participants (the "OTC Participants"). While the Bonds are held by DTC under the Depository Agreement, the Holder of the Bonds on the Security Register for all purposes, including payment and notices, s hall be cede & co., as nominee of DTC, notwithstanding the ownership of each actual purchaser or owner of each Bond (the "Beneficial Owners") being recorded in the records of OTC and OTC Participants. In the event DTC determines to discontinue serving as securities depository for the Bonds or otherwise ceases to provide book-entry clearance and settlement of securities transactions in general or the City determines that OTC is incapable of properly discharging its duties as securities depository for the Bonds, the City covenants and agrees with the Holders of the Bonds to cause Bonds to be printed in definitive form and provide for the Bonds to be issued and delivered to OTC Participants and Beneficial Owners, as the case may be. Thereafter, the Bonds in definitive D121399 -5- --~·--··········---·-···•-·~--.... -·-· .. _ .. _, ____ _ () 0 0 form shall be assigned, transferred and exchanged on the security Register maintained by the Paying Agent/Regis trar and paYll\ent of such Bonds shall be made in accordance with the provisions of Sections J and 5 hereof. SECTION 7: Execution -Registration. The Bonds shall be executed on behalf of the City by the Mayor under its seal reproduced or i mpressed thereon and countersigned by the City Secretary. The signature of said officers on the Bonds may be manual or facsimile. Bonds bearing the 111anual or facsimile signatures of individuals who are or were the proper officers of the City on the Bond Date shall be deemed to be duly executed on behalf of the City, notwithstanding that such individuals or either of them shall cease to hold such offices at the time of delivery of the Bonds to the initial purchaser(s) and with respect to Bonds de livered in subsequent exchanges and transfers, all as authorized and provided in the Bond Procedures Act of 1981, as ar11ended. No Bond shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Bond either a certificate of registration substantially in the form provided in section 9C, manually executed by the Comptroller of Public Accou.nts of the State of Texas, or his duly authorized agent, or a certificate of registration substantially in the form provided in Section 9D, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar, and either such certificate duly signed upon any Bond shall be conclusive evidence, and the only evidence, that such Bond has been duly certified, registered and delivered, SECTION 8: Initial Bond<s). The Bonds herein authorized shall be initially issued either (i) as a single fully registered bond in the total principal amount of $19,215,000 with principal ins tallments to become due and payable as provided in Section 2 hereof and numbered T-1, or (ii) as twenty (20) fully r egistered bonds, being one bond for each year of maturi ty in the applicable principal amount and denomination and to be numbered consecutively from T-1 and upward (hereinafter called the "Initial Bond(s)") and, in either case, the Initial Bond(s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Bond(s) shall be the Bonds submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any tiroe after the delivery of the Initial Bond(s), the Paying Agent/Registrar, pursuant to written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial Bond(s) delivered hereunder and exchange therefor definitive Bonds of authorized denominations, Stated Maturities, principal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser(s), or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. SECTION 9 : Fonns. A. Forms Generally. The Bonds, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Registration certificate ot Paying Agent/Registrar, and the form ot Assignment to be printed on each of the Bonds, shall be substantially in the forms set forth in this section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Colllll\ittee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including any reproduction of an opinion of counsel) 01l1399 -6- .... _,.,_.,_., _____ , .......... , ....... ,., ... ---~------·~-•-.---•·-· ··------ ) ' thereon as may, consistently herewith, be established by the City or determined by the officers executing such Bonds as evidenced by their execution. Any portion of the text of any Bonds may be set forth on the reverse thereof , with an appropriate reference thereto on the face of the Bond. 'the definitive Bon~s sha ll be printed, lithographed, or engraved or produced in any other similar manner, all as determined by the officers executing such Bonds as evidenced by their execution, but the Initial Bond(s) submitted to the Attorney General of Texas may be typewritten or photocopied or otherwise reproduced. The City may provide (i) for issuance of one fully registered Bond for each Stated Maturity in the aggregate principal amount of each Stated Maturity and (ii) for registration of such Bonds in the name of a securities depository, or the nominee thereof. The Letter of Representations by and among the city, the Paying Agent/Registrar, and the initial securities depository (Depository Trust Company) a form of which is attached hereto as Exhibit B, is approved and may be executed by the Mayor and City Secretary on behalf of the City. The execution of a Letter of Representations may occur either before or after delivery of the Bonds to the initial purchasers but shall not affect the City's obligation to pay the registered owners the principal of and interest on the Bonds as the same become due. While any Bond is registered in the name of a securities depository or its nominee, references herein and in the Bonds to the holder or owner of such Bond shall mean the securi ties depository or its nominee and shall not mean any other person. B. Form of Definitive Bond. REGISTERED REGISTERED NO.___ $ ____ _ UNITED STATES OF AMERICA STATE OF TEXAS CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS, SERIES 1993 Bond Date: Interest Rate: Stated Maturity: CUSIP NO: October 1, 1993 Registered owner: Principal Amount: DOLLARS The City of Lubbock (hereinafter referred to as the "City"), a body corporate and political subdivision in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered owner named above, or the registered assigns thereof, on the Stated Maturity date specified above the Principal Amount hereinabove stated (or so much thereof as shall not have been paid upon prior redemption) and to pay interest on the unpaid principal amount hereof from the Bond Date at the per annum rate of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 15 and August 15 in each year, commencing August 15, 1994. Principal of this Bond is payable at its stated Maturity or redemption to the registered owner hereof, upon presentation and surrender, at the principal office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor. Interest is payable to the registered owner of this Bond (or one or more Predecessor Bonds, as defined in the Ordinance hereinafter referenced) whose name appears on the "Security Register" 0121399 -7- #~·--·-.... -_, .. ·----------.-.-~------_,........--·-.# - maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date, and i nterest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. If the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. All payments of principal of, premium, if any, and interest on this Bond s hall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Bond is one of the series specified in its title issued in the aggregate principal amount of $19,215,000 (herein referred to as the "Bonds") for the purpose of making permanent public improvements, to wit: constructing improvements and extensions to the City's waterworks system, including acquisition of water supply; waterworks improvements and extensions; improvements and extensions to the City's sanitary sewer system; constructing street improvements in and for said City, including signalization, lighting and acquisition of rights-of-way; construction of street improvements, including signalization, lighting and rights-of-way; improving and equipping library facilities in and for said City; park improvements, including neighborhood parks, athletic fields and swilllJlling pools; improvements to coliseum, including heating, ventilation, and air conditioning, roofing, stadium sea1ing, and lighting; construction of and improvements to animal control facilities, under and in str ict conformity with the constitution and laws of the State of Texas and pursuant to an ordinance adopted by the City Council of the City (herein referred to as the "Ordinance"). The Bonds maturing on and after February 15, 2004, may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in pri ncipal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2003, or on any date thereafter, at the redemption price of par, together with accrued interest to the date of redemption and upon 30 days prior written notice being sent by United States Mail, first class postage prepaid, to the registered owners of the Bonds to be redeemed, and subject to the terms and provisions relating thereto contained in the Ordinance. If this Bond (or any portion of the principal swu hereof) shall have been duly called for redemption and notice of such redemption duly given, then upon such redemption date this Bond (or the portion of the principal sum hereof to be redeemed) s hall become due and payable, and interest thereon shall cease to accrue from and after the redemption date therefor, provided moneys for the paY111ent of the rede:mption price and the interest on the principal amount to be r edeemed to the date of redemption are held for the purpose of such paY111ent by the Paying Agent/Registrar. In the event of a partial redemption of the principal amount of this Bond, paY111ent of the redemption price of s uch principal amount shall be made to the registered owner only upon presentation and surrender of this Bond to the Paying Agent/Registrar at its principal office and there shall be issued, without charge therefor to the registered owner hereof, a new Bond 0121399 -s- .J>~ -~--• - or Bonds of like maturity and interest rate in any authorized denominations provided by the ordinance for the then unredeemed balance of the principal sum hereof. If this Bond i s selected for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer this Bond to an assignee of the registered owner within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the registered owner of the unredeemed balance hereof in the event of its redemption in part. The Bonds are payable from the proceeds of an ad valorem tax levied, within the limitations pres cribed by law, upon all taxable property in the City. Reference is hereby ma~e to the Ordinance, a copy of which is on file in the principal office of the Paying Agent/Registrar, and to all of the provisions of which the owner or holder of this Bond by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the tax l evied for the payment of the Bonds; the terms and conditions relating to the transfer or exchange of this Bond; the conditions upon which the Ordinance may be amended or supplemented with or without the consent of the Holders; the rights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which this Bond may be discharged at or prior to its maturity or redemption, and deemed to be no longer outstanding thereunder; and for other terms and provisions contained therein. capitalized terms used herein have the meanings assigned in the Ordinance. This Bond, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only uppn its presentation and surrender at the principal office of the Paying Agent/Registrar, with the Assignlllent hereon duly endorsed by, or accompanied by a written instrwuent of transfer in for111 satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent. When a transfer on the Security Register occurs, one or more new fully registered Bonds of the same Stated Maturity, of authorized denominations, bearing the same rate of interest, and of the same aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, shall treat the registered owner whose name appears on the security Register (i) on the Record Date as the owner entitled to payment of interest hereon, (ii) on the date of surrender of this Bond as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be s ent at least five (5) business days prior to the Special Record Date by United states Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the l ast business d.ay next preceding the date of :mailing of such notice. It is hereby certified, recited, represented and declared that the City is a body corporate and political subdivision duly organized and legally existing under and by virtue of the constitution and laws of the State of Texas; that tbe issuance of the Bands is duly authorized by law; that all acts, conditions and things required to exist and be done precedent to and in the 0121399 -9- . ,--·~- ------· ·---·--·--...--....... ------ issuance of the Bonds to render the same lawful and valid obligations of the City have been properly done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the ordinance; that the Bonds do not exceed any constitutional or statutory limitation; and that due provision has bee n made for the payment of the principal of and interest on the Bonds by the levy of a tax as aforestated. In case any provision in this Bond shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The terms and provisions of this Bond and the Ordinance shall be construed in accordance with and shall be governed by the laws of the State of Texas. IN WITNESS WHEREOF, the City Council of the City has caused this Bond to be duly executed under the official seal of the City as of the Bond Date. CITY OF LUBBOCK, TEXAS COUNTERSIGNED: Mayor City Secretary (SEAL) c. •Fopp of Registration Certificate of Comptroller of Public Accounts to appear on Initial Bondfs) only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS REGISTER NO. THE STATE OF TEXAS I HEREBY CERTIFY that this Bond has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Colllptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this _______ _ comptroller of Public Accounts of the State of Texas (SEAL) *NOTE TO PRIN'l'ER: Do Not Print on Definitive Bonds D. Form of certificate of Paying Agent/Registrar to appear on Bonds Cother than a s ingle ful ly registered Initial Bond) • REGISTRATION CERTIFICATE OF PAVING AGENT/REGISTRAR This Bond has been duly issued and re9istered under the provisions of the within-mentioned Ordinance; the bond or bonds of the above entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. 01Z1J99 -10- ----:----,-.,...,..,,,,...-,-.,-......,,,.....,....-,--------·-------·--·· . For purposes of this Bond, the principal office of the Paying Agent/Registrar means its principal office in Dallas, Texas. Registration Date: NATIONSBANK OF TEXAS, N.A. Dallas, Texas as Paying Agent/Regis trar By Authorized Signature E. Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee: ) .•....••.•..•...••.•. • • • • • • • • • • • • • • • • • • • • • ~ ••••••••••••••••••••• It •••••••••••••••••••• . . . . . . . . . . .. . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . (Social security or other identifying number: •..••..••.•.. ••.•...•..•••... ) the within Bond and all r ights thereunder, and hereby irrevocably constitutes and appoints ....•....•• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature guaranteed: NOTICE: The signature on this assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular. F. The Initial Bond(s) shall be in the fonn set fo~th in paragraph B of this Section. except that the form of the single fully regi1tered Initial Bond shall be modified as follows; (i} immediately under the name of the bond the headings "Interest Rate----" and "Stated Maturity ____ ,. shall both be completed "as shown below"; (ii) Paragraph one shall read as follows: Registered Owner: Principal Alllount: Dollars The city of Lubbock (hereinafter referred to as the "Cityn), a body corporate and municipal corporation in the County of Lubbock, state of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered OWner named above, or the registered assigns thereof, the Principal Amount hereinabove stated on February 15 in each of the years and in principal installments in accordance with the following schedule: 01213W YEAR OF MATURITY PRINCIPAL INSTALLMENTS (Information to be inserted from schedule in Section 2 hereof). -11- INTEREST RATE (or so much principal thereof as shall not have been prepaid prior to maturity} and to pay interest on the unpaid Principal Amount hereof from the Bond Date at the per annum rates of interest specified above computed on the basis of a 360-day year of twelve JO-day months; such interest being payable on February 15 and August 15 in each year, commencing August 15, 1994, Principal installments of this Bond are payable in the year of maturity or on a prepayment date to the registered owner hereof, upon its presentation and surrender, at the principal office in Dallas, Texas, of NationsBank of Texas, N.A., Dallas, Texas (the "Paying Agent/Registrar"). Interest is payable to the registered owner of this Bond whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date, and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and eXpense of, the registered owner. If the date for the paY'lllent of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original <Ulte payment was due. All payments of principal of, pre111iU111, if any, and interest on this Bond shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of publi c and private debts. SECTION 10: Levy of Taxes. To provide for the payment of the "Debt Service Requirements" of the Bonds, being (i) the interest on the Bonds and (ii) a sinking fund for their redemption at maturity or a sinking fund of 2\ (whichever amount is the greater), there is hereby levied, and there shall be annually assessed and collected in due time, form, and Manner, a tax on all taxable property in the City, within the limitations p.rescribed by law, and such tax hereby levied on each one hundred dollars' valuation of taxable property in the City for the Debt service Requirements of the Bonds shall be at a rate from year to year as will be ample and sufficient to provide funds each year to pay the principal of and interest on said Bonds while outstanding; full allowance being made for delinquencies and costs of collection; separate books and records relating to the receipt and disbursement of taxes levied, assessed and collected for and on account of the Bonds shall be kept and maintained by the City at all ti:mes while the Bonds are Outstanding, and the taxes collected for the payment of the Debt Service Requirements on the Bonds shall be deposited to the credit of a "Special 1993 Bond Account" (the "Interest and Sinking Fund") maintained on the records of the City and deposited in a special fund maintained at an official depository of the city's funds; and such tax hereby levied, and to be assessed and collected annually, is hereby pledged to the payment of the Bonds. Proper officers of the City are hereby authorized and directed to cause to be transferred to the Paying Agent/ Registrar for the Bonds, from funds on deposit in the Interest and Sinking FUnd, amounts sufficient to fully pay and discharge promptly each installment of interest and principal of the Bonds as the same accrues or matures or comes due by reason of redemption prior to maturity; such transfers of funds to be made in such manner as will cause collected funds to be deposited with the Paying Agent/Registrar on or before each principal and interest payment date for the Bonds. -12- Provided, however, in regard to the payments to become due on the Bonds on August 15, 1994, sufficient current funds will be available and are hereby appropriated to make such payments; and proper officials of the City are hereby authorized and directed to transfer and deposit to the credit of the Interest and Sinking Fund, such current funds which, together with the accrued interest received from the purchaser, will be sufficient to pay the amount of the payments due on the Bonds on August 15, 1994. SECTION 11: Mutilated-Destroyed-Lost and stolen Bonds. In case any Bond shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar, subject to City approval and in its discretion, may execute and deliver a replacement Bond of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Bond, or in lieu of and in substitution for such destroyed, lost or stolen Bond, only upon (i) the filing by the Holder thereof with the Payin<J A9ent/Reqistrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such Bond, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the City and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Bond shall be borne by the Holder of the Bond mutilated, or destroyed, lost or stolen. Every replacement Bond issued pursuant to this Section shall be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other outstanding Bonds; notwithstanding the enforceability of payment by anyone of the destroyed, lost, or stolen Bonds. The provisions of this section are exclusive and sh.all preclude (to the extent lawful) all other rights and remedies with respect to the replace~ent and payment of mutilated, destroyed, lost or stolen Bonds. SECTION 12: satisfaction of Obligation of City. If the city shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Bonds, at the times and in the manner stipulated in this Ordinance, then the pledge of taxes levied under this Ordinance and all covenants, agreements, and other obligations of the City to the Holders shall thereupon cease, terminate, and be discharged and satisfied. Bonds or any principal amount(s) thereof shall be deemed to have been paid within the meaning and with the effect expressed above in this section when (i) Money sufficient to pay in full such Bonds or the principal amount(s) thereof at ~aturity or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/ Registrar have been made) the redemption date thereof, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Government Securities shall have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Government Securities have been certified by an independent accounting firm to mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the principal of and interest on such Bonds, or the principal amount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/ Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or 0121399 -13- -----------. ·-·~="-.,::::_,-,. ,,-.,,,.,.-,-•--•.-~~---·--·--~------~ ) 1 ; Governroent securities will be made under this Section and no use made of any such deposit which would cause the Bonds to be treated as "arbitrage bonds" within the meaning of section 148 of the Internal Revenue code of 1986, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/Registrar, or an authorized escrow agent, and all income from Government securities held in trust by the Paying Agent/Registrar, or an authorized escrow agent, pursuant to this Section which is not required for the payment of the Bonds, or any principal amount(s) thereof, or interest thereon with respect to which such moneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and inte.rest on the Bonds and remaining unclaimed for a period of four ( 4) years after the Stated Maturity, or applicable redemption date, of the Bonds for which such moneys were deposited and are held in trust to pay, shall upon the request of the City be remitted to the City against a written receipt therefor. Notwithstanding the above and foregoing, after a period of four (4) years after stated Maturity, any remittance of funds from the Paying Agent/Re9istrar to the City shall be subject to any applicable unclaimed property laws of the State of Texas. The term "Government securities", as used herein, means direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, which are non-callable prior to the respective Stated Maturities of the Bonds and may be United States Treasury Obligations such as the State and Local Government Series and may be in book-entry form. SECTION 13: Ordinance a contract -Amendments -outstanding Bonds. This ordinance shall constitute a contract with the Holders from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Bond remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Holders, from tillle to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Holders, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the consent of Holders holding a majority in aggregate principal amount of the Bonds then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders of outstanding Bonds, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Bonds, reduce the principal amount thereof, the redemption price therefor, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, premium, if any, or interest on the Bonds, (2) give any preference to any Bond over any other Bond, or (3) reduce the aggregate principal amount of Bonds required to be held by Holders for consent to any such amendment, addition, or rescission. The term "Outstanding" when used in this Ordinance with respect to Bonds means, as of the date of determination, all Bonds theretofore issued and delivered under this Ordinance, except: 0121399 (1) those Bonds canceled by Agent/Registrar or delivered to Agent/Registrar for cancellation; the the Paying Paying (2) those Bonds deemed to be duly paid by the City .in accordance with the provisions of Section 12 hereof by the irrevocable deposit with the Paying Agent/Registrar, or an authorized escrow agent, of money or Government Securities, or both, in the amount -14- -~-----~ -------··•----··-·--.. ---.--·------- " .) ) necessary to fully pay the principal of, premium, if any, and interest thereon to maturity or redemption, as the case may be, provided that, if such Bonds are to be redeemed, notice of redemption thereof shall nave been duly given pursuant to this Ordinance or irrevocably provided to be given to the satisfaction of the Paying Agent/Registrar, or waived; and (3) those mutilated, destroyed, lost, or stolen Bonds which have been replaced with Bonds registered and delivered in lieu thereof as provided in Section 11 hereof. SECTION 14: Covenants to Maintain Tax-Exempt Status • A. pefinitions. When used in this section, the following terms have the following meanings: nc1osing Date" means the date on which the Bonds are first authenticated and delivered to the initial purchasers against payment therefor. "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. ucomputat:ion DateN has the meaning set forth in section 1.148-l(b) of the Regulations. "Gross Proceeds" means any proceeds as defined in Section l.148-l{b) of the Regulations, and any replacement proceeds as defined in Section 1.148-l(c) of the Regulations, of the Bonds. urnvestmentu has the meaning set forth in Section 1.148-l(b} of the Regulations. nNonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and which is not acquired to carry out the governmental purposes of the Bonds. "Rebate A.mount" has the meaning set forth in Section 1.148-l(b) of the Regulations. "Regulations" means any proposed, temporary, or final Incoae Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Bonds. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific RegUlation referenced. "Yield" of (l} any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (2) the Bonds has the meaning set forth in section 1.148-4 of the Regulations. e . Not to cause Interest to Become Taxable. The City shall not use, permit the use ot, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Bond to become -15- -.-. ----·-·--------=--~---~-~--.... -.. --•. --------·•··-·--· .. ·-. ') includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Bond, the City shall comply with each of the specific covenants in this Section. c. No Private use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Bonds: (1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Bonds, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity ( including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. D. No Private Loan. Except to the extent perl!litted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, sucn Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is collllllitted to such person or entity under a take-or-pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. E, Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Bonds directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Bonds. F. Not Federally Guaranteed. Except to the extent permitted by section l49(b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Bonds to be federally guaranteed 0121399 -16- --------····--·. -·---·-··-----·-----·--·--·---. ') ' t ) within the meaning of section 149(b) of the code and the Regv.lations and rulings thereunder. G. Information Report. The city shall timely file the information required by section 149 (e) of the Code with the secretary of the Treasury on Form 8038-G or such other form and in such place as the secretary may prescribe. H. Rebate of Arbitrage Profits. otherwise provided in section 148(f) Regulations and rulings thereunder: Except to the extent of the Code and the 01lU99 (l) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six: years after the day on which the last outstanding Bond is discharged. However, to the extent penaitted by law, the City may comlllingle Gross Proceeds of the Bonds with other money of the City, provided that the City separately accounts for each receipt and e,cpenditure of Gross Proceeds and the obligations acquired therewith. (2) Not less frequently than each Computation Date, the City shall calculate the .Rebate Amount in accordance with rules set forth in section 148 (f) of the code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date. (J) As additional consideration for the purchase of the Bonds by the Purchas ers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Interest and Sinking Fund or its general tund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Tex:as, the amount that when added to the future value of previous rebate payments made for the Bonds equals (i) in the case of a Final Computation Date as defined in Section l.148-3(e)(2) of the Regulations, one hundred percent (1001') of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90\) of the Rebate Amount on such date. In all cases, the rebate paytaents shall be made at the times, in the installments, to the place and in the manner as is or may be required by section l48(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied ·by Form 8038-T or such other forms and information as is or may be required by Section 148(£) of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and prolllptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty {180) days after discove.ry of the error) , including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148-J(h) of the Regulations. -17- -------,.,------·------·---·--·----- ) ' I. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the stated Maturity or final payment of the Bonds, enter into any t ransaction that reduces the amount required to be paid to the united States pursuant to Subsection Hof this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Bonds not been relevant to either party. J. Elections. The City hereby directs and authorizes the Mayor, city Secretary, City Manager, and Assistant City Manager for Financial services, either or any combination of them, to make elections permitted or required pursuant to the provisions of the code or the Regulations, as they deem necessary or appropriate in connection with the Bonds, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. SECTION 15: Sale of the Bonds. The sale of the Bonds to Kidder Peabody & co., Inc. and southwest Securities Incorporated at the price of par, accrued interest plus a premium of $-0-is hereby confirmed. The Council finds that the bid of the purchaser(s) was the highest and best bid received. Delivery thereof to the purchaser{s) shall occur as soon as possible upon payment being made therefor in accordance with the terms of sale. SECTION 16: Control and custody of Bonds. The Mayor of the City shall be and is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the state of Texas, including the printing and supply of definitive Bonds, and shall take and have charge and control of the Initial Bond(s) pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers. Furthe rmore, the Mayor, City Secretary, city Manager, and Assistant City Manager for Financial Services, any one or more of said officials, are hereby authorized and directed to furnish and execute such docUlllents relating to the City and its financial affairs as may be necessary for the issuance of the Bonds, the approval of the Attorney General and the registration by the comptroller of Public Accounts and, together with the City's financial advisor, bond counsel and the Paying Agent/Registrar, make the necessary arra.ngements for the delivery of the Initial Bond(s) to the Purchasers and the initial exchange thereof for definitive Bonds, SECTION 17: Official Stateme nt. The Official Stat8lllent prepared in the initial offering and sale of the Bonds by the City, together with all addendas, supplements a.nd amendments thereto issued on behalf of the City, is hereby approved as to form and content, and the City Council hereby finds that the information and data contained in said Official statement pertaining to the City and its financial affairs is true and correct in all 1Uaterial respects and no material facts have been omitted therefrom which are necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The use of such Official Statement in the reo ffering of the Bonds by the Purchasers is hereby approved and authorized. SECTION 1a: Notices to Holders-Waiver. Wherever this Ordinance provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and sent by United States Mail, first class postage prepaid, to the address of each Holder appearing in the Security Register at the close of busi ness on the business day next preceding the mailing of such notice. 01213119 -18- -----·-------------- In any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Bonds. Where this Ordinance provides for notice in any manner, such notice may be waived in writing by the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 19: cancellation. All Bonds surrendered for payment, redemption, transfer, exchange, or replacement, if surrendered to the Paying Agent/Registrar, shall be prot11ptly canceled by it an<i, if surrendered to the city, shall be delivered to the Payi ng Agent/Registrar and, if not already canceled, shall be promptly canceled by the Paying Agent/Registrar. The City may at any time deliver to the Paying Agent/Registrar for cancellation any Bonds previously certified or registered and delivered which the City may have acquired in any manner Whatsoever, and all Bonds so delivered shall be promptly canceled by the Paying Agent/Registrar. All canceled Bonds held by the Paying Agent/Registrar shall be returned to the City. SECTION 20: Printed Opinion. The Purchasers' obligation to accept delivery of the Bonds is subject to being furnished a final opinion of Fulbright & Jaworski L.L.P., Attorneys, approving the Bonds as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for the Bonds. Printing of a true and correct reproduction of said opinion on the reverse side of each of th.e definitive Bonds is hereby approved and authorized. SECTION 21: CUSIP NUJttbers. CUSIP nulllbers may be printed or typed on the definitive Bonds. It is expressly provided, however, that the presence or absence of Cl.JSIP numbers on the definitive Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving the Bonds as to legality are to be held responsible for CUSIP nUlllbers incorrectly printed or typed on the defini tive Bonds. SECTION 22: Benefits of Ordinance, Nothing in this Ordinance, expressed or implied, is intended or shall be construed to confer upon any person other than the City, the Paying Agent/Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision hereof, this Ordinance ancl all its provisions being intended to be and being for the sole and exclusive benefit of the City, the Paying Agent/Registrar and the Holders. SECTION 23: Inconsistent Provisions. All ordinances, orders or resolutions, or parts thereof, which are in conflict or inconsistent with any provi1>ion of this Ordinance are he.reby repealed to the extent of such conflict, and the provisions of this Ordinance shall be and remain controlling as to the matters contained herein. SECTION 24: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the state of Texas and the United states of America. SECTION 25: Effect of Headings. The section headings herein are for convenience only and shall not affect the construction hereof. SECTION 26: construction of Terms. If appropriate in the context of this Ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall -19- ·--·--·-...... ,_, ____ ,, ____ ,, ..... ---~----------------------·•--·-·----- ) ) be considered to include the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders. SECTION 27: Severability. If any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other circumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 28: Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by Article 6252-17, Vernon's Texas civil Statutes, as amended. SECTION 29: Effective Date. Thh• Ordinance shall be in force and effect from and after its passage on second and final reading and IT IS SO ORDA1NED, PASSED ANO ADOPTED ON FIRST READING, this 14th day of October, 1993. PASSED AND ADOPTED ON~-•-c, this 15th day of October, 1993. ATTEST: (City Seal) 0121599 -20- ----------- No Text ') ORDINANCE NO. 10042 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION, SERIES 1998 11 ; specifying the terms and features of said certificates; providing for the payment of said certificates of obligation by the levy of an ad valorem tax upon all taxable property within the City and a limited pledge of the net revenues from the operation of the City's Waterworks System; and resolving other matters incident and related to the issuance, sale, security, payment and delivery of said certificates, including the approval of a ~aying Agent/Registrar Agreement and the approval and distribution of an Official Statement pertaining thereto; and providing an. effective date. WHEREAS, . notice of the City Council's intention to issue certificates of obligation in the maximum principal amount of $10,260,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Waterworks sy~tem, (ii) site development for solid waste disposal, and (iii) professional services rendered in connection with such projects and the financing thereof, has been duly published in the Lubbock Avalanche-Journal, a newspaper hereby found and determined to be of general circulation in the City of Lubbock, Texas, on December 21, 1997 and December 28, 1997, the date of the first publication of such notice being not less than fifteen (15) days prior to the tentative date stated therein for the passage of this Ordinance; and WHEREAS, no petition, protesting the issuance of such certificates and bearing valid petition signatures of at least 5% of the qualified voters of the City, has been filed with the City Secretary, any member of the Council or any other official of the City on or prior to the date of the passage of this Ordinance; and WHEREAS, the Council hereby finds and determines that all of the certificates of obligation described in such notice should be issued and sold at this time; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION 1: Authorization-Designation-Principal Amount- Purpose. Certificates of obligation of the City shall be and are hereby authorized to be issued in the aggregate principal amount of $10,260,000 to be designated and bear the title "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION, SERIES 1998" (the 11Certificates"), for 0480'103 the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Waterworks System, (ii) site development for solid waste disposal, and (iii) professional se:tVices rendered in connection with such projects and the financing thereof, pursuant to authority conferred by and in conformity with the Constitution and laws of the State of Texas, including V.T.C.A., Local Government Code, Subchapter C of Chapter 271. SECTION 2: Fully Registered Obligations -Authorized Denominations-Stated Maturities-Date. The Certificates are issuable in fully registered form only; shall be dated Ja~uary 1, 1998 (the 11Certificate Daten) and shall be in denominations of $5,000 or any integral multiple thereof (within a Stated Maturity) and the Certificates shall become due and payable on February 15 in each of the years and in principal amounts (the 11Stated Maturities") and bear interest at the per annum rate (s) in accordance with the .following schedule: Year of Principal Interest Stated Maturity Amount Rate 1999 $510,000 6.25% 2000 510,000 6.25% 2001 510,000 6.25% 2002 510,000 6.25% 2003 510,000 6.25% 2004 510,000 6.25% 2005 510,000 6.125% 2006 51.0,000 4.25% 2007 515,000 4.30% 2008 515,000 4 .35% 2009 515,000 4.45% 2010 sis ,·ooo 4.55% 2011 515,000 4.60% 2012 515,000 4.65% 2013 515,000 4.70% 2014 515,000 4~75% 2015 515,000 4.75% 2016 515,000 4.25% 2017 515,000 4.25% 2018 515,000 4.25% The Certificates shall bear interest on the unpaid principal amounts from the Certificate Date at the per annum rate{s) shown above in this Section (calculated on the basis of a 360-day year of twelve 30-day months). ·Interest on the Certificates shall be payable on February 15 and August 15 in each year, commencing August 15, 1998. ) \ SECTION 3: Terms of Payment-Paying Agent/Registrar. The principal· of, premium, if any, and the interest on the Certificates, due and payable by reason of maturity, redemption or otherwise, shall be payable only to the registered owners or holders of the Certificates (hereinafter called the 11Holders I{) appearing on the registration and transfer books maintained by the Paying Agent/Registrar and the payment thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without exchange or collection charges to the Holders. The selection and appointment of U. S. Trust Company of Texas, N.A., Dallas, Texas to serve as Paying Agent/Registrar for the Certificates is hereby approved and confirmed. Books and rec;ords relating to the registration, payment, exchange and transfer of the Certificates (the "Security Register") shall at all times be kept and maintained on behalf of the City by the Paying Agent/Registrar, all as provided herein, in accordance with the terms and provisions of a "Paying Agent/Registrar Agreement", substantially in the form attached hereto as Exhibit A and such reasonable rules and regulations as the Paying Agent/Registrar and the City may prescribe. The Mayor and City Secretary of the City are hereby authorized to execute and deliver such Agreement in connection with the delivery of the Certificates. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Certificates are paid and discharged, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity qualified. and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice thereof to be sent to each Holder by United States Mail, first class postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Principal of and premium, if any, on the Certificates shall be payable at the Stated Maturities or the redemption thereof only upon presentation and surrender of the Certificates to the Paying Agent/Registrar at its designated offices in New York, New York {the 11Designated Payment/Transfer Office11 ) • Interest on the Certificates shall be paid by the Paying Agent/Registrar to the Holders whose name appears in the Security Register at the close of business on the Record Date (the last business day of the month next preceding each interest payment date) and payment of such interest shall be (i) by check sent United States Mail, first class postage prepaid1 to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder. If the date for the payment of the -3- ) ) . principal of or interest on the Certificates shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the City where the Designated Payment/Transfer Office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day when banking institutions are authorized to close; and payment on such dat e shall have the same force and effect as if made on the original date payment was due. In the event of a nonpayment of interest on a scheduled payment date, and for thi rty (30) days thereafter, a new record date for such interest payment (a "Special Record Date1') ·wil l be established by the Paying Agent/ Registrar, if and when funds for the payment of such interest have been recei ved from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business next preceding the date of mailing of such notice. SECTION 4: Redemption. (a) Optional Redemption. The Certificates having Stated Maturities on and after rebruary 15, 2009, shall be subject to redemption prior to maturity, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2008 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. (b) Exercise of Redemption Option. At least forty-five (45) days prior to a redemption date for the Certificates (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the City shall notify the Paying Agent/Registrar of the decision to redeem Certificates, the principal amount of each Stated Maturity to be redeemed, and the ·aate of redemption therefor. The decision of the City to exercise the right to redeem Certificates shall be entered in the minutes of the governing body of the City. (c) Selection of Certificates for Redemption. If less than all Outstanding Certificates of the same Stated Maturity are to be redeemed on a redemption·date, ·the Paying Agent/Registrar shall treat such Certificates as representing the number of Certificates Outstanding which is obtained by dividing the principal amount of such Certificates by $5,000 and shall select the Certificates, or principal amount thereof, to be redeemed within such Stated Maturity by lot. -4- '") 7 } ) ) \ (d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date f or t he Certi ficates, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the City and at the City's expense, to each Holder of a Certificate t o be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemption shall {i) specify the ~ate of redemption for the Certificates, (i i) identify the Certificates to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, {iv) state that the Certificates, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and (v) specify that payment of the redemption price for the Certificates, or the principal amount thereof to be redeemed, shall be made at the Designated Payment/Transfer Office of the Paying Agent/Registrar only upon presentation and surrender thereof by the Holder. If a Certificate is subject by its terms to prior redemption and has been called for redemption and notice of redemption thereof .has been duly given as hereinabove provided, such Certificate (or the principal amount thereof to be redeemed} shall become due and payable and interest thereon shall cease to accrue from and after the redemption date therefor; provided moneys sufficient for the payment of such Certificate (or of the principal amount thereof to be redeemed) at the then applicable redemption price are held for the purpose of such payment by the Paying Agent/Registrar. SECTION 5: Registration Transfer -Exchange of Certificates-Predecessor Certificates. The Paying Agent/Registrar shall obtain, record, and maintain in the Security Register the name and address of each and every owner of the Certificates issued under and pursuant to the provisions of this Ordinance, or if appropriate, the nominee thereof. Any Certificate may be transferred or exchanged for Certificates of other authorized denominations by the Holder, in person or by his duly authorized agent, upon surrender of such Certificate to the Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. -5- .... Upon surrender of any Certificate for transfer at the Designated Payment/Transfer Office of the Paying Agent/Registrar, the Paying Agent/Registrar shall register and deliver, in the name of the designated transferee or transferees, one or more new Certificates of authorized denominations and having the same Stated Maturity and of a like aggregate principal amount as the Certificate or Certificates surrendered for transfer. At the option of the Holder, Certificates may be exchanged for other Certificates of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Certificates sur~endered for exchange, upon surrender of the Certificates to be exchanged at the Designated Payment/Transfer office of the Paying Agent/ Registrar. Whenever any Certificates are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new Certificates to the Holder requesting the exchange. All Certificates issued in any transfer or exchange of Certificates shall be delivered to the Holders at the Designated Payment/Transfer Office of the Paying Agent/Registrar or sent by United States Mail, first class, postage prepaid to the Holders, and, upon the registration and delivery thereof, the same shall be the valid obligations of the City, evidencing the same obligation to pay, and entitled to the same benefits under this Ordinance, as the Certificates surrendered in such transfer or exchange. All transfers or exchanges of Certificates pursuant to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. Certificates canceled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be "Predecessor Certificates," evidencing all or a portion, as the case may be, of the same obligation to pay evidenced by the ne~ Certificate or Certificates registered and deliyered in the exchange or transfer therefor. Additionally, the term "Predecessor Certificates" shall include any mutilated, lost, destroyed, or stolen Certificate for which a replacement Certificate has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 23 hereof and such new replacement Certificate shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Certificate. ..., ·, ,. Neither the City nor the Paying Agent/Registrar shall be required -to issue or transfer to an assignee of a Holder any Certificate called for redemption, in whole or in part, within 45 days of t he date fixed for the redemption of such Certificate; provi ded, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a Certificate called for redemption in part. SECTION 6: Book-Entry Only Transfers and Transactions . Notwithstanding the provi sions contained in Sections 3, 4 ands hereof relating to the payment and transfer/exchange of the Certificates, the City hereby approves and authorizes the use of 11 Book-Entry Only" securities clearance, settlement and transfer system provided by The Depository Trust Company (DTC), ·a limited purpose trust company organized under the laws of the State o f New York, in accordance with the requirements and procedures identified in the Letter of Representation by al'.ld between the City, the Paying Agent/Registrar and DTC (the "Depository Agreement'') relating to the Certificates. Pursuant to the Depository Agreement and the rules of DTC, the Certificates shall be deposited with DTC who shall hold said Certificates for its participants (the "DTC Participants0 ). and, while the Certificates are held by DTC under the Depository Agreement, the Holder of the Certificates on the Security Register for all purposes, including payment and notices, shall be Cede & Co., as nominee of OTC, notwithstanding the ownership of each actual purchaser or owner of each Certificate (the 11Benef icial Owners") being recorded in the records of DTC and OTC Participants. In the event DTC determines to discontinue serving as securities depository for the Certificates or otherwise ceases to provide book-entry clearance and settlement of securities transact ions in general or the City determines that OTC is incapable of properly dischargi ng its duties as securities depository for the Certificates, the City covenants and agrees with the Holders of the Certificates to cause Certificates to be printed in definitive form and provide for the · Certificate certificates to be issued and delivered to OTC Participants and Beneficial Owners, as the case may be. Thereafter, the Certificates in definitive form shall be assigned, t ransferred and exchanged on the Security Register maintained by the Paying Agent/Registrar and payment of such Certificates shall be made in accordance with the provisions of Sections 3, 4 and 5 hereof. SECTION 7: Execution -Registration. The Certificates shall be executed on behalf of the City by the Mayor under its seal reproduced or impressed thereon and countersigned by the City Secretary. The signature of said officers on the Certificates may -7- be manual or facsimile. Certificates bearing the manual or facsimile· signatures of individuals who are or were the proper officers of the City on the Certificate Date shall be deemed to be duly executed on behalf of the City, notwithstanding that one or more of the individuals executing the same shall cease to be such officer at the time of delivery of the Certificates to the initial purchaser(s) and with respect to Certificates delivered in subsequent exchanges and transfers, all as authorized and provided in the Bond Procedures Act of 1981, as amended. No Certificate shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Certificate either a certificate of registration substantially in the form provided in Section 9C, manually executed by the Comptroller of Public Accounts of the State of Tex~s, or his duly authorized agent, or a certificate of registration substantially in the form. provided in Section 9D, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar, and either such certificate duly signed upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly certified, registered and delivered. SECTION 8: Initial Certificate(s). The Certificates herein authorized shall be initially issued either (i) as a single fully registered certificate in the total principal amount of $10,260,000 with principal installments to become due and payable as provided in Section 2 hereof and numbered T-1, or (ii) as twenty (20) fully registered certificates, being one certificate for each year of maturity in the applicable principal amount and denomination and to be numbered consecutively from T-1 and upward (hereinafter called the 11 Initial Certificate(s)") and, in either case, the Initial Certificate(s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Certificate(s) shall be the Certificates submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser (s) . Any time after the delivery of the Initial Certificate(s), the Paying Agent/Registrar, pursuant to written instructions from the initial purchaser (s), or the designee thereof, shall cancel the Initial Certificate(s) delivered hereunder and exchange therefor definitive Certificates of authorized denominations, Stated Maturities, principal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser (s}, or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. -8- ") ) SECTION 9: Forms. A. Forms Generally. The Certificates, the Registration Certificate of the Comptroller of 'Public Accounts of the State of Texas, the Registration Certificate of Paying Agent/Registrar, and the form of Assignment to be printed on each of the Certificates, shall be substantially in the forms set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including insurance legends in the event the Certificates, or any maturities thereof, are purchased with insurance and any reproduction of an opinion of counsel) thereon as may, consistently herewith, be established by the City or determined by the officers executing such Certificates as evidenced by their execution. "Any portion of the text of any Certificates may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. The definitive Certificates and the Initial Certificate(s) shall be printed, lithographed, or engraved, typewritten, photocopied or otherwise reproduced in any other similar manner, all as determined by the officers executing such Certificates as evidenced by their execution thereof. B. Form of Certificat·es. REGISTERED NO. UNITED STATES OF AMERICA STATE OP TEXAS CITY OF LUBBOCK, TEXAS, RE3ISTERED $ ___ _ TAX AND WATERWORKS SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATE OF OBLIGATION, SERIES 1998 Certificate Date: Interest Rate: Stated Maturity: CUSIP NO: January 1, 1998 _____ \ Registered Owner: Principal Amowit: DOLLARS The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner -9- ., named above, or the registered assigns thereof, on the Stated Maturity <late specified above the Principal Amount stated above (or so much thereof as shall not have been paid upon prior redemption) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid Principal Amount hereof from the Certificate Date at the per annum rate of interest specified above; such interest being payable on February 15 and August 15 of each year, commencing August 15, 1998. Principal of this Certificate is payable at its Stated Maturity or redemption to the registered owner hereof, upon presentation and surrender, at the Designated Payment/Transfer Office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor. Interest is. payable to the registered owner of this Certificate (or one or more Predecessor Certificates, as defined in the Ordinance hereinafter referenced) whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register on the Record Date or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the ¼isk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Certificate shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Certificate is one of the series specified in its title issued in the aggregate principal amount of $10,260,000 (herein referred to as the "Certificates") for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Waterworks System, (ii) site development for solid waste disposal, and (iii) professional services rendered in connection with such projects and the financing thereof, under and in strict conformity with the Constitution and laws of the State of Texas, particularly V. T .C.A., Local Government Code, Subchapter C of Chapter 271, and pursuant to an Ordinance adopted by the governing body of the City (herein ref erred to as the 11 ordinance11 ). The Certificates maturing on and after February 15, 2009, may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2008, or on any date thereafter, at the redemption price of par, together .with accrued interest to the date of redemption. IM&070~ -10- At least thirty days prior to a redemption date, the City shall cause a written notice of such redemption to be sent by United States Mail, firs~ class postage prepaid, to the registered owners of each Certificate to be redeemed at the address shown on the Security Register and subject to the terms and provisions relating thereto contained in the Ordinance. If a Certificate (or any portion of its principal sum) shall have been duly called for redemption and notice of such redemption duly given, then upon the redemption date such Certificate (or the portion of its principal sum to be redeemed) shall become due and payable, and, if moneys for the payment of the redemption price and the interest accrued on the principal amount to be redeemed to the date of redemption are held for 'the purpose of such payment by the· Paying Agent/Registrar, interest shall cease to accrue and be payable from and after the redemption date on the principal amount redeemed. rn the event a portion of the principal amount of a Certificate is to be redeemed and the registered owner is someone ·other than Cede & Co., payment of .the redemption price of such principal amount shall be made to the registered owner only upon presentation and surrender of such Certificate to the Designated Payment/Transfer Office of the Paying Agent/Registrar, and a new Certificate or Certificates of like maturity and interest rate in any authorized denominations provided by the Ordinance for the then unredeemed balance of the principal sum thereof will be issued to the registered owner, without charge. If a Certificate is selected for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer such Certificate to an assignee of the registered owner within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the registered owner of the unredeemed balance of a Certificate redeemed in part . The Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and from a limited pledge of the Net Revenues (as defined in the Ordinance) of the City's Waterworks System {the "System"), such pledge being limited to an amount not in excess of $500 and being junior and subordinate to the lien on and pledge of such Net Revenues securing the payment of "Prior Lien Obligations" (as defined in the Ordinance) now outstanding and hereafter issued by the City. In the Ordinance, the City reserves and retains the right to issue Prior Lien Obligations without limitation as to principal amount but subject to any applicable terms, conditions or restrictions under law or otherwise. O,t80703 -11- ) Reference is hereby made to the Ordinance, a copy of which is on file in the Designated Payment/Transfer Office of the Paying Agent/Registrar, and to all the provisions of which the Holder hereof by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the tax levied for the payment of the Certificates; the nature and extent of the limited pledge of the Net Revenues securing the payment of the Certificates; the terms and conditions relating to the transfer or exchange of this Certificate; the conditions upon which the Ordinance may be amended or supplemented with or without the consent of the Holders; the rights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which the tax levy and the pledge of the Net Revenues and covenants made in the Ordinance may be discharged at or prior to the maturity of this Certificate, and this Certificate deemed to be no longer Outstanding thereunder; and for the other terms and provisions contained therein. Capitalized terms used herein have the meanings assigned in the Ordinance. This Certificate, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only upon its presentation and surrender at the Designated Payment/Transfer Office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent. When a transfer on the Security Register occurs, one or more fully registered Certificates of authorized denominations and of the same aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, may treat the registered owner hereof whose name appears 0n the Security Register (i) on the Record Date as the owner entitled to payment of interest hereon, (ii) on the date of surrender of this Certificate as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty (30) days thereafter, a new record date for such interest payment (a 11 Special Record Date11 ) will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United 0480703 -12· States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. It is hereby certified, recited, represented and covenanted that the City is a body corporate and political subdivision duly organized and legally existing under and by virtue .of the Constitution and.laws of the State of Texas; that the issuance of the Certificates is duly authorized by law; that all acts, conditions and things required to exist and be done precedent to and in the issuance of the Certificates to render the same lawful and valid obligations of the City have been properly done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Certificates do not exceed any constitutional or statutory limitation; and that due provision has been made for the payment of the principal of and interest on the Certificates as aforestated. In case any provision in this Certificate or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications shall not in any way be affected or impaired thereby. The terms and provisions of this Certificate and the Ordinance shall be construed in accordance with and shall be governed by the laws of the State of Texas. IN WITNESS WHEREOF, the City Council of the City has caused this Certificate to be duly executed under the official seal of the City as of the Certificate Date. · COUNTERSIGNED: City Secretary (SEAL} CITY OF LUBBOCK, TEXAS Mayor -13. ... C. * Form of Registration Certificate of Comptroller of Public Accounts to Appear on Initial Certificate(s) only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS THE STATE OF TEXAS § § § § REGISTER NO . I HEREBY CERTIFY that this Certificate has been e·xamined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my (SEAL) *NOTE TO. PRINTER: signature and seal of office Comptroller of Public Accounts of the State of Texas Do not print on definitive Certificates this D. Form of Certificate of Paying_Agent/Registrar to Appear on Definitive Certificates. • REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR This Certificate has been duly issued and registered under the provisions of the wi thin-ment-ioned Ordinance; the certificate or certifi.cates of the above entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. The designated offices of the Paying Agent/Registrar located in New York, New York, is the "Designated Payment/Transfer Office'' for this Certificate. Registration Date: U. S. TRUST COMPANY OF TEXAS, N .A., Dallas, Texas, as Paying Agent/Registrar By Authorized Signature -14- ' E. Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee:) (Social Security or other identifying number: _________________ ) _the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the· within Certificate on the books kept for registration thereof, with full power of substitution in the premises. DATED : NOTICE: The signature on this Signature Guaranteed: assignment must correspond with the name of the registered owner as it appears on the face of the within Certificate in every particular. F. The Initial Certificate(s) shall be in the form set forth in paragraph B of this Section, except that the form of a single fully r ·egistered Initial Certificate shall be modi£ ied as follows: (i) immediately under the name of the certificate the headings "Interest Rate ______ " and "Stated Maturity _______ 11 shall both be omitted; (ii) paragraph one shall read as follows : Registered Owner: Principal Amount: Dollars The City of Lubbock (hereinafter referred to as the 11City11 }, a body corporate and municipal corporation in the county of Lubbock, State of Texas, for value received, acknowledges i tself indebted to and hereby promises to pay to the Registered owner named above, or the registered assigns thereof, the Principal Amount hereinabove stated, on February 15 in each of the years and in principal installments in accordance with the following schedule: -15- PRINCIPAL INSTALLMENTS (Information to be inserted from schedule in Section 2 hereof). INTEREST RATE (or so·much principal thereof as shall not have been prepaid prior to maturity} and to pay interest on the unpaid Principal Amount hereof from the Certificate Date at the per annum rates of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 15 and August 15 of each year, commencing August 15, 1998. Principal installments of this Certificate are payable in the year of maturity or on a prepayment date to the registered owner hereof by U.S. Trust Company of Texas, N.A., Dallas, Texas (the "Paying Agent/Regis_trar11 }, upon presentation and surrender, at its designated offices in New York, New York (the "Designated Payment/Transfer Office"). Interest is payable to the registered owner of this Certificate whose ·name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date hereof and interest shali be paid by the Paying Agent/Regist+ar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/ Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Certificate shall be without exch~nge or collection charges to the · owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. SECTION _10: Definitions. For purposes of this Ordinance and' for clarity with respect to the issuance of t.he Certificates, and the levy of taxes and appropriation of Net Revenues therefor, the following words or terms, whenever the · same appear herein without qualifying language, are defined to mean as follows: 0480703 {a) The term "Certificates11 shall mean $10,260, ooo "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM {LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION, SERIES 199811 authorized by this Ordinance. · (b) The term ncertificate Fund" shall mean the special Fund created and established under the provisions of Section 11 of this Ordinance. -16~ i O•ll070S (c) The term "Collection Date11 s:-.all mean, when reference is being made to the levy and collection of annual ad valorem taxes, the date annual ad valorern taxes levied each year by the City become delinquent. (d) The term "Fiscal Year11 shall mean the annual financial accounting period used with respect to the operations of the System now ending on September 30th of each year; provided, however, the City Council may change, by ordinance duly passed, such annual financial accounting period to end on another date if such change is found and determined to be necessary for budgetary or other fiscal purposes. · (e) The term "Government Securities11 shall mean direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, and the United States Treasury obligations such as its State and Local Government Series in book-entry form. (f) The term "Gross Revenues" shall mean all income, receipts and revenues of every nature derived or received from the operation and ownership (excluding gifts and grant moneys, federal or state) of the System, -including earnings and income derived from the investment or deposit of moneys in any special funds or accounts created and established for the payment and security of the Prior Lien Obligations and other obligations payable in whole or in part from and secured by a lien on and pl·edge of the Net Revenues. (g) The term "Net Revenues" shall mean the Gross Revenues of the System, with respect to any period, after deducting the System's Operating and Maintenance Expenses during such period. {h) The term 110perating and Maintenance Expenses 0 shall mean all reasonable and necessary expenses directly related and attributable to the operation and maintenance of the System, including, but not limited to, the cost of insurance, the purchase and carrying of stores, materials, and supplies, the payment of salaries, labor and other expenses reasonably and properly charged, under generally accepted accounting principles, to the operation and maintenance of the System and those expenses required by statute (Article 1113, V.A.T .C.S. or other applicable statute) to be a first lien and charge against the Gross Revenues. -17- 0"8070:S 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 H for purposes of determining 11 Net Revenues". (i) The term "Outstanding" when used in this Ordinance with respect to Certificates means, as of the date of determination, all Certificates theretofore issued and delivered under this Ordinance, except: (1) those certificates canceled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Certificates deemed to be duly paid by the City in accordance with the provisions of Section 19 hereof; and (3) those Certi ficates that have been mutilated, destroyed, lost, or stolen and replacement Certificates have been registered and delivered in lieu thereof as provided in Section 23 hereof. {j) The term 11 Prior Lien Obligations" shall mean all bonds or other similar obligations now outstanding and hereafter issued that are payable in whole or in part from and secured by a lien on and pledge of the Net Revenues of the System and such lien and pledge securing the payment thereof is prior and superior in claim, rank and dignity to the lien and pledge of the Net Revenues securing the payment of the Certificates, including, but not limited to, the outstanding obligations of the following issues: (1) "City of Lubbock, Texas, Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation, series 199111 , dated May 15, 1991, and originally issued in the principal amount of $16,120,000; (2) "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1992", dated August 15, 1992, and originally issued in the principal amount of $7,565,000; -18- (3) "City of Lubbock, Texas, Tax and -Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1993", dated October 1, 1993, and originally issued in the principal amount of $1,470,000; and (4) "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1995", dated December 15, 1995, and originally issued in the principal amount of $10,000,000. {k) The term "System" shall mean the City's Waterworks System, being all properties, facilities, and plants currently owned, operated, and maintained by the City for the supply, treatment, and transmission of treated potable water, together with all future ext ens ions, improvements, replacements and additions thereto. SECTION 11: Certificate Fund. For the purpose of paying the interest on and to provide a sinking fund for the payment and retirement of the Certificates, there shall be and is •hereby created a special Fund to be designated "SPECIAL 1998 CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATE OF OBLIGATION FUND 11 , which Fund shall be kept and maintained at the City's depository bank, and moneys deposited in said Fund shall be used for no other purpose. Proper officers of the City are hereby authorized and directed to cause to be transferred to the Paying Agent for the Certificates, from funds on deposit in the Certificate Fund, amounts sufficient to fully pay and discharge promptly each installment of interest and principal of the Certificates as-the same accrues or matures or comes due by reason of redemption prior to maturity; such transfers of funds to be made in such manner as wil 1 cause immediately available funds to be deposited with the Paying Agent for the Certificates at the close of business on the last business day next preceding each interest and/or principal payment date for the Certificates. · Pending the transfer of funds to the Paying Agent/Registrar, money in the Certificate Fund may, at the option of the City, be invested in obligations identified in, and in accordance with the provisions of the II Public Funds Investment Act 11 {V. T. C. A., Government Code, Chapter 2256) relating to the investment of 11bond proceeds"; provided that all such investments shall be made in such a manner that the money required to be expended from said Fund will be available at the proper time or times. All interest and income derived from deposits and investments in said -19- ... ! Certificate Fund shall be credited to, and any losses debited to, the said-Certificate Fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Certificates. SECTION 1 2: Tax Levy. To provide for the payment of the "Debt Service Requirements11 on the Certificates being (i) the interest on said Certificates and (ii) a sinking fund for their redemption at maturity or a sinking fund of 2% (whichever amount shall be the greater}, there shall be and there is hereby levied for the current year and each succeeding year thereafter while said Certificates or any interest thereon shall remain Outstanding, a sufficient tax on each one hundred dollars' valuation of taxable property in said City, adequate to pay such Debt Service . Requirements, full allowance being made for delinquencies and costs of collection; said tax shall be assessed and collected each year and applied to the payment of the Debt Service Requirements, and the same shall not be diverted to any other purpose. The taxes so levied and collected sha11· be paid into the Certificate Fund. The City Council hereby declares its purpose and intent to provide and levy a tax legally and fully sufficient to pay the said Debt Service Requirements, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax in consideration of all other outstanding indebtedness. Accrued interest and premium, if any, received from the purchasers of the Certificates shall be deposited to the Certificate Fund. In addition, any surplus proceeds from the sale of the Certificates not expended for authorized purposes shall be deposited in the Certificate Fund, and such amounts so deposited shall reduce the sums otherwise required to be deposited in said Fund from ad valorem taxes. SECTION 13: Limited Pledge of Net Revenues. The City hereby covenants and agrees that, subject to the prior lien on and pledge of the Net Revenues of the System to the payment and security of Prior Lien Obligations, the Net Revenues of the System in an aggregate amount not to exceed $500 are hereby irrevocably pledged to the payment of the principal of and interest on the Certificates in accordance with the provisions of this Ordinance, and the limited pledge of $S00 of the Net Revenues of the System herein made for the payment of the Certificates shall constitute a lien on the Net Revenues of the System in accordance with the terms and provisions hereof. Furthermore, such lien on and pledge of the Net Revenues securing the payment of the Certificates shall be valid and binding without further action by the City and without any filing or recording except for the filing of this Ordinance in the records of the City. o-180703 -20- _, SECTION 14: System Fund. The City hereby covenants and agrees that all Gross Revenues (excluding earnings from the investment of money held in any special funds or accounts created for the payment and security of Prior Lien Obligations) shall be deposited from day to day as collected into a "City of Lubbock, Texas, Waterworks System Operating Fund" {hereinafter called 11 System Fund") ·-:hich Fund shall be kept and maintained at an official depository bank of the City. All moneys deposited in the System Fund shall be pledged and appropriated to the extent required for the following purposes and in the order of priority shown, to wit: First: To the payment of all necessary and reasonable Operating and Maintenance Expenses of the System as defined herein or required by statute to be a first charge an and claim against the Gross Revenues. Second: T? the payment of the amounts required to be deposited in the special Funds created and established for the payment, security and benefit of Prior Lien Obligations in accordance with the terms and provisions of the ordinances authorizing the issuance of Prior Lien Obligations; and Third: To the payment of the limited amount pledged to the payment of the Certificates. Any Net Revenues remaining in the System Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other City purpose now or hereafter permitted by law. SECTION 15: Security of Funds. All moneys on deposit in the Funds for which this Ordinance makes provision (except any portion thereof as may be at any time properly invested) shall be secured in the manner and to the fullest extent required by the laws of Texas for the security of public funds, and moneys on deposit in such Funds shall be used only for the purposes permitted by this Ordinance. SECTION 16: Special Covenants. The City hereby further covenants as follows: (a) It has the lawful power to pledge the Net Revenues of the System supporting this issue of Certificates and has lawfully exercised said powers under the Constitution and laws of the State of Texas, including said power existing under Articles 1111 et -21- l ) ' seq., V.A.T.C.s. and V.T.C.A., Local Government Code, Subchapter C of Chapter 271. (b) Other than for the payment of the Prior Lien Obligations and the Certificates, the Net Revenues of the System have not in any manner been pledged to the payment of any debt or obligation of the City or of the system. SECTION 17 : Issuance of ~rior Lien Obligations and Additional Certificates. The City hereby expressly reserves the r i ght to hereafter issue Prior Lien Obligations, without limitation as to principal amount but subject to any terms, conditions or restrictions applicable thereto under law or otherwise. Additionally, the City reserves the right to issue obligations payable, in whole or in part, from the Net Revenues of the System and, to the extent provided, secured by a parity lien on and pledge of the Net Revenues of equal rank and dignity with the lien and pledge securing the payment of the Certificates. SECTION 18: Subordinate to Prior Lien Obligations. Covenants and Agreements. lt is the intention of this governing body and accordingly hereby recognized and stipulated that the provisions, agreements and covenants contained herein bearing upon the management and operations of the System and the administering and application of revenues derived from the operation thereof, shai1 to the extent possible be harmonized with like provisions, agreements and covenants contained in ordinances authorizing the issuance of Prior Lien Obligations, and to the extent of any irreconcilable conflict between the provisions contained herein and in ordinances authorizing the issuance of Prior Lien Obligations, the provisions, agreements and covenants contained therein shall prevail to the extent of such conflict and be applicable to this Ordinance but in all respects subject t9 the· priority of rights and benefits, if any, conferred thereby to the holders or owners of the Prior Lien Obligations. Notwithstanding the above, any change or modification affecting the application of revenues derived from the operation of the system shall not impair the obligation of contract with respect to the pledge of revenues herein made for the payment and security of the Certificates. SECTION 19: Satisfaction of Obligations of City. If the City shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Certificates, at the times and in the manner stipulated in this Ordinance, then the pledge of taxes levied and the lien on and pledge of the Net Revenues of the System under this Ordinance and all covenants, agreements, and other OU0703 -22- ) ) ) obligations of the City to the Holders shall thereupon cease, terminate~ and be discharged and satisfied. Certificates shall be deemed to have been paid within the meaning and with the effect expressed above in this Section when {i) money sufficient to pay in full such Certificates or the principal amount(s) thereof at maturity or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an au~horized escrow agent, or (ii) Government Securities shal 1 have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Government Securities have been certified by an independent accounting firm to mature as · to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the principal of and interest on such Certificates, or the principal arnount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or Government securities will be made under this Section and no use made of any such deposit which would cause the Certificates to be treated as "arbitrage bonds11 within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/ Registrar and . all income from Government Securities held in trust by the Paying Agent/Registrar, or an authorized escrow .agent, pursuant to this Section which is not required for the payment of the Certificates, or any principal amount(s} thereof, or interest thereon with respect to which such moneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent/Registrar fqr the payment of the principal of and interest on the Certificates and remaining unclaimed for a period of four (4) years after the maturity, or applicable redemption date, of the Certificates for which such moneys were deposited and are held in trust to pay, shall upon the request of the City be remitted to the City against a written receipt therefor. Notwithstanding the above and foregoing, any remittance of funds from the· Paying Agent/Registrar to the City shall be subject to any applicable unclaimed property laws of the State of Texas. -23- 1 1 }· . '\ ) SECTION 2 O: Ordinance a Contract -Amendments. This Ordinance· shall constitute a contract with the Holders from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains Outstanding except as permitted in this Section. The City, may, without the consent of or notice to any Holders of the Certificates, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Holders of the Certificates, including the curing of any ambig'IJi ty, inconsistency, or formal defect or omission herein. In addition, the City may, with the written consent of Holders of the Certificates holding a majority in aggregate principal a~ount of the Certificates then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders of Outstanding Certificates, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Certificates, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, premium, if any, or interest on the Certificates, (2) give any preference to any Certificate over any other Certificate, or (3) reduce the aggregate principal amount of Certificates required to be held by Holders for consent to any such amendment, addition, or rescission. SECTION 21: Notices to Holders -Waivers . Wherever this .Ordinance provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided} if in writing and sent by United States Mail, first class postage prepaid, to the address of each Holder appearing in the Security Register at the close of business on the business day next preceding the mailing of such not~ce. In any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Certificates. Where this Ordinance provides for notice in any manner, such notice may be waived in writing by the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 22: Cancellation. Certificates surrendered for payment, redemption, transfer, or exchange, if surrendered to the Paying Agent/Registrar, shall be promptly canceled by it and, if -24- ) surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already canceled, shall be promptly canceled by the Paying Agent/Registrar. The City may at any time deliver to the Paying Agent/Registrar for cancellation any Certificates previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Certificat es so delivered shall be promptly canceled by the Paying Agent/Registrar. All canceled Certificates held by the Paying Agent/Registrar shall be returned to the City. SECTION 23: Mutilated, Destroyed, Lost and Stolen Certificates. In case any Certificate shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar may execute and deliver a replacement Certificate of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Certificate,·or in lieu of and in substitution for such destroyed, lost or stolen Certificate, only upon the approval of the City and after (i) the filing by the Holder thereof with the Paying Agent/Registrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such Certificate, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the City and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation1 execution and delivery of a replacement Certificate shall be borne by the Holder of the certificate mutilated, or destroyed, lost or stolen. Every replacement Certificate issued pursuant to this Section shall be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Certificates; notwithstanding the enforceability of payment by anyone of the destroyed, lost or stolen Certificates. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement and payment of mutilated, destroyed, lost, or stolen Certificates. SECTION 24: Covenants to Maintain Tax-Exempt Status. A. Definitions. When used in this Section1 the following terms have the following meanings: "Closing Date" means the date on which the Certificates are first authenticated and delivered to the initial purchasers against payment therefor. -25- , ) ) ) . "Code 11 means the Internal Revenue Code of 1986, as amended by all legislation, if any, ef fee ti ve on or before the Closing Date. "Computation Date" has the meaning set forth in Section 1.148-l(b) of the Regulations. "Gross Proceeds" means any proceeds as defined in Section 1.148-l(b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1 (c) of the Regulations, of the Certificates. "Investment'' has the meaning set forth in Sect'ion 1.148-l(b) of the Regulations. "Nonpurpose Investment" means any investment property, as defined in section 148{b) of the Code, in which Gross Proceeds of the Certificates are invested and which is not acquired to carry out the governmental purposes of the Certificates. "Rebate Amount" has the meaning set forth in Section l.148-l{b) of the Regulations. "Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Certificates. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. "Yield" of (1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (2) the Certificates has the meaning set forth in Section 1.148-4 of the Regulations. B. Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any certificate to -26- j ) ) become includable in the gross income, as defined in section 61 of the Code,-of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Certificate, the City shall comply with each of the specific covenants in this Section. C.. No Private Use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Certificates: (1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Certificates, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public} or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Certificates or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. D. No Private Loan. Except to the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Certificates to make or finance loans to any p~rson or entity other than a state or local government. For purposes of t.he foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with •such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such -27- property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction ~hich is the economic equivalent of a loan. E. Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final stated Maturity of the Certificates directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds {or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Certificates. F. Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Certificates to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. G.· Information Report. The City shall timely file the information required by section 149 (e} of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. H. Rebate of Arbitrage p·rofits. otherwise provided in section 148(f} Regulations and rulings thereunder: Except to the extent of the Code and the O«o703 (1) The City shall account for all Gross Proceeds {including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least· six years after the day on which the last Outstanding Certificate is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of the Certificates with other money of the City, provided that the City separately ac;counts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148 (f) of the Code and the Regulations and rulings thereunder. The -28- ) City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Certificates until six years after the final Computation Date. (3) As additional consideration for the purchase of the Certificates by the Purchasers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Certificate Fund or its general fund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Certificates equals (i) in the case of a Final Computation Date as defined in Section 1.148-3 (e} (2) of the Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by Section 148(f) of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs {2) and (3}, and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section l.148-3(h) of the Regulations. I. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the Certificates, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection H of this Section because such transaction results in a smaller profit or a iarger loss than would have resulted if the -29- 7 ) ) transaction had been at arm's length and had the Yield of the Certificates not been relevant to either party. J .. Elections. The City hereby directs and authorizes the Mayor, City Secretary, City Manager, and First Assistant City Manager, individually or jointly, to make elections permitted or required pursuant to the provisions of the Code or the Regulations, as they deem necessary or appropriate in connection with the Certificates, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. SECTION 25: Sale of the Certificates. Pursua11t to a public sale for the certificates, the bid submitted by Salomon Smith Barney & Associates (herein referred to as the 0 Purchasers0 ) is declared to be the best bid received producing the lowest net effective interest cost to the City, and the sale of the Certificates to said Purchasers at the price of par and accrued interest to the date of delivery, plus a premium of $377 .11, is hereby approved and confirmed. Delivery of the Certificates to the Purchasers shall occur as soon as possible upon payment being made therefor in accordance with the terms of sale. SECTION 26: Proceeds of Sale. The proceeds of sale of the Certificates, excluding the accrued interest and premium, if any, received from the Purchasers, shall be deposited in a construction fund maintained .at the City's depository bank. Pending expenditure for authorized projects and purposes, such proceeds of sale may be invested in authorized investments and any investment earnings realized maybe expended for such authorized projects and purposes or deposited in the Certificate Fund as shall be determined by the City Council. Accrued interest and premium, if any, received from the Purchasers as well as all surplus proceeds of sale of the Certificates, including investment earnings, remaining after completion of all authorized projects or purposes shall be deposited to the credit of the Certificate Fund. SECTION 27: Control and Custody of Certificates. The Mayor of the City shall be and is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the State of Texas, including the printing of the Certificates, and shall take and have charge and control of the Certificates pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers . · Furthermore, the Mayor, City Secretary, City Manager, First Assistant City Manager, Director of Financial Services I and F~nance Manager, any one or more of said officials, are hereby -30- ) ) ,.. authorized and directed to furnish and execute such do cuments and cert if ica·tions relating to the City and the issuance of the Certificates, including a certification as to facts, estimates, circumstances and reasonable expectations pertaining to the use and expenditure and investment of the proceeds of the Certificates as may be necessary for the approval of the Attorney General, registration by the Comptroller of Public Accounts and delivery of the Certificates to the purchasers thereof and, together with the City's financial advisor, bond counsel and the Paying Agent/Registrar, make the necessary arrangements for the delivery of the Initial Certificate(s) to the purchasers. SECTION 28: Official Statement. The Official statement prepared in the initial offering and sale of the Certificates by the City, together with all addendas, supplements and amendments thereto issued on behalf of the City, is hereby approved as to form and content, and the City Council hereby !inds that the information and data contained in said Official Statement pertaining to the City and its financial affairs is true and correct in all material respects and no material facts have been omitted therefrom which are necessary to make the statements therein, in light of the circumstances under which they were .made, not misleading. The use of such Official Statement in the reoffering of the Certificates by the Purchasers is hereby approved and ·authorized. SECTION 29 : Legal Opinion. The obligation of the Purchasers to accept delivery of the Certificates is subject to being furnished a final opinion of Fulbright & Jaworski L.L.P., Attorneys, Dallas, Texas, approving such Certificates as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for such Certificates. A true and correct reproduction of said opinion is hereby authorized to be printed on the definitive Certificates or an executed counterpart thereof shall accompany the global Certificates deposited with the Depository Trust Company. SECTION 30: CUSIP Numbers. That CUSIP numbers may be printed or typed on the definitive Certificates. It is expressly provided, however, that the presence or absence of CUSIP numbers on the definitive Certificates shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving said Certificates as to legality are to be held responsible for CUSIP numbers incorrectly printed or typed on the definitive Certificates. SECTION 31: Benefits of Ordinance. Ordinance, expressed or implied, is intended or to confer upon any person other than the Ag_ent/Registrar and the Holder_s, any right, 0480103 -31- Nothing in this shall be construed City, the Paying remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision· hereof, this Ordinance and all its provisions being intended to be and being for the sole and exclusive benefit of the City, the Paying Agent/Registrar and the Holders. SECTION 32: Inconsistent Provisions. All ordinances, orders or resol utions, or parts thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to the extent of such conflict and the provisions of this Ordinance shall be and remain controlling as to the matters contained herein. SECTION 33: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 34: Severability. If any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other circumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would· have been enacted without such invalid provision. SECTION 35: Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 36: Construction of Terms. If appropriate in the context of this Ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to include the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other g~nders. SECTION 37: Continuing Disclosure Undertaking. (a) Definitions. A~ used in this Section, the following terms have the meanings ascribed to such terms below: 11 MSRB11 means the Municipal Securities Rulemaking Board. 11 NRMSIR11 means each person whom the SEC or it.s staff has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. "Rule" means SEC Rule 1Sc2-12, as amended from time to time. "SEC14 means the United States Securities and Exchange Commission. -32- ) ) 11 SID11 means any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule fr9m time to t ime . (b) Annual Reports. The City shall provide annually to each NRMSIR and any SID, within six mont hs after the end of each fiscal year (beginning with the fiscal year ending September 30, 1997) financial information and operating data with respect to the City of the general type included in the final Official Statement .approved by Section 28 of this Ordinance, being the informati on described in Exhibit B hereto. Financial statements to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit B hereto and (2) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided . If audited financial stat ements are not available at the time the financial information and operating data must be provided, then the City shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and any SID with the financial information and operating data and will file the annual audit report, when and if the same becomes available. If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section, The financial i nformation and operatirig data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (i ncluding an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC . (c) Material Event Notices. The City s.hall 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: 0481)10S 1. Principal and i nterest 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 difficulti es; s . Substitution of credit or liquidity providers, or their failure to perform; -33- ") ') ) 6. Adverse tax opinions or events affecting the tax- exempt status of the Certificates; 7. Modifi cations to rights of holders of the Certificates; 8. Certificate calls; 9 . Defeasances; 10. Release, substitution, or sale of property securing repayment of the Certificates; and 11. Rating changes. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the . City to provide financial information or operating data in accordance with subsection (b) of this Section-by the time required by such Section. {d) Limitations, Disclaimers, and Amendments. The City shall be obligated to observe and perform the covenants specified in this Section while, but only while, the City remains an "obligated person11 with respect to the Certificates within the meaning of the Rule, except that the City in any event will give the notice required by subsection (c) hereof of any Certificate calls and defeasance that cause the City to be no longer such an "obligated person." The provisions of this Section are for the sole benefit of the Holders and beneficial owners of the Certificates, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may · be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information· or its usefulness to.a decision to invest in or sell Certificates at any future date. · UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. -34- j . No default by the City in observing or performing its obligations under this Section shall constitute a breach of or default under this Ordinance for purposes of any other provi sion of this Ordinance. Nothing in this Sec tion is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances resulting from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2} either {a) the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally rec·ognized bond counsel) determines that such amendment will not materially impair the interests of the Holders and beneficial owners of the Certificates. The provisions of this Section may also be amended from time to time or repealed by the City if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such provisions are invalid, but only if and to the extent that reservation of the City's right to do so would not prevent underwriters of the initial public offering of the Certificates from lawfully purchasing or selling Certificates in such offering. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (b} an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data ,so provided. SECTION 38 : Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by V.T.C.A.,_ Government Code, Chapter 551, as amended. 0480703 0 1 ) SECTION 39: Effective Date. This Ordinance shall take ·effect and be in force immediately from and after its passage on second and final reading, and IT IS SO ORDAINED. PASSED AND ADOPTED ON FIRST READING, December 11, 1997. PASSED AND ADOPTED ON SECOND AND FINAL READING, this the 8th day of·January, 1998. CITY OF.LUBBOCK, TEXAS ATTEST: (City Seal) -36- EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT See Document Number 5 ") ') 0 ""· DESCRIPTION OF ANNUAL FINANCIAL INFORMATION Exhibit B to Ordinance The following information is referred to in Section 37 of this Ordinance. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: 1 . The financial statements of the City appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. :2 • The information contained in Tables l through 6 and 8A through 20 of the Official Statement. Accounting Principles The accounting principles referred to in such Section are the generally accepted accounting principles as applicable to governmental uni ts as prescribed by The Government Accounting Standards Board. No Text "'\' ORDINANCE NO. 10137 AN ORDINANCE authorizing 1he issuance of "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 1999"; specifying the terms and features of sai~ bonds; levying a continuing direct annual ad valorem tax for the payment of said bonds; and resolving other matters incident and related to the issuance, sale, payment and delivery of said bonds, Including the approval and execution of a Paying Agent/Registrar Agreement, a Purchase Contract and a Special Escrow Agreement and the approval and distribution of an Official Statement, and providing an effective date. WHEREAS, the City Council of the City of Lubbock, Texas (the "City'1 has heretofore issued, sold, and delivered, and there is currently outstanding, obligations totaling in principal amount $19,730,000 (collectively, the ~Refunded Obligations'j more particularly described as follows: (1) City of Lubbock, Texas, Combination Tax and Exhibition Hall/Auditorium (limited Ptedge) Revenue Certificates of Obligation, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2002, 2010 and 2011, and aggregating in principal amount (2) City of Lubbock, Texas, Combination Tax and Waterworks System Subordinate Uen Revenue Certificates of Obligation, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2002, $610,000 2010 and 2011, and aggregating in principal amount $2,425,000 (3) City of Lubbock. Texas, General Obligation Bonds, Series 1991, dated May 15, 1991, maturing on February 15 in each of the years 2002, 201 0 and 2011, and aggregating in principal amount $ 300,000 (4) City of Lubbock, Texast Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1991, dated November 15, 1991, maturing on February 15 in each of the years 2003 through 2012, and aggregating in principal amount $ 850,000 (5) · City of Lubbock, Texas, Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1992, dated May 15, 1992, maturing on February 15 in each of the years 2006 through 2014, and aggregating in principal amount $15,545,000 AND WHEREAS, pursuant to the provisions of Artide 717k, V.A. T.C.S., as amended, the City Council is authorized to issue refunding bonds and deposit the proceeds of sale directly with any place of payment for the Refunded Obligations, and such deposit, when made in accordance with said statute, shall cons1itute the making of finn banking and financial anangements for the discharge and final payment of the Refunded Obligations; and 745670.l 0 0 . .... ,•; WHER~S. the City Council hereby finds and determines that general obligation refunding bonds should be issued at this time to refund the Refunded Obligations, and such refunding wilf result in the City saving approximately $1,085,490.11 in debt service payments on such indebtedness and further provide present value savings of approximately $765,018.67; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: . SECTION 1: Authorization -Designation -Principal Amount-Purpose. General obligation refunding bonds of the City shall be and are hereby authorized to be issued in the aggregate principal amount of $20,835,000 to be designated and bear the title "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 1999" (hereinafter referred to as the "Bonds"), for the purpose of providing funds for the discharge and final payment of certain outstanding obligations of the City (identified in the preamble hereof and referred to as the "Refunded Obligations'; and to pay costs of issuance, in accordance with authority conferred by and in confonnity with the Constitution and laws of the State of Texas, including Article 717k, V.A.T.C.S. SECTION 2: Fully Registered Obligations -Bond Date -Authorized Denominations -Stated Maturities -Interest Rates. The Bonds shall be issued as fully registered obligations only, sha.11 be dated January 15, 1999 (the .. Issue Date"), shall be in denominations of $5,000 or any integral multiple (within a Stated Maturity, except for the single Initial Bond referenced in Section 8) thereof, and shall become..due and payable on February 15 in eaeh of the years and in principal amounts (the "Stated Maturities") and bear interest at the rate(s) per annum in accordance with the following schedule: · YEAR OF PRINCIPAL INTEREST MATURITY INSTALLMENTS RATE 2000 $140,000 4.00% 2001 . 145,000 4.00% 2002 1,245,000 4.00% 2003 215,000 4.00% 2004 220,000 4.00% 2005 220,000 4.00% 2006 1,940,000 4.00% 2007 1,915,000 4:00% 2008 1,895,000 4.10% 2009 1,870,000 4.20% 2010 2,960,000 4.30% 2011 2,930,000 4.45% 2012 1,785,000 4.55% 2013 1,685,000 4.65% 2014 1,670,000 4.70%. 7•6670.1 -2- 0 0 ,.,_,.••! The Bonds shall bear interest on the unpaid principal amounts from the Issue Date at the rate(s) per annum shown above in this Section (calculated on the basis of a 360-day year of twelve 30-day months). Interest on the Bonds shall be payable on February 15 and August 15 in each year, commencing August 15, 1999. SECTION 3: Terms of Payment -Paying Agent/Registrar. The principal of, premium, if any, and the interest on the Bonds, due and payable by reason of maturity, redemption or otherwise, shaU be payable only to the registered owners or holders of the Bonds (hereinafter called the "Holders") appearing on the registration and transfer books maintained by the Paying Agent/Registrar, and the payment thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without exchange or collection charges to the Holders. The selection and appointment of Chase Bank of Texas, National Association to serve as Paying Agent/Registrar for the Bonds is hereby approved and confirmed. Books and records relating to the registration, payment, exchange and transfer of the Bonds (the "Security Register") shall at all times be kept and maintained on behalf of the City by the Paying Agent/Registrar, all as provided herein, in accordance with the terms and provisions of a "Paying Agent/Registrar Agreement", substantially in the form attached hereto as Exhibit A, and such reasonable rules and regulations as the Paying Agent/Registrar and the City may prescribe. The Mayor and City Secretary are hereby authorized to execute and deliver such Agreement in connection with the delivery of the Bonds. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds are paid and discharged. and any successor Paying Agent/Registrar shall be a bank, tn.Jst company, financial institution or other entity qualified and authorized to serve · in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Bonds, the City agrees to promptly cause a written notice thereof to be sent to each Holder by United States Mail, first class postage prepaid, which notice shalt also give the address of the new Paying Agent/Registrar. Principal of and premium, if any, on the Bonds shall be payable at the Stated Maturities or redemption, only upon presentation and surrender of the Bonds to the Paying Agent/Registrar at its designated offices in OaUas, Texas (the "Designated Payment/Transfer Office"). Interest on the Bonds shall be paid to the Holders whose name appears in the Security Register at the close of business on the Record Date (the last business day of the month next preceding each interest payment ·date) and shall be paid by lhe Paying Agent/Registrar {i) by check sent United States Mail, first ciass postage prepaid, to the address of the Holder recorded in the Security Register or {ii) by such other method, acceptable to the Paying Agent/ Registrar, requested by, and at lhe risk and expense of, the Holder. If the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the City where the Designated Payment/Transfer Office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day when banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. . 7.(5610.l -3- n 0 r, ·, In the event of a nonpayment of interest on a scheduled payment date, and for thirty {30) days thereafter, a new record date for such interest payment (a "Special Record Date") 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 (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first ciass postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. SECTION 4: Redemption. (a) Optional Redemption. The Bonds having Stated Maturities on and after February 15, 2010 shall be subject to redemption prior to maturity, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by tot by the Paying Agent/Registrar), on February 15, 2009 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. {b) Exercise of Redemption Option. At least forty-five (45) days prior to a redemption date for the Bonds (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the City shall notify the Paying Agent/Registrar of the decision to redeem Bonds, the principal amount of each Stated Maturity to be redeemed, and the date of redemption therefor. The decision of the City to exercise the right to redeem Bonds shall be entered in the minutes of the governing body of the City. (c) Sefection of Bonds for Redemption. If less than all Outstanding Bonds of the same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Bonds as representing the number of Bonds Outstanding which is obtained by dividing the princip~I amount of such Bonds by $5,000 and shall select the Bonds to be redeemed within such Stated Maturity by lot. (d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Bonds, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the City and at the City's expense, to each Holder of a Bond to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemptiOn shall (i) specify the date of redemption for the Bonds, (ii) identify the Bonds to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, (iv) state that the Bonds, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and (v) specify that payment of the redemption price for the Bonds, or the principal amount thereof to be redeemed, shall be made at the Designated Payment/Transfer Office of the Paying 7•5670.1 -4- 0 0 0 :,· .· Agent/Registrar only upon presentation and surrender thereof by the Holder. If a Bond is subject by its terms to prior redemption and has been called for redemption and notice of redemption thereof has been duly given as hereinabove provided, such Bond (or the principal amount thereof to be redeemed) shall become due and payable and interest thereon shall cease to accrue from and after the redemption date therefor, provided moneys sufficient for the payment of such Bond (or of the principal amount thereof to be redeemed) at the then applicable redemption price are held for the purpose of such payment by the Paying Agent/Registrar. SECTION 5: Registration -Transfer-Exchange of Bonds-Predecessor Bonds. The Paying Agent/Registrar shall obtain, record, and maintain in the Security Register the name and address of each and every owner of the Bends issued under and pursuant to the provisions of this Ordinance, or if appropriate, the nominee thereof. Any Bond may be transferred or exchanged for Bonds of other authorized denominations by the Holder, in person or by his duly authorized agent, upon surrender of such Bond to the Paying Agent/Registrar at the Designated PaymenVTransfer Office for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. Upon surrender of any Bond (except for the single Initial Bond referenced in Section 8 hereof) for transfer at the Designated Payment/Transfer Office of the Paying Agent/ Registrar, one or more new Bonds shall be registered and issued to the assignee or transferee of the pr~vious Holder; such Bonds to be in authorized denominations, of like Stated Maturity and of a like aggregate principal amount as the Bond or Bonds surrendered for transfer. At the option of the Holder, Bonds (other than the single Initial Bond referenced in Section 8) may be exchanged for other Bonds of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate.principal amount as the Bonds surrendered for exchange, upon surrender of the Bonds to be exchanged at the Designated Payment/Transfer Office of the Paying Agent/ Registrar. Whenever any Bonds are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new Bonds to the Holder requesting the exchange. All Bonds issued in any transfer or exchange of Bonds shall be delivered to the Holders at the Designated Payment/Transfer Office of the Paying Agent/Registrar or sent by United States Mail, first ciass, postage prepaid to the Holders, and, upon the registration and delivery thereof, the same shall be the valid obligations of the City, evidencing the same obligation to pay, and entiUed to the same benefits under this Ordinance, as the Bonds surrendered in such transfer or exchange. All transfers or exchanges of Bonds pursuant to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or excnange of any tax or other governmental charges required to pe paid with respect to such transfer or exchange. 71'5670.l -5- 0 0 0 'j' Bonds. cancelled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be "Predecessor Bonds," evidencing aJI or a portion, as the case may be, of the same obligation to pay evidenced by the new Bond or Bonds registered and delivered in the exchange or transfer therefor. Additionally, the term "Predecessor Bonds" shall include any mutilated, lost, destroyed, or stolen Band for which a replacement Bond has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 11 hereof and such new replacement Bond shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Bond. Neither the City nor the Paying Agent/Registrar shall be required to issue or transfer to an assignee of a Holder any Bond called for redemption, in whole or in part, within 45 days of the date fixed for the redemption of such Bond; provided, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a Bond called for redemption in part. SECTION 6: Book-Entry Only Transfers and Transactions. Notwithstanding the provisions contained in Sections 3, 4 and 5 hereof relating to the payment, and transfer/exchange of the Bonds, the City hereby approves and authorizes the use of "Book-Entry Only" securities clearance, settlement and transfer system provided by The Depository Trust Company (OTC), a limited purpose trust company organized under the laws of the State of New York, in accordance with the operational arrangements referenced in a Blanket Issuer Letter-of Representations by and between the City and OTC (the ~Depository Agreement"). Pursuant to the Depository Agreement and the rules of OTC, the Bonds shall be deposited with OTC who shall hold said Bonds for its participants (the "OTC Participants"). While the Bonds are held by OTC under the Depository Agreement, the Holder of the Bonds on the · Security Register for all purposes, including payment and notices, shall be Cede & Co., as nominee of OTC, notwithstanding the ownership of each actual purchaser or owner of each Bond (the "Beneficial Owners") being recorded in the records of OTC and OTC Participants. In the event OTC determines to discontinue serving as securities depository for the Bonds or otherwise ceases to provide book-entry clearance and settlement of securities transactions in general or the City determines that OTC is incapable of property discharging its duties as securities depository for the Bonds, the City covenants and agrees with the Holders of the Bonds to cause Bonds to be printed in definitive form and provide for the Bond certificates to be issued and delivered to OTC Participants and Beneficial Owners, as the case may be. Thereafter, the.Bonds in definitive fonn shall be assigned, transferred and exchanged on the Security Register maintained by the Paying Agent/Registrar and payment of such Bonds shall be made in accordance with the provisions of Sections 3, 4 and 5 hereof. SECTION 7: Execution. Registration. The Bonds shall be executed on behalf of the City by the Mayor under its seal reproduced or impressed thereon and countersigned by the City Secretary. The signature of said officers on the Bonds may be manual or facsimile. Bonds bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the Issue Date shall be deemed to be duly executed on behalf of the City, 7•5670.1 -6- 0 0 ... ..., notwithstanding t)'lat such individuals or either of them shall cease to hold such offices at the time of delivery of the Bonds to the initial purchaser(s) and With respect to Bonds delivered in subsequent exchanges and transfers, all as authorized and provided in the Bond Procedures Act of 1981, as amended. No Bond shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Bond either a certificate of registration substantially in the form provided in Section 9C, manually executed by the Comptroller of Public Accounts of the State of Texas, or his duly authorized agent, or a certificate of registration substantially in the form provided in Section 9D, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar. and either such certificate duly signed upon any Bond shall be conclusive evidence, and the only evidence, that such Bond has been duly certified, registered and delivered. SECTION 8: Initial Bond(s). The Bonds herein authorized shall be initially issued either (i) as a single fully registered bond in the total principal amount noted in Section 1 with principal installments to become due and payable as provided in Section 2 hereof and numbered T-1, or (ii) as fifteen (15) fully registered bonds, being one bond for each year of maturity in the applicable principal amount and denomination and to be numbered consecutively from T-1 and upward (hereinafter called the "Initial Bond(s)") and, in either case, the Initial Bond(s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Bond(s} shall be the Bonds submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any time after the detivery of the Initial 8ond(s), the Paying Agent/ Registrar, pursuant to written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial Bond(s) delivered hereunder and exchange therefor definitive Bonds of authorized denominations, Stated Maturities, principal amounts and bearing applicable interest rates for transfer and defivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser(s}, or the deslgnee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. SECTION 9: Forms. A. Forms Generally. The Bonds, the Registration Certificate of the Comptroller of. Public Accounts of the State of Texas, the Registration Certificate of Paying Agent/Registrar, and the fonn of Assignment to be printed on each of the Bonds, shall be substantially in the forms set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (induding identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including insurance legends on insured Bonds and any reproduction of an opinion of counsel) thereon as may, consistently herewith, be established by the City or detennined by the officers executing such Bonds as evidenced by their execution. Any portion of the text of any Bonds may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Bond . 7<15670.t -7- 0 0 ' The definitive Bonds and the Initial Bond( s) shall be printed, I ithographed, or engraved or typewritten, photocopied or otherwise reproduced in any other similar manner, all as determined by the officers executing such Bonds as evidenced by their execution thereof. 8 . REGISTERED NO. __ _ Form of Definitive Bond. UNITED STA TES OF AMERICA STATE OF TEXAS CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION REFUNDING BOND, SERIES 1999 REGISTERED $ ____ _ Issue Date: Interest Rate: Stated Maturity: CUSIPNO: January 15, 1999 Registered Owner: Principal Amount: DOLLARS The City of Lubbock (hereinafter referred to as the "City'1, a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the order of the Registered Owner named above, or the registered assigns thereof, on the Stated Maturity date specified above the Principal Amount hereinabove stated ( or so much thereof as shall not have been paid upon prior redemption), and to pay interest on the unpaid principal amount hereof from the Issue Date at the per annum rate of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 15 and August 15 in each year, commencing August 15, 1999. Principal of this Bond is payab~e at its Stated Maturity or rederription to the registered owner hereof, upon presentation and surrender, at the Designated Payment/Transfer Office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor. Interest is payable to the registered owner of this Bond (or one or more Predecessor Bonds, as defined in the Ordinance hereinafter referenced) whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date, and interest shatl be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Bond shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Bond is one of the series specified in its title issued in the aggregate principal amount of $20,835,000 (herein referred to as the "Bonds") for the purpose of providing funds 7•5670.1 -8~ n 0 0 :, for the discharg~ and final payment of certain outstanding obligations of the City (identified in the Ordinance hereinafter referenced and referred to as the "Refunded Obligations") and to pay costs of issuance, under and in strict conformity with the Constitution and laws of the State of Texas, including Article 717k, V.A.T.C.S., and pursuant to an Ordinance adopted by the City Council of the City (herein referred to as the "Ordinance"}. The Bonds maturing on and after February 15, 2010 may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof ( and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2009, or on any date thereafter, at the redemption price of par, together with accrued interest to the date of redemption and upon 30 days prior written notice being sent by United States Mail, first class postage prepaid, to the registered owners of the Bonds to be redeemed, and subject to the terms and provisions relating thereto contained in the Ordinance. If this Bond (or any portion of the principal sum hereof) shall have been duly called for redemption and notice of such redemption duly given, then upon such redemption date this Bond (or the portion of the principal sum hereof to be redeemed) shall become due and payable, and interest thereon shall cease to accn.,e from and after the redemption date therefor, provided moneys for the payment of the redemption price and the interest on the principal amount to be redeemed to the date of redemption are held for the purpose of such payment by the Paying Agent/Registrar. In the event of a partial redemption of the principal amount of this Bond, payment of the redemption price of such principal amount shall be made to the registered owner only upon presentation and surrender of this Bond to the Designated Payment/Transfer Office of the Paying Agent/Registrar, and there shall be issued to the registered owner hereof, without charge, a new Bond or Bonds of like maturity and interest rate in any authorized denominations provided by the Ordinance for the then unredeemed balance of the principal sum hereof. If this Bond is selected for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer this Bond to an assignee of the registered owner within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the registered owner of the unredeemed balance hereof in the event of its redemption in part. The Bonds are payable from the proceeds of an ad vatorem tax levied, within the limitations prescribed by law, upon all taxable property in the City. Reference is hereby made to the Ordinance, a copy of which is on file in the Designated Payment/Transfer Office of the Paying Agent/Registrar, and to all of the provisions of which the owner or holder of this Bond by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of lhe tax levied for the payment of the Bonds; the terms and conditions relating to the transfer or exchange of this Bond: the conditions upon which the Ordinance may be amended or supplemented with or without the consent of the Holders; the rights, duties, and obligations of the City and lhe Paying Agent/Registrar, the tenns and proviSions upon which this Bond may be discharged at or prior to its maturity, and deemed to be no longer Outstanding thereunder; and forothertenns and provisions contained therein. Capitalized tem,s used herein have the meanings assigned in the Ordinance. 7"5670.l -9- ... This Bond, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only upon its presentation and surrender at the Designated Payment/Transfer Office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent. When a transfer on the Security Register occurs, one or more new fully registered Bonds of the same Stated Maturity, of authorized denominations, bearing the same rate of interest, and of the same aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, shall treat the registered owner whose name appears on the Security Register (i) on the Record Date as the owner entitled to payment of interest hereon, (ii) on the date of surrender of this Bond as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and Oii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/ Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty (30) days thereafter, a new record date for such interest payment (a •special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first c;lass postage prepaid, to the address of each Holder appearing on the Security Register at the cfose of business on the last business day next preceding the date of mailing of such notice. It is hereby certified, recited, represented and decfared that the City is a body corporate and political subdivision duly organized and legally existing under and by virtue of the Constitution and laws of the State of Texas; that the issuance of the Bonds is duly authorized by law; that all acts, conditions and things required to exist and be done precedent to and in the issuance of the Bonds to render the same lawful and valid obligations of the City have been property done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Bonds do not exceed any Constitutional or statutory limitation; ~d that due provision has been made for the payment of the principal of and interest on the Bonds by the levy of a tax as aforestated. In case any provision in this Bond shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The tenns and provisions of this Bond and the Ordinance shall be construed in accordance with and shall be govemed by the laws of the State of Texas. 745670.l -10- 'I tN WITN~SS WHEREOF, the City Council of the City has caused this Bond to be duty executed under-the official seal of the City as of the Issue Date. COUNTERSIGNED: City Secretary (SEAL} CITY OF LUBBOCK, TEXAS Mayor c. •Form of Registration Certificate of Comptroller of Public Accounts to appear on Initial Bond{s) only. REGISTRATION CERTJFICA TE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS ( ( ( ( REGISTER NO. ___ _ THE STATE OF TEXAS I HEREBY CERTIFY that this Bond has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seat of office this ____ _ (SEAL) •NOTE TO PRINTER: 745670.l Comptroller of Public Accounts of the State of Texas Do Not Print on Definitive Bonds -11- ' D. · Form of Certificate of Paying Agent/Registrar to appear on Definitive Bonds only. REGISTRA TrON CERTIFICATE OF PAYING AGENT/REGISTRAR This Bond has been duly issued and registered under the provisions of the within-mentioned Ordinance; the bond or bonds of the above entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. The designated offices of the Paying Agent/Registrar in Dallas, Texas, is the Designated Payment/Transfer Office for this Bond. Registration Date: E. Fonn of Assignment CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as Paying Agent/Registrar By ____ ::--:----------Authorized Signature ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address; and zip code of transferee:) ______ _ (Social Security or other identifying number: _______________ _ _______________ _, the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints _______________ _ attorney to transfer the within Bond on the books kept for registration thereof, with ruu power of substitution in the premises. DATED: _________ _ Signature guaranteed: 7•5670.1 NOTICE: The signature on this assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular. -12- F. The Initial Bond(s) shall be in the form set forth in paragraph B of this Section. except that the form of the single fully registered Initial Bond shall be modified as follows: (i) immediately under the name of the bond the headings "Interest Rate _ __ .. and "Stated Maturity " shall both be omitted; (ii) Paragraph one shall read as follows: Registered Owner: Principal Amount: Dollars The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to U,e order of the Registered Owner named above, or the registered assigns thereof, the Principal Amount hereinabove stated on February 15 in each of the years and in principal installments in accordance with the following schedule: YEAR OF MATURITY PRINCIPAL INSTALLMENTS INTEREST RATE (Information to be inserted from schedule in Section 2 hereof). (or so much principal thereof as shall not have been prepaid prior to maturity) and to pay interest on the unpaid Principal Amount hereof from the Issue Date at the per annum rates of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 15 and August 15 in each year, commencing August 15, 1999. Principal installments of this Bond are payable in the year of maturity or on a prepayment date to the registered owner hereof by Chase Bank of Texas, National Association (the "Paying Agent/Registrar''), upon presentation and surrender, at its designated offices in OaUas, Texas (the "Designated Payment/Transfer Office'l Interest Is payable to the registered owner of this Bond whose name appears on the "Security Register'' maintained by the Paying Agent/Registrar at the close of business on the "Record Date•, which is the last business day of the month next preceding each interest payment date, and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first ciass postage prepaid, to the address of the registered owner recorded ih Ule Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Bond shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. SECTION 10: Levy of Taxes. To provide for the payment of the "Debt Service Requirements" of the Bonds, being (i) the interest on lhe Bonds and (iO a sinking fund for their redemption at maturity or a sinking fund of 2% (whichever amount is the greater), there is hereby 1•5670.1 -13- ) ) ) ) levied, and there _shall be annually assessed and collected in due time, form, and manner, a tax on all taxable property in the City, within the limitations prescribed by law, and such tax hereby levied on each one hundred dollars' valuation of taxable property in the City for the Debt Service Requirements of the Bonds shall be at a rate from year to year as will be ample and sufficient to provide funds each year to pay the principal of and interest on said Bonds while Outstanding; full allowance being made for delinquencies and costs of collection; separate books and records relating to the receipt and disbursement of taxes levied, assessed and collected for and on account of the Bonds shall be kept and maintained by the City at all times while the Bonds are Outstanding, and the taxes collected for the payment of the Debt Service Requirements on the Bonds shall be deposited to the credit of a "Special 1999 Refunding Bond Account" (the "Interest and· Sinking Fund") maintained on the records of the City and deposited in a special fund maintained at an official depository of the City's funds; and such tax hereby levied, and to be assessed and collected annually, is hereby pledged to the payment of the Bonds. Proper officers of the City are hereby authorized and directed to cause to be transferred to the Paying Agent/ Registrar tor the Bonds, from funds on deposit in the Interest and Sinking Fund, amounts .sufficient to fully pay and discharge promptly each installment of interest and principal of the Bonds as the same accrues or matures; such transfers of funds to be made in such manner as will cause collected funds to be deposited with the Paying Agent/Registrar on or before each principal and interest payment date for the Bonds. Provided, however, in regard to the interest payment to become due on the Bonds on August 15, 1999, sufficient current funds are available and are hereby appropriated to make such payments; and proper officials of the City are hereby authorized and directed to transfer and deposit to the credit of the Interest and Sinking Fund, such current funds which, together with the accrued interest received from the purchaser, will be sufficient to pay the amount of the interest payment due on the Bonds on August 15, 1999. SECTION 11: Mutilated -Destroyed -Lost and Stolen Bonds. In case any Bond shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar may execute and deliver a replacement Bond of like fonn and tenor,· and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Bond, or in lieu of and in substitution for such destroyed, lost or stolen Bond, only upon the approval of the City and after (i) the filing by the Holder thereof with the Paying Agent/ Registrar of evidence satisfactory to lhe Paying Agent/ Registrar of the destruction, loss or theft of s~ch Bond, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the City and the Paying Agent/ Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a·replacement Bond shall be borne by the Holder of the Bond mutilated, or destroyed, lost or stolen. Every replacement Bond issued pursuant to this Section shall be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Bonds; notwithstanding the enforceability of payment by anyone of the destroyed, lost, or stolen Bonds. 7•5670.l -14- ) ) . I. The pr~visions of this Section are exclusive and shaJI preclude {to the extent lawful) all other rights and remedies with respect to the replacement and payment of mutilated, destroyed, lost or stolen Bonds. SECTION 12: Satisfaction of Obligation of City. If the City shall pay or cause to be paid, or there shaH otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Bonds, at the times and in the manner stipulated in this Ordinance, then lhe pledge of taxes levied under this Ordinance and all covenants, agreements, and other obligations of the City to the Holders shall thereupon cease, terminate, and be discharged and satisfied. Bonds or any principal amount(s) thereof shall be deemed to have been paid within the meaning and with the effect expressed above in this Section when (i) money sufficient to pay in full such Bonds or the principal amount(s} thereof at maturity or to the redemption date therefor, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or Oi) Government Securities shall have been irrevocably deposited in trust with the Paying Agent/ Registrar, or an authorized escrow agent, which Government Securities have been certified by an independent accounting firm to mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the principal of and interest on such Bonds, or the principal amount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or Government Securities will be made under this Section and no use made of any such deposit which would cause. the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/ Registrar, or an authorized escrow agent, and alt income from Government Securities held in trust by the Paying Agent/Registrar, or an authorized escrow agent, pursuant to this Section which is not required for the payment of the Bonds, or any principal amount(s} thereof, or interest thereon with respect to which such moneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and interest on the Bonds and remaining unclaimed for a period of four (4) years after the Stated Maturity, or applicable redemption date, of the Bonds such moneys were deposited and are held in trust to pay shall upon the request of the City be remitted to the City against a written receipt therefor. Notwithstanding the above and foregoing, any remittance of funds from the Paying Agent/Registrar to the City shall be subject to any applicable unclaimed property laws of the State of Texas. The term "Government Securities", as used herein, means direci obligations of, or obligations the principat of and interest on which are unconditionally guaranteed by, the United States of America, which are non-callable prior to the respective Stated Maturities of the Bonds 7•5670.1 -15- ' ) :, ·,·' -~· ,\ and may be Unit~d States Treasury Obligations such as the State and Local Government Series and may be in book-entry form. SECTION 13: Ordinance a Contract• Amendments • Outstanding Bonds. This Ordinance shall constitute a contract with the Holders from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Bond remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Holders, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Holders, including the curing of any ambiguity, inconsistency, or fonnal defect or omission herein. In addition, the City may, with the consent of Holders holding a majority in aggregate principal amount of the Bonds then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders of Outstanding Bonds, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Bonds, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, premium, if any, or interest on the Bonds, (2) give any preference to any Bond over any other Bond, or (3) reduce the aggregate principal amount of Bonds required to be held by Holders for consent to any such amendment, addition, or rescission. The term "Outstanding" when used in this Ordinance with respect to Bonds means, as of the date of determination, all Bonds theretofore issued and delivered under this Ordinance, except: ( 1) those Bonds cancelled by the Paying Agent/Registrar or delivered to the Paying Agent/ Registrar for cancellation: (2) those Bonds deemed to be duly paid by the City in accordance with the provisions of Section 12 hereof; and (3) those mutilated, destroyed, lost, or stolen Bonds which have been replaced with Bonds registered and delivered in lieu thereof as provided in Section 11 hereof. SECTION 14: Covenants to Maintain Tax-Exempt Status. {a) Definitions. When used in this Section, the following terms shall have the following meanings: 7•5670.1 "Closing Date" means the date on which the Bonds are first authenticated and delivered to the initial purchasers against payment therefor. "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. "Computation Oate"has the meaning set forth in Section 1.148-1 (b) of the Regulations. -16- ' •,. "~ross Proceeds• means any proceeds as defined in Section 1.148-1 (b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1(c) of the Regulations. of the Bonds. "Investment• has the meaning set forth in Section 1.148-1(b) of the Regulations. "Nonpurpose Investment" means any investment property, as defined in section 148{b) of the Code, in which Gross Proceeds of the Bonds are invested and which is not acquired to carry out the governmental purposes of the Bonds. "Rebate Amount" has the meaning set forth in Section 1.148-1 (b) of the Regulations. HRegulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Bonds. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary orfinat Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. "Yield" of (l) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (ii) the Bonds has the meaning set forth in Section 1.148· 4 of the Regulations. (b) Not to Cause Interest to Become Taxable. The City shall not use, pennit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Bond to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant wi11 not adversely affect the exemption from federal income tax of the interest on any Bond, the City shall comply with each of the specific covenants in this Section. (c) No Private Use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Bonds: 7~5670.l (1) exclusively own, operate and possess all property the acquisition, constl'\Jction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Bonds (including property financed with Gross Proceeds of the Refunded Obligations), and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public} or any property acquired, constructed or improved with such Gross -17- ' Proceeds. in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds (induding property financed with Gross Proceeds of the Refunded Obligations). other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. (d) No Private Loan. Except to the extent pennitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or ·service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed·or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. (e) Not to Invest at Higher Yield. Except to the extent pennitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Bonds directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Bonds. (f) Not Federally Guaranteed. Except to the extent permitted by section 149{b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Bonds to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. (g) Information Report. The City shall timely file the information required by section 149(e) of the Code with the Secretary of the Treasury on Fenn 8038-G or such other form and in such place as the Secretary may prescribe. (h} Rebate of Arbitrage Profits_ Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder: 7•5670.1 (1) The City shall account for all Gross Proceeds (incJuding all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) -18- and shall ~etain all records of accounting for at least six years after the day on which the last Outstanding Bond is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of the Bonds With other money of the City, provided that the City separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date. (3) As additional consideration for the purchase of the Bonds by the Purchasers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Interest and Sinking Fund or its general fund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Bonds equals (i) in the case of a Final Computation Date as defined in Section 1.148- 3( e) (2) of the Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied by Fonn 8038-T or such other forms and information as isormayberequired by Section 148(f) of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148-3(h) of lhe Regulations. {i) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the Bonds, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection (h) of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Bonds not been relevant to either party. 7•5670.1 -19- (j) Elections. The City hereby directs and authorizes the Mayor, Mayor Pro Tem, City Secretary, City Manager, and Managing Director of Finance, individually or joinUy, to make elections permitted or required pursuant to the provisions of the Code or the Regulations. as they deem necessary or appropriate in connection with the Bonds, in the Certificate as to Tax Exemption or similar or other appropriate certificate, fonn or document. (k) Bonds Not Hedge Bonds. (1) At the lime the original bonds refunded by the Bonds were issued, the City reasonably expected to spend at least 85% of the spendable proceeds of such bonds within three years after such bonds were issued and (2) not more than 50% of the proceeds of the original bonds refunded by the Bonds were invested in Nonpurpose Investments having a substanti~lly guaranteed Yield for a period of 4 years or more. · (I) Qualified Advance Refunding. The Bonds are issued exclusively to refund the Refunded Obligations, and the Bonds will be issued more than 90 days before the redemption of the Refunded Obligations. The City represents as follows: (1) The Bonds are the first advance refunding of the Refunded Obligations, within the meaning of section 149{d)(3) of the Code. (2) The Refunded Obligations are being called for redemption, and will be redeemed not later than the earliest date on which such bonds may be redeemed. (3) The initial temporary period under section 148(c) of the Code will end: (i) with respect to the proceeds of the Bonds not later than 30 days after the date of issue of such Bonds; and (ii) with respect to proceeds of the Refunded Obligations on the Closin_g Date if not ended prior thereto. (4) On and after the date of issue of the Bonds, no proceeds of the Refunded Obligations will be invested in Nonpurpose Investments having a Yield in excess of the Yield on such Refunded Obligations. (5) The Bonds are being issued for the purposes stated in the preamble of this Ordinance. There is a present value savings associated with the refunding. In the issuance of the Bonds the City has neither: 0) overburdened the tax-exempt bond market by issuing more bonds, issuing bonds earlier or allowing bonds to r~main outstanding longer than reasonably necessary to accomplish the governmental purposes for which the Bonds were issued; {ii) employed on "abusive arbitrage device" within the meaning of Section 1.148--10(a) of the Regulations; nor (iii) employed a "device" to obtain a material fmancial advantage based on arbitrage, within the meaning of section 149(d)(4) of the Code, apart from savings attributable to lower interest rates and reduced debt service payments in early years. SECTION 15: Sate of Bonds -Official Statement Approval. The Bonds authorized by this Ordinance are hereby sold by the City to Morgan Keegan & Company, Inc., Estrada Hinojosa 74.5670.J -20- ., & Company, Inc.,_ Nations Banc Montgomery Securities LLC and Siebert Brandford Shank & Co., LLC {herein referred to as the "Purchasers") in accordance with the Purchase Contract, dated January 28, 1999, attached hereto as Exhibit Band incorporated herein by reference as a part of this Ordinance for all purposes. The Mayor is hereby authorized and directed to execute said Purehase Contract for and on behalf of the City and as the act and deed of this Council, and in regard to the approval and execution of the Purchase Contract, the Council hereby finds, determines and deciares that the representations, warranties and agreements of the City contained in the Purchase Contract are true and correct in all material respects and shall be honored and performed by the City. Furthermore, the use of the OfficiaJ Statement by the Purchasers in connection with the public offering and sale of the Bonds is hereby ratified, confirmed and approved in all respects. The final Official Statement, which reflects the terms of sale, attached as Exhibit A to the Purcllase Contract {together with such changes approved by the Mayor, Mayor Pro Tern, City Secretary, City Manager, First Assistant City Manager or Managing Director of Finance, one or both of said officials), shalt be and is hereby in all respects approved and the Purchasers are hereby authorized to use and distribute said final Official Statement, dated January 28, 1999, in the reoffering, sale and delivery of the Bonds to the public. The Mayor and City Secretary are further authorized and directed to manually execute and deliver for and on behalf of the City copies of said Official Statement in final form as may be required by the Purchasers, and such final Official Statement in the form and content manually executed by said officials shall be deemed to be approved by the City Council and constitute the Official Statement authorized for distribution and use by the Purchasers. SECTION 16: Special Escrow Agreement Approval and Execution. The "Special Escrow Agreement" (the "Agreement") by and between the City and ·Norwest Bank Texas, National Association (the "Escrow Agent''), attached hereto as Exhibit C and incorporated herein by reference as a part of this Ordinance for all purposes, is hereby approved as to form and content, and such Agreement in substantially the form and substance attached hereto, together with such changes or revisions as may be necessary to accomplish the refunding or benefit the City, is hereby authorized to be executed by ttle Mayor and City Secretary for and on behalf of the City and as the act and deed of this City Council; and such-Agreement as executed by said officials shall be deemed approved by the City Council and constitute the Agreement herein approved. Furthermore, appropriate officials of the City in cooperation with the Escrow Agent are hereby authorized and directed to make the necessary arrangements for the purchase of the Federal Securities referenced in the Agreement and the delivery thereof to the Escrow Agent on the day of delivery of the Bonds to the Purchasers for deposit to the credit of the "SPECIAL 1999 CITY OF LUBBOCK, TEXAS, REFUNDING BONO ESCROW FUND" (the "Escrow Fund"); all as contemplated and provided in Article 717k, V.A.T.C.S., as amended, this Ordinance and the Agreement. SECTION 17: Control and Custody of Bonds. The Mayor of the City shall be and is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the State of Texas, including the printing and supply of 7•5670.1 -21- ) l . definitive Bonds, .and shall take and have charge and control of the Initial Bond(s) pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers. Furthennore, the Mayor, Mayor Pro Tern, City Manager, First Assistant City Manager, Managing Director of Finance, and City Secretary, any one or more of said officials, are hereby authorized and directed to furnish and execute such agreements, documents and certifications relating to the City and the issuance, sale and delivery of the Bonds, induding certifications as to facts, estimates, circumstances and reasonable expectations pertaining to the use, expenditure and investment of the proceeds of the Bonds, as may be necessary for the approval of the Attorney General, the registration by the Comptroller of Public Accounts and the delivery of the Bonds to the Purchasers, and, together with the City's bond counsel and the Paying Agent/Registrar, make the necessary arrangements for the delivery of the Initial Bond(s) to the Purchasers and the initial exchange thereof for definitive Bonds. SECTION 18: Proceeds of Sale. Immediately following the delivery of the Bonds, the proceeds of sale thereof (less certain costs of issuance and the accrued interest received from the Purchasers of the Bonds) shall be deposited with the Escrow Agent for application and disbursement in accordance with the provisions of the Agreement The proceeds of sale of the Bonds not so deposited with the Escrow Agent for the refunding of the Refunded Obligations shall be disbursed and deposited for payment of costs of issuance and deposited in the Interest and Sinking Fund all in accordance with written instructions from the City. Additionally, on or immediately prior to the date of the delivecy-of the Bonds to the Purchasers, the Managing Director of Finance shall cause to be transferred in immediately available funds to the Escrow Agent from moneys on deposit in the interest and sinking funds maintained for the payment of the Refunded Obligations the sum of $115,000.00 to accomplish the refunding. SECTION 19: Redemption of Refunded Obligations. (a) The bonds of that series known as "City of Lubbock, Texas, General Obligation Bonds, Series 1991", dated May 15, 1991, maturing in the years 2002, 201 O and 2011, and aggregating in principal amount $300,000, shall be redeemed and the same are hereby called for redemption on February 15, 2001, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this Ordinance, together with a suggested fonn of notice of redemption to be sent to bondholders, with Norwest Bank Texas, National Association, in accordance with the redemption provisions applicable to such bonds; such suggested form of notice of redemption being attached hereto as Exhibit D and incorporated herein by reference as a part of this Ordinance for all purposes. (b) The certificates of obligation of that series known as ''City of Lubbock, Texas, Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation, Series 1991", dated May 151991, maturing in the years 2002, 2010 and 2011, and aggregating in principal amount $2,425,000, shall be redeemed and the same are hereby called for redemption on February 15, 2001, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this 7•5670.l -22- Ordinance, tog~ther with a suggested form of notice of redemption to be sent to certificateholders, with Norwest Bank Texas, National Association, in accordance with the redemption provisions applicable to such obligations; such suggested fonn of notice of redemption being attached hereto as Exhibit E and incorporated herein by reference as a part of this Ordinance for all purposes. {c) The certificates of obligation of that series known as "City of Lubbock, Texas, Combination Tax and Exhibition HalVAuditorium (Limited Pledge) Revenue Certificates of Obligation, Series 1991", dated May 15, 1991, maturing in the years 2002, 2010 and 2011, and aggregating in principal amount $610,000, shall be redeemed and the same are hereby called for redemption on February 15, 2001 , at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this Ordinance, together with a suggested form of notice of redemption to be sent to certificateholders, with Norwest Bank Texas, National Association, in accordance with the redemption provisions applicable to such obligations; such suggested fonn of notice of redemption being attached hereto as Exhibit F and incorporated herein by reference as a part of this Ordinance for alt purposes. (d) The certificates of obligation ·of that series known as "City of Lubbock, Texas, Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1991", dated November 15, 1991, maturing in the years 2003 through 2012, and aggregating in principal amount $850,000, shall be redeemed and the same are hereby called for redemptio!l on February 15. 2002, at the price of par and accrued interest to the date of redemption. The City Secretary is hereby authorized and directed to. file a copy of this Ordinance, together with a suggested fonn of notice of redemption to be sent to certifrcateholders, with Chase Bank of Texas, National Association (successor paying agent/registrar to Texas Commerce Trust Company, N.A.), in accordance with the redemption provisions applicable to such obligations; such suggested form of notice of redemption being attached hereto as Exhibit G and incorporated herein by reference as a part of this Ordinance for an purposes. (e) The certificates of obligation of that series known as •City of Lubbock, Texas, Combination Tax and Sewer System Subordinate Uen Revenue Certificates of Obligation, Series 1992", dated May 15, 1992, maturing in the years 2006 through 2014, and aggregating in principal amount $15,545,000, shall be redeemed and the same are hereby called for redemption on February 15, 2004, at the price of par and accrued Interest to the date of redemption. The City Secretary is hereby authorized and directed to file a copy of this Ordinance, together with a suggested form of notice of redemption to be sent to certificateholders," with Chase Bank of Texas, National Association (successor paying agent/registrar to Texas Commerce Trust Company, N.A.), in accordance with the redemption provisions applicable to such obligations: such suggested fonn of notice of redemption being attached hereto as Exhibit H and incorporated herein by reference as a part of this Ordinan~ for all purposes. The redemption of the obligations desaibed above being associated with the advance refunding of such obligations, the approval, authorization and arrangements herein given and provided for the redemption of such obligations on the redemption dates designated therefor and 745670.l -23- I· in the manner prqvided shall be irrevocable upon the issuance and delivery of the Bonds; and the City Seaetary is hereby authorized and directed to make all arrangements necessary to notify the holders of such obligations of the City's decision to redeem such obligations on the dates and in the manner herein provided and in accordance with the ordinances authorizing the issuance of the obligations and this Ordinance. SECTION 20: Notices to Holders -Waiver. Wherever this Ordinance provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and sent by United States Mail, first dass postage prepaid, to the address of each Holder appearing in the Security Register at the close of business on the business day next preceding the mailing of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Bonds. Where this Ordinance provides for notice in any manner, such notice may be waived in writing by the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given. and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 21: Cancellation. All Bonds surrendered for payment, redemption, transfer, exchange, or replacement, if surrendered to the Paying Agent/Registrar, shall be promptly cancelled by it and, if surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already cancelled, shall be prompUy cancelled by the Paying Agent/ Registrar. The City may at any time deliver to the Paying Agent/Registrar for cancellation any Bonds previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly cancelled by the Paying Agent/Registrar. All canc;elled Bonds held by the Paying Agent/Registrar shall be returned to the City. SECTION 22: Legal Opinion. The obligation of the Purchasers to accept delivery of the Bonds is subject to being furnished a final opinion of Fulbright & Jaworski L.L.P., Attorneys, Dallas, Texas, approving such Bonds as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for such Bonds. A true and correct reproduction of said opinion or an exeruted counterpart thereof is hereby authorized to be either printed on definitive printed obligations or deposited with OTC along with the global certificates for the implementation and use of the Book Entry Only System used in the settlement and transfer of the Bonds. SECTION 23: CUSIP Numbers. CUSIP numbers may be printed or typed on the Bonds deposited with The Depository Trust Company or on printed definitive Bonds. It is expressly provided, however. that the presence or absence or CUSIP numbers on the definitive Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving the Bonds as to legality are to be held responsible for CUSIP numbers incorrectly printed or typed on the definitive Bonds. 745670.1 -24- ) SECTION 2.4: Benefits of Ordinance. Nothing in this Ordinance, expressed or implied, is intended or shall be construed to confer upon any person other than the City, the Paying Agent/Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision hereof, and this Ordinance and all its provisions is intended to be and shaU be for the sole and exclusive benefit of the City, the Paying Agent/Registrar and the Holders. · SECTION 25: Inconsistent Provisions. All ordinances, orders or resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to the extent of such conflict, and the provisions of this Ordinance shall be and remain controlling as to the matters contained herein. SECTION 26: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 27: Effect of Headings. The Sedion headings herein are for convenience only and shall not affect the construction hereof. SECTION 28: Construction of Terms. If appropriate in the context of this Ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to indude the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders. SECTION 29: Severability. If any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other circumstances shall nevertheless be valid, and the City Councii hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 30: Incorporation of Findings and Oetenninations. The findings and determinations of the City Council contained in the preamble hereof are hereby incorporated by reference and made a part of this Ordinance for all purposes as if the same were restated in full in this Section. SECTION 31 : Continuing Disclosure Undertaking. (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB' means the Municipal Securities Rulemaking Board. "NRMS/Fr' means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the r:neaning of the Rule from time to time. 7•5670.l "Rule" means SEC Rule 1sc:2-12, as amended from time to time. "SEC' means the United States Securities and Exchange Commission. -25- ) . ' .. "SIG'· means any person designated by the State of Texas or an authorized department. officer. or agency thereof as, and determined by the SEC or its staff to be, a state infonnation depository within the meaning of the Rule from time to time. (b) Annual Reports. The City shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year (beginning with the fiscal year ending September 30, 1998) financial information and operating data with respect to the City of the general type included in the final Official Statement approved on the date hereof, being the information described in Exhibit I hereto. Financial statements to be provided shall be (1) prepared in accordance with the accounting principles descnbed in Exhibit I hereto and (2) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not so provided, then the City shall provide audited financial statements for the applicable fiscal year to each NRMSIR and any SID, when and if audited financial statements become available. If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial infonnation and operating data pursuant to this Section. The financial infonnation 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 re.ference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. (c) Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Bonds, if such event is material within the meaning of the federal securities laws: 7•5670.l 1. 2. 3. difficulties; 4. 5. 6. Bonds; 7. 8. 9. 10. Bonds;and 11. Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on debt service reserves reflecting financial Unscheduled draws on aedltenhancements reflecting financial difficulties: Substitution of credit or liquidity providers, or their failure to·perform; Adverse tax opinions or events affecting the tax-exempt status of the Modifications to rights of holders of the Bonds; Bond calls; Defeasances; Release, substitution, or sale of property securing repayment of the Rating changes. -26- ' ' . The City shatl notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such Section. (~) Umitations, Disclaimers, and Amendments. The City shall be obligated to observe and perform the covenants specified in this Section while, but only while, the City remains an "obligated person·• with respect to the Bonds within the meaning of the Rule, except that the City in any event will give the notice required by subsection (c) hereof of any Bond calls and defeasance that cause the City to be no longer such an "obligated person." The provisions of this Section are for the sole benefit of the Holders and beneficial owners of the Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any olher information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT ANO REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Section shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall ad to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Section may be amended by the City from time to time to adapt to changed·circumstances resulting from a change in legal requirements, a change.in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Section, as so amended, would have pennitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Bonds consent to such amendment or (b) a Person that is unaffiliated with the City (such as nationally recognized bond counsel) detennlnes that such 7•5670.l -27- ) amendment will not.materially impair the interests of the Holders and beneficial owners of the Bonds. The provisions of this Section may also be amended from time to time or repealed by the City if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such provisions are invalid, but only if and to the extent that reservation of the City's right to do so would not prevent underwriters of the initial public offering of the Bonds from lawfully purchasing or selling Bonds in such offering. If the City so amends the provisions of this Section, it shall include with any amended financial infonnation or operating data filed with each NRMSIR and SID pursuant to subsection (b) of this Section an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. SECTION 32: Public Meeting. It is officially found, detennined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by V. T.C.A., Government Code, Chapter 551, as amended. SECTION 33: Effective Date. This Ordinance shall be in force and effect from and after its passage on second and final reading and IT IS SO ORDAINED. PASSED AND ADOPTED ON FIRST READING, this January 14, 1999. PASSED AND ADOPTED ON SECOND ANO FINAL READING, this the 28th day of January, 1~99. CITY OF LUBBOCK, TEXAS ATTEST: CitySe r (City Seal} 7•6670.l -28- EXHIBIT A ) PAYING AGENT/REGISTRAR AGREEMENT See Document Number 6 ) ' EXHIBITS EXECUTED PURCHASE CONTRACT See Document Number 11 } . EXHIBIT C EXECUTED SPECIAL ESCROW AGREEMENT See Document Number 7 j ) } EXHIBIT D NOTICE OF REDEMPTION CllY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS SERIES 1991 DA TED MAY 15, 1991 NOTICE IS HEREBY GIVEN that all bonds of the above series maturing on February 15, 2002, 2010 and 2011 and aggregating in principal amount $300,000 have been called for redemption on February 15, 2001 at the redemption price of par and accrued interest to the date of red.emption, such bonds being identified as follows: Year of Principal Amount Maturity Outstanding 2002 $100,000 2010 100,000 2011 100,000 ALL SUCH BONDS shall become due and payable on February 15, 2001, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said bonds shall ·be paid to the registered owners of the bonds only upon presentation and surrender of such bonds to Norwest Bank Texas, National Association (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas). THIS NOTICE is issued and given pursuant to the tenns and conditions prescribed for the redemption of said bonds and pursuant to an ordinance by the City Council of the City of Lubbock, Texas. 7•5670.l NORWEST BANK TEXAS, NATIONAL ASSOCIATION Address: 5tt1 and Marquette Avenue Minneapolis, MN 55479-1113 ) ,. EXHIBIT E NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, COMBINATION TAX AND WATERWORKS SYSTEM SUBORDINATE LIEN REVENUE CERTIFICATES OF OBLIGATION SERIES 1991 DATED MAY 15, 1991 NOTICE IS HEREBY GIVEN that all certificates of obligation of the above series maturing on February 15, 2002, 201 0 and 2011 and aggregating in principal amount $2,425,000 have been called for redemption on February 15, 2001 at the redemption price of par and accrued interest to the date of redemption, such certificates of obligation being identified as follows: Year of Maturity 2002 2010 2011 Principal Amount Outstanding $805,000 810,000 810,000 ALL SUCH CERTIFICATES OF OBLIGATION shall become due and payable on February 15, 2001, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said certificates of obligation shall be paid to the registered owners of the certificates of obligation only upon presentation and surrender of such certificates to Norwest Bank Texas, National Association (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas). TH IS NOTICE is issued and given pursuant to the tenns and conditions prescribed for the redemption of said certificates and pursuant to an ordinance by the City Council of the City of Lubbock, Texas. 745670.1 NORWEST BANK TEXAS. NATIONAL ASSOCIATION Address: 6111 and Marquette Avenue Minneapolis. MN 55479--1113 ) ) EXHIBlT F NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, COMBINATION TAX AND EXHIBITION HALUAUDITORIUM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION SERIES 1991 DATED MAY 15, 1991 NOTICE IS HEREBY GIVEN that alt certificates of obligation of the above senes maturing on February 15, 2002, 2010 and 2011 and aggregating in principal amount $610,000 have been called for redemption on February 15, 2001 at the redemption price of par and accrued interest to the date of redemption, such certificates of obligation being identified as follows: Year of Maturity 2002 2010 2011 Principal Amount Outstanding $200,000 205,000 205,000 ALL SUCH CERTIFICATES OF OBLIGATION shall become due and payable on February 15, 2001, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said certificates of obligation shall be paid to the registered owners of the certificates of obligation only upon presentation and surrender of.such certificates to Norwest Bank Texas, National Association (successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas). THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for the redemption of said certificates and pursuant to an ordinance by the City Council of the City of Lubbock, Texas. 7•6670.l NORWEST BANK TEXAS, NATIONAL ASSOCIATION Address: 6"' and Marquette Avenue Minneapolis, MN 55479-1113 1 ) ) : EXHlBITG NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, COMBINATION TAX AND SEWER SYSTEM SUBORDINATE LIEN REVENUE CERTIFICATES OF OBLIGATION SERIES 1991 DATED NOVEMBER 15, 1991 NOTICE IS HEREBY GIVEN that all certificates of obligation of the above series maturing on and after February 15, 2003 aggregating in principal amount $850,000 have been called for redemption on February 15, 2002 at the redemption price of par and aecrued interest to the date of redemption, such certificates of obligation being identified as follows: Year of Maturity 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Principal Amount Outstanding $85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 ALL SUCH CERTIFICATES OF OBLIGATION shall become due and payable on February 15, 2002, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said certificates of obligation shall be paid to the registered owners of the certificates of obligation only upon presentation and surrender of such certificates to Norwest Bank Texas, National Association (successor paying agent/registrar to Texas Commerce Bank National Association, LubbOck, Texas). THIS NOTICE is issued and given pursuant to the terms and conditions prescribed for the redemption of said certificates and pursuant to an ordinance by the City Council of the City of Lubbock, Texas. 1•5670.l NORWEST BANK TEXAS, NATIONAL ASSOCIATION Address: 6th and Marquette Avenue Minneapolis, MN 55479-1113 '\ ) ) . EXHIBIT H NOTICE OF REDEMPTION CITY OF LUBBOCK, TEXAS, COMBINATION TAX AND SEWER SYSTEM SUBORDINATE LIEN REVENUE CERTIFICATES OF OBLIGATION SERIES 1992 DATED MAY 15, 1992 NOTICE IS HEREBY GIVEN that all certificates of obligation of the above series maturing on and after February 15, 2006, and aggregating in principal amount $15,545,000 have been called for redemption on February 15, 2004 at the redemption price of par and accrued interest to the date of redemption, such certificates of obligation being identified as follows: Year of Principal Amount Maturi!'( Outstanding 2006 $1,725,000 2007 1,725,000 2008 1,725,000 2009 1,725,000 2010 1,725,000 2011 1,730,000 2012 1,730,000 2013 1,730,000 2014 1,730,000 ALL SUCH CERTIFICATES OF OBLIGATION shall become due and payable on February 15, 2004, and interest thereon shall cease to accrue from and after said redemption date and payment of the redemption price of said certificates of obligation shall be paid to the registered owners of the certificates of obligation only upon presentation and surrender of such certificates to Norwest Bank Texas, National Association {successor paying agent/registrar to Texas Commerce Bank National Association, Lubbock, Texas). THIS NOTICE is issued and given pursuant to the tenns and conditions prescribed for the redemption of said certificates and pursuant to an ordinance by the City Council of the City of Lubbock, Texas. 7-45670.l NORWEST BANK TEXAS, NATIONAL ASSOCIATION Address: 6"' and Marquette Avenue Minneapolis, MN 5547S.1113 '· l '· DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 31 of this Ordinance. Annua• Financial Statements and Operating Data Exhibit I to Ordinance The financial infonnation and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or ' · under the headings of the Official Statement referred to) below: ... ..•. \ 1. The financial statements of the City appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. 2. The infonnation under Tables 1 through 6, BA through 20. Accounting Principles The accounting principles referred to in such Section are the generally accepted accounting principles as applicable to governmental units as prescribed by The Government Accounting Standards Board. 7•5670.l No Text ) ORDINANCE NO. 10153 AN ORDfNANCE authorizing the issuance of "CllY OF LUBBOCK. TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING BONDS, SERIES 1999"; specifying the terms and features of said bonds; providing for the payment of said bonds by the levy of an ad valorem tax upon all taxable property within the City and a pledge of the net revenues derived from the operation of the City's Waterworks System; and resolving other matters incident and relating to the issuance, payment. security, sate and delivery of said bonds, including the approval and execution of a Paying Agent/Regis1rar Agreement and a Escrow Agreement and the approval and distribution of an Official Statement pertaining thereto; and providing an effective. WHEREAS, the City of Lubbock (the City") is a member of the Canadian River Municipal Water Authority (the "Authority") pursuant to Chapter 243, Acts of the 57 Leg., Regular Session, (1953), as amended, and has entered into a contract with the Authority known as the Meredith Supply Agreement, dated January 9, 1961, as amended ( the "Meredith Supply Agreement") for the purchase of water from Lake Meredith that was constructed by the United States of Am~rica under an act of Congress, dated December 29, 1950 (64 Stat.1124) and Repayment Contract No. 14-06-500-485, between the United States of America and the Authority, dated November 28, 1960. as amended; and WHEREAS, under the tenns of the Meredith Supply Agreement, a portion of the cost of water supplied the City represents the Authority's obligation to repay the United States of America for the construction of Lake Meredith, and pursuant to Public Law No. 105,316, the Authority became entitled to prepay its obligation to the United States of America, provided such prepayment occurs within 360 days of October 30, 1998; and WHEREAS, the Meredith Supply Agreement has been amended by an Agreement between the Canadian River Municipal Water Authority And The City of Lubbock, Texas For The Prepayment Of The Obligations To The United States Of Amefica Incurred In Connection With The Construction Of The Canadian River Project (the "Prepayment·Agreementj, made and . entered into as of January 28, 1999, providing for the City's percentage share of the repayable construction cost obligations owed to the Untied States of A!11erica by the Authority to be 41 .877%, after appropriate credits for certain costs and for payments previously made, O( the-sum of $12,212,860.87 (hereinattercaJled the ·city's Obligation;: and · WHEREA~1. the City Council of the City her~by finds and determines that refunding bonds should be issued and sold at this time for the purpose of providing..funds for the prepayment of . _ the "City's Obligation· under the Meredith Supply Agreemen~ as ameri<fed by .the Prepayment· · Agreement; and WHEREAS, pursuant to the provisions or Article 717k, V.A.T.C.S., as amended, and in accordance with the terms of the Prepayment Agreement. the City is authorized to issue refunding bonds and deposit the proceeds of sale in an escrow account pursuant to an escrow agreement with a state or national bank with trust powers having a combined capital, surplus and undivided profits of at least $75,000,000 that will be for the exclusive benefit of making the City's payment to the Authority for payment of the City's Obligation; and 761920.l WHEREAS, the City Council hereby finds and determines refunding bonds should be issued and s9Ld at this time to prepay the City's Obligation under and pursuant to the Meredith Supply Agreement as amended by the Prepayment Agreement and such refunding will result in savings to the City of approximately $7,709,067 and a reduction in the City's annual payments to the Authority under the Meredith Supply Agreement by approximately $360,000; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK, TEXAS: SECTION 1: Authorization, Designation, Principal Amount Purpose. Refunding bonds of the City shall be and are hereby authorized to be issued in the aggregate principal amount of $12,300,000 to be designated and bear the title "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING BONDS, SERIES 1999" (hereinafter referred to as the ''Bonds11), for the purpose of prepaying the City's Obligation under and pursuant to the Meredith Supply Agreement as amended by the Prepayment Agreement and paying costs of issuance, in conformity with the Constitution and laws of the State of Texas, including Article 717k, V.A.T.C.S., as amended. SECTION 2: Fully Registered Obligations -Bond Date -Authorized Denominations - Stated Maturities -Interest Rates. The Bonds shall be issued as fully registered obligations only, shall be dated April 1, 1999 (the "Bond Date;, shall be in denominations of $5,000 or any integral multiple (within a Stated Maturity, except for the Initial Bond authorized in Section 8 hereot) thereof, and shall become due and payable on February 15 in each of the years and in principal amounts (the "Stated Maturities") and bear interest at the rate(s) per annum in accordance with the following schedule: YEAR OF PRINCIPAL INTEREST MATURITY INSTALLMENTS RATE 2000 $520,000 6.25% 2001 620,000 6.25% 2002 620,000 6.25% 2003 620,000 6.25% 2004 620,000 lf25% · 2005 620,000 6.25% · 2006 620,000 .6.25% 2007 620,000 4.70% 2008· 620,000 4.25% 2009 620,000 4.30% 2010 . -620,000 4.40% 2011 620,000 4.50% 2012 620,000 4.50o/o' = .. _ .•. 2013 620,000 4.50% 2014 620,000 4.50% 2016 1,240,000 4.500/o 2019 1,860,000 f50% 761920.1 -2- 1 ) The.Bon~s shall bear interest on the unpaid principal amounts from the Bond Date at the rate(s) per annum shown above in this Section, and such interest (calculated on the basis of a 360..day year of twelve 30-day months) shall be payable on February 15 and August 15 in each year, commencing February 15, 2000. SECTION 3: Tem,s of Payment• Paying Agent/Registrar. The principal of, premium, if any, and the interest on the Bonds, due and payable by reason of maturity, redemption or otherwise, shall be payable only to the registered owners or holders of the Bonds (hereinafter called the "Holders") appearing on the registration and transfer books maintained by the Paying Agent/Registrar and the payment thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without exchange or collection charges to the Holders. The selection and appointment of Chase Bank of Texas, National Association to serve as Paying Agent/Registrar for the Bonds is hereby approved and confirmed. Books and records relating to the registration, payment, transfer and exchange of the Bonds (the "Security Register'') shall at all times be kept and maintained on behalf of the City by the Paying Agent/Registrar, as provided herein and in accordance with the terms and provisions of a "Paying Agent/ Registrar Agreement", substantially in the form attached hereto as Exhibit A and such reasonable rules and regulations as the Paying Agent/Registrar and the City may prescribe. The Mayor and City Secretary are authorized to execute and deliver such Agreement in connection with the delivery of the Bonds. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds are paid and discharged, and any successor Paying Agent/Registrar shall be a bank, trust company, financiaJ institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying AgenVRegistrar. Upon any change in the Paying Agent/Registrar for the Bonds, the City agrees to promptly cause a written notice thereof to be sent to each Holder by United States Mail, first crass postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Principal of and premium,-if any, on the Bonds shall be payable at the Stated Maturities or redemption thereof, only upon presentation and Sl:HTeAder Qf the Bonds to the Paying Agent/Registrar at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest on the Bonds shall be paid to the Holders whose name appears in the Security Register at the close of business on the Record Date (the. last business day of the month next preceding each interest payment date) and shall be paid by the Paying Agent/Registrar (i) by check sent lfnited States Mail, first class postage prepaid, to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable tc the Paying Agent/Registrar, requested by, and.at th~ risk and expense of, the Holder. If the 9ate for the payment of the principal of or interest on the Bonds shall be·a Saturday, ·Sanday, a·l~g~l ~<?Ji~ay, or a day when .·.- banking institutions in the City where the Designated Payment/Transfe·r ·office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shalt be the next succeeding day Which is not such a Saturday, Sunday, legal holiday, or day when banking institutions are authorized to close; and payment on sµch date shall have the same force and effect as if made on the original date payment was due. 76)920.l -3- In the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment {a KSpecial·Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first dass postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. SECTION 4: Redemption. (a) Optional Redemption. The Bonds having State<i Maturities on and after February 15, 2010, shall be subject to redemption prior to maturity, at the option of the City, in whole or in part in piincipat amounts of $5,000 or any integral multiple thereof (and if l . • within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2009 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. At least forty-five (45) days prior to a redemption date for the Bonds (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the City shall notify the Paying Agent/Registrar of the decision to redeem Bonds, the principal amount of each Stated· Maturity to be redeemed, and the date of redemption therefor. The decision of the City to exercise the right to redeem Bonds shall be entered in the minutes of the governing body of the City. (b) Mandatory Redemption. The Bonds having Stated Maturities of February 15, 2016 and February 15, 2019 (''Term Bonds") shall be subject to mandatory redemption in part prior to maturity at the redemption price of par and accrued interest to the date of redemption on the respective dates and in principal amounts as follows: (i). Bonds maturing February 15, 2018 shall be subject to mandatory redemption on February 15, 2015 in the principal amount of $620,000. (ii) Bonds maturing February 15, 2019._shaU be subject to mandatory redemption as follows: · Redemption Date February 15, 2017 February 15, 2018 Amount $620,000 ·e20.ooo Approximately forty-five (45) days prior to·· each. mandatory redemption date specified above that the Tenn Bonds are to be mandatonly redeemed, ·the Paying =Agent/Registrar shall · · · -- 7619:!Cl.l -4- select by lofthe numbers of the Term Bonds within the applicable Stated Maturity to be redeemed on the next following February 15 from moneys set aside for that purpose in the Bond Fund (as hereinafter_defined). Any Term Bond not selected for prior redemption shall be paid on the date of their Stated Maturity. The principal amount of the Term Bonds for a given Stated Maturity required to be redeemed pursuant to the operation of such mandatocy redemption provisions shall be reduced, at the option of the City, by the principal amount of Term Bonds of like Stated Maturity which, at least 50 days prior to the mandatory redemption date, (1) shall have been acquired by the City at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase thereof. and delivered to the Paying Agent/Registrar for cancellation or (2) shall have been redeemed pursuant to the optional redemption provisions set forth in paragraph(a) of this Section and not theretofore credited against a mandatory redemption requirement {c) Selection of Bonds for Redemption. If less than all Outstanding Bonds of the same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Bonds as representing the number of Bonds Outstanding which is obtained by dividing the principal amount of such Bonds by $5,000 and shall select the Bonds to be redeemed within such Stated Maturity by lot. ( d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Bonds, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the City and at the City's expense, to each Holder of a Bond to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be condusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemption shall (i) specify the date of redemption for the Bonds, (ii) identify the Bonds to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption. price, (iv) state that the Bonds, or the portion of the principal amount thereof to be redeemed, shall become due and payable Qn the redemption _date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue··trom and after the redemption date, and (v).specify that payment of the redemption price for the Bonds, or the principal amount ,. thereof to be redeemed, shall be made at Designated PaymenVTransfer Office of the Paying Agent/Registra(only upon presentation and surrender thereof by the Holder. If a Bond is subject by its terms to pri()t redemption and has been called for 11:!dempti9n and notice of redemption thereof has been duly given as hereinabove provided, such Bond (or the-principal amount thereof·· -- to be redeemed) shall become due and payable and interest thereon shall cease to accrue from and after the redemption date therefor; provided moneys sufficient for the payment of such Bond (or of the principal amount thereof to be redeemed) at the then applicable redemption price are held for the purpose of such payment by the Paying Agent/Registrar. SECTION 5: Registration -Transfer -Exchange of Bonds-Predecessor Bonds. The Paying Agent/Registrar shall obtain, record, and maintain in the Security Register the name and 761920.1 -5- ' ). address of each and every owner of the Bonds issued under and pursuant to the provisions of this Ordinance, or if appropriate, the nominee thereof. Any Bond may be transferred or exchanged for Bonds of other authorized denominations by the Halder, in person or by his duly authorized agent, upon surrender of such Bond to the Designated Payment/Transfer Office of the Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/ Registrar. Upon surrender of any Bond (other than the Initial Bond authorized in Section 8 hereof) for transfer at the Designated PaymenVTransferOffice of the Paying Agent/Registrar, one or more new Bonds shall be registered and issued to the assignee or transferee of the previous Holder. such Bonds to be in authorized denominations. of like Stated Maturity and of a like aggregate principal amount as the Bond or Bonds surrendered for transfer. At the option of the Holder, Bonds ( other than the Initial Bond authorized in Section 8 hereof} may be exchanged for other Bonds of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Bonds surrendered for exchange, upon surrender of the Bonds to be exchanged at the Designated Payment/Transfer Office of the Paying Agent/Registrar. Whenever any Bonds are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new Bonds to the Holder requesting the exchange. All Bonds issued in any transfer or exchange of Bonds shall be delivered to the Holders at the Designated Paymentrrransfer Office of the Paying Agent/Registrar or sent by United States Mail, first class postage prepaid, to the Holders, and, upon the registration and delivery thereof, the same shall be the valid obligations of the City, evidencing the same obligation to pay, and entitled to the same benefits under this Or.dinance, as the Bonds surrendered in such tr.ansfer or exchange. ·· All transfers or exchanges of Bonds pursuant t9 thi~ Section shall be made without expense or service charge to the Holder, except as otherwise tierein pro¥ided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax. or other govemm~ntal charges required to be paid wjth respect to such transfer or exchange. · · Bonds cancelled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defiried to be .. Predecessor Bonds", evidencing all or a portion, as the case may be, of the same obligation to pay.evidenced by the new Bor,d.or Bond.s registered and delivered in ... the exchange or transfer therefor. Additionally,··the tenn "Predecessor BendsN st,all inciude any · · mutilated, lost. destroyed, or stolen Bond for which a replacement Bond has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 20 hereof and such new replacement Bond shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Bond. Neither the City nor the Paying Agent/Registrar shall be required to issue or transfer to an assignee of a Holder any Bond called for redemption, in whole or in part, within 45 days of the 7619l0.I ) . date fixed for the-redemption of such Bond; provided, however, such limitation on transferability· shall not be applicable to an exchange by the Holder of the unredeemed balance of a Bond called for redemption in part. SECTION 6: Book-Entry Only Transfers and Transactions. Notwithstanding the provisions contained in Sections 3, 4 and 5 hereof relating to the payment, and transfer/exchange of the Bonds, the City hereby approves and authorizes the use of "Book-Entry Only" securities clearance, settlement and transfer system provided by The Depository Trust Company (OTC), a limited purpose trust company organized under the laws of the State of New York, in accordance with the operational arrangements referenced in the Blanket Issuer Letter of Representation, by and between the City and OTC (the "Depository Agreement''). . Pursuant to the Depository Agreement and the rules of OTC, the Bonds shall be deposited with OTC who shall hold said Bonds for its participants (the "OTC Participants"). While the Bonds are held by OTC under the Depository Agreement, the Holder of the Bonds on the Security Register for all purposes, induding payment and notices, shall be Cede & Co., as nominee of OTC, notwithstanding the ownership of each actual purchaser or owner of each Bond (the "Beneficial Owners") being recorded in the records of OTC and OTC Participants. In the event OTC determines to discontinue serving as securities depository forthe Bonds or otherwise ceases to provide book-entry clearance and settlement of securities transactions in general or the City determines that OTC is incapable of property discharging its duties as securities depository for the Bonds, the City covenants and agrees with the Holders of the Bonds to cause Bonds to be printed in definitive form and provide for the Bond certificates to be issued and delivered to OTC Participants and Beneficial Owners, as the case may be. Th~reafter, the Bonds in definitive form shall be assigned, transferred and exchanged on the Security Register maintained by the Paying Agent/Registrar and payment of such Bonds shall be made in accordance with the provisions of Sections 3, 4 and 5 hereof . .. SECTION 7: Execution-Registration. The Bonds shall be executed on behalf of the City by the Mayor under its seal reproduced or impressed tli"&reon and countersigned by the City Secretary. The signature of ·said officers on the Bonds may 'be manual or facsimile. Bonds bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the Bond Date· shall be deemed· to be duly executed on behalf of the City, notwithstanding that such individuals or either of them shall cease to hold such offices at the time of delivery of the Bonds to the initial purchaser(s) and with respect to Bonds delivered in subsequent exchanges and transfers, all as authorized and provided in the Bond Procedures Act of 1981, as amended. . .. , ; .. ~ .. No Bond·shall be entitled to any right or benefit under this Ordinance~ or be valid or obligatory for any purpose, unless there appears on such Bond either a certificate of registration substantially in the form provided in Section SC, manually executed by the Comptroller of Public Accounts of the State of Texas, or his duly authorized agent, or a certificate of registration substantially in the form provided in Section 90, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar. and either such certificate duly signed 761920.l -7- '\. ) upon any Bond shall be conclusive evidence, and the only evidence, that such Bond has been duly certmed, registered and delivered. SECTION 8: Initial Bond{s). The Bonds herein authorized shall be initially issued either (i) as a single fully registered bond in the total principal amount identified in Section 1 with principal installments to become due and payable as provided in Section 2 hereof and numbered T-1, or (ii) as multiple fully registered bonds, being one bond for each year of maturity in the applicable prin<;ipal amount and denomination and to be numbered consecutively from T ~ 1 and upward {hereinafter called the "Initial Bond(s)") and, in either case, the Initial Bond(s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Bond(s) shall be the Bonds submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any time after the delivery of the Initial Bond(s). the Paying Agent/ Registrar, pursuant to written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial Bond(s) delivered hereunder and exchange therefor definitive Bonds of authorized denominations, Stated Maturitias, principal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser(s), or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. SECTION 9: Forms. A. Fonns Generally. The Bonds, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Registration Certificate of Paying Agent/Registrar, and the fonn of Assignment to be printed on each of the Bonds, shall be substantially in the forms set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including insurance legends in the event the Bonds are sold with insurance and any reproduction of an op.inion of counsel) thereon as may, consistently herewith, be established by the City or determined by the officers executing such · Bonds as evidenced by their execution. Any portion of the text of any Bonds may be set forth on the reverse thereof, with an appropriate reference thereto on the face of th~ Bond. . . The definitive Bonds and the Initial Bond(s) shall be printed, lithographed, or engraved or =- typewritten, photocopied or otherwise reproduced in any other similar manner, all as detennined by the officer:s-ex~~tin~ such Bonds as evidE:nce9 by their execution thereof. : ,.,,...,. 16l920.l -8- . . B. REGISTERED NO. . Form of Definitive Bond. UNITED STATES OF AMERICA STATE OF TEXAS REGISTERED $ ___ _ CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING BOND, SERIES 1999 Bond Date: Interest Rate: Stated Maturity: CUSIP NO: April 1, 1999 Registered Owner: Principal Amount: DOLLARS The City of Lubbock (hereinafter referred to as the "City"), a body corporate and political subdivision in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the order of the Registered Owner named above, or the registered assigns lhereof, on the Stated Maturity date specified above the Principal Amount hereinabove stated (or so much thereof as shall not have been paid upon prior redemption) and to pay interest on the unpaid principal amount hereof from the Bond Cate at the per annum rate of interest specified above computed on the basis of a 36Q.day year of twelve 30-day months; such interest being payable on February 15 and August 15 in each year, commencing February 15, 2000. Principal of this Bond is payable at its Stated Maturity or redemption to the registered owner hereof. upon presentation and surrender, at the Designated Payment/Transfer Office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor; provided, however, while this Bond is registered to Cede & Co., the payment of principal upon a partial redemption of the principal amounl he~of may~e accomplished without presentation and surrender of this Bond. Interest is payable to the registered owner of this Bond (or one or more Predecessor Bonds, as defined in the Ordinance hereinafter referenced) whose name ·appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Rec:oro Oate", which is the last business day of the month next preceding each interest payment date, and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail; first dass postage prepaid, to the address of the registered owner recorded in the Security-Register or by such other n:aethod; acceptable to the Paying Agent/Registrar, requested by. and at the risk and expense of, the registered owner. 'All payments of principal of; · · .- premium, if any, and interest on this Bond shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Bond is one of the series specified in its title issued in the aggregate principal amount of $12,300,000 {herein referred to as the "Bonds") for the purpose of prepaying the City's Obligation 0dentified in the Ordinance) under and pursuant to the Meredith Supply Agreement 761920.l ~9- between the City and the Canadian River Municipal Water Authority, as amended by the Agreement between the Canadian River Municipal Water Authority And The City of Lubbock, Texas For The Prepayment Of The Obligations To The United States Of America Incurred In Connection With The Construction Of The Canadian River Project, made and entered into as of January 28, 1999, and paying costs of issuance, under and in strict conformity with the Constitution and laws of the State of Texas, including Article 717k, V.A.T.C.S., as amended, and pursuant to an Ordinance adopted by the City Council of the City (herein referred to as the ''Ordinance"). The Bonds maturing on dates hereinafter Identified (the "Term Bonds") are subject to mandatory redemption prior to maturity with funds on deposit in the Bond Fund established and maintained for the payment thereof in the Ordinance, and shall be redeemed in part prior to maturity at the price of par and accrued interest thereon to the date of redemption, and without premium, on the dates and in the amounts set forth in the Ordinance. Bonds maturing February 15, 2016, are subject to mandatory redemption on February 15, 2015 in the amount set forth in the Ordjnance. Bonds maturing February 15, 2019, are subject to mandatory redemption on February 15, 2017 and February 15, 2018 in the amount set forth in the Ordinance. The particular Term Bonds of a given maturity to be redeemed on each redemption date shall be chosen by lot by the Paying Agent/Registrar; provided, however, that the principal amount of Term Bonds for a given maturity required to be redeemed pursuant to the operation of such mandatory redemption provisions shall be reduced, at the option of the City, by the principal amount of Term Bonds of like maturity which, at least 50 days prior to a mandatory redemption date, (1) shall have been acquired by the City at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation or (2) shall have been redeemed pursuant to the optional redemption provisions appearing below and not theretofore credited against a mandatory redemption requirement The Bonds maturing on and after February 15,201 O maybe redeemed priorto their Stated Maturities, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2009, or on any date thereafter, at the redemption price of par, together with accrued interest to the date of redempt~on. .-· · .At least thirty days prior to the date fixed for any redemption of Bonds, the City shall cause a written notice of such redemption to be sent by United States Mail, first class postage prepaid, to the registered owners of each Bond to be redeemed at the address shown on the Security Register and subject to. the tenns and provisions relating thereto contained in the Ordinance. If a Bond (or any portion of its principal sum) shall have been duly called for redemption and notice of such redemption-duty. given, then upon su~-redemption date such Bond (or the portion of its principal sum to be redeemed) shall become due and payable, and.il'ltere;St.thereon shall cease . · .- to accrue from and after the redemption date therefor, provided moneys for the payment of the redemption price and the interest on the principal amount to be redeemed to the date of redemption are held for the purpose of such payment by the Paying Agent/Registrar. 761920.1 -10- ) ) ) j In tlie-event a portion of the principal amount of a Bond is to be redeemed and the registered owner is someone other than Cede & Co., payment of the redemption price of such principal amount shall be made to the registered owner only upon presentation and surrender of such Bond to the Designated Payment/Transfer Office of the Paying Agent/Registrar, and a new Bond or Bonds of like maturity and interest rate in any authorized denominations provided by the Ordinance for the then unredeemed balance of the principal sum thereof will be issued to the registered owner, without charge. If a Bond is selected for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer such Bond to an assignee of the registered owner within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the registered owner of the unredeemed balance of a Bond redeemed in part. The Bonds are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and, together with the Previously Issued Obligatiens (as defined in the Ordinance), are additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Ordinance) of the City's Waterwor1<s System (the "System"), such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of "Prior Lien Obligations0 (as defined in the Ordinance) hereafter issued by the City. In the Ordinance, the City reserves and retains the right to issue Prior Lien Obligations while the Bonds are outstanding without limitation as to principal amount but subject to any tenns, conditions or restrictions as may be applicable thereto under law or otherwise, as weU as the right to issue Additional Obligations (as defined in the Ordinance). Reference is hereby made to the Ordinance, a copy of which is on file in the Designated Payment/Transfer Office of the Paying Agent/Registrar, and to all the provisions of which the owner or holder of this Bond by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the tax levied for the payment of the Bonds; the properties constituting the System; the Net Revenues pledged to the payment of the principal of and interest on the Bonds; the nature and extent and manner of enforcement of the pledge; the tenns and conditions relating to the transfer or exchange'bf thi~ Bond; .PJ~ conditions upon which the Ordinance may be amended or supplemented with or without the consent of the· Holders; the rights, duties, and obligations of the City and the Paying Agent/Registrar, the tenns and provisions upon which the tax levy and the Rens, pledges; charges and covenants made therein may be discharged at or prior to the maturity of this Bond, and this Bond deemed to be no longer Outstanding thereunder; and for the other tenns and provisions contained therein. CapitaUzed terms used ~ereiri have the meanings assigned in the Ordinance. . . This Bond, subject to certain limitations contained in the Q'rdina~.-may be transferred.· .-· on the Security Register only upon its presentation and surrender at · the Designated Payment/Transfer Office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or accompanied by a written instrument of transfer in fonn satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent When a transfer on the Security Register occurs, one or more new fully registered Bonds of the same Stated Maturity, of authorized denominations, bearing the same rate of interest, and of the same 761920.l •ll- } . ' aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, shall treat the registered owner whose name appears on the Security Register (i) 9n the Record Date as the owner entiUed to payment of i'nterest hereon, (ii) on the date of surrender of this Bond as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least fiv~ (5) business days prior to the Special Record Date by United States MaU, first class postage prepaid, to the address of each Holder appearing on the Security Register at the dose of business on the last ~usiness day next preceding the date of mailing of such notice. It is hereby certified, recited, represented and declared that the City is a body corporate and political subdivision duly organized and legally existing under and by virtue of the Constitution and laws of the State of Texas; that the issuance of the Bonds is duly authorized by law; that all acts, conditions and things required to exist and be done precedent to and in the issuance of the Bonds to render the same lawful and valid obligations of the City have been property done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Bands do not exceed any Constitutional or statutory limitation; and that due provision has been made for the payment of the principal of and interest en the Bonds by the levy of a tax and a pledge of and lien on the Net Revenues of the System as aforestated. In case any provision in this Bond shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The tenns and provisions of this Bond and the Ordinance shall be construed in accord~nce with and shall be·gov~med by the laws of the State of Texas. · ·• • · ; _.,,.. 761920.1 -12- ) IN WlTN.ESS WHEREOF, the City Council of the City has caused this Bond to be duly executed under the official seal of the City as of the Bond Date. COUNTERSIGNED: City Secretary (SEAL) CITY OF LUBBOCK, TEXAS Mayor C. •Form of Registration Certificate of Comptroller of Public Accounts to appear on Initial Bond(s) only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS THE STATE OF TEXAS ( { ( { REGISTER NO. ____ _ . I HEREBY CERTIFY that this Bond has been examined, certified as to validity and approved by the Attorney General of _the State of Texas\-and-duly _registered by the Comptroller of Public Accounts of the State of Texas. ·· WITNESS my signature and seal of office ~is ___ ....__ ________ _ (SEAL) 761920.l .• Comptroller of Public Accounts of. the ~tate-of T~~s -13- ' ) ) '\ \\ 0. · -Fonn of Certificate of Paying Agent/Registrar to appear on Definitive Bonds only. _ REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR This Bond has been duly issued and registered under the provisions of . the within-mentioned Ordinance: the bond or bonds of the above entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. The deslgnated offices of the Paying Agent/Registrar in Dallas, Texas, is the "Designated Payment/Transfer Office" for this Bond. Registration Date: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as Paying Agent/Registrar By _________________ _ Authorized Signature *NOTE TO PRINTER: Do Not Print on Definitive Bonds E. Fann of Assignment. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee:) ____________ _ (Social Security or other identifying number. _______ ...:..:...._ ________ .--J the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints __ attorney tp transfer the within Bond on the books kept for registration thereof, wfth full power of substitution in the premises.· · · DATED: _________ _ Signature guaranteed; NOTICE: The signature on this assignment must corr8$pond with the name of the registered owner · a$ it appears on the •-face. of the within Bond in F. (i) 7619'20.1 every particular. ·· · ' ·,. · · · · · The Initial Bond(s) shaU be in the form set forth in paragraph B of this Section, except that the form of the single fully registered Initial Bond shall be modified as follows: immediately under the name of the bond the headings "Interest Rate _" and "Stated Maturity __ " shall both be omitted; -14- ) ) ) ) (ii) · ~ Paragraph one shall read as follows: Registered Owner: Principal Amount: Dollars The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the order of the Registered OWner named above, or the registered assigns thereof, the Principal Amount hereinabove stated on February 15 in each of the years and in principal installments in accordance with the following schedule: YEAR OF MATURITY PRINCIPAL INSTALLMENTS (Information to be inserted from schedule in Section 2 hereof). INTEREST RATE (or so much principal thereof as shall not have been prepaid prior to maturity) and to pay interest on the unpaid Principal Amount hereof from the Bond Date at the per annum rates of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 15 and August 15 in each year, commencing February 15, 2000. Principal installments of this Bond are payable in the year of maturity· or on a prepayment date to the registered owner h~reof by Chase Bank of Texas, National Association (the "Paying Agent/Registrar',, upon presentation and surrender, at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office11 ). Interest is payable to the registered owner of this Bond whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date, and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first dass postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of,-u,e regi~t~t1!d cwner. All payments of principal of, premium, if any, and interest on this Bond shall be without exchange or collection charges to the owner hereat and in any coin or currency of the United States of America which at the time of payment is legal tender"for the payment of public and private debts. SECTION 10: Definitions. For purposes of this Ordinance and for clarity with respect to the issuance oJ tlie Bonds herein authorized, and the levy of taxes and appropriation of Net Revenues therefor, the following worcts or: terms; whenever the same appear herein without qualifying language, are defined to mean as follows: -· ·· .. . · . --~ . 761920.l (a) The tenn "Additional Obligations" shall mean tax and revenue obligations hereafter issued which by their tenns are payable from ad valorem taxes and additionally payable from and secured by a parity lien on and pledge of the Net Revenues of the System of equal rank and dignity with the lien and pledge securing the payment of the Previously Issued Obligations and the Bonds. -15- ) ) ) 761920.1 . ~ ~) The term "Bond Fund" shall mean the special Fund created and established under the provisions of Section 11 of this Ordinance. (c) The term "Bonds" shall mean the "City c;,f Lubbock, Texas, Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 1999", dated April 1, 1999 authorized by this Ordinance. (d) The tern, "Collection Date" shall mean, when reference is being made to the levy and collection of annual ad valorem taxes, the date the annual ad valorem taxes levied each year by the City become delinquent. (e) The term 11Fiscal Yea(' shall mean the annual financial accounting period used with respect to the operations of the System now ending on September 30th of each year; provided, however, the City Council may change, by ordinance duly passed, such amual financial accounting period to end on another date if such change is found and detennined to be necessary tor budgetary or_ other fiscal purposes. (f) The term "Government Securities" shall mean direct obligations of the United States of America, inciuding obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, and the United States Treasury cbfigations such as its State and Local Government Series in book-entry form. (g) The tenn "Gross Revenues,. shall mean, with resped to any period, all income, revenues and receipts received from the operation and ownership of the System. (h) The tenn "Net Revenues" shall mean the Gross Revenues of the System, with respect to any period, after deducting the System's Operating arid Maintenance Expenses ~uring such period. {i) The term "Operating and Maintenance Expenses" shall mean all reasonable and necessary expenses directly related ~nd attnbutable to the operation and maintenance of the System, induding, but not limited to, the cost of insurance, the purchase and canying of stores, materials, an~ supplies, the payment of salaries· and labor, and other expenses reasonably and proper1y charged, LITTder generally accepted accol.!_0ting principles, to the operation and maintenance of the System. Oepred~on charges _on equipn,ent, machinery, plants and other faciHties comprising the System and expenditures·aassed under generally accepted accounting principles as capital expenditures shall not be considered as "Operating and Maintenance Expenses" for purposes of detennining "Net Revenues". -16- ' ) ) "'t ... -rn The term "Outstanding" when used in this Ordinance with respect to Bonds means, as of the date of determination, all Bonds theretofore issued and deljvered under this Ordinance, except: ( 1) those Bonds cancelled by U,e Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation: (2) those Bonds for which payment has been duly provided by the City in accordance with the provisions of Section 21 hereof; and (3) those Bonds that have been mutilated, destroyed, lost, or stolen and replacement Bonds have been registered and delivered in lieu thereof as provided in Section 20 hereof. (k) The term "Previously Issued Obligations" shall mean the outstanding "City of Lubbock, Texas, Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation, Series 1991", dated May 15, 1991. (I) The term "Prior Lien Obligations" shall mean all bonds or other similar obligations hereafter issued that are payable in whole or in part from ~nd secured by a lien on and pledge of the Net Revenues of the System and such lien and pledge securing the payment thereof is prior and superior in daim, rank and dignity to the lien and pledge of the Net Revenues securing the payment of the Previously Issued Obligations and the Bonds. (m) The tenn "Similarty Secured Obligations11 shaH mean collectively the Bonds, the Previously Issued Obligations, and any Additional Obligations. (n) The term "System" shall mean 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. -SECTION 11: Bond Fund. For the purpose of paying the interest on and to provide a sinking fund for the payment, redemption and retirement Of the Bonds. there shall be and is hereby createa a· special a~unt or fund on the books and records of the City known as "SPECIAL 1999 TAX AND WATERWORKS SYSTEM SURPLUS REVENUE REFUNDING BOND.· .- FUND", and all moneys deposited to the credit of said Fund shall be kept and· maintained in a special banking account at the City's depository bank. Authorized officials of the City are hereby authorized and directed to make withdrawals from said Fund sufficient to pay the principal of and . interest on the Bonds as the same become due and payable, and, shall cause to be transferred to the Paying Agent/Registrar from moneys on deposit in the Bond Fund an amount sufficient to pay the amount of principal and/or interest falling due on the Bonds, such transfer of funds to the Paying Agent/Registrar to be made in such manner as will cause immediately available funds to 761920.1 -17- ) ) ) ) ' , be deposit~~ with the Paying Agent/Registrar on or before the last business day next preceding each interest al'ld principal payment date for the Bonds. Pending the transfer of funds to the Paying Agent/Registrar, money in the Bond Fund may, at the option of the City, be invested in obligations identified in, and in accordance with the provisions of the "Public Funds Investment Act'' 0/.T.C.A., Government Code, Chapter 2256) relating to the investment of ~bond proceeds"; provided that all such investments shall be made in such a manner that the money required to be expended from said Fund will be available at the proper time or times. All interest and income derived from deposits and investments in said Bond Fund shall be credited to, and any losses-debited to, the said Bond Fund. All such investments shall be sold prompUy when necessary to prevent any default in connection with the Bonds. SECTION 12: Tax Levy. To provide for the payment of the "Debt Service Requirements" on the Bonds being (i) the interest on said Bonds and (ii) a sinking fund for payment of principal at maturity, mandatory redemption or a sinking fund of 2% (whichever amount shaU be the greater), there shall be and there is hereby levied for the current year and each succeeding year thereafter while said Bonds or any interest thereon shall remain Outstanding, a sufficient tax on each one hundred dollars' valuation of taxable property in said City, adequate to pay such Debt Service Requirements, full allowance being made for delinquencies and costs of collection; said tax shall be assessed and collected each year and applied to the payment of the Debt Service Requirements, and the same shall not be diverted to any other purpose. The taxes so levied and collected shall be paid into the Bond Fund. The City Council hereby declares its purpose and intent to provide and levy a tax legally and fully sufficient to pay the said Debt Service Requirements, it having been detennined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax in consideration of all other outstanding indebtedness. The amount of taxes to be provided annually for the payment of the principal of and interest on the Bonds shall be detennined and accomplished in the following manner: · (a) Prior to the date the City Council establishes :the annual tax rate and passes an ordinance levying ad valorem taxes each y~ar, the Council shall determine: 761920.I . (1) The amount or, deposit in the Bond F~nd after (a) deducting therefrom the total amount of Debt Service Requirements to become due on Bonds prior to the Collection Date for the ad valorem taxes to be levied and (b) adding thereto the. amount of the Net Revenues of the System appropriated and allocated to pay .such Debt Service Requirements prior to the Collection Date for the ad valorerri"taxes to be levied. · ••• : ,,,. • (2) The amount of Net Revenues of the System, appropriated and to be set aside for the payment of the Debt Service Requirements on the Bonds between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year. -18- ) ) . · -(3) The amount of Debt Seivice Requirements to become due and payable on the Bonds between the Collection Date for the taxes then to be levied an(! the Collection Date for the taxes to be levied during the next succeeding calendar year. (b) The amount of taxes to be levied annually each year to pay the Debt Seivice Requirements on the Bonds shall be the amount established in paragraph (3) above less the sum total of the amounts established in paragraphs (1) and (2), after taking into consideration delinquencies and costs of collecting such annual taxes. SECTION 13: Pledge of Revenues. The City hereby covenants and agrees that, subject to the prior lien on and pledge of the Net Revenues of the System to the payment and security of Prior Lien Obligations, all the Net Revenues of the System, with the exception of those in excess of the amounts required to be deposited to the Bond Fund as hereafter provided, are hereby irrevocably pledged, equally and ratably, to the payment of the principal of and interest on the Bonds and Similarly Secured Obligations, and the pledge of Net Revenues of the System herein made for the payment of the Bonds shall constitute a lien on the Net Revenues of the System in accordance with the terms and provisions hereof and be valid and binding without further action- by the City and without any filing or recording except for the filing of this Ordinance in lt!e records of the City. SECTION 14: System Fund. The City hereby covenants and agrees that all Gross Revenues ( excluding earnings from the investment of money held in any special funds or accounts created for the payment and security of Prior Lien Obligations) shall be deposited from day to day as collected into a "City of Lubbock, Texas, Waterworks System Operating Fund" (hereinafter called "System Fund'1 which Fund shall be kept and maintained at an official depository bank of the City. All moneys deposited in the System Fund shall be pledged and appropriated to the extent required for the following purposes and in the order of priority shown, to wit First: To the payment of all necessary and reasonable Operating and Maintenance Expenses of the. System as defined-herein or,required by statute to be a first charge on and daim against the Gross Revenues. ·• • · Second: · To the payment of-the amounts required to be deposited in the special Funds created and established for the payment, security and benefit of Prior Lien Obligations in accordance with the tenns and provisions of the ordinances authorizing the issuance of Prior Lien Obligations; and Third: To the ·payment, equally and ratably; of the ~u.n~_~quired to be deposited in the special funds and accounts created and established for the payment of the Bonds (Bond Fund) and Similariy Secured Obligations. Any Net Revenues remaining in the System Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other City purpose now or hereafter permitted by law. 761920.l -19- ) ) SECTION 14: Deposits to Bond Fund. The City hereby covenants and agrees to cause to be deposited to the credit of the Bond Fund prior to each principal and interest payment date for lhe Boods from the pledged Net Revenues of the System in the System Fund, after the deduction of all payments required to be made to the special Funds or accounts created for the payment and security of the Prior Lien Obligations, an amount equal to one hundred per centum { 100%) of the amount required to fully pay the interest and principal then due and payable on the Bonds, such deposits to pay maturing principal and accrued interest on the Bonds to be made in substantially equal monthly installments on or before the last day of each month beginning the last day of the month first to follow the date of delivery of the Bonds to the initial purchaser(s). The deposits to be made to the credit of the Bond Fund, as hereinabove provided, shall be made until such time as such Fund contains an amount equal to pay the principal of and interest and premium, if any, on the Bonds to maturity. Accrued interest and premium, if any; received from the purchaser of the Bonds deposited to the Bond Fund and ad valorem taxes levied, collected and deposited in the Bond Fund for and on behalf of the Bonds may be taken into consideration and reduce the amount of the deposits otherwise required to be deposited in the Bond Fund from the Net Revenues of the System. In addition, any surplus proceeds from the sare- of the Bonds not expended for authorized purposes shall be deposited in the Bond Fund, and such amounts so deposited shall reduce the sums otherwise required to be deposited in ~d Fund from _ad valorem taxes and the Net Revenues of the System. SECTION 15: Security of Funds. All moneys on· deposit in the Funds for which this Ordinance makes provision (except any portion thereof as may be at any time proper1y invested) shall be secured in the manner and to the fullest extent required by the laws of Texas for the security of public f4nds, and moneys on deposit in such Funds shall be used only for the purposes pennitted by this Ordinance. 761920.l SECTION 16: Special Covenants. The City hereby further covenants as follows: (a) . It has the lawful power to pledge tfie Net Reve~~e~ of the System supporting this issue of Bonds and has lawfully exercised said powers under the Constitution and laws of the State of Texas, including Articles 1111 et seq., V.A.T.C.S. (b) Other than for the payment of the outstanding Previously Issued Obligations, the Bonds, the "City of Lubbock, Texas, Tax and Wateiworks System (Limited Pledge) Revenue Certificat~s of Obligation, Series 1992", dated August 15, 1992, "'City of Lubbock, Texas, Tax-and Waterworks System{Limited Pledge) Revenue Certificates of Obligation, Series 1993", dated October 1, 1993, "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1995", dated December 15, 1995, "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1998", dated January 1, 1998, and "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1999", dated January 15, 1999, the Net Revenues -20- ) ) of the System have not in any manner been pledged to the payment of any debt or obligation of the City or of the System. SECTION 17: Issuance of Prior Lien Obligations and Similarly Secured Obligations. The City hereby expressly reserves the right to hereafter issue Prior Lien Obligations, without limitation as to principal amount but subject to any terms, conditions or restrictions applicable thereto under law or otherwise. In addition. the City reserves the right to issue Additional Obligations, without limitation or any restriction or condition being applicable to their issuance under the terms of this Ordinance, payable from and secured by a lien on and pledge of the Net Revenues of the System of equal rank and dignity, and on a parity in all respects, with the lien thereon and pledge thereof securing ).: the payment of the Bonds. · SECTION 18: Subordinate to Prior Lien Obligations Covenants and Agreements. It is the intention of this governing body and accordingly hereby recognized and stipulated that the provisions, agreements and covenants contained h8f"ein bearing upon the management and operations of the System and the administering and application of revenues derived from the ) operation thereof, shall to the extent possible be hannonized with like provisions, agreements and covenants contained in ordinances authorizing the issuance of Prior Lien Obligations, and to the extent of any irreconcilable conflict between the provisions contained herein and in ordinances authorizing the issuance of Prior Lien Obligations, the provisions, agreements and covenants contained therein shall prevail to the extent of such conflict and be applicable to this Ordinance but in all respects subject to the priority of rights and benefits, if any, conferred thereby to the holders or owners of the Prior Lien Obligations. Notwithstanding the above, any change or modification affecting-the application of revenues derived from the operation of the System shall not impair the obligation of contract with respect to the pledge of revenues herein made for the payment and security of the Bonds. ) .. SECTION 19: Notices to· Holders-Waiver. Wherever this Ordinance provides for notice to Holders of any event, such notice shall be sufficiently given {unl$.SS otherwise herein expressly provided) if in writing and sent by United States Mail, first class postage 'prepaid, to the address of each Holder appearing in the Security Register at the close of business on the business day next preceding the mailing of such notice. In any case where notice to Holders is given by mail, neither the fa~ure to mail such notice to any particular Holders, nor any defed in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Bonds. Where this Ordinance provides for notice in any manner, such notice may be waived in writin·g by the Hotder entitled to r:e~il(e such notice, eith~(. .- before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 20: Cancellation. Bonds surrendered for payment, redemption, transfer, or exchange, if surrendered to the Paying Agent/Registrar, shall be promptly canceled by it and, if surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already 761920.1 .., ) ). \ ._., canceled; shall be prompUy canceled by the Paying Agent/Registrar. The City may at any time deliver to the Paying Agent/Registrar for cancellation any Bonds previously certified or registered and delive,:.ed which the City may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly canceled by the Paying Agent/Registrar. All canceled Bonds held by the Paying Agent/Registrar shall be returned to the City.. SECTION 21 : Satisfaction of Obligation of Citv. If the City shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Bonds, at the times and in the manner stipulated in this Ordinance, then the pledge of taxes levied under this Ordinance and the lien on and pledge of the Net Revenues created by this Ordinance and all covenants, agreements, and other obligations of the City to the Holders Shall thereupon cease, tenninate, and be discharged and satisfied. Bonds or any principal amount(s) thereof shall be deemed to have been paid within the meaning and with the effect expressed above in this S~ction when (i) money sufficient to pay in full such Bonds or the principal amount(s) thereof at maturity or tc the redemption date therefor, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Government Obligations shall· have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Government Obligations have been certified by an independent accounting finn to mature as to principal and interest in such amounts and at such times as will insure the avattability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the principal of and interest on such Bonds, or the principal amount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Ag.ent/Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or Government Obligations will be made under this Section and no use made of any such deposit which would cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or regulations adopted pursuant thereto. Any moneys so deposited. with the Paying Agent/Regis~r. or-a1:v~~orized escrow agent, and all income from Government Obligations held in trust by the Paying Agent/Registrar, or an authorized escrow agent, pursuant to this Section which is not required for the payment of the Bonds, or ·any principal amount(s) thereof, or interest thereon with respect to which such moneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and interest on the Bonds and remaining undaimed for a period of four (4) years after the Stated Maturity, or applicable redemption date, of tf)e .Sonds such moneys were deposited and are held in tl'\Jst to pay shall upon the request of the City be remitted to the· City. ag~nst a written receipt.· .- therefor. Notwithstanding the above and foregoing, any remittance of funds·trom the Paying Agent/Registrar to the City shall be subject to any applicable undaimed property laws of the State of Texas. SECTION 22: Ordinance a Contract -Amendments. This Ordinance shall constitute a contract with the Holders from time to time, be binding on the City, and shall not be amended or repealed by the City while any Bond remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Holders, from time to time and at any time, 761920.1 -22- ') ), ',•~ ) ) ) amend this Ordinance in any manner not detrimental to the interests of the Holders, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with tJ,e consent of Holders holding a majority in aggregate principal amount of the Bonds then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders of Outstanding Bonds, no such. amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Bonds, reduce the principal amount thereof, or the rate of interest thereon, the redemption price, or in any other way modify the tenns of payment of the principal of, premium, if any, or interest on the Bonds, (2) give any preference to any Bond over any other Bond, or (3) reduce the aggregate principal amount of Bonds required to be held by Holders for consent to any such amendment, addition, or rescission. SECTION 23: Mutilated -Destroyed• Lost and Stolen Bonds. In case any Bond shall be mutilated, or destroyed, lost or stolen, the Paying Agentl,Registrar may execute and deliver a replacement Bond of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Bond, or in lieu of and in substitution for such destroyed, lost or stolen Bond, only upon the approval of the City and after ~) the filing by the Holder thereof with the Paying Agent/Registrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such Bond, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the City and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Bond shall be borne by the Holder of the Bond mutilated, or destroyed, lost or stolen. Every replacement Bond issued pursuant to this Section shaU be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Bonds; notwithstanding the enforceability of payment by anyone of the destroyed, lost, or stolen Bonds. The provisions of this Section are exclusive and-shalt pregude (to the extent lawful) all other rights and remedies with respect to the replacement and· payment of mutilated, destroyed, lost or stolen Bonds. SECTION 24: Covenants to Maintain Tax-Exempt Status. (a) Definitions. When used in this Section, the following terms shall have the foUowing meanings: 761920.l · "Closing .Date .. means the date .on which the Bonds are first authenticated and delivered to the initial purchasers against payment the~for.-, >. •cocte• means the Internal Revenue Code of 1986, as amended by all legislation. if any, effective on or before the Closing Date. "Computation Date• has the meaning set forth in Section 1.148-1(b) of the Regulations. -23- 1 ) . "· ) ) -"Gross Proceeds"means any proceeds as defined in Section 1.14S.1(b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1(c) of the Regulations, of the Bonds. "Investment" has the meaning set forth in Section 1.148-1(b) of the Regulations. "Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and which is not acquired to carry out the governmental purposes of the Bonds. "Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are appHcable to the Bonds. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. "Yield" of ( 1} any Investment has the meaning set forth in Section 1.148--5 of the Regulations; and (2) the Bonds has the meaning set forth in Section 1. 148-4 of the Regulations. (b) Not to Cause Interest to Become Taxable. The City shall not use, pennit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Bond to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law te the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Bond, the City shall ~mply with each of the specific covenants in this Section. · · • • · (c) No Private Use or Private Payments. Except as pennitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Bonds: · -(1)··· exclusi_vely own, oper:ate and possess all property the acquisition, construction or improvement of Which is to be financed or refiol:11,ns;ed directly or indirectly with Gross Proceeds of the Bonds (including property financed with Gross " , Proceeds of the Refunded Obligations), and not use or pennit the use of such Gross Proceeds {including all contractual arrangeirients with tenns different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a ) member of the general public; and 761920.l -2.f ~ ) (2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indiredly with such Gross Proceeds (induding property financed with Gross Proceeds of the Refunded Obligations), other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. ( d) No Private Loan. Except to the extent pennitted by section 14 ~ of the Code and the Regulations and rulings thereunder, the City shaJI not use Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For ) purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is· sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person ar entity under a take-or-pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic eq~ivalent of a loan. ) ( e) Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Bonds directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such Investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Bonds. (f) Not Federally Guaranteed. Except to the extent pennitted by section 149(b) of the Code and the Regulations and rulings thereunder, the CitY._ shaU not take or omit to take any action which would cause the Bonds to be federally guaranteed within the=m4:tsU'ling of section 149(b) of the Code and the Regulations and rulings thereunder. (g) Information Report. The City shall timely file the information requtred by section 149{e) of the Code with the Secretary of the Treasury on Fonn 8038-G or such other form and in such place as tf:le. Secretary may prescribe. -· (h) Rebate · of Arbitrage Profits .. Except to tJ:l~. extent ~therwise provided in sedion 148(f) of the Code and the Regulations and rulings thereunder. •· . · ., -.-•. · .- 7~1920.1 (1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all otherfunds(and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Outstanding Bond is discharged. However, to the extent pennitted by law, the City may commingle Gross Proceeds of the Bonds with other money of the City, -25- ) ) ) '\ proYidec;t that the City s.eparately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. {2} Not less frequently than eadl Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Bonds until siX years after the final Computation Date. (3) As additional consideration for the purchase of the Bonds by the Purc:hasers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the exdudability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Bond Fund or its general Jund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Bonds equals (i) in the case of a Final Computation Date as defined in Section 1.148-3(e)(2) of the Regulations, one hundred percent (100%) of the Rebate Amount on such date; and {ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f} of the Code and the Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other fonns and information as is or may be required by Section 148(f) of the Code and the Regulations and nJlings thereunder. ( 4) The City shall exercise reasonable difigence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter{and in all events within one hundred eighty (180) days after discovery of the e~r) •. inclu.ding payment to, the µnited States of any additional Rebate Amount owed to it, interest thereon, ·and ariy'penalty imposed under Section 1.148-3(h) of the Regulations. (Q Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the Bonds, enter into any transaction that reduces the amount required to be p~d to the United States pursuant to Subsection H of this Section because such transaction results in a smaller profit or. a larger loss than ~o.ul~ .. .have resulted if the . • .- transaction had been at ann's length and had the Yield of the Bonds not 'been relevant to either party. O) Elections. The City hereby direds and authorizes the Mayor, City Secretary, City Manager, Managing Diredor of Finance, and First Assistant City Manager, individually or joinUy, to make elections permitted or required pursuant to the provision~ of the Code or the Regulations, 76UZl>.l ) ) ) as they deem necessary or appropriate in connection with the Bonds, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. (k) Current Refunding. The Bonds are being issued exclusively to pay and discharge in full the City's Obligation and such payment of the City's Obligation will occur within ninety (90) days after the issuance of the Bonds. SECTION 25: Sale of Bonds. Pursuant to a public sale for the Bonds, the bid submitted by J.C. Bradford & Co. and Associates (herein referred to as the "Purchasers1 is declared to be the best bid received producing the lowest net effective interest cost to the City, and the sale of the Bonds to said Purchasers at the price of par and accrued interest to the date of delivery, plus a premium of$ -0-is hereby approved and confirmed. Delivery of the Bonds to the Purchasers shall occur as soon as possible upon payment being made therefor in accordance with the tenns of sale. SECTION 26: Official Statement The Official Statement prepared in the initial offering and sale of the Bonds by the City, together with all addendas, supplements and amendments thereto issued on behalf of the City, is hereby approved as to form and content, and the City Council hereby finds that the infonnation and data contained in said Official Statement pertaining to the City and its financial affairs is true and correct in all material respects and no material facts have been omitted therefrom which are necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The use of such Official Statement in the reoffering ·of the Bonds by the Purchasers is hereby approved and authorized. SECTION 27: Escrow Agreement Approval and Execution. The "Escrow Agreement" (the "Agreement") by and between the City and the Norwest Bank Texas, National Association, (the "Escrow Agent'1, attached hereto as Exhibit 8 and incorporated herein by reference as a part of this Ordinance for all purposes, is hereby approved as to fonn and content, and such Agreement in substantially the form and substance attached hereto, together with such changes or revisions as may be necessary to accomplish the prepaym~nt of the City's Obligation, is hereby authorized to be executed by the Mayor and City Secretary for and oA-behalf of the City and as the act and deed of the City Council; and such Agreement as executed by said officials shall be deemed approved by the City Council and constitute the Agree,:nent herein approved. SECTION 28: Control and Custody of Bonds. The Mayor of the City shall be and is hereby authorized to ta.ke and have charge of all necessary orders and records pending investigation by the Attorney .Gem~_r:al of the State of Texas, includ!!19 the printing and supply of definitive Bonds, and shall take and have charge and control of the Initial. Bonds pending the approval thereof by . _ the Attorney General, the registration thereof by the Comptroller of Public Accounts and the · delivery thereof to the Purchasers. Furthermore, the Mayor, Mayor Pro Tem, First Assistant to the City Manager, Managing Director of Finance and City Secretary, any one or more of said officials, are hereby authorized and directed to furnish and execute such documents and certifications relating to the City and the issuance of the Bonds, including certifications as to facts, estimates, circumstances and reasonable expectations pertaining to the use, expenditure and investment of the proceeds of the Bonds, as !TISY be necessary for the approval of the Attomey General, the registration by the 761920.1 -27- ' i Comptroller of Public Accounts and the delivery of the Bonds to the Purchasers, and, together with the City's bond counsel and the Paying Agent/Registrar, make the necessary arrangements for the delivery of the Initial Bond(s) to the Purchasers and the initial exchange thereof for definitive Bonds. SECTION 29: Proceeds of Sale. Immediately following the delivery of the Bonds, the proceeds of sale (less certain costs of issuance and the accrued interest received from the Purchaser of the Bonds) shall be deposited with the Escrow Agent for application and disbursement in accordance with the provisions of the Agreement. The proceeds of sale of the -. Bonds not initially deposited with the Escrow Agent, including investment earnings thereon and amounts returned to the City pursuant to the Agreement, shall be disbursed for payment of costs of issuance or deposited in the Bond Fund for the Bonds to be maintained at the City's depository bank, all in accordance with written instructions. SECTION 30: Legal Opinion. The Purchasers' obligation to accept delivery of the Bonds ) . is subject to being furnished a final opinion of Fulbright & Jaworski LL.P., Dallas, Texas, approving the Bonds as to their validity, said opinion to be dated and delivered as of the date of delivery and payment far the Bonds. An executed counterpart of said opinion shall accompany the global Bonds deposited with The Depository Trust Company or a reproduction thereof shall be printed on the definitive Bonds in the event the book entry only system shall be discontinued. "I ' '\ . ;, ) SECTION 31: CUSIP Numbers. CUSIP numbers may be printed or typed on the definitive Bonds. It is expressly provided, however, that the presence or absence of CUSIP numbers on the definitive Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving the Bonds as to legality are to be held responsible for CUSIP numbers incorrecUy printed or typed on the definitive Bonds. SECTION 32: Benefits of Ordinance. Nothing in this Ordinance, expressed or implied, is intended or shall be construed to confer upon any person other than the City, the Paying Agent/Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision hereof, this Ordinance and all its provisions being intended to be and being for the sole and exclusive benefit of the City, the Paying Agent/Registrar and ttie Holders. SECTION 33: Inconsistent Provisions. All ordinances, orders or resolutions, or parts thereof, which are in conflict. or inconsistent with any pfovision .. of this Ordinance are hereby repealed to the extent of such conflict, and the prov"isions of this Ordinance shall be and remain controlling as·to the matters contained herein. · SECTION ~4: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Te)(as .~nd the Unite9 States of.A.meric_a. . H • •: , .... • SECTION 35: Effect of Headings. The Section headings herein are for convenience only_ and shall not affect the construction hereof. SECTION 36: Construction of Terms. If appropriate in the context of this Ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to include the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders. 761920.1 -28- '\ ) ) ) ) sec,:10~ 37: Severability. If any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other circumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 38: Incorporation of Findings and Oetenninations. The findings and detenninations of the City Council contained in the preamble hereof are hereby incorporated by reference and made a part of this Ordinance for all purposes as if the same were restated in full in this Section. SECTION 39: Continuing Disclosure Undertaking. (a) Definitions. As used in this Section, the following tenns have the meanings ascribed to such terms below: "MSRB' means the Municipal Securities Rulemaking Board. "NRMSIR' means each person whom the SEC or its staff has detennined to be a nationally recognized municipal securities infonnation repository within the meaning of the Rule from time to time. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC' means the United States Securities and Exchange Commission. "Sta• means any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state infonnation depository within the meaning of the Rule from time to time. (b) Annual Reports. The City shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year (beginning with the fiscal year ending September 30, 1999) financial information and operating data with respect to the City of the general type included in the fin~I Official ~tatement approved by $ection 26 of this Ordinance, being the information described in Exhibit C hereto. Financial statements to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit C hereto and (2) audited, if the City commissions an audit of such statem.ents and the audit is completed within the period during which they must be provided. If audited financial statements are not available at the time the ·financial information and operating data must be provided, then the City shall provide unaudited f1r1ancial statements for the applicable fiscal year to each N RMSIR and any SID with the financlal infom:,ation and operating d~ta and wiH file the annual audit report, when and if the same becomes available. .. . . : ~ .. ~ ... If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior ta the next date by which the City othelWise would be required to provide financial information and operating data pursuant to this Section. The financial infonnation and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any 761920.1 ) ) )'· ) ') . document ~nclu.ding an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. (c)-Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSR8, in a timely manner, of any of the following events with respect to the Bonds, if such event is material within the meaning of the federal securities laws: Bonds; and 1. 2. 3. 4. 5. 6. 7. a. 9. 10. Principal and interest payment delinquencies; Non-payment related defaults: Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled draws on credit enhancements reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Modifications to rights of holders of the Bonds; Bond calls; Oefeasances; Release, substitution, or sale of property securing repayment of the Bonds; 11. Rating changes. The City shaU notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City .to provide financial infonnation or operating data in accordance with subsection (b) of this Section by the time required by such Section. · ( d) Umitations, Discfaimen;, and Amendments. The City shall be obligated to observe and perform the covenants specified in this Section while, but only while, the City remains an "obligated person• with respect to the Bonds within the meaning of the Rule, except that the City in any event will give the notice required by subsection (c) hereof of any Bond calls and defeasance that cause the City to be no longer such an "obligated person.'' . -· The provisions of this Section are for the sole benefit of the Holders and beneficial owners of th~ Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereµnderto any other person; The City undertakes to provide only the financial infonnation, operating data, financial statements, and notices which it has expressly agreed to· provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial resalts, condition, or prospects or hereby.undertake to update any information provided in accordance with this Section or otherwise, except as expressly p~yiC,99.~~rein. The City d~s ... - not make any representation or warranty concerning such information or its ·usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED 7619'20.l -3'0- ") .- ) ') , IN THIS SECJION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or perfonning its obligations under this Section shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities Jaws. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances resulting from a change in legal requirements, a change in law, or a change in the identity, nature, status, ortype of operations of the City, but only if (1) the provisions of this Section, ~s so amended, would have pennitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date i:,f such amendment; as well as such changed circumstances, and (2) either (a) the Holders of a majority in aggregate principal amount ( or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Bonds consent to such amendment or (b) a Person that is unaffiliated with the City (such as nationally recognized bond counsel) detennines that such amendment will not materially impair the interests of the Holders and beneficial owners of the Bonds. The provisions of this Section may also be amended from time .to time or repealed by the City if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such provisions are invalid, but only if and to the extent that reservation of the City's right to do so would not prevent underwriters of the initial public offering of the Bonds from lawfully purchasing or selling Bonds in such offering. If the City so amends the provisions of this Section, it shall incil,!de with any amended financial infonnation or operating data filed with each NRMSIR and SID pursuant to subsection (b) of this Section an explanation, in narrative fonn, of the reasons for the amendment and of the impact of any change in the type of financial infonnation or operati~ data so provided. .. SECTION 40: Public Meeting. It is officially found, detennined, and declared that the meeting at which this Ordinance is adopted was op~n to the. public;: and public notice of the time,. place, and subject matter of the public business to be considered at such meeting, inciuding this Ordinance; was given, all as required byV .T.C.A., Government Code, Chapter 551, as amended. : ..... 761970.1 -31- ) . SECTION 41 : Effective Date. This Ordinance shall take effect and be in force immediately from and-after its passage on second and final reading, and IT IS SO ORDAINED . . PASSED AND ADOPTED ON FIRST READING, March 25, 1999. PASSED ANO ADOPTED ON SECOND AND FINAL READING, this the 8th day of April, 1999. CITY OF LUBBOCK. TEXAS ATTEST: (City Seal) .. . . : ~ ..... 761920.l -52- ,.. .. · .- EXHIBIT A PA YING AGENT/REGISTRAR AGREEMENT See Document Number 6 .., . : ····"" - 7B212l EXHIBIT B EXECUTED SPECIAL ESCROW DEPOSIT AGREEMENT See Document Number 7 "\ ) ·; ,•ft• "\ , 782121 ,· ) } DESCRIPTION OF ANNUAL FINANCIAL INFORMATION Exhibit C to Ordinance The following information is referred to in Section 39 of this Ordinance. Annual Financial Statements and Operating Data The financial infonnation and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: 1. The financial statements of the City appended to the Official Statement as Appendix 8, but for the most recently concluded fiscal year. 2. The infonnation contained in Tables 1 through 6 and SA through 20 of the Official Statement. Accounting Principles The accounting principles referred to in such Section are the generally accepted accounting principles as applicable to governmental units as prescribed by The Government Accounting Standards Board. .-. 761920.l j ) ESCROW AGREEMENT Between CITY OF LUBBOCK, TEXAS and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. Pertaining to CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2009 DA TED AS OF MARCH I, 2009 Dallas 1541215v.2 TABLE OF CONTENTS ) Parties .............................................................................................................................................. 1 Recitals ............................................................................................................................................ 1 ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1.01. Definitions ............................................................................................................... 2 Section 1.02. Other Definitions ..................................................................................................... 3 ' Section 1.03. Interpretations .......................................................................................................... 3 ARTICLE II DEPOSIT OF FUNDS AND FEDERAL SECURITIES Section 2.0 l. Deposits in the Escrow Fund ................................................................................... 3 ARTICLE III CREATION AND OPERATION OF ESCROW FUND Section 3.0 I. Escrow Fund ............................................................................................................ 3 Section 3.02. Payment of Principal and Interest ........................................................................... 4 Section 3.03. Sufficiency of Escrow Fund .................................................................................... 4 Section 3.04. Trust Funds .............................................................................................................. 4 j Section 3.05. Security for Cash Balances ..................................................................................... 5 ARTICLE IV SUBSTITUTION OF FEDERAL SECURITIES Section 4.01. In General ................................................................................................................ 5 Section 4.02. Substitution of Federal Securities at Bond Closing ................................................ 5 Section 4.03. Substitution of Federal Securities following Bond Closing .................................... 5 Section 4.04. Allocation of Certain Federal Securities ................................................................. 6 Section 4.05. Arbitrage .................................................................................................................. 6 .. ., ARTICLE V APPLICATION OF CASH BALANCES "\ Section 5.01. In General ................................................................................................................ 6 Section 5.02. Reinvestment in SLGS ............................................................................................ 6 Section 5.03. Reinvestment of Cash Balances .............................................................................. 6 (i) Dallas 15412l5v.2 ARTICLE VI RECORDS, REPORTS AND NOTICES Section 6.01. Records .................................................................................................................... 7 Section 6.02. Reports .................................................................................................................... 7 ARTICLE VII CONCERNING THE PA YING AGENTS AND ESCROW AGENT Section 7 .0 l. Representations ....................................................................................................... 7 Section 7 .02. Limitation on Liability ............................................................................................ 7 Section 7.03. Compensation .......................................................................................................... 8 Section 7 .04. Successor Escrow Agents ........................................................................................ 9 ARTICLE VIII ") MISCELLANEOUS Section 8.01. Notice .................................................................................................................... 10 Section 8.02. Termination of Responsibilities ............................................................................ 11 Section 8.03. Binding A greeinent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 11 Section 8.04. Severability ............................................................................................................ 11 Section 8.05. Texas Law Governs ............................................................................................... 11 Section 8.06. Time of the Essence .............................................................................................. 11 Section 8.07. Effective Date of Agreement. ................................................................................ 12 Section 8.08. Modification of Agreentent ................................................................................... 12 '\ ARTICLE IX ACKNOWLEDGMENT OF RECEIPT OF NOTICE Section 9.01. Acknowledgment of Receipt of Notice ofDefeasance and Redemption .............. 12 ., EXHIBIT A Description of the Refunded Obligations ............................................................ A-1 EXHIBIT B Schedule of Debt Service on Refunded Obligations ........................................... B-1 EXHIBIT C Description of Beginning Cash Balances and Federal Securities ....................... C-1 EXHIBIT D Escrow Fund Cash Flow ..................................................................................... D-1 EXHIBIT E Reinvestments in Zero Interest Rate SLGS ......................................................... E-1 "I (ii) Dallas 15412\Sv.2 ) ..., ") ESCROW AGREEMENT THIS ESCROW AGREEMENT, dated as of March 1, 2009 (herein, together with any amendments or supplements hereto, called the "Agreement"), entered into by and between CITY OF LUBBOCK, TEXAS (the "Issuer"), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association, as escrow agent (herein, together with any successor in such capacity, called the "Escrow Agent") .. WITNESSETH: WHEREAS, the Issuer has heretofore issued and there presently remain outstanding the obligations (the "Refunded Obligations") of the Issuer listed and described on Exhibit A, attached hereto; WHEREAS, the Refunded Obligations are scheduled to mature or have been called for early redemption in such years, bear interest at such rates, and are payable at such times and in such amounts as are set forth in Exhibit B attached hereto and made a part hereof; WHEREAS, when finn banking arrangements have been made for the payment of principal and interest to the maturity dates or redemption dates of the Refunded Obligations, then the Refunded Obligations shall no longer be regarded as outstanding except for the purpose of receiving payment from the funds provided for such purpose; WHEREAS, Chapter 1207, Texas Government Code, as amended ("Chapter 1207"), authorizes the Issuer to issue refunding bonds and to deposit the proceeds from the sale thereof, and any other available funds or resources, directly with the paying agent for any of the Refunded Obligations, and such deposit, if made before the payment dates of the Refunded Obligations and in sufficient amounts, shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded Obligations; WHEREAS, Chapter 1207 further authorizes the Issuer to enter into an escrow agreement with the paying agent for any of the Refunded Obligations with respect to the safekeeping, investment, administration and disposition of any such deposit, upon such terms and conditions as the Issuer and such paying agent may agree, provided that such deposits may be invested only in direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, and which may be in book entry form, and which shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment of principal and interest on the Refunded Obligations when due; WHEREAS, The Bank of New York Mellon Trust Company, N.A., is the paying agent for all of the Refunded Obligations and this Agreement constitutes an escrow agreement of the kind authorized and required by Chapter 1207; WHEREAS, Chapter 1207 makes it the duty of the Escrow Agent to comply with the terms of this Agreement and timely make available to the other places of payment, if any, for the Refunded Obligations the amounts required to provide for the payment of the principal of and Dallas 15412l5v.2 ) ·, ) interest on such obligations when due, and in accordance with their tenns, but solely from the funds, in the manner, and to the extent provided in this Agreement; WHEREAS, the issuance, sale, and delivery of the City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009 (the "Refunding Bonds"), have been duly authorized for the purpose, among others, of obtaining the funds required to provide for the payment of the principal of the Refunded Obligations at their respective maturity or redemption dates and the interest thereon to such maturity or redemption dates; WHEREAS, the Issuer desires that, concurrently with the delivery of the Refunding Bonds to the purchasers thereof, a portion of the proceeds of the Refunding Bonds shall be applied to purchase certain "Federal Securities" (as herein defined) for deposit to the credit of the Escrow Fund created pursuant to the terms of this Agreement and to establish a beginning cash balance (if needed) in such Escrow Fund; WHEREAS, the Federal Securities shall mature and the interest thereon shall be payable at such times and in such amounts as will provide moneys which, together with cash balances from time to time on deposit in the Escrow Fund, will be sufficient to pay the interest on the Refunded Obligations as it accrues and becomes payable and to pay the principal of the Refunded Obligations on their maturity dates or redemption dates; WHEREAS, to facilitate the receipt and transfer of proceeds of the Federal Securities the Issuer desires to establish the Escrow Fund at the designated office of the Escrow Agent; and WHEREAS, the Escrow Agent is a party to this Agreement and hereby acknowledges its acceptance of the tenns and provisions hereof; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, the sufficiency of which hereby is acknowledged, and to secure the full and timely payment of principal of and the interest on the Refunded Obligations, the Issuer and the Escrow Agent mutually undertake, promise, and agree for themselves and their respective representatives and successors, as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1.0 I. Definitions. Unless the context clearly indicates otherwise, the following terms shall have the meanings assigned to them below when they are used in this Agreement: "Beginning Cash Balance" means the funds described in Exhibit C attached to this Agreement. "Code" means the Internal Revenue Code of 1986, as amended, including applicable regulations, published rulings and court decisions thereunder. "Federal Securities" means direct, noncallable obligations of the United States of America, including noncallable obligations of which the full and timely payment of the principal -2- Dallas 15412l5v.2 ) and interest are unconditionally guaranteed by the United States of America, that mature and/or bear interest payable at such times and in such amounts sufficient without reinvestment to provide for the scheduled payment of the principal of and interest on the Refunded Obligations. Investments in mutual funds and unit investment trusts are prohibited. "Escrow Fund" means the escrow created in Section 3.01 of this Agreement to be administered by the Escrow Agent pursuant to the provisions of this Agreement. "Sufficiency Certificate" means the certificate executed by Paying Agent for the Refunded Obligations, in connection with the def easance of the Refunded Obligations, verifying the sufficiency of deposits to defease the Refunded Obligations. Section 1.02. Other Definitions. The terms ''Agreement," "Issuer," "Escrow Agent," "Refunded Obligations" and "Refunding Bonds," when they are used in this Agreement, shall have the meanings assigned to them in the preamble to this Agreement. Section 1.03. Interpretations. The titles and headings of the articles and sections of this Agreement have been inserted for convenience and reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Obligations in accordance with applicable law. ARTICLE II DEPOSIT OF FUNDS AND FEDERAL SECURITIES Section 2.01. Deposits in the Escrow Fund. Concurrently with the sale and delivery of the Refunding Bonds the Issuer shall deposit, or cause to be deposited, with the Escrow Agent, for deposit in the Escrow Fund, the Beginning Cash Balance and the Federal Securities described in Exhibit C attached hereto and incorporated by reference as a part of this Agreement for all purposes. The Escrow Agent shall, upon the receipt thereof, acknowledge such receipt to the Issuer in writing. ARTICLE III CREATION AND OPERATION OF ESCROW FUND Section 3.01. Escrow Fund. The Escrow Agent hereby creates on its books a special trust and irrevocable escrow fund to be known as City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009 Escrow Fund (the "Escrow Fund") for the purpose of paying the principal of and interest on the Refunded Obligations, as described in Exhibit A, in order to make finn banking arrangements therefor. The Escrow Agent hereby agrees that upon receipt thereof it will deposit to the credit of the Escrow Fund the Beginning Cash Balance and the Federal Securities described in Exhibit C attached hereto. Such deposit, all proceeds therefrom, and all cash balances from time to time on deposit therein (a) shall be the property of the Escrow Fund, (b )shall be applied only in strict conformity with the terms and conditions of this Agreement, and (c) to the extent needed to pay the principal and interest -3- Da\las l5412!5v.2 "'\ ) "\ ) '\ requirements on the Refunded Obligations, are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations, which pa}111ent shall be made by timely transfers of such amounts at such times as are provided for in Section 3.02 hereof. When the final transfers have been made for the pa}111ent of such principal of and interest on the Refunded Obligations, any balance remaining in the Escrow Fund shall be transferred to the interest and sinking fund for the Refunding Bonds. Section 3.02. Payment of Principal and Interest. The Escrow Agent is hereby irrevocably instructed to transfer, from the cash balances from time to time on deposit in the Escrow Fund, the amounts required to pay the principal of the Refunded Obligations at their respective maturity date or dates as of which such Refunded Obligations have been called for earlier redemption, and interest thereon when due, in the amounts and at the times shown in Exhibit B attached hereto. Section 3.03. Sufficiency of Escrow Fund. The Issuer represents, based on the Sufficiency Certificate, that the successive receipts of the principal of and interest on the Federal Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient to provide moneys for transfer to each place of pa}111ent for the Refunded Obligations, at the times and in the amounts required to pay the interest on the Refunded Obligations as such interest comes due and the principal of the Refunded Obligations as such principal comes due, all as more fully set forth in Exhibit D attached hereto. If, for any reason, at any time, the cash balances on deposit or scheduled to be on deposit in the Escrow Fund shall be insufficient to transfer the amounts required by each place of payment for the Refunded Obligations to make the payments set forth in Section 3.02 hereof, the Issuer shall timely deposit in the Escrow Fund, from any funds that are lawfully available therefor, additional moneys in the amounts required to make such payments. Notice of any such insufficiency shall be given promptly as hereinafter provided, but the Escrow Agent shall not in any manner be responsible for any insufficiency of funds in the Escrow Fund, unless such insufficiency shall be caused by the Escrow Agent's negligence or misconduct, or the Issuer's failure to make additional deposits thereto. Section 3.04. Trust Funds. The Escrow Agent shall hold at all times the Escrow Fund, the Federal Securities and all other assets of the Escrow Fund wholly segregated from all other funds and securities on deposit with the Escrow Agent; it shall never allow the Federal Securities or any other assets of the Escrow Fund to be commingled with any other funds or securities of the Escrow Agent; and it shall hold and dispose of the assets of the Escrow Fund only as set forth herein. The Federal Securities and other assets of the Escrow Fund shall always be maintained by the Escrow Agent as trust funds for the benefit of the owners of the Refunded Obligations, and a special account thereof shall at all times be maintained on the books of the Escrow Agent. The owners of the Refunded Obligations shall be entitled to a preferred claim and first lien upon the Federal Securities, the proceeds thereof, and all other assets of the Escrow Fund. The amounts received by the Escrow Agent under this Agreement shall not be considered as a banking deposit by the Issuer, and the Escrow Agent shall have no right or title with respect thereto except as a trustee and Escrow Agent under the tenns of this Agreement. The amounts received by the Escrow Agent under this Agreement shall not be subject to warrants, drafts or checks drawn by the Issuer or, except to the extent expressly herein provided, by a place of payment for the Refunded Obligations. -4- Dallas 1541215v.2 1 ) ") Section 3.05. Security for Cash Balances. Cash balances from time to time on deposit in the Escrow Fund shall, to the extent not insured by the Federal Deposit Insurance Corporation or its successor, be continuously secured by a pledge of direct noncallable obligations of, or noncallable obligations unconditionally guaranteed by, the United States of America, having a market value at least equal to such cash balances. ARTICLE IV SUBSTITUTION OF FEDERAL SECURITIES Section 4.01. In General. Except as provided in Section 4.02 and 4.03 hereof, the Escrow Agent shall not have any power or duty to make substitutions for the Federal Securities described in Exhibit C hereto, or to sell, transfer, or otherwise dispose of such Federal Securities. Section 4.02. Substitution of Federal Securities at Bond Closing. Concurrently with the sale and delivery of the Refunding Bonds, the Issuer, at its option, may substitute cash or Federal Securities for the Federal Securities listed in part III of Exhibit C attached hereto, but only if such cash and/or Federal Securities: (a) are in an amount, and/or mature in an amount, which, together with any cash substituted for such obligations, is equal to or greater than the amount payable on the maturity date of the obligation listed in part III of Exhibit C for which such obligation is substituted, and (b) mature on or before the maturity date of the obligation listed in part III of Exhibit C for which such obligation is substituted. The Issuer may at any time substitute the Federal Securities listed in part III of Exhibit C which, as permitted by the preceding sentence, were not deposited to the credit of the Escrow Fund, for the cash and/or obligations that were substituted concurrently with the sale and delivery of the Refunding Bonds for such Federal Securities, provided, that upon any such substitution the Escrow Agent receives (i) a verification report from a firm of independent certified public accountants as to the sufficiency of the Federal Securities to provide for the payment of the Refunded Obligations ( assuming such substitution has been made and assuming a zero percent reinvestment rate), (ii) an opinion of bond counsel or tax counsel to the effect that such substitution shall not affect the tax-exempt status of interest on the Refunded Obligations or the Refunding Bonds and (iii} that such transaction complies with the Constitution and laws of the State of Texas. Section 4.03. Substitution of Federal Securities following Bond Closing. (a) At the written request of the Issuer, and upon compliance with the conditions hereinafter stated, the Escrow Agent shall sell, transfer, otherwise dispose of or request the redemption of all or any portion of the Federal Securities and apply the proceeds therefrom to purchase Refunded Obligations or other Federal Securities. Any such transaction may be effected by the Escrow Agent only if (1) the Escrow Agent shall have received a written opinion from a firm of independent certified public accountants that such transaction will not cause the amount of money and securities in the Escrow Fund to be reduced below an amount which will be sufficient, when added to the interest to accrue thereon and assuming a zero percent reinvestment -5- DaUas 1541215v.2 ) ") ) rate, to provide for the payment of principal of and interest on the remaining Refunded Obligations as they become due, and (2) the Escrow Agent shall have received the unqualified written legal opinion of nationally recognized bond counsel or tax coW1sel acceptable to the Issuer and the Escrow Agent to the effect that (A} such transaction will not cause any of the Refunding Bonds to be an "arbitrage bond" within the meaning of the Code or otherwise adversely affect the tax-exempt status of the Refunded Obligations or the Refunding Bonds, and (B) that such transaction complies with the Constitution and laws of the State of Texas. (b) The foregoing provisions of substitution notwithstanding, the Escrow Agent shall be under no obligation to effect the substitution of the Federal Securities in the manner contemplated by Subsection 4.03(a) if the Issuer fails to deliver or cause to be delivered to the Escrow Agent no later than three Business Days prior to the proposed date such substitution is to be effected a written certificate setting forth in reasonable detail the maturity dates and maturity amounts of the Federal Securities to be substituted and the proposed date such substitution is to occur. Section 4.04. Allocation of Certain Federal Securities. The maturing principal of and interest on the Federal Securities may be applied to the payment of any Refunded Obligations and no allocation or segregation of the receipts of principal or interest from such Federal Securities is required. Section 4.05. Arbitrage. The Issuer hereby covenants and agrees that it shall never request the Escrow Agent to exercise any power hereunder or permit any part of the money in the Escrow Fund or proceeds from the sale of Federal Securities to be used directly or indirectly to acquire any securities or obligations if the exercise of such power or the acquisition of such securities or obligations would cause any Refunding Bonds or Refunded Obligations to be an "arbitrage bond" within the meaning of Section 148 of the Code. ARTICLE V APPLICATION OF CASH BALANCES Section 5.01. In General. Except as provided in Sections 5.02 and 5.03 hereof, neither the Issuer nor the Escrow Agent shall reinvest any moneys deposited to or held as part of the Escrow Fund. Section 5.02. Reinvestment in SLGS. Cash balances in the Escrow Fund shall be reinvested as set forth on Exhibit E attached hereto. Section 5.03. Reinvestment of Cash Balances. At the written request of the Issuer, and upon compliance with the conditions hereinafter stated, the Escrow Agent shall permit or cause the reinvestment of cash balances in the Escrow Fund, pending the use thereof to pay when due the principal of and interest on the Refunded Obligations, in Federal Securities which obligations must mature on or before the respective dates needed for payment of the Refunded Obligations. Any such modification must include (i) an opinion of nationally recognized bond counsel or tax counsel that such transaction {a) does not adversely affect the tax-exempt nature of the Refunding Bonds or the Refunded Obligations and (b) complies with the Constitution and laws -6- Dallas 1541215v.2 ) ') ) of the State of Texas and (ii) a verification report by a firm of independent certified public accountants verifying the sufficiency of the Escrow Fund and the yield on the investment thereof. ARTICLE VI RECORDS, REPORTS AND NOTICES Section 6.01. Records. The Escrow Agent will keep books of record and account in which complete and correct entries shall be made of all transactions relating to the receipts, disbursements, allocations and application of the money and Federal Securities deposited to the Escrow Fund and all proceeds thereof, and such books shall be available for inspection at reasonable hours and under reasonable conditions by the Issuer and the owners of the Refunded Obligations. Section 6.02. Re.ports. While this Agreement remains in effect, the Escrow Agent at least annually shall prepare and send to the Issuer a written report summarizing all transactions relating to the Escrow Fund during the preceding year, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Federal Securities and transfers from the Escrow Fund for payments on the Refunded Obligations or otherwise, together with a detailed statement of all Federal Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. ARTICLE VII CONCERNING THE PA YING AGENTS AND ESCROW AGENT Section 7.01. Representations. The Escrow Agent hereby represents that it has all necessary power and authority to enter into this Agreement and undertake the obligations and responsibilities imposed upon it herein, and that it will carry out all of its obligations hereunder. Section 7.02. Limitation on Liability. The liability of the Escrow Agent to transfer funds for the payment of the principal of and interest on the Refunded Obligations shall be limited to the proceeds of the Federal Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, neither the Escrow Agent nor any place of payment for the Refunded Obligations shall have any liability whatsoever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligors of the Federal Securities to make timely payment thereon, except for the obligation to notify the Issuer promptly of any such occurrence. The recitals herein and in the proceedings authorizing the Refunding Bonds shall be taken as the statements of the Issuer and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. The Escrow Agent is not a party to the proceedings authorizing the Refunding Bonds or the Refunded Obligations and is not responsible for nor bound by any of the provisions thereof ( except as a place of payment or a paying agent/registrar therefor). In its capacity as Escrow Agent, it is agreed that the Escrow Agent need look only to the tenns and provisions of this Agreement. -7- Dallas 1541215v.2 ) The Escrow Agent makes no representations as to the value, conditions or sufficiency of the Escrow Fund, or any part thereof, or as to the title of the Issuer thereto, or as to the security afforded thereby or hereby, and the Escrow Agent shall not incur any liability or responsibility in respect to any of such matters. It is the intention of the parties hereto that the Escrow Agent shall never be required to use or advance its own funds or otherwise incur personal financial liability in the perfonnance of any of its duties or the exercise of any of its rights and powers hereunder. The Escrow Agent shall not be liable for any action taken or neglected to be taken by it in good faith in any exercise of reasonable care and believed by it to be within the discretion or power conferred upon it by this Agreement, nor shall the Escrow Agent be responsible for the consequences of any error of judgment; and the Escrow Agent shall not be answerable for any loss unless the same shall have been through its negligence or want of good faith. Unless it is specifically otherwise provided herein, the Escrow Agent has no duty to detennine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the Issuer with respect to arrangements or contracts with others, with the Escrow Agent's sole duty hereunder being to safeguard the Escrow Fund, to dispose of and deliver the same in accordance with this Agreement. If, however, the Escrow Agent is called upon by the tenns of this Agreement to detennine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such detennination, only to exercise reasonable care and diligence, and in event of error in making such determination the Escrow Agent shall be liable only for its own misconduct or its negligence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the Issuer or any other person such reasonable additional evidence as the Escrow Agent in its discretion may deem necessary to determine any fact relating to the occurrence of such event or contingency, and in this connection may make inquiries of, and consult with, among others, the Issuer at any time. Section 7.03. Compensation. (a) Concurrently with the sale and delivery of the Refunding Bonds, the Issuer shall pay to the Escrow Agent the sum of $375, the sufficiency of which is hereby acknowledged by the Escrow Agent to pay its fee for performing the services of Escrow Agent hereunder and for all expenses incurred or to be incurred by it as Escrow Agent in the administration of this Agreement. In the event that the Escrow Agent is requested to perform any extraordinary services herewider, the Issuer hereby agrees to pay reasonable fees to the Escrow Agent for such extraordinary services and to reimburse the Escrow Agent for all expenses incurred by the Escrow Agent in performing such extraordinary services, and the Escrow Agent hereby agrees to look only to the Issuer for the payment of such fees and reimbursement of such expenses. The Escrow Agent hereby agrees that in no event shall it ever assert any claim or lien against the Escrow Fund for any fees for its services, whether regular or extraordinary, as Escrow Agent, or in any other capacity, or for reimbursement for any of its expenses. (b) Concurrently with the sale and delivery of the Refunding Bonds, the Issuer shall pay to the Escrow Agent the sum of $1,500, the sufficiency of which is hereby acknowledged by -8- Dallas 15412l5v.2 ) i the Escrow Agent, for all future reasonable fees and expenses for paying agency services relating to the Refunded Obligations for which it serves as the paying agent. The Escrow Agent shall be obligated to make available for the Refunded Obligations amounts from the Escrow Fund sufficient to pay when due the principal of and interest on any Refunded Obligations presented for payment. The Escrow Agent hereby agrees that in no event shall it ever assert any claim or lien against the Escrow Fund for any fees for its services, whether regular or extraordinary, as paying agent for any of the Refunded Obligations or for reimbursement for any of its expenses. (c) Upon receipt of the aforesaid specific sums stated in subsections (a) and (b) of this Section, the Escrow Agent shall acknowledge such receipt to the Issuer in writing. Section 7 .04. Successor Escrow Agents. (a) If at any time the Escrow Agent or its legal successor or successors should become unable, through operation of law or otherwise, to act as Escrow Agent hereunder, or if its property and affairs shall be taken under the control of any state or federal court or administrative body because of insolvency or bankruptcy or for any other reason, a vacancy shall forthwith exist in the office of Escrow Agent hereunder. In such event the Issuer, by appropriate action, promptly shall appoint an Escrow Agent to fi11 such vacancy. If no successor Escrow Agent shall have been appointed by the Issuer within 60 days, a successor may be appointed by the owners of a majority in principal amount of the Refunded Obligations then outstanding by an instrument or instruments in writing filed with the Issuer, signed by such owners or by their duly authorized attorneys-in-fact. If, in a proper case, no appointment of a successor Escrow Agent shall be made pursuant to the foregoing provisions of this section within three months after a vacancy shall have occurred, the owner of any Refunded Bond may apply to any court of competent jurisdiction to appoint a successor Escrow Agent. Such court may thereupon, after such notice, if any, as it may deem proper, prescribe and appoint a successor Escrow Agent. (b) Toe Escrow Agent may at any time resign and be discharged from the trust hereby created by giving not less than 60 days' written notice to the Issuer; provided, that, no such resignation shall take effect unless: (i) a successor Escrow Agent shall have been appointed by the Issuer as herein provided; (ii) such successor Escrow Agent shall have accepted such appointment; (iii) the successor Escrow Agent shall have agreed to accept the fees currently in effect for the Escrow; and (iv) the Escrow Agent shall have paid over to the successor Escrow Agent a proportional part of the Escrow Agent's fee hereunder. Such resignation shall take effect immediately upon compliance with the foregoing requirements. (c) Any successor Escrow Agent shall be: (i) a corporation organized and doing business under the laws of the United States or the State of Texas; (ii) authorized under such laws to exercise corporate trust powers; (iii) have a combined capital and surplus of at least $5,000,000; (iv) subject to the supervision or examination by Federal or State authority and (v) qualified to serve as Escrow Agent under the provisions of Chapter 1207. ( d) Any successor Escrow Agent shall execute, acknowledge and deliver to the Issuer and the Escrow Agent an instrument accepting such appointment hereunder, and the Escrow Agent shall execute and deliver an instrument transferring to such successor Escrow Agent, subject to the terms of this Agreement, all the rights, powers and trusts of the Escrow Agent -9- Dallas 1541215v.2 ) hereunder. Upon the request of any such successor Escrow Agent, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confinning to such successor Escrow Agent all such rights, powers and duties. The Escrow Agent shall pay over to its successor Escrow Agent a proportional part of the Escrow Agent's fee hereunder. ARTICLE VIII MISCELLANEOUS Section 8.01. Notice. Except as provided in Sections 3.01 and 8.08 hereof, which require actual receipt of notice or consent, as the case may be, any notice, authorization, request, or demand required or permitted to be given hereunder, shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid, addressed as follows: To the Escrow Agent: To the Issuer: To the Rating Agencies: The Bank of New York Mellon Trust Company, N.A. Issuer Administrative Services 2001 Bryan Street, 8th Floor Dallas, Texas 75201 City of Lubbock, Texas 1625 13th Street Lubbock, Texas 79457 Attention: Chief Financial Officer Moody's Investors Service, Inc. 2200 Ross A venue Suite 4650 West Dallas, Texas 75201 Attention: Public Finance Department Standard & Poor's Rating Group 25 Broadway New York, New York 10004 Fitch Investors Service, L.P. 4514 Cole Avenue, Suite 600 Dallas, Texas 75205 The United States Post Office registered or certified mail receipt showing delivery of the aforesaid shall be conclusive evidence of the date and fact of deli very. Either party hereto may provide an electronic address to which notices are to be delivered in lieu of the physical address provided above or change the physical address to which notices are to be delivered by giving to the other party not less than ten (10) days prior notice thereof. -10- Dallas !541215v.2 ) Section 8.02. Termination of Responsibilities. Upon the talcing of all the actions as described herein by the Escrow Agent, the Escrow Agent shall have no further obligations or responsibilities hereunder to the Issuer, the owners of the Refunded Obligations or to any other person or persons in connection with this Agreement. Section 8.03. Binding Agreement. This Agreement shall be binding upon the Issuer and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the owners of the Refunded Obligations, the Issuer, the Escrow Agent and their respective successors and legal representatives. Section 8.04. Severability. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. In the event any one or more provisions hereof are held to be invalid, illegal or unenforceable the Issuer shall promptly notify each of the rating agencies then maintaining a rating on the Refunded Obligations. Section 8.05. Texas Law Governs. This Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Texas. Section 8.06. Time of the Essence. Time shall be of the essence in the performance of obligations from time to time imposed upon the Escrow Agent by this Agreement. -11- Dallas 1541215v.2 ) Section 8.07. Effective Date of Agreement. This Agreement shall be effective upon receipt by the Escrow Agent of the funds described in Exhibit C attached hereto and the Federal Securities, together with the specific sums stated in subsections (a) and (b) of Section 7.03 for Escrow Agent and paying agency fees, expenses, and services. Section 8.08. Modification of Agreement. This Agreement shall be binding upon the Issuer and the Escrow Agent and their respective successors and legal representatives and shall inure solely to the benefit of the owners of the Refunded Obligations, the Issuer, the Escrow Agent and their respective successors and legal representatives. Furthermore, no alteration, amendment or modification of any provision of this Agreement (1) shall alter the firm financial arrangements made for the payment of the Refunded Obligations or (2) shall be effective unless (i) prior written consent of such alteration, amendment or modification shall have been obtained from the owners of all Refunded Obligations outstanding at the time of such alteration, amendment or modification and (ii) such alteration, amendment or modification is in writing and signed by the parties hereto; provided, however, the Issuer and the Escrow Agent may, without the consent of owners of the Refunded Obligations, amend or modify the terms and provisions of this Agreement to cure in a manner not adverse to the owners of the Refunded Obligations any ambiguity, formal defect or omission in this Agreement. Prior notice of any such modification shall be given to each rating agency then maintaining a rating on the Refunded Obligations. ARTICLE IX ACKNOWLEDGMENT OF RECEIPT OF NOTICE Section 9.01. Acknowledgment of Receipt of Notice of Defeasance and Redemption. The Escrow Agent, by its execution hereof, as paying agent/registrar for the Refunded Obligations set forth on Exhibit A hereto, acknowledges receipt of the ordinance authorizing the issuance of the Refunding Bonds constituting written notice of defeasance and redemption of the Refunded Obligations, and agrees to provide or cause to be provided to the owners thereof notice of defeasance and redemption of such Refunded Obligations as required by the respective ordinances that authorized the issuance of such Refunded Obligations. [Execution Page Follows) -12- Dallas 1541215v.2 'I IN WITNESS WHEREOF, this Escrow Agreement has been executed in multiple counterparts, each one of which shall constitute one and the same original Agreement, as of the date and year appearing on the first page of this Agreement. CITY OF LUBBOCK., TEXAS ATTEST: Signature Page for Escrow Agreement Dallas IS41215v.l .. "'\ Dallas I S4121Sv. l THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. By. /Jat&d Title: At SiSTANT V!Cc p~ Signature Page for Escrow Agreement ) Exhibit A Exhibit B Exhibit C ExhibitD Exhibit E Dallas \541215v.2 INDEX TO EXHIBITS Description of the Refunded Obligations Schedule of Debt Service on Refunded Obligations Description of Beginning Cash Balance and Federal Securities Escrow Fund Cash Flow Reinvestments in Zero Interest Rate SLGS EXHIBIT A SCHEDULE OF REFUNDED OBLIGATIONS See Attached Schedule A-1 Da!las 1541215v.2 SUMMARY OF BONDS REFUNDED City of Lubbock· GO Debt Total New Issue ••Final Pricing Numbers•• Maturity Interest Par Call Call Bond Date Rate Amount Date Price Tax & WW Sys Rev CO, Series 1993, 199JCO: SER14 02/15/2012 4.000% 75,000.00 05/12/2009 100.000 02/1 S/2013 4.000% 75,000.00 05/12/2009 100.000 02/15/2014 4.000% 75,000.00 05/12/2009 100.000 225,000.00 GO Bonds, Series 1993, 1993GO: SER14 02/15/2012 4.000% 965,000.00 05/12/2009 100.000 ' 02/15/2013 4J)00% 965,000.00 05/12/2009 100.000 02/15/2014 4.000% 965,000.00 05/12/2009 100,000 2,895,000.00 Tax & WW Sys Rev CO, Series 1998, 1998: SER18 02/15/2016 4.250% 515,000.00 05/12/2009 100.000 02/15/2017 4.250% 515,000.00 05/12/2009 100.000 02/15/2018 4.250% 515,000.00 05/12/2009 100.000 1,545,000.00 GO Ref Bonds, Series 1999, l 999GO: SERl4 02/15/2010 4.300% 2,960,000.00 05/12/2009 100.000 02/15/2011 4.450% 2,930,000.00 05/12/2009 100.000 02/15/2012 4.550% 1,785,000.00 05/12/2009 100.000 02/15/2013 4.650% 1,685,000.00 05/12/2009 100.000 02/15/2014 4.700% 1.670,000.00 05/12/2009 100.000 11,030,000.00 Tax & WW Sys Sur Rev Ref Bonds, Series 1999, 1999REF: SER14 02/15/2010 4.400% 620,000.00 05/12/2009 100.000 02/15/2011 4.500% 620,000.00 05/12/2009 100.000 02/1 S/2012 4.500% 620,000.00 05112/2009 100.000 02/15/2013 4.500% 620,000.00 05/12/2009 100.000 02/15/2014 4.500% 620,000.00 05/12/2009 100.000 TERMl6 02/15/2015 4.500% 620,000.00 05/12/2009 100.000 02/15/2016 4.500% 620,000.00 05/12/2009 100.000 TERMl9 02/15/2017 4.500% 620,000.00 05/12/2009 100.000 02/15/2018 4.500% 620,000.00 05/12/2009 100,000 02/15/2019 4.500% 620,000.00 05/12/2009 100.000 6,200,000.00 21,895,000.00 Mar 12, 2009 .12:38 pm Prepared by RBC Capital Markets· DH (Finance 6.01 I Lubbock:COMBGO) Page 21 ) EXHIBIT B SCHEDULE OF DEBT SERVICE ON REFUNDED OBLIGATIONS See Attached Schedule B-1 Dallas 15412l5v.2 Date 05/12/2009 BOND DEBT SERVICE TO CALL Tax & WW Sys Rev CO, Series 1993 Debt Service to Call (5/12/09) Principal Interest 2,175.00 0.00 2,175.00 Principal Redeemed 225,000.00 225,000.00 Mar 30, 2009 I :31 pm Prepared by RBC Capital Markets -DH Total 227,175.00 227,175.00 (Finance 6.01 I ) Page 1 ) Date 05/12/2009 BOND DEBT SERVICE TO CALL· GO Bonds, Series 1993 Principal 0.00 Debt Service to Call (5/12/09) Interest 27,985.00 27,985.00 Principal Redeemed 2,895,000.00 2,895,000.00 Mar 30, 2009 I :33 pm Prepared by RBC Capital Markets· DH Total 2,922,985.00 2,922,985.00 (Finance 6.01 1 ) Page I Date 05/12/2009 BOND DEBT SERVICE TO CALL Tax & WW Sys Rev CO, Series 1998 Debt Service to Call ( 5/ 12/09) Principal Interest 15,868.44 0.00 15,868.44 Principal Redeemed 1,545,000.00 1,545,000.00 Mar 30, 2009 1:35 pm Prepared by RBC Capital Markets -DH Total 1,560,868.44 1,560,868.44 ( Finance 6. 01 1 ) Page I Date 05/12/2009 BOND DEBT SERVICE TO CALL Go Ref Bonds, Series 1999 Debt Service to Call (5/12/09) Principal 0.00 Interest 119,800.21 119,800.21 Principal Redeemed 11,030,000.00 11,030,000.00 . Mar 30, 2009 I :37 pm Prepared by RBC Capital Markets -DH Total 11,149,800.21 11,149,800.21 (Finance 6.01 l) Page I ) ) Date 05/12/2009 BOND DEBT SERVICE TO CALL Tax & WW Sys Sur Rev Ref Bonds, Series 1999 Debt Service to Cal I ( 5/ I 2/09) Principal Interest 67,275.17 0.00 67,275.17 Principal Redeemed 6,200,000.00 6,200,000.00 Mar 30, 2009 I: 38 pm Prepared by RBC Capital Markets -DH Total 6,267,275.17 6,267,275.17 (Finance 6.01 I ) Page I EXHIBITC DESCRIPTION OF BEGINNING CASH BALANCES AND FEDERAL SECURITIES Dallas 1541215v.2 I. Cash $.82 II. State and Local Government Series Obligations $22,128,103 (see attached) III. Open Market Securities $0 C-1 .., ' • U.S. TREASURY SECURITIES Subscription Review Treasury Case Number: 2009-01381 Issue Date: 04/08/2009 Issue Amount: $22,128,103.00 Issue Information Bank Ref Number: Rate Table Date: 03/25/2009 Status: Complete State or Local Government Body Underlying Bond Issue: City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009 Taxpayer Identification Number: 75-6000590 CITY OF LUBBOCK, TEXAS 162513TH STREET LUBBOCK, TX 79457 Contilci: MR. ANDY BURCHAM Telephone: 806-775-2149 Fax:806-n5-2051 E-Mail: aburcham@mytubbock.us Trustee Bank ABA Routing Number: 021000018 THE BANK OF NEW YORK TRUST COMPANY, N.A. 2001 BRYAN STREET, 8TH FLOOR DALLAS, TX 75201 Contact: PAT BLUE Telephone: 214-468-6511 Fax: 214-468-5411 E-Mall: patricia.blue@bnymellon.com Financial Institution Managing (ACH) Payments ABA Routing Number: 021000018 THE BANK OF NEW YORK MELLON TRUST COMPANY, NA 330 WEST 34TH STREET INCOME COLLECTIONS NEW YORK, NY 10286 Contact: PAT BLUE Telephone: 214468-6511 Fax: 214-468-5144 E-Mall: patricia.blue@bnymellon.com ACH Payment lnstrucUons: Account Name; BNY TAS #700407 Account Number: 111566-lncome Account Type: Checking ABA Routing Number: 021000018 Date: 312512009 • ) U.S. TREASURY SECURITIES Subscription Review Financial Institution Transmitting Funds for Purchase ABARoutlng Number: 021000018 THE BANK OF NEW YORK TRUST COMPANY, NA Contact: PAT BLUE Telephone: 214-468-a511 Fax: 214-468-5144 E-Mail: patricia.blue@bnymellon.com ABA Routing Number or TIN: 411416330 RSC Capital Mantels 2711 N. Haskell Avenue Suite 2400 Dallas, TX 75204 Contact: STEVEN DEREK HONEA Telephone: 214-989-1671 Fax: 214-989-1650 E-Mail: derek.honea@rbe<:m.com Subscriber Viewers Date: 3/25/2009 • ' Treasury Case Numb8f: 2009-01381 Issue Data: 04/08/2009 Issue Amount: $22,128,103.00 Security Number 1 U.S. TREASURY SECURITIES Subscription Review Issue Information Bank Ref Number: Rate Table Date: 03/25/2009 Status: Complete Schedule of SLGS Securities Principal Interest Rate Maturity Date Amount $22,128,103.00 0.05 05/12/2009 Data: 3/25/2009 First Interest Payment - Dallas 154l215v.2 EXHIBIT D ESCROW FUND CASH FLOW See Attached Schedule D-1 ESCROW SUFFICIENCY j City of Lubbock -GO Debt Total New Issue Escrow Net Escrow Excess Excess Date Requirement Receipts Receipts Balance 04/08/2009 0.82 0.82 0.82 ' : 05/12/2009 22,128,103.82 22,129,133.62 1,029.80 1,030.62 22,128,103.82 22,129,134.44 I,o30.62 ) ) Apr 3, 2009 4:33 pm Prepared by RBC Capital Markets -DH (Finance 6.011 Lubbock:COMBGO) Page I j Dallas \ 54121 Sv.2 EXHIBITE REINVESTMENTS IN ZERO INTEREST RATE SLGS None E-1 ) PAYING AGENT/REGISTRAR AGREEMENT between CITY OF LUBBOCK, TEXAS and THE BANK OF NEW YORK MELLON TRUST COMP ANY, N.A. Pertaining to City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation Series 2009 Dated as of March 1, 2009 Dallas 1540751 v.1 ) TABLE OF CONTENTS Page Recitals ........................................................................................................................................ 1 ARTICLE I APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Section 1.02. Section 2.01. AppointJnent. ................................................................................................... 1 Compensation .................................................................................................. I ARTICLE II DEFINITIONS Definitions ....................................................................................................... 2 ARTICLE III PAYING AGENT Section 3.01. Duties of Paying Agent ................................................................................... 3 Section 3.02. Paynient Dates ................................................................................................. 3 Section 4.01. Section 4.02. Section 4.03. Section 4.04. Section 4.05. Section 4.06. Section 4.07. Section 5.01. Section 5.02. Section 5.03. Section 5.04. Section 5.05. Section 5.06. Section 5.07. Dallas 1540751v.l ARTICLE IV REGISTRAR Transfer and Exchange .................................................................................... 4 The Certificates ............................................................................................... 4 F onn of Register .............................................................................................. 4 List of Owners ................................................................................................. 5 Cancellation of Certificates ............................................................................. 5 Mutilated, Destroyed, Lost, or Stolen Certificates .......................................... 5 Transaction Information to Issuer ................................................................... 6 ARTICLEV THE BANK Duties of Bank ................................................................................................. 6 Reliance on Docwnents, Etc ........................................................................... 6 Recitals of Issuer ............................................................................................. 7 May Hold Certificates ..................................................................................... 7 Money Held by Bank ...................................................................................... 7 Indemnification ............................................................................................... 8 Interpleader ...................................................................................................... 8 (i) ' Section 6.01. Section 6.02. Section 6.03. Section 6.04. Section 6.05. Section 6.06. Section 6.07. Section 6.08. Section 6.09. Section 6.10. Section 6.11. ARTICLE VI MISCELLANEOUS PROVISIONS Amendment ..................................................................................................... 8 Assignment ...................................................................................................... 9 Notices ............................................................................................................. 9 Effect of Headings ......................................................................................... 10 Successors and Assigns ................................................................................. 10 Separability .................................................................................................... 10 Benefits of Agreenient .................................................................................. 1 0 Entire Agreement .......................................................................................... 10 Counterparts .................................................................................................. 1 O Tennination ................................................................................................... 10 Govenling Law .............................................................................................. 11 Execution ....................................................................................................................................... 11 Annex A -Schedule of Fees for Service as Paying Agent/Registrar (ii) Dallas 1540751 v. l ) ) ' PA YING AGENT/REGISTRAR AGREEMENT THIS PAYING AGENT/REGISTRAR AGREEMENT (the or this "Agreement"), dated as of March 1, 2009, is by and between CITY OF LUBBOCK, TEXAS (the "Issuer''), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. (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 2009 (the "Certificates"), dated March 1, 2009, 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 th.at 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 terms thereof, and th.at 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 1.01. 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 amowits 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. Dallas 1540751 v. l ) ) \ , 'I ) ) (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 of New York Mellon Trust Company, N.A. "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 Obligation, Series 2009, dated March 1, 2009. "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 Banlc when it is performing the functions associated with the terms in this Agreement. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, or government or any agency or political subdivision of a government. "Predecessor Certificates" 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 Dallas 154075lv.l "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 Chairman of the Board of Directors, the Chairman or Vice Chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those perfonned 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 terms of the Certificate Ordinance for redemption of the Certificates, or any portion thereof, prior to the fixed maturity date. ARTICLE III PA YING AGENT Section 3.01. Duties of Paying Agent. (a) The Bank, as Paying Agent and on behalf of the Issuer, shall pay to the Owner, at the Stated Maturity and upon the surrender of the 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 Bank, 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 Dallas 1540751 v. l ) ARTICLE IV REGISTRAR Section 4.01. Transfer and Exchange. (a) The Issuer shall keep the Register at the Bank Office, and subject to such reasonable written regulations as the Issuer may prescribe, which regulations shall be furnished to the Bank herewith or subsequent hereto by Issuer Order, the Issuer shall provide for the registration and transfer of the 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 documentation 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 form other than a form which the Bank has currently available and CUITently 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. 4 Dallas 15407Slv.1 'I 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, ofreproductio~ a copy of the information contained in the Register. The Issuer may also inspect the infonnation 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 manner whatsoever, and all Certificates so delivered shall be promptly cancelled by the Banlc. All cancelled Certificates held by the Banlc shall be disposed of pursuant to the Securities Exchange Act of 1934. Section 4.06. Mutilated, Destroyed, Lost. or Stolen Certificates. (a) Subject to the provisions ofthis 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 Banlc, 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 Banlc 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 stole~ and upon receipt by the Bank and the Issuer of such indemnity or security as they may require, the Banlc shall cancel the Certificate number on the Certificate registered with a notation in the Register that said Certificate has been mutilated, s Dallas l540751v.l destroyed, lost, or stolen; and a new Certificate shall be issued of the same series and of like tenor and principal amount bearing a nwnber, 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 cUITent 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 terms of any such bond, provided that the amount of such bond is not reduced below the amount of the bond on the date of execution of this Agreement. The blanket bond then utilized by the Bank for lost, stolen, or destroyed 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 perfonn the duties set forth herein and in accordance with the Certificate Ordinance and agrees to use reasonable care in the performance thereof. The Bank hereby agrees to use the funds deposited with it for payment of the principal of, redemption premium, if any, and interest on the 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 performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that 6 Dallas 1540751 v.1 ' ) 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 is also authorized to transfer funds relating to the closing and initial delivery of the Certificates in the manner disclosed in the closing memorandum as prepared by the Issuer's financial advisor or other agent. The Bank may act on a facsimile or e-mail transmission of the closing memorandum acknowledged by the financial advisor or the Issuer as the final closing memorandum. The Bank shall not be liable for any losses, costs or expenses arising directly or indirectly from the Bank's reliance upon and compliance with such instructions. (f) 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. (g) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03. Recitals oflssuer. (a) The recitals contained herein and in the 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 amount 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. 7 Dallas 1540751 v.1 ) ) (b) The Bank shall be under no liability for interest on any money received by it hereunder. (c) Subject to the provisions of Title 6, Texas Property Code, any money deposited with the Bank for the payment of the principal, redemption premium, if any, or interest on any 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. (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 Corporation 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 pennitted by law, the Issuer agrees to indemnify the Bank, its officers, directors, employees, and agents for, and hold them harmless against, any loss, liability, or expense incurred without 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 performance of any of its powers or duties under this Agreement. Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, 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. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereof. 8 Dallas l540751v.l "\ ' ) 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 docwnent 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: 9 Dallas 1540751 v. I ) ) (a) if to the Issuer: (b) if to the Bank: CityofLubbock, Texas 1625 13th Street Lubbock, Texas 79457 Attention: Chief Financial Officer The Bank of New York Mellon Trust Company, N.A. 2001 Bryan Street, 8th Floor Dallas, Texas 75201 Attention: Corporate Trust Department Section 6.04. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. Section 6.06. 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 tenninate on the date of final payment by the Bank issuing its checks for the final payment of principal, redemption premium, if any, and interest of the 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. 10 Dallas 154075Jv.l ) ) ' (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 of Texas. 11 Dallas 1540751 v. l ) ) IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. CTIY OF LUBBOCK TEXAS By: ~~/'ltd Tom Martin, Mayor ATTEST: Signature Page for Paying Agent/Registrar Agreement Dallas J54075lv./ ) ) .., Dallas 154075 Iv. l THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. By: Title: ) ANNEX"A" .. SCHEDULE OF FEES FOR SERVICE AS PA YING AGENT/REGISTRAR ) ) \ Dallas 1540751 v.1 The Bank of New York Mellon Trust Company. NA Fee Schedule City of Lubbock, TX Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 A one-time charge covering the Bank Officer's review of governing docwnents, 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. Lfa,n~I Paying Agen~9~lstr~ion F!9j L_ •. -~~~:~_,......_. -~.i::.. An annual charge covering the normal paying agent duties related to account administration and bondholder services. Our pricing is based on the assumption that the bonds are DTC-eligible/book-entry only. if the bonds are certificated or physical, then we will have to charge an additional $1000 per year as a paying agent. This fee is payable annually, in advance. 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 commensurate with the service to be provided and may be charged in BNYMTC's sole discretion. Ifit 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 fonn, additional annual fees will be charged for any applicable tender agent and/or registrar/paying agent services. Additional information wilt be provided at such time. Should this transaction tenninate 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. These extraordinary services may include, but are not limited to, supplemental agreements, consent operations, unusual releases, tender processing, sinking fund redemptions, failed remarketing processing, the preparation of special or interim reports, custody of collateral, a one-time fee to be charged upon termination of an engagement. Counsel, accountants, special agents and others will be charged at the actual amount of fees and expenses billed, C filing fees, money market sweep fees, auditor confirmation 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 infonnation. Non-standard audit confirmation requests may be assessed an additional fee. 200 I Bryan -8111 Floor Dallas, TX 7520 I ) The Bank of New York Mellon Trust Company. N.A. Periodic tenders, sinking fund, optional or extraordinary call redemptions will be assessed at $300 per event. The fee for non-interest bearing balances left uninvested with the Bank will be 10 basis points for the quarter, based on quarter-end spot balance levels, in excess of $250,000 (held in the U.S. offices of the Bank}. Tenns and Disclosures Terms of Proposal Final acceptance of the appointment under the Indenture is subject to approval of authorized officers of BNYM 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 first 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 infonnation 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. 200 I Bryan -8" Floor Dallas, TX 7 520 l ..., Dallas 1540771 v. l PA YING AGENT/REGISTRAR AGREEMENT between CITY OF LUBBOCK, TEXAS and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. Pertaining to City of Lubbock, Texas General Obligation Refunding and Improvement Bonds Series 2009 Dated as of March 1, 2009 ) TABLE OF CONTENTS Page ARTICLE I APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment .................................................................................................... I Section 1.02. Compensation .................................................................................................. 1 Section 2.01. Section 3.01. Section 3.02. Section 4.01. Section 4.02. Section 4.03. Section 4.04. Section 4.05. Section 4.06. Section 4.07. Section 5.01. Section 5.02. Section 5.03. Section 5.04. Section 5.05. Section 5.06. Section 5.07. Section 6.01. Section 6.02. Section 6.03. Dallas 1540771 v. I ARTICLE II DEFINITIONS Definitions ....................................................................................................... 2 ARTICLE III PAYING AGENT Duties of Paying Agent ................................................................................... 3 Pa}'lilent Dates ................................................................................................. 3 ARTICLE IV REGISTRAR Transfer and Exchange .................................................................................... 4 The Bonds ....................................................................................................... 4 Form of Register .............................................................................................. 4 List of Owners ................................................................................................. 5 Cancellation of Bonds ..................................................................................... 5 Mutilated, Destroyed, Lost, or Stolen Bonds .................................................. 5 Transaction Information to Issuer ................................................................... 6 ARTICLEV THEBANK Duties of Bank ................................................................................................. 6 Reliance on Documents, Etc ........................................................................... 6 Recitals of Issuer ............................................................................................. 7 May Hold Bonds ............................................................................................. 7 Money Held by Bank ...................................................................................... 7 Indentnification ............................................................................................... 8 Interpleader ...................................................................................................... 8 ARTICLE VI MISCELLANEOUS PROVISIONS Amendment ..................................................................................................... 8 Assignment ...................................................................................................... 8 Notices ............................................................................................................. 8 (i) ) ) ) ) Section 6.04. Section 6.05. Section 6.06. Section 6.07. Section 6.08. Section 6.09. Section 6.10. Section 6.11. Effect of Headings ........................................................................................... 9 Successors and Assigns ................................................................................... 9 Separability ...................................................................................................... 9 Benefits of Agreement .................................................................................... 9 Entire Agreement ............................................................................................ 9 Counterparts .................................................................................................... 9 Termination ..................................................................................................... 9 Governing Law .............................................................................................. 10 Execution ....................................................................................................................................... 11 Annex A-Schedule of Fees for Service as Paying Agent/Registrar (ii) Dallas 1540771 v. I ) ) ) .. PA YING AGENT/REGISTRAR AGREEMENT THIS PA YING AGENT/REGISTRAR AGREEMENT (the or this "Agreement"), dated as of March 1, 2009, is by and between CITY OF LUBBOCK, TEXAS (the "Issuer"), and THE BANK OF NEW YORK MELLON TRUST COMP ANY, N.A. (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 General Obligation Refunding and hnprovement Bonds, Series 2009 (the "Bonds"), dated March 1, 2009, to be issued as registered securities without coupons; and WHEREAS, all things necessary to make the Bonds the valid obligations of the Issuer, in accordance with their terms, will be taken upon the issuance and delivery thereof; and WHEREAS, the Issuer is desirous that the Bank act as the Paying Agent of the Issuer in paying the principal, redemption premium, if any, and interest on the Bonds, in accordance with the terms thereof, and that the Bank act as Registrar for the Bonds; and WHEREAS, the Issuer has duly authorized the execution and delivery of this Agreement, and all things necessary to make this Agreement the valid agreement of the Issuer, in accordance with its terms, have been done; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE I APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Aru>9intrnent. (a) The Issuer hereby appoints the Banlc to act as Paying Agent with respect to the Bonds in paying to the Owners of the Bonds the principal, redemption premium, if any, and interest on all or any of the Bonds. (b) The Issuer hereby appoints the Bank as Registrar with respect to the Bonds. (c) The Bank hereby accepts its appointment, and agrees to act as, the Paying Agent and Registrar. Section 1.02. Compensation. (a) As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Annex A hereto for the first year of this Agreement, or such part thereof as this Agreement shall be in effect, and thereafter while this Agreement is in effect, the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. Dallas 1540771 v. l ) ) ) ) ) (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 of New York Mellon Trust Company, N.A. "Bank Office" means the Bank's office in Dallas, Texas. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Bond" or "Bonds .. means any or all of the Issuer's General Obligation Refunding and Improvement Bonds, Series 2009, dated March 1, 2009. "Bond Ordinance" means the ordinance of the City Council of the Issuer authorizing the issuance and delivery of the Bonds. "Fiscal Year" means the 12 month period ending September 30th of each year. "Issuer" means the City of Lubbock, Texas. "Issuer Request" and "Issuer Order" means a written request or order signed in the name of the Issuer by the Mayor of the Issuer, or any other authorized representative of the Issuer and delivered to the Bank. "Legal Holiday" means a day on which the Bank is required or authorized by applicable law to be closed. "Owner'' means the Person in whose name a Bond is registered in the Register. "Paying Agent" means the Bank when it is performing the functions associated with the terms in this Agreement. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, or government or any agency or political subdivision of a government. "Predecessor Bonds" of any particular Bond means every previous Bond evidencing all or a portion of the same obligation as that evidenced by such particular Bond (and, for the purposes of this definition, any Bond registered and delivered under Section 4.06 in lieu of a mutilated, lost, destroyed or stolen Bond shall be deemed to evidence the same obligation as the mutilated, lost, destroyed or stolen Bond). -2- Dallas 1540771 v. I ) ) ) ) ) "Record Date" means the last Business Day of the month next preceding an interest payment date established by the Bond Ordinance. "Register" means a register in which the Issuer shall provide for the registration and transfer of Bonds. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice Chairman of the Board of Directors, the Chairman or Vice Chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Stated Maturity" means the date or dates specified in the Bond Ordinance as the fixed date on which the principal of the Bonds is due and payable or the date fixed in accordance with the terms of the Bond Ordinance for redemption of the Bonds, or any portion thereof, prior to the fixed maturity date. ARTICLE III PAYING AGENT Section 3.01. Duties of Paying Agent. (a) The Bank, as Paying Agent and on behalf of the Issuer, shall pay to the Owner, at the Stated Maturity and upon the surrender of the Bond or Bonds so maturing at the Bank Office, the principal amount of the Bond or Bonds then maturing, and redemption premium, if any, provided that the Bank shall have been provided by or on behalf of the Issuer adequate funds to make such payment. (b) The Bank, as Paying Agent and on behalf of the Issuer, shall pay interest when due on the Bonds to each Owner of the Bonds (or their Predecessor Bonds) as shown in the Register at the close of business on the Record Date, provided that the Bank shall have been provided by or on behalf of the [ssuer 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 Bonds at the dates specified in the Bond Ordinance. -3- Dallas 1540771 v. I ) ) ) ) ' ) ARTICLEN REGISTRAR Section 4.01. Transfer and Exchange. (a) The Issuer shall keep the Register at the Bank Office, and subject to such reasonable written regulations as the Issuer may prescribe, which regulations shall be furnished to the Bank herewith or subsequent hereto by Issuer Order, the Issuer shall provide for the registration and transfer of the Bonds. The Bank is hereby appointed "Registrar" for the purpose of registering and transferring the Bonds as herein provided. The Bank agrees to maintain the Register while it is Registrar. The Bank agrees to at all times maintain a copy of the Register at its office located in the State of Texas. (b) Toe Bank as Registrar hereby agrees that at any time while any Bond is outstanding, the Owner may deliver such Bond to the Registrar for transfer or exchange, accompanied by instructions from the Owner, or the duly authorized designee of the Owner, designating the persons, the maturities, and the principal amounts to and in which such Bond is to be transferred and the addresses of such persons; the Registrar shall thereupon, within not more than three (3) business days, register and deliver such Bond or Bonds as provided in such instructions. The provisions of the Bond Ordinance shall control the procedures for transfer or exchange set forth herein to the extent such procedures are in conflict with the provisions of the Bond Ordinance. ( c) Every Bond surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed in a manner satisfactory to the Bank, duly executed by the Owner thereof or his attorney duly authorized in writing. ( d) The Bank may request any supporting documentation it feels necessary to effect a re-registration. Section 4.02. The Bonds. The Issuer shall provide an adequate inventory of unregistered Bonds to facilitate transfers. The Bank covenants that it will maintain the unregistered Bonds in safekeeping and will use reasonable care in maintaining such unregistered Bonds in safekeeping, which shall be not less than the care it maintains for debt securities of other governments or corporations for which it serves as registrar, or which it maintains for its own securities. Section 4.03. Form of Register. ( a) The Bank as Registrar will maintain the records of the Register in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Register in any form other than a form which the Bank has currently available and currently utilizes at the time. (b) Toe Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. -4- Dallas 1540771 v. I ) "'I ) ) ) ) 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 fonn. (b) The Bank will not release or disclose the content of the Register to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a subpoena or court order or as otherwise required by law. Upon receipt of a subpoena or court order the Bank will notify the Issuer so that the Issuer may contest the subpoena or court order. Section 4.05. Cancellation of Bonds. All Bonds surrendered for payment, redemption, transfer, exchange, or replacement, if surrendered to the Banlc, 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 Banlc. The Issuer may at any time deliver to the Bank for cancellation any Bonds previously certified or registered and delivered which the Issuer may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly cancelled by the Bank. All cancelled Bonds held by the Bank shall be disposed of pursuant to the Securities Exchange Act of 1934. Section 4.06. Mutilated, Destroyed, Lost. or Stolen Bonds. (a) Subject to the provisions of this Section 4.06, the Issuer hereby instructs the Bank to deliver fully registered Bonds in exchange for or in lieu of mutilated, destroyed, lost, or stolen Bonds as long as the same does not result in an overissuance. (b) If (i) any mutilated Bond is surrendered to the Bank, or the Issuer and the Bank receives evidence to their satisfaction of the destruction, loss, or theft of any Bond, and (ii) there is delivered to the Issuer and the Bank such security or indemnity as may be required by the Bank to save and hold each of them harmless, then in the absence of notice to the Issuer or the Bank that such Bond has been acquired by a bona fide purchaser, the Issuer shall execute, and upon its request the Bank shall register and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost, or stolen Bond, a new Bond of the same stated maturity and of like tenor and principal amount bearing a number not contemporaneously outstanding. (c) Every new Bond issued pursuant to this Section in lieu of any mutilated, destroyed, lost, or stolen Bond shall constitute a replacement of the prior obligation of the Issuer, whether or not the mutilated, destroyed, lost, or stolen Bond shall be at any time enforceable by anyone, and shall be entitled to all the benefits of the Bond Ordinance equally and ratably with all other outstanding Bonds. ( d) Upon the satisfaction of the Bank and the Issuer that a Bond has been mutilated, destroyed, lost, or stolen, and upon receipt by the Bank and the Issuer of such indemnity or security as they may require, the Bank shall cancel the Bond number on the Bond registered with a notation in the Register that said Bond has been mutilated, destroyed, lost, or stolen; and a new -5- Dallas 1540771 v. I ) ) ) Bond shall be issued of the same series and of like tenor and principal amount bearing a nwnber, according to the Register, not contemporaneously outstanding. (e) The Bank may charge the Owner the Bank's fees and expenses in connection with issuing a new Bond in lieu of or exchange for a mutilated, destroyed, lost, or stolen Bond. (f) The Issuer hereby accepts the Bank's current blanket bond for lost, stolen, or destroyed Bonds and any future substitute blanket bond for lost, stolen, or destroyed Bonds that the Bank may arrange, and agrees that the coverage under any such blanket bond is acceptable to it and meets the Issuer's requirements as to security or indemnity. The Bank need not notify the Issuer of any changes in the security or other company giving such bond or the terms of any such bond, provided that the amount of such bond is not reduced below the amount of the bond on the date of execution of this Agreement. The blanket bond then utilized by the Bank for lost, stolen, or destroyed Bonds by the Bank is available for inspection by the Issuer on request. Section 4.07. Transaction 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 Bonds it has paid pursuant to Section 3.01; Bonds it has delivered upon the transfer or exchange of any Bonds pursuant to Section 4.01; and Bonds it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Bonds pursuant to Section 4.06 of this Agreement. ARTICLEV THE BANK Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth herein and in accordance with the Bond Ordinance and agrees to use reasonable care in the performance thereof. The Bank hereby agrees to use the funds deposited with it for payment of the principal of, redemption premium, if any, and interest on the Bonds to pay the Bonds as the same shall become due and further agrees to establish and maintain all accounts and funds as may be required for the Bank to function as Paying Agent. Section 5.02. Reliance on Docwnents, 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 performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. ( d) The Bank may rely and shall be protected in acting or refraining from acting upon any ordinance, resolution, certificate, statement, instrument, opinion, report, notice, request, -6- Dallas 1540771 v. I ) direction, consent, order, certificate, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Bonds, but is protected in acting upon receipt of Bonds containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Owner or an attorney-in-fact of the Owner. The Bank shall not be bound to make any investigation into the facts or matters stated in an ordinance, resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, certificate, note, security, or other paper or document supplied by Issuer. (e) The Bank is also authorized to transfer funds relating to the closing and initial delivery of the Bonds in the manner disclosed in the closing memorandum as prepared by the Issuer's financial advisor or other agent. The Bank may act on a facsimile or e-mail transmission of the closing memorandum acknowledged by the financial advisor or the Issuer as the final closing memorandum. The Bank shall not be liable for any losses, costs or expenses arising directly or indirectly from the Bank's reliance upon and compliance with such instructions. (f) 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. (g) 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 Bonds shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. (b) The Bank shall in no event be liable to the Issuer, any Owner or Owners, or any other Person for any amount due on any Bond except as otherwise expressly provided herein with respect to the liability of the Bank for its duties under this Agreement. Section 5.04. May Hold Bonds. The Bank, in its individual or any other capacity, may become the Owner or pledgee of Bonds and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05. Money Held by Bank. (a) Money held by the Bank hereunder need not be segregated from any other funds provided appropriate accounts are maintained. (b) The Bank shall be under no liability for interest on any money received by it hereunder. (c) Subject to the provisions of Title 6, Texas Property Code, any money deposited with the Bank for the payment of the principal, redemption premium, if any, or interest on any Bond and remaining unclaimed for three years after final maturity of the Bond has become due and payable will be paid by the Bank to the Issuer, and the Owner of such Bond shall thereafter -7- Dallas 1540771 v. l .... ) ) ) ) look only to the Issuer for payment thereof, and all liability of the Bank with respect to such monies shall thereupon cease. (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 Bonds, with such moneys in the account that exceed the deposit insurance, available to the Issuer, provided by the Federal Deposit Insurance Corporation to be fully collateralized with securities or obligations that are eligible under the laws of the State 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 Bonds have been presented for payment and paid to the owner thereof. Payments made from such trust account shall be made by check drawn on such trust account unless the owner of such Bonds shall, at its own expense and risk, request such other 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 harmless 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 Bond Ordinance, including the cost and expense (including its counsel fees) of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07. 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 detennine the rights of any person claiming any interest herein. ARTICLE VI MISCELLANEOUS PROVISIONS Section 6.01. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereof. Section 6.02. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or pennitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown below: -8- Dallas 1540771 v. I ) ) ) ) (a) if to the Issuer: if to the Bank: CityofLubbock, Texas 1625 13th Street Lubbock, Texas 79457 Attention: Chief Financial Officer The Bank ofNew York Mellon Trust Company, N.A. 2001 Bryan Street, 8th Floor Dallas, Texas 75201 Attention: Corporate Trust Department Section 6.04. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. Section 6.06. 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 Bond 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 Bond Ordinance, the Bond Ordinance shall govern. Section 6.09. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.10. Termination. (a) This Agreement will 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 Bonds. (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- Dallas 1540771 v. I ' J (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 of Texas. -10- Dallas 1540771v.l ) IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. CITY OF LUBBOCK, TEXAS By: ~111& Tom Marti~ Mayor ATTEST: Dallas 1540771v.1 ) Dallas 1540771 v .1 THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. By: Title: ANNEX"A" SCHEDULE OF FEES FOR SERVICE AS PAYING AGENT/REGISTRAR ) ) Dallas 1540771 v. l ) '\ ..., The Bank of New York Mellon Trust Company. N.A. Fee Schedule City of Lubbock, TX General Obligation Refundi,ng and Improvement Bonds, Series 2009 A one-time charge covering the Bank Officer's review of governing documents, commwiication with members of the closing party, including representatives of the issuer, investment banker(s) and attomey(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 . . Atinual'P~rig Ment A~mlnlstraf:lon ~ p-'. -i:_ _____ .....; ___ ~~~ ...... ~ ........... ..:..;;;~~ ...... An annual charge covering the normal paying agent duties related to accowit administration and bondholder services. Our pricing is based on the assumption that the bonds are OTC-eligible/book-entry only. if the bonds are certificated or physical, then we will have to charge an additional $1000 per year as a paying agent. This fee is payable annually, in advance. The Escrow Agent Fee covers the consideration of documents and the normal administrative duties of the escrow agent according to the governing documents. This fee is payable on the closing date and assumes maturity May 12, 2009. Call Pricing includes distribution of the call notice to holders of record, redemption processing, and notification to NRMSIRs. Any publication expenses (i.e. Bond Buyer, regional periodical, financial periodicals, etc.) for the call notice will be billed to the Issuer at cost. 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 commensurate with the service to be provided and may be charged in BNYMTC's sole discretion. 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 tennination fee may be assessed at that time. 2001 Btyan -8111 Floor Dallas, TX 75201 "I J The Bank of New York Mellon Trust Company. N.A. These extraordinary services may include, but are not limited to, supplemental agreements, consent operations, unusual releases, tender processing, sinking fund redemptions, failed remarketing processing, the preparation of special or interim reports, custody of collateral, a one-time fee to be charged upon tennination of an engagement. Counsel, accountants, special agents and others will be charged at the actual amount of fees and expenses billed, C filing fees, money market sweep fees, auditor confinnation 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 at $300 per event. The fee for non-interest bearing balances left uninvested with the Bank will be 10 basis points for the quarter, based on quarter-end spot balance levels, in excess of$250,000 (held in the U.S. offices of the Bank). Terms and Disclosures Terms of Proposal Final acceptance of the appointment under the Indenture is subject to approval of authorized officers of BNYM 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 first 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 infonnation (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. 2001 Bryan-8,.,FloorDallas. TX 75201 PRELIMINARY OFFICIAL STATEMENT DATED MARCH 5, 2009 This Preliminary Official Statement is subject to completion and amendment Upon sale of ttie 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 informed investment decision. IN 1HE 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 ACTIVTIY BONDS. SEE "TAX MATTERS -TAX EXEMPTION" HERElN FOR A DISCUSSION OF THE OPINION OF BOND COUNSEL, INCLUDING A DESCRIPTION OF ALTERNATIVE MINIMUM TAX CONSEQUENCES FOR CORPORATIONS. NEW ISSUE: BOOK-ENTRY-ONLY RATINGS: Moody's Investors Service, Inc. .. _ .. Dated: March 1, 2009 $23,670,000* CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2009 Standard & Poor's Ratings Services "-., Fitch Ratings "'_,. See "OTHER INFORMATION. -RATINGS" herein. $58,650,000* CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM. SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2009 Due: February 15, as shown on the inside cover · Principal of and interest on the $23,670,000• City of Lubbock, Texas (the "City''), General Obligation Refunding and Improvement Bonds, Series 2009 (the "Bonds") and the $58,650,000* City of Lubbock, Tex.as, Tait and Waterworks System Swplus Revenue Certificates of Obligation. Series 2009 (the ''Certificates" and, collectively with the Bonds, the "Obligations") are payable by Toe Bank .of New York Mellon Trust Company, National Association, Dallas, Texas (the "Paying Agent/Registrar"). The Obligations are initially registered and delivered only to Cede & Co., the nominee of The DepQsitory Trust Company (''DTC') pursuant to the Book-Entry-Only System described herein. Beneficial ownership 9f 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 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 OBUGATIONS -BOOK~ENTRY-ONLY SYSTEM" herein. lntem.t on the Obligations will be calculated on the basis of a 360-day year consisting of twelve 30-day months, will accrue from March I, 2009, and is payable on February 15 and August 15 of each. year, commencing February 15, 2010, until maturity or earlier redemption, to the r.egistered owners (initially Cede & Co.) appearing on the registration books of the Paying Agent/Registrar on the last business day of the month preceding each interest payment date (the "Recoi:d Date") (see "THE OBLIGATIONS -DESCRIPTION OF TIIE OBLIGATIONS"). Tbe,Obligations of either series are subject to optional redemption prior to their scheduled maturities at the option of the City (see "THE OBLIGATIONS-OPTIONAL REDEMPTION"). The Bonds constitute direct obligations of the City and are payable from the proceeds of a continuing, direct ~al ad valorem tax, levied within the limits prescribed by law, against 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 pteScnbed by law, on all taxable property within the City, and (ii) a pledge of swplus net revenues of the City's Waterworks System, not to exceed Sl,000. The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapters 1207, 1331 and 1371, Texas Government Code, as amended, an election held in the City on May 15, 2004, and an ordinance adopted by the City Council (the "Bond Ordinance"). The Certificates are issued pursuant to the Constitution and general laws of the State of Texas, particularly subchapter C of Chapter 271, Texas· Local Government Code, as amended, and an ordinance adopted by ~e City Council (the "Certificate Ordinance" and. together with the Bond Ordinance., the "Ordinances"). While the Bonds ~ 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 ~ 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 holdels. Toe 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.LP., Bond CoUDSel, Dallas, Texas. Cenain legal matters will be passed upon for the underwriters ·named below (the "Underwriters'')° by their counsel, McCall, Parldiur.rt & Horton L.L.P., Dallas, Texas. See "OTHER INFORMATION -LEGAL MA TIERS." Delivery of the Obligations tbrou~ The Depository Tnast Company is expected to be on or about April 8, 2009. Morgan Keegan & Company, Inc. Morgan Stanley • Preliminary, subject to change. Merrill Lynch & Co. Southwest Securities Maturi!l:: 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Mllturi!l 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 PRINCIPAL AMOUNTS, INTEREST RATES AND PRICES CUSIP Prefix: 549188 $23,670,000* Genenl Obligation Refunding and Improvement Bonds, Series 2009 (Due February 15) Initial Initial Principal Interest Offering CUSIP Principal Jnten:st .Offeri~ Amoutt• Rate Yidd ~a! Nos. !!?l Maturi~ Amoum• RJite Yield~al $ 3,360,000 % ¾ 2020 (c) s 130,000 % % 3,67S,OOO 2021 (c) l3S,OOO 3,540,000 2022 (c} 140,000 3,415,000 2023 (c) 150,000 3,370,000 2024 (c) 155,000 640,000 2025 (c) 165,000 l,l SOJ)OO 2026 (c) 175,000 l,~40,fJOO 2027 (c) 185,000 ~13SS)OO 2028 (c) 190,000 620POO 2(129 (c) 200,000 (plus accrued interest to date of delivery) SSS,650,000* Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (Due Februacy 15) Initial Initial Principal Interest Offering CUSlP Principal Interest Olferi~ Amoutt• Rate Yield ia~ Nos.~) Maturi!l:: Amourt* Rate Yield!a~ s 1,7251){)0 % % 2020 (c) s 2,28S,OOO % % Z695,000 2021 (c) 2,390,000 2.790,000 2022 (c) 2,SIS,000 2,89SPOO 2023 (c) 2,645,000 2,99SS)OO 2024 (c) 2,780,000 . 3,100,000 2025 (c) 2-,920,000 3,21 S,000 21Jl6 (c) 3,070,000 3,335,j)OO 2027 (c) 3,230,000 3,4701){)0 2028 (c) 3,400,000 · 3,610,000 2029 (c) 3,585,000 (plus accrued interest to date of delivery) • Ptelimiiwy, subject to c:hange. (a) Tbe illitial yields will be established by aad are lbe sole respomibility of the Uoderwritm, aod may subsequently be changed. (b) CUSIP IIIIUlbas have been assiped to die Obliptiom by Standard aad Poor's CUSIP Scmce Bureau. a Divisioa of The McGraw-Hill CoOlpmies, Inc., and lR iocludoo solely for lhe coo~ of 1he Rgistered OWJ!ffl of the Obligatioos. Neithel-the City, the Fiaaocial Advisor, nor the Underwriters are re.,ponsible for the selcctiou or cortedlless of the CUSIP nlllllbers set foith herein. (c) TbeObligatioos maturing on Febnmy IS, 2020 and thereafter are subject 1D redemption, at the option of the City, at par value thereof plus acaued imeRst 10 1bc dale of ICdeuJption. on Febnwy IS, 2019 or any date thereafter (see "THE OBLIGATIONS -OPTIONAL REDEMPTION"). CUS[P Nos. ~l CUSJP Nos. (b) -I.. ,. " ' ( C -. ' } .. USE OF INFORMATION IN OFFICIAL STATEMENT For purposes of compliance with Rule I Sc2-l 2 of the Securities and Exchange Commission., this docwnent may be treated as a Preliminary Official Statement of the City with respect to the Obligations descnoed herein deemed "final" by the City as of its date except for the omission of oo more than the information permitted by Rule 15c2-12. No dealer, broker, salesman or other pem:,n bas been authorized by the City to give any information or to make any representation other than those contained in. this Official Statement, and, if given or made, such other information or representations must not be relied upon 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 offel-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 ls made as to the correctness of such estimates. assumptions or matters of opinion or as to the likelihood that they will be realiud.. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery _of this Offic;ial 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 matten. described herein since the date hereof. See "OTHER INFORMATION -CONTINUING DISCLOSURE OF INFORMATION" for a description of the City's undertaking to provide certain information or a continuing basis: · ' The information set forth or included in this Official Sta~ent has been provided by the City and from othet sources believed by the City to be reliable. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale 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 wananty is made as to the correctness of such estimates and opinions or that they will be realized. · · IN CONNECTION WITH THE OFFER.ING, TIIE UNDERWRITERS MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF TIIE OBLIGATIONS AT A LEVEL ABOVE THAT WHICH MIGKT PREVAil:. IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 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 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 infonnation. · NEITHER THE CITY; THE FINANCIAL ADVISOR, THE UNDERWRITERS NOR BOND COUNSEL MAKE ANY REPRESENT.A.170N OR WARRANTY WITH RESPECT TO THE INFORMATION CONI'AINED' lN TiDS OFFICIAL STATEMENT PROVIDED BY DTC REGA.RD/NG DTC OR ITS BOOK-ENTRY-ONLY SYSTEM __ • . ' THE COVER PAGE CONTAINS CERTA.IN INFORMATION FOR GENERAL REFERENCE ONLY AND IS NOT INTENDED AS .4. SUMMARY OF THIS OF.FER/NG. JNVESroRS SHOUW READ THIS ENTIRE OFFICIAL STATEMENT. INCLUDING THE AITACHED APPENDICES, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. TABLE OF CONTENTS ~ USE Of INFORMATION IN OFFICIAL ST A TEMENT ." ... " .. "" ... ··-········-···"· ... " .. :._ .. _ .. 1 TABLE OF CONTENTS ···••M•• .. ···-··· ...... _ ..... _ •• _____ 2 OFFICIAL STATEMENT SUMMARY.·---··· 3 INTRODUCTION ............. ---·· .. ····· ............ " ... -.. 6 DESCRIPTION OF 1HE CITY ............................ 6 THE OBLIGATIONS ........ ___ , ............ _ ......... 6 DESCRIPTION OF 1HE OBLIGATIONS .......... 6 PURPOSE ............................................................... 6 REFUNDED OBLIGATIONS .............................. 7 AUTHORIIY FOR ISSUANCE ................. ; ......... 7 SECURIIY AND SOUR.CE OF PAYMENT ...... 7 TAXRATELOOTATION ................................... 7 . OPTIONAL REDa{P"]]ON ................................. 7 NOTICE OF REDEWI'ION ................................ 7 AtdENDlvfENTS .................................................... 8 DEFEASANCE ...................................................... s· BOOK-EN1RY•ONLY SYSTEM ........................ 8 Use of Certain Terms in Other Sections of this Official Statement.. ...................................... 10 PA YING AGENT/REGISTRAR ........................ 10 TRANSFER, EXCHANGE~ REGISTRATION ........................................ J 0 RECORD DATE FOR INTEREST PAYMENT 10 ~IES .......................................................... 10 SOURCES AND USES OF PROCEEDS ........... 11 ADV ALOREM TAX INFORMATION---12 ADVALOREMTAXLAW ............................... 12 EFFECTIVE TAX RATE AND ROLLBACK TAXRATE ................................................. 13 · PROPERTY ASSESSMENT ANDTAX PA,Y}.IBNT.: ................................................ 14 PENALTIES AND ~T .............. : ........... 14 CITY APPLICATION OF TAX CODE ......... '. ... 14 TAX ABATEMENT f()LICIBS ......................... 14 TAX INCREMENT FJNANCING ZONES ....... 15 FINANCIAL ~ORMATION.-.. -.. ----16 FINANCIAL POLICIES-......... _ .. ,_, ______ 30 POLICIES .................... : ........................................ 30 AD:t-.ilNISTRA TION ........................................... 31 · INVESTMENTS .. -·--··---···---···-··----· .. ·-···· ...... " ... 3 2 LEGAL INVES11dENTS .................................... 32 INVES11dENT POLICIES ................................. 32 ADDmONAL PROVISIONS ............................ 33 TAX MATIERS-.-· ... -.. ,-·-· .. ··---... -m ... _ .... 33 TAX EXEMPTION ............................................. 33 ADDmONALFEDERAL INCOME TAX CONSIDERATIONS .................................. 34 Collateral Tax Consequences ............................... 34 Tax: Accounting Treatment of Original Issue Premium ....................................................... 34 Tax Accounting Treatment of Original Issue Discount Obligations ................................... 35 OTHER INFORMATION ....... ,_ ........................... ,_. 35 RATINGS ............................................................. 35 LITIGATION ....................................................... 35 INVESTIGATIONS RELATING TO CTIY'S 2 HEALIB INSURANCE AD:t-.ilNIS1RATOR .................................... 36 REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE ...................... 37 LEGAL INVESTMENTS AND ELIGIBil.JIY TO SECURE PUBLIC FUNDS IN 1EXAS37 LEGAL MATIERS ............... '. .................... : ........ 37 CONTINUING DISCLOSURE OF INFORMATION ......................................... 38 Annual Reports ..................................................... 38 Materi.µ Event Notices ...................... : .................. 38 Availability of Infonnation .................................. 38 Limitations and Amendments .............................. 39 lmplementltion of the MSRB's EMMA System 39 Compliance with Prior Undertakings .. : ............... 39 FINANCIAL ADVISOR ..................................... 3.9 UNDERWRITING ............................................... 39 FORWARD-LOOKING STATEMENTS . DISCLAilvlER ........................................... ·. 40 l\.11SCELLANEOUS ............... ; .................... : ....... 40 SCHEDULE I -SCHEDULE OF REFUNDED OBLIGATIONS APPENDICES APPENDIX A -EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2008 APPENDIX B -FORMS OF BOND COUNSEL OPINIONS ( ( ,. ' ( i .., OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions cont$ed or illCOrporated in this Official Statement. The offering of the Obligations to potential investors is made only by _means of this entire Official Statement. No per!On 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, TcrolS (the "City'') is a political subdivision and municipal corporation of the State, located in Lubbock Co~ty, Texas. The City covers approximately 119.1 square miles and has an estimated 2009 population of218.327 (see "INTRODUCTION -DESCRIPTION OF THE CITY"). . . THE BONDS ....................................... $23,670,000* General Obligation Refunding and Improvement Bonds, Series 2009 (the "Bonds"), are dated March I, 2009, and mature on February 15 in each of the years 2010 through-2029. THE CERTIFICATES ....................... $58,650,000• Tax aftd Waterworks System. Surplus Revenue Certificates of Obligation, Series 2009 (the "Certificates" and. collectively with the Bonds, the "Obligations"), are dated Man.:h I, 2009, and mature on February 15 in each of the years 2010 through 2029 .. PAYMENT OF INTEREST ............... Inten:st on the Obligations accrues from the dated date, and is payable Febnwy 15, 2010 and each August 15 and February 15 thereafter until maturity or prior redemption (see "TIIE OBLIGATIONS -DESCRIPTION OF THE OBU:GATIONS"). . AUTHORITY FOR ISSUANCE ....... The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapters 1207, 1331 and 1371, Texas Government Code, as amended, an el~tion held in the City on May 15, 2004, and an ord,inance adopted by the City Council (the "Bond Ordinance"). The Certificates are issued pursuant to the Constitution .and general laws of the State of Texas, particularly S~ter C of Chapter 271 of the Texas Local Government Code, as amended, and aa ordinance adopted by the City Co\lllCil (the "'Certificate Ordinance" and, together with.tire Bond Ordinance, the "Ordinances"): SECURITY FOR THE BONDS .............................................. '.. The Bonds constitute direct obligations of the City and are payable from the proceeds of · a continuing, direct annual ad valorem tax, levied within the limits prescrJ'bed by law, against all taxable property within the City. SECURITY FOR THE CERTIFICATES ................................ The Certificates iue payable from a combination of.(i) the proceeds of a continuing, direct annual ad valorem tax, levied wilhin the limits prescnbed 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 exceedSl,000. ' . omoNAL REDEMPTION .. , .......... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after Februaiy 15, 2020, in whole or in part in principal amounts ofSS,000 or any integral multiple thereof, on February 15, 2019, 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 MATTERS-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 (i) for various public improvements and public p~ (ii) to refund a portion of the City's outstanding indebtedness for the purpose of achieving debt service savings (the ~Refunded Obligations") (see "SCHEDULE I. -SCHEDULE OF REFUNDED OBLIGATIONS") and (iii} to pay the costs associated with the 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 (i) various public improvements including solid waste, drainage, water, street, electric, park, fire, City Hall and ( ii) 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 Ce:rtificates. .. Prellininaiy. subject to change. RATINGS ............................................ The Obligations are rated"_" by Moody's Investors Servi~ Inc.,"-~• by Standard & Poor's Ratings Services, a Division of Toe McGraw-Hill Companies, Inc. and"_" by Fitch Ratings (see "OTIIER. INFORMATION -RA TINGS"). BOOK-ENTRY-ONLY SYSTEM .............................................. The definitive Obligations will be initially registered and delivered only to Cede & Co., the nominee of OTC pursuant to the Book-Entry-Ooly System descnbed herein. Beneficial ownership of the Obligations may J?e acqum 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; premiwn, 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 Qf OTC for subsequcot payment to the beneficial owners of the Obligations (see "TIIE OBLIGATIONS - BOOK-ENTRY-ONLY SYSTEM"). PAYMENT RECORD ........................ The City has never defaulted in payment of its general obligation tax debt -Selected Financial Information - SELECTED FINANOAI, INFORMATION l'er"Capita Fiscal Per Capita Geaeral General Year Estimated Tauble Tauble Purpose Purpose Ended City Assessed Assessed Fanded FW1ded JO-Sep Po!!ulation !•l Valuation Valuatioo Tu Debt!'> Tu Debt"> 2004 206,290 $7,921,590,380 38,400 70,161,218 340.ll 200S 209,120 8,634,994,862 41,292 80,210,269 383.56 2006 2tl,187 p46,613,9SI 44,2S8 87,231,945 413.06 2007 212,365 10,002,725,637 47,102 92,487,363 435.Sl 2008 214,847 t 0,897,210,563 S0,721 101,185,953 470.97 2009 218,327 t 1,673,074,132 53,466 104,483,800 "' 478.S7 «> 1-' Sow= The Crty. (II Doc, llOI ioclade xlf.._icd dcl,t. <<1 ~. lllhjccc to ~ lo.dudes the Baods aru! a po<li011 of !he Ca1i&alQ 1b&t io oot anticipolo:l to be odf-s,q,poct<d. Excludes lhc RefiiadcdOblipliom. Ge11efa! Fund Consolidated Stateme11t Summary 2008 2007 2006 Beginning Balance s 19,125,648 19,924,711 17,376,420 Tobu Revenues I 06,571 ,570 102,520,653 · 97,818,207 Total Expenditutts 120,345,933 117,202,093 112,278,444 Ending Bala.nee 19,962,275 19,125,648 19,924,711 Reserves & Designations Undesignatcd Fund Balance $ 19,962,275 19,125,648 19,924,711 For additional inmrm.atio_n regarding the City, please CODtaGt.: Andy Burcham Chief Financial Officer City ofI.ubbodc P.O.Box2000 Lubbock, TX 79457 Phone (806) 775-2149 Fax (806) 775-2051 Mauhew Boles RBC Capital Maib:ts Corporation 2711 N. Kasel! A--, Suite 2500 Dallas, TX 75204 . Phone (2i4) 989-1672 Fax (2_14) 989-1650 4 2005 12,694,525 104,35 I, 116 103,203,269 17,376,420 l7,376,420 Rado TnDebtto Assessed Valuation (lo) 0.8~% 0.93% 0.93% 0.92% 0.93% 0.90% 2004 9,417,346 97,437,436 94,160,257 12,694,525 12,694J2S •1o or Total Tu Collections 98.64 100.28 99.71 99:02 99.62 "' (ID l'mc:es:,) Tu: Year 2003 2004 2005 2006 2007 2008 ( C C ( C C C ,c ) CITY OFFICIALS, ~TAFF AND CONSULTANTS ELECTED 0FF1CIALS City Council Tom Marcin Ma~r Linda Deleon CaJDcil Member, District l Flo)<! Price · Cooncil Member, District 2 Todd R. Klein (I) Cooncil Member, District 3 Paul R. Beane Camcil Member, District 4 John W. Leonard, III Cruncil Member, Distri.ct S JimGillreath Cooncil Member, District 6 Date of I nsta llalion to Office May2008 May2004 May2004 Jure 2007 JUDC :nos May2006 May2003 Tenn F.xl?ires Occupation May2010 Retm:d May2010 Business Owner May20l2 Re~d May2010 Sales Comultatt May2012 Radio StationGcncnl Mamger May2010 Business Owner May20l2 Business Owner (I) Todd R. Klein was elected June 9, W07, to fill tbe une,q,iied term of Di.!lri:13 Councitnan Gary 0. Benn. / SELECTED ADMINISTRATIVE STAFF Date aF.mplo}lllait. Dlte d Emplo}Ulent Totd 'GoVU'llllmt Name Position in Cmrmt Position with Cityof wblx>ck SEnire Lee AnnDwmauld CityM:lnag~ Septcmlx:r 2005 ~uly2004 2o+ Tom.Adams Dqn:tyCity MuaB!r Au~2()(» Aupt.20(» 24 Andy Blm:lnm Chief Fmanaal Offlffl Aupt2()(E l'bvmber 1918 -tO D:>n Vandira-City Attora:y ~20CE October 1972 37 Rdleoca Gana City Seclda,:y Januaty 2001 Auptl9$ 9 · CONSULTANTS AND ADVISORS Auditors ...................................................................................................................................... BKD, LLP. Little Rock. Arkansas Bond Counsel .............................................................................................................................. Vinson & Elkins L.L.P. Dallas, Texas . . Financial Advisor .......................................................................................................... : ...... , ...... RBC Capital Matkets Corporation Dallas, Texas 5 OfflClAL STATEMENT RELATINGTO CITY OF LUBBOCK, TEXAS $23,670,000• GENERAL OBLIGATION REFUNDING AN.D IMPROVEMENT BONDS, SERIES 2009 SSS,650,000• TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2Q09 INTRODUCI10N This Official Statement, which includes the Appendices hereto, p~vides certain information ~garding the issuance of $23,670,000• City of Lubbock, Texas (the "City") General Obligation Refunding and Improvement Bonds, Series 2009 (the uBonds") and $58,650,000• City of Lubbock, TexilS Tax and Waterworks System Sqrplus Revenue Certificates of Obligation, Series 2009 (the "Certificates" and collectively with the Bonds, the "Obligations"). Capitalized ·terms used in this Official Statement have the same meanings assigned to such tetms in the Ordinances (as defined herein) authorizing the issuance of the Bonds and the Certificates except as otherwise indicated herein. 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 analyud independently, including, among other matters, the· kind and type of obligations being offered, their terms for payment, the security for th~ir payment and the rights of the h~lders. There follows in this Official Statement descriptions of the Bonds, the Certificates and certain information regarding the City and its finances. All descriptions of <;tocuments 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 Cotporation, D~as. Texas. · · DESCRIPTION OF THE CITY The City is a political subdivisi~n and municipal corporation of the S.tate of Texas (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. ·Toe City operates under a Council/Manager funn of government with a City Council comprised of the Mayor and six council members. 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 d,istrict fo( a four-year term of office. The terms of three members of lhe 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 saniiary ~ 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 2009 population is 218,327. The City covers approximately 119.1 square miles. THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS . The Obligations are dated March 1, 2009, and mature on February 15 in ea.ch of \he 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 Febnwy 15, 2010; and on each August 15 and February 15 thereafter, uritil maturity or prior redemption. The definitive Obligations will be issued only in fully ·registenxl form in any integral multiple or'$5,000 for any one maturity of each series and will be initially registered and deli~ only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System descn'bed herein. No physical delivery of the Obng.tions will be made lo the owners thereof. Principal of, premium, if any, and interest oo the Obligations will be payable by the Paying Agent/R.egisllar 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-ONU'. SYSTJ¥" herein. .PURPOSE · Proceeds from the sale of the Bonds will be used. (i) for various public improvements and public purposes (see "FINANCIAL INFORMATION -TABLE 11 -AUillORIZED BUT UNISSUED GENERAL OBLIGATION BONDS"), (ii) to refund a portion of the City's outstanding indebtedness for the purpose of achieving debt service savings (the "Refunded Obligations; (see "SCHEDULE I -SCHEDULE OF REFUNDED OBLIGATIONS''} and (iii) to pay the costs associated with the issuance of the Bonds. · • Preliminary, subject to ~ange. 6 /"' C C ( ( C ( ·( ( ) Proceeds from the sale of the Certificates will be used for the pwpose of paying contractual ·obligations to be incurred for (i) various public improvements including solid 'waste. drainage, ~. street, electrical, park, fire, City Hall and (ii) professional services m;idered 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. REFUNDED OBLIGATIONS Upon deliver:y of the Bonds, the City will deposit a portion of the proceeds from-the sale of the Bonds to effect the refunding of the Refunded Obligations with The Bank of New York Mellon Trust Company, National Assocation (the ''Escrow Agent"). The amount of Bond proceeds so deposited, when added to anyotherlawftally availabl~ funds of the City, if any, will be sufficient to ~mplish 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 pun:hase direct obligations of the United States of America (the "FedC'1_"31 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. The Paying Agent/Registrar for the Refunded Obligations will determine and certify at the time of deliveiy of the Bonds that the amounts deposited to the Escrow Fund will equal an amount sufficient lo pay, on the scheduled redemption date, the principal of and interest on the Refunded Obligations. By the deposit of the bond proceeds 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 cash held for such purpose by the Escrow Agent and such R~ Obliptions will not be deemed outstanding obligations of the City, and the obligations of the City to ~ payments in support of the debt service on such Refunded Obligations will be extinguished. - AUTHORITY FOR ISSUANCE The Bonds are issued pursuant to the· Constitution and general laws of the State, particularly Chapters 1207, 1331 and 1371, Texas Government Code. as amended,· an election held in the City on May 15, 2004, and an ordinance adopted by the City Council (the "Bond Ordinance"). The Certificates are issued pursuant to the Constitution and general: laws· of the S~ of Texas, parti~ly Subchapter C of Chapter 271 of the Texas Local Government <:ode, as amended, and an ordinance adopted by the City Co\UICil (the "Certificat.e Ordinance" and, together with the Bond Ordinance. the "Ordinances"). · . . . . · SECURITY ANDSOURCEOFPAYMENT The Bonds constitute direct obligations of the City and are pay,able ·from the proceeds of a contfuuing, direct annual ad valorem tax, levied within the limits prescribed by law, against all w:able property within the City. The Certificates are payable from a combination of (i} the proceeds of a continuing, direct annual ad valorem tax, leviecf within the limits presedbed by law, on all w:able property within the City, and (ii) a pledge of surplus net revenues of the City's W~orks 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 tu sufficient to provide for the payment of principi,J of and interest on all ad valorem lax debt within the limits prescribed by law. Article XI, Section S, of the Texas Constitution is applicable to die City, and limits its maximum ad valorem tax rate to $2.SO per $ I 00 taxable assessed valuation for all City pwposes. The Home Rule Charter-of the City adopts the constitutionally anthorize(f"rnaximum tax rate of$2.S0 per $100 taxabl~ assessed valuation. OPTIONAL REDEMPTION The City reserves the right, at its option, to redeem Obligations 'having stated maturities on and after Febnwy Is, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof; on Febnwy ts, 2019; or any date lhc:Rafter, at the par value thereof plus accrued interest to the date of redemption. If~ than all of the Obligations are to be redeemed, the City may l!Clect the maturities of Obligations to be redeemed. If less than all the (.)bligations of ~y maturity are 'to be ,redeemed, the Paying Agent/Registrar (or DTC while the Obligations are in Book-Entry-Only fonn) shall determine by lot the Obligations, or porti~ns thereof, within such maturity to be redeemed. If an Obligation (or any portion .of the principal sum the.reoO 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 in~ thereon are held by the Paying Agent/Registrar on the redemption date. NOTICE OF REDEMP110N 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 mai~ 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 n:gistration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HA VE BEEN DULY GIVEN, WHETIIER OR 7 NOT THE REGlSTERED OWNER RECEIVES SUCH NOTICE. NOTICE HA YING BEEN SO GIVEN, n1E OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND.PAY ABLE ON THE SPECIFIED REDEMP'.I'JON DATE, AND· NOTWl11-ISTANDING THAT ANY OBLIGATION OR PORTION THEREOF HAS NOT BEEN ~URRENDERED FOR PAYMENT, INTEREST ON SUCH OBLIGATION OR PORTION TIIEREOF 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 curing of any ambiguity, inconsistency, formal defect or omission therein. In addition. the City may, with the written consent of the holders of a majority in aggregate principal amount of the Bonds or Certificates 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 Bonds or Certificates. 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 Bond or Certificate, as applicable, ,over any other Bond or Certificate 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 1'ie 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 law, such discharge may be accomplished by either (i) depositing with the C.Omptroller of Public Ac:counts 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 invest¢ and reinvested only in (a) direct, noncallable obligations of the United States of Am¢ca, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable . obligations . of an agency or instrumentality of the Unite;d States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrwnentality and that are rated as to investment quality by a nationally ·recognized investment rating finn not less than AAA or its equivalent, or ( c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded arid that are rated as to investment quality by a nationally recognized investment rating ~ not less than ~ or its equivalenL Un4er 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· furn 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 tenns of the Obligations are extinguis~ 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 arrangements, expressly reserves the right f9 call the Obligations for redemption; (ii) gives"notice of the reservation of that right to lhe owners of the Obligations immediately following the making of the fum banking and financial anange.ments; and (iii) directs that notice ~f the reservation be included in any redemption notices that it authorizes. BOOK-ENTRY-ONLY SYSTEM . This section tkscribes how ownership of the Obligations is to be trans/erred and how the principal of, premiwn, if any. and interest on the Obligations are to. be paid to and credited by The Depository Trust Company ("DTC''), New York, Ne:w York, while tire Obligations are registered in its nominee name. The information in this sectwn concerning DTC and the Book-Entry- Only System ltas been provided by DTC for use in disclosure documents such as this Official Sialement. The City, the Fill=ial .. Advisor,. and the Underwriters beliiNe the· source of such informa#,on to be reliable, but lake no responsibility for the accuracy or compl~s thereof The City cannot and does not give any as.ruranc€ thaJ (1) DTC will disl!ihute 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 i~ nominee (as the registered owner·~! the Obligations), or redemptwn or ·other notices, to the Beneficial Owners, or thaJ they wif/ do so on a timely basis, or (3) DTC will serve and act in the manner described ill this Official Stat,ement. The current rules applicable to DTC ore on file witA the United States Securities and Exchange Commission, and the cu"ent procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. OTC will act as securities depository for the Obligations. The Obligations will be issued as fully registered securities registered in the name of Cede.& C.O. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of OTC. One fully registered certificate will be issued for each mamrity of each series of the Obligations, in the aggregate principal amount of such issue, and will be deposited with DTC. · DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York. Uniform Commen:ial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over I 00 countries that DTC's participants ("O"uect Participants") deposit with DTC. DTC also racilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entty 8 C C C ,. ( .( ' ) '\ ) transfers and pledges between Direct Participants' accounts. This eliminates 'the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, bi.1st companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"}. DTCC is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its rqulak4 subsidiaries. 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 n:lationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The OTC Rules applicable to its Participants are· on file with the United States Securities and Exchange Commission. More infonnation about DTC can be found al www.dtcc.com and www .,itc.qrg. Purchases of Obligations under the DTC system must be made by or through Direct Participants. which will receive a credit fur the Obligations on DTC's records. The ownership interest of each actual purcham:r of each Obligation ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confinnation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction. as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Obligations.are to be ac(:()!Dpiished 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, e,;cept 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 partnership nominee, Cede & Co., or such other name as may be requested by an autho~ representative of DTC. The deposit of Obligations with •OTC 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 Dµ-ect Participants to whose accounts such Obligations are cn:dited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of lheir 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 arrangemCJl,ts 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 ·ta1ce 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 .Obligation 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, aeneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the. Obligations within ·a maturity ue 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 Omm"bus Proxy _assigns Cede & Co,'s consenting or voting rights to those Direct Participants to whose accounts Obligations are credited on the record <late (identified in a listing attached to the Ommbus Proxy). · Redemptioo, principal, and interest payments on the Obligations will be ~e 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 infonnation from the City or the Paying Agent/Registrar, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices., as is the case with securities-held for the accounts of customers in bearer form or •terca in "street name\ and will be the responsibility of such Participant and.not of DTC nor its nominee, the Paying Agent/Regjstrar, or the City, subject ·to any statuto,:y or regulato,:y requirements as may be in effect from time to time. Payment of redemption . proceeds. principal, and interest payments to·_Cede & Co. (or such other nominee as DlJ!:Y be requested by an authorm:d representative of OTC} is the responsibility of the City ~r the Paying Agent'Registrar, disbunement Qf such payments to Diteet 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 deposito,:y with respect to the Obligations at any time by giV#lg reasonable notice .to Issuer or Paying Agent/Registrar. Under such circumstances, in the event that a succesmr depositoty is not obtained, security certificates for each maturity of the Oblig1'ti~ ~ required to be printed a[lfl delivered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities' depository), In that event, security certificates for each maturity of the Obligations will be printed and delivered and the Obligations will be subject the transfer, exchange and registration provisions as set forth in lhe respective Oroinances and summarized wider "TRANSFER, EXCHANGE AND REGISTRATION" below. The infonnation if!-this section concerning DTC and DTC's book-entty system has been obtainal. from sources that the City, lhe Financial Advisor, and the Underwriters believe to be reliable, but neither of the City, _the Financial Advisor, nor .the 9 Underwriters take responsibility for the accuracy thereof. 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-Eotty-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 (l) all rigbts of ownership must be exercised through DTC and the Book- Entry-Only System, and (ii) except as described above, payment or notices that are to be given to registered owners under the Ordinance will be given only to OTC. · PAYING AGENT/REGISTRAR The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Com~y, National Association, Dallas, Texas. In the 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 Obligations 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 the Obligations. Upon any change. in the Paying Agent/Registrar for the Obligations, the ~ity agrees to promptly cause a written notice thereof to be sent to each registered owner of the Obligatioos then outstanding and affected by such change by United States mail, first class, postage prepaid, which notice shall 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/Regi~ 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 l'aying Agent/Regis\rlll', or (ii) by such other method acceptable to the Paying Agent/Registiar rt;quested by, and at the risk and expense of, the registeted owner. Principal of the Obligations will be paid to the registered owner at the stated maturity or earlier redemption upon presentation to the designaled 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 pa~ent was _due. TRANS.FER, EXCHANGE AND REGISTRATION In the event the Book-Entry-Only· System is discontinued, printed Obligations will be issued to the registered owners of the Obligations affected and, thereafter, the Obligations may be transferred and exchanged on the registratiOf! books of the Paying Agent/Registrar only upon presentation and sun-ender of such printed Obligations to the Paying Agent/Registrar. Such transfer or exchange shall be without expense or service charge to the registered owner, except for any t/11' or other governmental cbarges_ required to be paid with respect to such registration, exchange or transfer .. Obligations may be assigned by the execution of~ assignment form 01,1. die Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying AgenVR-egistrar, 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, 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 a form satisfactory to the Paying Agent/Registrar. New Obligations registered ancf delivered in an exchange or transfer shall be in any integral multiple of.$5,000 for any one maturity 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' ObligatiOOS: Neither the City nor the Paying Agent/Registrar shall lie _required to transfer or exchange any Obligation called for redemption, UJ. whole ·or in part, within 45· days of the date fixed for redemption; provided, howc:ver, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of an Obligation. · RECORD DATE FOR INTEREST PAY)fENT The record date ("Record Date") for the interest payable on the Obligations on any utterest payment date means the close of business OD the last ~ day of the preceding month. In the event of a non-payment of interest OD a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar if and when funds for the payment. of such interest have been ,:eceived ftom 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 an Obligation appearing on the registration books of the Paying Ageµt/Registrar at the close of business on the last business day next preced~ the date of mailing of such notice. REMEDIES The respective Ordinances establish specific ·events of default with respect to the Obligations. If the City defaults in th~ 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 10 ( (" ... ( (" ... C ( I . . ' covenants, conditions or obligations of the City, the failure to perform which materially, adversely affects the rights of the ownera, including but not limited to their prospect or ability to be _repaid in accordance with each respective Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any owner to the City, each respective Ordinance 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 perfonn 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 petfonnance of the Obligations or the respective 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 arl>itrarily 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 respective Ordinances do not provide for the appointment of a trustee to repn:sent the interests of the owners upon any failure of the City l'D perform in accordance with the terms of the respective Ordinances, or upon any other ·condition. Accordingly, all legal actions to ·eofon:e · 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. In so ruling, the Court declared that statutory language such as "sue and be sued," in and of itself, did not constitute a clear and unambiguous · waiver of ~vereign immunity. Because it is not clear that the Texas Legislature has effectively waived the City's immunity from suit fur money damages., holdm of Obligations may not be able to bring such a suit against the City for breach of the Obligation or· the respective Ordinances_-In :fooke, the Court noted the enactment in 2!)05 of sections 271.151-.160, Texas Local Government Code (the "Local Government Immunity Waiver Act'), which, according to the Coun, waives "immunity from suit for contract claims~ most local governmental entities in certain cireumstances." The Lqcal Government Immunity Waiver Aet covers cities and relates to contracts entered into by cities for providing goods or services to cities. The City is not aware of any Texas court construing the Local Government Immunity Waiver Act in the context of whether co~ctual undertl!kings of local governments. that relate to their borrowing powers are conlracts covered by the Act. As noted above, the· respective Ordinances provide that holders of Obligations may exercise the remedy 9f mandamus to enforce the obligations of the City under the respective Ordinances. Neither the remedy of mandamus nor any other type of injunctive relief was at-issue in Tooke, and it is unclear whether Tooke will be construed to have any effect with respect to the exercise of mandamus, as such n:medy has been inteq,reted by Texas courts.' In general, Texas cowts have held that a writ of mandamus may be issued to require public officials ta, perform ministerial acts that clearly pertain to their duties. Texas courts have held that a ministerial act is defined as a legal duty that is prescribed _and . defined with a precisi~n and certainty that leaves nothing to the exercise of discretion or judgment.. though mandamus is not available to enforce purely contractual duties. However, mandamus may be used to requiie a public officer to perform legally-imposed ministerial duties necessary for the performance of a valid contract to which the State _or a political subdivision of the· State is a party (including the payment of monies due under a contract). Even if a judgment against the City oould be obtained, it could not be enforced by diffl:t ievy and execution against the City's property. Further, the registered owners cannot themselves foreclose on property _within the City or sell property ~thin the City to enforce the tax lien on taxable property to pay the principal of, and interest on, the Obligations. Furthem:!ore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code (''Chapter 9j. Although Chapter 9 provides for the recognition of a security int=t 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 R:COgnized as a security interest under Chapter 9. Chapter 9 also inclucles an automatic stay provision that would prolubit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or registered owners of an entity that 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 " Bankruptcy Court in administering any p~ bro~ght before the Court. The opinions 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 Ordinances and the Obligations are subject to bankruptcy and other laws affecting creditors rights or remedies generally. SOURCES AND USES OF PROCEEDS The proceeds from the _sale of the Bonds will be applied as follows: SOURCES OF FUNDS: Principal Alnount of Bonds ................................. ; ....................................... , ....................... . Net Original Issue Premium (Discount) .............................................................................. . Accrued.Interest ....................................... -............................................... · .......................... . Total Sources of Funds ................................. · ................................................................ . USES OF FUNDS: Deposit to Project Fund. .............................................................................................. : ...... .. Deposit to Escrow Furul .•.........•........•......•..... ·-····················· .............................................. . Accrued Interest Deposited to J.nterest & Sinking Fund ...................................................... . Undetwriters' Discount ................................................. · .................................................... . Cost of Issuance .•.•......... • ................................... · ................................................................ . Total Uses of Funds·····•-· ........... -............... -............................. _ ............... _ ............. ." ...... . 11 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 Sowres of Funds .................•................................................. , .............................. . USES OF FUNDS: Deposit to Project Fund ....................................................................................................... . Accrued Interest Deposited to Interest & Sinking Fwtd ...................................................... . Underwriters' Discount ...................................................................................................... . Cost of issuance .................................................................................................................. . Total Uses of Funds ....... : ..................................................................................... ~·········· AD VALOREM TAX INFORMATION ADV ALOREM TAX LAW The appraisal of property •within Lubbock is the responsibility of the Lubbock Central Appraisal District (the "Appraisal District"). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code (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. lo detennining market value of property, different methods of appraisal may be used, including the cost method of appraisal.. the income method of appraisal, and lhe market data comparison method of appraisal. The method considered most appropriate by the chief appraiser is to be used. The appraised value of a residence homestead for a tax year may not exceed the lesser of (1) the most recent marlcet value of the residence homestead as determined by the appraisal entity or (2) 110% of the app~ value of the residence homestead for th.e precedjng tax year. The'value placed upon property within the Appraisal District is subject tb review by an Appraisal Review Board consisting of thiee members appointed by the Bol)td of Directors of the Appraisal Districl The Appraisal Di,strict is required to review the value o( property withir). 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 withln the City by petition filed with the Appraisal Review Board. Reference is made to Title I of the T~ 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 puq>0ses;. and the procedures and limitations applicable to the levy and collection of ad valorem tax~. Article vm of tf,le State Co11$1itution (" Article VIII") and State law provide ro·r certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain petSOnal property from ad valorem taxation. Under Section 1-b, Article VIIl, and State law, the governing body of a political subdivision., at its option, may grant: (1) an exemption of not less than $3,000 of the marlcet 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 liomesteads. Toe minimum exemption under the provision is $5,000. In the case of m1idence homestead exemptions granted Ul).der Section 1-b, Article VIII, ad valorem taxes may continue to be · levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximwn ofS 12,000. Effective Jaowuy I, 2004, under Article VIII and State law, the governing body of a county, municipality, or jwiior college , district, may provide that the total amount of ad valorem taxes levied on the residence homestead of a disabled person or petSOns 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 5% of the registered voters of the county, municipality or junior college · disbict, an election must be held to detennine by majority vote whether to establish such a limitation on taxes paid on residence · homesteads of persons 65 years of age or older or of persons who are disabled. Upon providing for such exemption, such-f'ree'LC on ad valorem taxes is transferable to a different residence homestead within the taxipg unit and to a surviving spouse living in such homestead who is disabled or who is at least SS years of age. If improvements (other than maintenance or repairs) ;ue made to the property, the value c:iftlie improvements is taxed at the then cummt tax rate, and the total amount of.taxes imposed is increased to reflect the new improvements with the.new amount of taxes then servmg 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. 12 ( ' C t ' ) ). ) Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section 1-d-l ), 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 capal:ity. The same land may not be qualified under both Section 1-d and l-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 such property. Boats owned as nonbusiness property are exempt from ad valorem taxation. State law additionally provides for one motor vehicle owned by an individual and used in the course of the owner's occupation or profession, and for personal activities of the owner, to be exempted from ad valorem taxation. Article VIII, Section 1-:i, 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 &eeport property are not subject to reversal. In addition, under Section 11.253 of the Texas Tax Code, "goods--in-transit" are exempt from taxation unless a taxing unit opts out of the exemption. Goods-in-transit are defined as tangible personal property that: (i) is acquired in or imported into the state to be forwarded to another location in the state or outside the state; (ii) is detained at a location in the state in which the owner of the property does not have a direct or indirect ownership interest for assembling, storing, manufacturing, processing, or fabricating purposes by the l)CfSOn who acquired or imported the property; (iii) is transported to another location in the state or outside the state not later than 175 days after the date the person acquired the property in or imported the property into the state; and (iv) does not include oil, natural gas, petroleum products, aircraft, dealer's motor vehicle inventoiy, dealer's vessel and outboard motor inventory, dealer's heavy equipment inventory, or retail manufactured housing inventory. The City may create one or more tax increment financing zones under which the tax values.on property in the zone are "trozen" at the value of the property at the time of creation of the zone. Other overlapping taxing units may agree to contribute all or part· of future ad valorem ·taxes levied and collect.eel 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 rone in excess of the ''frozen value" are ,;iot available for genCfcl]. city use but are restri<;ted to paying oi: financing "project costs" within the zone. See "TAX INCREMENT FINANCING ZONES" below. The City also may enter in~ lllx abatement agreements to encourage ec:cinomic. development Under the agreements, a property owner agrees to consll'Uct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the impro;vements until the expiration of the agreement Tb,e abatem~t agreement may last for'- 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 CQuncil 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 appr;usa1 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 ofth~ "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 ~uncil 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 that public notice be given by television if the City has free ~ 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 Rlduce the tax rate, adopted for the current · year, to the rollback tax rate. · "Effective tax rate" is defined as the rate that will produce the preceding year's total tax levy (adjusted) from the cwrent year's total taxable values (adjusted). "Adjusted'' means lost values are not included in ~e calculation of last year's taxes and new values are not included in this year's taxable values. · "Rollback tax rate" is defined as the rate that will produce the preceding year's maintenance and operation tax levy (adjusted) · from the current year's values (adjusted) multiplied by 1.08 plus a rate that will produce the current year's debt service from the current year's values (wiadjusted) 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 voteis 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 arc required to be offset by the revenue that will be generated by the sales tax in the current year. . ~ence 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. · 13 PROPERTY ASSESSMENT AND TAX PAYMENT Property within the City is generally assessed as of January 1 each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process that uses an average of the daily price of oil and gas from the prior year. Taxes become due October I of the same year, and become delinquent on Februazy 1 of the following year, Taxpayers 65 years of age or older are permitted by State law to pay taxes on homesteads in four insta!iments with the first due on February I each year and the final installment due on Aug11St 1. PENALTIES AND INTERE~T Charges for penalty and interest on the unpaid balance of delinquent ~es are made as fullows: Cumulalive Cumulative Mooth Penalty% Interest¾ Tomi¾ Februaty 6 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 al the rate of 1% each month. In ~itioo, if an account is delinquent in July, a IS¾ attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, delinquent taxes o.n the homestead of a taxpayer 65 years of age 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 tlie 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 auto_matic stay of action by creditors and other entities, including governmental units, goes into effect with the 61ing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclos~ on propercy and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either ~ an order lifting the stay is ~tained 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 APfLICATION OF TAX CODE The City grants a $16,600 exemption to the market value of the residence homestead of~ 65 years of age or older; the disabled are also ~ an exemption of $10,000. The City has not granted any part of ~ additional exemption of up to 20% of the market value of residence homesteads; the minimum exemption that may be granted under this provision is $5,000. . . The City has established the tax freeze on residence homesteads of disabled persons and persons 65 of age OT older. See Table 'I for a listing ~f the amounts.of the exemptions described above. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debL The City does not~ nonbusiness personal property; and the Appraisal District cpllects taxes for the City. The City does not permit split payments 'of taxes, and does not allow discounts for early payment of taxes., although discounts are 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 additionaJ one-eighth cent sales tax to help reduce ad valorem taxes. The City held an election on November 4, 2003, to increase sales tax one quarter cent, for a total of three eighths of a cent. The rate increase became effective on October 1, 2004. TAX ABATEMEN1' POLICIES The City has established a tax abatement progmn to encourage economic developmeoL To be considered for tax abatement,· a project must be located in a reinvestment rone or enterprise zone (a commercial project must be in an enterprise zone) and must meet 54?Verai criteria pertaining to job creation and property value enhancemenL The City had three enterprise zones that have expired: the Lubbock 2000 North Enterprise Z.One and the Lubbock 2000 South Enterprise Zone expired September 1, 2008, and the Lubbock International Airport Enterprise :lone that expired September I, 2005. In 2003, the Legislature made changes to the . statute governing enterprise z.oncs, including designating zones by block ~up based on poverty rate. The block groups meeting the criteria become enterprise zone eligi"ble, but can only be used for tax abatement if the new zones are activated. In November, 2007 the City activated thirty eligible block groups. At present, there are 18 active tax abatement agreements, principally for companies located in the northeast and southeast sections of Lubbock. [n accordance with State law, the City has adopted 14 C C ( ( ( "\ ) ) policies for granting tax abatements, which provide guidelines for tax abatements for both industrial and commercial projects. The guidelines for industrial and commercial projects ~ 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 ~ents were given full (100%) tax abatement. since 1m the City has negotiated abatements on a declining percentage basis. with a portion of the tax value added to the City's tax roll each year•during the life of the abatemenL 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 abatement, with certain businesses targeted for abatement, the amount of real or personal property to be added to the tax rol~ the nwnber of jobs to be created or retained, and other factors. The. policies disallow abatements for certain categories of property including real property,. inventories, tools, vehicles, aircraft, and housing. Each abatement policy provides for a recapture of the abated taxes if the business is discontinued during the term of the agreement, except for discontinuances caused by natural disaster or other factors beyond the reasonable control of tl:ae applicanl For a description of the amount of property abated for City taxation purposes, see."TABLE I -VALUATIONS, EXEMPTIONS AND GENERAL OBLIGATION DEBT." TAX INCREMENT FINANCING ZONES Chapter 311, Texas Tu Code, provides that the City and other taxing entities may designate a continuous geographic area in its jurisdiction as a tax increment financing zone ("TIF") if the area constitutes an economic or social liability in its present condition and use. Other overlappjng taxing units may agree to ~ntribute 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 lhe 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 North Overton Tax Increment Financing Reinvestment I.one (the "North Overton TIF"). · The Downtown TIF covers a 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 fqr 2001, the year of creation; at $105,858,251. For tax year 2008, the Downtown TIP had a taxable value of $165,812,393 before taking into account tax abatements and.exemptions. After tax abatements and exemptions, the tax value in the Dow:ntown TIF was $160,258,Sl.1. 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 thai the City will be the .largest contributor to the tax increment fund if there is growth from the frozen ba:se. The City Ordinance establishing the Downtown TIF provides that the Downtown TIF will tenninate on December 31, 2021, or at an earlier time designated by a subsequent City ordinance. · . . In addition to the Downtown 'fll'., the City enacted an ordinance in 2001 establishing the North Ov~n TIF. Each of the other Taxing Units in the Downtown TIF also participate in the North Overton TIF. The City oroinance establishing the Notth Overton TIF provides that the North Overton TIF will terminate on December 31, 2031, or at an earlier time desi~ by a subsequent City ordinance. The North Overton TIF consists of 325 acres near the Central Business District of Lubbock. The frozen tax base for the North Overton TIF was established as of January I, 2002, at $26,940,604. For tax year 2008, the North Overton TIF had a taxable value of $209,920,452 before taking into account tax abatements and exemptions, After tax abatements and exemptions,· the tax value in the North Overton TIF was $182,929,310. · [1HE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 15 FINANCIAL INFORMATION TABLE 1-VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2008. Marlcet Valuation Established by Lubbock Central Appraisal District -Less Ex.emptions/Reductions at 100% Marlcet Value: Residential Homestead Exemptions Homestead Cap Adjustmeni Disabled Persons Disabled Veterans Prorated Ex.empt Property Agricultural/Open-Space Land Use Reductions Pollution Exemptions ~ Vehicles Exempt House Bill 366 Energy Freeport Exemptions · Tax Abatement Reductions (1) Market Value Reduction for Protested Properties 2008 Taxable Assessed Valuation City Funded Debt Payable from Ad Valomn Taxes: General Obligation Debt (as qf2-IS-09) (2) (3) Less: Refunded Obligations Plus: The Bonds Plus: The Certificates Total Funded Debt Payable· &om Ad Valorem Taxe& Less: .Self Supporting Debt (as of 2-15-09) (3) (4) · Waterworks System General Obligation Debt Sewer System·General Obligation Debt Soli~ Waste Disposal System General Obligatio~ Debt Drainage; Utility System General Obligation Debt Tax Increment Financing~ Obligation Debt Electric Light and Power System General Obligation Debt Cemetery General Obligation Debt Gateway General Obligation Debt Hotel Occupancy Tax Debt 216,764,642 . 68,803,763 14,792,410 15,384,351 519,415 75,737,115 3,086,919 21,975 177,091 960,000 78,871,454 19,109,213 79,127,693 625,440,000 21,895,000 .• 23,670,000 • 58,650,000 • 162,511,542' 103,309,728 13,135,568 89,186,010 3~,007,298 69,482,033 637,401 89,649,761 1,144,548 $12,246,430,173 573.356,04'1 11,673,074,132 685;865,000 • Airport Genenl Obligation· Debt 13,757,312 578,821,200 General Purpose Funded Debt Payable from Ad Valorem Taxes (5) Audited General Obligation Interest and Sinking Fund as of September 30, 2008 Ratio Total Funded Debt to Taxable Assessed Valuation Ratio General Purpose Funded Debt to Taxable Assessed Valuation 2009 Estimated Population (6) Per Oipita Taxable Assessed Valuation Per Capita Total Funded Debt Payable from Ad Valon:m Taxes Per Oipita General Purpose Funded Debt Payable &om Ad Valorem Taxes • Preliminary, subject to change. (1) See "AD V ALOREM TAX INFORMATION -TAX ABATEMENT POLICIES." $ 107,043,800 $ s $ s 2,104,697 5.88% 0.92% 218,327 53,466 3,141 490 (2) The statement of indebtedness does not include lhe City's outstanding Electric Light and Power System Revenue Bonds, 16 ( ,. ... ( ( I ) ) ) payable solely from the net ~ of the City's Electric Light and Power System. (3) Includes the Refunded Obligations. (4) Preliminary, subject to change. Includes the self~supporting portion of the Certificates (approximately S-48,150,000 of projects to be funded will be ~If-supporting). As a matter of policy, the City provides-debt servi~ on general obligation· debt issued to fund improvements to its Waterworlcs System, Sewer System, Solid Waste System. Drainage System, Tax Increment Finance Reinvestment Zone, Electric Light and Power System, Cemetecy, Gateway Streets, Hotel Occupancy Tax projects, and Allport from surplus revenues of these· Systems (see "TABLE 8A -GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS," "TABLE 8B -INTEREST AND SINKING FUND BUDGET PROJECT[ON," "TABLE 9 - DMSION OF GENERAL OBUGATION DEBT SERVICE REQUIREMENTS," and "TABLE 10-COMPUTATION OF SELF~SUPPORTING DEBT"}. - The Gity's Waterworkl! System General Obligation Debt bas been issued to finance or refinance Waterwortcs 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 or refinance Sewer System improvements and is being paid, or is expected to be paid, ~m Sewer System revenues. Toe City has no outstanding Sewer System Revenue Bonds. The City's Solid Waste Disposal System General Obligation Debt has been iss,ued to finance or refinance Solid Waste · System improvements and is beii:tg paid, or is expected to be paid, from revenues derived from Solid Waste service fees. Toe City has no outstanding Solid Waste Disposal System Revenue Bonds. The City's Drainage Utility SysWm General Obligation Debt bas been issued to finance or re~ Drainage System improvements and •is being paid, or is expected to be paid, from revenues derived from Drain.age Utility System fees. The City has no outstanding Drainage Utility System Revenue Bonds. The City's Tax lnc:mnent Fin;mcing General Obligation Debt has been issued to finance or refinance construction of improvements in the North Overton TIF and is being paid, or is expected to be paic( from revenues derived from the Pledged Tax Increment Revenues. The City has no outstanding Tax Increment Financing.Revenue Bonds. In FY 2009, based upon development projections that the City believes to be reasonable, but which are dependent in part on future economic conditions and other factors that the City cannot control and to which it can give no assurances, the City anticipates that lax increment revenues will be adequate to cover debt requirements on ·the existing Tax Increment Certificates of Obligation. In the instance that the tax increment revenues are not sufficient to pay debt se.ivice, the City intends to make an interfunli loan to rover the debt service and, if the projected develop~ent in the North Overton TIF proceeds as expected, 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 ~ there could be yean in which the TIF may not produce revenues in amounts sufficient to cover all debt issued for it, at least until the TIF has n:ached full build-out status. Toe ·city's El~lric Light and Power System General Obligation Debt has been issued to finance or refinance Electric Light and Power System· improvements and is being paid, or is expected to be paid, from revenues derived from the Electric Light and Power System. The City 'has S16,480,000 of outstanding Electric Light and Power System Revenue Bonds payable from i pledge of system revenues. The City's Cemetery General Obligation Debt bas been issued to finance or refinance Cemetery improvements and is being paid, or is expected to be paid, from•revenues derived from the Cemetery. The City has no outstanding Cemetery Revenue Bonds. The City's Gateway General Obligation Debt has been issued to finance or refinance Gateway Streets improvements and is being paid, or is expected to be paid, from franchise fees. Toe City bas no outs~ding Gateway Fund Revenue Bonds. The City's Hotel Occupancy Tax General Obligation Debt bas been issued to finance tourism projects and is being paid, or is expected to be paid, from hotel occupancy taxes. The City has no outstanding Hotel Occupancy Tax Bonds. Toe City's Allport General Obligation Debt has been issued to finance or refinance Airport improvements and is being paid, or is expected to be paid, from revenues derived from the Aiiport. The City has no· outstanding Airport Revenue Bonds. (5) Preliminary, subject to change. Includes the Bonds and the portion of the Certificates that is not anticipated to be self- supporting (approximately $10,500,000). Excludes the Refunded Obligations. (6) Source: City of Lubbock, Texas. [TI{E REMAINDER OF nus PAGE INTENTIONALLY LEFT BLANK] 17 TABLE 2-TAXABLE ASSESSED VALUATION BY CATEGORY Real, Resideatial, Single-Family Real, Residaitial, Multi-Family Real. Vacant Lots/fracts Real, Acreag<: (Land Only) Real, Farm a.ad Ranch lmprovcmeolS Real, Commercial and lnduslrial Real, Oil, Gas and Other Minetal Reserve$ Real and Tangible Personal, Utilities Tangible Personal, Business Tangible Personal, Other Rml P.n:,perty, Invent01}' Special Inveotory Other/ Adjustmcuts Total Appraised Value B:eforc Exemptions I;ess: Total Exemptiom/Raluctions Taxable Assessed Value Real, Raidc:Dlial, Single-Fetnily Real, Residential, Multi-Family Real, Vacant LotslfrllciS Real, Al:ttaf,e (Land Only) Real, Farm and R.aoch Improvemellls Real, Comme!Cial and Industrial Real, Oil, Gas and Other M~ Reserves Real and Tangible Persooal, Ulilities Tangiole Penooal, Business Tangible Penooal, .Other Real Propetty, I.nvcoto,y Special lnvcolo,:y Other,'.Adjusanencs Tow Appraised Value.Before Exemp(ions Less: Total Ex.emptiom/Reductions Taxable~ Value Amount Taoble Appnlsed Value roe F.isc:al Year Ended September 30, 2009 2008 2007 %of Total Amount %of Total Amount %of Tola\ $ 6,687,368,655 54.61 6,321,729,050 55.01 5,889,918,195 55.53 922,530,900 7.53 931,507,661 8. I I 873,394,391 8.23 201,167,097 1.64 202,703,022 1.76 186,939,508 1.76 106,628,878 0.87 103,474,361 0.90 104,443,417 0.98 11,977,88!1 0.10 10,948,799 0.10 10.601,9&6 o. to 2,476,922,746 20.23 2,246,869,059 19.55 1,968,271,689 18,!i6 39,976,390 0.33 26,864,150 0.23 28,446,050 0.27 173,239,955 1.41 181,023,472 I.SS 179,562,657 1.69 1.494,921,128 12.21 1,340,911,089 11.67 l,245,'600,988 I 1.74 11,981,462 0.10 13,018,766 0.11 13,940,265 0.13 43,435,213 0.35 41,291,828 0.36 37,577,657 0.35 76,063,260 0.62 72,685,000 0.62 68,621,321 0.65 ---""21:..::6-=,600~ ___ o_.o_o ___ c..,,1.:.:1s~,oo"'-='-n _ ____;o:::;.o:.:::.o ___ .::;22;.;:.0,,:,192::..:.... ---"o""'.o.;;..1 12,2%,430,173 100.00 11,492,911,247 100.00 10,607,538,316 100.00 (573,356,041) (595,700,684) (604,812,679) S 11,673,074;132 10,897,210,563 10,002,725,637 Amount Tuable Appraised Value for FhcaJ Year Ended September 30, 2006 2005 2004 %of Total %of Tola! Amount %of Total $ S,517,769,306 SS.SS 5,169,490,706 56.09 4,690,158,161 55.50 795,689,400 8.01 615,453,2.SO 6.68 561,569,488 6.64 166,089,379 1.67 137,411,731 1.49 10~,625,954 1.29 80,067,791 0.81 64,532,486 0.70 65,880,410 0.78 11,038,8.95 0.11 10,406,299 0.11 10,835,088 0.13 1,827,901,763 18.40 1,712,457,490 18.58 1,638,846,765 19.39 17,526,S10 0.18 12,167,754 0.13 S,923,810 0.11 177,838,907 l.79 173,908,469 1.89 185,761,346 2.20 1,228,428,632 12.37 1,226,369,118 13.31 I ,090,862,579 12.91 14,527,171 0.15 1S,465,413 0.17' 16,287,022 0.19 26,685,491 0.27 9,863,035 0.11 4,774,287 0.06 67,329,545 0.68 68,232,264 0.74 68,663,514 0.80 __ ......;;.cl,~499;.:;.zz.:.'6.;.;:16;.... __ .....;;;O~.O.a..1 _____________ 0_.00,;;. -----------...... 0-...... 00 .... 9,932,392,406 100.00 9,215,758,015 100.00 8,451,188,~24 · 100.00 (S85,m,455) · (580,763,lS)) (529,598,044) $ 9,346,613,951 . 8,634,994,862 7,921,590,380 NOTE: Valuations shown are cenified taxable assessed values reported by the Appraisal District to the City for pUipOses of establishing and Levying the City's annual ad valorem tax rate and to the State C.Omptroller of Public Accounts. Certified values are ~ject m change throughout the year as contested values are resolved and the Apprrusal Dislrict updates records. 18 C ( ( ( ) TABLE 3A-VALUATION AND GENERAL OBLIGATION DEBT HISTORY Fisal Per~ita General Ratio Year F.s1imated Tanllle Tauble Purpose Tu Debt lo Ended. Cily Assessed Assessed FuAded A$SCIMd .2!!:::!:.L P3!Ulation (JI Valutio11 Valllllioo TuDebtl'I Valuationw 2004 206,290 S 7,921,590,380 38,400 70,161.218 0.89% 2005 209,120 . 8,634,994,862 41,292 80,210,269 0.93% 2006 211,187 9,346,613,951 44,258 87,231,945 0.93% 2007 212,365 10,002,725,637 47,102 92,487,363 0.92% 2008 214,847 10,897,210,S63 50,721 101,185,953 0.93% 2009 218,327 11,673,074,132 53,466 104,483,800 (4 0.90% • (cl "'So,ll'(e:Tu,City. (II Docs 1101 O>CNil< seif-$1j>pJ11od debt (4 l'nimilmy, m,p:l IO daoge. Jndud., lhc Beads 111111 the pmtiaa of lhcCtnificms that is ml anticipakd IO be ,df~ Exdlldcs lhc Rdundod (Hplions. . . TABLE 3B-DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT FwuledDebl Tu PerC!!l!lta Year 340 2003 384 Z004· 413 200S 436 2006 471 2007 479 <4 2003 The following table sets forth certain information with respect to the City's general purpose and self-supporting general obligation debt The City is revising its capital improvement pl~ but the City ex~ to issue additional self-supporting general obligation debt within a three to five year time frame: See "ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT' below. · Fiscal Less: General Purpose Year Fonded Tu De~t Self-Supporting Funded :ru Debt . Ended Outstaading at Fullded.Tax Outst.nding 30--Sep ElidofYear . Debt atEnd-of Year 2005 s 388,595,000 308,384,731 80,210,269 2006 447,275,000 360,043,055 87,231,945 2007 512,250,000 419,762,637 . 92,487,363 2008 633,065,000 531,879,047 101,185,953 2009w 683,.305,000 . 578,821,200 104,48.3,800 TABLE 4-TAX RATE. LEVY AND COLLECTION HISTORY Fiscal Tu Rate Di'stribution Year End General E(onomlc Interest aad Tu Tu: Percent Collected 09/30 · Fund Development Siakin.2; Fund Rate Levy Current • Total Tu Year 2004 s 0.41504 0.03000 0.10066 0.54570 4.3,6S9,lll 97.02 98.64 2003 2005 0.33474 0.03000 0.1)9496 0.45970 39,697,452 97.73 100.23 2004 2006 0.35626 0.03000 0.06094 0.44720 41,775,367 97.69 99.71 200s· 2<m 036074 0.03000 ·0.0112.s 0.46199 46,068,744 .. 97.88 99.02 2006 2008 0.35380 0.03000 0.07125 0.4SSOS 49,195,247 98.41 99.62 2007 2009 0.3254-0 0.03000 0.09100 0.44640 51,616,589 (In process of Collection) 2008 19 TABLES -TEN LARGEST TAXPAYERS 1008 %ofTotal Taxable Tanble Name Macerich Lubbock Ltd. AT&T Assessed Valuation Asseyed V!!l!!ation Uoited Supermarkets LLC PYCO Industries, Inc. Xcel Energy Wal-Matt Real Estate Business Trust Atmos Energy/ West Texas Division X-Fab Texas, inc. Wal-Mart Stores, lne. .Naples Lubbock Venture LLC Souroe: The City and the Appraisal District TABLE 6_-TAX ADEQUACY $ 128,778,473 58,830,186 52,459,356 47,483,420 38,786,891 37,970,476 35,364,580 34,550,415 32,072,801 31,021,727 s 497,318,32S Average Annual Debt Service Requirements All General <;)bligation Debt (2009-2034): $0.3498 per $100,A V against the 2008 Taxable AV, at 99% collection. produces Maxim.um Annual Debt Service Requirements All General Obligation Debt (2010): $0.5881 . per $100 AV against the 2008 Taxable AV, at 99% collection, produces W Includes die Obiigaliom and self supported 4ebt Excludes llx: Refunded Obligations. hlimiqa,y, ~ubjcct to change. TABLE 7 -ESTIMATED OVERLAPPING DEBT I.IO 0.50 0.45 0.41 0.33 0.33 0.30 0.30 0.27 0.27 4.26 $4-0,419,832 w $40,424,089 $67,959,827 (a) $67,%2,855 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 bonowings to finance their expenditun=s. 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 bas not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed may have issued additional Tax Debt since the date hereof, and such entities. may have programs requiring the issuance of substantial amounts of additional Tax · Debt, the amount of which cannot be de1ennined. The following table reflects the estimated share of overlapping Tax Debt of the City. . Tpmg Jurisdkti0ll Frenship ISD ldalouISD LubbQck County LubbockISD Lubbock-Cooper ISO New Deal ISD Roosevelt ISD Estimated Overlapping Debt The City Gross Debt (As of 2/lS/09) $ 157,574,716 78,00S,000 122,005,112 45,760,000 11,909,998 S 685,865,000 00 Total Dim:t & Estimated Overlapping Debt As a% of2008 Taxable Assessed Valuation Per Capita Total Direct & Estimated Overlapping ~t 20 Estimated% Overlapping 66.53 3.92 83.13 98.70 57.09 25.44 2.98 100.00 Overlapping Debt 104,834,459 64,845,557 120,419,046 26,124,384 354,918 3 16,578,363 68S,86S,OOO $ l,002,443,363 8.59 s 4,5~1 C C ( ( ( N -TABLE BA· GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS ft); O._d.,1D•""' ,.. ....... ~-Prtachll Jat-i Total Pria!!J!!! latortat 2009 ·s 32,III0,000 31,129,011 63,929,0&I 2010 3-4,070,000 •21,407,m 62,477,ln 3,360,000 1,203,467 2011 15,135,000 M,921,141 '2,1156,7-41 l,61S,OOO 615,:M 2012 35,085,000 25,J'IJ,614 60,451,614 ],540,-000 559,0JI 2013 36,260,000 23,719,117 60,049,lt7 3,415,000 437,319 2014 36,615,000 22,Ul,567 51,773,Sa? 3,170,000 Sll,511 20!S SS,070,000 20)33,7,U 55,W,745 640,000 2'11,406 20\6 34,a20.000 ll,956Jl)4 53,576,034 1,150,000 217,011 201'1 3S,2d0,000 17,SOJ,710 52,.5153,710 1,140,000 174,IS6 2018 36,325,000 U,ISOS,9'12 s1,ne,m -l,IJ5,000 128,1116 2019 34,710,000 13,861,275 48,631,275 620,000 93,556 1010 "•1SS,OOO 12,ll7,415 45,492,415 130,000 ?l,556 2021 32,310,000 10,651,ffl 42,967,119 135,000 72,SII 20:22 30,330,000 9,124,,n 39,456,612 140,000 65,706 1023 30,140,000 7,6-41,05 :J?,711,43' IS0,000 58,4$6 2024 29,015,000 6,194,&71 35,219,171 155,000 50,131 2015 21,7SS,GOo •,I00,574 3',555,574 16S.000 •2,131 2026 2S,7GO,OOO 3,465,212 29,115$,272 175,000 34,Jll 2027 2Q,44D,000 2,3'1,311 22,771,323 IIS,000 25,216 2028 15,600,000 1,461,292 17,061,2'1 190,000 IS,481 2019 S,475,000 967,143 6,442,143 200,000 5,2'0 2030 S,735,000 712,173 6,447,173 20,1 6,000,000 445,949 6,445,949 2032 2,195,000 260,4Sl 2,4$5,438 20U 2.2!10,000 159,525 2,"'49,52' ~u 2,400,000 '4,000 2,454,000 s 6551=000 3~"4!.435 960~435 21,,10,000 415141795 Av.nae Annllll Debt SormoRequ!nmau AU Goaoral 01,Updoa Dobt (200,-ffl•): ,Mulnwm Allauel Debi SIIYlce ~ All Ocaonl Oblllllllo,i Debi (2010); Iii Dooeaoe..-.......,,__.Mil..._ N l'tollmlury, ftbjeol to MIDIO. TABLE 8B -INTEREST AND SINKING FUND BUDGET General PwpoH General Obliplion Debt se...,;ce Requiremcnu, September 30, 2009 FiJcal Agent Feea Interest and Sinking F1111d, Septmiber 30, 2001 Interest and Sinlcing Fund Tax Levy@ 99.0% Estimated Interest Baminp Projected Balance, September 30, 2009 Tobi ·Prildpl 4,$63,467 1,72.5,000 4,360,294 l,69$,000 4,0!19,0ll 2,7P0,000 3,152,119 2,195,000 ],ISSl,511 2,995,000 111,406 3,100,000 1,167,0II 3,21$,000 1.,314,156 3,335,000 l,UJ,656 3,470.000 713,556 3,610,000 201,556 2,215,000 207,Sll 2,390,000 205,706 2,515,000 201,456 2,~s.000 205,UI 2,710,000 20'1,131 2,920,000 209,131 3,070,000 21D,216 3,230,000 205,411 3,400,000 205,2'0 3,5U,OOO ~1141795 5~650i<)()O S 11~4,503 15,000 2,104,697 10,143,378 641,437 12.889,51:2 S 1,640,009 '-/ '111e Ccrtffl .. teoM Lm:lteflm'1ed Told ..... TOI.II Obl""11am"' Dt111 l..-,lee 412,214 63,~m S,660,774 S,315,774 4,"467,21S 61,9$9,117 2,4».231 ,.1~ 4,2l0.l6S 67,259,407 2,U2,250 5,122,250 ·4,021,364 65,651,531 2.212,m 5,127,763 3,7n,07P 65,257,1.19 2,l~,611 5,124.681 UO!l,151 63,ffl,611 2,023,023 5,123,025 111,213 60,'°3,964 1,Pl2,513 S,127,Sll 1,217,16' 51,11),259 1,719,5!0 5,12-4,SSO 1,237,511 57,764,905 1,6.53,450 5,123,450 1,187,7'4 57,121)14 1,511,UO 5,121,UO 633,9'0 53,8'1,732 l,lf.l,9SO 3,671,9SO 49,179,921 1,218.SOO 3,61S_SOO 46,1$3,161 l,16S,17S J.610,875 43,)0,254 1,036,175 3,611,&75 41,671,766 901,2$0 ,.m.2so 39,106,960 151,750 3,671,750 '7,442,156 609,000 3,679,000 :n,oSJ,603 449,411 3,619,411 26,661,020 117,463 3,677,"63 20,944,142 94,106 3,679,106 10,326,499 6,441,173 6,44$,949 2,4$5,431 2,449,525 . 2,454,000 2116491349 lli,'191349 .2S.1!?2i943 11oso19U1t.i6 s 40,41P,ll2 s 67,,,9,117 TABLE 9;. DIVISION OF GENERAL OBLIGATION DEBT SERVICE C•> 1o11a-D ........ Tn Da:lrl<Udll -... -...... .,.Id UCIIIIJ --........ Gmcnl Total rn 8,-.,_ .,.._ ·S,-JIDaDdq s,.... C<at"7 _.,. BOT ~ ""-I..on:lldlmded -~ GA ....!!:!!!2.... ----Dm1a.m.. ------.. --------.. --Ol>III!!!!!!!! lloodl -Sc-2009 s 16.'10.o,4 IJ,60U71 1.202,111 6,451,5'1 3,044.660 u~ 55,118 4,716,6" n.m 2.463,.m 11,234,sc:1 ffl,284 63,416,m 2010 IU75,123 .ll,107JM IJD7,91J 6,)3),521 U94.715 6,944,771 ".13' 7,236,1141 t7JI) 2,417,616 11,114,591 4,4G7,2at Wl,631 67,9'9,117 2011 u:non, . 11.046,319 IJH.791 021."4 J,IIU:12 6,&47,5114 JS,124 7,IJ9J,031 97.lN 2,408,627 . 12,100.902 4,2SU65 ,.uo,0110 67,2S9,4o? 20U 11,167,6K 10,109.0I• 1,176,916 6,J21,1U J.17'.ffl ,.m.'41 55,213 7,096,611 '7,241 2,40,,m 11,712,106 4,021,3114 ,.m,m 65,6Jl,l)I 201) U,IU,t79 10,613,ffl 1,166,112 U22.70'J ).111~9 '~'°' 55,ul 7,1196,3911 '7JD 2,3n,.111 U,&l&,.199 ),772,079 l,'4UI) &J,157,119 2014 U.776,104 I0,46U19 1,1511,.109 0111,74' ,.111.m 6,611,311 JS,117 7,°'6,414 97.218 1,414,0,1 11,567,1-45 3.6C9.llll ),1711.~ 6l,fflti'11 201, IJ.6,17,111 8,!11.1149 1-»'.S?ll 020.7711 3,IID.990 6),12,053 51,127 7,091,214 97J28 1,341,o:JJ 10,631,914 111,21) 612,163 &O,IG3,K4 lOU 11)90,'24 7,7119,902 1,155,109 6,!.13.210 ',lll.039 6,461.624 55,223 7.1)9S,324 97,2,18 4'5,11.! 10,m.m l.l81.J69 1,119,600 '8,ffl,159 21117 U,514,092 7,749,730 1,232,540 "'""' J.1'7.0U w,,.., 55,206 7.1191.014 97,248 4'7,!140 9,!42.)98 1.137,511 1,105,900 5'1,164,9GS 2011 15,334.&I0 7,4Mj42 1,119,557 6,510,171 J,111,$11 6,ffl,ffl 51,2114 7,094.760 91.l\1 4'6,041 9,463,461 1,117.794 1.051.1~ 57,121,2114 lOU 14,ffl,422 1,4411,n-t 1,02.l,st? 6,170,2$0 ),114,7.!2 4,?JJ,717 S'-217 7,1)911,671 97,190 4$4,02.l 8.)91-'91 633,9SG ~,900 5l,13l.7'1 2020 u.ois,619 &;12.7,817 l,019~ 6,!71,141! l.111.931 4,7'2.l6S '5.22J 7,G91,9)9 97,142 411,92) 7.JJS.ffl 49)79,921 2021 10,160,671 &;12.5,411 1,012,122 ',.!6S,"47 l,Ut.6:!i 4,ffl.t90 '5.210 7.0llS.048 97,Jl? 41',969 li,ffl.850 44,113,UI 2021 1,413,61$ &,125,2,14 177,9'11 6,JI0,4)1 l.111.12.6 4,754.16' JJ.238 7.1»4)31 9'1J]9 4'1,114 6.0'll.867 43)43,154 202' "'37'11 6)97,021 880,Sd 6,!7'1,724 3.ltUl6 4,N7.0H SJ.204 1J1Ylp,(, 9'1,151 4'7,149 '-249.693 41,Qt,ffl 2024 ,.mm 6,39042 178,515 6,549,611 03,112.041 3,091,346 55,102 7,0,J,ffl 9'1,'WJ 4S7Jl7 4,369,762 39.10060 21W 4,199.)'JO 6)!0,166 607,322 '-512,690 2.mm 3.0K.108 55.207 7,0lll,746 9'1,»I 4'7,1)7 U41.1'2 37,442,IM 21126 MIO,ICI s,m,.,M 607,181 4,!'6.766 2.181.110 2,614.411 55.212 l,9.'1,714 91,305 2)2,352 3.070,1 33,01).60, 21127 4,ffl,M] 4,60'!,176 243,726 S,tl0,440 1,67.I.~ 2,1"-'28 l'-6119 !.7.lUl7 97.270 32,?97 1,634.7" 26.6'1,G10 ma 3,176,17 4,316,422 136,646 !,441,414, Jal,$7.J 1,074,m S,729,619 687,l!!J l0.M4,142 iau 2411.064 34,lMO 4,18'7,085 141,166 $'5,275 4,113.l'9 . ])9,609 10.,16,499 20)0 4,1-40,0 1,706,110 6,447,173 2031 4,7'40,044 l.10l~l ',.4'1,!149 lOJ2 ,.415,431 . 2,451,431 N 2033 '-4'9-'25 2,449,521 "' '"" 2,414,000 2,414,000 S 2lla27,'79 15!1901516 19.ll?,'!0 IIWP,1112 17im1s11 1112JIU22 J,009,ffl 143i31u91 114353) up51,m u ... 1,ei:s 25.790.94l I 14.013.911 1,0,0,91,,63, & tedillkalk~ ~~ldlJldtodiap. ...... ,.... r--r ... r. '\ ) ) '.f ABLE 10 -SELF-SUPPORTED DEBT Toe.following details the revenues available and debt allocations for the self-supported general obligation debt of the City. See also Table 9. [n addition to the funds detailed below, the City Council of the City approved ordinances 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. THE WATERWORKS FUND 1•> N~ System Revenue Available, Fiscal "X ear Ended 9-30-08 . Less; Requirements for Revenue Bonds, Fiscal Year Ended 9-30-09 Balance Available for Other Purposes Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-09 Pm:entage of System General Obligation Debt Self-Supporting 21,107,436 21,107,436 16,520,034 100.00 00 Ea,;h F"uca.l Year lhc Cily nnsfen an amount equal 10 debt suvice requin:mml:! OQ the Wau:rworiol Fond gc:,,ml obligatic,:,. dd,c 10 a segregated I.CCOUIIC io. lhe WalclWoib Fund. THE SEWER FUND<-, Ne1 System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-09 Balance "Availab(e for Other Purpo~ Requirements for System Genera.I Obligation Debt, Fiscal Year Ending 9-30-09 Percentage of System GCllerl!l Obligation Debt Self-Supporting 16,02S,846 16,025,846 11,606,571 · 100.00 • 00 Each fu:cal Year Ille City \ml>Sfffl 1111 amount equal to debt service requitemmb«i the Sewer Fund general obligation ddit to a ~led accowu in the · s.....,,-Fund. FY2008 n:venue incll>dcs a llaDSfero!$4,680,S 13 lh>m genctal.sewa lillJ!! blllanc:e. THE SOLID WASTE FUND lo) Net System Revenue Available, Fiscal. Year Ended 9-30-08 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-09 Balance Available for Other Purposes Requirements for System General Obliga~on Debt, Fiscal Year Ending 9-30-09 Pen:entage of System General Obligation Debt Self-Supporting s ~.681,364 S,681,364 1,202,711· 100.00 W Each Fiscal Year die City 11aasrers an amouni equal ro deb« service n,quin:mmls on !he Solid w .. tc FUQd geae,a1 obliplion dcb1 10 a sc:grcgallCd accowit ,mlhc~~Waslr:Fund. . THE DRAINAGE FlJND (,, Net System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requirements fur Revenue Bonds, Fiscal Year Ended 9-30-09 Balance Available for Other Purposes Requirmients for System General Obligation Debt,, Fiscal Year Ending 9-30-09. Percentage; of System General Obligation Debt Self-Supporting . $ 6,922,614 6,922,614 6,451,S91 100.00 00 ~h Fiscal Year die City lr8DSfers an amouat equal IO debt :service n,quiremeols OIi the Drainage fllDd a-,al obligation debt ro a segregated 1.c:coun1 in Ille Dnin.ge Fund. FY2008 rcvawe includes • !rans= ofS3,67•,9 lO fn,m gencqJ dramage fund balance. THE ELEqRIC LIGHT AND POWER FUND <•1 Net Elcc1ric Light and Power System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requimnents for Revenue Bonds, Fiscal Year Ending 9-30-09 Balance Available for Other Pwposes · Requirements for Electric System Geoeral Obligation Debt, Fiscal Year Ending 9-30-09 Pen:entage of Electric S~ General Obligation Debt Seif-Supporting s 26,421,986 2,501,655 23,920,331 6,466,230 100.00 (IJ Each Fllle8l Year die City llaOSfelll 1111 &IIIIIWII eqwii IO debt service ~ Oil die ~ Light and fower Fund general obliptio.n dc::bl to a scgtqltlJd 8CCOun1 in 1be Electric Light aad P<Jwer Fund. 23 THE GATEWAY FUND eoi Net System Re\/Cllue Available, Fiscal Year Ended 9-30-08 Less: Requirements for R~enue Bonds, Fiscal Year Ended 9-30--09 Balance Available for Other Purposes Requirements for Fund General Obli~on Debt, Fiscal Year Ending 9-30-09 Percentage ofFund General Obligation Debt Self-Supporting oo Each F"ISC8I Year die City cransfcR an iunouat eqll8110 debt service n:quuements on che Gateway Fund general obliplion debt r,; a tegtegated ~ in lhe Gateway Flllld. THE AIRPORT FUND (•I Net System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-09 Balance Available for Other PUfJ)l)ses Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30--09 Percentage of Fund General Obligation Debt Self-Supporting {,) Each fiscal Year the City transfcn an amaunt equal to debt scrvic:c: n:quircmmts on die Airport Fund gm,:nl obligation debt to a scgr,:pted aocounl in the Ailport fund. THE NOR1B OVERTON TlF TAX INCREMENT FINANCING FUND<-> . Net System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requimnents for Revenue Bonds, Fiscal Year Ended 9-30-09 Balance Available for Other Purposes . Requirements for Fund .General Obligalio~ Debt, Fiscal Year Ending 9-30-09 Percentage of Fund General Obligation Debt Self-Supporting . $ $ $ 5,791;119 5,791,119 4,786,67S 100.00 4,439,855 4,439,855 2,463,559 100.00 1,447,829 1,447,829 3,044,660 47.55 (I) Each Fi5cal Year the City tramfers an amolllll equal to dcbl savice ~ DB the Tax tocreroem F"inancing Fund general oo_liplioCI debt to • segrqi,.tcd accowit in lhe Tax Incm:neot financing Fund. The remaindet of ,-ue .-led IO suppon lbc Tax lm:r=ent Flll&DCu,g fllod general ooligatioa debt is lrall5fetTcd 1iom ,die c;it)'s Solid Waste Fund. TABLE 11 -AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS ScwerSy&em WaterworlcsSystcm Slreet Improvcmcms Stm:t Improvements r111::e0se Civic Center/ Auditorium Renovalioo and Improvcmems Parle Improvcmetlls Polico'Mllllii:ipel Court Facilities Lllmuy Jmprovemcots Fire Stalions Animlll Shel~ Renovations & Improvements Date Authorized s121m 10/17/87 S/1/93 5115/04 ·SJ\5/04 S/15104 SIIS/04 5/IS/04 5/15/04 S/15/04 S ).303,000 ·2,810,000 10,170,000 9,210,000 6,45-0,000 6,395,000 ].350,000 2,145,000 l,.,OS,000 1,045,000 S 46,283,000 hsued To Date 2,175,000 200,000 10,166,000 7,369,000 6,395,000 1,405,000 t(,(),000 271870/YJ-O The Bonds 1,395,000 500,000 S00,000 250,000 2,645,000 Uiwned 1,128,000 2,610,000 4,000 446,000 5,950,000 2,850,000 1,895,000 15,768,000 ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ••• The City Council adopted a resolution during lhe 1984-85 budget process establishing capital maintenance funds for capital projects. A capital improvement pfan is made for planning purposes and may identify projects that will be deferred or omitted en~ly 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_se,.:en or more years. For FY 2008-2009, the City Co1D1Cil approved $148.7 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 airpQrt. The Capital Projects Fund budget for FY ·2008-2009 also included an additional $458.l million in future improvements for all City departments over the five succeeding fiscal yeaIS. 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 11, upon issuance of the Bonds. the City will ha~ ·s 12,026,000 of authorized but unissued bonds from_ the May 15, 2004 bond election. When 1he election was held, the City anticipated that the bonds would be issued over the 2004 through 2008 time fuune. The City typically issues voted bonds for general pwpose City projects, such as slreets, parks. libraries, civic centers and public safety improvements: However, the City has incurred substantial unvoted tax supported debt to fund 24 ( C ,. I,, ( < ) ) ) . I ... portions of the capital budget-of the Electric Fund, Water Fund, Sewer Fund, Solid Waste Fund, Stonn Water Fund, Tax Increment Fund, Cemetery Fund, Gateway Fund and Airport Fund As described elsewhere in the Official Statement, such enterprise fund indebtedness is generally anticipated to be self-supporting fiom entaprise fund revenues. The City does no_t anticipate the issuanJ;e of additional general obligation debt within the next 12 months. TABLE 12-OTHER OBLIGATIONS The City has various capital leases outstanding. The debt service requirements of the leases are detailed below. Governmental Business-Type Total Capl~I Lease Capital Lease Capital Lease ~ Minimum Minimum Minimum 30-Sep . Pal'.!!!ent Paeent Paeent 2009 $ 3,333,027 4,699,719 8,032,746 2010 3,106,737 4,679,923 7,786,661 20tl 2,045,097 3,950,210 5,995,307 2012 1,429,893 2,773,922 4,203,815 2013 910,279 1,689,579 2,599,858 2014-2018 2,768,721 2,469,737 5,238,458 Interest { 11328~169} p,724,774) (3,052,943) $ 1~265,586 18,538,317 30.803,903 The City also has obligations to pay various contract revenue bonds issued through the Department of Housing and Urban Develol)Ment and the Canadian Municipal River Authority. The debt service requin:ments of the contract revenue bonds are detailed below. . FYE Contract Revenue Bonds 30-Scp Prindl?!! Interest Total 20f)9 $ 1,392,998 1,693,914 3,086,912 2010 1,442,600 1,636,951 3,079,551 2011 1,494,093 1,573,481 3,067,574 2012 1,556,264 1,504,834 3,061,098 2013-27 29,304,554 11,617,252 40,921,806 $' 35,190,509 18,026,432 53,216,941 PENSION FUND ... TEXAS MUNICIPAL RlITIREMENT SYSTEM !a»l ••• 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 covered by a State statute and administered by six trustees appointed by the Governor of Teus. TMRS operates independently of its member cities. The City joined TMRS in I 950 to supplement Social Security. All City employees except firefighters are covered by Social Security. Options offered under lMRS, and adopted by the City, include cwrent, prior and antecedent service credits, five year _vesting, updated service credit, occupation.al disability benefits, and survivor benefits for the spouse of a vested employee. An employee who retin:s receives .an annuity based on the amount of die employee's 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 actwirial. techniques applied to experience. Enabling statutes prohibit any member city from adopting options which impose liabilities that cannot J>e amortized over 25 years within a specified statutory rate. On December ~ 1, 2007, the actuarial value of assets held by TMR.S (not including those of the Supplemental Disability Fund, which is "pooled") fur the Cily were $200 million. Unfunded 3':tuarial accrued liabilities on December 31, 2007, were $126 million and amortized over a 30-year period begµming Jan113IY 1997. FIRE PENSION FUND 00 ••• City firefighten are members of the locally administered Lubbock. Fire Pension Fund (the .. Fundj operating Wider.an act pused in. 1937 by the State Legislature and adopted by City firefighters, by vote of the department, in 1941. Firefighters are not covCRld by Social Security. · The Fund is governed by seven trustees, consisting of three firefighters, two outside~ (appointed by the other trustees), the Mayor or the representative tbereot: 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 "fonnula" or a "final salary" plan. Actuarial reviews are performed every two years, and the fund is audited ann~ly. Firefighters contribute a pcn;entage of full salary into the fund. Based on the plan effective~ I, 2005, the Fund's funding policy requires contnbutions equal to 12.43% oflhe firefighters' pay. The City 25 contributes on a basis of the percentage of salary, which is an annually adjusted ration that bears the same relationship to the fuefighter'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 December 31, ~006, actuarial valuation asswnes the City's contributions will average 19.7S%ofpayroll in the future. AS of Deoember 31, 2006, the most recent actuarial valuation date, the plan was 84% funded. As of December 31, 2006, the unfunded pension benefit oblfgation was $26,297,944 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. The December 31, 2004 actuarial valuation, which used plan provisions effective November I, 2003, needed 20.6 years to amortize the unfunded pension obligation. The December 31, 2006 actuarial valuation was based on the plan provisions effective December 1, 2005 and needed 30 years to amortize the unfunded pension obligation. OTHER POST-EMPLOYMENT BENEFITS ... The City currently provides certain post-employment benefits to its employees. The City's annual OPEB expense is calculated based on the annual requimi contribution of the employer, an amount actuarially determined in accordance with the parametm ofGASB Statement 45. For further information regarding the City's OPEB obligation, see Note III. F (Notes to the.Basic Financial Statements) set forth in Appendix A. Ill For historical information c:onceming the retirement plans, see "APPENDIX A, EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2008 -Note ill, Subsection E • Retimnent Plansn. (bl Sourte: Texas Muoicipal Retirement System, Comprehensive Annual Finmrcial Report for Year_Ended December Ji. 2007. ~lllE REMAINDER OF IBIS PAGE INTENTIONALLY LEFT BLANK] 26 ( C ( ( < TABLE 13 -CHANGES IN NET ASSETS Fiscal Year Ended S!:ftember.30 <a> 2008 2007 2006 2005 2004 REVENUES , Program Revenues Charges for Services $ 12,6n 10,~36 9,632 10,583 12,713 · Grants and Contributions 25,154 14,645 11,048 13,296 9,643 General Revenues ~perty Taxes 50,330 47,007 42,771 39,748 44,497 Sales Taxes 50,549 47,780 45,577 41,803 30,555 Other Taxes 5,370 4,.909 4,447 4,242 3,793 Franchise Taxes 12,978 12,378 13,348 11,154 9,654 ' Investment Earnings,'Other 10i116 9,787 I 11292 5,742 4~74 · Total Revenues $ 167,374 147,142 138,115 126,568 115,129 EXPENDITURES Administrative Services $ 12,372 12,155 9,910 · 8,220 7/~46 Community Seivices 6,874 6,951 6,112 6,146 6,776 Cultural and Recreation 16,660 19,671 18,915 17,745 17,102· &lonomic Development 12,378 11,620 10,283 9,739 4,610 Fire 31,789 27,338 26,711 ~,517 22,074 Health 6,142 5,899 5,014 5,040 4,585 Police 46,850 43,022 42,063 38,452 36,543 Other Public Safety 6,678 5,886 5,240 4,977 4,2ll Streets and Traffic 16,357 14,370 11,850 12,466 -10,570 Non-departmental 5,206 6,253 2,924 lntelgovemmental 12,500 Interest on Long-Term Debt 8J67 6~8 4J26 3zl95 4,877 Total .t;:q,enditures $ 164,467 · 166,3"80 145,630 135,750 122,218 Changes in net assets befoR: special items and transfers $ 2,907 Special it.ems (19,238) (7,515) (9,182) (7,089) Transfers (4,703) 10,572 9,607 15,469 9,745 Olariges in net assets (1,796) (8,666) 2,092 6;1.87 2,656 Net Assets -beginning of year, as restated 141,729 112,721 110,629 104,341 101,684 Restatement 37,674 Net assets -c:nd of year $ 139,933 141,729 112,721 110,628 104J40 W Uni1s are in thousands. Note: Dala shown in Table 13 reflects general governmental. activities n:ported in accordance with GASB Stllemeot No. 34. The financial staremmls include a mmiagement discussion and analysis of the operating results of such fiscal year, including ·restatements to begianing fund balances aod net assets. 27 ( TABLE 13A-GENERAL FUND REVENUES AND EXPENDITURES HISTORY C Fmal Vear Ended Se~tember 30 2008 2007 2006 2005 2004 REVENUES Taxes $ 8S,34S,082 80,266,416 75,999,624 68,716,601 64,727,362 Franchise Taxes 7,786,611 7,429,660 8,008,973 6,693,209 9,654,447 Licenses and Pennits 2,663,139 2,531,032 2,250,635 1,953,666 1,982,281 ( Intergovernmental 530,389 514,896 408,997 480,648 428,459 Charges for Services 3,339,148 4,057,958 4,781,043 4,070,642 4,467,733 Fees and Fines 1,279,911 3,669,099 3,981,978 4,015,402 3,675,856 Miscellaneous 2,574,448 2,582,509 1,465,215 1,506,315 1,442,677 Interest 1,052,842 1,469,083 921,742 349,236 334,730 Operating Transfers 16,565,397 10,723,891 ( Total Revenues and Tramfers $ 106,571,570 102,520,653 97,818,207 104,3Sl,U6 97,437,436 EXPENDITURES General Government $ 6,159,536 5,633,469 Fioancial Services 2,139,492 2,333,469 Cultural and Recreation 12,253,380 15,251,742 13,986,576 ( Ecooomic & Busines.s Development 1,215,978 1,122,880 1,146,267 Non-departmental 1,882,255 445,251 214,562 Admin/General Government 11,047,039 11,560,733 9,356,059 18,330,508 18,156,455 · Police 42,831,016 40,448,254 37,463,740 33,919,626 32,400,371 · Fire 29,630,222 26,690,350 24,638,814 21,943,267 20,613,077 Health 4,133,917 4,004,913 3,738,790 ( Other Public Safety 4,703,249 4,508,394 4,287,806 Planning _and Transportation 8,120,727 7,180,843 Streets and Traffic 8,168,462 7,663,278 7,439,045 2,214,291 2,185,286 Human Resources . 740,826 154,225 Debt Service 2,3%,605 1,694,844 1,154,226 Capital Outlay ~.966,065 4,256,705 7,184,866 S,277,100 475,585 Operating Transfers 3,91~645 4,212,915 Total E1penditures $ 120,345,933 117,202,093 112,278,444 103,203,269 94,160,257 Excess (Deficiency) of Revenues and Transfers over. Expenditures $ (13,774,363) (14,681,440) (14,460,237) 1,147,847 3,277,179 Capi!-31 Leases 3,011,141 3,721,262 5,119,980 3,534,048 Transfer In 17,729,361 14,536,071 13,325,046 Transfer Out (6,129,512) (4,374,956) (1,436,498) Fund Balance at Beginning of Year 19,125,648 19,924,711 17,376,420 12,694,525 9!417,346 Fund Balance at End ofYear $ 19,962,275 19,125,648 0 19,924,711 0 17,376,420 12,694,525 Less: Reserves and Designations® Undeiignated Fund Balance $ 19,962,275 19,125,648 19,924,711 17,376,420 12,694,525 (II The City's financial policies target a General Eund undesiguated balance of at least 20% of General l'und revenues. The undesignated fund balance is at 93.66% of the target established by the City's financial policies. 28 ) I • TABLE 14-MUNICJPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, Chapter 321, T~as 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 credite.d to the General Fund and are not pledged to the payment of the Obligations or other debt of the City. In addition, in January 1995, Lubbock 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. Collectioo for the additional tax commenced in October 1995 with the proceeds from the one-eighth cent sales tax designab:d 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 Lubbock. The City began to receive proceeds of these taxes in October 2004. Collection and enforcement of the City's sales tax is effected through the offi~ of the Complroller of Public Accounts, State of Texas. The Complroller remits the proceeds of the tax lo the City on a monthly basis.after the deduction of a 2% service fee. Historical collections of the City's local Sales and Use Tax are shown below: %of Equivalent of FYE Total Ad Valorem AdValorem Per 30-S~ Colleded(W) Ta:iLevy Tu:Rate Caj!ita\111 2003 $ 29,092,032 §9.11 0.3962 142.09 2004 30,554,632 69.98 0.3857 148.11 2005 41,803,092 lOS.30 0.4825 199.90 2006 45,576,582 109.to 0.4556 215.81 2007 47,780,448 103.72 0.4385 224.99 2008 50,548,865 102.75 0.4093 235.28 Gi Excludes bingo tax mieipts aod awi:cd beverage tax. l\l Based oa popalation estima1cs of Ille City. Effective as of October I, 2006, the sales tax allocation for the City is as follows: · City Sal~ & Use Tax City Sales & Use Tax for Property Tax Relief City Sales & Use Tax for Economic Development Collllty Sales & Use Tax Staie Sales &: Use Tax Total 29 Sales Tax Allocation % 1.000 0.375 0.125 0.500 6.250 8.250 FINANCIAL POLICIES 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 through September 30, 2007. The City will submit the City's 2008 report to GFOA to determine its eligibility for another certificate. Comprehensive Annual Financial Report {CAFID •.. Beginning with the year ended September 30, 2002, the City's CAFR has been presented under the Governmental Acoounting Standard Board ("GASBj Statement No. 34, Basic Financial Stateme11ts. 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 State and local Governments: Omnibus, and GASB Statement No. 38, Certain Financial Note Disclosures. For additional infonnation r~ing 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 Fwyl Balance ... The City's objective is to maintain an unreserved/undesignated fund balance at a minimum of an amount equal to two months budgeted operating expenditures to meet unanticipated contingencies and fluctuations in revenue. The City's General Fund currently has an IUU'eSCl'Vedfundesignated fund balance that is at 93.66% of the target established by the City's financial policies. Water Wastewater. Stom, Water, Solid Waste and Airport Enterprise Fund Balances ... ~t is the policy of the City to maintain appropriable net assets in the Water aod Wastewater funds in an amount equal to 25% of operating,evenues for unforeseen contingencies. The City's goal of appropriable net assets' in the Solid Waste, Airport, and Stonn Water funds is an amount equal to 15% of regular operating revenues. Excluding the Airport, the City currently exceeds its policy on appropriable net assets and unrestricted net assets for its various entetprise funds. According to audited numbers for FY 2008, the target net assets by policy and cw:rent appropriable net assets for the Water, Wastewater, Storm Water, Solid Waste and Airport enterprise funds are as follows: · Entemrise FUDd Tmet Net Assets hI Pollg: Appropriable Net Assets Water $ I 0.6 million $10. 3 million Wastewater . $5.3 million $10.6 milliQn Storm Water SI.O million $7.8 million SolldWaste $2.S million $9.1 million Airport $ 1.0 rnillion $.7 million Electric Entuprise Fund Balance .•. It is the policy of LP&L to maintain unrestricted net assets set by the City Charter. The LP&L Governance Ordinance was amended in November of.2008 to include, among other things, changes to the requirements regarding-the reserve funds LP&L maintains. The LP&L Governance Ordinance n:quires the Electric Utility Board to (i) maintain sufficient operating cash to satisfy all current accounts payable and (ii) maintain a general reserve fund that is equal to the greater of four months gross retail electric revenue (GRR) as determined by taking the average monthly GRR from the previous fucal year or $SO million dollars. This general reserve fund shall be used for operational pwpOses, rate stabilization and for meeting the electric utility demattd of any rapid or unforeseen increase in residential and/or commercial development According to audited numbers for FY 2008, the target net assets by ordinance and current unrestricted net assets for LP&L are as follows: Enterprise Fund LP&L Target Net Assess hI Polig: $50.0 mi)lion Unrestricted Net Assets $48.0 million At the end of FY 2008, LP&L partially funded its general reserve fund by the amount ofS40 million. LP&L has not funded all of the ~e fund established under the LP&L Governance Ordinance, as net revenues have been inadequate for a total funding of this reserve fund. · Enterprise 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 FY 2003). Such self sufficiency is to be obtained through lhe rates, fees and charges of each of these ent.erprise funds. For pw-poses of determining self sufficiency, cost recove,y for each enterprise fund includ~ drrect operating and maintenance expense, as well as indirect cost recovery, in-lieu of uansfers 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 Fwul Balance ... A reasonable debt service fund balance is maintained in order to compensate for unexpected contingencies. 30 ( ( ( ( ( I ' '\ ) Budgetary Proced'fres ••. The City follows these procedures in establishing operating budgets: 1) Prior to August I, the City Manager submits 10 the City Council a proposed operating budget for the ~ year commencing the following October I. The operating budget includes proposed expenditures and the means of financing them. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to October 1 the budget is legally enacted through passage of an ordinance. '4) The City Manager is authorized to ttansfer budgeted amounts between accounts below the department level. Any transfer of ~ 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 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 oo an annual basis. Formal budgetary integration is not employed fur Debt Service funds because effective budgetary control is alternatively achieved through general obligation bond ind~ture 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 1, 1983-88 and 1990--08. · Insurance gnd /wk Mam:gement • . . The City is self-insured for public entity liability and health benefits coverage. Risk management purchases an$ 18 million excess insurance policy for liability claims in excess of SS00,000, per occurrence. Airport liability insurance-and workers• compensation is insured under guaranteed cost policies. The Heallh Benefits are covered by a self insured program with an $20,524,298 cap and a $200,000 individual cap. The. City maintains insurance policies with large deductt'bles for fire and extended property coverage and boiler and machinery-coverage. · · AD Insurance Fund has .been established in the Internal Service Fund to account for insuran~ programs and budgeted transfers are made to this fund based upon estimated payments for claim losses. At September 30, 2008 the total Net Assets. of these insurance fiµlds were as follows: Self-insurance -health $6,963,506. Self-insurance-risk management $4,930,786 The City obtains an actuarial study of its risk management fund (the "Risk Fund") every year. In FY 2005, an actuarial study was CQnducted that considered the types of insurance protection obtained by the City, the loss exposure and loss histozy, and claims being paid or reserved that are uot 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 ("GASS 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 ofSl,688,000 over the recommended funding level Given the risk net assets -balance, th~ City exceeds the minimum GASB 10 requiremenL . ADMINISTRATION Since FY 2004, the City has implemented a number of significant changes in the administration and management of the 9ty•s budgeting-and fiscal needs. Certain of the measures implemented by the City to strengthen this process are described below. Establishment of Audit and Investment Committee ... Through the adoption of a resolution in June 2003, the City Council established an independent Audit and Investment Committee composed of five members. The Audit and Investment Committee ill 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 fiduciaiy responsibility to its citizens. The committee bas tl\e ·power to conduct or authorize investigations into the City's financial performances, internal fiscal controls, exposure and risk assessmenl The committee is appointed by the City Council and informally reports to the City Manager. The establishment of the committee is designed to serve as an additional check on the preparation of the City's financial statements and to avoid weaknesses in lbe City's internal conlrols, including the status and adequacy of infurmation systems and security. The chair of the committee is appointed by the Mayor and the other positions are filled by a vote of the City Council. At least two members of the committee are required to have a background in financial reporting, accounting or auditing, at least one member is required to be a certified public accountant. and at least one member is required to have an extensive background in investments. The current mem~ 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; R.J. Givens, a real estate agent in the City; Kim Turner, the Director of Intemal. Audit at Texas Tech; and John Zwiacher, a member of the Board ~f Directors of LP&L. Mr. Zwiacher is the chair of the committee. Montkly AssessmenY of Revenues and Expenditures .. . Since FY 2006, City management assesses monthly the budgeted expenditures and revenues of the City, and incorporates budget adjustments as necessary to better match e~tures with revenues. Transfers within the various Funds of the City are implemented on an as-needed basis to, take into account changes in 31 revenues projected to be received throughout a fiscal year as well as efficiencies realized in the provision of services to the citizens of the City. Truth-in-Taxation •.. In FY 2008, the City's total tax rate was set at $0.45505 per $100 taxable assessed vaJuation, down from $0.46199 in FY 2007. The City's tax roll increased $894.5 million. or 8.9'%, from FY 2007 to FY 2008. The City Counci~ on June 12, 2003, passed a resolution affirming their support for tru!h-in-taxation. The goal of this resolution is to allow the citizens to be better infonned 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 ~e actual needs of government The 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. In addition, the City Council recognized the need for the City to be autonomous in its abiljty to provide the public safety, health, and quality oflife for its citizens. INVESTMENTS The City invests its inyestable funds in investments authorized by Teiras law, including specifically the Public Funds Investment Act (Chapter 2256, Texas Government Code, and refeITed to herein as the "PFIA j, in accordance with investment policies approved by lhe City Council of the City. Both state law and the City's investment policies are subject to change. LEGAL INVESTMENI'S Under Texas law, the City is authorized to invest in (I) obligations, including lettecs of credit, of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage 'obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or inslrumentality 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 St.ate of Tex.as or the United St.ates 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 lnvestment rating finn not less 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 lnsl.mlnce Fund, or are secured as to principal by obligations de8Cn'bed 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 descn'bed in clause (1), and are placed through a primacy government-securities dealer or a financial institution doing business in the State of Tex.as, (9) bankers' acceptances with the remaining term of 270 days or less, ·if the short-term. obligations of the a~ting bank or its parent ·are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating. agency, (10) commercial paper that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized cRdit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (11) no-load money marlcet mutual funds regulated by the Securities and Exchange Commission that have a dollar weighted average portfolio maturity of 90 days or I~ and include in their investment objectives the maintenance of a stable net asset value of SI 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 ex.elusively in obligations described in the preceding clauses; and are continuously iated 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 lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: ( 1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principa~ (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateraliz.ed 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 opposit~ to the changes in a market index. Govemment{'l 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 (11,) obligations that are described in clauses (I) through (6) of the first paragraph under this suhcaption, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm not less than "A" or its equivalent, or (c) cash invested in obligations that are descn'bed in clauses (1) through (6) and (1.0) through (12) of the first paragraph lll1der this subcaption, or an anthorized investment pool; (ii) securities held as collateral under a loan are pledged to the governmental body, held in tlH; 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 deal.er or a financial i!isti.tution doing business in the State of Texas; and (iv) the ~ent to lend securities has a tenn ofone 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 liq~dity; that address inves1ment diversification, yield, maturity, and the quality and capability of investment IJllUlll8fflleDI; and that incl~ 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 32 ( ( , \. ( ( ( ( ) \ ' be invested oonsistent with a fonnally adopted "Investment Strategy Statement" that specifically addresses each funds' investment Each htvestment Slrategy Statement will describe its objectives concerning: (I) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, ( 4) ma_rketability 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 offi= of the City shall submit an investment report detailing: (I) the invesbnent position of the City; (2) that all investment officers jointly pr:epared and signed the report; (3) the beginning marlcet 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 ea.ch 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 PROVISIO~S Under Texas law, the City is additjonally 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 m disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) requh-e 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 invesbnent activities, and (c) deliver a written statement attesting to these requirements; (4) perfunn an annual audit of the management controls on investments and adherence to the City~s investment policy; (S) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) reslrict reverse repurchase ~ents to not more than 90 days and n:strict 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 th.an 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 (unds; and (8) require local government investment pools to conform to the new discloslll'C, rating, net asset value. yield calculation. and advisory ~ requirements. TABLE 15 • CURRENT INVESTMENTS As of December 31, 2008, the City's investable funds were invested in the following categories: Book Value Estimated Market Valae "1 Par %orTotal % of Total T2'.J!! Value Value Book Value Value Market Value United States Agcucy O~ligations $ 127,47S,0OO 128,414,849 32.34 130,244,628 32.6S United States Treasury Bills IS0,000 lS0,288 ·o.04 150,732 0.04 Money Marlett Mutual Fwids "1 3,373,880 3,373,880 o.ss 3,373,880 0.85 Local Go:vemment Investment Pools<" 26S11481668 26511481668 66.77 26511481668 66.47 $ 39611471549 3971087,686 100.00 39819171908 100.00 II) Madzt pru:es are oblained from Wells Fargo Brolterage. No funds are invested .in mortpge baclred securities. The City holds all investments to maturity which minim.ize;I !he risk of market prioe volalility: (bJ Money Marlcet Funds are held at Wells F,ugo Bank, T~ N.A. <<l Local govemmeat investment pools consist of entities whose in~ objectives are preservation and safety of priuc:ipal, liquidity .and yi.el.d. The pools seek to maintain a $1.00 value per share as ~uired by the Texas Public Funds Investment Act TAXMATIERS TAX EXEMPTION In the opinion of Vinson & Elkins L.LP., 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) the obligations are not "private activity bonds" under the Internal Revenue Code of 1986, as amended, (the "Codej, and as such, interest on each 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 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 ofboad proceeds and the source of repayment of bonds, limitations on the investment of bond proceeds prior to expenditure, a requirement that ·excess arbilrage 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. 1be City has 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 33 the Code that affect the exclusion from gross income of interest on the Obligations for federal income tax pul'J)Oses and, in addition, will rely on representations by the City, the City's Finan<;:ial 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. If the City should fail to comply with tlie oovenants in the Ordinances or if the foregoing representations should be detennined to be inaccurate or incomplete, interest on the Obligations could become includable in gross income from the date of delivery of the Obligations, regardless of the date on which the event causing such includability occulS. The Code also imposes a 20% alternative minimum tax on the "alternative minimwn 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 minimwn taxable income." However, interest on .tax-exempt bonds issued in 2009 and 2010 for new money projects or to refund tax- exempt bonds issued during 2004 through 2008, inclusive, is not includable in the "adjusted current earnings" of a corporation for pul'J)Oses of computing its alternative minimum tax liability. Therefore, interest on the Certificates is not includable in lhe adjusted current earnings of a corporation for pwposes of computing its alternative minimum tax liability, but interest on a portion of the Bonds is so included and, as such, could subject a corporation investing in the Bonds to alternative minimwn tax consequences. · Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequ= resulting from the receipt or accrual of interest on, or acquisition, ownership or disposition of, lhe Obligations. Bond Counsel's opinions ate based on existing law, which is subject to change. Such opinions are further based on Bond Counsel's knowledge of facts as of t}ie date thereof. Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel's attention or to reflect any changes in ~Y law that · may thereafter occur or become effective. Moreover, Bond Counsel's opinions are 11-ot 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 opiniorui. 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 pUl'J)Oses. No assurance can be given regarding whether or • not the Service will commence a:ii audit of the Obligations. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the City 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 . regardless of the ultimate outco~ of the audit. ADDffiONAL FEDERAL INCOME TAX CONSIDERAUONS . · 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, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security. or Railroad Retirement benefits, taxpayers who me.y be deemed to have incurred or continued indebtedness to purchase or carry tax exempt obligations, taxpayers o~g an interest in a FASIT that holds tax-exempt obligations and individuals othCf\\'.ise 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 proijts, including tax exempt interest such as interest on the Obligations. These categories of prospective purchasers should co~lt 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 oftax~empt interest, such as interest on the Obligations, received or accrued during the year. Tax ~ccounting Treatment ofOriginaJ Issae PremillDl The issue price of aJl .or a portion of the Obligations may exceed the stated redemption price payable at maturity of such Obligations. Such Obligations (the "Premium Obligatioos'') are considered for federal income tax pwposes to have "bond premium" equal to the amount of such excess. The basis of a Premium Obligation in the bands 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 pwposes. 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. deduct.ion is allowed for federal income tax pU(p()ses for the reduction in basis resulting from amortizable bond premium. The amount of bond premium on e. Premium Obligation that is amortizahle 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 Obligation. · 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 descnoed above. All owners of Premium Obligations should consult their own tax advisors with respect to the determination fur 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 con.sequences of the pw-chase. ownership, arid sale, ~emption or other disposition of such Premium Obligations. 34 .( ( ( ( ( C ( ( ( ( ' ) ) 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 differen~ 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 lo 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 fiom 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 cootinues to he 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 MATTERS-TAX EXEMPTION" and "TAX MATIERS-ADDffiONAL FEDERAL INCOME TAX CONSEQUENCES - Collateral Tax Consequences" generally applies, and should be considered in connection with the discussion in this portion of the Official Statement. In the event of the redemption, sale or other taxable disposition of such Original · 1ssue Discount Obligations prior to stated maturity, however, the amowit 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 (i) the Underwriters have purchased the Obligations for contemporaneous sale to the public arid (ii) 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 pri()(: (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 inv~n or offers any .comfort that the Original Issue Discount Obliglltioos 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 desmbed below for each sbt~month period ending on the date befure 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 puq,oses of determining the amount of gain or loss recognized by· such owner upon the redemption, sale or other disposition thereof. The amount to he added to basis for each accrual period is equal to (i) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (<ieten:nined on the basis of c:ompowidiog at the close of each accrual period and properly adjusted for the length of the accrual period) less (ii) the amounts payable as cunent interest during such accrual period on such Obligation. The federal income tax consequences of the purchase, ownersbip, and redemption, sale or other disposition of Original Issue Discount Obligations that are not purchased in the initial offering at the initial offetjng price may be determined according to rules ·that .~er from those descnbed 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 INFO~TION RATINGS The Obligations are ratl:d "_" by Moody's Investors Service, Inc., "-" by Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. and "_" by Fitch Ratings. An explanation of the significance of such ratings may he 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 any or all of such rating companies, if in the judgment of any (Ir all 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. LfflGATION The City is involved in various legal proceedings related to alleged personal and property damages, torts, breach of contract and civil rights cases. some of which involve claims against the City that exceed SS00,000. Sl;ilte 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. For purposes of this report, included are only suits in which the City has exposure greater than $50,000. The City's insurance coverage, if available, contains either a $250,000 self-insured retention or a $500,000 self-insured retention depending on the date of the occurrence. · The City has been sued by a con~r who was not awarded the bid on a portion or the storm_ water drainage project The contract.or has alleged violations or 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 35 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 'camer regarding coverage. 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. '.fhe matter bas been dismissed on a plea to the jurisdiction, and the plaintiff has appealed the court's decision. The Court of Appeals reversed the trial court's decision and l'efllanded the case back to the trial court. Plaintiff is not seeking monetary damages except for attorney's fees. The case has been appealed to the Texas Supreme Court. The City Attorney believes there is insurance for any potential damages. The City and a police officer have been sued by an individual on behalf of bimsel( 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 ~ was speeding at the time of the automobile collision. The defendants have asserted that the driver of the vehicle canying the plaintiff's children was negligent in failing to yield the right• of-y.ay to the police officer. The City filed a motion for summary judgment which was granted based on the &ct the plaintiff did _ not file a claim with the City. The Court of Appeals reversed the decision and remanded the case back for trial. The City has appealed the case to the Texas Supreme Court but the Court refused to hear the case. The case is now back in the trial court. The · City Attorney believes there is insurance covering the claims. · · The City and a police officer have been sued by an individual whq was tased during a traffic stop. The plaintiff has alleged violation of his civil rights and violations under the Tort Claims AcL The City Attorney is of the opinion that insurance is available and that there are no significant injuries to the plaintiff. A funner employee sued the City in Octobec 2007 for wrongful termination. While the case is still in the early stages of development, the City does not believe there is a strong likelihood of recovery. The City believes there is insurance coverage in this matter. The City, Garza County, Kent County, and the Texas Attorney General's Office has~ sued by Templeton Mortgage. for certain rights regarding the restrictive easements at Lake Alan Henry as well as other areas such as lh_e use of water. The City has briefed some of the issues for the court and plans to file a Motion for Summary Judgment in February 2009. This is not a damages case. but the court bas authority to grant attorneys fees to ~e prevailing party. The City has been sued by Templeton Mortgage and Mark Brown for damages to his property because of the rising and fillling of water at Lake Alan Henry. He argues that if the restrictive easements are strictly enforced as inteJpreted by the City of Lubbock. he will not be able to build a structure to stop the erosion of his property, thus causing him damage. There is no insurance on the damage claim.. • The City-and Atmos Energy have been sued due to the death of·a motorcyclist who collided with an Atmos truck. A City patrol car driver, while responding to a call, had bis lights on to proceed through trafti.c. As the patrol car was behind the Atmos truck, the patrol car driver "bumped" his siren. The Atmos truck then made a left tum to move out of the patrol car's pa.th. In doing so, the motorcyclist, proceeding in the opposite direction, collided with the Atmos truck. The City believes damages are covered by insurance. The City is being, sued by a lady who·fell at the Civic ,Center. She alleges that the bleachers were defective in that they were unstable, causing her to fall This is a new lawsuit and discovery is beginning. The City believes there is insurance coverage for damages, if any . . The City is being sued by a City employee who, will wodcing for the City, was involved in an accident with an intoxicated automobile driver. Plaintiff bas sued the driver along wilh her insurance carrier, another insurance carrier, and the City pUISuant lo its UIM coverage. Thertl is little doubt that the driver was at fault. However, the driver carried only $20,000 worth of insurance. The City, pursuant to its workers' compensation coverage, has paid for most of the Plaintiffs medical expenses although some of the expenses are in dispute. The City believes there is insurance _coverage in this matter. 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 are of the opinion that the City •s· available sources for payment of any such claims, which include insurance policies and City reserves for self insured claims, are adequate to pay any foreseeable damages (see "FINAN<;IAL POLICIES -Insurance and Risk Management''). On the date of delivery of the Obligatioos to the Underwriters, the City will execute and deliver to the Underwriters a certificate lo 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 of the Obligations or which-would affect the provisions for their payment or security or in any manner question the validity of the Obligations. INVESTIGATIONS RELATING TO CITY'S HEALTH INSURANCE ADMINISTRATOR In 2006, the City hired an outside independent auditing company, Benefit Plan Partners, a California company, (the "Auditor'') to conduct an audit of its contract (the "Administration Contract") with its then current health insurance administrator, American Administrative Group, Inc. ( .. AAGj. The Administration Contract provided for AAG's administration of all City employee claims on the City's self-insured health inslllllilce. The Auditor found numerous possible overcharges and errors by AAG during 36 ( ( ( ( ( ( "'\ the tenn of the Administration Cootra.ct, including overcharges possibly arising from unauthorized commissiol!S taken by M.G and possible payments to MG by phannacies as rebates. The 011tside Auditor-estimated the aforementioned errors and overcharges to be approximately $2 million. The Administration Contract terminated by its own terms in December 2006, and M.O has ceased to administer any claims for the City. The City has hired another lhird party administrator to administer the run-out claims that accrued prior to· December 2006. The City selected Blue Cross Blue Shield to be the City's new health insurance administrator beginning January 2007. · In March 2007, the City filed an application with the State district court to compel M.G to preserve and provide documentation relating to the Administration Contract and claims submitted by City employees during the term of the Administration Contract. It is the intent of the City to utilize such documentation to complete the audit by Benefit Plan Partners of its contract with M.O to detennine whether any further overcharges have occwmi. The lrial court never issued a ruJing as to the City's application and instead referred the matter to arbitration. The City will continue to pursue the do~ents and any damages it may be entitled in the arbitration. M.G also sued the City for' damages to its business in the amol\Jltof$450,000. Arbitration has been scheduled in these matters for October 26, 2009. In an attempt to obtain the necessary documents to conduct the audit, the City attempted to obtain the necessary documents directly ·from Covenant Health System. Covenant was unS\lfe it could release tl:ie documents to the City as it opined Sl,ICh could be a violanon of HIP AA,. The City filed a declaratory judgment action in federal court against Covenant seeking a declaration as to whether Covenants release of these documents violated HIP AA HealthSmart intervened in the lawsuit presumably in an attempt~ prevent the release of the documents. The matter is still pending. No damages are being sought by any party in the suit . . Another lawsuit has been filed by the City's funner third party administrator, American Administrative Group, Inc, (AAG) against Lee Ann Dumbaul.d, City Manager; Scott Snider, Assistant City Manager; Leisa Hutcheson, City Risk Manager; and David Miller, former Mayor. The lawsui_t arises from the City's selecting Blue Cross as its new thiJ;d party administrator instead of MG. The City employees were sued for civil conspiracy, misappropriation, lortious interference with existing and prospective contracts, business disparagement; and defamation. llie City believes that it bas an obligation to defend the suits on behalf of the individuals. · The city is aware. of federal authorities investig;lting matters relating to· AAG and the Administration Conttact, including investigations conducted by the Federal Bureau of Investigation. No subpoenas at this time have been directed at, or issued to, the City in regards to the investigations _involving M.G or the Administration (;ontract. REGISTRATl()N AND QUALIF1CATION 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 · cx:emption provided thelevoder 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 EUGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Tens Government Code) provides that the Obligations are negotiable instruments goven,ied by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance comp,anies, fiduciaries, and trustees., and for the sinking funds of muoicipalities 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 riling of"' A., or its equivalent as to investment quality by a national rating agency. See ''OTHER INFORMATION -RATINGS" herein. In addition, various provisiODS of the Texas Finance Code provide that, subject to a prudent investor standard, the Obligations are legal investments for state banks. savings banks, tnist 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 se(:urity for those deposits to the extent of their market value. No review by the City has been made of the laws in other stales to determine whether the Obligations are legal investments for various institutions in those s~. LEGAL MATI'ERS The delivery of the Obligations is subject to the approval of the Attorney General ofTexas to th!l effect that such Obligations are valid and legally binding obligations of the City payable from sources and in the manner descn"bed herein and in the respective Ordinances and the approving legal opinions of Bond Counsel. The forms of Bond Counsel's opinions are 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 opinions of Bond Counsel will accompany the Obligations deposited with DTC or will be printed oo the definitive Obligations in the event of the discontinuance of the Book-Entry-Only System. Certain legal maUets will be passed upon for the Underwriter.I 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. 37 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 sue~ furn has not assumed any responsibility with respect thereto or undertaken independently lo verify any of the information contained herein except that in its capacity as ijond Counsel, such finn has ~icwed the information appearing in this Official Statement under the captions "THE OBLIGATIONS" (exclusive of the m~rmation under the subcaptions "BOOK-ENTRY-ONLY SYSTEM" and "SOURCES AND USES OF PROCEEDS") and "TAX MATTERS" and under the subcaptions "LEGAL MATTERS," "LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS" and "CONTINUING DISCWSURE OF INFORMATION" (Clf.cept for the subsection "Compliance with Prior Undertakmgs") under the caption "OTHER INFORMATION" and such finn is of the opinion that such descriptions present a fair and accurate summary of the provisions of the laws and instruments therein described -and such infonnation conforms to the Ordinances. 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 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. CONilNUING DISCLOSURE OF INFORMATION In the Ordinances 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 brok«s and others who subscnl,e to receive the information from the vendors. Beginning July 1, 2009, this information will be available free of charge from the Municipal Securities Rulcmaking Board ("MSRB") via the Electronic Municipal Market Access ("EMMA") system at www.emma.msrb.org. Aanual Reports · The City will provide certain updated financial information and operating data to certain information vendors annually. The infonnation to be updated includes all quantitative financial information and opernting data with respect to the City of the general type included in this Official Statement under Tables numbered I through 6 and SA 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 Ex.change Commission ("SEC") and to any state information depository ("SID") that is designated and approved by the State of Texas and by the SEC staff .. In accordance with recent amendments to SEC Rule 15c2-12 (the "Rule"), effective July 1, 2009, any filings the City is required to make-to either the NRMSIRs or the SID will be made to the MSRB .. The City may ·provide updated information 'in full text or may incorporate by reference certain other publicly available documents, as permitted by the Rule. The updated infonnatioo 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 descn'bed 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 Sq>tember 30. Accordingly, it must provide updated information by March 31 in each year, mtless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change, or the MSRB, as applicable. Material Event Noti(fS The City will also provide timely notices of certain events to certain infonnation vendois. The City will provide notice of ai,y 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 int=t: payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws oo debt service reserves reflectmg financial difficulties; ( 4) unscheduled draws on credit enhancements reflecting financial difficulties; ( S) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions; (7) modifications to rights of holders of the Obligations; (8)' early redemption of the Obligations; (9) defeasances; ( I 0) release, substitution, or .sale of property securing repayment of the Obligations; and (11) rating changes. (Neither the Obligations nor the Ordinances make any provision for debt service reserves or liquidity enhancement) In addition, the City will provide timely notice of any failwe by the City to provide infomiatioo, data, or financial statements in accordance with its agreement described above under "Anru.1al Reports." The City will provide each notice described io this paragraph to the SID and to either each NRMSIR or the MSRB until July 1, 2009, aod thereafter only to the MSRB. · . Availability of Information The City has agreed to provide the foregoing infonnation only to NRMSIRs, the MSRB and the SID, as described above. Prior to July I, 2009, the infonnatioo will be available lo 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. 38 r '- C ( ( ( ( ( 'l. Effective July I, 2009, all such infonnation must be filed with the MSRB, rather than NRMSIR.s and any SID. The.MSRB intends to make the infoR11ation available to the public without charge through an internet portal The Municipal Advisory Council of Texas (the "MAC'j has been designated by the State of Texas and approved by the SEC staff as a qualifi~ SID. The address of the MAC is 600 West 8th Street. P.O. Box 2177, Austin, Texas 78768-21.77, and its telephone number is 512/476-6947. Toe MAC has also ooceived SEC approval to operate, and has begim to operate. a "centtal post office" for information filings made by municipal issuers, such as the City. A municipal issuer may submit -its infonnation 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 fur the filing of information relating to the Obligations. Effective July l, 2009,-such infonnation will be filed only with the MSRB. Limitations and Amendments The City has agreed to update infonnation and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition.or prospects or agreed to update any information that is provided, except as described above. The ~ity makes no representation or wananty 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 ~ 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 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, stallls, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter ti? 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 9f the outstaodJng Obligations consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) detennines that the amendtnent 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 continui,ng disclosure agreement if the SEC amends or repeals the applicable provisions of the Rute· Qr a court 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 agreement, it has agreed to include with the next financial information and operating data provided in accordance \\'.ith its agreement described above under "Annual Reports" an explanation, in narrative furm, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. lmplemenution of the MSRB's EMMA System Effective July l, 2009, all filings and notices that the City is ~uircd to make or give in satisfaction of its continuing disclosure undertaking set fonh in the Ordinances will be made solely to the MSRB, and such filings and notices will be made or given electronically in such format as determined by the MSRB. To make such continuing disclosure information available to investors free of charge, the MSRB has established the EMl\1A system, which may be accessed at www.cmma.msrb.org. · Compliance with Prior Undertakings · The City became obligated to file annual reports and financial statements with the SID and each NRMSIR in an offering that took place in l 997. Under continuing disclosure agreements made in connection with its electric 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 stalements were not available until mid-September 2004. Therefore, when the City made. its annual disclosure filing with the SID and NRMSIRs in March 2004, it filed unaudited financial statements in acoordance with its undertaking. Several references in that filing, including in the unaudited MD&A. in notes to those statements and in the statistic:al tables, reported dial for FY 2003, the City's electric utility had failed to meet its rate covenanl Because there was an uncertainty as to an amount by which the rate covenant would. fail to be met; which Willi 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 until September 2004 to make its event filing of non-compliance with its electric revenue debt rate covcnanl FINANCIAL ADVISOR RBC Capital Markets Corporation is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered widi respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. The Financial Advisor has not independently verified any of the data contained herein or conducted a detailed investigation of the affairs of the City to determine the accuracy or completeness of this Official Stat.ement UNDERWRITING The Underwriters have agreed to purchase the Bonds, subject to certain conditions, and have agreed to, pay a purchase price 39 reflecting the par amo~t of the Bonds, pl11S a net original issue premium ( discount) of$_, less an Underwriters' discount of $_, plus accrued interest · The Undetwriters have~ to purchase the Certificates, subject to certain conditions, and have agreed to pay a purchase price reflecting the par amount of the Certificates. plus a net original issue premium (discount) of$ __ _, less an Underwriters' discount of$__, plus accrl!ed interest The Underwriters have reviewed the infonnation in this Official Statement in accordance with, and as part of, their responsibilities to in~tors 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. FORW~LOOKJNG STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City's aclual results could differ materially from those discussed . in such forward-looking statements. The foiw.ud-looking statements included herein are necessarily based on various assumptions and estimates and are inhere~tly .subject to vazj.ous 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, ind11Stry, market, legal, and regulatory crn:umstances and conditions and actions taken or omitted to be takeo by third parties, including customers, suppliers, business partnem and competitors, and legislative, judicial, and other governmental authorities ~ officials. Assumptions related to the foregoing involve judgments with respect to, among olher things, future economic, competitive, and market conditions and future business decisions, all of which are difficuJt or impossible to predict accurately and many of wl}ich 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 infonna~on contained herein have been obtained from the City's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein :will be realized. All of the summaries of the statutes, documents and -resolutions contained in this Official Statement are made subject to ;di of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete statements of such provisipns and reference is made to such documents for further information. Reference is made to original documents in all respects. The Ord~ces 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 Underwri~. ATfEST: s/ City Secretary City of Lubbock, Texas 40 I Mayor City of Lubbock, Texas ( ( C ,. ... ( C C C ( C SCBEDULEI SCHEDULE OF REFUNDED OBLIGATIONS* Maturity Refunded Call Series Date Obligatio11s Date Tax & Waterworks System (Limited Pledge) 02/15/2012 $ 75,000 05/1212009 ... Revenue Certificates of Obligation, Series 1993 02/15/2013 7S,000 02/15/2014 7S,000 $ 225,000 General Obligation Bonds, Series 1993 02/15/2012 s 9!>5,000 0S/1212009 02/15/2013 965,000 02/IS/2014 965,000 s 2,895,000 Tax· & Waterworks System (Limited Pledge) 02/IS/2016 $ S15,000 05/12/2009 Revenue Certificates of Obligation, Series 1998 02/IS/2017 515,000 . 02/15/2018 515,000 $ 1,545,000 'General Obligatio11 Refunding Bonds, Seri~ 1999 02/15/2010 $ 2,960,000 OS/12/2009 02/1S/2011 2,930,000 02/15/2012 1,785,000 02/1 S/2013 · 1,685,000 02/15/2014 1,670,000 s 11,030,000 Tax. & Waterworks System Surplus Revenue 02/15/2010 $ 620,000 OS/12/2009 Refunding Bonds, Series i999 02/15/2011 620,000 02/15/2012 620,000 02/15/2013 620,000 01.IIS/2014 620,000 02/1S/2015 620,90() 02/15/2016 620,000 02/15/2017 620,000 02/1512018 620,000 02/15/2019 620,000 1 s 6,200,000 • Pn:liminary. subject tD cbaage. ) ') APPENDIXA EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTE)MBER 30,.2008 ( ( ,. ( C C C ' ., Office of the City Manager February_13, 2009 P.O. Boxiooo • 1625 13th Street• Lubbock, TX 79457 (806) 775-3002 • Fax: (806) 775-2051 Honorable Mayor, City Council, and Citizens of Lubbock, Tex.as: We are pleased to submit the Comprehensive Annual Financial Report (CAFR) of the City of Lubbock, Texas for the fiscal year ended September 30, 2008. The purpose of the CAFR is to provide ·accurate and meaningful _information concerning the City's financial condition and performance. In addition, independent 11,uditors have verified that the City has fairly presented its financial position, in all material respects. The CAFR satisfies Section 103.001 of the Texas Local Government Code requiring annual audits of all municipalities. Responsibility for both the accuracy of the presented ~ta and the completeness and fairness of the presentation, including all disclosures, rests with the City. We believe the data is accurate in ·a11 material respects and is presented in a manner that fairly sets forth the financial position and results of the City. We also believe all disclosures necessary to enable the reader to gain an understanding of the City's . financial affairs have been included. To provide a reasonable basis for making these representations, City management has established a c,oniprehensive 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 accounting principles generally accepted in the United States of America (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, ~er than absolute assurance that the financial statements will be free from material misstatement. The City's _financial statements have been audited by BKD, LLP, a fum of licensed certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements are free of material misstatement. The independent audit involves: • examining evidence on a test basis that supports the amounts and disclosures in the financial statements, • assessing the accounting principles used and significant estimates made by management, and • ev~uating the overall financial statement presentation. I Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 The independent auditor has concluded that the City's financiai statements are in confonnity with GAAP, are fairly represented, and there is a reasonable basis for providing an unqualified opinion. The independent auditor's report is presented as the first component of the financial section of this report. The independent accountants' audit of the City's financial statements is part of a broader, federally mandated "Single Audit", which is designed ·to meet the special needs of federal granting agencies. These reports are available in the City's separately issued Single Audit Report. The standards governing Single Audit engagements require the independent auditor to report on several facets of the granting agencies' financial processes and controls: • Fair presentation of the financial statements, • Internal controls involving the administration of federal awards, and· • Compliance with legal and grant requirements. GAAP requires management to pro~de a narrative introduction, overview, and analysis to accompany the basic financial statements in the foi:m of a Management Discussion and Analysis (MD&A). This letter of ~mittal is designed to complement the MD&A. The City's MD&A can be found immediately · following the report of the independent accountants. . THE CITY AND ITS ORGANIZATION Description of the Ci!Y The City is a politi~ ~bdivision 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, an4 first adop~ed its Home Rule Charter in 1917. The City operates under a Council/Manager fonn of government with a Gity Council comprised of the Mayor and six council members. The Mayor is elected at-large for a two-year t~ ending in an even-numbered year. Each of the six members of the City ~uncil is elected from a single-member district for a four-year term of office. The tenns of ~ members of the City Council expire· in ea.ch even-nwnbered year. lpe City Manager is the chief -administrative officer for the City. 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 as the City-Council deems appropriate. The 2000 Census population for the City was 199,564; the estimated 2008 population is 214,847. The City covers approximately 119.9 square miles. City Services The City provides a full range of services including public safety (police and fire protection), electric, water and wastewater, stonn water, solid waste, public transportation, health and social services, culture- recieati.on, highways and streets, airport, planning and zoning, and general administrative services. Public Safety: The Police Department serves and protects the public by conducting criminal investigations and enforcing laws govc:rning public health, and order. The department is staffed with 377 sworn officers. The Fire Department serves to minimize loss of life and property from the effects of fires by quickly responding to emergencies. The department operates 15 fire stations and is staffed with 334 sworn firefighters. During 2008 the City improved it insurance standards rating, going from a Class 3 to a Class 2 on a measurement of 10 with Class 1 representing the best public protection. 2 ( t' ... ( ( ( ,. ... C C " . ) " ) '\ Honorable Mayor, City Council, And Citizens of the City of Lubbock, Teias ·February 13, 2009. Electric Utility: Electric service in the City is provided by Lubbock Power and Light (LP&L), Xcel Energy; and South Plains Electric Cooperative. LP&L is the municipal-owned electric company and has 73,619 meters with an average daily consumption of 4,485,835 kWh. LP&L has 14 substations, one substation under construction, more than 1,030 miles of distribution lines, and approximately 85 miles of transmission lines. W~r Utility: To assist with the strategic development of additional water supplies, the City Council established the Lubbock Water Advisory Commission in July 2003, with the primary objective of developing a I 00-year water supply plan. In July of 2007, with the recommendation of the Lubb9ck Water Advisory Commission, the City Council approved the Strategic Water Supply Plan for Lubbock. The City has also worked closely with the Region O Planning Group in preparing the State Water Plan, which includes the City's water supply needs and alternatives. The City has initiated five major water and wastewater studies over the past four years in order to help develop the Strategic Water Supply Plan. The Water Texas study was completed in 2004 an_d laid the foundation for additional work so the City could document both current and future water needs for annual supply and peak day demand. The City has also completed preliminary engineering a.rid final design for improvements to the Southeast Water Reclamation Plant to improve the quality of the City's effluent discharge and prepare for po•ssible future reuse. The City 'obtains. 10 billion gallons of its annual water supply from Canadian River Mimicipal Wa:ter Authority (CRMW A). CRMW A combines surface 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. The City secures the remaining 2 billion gallons of its annual water supply from groundwater in Bailey and Lamb counties. The City provides water service to over 77,000 meters through 1,400 mile.s of distribution lines. In addition to Lubbock, the City also services the communities of Shallowater, Ransom Canyon, Buffalo Springs Lake, Reese Redevelopment Authority, and Lubbock Cooper and Roosevelt school districts. The daily capacity of the City water supply and treatment system is 8 I million gallons per day with an average utilization of33 million gallons per day. In the Bailey County Well Field, the City has 160 active water wells with 83,265 acres of water rights. CRMW A allocates more than l O billion gallons of water to the City annually. Lake Alan Henry, built by the City in 1993, is in development as a future water source. In order for the City to utilize water from Lake Alan Henry, the construction of pump stations, a pipeline, and a new water treatment plant is required. Preliminary engineering for these improvements · was completed in November of 2007 and final design is now underway. The projected construction completion da~ is 2012. CRMW A has secured additional acres of groundwater rights in the Northern Texas Panhandle. The additional groundwater rights have increased the total from 42,000 to 265,999 acres with estimated 15 million acre feet of water within those rights. Conservative projections. using current secured water rights, indicate CRMW A will be able to provide groundwater supplies utilizing existing infrastructure · through the year 2097. Wastewater Utllity: Wastewater collection and treatment is provided within the city limits to residential, . coµunercial, and industrial customers. & of January I, 2008, the collection system consists of996 miles of sanitary sewer lines. The wastewater treabnent plant has a capacity of 31.5 million gallons per day (permitted capacity} and an average utilization of approxi~ely 23 million gallons per day. The peak utilization of the wastewater treabnent plant is 27 million gallons per day. The· City has completed Phase I and begun construction of Phase II of a four phase project t? upgrade the Southeast Water Reclamation 3 Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 Plant. Phase I included upgrades and improvements to the influent lift station. Phase II construction has begun and includes upgrades to Plant 3 for filtration and ultraviolet disinfection and Plant 4 for biological nutrient removal, filtration and ultraviolet disinfection. Phase III will include design and construction improvements to solids and handling, Phase IV will include .upgrades to Plant 3 for biological removal. The improvements will produce a high quality of effluent that will be discharged for potential reuse into the North Fork of the Double Mountain fork of the Brazos River. Storm Water Utility: The City's storm drainage is. primarily conveyed through the City's street system that discharges into more than 115 playa lakes. The subsurface drainage, via stonn sewer pipes with curb inlets, conveys water to two small intermittent str~s (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 separate municipal stonn s~er system (MS4) is made up of approximately 3,000 lane miles of p,av~ and unpaved streets, 555 linear miles of paved and unpaved alleys, 1,188 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 stonn sewers and street cleaning are funded through storm water fees ... During.FY 2007-08, a primary focus of the storm water utility was the completion of the South Lubbock Drainage Project -Phase I Main Trunk Line. This project was substantially completed approximately one year ahead of schedule and has connected six playa lakes. ·Construction for Phase lA of the South Lubbock Project began in FY 2007-08. This project will add five additional playa lakes to the Project, and is scheduled for completion in 2010. Other areas of activity within the Storm Water Utility during FY 2007-08 included the following: • • • • • • Received the new Texas Pollution Discharge Elimination System (TPDES) MS4 permit issued by the Texas Commission on Environmental Quality (TCEQ). Efforts are underway to generate a comprehensive Storm Water Ordinance in order to comply with the provisions set forth in the new MS4permit. Completed and submitted information to the Federal Emergency Management Agency (FEMA) for the Elood Insurance Restudy of two of the playa lake systems. The study is currently awaiting review by FEMA for further action. Began a master plan of the northwest quadrant of the City as well as an update to the Master Drainage Plan for western and southern portions of the City. · Continued evaluating options for flood risk.reduction at Maxey Park Lake . Continued video inspection and cleaning of the downtown area storm sewer pipelines . Continued the design of drainage improvements at Mose Hood and Stumpy Hamilton Parks. Solid Waste Utility: The City provides garbage collection and disposal services to 65,829 residential customers and 2,829 commercial customers. One of the City's two landfill sites is designated as the North Avenue P Landfill and includes a citizen's transfer station. The second site is the West Texas Regional Disposal Facility. The West Texas Regional Disposal Facili~ opened in 1999 and is one of the largest landfills in the State of.Texas. With 1,260 acres, the expected useful life is more than 92 years. Public Transportation: Citibus provides public transportation for the City and is professionally managed by McDonald Transit Associates, Inc. Citibus provides a Fixed Route Service, CitiAccess (paratrnnsit system), evening service, and other special services. CitiAccess is a curb-to-curb service for disabled members of the community. The Citibus evening service is designed to meet the needs of CitiAccess and fixed route passengers who rely on public transit. A majority of evening service passengers work at night -and use the service for transportation to and from their jobs. In addition, Citibus offers route service for 4 ( ( C ( ( ,. I. ,. \. ,, \. ( ) ) . Honorable Mayor, City Council, And Citizens of the City of Lubbock, Tex.as February 13, 2009 Texas Tech University. Finally, Citibus is the contracted agent for 'passenger sales and freight shipping and receiving for Greyhound Lines, Inc. operating out of the Downtown Transfer Plaza. Health and Social Services: The City has a housing and community development program implemented and administered through funding from the Federal Community Development Block Grant Program, · HOME Investment Partnership Program, and Emergency Shelter ~t Program. Through these programs, the City has completed work on over 196 houses and created 3· jobs through an economic development loan program. The City also receives funding from the Texas Department of Housing and Community Affairs. These funds allow the City to offer additional programs to its citizens. Through these programs, 71 homes or 141 individuals received assistance in weatherizing their home to make thejr home more energy effici~t; 1,369 households received utility assistance; 54 individuals graduated from the Self-Sufficiency Program; and, 25,093 residents re<,eived referral assistance through the Information and Referral Hotline. Culture-Recreation: Cultural and recreational services are provided by the City through four libraries, 80 parks, and 57 playgrounds. Other recreational facilities include 4 swimming pools, 58 tennis courts, 48 baseball and softball fields, a cultural arts ~ter, five community centers, and five senior centers. To further.enhance quality of life and to provide support to tourism, the City operates the Memorial Civic Center, City Bank Coliseum, City Bank Auditorium, the Buddy Holly Center, the Wells Fargo Amphitheatre, and the Silent Wings Museum. The City is financially accountable for a legally separate civic services corporation and three economic development corporations, 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. · · Highways and Streets: The City is responsible for the construction and maintenance of 1,058 centerline miles of paved streets. · In 2004 the City Council established the Gateway Streets Program. The program, funded primarily through 40 percent of franchise fees, opens ai:eas of the City through thoroughfare construction. The Gateway Streets Program consists of the Northwest Passage, which includes City thoroughfare streets and Texas Department of Transpoi:tati~n (TxDOT) improvements in Northwest Lubbock, as well as other thoroughfare improvements in other parts of the City. The City streets portion of the Northwest Passage consists of the widening of Erskine . Street from Frankford Avenue to Salem Road, and the construction of Slide Road from 4th Street to Erskine. The construction of a Slide Road overpass at Loop 289, is being funded by the City, and will be constructed by TxDOT as part of a larger Loop 289 improvement project. Other major street improvement projects approved by the City Council for design include: .Indiana Avenue from 103111 Stre.et to FM 1585; Quaker Avenue from 981h Street to FM 1585; 114111 Street from Quaker Avenue to Slide Road; Frankford Avenue from 9g11i Street to 114• ·Street; 98111 Street from Frankford Avenue to Milwaukee Avenue; and Milwaukee Avenue from 94di Street to FM 1585. The construction of981b. Street from Slide Road to Frankford Avenue was completed during FY 2007-08. Lubbock Preston Smith International Airport: A key component of Lubbock's transporn,.tion system is the Lubbock Preston Smith lnternational Airport, located seven miles north of the City's central business district on 3,000 acres of land adjacent to Interstate 27. The Airport is operated as a department of the 5 Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February.13, 2009 City, with the guidance of an advisory board, and includes a 220,000 square foot passenger terminal building. The Airport has two commercial service runways, 11,500 and 8,000 feet in length. The Airport's third general aviation runway is 2,869 feet in length. Air traffic control services include a 24- hour Federal Aviation Administration control tower and a full range of instrument approaches. The Airport is served by four major passenger ajrlines and two major cargo airlines having over 80 commercial flights per day. Annual Budget Process The annuai operating budget serves as·the foundation for the City's financial planning and.control. All City departments submit requests for appropriation to the City Manager each year. The City Manager uses these requests as the starting point for developing_ the proposed Operating Budget" and Capital Program. The City Manager then presents the proposed Operating Budget and Capital Program to the City Council for review, as required by City Charter. The City Council is required to hold a public hearing on the proposed Operating Budget and Capital Program and to adopt it ·no later than September 30; the close of the City's fiscal year. The adopted Operating Budget and Capital Program appropriates funding at-the departmental level in the General Fund, at the fund level in the other funds, and at the . project level in the Capital Program. The General Fund Operating Budget is adopted on a basis other than GAAP, with the main difference being that capital lease proceeds and -related capital outlay are not budgeted. Budgetary control is maintained at the department level. Management may make administrative transfers and increases or decreases between accounts below the department level without Council approval. However, any transfer of funds between departments, the legal level of control, or higher level shall be presented to Cowicil for approval by ordinance before such funds can be transferred between departments or expended. All annual operating appropriations lapse at the end of the fiscal year. Capital Project appropriations do not lapse at fiscal year end but remain in effect until the project is completed and closed .. ECONOMIC CONDITION AND OUTLOOK The information presented in the financial statements is perhaps best widerstood when it .is considered within the context of the City's economy. The following information is provided to highlight a broad range of economic forces that support the City's operations. Local Economy Lubbock has a stable economy with historically slow and steady growth, which has continued throughout FY 2007-08. Lubbock's agriculturally based economy has diversified over the past 20 years, which has minimized the effects of business cycles experienced by individual sectors. The South Plains is one of the most productive agricultural areas in the United States. In 2008, 17.4 percent of the nation's cotton crop and 46.3 percent of the state's cotton crop were produced by farmers in the Southern High Plains District Southern High Plains production was 2.36 million bales, down 44.7 percent from record highs in 2006 and 2007. The decrease in production was due to weather conditions (United States Department of Agriculture, National Agriculture Statistics Service, Texas County Data - Crops, retrieved from http://www.nass.usda.gov/QuickStats/PullData_US_CNTY Jsp). The City has strong manufacturing, wholesale and retail trade, services, and government sectors. Manufacturing includes a diverse group of employers who support approximately 5,200 workers. A 6 ( I' ... c ( C C t ('" ... C r ... ) '\ ) ) '\ Honorable Mayor, City Council, · And Citizens of the City of Lubbock. Texas February 13, 2009 central location and access to transportation have contributed to Lubbock's development as a regional warehousing and distribution center. Lubbock serves as the major retail trade center and health care provider for a region of more than a half million people. A breakdown of the percent of employment base by industry category has been provided, giving a snapshot of the industry base of the City. Percent Employmeat Base by Industry Category Transportation 4.T'/4 Manufacturing . 4.0% Natunl Rcsowccs, Mining & Conswclion 4.8% Waiebousiag & Ulillies .3.1¼ 20.6% Financial Activities $.6% Prufessional &. Business Senices 3.6% Educational & Health Services IS.2% Leisure and Hospitality Other Service, 12.4% 4.1% (Texas Workforce Commission., MSA Employment and Unemployment Data, retrieved from http://www.tracer2.com.) Two major components of the local economy are education and health care services. Lubbock is hom~ to three universities and one community college: Tex~ Tech Univeisity, Lubbock Christian University, Wayland Baptist University-Lubbock Center, and South Plains College. Total enrollment for all higher education institutions in Lubbock for fall 2008 is 46,032. This is a 1.1 percent increase over the enrollment for fall of 2007, The availability of graduates in the City is an added advantage to local industries as the universities and colleges continue to produce a ready source of qualified labor. (City of Lubbock Finance Department, Secondary and Higher Education Enrollments 2000-2008. Fall 2008) The health care and social services sector is also a vital component of the Lubbock economy, with more than 19,435 employees and payroll of more than $712 million (U.S. Census Bureau, 2006 County Business P~tterns, retrieved from http:llcenstats.census.govlcgi-b.inlcbpnaiclcbpsecl.pl (2-year delay in publication)). Lubbock Economic Index The Lubbock Economic Index is designed to represent the general condition of the Lubbock economy by tracking local economic growth rates. The base year for the index was 1996, when the index was set to 100. The economic index for September 2008 is ·132.8, which represents an increase of 1.2 percent from September 2007. The Lubbock Economic Index rose to record levels in FY 2007-08, with September marking the fourth consecutive monthly increase in the Index. Local and regional spending by households and businesses remains the brighi spot in the economy, along with continued strength in the construction sector and gains in home building. 7 Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 Lubbock Economic Index Eleven Year Trend by Month 100+---...------,.....----,-----,-----,--------.---~--"T-----.----' Jan-98 Jan-99 Jan-00 Jan-01 Ian-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 (Ingham Economic Rq,orting, September 2008, Lubbock Economic Index and Consumer Price Index, Amarillo, Texas: Karr Ingham.) Building Permit Valuations The construction sector continues to make a strong contribution to the economy with the value of all building permits issued through September 2008 up 14.9 percent over the same period in 2007. The $412.3 million in building permits issued thr01,1gh the first nine months of 2008 are near_ the record setting . levels that have been seen during the last few years 500 450 400 :! 350 :!! 300 = · :2 250 200 150 100 $181.7 .... 1998 $231.3 _-,,,Ir 1999 Total Building Permit Valuations (Calendar Year) $417.J $408.7 $452.5 .... .... £__,_-- ....... ./ . $278.l ~o.l _...., ~ -~ 2000 2001 2002 2003 2004 200S 8 5453.S $454.7 ..... .... -- 2006 2007 ( ( C ,. ... ( C C C ( ' ' ) \ Honorable Mayor, City Council, And Citizens of the.City of Lubbock, Texas February 13, 2009 The total number of new residential permits through September 2008 increased 12.9 percent over 2007 levels, and valuation amounts were $207.1 million, or 27.9 percent, higher than 2007 vah1ations (City of Lubbock Building Inspection Department, September 2008, Bui/dinglnspection Statistical Report). The average home sale price, through September 2008, has increased 10.3 percent over the September 2007 average home sale price (Texas A&M University Real Estate Center, Lubbock Residential Housjng Activity Report, retrieved from http://r_ecenter.tamu.edu/data/datahs.hbnl). Sales Tax Collections Sales tax collections for September 2008 were 5.8 percent higher than the September 2007 level (FY 2008 an~ FY 2007 City of Lubbock Comprehensive Annual Financial Report, Statement of Activities). Tourism/Visitor Related Indicators Lodging tax receipts increased from $2.9 million in September 2007 to $3.0 million in September 2008, a 3.9 percent increase. Airline boardings at Lubbock Preston Smith International Airport decreased 0.6 percent from FY 2006-07 to FY 2007-08 (Ingham Economic Reporting, September 2008, Lubbock Economic Index and Consumer Price Index. Amarillo, Texas: Karr Ingham). Employment The total non-agricultural employment estimate for September 2008 was 128,600. This is a 0.2 percent improvement over September 2007. There were 300 more people employed in. September 2008 than in September 2007. The unemployment rate for the Lubbock Metropolitan Statistical Area in September, 2008 was 4.0 percent, the 4111 lowest in the State of Texas. Historically, Lubbock has had a low rate of unemployment that is' one to two percent below the national rate and about one percent below the state rate (Te~ Workforce Commission, LMCI Economic Profiles,. retrieved from http://www.tracer2.com/admin/uploadedpublications/1724_1ubbockmsa.pdf). Unemployment Rates -Lubbock MSA 1999 2000 lGOt 2002 2003 2004 2005 2006 2007 2008 Note: The methodology for calculating the unemployment rate was changed in 2005 and the last four years were. recalculated based on the new method. The Lubbock MSA also changed in 2005 to include both Lubbock and Crosby Counties. · 9 Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 Economic Development 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 three cents of the property tax. allocation. In October 2004, the Lubbock Economic Development Alliance (LEDA), an economic development sales tax corporation, assumed responsibility for economic development. LEDA program strategies include business ret~tion, business recruitment, workforce development, foreign trade zone, and the bioscience initiative. LEDA is ~11l(ied by a 1/8 cent economic develQpment sales tax. Total allocated tax revenues for Market Lubbock, Inc. and LEDA for FY 2007--08 were $7,381,355. During the last year, through their business retention, expansion, and attraction programs, LEDA assisted 12 companies in the creation of 589 new jobs with an annual payroll of $17.9 million and capital investment of $34.8 million. The City's Business Development Department works closely with LEDA to provide assistance in their economic development projects. Busines~ Development is responsible for tracking and maintaining economic and demographic .information for the City, assisting with city-related business issues, the enterprise zone and tax abatement programs, two Tax Increment Financing Reinvestment Zones and all Public Improvement Districts. Development Initiatives Overt.on Park: Overton Park, a former blighted area called North Overton, is a 300-acre revitalization project adjacent to the downtown area of Lubbock. Overton Park has developed much faster than anticipated. By the end of 2008, three student oriented apartment complexes were completed along with Toe Centre, an apartment complex built over upscale retail. Other projects completed were City Bank, Starbucks, Super Wal-Mart, a retail center adjacent to Wal-Mart, and the first phase of Main Street Condominiums. The second phase of the ·condominiums and nine single family houses were nearing completion. There were several projects under construction at the end of 2008. An hotel/conference center project began construction in September 2007 with an estimated completion date of July 2009. Toe Suites, an apartment complex, is under construction and should be completed in late 2009. A retail center adjacent to the hotel/conference center began construction in early 2008 and should be completed in 2009. The Cottages, a large multi-family project, began construction in 2008 and is expected to be completed by August 2009. Toe Overton Park project, as a whole, is running three years ahead of schedule with much of the construction now expected to be complete by the end of 2010. The City of Lubbock, Lubbock County, Lubbock Hospital District and High Plains Underground Water District have participated in this public/private project with the creation or· a Tax Increment Financing Reinvestment Zone that has funded ·the replacement of the 80-year old infrastructure. · According to the latest Project and Finance Plan for the North Overton Tax Increment Financing Reinvestment Zone (TIF), there are planned expenditures of approximately $41.7. million for public infrastructure improvements, which will result in an increase of taxable value of approximately $530 million over the TIF's 30-year life. The 2008 appraised value of the North Overton TIF was $209.9 million, which is a $183 million increase over the 2002 base year value. North and East Lubbock Community Development Corporation: While Lubbock grew during the last 50 years, the areas of north and east Lubbock experienced an out-migration of people. From 1960 to 2000, the area's population decreased by 47 percent. In response to the deterioration of north and east Lubbock, the City created the North and East Lubbock Community Development Corporation 10 < .. " ( ,. \, C ( ) '\ . ' ) .., \ Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas FebIUary 13, 2009 (NgLCDC) in 2004 to oversee and promote development in the area. The City also committed to provide funding to the NELCDC for four years. King's Dominion, a new single-family housing project, consists of fifteen homes with a sixteenth ·presently under construction. The NELCDC has also placed twenty- three families into scattered site develo~ents, and bas an additional two homes under construction. At the end of 2008, the NELCDC has origjnated $1,678,245 in mortgages for King's Dominion aµd an additional $1,914,301 for scattered site developments. Downtown Redevelopment:-The City of Lubbock Central Business District (CBD) ~as developed over the years with traditional office, retail, and governmental agency uses. As for 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. On Th,cem,ber 3, 2001, in an effort to reverse that trend and to stimulate further develepment downtown, the City established the CBD Tax Increment Finance Reinves'1Jlent Zone (TIF). Also in 2005, the City Council created the Downtown Redevlopment Commission (DRC) who retained a consultant to draft a Revitaliz.ation Action Plan for the downtown area. During the planning process, the DRC conducted one-on-one interviews with business and property owners in the downtown area and held three. public meetings· to receive input from citizens on their vision for downtown: The new Revitalization Action Plan (Plan) for downtown Lubbock was completed in FY 2007-08. The Plan has been approved by the TIF Board of Directors and the City Council. The City issued an RFQ in FY 2007-08 for a Master Developer to implement the Plan. On December 4, ;2008, the City Council contracted with McDougal Land Company, LT. to provide Consulting/Master Deyeloper services to implement the Plan; · Other Residential/Commercial Development.: Growth in commercial and residential construction occurred at a healthy rate throughout the past five years. Construction on several new residential and commercial developments has continued. The Cottages, a multi-family project in Overton Parle, will have an expected $50 million investment and should be completed by August 2009. Vintage Township, a residential/commercial development ~II have an expected $350 million investment. Development along Milwaukee Avenue is expected to generate a total investment in commercial/residential development of approximately $844 million in the next five to ten years. · FINANCIAL INFORMATION Long-term financial planning The City uses ten-year rate models for long-range planning in all enterprise funds as a basis for budget discussion and policy decision-making. These models are based on current projects and policies and are driven by the idea that the rate should be annually adjusted to reflect the service needs of the citizens and long term capital needs. Because of this philosophy, the rates in the models are annually trimmed to leave as little excess as possible, after allowing for financially sound net asset reserves, as established by City Council Policy. The models, in association with the City's Five-Year Forecast, provide anticipated trends given current policies.- 11 . Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 Cash management policies and practices <;ash is invested in U.S. Agencies, money market muhlal funds, and state investment pools. The maturities of the investments range from l day to 3 years, with an average maturity of approximately 11.25 months. The average yield on investments for FY 2008 was 4.21 percent for the City's operating funds and 3,21 percent for the City's bond funds. Investment income is enhanced with increases in the fair value of investments. Increases 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 chai:i,ges in the fair value of investments that the City intends to hold to maturity. Risk management During 2007, the City continued its use of third party workers' compensation coverage on an initial dollar coverage basis. The City is primarily self-insured for various liability coverages with an a~achment point of $500,000 per occurrence and $10,000,000 aggregate annual coverage. During 2007, the City's Health Benefits Fund conti~ued its self-insured status for medical and dental. The current stop loss coverage provides for $175,000 individual attachment and a $18,181,945 aggregate attachment, point The City also carried transplant insurance on an initial dollar basis. 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, through the Texas Municipal Retirement System, 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 ensure that the plan will be able to fully meet its obligations to retired employees. As a matter of policy, the City fully funds each year's annual required contribution to the pension p.lan as determined by the actuary. As of December 31, 2007, the City has funded 61.4 percent of the present value of the projected benefits earned by emplQyees. _The remaining unfunded amount is being systematically funded over 30 years as p!!I't 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 Fire Pension Fund (LFPF), which is administered by the Board of Trustees. The City contributes an amount that is determined by a formula and is 19.97 percent of firefighters pay. · The City provides 34 percent to 73 percent of post retirement health and 8 percent to 38 percent of dental care benefits for retirees 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 for its comprehensive annual financial report for the fiscal year ended September 30, 2007. This is the fourth consecutive year that the City has received this award. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable 12 ( r .. e. r .. ( C \ , .. . ' ) ' ) ) ) \ Honorable Mayor, City Council, . And Citizens of the City of Lubbock, Texas February 13, 2009 and efficiently organized comprehensive annual financial report whose contents confonn to program standards. Such reports must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one-year only. We believe our current report continu~ to confonn to (he 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 sta(!ofthe Finance Division. We would particularly like to thank the S~nior Accountants and Accountants for their countless hours of work on this financial report. We ex.press our appreciation to all members of the departments who assisted with and contributed to the preparation of this report. Credit is also given to the City: Council and the Audit Committee for their interest and suppo.n in planning and conducting the operations ofth.e City in a responsible and progressive manner. Respectfully submitted, ~MMJ Lee Ann Dumbauld City Manager A~ ~*rclmm . Chief Financial Officer 13 ~~Ml~ Pamela Moon, CPA Director of Accounting ( < C < i e ( $::::l 0 ( • """4 !d N ...... a bl) ;....i 0 I . C ~ 0 0 ...0 ~ -~ ~ t+-t 0 0 • """4 C u 14 ( ) ). ) ) ) 1 Certificate of Achievement for Excellence in Financial Reporting Presented to City of Lubbock Texas For its ,;ompreh~sive Annu~ Financial Report for the fiscal Year Ended September 30, 2007 A Certificate of Achievement for Excellence in Financial Reporlmg is presented by the Go~ Finance Officers Association of the United States and Canada to government units and public employee retirement system. whose co!]lpffilCDSive lbmual f"inancial i:epom (CAFRs) achieve the highest standards in government account.mg and financial reporting. President ~/.~ Executive Director 15 Comprehensive Annual Fina ncial Report for the Fiscal Year Ended September 30, 2008 16 r .. ) ) ) .,. .., ., ) PO B::i, 3667 l l(tl~ Ro.<. ~R 7720.J-:,lv.,! 5'!1,:,7;! l•j.1(> F~ . .:.~!.)· 11:! l:?'=O www.bkd.com Independent Accountants' Report on Financial Statements and Supplementary Information The Honorable Mayor and Members of the City Council City ofluhbock, Texas · We have-audited the accompanying financial stalcmcnts· ofd1c govcrp:mcotal activities, the business-type activities, the ag'gr$tc .discrttcly pTCSCn.tcd compon~~ unit$. ~ major fund. and the aggregate remaining Jund information of the City of Lubbock, Texas (the City). as of and for the year ended .Sep~er 3~, '2QO&, which collectively comprise-the City'~ 1;,!l,Sic .financi!'l statements as listed in the ·tabl~ of ccintents. These financial statements arc the J."e$P9ns~ility of the City's management. Our ,resix,n~il>ili(y.is to ~ _opinions on these fi11lllld~t siaiemenu ·based. on our audit. W c did not audit :the finantj\ihtat~ts of Civic. Lubbock, lnc., 'Market Lubboi;:l;:&qnQmic Development Corporation d/bl~ Miu:\c.c.t LµbbQ:ck. In~. and i~bbock ~omi9 .Dev.c:IQ~~ Alµ~ .component units of•~he City •. which statc:r.nc:nts reflect total assets-and program·reve:mies Q($30;iJ 9~969 and SI 6, 769.680. respccl1vely. ,afl!:I rq:,,cscµtJ3,b°/4 ~4 ~9.5% ofih.c aggregate•djs~cJy ~~cd~q1p0ncnt units' total assets and •prograin.Te:V¢im~ •. ic$pectjvely, at S'eptem:b~ 30. 2008, arid fo,.rthe year lheri ended. The financial ~1atemehlS Ofll1ese eniities ·we1·e audited by olher . .accPWJlmitS Whp:.~.reports thereon have ~en furnished · ,t~ us. arid ou,t·tipmi4n, insofar· as it refat~ tp tlie·anj~UJ1($ foc;lud¢ l'or such ertlitfos, is based solely t,lti the r~ 9ftbe oJher.ll(:COWJlauts, . · We Cdiid1.Jcted :0W' ,a1,1dit in accorqanc~ with auditii!g stan.~ gero.:talty accepted jn the United States of America and the •standards applicaJ:,le to finallcial audits C9Dtai®d ~ Government Auditing Standards, issµed by the. Comptroller General of the Unrted Sta~. Those s~ require lhat we plat1 and perform the audit to .obtain reasonable assurance abou.1 wl1ether the f'uianciid ~e:ments are free .of mctte, ia1 riusslatement The finam::1al statements of the. cofDJ)C)"tient units Ci-v1c lllbbock.. h,c.~ Marke~ Lubbock ·Eci>nothic f.Jevelopm~t Corporation d/bta Market Lu'bbuck. lnc., Lubbock. Economic Dev~lopment Alliance at\(i th.e.ntaJo,r f\md Wesl Texas Munici~ Pow.er Agency, were llOt 81,ldited in accorcfarice ')Villi rG(JVetnmeni Audiring Stt1111fards. An audit includes examµ,.ing,. on a test basrs, evidence supporting the ampt¢ts and disclosures in the·financial stat~ems. An audit also incla.des'assessing lhe atcounling ptinclples used atid significant estimltes made by .management. ilS well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other accountants provide a .reasorutble basis for our opinions .. In our opinion, based on our audit and th~ reports of the ~ther act:9un~ts, the. financial statements referred to.above present fairly. in all materi~l resJ>ects, the respective financial position of lhe gnv~mental -ac.tivities. the business-type activities, the aggregate discretely presented comronenl units, each major fun~. and the aggregate remaining fund infonnatioµ of the City of Lubbock, Texas, as of September 30, 200!S, and the respective changes in 'financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. experience BKD 17 The Honorable Mayor and Members of the City Council City of Lubbock, Texas Page2 As discussed in Note l.l., in 2008, the City changed its method of accounting for postemployment benefits · other than pensions and its method of disclosures of pension infonnation by implementing Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions and Statement No. 50, Pensions Disclosures. In accordance with Government Auditing Standards, we have also issued our report dated February 13, 2009, on our consideration of the City's internal control ov.er financial reporting and our tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements and Q_ther matters. The purpose of that report is to descnoe the scope 'of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That_ report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The accompanying management's discussion and analysis, budgetary information and schedul~ of funding progress related to pension plans and other postemployment benefits as liste.d in the table of contents are not a required part of the basic financial statements but are supplementary information required by the Gov~ental 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 suppl~mentary information. However, we did not audit the infonnation.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, as listed in the table of contents is presented for purposes of addi_tional 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 statemen~ and, accordingly, we express no opinion on it. · February 13, 2009 18 C C C C ( C ' ) ) ). ) ) City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 The Management Discussion and Analysis (MD&A) provides a narrative overview and analysis of the financial actiyities of the City of Lubbock for the fiscal year ended September 30, 2008. Readers of the financial statements are encouraged to consider the information included in the transmittal letter and in the other sections of the Comprehensive Annual Financial Report (CAFR) e.g., combining statements, and the statistical section in conjunction with the MD&A. Financial Highlights The following financial highlights summarize the City's financial position and operations as presented in more detail in the Basic Financial Statements (BFS). • The City's assets exceeded its liabilities at September 30, 2008, by $666.5 million (net assets), of which $136.4 million (unrestricted net assets) may be used to meet the City's ongoing obligations to citizens and creditors. • The City's total net assets increased by $26.5 ~illion as a result of operations during the fiscal year. • The ending unreserved fund balance for the General Fund was $19 .8 million, or 18.6% of total General Fund revenues~ an increase of $0.8 million from the prior year. • The City's governmental fun$ reported combined ending fund balances of $130.5 ·million, of· which $19.8 million is available for spending at the City's discretion • The City's enterprise funds reported combined ending net assets of $517.3 million, of whicQ. $96.3 million is available for spending at the City's discretion. • During FY 2008, the City issued $169.8 million in debt for capital projects. Overview of the Financial Statements Basic Financial Statements. The MD&A is intended to serve as an introduction to the ·city's BFS. The BFS are comprised of three components: 1) Government-Wide Financial Statements (GWFS), 2) Fund Financial Statements (FFS), and 3) Notes to Basic Financial Statements (Notes). The CAFR contains other supplementary information in addition to the BFS. Government-Wule Financial Statements. The GWFS, shown on pages 35-37 of the CAFR, contain the Statement of Net Assets and the Statement of Activities, described below: The Statement of Net Assets presents informa,tion on 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 of accounting. Over time, increases or decreases in net assets serve as a useful indicator of whether the financial position of the City is improving or deteri.orating. The Statement of Activities presents a comparis·on between direct expenses and program revenues for each of the City's functions or programs. Direct expel\SCS 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. Program revenues also include grants and contributions · restricted to meeting the operational or capital requirements of a particular activity. Revenues not directly 19 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 related to a specific activity are presented as general revenues. The comparison of direct expenses with revenues from activities identifies th~ extent to which each activity is self-financing, or alternatively, draws from any City generated general revenues. . . Governmental activities (activities principally supported by taxes and intergovernmental revenues) of the City include administrative services and general government, community services, cultural and recreation, economic and business development, fire, health, police, other public safety, and streets and traffic. Business-type activities (activities intended to recover all of their costs through user fees and charges) of the City include Electric, Water, Wastewater, Solid Waste, Storm Water, Transit, Airport, Civic Centers, and Cemetery. Electric includes Lubbock Power and Light (LP&L) and West Texas Municipal Power Agency (WTMP A). All changes in net assets are reported as soon as the underlying event 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 Units. The G~S include the City (the •'primary government"), and four legally separate entities. (the "component units") for which the City is financially accountable. The component units consist of: Market Lubbock Economic Development Corporation, d/b/a Market Lubbock, Inc., Lubbock ~nomic Development Alliance, Civic Lubbock, Inc., and Vintage Township Public Facilities Corporation. The component units provide economic development services, arts and cultural activities, and public improvement financing for the Ctty. Financial information for the component units is reported separately in the GWFS to differentiate them from the City's financial infor,mation. No component unit is considered a major component unit. · Fund Financial Statements. Afimd is defined as a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of ca,rrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The principal role of funds in the 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-relate<flegal requirements. The focus of the FFS is on major funds. Major funds are those that meet minimum criteria (a percentage of assets, liabilities, revenue, or expenditures/expenses of fund category and of the governmental and enterprise funds combined), or those that the City chooses to report as major funds given_ their qualitative significance. Non-major funds are aggregated and shown in• a single colwnn in the appropriate financial statements. Combining schedules of nonmajor funds are il;lcluded in the CAFR following the RSI. All funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental FFS. Governmental funds are used to accou,nt for essentially the same functions reported as governmental activities in the GWFS. However, unlike the GWFS, governmental FFS focus on near- term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the City's fiscal year. Such information is useful in evaluating the City's near-term financing requirements. Because the focus of governmental funds is narrower than that of the GWFS (modified accrual versus accrual basis of accounting, and current financial resources versus economic resources), it is useful to compare the information presented for governmental funds with similar information presented for 20 < ( ,. - .. ... ( C C ,. ... C ' ) '\ .., ) ) ' ' ) City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 governmental activities in the GWFS. By doing so, the reader may better understand the long-term impact of 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 27 individual govmunental 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 and the Governmental Capital Projects Fund, both of which are considered to be major funds. The governmental FFS can be found on pages 3841 of the CAFR. Data for the other 25 governmental funds are combined into a single, aggregated presentation • The City adopts a budget annually for the General Fund and all other funds. In the RSI section, a budgetary comparison statement for the General Fund has been provided to demonstrate compliance with the budget. Proprietary FFS. The City maintains two different types of proprietary funds. Enterprise fends are used to report the same functions presented as. business-type activities in the GWFS. Enteq,rise FFS provide the same type of information as the GWFS, .only in more detail. The City uses enteq,rise funds to account for LP&L, Water, Wastewater, WTMPA., Storm Water, Transit, Solid Waste, Airport, Civic Centers, and Cemetery activities, of which the first five activities .are considered to be major funds by the City and are presented separately. the latter five activities are considered non-major funds 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 vehicle service operations and fueling', central warehouse and printing services, information technology services, risk management, health benefits, and investment pool funds. The services provided by the internal seivice funds benefit both governmental and business-type activities, and accordingly, they have been included within governmental activities and ~usiness-type activities, as appropriate, in the GWFS. All internal service funds are combined into a single aggregated presentation in the proprietary FPS. Reconciliations are provided for the proprietary fund statement of net assets and the proprietary fund statement of revenues, expenses, and changes in fund net assets for comparison between enteq,rise funds and business- type activities. The proprietary FPS can be found on pages 42~53 of the CAFR. Notes to Basic Financial Statements. The notes provide additional information that is essential to a full. understanding of the data provided in the GWFS and FFS. The notes can be found on pages 55-94 of the CAFR . Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain Required Supplementary Information (RSI) concerning the City's progress in funding its obligation to provide pension and post retirement benefits to its employees and retirees. The General Fund budgetary comparison demonstrating the legal level of budgetary control can also be found as part of RSI. RSI can be found on pages 95-99 of the CAFR. 21 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 Government-Wide Financial Analysis As noted earlier, net assets serve as a useful indicator of the City's financial position. Assets exceeded liabilities by $666.5 million (net assets) at the close of the fiscal year, compared to assets exceeding liabilities by $640.0 million (net assets) at the end of the prior fiscal year. As a result of operations, total net assets increased by $26.5 million during the period. City of Lubbock Net Assets For the Year Ended September 30 (in thousands) Governmental Business-type Activities Activities Total 2008 2007 2008 2007 2008 2007 Current and other assets $ 161,688 $ 14t205 $ 314,01 I $ 220,133 $ 475,69·9. $ 361,338 Capital assets 237,203 2131679 787,522 738,066 1,0241725 9511745 Total assets 3981891 354,884 1,101,533 9581199 1,500,424 11313,083 . Current liabilities · 41,496 38,303 66,249 56,939 107,745 95,242 Noncuqent liabilities 2171462 174,853 5081748 403,003 726,210 577,856 Total liabilities 2581958 2131156 574,997 4592942 8331955 6731098 Net assets: Invested in capital assets, net of related debt 96,275 102,925 400,552 384,516 496,827 487,441 Restricted 11,956 5,128 21,275 17,730 33,231 22,858 Unrestricted 3i,701 331676 1041709 96,0H 136,410 . 1291687 Total net assets $ 139,932 $ 141,729 $ 5261536 $ 498,257 $ 6661468 $ 639,986 Approximately 74.5% of the City's net assets reflect its inves1ment in capital assets, e.g,, land, buildings, infrastructure, machinery, and equipment, less any related outstanding debt used to acquire those assets. The City uses capital assets to provide services to citizens; consequently, those assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources since the capital assets cannot be used to liquidate the liabilities. The City has restricted net assets totaling 5.0% of total net assets,-which represent resources subject to external restrictions on how they may be used. Such resources include bond funds restricted to be spent for specified capital projects, debt service reserves restricted by bond covenants, passenger facility charges restricted for airport improvements, and grant programs. restricted for specific pwposes. The remaining balance of unrestricted net assets of $136.4 million may be used to.meet the City's ongoing obligations. The City reports positive balances in all three categories of net assets for the City as a whole, and for its separate governmental activities and business-type activities. 22 ( t .. ,. \, ( ( ( C C C ( .. ) City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 Qty of Lubbock Changes in Net Asset$ For die Year Ended September JO (in thousands) Business- Goveromenbll type '\ Activities Activities Totals Revenues: 2008 :Z007 . 2008 2007 2008 2007 Program Revenues: Charges tor services $ 12,677 $ 10,636 $ 260,494 $ 243,835 $ 273,171 $ 254,471 Operating grants and contnouti.om 9,232 10,323 5,133 5,813 14,365 16,136 · Capital wants and contributions 15,922 4,322 5,953 8,792 21,875 13,114 General Revenues: Property taxes 50,330 47,0(17 50,330 47,007 Sales taxes 50.549 47,780 50,549 47,180. Oth«taxes 5,370 4,909 5,370 4,909 Franchise fees 12,978 12,378 12,978 12,378 Investment eamin~ 5,505 6,118 . 8,284 7,146 13,789 13,264 Other 4,811 3,669 31&:)7 2z004 8,618 9,673 "I Total revenues 167,374 147,142 283,671 271,590 451,045 418,732 ·E:rpemes: Administratiw services'gmcral govt. 12,372 12,155 12,372 12,155 Carunmi.ty services 6,874 6,951 6,874 6,951 Cultural and rccreatioo 16,660 19,671 16,660 I9,67i Economic and rusines. develq,ment 12,378 11,620 12,378 11,620 Fire 31,789 27,338 31,789 27,338 Health 6,142 5,899 6,142 5,899 Pdice 46,850 43,022 46,850 · 43,022 Other public safety .6,678 5,8tr6 6,678 5,886 Streds and traffic 16,357 26,870 16,357 26,870 Interest oo long-term debt 8,367 6,968 8,367 6,968 Electric 153,108 145,832 153,108 145,832 ) Warer 38,424 32,125 38,424 32,125 Wastewatec . 19,001 18,048 · 19,001 18,048 Solid Waste 16,261 14,454 16,261 14,454 StamWatec 7,677 3,933 7,677 3,933 Transit 11,338 11,004 11,338 11,004 Aupa:t 9,465 8,524 9,465 8,524 Civic CeDters 4,099 4,099 Cem:tery 7].2 619 722 619 Total expenses 164,467 1(,6,380 260,095 234,539 424,562 400,919 Oiange in net assets befcre transfers 2,907 (19,238) 23,576 37,051 26,483 17,813 Transfas (4,703) 10,572 4,703 (10,572) Change in net assets (1,796) (8,6(,6) 28,279 26,479 26,483 17,813 Net assets -beginning of year Net assets -end of year $ 141,729 ['J9:9JJ $ 150z395 141,7~ s 4981257 m,3Jli ! 47kHs ~ ' ~ 639,986 li(i(i~ s ~173 ,98li Changes in Net Assets. Details of the above summarized information can be found on pages 36-37 of theCAFR. 23 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 Governmental activities. The City's governmental activities experienced a decrease in net assets of $1.8 million, compared to a decrease of $8.7 million during the prior fiscal year. Key elements of the operational decrease include: • Revenues increased approximately $20.3 million, from $147 .1 million to $167.4 million. o Capital grants and contributions accounted for the largest increase, rising frpm $4.3 million in FY 2007 to $15.9 million in FY 2008. In FY 2008, private foundations and private developers granted money ·and donated property in the amount of $7 .5 million for a conference center. In FY 2008, private developers donated $6.5 million of streets, alley ways, and parks; compared to $3.6 million in the prior year with most of the developer increase due to donations for the Vintage Township development. o Property taxes increased from $47.0 million in FY 2007 to $50.3 million in FY 2008. The property tax rate·was $0.45505 per $100 of assessed value in FY 2008, compared to $0.46199 per $100 of assessed value in FY 2007. While the tax rate decreased, taxable assessed values increased from $10.4 billion in FY 2007 to $11.3 billion in FY 2008. o Sales tax revenue totaled $50.5 million, an increase of $2.8 million from the prior year, reflecting Lubbock's growing economy. o Charges for services increased $2. l million to $ 12. 7 million, primarily due to revenue recognized from prepaid paving jobs at the completion of street projects. • Total expenses decreased $1.9 million from the prior year, from $166.4 million to $164.5 million. o Fire expenses totaled $31.8 million, a $4.5 million increase from the prior year. In FY 2008, the City Council authorized 21 new fire fighter positions, 2 new division chief positions, 2 new fire inspector positions, and a 5-year firefighter compensation plan to achieve salaries that rank in the top 10 of fire departments in the State. Vehicle costs and computer expenses also increased accordingly with the increase in personnel. o Police expenses totaled $46.9 million, a $3 .8 million increase from the prior year with most of the increase occurring in salaries and benefits. Police has the largest number of employees in governmental activities and received the largest allocation ofpost retirement benefit expense due to the adoption of GASB Statement No. 45. In FY 2008, the City implemented a shift differential program and. certification pay for police officers. In addition, higher fuel costs and increased . vehicle maintenance expenses occurred. o Streets and traffic expenses totaled $16.4 million, a decrease of $10.5 million from the prior year, primarily due to a one-time $12.5 million contribution in FY 2007 to the Texas Department of Transportation (TxDOT), which provided funding for the Marsha Sharp Freeway project. Exclusiv~ of the TxDOT transaction, costs in streets increased for planned use of prepaid paving funds and additional depreciation on infrastructure added by donated and dedicated assets. o Cultural and recreation expense totaled $16.7 million, a decrease of $3.0 million from the prior year as a result of moving the Civic Centers from a governmental activity in FY 2007 to a business-type activity in FY 2008. o Interest expense totaled $8.4 million, an increase of $1.4 million from the prior year as a result of additional bonded indebtedness and capital leases. • Transfers to or from business-type activities during the fiscal year reduced governmental activities' net assets $4.7 million. During the prior fiscal year, the transfers increased governmental activities' net assets by $10.6 million. o $13.8 million of one-time transfers from governmental activities to business-type activities consisting of capital assets, net of long-term liabilities, were made in FY 2008. Most of the 24 (. C ( ( C ( C ( ) ) ... , ) ) ) ) City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 transfers were related to moving the Civic Center, Auditorium, and Coliseum. from the governmental funds to the Civic Centers Enterprise Fund. o Transfers from business-type activities included payments in lieu of taxes, franchise fees, and indirect costs of operations for centralized services such as payroll and purchasing to governmental activities. The most notable increase in payments was related to a contribution from LP&L totaling $1.0 million for a payment in lieu of franchise fees. · · · o Transfers from governmental activities to business-type activities increased due to General Fund support of the newly created Civic Centers Enterprise Fund and increased contributions to Transit due to a decline in Federal funding. The following graph depicts the expenses and program revenues generated through the City's various governmental activities. :a-l'I • ; 0 ,;! a ,:::. -a = 0 a < SS0,000 $45,000 $40,000· SJS,000 $30,000 $25,000 S20,00G SIS,000 Sl0,000 SS.000 so Expenses and Program Revenues .:. Governmental Activities 25 liExpense •Program revenue City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 The following graph reflects the source of revenues and the percentage each source represents of the total. Revenues by Source -Governmental Activities Charges for Services · 7.5% Grants & Contributions----: 15.0% Investment Earnings 3.3% Franchise Fees 7.8% 3.3% M iscellaoeous 2.9% Sales Taxes 30.2% Property Taxes 30.0% Business-type activities. The City's business-type activities experienced an increase in net assets of $28.3 million during ,FY 2008, compared to an increase of $26.5 million during the prior fiscal year. Key elements of the increase from operations include: · • Revenues for business-type activities totaled $283.7 million in FY 2008, an increase of$12.t" million from the prior year. o Charges for services for business-type activities totaled $260.5 million in FY 2008, an increase of $16. 7 million from the prior year. o Electric operations, which include LP&L and WTMPA, accounted for $7.2 million of the increase in charges for services. Charges for services in the electric operations consist principally of the retail sale of electricity to residential, commercial, and government customers, and off- system sales to wholesale power customers. LP&L charges a base rate for .electric service, which remained consistent between FY 2007 and FY 2008, plus a fuel cost'adjustment rate for electric service, which increased in FY 2008. Offsetting the increase in charges for services was a $14.5 million decline in revenues related to gas sales to a third party wholesaler. LP&L's gas supplier 26 ( ( (' .. ( C C ( C ( ) ). ' ) ) ) ) City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 exhausted its-supply during the prior fiscal year, and as a result, sales to the third party wholesaler were eliminated. o Water and Wastewater operations accounted for $8.3 million of the increase in charges for services. Water rates increased l l % in March 2007 and again in March 2008 when the City, in an attempt to encourage water conservation, implemented a tiered water rate structure with higher rates charged for peak demand and excess usage. The rate increase was necessary ta pay debt · service on aging infrastructure and water supply projects. The City continues to implement mandatory water conservation efforts as part of its drought management plan due to low levels of water in area reservoirs. Water levels continues to fluctuate from year to year depending on the amount of annual rainfall, while the new water rate structure has moderated peak water use and revenue in summer months. Water revenue was $42.5 million in FY 2008, an increase of $7.1 million over the prior year. Wastewater revenue was $21.1 million, an increase of $1.2 million over the prior year. Wastewater had a mid-year rate increase and processed additional water as water usage increased. · o Operating grants, capital grants, and contrjbuti.ons continued to be a significant revenue source for business-type activities during FY 2008, producing $11.1 million in revenue. This is a $3.5 million decrease from $14.6 million during the prior year. The decrease is primarily due to fewer developer donated assets to the Water and Wastewater Funds. • Expenses for business-type activities were $260.1 million in FY 2008, an increase of $25.6 million. o Collection expense decreased in the LP&L Fund by $4.1 million, with an offsetting increase in Water, Wastewater, Solid Waste, and Storm Water due to a change in recording interfund activity for billing and other services provided to other utility funds by the LP&L. In FY 2008, o~ting expenses of LP&L were reduced by charges t9 other utility funds, and operating expenses of the other utility funds were increased. In FY 2007, the other utility funds transferred funds to the LP&L Fund to pay for services provided by the LP&L Fund. -. · o Electric operating expenses were $153.1 million, an increase of$7.3 million from the prior year. Fuel purchases, after eliminating interfund activity between LP&L and WTMP A, decreased from $123.3 million in FY 2007 to $121.0 million in FY 2008. In FY 2007, surplus fuel for sale to a third party wholesaler totaled $12.8 million; however, there were no purchases of sUiplus fuel in FY 2008 as supplies were exhausted. The average cost of fuel for use in the production of electrical power and for sale to government users increased in FY 2008. o Expenses in Water and Wastewater Funds were $38.4 million and $19.0 million, respectively. Water expenses increased by $6.3 million and Wastewater expenses increased by $1.0 million over the prior fiscal year. Three staff positions were added and additional supplies and contractors were needed in order to address frequent pipeline breaks. Interest expense in the funds increased by $2.0 million as more debt has been incurred during the last few years to address future water supply needs and infrastructure and facility improvements. o Expenses in Storm Water were $7.7 million, an increase of $3.8 million from the prior year. In FY 2008, five staff members were added to comply with the MS4 permit and video inspections of storm sewers were performed. The Storm Water Fund continued to issue debt to pay for capital improvements· to the storm water system, resulting in an increase of interest expense of $1.0 million. o Civic Centers, with expenses of $4.1 million, was recorded as a business-type activity beginning in FY 2008. 27 City of Lubboclc, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 • Transfers from governmental activities to business-type activities increased net assets by $4.7 million during the fiscal year compared to a decrease of $10.6 million in the prior year. The reasons for the changes were discussed under governmental activities. The following graph reflects the revenue sources generated by the business-type activities. As noted earlier, the activities include LP&L and WI'MPA (Electric), Water, Wastewater, Stonn Water, Solid Waste, Transit, Airport, Civic Centers, and Cemetery. Revenues by Source -Business-type Activities Cliarges for Services 91.9% Financial Analysis of the City's Funds Miscellaneous 1.3% Grants and . Contributions 3.9% Investment earnings 29% Governmental funds. The focus of'the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance serves as a useful measure of the City's resources available for spending at the end of the fiscal year. At the end of the year, the City's governmental funds reported combined ending fund balances of$130.5 million, compared to $110.2 million at the end of the prior fiscal year. The increase is primarily the result of debt issued for North Overton Tax Increment Finance Reinvestment Zone Capital Projects and Gate.way Streets Capital Projects, which exceeded capital outlays by $22.9 million. Unreserved fund balance, which is available for spending at the City's discretion, amounts to $19.8 million, or 15.2% of the ending governmental fund balance. This is compared to $19.0 million, or 17.2% of ending governmental fund balance, at the end of the prior fiscal year. There is $21.7 million, or 16.7% of ending governmental fund baiance, reported in unreserved fund balance designated in special revenue funds. 28 ( ( ( ( C C C C C ) ) "I ) ) City of Lubbock, Texas Management's Discussion ~nd Analysis For the Year Ended September 30, 2008 This is compared to $24.9 million, or 22.6% of ending governmental fund balance, at the end of the prior fiscal year. The reason for the reduction in unreserved fund balance was primarily due to a transfer of · $1.8 million from the Information Technology Fund and $0.3 million from the Print Shop and Warehouse fund to the General Fund that represented funds in excess of policy levels. The remainder of the fund balance is reserved to indicate it has already been committed to pay debt service, use in construction of approved capital projects, or is restricted for other purposes. The General Fund is the chief operating fund of the City. At the end of the fiscal year, unreserved fund balance in the General Fund was $19.8 million, compared to $19.0 million in the previous fiscal year, representing an increase of approximately $0.8 ,million. Total fund balance (reserved and unreserved) was $20.0 million at the end of the fiscal year, compared to $19.l million at the end of the prior fiscal year. As a measure of the General Fund's liquidity, it is useful to compare both unreserved fund balance and total fund balance to total fund revenues. Unreserved fund balance represented 18.6% of total General Fund revenues compared to 18.S% of total General Fund revenue in the prior year. Total fund balance was 18.7% of total General Fund revenues in FY 2008 and FY 2007. Proprietary funds. The City's proprietary fund statements provide essentially the same type of information found in the GWfS, but in more detail. Unrestricted net assets of the major proprietary funds -at the end of September 30 are shown next witJi amounts presented in thousands: 2008 2007 · LP&L $ 62,540 $ 51;020 Water Fund 2,764 9,663 Wastewater Fund 5,829 8,270 WTMPA 1,883 1,514 Storm Water 6,318 9,158 $ 79,334 $ 79,625 The LP&L Fund increased unrestricted net assets by $11.5 million, compared to an increase of $18.9 million during the prior year. The increase is due to the results of operations and the decision of the City Council to reduce the charge for payments in lieu of franchise fees to increase cash reserves. At the end of the fiscal year, the Water Fund unrestricted net assets decreased $6.9 million, compared to a decrease of $1.2 million from the prior year. The FY 2008 adopted budget included a $6.4 million utilization of net assets in an effort to smooth rate increases over a five-year period. Net assets were utilized and acted as a rate stabilizer, while future rates were planned in a manner that ultimately leaves the fund with sufficient net assets in accordance with policy levels. At the end of the fiscal year, the Wastewater Fund unrestricted net assets decreas'ed $2.4 million compared to a $1.3 million decrease during the prior year. In FY 2008, the City budgeted $1.5 million utilization of net assets to smooth rate increases over a five-year period. Net assets were utilized and acted as a rate stabilizer, while future rates were planned in a manner that ultimately leaves the· fund with sufficient net assets in accordance with policy levels. 29 City of Lubbock, Texas Management's Discussion and A:nalysis For the Year Ended September 30, 2008 The WTMPA Fund had an increase in unrestricted net assets of$0.4 million, compared to an increase in unrestricted nets assets of $0.2 million during the prior fiscal year. The Storm Water Fund experienced a decrease in unrestricted net assets of $2.8 million during the fiscal year, compared to a $0.9 million decrease in the prior fiscal year. In FY 2008, the City budgeted $1.5 million utilization of net assets. Unrestricted net assets are in excess of policy levels, and .will continue to act as a rate stabilizer as debt service expenditures exceed revenues. A rate increase is planned for FY 2009-10 when the unrestricted net assets reach policy levels. General Fund Budgetary Highlights The final amended budget expenditures and transfers out increased ·by $84,463 over the origihal budget. The main reason for the increase was related to encumbrances that had lapsed in the prior yeax: that were appropriated in FY 2008. Revenues and transfers in the General Fund were under budget by $.2 million. The General Fund ended the fiscal year with expenditures and transfers out of $.4 million more than budgeted. The City budgets on a basis other than Generally Accepted Accounting Principles (GAAP), with the main difference being that capital lease proceeds and related capital outlay are not budgeted. Capital Assets and Debt Administration Capital assets. The City's investment in capital assets for its governmental and business-type activities at September 30, 2008, totaled $1.024 7 billion net of accumulated depreciation, a $48.3 million increase over the prior fiscal year's balance of $951. 7 million net _of accumulated depreciation. The investment in capital assets includes land, buildings and improvements, equipment, construction in progress, and infrastructure. · City ofL·ubbock Capital Assets (Net of Accumulated Depreciation) September 30 (in thousands) Business- Governmental type Activities Activities Totals 2008 2007 2008 2007 2008 2007 Land $ 9,034' $ 9,056 $ 33,l I 2 $ 31,963 $ 42,146 $ 41,019 Buildings 23,141 32,029 68,150 62,459 91,291 94,488 Improvements other than buildings 120,298 111,293 477,402 476,269 597,700 587,562 Machinery and equipment 17,915 20,541 81,185 76,859 99,100 97,400 Construction in progress 661816 401760 1271673 901516 l94z489 1311276 Total $ 237,204 s 213,679 $ 787,522 s 738,066 $ 1,024,726 $ 951,745 Major capital asset projects during_ the fiscal year included the following: • The City spent $12.4 million on a youth sports complex, and 2 new Little League complexes. • The City spent $9.0 million on projects that qi.eluded street improvements, drainage, curbs, gutters, and other improvements. 30 ( ( \ C ,. '" C C C C C ) , ...., )_ ') i. City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 • The North Overton Tax Increment Finance reinvestment zone (TIF) spent $7.9 million on the construction of a conference center. • The City began construction on the Southeast Water Reclamation Plant. Phase II of the project includes the design and construction of improvements associated to upgrade Plant 4 for biological nutrient removal, filtration, and lN disinfection. Expenditures during the fiscal year totaled $7.3 million. · • LP&L spent $6.9 minion during FY 2008 for projects such as transformers, overhead and underground electric lines, and substations. · • The South Central and South Lubbock Drainage projects spent $6.9 million on the first and second phase of the drainage system . • The Airport continued improvements on the parking lot and runway and started improvements to the terminal building. Expenditures during the fiscal year amounted to $6.8 million. At the end of the fiscal year, the City had construction commitments of $215.3 million. Construction on the Southeast Water Reclamation Plant will continue as the City strives to make wastewater facility improvements. The Water Treatment Plant upgrade, Lake Alan Henry Reservoir construction, Canadian River Municipal Water Authority (CRMW A) projects, and new water lines throughout the City will talce a large share of financial resources while the City _implements plans for current and future water supplies. Additional infonnati.on about the City's capital assets can be found on pages 70-72 of the CAFR. Long-term debt. A swnmary ofth~ City's total outstanding debt follows: General obligation bonds $ Revenue bonds Total s City of Lubb oek Outstanding Debt General Obligation and Revenue Bonds September 30 (in thousand$} Business- Governmental type Activities Activities 2008 2007 2008 199,054 s 160,388 s 457,126 s 199,054 s 160,388 $ 501431 j(YT ,557 s 2007 352,487 S41208 406,695 Totals 2008 s 656,180 s s 501431 706,611 S . 2007 S 12,875 54j08 567(83 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 maximwn tax rate for all City purposes to $2.50 per $100 of assessed valuation. The Attorney General of the State of Texas permits an allocation of $1.50 of the $2.50 maximum tax rate for general obligation bonds debt service. The current interest and sinking fund tax rate per $100 of assessed valuation is $0.07125, which is significantly below the maximum allowable tax rate. As of September 30, i008, the City's total outs~ding debt has increased by $139.5 million, or 24.6% over the prior fiscal year. The increase in outstanding debt is attributed to the issuance of $169.8 million in debt, offset by the payment of scheduled debt service totaling $30.3 million. 31 City of Lubbock, Texas_ Management's Discussion and Analysis For the Year Ended September 30, 2008 During the fiscal year, the City issued the fol.lowing bonds and certificates: • $11.8 -million Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 were issued to fund construction of a Hotel Conference Center. • $52.9 million of Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2008 were issued for improvements and extensions to the City's wastewater system. • $2.0 million of General Obligation Bonds, Series 2008 were issued for various public purposes including street improvements. • $80.5 million of Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2008 were issued to finance various pu"blic improvements including cultural and arts, fire, airport, .:... parlc, solid waste, drainage, street, electrical, tax increment financing reinvesbnent zone, water, and wastewater. • $22.6 million of Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2008 were issued to finance design and engineering of the Lake Alan Henry Pipeline. All bonds and certificates issued during the fiscal year were insured ill an effort to provide a lower cost of interest expense. It is the City's policy to evaluate each bond issue to determine whether it is economically prudent to purchase bond insurance. In April 2008, the City received from Standard_ & Poor's a rating upgrade from "AA" to "AA+". Concurrently, the ratings of "Aa3" and "AA" were confirmed by Moody's Investors Service and Fitch Ratings, Inc., respectively. All three rating agencies characterize the City's rating outlook as stable. During FY 2008, there were no changes in the ratings for LP&L. The current ratings and corresponding outlooks for LP&L are as follows: Standard & Poor's, BBB (positive outlook) Fitch Ratings, BBB+ (stable outlook) Moody's Investor's Service, A3 (stable outlook) Additional information about the City's long-term debt can be found on pages 80-85 of the CAFR. Economic Factors and the Next Fiscal Year's Budget and Rates • In September 2008, the unemployment rate for the Lubbock area was 4.0%. This is a 0.2% improvement over September of the previous year, and compares favorably to the state's unemployment rate of 5.2% and the national rate of 6.0% for September 2008. • Taxable retail sales figures reflected a 5.8% increase in FY zoos; compared to FY 2007. • The number of building pennits for new construction decreased from 1,709 during FY 2007 to 1,660 in FY 2008, a 2.9% decline. Building permit values for new construction increased from $404.0 million in FY 2007 to $431.9 million in FY 2008, ora 6.9% increase. 32 C C C C C ,. .... C ) ) ) ) ) ) City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 • Total occupancy in local hotels and motels improved, and the local occupancy tax totaled nearly $4.2 million, a 10.5% increase over the prior fiscal year. The above factors were considered in preparing the City's budget for FY 2009. . . • In FY 2009, the City continues to focus on public safety, transportation infrastructure, and the develoP.ment of future water supplies. The FY 2009 budget focuses on maintaining core services and, at the same time, decreasing the tax rate by $0.00865 per $100 valuation. • The City adopted a tax rate of $0.44640 in FY 2009. General Fund revenue from property tax is lower than the prior fiscal year by $498,956 due to a shift of$0.0l975 of the tax rate from General Fund operation and maintenance to debt service and the $0.00865 reduction in the rate to offset increasing property valuations. · · • Sales tax estimates for FY 2009 call for no growth due to the all-time high cost of fuel, natural gas, and corresponding utility rates. Though Lubbock's economy is solid, a conservative approach is financially prudent at this time .. Total General Fund revenue projections are $0.89 million over FY · 2008 amounts. • A resumption of payment in lieu of franchise fees for LP&L will result in ·a $5.0 million dollar transfer to the City. The allocation of the payment will be $3.7 million to the General Fund and $1.3 million to the Gateway Fund; • The City's fuel costs are expected to increase $2.7 million in FY 2009. The increase totals $1.1 million in the General Fund, $0.9 million in the Solid Waste Fund, $0.5 million in the Water and' Wastewater Funds, and $0.2 million in all other funds. Fuel estimates•are based on the City's fuel price on June 2, 2008, of $3.83 per gallon for unleaded and $4.25 per gallon for diesel. · • In FY 2009, rate increases in Water, Wastewater, and Storm Water are planned. The increases are mainly related to increased debt service requirements, pay-as-yon-go funding, ·and fuel and utility costs. There is no rate increase for Solid Waste, as fund net assets are utilized to offset the increase for FY 2009. The City will continue to implement the strategic water pla.ti focusing on future water supply needs, additional infrastructure to transport water, and facilities maintenance. · · • hi September 2008, LP&L implemented a 2.0% surcharge to recover. costs associated with our provider's new power plant. LP&L also anticipates a rate increase to occur in March 2009. Requests for Information The fmancial report is designed to provide a general overview of the City of Lubbock's finaµces. Questions concerning any of the information provided in tht report or requests for additional financial information should be addressed to the Chief Financial Officer, City of Lubbock, P.O: Box 2000, Lubbock, Texas, 79457. 33 Comprehensive Annual Financial Report for the Fiscal Year Ended Septen1ber 30, 2008 34 C ) City of Lubbock, Texas Statement of Net Assets September 30, 2008 ) Primary CovenlmeRt Governmental Basluas-type Component Activities Aetivities Total Units ASSETS Cash m1 cub eqmvalenls s 375,S46 s 2,092,480 s 2,468,026 $ S,0S9,563 bMsancll1s 47,092,702 92.621,58.S 139,714,287 100,408 )' Receivables (na of allowance rm-uncollecbl>les) 11,573,206 31,880,880 43,454,086 1,762,016 Internal balan« (99,681) 99,681 DIie &-o=octM:rgovemrneois 4,480,115 4,480,115 DucfiomOlbcn 2,509,088 1,351,244 3,860,332 illwmories 205,454 3,342,792 3,548,246 126,9S0 rn-in pmperty 208,213 208,213 .... Pn:paidcxpenses 882,298 60,261 942,559 106,308 Rcsbicmlassets: C8$h and msh eq..mlenls 2,562,465 b!'lesalleDls 88,668,725 179,596,58 I 268,265,306 Rt,cdvables 178,571 154,648 333,219 S,000,000 Mortgage NCZiwblls 5,612,742 5,612,742 ) Capital asselS (net of t.ec,lll!Ulated deprecialion): NOD-dcpnlciable 7S,849,966 160,78S,542 236,635,508 17,430,818 Dcpreeiable 161,353,736 626,736,918 788,090,654 252.,020 Deferred diarg,es 21811,110 2,811,110 TatalaSICIS 3981890,681 1,101,533,722 1,500,4241403 3~4001548 UABILfilES At.co.mis payable 10,088,992 20,394,740 30,483,732 1,148,361 A4'cnlecl liabililics 6,.382,994 3,279,222 9,662,216 320,139 Aa:rui:d idl,crest_pa)'Bble 1,432,711 3,950,697 5,383,408 OJS!mna'deposiss 3,655,481 3,655,481 Unr.amcd -2,m,640 81,621 2,854,261 5,264,793 NCIIIClllllall Jiabllilie$ doe wilhin one y,:ar: Compemated ._ 6,806,236 2,838.245 9,644,481 A=ued illsllraace claim5 1,599.299 l,420,757 3,020,056 Colllrllasandleues~ 2,934,588 4,164,910 7,099,498 2,539,123 Bonds payal,k 9,47_8,486 26,463,446 35,941,932 ~ 1iabililies due in IROl'e lhan one )QC' Compensaledabsmccs 11,117,607 2,769,439 13,887,046 -. Post emplO)'lll8III bc:nefils 2,813,759 1,541,761 4,355,520 Atlcnm1 lnsnrance daims 156,407 1,424,922 1,581,329 Reballble llbiuagie 570,747 571,274 1,142,021 LandfiU ~ ml. ~kmltc ure 3,770,566 3,770,566 C<JDlrads and leases pa)'Bble 9,287,918 14,417,486 ~.705,404 6,724,275 ..., eo,,cbpa)'lll,II: 193,515,885 484125:i,822 677?68.707 3,394,000 Toed !u"lities 258,958,269 5_74,997 289 833,9551658 19z2901691 NETASSETS Invested in capital usea, net of re laud debt 96,274,734 400,552,048 496,826,782 8,696,339 Rl:s1l'ictccl fGr: Passenger lidlity~ 2,318,723 2,318,723 Debtsc:mee 4,676,551 18,956,448 23,632,999 Gnatpropm 7,156,393 7,156,393 Primary go,,--....-,1 100,000 Non-apc:uclal)le -perpelUal care 123,462 123,462 Unresllicuid 31,701,272 104,709,114 1361410,386 4,2131518 ToCalnetassels 139,932,412 526,536,333 666,468,745 1310091857 See ~mpanying Notes to Basic F'mancial Stakmellts ) 35 C City of Lubbock, Texas Statement of Activities For the Year Ended September 30, 2008 Program Revenues ( Operating Capital Cbarges for Gnats a.ad Grants and EJ:f!!DHS Services Contributions Contributions Primary government Governmental activities: Administrative services and general government $ 12,372,316 $ 35,766 $ $ 200,289 ( Community serviocs 6,874,065 5,990,797 Cultural and recreation 16,660,378 1,589,515 692,460 1,534,716 Economic and business development 12,378,335 423,747 7,504,530 .Fire 31,789,223 14,420 126,534 Health 6,141,386 805,601 1,667,263 24,360 r Police 46,849,826 208,621 279,984 1,136,221 .. Other public safety 6,677,751 7,307,182 601,245 101.497 Streets and traffic 16,357,025 2,291,900 5,293,806 Interest on long-term debt 8,3671167 Total governmental activities 164,467,472 12,676,752 9,2311749 15,921,953 Business-type activities: ( Electtic 153,108,050 161,329,847 Water 38,424,263 42,527,445 198,400 1,073,098 Wastewater 19,000,488 21,095,745 1,030,539 Solid Waste 16,260,630 1~,754,438. Storm Water 7,676,456 6,633,255 ( Tran.sit 11,338,463 4,306,204 3,231,060 Airport 9,465,392 6,793,829 1,703,632 3,849,200 Civic Ccntm 4,098,873 717,494 Cemetery 722,393 335,884 Total· business-type activities 260,095,008. 260,494,141 511332092 5,952,837' Total primary government $ 424.562,480 S 273,170,893 $ 14,364,841 $ 21!874,790 r I,. Compoa.ent llllitll: Civic Lubbock, lnc. $ 2,491,456 $ 2,018,527 $ 512,975 ·s 30,000 Market Lubbock, Inc. 5,837,232 59,746 6,817,752 Luboo.k Economic Development Alliance 4,293,560 6,102,185 1,228,495 Vintage Township Public Facilities Corporation 1,302,311 78,993 C Tolal component units $ 13,924,559 $ 2,078,273 $ 13,432,912 $ 1,3371488 General revenues: Property taxes Sales taxes Occupancy taxes Other taxes Franchise taxes ( Investment earnings Miscellaneous Transfers, net Tolal general revenues and transfers Change in net assets ,. Net assets -beginning "' Net assets -ending See ate:0111panying Notes to Basic Financial Statements 36 ,. I,. Net (Expenses) RC'vcllues and Changes In Net Assets Primary Government Govemmentll Busiaess-type Activities Activities Total Component Ullits s (12,136,261) $ S (12,136,261) $ (883,268) (883,268) {12,843,687) (12,843,687) (4,450,058) (4,450,058) (31,648,269} (31,648,269) (3,644,162) (3,644,162) (45,225,000) (45,225,000) 1,332,173 1,332,173 (8,771,319) (8,771,319) {8,3671161) (8,3671161) (126,637,018) (126,637,018) 8,221,797 8,221,797 5,374,680 5,374,680 3,125,796 3,125,796 493,808 493,808 "\ (1,043,201) (1,043,201) (3,801,199) (3,801,199) 2,881,269 2,881,269 (3,381,379) (3,381,379) (386,509l {3861S09} 11.485.062 11,485,062 {126,637,018) 11,485,062 (115,151,956) 70,046 1,040,266 3,037,120 ) !},223,318~ 2,924,114 50,330,322 50,330,322 50,548,865 50,548,865 4,190,376 4,190,376 1,180,332 1,180,332 12,977,686 12,977,686 5,505,386 8,284,058 13,789,444 28,213 4,810,900 3,806,864 8,617,764 (1,396,145) {4,703,317} 4,703,317 124,840,550 16,794,239 141,634,789 . (11367,932} (1,796,468) 28,279,301 26,482,833 1,556,182 141,728,880 498,257,032 63929851912 11,453,675 $ 139,932,412 S 526,536,333 $ 666.~81745 $ 13,009,857 ) 37 C City of Lubbock, Tens Balance Sheet Governmental Funds September JO~ 2008 ( NonmaJor Total Governme.atal ~em.mental Governmental General Fund Capital Projects Funds Funds ASSETS C Cash and cash equivalents $ 120,449 $ 68,267 $ 164,.560 s 353,276 Investments 14,747,933 8,358,699 21,259,261 44,365,893 Taxes receivable (net) 9,711,930 376,629 10,088,559 Accowrts receivable (net) 1,109,105 1,109,105 Interest receivable 177,748 14,078 150,733 342,559 Due from ocher funds 3,266,168 152,000 3,418,168 C Due from olher govmunents 4,480,115 4,480,115 Due &om others 882,879 1,528,818 2,411,697 lnvc:stmc:ut in property 208,213 208,213 Inventory 168,657 168,657 Restricted in~ts· 18,200,686 60,975,583 79,176,269 C Mortgage receivabl~ 5,612,742 5,612,742 Total assets $ 30,184,869 $ 26,641,730 $ 94,908,654 $ 151,735,253 LIABILITIES Acco1mts payable $ 3,522,540 $ 1.233,491 $ 4,172,472 $ 8,928,503 C · Due to other funds 2,073,164 2,073,164 Accrued liabilities 4,695,067 18,633 238,782 4,952,482 Accrued interest payable 191,702 191,702 Deferre.d revenue 2,004,987 4551724 2,595.236 5,055,947 Total liabilities 10,222,594 1,707,848 9,271.356 21,201,798 C FUND BALANCES P,eserved for: Prepaid items/inventory 168,657 168,657 Debt service 2,104,697 2,104,697 ,.. I,,, Capital projects 24,933,882 53,855,061 78,788,943 Special revenue -Civic Center facilities 6.S0,080 650,080 Special revenue -grants 7,156,393 7,156,393 Perpetual care 123,462 123,462 UIIICSCIWd, designated in special revenue fimds 21,740,729 2l,740,729 C Unreserved, undesignated reported in: Geucra1 fund 19,793,618 19,793,618 Permanent fund 61876 6,876 Total fund balances 191962J75 24,933!882 85,637,298 130,533,455 C Total liabilities and fund balances $ 30,184,869 $ 26,641,730 s 94,908,654 $ 151,735,253 See a«ompanying Notes 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, 2008 Total fund balance -governmental funds s 130,533,455 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used. in governmental activities are not financial resources and therefore are not reported in the funds. 237,203,702 lntemal service funds (ISFs) are used by mana~ to charge the costs of certain activities, such as insurance and telecommunications, to individual funds. The portion of the assets and liabilities of the ISFs primarily serving governmental funds are included in governmental activities in the. statement of net assets as follows: Net assets 10,157,898 Net book value of capital assets (2,204,710) Capital leases payable 1,110,125 Compensated absences 403,091 Post retirement benefits 129,867 Amounts due from business-type ISFs for amounts undei:cbarged (1,444,685) Certain liabilities are not due and payable in the cum:ut period ) and therefore are not ~rted in the funds. Those liabilities are as follO'NS: General obligation bonds (199,053,653) Capital leases payable (12,222,506) Compensated absences (17,923,843) Post retirement benefits (2,813,759) Accrued interest on general obligation bonds {1,237,703) Arbitmge payable (570,747} Environmental remediation (1,290,280) Bond premiums are recognized as an other financing source in the fund stalements but the premiums are amortized over the life of the bonds in the govemment-wide statement'S. (3,940,718) Actual City contnl>utions to the firefighter's pension trust fund is greater than the actuarially determined required contribution. This will reduce futme fuucliug requirements and is not recognized as an asset at the fund level but is a prepaid expense in the Statement of Net Assets. 813,571 "'I Revenue earned but unavailable in the funds is defened. 2,283,307 Net asse1s of governmental activities s 139..932,412 See accompanying Notes to Basic Financial Statements. 39 C City of Lubbock, Texas Statement of Revenues, Expenditures and Changes in Fund Balances- Governmental Fonds For the Year Ended September 30, 2008 C Nonmajor Total Governmental Goverumental Governmental General Fund Capital Projects Funds Fwlds REVENUES Taxes $ SS,345,982 $ $ 20,971,596 $ 106,316,678 C Franchise taxes 7,786,611 5,191,075 12,977,686 Special assessments 296,482 296,482 Fees and fines 3,279,911 521,391 3,801,302 Licenses and permits 2,663,139 2,663,139 lntagovcmmenta.l 530,389 215,561 16,733,463 17,479,413 Charges for services 3,339,148 2,290,160 466,131 6,095,439 ,.. \.. Interest 1,052,842 1,259,842 2.375,665 4,688,349 Miscellaneous 2,574,448 2.3931465 4,967,913 Total revenues 106,571,570 3,76S,S63 48,949,268 159,.286,401 EXPENDITURES Cuncm: C Administrative services and general government 11,047,039 63,697 11,110,736 Community services 6,586,711 6.586,711 Cultural and recreation 12,253,380 95,598 927,430 13,276,408 Economic and business dcvclopmcnt 1,215,978 10,663,287 11,879,265 Health 4,133,917 1,671,071 5,804,988 i 29,630,222 45,856 57,231 29,733,309 '" Fire Police 42,831,016 1,034,256 43,865,272 Odler. public safety 4,703,249 1,401,664 6,104,913 Streets and traffic 8,168,462 324,850 8,493,312 Intergovernmental 123,852 123,852 r Debt service: '- Principal 2,069,461 7,939,868 10,009,329 Interest aod other charges 327,144 151,047 7,854,089 8,332,280 Capital outlay 319661065 28~3571960 14,359,347 461683,372 Totalexpendirurcs 1201345,933 29,039,008 52,618,806 202,003,747 . Deficiency of revenues under C expenditures {13,n4,363} {25,273,445} f3z669,538} {42,71724fil OTHER FlNANCING SOURCES (USES) Loog--tcnn debt issued 10,690,376 35,914,775 46,605,151 Bond premium 625,760 1,.218,259 1,844,019 Capital leases 3,011,141 345,878 3,357,019 C Transfers in 17,729,361 1,019,009 7,394,572 26,142.942 Transfers out {6,129,512} !1.4692423} {7,2n1}03} {14,876,038} Net other fuwlcing sources (uses) 14,610,990 11.211,600 37,250,503 63,073,093 Net change in fund balancc:s 836,627 (14,061,845) 33,580,965 20,355,747 Fund balances -beginniag of year 19,125,648 38,995,727 52,056,333 110,177,708 C Fund balances • end of year $ 19,9621275 $ 24,933,882 $ 85,637,298 $ 130,533,455 Sec accompaning Notes to Basic Financial Statements 40 C City of Lubbock, Tes:as Reconciliation of the Statement of Revenues, Expenditures and Changes Io Fund Balances of Governmental Funds To the Statement of Activities For the Year Ended September 30, 2008 Net change in fund balances -total governmental funds Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of A~vities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amowtt by which capital outlays of $46,683,372 ex~ depreciation ofS 16.912,33 L in the oirrent period. Bond proceeds provide cummt financial TCSOW'CC$ to governmental funds, but issuing debt increases long- term liabilities in the Statement of Net Assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. This is the amowit by which proceeds or $46,605, l 51 cxoecded repayments and debt defeasence ofS7,939,868. Capital lease transactions provide cum:nt financial resources to governmental funds and repayment of principal is an expenditure. This is the amount by which proceeds ofSJ,357,019 exceeded repayments of $2,069,461. Bond premiums are recognized as an other financing soun:e in the governmental funds. but are considered deferred assets on the Statement of Net Assets. Premiums are amortized over the life of the bonds. This is the amount by which bond premium issued ofSI,844,0 l 9 exceeded amortization ofS219,22S. Estimated long-term liabilities are recognized as expenses in the Statement of Activities as earned. but are recognized when current financial resources ere used in the governmental funds. Arbitrage payable Compensated absences Post retirement benefits Environmental remediation Property taxes levied and court fines and fees earned. but not available, are deferred in the govemmc:nt81 funds, but are recognized when earned (net of estimated uncollectibles) in the Statement of Activities. This amount is the net change in defem:d property taxes and court fines and fees for the year. Actual City contn'butions to the firefighter's pension trust fund are greater than the actuarially determined Net Pension Obligai;ion (NPO). This amount is recognized as an expenditure at the fund level but is accrued when ovetpaid and reduces expenses on the Statement of Activities. Internal service funds arc used by management to charge the costs of certain activities, such as insurance and telecommunications. to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. Accrued interest is rec::ognized as expenses in the Statement of Activities as incurred, but is RlCCgnized when current financial resources are used in the governmental fimds. This amount is the net change in the accrued interest this year. The net effect of various miscellaneous transactions involving capital assets. This amount includes $7,474,000 developer donated streets and parks, less $13,nS,023 equipment transf~ out to business-type activities, less $304,282 sales and tnuie--in. Change in net assets of governmental activities See accompanying Notes to Basic Financial Statements. 41 S 20,355,747 29,771,041 (38,665,283) (1,287 ,558) (1,624,794) 105,305 (640,671) (2,683,892) (497,611} (246,393) (48,740) S96,996 (325,310) (6,605,305) $ · (1.796.468) City of Lubbock, Texas Statement of Net Assets Proprietary Funds September 30, 2008 ASSETS Current assets: Cash and _cash equivalents Investments Accounts receivable Interest receivable Due.from others Due from other funds Prepaid expenses Inventories Total current assets Nonc:urrent assets: Restricted investments Restricted interest rec;ci vable Restricted accowits receivable Deferred charges Capitalasse<i: Land Construction in progress Buildings Improvements other than buildings Machinery and equipment Less accumulated depn:cianon Total capital assets Total noncum:nt assets Totaliwets See acc:cmpanying Notes to Basic Financial Statemenis LP&L $ 491,892 60,227,762 18,870,298 378,414 223,661 . 80,192,027 9,847,790 is111110 12,658,900 756,714 14,207,9~ 8,054,811 199,561,578 56,974,517 { 126,673,5262 152,882,058 165,540,958 $245,732,985 42 C C Enteaprise Funds Water Wastewater WTMPA C $ 24,093 $ 60,467 $ 1,301,168 2,950,033 7,403,649 398,645 4,998,563 2,297,834 899,013 C S4,542 165,330 3~,901 161,958 9,009,713 226,079 8,287,211 10.089,238 11,608,539 C 68,831,234 65,861,577 934 3,309 C 68,834243 65,862,511 12,724,350 12,578,774 27,600,824 21,654,174 22,240,589 24,018,814 ~ C 291,969,454 127,470,376 34,681,932 18,054,744 (104,898,891} . {73,516,931} 284,3l8J58 130J59,951 353,152,801 196,122,462 C $361,440,012 $206,211,700 $ 11.608,539 C C C Storm Water $ 56.878 6,964,191 825,365 65,631 7,912,065 15,278,471 151278,471 283,337 50,127,279 64,580 47,834,412 4,126,314 {11!614,025} 90,821,897 106,100,368 S 114,012,433 .... Enterprise Funds $ Nonmajor Enterprise Funds 152,745 14,036.081 3,280,713 39,636 1,153,009 511,996 60,261 735,614 19,970,055 12.018,048 70,787 12,088,835 6,768,963 14,083,163 64,773,414 125,785,894 65,317,750 {148,322,501} 128,406,683 140.495,518 s 1601465.573 Total Enterprise l11ternal Service Funds Fu11ds $ 2,087,243 $ 27,507 91,980,361 3,368,033 31,171,786 703,553 38,524 1,348,868 99,767 9,521,709 60,261 68,727 1,1851354 2,194,235 138,059,135 5,796,793 171,837,120 17,251,917 71,721 99,817 3,309 158,372 ~811,110 174.723,260 17,510,106 33,112,138 65,343 127,673,404 180,942 119,152,208 1,637,054 792,621,714 649,868 179,155,257 9,309,071 {465,025,874} {8,803,955} 7861688,847 3,0381323 961,412,107 20,5481429 s 110991471~42 $ 26,3451222 43 City of Lubbock, Texas Statement of Net Assets Proprietary Fonds September 30, 2008 LIABILmES Cum:nt liabilities: Accounts payable Acaued liabilities Acaued interest payable Due to other funds CUstomer deposits Deferred revenue Compensated absences Accrued insurance claims Leases payable Bonds payable Total CUrTeDt liabilities Noncum:nt liabilities: Accrued insurance claims Rebatable arbitrage Landfill closure and post closure care Compensated absences Post empl~t benefits Leases payable Bonds payable Total noncurmrt liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Passenger facility charges Debt service Unrestricted Total net assets LP&L $ 1,946,626 1,761,681 1,217,841 9,009,713 3,499,752 1,183,S14 1,067,930 5,121,977 24,809,034 72,702 1,2~.172 506,873 2,975,&82 74,6991158 79,518,787 104,327,821 72,858,231 6,006,670 62,540.263 $ 141,405,164 44 C C E11terprise Fu11ds Water Wastewater WfMPA C s 2,402,156 $ 2,760,545 $ 9,725,988 361,733 200,251 1,193,544 654,239 C 80,340 494,183 241,390 675,290 473,734 C 1013501270 61620,942 15,557,516 10,951,101 9,725,988 ,. I... 163,965 184,351 527,861 257,841 302,TT8 130,082 2,583,912 1,.114,259 -C 189,849,751 _1061454,669 193,428,267 108,141,202 208!985,783 119,092,303 9,725,988 ,. '- 143,586,818 76,784,510 6,103,451 4,~06,302 C 2,763,960 5,828,585 1,882,551 $152,454.229 $ 87,119,397 $ 1,882,551 C C ) Storm Water $ 619,990 69,444 ""' I 574,084 89,428 ) 76,176 2,177,520 3,606,642 ) 64,050 95,522 · 82,021 ) 566,829 85,216,981 86,025.403 89,632.045 ) 16,321,372 1,741,490 6,317,526 $ 24,380,388 "'\ Enterprise Fnds $ Nonmajor Enterprise Funds 2,346,355. 834,208 310,775 1,857,000 75,389 81,621 m,4s3 1,857,189 2z192t737 10,328,727 86,206 3,770,566 563,389 ·437,986 7,148,115 281032,263 40;038,525 50~671252 90,210,584 2,318,723 598,535 16,970.479 $ 110,098,321 Total Enterprise lntentaJ servtce Funds Faads $ 19,801,660 $ 1,753,56!) 3,227,317 192,137 3,950,483 3,520 10,866,713 3,655,481 81,621 2,781,968 209,323 3,020,056 4,150,319 · 461,361 26,463,446 74,979,008 S,639,966 1,581,329 571,274 3,770,566 2,708,785 310,699 1,459,740 211,888 14,388,997 691,844 484,252,822 507,152,184 2,795,760 582,131,192 8,435,726 399,761,515 1,885,118 2,318,723 18,956,448 96,303,364 16,01A,378 $ 517,340,050 $ 17.909,496 45 t•~.' • Comprehensive Annual Financial Report for the Fiscal Year E·nded September 30, 2008 46 C ") "'\ City of Lubbock, Texas Reconciliation of the Statement of Net Assets -Proprietary Funds · To the Statement of Net Assets September 30, 2008 . Total net assets -proprietary funds Amounts reported for business-type activities in the Statement ofNet Assets are different because: Internal service funds (ISFs) are used by management to charge the costs of certain activities, such as insurance and tclecomnnmications, to individual fimds. The portion of asse1s and liabilities of the ISFs primarily serving enterprise funds are included in business- type activities in the Statement of Net Assets as follows: Net assets ofbusiness-type ISFs Amollllts due to governmental ISFs for amounts overcharged Net assets ofbusinesHype activities See accompanying Not.cs. to Basic Financial Statements. 47 $ 517,340,050 7,751,598 1,444,685 $ 526,536,333 C City of Lubbock, Texas Statement of Reven11es, Expenses and Changes in Fund Net Assets Proprietary Funds For The Year Ended September 30, 2008 C Enterprise Faads LP&L Water Wastewater WfMPA OPERATING REVENUES ,.. \.. Charges for services (net) $ 153,071,017 $ 42,527,445 $21,095,745 S 121,111,798 Miscellaneous Total operating revenues 153,071,017 42,527,445 21,095,745 121,111,798 . OPERATING EXPENSES C Pem>nal services 12,305,453 7,793,454 4,120.422 Insurance Supplies 1,196,956 1,674,7&4 1,028,572 Materials Maintenance l,&41,172 2,309,434 1,290,050 Purchase of fuel and power 112,852,968 121,005,410 C CoUcction expense 1,742,590 1,074,669 Other services and charges 3,819,293 10,023,600 4,191,443 563,666 Depreciation mp amortization 9,732,413 8,387,182 51432,048 Total operating expenses 141,748,255 31,931,044 17,137,204 1211569i076 Operating income (loss) 11,322,762 10,596.401 3,958,541 (457.278) C NON OPERA TING REVENUES (EXPENSES) Interest earnings 2,765,622 1,648,913 1,837.589 12,628 Passenger facility charges/Federal grants 198,400 Disposition or MSCts 284,272 (61,505) 9,393 C Miscellaneous 2,316,917 338,045 107,762 200,000 lntez-c:st expense C3,352.470l {6,683,45~ {2,022,380} Net nonoperating revenues (expenses) 2,014.341 (4,559,603) (67,636) 212,628 Income (loss) before contributions and transfers 13,337,103 6,036,798 3,890,905 (244,650) C Capital contnlmtions 175,075 1,713,804 1,672,990 Transfers in 2,186,447 409,574 30,344 613,612 Transfers out {2,409,997) {6,386,649} {3,094,350} Qiange in net assets 13,288,628 1,TI3,527 2,499,889 368,962 Total net assets-beginning of year 128,116,536 150,680,702 84,619,508 1,513,589 C Total net assets -ending $ 141,405,164 $ 152,454,229 $87,119,397 $ 11882!551 See accompanying Notes to Basic Fioancial Statements. 48 C ) Enterprise Funds Noamajor Total Enterprise Internal Service Storm Water Eaterprlse Funds Funds Funds ) $ 6,633,255 s 28,907,849 $ 373,347,109 $ 47,945,658 125,486 1251486 6,633.255 29.033,335 373,472,595 47.945,658 ) 1,594,511 15,606,4S7 41,420,297 4,797,207 23.,77~,560 130,597 4,153,794 8,i84,703 109,978 11,430,971 ) 254,116 3,906.332 9,601,104 2,110,429 233,858,378 629,302 694,832 4,141,393 1,729.228 6.221,917 26,549,147 .2,518,552 1,274.719 10,780,827 35,607,189 323,558 5,612.473 41,364,159 359,362,211 45,067,258 ) 1,020,782 (12,330,824) 14,110,384 2.878,400. 950,337 712,799 7,927,888 1,173,207 4,934,692 5,133,092 1,566 15,537 . 249,263 (40,770) 775,173 3,737,897 133,580 (2,107,878} (885,538) {15,051,722) (36,167) (1,155,975) 5,552,663 1,996.418 1.229,850 (135,193) (6,778,161) 16,106,802 4,108,250 16,165,991 19,727,860 200,289 4,519,160 7,759,137 320,880 (1,0661358} (318761215} (16,833,569} ,2,s13.3s2l (1,201,551) 10,030,775 26,760,230 2,ll6,067 25,581,939 100,067,546 490,579,820 15.793,429 s 24,380,388 $ 110,098,321 $ 517,340,050 $ 171909!496 49 . ' i;. Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2008 50 ( ) "). ) .., ) . 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, 2008 Net change in fund net assets -total enterprise funds Aim1D1ts .reported for business-type activities in the statement of activities are ditfcrcnt because: lntema1 service funds (ISFs} are used by management to charge the costs of certain activities such as fleet setviccs, ceotral warehousing activities, management information activities, etc. to individual funds. The 11et 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. 51 $ 26, 760,230 1,519,071 $ 28,279.301 C City or Lubbock, Texas Statement of Cash Flows Propriemy Fu.ds For the Year Ended September 30, 2008 Eaterprlte Fu.da LP&L Water Wutnvater WTMPA CASH nows FROM OPERATING AC11VITIES a-ipCs frvm custamen s I S-0,857 ,330 $ 42,426,063 s 21,147,248 s 120,812,497 Pa:,tna11!1 IO supplier.; (I 17,607,449) (14,685,716) (5,836,312) (121,459,026) Pa)'Dll:lll:ll 10 employees (12,570,948) (8,JSS,187) (4,320,673) C OCher """'ipts 2,601,189 536,445 107.761 200z000 Na cash pl'OYided (llled) by opaating lldivitio:s 2312801122 20,121z60S 11,098.025 !446.5292 CASH FLOWS PROM NONCAPITAL AND RELATED FINANONG ACTIVl11ES Transfen in fian Olher funds 2,186,447 409,574 30,344 613,612 Transfers 0111 to 01he:r ftmds (2,409,997) (6,386,649) (3,094,350) r Sbon-ttnn iatemmd bomJwiap (43,662) ... Pa)'1'ellts m,eived oa advances from othtt tbl\lk Net cash provided {used) by noncapifal and relattd financing activities {B;!~SO} (S1m,01S). {3,107,668} 613,612 CASH n.ows FROM CAPITAL AND RELATED FINANCING AC"I1VlTIES Pwchascs of capital ISSCIII (16,023,497) (12,924,246) (14,005,819) ( Sale of capilal lsselS 540,244 2,873 9,393 Principal paid O!l llapital leases (789,245) (391,881) (364,072) Prmcipal paid OIi bonds ml other debt (S,8SS,576) (8.673,559) (4,814,663) Bond issuance c:mt paid (125,866) (364,615) (761,278) lnte=tpaidon l't:'iffll&Cbonds (899,060) (2,928,491) (187,546) Interest paid oa bonds and other debt (2,523,574) (4,875,957) (I, 725,452) Issuance of revenue aod G.O. bonds 7.041,314 43,534,276 59,949,300 1sswn:c or capital lea.sea 1,239,763 1,868,123 586,738 ( Passenp-facility charges/capital gnlltl Rebabble arbitnge 509 2,419 869 Net cull pt0vided (used) for capital and related financing -.:timies (17 J94,988l 15,248,942 38,687,470 CASB FLOWS FR.OM INVESTING ACllVl1'JES Pn:>ceeds m,m sales arul matllrilies ofinvatments 52,768,247 JS,479,002 19,541,109 Pun:hasc of UMS1111e111S (61,380,798) (66.626,n!>) (68,004,t 77) (1~82) C Interest eammp 011 -11 and invesancnts 2,7651622 11652,960 11731,838 12,682 Net cash provided (nsed) (or inwmng lldivitics (S.846,929! Q21494t81!2 (46. 731J30} Nee iacrease (dccruse) in CW! and cash equivaleals (185,345) (101,345) (S3,403) 167,083 Cash and cash cquiwlt:n!s • beginning of,_. 677J37 125,438 113,870 1,134.0BS Cash and caslt eq~Y2lenls -end of )'all' $ 4911892 s 24,093 $ «1.467 $ 1,301,168 8-adllatio• or operatfug lacoate (loss) to Ht cull ( pnvkhd (Died) by opel"lllh.g ldMda: Opmling fflQCXllC (loss) s 11,322,762 s 10,596.401 s 3,958,541 s (457,278) Adjustments to mic=i"lc operalir,g income {lolls) 10 net cash provided (used) by opeming activities: Deprmation anclemattimicm 9,732,413 8,387,182 S,432,048 :Other income (expense) 2,601,189 S36,44S 107,762 200,000 Change io. cunmt assm and liabilities: "-Is receivable (2,213,687) (101,382) 51,503 (180,0$7) ,... I.. Inventory S,802 (4,649) Out: fimnatf,a-~ (187) Acmunls i-,)'lble 869,426 330,877 1,398,846 110,051 Duo llim,m other funds 119,245 (119,245) Ollleraccruedcxpmses 74,823 82,258 24,552 Customer dq,osits 296,268 18,025 Change in caaipensall!d ,bieaces and n:limncnt benefits 471.881 276,635 124.m ,. Net ""'811 pnMded (-1) by ~activities s 23.280!122 s 20,121,605 s 111098,025 s {446,529! I,, Sapple111total adz new laCormadoa: Noneasb eapita1 conlnlndioas and otba-c:hqes s l1S,07S s 1,713,804 s 1,672,990 $ Sec: accompanying Nati:s to Basic financial SlalmllUs. 52 ( ) Eatnvrite Fa11ds NoamaJor lat..naal ) Ea~rprbe Senic:e Stona. Watu FuDds Totalt Fa.u.d1 s 6,567,486 s 29,072,631 S 370,883.255 s 47,914,017 (3,024,665) (8,973,720) (271,586,888) (41,212,271) (1,663,955) (15,994,690) (42,705,453) (4,585,319) ) 905,910 4~Sl~06 133,580 1,878,866 S,010,131 60,942,220 2,250,007 4,519,160 7,759,137 320,SSO (1,066,358) (3,876,215) (16,833,569) (2,513,352) ) (2,659,996) (2,703,658) 24,357 1,100,000 1,100.000 (1,066.358) (917,051) (10,678.090) (2,168,115) (9,3~,965) (14,652,034) (66,996,561) (488,984) ) l,S66 1,374,442 1,928,518 23,698 (38,175} (1,161,526) (2,744,899) (422,409) (1,952,507) (1,157$63) (22,453,868) (98,928) (147,515) (1,498,202) (1,958,798) (5,973,895) (8_20,474) (9,945,457) (34,708) 7,434,060 11,08.S,260 129,044,210 426,360 417,060 4,161,619 8,273,303- 4,934,692 4,934,692 1,738 724 ~9 (S.S 84,949) 3,617,625 34.574,100 (496,043) 24,395,925 15,777,259 147,961,542 12,971,953 (20,64S,4SS) (24,183,226) (240,853,117) (13,778~5) 938,913 700;199 7,802,214 1,168,728 4M9J83 {7,705 I 768) (85,089,361} 361,986 (83,058) 4,937 (251,131) (52,165) 139,936 147J08 2,338~74 791672 s 56,878 s 152.745 s 2,087,243 $ 27,507 s 1,020,782 s (12,330,824) $ 14,110,384 s 2,878,400. 1,274,719 10,780,827 35,607,189 323,558 775,173 4.220,569 133,580 J . (65,769) 39,296 (2,470,096} (31,152) (89,814) (88,661) (171,614) 2,820,448 2,820.261 (533,492) 965,590 3,141,298 (n0,721) 1,147,080 1,147,080 (488) 24,876 152,893 359,402 (378,409) 68,017 382,310 157,7.SO 741,706 1,772.745 216,853 s 1,878,866 s 5,010,131 $ 60,942,220 s 2,250,007 $ s 16,165,991 s l9,n7,860 s 53 ~ .( Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2008 54 ) ' ) City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Basic Financial Statements {BPS) of the City of Lubbock, Texas (City) have been prepared in conformity with accounting principles generally accepted in the United Slates of America (GAAP) as applied to government units, including specialized industry practices as specified in lhe American Institute of Certified Public Accountants audit and accounting guide titled S¥fte and Local Governments. The Govemmemal Accounting Standards Board (GASB) is the acknowledged standard-settiDg body for establishing · govcmmcntal accounting and financial reporting principles. With respect to proprietary activities related to businm-typc activities and enterprise funds, including component units, the City applies all applicable GASB. proJlOllDCemeots as well as Financial Accounting S~ Board (FASB) Statements and lnterpretatiom. Accounting Principles Board (APB) Opinions and Accounting Research Bulletins of the Committee on Acco1mt:ing Procedure, issued on or before November 30, 1989, unless those pronouncements conflict with or contradict G~ pronouncements. The more significant accounting policies are descnbed bell>w. A. REPORTING ENTITY The City is a municipal co1p0ration governed by a Council-Manager fonn of gov~ The City, incorporated in 1909, is located in the northwestern part of the state. The City currently occupies a land area of· 119.9 square miles and seives a population approximating 215,000. The City is empowered to levy a property tax on both real and personal properties located wi1hin its boundaries. It is also empowered by state statute to extend its corporate limits by annexation, which occurs periodically wben deemed appropriate by the City Council. The City provides a full amge of services, including police and fire protection; recreational activities and cultural events; construction and maintenance of highways, streets, aixport and other inframucture; and sanitation services. The City also provides utilities for electricity, water, wastewater, and storm water as well as a public transportation system. The BFS present the City and its componem: units and include all activities, organizations, and functions for which the City is considered to be financially accountable. The criteria COIWdered in determining activities to be zeported within the City's BFS are based upon and consistent with those set forth in the Codification of Govermnental Accounting Standards, Section 2100, "Defining the Fi1tancial Reporting Entity." The criteria includes whether: • The organiz.ation is legally separate (can sue and be sued in i1s own name); • The City holds the corporate powers of the 01ganization; • The City appoints a voting majority of the O®inization's board; • The City is able to impose its will on the organization; · • The organization has the potential to impose a financial benefit or burden on the City; or • There is fiscal dependency by the organ.rzation on the City. As n:quired by GAAP, the BFS present the reportiog entity which consists of the City (the primary government), organizations for which the City is fuwlcially accountable, and other organizations for which the nature and significance of their relationship with the City me such that exclusion could cause the City's BFS to be misleading or incomplete. 55 City or Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POUCIES (Continued) A. REPORTING ENTITY (Continued) BLENDED COMPONENT UNITS The Urban Renewal Agency (URA) has been included in the City's primary government financial repo~ entity using the blended method because, although it is legally separate, the URA is an arm of the City. The URA is governed by State law and MS formed to help eliminate slum and blight within the City. The URA board oversees acquisition and disposition of real property and also designares and approves Urban Renewal Plans. The URA Board is composed of Dine members. appointed by the City Council There are no separate financial statements available for the URA. Wat Texas Municipal Power Agency (WfMPA) is a legally sepaiate municipal corporation, a political subdivision of Texas, and body politic and corporate, funned in 1983, governed by an eight member Board of Directors. The board consists of two directors from each pa:nicipating city. One member is elected as the president who presides over mon1hly meetings. Directors serve without compensation. WTMP A has no employees and instead ConttllCts for services to meet its general operating needs. WTMPA may engage in the business of generation, transmission, sale, and exchange of electric energy to the four participating public entities: Lubbock, Tulia, Brownfield. and Floydada. WTMP A may also participate in power pooling and power ex.change agreements with other entities. WI'MP A provides electricity to its four member cities with the City having a 92. 7% inter.est in its operations. Each member city appoints two members to the WTMP A board, however an affirmative vote of the "majority in inleRst" is required to approve the operating budget, approve capital projects, approve debt issuance, and approve any amendments to Wl'MP 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 pwchases approximately 92. 7% of the electricity brokered, WTMP A provides services almost exclusively to !he City and is therefore presented as a blended enterprise fund. 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 Govcmmcnt-Wide Financial Statements. They are reported in a separate column to emphasize that they are legally separate fu>m the City. The following Component Units are included in the reporting entity because the primary government is financially accountable, is able to impose its will on the organiution., or can significantly influence operations and/or activities of the organization. Civic Lubbock, Inc. is a legally separate entity that wu organized to foster and promote the presentation of wholesome educational, cultural, and enteitaµm:lent programs for the general moral. intellectual. physical improvement, and welfare of the citizens of Lubbock and its sumnmding area. The eleven-member board is appointed by the City Council. City Council reviews and accepts the annual budget. Separate audited financial statements for Civic Lubbock may be obtained from Civic Lubbock, Inc. at 1501 ~ Street, Lubbock, Texas. Market Lubbock Economic Development Corporation, dba Market Lubbock, is a legally separate entity that 'WllS formed on October 10, 1995 by the City Council to create, manage, operate, and supervise programs and activities to promote, assist. and enhance economic development within and around the City. The City Council appoints the seven-member board and its opecations are funded primarily through budgeted allocations of the City's property and hotel occupancy taxes. Separate audited financial statements may be obtained from Malket Lubbock at 1500 Broadmy, Sixth Floor, Lubbock, Texas. 56 ( ( ( ) \ City of Lubbock, Texas Notes to Basic Financial Statements September30,2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. REPORTING ENTITY <Continued) Lubbock Economic Development Alliance is a legally sepaiate entity that was formed on June 1, 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 seven-member board and its operations are funded primarily 1hrough budgeted allocations of the City's sales and use taxes. Separate audited financial statements may be obtained from Lubbock Economic Developmcm Alliance, Inc. at 1500 Broadway, Sixth Floor, Lubbock, Texas. The Vintage Township Public Facilities Corporation is a legally separate entity that was formed on Januazy 12, 2007 by the City Council to assist the City in financing, refinancing, providing or otherwise assisting in the acquisition, construction and maintcnam:c of ~ public facilities benefiting the Vimage Township Public Improvement District Toe three-member board is appointed by the City C-ouncil. City CoWlcil reviews and accepts the annual budget. Separate audited financial statements are not available. RELATED ORGANIZATIONS The City Council is responsible for appointing the board membctS of other organizations and the City's accountability for these organizations does not extend beyond board app<'rntrnents. The City Couoci1 is not able to impose its will on these entities and there is no financial benefit or burden relatioll$hip. 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 is a legally separate entity. The Mayor appoints the five. member board The Lubbock Health Facilities Development Corporation promotes health facilities development. The City Council appoints the seven-member board. The Lubboek Housing Finance Corporation, Inc. was formed pUISUaDt to the Texas Housing Finance Coiporation Act to finance the cost of decent, safe, and affordable residential housing. The City Council appoints the seven-member board. The North and East Lubbock Commmity Development Corporadon (CDC) was incorporated in February 2004 to effectuate change in North and East Lubbock. The North and East Lubbock CDC is a local entity that drives social change am promotes autonomy and empowerment by increasing the supply of quality and aft'ordable homing, generating economic activity, and coordinating the efficient delivery of social services. The Lubbock Educatioo Facilities Authority, Inc. is a non-profit corporation and instrumentality of the City and was eteated pu1Suant to the Higher Education Authority Act, Chapter 53 Texas Education Code for the pmpose of aiding institutions of higher educatiou, sc:coodaiy schools, and primary schools in providing cducatiODal facilitit;S and housing facilities. The seven-member board is appointed by the City CollllCil. The Lubbock Yi.re Pension Fund (LFPF) operates under provisions of the Texas Local Fire Fighters' Retirement Act for purposes of providing .:etitement benefits for the City's firc:fighters. The Mayor's designee, the Chief Financial Officer, three firefigh.teIS elected by active fin:fighters and two . at-large members elected by the LFPF Board, govern its aff.aks. The Pension Fund is funded by contributions from the firefighters and City matching contributions. As provided by enabling legislation. the City's 57 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POUCIES (Continued) A. REPORTING ENTITY {Continued} responsibility to the LFPF is limited to matching bi-weekly contributions made by the members. Title to assets is vested in the LFPF and not the City. The Texas State Pension Review Board is mandated to oversee all Texas public retirement systeim in regard to their actuarial soundness and compliance with state law and the City cannot significantly influence its operations. Separate audited financial statements rmy be obtained from the LFPF or from the City. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Toe City's financial statements are prepared using the reporting model specified in GASB Statement No. 34- Ba.sic 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 State and Local Governmems -Omnibus, GASB Sta.tement·No. 38 -Certain Financial Statement Note Disclosures, and GASB Interpretation No. 6 -Recognition and Measurement of Certain Liabilities and Expenditures in Governmental, Fund Financial Statements. AB specified by Statement No. 34, the BFS include both Government-Wide and Fund financial Statements. The Government-Wide Financial Statements (GWFS) (i.e., the Statement ofNet 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 of interfund activity bas 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. Governmer:rtal activities, which are prunarily supported by taxes and intei:govemmental ~enues, arc reported separately from business-type activities, which rely to a siguificant 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 a<:cIUa1 basis of accounting, which includes long-tenn assets and ~vables as well as loog-tenn debt and obligations. The GWFS focus more on the sustainability of the City as an entity and the change in aggregate :fiaancial position resulting from the activities of the fiscal period. The Government-Wide Statement ofNet Assets reportS all financial and capital resources of the City. It is displayed in the fonnat of assets less liabilities equals net assets, with the assets and liabilities shown in order of their relative ~uidity. 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 aCCUDllllated depreciation and reduced by outstanding balances of any bonds, mortgages, ,notes, or other borrowings that are attnbutable 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, contnbutots, or laws or regulations of other governments: or (2) imposed by law through constitutional provisions or.enabling legislation. All net assets not othetwise 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 administtative 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 58 ( ( f \ _City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued} 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 iteins not properly· included among . program revenues are rewrted instead as general revenues. The general revenues Sllppl)rt the ~ costs of the functions and segments not covered by program revenues. Fund Financial Statements (FFS) for govcmmental and proprietary funds are also part of the BFS. The focus of the FFS is on major funds. as defined by GASB Statement No. 34. GASB Statement No. 34 sets forth minitm1m criteria for determination of major funds, ie., a percentage of assets, liabilities, revenue. or expenditures/expenses of fund category and of the govemmen.tal and enterprise funds combined. However, it also gives govcmmems 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 individua1 enterprise funds are reported as separate columns in the FFS. Other non-major funds are combined in a single colunm in the appropriate FFS. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Fund Financial Statements The GWFS are reported using the ecol!,l)mic resources measurement fOCLlS and the accrual basis of accounting, as are the proprietuy FFS. Revenues are recorded when earned and expenses are recorded when a liability is incum:d, regardless of the timing of related ca.sh flows. Property taxes are reco~ 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 :lbnds are combined into a single business-type activities colunm on the GWFS, cer1ain interlimd activities between these funds are eliminated in the consolidation for the GWFS, but are included in the fund columns in the propriet:aiy FFS. The effect of imerfund activity has been eliminated from the GWFS. For instance, 92.7% of the operations ofWTMPA representing lnmactions between WTMPA and Lubbock Power & Light (LP&L) have been eliminated for the GWFS pICSentation. and for the electric business-type activities (BTA). Exceptions to this general rule are payments-in-lieu of fixes and other chatges between the City•s electric, water and wastewater functions and various other functions of the government Elimination of these chmges would distort the direct costs and program revenue& reported for the various fimctions concemed. Governmental FFS are reported using the current financial resources measurement focus and the modified accruaJ. basis of accounting. This is the traditional basis of accounting for governmental funds .. This presentation is neccssacy (1) to demonstrate legal and covenant compliance, (2) to demonstrate the soun:es and uses of liquid resources, and (3) to demonstrate how the City's actual revenues and expcmdi:lures conform to die annua1 budget Revenues are recognized as soon as the,y are both measurable and available. Revenues arc co~idered to be available when they are oollectJ.ble within the current period or soon enough thereafter to pay liabilities of the current period. For this pocpose, the go~ considers revenues to be available, generally, if they are collected within 45 days' of the end of the cmrent 6scaJ. period. The City considers the grant availability period to be one year for revenue recognition. Expenditures genemly are recorded when a liability is incmrcd, as under accrual accounting. However, debt service expenditures, as well as expenditures· related to compensated absences, and claims aud judgments arc recorded ooly when the liability has matured. Because the governmental FFS are presented on a different basis of accounting than the GWFS, 59 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING. AND FINANCIAL STATEMENT PRESENTAffON(Contioued) reconciliations are provided immediately following each fund statement These reconciliations explain the adjustments necessary t:o cooven the FFS into the governmental activities column of the GWFS. Property taxes, sales taxes, franchise taxes, occupancy taxes, grants, licenses, court fines, and interest associated with the current fiscal period are all considm:d .to be susceptible to accrual and have been recognized as revenues of the curn:nt fiscal period. Only the ponion of special assessments receivable due within the current fiscal period is considered to be susceptible t.o accrual as revenue of the current period. All other revemie items ~ considered to be measurable and available only when the City receives cash. F11od Ac(:ouating The City uses funds to report its financial position and the results of its operations. Fund accounting segregates funds according to their intended pUipOSC and is designed to demonstrate legal compliance and to aid ~ial management by segregating b:ansactions related to certain govemmenlal 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 expenditum;/~es. Governmental Funds are those through which most of the governmental functions of the City are fmanced. The City reports two major govemmental ~: The General Fund. as the City's primary opexating fund. accounts for -all financial resources of the general government, except those required to be accounted for in another fund. The Goverume11tal Capital Projects FUDd accounts for financing and construction of government capital projects, except for North Overton Tax Increment Financing Reinvestment Zone (TIF) capital projects and Gateway Streets Fund capital projects. Projects include public safety improvements, parlc improvements, street improvements, purchase and construction of municipal buildings, and major maintenance, ICpair, and replacement of public buildings and facilities. Enterprise F11Dds are used to account for operations: (1) that are finam:ed !Uld operated in a manner similar to private business enterprises where the intent of the governing body is that the costs (expcmes, 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 bas decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maioteoancr., public policy, management control. accDW1tability, or other pwposes. The City reports the following major eutelprise funds: LP&L accounts for the activities of the City-owned electric production and distribution system. The Water Fund accounts for the activities of the City's water system. The Wastewater Fund accounts for the activities of the City's sanitary wastewater system. The W'l'MPA Fund accounts for the activities of power generation and power brokering to member cities. Member cities include Lubbock with 92.7% ownership, and Tulia, Brownfield, and Floydada comprising the remaining 7.3% ownership. 60 t .. ,, \ ( < ) City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING. AND FINANCIAL STATEMENT PRESENTATION (Continued) The Storm Water Fund accounts for the activities of the storm water utility. The City reports the following DOD-major funds: Governmental Fwlds Special Revenae Funds are used to account for the proceeds of specific revenue sources ( other than special assessments or major capital projects) that are legally iestricted to expenditures for specified purposes. The Debt Service Fund is used to account for the accumulation of resources for and the payment of; genera long-tenn obligation principal and interest (other than debt service payments made by proprietary funds). The Permanent Fund is used to report resources that are legally restricted to the extent that only earnings. and not principal. may be used for purposes that benefit the City and its citizens. The Ccmete.ry Permaneut Care Fund accounts for interest earned on principal funds and authomed disbursements for cemetery maintenance and improvemcolS. Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital improvements ( other than those ~ in. the proprietary funds). Proprietary Fwtds distinguish operating revemes and expenses from non-operating itc:Jm. Operating ~CDl.lCS and expenses gencnlly result Crom providing services and producing and delivering goods in coanection with a proprietaiy fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds and of the City's intemaI service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services. administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Enterprise Funds are used to aa:ount for services to outside users where the full CO$t. of providing services, including capita]. is to be recovered through fees and clwges. e.g.. Lubbock Preston Smith bdemational Airport (Airport Fund), Cib"bus (Transit Fund), Solid Waste, Cemetery, and Civic Centers. IDtenal Service Fnncls arc used to acc<nmt for services provided to other departm:nts, agcacics of the departments or to other governments on a cost reimbursement basis (i.e., Fleet M.aintemmce Fund, Print Shop and Warehouse Fund, Information Technology Fund, Risk Management, Health Benefits, and Investment Pool). D. BUDGETARY ACCOUNTING The City Manager submits a proposed operating budget and capital program to the City Council annually for the upcoming fiscal )Ur. Public hearings are conducted to obtain cimen coDDDCOlS. and the budget is leplly enacted through pu.,age of an ordinance by City CounciL City Council action is a1s9 ~ for the approval of any supplemental appropriations. All budget amounts pmieoted in the budget comparison statement reflect the original budget and the amended budget, which have been adjusted for legally aut!iorized supplemental appropriatiODS to the annual budget during the fiscal year. The operating budget is adopted on 61 City of Lubbock, Texas Notes to Basic Financial Statements September JO, 2008 NOTE L SUMMARY OF SIGNIFICANT ACCOUNl'ING POLICIES (Continued) D. BUDGETARY ACCOUNTING (Continued.) a basis other than GAAP for the General Fund. with the rµain difference being that capital lease proceeds and ielated capital outlay are not budgeted. Budgetary control is maintained at the department level in the following expenditure categories: personnel SCIVices, supplies, other charges, and capital outlay. Management may make administrative transfers and increases or decreases between accounts below the depattment level without Council approval. However, any transfer of funds between departments, the legal level of control, shall be presented to Council for approval by ordmance before such ftmds can be transferred between departments or expended 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 va1orem tax levy for a sinking fund (General Obligation and Certificates of Obligation Debt Service) which. with cash and investments in the fund, is sufficient to pay all debt service due during the fiscal year. E. ENCUMBRANCES At the end of~ fiscal year, encumbrances for goods and services that have not been received are canceled. At the beginning of the next fiscal year, management reviews all open encumbrances. On October 1, 2008, the General Fund had no significant a.mounts of open encumbrances. · F. A.S$TS, LIABILITIES AND FUND BALANCF.JNET 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 arf! maintainec( which reflect each fund's equity in the pooled account. The City's investments are sca1ed at fiur value, which is based on quoted market prices as of the valuation date. Cash Equivalents -Cash equivalents are defined as short-term · highly liquid investments that are readily convertiole to known amounts of cash and have original maturities of three months or less when purchased. These investments present an insignificant risk of change in value due to changes in interest rates. Investments -Investments include secwities in the Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, U S Treasury Notes, and Farm Credit Notes. Restricted investments include investments that have been restricted for bond financed capital projects and money restricted for claims in the Risk and Health Insurance Funds. Restricted investments also include funds that have been restricted by bond covenants for debt service requiremen1s and for passenger facility charges. Property Tu: Receivable -The value of all real and business property located in the City is assessed annually on 1anuary 1 in conformity with Subtitle E of the Texas Property Code. Property taxes are levied on October 1 on those iw;essed values and the taxes are due on receipt of the tax bill. On the following January 1, a tax lien attaches to property to secure 1he payment of all taxes, penalties, and imerest ultimately imposed. The taxes are considered delinquent if not paid before February 1. Therefore, at fiscal year end all property taxes receivable are delinquent, but are secured by a 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 revem1e until the taxes are collected or available. For each fiscal year, the City recognizes revenue in the amount of taxes collected during tbe year plus an wimate of 62 C ( "\ ) ' City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POIJCIES (Continued) F. ASSETS, LIABILITIES. AND FUND BALANCE/NET ASSETS (Continued) taxes to be collected in the subsequent 45 days. The City allocates property tax revenue between the General, certain Special Revenue, and Debt Service Funds based on tax rates adopted for the year of levy. The Lubbock Central Appraisal District assesses property values, bills, oollecis, and remits the property taxes to the City. The City adjusts the allowance for uncollecb"'ble taxes aIJd deferred tax revenue at fiscal year end based upon historical collection experience. To write off property taxes receivable, the City eliminates the receivable and reduces the allowance for uncollectible accounts. · Enterprise Funds Receivable.t -Within the LP&L. Water, Wastewater, Storm Water, and WTMPA Enterprise Funds, services rendered but not billed as of the close of the fiscal year are accrued and this amoum is re.fleeted in the accounts receivable balances of each fund. Amounts billed are reflected as accounts receivable net of an allowance for uncollectihle accounts. Inventories -Inventories consist of expendable supplies held for comumption. lnvento~ are valued using the ·average cost method of valuation, and are accounted for using the consumption. method of accounting, ie., inventory is expensed when used ratheI than when pmchased. Prepaid Items -Prepaid items are accounted for under the collSlllDption method. Mortgage Receivables -Mortgage receivables consist of loans made to Lubbock residents and ~usinesses un.der the City's Community Devel.opmen.t loan program. These loans were originally funded through grants received from the U.S. Department of Housing and Urban Development Capital Assets and Depredation -Capital assets, including public domain inftastruc1llre ( streets, bridges, sidewalks and other assets tliat are immovable and of value only to the City) are defined as ~ with an initial, individual cost of more than $5,000 and an estimated useful life in excess of three years. These capital assets ue reported in the. GWFS and the proprietary fund&. Capital assets arc 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 capittl assets and improvements are capitali.zed as the projects are constructed. The cost of nomia.l 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 ,mnaioing useful lives of the related capital assets. Depreciation is computed using the straight.line method over the estimated useful lives as follows: Infi:astructure.llmprovemen!S BuildiDgs Equipment Water rights 10--50 years 15-50 years 3-15 years 85 years Interest Capitalization -Because the City issues general-purpose capital improvement bonds, which are recorded within. the proprietary funds, the City capitalu.es interest costs for business-type activities and entctprise funds according to the FASB Statement No. 34 Capitalization oflnterest Cost and FASB Statement No. 62 Capitalization of Interest Costs. The City capitalized interest of approximately $4,190,000 net of interest earned, for the business-type activities and the enterprise funds dnring the cuncnt fiscal year. 63 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F, ASSETS. LIABILITIES, AND FUND BALANCE/NET ASSETS {Continued) Fund Balances -In the fund financial statements, governmental funds report reservations of fund balance for ~ that are not available for appropriation or are legally restricted by outside parties for use for a specific pmpose. Designations of fund balance represent tentative management plans tbat are subject to change. · Restricted Net Assets -Certain enterprise fund and govemmental activities assets are testricted for debt and federal requirements; consequently, net assets have been restricted for these ammmts. The excess of other restricted assets over related liabilities are included as restricted net assets for bond indenture requirements and passenger facility charges. Use of Estimates -The preparation of financial statements in conformity with GAAP reqwres management to :mab: 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. REVENUES, EXPENSES AND EXPENDITURES Interest Income on pooled cash and investments is allocated monthly based on the percentage of a fund's six- momh rolling average monthly balance in pooled cash and investments to the total City-wide six-month rolling average monchly balance in pooled cash and investments. Bond Funds and other separate nonpooled cash are distn'buted to the fund where the cash and investmem is recorded. Sales Tax Revenue for the City results from an allocation of 1.5% of the total sales t.ax 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 theD paid to the City by the Friday following the second Wednesday of the month. Grant Revenue from federal and state: grants is reoognized as revenue as soon as all eligt"bility requirements have been mcl The availability period for grants is considered to be one year. loterfund Transactions are 8CCOl1Trteo. for as revenues, expenditures, expenses, or other finandng 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 reductioos of expenditures/expenses in the fund that is reimbursed. In addition, transfeis are made between funds to shift resources from a fund legally authorized to n:ceive revenue to a · fund authomed to expend the revenue. Compensated Absences consists of vacation leave and sick leave. Vacation leave of 10-20 days is gnmted 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 Rtinmient or termination for employees in good standing for any available, unused vacation leave. Sick leave for employees is accrued at 1 1/4 days per month with a maximum accrual status of 200 days. After 15 years of continuous full time service for non-civil service personnel, vested sick leave is paid on i:ctin:ment or termination at the current hourly rate for up to 90 days. Upon retirement or termination, Police Civil Service Peisonoel are paid for up to 90 days accrued sick leave after one year of employment. Firefighter Civil Service Personnel are paid for up to 90 days of accrued sick leave upon retirement or 64 ( ( ( I • ") "\ ) 1 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. REVENUES, EXPENSES AND EXPENDTilJRES {Continued} termination. The Texas Civil Service laws dictate certain benefits and persom1el 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 die extent it is due and payable. Post Employment Benefits for retirees of the City include the option to purchase health and life insurance benefits at a subsidized premium However, employees that retire with 15 years of service or Civil Service employees tbat retire who have a sick-leave balance in excess of 90 days will be able to elect to continue receiving medical coverage in full 30-day periods for the term of the balance of their sick leave. Amounts to cover premiums and administrative costs, with an incremema.l charge {Qr reserve funding, are detennined by the City's health care administrator. Employer contnbutions are funded on a pay-as-you-go basis and approximated $2.3 million for FY 2008. These contnlrutions are included :in the amount of insurance expense reflected in the financial activity reported in the Health Benefits lntemal Service Fund. H. NEW PROUNCEMENTS The City will implement the following new financial accounting and reporting standards issued by the GASB. • Statement No. 49, "Accounting and Financial Reporting for Pollution Remediation Obliga- tions." The requirements of this statement are effective for FY 2009, but the effect of implementing the statement is unknown. . • Statement No. 51, "~unting and Financial Reporting. for Intangible Assets." The requirements' of this statement are effective for FY 2010, but the effect of implementing the · statement is unknown. I. CHANGE IN ACCOUNTING PRINCIPLES Effective October 1, 2007, the City implemented the following new financial accounting and reporting standards issued by GASB: • Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. Statement No. 45 establishes uniform financial reporting standards for other postcmployment benefits (OPEB) p~ improves the relevance and usendness of fi:oaocial reporting, and supersedes portions of statements No. 12 and 27. The finaocia1 impact of the impJementatiou on the City during the year is discussed in No~ m. F. • Statement No. SO, Pension Disclosures. Statement No. so amends the note disclosure and required ~lemcntary information standards of Statements No. 25 and 27. The pension · footnote disclosure is discussed in Note Ill. E. NOTE IL STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. RESTRICTED NET ASSETS Restricted net assets are only used for their int.ended purpose. For the majority of projects funded by tax exempt debt proceeds, the debt proceeds are used first, followed by unrestricted resources. 65 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE II. STEW ARDSRIP~ COMPLIANCE AND ACCOUNTABil.,ITY (Continued) B. GENERAL FUND BUDGET COMPARISON The General Fund FY 2008 amended budgeted expenditures and transfers out were $122.,506,503 and actual expenditures and transfers out were $122,874, 160, a difference of$367,657. NOTE DL DETAIL NOTES ON ALL ACTIVITIES AND FUNDS A. DEPOSITS AND INVESTMENTS Deposits On September 30, 2008, the bank balance of the City's deposits was $3,018,670. ·All of the bank balances are · covered by federal depository insurance or are fully collateralli:ed. Custodial credit risk is the risk that in the event of a bank failure, a government's deposits may not be retumcd. The City's deposit policy for custodial credit risk requires compliance with the provisions of Texas Public Funds Investment AcL State law requires collatetalization 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 minimnm collateral level to be 102% of maiket value of principal and accrued interest At September 30, 2008, bank balances were exposed to custodial credit risk, as follows: Insured Uninsured and wic;ollateralized Uninsured and collateral held by pledging financial institution Uninsured and collateral held by pledging financial institution's trust department or agent in other than the City's name S 750,000 2,268,670 S 3,018,670 Investments At September 30, 2008, the City had the following investments and maturities: . September 30, 2008 Maturities In Yean Less TYl>e FairValae 'lbal 1-S Money Marlcets S 21,520,865 S 21,520,865 s -Fedenl Home Loan Banks 72,100,888 37,685,274 34,4IS,614 Federal Home Loan Mortgage Corporation 22,026,380 9,011,960 13,014,420 Federal National Mortgage Association 9,240,630 S,035,630 4,205,000 Fann Credit Note 15,012,510 6,987,SIO 8,025,000 US Treaswy Note IS0,797 150,797 State Investment Pools • 267,927,523 2§1,22~2.l S407,2:z2 ~~ S3~a JJ2 SS2 il2§.®Q~j •state Investment Pools are considered investments for financial reporting. 66 C C C C C ' r-... C C C )' \ ) City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) A. DEPOSITS AND INVESTMENTS (Continued) Interest Rate Risk -As a means of limiting its exposure to wr value losses arising from rising interest mtes, the City's investment policy limits investments to those that can be held to maturity and by limiting final maturity to oo more than five (5) years. The money.market accounts and investment pools are presented as an . investment with a maturity of less than _one year because they are redeemable in full UDJI1Miately. 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 inves1mcut 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 a:pun:base agreements. fWly collateralized certificates of deposit, commercial paper and bank acceptances with a stated maturity of270 days or fewer from the date: of issuance, MA-rated, no-load money market mutual funds regulated by the Securities and Exchange Commission. and AAA-rated, comtant dollar investments pools authorized by the City CoUDCil. At September 30, 2008, Standard & Poor's rated the investment pools and the money market mutual funds AAAm. The senior unsecured debt for investments in FNMA and FHLMC are rated.AAA by Standard & Poor's and Aaa by Moody's. Custodial Credit Risk -For an investment, custodial credit risk is the risk·that, in the event of the failure of the counteiparty, 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 requires that deposits and repurchase agreements be held in an institution that has a minimum collateral level of 102% of the market value. FFCB, FHLB, FHLMC, and FNMA investmems are held in the City's name in third party safela:eping by a Federal Reserve member financial institution designated as a City depository. The City shall marnttin a list of authorized broker/dealers and financial imtituti.ons, which are approved by the Audit and investmen!: Committee for investment pwposes. Concentration of Credit Risk -The City places limits on the amount that may be invested in any one issuer with the exception of United Stares Treaswy obligations. As of September 30, 2008, the City's investments constituted the following percentages of total investments: Iovestment Percentar;e State Investment Pools 6S.61 FHLB 17.67 FHLMC 5.40 Money Markets 5.28 FFCB 3.68 FNMA 2.26 U.S. Treasury 0.04 Foreign Currency Risk -This risk relates to adverse affects on the fair value of an investment from changes in exchange rates. The City bas no foreign currency risk 67 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAll, NOTES ON ALL ACTIVITIES AND FUNDS (Continued) B. INTERFUND TRANSACTIONS lnterfund balances, specifically the due to and due from other funds, are short-term loans to cover temporary cash ddicits in various funds. This occasiooally occurs prior to bond sales or grant reimbursements. These outstanding balances are iepaid within the following fiscal year. Interfund balances, specifa:ally advances to and from other :fimds, are longer-term loans to cover Council diiected internal financing of certain projects. At September 30, 2008 the City had $12,938,877 in intemaJ. financing. These balances arc assessed an interest charge and are repaid over time through operations and transfers. The following amounts due to other funds or due from other fund5, including advances, are included in the fund financial statements (all amounts in thousands): lmtdimd Receivables (!homancls} Gova-nmeatal Funds ProJ?rie!!!z Funds lllterfund Payables (Tbousaads) Nonmajor Nonmajor Gmeral Govcramen.t WTMPA Eoterprist Totals Goventmeatal Funds: Nonmajor Governmental $ 1,409 s 152 s $ 512 $ 2,073 Proprietary Fuods: LP&L 9,009 9,009 N omnajor Entcipr~ 1,8S7 1,857 Tola.ls s 3.266 $ 152 s 9,009 s S12 $ 12,93!) Transfers include l) debt service payments made from the debt service fund, but funded from an operating fund; 2) subsidy transfer.I 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 interfund transfers are reflected in the fund financial statements (all amounts in thousands): 68 C ( ( C ( ) ) City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) B. INTERFUND TRANSACTIONS {Continued) Funds Proprtefllry Fa.ads Govt. Nomnajar Was~ S1Dnn-Noninajor mtemal lntutand Transfers In: (Tlaousands) General Capiral Oovt Electric Watet water waa,r En11erprise Service Totals GoHrnmental F1111ds: General Fund $ • S -S 31S S 1,7% $5,987 $2,S!M $1,066 S 3,624 S 2,047 $17,729 Govt. Capital Projects 759 25 125 110 1,019 N onmajor Governmental 221 1,444 5,729 7,3!M Proprietary Fu.nds: LP&L WIier Wastewater WTMPA N onmajor Enterprise Internal Service Totals 1,013 574 282 30 614 400 200 128 4,137 347 3.S 321 S6,IJ0 $ 1,469 S 7;1.77 $2,410 S6,387 S3,094 Sl,066 S J,ft77 S 2,Sl3 Net transfers on the GWFS amounted to $4,703,317 from govemmental. activities to business-type activities. In FY 2008 the Civic Centers Entexprise Fund was created and $12,299,692 in capital assets net oflong-term liability was contributed from governmental funds to the Civic. Center Enterprise Fund. This was netted against transfers of indirect cost allocations and PILOT transfers from business-type activities to govcmmentaJ. activities. C. DEFERRED CHARGES The total deferred charge of $2,811, l 10 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 will continue for 30 years. 69 2,187 410 30 614 4,519 32i $34,223. City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAR. NOTES ON ALL ACTIVITIES AND FUNDS (Continued) D. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2008, was as follows: Primary Goverwnent: Govenuneotal Activities Beginning Balance Increases Decreases Capital Assets Not Depredated: Land $ 9,056,284 $ 1,216,338 $ 1,238,454 Construction in Progn:ss 40,759,945 42,767,016 16,711,163 ·Tota.I Capilal Assets Not Depreciated 49,816,229 43,983,354 17,949,617 Capital Assets D epredated: Buildings 65,604,748 148,293 21,352,638 Improvements Otia-than Buildings 231,108,317 19,979,475 4,264,979 Machinery and Equipn-ent 68,762,656 7,8CrT,656 12,382,438 Total Capilal Assets Deprccia~d 365,475,721 27,935,424 38,000,055 Less Accumulated Depreciation: Buildings 33,575,928 1,784,067 14,100,591 Improvements 01ha-than Building:i 119,815,172 9,505,742 2,795,500 Madiinery and Equipment 48,221,912 6,667,058 8,616,434 Total Accumulated Depreciation 201,613,012 17,956,867 25,512,525 T oCal Capila.l Assets Depreciated. Net 163,862,709 9,978,557 12,487,530 Oovemmental Activities Capital Assets, Net $ 213,678,938 S 53,961,911 $ 30,437,147 Depreciation expense was charged to functions/programs of the govemmental activities as follows: Governmental aclivities: Administrative Services and Gtneral Govemmm t Community Scrvi::cs Cultural and Rca-calion Services Eoonomic and Busine~ Development Fire Health Other Public Safety Police Streets and Traffic Internal Service Funds T olill depreciati>n expc:nse -governmental activities Transrcr in ID accuaulated depreciation -governmental activities . lnaease in ac:cum.ilated depreciation -govcmmcntal ac1ivities 70 S 524,279 138,044 3,245,553 481;235 1,359,866 313,159 532,832 2,545,.551 7,771,812 265,779 17,l 78,110 778,757 $ 17 ;}56,867 . C ( C Ending Balances s 9,034,168 66,815,798 7~,849,966 44,400,403 246,822,813 64,187,874 355,411,090 21,259,404 126.525,414 46,272,536 194,057,354 161,353,736 $237,203,702 ' \ ) .., City of Lubbock, Teus Notes to Basic Financial Statements September 30, 2008 NOTE IIL DETAIL NOTES ON ALL ACI1VITIES AND FUNDS (Continued) D. CAPITAL ASSETS (Continued) Business.type Actfvldes Begtunlag Balance Increases Decreases Capital Assets Not Depreciated: Ending Balances· Land $ 31,962,807 $ 1,238,453 $ 89,122 · $ 33,112,138 Conslruetion in Progress 90,515,665 61,225,550 24,067,811 Total Capital Assets Nol Depreciated 122,478,472 62,464,003 24,156,933 Capital Assets Depredated: Buildingi; 98,005,752 22,755,074 Improvements Other lhan Buildings 769,665,416 25,525,413 2,569,115 Machinery and F.quipment 1661693,910 19,712,468 61447,317 Total Capital Assets Depreciated 1,034,365,078 67,992,955 9,016,432 / Less Ac:a,.mu.b.ted Depredation: Buildings 35,546,976 17,063,888 Improvements Other cban Buildings 293,396,223 22,518,048 694,486 Machinery and F.quipment 89,834,350 15,183,983 6,244,299 Total Accumulated Deprmation 418,777,549 54,765,919 6,938,785 Total Capital Assets Depreciated, Net 615,587,529 13,227,036 2,0771647 Business-type Activities Capital Assets, Nc;t $ 738,066,001 $ 75,691,039 $ 26,234,580 Depreciation expense was charged to functiom/programs of the business-type activities as follows: Business-Type Activities: LP&L Water Wastewater Stormwatcr Solid Waste Airport Transit Civic: Cmt:Cf'S Cem:tay I ntcmal Service Total deprcciafun expense• business-type activities Transfer in i> aa:WDllated depreciation -business-type activities Increase inaocwmlated dcpmciation -business-twc ac:tivitics 71 S 9,S99,079 8.387,182 5,432,048 1,274,719 4,233,675 4,205,461 1,509,962 813,674 18,055 57,779 35,531,634 19,234,285 $ 54,765,919 127,673,404 160,785.542 120,760,826 792,621,714 179z9591061 11093,341,601 52,610,864 31S.219,785 98,774,034 466,604,683 626,736,918 $ 787,522,460 City o(Lobbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE DI. DETAIL NOTES ON ALL ACI1VITIES AND FUNDS (Continued) D. CAPITAL ASSETS (Continued} Construction Commitments The City of Lubbock has active construction projects at fiscal year end. Wamr Projects include the acquisition of the right.of-way necessary for the construction of a pipeline to transport water from the Lake Alan Remy reselVoir to the City. Another project related to bringing Lake Alan Henry online are costs associated with the final design of an intake pump station, a 65 mile transmission line, transmission pump stations, and a 24 million gallon per day water treatment plant. Wastewater projects include the design and coostruction for plant improvements to the Southeast Water Reclamation Plaot These improvements will produce stream quality effluent to be dis~ into the North Fork of the Double Mountain Fork of the Brazos River for potential reuse. Construction of Fire Station # 17 has begun. This new fire station will maintain the current service level of our fire protecti.01,1 servu:cs throughout 1he city. Worlc ~ntinued on a Gateway Street Project that will construct a T-2 thoroughfare street on Erskine Street from.Frankford to Salem. The completed project will provide for tbJ:ee lanes of traffic in each direction plus a continuous left tum lane. Project• Governm=ntal Capital Projects TIF Capital Projects Gateway Street Projects LP&L Water Wastewater Solid Waste Ai-port Stonnwater Internal Service Fund . Total E. RETIREMENT PLANS Commitments S 92,714,556 S 38,520,171 26,795,200 21,497,813 89,249,756 f!:7,688,073 3,503,900 23,157,941 56,729,500 1,600,000 $ 441,456,910 $ Spent-to-Date 56,632,482 S 17,106,456 3,443,571 17,341,462 40,635,808 30,488,082 818,893 13,097,475 45,744,166 835,79') 226,144,194 S Commltlments 36,082,074 21,413,715 23 ,.351,629 4,156,351 48,613,948 57,199,991 2,685,007 10,060,466 10,985,334 764,201 215,.312,716 Each qualified employee is included in one of two retirement plans in which the City participates. These are 1he Texas Municipal Retirement System and the Lubbock Fm: Pension Fund. 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) P~ Description The City provides pension benefits for all of its full-time employees (with the exception of firefighters) through a non-traditional, joint contnlmtory, hybrid defined benefit plan in the state-wide TMRS, an agent nmltiple-employer public empioree retirement system. 72 C C < ( t " C ( ( ) ) ; City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) E. RETIREMENT PLANS (Continued) Benefits depend upon the sum of the employee's contn"butioos to the plan. with interest. and the City-financed monetary credits, with interest At the date the plan began, the City granted monetazy cm:lits for service rendered befOIC the plan be$811 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 secvice smce the plan began are a percent (100%,, 1500/4, or 200%) of the employee's accumu1ated contnbutions. In addition, the City can grant, as often as annually, another type ofmonelary credit referred to as an updated service credit which is a theon:tical amount which, when added to the employee's accumulated contnbutions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions a.ccumulated with interest if the current employee contnbution rate and City matching percent bad always been in existence and if the employee's salazy bad always been the avexage of his salary in the last three years that are one year before the effectiye date. At n:titement, the benefit is calculated as if the sum of the eiq>loycc's accumulated contributions with interest and the employer-financed monetaiy credits with interest were used to purchase an annuity. · The plan provisions are adopted by City C.ouncil. 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 oc more years of service or with 20 years o~ service regardless of age. A member is vested after 5 years. Contributions The contn"bution rate for employees is 7% and the City matching ratio is cuaently 2~to-l, both as adopted J;>y the City Counca Under the State law govemmg TMRS. the actuary annually determines the City contribution rate. This rate consists of the normal cost contnoution 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 DOima1 cost contribution rate finances the currently accntiDg monetary credits due to the City matching percent, which is the obligation of the City as of an employee's retirement date, not at the time the employee1s contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each eiq,loyee at the· time his/her retirement becomes effective. The prior service contnoution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 30-year amortiution period. The projected unit credit actuarial cost method is used for detenrrioing the City contribution rate. Boch the employees and the City make contnlnrtions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one- year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the . rate goes into effect (i.e. December 31, 2007 valuation is effective for rates beginning January 2009). Actuarial Assumptions . The actuarial assumptions for the December 31, 2007 valuations are as follows: Actuarial cost method: Amo.nization method: Remaining amortization period: Assd valuation method: Investment rate of return: Projected salary ~ Includes inflation at: Cost of Living adjustments: Projected unit credit Level perceot of payroll 30 years-closed period Amortirecl cost 7% Varies by age and service 3% 2.1%(3%CPI) 73 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAll. NOTES ON ALL ACTIVITIES AND FUNDS (Continued) E. RETIREMENT PLANS (Continued} Payroll Growth Withdrawal ra!es for Male/Female ft.cal Year Endlag 9/30/06 9/30/07 9/30/08 Anaual Pension Cost S 10,904,03 I 10,903,717 11,369,691 3% Mid/Mid Percentage ofAPC Coatribnted 100 100 100 Net Pension Obllgatiaa so 0 0 As of December 31, 2007, the most recent actuarial valuation date, the plan was 61.4% funded. The actuarial accrued liability for benefits was $326.0 million. and the actuarial value of assets was $200.0 million. resulting in an unfunded actuarial accrued liability (UAAL) of $126.0 million. The covered payroll (annual payroll of active employees covered by the plan) was $70.9 million. and the ratio of the UAAL to the covered payroll was 177.5%. The scheduJe of funding progress, presented as required supplementary infonnatioa (ollowing the notes to the financial statements. will present multiyear trend information about whether the actuarial value of plan assets is increasing or deacasing over time relative to the actuarial accrued liabilities for benefits. Toe City of Lubbock is one of 827 mmicipalities having the benefit plan administered by TMRS. Each of the municipalities bas an annual, individual actuarial valuation performed. All assumptions for die December 31, 2007 valuations are contained in the 2007 TMRS Comprehensive ADnual Financial Report, a, copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153, LUBBOCK FIRE PENSION FUND (LFPF) Plan Description The Board of T,rustees of the LFPF 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 comiden:d to be a part of the City financial reporting entity. Firefighters in the Lubbock Fire Department are covered by thcLFPF. The LFPF 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 fire6gbters 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 tenniDate employment with 20 or more years of service. The LFPF Plan. effective December 1, 2005, provides a monthly normal service retirement benefit, payable in a Joint and Two-Thirds to Spouse form of annuity, equal to 68:92% of final 48-month average sabuy plus $335.05 per mooth for each year of service in excess of 20 years. A firefighter has the option to participate in a Retroactive Deferred Retirement Option Plan (RETRO DROP) which provides a lmnp sum benefit and a reduced amwity upon termination of employment Firefighters must be at least 51 ycan of age with 21 years of service at the selected "RETRO DROP benefit calculation date" (which. is prior tO date of employment termination). Early RETRO DROP with benefit reductions is available 74 C c C < C C C C ') City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAil, NOTES ON ALL ACTIVITIES AND FUNDS (Continued) E, RETIREMENT PLANS {Continued) 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 prcsc:nt value of the benefits under the option is actuarially equivalent to that of the normal form of the monthly benefit Optional forms are also available at varying levels of surviving spouse benefits instead of the standard two-thirds fonn. · There is no provision for automatic postretirement benefit increases. LFPF bas the authority to provide, and bas periodically provided for in the past, ad hoc postrctirement benefit increases. The benefit provisions of this plan are authori7.c:d by the Texas Local Fire Fighter's Retirement Act (TI.FFRA). 1LFFRA provides the authority and procedure to amend benefit provisions. Contributions Required and Contributions Made The contribution provisions of this plan are authori7.c:d by TLFFRA. 1LFFRA provides the authority and procedure to ~ the amount of contnlmtions detennined as a percentage of pay by each firefighter and a percentage of payroll by the City. While the actual·contribution rates are not actuarially determined, state law requires that ~h plan of benefits adopted by LFPF be approved by an eligibie actuary. The actuazy certifies that the contribution commitment by the fircfigbteis and the City provides an adequate financing arrangement. Using the enoy age actuarial cost method, LFPF's normal cost contnbution rate is determined as a percentage of payroll. The excess of the total contnbution nte over the normal cost contnbution rate is used to amortize LFPFs unfunded actuarial accrued liability (UAAL), if any, and the number of years needed to amortize LFPFs unfunded actuarial liability, if any, is determined using a level percentage of payroll method. The costs of administering the plan are fioanccd by IFPF. ADnaal Pension Cost For the fiscal year ended September 30, 2008, the City Annual Pension Cost (APC) for the LFPF was equal to $3,889,208 as described in item 4 in the table below. Based o:q. the results of the December 31, 2006 actuarial valuation of the Plan effective December I, 2005, the most recent bieunial actuarial valuation, the Board's actuary found that the fund bad an adequate financing airangement based on the cunent level of the firefighter coutnbution rates and on the assumed average of City contribution rates. The fundiDg policy of the Fund requires firefighters to contnl,ute 12.43% of pay. The City co~ based on a fonnula which causes the City's contribution rate to fluctuate from year to year. The December 31, 2006 actuarial valuation assumes that the City•s contnbutions will avenge 19. 75% of payroll in the futu1'e. .The Annual RJ:quired Contnoution (ARC) by the City for the fiscal year ending September 30, 2008 were based on the results oftbe actuarial valuations as of December 31, 2004 and~ of December 31, 2006 using the entry age actuarial cost method and were determined in compliance with the GASB Statement No. 27 parameters. The actuarial methods and assumptiom used for these two valuations as follows: 75 City of Lubboc~ Texas Notes to Basic Financial Statements September 30, 2008 NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) E. RETIREMENT PLANS (Continued) Valuation Date Actuarial cost method Amortization method Amortization period of ARC Asset valuation method Aauarial assumptions: Investment return Projected salary inaeases lnfiation Cost-of-living increase Payroll increases ARC as percent of payroll 12/31/2004 Bnttyage Level percent of payroll, open 21 years S-year adjusted market value 8% 4% plus promotion and longevity 4% 0% 4% Budget rates 12131no06 Entry age Level percent of payroll, open 30 years S-year adjusted marlcet value 8% 4% plus promotion and longevity 4% 0% 4% 20.42% The following shows the development of the Net Pension Obligation (NPO) as of Sept~er 30, 2008 1. Annual Required Qmtn"butions (ARC) 2. Interest on NPO 3. Adjustment to ARC 4. Annual Pension Cost (APC) s. Actual City contributions made 6. Increase (Decrease) in NPO/(asset) 7. NPO/(asset) at October 1, 2007 8. NPO/(asset) at September 30, 2008 $3,903,048 (68,985) 50,145 3,889,208 (3,840,468) 48,740 (862,311) S (813,571) Further details concerning the financial position of the IFPF and the latest actuarial valuation are available by comacting the-Board of Trustees, LFPF, City ofLubboek, P.O. Box 2000, Lubbock. Texas 79457. A stand- alone fiDancial report is available by ~ting the LFPF. Fiscal Year Ended 9/30/06 9/30/07 9/30/08 Trend Information. Annual Pension Cost(APC) $ 3,208,595 3,530,944 3,889,208 Percentage of APC Contrtbuted 100.0% 98.4 98.8 Net Pension Obligation (Asset) $(920,722} (862,311) (813,571) As of December 31, 2006, tl;e most n:ccnt actuarial valuation date, the plan v.ras 84% fimded. The actuarial acaued liability for benefits was $164.4 million, and the actuarial value of assets was $138.1 million, resulting in an unfunded. actuarial aCCIUed liability (UAAL) of $26.3 million. The covered payroll (annual payroll of active employees covered by the plan) was $17.3 million, and the ratio of the UAAL to the covered payroll was 152.1%. The schedule of funding progress, presented as required supplementary infon:Dation following the notes to the financial.statements, will present multiyear trend iDformation about whether the actuarial va111C of plan assets is incteasmg or decreasing over time relative to the actuarial accrued liabilities for benefits. 76 C C C C C C C C ,. ... C C. "\ ). ) ) ) City of Lubbock, Tens Notes to Basic Financial Statements September 30, 2008 NOTE ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) F. OTHER POST EMPLOYMENT BENEFITS (OPEB) Plan Description: The City sponsors and acbnimstcn an informal single-employer health/dental plan. Texas statute provides that retirees from a rmmicipality with a population of 25,000 or more and that receive retirement benefits from a municipal retirement plan are entitled to pmcbase continued health benefits coverage for the person and the person's dependents unless the person is eligil,le for group health benefits coverage through another employer. The Slate of Texas bas the authority to establish and amend the requirements of this statute. The City does not issue stand alone financial statements of the health/dental plan, however, all required information is presented in this report. Funding Policy: The conmbution requirements of plan members are established by the City and may be amended as needed Retiree medical/dental coverage levels for retirees is the same as coverage provided to active City employees in accordance with the terms and conditiom of the current City Benefit Plan. Employees who retire with 15 or more years of service or Civil Service employees that retire -who have a balance in excess of 90 days sick leave are eligible to continue n:ceiving medical coverage in full 30 day periods for the term of their sick leave balance. Toe City contdbutes 33.89% to 58.83% of the monthly premium for the retiree oDly health premium and 7.88% for the retiree only dental premium. Plan members may purchase retiree health/dental care coverage for eligible spouses and dependents at their own expense and receive a benefit from the blended premium rate from all of the employees participating in the City's health insurance plans. 1be City is not required to make contn"buti.ons to the plan on behalf oflhe retirees and funds the plan on a projected pay•as-you-go financing method. The plan has 499 active participants who pay monthly premimm between $272/$22 (medical/dental) for single coverage and ($320/$27) medical/dental for family coverage. A.nm,al OPEB Cost and Net OPEB Obligation: The City's annual OPEB expense is calcuiated based on the ammal required contribution (ARq of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis. is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City's amma1 OPEB cost for the year, the amount actually contnbuted to the plan, and changes in the City's net OPEB obligation: .Amma1 required contnbution Interest on net OPEB obligation Annual OPEB Cost Total annual employer contribution (pay-as-you-go) Increase in net OPEB obligation Net OPEB obligation -~ginning of year Net OPEB obligation -end of year $6,636,899 6,636,899 (2,281,379) 4,355,520 s 4 355 520 The components of the ARC calculation reflectiug a 30 year amortization period is as follows: Normal Cost .Amortization ofttausition obligation Interest cost ARC 77 S 3,221,541 3,415,358 S 6 636 899 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) F. OTHER POST EMPLOYMENT BENEFITS (Continued) The City's annual OPEB cost, the percentage of annual OPEB cost contn"buted to the plan. and the net OPEB obligation for 2008 is as follows: Percentage of Annual Fiscal Year AnoualOPEB OPEBCost NetOPEB Ended Cost Contributed Obligation 09/30/2008 $6,636,899 34.4% $4,355,520 Fwrded Status and Funding Progress: As of October 1, 2007, the most recent actuarial valuation date, the plan was not funded. The actuarial acc:nu:d liability for .benefits was $81,918,738, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $81,918,738. The covered payroll ( annual payroll of active employees covered by the plan) was $88,185,412, and the ratio of the UAAL to the covered payroll was 92.9%. Actuarial valuations of an ongoing plan involve estimates of the value of reporled amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts deteimined regarding the funded status of the plan and the ARC of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplemcntaty information following the notes to the financial statements., will pn:seot multi-year irend information about whether the actuarial value of plan ~ is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits: However, since this is the first year of implementation there is no ttend information to report. Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattem of sharing of benefit costs between ~ employer and plan members to . that point The actuarial methods and assumptions used include techniques lhat are designed to reduce the effects of short.tenn volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the·October 1, 2007, actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptiom included a 4.5% investment rate of~ based on a long term rate of investment, a 3% annual salary increase projection, and an annual healthcare cost trend rate of 10% for 2007 and then reduced by decrements to an ultimate rate of 4.5% after fifteen years. The UML is being amortized as a level percentage of projected payroll on a closed basis. ·The remaining amortization period at September 30, 2008, was twenty-nine yeais. G. DEFERRED COMPENSATION The City offers its employees five defened compensation plans in accordance with Intemal Revenue Code ("IR.C') Section 457. The plans, available to all City employees, permit them to defer a portion of their sa1aiy 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. 78 C C ( C C f ... C • C I" ) )_ ) "I \ City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACl1VITIES AND FUNDS (Continued) G. DEFERRED COMPENSATION (Continued) The City does not provide administrative services or have any fiduciary responsibilities for these plans; therefore, they are not presented in the BFS. H. SURFACE WATER SUPPLY Canadian River Municipal Water Authority The Canadian River Municipal Water Authority (CRMW A) is a Conservation and Reclamation Authority established by the Texas Legislature to construct a dam, water resexvoir, and aqueduct system for the pmposc of supplying water to surrounding cities. The Authority was created in 1953 and comprises eleven cities, including the City of Lubbock. The budget, financing, and operations of the Authority are goven,ted .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 Sept.ember 30, 2008, the Board was comprised of 18 members, two ofwbich represented the City. The City contracted with the CRMW A to reimburse it for a portion of the cost of the Ca:oadian lliver Dam and aqueduct system in exchange for surface water. The City's pro rata share of annual ~ and variable operating and reserve assessments are recorded as an expense of obtaining sw:face water.· Prior to fiscal year 1999, long-term debt was owed to the U.S. Bureau of Reclamation for the cost of co:ostru.ctioo of the facility, which was completed in 1969. The City's allocation of project costs was $32,905,862. During fiscal year 1999, bonds in the principal amount of$12,300,000 were issued to pay off the construction obligation owed to the U.S. Bureau of Reclamation via CRMW A in the amount of $20,809,067, The difference of $8,509,067 was a dis<:ouot 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 amorti7.ed over the life of the refundi:og bonds. At September 30, 2008, $1,363,690 remains unamortized. The annua1 principal and interest paymeut.s are included in the disclosures for other City related long-term debt The above cost for the riP,Its are recorded as capital assets and are being amortized over 85 years. The cost and debt arc recorded in the Water Enterprise Fund In 2005, the Canadian River Municipal Authority issued $48,125,000 in Contract Revenue Bonds. The City of Lubbock shared in this issue in the amount of $17,960,000. The Owdiau River Mumcipal Authority · issued a new Contract hvenue Bond. Series 2006 in April 2006 in the amount of$49,075,000. The City of Lubbock shared in the issue for $18,573,906 and other costs of $492,465, and received depreciable assets (water rights) valued at $19,066,371. These assets and liabilities are recorded in the Water EotCiprisc Fund. Brazos River A11thority-Lake Alan Henry During 1989, the City entered into an agreement with the Brazos River Authority (BRA) for the construction, maintenance, and operation of the facilities known as Lake Alan Henry. The BRA, which is authorized by the State of Texas to provide for the conservation and development of surface waters in the Brazos River Basin, issued bonds for the construction of a 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 1991. The BRA revenue bonds were refunded in 1995 and 2005, legally defeasiug 1he BRA debt. The new debt is in the City's name and is no longer BRA debt The Lake Alan Henry dam and facilities assets are recorded as capital assets a:od are being depreciated over 50 years. The financial. activity, along with related obligation, is accounted for in the Water Enterprise FUlld 79 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) L LONG-TERM DEBT GENERAL OBUGATION BONDS AND CERTIFICATES OF OBLIGATION: Interest Maturity Amount Outstanding . · ~ Dated Date Issued 09-30-08 5.39 10-01-93 02-15-14 S 2,SS0,000 S 780,000 5.20 10-01-93 02-15-14 1,470,000 22S,000 5.14 10-01-93 02-lS-14 19,215,000 2,895,000 4.71 01..01-98 02-15-18 10,260,000 l,54S,000 4.36 01-15-99 02-1S-l4 20,835,000 12,900,000 4.58 01-15-99 02-tS-19 15,355,000 770,000 4.77 04-01-99 02-15--19 6,100,000 305,000 4.71 04-01-99 02-15-19 12,300,000 6,820,000 5.37 09-15-99 02-15-20 24,800,000 1,085,000 5.S4 03-15-00 02-1S-20 7,000,000 310,000 4.90 02-01-01 02-1S-21 9,100,000 815,000 4.81 02-01-01 02-15-21 2,770,000 280,000 S.25 06-01-01 02-15-31 35,000,000 2,335,000 4.68 02-15-02 02-15-22 9,400,000 3,700,000 4.71 02-lS-02 02-15-22 6,450,000 2,535,000 4.70 02-15-02 02-15-22 1,545,000 1,270,000 4.62 07-01-02 02-15-22 2,605,000 2,045,000 3.18 07-01-02 02-1S-IO 10,810,000 1,855,000 4.42 07-15-03 02-1S-23 11,855,000 3,655,000 4.47 07-1S--03 02-15-24 9,765,000 8,425,000 4.48 07-15-03 02-15-24 680,000 585,000 4.47 07-1S-03 02-15-24 3,590,000 3,095,000 4.87 07-1S-03 02-15-34 40,135,000 6,060,000 4.47 07-15-03 02-1S-24 3,795,000 3,275,000 4.60 08-15-03 04-1S-23 8,900,000 7,130,000 4.60 08-15..()3 04-15-23 13,270,000 4,810,000 4.37 06-30-04 08-01-12 1,000,000 500,000 4.09 09-15-04 02-15-24 2,025,000 1,590,000 4.08 09-28-04 02-IS,24 3,100,000 2,370,000 3.58 09-28-04 02-1S-20 22,620,000 18,385,000 3.89 02-15-05 04-15-25 23,055,000 18,040,000 3.94 06-1.S-OS 02-15-21 49,615,000 49,615,000 4.26 08-15-05 02-15-25 46,525,000 41,700,000 4.82 07-01-05 02-1S-21 43,080,000 37,215,000 4.27 07-15-05 02-15-25 7,265,000 6,510,000 4.58 04-IS-06 02-15-26 76,950,000 73,435,000 4.S8 04-15~ 02-15-26 2,740,000 2,645,000 4.84 05-1S-06 02-15-31 18,830,000 18,770,000 4A2 01..01-07 02-15-34 54,020,000 51,485,000 4A2 01-01-07 0l-1S-34 25,255,000 24,625,000 4.88 08-15-07 08-15-27 1,155,000 1,125,000 4.88 08-1S--07 08-15-27 60,820,000 S8,825,000 6.45 12-15-07 08-15-27 11,805,000 11,805,000 4.22 01-15-08 08-15-27 52,900,000 52,900,000 4.80 04-15-08 08-15-27 2,035,000 2,035,000 4.42 04-1.S-08 0&..15-27 80,485,000 80,485,000 2.45 06..()1-08 08-15-27 22,615,000 22,615,000 Total S 902,750,000 S 656,180,000 (A) (A) Excludes ($7,841,525) net delem:d losses on advance refundings. net bond premiums and discounts, and bond issuance costs -($3,900,807) business-type and ($3,940,718) governmental. Additionally, this amount includes $457,126,347 of bonds used to finance enterprise fund aaivities. 80 C C ( C ,. ... C C ,. ) ) ) ) City or Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) I. WNG.TERM DEBT (Continued) At September 30, 2008, management of the City believes that it was in compliance with all financial bond covenants on oU1stallding general obligation bonded debt, certificates of obligation. and water revenue bonded debt. ' LP&L REVENUE BONDS Balance Final Amount Outstmdlag Interest Rate<%} wueDate Maturi!):: Date mued 09-30-08 4.2.S to 6.2S 1--01-98 4-15-18 $ 9,170,000 S 4,600,000 3.10 to S.00 1-15-99 4-15-19 14,975,000 5,900,000 4.00to S.2S 7..01..01 4-15-21 9,200,000 5,980,000 Total S 33,345,000 S 1614801000 * • Balance outstanding excludes $376,493 of net deferred losses on advance refundings, bond premiums and discounts, · and bond issuance costs. · · Interest Rate(%) 3.983 4.25 toS.O Issue Date OTHER REVENUE BONDS Final Maturity Date 09-30-25 02-15-27 AmGllDt Issa«l $17,960,000 18,573,906 Balance Outstanding 09-30-08 S 16).99,167 17,651,677 $ 36,533,906 S 33,950,844 * *Balance outstanding excludes $365,241 discount and deferred losses on bonds sold or refunded The annual requirements to amorti7.e all outstanding debt of the City as of Sept.ember 30, 2008 are as follows: GovemmeotaJ Activldes Bmines.,-Typ~ Adivties Fiscal Gmeral Obligaton Boom General Obllgadoa Bonds Revenue 8oDds Year Priacfpal Interest Principal IDterest Principal ID1erest 2009 $ 9,478.,486 $ 9,832,982 $ 23,446,514 $ 21,319,399 s 3,016,932 $ 2,448,196 · 2010 9,876,223 8,853,219 24,Jts,,n 19,572,553 3.()62,637 2.315,474 2011 10,249,465 8,407,095 25,010,535 18,526J132 3,110,359 2,181,036 2012 10,327,340 7,940,486 24,882,660 17,439.,327 2,82a,634 2,040,891 2013 10,593,204 7,463,337 25,666,796 16,326,550 2,896,718 1,911,990 2014-2018 53,884,423 29,805,852 124,025,575 64,730,247 15,694,414 7,414,609 2019-2023 53,170,710 16,938,528 107,634,292 36,593,050 13,265,992 3,616,585 2024-2028 36,673,802 4,856,312 82,846,198 13,397,027 6,555,158 651,232 2029-2033 4,80Q,OOO 315,620 16,895,000 2).29/;07 2034--2038 2,400,000 54.000 Totlls S 199,053,653 $ 94,413,430 $ 457,126,347 S 210,188,592 $ 50,430,844 $ 2~80.013 81 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAR. NOTES ON ALL ACTIVITIES AND FUNDS (Continued) L LONG-TERM DEBT (Continued) Capital leases were used to acquire equipment and vehicles. The interest tale on the leases ranged from 1.5% to 3.8%. The annual requirements on capital leases of the City as of September 30, 2008, inclwling interest payments of$3,052,943 are as follows: Govecnmelltal Bu siaea-Type Total Capital Lease Capital Lease Capital Lease Fiscal Minimum Minimum Minimum Year Payment Patment Payment 2009 $ 3,316,870 s 4,715,877 s 8,032,747 2010 3,090,580 4,697,081 7,787,661 2011 2,03l,4lS 3,963,893 S,995,308 2012 1,429,893 2,773,922 4,203,815 2013 910,279 1,689,579 2,599,858 2014-2018 2,768,721 2,469,736 S,238,4S7 Less: Interest (1,325,252! (1,727,692) (3,052,944) Tola I $ 12,222,506 $ 18,582,396 $ 30,804,902 The carrying values on the leased assets of the City as of September 30, 2008 are as follows: Acaamulated Net Book Gross Value Depredation Value Governmental Aclivilies s 16,813,621 s 3,144,099 s 13,669,522 . Business-type Activities 27,0&S,294 2,713,112 24,372,182 Total Leiscd Assets $ 43,898,915 s 5,857,211 $ 38,041,704 82 C C ' ( r "" ,. ' C ' ) ) ) ) ' City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE ID, DETAil.. NOTES ON ALL ACTIVITIES AND FUNDS (Continued) L WNG-Jl:RM DEBT (Continued) Long-tenn. obligations (net of discounts and pmniums) for governmental and business-type activities for the year ended September 30, 2008 are as follows: Debt Payable Debt Payable D11ei11 09/30/07 Adcldo11s Deletions 09/J0/08 oaeyear Govemlllffllll adivltles: Tax-Supported - Obligation Bonds S 160,388,370 $ 46,60S,I 51 s 7,939,868 S 199,053,653 $ 9,478,486 BondDsounts/Premi.wns 2,315,924 1,844,019 219,225 3,940,718 Capilal Lmes 10,916,970 3,783,379 2,477,843 12,222,506 2,934,588 Compemated Absences 17,228,753 8,002,065 7,306,975 17,923,843 6,806,236 Pose R~m:ntBcncli.ts 2,813,759 2,813,759" lnsura~e Oai:n Payable 2,469,382 I 9,333,090. 20 ,()46 ,766 1,7SS,706 I.S99,299 Adritrage Payable 676,052 10S,30S 570,747 Total Governmental acti.vides S 193,995,4S1 s 82,381,463 s 38 ,()95 ,982 S 238.280,932 S 20.818,609 811slneu-type activities: Self-Supported - Obligation Bonds 352,486,630 1 23.Z 34,849 18,595,132 457,126,347 23,446,514 Revenue Bonds 54,208,174 3,777,330 50,430,844 3,016,932 Bond Discounts/Pn:miwns 314,988 4,182,809 1,.338,720 3,159,077 Capital Leases 13.049,379 8,273,303 2,740,286 18,582,396 4,164,910 Closurdl'O$tClosure 3,531,61 I 238,955 3,770,566 Compensated Absences S,357,820 U77,390 2:rn,s26 5,607,684 2,838,245. Post RetiRl=nt Benefits I.S4l,76I l,S4l,761 lnsunuiee Oaim Payable 3,258,788 4,443,470 4,8S6,S79 2,845,679 1,420,757 Adritrage Payable 56S,0IS 6,613 354 S11,214 Total Baslllas-type ac11vl11es S 432,772,405 S 144,899,1 so $ 34,035,927 S 543,635,623 s 34,887,358 Paymems on bonds payable for governmental activities aie made in the Debt Service Fund. Bonded debt is subject to the applicability of federal arbitrage regulations. Accrued compensated absences that pertain to govermncntaJ activities will be liquidated by the General Fund and Special Revemte Funds. The Risk M.auagemem Intema:I Service Fund will liquidate insurance clanm 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. · The total long-term debt is n:concilcd to the total annual requirements to amortize long-term debt as follows.: Loog-tenn dd>t -~mmmtll Acti"l'ities $ 238,280,933 Loag-tenn debt • Business-type Aaivitie s [ottrest Total amou11tof debt Less: Bond discouats/pmniums Less: upbl leases Less: Oosurc/post dosUIC Less: Compemated abseases Less: Post retin:meot beru: fits Less; r llllUr:I.OQC daims payable Less: Atbitnge p a.yable Total other debt T otaJ futwe bond cd debt ~equirer:nents 83 W,635,628 3Z7 ,182,(85 (7,099,795) (30,804,902) (3,no,566) (23,531,528} (4,355,520) (4,601,385) (t,142,021) S 1,109,098,596 (75,305,717) S 1,0l3,792,879 City of Lubboc~ Texas Notes to Basic Financial Statements September 30, 2008 NOTE ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) L LONG-TERM DEBT {Continued) New Bond Issuances In January 2008, the City issued $11,805,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008. The Certificates were issued at a discount of $l85,703. After paying issuance costs of $219,297, the net proceeds were $11,400,000. Proceeds from the sale of these certificates will be used for the purpose of paying contractual obligations to be incw'red for construction of a Civic/Conference Center. The proceeds of the debt are recorded in a Capital Projects Fund. In Februuy 2008, the City issued $52,900,000 Tax and Wastewater System SUIJllus Revenue Certificate of Obligation, Series 2008. The Certificates were issued at a premium ofS2,851,567. After paying issuance costs of $686,897, the net proceeds were $55,064,670. Proceeds from the sale of these certificates will be used for the purpose of paying collbaetual obligations to be incurred for Wastewater System extension and improvements. The proceeds of the debt are recorded in the Wastewater Fund In May 2008, the City issued $2,035,000 General Obligation Bonds, Series 2008 and $80,485,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2008. The General Obligation Bonds were issued at a premium of $110,554. After paying issuance costs of $36,832, the net proceeds were $2,108,722. Proceeds from the sale of these bonds will be used for street improvements and costs associated with the issuance of the bonds. The C.ertificates of Obligation were issued at a premium of$4,714,28S. After paying issuance costs of $1,082,542, the net proceeds were $84,ll6,742. Proceeds from the sale of these certificates will be used for the pwpose of paying contractual obligations to be incurred for i) various public improvements including fire. parks,· municipal building, solid waste, drainage, street. .~lecirical, water and wastewater improvements and ii) professional services rendered in comicction therewith and costs associated with the issuance of the Certificates. The proceeds of the debt are recorded in various Capital Projects Funds. In June 2008, the City issued $22,615,000 Tax and Watexworks System Surplus Revenue Certificates of Obligation. Series 2008A. After paying issuance costs of $76,733, the net proceeds were 522,538,267. Proceeds from the sale of these certificates will be used for !he purpose of paying contractual obligations to be incuIIed for construction of Lake Alan Henry Pipeline. The proceeds of the debt are recorded in the Water Fund and are held in escrow by the Texas Water Development Board. Proceeds from debt issuances are primarily capital related and are included in net assets. invested in capital assets, µet of related debt. Advanced Refuadings The City issued advance refundings to retire a portion of the City's outstanding debt to lower the debt service requirements. The net proceeds from the issuance of the Refunding Bonds were deposited with the ~w Agent 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 will be used to purchase direct obligations of the United States of America. Under the escrow agreements, between the City and the Escrow Agent, the escrow funds are irrevocably pledged to the payment of principal and interest on the Refunded Bonds. 84 C C C ( I' I• C C ( ") . ) ) ; ) City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m DETAil. NOTES ON ALL ACI1VITIES AND FUNDS (Continued) J. CONDUIT DEBT The City issued Housing Finance Corporation Bonds, Health Facilities Development Coq,oration Bonds, and Education Facilities Authority Bonds to provide financial assistance to private sector entities for the acquisition and construction of public facilities. The bonds are secured by the property financed. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligakld in any manner for repaymeni of the bonds. According]y, the bonds are not reported as liabilities in the accompanying financial statements. As of September 30, 2008 there were seven series of Lubbock Health Facilities Development Corporation Bonds outstanding with an aggregate principal amount payable of $260,695,343. The bonds were issued between 1993 and 2008. Also as of September 30, 2008, then: was one series of Lubbock Education Facilities Authority Inc. Bonds outstanding with an aggregate principal amount payable of$8,4S5,000. Th.e bonds were issued in 1999. K. SPECIAL ASSESSMENT DEBT The Vintage Township PFC, a discretely presented component unit of the City, is.med special assessment debt for acquisition and construction of certain public facilities benefiting Vintage Township. The PFC issued S3,4n,ooo in special assessment debt and bad $3,.394,000 outstanding special assessment debt as of September 30, 2008. The City collects assessments and forwards the collections to the bondholders. The City is not obligated in any manner for special assessment debt and is not liable for repayment of the debt .As the PFC completes construction of certain public facilities. the assets . are donated to the City. As of September 30, 2008, $1,200,000 in completed construction costs was contn"buted to the City. The P~C has a deficit in net assets invested in capital assets, net of related debt which is a result of the debt held in the PFC name while the assets are donated to the City and held in the City name. L RISK MANAGEMENT The Risk Management Fund MS established to account for liability claims, worm's compensation claims, and premium; for property/casualty insurance coverage. The Risk Management Fund generate$ its revenue through charges to other departments, which are based on costs. In April 1999, the City purchased workers' compensation coverage, with no deductible, from a third party. 'Prior to Apnl 1999 the City was self-insured for worker's compensation claims. Any claims outstanding prior co April 1999 continue to be the City's responsibility. The City's self-insurance liability program is on a cash flow basis. which means that the servicing comractor processes. adjusts and pays clabm from a deposit provided by the City. The City accounts for the liability program by charging premiwm based upon losses, administrative fees and reserve requirements. In order to c:onttol the risks associated with liability claims, the City purchased excess liability coverage in September 1999, which is renewed annually. The policy has a $10 million amwal aggregate limit and is subject to a $250,000 deducb"ble per claim prior to October 1, 2005, and a $500,000 deductible per claim since October 1,2005. 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) ~ have been reported but not settled, and of cJaims that have been incmred but not reported (ffiNR). The length of time for which such costs mu.st be estimat.ed varies depending on lhe coverage involved. Bcciwse actual claim costs depend on such complex 85 City of Lubbock, Texas Notes to Buie Financial Statements September 30, 1008 NOTE m. DETAR NOTES ON ALL ACTMTIES AND FUNDS (Continued) L. RISK MANAGEMENT <Continued) 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 ec:onomic and SQCial 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 aCC1>Unted for in the Risk Management Fund. The property insurance policy -was purchased from an outside insurance carrier. The policy has a $250,000 deducllble per occurrence, and the boiler coverage insw:ancc 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 ~U1111lce policies, such as surety bond coverage and miscellaneous floaters, are also accounted for in 1he Risk Management Fund. Funds are clwged 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 the Internal Service Funds. · M. HEALTH INSURANCE The City provides medical and dental insurance for all full-time employees that are accounted for in 1he Health Benefits Fund Revenue for the health insurance premiwns 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 City purchases excess coverage of Sl 75,000 per covered individual ammally and an aggregate cap of$19,188,006. The imurance vendor based on medical trend, claims history, awl utilw.tion determines the aggregate deducb'ble. The actuarially determined calculation of the claim liability is $1.45 million at September 30, 2008 for all health coverages including medical, prescription drugs and dental. The City also provides full-time employees basic term life insurance. The life insurance policy bas a mcc value of$ I 0,000 per eJll)loyee. Full-time employees may elect to purchase medical and dental insurance for eligible dependents at a reduced rate. Employees may also elect, at their cost, to participate in several voluntuy insurance p~ such as a cancer income policy, vohmtary life and personal accident inmram:e. N. ACCRUED INSURANCE CLAIMS The Risk Management and Health Benefits Funds establish a liability for self-insurance for both reported and unreported insured events, which includes estimates of future payments of losses and related claim adjustment expenses. The following represents changes in those aggregate liabilities for these funds during the past two years ended September 30: 86 ( C ( ( C C C C C ( ) ) ) ) 1 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE DI. DETAll. NOTES ON ALL ACTIVITIES AND FUNDS (Continaed) N. ACCRUED INSURANCE CLAIMS (Continued} PY2008 · FY2007 Workers conq,ensation and liability rcsenes at beginning offJ.SCal year $ 3,258,788 $ 5,260,976 Claims c,q,enses 4,443,470 2,907,050 Oaims payments (4,856,579) (4,909,238) Workers' COIJ1>CI!sation and liability reserves at end of fiscal year 2,845.679 3,2S8,788 Medical and dental claims liabilily at beginning of fiscalycar 2,469,382 2,761,156 Claims ~enses 19.333.090 17J07,683 Claims payments (20,04~7~ ( 17,.$99,45:!i Medieal and dental claims liability at end of fiscal .year 1,755,706 2,469,382 Total self..insulllI1ce liability at end of fiscal year 4,601,385 S,728,170 Total assets to pay claims at em of fiscal year 17,.H0,106 14,293,590 Accrued insurance claims payable -current 3,020,056 4,344,914 Accrued imur&DCC claims payable -ncncurrent 1,581,329 1.383,2S6 Total accrued insut3!lce claims $ 4,601,385 s 5,728.170 0. LANDFil,L CWSURE AND POSTCLOSURE CARE COST· State and federal laws and regulations require the City to place final covets on its landfill sites at closure and to perform certaiD maintenance and monitoring functions for thirty years thereafter. Although closure and postclosure care costs will be paid only near or after the date that the landfills ,;,top accepting waste, the City reports a portion of these closure and postclosure costs as operating expenses (and recognizes a corresponding liability) in each period based on landfill capacity used as of each balance sheet date. The $3,770,566 included in landfill closure and postclosure care liability at September 30, 2008, ICpresents the cumulative amount expemed by the City to date for its two landfills that are registered under TCEQ permit numbets 69 (Landfill 69) and 2252 (Landfill 2252), less amounts that have been paid. Approximately 93.3 percent of 1he estimated capacity of Landfill 69 bas been used, with $780,572 remaining to be recognized over the remaining closure period, an estimated two years. Approximately 3.6 percent of the estirnared capacity ofLandfill 2252 has been used to date, with $25,055,779 remaining to be recognized over the remaining closure period. estimated at over 80 years. Postclosure care costs are based on prior estimates ·anc1 have been adjusted for inflation. Actual costs may differ due to inflation, deflation, changes in technology, or other regulatory changes. The City is required by state and federal laws and regulatiom to provide assw:aoce that financial resources will be available for landfill closure, postclosu:re care, and remediation or contaimnent of enviromne:n13l ba28tds. The City is in compliance with these requirements and bas chosen the Local Govemment Financial Test mechanism for providing assurance. The City expects to finance costs through normal operations. 87 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) P. DISAGGREGATION OF ACCOUNTS -FUND FINANCIAL STATEMENTS A ttOUllts Receivable SUIIIIDll!t: Coan Property F1nes Damage Goveramcntal Fundt: Pavl!!; . Misc. General Fuad s 31229,541 $ 2681333 $ 2831795 $ 1261405 $ Total s 3,229,541 $ 268,333 S 283,795 $ 126,405 s General Acco1111ts Receinble S•mma2: Credit Balance al Coas.mer Card Misc. 09/30/08 Proprietary Fa ads: LP&L s 21,226,784 s . $ 367,212 S 21,593,996 Water 6,081,279 6,081,279 Wastewater 2,759,263 2,759,263 WI'MPA 899,013 899,013 Stormwater 1,031;468 1,031,468 Nonmajor 319181170 546 3191 si716 Total $ 35,915,977 $ 546 $ 367,212 $ 36,283,735 Allowance for Doubtful Accounts Summary Balance at 09/30/08 Govenuneatal Funds: General Fund $ 2,798,969 Proprietary F11Dds: LP&L 2,723,698 Water 1,082,716 Wastewater 461,429 Storm Water 206,103 Nonmajor 638,003 Total $ 7,910,918 88 C C Bala11wat 09/30/08 319081074 3,908,074 ( ( ,. .... t "' C ( ) ) -.. City of Lubbock, Texas Notes to Basic Financial Statements September 30, 1008 NOfE m. DETAIL NOTES ON ALL ACI1VITIES AND FUNDS (Continued) P. DISAGREGATION OF ACCOUNTS -FUND FINANCIAL S1:ATEMENTS (C4ntinued) Aceouats Payable Summary Governmental Funds: ~~IFWld Govt. Capital Proj ec:ts Nomnajor Proprietary Funds: LP&L Water Wastewater Wl'MPA Stonnwatcr Nonmajor lntcmal Servic c: Total Voudiers $ 833,893 120,890 463,522 1,619,115 687,152 413,535 132,188 384,802 865,053 $ 5,520,150 Acco11111s $ 1,952,776 1,112,601 3,707,404 211,428 1,533,108 2,246,435 9,725,988 487,802 1,951,474 888,516 $ 23,817,532 Miscellaneous $ $ 735,871 1,546 116,083 181,896· 100,575 10,079 1,146,050 Balance at 09/30/08 S 3,522,540 1,233,491 4,172,472 1,946,626 2,402,156 2,760,545 9,725,988 619,990 2,346.355 1,753,569 $ 30,483,732 Q. DISAGGREGATION OF ACCOUNTS -GOVERNMENT-WIDE Net Receivables Aceounts llecelvablt Interest Ta:i:es Imerual Service Balance at Recelvable . il«dvable Receivables O!>/.JG/08 Governmmml ActMtles $ 1,100,105 $ 342,559 $ 10,088.559 $ Business-type Activities 31,I 71,786 703,553 Total $ 32,280.891 S 1,046,112 $10,088,559 $ Accounts Payable Accounts Internal Service Payable Payables Covenunmtal ActMtiet $ 8,928,503 $ 1,160.489 Busloen-type Activities 19,$01,660 593,080 Total $ 28,730.163 $ 1,153,50) R. FUND CLOSURES 32.983 $ 11,573,206 5,541 31,880,880 38.524 $ 43,454,086 Balance at 09/30/08 $ 10,088,992 20.394,740 $ 30,483,732 In fiscal year 2008, City Council terminated the automated traffic signal enforcement program. As a result, the Red Light Camera fund was closed. 89 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE IV. CONTINGENT LIABILITIES A. FEDERAL GRANTS In the normal course of operations, the City receives grant funds from state and federal agencies. The grant prognuns arc 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 beli~ved to be significant B, LfflGATION The City is involved in various legal proceedings related to alleged pei:sonal and property damages, breach of contract and civil rights cases, some of which involve claims against the City that exceed SS00,000. State law limits municipal liability for personal illjury to $250,000/$500,000 and property damage to $100,000 per claim. The following represents the significant litigation against the City at this time. Depending on the date of the occu:rrence, the City's insurance coverage, if available, contains either a $250,000 or a $500,000 self-insured retention depending on the date of the occurrence. As of September 30, 2008, the City has $1,048,856 reserved on general liability claims. Oscar Renda Contncting, Inc., et al v. City or Lubbock: The Plaintiff is a contractor who bid to perform a contract for the City of Lubbock. Oscar Renda asserts that they were not awarded the contract because they bad filed a suit against another public entity. City of Lubbock filed a· motion for summary judgment and it was granted by the trial court.. However, the Fifth Circuit of Appeals ~ersed the decision of the trial court and remanded the case back to trial in a split decision in August 2006. The City of Lubbock bas filed a petition with the United States Supreme Court in an effort to get them to review the case. The City's request was denied. The City filed a motion for summacy judgment and it was granted in April 2008. The case is on appeal to the Fifth Circuit of Appeals. · Charles Emmanuel Bosler, as Surviving Parent or Courtney ~icole Bosler, as Guardian of Colton Bosler v. Travis Riddle and The City of Lubbock: Plaintiff sued the City of Lubbock and Officer Travis Riddle on behalf of himself and his children arising out of the death of his teenage daughter and injuries to his son from an automobile accident with Officer Travis Riddle. Plain.ti.ff alleges that the officer was operating his vehicle in a negligent manner. The City filed a motion for summary judgment based on the fact that the Plaintiff' did not present his notice of claim to the City of Lubbock within six (6) months of the date of the accident The Plaintiff never filed a notice of claim and filed suit seven (7) mombs after the date of the accident The Plaintiff claims that notice was not necessary i:11 that the Defendants had actual notice of the incident. The trial court granted the City's summary judgment based on the &ct that the Pleintiff did not file a claim with the City of Lubbock within six (6) DlOllths from the date of the accident The Plaintiff appealed this decision to the Court of Appeals and the Comt of Appellate reversed the trial court ruling as to the City of Lubbock but affumed the ruling as to Officer Riddle. The case is set for trial on June I, 2009. 90 C C C C C C C C ( I" ... ) } J City of Lubbock, Tens Notes to Basic Financial Statements· September 30, 2008 NOTE IV. CONTINGENT LIABILITIES (Continued) C. LITIGATION (Continued) L.J. McCallan, Jr. v. City of Lubbock, et al: A lawsuit was filed in late November against the City o{ Lubbock and three Lubbock police officeIS pertaining to an incident in which a suspect was iajured with a taser utilized by one of the Lubbock police officers. Plaintiff is suing the City and the officers under the Civil Rights Act and is also suing the City under the Texas Tort Claims Act. The case is in federal court and has not been set for trial Plaintiff does not appear to have suffered lasting physical injuries as a result of 1hc tasing. Two of the individual officers have been dismissed. Ackers v. City ofLubbocl<, et al Plaintiff sued the City, its Police Chief and two police officers for violation of his Fust Amendment rights. Plaintiff alleges that bis Fust Amendment rights were violated when the film from his camera was confiscated by police while he was photographing a children's basketball game. The City filed a Plea to the Jurisdiction which was gmUed by the trial court. Plaintiff appealed the case to the appellate court and the appellate court remanded the case to the trial court rea.soomg that a Plea 10 the Jurisdiction was not the proper proccdlual DlC"claoism The case is set for trial in August 2009. Estate of Tommy Zobor v. City of Lub~ock and Atmos Epergy A lawsuit was filed in October 2008 by the Estate of Tommy Zobor. Zohor died as a result of an accident with an Atmos Energy truck. A City patrol car was responding to a call with his lights on. As the patrol car came up behind the Atmos Energy truck the officer "bumped" his siren and the Atmos Enezgy ttuck made a left tum to move out of the patrol car's path. The motorcyclist. Tommy Zobor. was proceeding in the opposite direction and collided with the Atmos truck.' Templeton Mortgage v. City of Lubbock, Garza County, ~nt County and the Tens Attorney General's Office Plaintiff seeks a declaration as to certain rights regarding the restrictive easements at Lab: Alan Hemy as well as other areas such as the use of water. The City will file a motion for summaiy judgment by February 2009. This is not a dap:Jages case, but the court has the authority to grant attorneys' fees to the prevailing party. The trial is set for spring 2009. Templeton Mortgage Corporation & MarkBroWD v. City of Lubbock This case involves some of the same facts and arguments as the Templeton Mortgage v. City of Lubbock, Garza County, Kent County and the Texas Attomey General's Office. In addition, the Plaintiff is seeking $100,000 in damages to his property because of the risiog and falling of the water at Lake Alan Hemy. The City is waiting for the outrome of the Templeton Mortgage v. City of Lubbock, Garza County, Kent County and the Texas Attorney General's Office case. 91 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE IV. CONTINGENT LIABILITIES (Continued) B. LmGA TION (Continued) In Re: ICON Benefit Administrators, L.P., American Administrative Group, Inc., Health Smart Preferred Care, LP. and Tbe Parker Group, Inc. v. City of Lubbock In the fall of 2006, the Cily requested an audit of the eta.um administration performed by the above-named entities on behalf of the City of Lubbock. American Administration Group, Inc (AAG) and ICON refused to give the City the necessary documents to perform the audit. The City filed a pre-arbitration discovezy petition in March 2007 in an attempt to obtain the documents necessary to perform this audit Prior to a hearing scheduled in February 2008, the court referred matters to arbitration. The arbitration is scheduled for October 26, 2009. ICON and the other Parker companies an: claiming that the City breached its contract with them by hiring an insurance broker in 2006 and by providing confidential information from ICON/AAG to third parties. The City is also being sued for disparagement, harassment, performing an inappropriate audit, seeking confidential infonnation, and other allegations which the City believes are not actionable. The City claims that ICON/AAG and HealthSmart breached the contract with the Qty by not providing the City 'With the same discounts and prices as provided by Blue Cross as agreed to in the contract and for applying the discounts and administering the contract improperly. - ICON and AAG v. Joella Mullin, Stanley Self, Andrea Davenport, Lee Ann Dumba1,1ld, Scott Snider, Leisa Hutcbesoo, David Miller, and unknown others ICON and AAG sued the defendants for various torts includillg civil conspiracy, misappropriation by p~paring an unlawful proposal to the City of Lubbock, wrongful interference with contract, interference with prospective contractual relations, business disparagement, defamation and violations of the Local Government Code. Dumbauld, Snider and Hutcheson are employees of the City of Lubbock and David Miller is the former Mayor of Lubbock. Discovery has begun. Robert Smith v. City of Lubbock Rohen Smith is an employee of the City of Lubbock who was involved in an al1IO accident with another vehicle. Mr. Smith suffered injuries in this accident and filed a claim against the other driver. The other driver had only miniamrn limits of insurance as required by the State of Texas and the insurance company tendered the policy limits to Mr. Smith. However. Smith claims this money was insufficient to cover his damages. Smith sued the City of Lubbock under the City's UIM coverage claiming that the City owes him for his damages under that insurance. He asserts he is entitled to over $600,000. Jerry R. Avery, Erika Cleveland, Joy Elliott, Donna McMillian, and Diana Melcher v. City or Lubbock (Lubbock Power & Light) Plaintiff's filed suit in December 2008 against the City of Lubbock/Lubbock Power & Light alleging damage to personal property from an electrical surge (electric appliances, computers, etc.) and related expenses (spoiled food, hotel·expenses, etc.). The estimate of damages received by LP & L from the Plaintiffs is approximately $39,300 but could reach $60,000. The lawsuit is in its initial stages and the City (LP&L) bas answered the Plaintiffs' petition. 92 C C C C C C ,.. I,, C C C ') ., ) ) l ) City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE IV. CONTINGENT LIABILITIES (Continued) B. LmGATION (Continued) Weatherbee d/b/a Sudsy Springs Car Wash v. G. Greenstreet, Inc. and City of Lubbock Plaintiff filed suit against the City of Lubbock, a.lODg with the conttactor who constructed the building. for the destmctiou of a building. The plaintiff's buildmg was damaged after a wind storm. It was damaged to the extent that the City believed that it constituted a hazard to the public and after giving notice to the plaimifl; tore it down. Plaintiff does not seem to dispute that the building was damaged and that some work needed to be performed to alleviate any hazards. However, plaintiff contends that the City should not have tom the entire building down in order to alleviate any danger. The City's damages should be limited to $250,000 Diaz v. City of Lubbock Diaz is a City police officer who was suspended without pay in May 2007 after an indictment was entered against her. This indictment was dismissed in late 2008. Diaz, pwsuant to civil service law, bas petitioned the Civil Service Commission for back pay. The back pay is approximately $100,000. Lamont Veatch Lamont V catch tripped and fell over a rope at the Coliseum resulting in a broken shoulder. Mr. Veatch died during surgery ID repair his shoulder. The roping was a barricade set up by ABC Rodeo. Satoa Enterprises Sexton F.nterprises allege that the City of Lubbock Council v,,rongfully' awarded a contract that Sexton bid for to another company. C. SITE REMEDIATION The City bas identified specific locations requiring site remediation relative to underground fuel storage tanks and historical fire training sites. One of the sites referred to below as LP&L Plant 1, represeitts a liability equally shared by both the City and LP&L. As of September 30, 2008 the City identified three locations that pose a probable liability. The City recorded the liabilities for the three locations in the enterprise funds as follows: • LP&L Plant 1 S 173,909 -this represents LP&L 's portion of the liability only • LP&L Cooke Plant $467,869 • WcsTexAircraftSI00,000 The City recorded the probable liabilities in the govemmcnt-wide govemmental statements as follows: • LP&L Plant 1 $173,909 -this represents the City's portion only • CFR TrainingFacility$124,706 • Fire Training Academy $854,918 • South Fueling Facility $136,748 93 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE IV. CONTINGENT LIABILITIES (Continued) c. SITE REMEDIATION <Continued) The City bas identified elevated levels of nitrates in the ground watcl' beneath the Lubbock Land Application Site (I.LAS). which is attributed to the historical lmd application of treated wastewater effluent and also impacted by the activities of individuals and other entities. As a result, the Texas Commission on Environmental Quality has issued an Agreed Order that requires the City to remedy the situation. The Order calls for, among other requimnents, pumping an annual average of 1,580 gallons ~ minute from 16 groundwater wells on the LLAS in order to eliminate a mound of groundwater under the LLAS. The growidwater, that is high in nitrates, is discharged into a sumce water lake system where. it is rcmediat.ed naturally. An effluent land application management plan and groundwater monitoring program was also established as a result of the Order. Phase I of the project to construct additions and improvements to the City's wastewater reclamation plant that will treat the sewage to higher quality in the future and address the nitrate issue is coa:plete. Phase D began in the spring of2008 and will be complete by 2011. During FY 08, the City held discussions with TCEQ to consider terminating the Agreed Order and to incorporate the mnaini:ng requimnents for remediation into the main wastewater tteatmcnt permit. Because the groundwater mound under the LLAS has been eliminated in a.ocordance with the requirements of the Order, there is an opportunity to terminate the Agreed Order and to continue addreMing any residual concerns as part of the permit The City is encouraged by the initial discussio~ and believes TCEQ will approve this in the near future. The City expects that the remodiation of nitrates will continue for some time after the new plam is built, but the length of time and total expense are not estimable. Since the remediation is probable, ·but not estimable and if is likely that we will terminate the Agreed Order, the City has not ac:cnicd this remediation. The remediation and monitorillg costs for the next fiscal year are included iD the FY 2009 budget. The City plans to implement GASB Statement No. 49, Accounting and FiDancial ReportiDg for Pollution Remediation Obligations, in FY 2009. This authoritative guidance requires that remediation liabilities be measured and n:corded as the sum of probability; weighted amounts in a range of po&Sible estimated amounts. Cooscqucntly, the City pl.ans to secure an engineering film to determine the mmunt of the poteotial exposure. exploring various methods of addressing the remediation. The potential exposure for one remainiog location is not readily determinable as of September 30, 2008. In the opinion of management. the ultimate liability for this location will not have a materially adverse effect on the City's financial position. 94 C C C ( C C C ,. \,, C C C APPENDIXB FORMS OF BOND COUNSEL OPINIONS ') ) l ") ·vinson&Elkins [FORM OF OPINION OF BOND COUNSEL] [Closing Date] $ _____ _ CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2009 WE HA VE represented the City of Lubbock, Tex.as (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 AND IMPROVEMENT BONDS, SERIES 2009 dated March 1, 2009, 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 HA VE 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 Mellon Trust Company, National Association, as escrow agent (the "Escrow Agent"), a certificate (the "Sufficiency Certificate") of the Escrow Agent verifying the sufficiency of the deposits made with the Escrow Agent for defeasance of the obligations being refunded (the "Refunded Obligations"), customary certificates of officers, agents and representatives of the · Vinson & Elkins L1.P Attomeys at Law Austin Beijing Callas Oubal Houston London Mosoow New YOfk Tokyo Washington Tramm&II Crow Center, 2001 RO$$ AYenue, Suits 3700 Oallas, Texas 75201-2975 Tel 214.220.noo Fax 214.220.7716 www.vetaw.com C C C ( C C r "' C C C ) ..... 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 TIIAT: (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 an~ therefore, the Bonds constitute valid and legally binding obligations of the City; (B) A continuing ad valorem tax upon all taxable ~roperty 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) Firm 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 oµtstanding 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 permit the exercise of judicial discretion. IT IS OUR RJRTHER OPINION THAT: (1) Interest on the Bonds is ex.cludable 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 could be included in the "adjusted current earnings" of a corporation ( other than an S corporation, regulated investment company, REIT, RE.MIC or FASfl) 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 -2- 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 Sufficiency Certificate. If such representations or the Sufficiency Certificate are determined to be inaccurate or incomplete or the City fails to comply with the foregoing provisions of the Ordinance, interest on the Bonds could become includable in gross income from the date of original delivery, regardless of the date on which the event causing such inclusion occurs. Except as stated above, we express no opinion as to any federal, state or local tax consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or disposition of, the Bonds. 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 assu.nµice can be given as to whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published proced.ures 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 talce any action within its control, that if taken or omitted, respectively, may result in the treatment of ~terest on the Bonds as includable in gross incoine for federal income tax purposes. -3- . C C C ( C C I' ... C C C C ) Vinson&Elkins [FORM OF OPINION OF BOND COUNSEL] [Closing Date] $ ____ _ CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 WE HA VE 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 2009, dated March 1, 2009, 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") and the Pricing Certificate executed pursuant to the Ordinance. WE HA VE 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 haye 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 Certiticates 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 L1.P Allomeys at Law Aus~n Beijing Dallas Dubai Housten London Mosoow New York TOkyo Washington Trammen Crow Center, 2001 Ross Avenue. Suile 3700 oaaas, Texas 75201-2975 TIii 214.220.7700 Fax 214.220.7716 www.velaw.com public officials, and other certified showings relating to the authorization and issuance of the Certificates. We have also examined executed Certificate No. 1 ofthis 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 pwpose~, 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 swplus net revenues of the City's Waterworks System, as described in the Ordinance. THE RlGIITS OF TIIE 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, as such. interest on the Certificates is not treated as an .. item of tax preference" to be included in the computation of "alternative minimum taxable income" for an individual or a corporation. Furthermore, interest on the Certificates is not treated as includable in the "adjusted current earnings" of a corporation 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 t~ those sections of the Code that affect the exclusion from gross income of interest on the Certificates for federal income qi.x purposes. If such representations are detennined to be inaccurate or incomplete or the City fails to comply with the foregoing -2- C C C ( C C C C C C C "\ ) ' . 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 Certi,ficates. 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 insw-ance 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 inter~t such as interest on the Bonds). The opinions set forth above are based on existing law, which is sµbject 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 as to 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, resp~tively, may result in the treatment of interest on the Certificates as includable in gross income for federal income tax purposes. -3- C C i ... C C C C ( ( OFFICIAL STATEMENT DATED MARCH 13, 2009 ':) IN THE OPINJON OF BOND COUNSEL, INTEREST ON THE OBLJGA TIONS IS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES UNDER EXISTING LAW AND THE OBLIGATIONS ARE NOT PRIVATE ACTIVITY BONDS. SEE "TAX MA TIERS -TAX EXEMPTION" HEREIN FOR A DISCUSSION OF THE OPINION OF BOND COUNSEL, INCLUDJNG A DESCRIPTION OF ALTERNATIVE MINIMUM TAX CONSEQUENCES FOR CORPORA TIO NS. 0 NEW ISSUE: BOOK-ENTRY-ONLY RATINGS: Moody's Investors Service, Inc. "Aa3" Dated: March 1, 2009 $23,185,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2009 Slandard & Poor's Ratings Services "AA+" Fitch Ratings "AA" See .. OTHER INFORMATION -RATINGS" herein. $58,705,000 CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2009 Due: February 15, as shown on the inside cover I"'\ Principal of and interest on the S23, 185,000 City of Lubbock, Texas (the "City"), General Obligation Refunding and Improvement Bonds, .J Series 2009 (the "Bonds") and the $58,705,000 City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (the "Certificates" and, collectively with the Bonds, the "Obligations") are payable by The Bank of New York Mellon Trust Company, National Association, Dallas, Texas (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 SS,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial 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 OBLIGATIONS -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 March l, 2009, and is payable on February 15 and August 15 of each year, commencing February 15, 2010, 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 business 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 redemption prior to their scheduled maturities at the option of the City (see "THE OBLIGATIONS -OPTIONAL REDEMPTION"). The Bonds constitute direct obligations of the City and 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. 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. The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapters 1207, 133 I and 1371, Texas Government Code, as amended, an election held in the City on May 15, 2004, and an ordinance adopted by the City Council (the "Bond '.) Ordinance"). The Certificates are issued pursuant to the Constitution and general laws 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 (the "Certificate Ordinance" and, together with the Bond Ordinance, the "Ordinances"). 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 6:) 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 Obligations through The Depository Trust Company is expected to be on or about April 8, 2009. Morgan Keegan & Company, Inc. Morgan Stanley Merrill Lynch & Co. Southwest Securities 0 PRINCIPAL AMOUNTS, INTEREST RA TES AND PRICES CUSIP Prefix: S49188 0 S23,185,000 General Obligation Refunding and Improvement Bonds, Series 2009 (Due February 15) Initial CUSIP Initial CUSIP 0 Principal Interest Offering Suffix Principal Interest Offering Suffix Maturi~ Amount Rate Yield (a) Nos. (b) Maturi!l'. Amount Rate Yield (a) Nos. (b) 2010 $ 3,065,000 5.000% 0.950% CH I 2020 (c) $ 130,000 4.125% 4.250% CTS 201 I 3,525,000 5.000% 1.720% CJ7 2021 (c) 135,000 4.250% 4.410% CU2 2012 3,440,000 5.000% 2.100% CK4 2022 (c) 145,000 4.375% 4.550% cvo 2013 3,360,000 5.000% 2.560% CL2 2023 {c) 150,000 4.5000/o 4.680% CW8 2014 3,370,000 5.000% 2.960% CM0 2024 (c) 155,000 5.250% 4.840% CX6 0 2015 665,000 3.250% 3.170% CNS 2025 (c) 165,000 5.250% 4.960% CY4 2016 1,170,000 3.500% 3.4000/o CP3 2026 (c) 175,000 5.000% 5.010% CZI 2017 1,160,000 3.750% 3.590% CQJ 2027 (c) 185,000 5.000% 5.090% DAS 2018 1,160,000 4.000% 3.780% CR9 2028 (c) 190,000 5.000% 5.130% DB3 2019 640,000 4.250% 3.980% CS7 2029 (c) 200,000 5.000% 5.170% DCI 0 (plus accrued interest to date of delivery) S58,705,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (Due February 15) C Initial CUSIP Initial CUSIP Principal Interest Offering Suffix Principal Interest Offering Suffix Maruri~ Amount Rate Yield (a} Nos. (b} Maturi!l'. Amount Rate Yield (a! Nos. (b) 2010 s 1,510,000 4.000% 1.050% D09 2020 (c) $ 2,275,000 5.250% 4.200% DP2 2011 2,575,000 4.000% 1.720% DE7 2021 (c} 2,400,000 5.250% 4.360% DQO C 2012 2,695,000 5.000% 2.100% DF4 2022 (c) 2,530,000 5.250% 4.500% DR8 2013 2,835,000 5.000% 2.560% DG2 2023 (c) 2,665,000 5.250% 4.620% DS6 2014 2,980,000 5.000% 2.960% OHO 2024 (c) 2,810,000 5.250% 4.770% DT4 2015 3,135,000 5.000% 3.1700/o D16 2025 (cl 2,960,000 5.250% 4.900% DUI 2016 3,265,000 3.500% 3.400% DK3 2026 (c) 3,120,000 5.250% 5.010% DV9 2017 3,390,000 3.750% 3.590% DLI 2027 (c) 3,285,000 5.000% 5.090% DW7 a 2018 3,525,000 4.000% 3.780% DM9 2028 (c) 3,450,000 5.000% 5.130% DXS 2019 3,675,000 4.500% 3.980% DN7 2029 {c) 3,625,000 5.000% 5.170% DY3 (plus accrued interest to date of delivery) C (a) The initial yields will be established by and are the sole responsibility of the Underwriters. and may s11bsequc:ntly be changed. (b) CUSIP numbers have been assigned to the Obligations by Standard and Poor's CUSIP Service Bureau, a Division of The McOraw-Hil! Companies. Inc .. and are included solely for the convenience of the registered owners of the Obligations. Neither the City. the Financial Advisor. nor the Underwriters are responsible for the selection or corrcctness of the CUSJP numbers set forth herein. (c) The Obligations maturing on February 15, 2020 and th.ereafter are subject 10 redemption. at the option of the City, al par value thereof plus accrued interest lo 1be date of redemption, on Febru:iry 15, 2019 or any date thereafter (sec "THE OBLIGATIONS -OPTIONAL REDEMPTJON''). C r -- ,.._ I D USE OF INFORMA TJON IN omCIAL ST A TEMENT 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 S1atement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Cily. 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 ro 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 dare hereof. See "OTHER INFORMATION -CONTINUING DISCLOSURE OF INFORMATION" 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 S1a1ement has been provided by the City and from other sources believed by rhe City to be reliable. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall create any implication that there has been no change in the financial condition or operations of 1he 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. IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH ST ABILJZE OR MAINTAIN THE MARKET PRICE OF THE OBLIGATIONS AT A LEVEL ABOVE THAT WHICH MIGHT PREVAIL IN THE OPEN MARKET. SUCH ST ABILIZJNG, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Starement 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. NEITHER THE CITY. THE FINANCIAL ADVISOR. THE UNDERWRITERS ,VOR BOND COUNSEL MAKE ANY REPRESENTA770N OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT PROVIDED BY DTC REGARDING DTC OR ITS BOOK-ENTRY-0.NLY 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 A7TACHED APPENDICES. TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. TABLE OF CONTENTS Page USE OF INFORMATION I~ OFFICIAL ST ATEl\·1ENT ....................................................... l TABLE OF CONTENTS ............................................. 2 OFFICIAL STATEMENT SUMMARY .................... 3 I NTRODUCTION ......................................................... 6 DESCRIPTION OF THE CITY .......................... 6 THE OBLIGATIONS ................................................... 6 DESCRIPTION OF THE OBLIGATIONS .......... 6 PURPOSE ............................................................... 6 REFUNDED OBLIGATIONS .............................. 7 AUTHOR1TY FOR ISSUANCE ........................... 7 SECURITY AND SOURCE OF PAYMENT ...... 7 TAX RATE LIMITATION ................................... 7 OPTIONAL REDEMPTION ................................. 7 NOTICE OF REDEMPTION ................................ 7 AMENDMENTS .................................................... 8 DEFEASANCE ...................................................... 8 BOOK-ENTRY-ONLY SYSTEM ........................ 8 Use of Certain Tenns in Other Sections of this Official Statement... ....................................... 9 PAYING AGENT/REGISTRAR ........................ 10 TRANSFER, EXCHANGE AND REGISTRATION ........................................ JO RECORD DATE FOR INTEREST PAYMENT I 0 REMEDIES .......................................................... 10 SOURCES AND USES OF PROCEEDS ........... I I AD VAi.OREM TAX I NFORMATION .................. 12 ADVALOREM TAX LAW ............................... 12 EFFECTIVE TAX RA TE AND ROLLBACK TAX RATE ................................................. 13 PROPERTY ASSESSMENT AND TAX PAYMENT .................................................. 14 PENALTIES AND INTEREST .......................... 14 CITY APPLICATION OFT AX CODE ............. 14 TAX ABATEMENT POLICIES ......................... I 4 TAX INCREMENT FINANCING ZONES ....... 15 FINANCIAi. l~FORMATION ................................. 16 FINA!\'CIAL POLICI £S ............................................ 30 POLICIES ............................................................. 30 ADMINISTRATION ........................................... 31 l '.'lVESTIHE:'ITS .......................................................... 32 LEGAL INVESTMENTS .................................... 32 INVESTMENT POLICIES ................................. 32 ADDITIONAL PROVISIONS ............................ 33 TAX l\·1A·I·TERS .......................................................... 33 TAX EXEMPTION ............................................. 33 ADDITIONAL FEDERAL INCOME TAX CONSIDERA TJONS .................................. 34 Collateral Tax Consequences ............................... 34 Tax Accounting Treatment of Original Issue Premium ....................................................... 34 Tax Accounling Treatment of Original Issue Discount Obligations ................................... 35 OTJ-IF:R l'.\'FORMATIOi\ ......................................... 35 RATINGS ............................................................. 35 LITIGATION ....................................................... 35 INVESTIGATIONS RELATING TO CITY·s 2 HEALTH INSURANCE ADMINISTRATOR .................................... 36 REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE ...................... 37 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS ........................................................ 37 LEGAL MA TIERS ............................................. 37 CONTINUING DISCLOSURE OF INFORMATION ......................................... 38 Annual Reports ..................................................... 38 Material Event Notices ......................................... 38 Availability oflnfonnation .................................. 38 Limitations and Amendments .............................. 39 Implementation oflhe MSRB's EMMA System 39 Compliance with Prior Undertakings .................. 39 FINANCIAL ADVISOR ..................................... 39 UNDERWRITING ............................................... 39 FORWARD-LOOKJNG STATEMENTS DISCLAIMER ............................................ 40 MISCELLANEOUS ............................................ 40 SCHEDLLE I ·· SCHEDL LE OF REFUNDED O13LIG:\ TJO:\IS APPENDICES 1\PPENDIX A -EXCERPTS FROtv1 ANNUAL Fl~A'.'JCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 3U. 200~ APPE\iDJX B -FORMS OF BO!'\D COL'.'-JSEL OPJ>ltO:--:S 0 0 C C C C C C C C OFFICIAL ST A TEMENT SUMMARY This summary is subject in all respects to the more complete infonnation and definitions contained or incorporated in this Official Statement. The offering of !he 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 enrire 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 2009 population of 218,327 (see "INTRODUCTION -DESCRIPTION OF TI-IE CITY"). THE BONDS ..................................... $23,185,000 General Obligation Refunding and Improvement Bonds, Series 2009 (the "Bonds''), are dated March I, 2009, and mature on February JS in each of the years 2010 through 2029. THE CERTIF1CATES ....................... $58.705,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 ( the "Cenificates" and, collectively with the Bonds, the "Obligations"), are dated March I, 2009, and mature on February 15 in each of the years 2010 through 2029. PAYMENT OF INTEREST ............... Interest on the Obliga1ions accrues from the dated date, and is payable February IS, 20 I 0 and each August 15 and February 15 thereafter until maturity or prior redemption (see •·THE OBLIGATIONS -DESCRIPTION OF IBE OBUGA TIONS"). AUTHORITY FOR ISSUANCE ....... The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapters 1207, 1331 and 1371, Texas Government Code, as amended, an elec1ion held in the City on May 15, 2004. and an ordinance adopted by the City Council (the '"Bond Ordinance"). 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, and an ordinance adopted by the City Council (the "Certificate Ordinance" and, together with the Bond Ordinance, the "Ordinances"). SECURITY FOR THE BONDS ................................................ The Bonds constitute direct obligations of the City and are payable from the proceeds of a continuing, direct annual ad valorem tax, levied within the limits prescribed by Jaw. against all taxable property within the City. 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 nef revenues of the City·s Waterworks System, not to exceed S 1,000. :) OPTIONAL REDEMPTION ............. The City reserves the right, at its option. to redeem Obligations having stated manirities on and after February 15. 2020. in whole or in pan in principal amounts of $5.000 or any integral multiple thereof. on February 15. 2019. 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 oo the Obligations is excludable from gross income for federal income lax 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 ( i) for various public improvements and public purposes. (ii) to refund a portion of the City·s outstanding indebtedness for the purpose of achieving debt service savings (the "Refunded Obligations'") (sec '"SCHEDULE I -SCHEDULE OF REFUNDED OBLIGATIONS"') and (iii) to pay the costs associated with the 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 (i) \·arious public improvements including solid waste. drainage, water. street. electric. park. fire. City Hall and (ii) professional services rendered in connection therewith. In addition. a portion of the proceeds from the sale of the Cenificatcs will be used to pay the costs of issuance of the Ccnificates. 3 RA TINGS ............................................ The Obligations are rated "Aar by Moody·s Investors Service. Inc., "AA+" by Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies. Inc. and "AA" by Fitch Ratings (see '"OTHER JNFORMA TJON -RA TINGS"). BOOK-ENTRY-ONLY SYSTEM .............................................. The definitive Obligations will be initially registered and deliYered 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 Ag.e111/Registrar to Cede & Co., which will make distribution of the amounts so paid to the panicipating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "THE OBllGATIONS - BOOK-ENTRY-ONLY SYSTEM"). PAYMENT RECORD ........................ The City has never defaulted in payment of its general obligation tax debt. -Selected Financial Information - SELECTED FINANCIAL INFORJ\IATIO!'i Fi,cal Per Capita Central Year Estimated Taxabl, THable Purpose Ended City AssesSfd Asse .. rd Funded )~p Po11ul1.tion '" Valuation Valuation Tai Debt'" 2004 206190 S 7.921.590,380 38.400 70.161.218 2005 209,120 8.634,994.862 41.292 80.210.269 2006 211,187 9346.613.951 44.258 87.231 .945 2007 212.365 10.002, 725.637 47.102 92.487.363 2008 214.847 10.897.210.563 50.721 101.185.953 2009 218.327 I l.673.074.132 53.466 104.053.800 '" 111 SourC"e": ThC' Ciiy. i"'1 Docs 001 lnr:l~ i.C'lf•~upportrd dcM. ~, Jndudc:s thi: Bon.di .311d a pnnion or the 0,:-nifii::.act~ th;Jt is ~ amidpattd to b~ self-suppont"d. E:rdlldie-s thci Rtfu1,ded Oblig:ltiOl'S. Genersl Fund Consolidat,d Smemtnl Summa')· 2008 2007 2006 Beginning Balance s 19.125.648 19.924.7! l 17J 71>.420 Tota 1 Re·,enucs 106371.570 102,520.653 97.$18.207 T Ola I Expenditure, 120.345.933 117.202.093 112 .27~ .4-14 End in~ Balance 19.962.275 19.125.648 19.924.711 Re!>erves & Designations U ndesigna1ed Fund Balance s 19.962,275 19.125.648 )9.924.711 For additional infonnation regarding 1hc City. please contact: And~· Burcham Chief Finantial Officer City of Lubbock P.O. Box 2000 Lubbock. TX 79457 Phone (806 i 775-2149 Fa~ \806) 775-105 l Matthew Boles RBC Cap1tal Markets Corporal ion 2711 N_ Hasen . .\ ,·tnue. Suite 2500 Dallas. TX 75204 Phone (214) 989,!672 fa,q214) 989·1650 4 Per Capita General Purpose Funded Tix Debt''' 340.11 383.56 413.06 43551 470.97 476.60 "' zoos 12.694.525 104.35!.I II> I 03.203.269 173 76.4!0 17.376.420 R1tio Tax Debt lo ¾of A5"essed Total Tax Valuation ,,, Collectioas 0.89% 98-64 0.93% 100.28 0.93% 99-71 0.92% 9902 0.93% 99.62 0.89% Cll\ rroces:q 2004 9.417.346 97.437.436 94.160.257 12_694.m 12.694.525 Tax \"ear 2003 2004 2005 2006 2007 2008 C 0 C C C: C C C r '- C C ) J J CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIAL'> Date of Term City Council I nsra llation to Office Ex(!ires Occupation Tom Martin Ma~r Linda De Leon Cooncil Member. District I Flo)d Price Cruncil Member. District 2 Todd R. Klein lll Cooncil Member, District 3 Paul R. Beane Council Member. District 4 Jdm W. Leonard !TI Cwncil Member, District 5 Jim Gi llxeath Cooncil Member. District 6 May2008 May2004 May2004 June 2007 Jure 2008 May2006 May2003 May 2010 Retired JIAay2010 Business Owner May2012 Retired May2010 Sa Jes Con,ulta nt May 2012 Radio Station General Mam~r May 2010 Business Owner May 2012 Business Owner •" Todd R. Klein "as cl!cted lune 9. 2007. to fill the unexpired term ofDisiricl 3 Counciman Gary 0. Boren. SELECTED ADMINISTRA Tl\'E STAFF Date of Employment Date of Employment Total Government Name Position in Cwrent Position with City oflobbock Service Lee Ann Dumbauld City Manager September 2005 July2004 20+ Tom Adams Deputy City Manager August2004 August2004 26 Andy Burclwn Chieffinancial Officer August 2008 Novembcri998 10 Don Vandiver City Attorney August 2008 October 1972 37 Rebecca Gar.ai City Secretary January 200 I August 1996 12 CONSULTANTS AND AD\'ISORS Auditors ....................................................................................................................................... BKD, LLP Linle Rock. Arkansas Bond Counsel .............................................................................................................................. Vinson & Elkins L.L.P. Dallas. Texas Financial Advisor ........................................................................................................................ RBC Capital Markets Corporation Dallas. Texas 5 omCIAL STATEMENT RELATING TO CITY OF LUBBOCK, TEXAS $23,185,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SE:RIES 2009 $58,705,000TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGA TJON, SERIES 2009 INTRODUCTION This Official Statement, which includes the Appendices hereto. provides certain infonnation regarding the issuance of $23,185,000 City of Lubbock, Texas (the "City") General Obligation Refunding and lmprovemen1 Bonds, Series 2009 (the "Bonds") and $58,705,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation. Series 2009 (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 (as defined herein) au1hori1.ing the issuance of the Bonds and the Certificates except as otherwise indicated herein. While the Bonds and Certificates are being offered under a common Official Statement, the Bonds and the Certificates arc 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. There follows in this Official Statement descriptions of the Bonds, the Certificates and certain infom,ation 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 Marke1s Corporation, Dallas, Texas. DESCRIPTION OF THE CITY The City is a political subdivision and municipal corporation of the State of Texas (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 council members. 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 rhree members of the City Council expire in each even-numbered year. The City Manager is the chief administra1ive officer for the City. Some of the services 1ha1 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 2009 population is 218,327. The City covers approximately 119.1 square miles. THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS Cl C C C C C C The Obligations are dated March I, 2009, and mature on February I 5 in each of the years and in the amounts shown on the inside cover page hereof. Interest wi II be computed on the basis of a 360..day year of twelve 30-day months. and wil I be payable on each series of the Obligalions on February 15, 20 I 0, and on each August I 5 and February 15 Thereafter unti I maturity or prior redemption. The definitive Obligations will be issued only in fully registered fonn in any integral multiple ofSS,000 for any one C mamrity of each series and will be initially registered and delivered only to Cede & Co .. the nominee of The Depository Trust Company ("DTC") pursuanl to 1he ~ook-Entry-Only System described herein. No physical delivery of 1he Obligations will be made to the ownen thereof. Principal of, premium, if any. and interest on the Obliga1ions will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribu1ion of the amounts so paid to the participa1ing members of DTC for subsequent payment 10 the beneficial owners of the Obligations. See "THE OBLIGATIONS -BOOK-ENTRY-ONLY SYSTEM'" herein. PURPOSE Proceeds from the sale of the Bonds will be used (i) for various public improvements and public purposes (see ··FINANCIAL INFORMATION -TABLE 11 -AUTIIORIZED BUT UNISSUED GENERAL OBLIGATION BONDS'"). (ii) to refund a portion of the City·s outstanding indebtedness for the purpose of achie\'ing debt service savings (the '"Refunded Ohliga1ions··) (see "SCHEDULE I -SCHEDULE OF REFUNDED OBLIGATIONS .. ) and (iii) to pay the costs associated with the issuance of the Bonds. Proceeds from the sale of 1he Certificates will be used for the purpose of paying contractual obligations 10 be inc..'Urrcd for (i) various public improvements including solid waste, drainage, water. sfrcet electrical, park. fire. and improvements 10 the City Hall and (ii) 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 Ccnificales. 6 r - C 0 REFUNDED OBLIGATIONS Upon delivery of the Bonds, lhe City will deposit a ponion of the proceeds from the sale of !he Bonds to effect the refunding of the Refunded Obligations with The Bank ofNew York Mellon Trust Company. National Association, acting as escrow agent {the "Escrow Agent"). The amount of Bond proceeds so deposited. when added to any other lawfully available funds of the City, if any, 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 direct obligations of the United States of America (the .. Federal Securities"). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of principal of and interest on the Refunded Obligations and amounts therein will not be available to pay the Bonds. The Paying Agent/Registrar for the Refunded Obligations will determine and certify at the time of delivery of the Bonds that the amounts deposited to the Escrow Fund will equal an amount sufficient 10 pay, on the scheduled redemption date. the principal of and interest on the Refunded Obligations. By the deposit of the bond proceeds and cash, if necessary, with rhe 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 cash held for such purpose by the Escrow Agent and such Refunded Obligations will not be deemed 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 Constitution and general laws of the State. particularly Chapters 1207, I 331 and 1371, Texas Government Code, as amended, an election held in the City on May 15. 2004. and an ordinance adopted by the City Council (the .. Bond Ordinance"). The Certificates are issued pursuant to the Constinnion and general laws of the State of Texas. particularly Subchapter C of Chapter 271 of the Texas Local Government Code, as amended. and an ordinance adopted by the City Council (the .. Certificate !"'\ Ordinance" and, together with the Bond Ordinance. the .. Ordinances") . ..... :) SECURITY AND SOURCE OF PAYMENT The Bonds constitute direct obligations of the City and 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. 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 1,000. TAX RA TE LIMITATION A II taxable property within the City is subject to the assessment. levy and col tection 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 vatorem tax debt within the limits prescribed by law. Article XI. Section 5, of the Texas Constitution is applicable to 1he City, and limits its maximum ad valorcm tax rate to S2.50 per $100 taxable assessed valuation for all City pUIJlOSes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per SI 00 taxable assessed va lual ion. OPTIONAL REDEMPTION The City reserves the right. at its option. to redeem Obligations of ei1her series having stated maturities on and after February 15. 2020. in whole or in part in principal amounts of 55.000 or any integral multiple thereof. on February 15. 2019. or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Obligations of a series are to be redeemed, the City may select the maturities of Obligations lo be redeemed. lfless than all the Obligations of any maturity are to be redeemed. the Paying Agent/Registrar (or DTC while the Obligations are in Book-Entry-Only form) shall determine by lot the Obligations, or ponions thereof. within such maturity to be redeemed. If an Obligation ( or any ponion 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 lhcreon 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, pos1agc prepaid. ,o the regis1ered owners of1he Obligations to be redeemed. in whole or in pan, 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 1he dale of mailing such notice. J ANY NOTICE SO MAILED SHALL BI: CONCLUSJVEL Y PRESUMED TO HAVE BEEN DULY GIVEN. WHETHER OR NOT THE REGISTERED OWN ER RECEIVES SUCH NOTICE. NOTICE HA YING BEEN SO GIVEN. THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAY ABLE ON THE SPECIFIED REDEMPTION DA TE, AND NOTWITHSTANDING THAT ANY OBLIGATION OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT. INTEREST ON SUCH OBLIGATION OR PORTION THEREOF SHALL CEASE TO ACCRUE. 7 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 curing of any ambiguity, inconsistency, fonnal defect or omission therein. In addition, the City may, with the written consent of the holders of a majority in aggregate principal amount of the Bonds or Cenificates 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 Bonds or Cenificates, 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 tenns of their payment, (2) give any preference to any Bond or Certificate, as applicable, over any other Bond or Certificate 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, intcres1 and redemption price thereon in any maner 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 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) direct, noncallable obligations of the Unite<l 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, or (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 law, upon the making of a deposit as described above, such Obligations shall no longer be regarded 10 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 fhe City: (i) in the proceedings providing for the finn 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 of the firm banking and financial arrangements; and (iii) directs that notice of1he reservation be included in any redemption notices that it authorizes. BOOK-ENTRY-ONLY SYSTEM This secrion describes how ownership of The Obligations is to be transferred and how the principal of premium, if a~·. and interest on the Obligations are to be paid to and credited by The Deposirory Tmst Company ( .. DTC"), New York. Ne\<· York, while the Obligalions are regisrered in its nominee name. The information in this section concerning DTC and the Book-Emry- Only System has been provided by DTC_for use in disclosure documenrs such as 1his Official Sraremenr. The City, the Financial Advisor. and the Underwriters believe the source of such information to be reliable, but lake no responsibilirrfor the accura9' or completeness thereof. C 0 C ; ... C The City cannot and does no/ gh·e any assurance Iha/ (}) DTC will distribute payments of debt service 011 the Obligations. or redemption or 01her 110Tices. lo DTC Participants, (l) DTC Participants or others will distrib11te debt service payments puid to D TC or it.1· nominee (as the registered owner of the Obligations), or redemption or other nor ices. to the Beneficial Owners, or that they will do so on a time(r hasis, or (3) DTC will serve and act in the manner described in this Official Statement. The curre111 rules applicable 10 DTC are on file with the United Swtes Securities and Exchange Commission. and the ('1trrent C procedures t?{ DTC lo he followed in dealing with DTC Participon/s are on.file with DTC. OTC will ac1 as securi1ies dcposirnry for the Obligations. The Obligations will be issued as fully registered securities regis1ered in the name of Cede & Co. (DTC-s partnership nominee) or such other name as may be requested by an authori,:ed represen1ative of DTC. One fully registered certificate will be issued for each maturity of each series of the Obligations. in the aggregate principal amount of such issue. 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 1he meaning of 1he New York Banking Law, a member of the Federal Reserve Sys1em. a "clearing corporation·· within the meaning of the New York Unifonn Commercial Code, and a "clearing agency"' registered pursuant to the provisions of Section 17 A of 1hc Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3 .5 million issues of U.S. and non•U.S. equity. corporate and municipal debt issues, and money market instruments from over 100 countries that DTCs participams r•oirecl Participants") deposi1 with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through elec1ronic computerized book-entry transfers and pledges between Dirccl Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securi1ies brokers and dealers. banks. trust companies. clearing corporations. and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation i-DTCC .. ). DTCC 1s the holding company for OTC. Na1ional Securities Clearing Corpora1ion. and Fixed Income Clearing Corporation. all of which arc registered clearing agcncic~. DTCC is owned by the users of its regulated subsidiaries. 8 C C C 0 ) ) 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 Participan1s"). OTC has Standard & Poor's highes1 ra1ing: AAA. The OTC Rules applicable 10 its Participants are on file with the United States Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. 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 Obligation ("Beneficial Owner") is in rum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confinnation from OTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statemen1s 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 1heir 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 OTC arc registered in !he name of DTCs 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 OTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; OTCs records reflect only the identity of the Direct Participants to whose accounts such Obligations arc 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 ofnolices and other communications by DTC to Direct Participants. by Direct Participants 10 Jndireci 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 10 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 Obligation documents. For example. Beneficial Owners of Obligations may wish to ascertain thal the nominee holding the Obligations for their benefit has agreed 10 obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to 1he registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Obliga1ions within a maturity are being redeemed. DTC's practice is to determine by lot the amount of the interest of each Direct Participan1 in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any orher DTC nominee) will consent or vole with respect to Obligations unless authorized by a Direct Panicipant 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 10 the Omnibus ProJCy). Redemp1ion, principal, and interest payments on 1he Obligations will be made 10 Cede & Co., or such other nominee as may be requested by an authorized represenrative ofDTC. DTCs 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 DTCs 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 accoums of customers in bearer form or registered in "street name", and will be the responsibility of such Participant and nol of DTC nor its nominee. 1he Paying Agent/Registrar, or the City, subject to any statutory or regula1ory requirements as may be in cffec, from time 10 time. Paymen1 of redemption proceeds, principal, and interest paymen1s to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent/Registrar, disbursement of such payments to Dirccl 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 deposirory wi1h respect ro the Obligations at any time by giving reasonable notice to Issuer or Paying Agent/Registrar. Under such circumstances. in the event that a successor depository is not obtained, security certificates for each maturity of the Obligations are required to be printed and delivered. The Issuer may decide 10 discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, security certifica1es for each maturity of the Obligations will be printed and delivered and 1he Obligations will be subject the transfer, exchange and registration provisions as set forth in the respective Ordinances and summarized under "TRANSFER. EXCHANGE AND REGISTRATION'. below. The information in this section concerning DTC and DTCs book-entry system has been obtained from sources that 1he City. the Financial Advisor, and the Underwriters believe to be reliable, but neither of the City, the Financial Advisor, nor the Underwriters take responsibility for the accuracy thereof. Use or Certain Terms in Other Sections or 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 9 Panicipant acquires an interest in the Obligations, but (J) all rights of ownership must be exercised through DTC and the Book- Entry-Only System, and (ii) except as described above, payment or notices 1ha1 are to be given to registered owners under the Ordinance will be given only lo DTC. PA YING AGENT /REGISTRAR The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, National Association, Dallas, Texas. In the Ordinances, the City retains the right 10 replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agcnt/RegiStrar at all times until the Obligations are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the laws of the State of Texas or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Obligations. Upon any change in the Paying Agent/Registrar for the Obligations, the City agrees to promptly cause a wrinen 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 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, lo the address of 1he registered owner recorded in the registration books of the Paying Agent/Registrar, or (ii) by such other method acceptable to the Paying Agent/Registrar requested by, and al the risk and expense of, the registered owner. Principal of the Obligations will be paid 10 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 nol such a day, and payment on such date shall have the same force and effect as if made on the date paymenl was due. TRANSFER, EXCHANGE AND REGJSTRA TION In the event the Book-Entry-Only System is discontinued, printed Obligations will be issued to the registered owners of the Obligations affected and. thereafter, the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender of such printed Obligations to the Paying Agent/Registrar. 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 or transfer. Obligations may be assigned by the execution of an assignment fonn on the Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying /\gent/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, not more than three business days after the receipl of the Obligations to be canceled, and the written ins1mmen1 of transfer or request for exchange duly executed by the registered owner. or his duly authorized agent, in a form satisfactory 10 the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in any integral multiple of SS,000 for any one maturity and a like aggregate principal amount as the Obligations surrendered for exchange or transfer. See '"THE OBLIGA TJONS -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 pan, 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 Obligalion. RECORD DATE FOR INTEREST PAYMENT The record date ('"Record Date··) for the interest payable on the Obligations on any interesl payment date means the close of business on the last business day of the preceding month. In the event of a non-payment of interest on a scheduled payment date. and for 30 days thereafter, a new record date for such interest payment (a '"Special Record Date .. ) will be established by the Paying Agent/Registrar if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest ("Special Payment Date ... which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Dale by United States mail. first class. postage prepaid, to the address of each Holder of an Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day ncxl preceding the dale of mailing of such notice. REMEDIES a 0 C C C ' The respective Ordinances establish specific events of default with respect to the Obligations. Jfthe City defaults in the paymcn1 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. 1hc failure to perform which materially. adversely affects the rights of the C: owners. including but not limited lo their prospcc1 or ability to be repaid in accordance with each respective Ordinance, and the continuation thereof for a period of 60 days after notice of such defaull is given by any owner to the City, each respec1ive Ordinance provides that any owner is entitled 10 seek a ,,Tit of mandamus from a court of proper jurisdiction requiring 1he City 10 make such paymen1 or observe and pcrform such covenants. obligations. or conditions. The issuance of a writ of mandamus may 10 C J be sought if there is no other available remedy at law to compel perfonnance of the Obligations or the respective 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 respective 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 terms of the respective Ordinances, or upon any other condition. 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. In so ruling, the Court declared that statutory language such as "sue and be sued," in and of itself, did not constitute a clear and unambiguous waiver of sovereign immunity. Because it is not clear that the Texas Legislature has effectively waived the City's immunity from suit for money damages, holders of Obligations may not be able to bring such a suit against the City for breach of the Obligarion or the respective Ordinances. In Tooke, the Court noted the enactment in 200S of sections 271.151-.160, Texas Local Government Code (the "Local Government Immunity Waiver Act"), which, according to the Coun, waives "immunity from sui1 for contract claims against most local governmental entities in certain circumstances." The Local Government Immunity Waiver Act covers cities and relates to contracts entered into by cities for providing goods or services to cities. The City is not aware of any Texas court construing the Local Government Immunity Waiver Act in the context of whether contractual undenakings of local governments that relate to their borrowing powers are con1rac1s covered by the Act. As noted above. the respeciive Ordinances provide that holders of Obligations may exercise the remedy of mandamus to enforce the obligations of the City under the respec1ive Ordinances. Neither the remedy of mandamus nor any other type of injunctive relief was at issue in Tooke. and it is unclear whether Tooke will be construed to have any effect with respect to the exercise of mandamus. as such remedy has been interpreted by Texas couns. In general, Texas courts have held that a writ of mandamus may be issued to require public officials to perform ministerial acts that clearly pertain to their duties. Texas courts have held that a ministerial act is defined as a legal duty that is prescribed and defined wilh a precision and certainty that leaves nothing to the exercise of discretion or judgment, though mandamus is not available to enforce purely contractual duties. However, mandamus may be used to require a public officer to perfonn legally-imposed ministerial duties necessary for the perfonnance of a valid contract to which the State or a poli1ical subdivision of the State is a party (including the payment of monies due under a contract). 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 1he 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"). Ahhough 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 that 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 olher federal or state court); and 1he Bankruptcy Code provides for broad discretionary powers of a Banknrp1cy Court in adminisrering any proceeding brought before the Court. The opinions 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 Ordinances and the Obligations are subject to bankruptcy and other Jaws affecting creditors rights or rcmcdics generally. SOURCES AND USES OF PROCEEDS The proceeds from the sale of the Bonds, along with other available funds of the City, will be applied approximately as follows: SOURCES OF FUNDS: Principal Amount of Bonds ................................................................................................. . Net Original Issue Premium ................................................................................................ . City Contribution from Prior Debt Service Funds ............................................................... . Accrued Interest .................................................................................................................. . Total Sources of Funds .................................................................................................. . USES OF FUNDS: Deposit to Projecl Fund ....................................................................................................... . Deposit 10 Escrow Fund ...................................................................................................... . Accrued Interest Deposited to Interest & Sinking Fund ........................................ ,. ............ . Underwriters· Discount ...................................................................................................... . Cost of Issuance ...................... ,. .................... ,. .................................................................... . Tora! Uses of Funds ....................................................................................................... . 11 523, 185.000.00· 1,243,042.45 580.000.00 112 660.50 $25. I 20, 702.95-. S 2.645.000.00 22,128, I 03.81 112.660.50 . 112,563.18 122.375.46 S25, 120,702. 9S The proceeds from the sale of the Certificates will be applied approximately as follows: SOURCES OF FUNDS: Principal Amount of Certificates ......................................................................................... . Net Original Issue Premium ................................................................................................ . Accrued lnterest .................................................................................................................. . Total Sources of Funds .................................................................................................. . USES OF FUNDS: Deposit to Project Fund ...................................................................................................... .. Accrued Interest Deposited to Interest & Sinking Fund ...................................................... . Underwriters' Discount ...................................................................................................... . Cost of Issuance .................................................................................................................. . Total Uses of Funds ....................................................................................................... . ADV ALOREM TAX INFORMATION AD VALOREM TAX LAW $58,705,000.00 2,175,876.95 287,400.07 $61,168,277.02 $60,327,795.00 287,400.07 354,989.14 198,092.81 $61,168,277.02 The appraisal of property within Lubbock is the responsibility of the Lubbock Central Appraisal District (the "Appraisal District"). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code (defined below) to appraise al! property within the Appraisal Districr on the basis of JOO% of its market value and is prohibited from applying any assessment ratios. In detennining market value of property, different methods of appraisal may be used. including the cost method of appraisal, the income method of appraisal, and the market data comparison method of appraisal. The method considered most appropriate by the chief appraiser is to be used. The appraised value of a residence homestead for a tax year may not exceed the lesser of ( 1) thc most recent market value of the residence homestead as de1ermined by the appraisal entity or (2) 110% of the appraised value of the residence homestead for the preceding tax year. 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 1he determination of appraised value of property wi1hin the City by pelition 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 limi1a1ions applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at produc1ivity 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 subdiYision. or (2) an exemption ofup to 20% of the market value of residence homesteads. The minimum exemption under the provision is S5.000. Jn 1he case of residence homestead exemptions granted under Section 1-b. Ar1icle VIII, ad valorcm taxes may continue to be levied against 1he value of homesteads exempted where ad valorem taxes haw 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. mandace an additional propcny tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the anncd forces: the exemption applies to either real or personal property wilh the amount of assessed valuation exempted ranging from S5.000 to a maximum of S 12.000. C 0 CJ C C C C C Effective January I. 2004, under Article VIII and State law, 1he goYeming body of a coumy. 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 amounr of taxes imposed in the year such residence qualified for such C limitation. Also, upon receipt of a petition signed by 5% of the registered Yotcrs of the county. municipality or junior college district, an election must be held to determine by majority vote whether 10 establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or older or of persons who are disabled, UpCln pro,·iding 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 who is at least 55 years of age. If impro,·cmcn1, (other than maintenance or repairs) are made 10 the property. the value of the improYemcnts is taxed at the then current tax rat<.>. and the total amounl of taxes imposed is increased to reflect the new improwmcnts with the new amount of taxes then scr\'ing as the ceiling on taxes for the following C years. Once established. the lax rate limitation may not be repealed or rescinded. The Ciry has established such a limitation on ad ,·alorem taxes. 12 c ) Anicle VIII provides that eligible owners of both agriculrural 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 propeny appraised for propeny taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and l-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 10 tax such propeny. Boats owned as nonbusiness propeny are exempt from ad valorem taxation. State law additionally provides for one motor vehicle owned by an individual and used in the course of the owner's occupation or profession, and for personal activities of the owner, to be exempted from ad valorem taxation. Anicle VIII, Section 1-j, provides for "freeport propeny" to be exempted from ad valorem taxation. Freeport propeny 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 freepon property are not subject to reversal. In addition, under Section 11.253 of the Texas Tax Code, "goods-in-transit" are exempt from taxation unless a taxing unit opts out of the exemption. Goods-in-transit are defined as 1angible personal property that (i) is acquired in or imponed into the state 10 be forwarded to another location in the state or outside the state; (ii) is detained at a location in the state in which the owner of the property does not have a direct or indirect ownership interest for assembling, storing, manufacruring, processing, or fabricating purposes by the person who acquired or imported the property; (iii) is transported to another location in 1he state or outside the state not later than 175 days after the date the person acquired the propeny in or imported the propeny into the state; and (iv) does not include oil, natural gas. petroleum products, aircraft, dealer's motor vehicle inventory, dealer's vessel and outboard motor inventory. dcaler·s heavy equipment inventory. or retail manufacrured housing inventory. 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 pan 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 cenain improvements on its property. The City in rum agrees not to levy a tax on all or part of the increased value anributable to the improvements until the expiration of the agreement. The abatement agreement may last for a period of up to IO 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 Ciry owns, operates, or controls an internet website, and that 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. J "Effective tax rate" is defined as the rate thai will produce the preceding year's total tax levy (adjusted) from the current year's total taxable values (adjusted). '"Adjusted·· means lost values are not included in the calculation of last year's taxes and new values arc not included in this year·s taxable values. "Rollback tax rate-is defined as the rate that will produce the preceding year's maintenance and operation tax levy (adjusted) from 1hc current year"s values {adjusted) multiplied by 1.08 plus a rate that will produce the current year's debt service from the current 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 ta-cable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations arc 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. 13 PROPERTY ASSESSMENT AND TAX PAYMENT Property wi1hin the City is generally assessed as of January I each year. Business inventory may, at the option of the taxpayer, be assessed as of September I. Oil and gas resetves are assessed on the basis of a valuation process that uses an average of the daily price of oil and gas from 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 of age or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February I each year and the final installment due on August I. PENALTIES AND INTEREST Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Cumulative Mmth Penaltv % Interest 0/o Total% Febrwry 6 I 7 Mar\:h 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 a 0 0 After July, the penalty remains at 12%, and interest increases at the rate of I% each month. Jn addition, if an account is delinquent in July. a 15% attorney's collection fee is added to the total tax penalry and interest charge. Under certain circumstances, delinquent taxes on the homestead of a taxpayer 65 years of age or older incur a penalty of 8% per annum with no C additional penalties or interest assessed. In general, property subject to the City's lien may be sold. in whole or in parcels, pursuant to coun order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities. including governmental units. goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents gowrnmental 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 coun. In many cases post-petition taxes arc paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy coun. C CITY APPLICATION OF TAX CODE The City grants a S 16,600 exemption to the market value of the residence homestead of persons 65 years of age or older; the disabled are also granted an exemption of S 10.000. The City has not granted any pan of the additional exemption of up to 20% of the market value of residence homcs1eads; the minimum exemption that may be granted under this provision is SS,000. C The City has established the tax freeze on residence homesteads of disabled persons and persons 65 of ag.c or older. See Table I for a listing of1he amounts of the exemptions described above. Ad valorem taxes arc not levied by the City agains1 the exempt value of residence homesteads for the payment of debt. The City docs not 1ax nonbusiness personal property: and the Appraisal District collects taxes for the City. The City docs not permit split payments of taxes, and does not allow discounts for early payment of taxes. although discounts are permitted on a local-option basis by the Property Tax Code. Since the 1999 tax year. the City has exempted freepon property from taxafion. C The City collects an additional one-eighth cent sales tax to help reduce ad valorem taxes. The City held an election on No,.·cmber 4, 2003. 10 increase sales tax one quaner cent, for a total of three cigh1hs of a cent. The rate increase became effective on October 1,2004. C TAX ABATEMENT POLICIES The City has established a tax abatement program to encourage economic dc,·clopmcnt. To be considered for rnx aba1ement. 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 10 job creation and property value enhancement. The City had three enterprise zones 1hat ha\·e expired: the Lubbock 2000 North Enterprise Zone and the Lubbock 2000 South Enterprise Zone expired September I. 2008. and the Lubbock lnterna1iona! Airpon Enterprise-Zone that expired September I. 2005. ln 2003. the legislature made changes to the C starute governing enterprise zones. including designating zones by block group based on poverty rate. The block groups meeting the criteria become enterprise zone eligible. but can only be used for tax abatement if the new zones arc activated. In No,,·cmber. 2007 the City acti\'ated thiny eligible block groups. At presenl. there are 18 acti\'c tax abatement agreements. principally for companies located in 1he nonhcast and southeast sections of Lubbock. In accordance with State law. the City has adopted 14 C ) policies for granting tax abatements, which provide guidelines for tax abatements for both industrial and commercial projects. The guidelines for industrial an<! 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 abatemenls were given full (!00%) tax abatement, since 1997 the City has negotiated abatements on a declining percentage basis, with a portion of the tax value 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 tenns of the abatement, including the projected life of the project, the type of business seeking 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, and other factors. The policies disallow abatements for certain categories of property including real property, inventories, tools, vehicles, aircraft, and housing. Each abatement policy provides for a recapture of the abated taxes if the business is discontinued during the term of the agreement, except for discontinuances caused by natural disaster or other factors beyond the reasonable control of the applicant. For a description of the amount of property 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 tax increment financing zone CTIF") if the area constitutes an economic or social liability in its present condition and use. Other overlapping taxing units may agree to comribUte all or a portion of their taxes collected against the "Incremental Value" in the TIF to pay for TJF projects. Any ad valorem taxes relating 10 growth of the tax base in a TIF, above the frozen base, may be used only to finance improvements within the TJF 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 Reinvcstmenl Zone (rhe "Downtown TIF") and the North Overton Tax Increment Financing Reinvestment Zone (the .. North Overton Tlf"'). The Downtown TIF covers a 0. 7 I square-mile area. which includes pan 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. For tax year 2008, the Downtown TIF had a taxable value of $165,812,393 before taking into account tax abatements and exemptions. After tax abatements and exemptions, the tax value in the Downtown TIF was $160,258,513. In addition to the City. the County, Lubbock County Hospital District, and the High Plains Underground Water Conservation District (collectively, the "Taxing Units") panicipate in the Downtown TJF. 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 City Ordinance establishing the Downtown TJF provides that the Downtown TIF will tenninate on December 31, 2021, or at an earlier time designated by a subsequent City ordinance. ln addition to the Downtown TIF. the City enacted an ordinance in 2001 establishing the North Overton TJF. Each of the other Taxing Units in the Downtown TIF also participate in the North Overton TIF. The City ordinance establishing the North Overton TIF provides that the North Oven on TIF wi II tenninatc on December 31, 2031, or at an earlier time designated by a subsequent City ordinance. The North Overton TIF consists of325 acres near the Central Business District of Lubbock. The frozen tax base for the North Overton TIF was established as of January I. 2002. at $26,940,604. For tax year 2008, the North Overton TIF had a taxable value of 5209,920,4S2 before taking into account tax abatements and exemptions. After tax abatements and exemptions, the tax value in the North Overton TIF was S 182.929.3 ! 0. ITHE REMAINDER OF THJS PAGE INTENTJONALL Y LEFT BLANK) 15 FINANCIAL INFORJ\1A TION TABLE 1-VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2008 Markel Valuation Established by Lubbock Central Appraisal District Less Exemptions/Reductions at I 00% Market Value: Residential Homestead Exemptions Homestead Cap Adjustment Disabled Persons Disabled Veterans Prorated Exempl Property Agricuhural/Open-Spacc Land Use Reductions Pollution Ex.emptions Lease Vehicles Exempt House Bill 366 Energy Freeporl Exemptions Tax Abatement Reductions ( I) Market Value Reduction for Protested Properties 2008 Tax.able Assessed Valuation City Funded Debt Payable from Ad Valorem Taxes: General Obligation Debt (as of2-l 5-09) (2) (3) Less: Refunded Obligations Plus: The Bonds Plus: The Certificates Total Funded Debt Payable from Ad Valorem Taxes Less: Self SuppOrling Debt (as of 2-15-09) (3) (4) Waterworks System General Obligation Debt Sewer System General Obligation Debi Solid Waste Disposal System General Obligation Debt Drainage Utility System General Obligation Debi Tax Increment Financing General Obligation Debt Electric Light and Power System General Obligation Debt Cemetery General Obligation Debi Ga1cway General Obligation Debi Hotel Occupancy Tax Debt Airpon General Obligation Debi General Purpose Funded Debt Payable from Ad Valorem Taxes (5) 2 I 6,764,642 68,803,763 14,792,410 15,384.35) 519,415 75.737,115 3.086,919 21,975 177.091 960,000 78.871,454 19.109.213 79,127,693 625,440,000 21.895,000 23.185.000 58.705.000 162,511.542 I 03.309.728 13.135.568 89.186.010 36,007.298 69.482.033 637.401 89.649.761 1.144.548 13.757.312 Audited General Obligation Jmeresl and Sinking Fund as of September 30. 2008 Ratio Total Funded Debt to Taxable Assessed Valuation Ratio General Purpose funded Debt 10 Taxable Assessed Valuation 2009 Estimated Population (6) Per Capita Taxable Assessed Valuation Per Capita Total Funded Debt Payable from Ad Valorem Taxes Per Capita General Purpose Funded Debt Payable from Ad Valorem Taxes (I) Sec"AD VALOREM TAX INFORMATION -TAX ABATEMENTPOLJCIES." $ 12,246,430,173 573,356,041 11,673,074,132 s s s s s 685.435,000 578.821 ,200 !06.613.800 2,104.697 5.87% 0.91% 218.327 53.466 3.139 488 (2) The statement of indebtedness does not include the City's ouistanding Electric Ligh1 and Power System Revenue Bonds. payable solely from the net revenues of 1he City·s Electric Light and Power System. 16 a 0 C C C C C C: C C '.) ) J "\ (3) Includes the Refunded Obligations. (4) Includes the self-supporting portion of the Certificates (approximately $48,950,000 of projects to be funded will be self- supporting). As a matter of policy, the City provides debt service on general obligation debt issued to fund improvements to its Waterworks System, Sewer System, Solid Waste System, Drainage System, Tax Increment Finance Reinvestment Zone, Electric Light and Power System, Cemetery, Gateway Streets, Hotel Occupancy Tax projects, and Airport from surplus revenues of these Systems (see '"TABLE 8A -GENERAL OBLJGA TJON DEBT SERVICE REQUIREMENTS," "TABLE 88 -INTEREST AND SINKING FUND BUDGET PROJECTION," '"TABLE 9 -DIVISION OF GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS," and "TABLE 10 -COMPUTATION OF SELF-SUPPORTING DEBT''). The City's Waterworks System General Obligation Debt has been issued to finance or refinance Waterworks System improvemenis 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 waler supply contracts. The City's Sewer Sys1em General Obligation Debt has been issued to finance or refinance Sewer System improvements and 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 to finance or refinance Solid Waste Sys1em improvements and is being paid. or is expec1ed 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 to finance or refinance Drainage System improvements and is being paid, or is expec1ed 10 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 10 finance or refinance construction of improvements in the North Overton TIF and is being paid, or is expected 10 be paid, from revenues derived from the Pledged Tax Increment Revenues. The City has no outstanding Tax Increment Financing Revenue Bonds. In FY 2009, based upon development projections that the City believes to be reasonable. but which are dependent in part on future economic conditions and other factors that the City cannot control and 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 Ccrti licates of Obligation. Jn the instance that the tax increment revenues are not sufficient 10 pay debt service, 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. repay such loan from revenues received in furure years. The North Overton master plan projects additional debt 10 be issued by the City for infrastrucrure improvements in the TIF. If rhat occurs. there could be years in which the TIF may 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 or refinance Electric Light and Power System improvements and is being paid. or is expected to be paid. from revenues derived from the Electric Light and Power System. The Ci1y has S 16,480,000 of outstanding Electric Light and Power System Revenue Bonds payable from a pledge of system revenues. The City's Cemetery General Obligation Debt has been issued to finance or refinance Cemetery improvements and is being paid. or is expected to be paid, from revenues derived from the Cemetery. The City has no outstanding Cemetery Revenue Bonds. The Ciry·s Gateway General Obligation Debr has been issued to finance or refinance Gateway Streets improvements and is being paid. or is expected lo be paid, from franchise fees. The City has no outstanding Ga1eway Fund Revenue Bonds. The City's Hotel Occupancy Tax General Obligation Deb! has been issued 10 finance tourism projects and is being paid, or is expected to be paid. from hotel occupancy taxes. The City has no outstanding Hotel Occupancy Tax Bonds. The City's Airport General Obligation Debt has been issued IO finance or refinance Airport improvements and is being paid, or is expected 10 be paid. from revenues derived from the Airport. The City has no outstanding Airpon Revenue Bonds. (5) Includes the Bonds and the portion of the Certificates that is not anticipated ro be self-supponing (approximately $9.755.000). Excludes 1he Refunded Obligaiions. (6) Source: City of Lubbock, Texas. (THE REMAINDER OF THIS PAGE JNTENTIONALL Y LEFT BLANK} 17 a TABLE 2-TAXABLE ASSESSED VALUATION BV CATEGORY Taxable Aeer:1ised Value for Fiscal Year Ended Sei!!ember 30, 2009 2008 2007 %of %of %of Ca1eso!l Amoun1 To1al Amount Tolal Amounl To1al 0 Real, Residential. Single-Family s 6.687 .368.655 54.61 6,321,729,050 55,01 5.889,9 ! 8.195 55.53 Real, Residential. Multi-Family 922 .530.900 7.53 93 l ,507,661 8.11 873.394,391 8.23 Real. Vacan, Lots/Tracts 201.H,7.097 1.64 202.703,022 1.76 186,939,508 1.76 Real. Acreage (Land Only) 106.628.Sn 0.87 103,474,361 0.90 I 04,443.4 I 7 0.98 Real. Farm and Ranch lmprovcmenls 11 .977.889 0.10 10.948,790 0.10 10,601.986 0.10 Real. Commercial and Industrial 2.4 76.922.746 20.23 2.246,869.059 !9.55 1.968,271.689 18.560 Real. Oil. Gas and Other Mineral Reserves 39.976.390 0.33 26.864, 1 so 0.23 28.446,050 0.27 Real and Tangible Personal. li1ilitie~ 173.239,955 1.41 181,023.472 1.58 179,562,657 1.69 Tangible Personal, Business l.49t.9:! 1. I 2R 12.21 1,340,911,089 11.67 1.245.600.9R8 11.74 Tangible Personal. Olher 11.981.46:>. 0.10 13,018.766 0.11 13.940.265 0.13 Real Propeny, Inventory 43,435.213 0.35 41.291,828 0.36 37.577.657 0.35 Special lnvcn1ory 76.063260 0.62 72,685,000 0.62 68,621,321 0.65 Other/ Adj ustmenls 216,600 0.00 (115,001) 0.00 220,192 0.0IC) Total Appraised Value Before Exemptions 12.246.430.173 100.00 I 1.492,911.247 J00.00 10.607.S31l.316 100.00 Less: Total ExemptionslRedU<:tions ( 573.356.041 ) (595.700,684) (604.812.679) Taxable Assessed Value s I 1.673.074.132 I 0,897 .210.563 I 0.002,725,637 Tauble Aeeraised Value for Fiscal Year Ended Se2tember 30, 2006 2005 2004 %of %of %of 0 Catei.o~ Amount Total Amount Total Amount Total Real. Residential. Single-Family .s 5.51 7.769.306 55.55 5.169.490, 706 56.09 4.690.158.161 55.50 Real. Residential. Multi-Family 795,689.400 8.01 615,453.250 6.68 561.569,488 6.64 Real. Vacant Lo1srrrac1s 166,089.379 1.67 137.411.731 1.49 I 08.625,954 1.29 Real. Acreage ( Land Only) 80,067.791 0.81 64,532,486 0.70 65,880.410 0.78 Real, Farm and Ranch Jmpro,,ernents I 1.038.895 0.11 10.406.299 0.11 l0.R35,088 o.nc Real. Commercial and Industrial 1.827.901.763 18.40 1.712.457.490 18.58 1.638.846.765 19.39 Real. Oil. Gas and O\her Mineral Reserves 17.526.5 !O 0.18 12,167.754 0.13 8,923.8!0 0.11 Real and Tangible Personal, litili1 ies 177 J\38.907 1.79 173.908.469 1.89 185.761.346 2.20 Tangible Personal. Business 1.228.421\.632 12.37 J.226.369.118 13.31 1.090.862.579 12.91 Tangible Personal. Other 14.527.1 71 0.15 15.465.413 0.17 16.287.022 0.19 Rea 1 Property. Inventory 26.6R5.491 0.27 9.863.035 0.1 I 4.774.2~7 0.06 Special Inventory 67329.545 0.68 68.232.264 0.74 68.663.514 0.80c 01her/ Adj ustmenls 1.499.6)6 0.01 0.00 0,00 Total Appraised Value Before Exemptions 9.932.392.406 100.00 9.215.758.015 100.00 8.45 I .188.4~4 100.00 Less: To1al E~empcions'Rcduccions (5&5.778.455) (5!<0.763.153) (529.59K044) Taxable Assessed Value s 9,346.613.951 8.634.994,862 7 .921.590.380 NOTE: Valuations shown arc certified taxable assessed values reported by the Appraisal District to the City for purposes of C 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 \'alues are resolved and the Appraisal District updates records. 18 C C r '- 0 ) ) ) -..) ) TABLE 3A -VALUATION AND GENERAL OBLIGATION DEBT HISTORY Fisl'al Per Capita General Ratio Year Estimated Tnable Taxable Purpose Tax Debt to Ended Ci~· Assessed Assessed Funded Assessed Funded Debt Tax 30-Sep Pol!ul atio n "' Valuation Valuation Tax Debi'" Valuation '" Per Capita Year 2004 206.290 $ 7,921,590,380 38,400 70,161,218 0.89% 340 2003 2005 209,120 8.634.994,862 41,292 80,210.269 O.'t3% 384 2004 2006 211.187 9,346.613,95 l 44,258 87,231,945 0.93% 413 2005 2007 212.365 10,002,725,637 47,102 92,487.363 0.92% 436 2006 2008 214.847 I 0,897,210,563 50,721 10 I, I 85,9S3 0.93% 471 2007 2009 218.327 11,673.074.132 53,466 104,053.800 "' 0.89% 477 '" 2008 11'1 Soul"('e: The City. 1 "' Dc,e~ nfll indudc: !.t:'ll~5upported debt " lndudr, ,he-Bonds .and the pnninn ofthcCrnificacc~ that is not ::in1kipattd to be 3C"J(.supponM. E,.:lw.t~ 1hc Refi.nHJ~d Oblig.1tions. TABLE 3B-DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT The following table sets forth certain information with respect to the City's general purpose and self-supponing general obligation debt. The City is revising its capital improvement plan, bu1 the City expects to issue additional self-supporting general obligation debt within a three to five year time frame. See '"ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT' below. Fiscal Less: General Purpose Year Funded Tax Debt Self-Supporting Funded Tax Debt Ended Outstanding at Funded Tax Outstanding 30-~p End of Year Debt at End of Year 2005 s 388,595.000 308,384.73 I 80,210,269 2006 447,275,000 360.043.055 87.231.945 2007 512.250.000 419.762.637 92,487,363 2008 633,065.000 531,879.047 101.185,953 2009'" 682.875,000 578,821,200 104.053.800 c~, Proj!X\cd. Jncludc~ lht Obli~tlons and cxdudcs the Refunded Obli~.l:lion~. TABLE 4 -TAX RATE, LEVY AND COLLECTION HISTORY Fiscal Tax Rate Distribution Year End General Economic Interest and Tax Tax Pe rcenl C olleeled 09/30 Fund Denloemenl Sinluni!; Fund Rate Le,} Current Total 2004 s 0.41504 0.03000 0.10066 0.54570 43.659.111 97.02 98.64 2005 0.33474 0.03000 0.09496 0.45970 39.697.452 97.73 100.28 2006 0.35626 0.03000 0.06094 0.44720 41.775.367 97.69 99.71 2007 0.36074 0.03000 0.07125 0.46199 46.068.744 97.88 99.02 2008 0.35380 0.03000 0.07125 0.45505 49. 195.247 98.41 99.62 2009 OJ2540 0.03000 0.09100 0.44640 51.616.589 (In process of Collection) 19 Tax Year 2003 2004 2005 2006 2007 2008 TABLE 5 -TEN LARGEST TAXPAYERS 2008 % of Total Taxable Tuable Name Macerich Lubbock Ltd. AT&T Assessed Valuation Assessed Valuation United Supermarkets LLC PYCO Industries. Inc. Xcel Energy Wal-Man Real Estate Business Trust Atmos Energy / West Texas Division X-Fab Tex.as. Inc. Wal-Mart Stores. Inc. Naples Lubbock Venture LLC Source: The City and the Appraisal District. TABLE 6-TAX ADEQUACY s 128. 77!!.4 73 58.830.186 52.459.356 47.483.420 38.786.891 37.970.476 35.364.580 34.550.415 32.072.801 31.021.727 s 497 .318.325 Average Annual Debt Service Requirements All General Obligation Debt (2009-2034): $0.3505 per $100 AV against the 2008 Taxable AV, at 99% collection. produces Maximum Annual Debt Service Requirements All General Obligation Debt (20 IO): $0.5897 per $100 AV against the 2008 Taxable AV, al 99% collection, produces "l Include,; the Obligalions 811d self supponed deb1. Excludes the Refunded Obliga1ion~. TABLE 7 -ESTIMATED OVERLAPPING DEBT 1.10 0.50 0.45 0.41 0.33 0.33 0.30 0.30 0.27 0.27 4.26 $40,496,804 $40,504,984 $68,144,484 $68,147,757 0 0 Cl C 0 Expenditures of the various !axing 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 1heir expenditures. C This statement of direct and estimated overlapping ad valorem tax bonds ("'Tax Debi'') was developed from infom1ation contained in ''Texas Municipal Repons" 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 compleleness of such infonnation, and no person should rely upon such information as being accurate or complete. Furthermore. cenain of the entities listed may have issued additional Tax Debt since the date hereof, and such c11tities may have programs requiri11g 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. C Taxing Jurisdiction Frenship ISO Idalou ISD Lubbock County Lubbock JSD Lubbock-Cooper ISD New Deal TSD Roosevelt \SD Estimated Overlapping Debt The City Gross Debt (As of2/1S/09) S 157,574.716 78,005.000 122.005.112 45.760.000 11.909,998 S 685.435.000 ,,. Total Direct & Estimated Overlapping Debt As a % of2008 Taxable Assessed Valuation Per Capita Total Direct & Estimated Overlapping Debi '" Includes 1he Ol>liga1ions and e,dud~i 1hc Refunded Obli~alioni. 20 Eslimafl'd % O,·erlapping 66.53 3.92 83.13 98.70 57.09 25.44 2.98 100.00 Overlapping Debt I 04,834.459 64,845.557 120,419.046 26,124.384 354.918 316,578.363 685,435.000 $ I ,002,013.363 8.58 s 4.590 C -I... C C u ,_ > J u u i.J V u TABLE 8A · GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS Fn: Oum•ndln~ llcht , .. Tho Bond, .10-Sop l'rlnolp•I h11rre!'it ·1·.1al l'rin<lpal ~Ol'l"l ~ )!,kllll,1100 .11.12•>.0KI i,J,9~9.0kl !01() 14.!170.0(11) lK,407,K7.1 /,!.417,K7,l .1.01,,.00ll 2011 J>.1.1.<.00!l ~t,}n I. 7J I 'l~.0~(1, 741 .l •. <25.000 101:? .1,,0R.<.000 ,,.J 7.1,(, 14 60.45K,/ol4 .1,440,000 lOIJ .16.!60.000 l.l,7K9.RH7 /,0.049.HR7 J .. 11,0.000 W14 )6,63.1,000 22.1 JK .. ll,7 .IK,773567 .l..HO.OIIO 201;, ).1,070.000 205.1.l. 745 5.S.bOJ,74.S hli~.mm 201(, 34.620.000 IX. 9.<6.0.14 ;.1,576.0)4 1.170.000 2017 .l.<.2Ml,001l 17,.IIIJ,7XO .<2 .. <r,.l.7HO 1.11,0.000 2n1k J6.)25.000 15.60.\.'l72 .<l.92R97! l.l/,0.000 2019 J4.770.00<l L\.k<,1.275 4M.6JU7< 1,40,0(10 1020 J3,2~~.nnn I 2.2.17.41 !o 4~.4'J1.4 I~ iJO,OOll 21121 J!.l 10.non 10.M7.779 42.%7.Jn D5.0ml 2021 )0.).10.0llO Q.l~f,~67! ,W,4H,.l,71 14.'.1100 .!O:?J J0.140.m)I) 7.l•"~.4J5 ,17.7kX.4H 150.1100 ~024 ~•}J)."!.~.flC)O 6.194,PX .l:\~fl)Jil?~ 1;;.ono !02<Ci 2K,7,;_0<~I 4.kllll574 .U.555574 16'-,000 !0~6 1.<.700,00(1 ,.4c.~.!n 2'>.16~ •. H~ 17'.0IHl ~n~; ,2().J40.{l00 2.1.11..12,l ZZ,77\,.12.l 1~5.0rl/1 202K l:OJ,on.ooo 1.4(d,21J.-? 17.0(,1.292 l')(),000 20~') 5.47/.000 W17.14:t (,.442.14.1 100.000 ~O.lO 5.H.<.!~10 712.173 (o.441.17.l 20l I t,.nm1,ooo -.14~.t)4<J (,.44.S.'>-19 !OJ; 2.lq_<,(K)O 2(10.4.'~ 2.4.<.<.4)8 20.lJ 2,290.(IOO 15952.< l,449,52.1 20.14 2.400.llllll 54.000 2,454,000 \ f>.<5,680.000 J04542,4H Q<,0 .. 22~.4.'~ 21.18.<.000 Avcrn~i: Anmml Dehl s'-~vin• R..:q11irt'm~n1s AU (icnci,il Ohlil!-Uli11d Di:hl (200Q.20J4}: M~,;i,;;imum Ann1r.!1I IJ.c'ht Scn·i,:c R1:<111in.:nicnl~ All ficocn1I < lhli1:;llitin '1ehl (.:!0101: ,., fNW~ 1101 mdmk lri?IM" r,1m;h;,,o(" d,.l1~,'tl1no,;; TABLE 8B -INTEREST AND SINKING FUND BUDGET General Purpose General Obligation Debi Service Requirements, September JO, 2009 fiscal Agcl\l Fees lnccrcs1 and Sinking Fund, Seplcn1bcr 30. 200R ln!cres1 and Sinking Fund Ta~ Levy(<& 99.0% Estimated I nlcrcsl Earnings l'rojcc!l?d Balance. Scplcmhcr 30, 2009 ln,tTHl 151K,Kql k/4.]kl (,1(0.(,% ,10.r,,1, .142.406 247J.SO 216,0,('iQ I 7.l,K44 l!k.k'l4 92,tl'l4 75.RIJ m.21o.1 64.22! ~7.'17~ ~0,.2.) I 41.kJ I .1).12.< ."!4.1.?~ 14,7.<11 ,.uoo 5,102,676 TPl•I Prlnrienl 45R.1.R91 15111,000 4 .. l7Q.7RI 1,~1~.oon 4.120.6.•~ ,,1,9;,0110 .l.R70.<,.ll, l.MH,000 3.712.40(, l.9kll.OIIO QIJ.J50 .l.1.,,.000 l..lk6.IIM J.2M.OOO l .. 1J.\M44 ,Jqo,1100 UkK.R94 ).515,onn 732,0<>4 ).(, 75.0ll!l 20,.x1.1 2.n,.000 205.2'~., 2.4011.001) 209.12~ 2.,.10.000 2[}7 .6 7~ 1.M,~.onn 105,2.'1 ,.x 10,1100 20/,,Kll 2.%0,llllO .:rn~.11~ J.120.000 ,?{l'l.12~ .l.28.<.000 204.750 J.4;0,1100 2()5,000 .l.(,25,000 n . .187.676 .<k,70;,ooo $ 11,234.503 15.000 2,104,697 10,143,378 64 l.437 12.889.512 $ 1.640.()09 u u .) \] Tflt c:rrunrllll'!(; l.r.u:Rt'rundtd T~t•l lntcref.C T•lal Ohl iii~ I inn'-llebt Soni rt 4RUR4 1,3.441,.n1 4.040.110<, .~ •• 111\.°'0,UO(, 4.467 .lRR <,R. I 44.4k4 !.l,K4.42~ 5.251}.42~ 4,2JCOJU1_1ii /, 7 .4 I <.(,~2 2.56.~5~0 .~.160 .. ili$0 4,0:?l,364 6.1.RIR.456 ,-.427 .. 100 5.!hl,300 J,77l.07Q /,.1.410. 7/,4 l,2$1.9~.I .<.261.925 ).f,M.1~1' M.IJK,740 2, IJq,o;n 5.21>4.0.<0 kll.213 {,O.<J61(,l}J_\ l,•)9.\ . .l)X .S,25X,5.1X 1,2R7 .. 11,9 5K9).\.!7 I 1.k7 c:.R,1R ~.2h~JOK I.J.17 .. <XI ~7.•)l~Jtxo l.7JU75 5.Jh.l.11~ l,IX7,Jq4 <7.29.l.k47 l,)R\.<&k 5,2'10 . .'~X (!JJ,1)~1l .<J.9'XIJ107 1.443,IRI J.7 IR.lkl 4').416.409 1,320,463 .1.n0.46.l 46, X9 .1,.104 1.191.0,ll J,7.::! 1.050 4J,.l~r,.944 1,054.MI J,71'1,6XI 41,71,.791 910.%.1 .1.7Jll.%.l .19.141,.072 7~9 . .<00 .1.719 . .101) .17.481 .90(, .<'l'l,qoo J,719.900 JJ,09.l,2q7 4.15,87.< J.720.87" 26,701,.\2.l 267.500 .l,717 .. <110 20.9A.1542 90.1,!.< .l,71S.h2.~ 10 .. 162.7(,k ,,.447.17.1 6.44.1.949 2.4S.l.4.18 2.449.525 2.454,000 31.392.BI 90,097,731 25.790.943 1,0U916R99 s 40.496.804 s 6R.144.4R4 TABLE 9-DIVISION OF GENERAL OBLIGATION DEBT SERVICE 1"1 SoUd Woitt-Praln;111:i: TH F.lrdrk Ua,:hf \\'nlC'fU"llrb St•n· Dbp,~•I L'11H1y ln<rtffl('n, & r~wC'r (~hcnal Tnral FYF. .SrM('ffl srurm S~'11tln S~-sl("m Flmuuln$l s,·~trm C.-rmr?ttr)' ,,a1r,111r HOT Airport PurpcH~ (,tn: RC'rundtd Plu~ Rrl'tlndl1'1l: c,.n. .111-.S.p nrht Stn-lrt OC'ht Sen'l<'t' DtM Stn·k'r nrht~f\'IC't Drht Sie-n·l"r ~t)J,"'i:erviu• Dt-btSt"'lce Cltbl :,i~n·lto Dll'hl SrrTlt<! PC'bt Srrvlrr Dtb1 Si-n1rr Ohlt&!;ftetu Br.nd1 flrhtSrtvlu 2(11\') s '"-~20.0J,4 11,t,M.lll 1.101.711 t,.4~1.~'>I ,Ul44,M,0 il.'IM,2J,fl ll.11~ 4.7lilf,,6H 97,:HIJ 2.4cC,.JJ~Q l1.U450) ... 2.2~4 t.:,.44t..,91 ;?~tn I 7,!2fl.'.'J.-' I I ,YIJ.l94 l.'IUN,L'!tl. hJJ.a.-421 .l.l lOJ<~• 6.94)1..f(,.I) ~s.2,~ 7,151,~~q 97.JI.\ l.41H~~ ,i.1,,.'IM 4.467.lR~ A •. lfil.;\(\2 f.M.144 • .aJ4 ~Oll 16.9~.'?J:IC I l)IJ0.!19 l.)"6J<"4 6.)l!.,76 J.I IO.l4l 6.~~J,)9 ll.224 1.001,noit 97.214 2.40~,627 12.M9.l(16 U~0.~6S 4.ll2,12<!l (,7.41.(.0!<2 ~012 lb,m>i.flQ' lfl,MOO.OIX 1.117.01.• •.121."92 l.14'19,,P,7 6,7(11.1~~ l~.21) 1.IOl.\11 ~l.2~1C 2.40.5,91_1 11.tiolill.fi!l._l 4.Cl21..l64 3,912.t,~8 il'\_ci.Jtl,c,456 ion 16.n4,_247 ltl-62.'.B'-1.lM551 6S?!.~71 \.110.0,R ll.t..9K5.'~ :\j.2;\4 1,Mlil.Ll4 f>7,J2J 1 • .}93517 1 l.MlK,M) J.772,019 :'.1,662.~f,_1 n.\.4I0.7M 1014 lf1JWltl,Q7 Hl.401..19 t.i~l'l.61.1, fi.,1Q.1t<9 l.l \1.000 "-<119.•7~ '-5.211 1,10:-,<,4<• l)i.2M.O 1.4"4.Ml I 1.S)4,'J67 J.M'J, 1.» ,1,S{M,,l_l)C M,11~.7-10 2n1~ 1.r..,n:i.901 k.~~1-641J 1.~~-4.MIO •.<1un1 l.l lllJlOL t..Htfl~M l.<.117 1.1on.n1 97.H& U4HJIJ5 IO.t.M,429 ~11.2lJ 70.).794 60,%K,9_\~ Wlfo 1~_:it:111,111.~ l.JM9J•::02 l.2,~.1_17 t,.~!-.\J.(}~ ~. i l(l-.:it1fr f, • .JhlJW:.7 _,._,._223 7.097.24~ 97.10 45~.n~ 1(11 .. \43.226 U~7.lhl> t.1•1.225 5.5:.9H.2?1 2011 1\.7:,.t/111 1.1~•1.1,n 1.?.l;?.M? .-,_~7n,-1,zq ).110.0~9 '1 • .161.141 '.'15-.20f, 7.09~.lOS ?1.14• 4l7.94<\ '>,~nt1.~ 19 1,137.,Jl 1.1 l8Jl!I 11.922.~,o ?111X 15.~f,~_:t•? 7.J.!(J).tl 1,21Q.I,"' r,.J:,,:11.~7~ 1.11n.$Jl O.l?l,-1.<1 l.<.1114 7.HH.1H 97.J17 --~ti.04~ ?.4.l,\,IM l.1"l.794 •.rnc2..'1KM ,\7.29.\.1!47 ,:n1•• l~_IB.<I~~ i_4Jh.1)77 1.oz-r;_;:.S<@ h5iOJ''l~2 1,ID.n,9 -1.i~'.:l.l I ~.'t.117 7.(l~l,Mtrl 01,lOO 454.0l~ •. ,$0.017 •noso llS.S44 .5,.1,Q90,00i ~o~u 12.2"1JIM ,,_7.27_:IUC7 1.019.t:?tt ~S7~..t20 .l.l !hJC,t\111, 4.7H.'.\~9-l$.2l1 7,0%.J•• 07.241 4~S.~2J 1.JOJ,9'1 49.ollf'l.•M ~o~, Hl,lli'\,Jc.>I ,,.12<,4i<k 1.011..:!I~ h.SM.OJO \.110.(,4.l J.1,1.t21 ,~.210 1.101..!M 07. Jll •s•.<M• 6.706.•<.I 4o.•9.J.l<14 ~12? 7_1\_llJIQ7 t,J2~.~44 ttiXJI"~ 6.~tt:0.74tc J.11<1.tM~ 4.H~.t2i.: .r.~,2.\K 7.MCJ.Hl 97,JJ<> 451.~S(, l."94.~14 4U'"·••• .!ti.!:.' 7.N?.1-1~ ,,_,11,.on IUH.nOJ '157,l.lJJO ;l. l \,t,Ot'lb 4.lJJ.Cm! .<S,2114 1.101..100 97.ll• 4.'.7Jt41) 5.204.0KJ ~1.7U.7tJI ir•~..i 7.tl.M_!_l,lfl,J. t,_\'lf1~l,U ttiJC,11,_q /l.~49,Jl:9_\ t.t HI_QJ5 _r.,c,Jl,.f\t') .'-~_lfll ,.1on.f.4o 01.1•• 4)7.}11 4,..lZ4 .. lXl 19.1%.072 :n2< ,, _ _1,l)[.}21) hJ~n.1,,r-, l"rel7A-nO 65~.\."2!-;?J1122.9b2 l."97.lfin .<l.2Cl1 7,flll7.l 7~ 117.~M 4!'-7.IJ7 ~'·91).S.4.U JJ.4Kl.9M w:11 t,,Ohfl.2\ \ ~.1i23U(,. M7.J.f,I f'.,557.1n, 2.1 m.n1t1 2.M~."92: ~5.212 5 .... ~J.242 91.,o.~ H2.}.\2 _l.()2S<.4M JJ,<W),207 ~n.n •.Nt.Hll ,l.(,fll.171',, l41JCIO <;_1)1n_prr;n1 l.(i0}.1170 2.12,.27,\ I ~.f.f!IJ 5.7,lJ,nbJ IJ7.2W ],.2.797 1.~~~.Q'.\2 lb.701 • .'21 lO:!lt \,l_!f,_l)C() -1,1,t{\..J?! IV,,7111 ,.441!C.,ZI ::D2.5~<• l.o,~.9H ,_7_1,4_-.c)b Ml •. l97 lO.<ll<.1.542 ~n2u lC)7 ,A2o(. .U.'IJ7'1 JJC~,.Hl Ji,cw.4 ~~~J(L}l -l,116.D--12 21)-1,!'iiJ-l 10,.l{\2...lMt ~,nn <1J-1n.%.' un•.110 b,•47.17J 10~1 4.14~.<IH 1.7RS.'1Jn_t fi.445.'>41) :rn: ~A~~A.\~ 2.4SS.·01' N :?O~l 2,.J-49.~H 2.4.IIJ __ .. 2~ tu 2ot-1 i ... ~4Jl(Nl 2.4~,1_000 .W-l!.IM.002 1~2tJCW.J1l('o l'IJ,i<:i-tt,;!nl 1,r,;no,.:1 !r(JJ <ill ~7~ li7'.' ICU.1111.11~2 I .OIW/·n, 1j\jOn ,r1.1 I K-1:< ',\l l'>.7~2.X ll'"I IOACitl <i~, 2Ci.7Qn_CMl 24.2.l.,_Onl l n\, QIJ. .klJL} '" h,,1,uk~ 1h,•t,N1.-:111 .. -.,,~ C'II ("\ n (i r'II 0 0 () 0 0 0 ) ) TABLE 10 -SELF-SUPPORTED DEBT The following details the revenues available and debt allocations for rhe self-supponed general obligation debt of the City. See also Table 9. In addition to the funds detailed below. the City Council of the City approved ordinances designa1ing 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. THE WATERWORKS FUND,., Net System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-09 Balance Available for Other Purposes Requirements for System General Obligation Debt. Fiscal Year Ending 9-30-09 Percentage of System General Obligacion Debt Self-Supporting $ 21,107,436 21,107,436 16,520,034 100.00 '" Each Fiscal Year the City 1ransfers an amount equal 10 debt ser\'ice requin,ments on the Warenvorks Fund general obliga1ion debt to a segregated account in rhe Waterworks Fund. THE SEWER FUND<•) Net System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requirements for Revenue Bonds. fiscal Year Ended 9-30-09 Balance Available for Other Purposes Requirements for System General Obliga1ion Debt. Fiscal Year Ending 9-30-09 Percentage of System General Obligation Debt Self-Supporting $ 16,025,846 16,025,846 11,606,571 100.00 •·• Each Fiscal Year the City transf= •• amoun1 equal ro debt sen ice n:quiremoms on the Se\\er Fund general obligation deb1 to a segregated account in 1he Sewer Fund. FY2008 re,·cnue includes a 1ransfer ofS4.6Sfl5lJ from general"'"'" fund balance. THE SOLID WASTE FUND,., Net System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requirements for Revenue Bonds, Fisl·al Year Ended 9-30-09 Balance Available for Other Purposes Requirements for System General Obligation Debt. Fiscal Year Ending 9-30-09 Percentage of System General Obligation Debt Self-Supporting $ 5,681,364 5,681,364 1,202,711 100.00 "' Each Fiscal Year the Ci!)· transfers an amount equal 10 dcb1 sen ice rcquin-mcn1s on 1hc Solid Waste Fund general obli11a1ion debt to a sesregared account in 11te Solid Wa.,1e Fund. THE DRAINAGE FUND,., Net System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requirements for Revenue Bonds. Fiscal Year Ended 9-30-09 Balance Available for Other Purposes Requirements for System General Obligation Debt. Fiscal Year Ending 9-30-09 Percentage of Syslcm General Obligation Debt Self-Supponing $ 6.922,614 6,922,614 6.451,591 100.00 "' Each Fiscal Year 1he City transfers an amount equal to deb! ~"'ice requirements on the Drainage Fund general obligation deb! 10 a segregated accuunr in Lhe Drainage Fund. FY2008 revenue indudts • 1ransfer of S3.674.?l0 from general drainage fund balance. THE ELECTRIC LIGHT AND POWER FUJ\'.D '"' Net Electric Light and Power Sys1em Revenue A,·ailablc. Fiscal Year Ended 9-30-08 Less: Requirements for Revenue Bonds. Fiscal Year Ending 9-30-09 Balance AYailablc for Other Purposes Requirements for Electric Sys1em General Obliga1ion Debt. Fiscal Year Ending 9-30-09 Percentage of Electric System General Obligation Debt Self-Supporting $ 26.421,986 2.501,655 23,920,331 6.466.230 100.00 i:ai Each Fiscal YC'3r the Cit~ transf1.1"S a:ri amnun1 .. -qual 10 deb\ scl'ice requirem~n1s on 1he El~rrric-Light and Pm'i.cr Fund gcnrrnl obJigacion deb1 10 a segregated account in 1h, Ele<:1ric Light and Pllwer Fund. 23 THE GATEWAY FUND •-> Net System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-09 Balance Available for Other Purposes Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30-09 Percentage of Fund General Obligation Debt Self-Supporting "1 Each Fiscal Year 1he City transfers an amount equal 10 debt senrice requirements on 1he Gat.-way Fund general obliga1ion debt to a segregaled accounl in the Gateway Fund. THE AIRPORT FUND i•l Net System Revenue Available, Fiscal Year Ended 9-30-08 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-09 Balance Available for Other Purposes Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30-09 Percentage of Fund General Obligation Debt Self-Supporting '"' Each Fiscal Year the City transfer, an amount equal to deb! service requirements on lhe Airpon Fund :;cm:ra! obli£alion debt 10 a ~egrcgated accoun1 in lhe Ahpon Fund. THE NORTH OVERTON TIFT AX INCREMENT FINANCING FUND ''' Net System Revenue Available, Fiscal Year Ended 9-30--08 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-09 Balance Available for Other Purposes Requirements for Fund General Obligation Debr, Fiscal Year Ending 9-30-09 Percentage of Fund General Obligation Debt Self-Supporting $ $ $ 5.791,119 5,79l.l 19 4,786,675 100.00 4.439.855 4.439.855 2.463.559 100.00 1.447.829 l.447.829 3.044.660 47.55 ••• Each Fista! Year 1he City transfns an amounl e,iual to deb1 service requirements on the Tax Jncremenl Financing Fund general obligation dcbl to a segregated account in the Ta~ Increment Financing Fund. The remainder of revenue nc...ded IO suppon the Ta. Increment Financing Fund general obligation debt is 1ransferred from the Ci1y's Solid Waste Fund. TABLE 11 -AUTHORIZED BUT UNJSSUED GENERAL OBLIGATION BONDS Oat~ Amount Issued Purl!ose Authorized Authorized To Date Sewer System 5121177 s 3.303.000 2.175,000 Wa1erworks Sys1cm 10/17/87 2.810.000 200.000 Street lmprovemencs S/1/93 10.170.000 !0.166.000 Street Improvements 5/15/04 9.210.000 7.369.000 Civic Cemcr'Auditorium Renovation and Improvements 5/15104 6.450.000 !'ark lmprovemencs 5/1 S/04 (l.395.000 6.395.000 Po!ice,Municipal Court Facilities 5115/04 3.350.000 Library lmprovcmcn1s 5115104 2.145.000 Fire Stations 5/15/04 l.405.000 1.405.000 A.nimal Sheller Renovations & hnprovemenls 5/15/04 1.045.000 160,000 $ 46.283.000 27.870.000 The Bonds l.395.000 500.000 500.000 250.000 2.645.000 linissued 1.128.000 2.&I 0.000 4.000 446,000 5,950.000 2.850.000 I .~95.000 885.000 !5.76R.OOO Q 0 0 C 0 C C 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 deforrcd or omitted entirely in fumre years. ln addition. as conditions C 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 S25.000 or more and a life of seven or more years. For FY 2008-2009. the City Council approved Sl48.7 million in total expenditures for capital projeets for all general purpose projects, as well as projeets for the clec1ric fund, water fund, sewer fund, solid waste fund, stom,water funds and airport. The Capital Projects Fund budget for FY 2008-2009 also included an additional S458.I million in future improvements for all City departments over the five succeeding fiscal years. The improvements included in the City"s capital improvement plan arc generally funded from a blend of bond proceeds. reserves or current year revenue sources. C As shown in Table I J. upon issuance of the Bonds, the City will have S 12.026.000 of authorized bu1 unissued bonds from 1he May 15. 2004 bond election. When the election was held. the City anticipated that the bonds would be issued o,·er the 2004 through 2008 time frame. The City typically issues voted bonds for general purpose City projecls. such as streets. parks. libraries. civic centers and public safety improvements. However. the City has incurred substantial unvoted tax supponcd debt 10 fund 24 C [) :) ) :) J ) portions of the capital budget of the Electric Fund, Water Fund, Sewer Fund, Solid Waste Fund, Storm Water Fund, Tax Increment Fund, Cemetery Fund, Gateway,Fund and Airport Fund. As described elsewhere in the Official Statement, such enterprise fund indebtedness is generally anticipated to be self-supporting from enterprise fund revenues. The City does not anticipate the issuance of additional genera 1 obi igation debt within the next 12 months. TABLE 12 -OTHER OBLIGATIONS The City has various capital leases outstandifig. The debt service requirements of1he leases are detailed below. Governmental Business-Type Total Capital Lease Capital Lease Capital Lease FYE Minimum Minimum Minimum 30-Sel! Paiment Payment Payment 2009 $ 3,333,027 4,699,719 8,032,746 2010 3,106,737 4,679,923 7,786,661 2011 2,045,097 3,950,210 5,995,307 2012 1,429,893 2,773,922 4,203,815 2013 910,279 1,689,579 2,599,858 2014-2018 2,768,721 2,469,737 5,238,458 Interest ( I ,328, 169} (1,724,774) (3,052,943) $ 12,265,586 18,538,3 l 7 30,803,903 The City also has obligations 10 pay various contract revenue bonds issued through the Department of Housing and Urban Development and the Canadian Municipal River Authority. The deb! service requirements of the contract revenue bonds are detailed below. FYE Contract Re,·enue Bonds 30-Se!! Princil!al Interest Total 2009 $ 1,392,998 I.693,914 3,086.912 2010 1,442,600 1,636,951 3,079.551 201 I 1,494,093 1,573,481 3,067,574 2012 1,556,264 1,504.834 3.061,098 2013-27 29,304,554 11.617,252 40,921,806 $ 35,190,509 18.026,432 53,216.941 PENSION FUND ... TEXAS MUNICIPAL RETIREMENT SYSTEM"'"' ... All permanent full-time Ci1y employees who are not firefighters are covered by the Texas Municipal Retirement System ("TMRS''). TMRS is an agent, multiple-employer, public employee retirement system covered by a State statute and administered by six tmstees appointed by !he Governor of Texas. TMRS opera1es independently of its member cities. The City joined TMRS in 1950 to supplement Social Security. All Ci!y 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 disabiliiy benefits, and survivor benefits for the spouse of a vested employee. An employee who retires receives an annuity based on the amount of 1he employee"s 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 acruarial techniques applied to experience. Enabling starutes prohibit any member city from adopting options which impose liabilities that cannot be amonized over 25 years within a specified statmory rate. On December 31. 2007, the actuarial value of assets held by TMRS (not including those of 1he Supplemental Disability fund. which is "pooled") for the City were $200 million. Unfunded actuarial accrued liabilities on December 31. 2007, were $126 mil lion and amortized over a 30-year period beginning. January 1997. FIRE PENSION FUND"' ... City firefighters are members of the locally administered Lubbock Fire Pension 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 trus1ees (appointed by the other truslees), 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. Based on the plan effective December I, 2005, the Fund's funding policy requires contributions equal to 12.43% of the firefighters· pay. The City 25 contributes on a basis of the percentage of salary, which is an annually adjusted ration that bears the same relationship to the firefighter's contribution rare that the City's rate paid into the TMRS and FICA bears to the rate other employees pay into the TMRS and FICA. The December 31, 2006, actuarial valuation assumes the City's contributions will average 19.75% of payroll in the future. AS of December 3 I. 2006, the most recent actuarial valuation date, the plan was 84% funded. As of December 31, 2006, the unfunded pension benefit obligation was $26,297,944 amonized with 1he 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. The December 31, 2004 actuarial valuation, which used plan provisions effective November I, 2003, needed 20.6 years to amortize the unfunded pension obligation. The December 31. 2006 actuarial valuation was based on the plan provisions effective December 1, 2005 and needed 30 years to amortize the unfunded pension obligation. OTHER POST-EMPLOYMENT BENEFITS ... The City curremly provides certain post-employment benefits to its employees. The City's annual OPEB expense is calculated based on the annual required contribution of the employer. an amount actuarially determined in accordance with the parameters ofGASB Statement 45. For further information regarding the City's OPEB obligation. see Note Ill. F (Notes to the Basic Financial Statements) set forth in Appendix A. 1"> For historical informalion concerning the retirement plans, sec "APPENDIX A, EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2008 -Note Ill, Subsection E -Retirement Plans'". '"' Source: Texas Municipal Rctircmcnl Sys1cm, Comprehensi"e Annual Financial Reporrfor Year Ended December 31. 2007. [THE REMAINDER OF THIS PAGE JNTENTIONALL Y LEFT BLANK] 26 a 0 0 Cl 0 C C C C C C TABLE 13 -CHANGES IN NET ASSETS Fiscal Year Ended Se~tember 30 (a) 2008 2007 2006 2005 2004 REVENUES Program Revenues Charges for Services s 12,677 10,636 9,632 10,583 12,713 Grants and Contributions 25,154 14,645 I 1.048 13.296 9.643 General Revenues Property Taxes 50,330 47,007 42,771 39,748 44,497 Sales Taxes 50,549 47,780 45.577 41.803 30.555 Other Taxes 5,370 4,909 4.447 4,242 3,793 Franchise Taxes 12,978 12,378 13.348 11,154 9.654 Investment Eamings/Olher 10,316 9,787 I! ,292 5,742 4,274 Total Revenues $ l 67,374 147,142 138.115 126,568 115,129 EXPENDITURES Administrative Services $ 12,372 12,155 9.910 8.220 7,946 Community Services 6,874 6,951 6.112 6.146 6,776 Cultural and Recreation 16,660 I 9,671 18.915 17,745 17.102 Economic Development 12,378 11,620 10.283 9,739 4.610 Fire 31,789 27,338 26.71 I 23,517 22,074 Health 6,142 5,899 5.014 5,040 4,585 Police 46,850 43,022 42,063 38.452 36,543 Other Public Safety 6,678 5,886 5.240 4.977 4.211 S tree ls and Traffic 16,357 14,370 11.850 I 2.466 10,570 Non-departmental 5.206 6,253 2.924 Intergovernmental 12,500 Interest on Long-Tenn Debt 8,367 6,968 4.326 3,195 4,877 Total Expenditures $ 164,467 166,380 145,630 135,750 122,218 ) Changes in net assets before special items and transfers s 2,907 (19,238) (7.515) (9,182) (7,089) Special items Transfers (4,703) 10,572 9.607 15A69 9.745 Changes in net assets (1,796) (8,666) 2.092 6.287 2.656 ) Net Assets -beginning of year, as restated 141 ,729 112,721 110.629 !04.341 101,684 Restalemenl 37,674 Net assets -end of year s 139,933 141,729 I 12.721 I 10,628 104,340 "' ..,, "' Units arc in thOu$llnds. Note: Data shown in Table 13 reflects general govcmmcncal activities rcponcd in accordance wich GASS Statement No. 34. The financial slalcmcnls include a managemcnc discussion and analysis oflhe operating results of such fiscal year. including restatements 10 beginning fund balances and net assets. ) 27 0 TABLE J3A -GENERAL FUND REVENUES AND EXPENDITURES HISTORY Fiscal Year Ended Seftember 30 2008 2007 2006 2005 2004 0 REVENUES Taxes s 85,345,082 80,266,416 75,999,624 68,716,601 64,727,362 Franchise Taxes 7,786,611 7,429,660 8,008,973 6,693,209 9,654,447 Licenses and Permits 2,663,139 2,531,032 2,250,635 1,953,666 1,982,281 Intergovernmental 530.389 514,896 408,997 480,648 428,459 Charges for Services 3,339,148 4,057,958 4,781,043 4,070,642 4,467,733 C Fees and Fines 3,279.911 3,669,099 3,981,978 4,015,402 3,675,856 Miscellaneous 2,574,448 2,582,509 1,465,215 1,506,315 1,442,677 Interest 1,052,842 1,469,083 921,742 349,236 334,730 Operating Transfers 16,565,397 10,723,891 Total Revenues and Transfers S I 06,571,570 102,520,653 97,818,207 104,351,116 97,437,436 0 EXPENDITURES General Government s 6,159,536 5,633,469 Financial Services 2,139,492 2,333,469 Cultural and Recrea1ion 12.253,380 I 5,251,742 13,986,576 Economic & Business Development 1115.978 1,122.880 1,146,267 0 Non-departmental 1,882,255 445,251 214,562 Admin.lGeneral Government I 1.047.039 11,560,733 9,356,059 18,330,508 18,156,455 Police 42,831.016 40,448,254 37,463,740 33,919,626 32,400,371 Fire 29.630.222 26,690,350 24,638,814 21,943,267 20,613,077 Health 4.133,917 4,004,913 3,738,790 Other Public Safety 4.703.249 4,508,394 4,287,806 C Planning and Transportation 8,120,727 7,180.843 Streets and Traffic 8.168.462 7,663,278 7,439,045 2,214,291 2,185,286 Human Resources 740,826 754,225 Debt Service 2.396.605 1,694,844 I, 154,226 Capital Outlay 3.966.065 4,256,705 7.184,866 5,277,100 475,585 Operating Transfers 3,912,645 4,212,915 C Total Expenditures S 120,345.933 117,202.093 112,278,444 103,203,269 94,160,257 Excess (Deficiency) ofRevenues and Transfers over Expenditures S (13,774.363) (14,681,440) ( 14.460,237) 1,147,847 3,277,179 Capital Leases 3.011.141 3,721,262 5.119.980 3,534,048 C Transfer In 17.729.361 14.536.071 13.325,046 Trans fer Out (6,129.512) (4,374,956) (1,436,498) fund Balance at Beginning of Year 19.125.648 19,924.711 I 7.376,420 12,694,525 9.417.346 Fund Balance at End of Year s 19.962.275 19,125.648 0 19.924,711 0 17,376,420 12,694.525 Less: Reserves and Designations ''' ,.. .... Undesignated Fund Balance s 19.962.275 19.125.648 19.924.711 17,376,420 12,694,525 "" The Ciiy 's financial policies 1argc1 a General fund nndesign,11cd balance of al lcasr 20% of General Fund revenues. The undcsignarcd fund balance is at 93.66% of the l3f!:'Ct c,aabli~hc\l lly rhc Ci1y·s finantial policies. 28 C n 0 0 0 () TABLE 14 -MUNJCIPAL 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 paymen1 of the Obligations or other debt of the City. In addition, in January 1995, Lubbock approved the imposition of an additional sales and use tax of one-eighth of a cent as authorized by Chapter 323 Te>tas 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 propeny 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 (Anicle 5190.6, Texas Revised Civil Statutes), to be used for economic development in Lubbock. The City began to receive proceeds of these taxes in October 2004. Collection and enforcement of the City's sales tax is effected through the offices of 1he Comptroller of Public Accounts, State of Texas. The Comptroller remits the proceeds of the tax to the City on a monthly basis after the deduction ofa 2% service fee. Historical collections of the City's local Sales and Use Tax are shown below: o/o of Equivalent of FVE Total AdValorem Ad Valorem Per 30-See Collei:ted ''1 Tax Levv Tax Rate Capita'•> 2003 $ 29,092,032 69.11 0.3962 142.09 2004 30,554,632 69.98 0.3857 148.11 2005 41,803,092 105.30 0.4825 199.90 2006 45,576,582 109.IO 0.4556 215.81 2007 47,780,448 103.72 0.4385 224.99 2008 50,548,865 102.75 0.4093 235.28 "' Excludes bingo lax rcceip1s and mixed beverage 1ax. '" Based on population e,1ima1e5 of lhe City. Effective as of October I, 2006, the sales lax allocation for the City is as follows: City Sales & Use Tax City Sales & Use Tax for Property Tax Relief City Sales & Use Ta>t for Economic Development County Sales & Use Tax State Sales & Use Tax Total 29 Sales Tax Allocation % 1.000 0.375 0.125 0.500 6.250 8,250 FINANCIAL POLICIES POLICIES Basis o f 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 through September 30. 2007. The City will submit the City·s 2008 report to GFOA to determine its eligibility for another certificate. Comprehensive Annual Financial Report (CAFRJ ... Beginning with the year ended September 30, 2002, the City's CAFR has been presented under the Governmental Accounting Standard Board r·GJ\S8"') Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Go~·ernments, GASB Statement No. 37, Basic Financial Statements -and Management's Discussion and Ana~vsis -for Stale 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 s1atemcnts of the City attached as Appendix A. General Fund Balance ... The City"s objective is to maintain an unreserved/undesignated fund balance at a minimum of an amount equal to two months budgeted operating expenditures to meet unanticipated contingencies and fluctuations in revenue. The City's General Fund currently has an unreserved/undesignated fund balance that is at 93.66% of the target established by the City's financial policies. Waler. Wastewater. Storm Water. Solid Waste and Airport Enterprise Fund Balances ... It is the policy of the City 10 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. /\irport, and Stonn Water funds is an amount equal to 15% of regular operating revenues. Excluding the Airport, the City currenlly exceeds its policy on appropriable net assets and unrestricted net assets for its various enterprise funds. According to audited numbers for FY 2008, the target net assets by policy and current appropriable net assets for the Water, Wastewater. Stonn Water. Solid Waste and Airport enterprise funds are as follows: Enter12rise Fund Taa:ct Net Assets by Policy Appropriable Net Assets Water SI 0.6 million SI0.3 million Wastewater S5.3 million $ I 0.6 million Storm Water SI .0 million $7.8 million Solid Waste $2.5 million S9. I million Airport $1.0 million S.7 million Electric Enterprise Fund Ba/a11ce ... It is the policy of LP&L to maintain unrestricted net assets set by the City Charter. The LP&L Governance Ordinance was amended in November of 2008 to include. among other things, changes to the requirements regarding the reserve funds LP&l maintains. The LP&L Governance Ordinance requires the Electric Utility Board to (i) maintain sufficient operating cash to satisfy all current accounts payable and ( ii) maintain a general reserve fund that is equal to the greater of four months gross retail electric revenue (GRR) as determined by taking the average monthly GRR from the previous fiscal year or S50 million dollars. This general reserve fund shall be used for operational purposes, rate stabilization and for meeting the electric mility demand of any rapid or unforeseen increase in residential and/or commercial development. According to audited numbi:rs for FY 2008. the target net assets by ordinance and current unrestricted net assets for LP&L are as follows: Enterprise Fund LP&L Target Net Assets bv Polin $50.0 million Unrestricted Net Assets S48.0 million At the end of FY 2008. LP&L panially funded its general reserve fund by the amount ofS40 million. LP&L has not funded all of the reserve fund establi~hed under the LP&L Governance Ordinance. as net re~·enues have been inadequate for a total funding of this reserve fund. £111e1prise Fund Re1w11es ... h 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 (allhough the Electric System received transfers from the General Fund during FY 2003). Such self sufficiency is to be obtained through the rates. fees and charges or 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 expendi111rc~ and dcb1 service payments. where appropriate. Rate increases may be considered in future budge1s as costs may warrant. including specifically the costs related to fuel charges that may affect LP&L and the cost ofpro\'iding service. Debi Sen,ice Fund Balance ... I\ reasonable debt service fund balance is maimaincd in order to compensate for unexpec1ed contingencies. 30 0 0 0 0 0 0 0 0 0 0 0 Buthetan: Procedures ... The City follows these procedures in establishing operating budgets: 1) 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 conduc1ed to obtain taxpayer comments. 3) Prior 10 Cktober I the budget is legally enacted 1hrough passage ofan ordinance. 4) The City Manager is authori7.ed 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, G Criminal lnvestigation, 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. 0 () 0 0 0 0 0 6) The Budge! 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 1990-08. Insurance and Risk Managemem ... The City is self-insured for public entity liability and health benefits coverage. Risk management purchases an S 18 million excess insurance policy for liability claims in excess of $500,000, per occurrence. Airport liability insurance and workers' compensalion is insured under guaranteed cost policies. The Health Benefits are covered by a self insured program with an 520,524,298 cap and a $200,000 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 Sep1ember 30, 2008 the co1al Net Assets of these insurance funds were as follows: Self-insurance -health $6,963,506 Self-insurance -risk management S4,930, 786 The City obtains an actuarial study of its risk management fund (the .. Risk Fund") every year. In FY 2005, an actuarial study was conducted thal considered 1he 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 10 $6.479,000 from S6.437.000 to the minimum expec1ed confidence level of 1he Government Accounting Standard Board Statemenc Number IO r·GASB IO'"). which requires maintenance of risk managemem 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 e:xceeds the minimum GASS 10 requirement. ADMINISTRATION Since FY 2004. the Ci1y has implemented a number of significant changes in the administration and management of the City's budgeting and fiscal needs. Certain of the measures implemented by the City to strengthen this process are described below. EsrablishmenT of Audit and l11\'es1men1 Commiuee ... Through the adoption of a resolution in June 2003. the City Council established an independenl Audit and Investment Committee composed of five members. The Audit and Investment Comminec is charged wi1h maintaining an open a\"enue of communication between the City Council, City Manager, internal auditor and independent external auditor 10 assis1 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 comrols, exposure and risk assessment. The committee is appointed by the City Council and informally reports 10 the City Manager. The establishment of the 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. Tht' chair of rhe comminee is appointed by tht" Mayor and the other positions are filled by a vote of the City Council. A1 least two members of the commi11ee are required 10 have a background in financial reporting, accounting or auditing, at least one member is required 10 be a certified public accountant. and at least one member is required to have an extensive background in investments. The current membership of 1he 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; R.J. Givens. a real estate agcm in lh<." City: Kim Turner. the Dirc-ctor of Internal Audit at Texas Tech; and John Zwiacher, a member of the Board of Directors ofLP&L. Mr. Zwiacher is the chair of the committee. Month fr A.ue.mmmrs o[ Reve1111es and Ewenditures . . . Since FY 2006, City management assesses monthly the budgeted expenditures and rcYcnues of 1hc City. and incorporates budget adjustments as-necessary to bener match expenditures with rc,·cnucs. T ronsfers within the ,·arious Funds of the City arc implemented on an as-needed basis 10 take into account changes in 31 revenues projected to be received throughout a fiscal year as well as efficiencies realized in the provision of services to the citizens of the City. 0 Truth-in-Taxation ... Jn FY 2008, the City's total tax rate was set at $0.45505 per S100 taxable assessed valuation, down from S0.46199 in FY 2007. The City's tax roll increased $894.5 million, or 8.9%, from FY 2007 to FY 2008. The City Council, on June 12. 2003, passed a resolution affinning their support for truth-in-taxation. The goal of this resolution is to allow the citi,:ens 0 to be better infonned 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. The goal was affinned 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. In addition, 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. INVESTMENTS Q The City im,ests its investable funds in investments authorized by Texas law. including specifically the Public Funds Investment Act (Chapter 2256, Tex.as Government Code, and referred to herein as the ··PFJA"), 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 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 1he United States or their respective agencies and instrumentalities. (5) obligations of states, agencies. counties, cities. and 01her 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 PFJA that are issued by or through an institution that either has its main office or a branch in Texas, and arc guaranteed or insured by the Federal Deposit Jnsurance 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 instirution doing business in the State of Texas, (9) bankers· acceptances with the remaining term of 270 days or less, if the shon-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency. (10) commercial paper that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable lener of credit issued by a U.S. or state bank, ( 1 I) no•load money marker murual funds regulated by the Securities and Exchange Commission that have a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of SI for each share, ( 12) no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two years: invests exclusively in obligations described in the preceding clauses; and are continuously rated as 10 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 obliga1ions 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 equivalcnl by at least one nationally recognized rating service. The City is specifically prohibited from investing in; ( 1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mongage-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 obliga1ions that have a stated final maturity of greater than IO years: and ( 4) coUateralized mongage 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 Stale 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 subcaprion. (b) irrevocable leners of credit issued by a state or national bank that is continuously rated by a 11ationally recognized investment rating finn not less than °11.·· 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 subcaptio11. or an authorized investment pool: (ii) securities held as collateral under a loan arc pledged to the go\·emmental body. held in the name of the governmental body and deposited at the time the investment is made with the City or a third pany 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 S1ate of Texas: and (iv) the agreement to lend securi1ics has a tenn of one year or less. INVESTMENT POLICIES Under Texas Jaw, 1he City is required to invest its funds under written inwstmcnt policies that primarily emphasize safety of principal and liquidity: 1hat address inws1ment diversification. yield. maturity. and the quality and capability of invesfment management: and thar includes a list of authorized investments for City funds. maximum allowable stated maturity of any individual investment and the maximum a,·crnge dollar-weighted maturity allowed for pook·d fund groups. All Ciry fnnds must 32 0 0 0 0 0 0 0 0 0 ') ) ) ) ) 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; ( 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 quanerly the investment officers of the City shall submit an investment report detailing: (I) the investmeni 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 al 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) s,ate law. No person may invest City funds without express written authority from the City Council. ADDITIONAL PROVISIONS Under Texas law, the City is additionally required to: ( I) annually review its adopted policies and strategies; (2) require any invesnnent officers· with personal business rela1ionships 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 !hese requirements: (4) perform an annual audit of the management controls on investments and adherence to 1he Ciiy'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. rn mumal funds: and (8) require local government investment pools to conform to the new disclosure, rating, ner asset value. yield calculation, and advisory board requirements. TABLE IS-CURRENT INVESTMENTS As of December 31. 2008. the Ciiy·s invcstable funds were invested in the following categories: Book Value Estimated Market Value .. , Par % of Total % of Total Tyee Value Value Book Value Value Market Value United States Agency Obligations s 127.47 5.000 128.414,849 32.34 130,244,628 32.65 United States Treasury Bills 150.000 150,288 0.04 150,732 0.04 Money Market Mutual Funds ••• 3.373.880 3,373.880 0.85 3,373,880 0.85 Local Government Investment Pools"-, 265.148.668 265,148,668 66.77 265,148,668 66.47 S 396.147.549 397,087.686 100.00 398,917,908 100.00 "'1 Market prices arc obtained from Wells Fargo Brokerage. No funds are invested in mongagc backed securities. The City holds all investments 10 malurily which minimi~es the risk of mark cl price ,·o!atility_ '"' Money Markel Funds arc held al Wells Fargo Bank. Texas N.A_ ••' Local govcrnmcn1 invcsrmenl pools consisc of cn1itics whose invcs1mcn1 o~jccrivcs arc preservation and safciy of principal, liquidity and yield. The pools seek 10 maintain a SI .00 value per share as required by 1he Texas Public Funds lnvcs1mcn1 Act. TAX MATTERS TAX EXEMPTION In the opinion of Vinson & Elkins l.l.P .. Bond Counsd. (i) interest on each series of the Obligations is excludable from gross income for federal income rax purposes under existing law and (ii) 1he obligations are not "'private activity bonds" under the Internal Revenue Code of 1986. as amended. (the ··code··). and as such. interest on each series of the Obliga1ions is not subject to 1he alternative minimum tax on individuals and corporations. exeepr as described below in the discussion regarding the adjusted current earnings adjustment for corporations. The Code imposes a number of requirements that mus1 be satisfied for interest on state or local obligations, such as rhe Obligations. 10 be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds and the source ofrepaymen1 of bonds. limitations on the investment of bond proceeds prior to expenditure, a requirement that excess arbi1rage earned on the inYcstment of bond proceeds be paid periodically to the United States and a requirement rbat the issuer file an information n·pon wi1h 1he Internal Revenue Service. The City has covenanted in the Ordinances that it will comply with these requirements. Bond Counscrs opinion will assume continuing compliance with 1hc covenants of !he Ordinances pertaining to those sections of 33 1he 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 Ciiy. the City"s Financial Advisor and the Underwriters, respectively, which Bond Counsel has not independenlly verified. lfthe City should fail to comply with the covenants in 1he Ordinances or if the foregoing representations should be detennined to be inaccurate or incomplete, interest on the Obligations could become includable in gross income from the date of delivery of the Obligations. regardless of the date on which the event causing such includability occurs. The Code also imposes a 20% alternative minimum tax on the "alternative minimum taxable income" of a corporation if the amount of such alternative minimum tax is greater than the amount of the corporation's regular income tax. Generally, the alternative minimum taxable income of a corporation (other than any S corporation, regulated investment company, REIT, REMIC or F ASJT), includes 75% of the amount by which its ··adjusted current earnings" exceeds its other "alternative minimum taxable income:· However, interest on tax-exempt bonds issued in 2009 and 2010 for new money projects or to refund tax- exempt bonds issued during 2004 through 2008. inclusive, is not includable in the ~adjusted current earnings" of a corporation for purposes of computing its alternative minimum tax liability. Therefore, interest on the Certificates is not includable in the adjusted current earnings of a corporation for purposes of computing its alternative minimum tax liability, but interest on a portion of the Bonds is so included and, as such. could subject a corporation investing in the Bonds to alternative minimum tax consequences. 0 0 0 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. 0 Bond Counsers opinions are based on existing law. which is subject to change. Such opinions are funher based on Bond Counsel's knowledge of facls as of the date thereof. Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel's attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, Bond Counsel's opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the ~service"); rather, such opinions represent Bond Counsel's legal judgment based upon its review of exisling law and in reliance upon the representations and covenants referenced above that it deems relevant to such Q opinions. The Service has an ongoing audit program to de,ennine 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 regarding whether or not the Seivice will commence an audit of the Obligations. lf an audi1 is commenced, in accordance with its current published procedures the Service is likely to treat the City 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 regardless of the ultimate outcome of the audit. ADDITIONAL FEDERAL INCOME TAX CONSIDERATIONS C Collaleral Tax Consequences Prospective purchasers of the Obliga1ions should be aware that the ownership of tax exempt obliga1ions may result in collateral federal income tax consequences 10 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 C owning an interest in a F ASJT that holds tax-exempt obligations and individuals otherwise qualifying for the earned income credit. ln addition, certain foreign corporations doing business in the United Siates may be subject to the "branch profits lax'" 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 1he applicability of these consequences. Prospective purchasers of the Obligations should also be aware that, under the Code. taxpayers are required 10 repon on their returns the amount of tax-exempt interest such as interest on the Obligations. recei,•cd or accrued during the year. Tax Accounting Treatment or Original Issue Premium C The issue price of all or a portion of the Obligations may exceed the stated redemption price payable at marurity 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 hands of an initial owner is reduced by the amount of such excess that is amorti7.ed 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 cax purposes on the sale or other taxable disposition of a Premium Obligation by the C initial owner. No corresponding deduction is allowed for federal income tax purposes for the reduction in basis resulting from amonizablc bond premium. The amount of bond premium on a Premium Obligation tha1 is amortizab\e 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 Obligation. The federal income tax consequences of the purchase. ownership and redemp1ion. 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 rhose described above. All owners of Premium Obligations should consult 1heir own tax advisors with respect to the determination for federal, state. and local income lax purposes of amortized bond premium upon the redemprion. sale or other disposition of a Premium Obligation and with respect 10 the federal. slate. local. and foreign tax consequences of the purchase. ownership. and sale. redemption or other disposition of such PTemium Obligations. 34 r '" ) ) Tax Accounting Treatment or Original Issue Discount Obligations The issue price of all or a por1ion 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 10 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 Discoum 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 MATfERS -TAX EXEMPTION" and ··TAX MATTERS -ADDITIONAL FEDERAL INCOME TAX CONSEQUENCES - Colla1eral Tax Consequences" generally applies, and should be considered in connection with the discussion in this portion of the Official Statement. In the event of the redemption, sale or other 1axable 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 lhe 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 (i) the Underwriters have purchased the Obligations for contemporaneous sale to the public and (ii) all of the Original Issue Discount Obligations have been initially offered. and a substantial amount of each maturity thereof has been sold, 10 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 srated on the cover page of this Official Statement. Neither the Ciry 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 rhereof (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 detennining the amount of gain or loss recognized by such owner upon the redemption. sale or other disposition thereof. The amount 10 be added to basis for each accrual period is equal to (i) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stared mamrity (detennined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less ( ii) the amounts payable as currc-nt 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 that are not purchased in the initial offering at the initial offering price may be detennined according to rules that differ from those described above. All owners of Original Issue Discount Obligations should consult their own tax advisors with respect to the detennina1ion 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 are rated ··Aa3" by Moody·s Investors Service. Inc .. '"AA+·· by Standard & Poor·s Ra1ings Services, a Division of The McGraw-Hill Companies. Inc. and .. /1./\. .. by Fitch Ratings. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respecti,,e Yiews of such organizations and the City makes no representation as to the appropria1eness of the ratings. There is no assurance 1hat such ratings will continue for any given period of time or that they will not be revised downward or withdra\\-TI entirely by any or all of such ra1ing companies, if in the judgment of any or all companies, circumstances so warrant. Any such d0'1';11Ward revision or withdrawal of such ratings may have an adverse effect on the market price of the Obligations. LITIGATION The City is involved in various legal proceedings related to alleged personal and property damages. torts. breach of contract and civil rights cases. some of which involve claims against the City that exceed S500.000. State law limils municipal liability for personal injury al S250.000/SSOO,OOO and property damage at SJ00.000 per claim. The following represents the significant litigation against 1he City at this time. For purposes of this rcpon. included are only suits in which the City has exposure greater than S50.000. The Ciry·s insurance coverage. if available. contains either a S250.000 self-insured retention or a S500.000 self-insured retention depending on the date of the occurrence. The City has been sued by a contractor who was not av,·arded 1he bid on a portion of !he stonn water drainage projec1. The contractor has alleged violations of the slate bid s1atute and a violation of Section 1983. The plaintiffs took a nonsuit in state court and re•filed the case in federal coun. The federal court dismissed the contractor·s Section 1983 claims. and the contractor 35 filed a Notice of Appeal. The Fifth Circuit court of appeals re\'ersed the District Court and the District Court has reinstated the federal and state claims. The City Attorney believes there is insurance co,·erage for the Section 1983 claim, although there is a dispute with the carrier regarding coverage. 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 rhe 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 has appealed the court's decision. The Court of Appeals reversed the trial court's decision and remanded the case back to the trial court. Plaintiff is not seeking monetary damages except for attorney's fees. The case has been appealed to the Texas Supreme Court. The City Attorney believes there is insurance for any potential damages. The City 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 10 his son from an automobile accident with 1he police officer. The plaintiff alleges that rhe 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 filed a motion for summary judgment which was granted based on the fact che plaintiff did not file a claim with the City. The Coun of Appeals reversed the decision and remanded the case back for trial. The City has appealed the case to the Texas Supreme Court but che Court refused to hear the case. The case is now back in the trial court. The City Attorney believes there is insurance covering the claims. The City and a police officer have been sued by an individual who was tased during a traffic stop. The plaintiff has alleged violation of his civil rights and violations under the Ton Claims Act. The City Anomey is of the opinion that insurance is available and that there are no significant injuries to the plaintiff. A former employee sued the City in October 2007 for wrongful tennination. While the case is still in the early stages of development. the Cicy does no\ believe there is a strong likelihood of recovery. The City believes there is insurance coverage in this matter. The City, Garza County, Kent County, and the Texas Anomcy General"s Office has been sued by Templeton Mortgage for certain rights regarding the restrictive easements at lake Alan Henry as well as other areas such as the use of water. The City has briefed some of the issues for the court and plans to file a Motion for Summary Judgment in February 2009. This is not a damages case, but the court has authority to grant attorneys fees to the prevailing party. The City has been sued by Templeton Mortgage and Marie Brown for damages to his property because of the rising and falling of water at Lake Alan Henry. He argues that if the restrictive casements are strictly enforced as interpreted by the City of Lubbock, he will not be able to build a structure to stop the erosion of his property, thus causing him damage. There is no insurance on the damage claim. The City and Atmos Energy have been sued due to the death of a motorcyclist who collided with an Atmos truck. A City patrol car driver, while responding to a call. had his lights on to proceed through traffic. As the patrol car was behind the Atmos truck, the patrol car driver "bumped" his siren. The Atmos truck then made a left tum to move out of the patrol car·s path. ln doing so. the motorcyclist, proceeding in the opposite direction. collided with the Atmos truck. The City believes damages are covered by insurance. The City is being sued by a lady who fell at the Civic Center. She alleges that the bleachers were defective in that they were unstable, causing her to fall. This is a new lawsuit and discovery is beginning. The City believes there is insurance coverage for damages. if any. 0 0 0 0 0 C C The City is being sued by a City employee who. will working for the City. was involved in an accident v.·ith an intoxicated automobile driver. Plaintiff has su<!d the driver along with her insurance carrier. another insurance carrier, and the City pursuant C to its UIM coverage. There is little doubt that 1he driver was al fault. However. the driver carried only S2O.O0O worth of insurance. The City, pursuant 10 its workers· compensation coverage. has paid for most of the Plaintiffs medical expenses although some of the expenses arc in dispute. The City believes there is insurance coverage in this matter. 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 are of the opinion that the City's available sources for payment of any such claims, which include insurance policies and City reserves for self insured claims. arc adequate to pay any foreseeable damages (see '"FINANCIAL POLICIES -Insurance and Risk Management"'). C On the date of delivery of the Obliga1ions to 1hc 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 of the Obligations or which would affect the provisions for their payment or security or in any manner question the validity of the Obligations. INVESTIGATIONS RELATING TO CITY'S HEALTH INSURANCE ADMINISTRATOR In 2006. the City hired an outside independent auditing company. Benefit Plan Partners. a California company, (the "Auditor··) to conduct an audit of its contract ( the "Administration Contract") with its then current health insurance administrator. American Administrative Group. Inc. ("AAG'"). The Administration Contract provided for AAG"s administration of all City employee claims on the City"s self-insured health insurance. The Auditor found numerous possible overcharges and errors by AAG during 36 C C 0 0 0 0 ) ) the term of the Administration Contract, including overcharges possibly arising from unauthorized commissions taken by AAG and possible payments to AAG by phannacies as rebates. The outside Auditor estimated the aforementioned errors and overcharges to be approximately $2 million. The Administration Comract tenninated by its own terms in December 2006, and AAG has ceased to administer any claims for the City. The City has hired another third party administrator to administer the run•out claims that accrued prior 10 December 2006. The Cicy selected Blue Cross Blue Shield to be the City·s new health insurance adminislrator beginning January 2007. In March 2007. the City filed an application with the State district coun to compel AAG to preserve and provide documentation relating to the Administration Contract and claims submitted by City employees during the term of the Administration Contract. It is the intent of the City to utilize such documentation to complete the audit by Benefit Plan Partners of its contrac1 with AAG 10 determine whether any further overcharges have occurred. The trial court never issued a ruling as to the City's application and instead referred the matter to arbitration. The City will cominue 10 pursue the documents and any damages it may be entitled in the arbitration. AAG also sued the City for damages to its business in the amount ofS450,000. Arbitration has been scheduled in these maners for October 26, 2009. In an attempt to obtain the necessary documents to conduct the audit, the City attempted lo obtain the necessary documents directly from Covenant Health System. Covenant was unsure it could release the documents to the City as it opined such could be a violation of HIP AA. The City filed a declaratory judgment action in federal court against Covenant seeking a declaration as to whether Covenants release of these documents violated HIPAA. HealthSmart intervened in the lawsuit presumably in an attempt to prevent the release of the documents. The matter is still pending. No damages are being sought by any party in the suit. Another lawsuit has been filed by the City's fonner third party administrator, American Administrative Group, Inc, (AAG) against Lee Ann Dumbauld. City Manager; Scott Snider, Assistant City Manager, Leisa Hutcheson, Ciry Risk Manager; and David Miller. former Mayor. The lawsuit arises from the City·s selecting Blue Cross as its new third party administrator instead of AAG. The City employees were sued for civil conspiracy, misappropria1ion, tortious interference with existing and prospective contracts, business disparagement; and defamation. The City believes that it has an obligation to defend the suits on behalf of the individuals. The Cicy is aware of federal authorities investigating matters relating to AAG and the Adminis1ration Con1rac1, including investigations conducted by the Federal Bureau oflnvestigation. No subpoenas at this time have been directed at. or issued to, the City in regards to the investigations involving AAG or the Adminislration Contract. 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 cxemp1ion provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Ac1 of Texas in reliance upon various exemptions contained therein; nor have the Obligalions been qualified under the sccuri1ies ac1s 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 regis1ration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLJC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chap1er 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 JNFORMA TJON -RA TINGS .. 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 10 secure deposits of any public funds of the State. its agencies. and i1s political subdivisions. and an~ legal security for those deposits to the extent of their market value. No review by 1he City has been made of the laws in other states to determine whether the Obligations arc legal investments for various instilUtions in those states. LEGAL MA ITERS The delivery of the Obligations is subject to the approval of the Attorney General of Texas to the effect that such Obligations arc valid and legally binding obligations of the City payable from sources and in the manner described herein and in the rcspective Ordinances and the approving legal opinions of Bond Counsel. The forms of Bond Counsers opinions arc anachcd hereto in Appendix B. The legal fee 10 be paid Bond Counsel for services rendered in connection with the issuance of 1he Obligations is contingent upon the sale and delivery of the Obligations. The legal opinions of Bond Counsel will accompany the Obligations deposited with OTC or will be printed on 1he definitive Obligations in the evenl of the discontinuance of the Book•Entry·On!y System. Certain legal matters will be passed upon for the Underwriters by McCall, Parkhurst & Honon LLP. Dallas. Texas. Counsel for the Underwriters. The legal fee of such firm is contingent upon the sale and delivery of the Ob!iga1ions. 37 0 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 1hat in its capacity as Bond Counsel, such firm has reviewed the information appearing in this Official Statement under the captions "THE OBLIGA TJONS" (exclusive of the information under the subcaptions "BOOK-ENTRY-ONLY SYSTEM" and ··SOURCES AND USES OF PROCEEDS") and 0 '"TAX MATTERS" and under the subcaptions "LEGAL MATTERS;' "LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS" and ·-CONTINUING DISCLOSURE OF INFORMATION" (except for the subsection "Compliance with Prior Undertakings") 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 laws and instruments therein described and such information conforms to the Ordinances. The legal opinions to be delivered concurren1ly with the delivery of the Obligations express 1he professional judgment of the Q 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 of the parties to the transaction, nor does the rendering of an opinion guarantee 1he outcome of any legal dispute that may arise out of the transaction. CONTINUING DISCLOSURE OF INFORMATION In the Ordinances 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 cenain updated financial information and operating data annually, and timely notice of specified material events. to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. Beginning July 1, 2009, this information will be available free of charge from the Municipal Securities Rulcmaking Board r·MSRB"') via the Electronic Municipal Market Access ("EMMA") system at wwv.·.emma.msrb.org. 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 SA 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 infonnation repository r·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. In accordance with recent amendments to SEC Rule 15c2-l 2 (the "Rule"), effective July I, 2009, any filings the City is required to make to either the NRMSIRs or the SJD will be made to the MSRB. The City may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by 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 sta1emcnts arc 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 regula1ion. 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. or the MSRB, as applicable. Material Event Notices 0 0 0 0 C The City will also provide timely notices of certain events to cerrain information vendors. The City will provide notice of any of the following even1s with respect to the Obligations. if such event is material to a decision to purchase or sel I Obligations: ( I) principal and interest payment delinquencies: (2) non-payment related defaults: (3) unscheduled draws on debl service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; {5) substitution of C credit or liquidity providers, or their failure 10 perform: ( 6) adverse lax opinions: (7) modifications to rights of holders of the Obligations; (8) early redemption of the Obligations: (9) defeasances: ( I 0) release. substitution. or sale of property securing repayment of the Obligations; and ( 11) rating changes. (Neither the Obligations nor the Ordinances make any provision for debt service reserves or liquidity enhancement.) Jn 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 pro-vide each notice described in this paragraph to the SID and to either each NRMSJR or the MSRB until July 1, 2009. and thereafter only to the MSRB. C Availability oflnformation The City has agreed 10 provide the foregoing information only to NRMSJRs. the MSRB and the SID. as described above. Prior to July I. 2009. the information will be aYailablc 10 holders of Obligations only if the holders comply with the procedures and pay the charges established by such information ,·cndors or obtain the information through securities brokers who do so. 38 C () ) ) Effective July I, 2009. all such information must be filed with the MSRB, rather than NRMSJRs and any SID. The MSRB intends to make the information available to the public without charge through an internet portal. 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 Mi\C 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 information relating to 1he Obligations. Effective July I. 2009. such infonnation will be filed only with the MSRB. Limitations and Amendments The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other infonnation tha1 may be relevant or material to a complete presenta1ion of its financial results of operations. condi1ion, or prospects or agreed to update any information that is provided, except 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 con1ractual 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 Obligations may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law. or a change in the identity. nature, status, or type of operations of the City, if (i) the agreement. as amended, would have permitted an underwriter to purchase or sell Obligations, in the offering described herein in compliance with the Rule, taking into account any amendments or interpreta1ions of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) eifher (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 na11onally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners ofrhe Obligations. The Ciry 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 court of final jurisdiction enters judgment that such provisions of the Rule are invalid, bul 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 agreement, 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 form, of the reasons for the amendment and of the impact of any change in the type of financial infonnation and operating data so provided. Implementation or the MSRB's EMMA System Effective July 1. 2009. all filings and notices that the City is required to make or give in satisfaction of its conlinuing disclosure undertaking set forth in the Ordinances will be made solely to the MSRB. and such filings and notices will be made or given electronically in such format as determined by the MSRB. To make such continuing disclosure infonnation available 10 investors free of charge. the M SRB has established the EMMA system. which may be accessed at www.emma.msrb.org. Compliance with Prior Undertakings The City became obligated to file annual reports and financial statements wilh the SID and each NRMSIR in an offering. that took place in 1997. Under continuing disclosure agreements made in connection with its electric revenue bonds. the City committed to make prompt filings with the SID and either each NRMSIR or the MSRB upon rhe 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 ~ith the SID and NRMSIRs 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 s1a1ements and in the statistical tables. reported that for FY 2003. the Ciry·s electric utility had failed to meet its rate covenant. 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 10 that time that the rate covenant had no! been met), the City waited until September 2004 to make its event filing of non-compliance with its electric revenue debt rate covenant. FINANCIAL ADVISOR RBC Capital Markets Corporation is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor·s fee for services rendered with respect 10 the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. The Financial Advisor has not independently verified any of the data contained herein or conducted a detailed investigarion of the affairs of the City to determine the accuracy or completeness of this Official Statement. UNDERWRITING The Underwriters have agreed 10 purchase the Bonds. subject to certain conditions. and have agreed to pay a purchase price 39 reflecting the par amount of the Bonds, plus a net original issue premium of $1,243,042.45, less an Underwriters· discount of $ I 12,563.18, plus accrued interest. 0 The Underwriters have agreed to purchase the Certificates, subject to certain conditions, and have agreed to pay a purchase price reflecting the par amount of the Certificates, plus a net original issue premium of $2,175.876. 95, less an Underwriters· discount O of$354,989.14, plus accrued interest. The Underwriters have reviewed the infomJation 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. FORWARD-LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City. that are not purely 0 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 10 the City on the date hereof, and 1he City assumes no obligation to update any such forward-looking statements. The City's actual resuhs 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 inhcrcn1\y O 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 panics, including customers, suppliers. business partners and compelitors, 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 1ha1 the forward-looking 0 statements included in this Official Statement will prove 10 be accurate. MISCELLANEOUS The financial data and other infonnation contained herein have been obtained from the City"s records. audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purpon 0 to be complete statements of such provisions and reference is made 10 such documents for further infonnation. Reference is made to original documents in all respects. The Ordinances 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 funher use in the reoffering of the Obligations by the Underwriters. ATTEST: Isl Rebecca Gar=o City Secretary City of Lubbock, Tex.as Isl Tom Manin Mayor City oflubbock. Texas 40 C C C C C SCHEDULE I SCHEDULE OF REFUNDED OBLIGATIONS 0 Ma1urity ReCunded Call Series Date Obligations Date Tax & Waterworks System (Limited Pledge) 02/15/2012 s 75,000 05/12/2009 Revenue Certificates of Obligation, Series I 993 02/1512013 75,000 0 02/15/2014 75,000 $ 225,000 General Obligation Bonds, Series 1993 02/15/2012 $ 965,000 05/12/2009 02/15/2013 965,000 02/15/2014 965,000 ') s 2,895,000 Tax & Waterworks System (Limited Pledge) 02/15/2016 $ 515.000 05/12/2009 Revenue Certificates of Obligation, Series 1998 021)5/2017 515,000 02/15/2018 515,000 $ 1,545,000 0 General Obligation Refunding Bonds, Series 1999 02/15/2010 $ 2,960,000 05/12/2009 02/15/2011 2.930.000 02/15/2012 1.785,000 02/15/2013 1.685,000 02/15/2014 1,670,000 $ 11,030,000 Tax & Waterworks System Surplus Revenue 02/15/2010 $ 620.000 05/12/2009 Refunding Bonds, Series 1999 02/15/201 I 620.000 02/15/2012 620.000 02/1 512013 620.000 02/15/2014 620.000 02/15/2016 1,240,000 02/15/2019 1,860,000 s 6,200,000 ) 1 0 0 0 0 0 This page intentionally left blank C C C C C 0 0 ) APPENDIX A EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2008 0 0 0 0 0 This page intentionally left blank C C C C C C 0 Office of the City Manager February 13, 2009 P .0. Box 2000 • 1625 13th Street• Lubbock, TX 79457 (806) 775-3002 • Fax: (806) 775-2051 Honorable Mayor, City Council, and Citizens of Lubbock, Texas: We are pleased to submit the Comprehensive Annual Financial Report (CAFR) of the City of Lubbock, Texas for the fiscal year ended September 30, 2008. The purpose of the CAFR is to provide accurate and meaningful infonnation concerning the City's financial condition and performance. Jn addition, independent auditors have verified that the City has fairly presented its financial position, in all material respects. The CAFR satisfies Section 103.001 of the Texas Local Government Code requiring annual audits of all municipalities. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. We believe the data is accurate in all material respects and is presented in a manner that fairly sets forth the financial position and results of the City. We also believe all disclosures necessary to enable the reader to gain an understanding of the City's financial affairs have been included. To provide a reasonable basis for making these representations, City management 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 accounting principles generally accepted in the United States of America (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 financial statements wiH be free from material misstatement. The City's financial statements have been audited by BKD, LLP, a firm of licensed certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements are free of material misstatement. The independent audit involves: • examining evidence on a test basis that supports 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. Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 The independent auditor has concluded that the City's financial statements are in conformity with GAAP, are fairly represented, and there is a reasonable basis for providing an unqualified opinion. The independent auditor's report is presented as the first component of the financial section of this report. The independent accountants' audit of the City's financial statements is part of a broader, federally mandated "Single Audit", which is designed to meet the special needs of federal granting agencies. These reports are available in the City's separately issued Single Audit Report. The standards governing Single Audit engagements require the independent auditor to report on several facets of the granting agencies' financial processes and controls: • Fair presentation of the financial statements, • Internal controls involving the administration of federal awards, and • Compliance with legal and grant requirements. GAAP requires management to provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of a Management Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A. The City's MD&A can be found immediately following the report of the independent accountants. THE CJTY AND ITS ORGANIZATION Description of the City The City is a political subdivision and municipal corporation of the State, duly organized and existing under the laws of the State, including the City's Home Rule Charter. The City was incorporated in 1909, and first adopted its Home Rule Charter in 1917. The City operates under a Council/Manager fonn of government with a City Council comprised of the Mayor and six council members. 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. 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 as the City Council deems appropriate. The 2000 Census population for the City was 199,564; the estimated 2008 population is 214,847. The City covers approximately 119.9 square miles. City Services The City provides a full range of services including public safety (police and fire protection), electric, water and wastewater, storm water, solid waste. public transportation, health and social services, culture- rccreation, highways and streets, airport, planning and zoning, and general administrative services. Public Safety: The Police Department serves and protects the public by conducting criminal investigations and enforcing laws governing public health, and order. The department is staffed with 377 sworn officers. The Fire Department serves to minimize loss oflife and property from the effects of fires by quickly responding to emergencies. The department operates 15 fire stations and is staffed with 334 sworn firefighters. During 2008 the City improved ii insurance standards rating, going from a Class 3 to a Class 2 on a measurement of 10 with Class l representing the best public protection. 2 0 0 0 0 0 C C C 0 0 0 0 G G Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 Electric Utility: Electric service in the City is provided by Lubbock Power and Light (LP&L), Xcel Energy, and South Plains Electric Cooperative. LP&L is the municipal-owned electric company and has 73,619 meters with an average daily consumption of 4,485,835 kWh. LP&L has 14 substations, one substation under construction, more than 1,030 miles of distribution lines, and approximately 85 mi Jes of transmission lines. Water Utility: To assist with the strategic development of additional water supplies, the City Council established the Lubbock Water Advisory Commission in July 2003, with the primary objective of developing a JOO-year water supply plan. ln July of 2007, with the recommendation of the Lubbock Water Advisory Commission, the City Council approved the Strategic Water Supply Plan for Lubbock. The City has also worked closely with the Region O Planning Group in preparing the State Water Plan, which includes the City's water supply needs and alternatives. The City has initiated five major water and wastewater studies over the past four years in order to help develop the Strategic Water Supply Plan. The Water Texas study was completed in 2004 and laid the foundation for additional work so the City could document both current and future water needs for annual supply and peak day demand. The City has also completed preliminary engineering and final design for improvements to the Southeast Water Reclamation Plant to improve the quality of the City's effluent discharge and prepare for possible future reuse. The City obtains IO billion gallons of its annual water supply from Canadian River Municipal Water Authority (CRMWA). CRMWA combines surface water from Lake Meredith and ground water from Roberts County to meet the water demands of Lubbock and the other IO member cities of CRMW A. The City secures the remaining 2 billion gallons of its annual water supply from groundwater in Bailey and Lamb counties. The City provides water service to over 77,000 meters through 1,400 miles of distribution lines. In addition to Lubbock, the City also services the communities of Shallowater, Ransom Canyon, Buffalo Springs Lake, Reese Redevelopment Authority, and Lubbock Cooper and Roosevelt school districts. The daily capacity of the City water supply and treatment system is 81 million gallons per day with an average utilization of 33 million gallons per day. In the Bailey County Well Field, the City has 160 active water wells with 83,265 acres of water rights. CRMW A allocates more than 10 billion gallons of water to the City annually. Lake Alan Henry, built by the City in 1993, is in development as a future water source. In order for the City to utilize water from Lake Alan Henry, the construction of pump stations, a pipeline, and a new water treatment plant is required. Preliminary engineering for these improvements was completed in November of 2007 and final design is now undetway. The projected construction completion date is 2012. CRMWA has secured additional acres of groundwater rights in the Northern Texas Panhandle. The additional groundwater rights have increased the total from 42,000 to 265,999 acres with estimated 15 million acre feet of water within those rights. Conservative projections, using current secured water rights, indicate CRMWA will be able to provide groundwater supplies utilizing existing infrastructure through the year 2097. Wastewater Utility: Wastewater collection and treatment is provided within the city limits to residential, commercial, and industrial customers. As of January 1, 2008, the collection system consists of 996 miles of sanitary sewer lines. 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 has completed Phase J and begun construction of Phase II of a four phase project to upgrade the Southeast Water Reclamation 3 Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 Plant. Phase I included upgrades and improvements to the influent lift station. Phase II construction has begun and includes upgrades to Plant 3 for filtration and ultraviolet disinfection and Plant 4 for biological nutrient removal, filtration and ultraviolet disinfection. Phase III will include design and construction improvements to solids and handling. Phase IV will include upgrades to Plant 3 for biological removal. The improvements will produce a high quality of effluent that will be discharged for potential reuse into the North Fork of the Double Mountain Fork of the Brazos River. Storm Water Utility: The City's storm 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 separate municipal storm sewer system (MS4) is made up of approximately 3,000 lane miles of paved and unpaved streets, 5 5 5 linear miles of paved and unpaved alleys, I , l 88 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 stonn sewers and street cleaning are funded through stonn water fees. During FY 2007-08, a primary focus of the stonn water utility was the completion of the South Lubbock Drainage Project -Phase I Main Trunk Line. This project was substantially completed approximately one year ahead of schedule and has connected six play a lakes. Construction for Phase 1 A of the South Lubbock Project began in FY 2007-08. This project will add five additional playa lakes to the Project, and is scheduled for completion in 2010. Other areas of activity within the Storm Water Utility during FY 2007-08 included the following: • Received the new Texas Pollution Discharge Elimination System (TPDES) MS4 permit issued by the Texas Commission on Environmental Quality (TCEQ). Efforts arc underway to generate a comprehensive Storm Water Ordinance in order to comply with the provisions set forth in the new MS4 permit. • Completed and submitted information to the Federal Emergency Management Agency (FEMA) for the Flood Insurance Restudy of two of the playa lake systems. The study is currently awaiting review by FEMA for further action. • Began a master plan of the northwest quadrant of the City as well as an update to the Master Drainage Plan for western and southern portions of the City. • Continued evaluating options for flood risk reduction at Maxcy Park Lake. • Continued video inspection and cleaning of the downtown area storm sewer pipelines. • Continued the design of drainage improvements at Mose Hood and Stumpy Hamilton Parks. Solid Waste Utility: The City provides garbage collection and disposal services to 65,829 residential customers and 2,829 commercial customers. One of the City's two landfill sites is designated as the North Avenue P Landfill and includes a citizen's transfer station. The second site is the West Texas Regional Disposal Facility. The West Texas Regional Disposal Facility opened in I 999 and is one of the largest landfills in the State of Texas. With 1,260 acres, the expected useful life is more than 92 years. Public Transportation: Citibus provides public transportation for the City and is professionally managed by McDonald Transit Associates, Inc. Citibus provides a Fixed Route Service, CitiAccess (paratransit system), evening service, and other special services. CitiAccess is a curb-to-curb service for disabled members of the community. The Citibus evening service is designed 10 meet the needs of CitiAccess and fixed route passengers who rely on public transit. A majority of evening service passengers work at night and use the service for transponation to and from their jobs. In addition, Citibus offers route service for 4 0 0 0 0 0 0 C 0 a Cl () 0 n 0 0 0 0 Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February I 3, 2009 Texas Tech University. Finally, Citibus is the contracted agent for passenger sales and freight shipping and receiving for Greyhound Lines, Jnc. operating out of the Downtown Transfer Plaza. Health and Social Services: The City has a housing and community development program implemented and administered through funding from the Federal Community Development Block Grant Program, HOME Investment Partnership Program, and Emergency Shelter Grant Program. Through these programs, the City has completed work on over 196 houses and created 3 jobs through an economic development loan program. The City also receives funding from the Texas Department of Housing and Community Affairs. These funds allow the City to offer additional programs to its citizens. Through these programs, 71 homes or 141 individuals received assistance in weatherizing their home to make their home more energy efficient; 1,369 households received utility assistance; 54 individuals graduated from the Self-Sufficiency Program; and, 25,093 residents received referral assistance through the Information and Referral Hotline. Clllture-Recreation: Cultural and recreational services are provided by the City through four libraries, 80 parks, and 57 playgrounds. Other recreational facilities include 4 swimming pools, 58 tennis courts, 48 baseball and softball fields, a cultural arts center, five community centers, and five senior centers. To further enhance quality of life and to provide support to tourism, the City operates the Memorial Civic Center, City Bank Coliseum, City Bank Auditorium, the Buddy Holly Center, the Wells Fargo Amphitheatre, and the Silent Wings Museum. The City is financially accountable for a legally separate civic services corporation and three economic development corporations, 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. Highways and Streets: The City is responsible for the construction and maintenance of 1,058 centerline miles of paved streets. In 2004 the City Council established the Gateway Streets Program. The program, funded primarily through 40 percent of franchise fees, opens areas of the City through thoroughfare construction. The Gateway Streets Program consists of the Northwest Passage, which includes City thoroughfare streets and Texas Department of Transportation (TxDOT) improvements in Northwest Lubbock, as well as other thoroughfare improvements in other parts of the City. The City streets portion of the Northwest Passage consists of the widening of Erskine Street from Frankford Avenue to Salem Road, and the construction of Slide Road from 4th Street to Erskine. The construction of a Slide Road overpass at Loop 289, is being funded by the City, and will be constructed by TxDOT as part of a larger Loop 289 improvement project. Other major street improvement projects approved by the City Council for design include: Indiana A venue from 103rd Street to FM 1585; Quaker Avenue from 981h Street to FM 1585; 1141h Street from Quaker Avenue to Slide Road; Frankford Avenue from 981h Street to 1141h Street; 98th Street from Frankford Avenue to Milwaukee Avenue; and Milwaukee Avenue from 94th Street to FM 1585. The construction of981h Street from Slide Road to Frankford Avenue was completed during FY 2007-08. Lubbock Pre~·ton Smith I llternational Airport: A key component of Lubbock's transportation system is the Lubbock Preston Smith l ntemational Airport, located seven miles north of the City's central business district on 3,000 acres of land adjacent to Interstate 27. The Airport is operated as a department of the 5 Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13. 2009 City, with the guidance of an advisory board, and includes a 220,000 square foot passenger terminal building. The Airport has two commercial service runways, 11,500 and 8,000 feet in length. The Airport's third general aviation runway is 2,869 feet in length. Air traffic control services include a 24- hour Federal Aviation Administration control tower and a full range of instrument approaches. The Airport is served by four major passenger airlines and two major cargo airlines having over 80 commercial flights per day. Annual Budget Process The annual operating budget serves as the foundation for the City's financial planning and control. All City departments submit requests for appropriation to the City Manager each year. The City Manager uses these requests as the starting point for developing the proposed Operating Budget and Capital Program. The City Manager then presents the proposed Operating Budget and Capital Program to the City Council for review, as required by City Charter. The City Council is required to hold a public hearing on the proposed Operating Budget and Capital Program and to adopt it no later than September 30, the close of the City's fiscal year. The adopted Operating Budget and Capital Program appropriates funding at the departmental level in the General Fund, at the fund level in the other funds, and at the project level in the Capital Program. The General Fund Operating Budget is adopted on a basis other than GAAP, with the main difference being that capital lease proceeds and related capital outlay are not budgeted. Budgetary control is maintained at the department level. Management may make administrative transfers and increases or decreases between accounts below the department level without Council approval. However, any transfer of funds between departments, the legal level of control, or higher level shall be presented to Council for approval by ordinance before such funds can be transferred between departments or expended. All annual operating appropriations lapse at the end of the fiscal year. Capital Project appropriations do not lapse at fiscal year end but remain in effect until the project is completed and closed. ECONOMJC 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 economy. The following information is provided to highlight a broad range of economic forces that support the City's operations. Local Economy Lubbock has a stable economy with historically slow and steady growth, which has continued throughout FY 2007-08. Lubbock's agriculturally based economy has diversified over the past 20 years, which has minimized the effects of business cycles experienced by individual sectors. The South Plains is one of the most productive agricultural areas in the United States. Jn 2008, 17.4 percent of the nation's cotton crop and 46.3 percent of the state's cotton crop were produced by farmers in the Southern High Plains District. Southern High Plains production was 2.36 million bales, down 44.7 percent from record highs in 2006 and 2007. The decrease in production was due to weather conditions (United States Department of Agriculture, National Agriculture Statistics Service, Texas Counzr Data - Crops, retrieved from http://www.nass.usda.gov/QuickStats/PullData_ US_ CNTY .jsp ). The City has strong manufacturing, wholesale and retail trade, services, and government sectors. Manufacturing includes a diverse group of employers who support approximately 5,200 workers. A 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, 2009 central location and access to transportation have contributed to Lubbock's development as a regional warehousing and distribution center. Lubbock serves as the major retail trade center and health care provider for a region of more than a half million people. A breakdown of the percent of employment base by industry category has been provided, giving a snapshot of the industry base of the City. Percent Employment Base by lnd1tstry C•tego11· Wholesale Trade 4.7% Manufacturing 4.0% T ransporl3 t ion Warehou.,ing & Utihies 3.1% Jn rorm;;:n1on 4.1% Financial Acti"i1ies 5.6% Profession:,! & Business Ser\'ices 8.6% Educational & Health 15.2% Leisure and Hospitality Other Sen ices 12.4% 4.1""'·• (Texas Workforce Commission, MSA Employment and Unemployment Data, retrieved from hup:l/www.tracer2.com.) 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. Total enrollment for all higher education institutions in Lubbock for fall 2008 is 46,032. This is a 1.1 percent increase over the enrollment for fall of 2007. The availability of graduates in the City is an added advantage to local industries as the universities and colleges continue to produce a ready source of qualified labor. (City of Lubbock Finance Department, Seconda,y and Higher Education Enrollments 2000-2008. Fall 2008) The health care and social services sector is also a vital component of the Lubbock economy, with more than 19,435 employees and payroll of more than S712 million (U.S. Census Bureau, 2006 County Business Patterns. retrieved from ht1p:llcensta1s.ce11sus.god cgi-bin/cbpnaiclcbpsect.p/ (2-year delay in publication)). Lubbock Economic Index The Lubbock Economic Index is designed to represent the general condition of the Lubbock economy by tracking local economic growth rates. The base year for the index was I 996, when the index was set to I 00. The economic index for September 2008 is 132.8. which represents an increase of 1.2 percent from September 2007. The Lubbock Economic Index rose to record levels in FY 2007-08, with September marking the fourth consecutive monthly increase in the Index. Local and regional spending by households and businesses remains the bright spot in the economy, along with continued strength in the construction sector and gains in home building. 7 Honorable Mayor. City Council, And Citizens of the City of Lubbock. Texas February 13. 2009 Lubbock Economic Index Eleven Year Trend by Month 100 1----~--,----,----,----.,....---.,......--.,....----r---~---r--~ Jan-98 .fan-99 Jan-00 Jan-0 I Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 J:m-08 (Ingham Economic Reporting, September 2008, Lubbock Economic Index and Consumer Price Jndex, Amarillo, Texas: Karr Jngham.) Building Permit Valuations The construction sector continues to make a strong contribution to the economy with the value of all building pennits issued through September 2008 up 14.9 percent over the same period in 2007. The $412.3 million in building pennits issued through the first nine months of2008 are near the record setting levels that have been seen during the last few years 500 450 460 .,. 350 "' :! JOG Total Building Permit Valuations (Calendar Year) $278.J S2?8.1 S452.5 ~ 250 ... ______ $221.3-=-------------------- $181.7 200 150 ----·--·-------· 100 1998 1999 2000 2001 2002 2003 2004 2005 8 5453.5 $454.7 2006 2007 0 0 0 C C C ,.. I... C C C 0 0 0 0 Honorable Mayor, City Council, And Cilizens of the City of Lubbock, Texas February 13, 2009 The total number of new residential permits through September 2008 increased 12.9 percent over 2007 levels, and valuation amounts were S207.1 million, or 27.9 percent, higher than 2007 valuations (City of Lubbock Building Inspection Department, September 2008, Building Inspection Statistical Report). The average home sale price, through September 2008, has increased I 0.3 percent over the September 2007 average home sale price (Texas A&M University Real Estate Center, Lubbock Residential Housing Activity Report, retrieved from http://recenter.tamu.edu/data/datahs.html). Sales Tax Collections Sales tax collections for September 2008 were 5.8 percent higher than the September 2007 level (FY 2008 and FY 2007 City of Lubbock Comprehensive Annual Financial Report, Statement of Activities). TourismNisitor Related Jndicators Lodging tax receipts increased from $2.9 million in September 2007 to $3.0 million in September 2008, a 3.9 percent increase. Airline boardings at Lubbock Preston Smith International Airport decreased 0.6 O percent from FY 2006-07 to FY 2007-08 (]ngham Economic Reporting, September 2008, Lubbock Economic Index and Consumer Price Jndex. Amarillo, Texas: Karr Ingham). 0 0 0 0 Employment The total non-agricultural employment estimate for September 2008 was 128,600. This is a 0.2 percent improvement over September 2007. There were 300 more people employed in September 2008 than in September 2007. The unemployment rate for the Lubbock Metropolitan Statistical Area in September 2008 was 4.0 percent, the 41h lowest in the State of Texas. Historically, Lubbock has had a low rate of unemployment that is one to two percent below the national rate and about one percent below the state rate (Texas Workforce Commission, LMCI Economic Profiles, retrieved from http://www.traccr2.com/admin/uploadedpublications/l 724_1ubbockmsa.pdf). Unemployment Rates-Lubbock MSA 6.00%-.---------------------------4.9% 3.00¾ 2.00% 1.00% 0.00% 1999 2000 2001 2002 2003 2004 2005 ?006 2007 2008 Note: The methodology for calculating the unemployment rate was changed in 2005 and the last four years were recalculated based on the new method. The Lubbock MSA also changed in 2005 to include both Lubbock and Crosby Counties. 9 Honorable Mayor, City Council, And Citizens of the City of Lubbock, Tex.as February 13, 2009 Economic Development 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 three cents of the property tax allocation. In October 2004, the Lubbock Economic Development Alliance (LEDA), an economic development sales tax corporation, assumed responsibility for economic development. 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 allocated tax revenues for Market Lubbock, Inc. and LEDA for FY 2007-08 were $7,381,355. During the last year, through their business retention, expansion, and attraction programs, LEDA assisted 12 companies in the creation of 589 new jobs with an annual payroll of$17 .9 million and capital investment of $34.8 million. The City's Business Development Department works closely with LEDA to provide assistance in their economic development projects. Business Development is responsible for tracking and maintaining economic and demographic information for the City, assisting with city•rclated business issues, the enterprise zone and tax abatement programs, two Tax Jncrement Financing Reinvestment Zones and all Public Improvement Districts. Development Initiatives Overton Park: Overton Park, a former blighted area called North Overton, is a 300•acre revitalization project adjacent to the downtown area of Lubbock. Overton Park has developed much faster than anticipated. 0 0 0 0 0 By the end of 2008, three student oriented apartment complexes were completed along with The Centre, 0 an apartment complex built over upscale retail. Other projects completed were City Bank, Starbucks, Super Wal-Mart, a retail center adjacent to Wal-Mart, and the first phase of Main Street Condominiums. The second phase of the condominiums and nine single family houses were nearing completion. There were several projects under construction at the end of 2008. An hotel/conference center project O began construction in September 2007 with an estimated completion date of July 2009. The Suites, an apartment complex, is under construction and should be completed in late 2009. A retail center adjacent to the hotel/conference center began construction in early 2008 and should be completed in 2009. The Cottages, a large multi-family project, began construction in 2008 and is expected to be completed by August 2009. The Overton Park project, as a whole, is running three years ahead of schedule with much of the construction now expected to be complete by the end of 20 I 0. O The City of Lubbock, Lubbock County, Lubbock Hospital District and High Plains Underground Water District have participated in this public/private project with the creation of a Tax lncrcment Financing Reinvestment Zone that has funded the replacement of the 80-year old infrastructure. According to the latest Project and Finance Plan for the North Overton Tax Increment Financing Reinvestment Zone (TIF), there are planned expenditures of approximately S41.7 million for public infrastructure improvements, 0 which will result in an increase of taxable value of approximately $530 million over the TJF's 30-year life. The 2008 appraised value of the North Overton Tlf was $209. 9 million, which is a S 183 mill ion increase over the 2002 base year value. North and East Lubbock Community Development Corporation: While Lubbock grew during the last O 50 years, the areas of north and east Lubbock experienced an out-migration of people. From 1960 to 2000, the area's population decreased by 47 percent. In response to the deterioration of north and cast Lubbock. the City created the North and East Lubbock Community Development Corporation 10 0 () 0 0 0 0 0 6 0 Honorable Mayor. City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 (NELCDC) in 2004 to oversee and promote development in the area. The City also committed to provide funding to the NELCDC for four years. King's Dominion, a new single-family housing project, consists of fifteen homes with a sixteenth presently under construction. The NELCDC has also placed twenty- three families into scattered site developments, and has an additional two homes under construction. At the end of 2008, the NELCDC has originated $1,678,245 in mortgages for King's Dominion and an additional S 1,914,30 I for scattered site developments. Downtown Redevelopment: The City of Lubbock Central Business District (CBD) has developed over the years with traditional office, retail, and governmental agency uses. As for 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. On December 3, 2001, in an effort to reverse that trend and to stimulate further development downtown, the City established the CBD Tax Increment Finance Reinvestment Zone (TIF). Also in 2005, the City Council created the Downtown Redevlopment Commission (DRC) who retained a consultant to draft a Revitalization Action Plan for the downtown area. During the planning process, the DRC conducted one-on-one interviews with business and property owners in the downtown area and held three public meetings to receive input from citizens on their vision for downtown. The new Revitalization Action Plan (Plan) for downtown Lubbock was completed in FY 2007-08. The Plan has been approved by the TIF Board of Directors and the City Council. The City issued an RFQ in FY 2007-08 for a Master Developer to implement the Plan. On December 4, 2008, the City Council coniracted with McDougal Land Company, LT. to provide Consulting/Master Developer services to implement the Plan. Other Residential/Commercial Development: Growth in commercial and residential construction occurred at a healthy rate throughout the past five years. Construction on several new residential and commercial developments has continued. The Cottages, a multi-family project in Overton Park, will have an expected $50 million investment and should be completed by August 2009. Vintage Township, a residential/commercial development will have an expected $350 million investment. Development along Milwaukee Avenue is expected to generate a total investment in commercial/residential development of approximately $844 million in the next five to ten years. FINANCIAL INFORMATION Long-term financial planning The City uses ten-year rate models for long-range planning in all enterprise funds as a basis for budget discussion and policy decision-making. These models are based on current projects and policies and arc driven by the idea that the rate should be annually adjusted to reflect the service needs of the citizens and long term capital needs. Because of this philosophy, the rates in the models are annually trimmed to leave as little excess as possible, after allowing for financially sound net asset reserves, as established by City Council Policy. The models, in association with the City's Five-Y car Forecast, provide anticipated trends given current policies. I I Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas February 13, 2009 Cash management policies and practices Cash is invested in U.S. Agencies, money market mutual funds. and state investment pools. The maturities of the investments range from l day to 3 years, with an average maturity of approximately 11.25 months. The average yield on investments for FY 2008 was 4.21 percent for the City's operating funds and 3.21 percent for the City's bond funds. Investment income is enhanced with increases in the fair value of investments. Increases in foir 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 2007, the City continued its use of third party workers' compensation coverage on an initial dollar coverage basis. The City is primarily self-insured for various liability coverages with an attachment point of $500,000 per occurrence and SI 0,000.000 aggregate annual coverage. During 2007, the City's Health Benefits Fund continued its self-insured sl3tus for medical and dental. The current stop loss coverage provides for S 175,000 individual attachment and a SI 8,181.945 aggregate attachment point. The City also carried transplant insurance on an initial dollar basis. 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, through the Texas Municipal Retirement System, 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 ensure that the plan will be able to fully meet its obligations to retired employees. 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 of December 3 I, 2007, the City has funded 61.4 percent of the present value of the projected benefits earned by employees. The remaining unfunded amount is being systematically funded over 30 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 Fire Pension Fund (LFPF), which is administered by the Board of Trustees. The City contributes an amount that is determined by a formula and is 19.97 percent of firefighter's pay. The City provides 34 percent to 73 percent of post retirement health and 8 percent to 38 percent of dental care benefits for retirees or their dependents. 0 0 0 0 0 0 0 Additional information on the City's pension arrangements and post employment benefits can be found in the notes to the financial statements. E) AW ARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its comprehensive annual financial report for the fiscal Q year ended September 30, 2007. This is the fourth consecutive year that the City has received this award. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable C, 12 0 0 0 0 ., Honorable Mayor, City Council. And Citizens of the City of Lubbock. Texas February 13, 2009 and efficiently organized comprehensive annual financial report whose contents conform to program standards. Such reports must satisfy both GAAP 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. We would particularly like to thank the Senior Accountants and Accountants for their countless hours of work on this financial report. We 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 the City Council and the Audit Committee for their interest and support in planning and conducting the operations of the City in a responsible and progressive manner. Respectfully submitted. /}tu JfiJ f14i Lee Ann Dumbauld City Manager ~~~ Chief Financial Officer 13 ~tvmt1aJJI~ Pamela Moon. CPA Director of Accounting ~ {"\ City of Lubbock -Organization Chart Code Enfo,.camtr11 Slual'IWallcar ("\ OoPlllYC<IVMgr. TmnAdJlmS Anlml\1$.l!JNicH Kovlri0'vor.lr4et w.ne,u11P.ty Al,boySl)fllar w,u.erUnfl r,,4:liml,mance-n Allpot1 S1oveNictlolliit:1A Cit,bus JDhnWilECr'I Pub1re:Wor1c& M1111ha Rl5ed Solid Wai,le T eny E11erbroo'( n Ccmmur,ity s,.....,.. ,.,..,,o,vr.<;,. Soon Snfder CemeM!iy SooGoodlw, CMc.F"aoLiN!I& F,~dyCh.....,&l l·hM~h N3t'lcy Hal\BY Llbrariet5 J.3n• Clau:1011 MustUMI RmokaAJBs.or. FIIC6f Oparallan1 PamMaort F.acalPol!oy 1-11J1N1n Rescurces Vldcte Berin&tt Prinl Sl'Klf! Ho,1 D,ay ~ &Connci ~,,t11n~enl Vtelor K•lmon P.1~1 a,,d Rec,e.alion Rll"cfy Tru11M1e'II W11re:Mu1e Clint Sheum.a"' () ,Risk Managemenl letliB Muk:l'iHOll n City Couoc,I ~nld?OI Cou~ RobenOolV Ci,V S.M>l,,y Bec1<yGaru C;tyAttomoy Dan ½ndlva, Lubbod< Power & Light Gary Zhong Fsti'lillet. CIO Aa,si11ant City MaN,go, Mark Yearwood Wu Everet! lnkll'Tl'laffcn "Tecimofogy Jaaan Ooelter Public 1monna~on JelJMd<ito R11d1Q$Mp J11:kMorri1gn Te~Zlil'O CiitllC.&ntflt IBllteCo111 Fleot T-om Vas~o 0 0 Oavetopma,l\t Servlca Aul.CIIY~-~bA.llisan Aul1lanl C,ly Manager OufJIC\rWMe Cammur,rty Dov81optr1ent Difl Howerton Lubbo<\C Hooling l'.ull>o<Oy Narlh&E.att Lubbee" Commur\'ty lewlopm&nl Co 0 fnlama1 Audikir Rameeh G•nesn 0 0 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 September 30, 2007 A Certificate of Achievement for Excellence in Financial Reporting is presenled by the Goverr .. nent Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. Executive Director 15 , ·- l.. .... , ,,:;-""l ,; . '.' .. t " • ,. .... ..... ~ .. -.. 't .. 1 •. ._ C,. -'\. ··..>• ',: ~ { ... \ ; )i.. •• -: . ' .. -~ . ' .. --. --.. ·.:,.1• '(:'I tr.I ~; Jfn\' lti\\ 11 ~·. J 1 ~1, t '\' I . l \ . !>< \ \ .• •· ' ·•,i•'• ., t~ ,._1 ... ,{.~ •g i~~)r·eh ensive Annual Financial Report ✓~ ' - 16 n 0 0 0 , 1 CPAs & Advisors Independent Accountants' Report on Financial Statements and Supplementary Information The Honorable Mayor and Members of the City Council City of Lubbock, Texas !!.• ·/ ·-,1 ·'. • ·-•·••• .. i•l,: ....... ,\,,; 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 (the City), as of and for the year ended September 30, 2008, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial sta1emen1s 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,, Markel Lubbock Economic Development Corporation d/b/a Market Lubbock, Inc. and Lubbock Economic Development A!Hance, component units of the City, which statements reflect total assets and program revenues of$30,l l9,969 and $16,769,680, respectively, and represent 93.0% and 99.5% of the aggregate discretely presented component uni1s· total assets and program revenues, respectively, at September 30, 2008, and for the year then ended. The financial statements of these entities were audited by other accounlanls whose reports thereon have been furnished 10 us, and our opinion, insofar as ir relates to the amounts included for such entities, is based solely on the reports of the other accountants. We conducted our audit in accordance with audiling standards generally accepted in the United States of America and the standards applicable to financial audits contained in Governmenl Auditing Standards, issued by the Comptroller General of lhe United States. Those standards require that we plan and perfonn the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The financial statements of the component units Civic Lubbock, Inc .• Market Lubbock Economic Development Corporation d/b/a Market Lubbock, Inc., Lubbock Economic Development Alliance and the major fund Wes1 Texas Municipal Power Agency, were not audited in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supponing 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 presentalion. We believe that our audit and the repons of the other accountants provide a reasonable basis for our opinions. In our opinion, based on our audit and the reports of the other accountants. the financial stalemcnls referred to above present fairly, in all malerial respects, the respective financial position of the governmental activilies. the business-type aclivities, 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, 2008, and 1he respective changes in financial position and cash flows, where applicable_ thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. experience BKD 17 The Honorable Mayor and Members of the City Council City of Lubbock, Texas Page 2 As discussed in Note JJ, in 2008, the City changed its method of accounting for postemployment benefits other than pensions and its method of disclosures of pension information by implementing Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefils Other than Pensions and Statement No. 50, Pensions Disclosures. ln accordance with Government Auditing Standards, we have also issued our report dated February 13, 2009, 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 financia 1 reporting and comp I iance 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, budgetary information and schedule of funding progress related to pension plans and other postemployment benefits as listed in the table of contents are not a required par1 of the basic financial statements but are 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 infonnation. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying supplementary information, as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial s1atemen1s. 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. 0 0 0 0 0 C The accompanying information in the introductory and statistical sections as listed in the table of contents has not been subjected to 1he procedures applied in the audit of the basic financial statements and, C accordingly, we express no opinion on it. February 13, 2009 18 r '- 0 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 The Management Discussion and Analysis (MD&A) provides a narrative overview and analysis of the financial activities of the City of Lubbock for the fiscal year ended September 30, 2008. Readers of the financial statements are encouraged to consider the information included in the transmittal letter and in the other sections of the Comprehensive Annual Financial Report (CAFR) e.g., combining C) statements, and the statistical section in conjunction with the MD&A. 0 Financial Highlights The following financial highlights summarize the City's financial position and operations as presented in more detail in the Basic Financial Statements (BFS). • The City's assets exceeded its liabilities at September 30, 2008, by $666.5 million (net assets), of which $136.4 million (unrestricted net assets) may be used to meet the City's ongoing obligations to citizens and creditors. • The City's total net assets increased by $26.5 million as a result of operations during the fiscal year. • The ending unreserved fund balance for the General Fund was $19.8 million, or 18.6% of total General Fwid revenues; an increase of$0.8 million from the prior year. • The City's governmental funds reported combined ending fund balances of $130.5 million, of which $19.8 million is available for spending at the City's discretion. • The City's enterprise funds reported combined ending net assets of $5 I 7.3 million, of which $96.3 miJlion is available for spending at the City's discretion. • During FY 2008, the City issued $169.8 million in debt for capital projects. Overview of the Financial Statements Basic Financial Statements. The MD&A is intended to serve as an introduction to the City's BFS. The BFS are comprised of three components: I) Government-Wide Financial Statements {GWFS), 2) Fund Financial Statements (FFS), and 3) Notes to Basic Financial Statements (Notes). The CAFR contains other supplementary information in addition to the BFS. Government-Wide Financial Statements. The GWFS, shown on pages 35-37 of the CAFR. contain the Statement of Net Assets and the Statement of Activities, described below: The Statement of Net Assets presents information on 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 of accounting. 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 Statemenl ~f Activilies presents a comparison between direct expenses and program revenues for each of the City's functions or programs. Direct expenses 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. Program revenues also include grants and contributions restricted to meeting the operational or capital requirements of a particular activity. Revenues not directly 19 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 related to a specific activity are presented as general revenues. The comparison of direct expenses with revenues from activities identifies the extent to which each activity is self-financing, or alternatively, draws from any City generated general revenues. Governmental activities ( activities principally supported by taxes and intergovernmental revenues) of the City include administrative services and general government, community services, cultural and recreation, economic and business development, fire, health, police, other public safety, and streets and traffic. Business-type activities (activities intended to recover all of their costs through user fees and charges) of the City include Electric, Water, Wastewater, Solid Waste, Storm Water, Transit, Airport, Civic Centers, and Cemetery. Electric includes Lubbock Power and Light (LP&L) and West Texas Municipal Power Agency (WTMPA). All changes in net assets arc reported as soon as the underlying event 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 Units. The GWFS include the City (the "primary government"), and four legally separate entities (the "component units") for which the City is financialiy accountable. The component units consist of: Market Lubbock Economic Development Corporation, d/b/a Market Lubbock, Inc., Lubbock Economic Development Alliance, Civic Lubbock, Inc., and Vintage Township Public Facilities Corporation. The component units provide economic development services, arts and cultural activities, and public improvement financing for the City. Financial infonnation for the component units is reported separately in the GWFS to differentiate them from the City's financial infonnation. No component unit is considered a major component unit. Fund Financial Statements. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The principal role of funds in the financial reporting model is to demonstrate fiscal accountability. The City, as with other state and local governments. uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The focus of the FFS is on major funds. Major funds are those that meet minimum criteria (a percentage of assets, liabilities, revenue, or expenditures/expenses of fund category and of the governmental and enterprise funds combined), or those that the City chooses to report as major funds given their qualitative significance. Non-major 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 RSI. All funds of the City can be divided into two categories: governmentalfunds and proprietary.funds. Governmental FFS. Governmental funds are used to account for essentially the same functions reported as governmental activities in the GWFS. However. unlike the GWFS, governmental FFS focus on near- term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the City's fiscal year. Such information is useful in evaluating the City's near-term financing requirements. Because the focus of governmental funds is narrower than that of the GWFS (modified accrual versus accrual basis of accounting, and current financial resources versus economic resources), it is useful to compare the infonnation presented for governmental funds with similar information presented for 20 0 0 0 0 0 0 0 a C 0 0 0 0 0 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 governmental activities in the GWFS. By doing so, the reader may better understand the long-term impact of 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 27 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 and the Governmental Capital Projects Fund, both of which are considered to be major funds. The governmental FFS can be found on pages 38-41 of the CAFR. Data for the other 25 governmental funds are combined into a single, aggregated presentation. The City adopts a budget annually for the General Fund and all other funds. In the RSI section, a budgetary comparison statement for the General Fund has been provided to demonstrate compliance with the budget. Proprietary FFS. The City maintains two different types of proprietary funds. Enterprisefimds 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 LP&L, Water, Wastewater, WTMPA, Storm Water, Transit, Solid Waste, Airport, Civic Centers, and Cemetery activities, of which the first five activities are considered to be major funds by the City and are presented separately. The latter five activities are considered non-major funds 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 vehicle service operations and fueling, central warehouse and printing services, information technology services, risk management, health benefits, and investment pool funds. The services provided by the internal service funds benefit both governmental and business-type activities, and accordingly, they have been included D within governmental activities and business-type activities, as appropriate, in the GWFS. All internal service funds are combined into a single aggregated presentation in the proprietary FFS. Reconciliations are provided for the proprietary fund statement of net assets and the proprietary fund statement of revenues, expenses. and changes in fund net assets for comparison between enterprise funds and business- type activities. The proprietary FFS can be found on pages 42-53 of the CAFR. Notes to Basic Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the GWFS and FFS. The notes can be found on pages 55-94 of the CAFR. Other Information. ln addition to the basic financial statements and accompanying notes, this report also presents certain Required Supplementary Information (RSI) concerning the City's progress in funding its obligation to provide pension and post retirement benefits to its employees and retirees. The General Fund budgetary comparison demonstrating the legal level of budgetary control can also be found as part of RSI. RSI can be found on pages 95-99 of the CAFR. 21 j City of Lubboc~ Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 Government-Wide Financial Analysis As noted earlier, net assets serve as a useful indicator of the City's financial position. Assets exceeded liabilities by $666.5 million (net assets) at the close of the fiscal year, compared to assets exceeding liabilities by $640.0 million (nel assets) at the end of the prior fiscal year. As a result of operations, total net assets increased by $26.5 million during the period. City of Lubbock Net Assets For the Year Ended September 30 (in thousands) Governmental Business-type Activities Activities Total 2008 2007 2008 2007 2008 2007 Current and other assets s 161,688 $ 141,205 $ 314.0ll $ 220,133 $ 475,699 $ 361,338 Capital assets 237,203 213,679 787,522 738,066 1,024,725 951,745 Total assets 398,891 354,884 1,101,533 958.199 1,500.424 1,313,083 Current liabilities 41,496 38,303 66.249 56,939 107,745 95,242 Noncurrent liabilities 217,462 174,853 508,748 403.003 726,210 577,856 Total liabilities 258,958 213,156 574,997 459,942 833,955 673,098 Net assets: Invested in capital assets, net of related debt 96,275 102,925 400,552 384.516 496,827 487,441 Restricted 11,956 5.128 21,275 17,730 33.231 22,858 Unrestricted 31,701 33,676 104,709 96,011 136,410 129,687 Total net assets s 139,932 s 141,729 s 526.536 $ 498,257 s 666.468 s 639,986 Approximately 74.5% of the City's net assets reflect its investment in capital assets, e.g .. land, buildings, infrastructure, machinery, and equipment, less any related outstanding debt used to acquire those assets. The City uses capital assets to provide services to citizens; consequently, those assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources since the capital assets cannot be used to liquidate the liabilities. The City has restricted net assets totaling 5.0% of total net assets, which represent resources subject to external restrictions on how they may be used. Such resources include bond funds restricted to be spent for specified capital projects, debt service reserves restricted by bond covenants, passenger facility charges restricted for airport improvements, and grant programs restricted for specific purposes. The remaining balance of unrestricted net assets ofSl36.4 million may be used to meet the City's ongoing obligations. The City reports positive balances in all three categories of net assets for the City as a whole, and for its separate governmental activities and business-type activities. 22 0 0 0 0 0 C C Cl () City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 0 City of Lubbock Changes in Net Assets For the Year Ended September 30 (in thousands) Business- Govemmencal type Activities Activities Totals 0 Revenues: 2008 2007 20cm 2007 2008 2007 Program Revenues: Charges for services $ 12,677 $ 10,636 $ 260,494 $ 243,835 $ 273,171 $ 254,471 Operating grants and contributions 9,232 10,323 5,133 5,813 14,365 16,136 Capital grants and cootributions 15,922 4,322 5,953 8,792 21,875 13,114 General Revenues: 0 Property taxes 50,330 47,007 50,330 47,007 Sales taxes 50,549 47,780 50,549 47,780 Other taxes 5,370 4,909 5,370 4,909 Franchise fees I 2,978 12,378 12,978 12,378 Investment earnings 5,505 6,118 8,284 7,146 13,789 13,264 Other 4,811 3,669 3!807 ~004 8,618 9,673 0 Total revenues 167,374 147,142 283,671 271,590 451,045 418,732 Expenses: Administrative services/general govt. 12,372 12,155 12,372 12,155 Community services 6,874 6,951 6,874 6,951 Cultural and recreation 16,660 19,671 16,660 19,671 Economic and business development 12,378 11,620 12,378 11,620 Fire 31,789 27,338 31,789 27,338 0 Health 6,142 5,899 6,142 5,899 Police 46,850 43,022 46,850 43,022 Other public safety 6,678 5,886 6,678 5,886 SI reets and tra Ifie 16,357 26,870 16,357 26,870 Interest on long-tenn debt 8,367 6,968 8,367 6,968 Electric 153,108 145,832 153,108 145,832 Water 38.424 32.,125 38,424 32,125 Wastewater 19,001 18,048 19,001 18,048 Solid Waste 16,261 14,454 16,261 14,454 Storm Water 7.677 3,933 7,677 3,933 Transit 11,338 11,004 ll ,338 11,004 Airport 9,465 8,524 9,465 8,524 Civic Centers 4,099 4,099 Cerretery 722 619 722 619 Total expenses 164.467 I <i>,380 260,095 234,539 424,562 400,919 Change in net assets before transfeis 2.907 (19,238) 23,576 37,051 26,483 17,813 Transfers (4.703) 10,572 4.703 (10,572) Change in nel assets ( 1.796) (8,666) 28.279 26,479 26,483 17,813 Net assets -beginning of year 141.729 150,395 498.257 471,778 639,986 622!173 Net assets -end of year $ rn~.933 $ 141,729 $ 526,536 $ 498,257 $ 666,469 $ (ij!J.986 Changes in Net Assets. Details of the above summarized infonnation can be found on pages 36-37 of the CAFR. 23 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 Governmental activities. The City's governmental activities experienced a decrease in net assets of$l.8 million, compared to a decrease of $8.7 million during the prior fiscal year. Key clements of the operational decrease include: • Revenues increased approximately S20.3 million, from$ I 47.l million to $167.4 million. o Capital grants and contributions accounted for the largest increase, rising from $4.3 million in FY 2007 to SI 5.9 million in FY 2008. In FY 2008, private foundations and private developers granted money and donated property in the amount of $7 .5 million for a conference center. In FY 2008, private developers donated $6.5 million of streets, alley ways, and parks; compared to S3.6 million in the prior year with most of the developer increase due to donations for the Vintage Township development. o Property taxes increased from $47.0 million in FY 2007 to $50.3 million in FY 2008. The property tax rate was S0.45505 per $100 of assessed value in FY 2008, compared to S0.46199 per S100 of assessed value in FY 2007. While the tax rate decreased, taxable assessed values increased from S 10.4 billion in FY 2007 to $11.3 billion in FY 2008. o Sales tax revenue totaled $50.5 million, an increase of $2.8 million from the prior year, reflecting Lubbock's growing economy. o Charges for services increased S2.1 million to Sl2.7 million, primarily due to revenue recognized from prepaid paving jobs at the completion of street projects. • Total expenses decreased SI .9 million from the prior year, from $166.4 million to $164.5 million. o Fire expenses totaled S3 I .8 million, a $4.5 million increase from the prior year. ln FY 2008, the City Council authorized 21 new fire fighter positions, 2 new division chief positions, 2 new fire inspector positions, and a 5-year firefighter compensation plan to achieve salaries that rank in the top JO of fire departments in the State. Vehicle costs and computer expenses also increased accordingly with the increase in personnel. o Police expenses totaled $46.9 million, a S3.8 million increase from the prior year with most of the increase occurring in salaries and benefits. Police has the largest number of employees in governmental activities and received the largest allocation of post retirement benefit expense due to the adoption of GASB Statement No. 45. In FY 2008, the City implemented a shift differential program and certification pay for police officers. In addition, higher fuel costs and increased vehicle maintenance expenses occurred. o Streets and traffic expenses totaled $16.4 million, a decrease of$10.5 million from the prior year, primarily due to a one-time Sl2.5 million contribution in FY 2007 to the Texas Department of Transportation (TxDOT), which provided funding for the Marsha Sharp Freeway project. Exclusive of the TxDOT transaction. costs in streets increased for planned use of prepaid paving funds and additional depreciation on infrastructure added by donated and dedicated assets. o Cultural and recreation expense totaled S16.7 million, a decrease of S3.0 million from the prior year as a result of moving the Civic Centers from a governmental activity in FY 2007 to a business-type activity in FY 2008. o Interest expense totaled $8.4 million, an increase of SI .4 million from the prior year as a result of additional bonded indebtedness and capital leases. • Transfers to or from business-type activities during the fiscal year reduced governmental activities' net assets S4. 7 million. During the prior fiscal year, the transfers increased governmental activities' net assets by S10.6 million. o S13.8 million of one-time transfers from governmental activi1ies to business-type activities consisting of capital assets, net of long-term liabilities. were made in FY 2008. Most of the 24 0 0 0 0 0 0 e C C C 0 n 0 0 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 transfers were related to moving the Civic Center, Auditorium, and Coliseum from the governmental funds to the Civic Centers Enterprise Fund. o Transfers from business-type activities included payments in lieu of taxes, franchise fees, and indirect costs of operations for centralized services such as payroll and purchasing to governmental activities. The most notable increase in payments was related to a contribution from LP&L totaling $1 .0 million for a payment in lieu of franchise fees. o Transfers from governmental activities to business-type activities increased due to General Fund support of the newly created Civic Centers Enterprise Fund and increased contributions to Transit due to a decline in Federal funding. The following graph depicts the expenses and program revenues generated through the City's various governmental activities. S50,000 S45,000 -;;;-S40,000 ,:, = SJS,000 "' ; 0 = $30,000 2 $25,000 .. = :, S20,000 0 E < $15,000 SI0,000 S5,000 so Expenses and Program Revenues -Governmental Activities 7Q! ~ 0 ~ ~ ~ .0 ~ ~~ ~ " ,. .... ..., o,::::. ~ ~ ~-~ ~ ~ \: ~ ~ '(! .... ,.. '(! ,; u' t t ,. ~ '},. rr. ~,.:: ~ ~-C, ~ ~ ~ ... ~ ~ ,,, ,I• ~ ~ -:,. ,..,_ ~ ~ ~ '>.,, ~ .. %. ~ 25 •Expense •Program revenue City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 The following graph reflects the source of revenues and the percentage each source represents of the total. Revenues by Source -Governmental Activities Charges for Services 7.5% Miscellaneous 2.9% 0 0 Property Taxes 0 Grants & Contributions----t.· 15.0o/e Investment Earnings 3.3% 7.8% Other Taxes 3.3% 30.0% 30.2% Business-type activities. The City's business-type activities experienced an increase in net assets of $28.3 million during FY 2008, compared to an increase of $26.5 million during the prior fiscal year. Key elements of the increase from operations include: • Revenues for business-type activities totaled S283. 7 million in FY 2008, an increase of SJ 2.1 million from the prior year. Charges for services for business-type activities totaled $260.5 million in FY 2008. an increase of S 16. 7 million from the prior year. 0 0 Electric operations, which include LP&L and WTMPA, accounted fo; S7.2 million of the increase in charges for services. Charges for services in the electric operations consist principally of the retail sale of electricity to residential, commercial, and government customers, and off- system sales to wholesale power customers. LP&L charges a base rate for electric service, which remained consistent between FY 2007 and FY 2008, plus a fuel cost adjustment rate for electric service. which increased in FY 2008. Offsetting the increase in charges for services was a SI 4.5 million decline in revenues related to gas sales to a third party wholesaler. LP&L ·s gas supplier 26 0 0 0 C ,.. '-' C n 0 0 • -, City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 exhausted its supply during the prior fiscal year, and as a result, sales to the third party wholesaler were eliminated. o Water and Wastewater operations accounted for $8.3 million of the increase in charges for services. Water rates increased 11 % in March 2007 and again in March 2008 when the City, in an attempt to encourage water conservation, implemented a tiered water rate structure with higher rates charged for peak demand and excess usage. The rate increase was necessary to pay debt service on aging infrastructure and water supply projects. The City continues to implement mandatory water conservation efforts as part of its drought management plan due to low levels of water in area reservoirs. Water levels continues to fluctuate from year to year depending on the amount of annual rainfall, while the new water rate structure has moderated peak water use and revenue in summer months. Water revenue was $42.5 million in FY 2008, an increase of $7.1 million over the prior year. Wastewater revenue was $21.1 million, an increase of SI .2 million over the prior year. Wastewater had a mid-year rate increase and processed additional water as water usage increased. o Operating grants, capital grants, and contributions continued to be a significant revenue source for business-type activities during FY 2008, producing SJ 1.1 million in revenue. This is a $3.5 million decrease from SI4.6 million during the prior year. The decrease is primarily due to fewer developer donated assets to the Water and Wastewater Funds. Expenses for business-type activities were $260. J million in FY 2008, an increase of S25.6 mil1ion . 0 0 0 0 Collection expense decreased in the LP&L Fund by $4.I million, with an offsetting increase in Water, Wastewater, Solid Waste, and Storm Water due to a change in recording interfund activity for billing and other services provided to other utility funds by the LP&L. In FY 2008, operating expenses of LP&L were reduced by charges to other utility funds, and operating expenses of the other utility funds were increased. In FY 2007, the other utility funds transferred funds to the LP&L Fund to pay for services provided by the LP&L Fund. Electric operating expenses were $153.1 million, an increase of S7.3 million from the prior year. Fuel purchases, after eliminating interfund activity between LP&L and WTMPA, decreased from $123.3 million in FY 2007 to $121.0 million in FY 2008. In FY 2007, surplus fuel for sale to a third party wholesaler totaled S 12.8 million; however, there were no purchases of surplus fuel in FY 2008 as supplies were exhausted. The average cost of fuel for use in the production of electrical power and for sale to government users increased in FY 2008. Expenses in Water and Wastewater Funds were $38.4 milJion and SI 9.0 million, respectively. Water expenses increased by S6.3 million and Wastewater expenses increased by S 1.0 million over the prior fiscal year. Three staff positions were added and additional supplies and contractors were needed in order to address frequent pipeline breaks. Interest expense in the funds increased by S2.0 million as more debt has been incurred during the last few years to address future water supply needs and infrastructure and facility improvements. Expenses in Storm Water were S7.7 million, an increase of S3.8 million from the prior year. ln FY 2008, five staff members were added to comply with the MS4 permit and video inspections of storm sewers were performed. The Stonn Water Fund continued to issue debt to pay for capital improvements to the storm water system, resulting in an increase of interest expense of S1.0 million. o Civic Centers, with expenses of S4.1 million, was recorded as a business-type activity beginning in FY 2008. 27 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 • Transfers from governmental activities to business-type activities increased net assets by $4.7 million during the fiscal year compared to a decrease of $10.6 million in the prior year. The reasons for the changes were discussed under governmental activities. The following graph reflects the revenue sources generated by the business-type activities. As noted earlier, the activities include LP&L and WTMPA (Electric), Water, Wastewater, Storm Water, Solid Waste, Transit, Airport, Civic Centers, and Cemetery. Revenues by Source -Business-type Activities Charges for Services 91.9% Financial Analysis of the City's Funds Miscellaneous 1.3% Grants and Contributions 3.9% Investment earnings 2.9% Governmental f11nds. The focus of the City's governmental.funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance serves as a useful measure of the City's resources available for spending at the end of the fiscal year. At the end of the year, the City's governmental funds reported combined ending fund balances ofS130.5 million, compared to $110.2 million at the end of the prior fiscal year. The increase is primarily the result of debt issued for North Overton Tax Increment Finance Reinvestment Zone Capital Projects and Gateway Streets Capital Projects, which exceeded capital outlays by S22.9 million. Unreserved fund balance, which is available for spending at the City's discretion, amounts to Sl9.8 million, or 15.2% of the ending governmental fund balance. This is compared to S19.0 million, or 17.2% of ending governmental fund balance, at the end of the prior fiscal year. There is S21. 7 million, or I 6.7% of ending governmental fund balance, reported in unreserved fund balance designated in special revenue funds. 28 0 0 0 0 0 0 C C C 0 0 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 This is compared to S24.9 million, or 22.6% of ending governmental fund balance, at the end of the prior fiscal year. The reason for the reduction in unreserved fund balance was primarily due to a transfer of $1 .8 million from the Information Technology Fund and $0.3 mmion from the Print Shop and Warehouse fund to the General Fund that represented funds in excess of policy levels. The remainder of the fund balance is reserved to indicate it has already been committed to pay debt service, use in construction of approved capital projects, or is restricted for other purposes. The General Fund is the chief operating fund of the City. At the end of the fiscal year, unreserved fund balance in the General Fund was S19.8 million, compared to $19.0 million in the previous fiscal year, representing an increase of approximately $0.8 million. Total fund balance (reserved and unreserved) was $20.0 million at the end of the fiscal year, compared to $19.1 million at the end of the prior fiscal year. As a measure of the General Fund's liquidity, it is useful to compare both unreserved fund balance and total fund balance to total fund revenues. Unreserved fund balance represented 18.6% of total General Fund revenues compared to 18.5% of total General Fund revenue in the prior year. Total fund balance was 18. 7% of total General Fund revenues in FY 2008 and FY 2007. Proprietary funds. The City's proprietary fund statements provide essentially the same type of infonnation found in the GWFS, but in more detail. Unrestricted net assets of the major proprietary funds at the end of September 30 arc shown next with amounts presented in thousands: 2008 2007 LP&L $ 62,540 $ 51,020 Water Fund 2,764 9,663 Wastewater Fund 5,829 8,270 WTMPA 1,883 1,514 Storm Water 6,318 9,158 $ 79,334 $ 79,625 The LP&L Fund increased unrestricted net assets by $11.5 million, compared to an increase of $18.9 million during the prior year. The increase is due to the results of operations and the decision of the City J Council to reduce the charge for payments in lieu of :franchise fees to increase cash reserves. At the end of the fiscal year, the Water Fund unrestricted net assets decreased $6.9 million, compared to a decrease of Sl.2 million from the prior year. The FY 2008 adopted budget included a S6.4 million utilization of net assets in an effort to smooth rate increases over a five-year period. Net assets were utilized and acted as a rate stabilizer, while future rates were planned in a manner that ultimately leaves J the fund with sufficient net assets in accordance with policy levels. At the end of the fiscal year, the Wastewater Fund unrestricted net assets decreased S2.4 million compared to a S 1.3 million decrease during the prior year. ln FY 2008, the City budgeted S 1.5 million utilization of net assets to smooth rate increases over a five-year period. Net assets were utilized and acted as a rate stabilizer, while future rates were planned in a manner that ultimately leaves the fund with sufficient net assets in accordance with policy levels. 29 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30t 2008 The WTMPA Fund had an increase in unrestricted net assets of $0.4 million, compared to an increase in unrestricted nets assets of $0.2 million during the prior fiscal year. The Storm Water Fund experienced a decrease in unrestricted net assets of S2.8 million during the fiscal year, compared to a $0.9 million decrease in the prior fiscal year. In FY 2008, the City budgeted $1.5 million utilization of net assets. Unrestricted net assets are in excess of policy levels, and will continue to act as a rate stabilizer as debt service expenditures exceed revenues. A rate increase is planned for FY 2009-10 when the unrestricted net assets reach policy levels. General Fund Budgetary Highlights The final amended budget expenditures and transfers out increased by $84,463 over the original budget. The main reason for the increase was related to encumbrances that had lapsed in the prior year that were appropriated in FY 2008. Revenues and transfers in the General Fund were under budget by S.2 million. The General Fund ended the fiscal year with expenditures and transfers out of S.4 million more than budgeted. The City budgets on a basis other than Generally Accepted Accounting Principles (GAAP), with the main difference being that capital lease proceeds and related capital outlay are not budgeted. Capital Assets and Debt Administration 0 0 0 0 0 Capital assets. The City's investment in capital assets for its governmental and business-type activities 0 at September 30, 2008, totaled $ 1.0247 billion net of accumulated depreciation, a $48.3 million increase over the prior fiscal year's balance of $95 I. 7 million net of accumulated depreciation. The investment in capital assets includes land, buildings and improvements, equipment, construction in progress, and infrastructure. City of Lubbock Capital Assets (Net of Accumulated Depreciation) September 30 (in thousands) Business- Governmental type Activities Acth•ities Totals 2008 2007 2008 2007 2008 2007 Land $ 9,034 s 9.056 s 33.112 s 3 I .963 $ 42.146 s 41.019 Buildings 23,141 32.029 68.150 62 .459 91.291 94.488 Improvements other 1han buildings 120,298 111.293 4 77.402 476.269 597.700 58 7 .562 Machinery and equipment 17.915 20,541 81.185 76,859 99.100 97 .400 Construction in progress 66.816 40. 760 I 27.673 90.516 I 94.489 131.276 Total $ 237,204 s 213,679 s 787,522 s 738.066 s 1.024.726 s 95 I .745 Major capital asset projects during the fiscal year included the following: C C ,. '- • The City spent $12.4 million on a youth sports complex. and 2 new Little League complexes. C • The City spent S9.0 million on projects that included street improvements, drainage, curbs, gutters, and other improvements. 30 0 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 • The North Overton Tax Increment Finance reinvestment zone (TIF) spent $7.9 million on the construction of a conference center. • The City began construction on the Southeast Water Reclamation Plant. Phase II of the project includes the design and construction of improvements associated to upgrade Plant 4 for biological nutrient removal, filtration, and UV disinfection. Expenditures during the fiscal year totaled $7 .3 0 million. • LP&L spent $6.9 million during FY 2008 for projects such as transfonners, overhead and underground electric lines, and substations. • The South Central and South Lubbock Drainage projects spent $6.9 million on the first and second phase of the drainage system. • The Airport continued improvements on the parking lot and runway and started improvements to the terminal building. Expenditures during the fiscal year amounted to $6.8 million. At the end of the fiscal year, the City had construction commitments of $215 .3 million. Construction on the Southeast Water Reclamation Plant will continue as the City strives to make wastewater facility improvements. The Water Treatment Plant upgrade, Lake Alan Henry Reservoir construction, Canadian River Municipal Water Authority (CRMWA) projects, and new water lines throughout the City will take a large share of financial resources while the City implements plans for current and future water supplies. Additional infonnation about the City's capital assets can be found on pages 70-72 of the CAFR. Long-term debt. A summary of the City's total outstanding debt follows: General obliga1ion bond~ s Re"cnue bonds To1al s Ory of Lubbock Outstanding Debi GenPra I Ob ligation and Revenue Bonds Seplember 30 (in thousands) Business- Governmental lype Activities Activities 2008 2007 2008 199.054 s I 60.388 s 457 .126 s 50.431 199.054 s I 60.388 s 507.557 s 2007 352.487 54,208 406,695 Totals 2008 s 656,180 s 50.431 s 706,611 s; 2007 512,875 54,208 567.083 There is no direcl 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 S2.50 per $100 of assessed valuation. The Attorney General of the State of Texas permits an allocation of SJ.50 of the S2.50 maximum tax rate for general obligation bonds debt service. The current interest and sinking fund tax rate per S100 of assessed valuation is $0.07125, which is significantly below the maximum allowable tax rate. As of September 30, 2008, the City's total outstanding debt has increased by S139.5 million, or 24.6% over the prior fiscal year. The increase in outstanding debt is attributed to the issuance of $169. 8 million in debt, offset by the payment of scheduled debt service totaling $30.3 million. 31 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 During the fiscal year, the City issued the following bonds and certificates: • $11.8 million Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 were issued to fund construction of a Hotel Conference Center. 0 0 • $52.9 million of Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 0 2008 were issued for improvements and extensions to the City's wastewater system. • $2.0 million of General Obligation Bonds, Series 2008 were issued for various public purposes including street improvements. • $80.5 million of Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series C 2008 were issued to finance various public improvements including cultural and arts, fire, airport, park, solid waste, drainage, street, electrical, tax increment financing reinvestment zone, water, and wastewater. • $22.6 million of Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series O 2008 were issued to finance design and engineering of the Lake Alan Henry Pipeline. All bonds and certificates issued during the fiscal year were insured in an effort to provide a lower cost of interest expense. 1t is the City's policy to evaluate each bond issue to determine whether it is economically prudent to purchase bond insurance. In April 2008, the City received from Standard & Poor's a rating upgrade from "AA" to ''AA+". Concurrently, the ratings of "Aa3'' and "AA" were confirmed by Moody's Investors Service and Fitch Ratings, Inc., respectively. All three rating agencies characterize the City's rating outlook as stable. C During FY 2008, there were no changes in the ratings for LP&L The current ratings and corresponding outlooks for LP&L are as follows: C Standard & Poor's, BBB (positive outlook) Fitch Ratings, BBB+ (stable outlook) Moody's Investor's Service, A3 (stable outlook) Additional information about the City's long-tenn debt can be found on pages 80~85 of the CAFR. Economic Factors and the Next Fiscal Year's Budget and Rates • In September 2008, the unemployment rate for the Lubbock area was 4.0%. This is a 0.2% C improvement over September of the previous year, and compares favorably to the state's C unemployment rate of 5.2% and the national rate of 6.0% for September 2008. • Taxable retail sales figures reflected a 5.8% increase in FY 2008, compared to FY 2007. • The number of building pennits for new construction decreased from I, 709 during FY 2007 to 1,660 in FY 2008, a 2.9% decline. Building pennit values for new construction increased from S404.0 million in FY 2007 to $431.9 million in FY 2008, or a 6.9% increase. 32 ,.. .... 0 City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2008 • Total occupancy in local hotels and motels improved, and the local occupancy tax totaled nearly $4.2 million, a 10.5% increase over the prior fiscal year. The above factors were considered in preparing the City's budget for FY 2009. • In FY 2009, the City continues to focus on public safety, transportation infrastructure, and the development of future water supplies. The FY 2009 budget focuses on maintaining core services and, at the same time, decreasing the tax rate by S0.00865 per SI 00 valuation. • The City adopted a tax rate of $0.44640 in FY 2009. General Fund revenue from property tax is lower than the prior fiscal year by $498,956 due to a shift of $0.0 l 975 of the tax rate from General Fund operation and maintenance to debt service and the $0.00865 reduction in the rate to offset increasing property valuations. • Sales tax estimates for FY 2009 call for no growth due to the all-time high cost of fuel, natural gas, and corresponding utility rates. Though Lubbock's economy is solid, a conservative approach is financially prudent at this time. Total General Fund revenue projections are S0.89 million over FY 2008 amounts. • A resumption of payment in lieu of franchise fees for LP&L will result in a S5.0 million dollar transfer to the City. The allocation of the payment will be S3.7 million to the General Fund and Sl.3 million to the Gateway Fund. • The City's fuel costs are expected to increase S2. 7 million in FY 2009. The increase totals S 1.1 million in the General Fund, S0.9 million in the Solid Waste Fund, $0.5 million in the Water and Wastewater Funds, and S0.2 million in all other funds. Fuel estimates are based on the City's fuel price on June 2, 2008, of $3.83 per gallon for unleaded and S4.25 per gallon for diesel. • In FY 2009, rate increases in Water, Wastewater, and Storm Water are planned. The increases are mainly related to increased debt service requirements, pay-as-you-go funding, and fuel and utility costs. There is no rate increase for Solid Waste, as fund net assets are utilized to offset the increase for FY 2009. The City will continue to implement the strategic water plan focusing on future water supply needs, additional infrastructure to transport water, and facilities maintenance. • In September 2008, LP&L implemented a 2.0% surcharge to recover costs associated with our provider's new power plant. LP&L also anticipates a rate increase to occur in March 2009. Requests for Information The financial report is designed to provide a general overview of the City of Lubbock's finances. Questions concerning any of the information provided in the report or requests for additional financial information should be addressed to the Chief Financial Officer, City of Lubbock, P.O. Box 2000, Lubbock, Texas, 79457. 33 ,. '- -·• t ,.. .. ,,.. ,t,. ... ~ ... ..,,.,,, ,,,I> : . ' -- '.> ,.., . ~-... . -. -~- ~, .... t ~: '•. ;,:••..: & l ........ ,, :) ...,. t~ ., ., .. , ' ... " . . , } . . , ' . "\. ·"' ' -J:;r '. .. ~ .. r ... ---- _;,_ ... :-/ ... , ' ,., , :, ~ ;•,,:.::. ,., , .. ,.. .. ~ •. .l. i ...... \: .::, 34 ,-.... 0 City of Lubbock, Texas Statement of Net Assets September 30, 2008 Primary Goven11nen1 () Governmental Business-type Component Activities Activities Total Units ASSETS Cash and c:ash cquivalc:nlS $ 375,546 $ 2,092,480 s 2,468,026 $5,059,563 ln-.nenlS 47,092,702 92,621,585 139,714,287 100,408 Receivables (net of allowanu for uncollcctibles) 11,573 ,.206 31,880,880 43,454,086 1,762,016 0 llumlalbalance (99,681) 99,681 Due Ii-om other governments 4,480,115 4,480,l!S Due from others 2,509,088 1,351,244 3,860,332 InYentories 205,454 3,342,792 3,548,246 126,950 ln"UDnent in property 208,213 208,213 n Prepaid expenses 882,298 60,261 942,559 106,308 Res1ricted asseis: Cash and cash equivalents 2,562,465 lnvesDnenlS 88,668,725 179,596,581 268,265,306 Rccci...,bles 178,571 154,648 333,219 5,000,000 Mortgage receivables 5,612,742 5,612,742 0 Capital asscts (ntt of a(cumulated depreciation): Non..tepreciable 75,849,966 160,785,542 236,635,508 17,430,818 Dcp=iabk: 161,353,736 626,736,918 788,090,654 252,020 Defened charges 2,81J,I JO 2,811,110 Total assets 398,890,681 I, 101,533,722 1,500,424,403 32,400,548 LIABBJTIES 0 Acrowns payable 10,088,992 20,394,740 30,483,732 1,148,361 A=ucd liahllilies 6,382,994 3,279,222 9,662,216 320,139 Acaued i ntcrest pa)'llble 1,432,711 3,950,697 5,383,408 Customer deposits 3,655,481 3,655,481 Unearned revenue 2,772,640 81,621 2,854,261 5,264,793 Nonc:urrent liabililie$ dtJC within one year: Compensated absem-.cs 6,806,236 2,838,245 9,644,481 A«rued insurance ~laims 1,599,299 1,420,757 3,020,056 Conuacts and lea$CS payable 2,934,588 4,164,910 7,099,498 2,539,123 Bonds payable 9,478,486 26,463,446 35,941,932 NOllC\ll'l'ent liabilities due io = than one )'l'ar: 0 Compensated absences 11,117,607 2,769,439 13,887,046 Post emplo)'fflent benelilS 2,813,759 1,541,761 4,355,520 Accrued ins= claims 156,407 1,424,922 1,581,329 Rebalable arbitrage 570,747 571,274 1,142,021 Landlill closun: and poslClosure care 3,770,566 3,770,566 0 Contracts and leases payable 9,287,918 14,417,486 23,705,404 6,724,275 Bonds payable 193,515,885 484,252,822 677,768,707 3,394,000 T ocal liabilities 258,958,269 574,997,389 833,955,658 19,390,691 NET ASSETS Invested in capital as5CIS, net of related debt 96,274,734 400,552,048 496,826,782 8,696,339 Restricted for. Passenger facili1y charges 2,318,723 2,318,723 0 Debc:semc:e 4,676,551 18,956,448 23,632,999 Grant programs 7,156,393 7,156,393 Prillw')' government agreement 100,000 N-peadable pcpcrual care 123,462 123,462 Unrestricted 31,701,272 104,709,114 I 36,410,386 4,213,5 I 8 Total~ aSKlS 139,932,412 526,536,333 666,468,745 13,009,857 0 Sec accompanying Notes to Basic Financial Statements 35 City or Lubbock, Texas 0 Statement of Activities For the Year Ended September 30, 2008 Program Revenues Operating Capital 0 Charges for Grantsa.od Grants and Expenses Services Contributions Contributions Primary government: Governmental activities: Administrative services and general government $ 12,372,316 $ 35,766 $ $ 200,289 Community services 6,874,065 5,990,797 0 Cultural and recreation 16,660,378 1,589,515 692,460 1,534,716 Economic and business development 12,378,335 423,747 7,504,530 Fire 31,789,223 14,420 126,534 Health 6,141,386 805,601 1,667,263 24,360 Police 46,849,826 208,621 279,984 1,136,221 0 Other public safety 6,677,751 7,307,182 601,245 101,497 Streets and traffic 16,357,025 2,291,900 5,293,806 Interest on long.term debt 8,367,167 Total governmental activities 164,467,472 12,676,752 9,231,749 15,921,953 Business.type activities: 0 Eleclric 153,108,050 161,329,847 Water 38,424,263 42,527,445 198,400 1,073,098 Wastewater 19,000,488 21,095,745 1,030,539 Solid Waste 16,260,630 16,754,438 Storm Water 7,676,456 6,633,255 0 Transit 11,338,463 4,306,204 3,231,060 Airpon 9,465,392 6,793,829 1,703,632 3,849,200 Civic Centers 4,098,873 717,494 Cemetery 722,393 335,884 Total business-type activities 260,095,008 260,494,141 5,133,092 5,952,837 0 Total primary government $ 424,562,480 $ 273,170,893 $ 14,364,841 $ 21,874,790 Component units: Civic Lubbock, Inc. $ 2,491,456 $ 2,018,527 $ 512,975 $ 30,000 Market Lubbock, Inc. 5,837,232 59,746 6,817,752 Lubbock Economic Development Alliance 4,293,560 6,102,185 1,228,495 Vintage Township Public Facilities Corporation 1,302,311 78,993 0 Total component units $ 13,924,559 $ 2,078,273 $ 13,432,912 $ 1,337,488 General revenues: Propeny taxes Salcswcs Occupancy taxes Other taxes 0 Franchise taxes Jnvesnnent earnings Miscellaneous Transfers, net Total general revenues and transfers 0 Change in net assets Net assets * beginning Net assets -ending See accompanying Notes to Basic Financial Statements 0 36 0 J Governmental Activities $ (12,136,261) (883,268) (12,843,687) (4,450,058) (31,648,269) (3,644,162) (45,225,000) 1,332,173 (8,771,319) (8,367,167~ (126,637,018) (126,637,018) 50,330,322 50,548,865 4,190,376 1,180,332 12,977,686 5,505,386 4,810,900 (4,703,317) 124,840,550 (1,796,468) 141,728,880 $ 139,932,412 Net (Expenses) Revenues and Changes In Net Assets Primary Government Business.-type Activities $ 8,221,797 5,374,680 3,125,796 493,808 (1,043,201) (3,801,199) 2,881,269 (3,381,379) p86,5091 11,485,062 11,485,062 8,284,058 3,806,864 4,703,317 16,794,239 28,279,301 498,257,032 $ 526,536,333 Total $ (12,136,261) (883,268) (12,843,687) (4,450,058) (31,648,269) (3,644,162) (45,225,000) 1,332,173 (8,771,319) iS,367,167) (126,637,018) 8,221,797 5,374,680 3,125,796 493,808 (1,043,201) (3,801,199) 2,881,269 (3,381,379) p86,509} 11,485,062 (115,151,956) 50,330,322 50,548,865 4,190,376 1,180,332 12,977,686 13,789,444 8,617,764 141,634,789 26,482,833 639,985,912 $ 666,468,745 Component Units $ 70,046 1,040,266 3,037,120 {l,223,318} 2,924,114 28,213 (1,396,145) {1,367,932} 1,556,182 11,453,675 $ 13,009,857 37 City of Lubbock, Texas 0 Balance Sheet Governmental Funds September 30, 1008 0 Nonmajor Total Governmental Governmental Governmental General Fund Capital Projttts Funds Funds ASSETS Cash and cash equivalents $ 120,449 $ 68,267 $ 164,560 $ 353,276 0 Investments 14,747,933 8,358,699 21,259,261 44,365,893 Taxes receivable (net) 9,711,930 376,629 10,088,559 Accounts receivable (net) 1,109,105 1,109,105 Interest receivable 177,748 14,078 150,733 342,559 Due from other funds 3,266,168 152,000 3,418,168 Due from other governments 4,480,115 4,480,115 0 Due from others 882,879 1,528,818 2,411,697 Investment in property 208,213 208,213 Inventory 168,657 168,657 Restricted investments 18,200,686 60,975,583 79,176,269 Mortgage receivables 5,612,742 5,612,742 0 Total assets $ 30,184,869 $ 26,641,730 $ 94,908,654 $ 151,735,253 LIABILITIES Accounts payable $ 3,522,540 $ J ,233,491 $ 4,172,472 $ 8,928,503 0 Due to other funds 2,073,164 2,073,164 Accrued liabilities 4,695,067 18,633 238,782 4,952,482 Accrued interest payable 191,702 191,702 Deferred revenue: 2,004,987 455,724 2,595,236 5,055,947 C Total liabilities 10,222,594 1,707,848 9,271,356 21,201,798 FUND BALANCES Reserved for: Prepaid items/inventory 168,657 168,657 Debt service 2,104,697 2,104,697 C Capital projects 24,933,882 53,855,061 78,788,943 Special revenue -Civic Center facilities 650,080 650,080 Special revenue • grants 7,156,393 7,156,393 Perpetual care 123,462 123,462 C Unreserved, designated in special revenue funds 21,740,729 21,740,729 Unreserved, undesignated reporred in: General fund 19,793,618 19,793,618 Permanent fund 6,876 6,876 Total fund balances 19,962,275 24,933,882 85,637,298 130,533,455 C Total liabilities and fund balances $ 30,184,869 $ 26,641,730 $ 94,908,654 $ 151,735,253 Sec accompanying Notes to Basic Financial Statements C 38 City of Lubboc.14 Texas Reconciliation of the Balance Slteet of Governmental Funds To the Statement of Net Assets September 30, 2008 0 Total fund balance -governmental funds $ 130,533,455 Amounts reported for governmental activities in the statement of net assets are 0 different because: Capital assets used in governmental activities are not fmancial resources and therefore are not reported in the funds. 237,203,702 Internal service funds (ISFs) are used by management to charge the costs of certain 0 activities, such as insurance and telecommunications, to individual funds. The portion of the assets and liabilities of the ISF's primarily serving governmental funds are included in governmental activities in the statement of net assets as follows: Net assets J0,157,898 Net book value of capital assets (2,204,710) Capital leases payable 1,110,125 Compensated absences 403,091 Post retirement benefits 129,867 Amounts due from business-type [SFs for amounts undercharged (1,444,685) 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 (199,053,653) Capital leases payable (12,222,506) Compensated absences (17,923,843) Post retirement benefits (2,813,759) Accrued interest on general obligation bonds (1,237,703) Arbitrage payable (570,747) Environmental remediation (1,290,280) Bond premiwns are recognized as an other financing source in the fund statements ""\ but the premiums are amortized over the life of the bonds in the government-wide ..I statements. (3,940,718) Actual City contributions to the fircfighter's pension trust fund is greater than the actuarially determined required contribution. This will reduce future funding requirements and is not recognized as an asset at the fund level but is a prepaid expense in the Statement ofNet Assets. 813,571 Revenue earned but unavailable in the funds is deferred. 2,283,307 Net assets of governmental activities $ 139,932,412 ...... ..I See accompanying Notes to Basic Financial Statements. 39 0 City of Lubbock, Texas Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2008 Nonmajor Total 0 Governmental Governmental Governmental General Fund Capital Projects Funds Funds REVENUES Taxes $ 85,345,082 $ $ 20,971,596 $106,316,678 Franchise taxes 7,786,611 5,191,075 12,977,686 0 Special assessments 296,482 296,482 Fees and fines 3,279,911 521,391 3,801,302 Licenses and permits 2,663,139 2,663,139 Intergovernmental 530,389 215,561 16,733,463 17,479,413 Charges for services 3,339,148 2,290,160 466,131 6,095,439 0 Interest 1,052,842 1,259,842 2,375,665 4,688,349 Miscellaneous 2,574,448 2,393,465 4,967,913 Total revenues 106,571,570 3,765,563 48,949,268 159,286,401 EXPENDITURES CurTCl'lt: 0 Administrative services and general government 11,047,039 63,697 11,l 10,736 Community services 6,586,711 6,586,711 Cultural and recreation 12,253,380 95,598 927,430 13,276,408 Economic and business development 1,215,978 10,663,287 11,879,265 Health 4,133,917 1,671,071 5,804,988 0 Fire 29,630,222 45,856 57,231 29,733,309 Police 42,831,016 1,034,256 43,865,272 Otbef-public safefy 4,703,249 1,401,664 6,104,913 Streets and traffic 8,168,462 324,850 8,493,312 Intergovernmental 123,852 123,852 0 Debt service: Principal 2,069,461 7,939,868 10,009,329 Interest and other charges 327,144 151,047 7,854,089 8,332,280 Capital outlay 3,966,065 28,357,960 14,359,347 46,683,372 Total expenditures 120,345,933 29,039,008 52,618,806 202,003,747 0 Deficiency of revenues under expenditures (13,774,363) (25,273,445) (3,669,538) (42,717,346) OTHER FINANCING SOURCES (USES) Long-term debt issued 10,690,376 35,914,775 46,605,151 Bond pn:mium 625,760 1,218,259 1,844,019 C Capital leases 3,011,141 345,878 3,357,019 Transfers in 17,729,361 1,019,009 7,394,572 26,142,942 Transfers out (6,129,512~ (1,469,423) p,211,103) (14,876,038) Net other financing sources (uses) 14,610,990 11,211,600 37,250,503 63,073,093 Net change in fund balances 836,627 (14,061,845) 33,580,965 20,355,747 Cl Fimd balances • beginning of year 19,125,648 38,995,727 52,056,333 110,177,708 Fund balances -end of year $ 19.962,275 $ 24,933,882 $ 85,637,298 $ 130,533,455 Sec accompaning Notes to Basic Financial Statements a 40 0 City of Lubbock, Texas Reconciliation of the Statement of Revenues, Expenditures and Changes In Fund Balances of Governmental Funds To the Statement of Activities O For the Year Ended September 30~ 2008 ) Net change in fund balances • total governmental funds Amounts reponed for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays of$46,683,372 exceeded depreciation of$l 6,912,331 in the current period. Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long- term liabilities in the Statement of Net Assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long•tenn liabilities in the Statement of Net Assets. This is the amount by which proceeds of $46,605,151 ex.ceeded repayments and debt defeasence of $7,939,868. Capital lease transactions provide current financial resources to governmental funds and repayment of principal is an expenditure. This is the amount by which proceeds of $3,357,019 exceeded repayments of $2,069.461. Bond premiums are recognized as an other financing source in the governmental funds, but are considered deferred assets on the Statement of Net Assets. Premiums are amortized over the Jjfe of the bonds. This is the amount by which bond premium issued of$ l,844,0I 9 exceeded amonization of$219,225. Estimated long-term liabilities are recognized as expenses in the Statement of Activities as earned, but are recognized when current financial resources arc used in the governmental funds. Arbitrage payable Compensated absences Post retirement benefits Environmental remediation Property taxes levied and court fines and fees earned, but not available, are deferred in the governmental funds, but are recognized when earned (net of estimated uncollectibles) in the Statement of Activities. This amount is the net change in deferred property taxes and court fines and fees for the year. Actual City contributions to the firefighter's pension trust fund are greater than the actuarially determined Net Pension Obligat_ion {NPO). This amount is recognized as an expenditure at the fund level but is accrued when overpaid and reduces expenses on the Statement of Activities. Jntemal service funds are used by management to charge the costs of cenain activities, such as insurance and teleconununications, to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. Accrued interest is recognized as expenses in the Statement of Activities as incurred, but is recognized when current financial resources are used in the governmental funds. This amount is the net change in the accrued interest this year. The net effect of \'arious miscellaneous transactions involving capital assets. This amount includes $7,474,000 developer donated streets and parks, less $13,775,023 equipment transfers out to business-type activities, less $304,282 sales and trade-in. Change in net assets of governmental activities See accompanying Notes io Basic FilJilncial Statements. 41 $ $ 20,355,747 29,771,041 (38,665,283) (1,287,558) (1,624,794) 105,305 (640,671) (2,683,892) (497,61 I) (246,393) (48,740) 596,996 (325,310) (6,605,305) (1,796,468} City of Lubbock, Texas Statement of Net Assets Proprietary Funds September 30, 2008 ASSETS Current assets: Cash and cash equivalents Investments Accounts receivable Interest receivable Due from others Due from other funds Prepaid cx.penses Inventories Total current assets Noncurrent assets: 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 asse1s Total noncurrent assets Total assets LP&L $ 491,892 60,227,762 18,870,298 378,414 223,661 80,192,027 9,847,790 2,811,1 IO 12,658,900 756,714 14,207,964 8,054,811 199,561,578 56,974,517 ! 126,673,526) 152,882,058 165,540,958 $ 245,732,985 See accompanying Notes to Basic Financial Slatemcnts 42 0 Enterprise Funds 0 Water Wastewater WfMPA 0 $ 24,093 $ 60,467 $ 1,301,168 2,950,033 7,403,649 398,645 4,998,563 2,297,834 899,013 54,542 165,330 0 33,901 161,958 9,009,713 226,079 8,287,211 10,089,238 11,608,539 0 68,831,234 65,861,577 934 3,309 0 68,834,543 65,862,511 12,724,350 12,578,774 27,600,824 21,654,174 22,240,589 24,018,814 C 291,969,454 127,470,376 34,681,932 18,054,744 il04,898,891! p3,5t6,93 t} 284,318,258 130,259,951 353,152,801 196, 122,462 C $361,440,012 $206,211,700 $ 11,608,539 C C C 0 0 Enterprise Funds Nonmajor Enterprise Total Enterprise Joteraal Service StonnWater Funds Funds Funds 0 $ 56,878 $ 152,745 $ 2,087,243 $ 27,507 6,964,191 14,036,081 91,980,361 3,368,033 825,365 3,280,713 31,171,786 0 65,631 39,636 703,553 38,524 1,153,009 1,348,868 99,767 511,996 9,521,709 60,261 60,261 68,727 735,614 1,185,354 2,194,235 0 7,912,065 19,970,055 138,059,135 5,796,793 15,278,471 12,018,048 171,837,120 17,251,917 70,787 71,721 99,817 0 3,309 158,372 2,811,110 15,278,471 12,088,835 174,723,260 17,510,106 283,337 6,768,963 33,112,138 65,343 50,127,279 14,083,163 127,673,404 180,942 0 64,580 64,773,414 119,152,208 1,637,054 47,834,412 125,785,894 792,621,714 649,868 4,126,314 65,317,750 179,155,257 9,309,071 ~)1!61410252 (148,322,501) { 465,025,8742 (8,803,955} 90,821,897 128,406,683 786,688,847 3,038,323 106,100,368 140,495,518 961,412,107 20,548,429 $ 114,012,433 $ 160,465,573 $ 1,099,471,242 $ 26,345,222 0 0 0 43 City ofLubboc~ Texas Statement of Net Assets Proprietary Funds September 30, 2008 LIABILITIES Current liabilities: Accounts payable Accrued liabilities Accrued interest payable Due to other fimds Customer deposits Deferred revenue Compensated absences Accrued msurance claims Leases payable Bonds payable Total CUJ'retll liabilities Noncurrent liabilities: Accrued insurance claims Rebatable arbitrage Landfill closure and post closure care Compensated absences Post employment benefits Leases payable Bonds payable Total noncurrent liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Passenger facility charges Debt service Unrestricted Total net assets LP&L $ 1,946,626 1,761,681 1,217,841 9,009,713 3,499,752 1,183,514 1,067,930 5,121,977 24,809,034 72,702 1,264,172 506,873 2,975,882 74,699,158 79,518,787 I 04,327 ,821 72,858,231 6,006,670 62.540,263 $141,405,164 44 0 Enterprise Funds 0 Water Wastewater WTMPA 0 $ 2,402,156 $ 2,760,545 $ 9,725,988 361,733 200,251 1,193,544 654,239 0 80,340 494,183 241,390 675,290 473,734 0 10,350,270 6,620,942 15,557,516 10,951,101 9,725,988 0 163,965 184,351 527,861 257,841 302,778 130,082 2,583,912 1,114,259 0 189,849,751 106,454,669 193,428,267 108,141,202 208,985,783 l 19,092,303 9,725,988 0 143,586,818 76,784,510 6,103,451 4,506,302 0 2,763,960 5,828,585 1,882,551 $152,454,229 $ 87,l 19,397 $ 1,882,551 0 0 0 G Enterprise Funds Nonmajor Enterprise Total Enterprise Internal Service Storm Water Funds Funds Funds 0, $ 619,990 $ 2,346,355 $ 19,801,660 $ 1,753,569 69,444 834,208 3,227,317 192,137 574,084 310,775 3,950,483 3,520 1,857,000 10,866,713 75,389 3,655,481 81,621 81,621 89,428 773,453 2,781,968 209,323 3,020,056 76,176 1,857,189 4,150,319 461,361 2,177,520 2,192,737 26,463,446 3,606,642 10,328,727 74,979,008 5,639,966 :) 1,581,329 64,050 86,206 571,274 3,770,566 3,770,566 95,522 563,389 2,708,785 310,699 82,021 437,986 1,459,740 211,888 566,829 7,148,115 14,388,997 691,844 85,216,981 28,032,263 484,252,822 86,025,403 40,038,525 507,152,184 2,795,760 ) 89,632,045 50,367,252 582,131,192 8,435,726 16,321,372 90,210,584 399,761,515 1,885,118 2,318,723 2,318,723 1,741,490 598,535 18,956,448 6,317,526 16,970,479 96,303,364 16,024,378 $ 24,380,388 $ 110,098,321 $ 517,340,050 $ 17,909,496 ) 45 -:if' t.. ";\ <:;, ,,. . "' . -~J:•:, ' I .. · . . -, -·· ,::, ... -· /_ ..-,,.... 8 C 46 0 0 0 0 0 0 0 n 0 0 City of Lubbock, Texas Reconciliation of the Statement of Net Assets -Proprietary Funds To the Statement of Net Assets September 30, 2008 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 activities, such as insurance and telecommunications, to individual funds_ The portion of assets and liabilities of lhe ISFs primarily serving enterprise funds are included in business- type activities in the Statement of Net Assets as follows: Net assets ofbusiness•type ISFs Amounts due to governmental ISFs for amounts overcharged Net assets ofbusiness•type activities See accompanying Notes to Basic Financial Statements. 47 $ 517,340,050 7,751,598 1,444,685 $ 526,536,333 City of Lobbock, Texas 0 Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds For The Year Ended September 30, 2008 Enterprise Funds 0 LP&L Water Wastewater WfMPA OPERA TING REVENUES Charges for services (net) $ 153,071,017 $ 42,527,445 $21,095,745 $ 121,111,798 0 Miscellaneous Total operating revenues 153,071,017 42,527,445 21,095,745 121,111,798 OPERA TING EXPENSES Personal services 12,305,453 7,793,454 4,120,422 -0 Insurance Supplies 1,196,956 1,674,784 1,028,572 Materials Maintenance 1,841,172 2,309,434 1,290,050 Purchase of fuel and power 112,852,968 121,005,410 0 Collection expense 1,742,590 1,074,669 Other services and charges 3,819,293 10,023,600 4,191,443 563,666 DepTCCiation and amortization 9,732,413 8,387,182 5,432,048 Total operating expenses 141,748,255 31,931,044 17,137,204 121,569,076 Operating income (loss) 11,322,762 10,596,401 3,958,541 (457,278)0 NONOPERATING REVENUES (EXPENSES) Interest earnings 2,765,622 1,648,913 1,837,589 12,628 Passenger facility charges/Federal grants 198,400 Disposition of assets 284,272 (61,505) 9,393 .0 Miscellaneous 2,316,917 338,045 107,762 200,000 Interest expense {3,352,470) (6,683,456) (2,022,380) Net nonoperating revenues (expenses) 2,014,341 (4,559,603) (67,636) 212,628 Income (loss) before contnbutions and transfers 13,337,103 6,036,798 3,890,905 {244,650)0 Capital contributions 175,075 1,713,804 1,672,990 Transfers in 2,186,447 409,574 30,344 613,612 Transfers out !2,409,997) i 6,386,649) p,094,350} Change in net assets 13,288,628 1,773,527 2,499,889 368,962 0 Total net assets• beginning ofyea:r 128,116,536 150,680,702 84,619,508 1,513,589 Total net assets -ending $ 141,405,164 $ 152,454,229 $87,119,397 $ I ,882,551 0 See accompanying ~otes to Basic Financial Statements. 0 48 0 () Eute!!rise Funds Nonmajor Total Enterprise lnkmal Strvice Storm Water Enterprise Funds Funds Funds () $ 6,633,255 $ 28,907,849 $ 373,347,109 $ 47,945,658 125,486 125,486 6,633,255 29,033.335 373,472,595 47,945,658 0 1,594,511 15,606,457 41,420,297 4,797,207 23,776,560 130,597 4,153,794 8,184,703 109,978 11,430,974 254,116 3,906,332 9,601,104 2,110,429 233,858,378 629,302 694,832 4,141,393 1,729,228 6,221,917 26,549,147 2,518,552 1,274,719 10,780,827 35,607,189 323,558 5!612,473 41,364,159 359,362,211 45,067,258 1,020,782 {12,330,824) 14,110,384 2,878,400 950,337 '712,799 7,927,888 1,173,207 ) 4,934,692 5,133,092 1,566 15,537 249,263 (40,770) 775,173 3,737,897 133,580 {2,107,878) (885,538~ (15,051,722} {36,167} (I, 155,915) 5,552,663 1,996,418 1,229,850 (135,193) (6,778,161) 16,106,802 4,108,250 16,165,991 19,727,860 200,289 4,519,160 7,759,137 320,880 (1,066,358} p,876,215} ! t 6,833,569l {2,513,352} ...._ ~7 (1,201,551) 10,030,775 26,760,230 2,116,067 25,581,939 100,067,546 490,579,820 15,793,429 $ 24,380,388 $ 110,098,321 $ 517,340,050 $ 17,909,496 49 ·' ,_ <; .. . ' · ... ,- . ·~ I• . .,. ,- ,. ~. -~ 50 ~e.,.... + .. ,· L,-•. .J ~.., t:.-1 l L .... ~ ,_ .. C 0 City of Lubbock, Texas Reconciliation of the Statement of Revenues, Expenses and Changes in Fund Net Assets -Proprietary Funds To the Statement of Activities 0 For the Year Ended September 30, 2008 0 0 ) J Net change in fund net assets -tota1 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 a~ts of business-type activities See accompanying Notes to Basic Financial Statements. 51 $ 26,760,230 1,519,071 $ 28,279,301 0 City or Labboc~ Tens Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2008 E•te!]!IUe Funds 0 LP&L Water Wastewater WfMPA CASH FLOWS FROM OPERA TING ACTIVITIES ReceiplS from customer.> s 150,857,330 s 42,426,063 s 21,147,248 s 120,812,497 Payme11is 10 mppliers (117,607,449) (14,685,716) (5,836,312) (121,459,026) Payments to employees ( l 2,570,948) (&,l 55,187) (4,320,673) Other receipts 2,601,189 536,445 107,762 200,000 0 Nel ~ provided ( used) by ope raring activities 23J80,122 20,121,605 11,098,025 {446.529~ CASH FLOWS FROM NONCAPIT AL AND RELATED FINANCING ACTIVITIES Transfers in from other fund5 2,186,447 409.574 30,344 613,612 Transfers our. to Olher funds (2,409,997) (6,386,649) (3,094,350) Short-lcnn interfund borrowings (43,662) .0 Payments rn:eived on advances from otbcr funds Net cllSh provided (used) by noncapit.al arid related fimncing activities {223,550~ {5,977,075} (3,107,668} 613,612 CASH FLOWS FROM CAPJTAL AND RELATED Fl!IIANCING ACTIVITIES Pm-chases of capital assru (16,023,497) (12,924,246) (14,005,819) Sale of capilal assets 540,244 2,873 9,393 . 0 Prineipal paid on capital leases (789,245) (391,881) (364,072) Principal paid 011 bonds and Olher debt (5 .855,576) (8,673,559) (4,814,663) Bond issuance cost paid (125,866) (364,615) (761,278) Interest paid on revmLltl bODds (899,060) (2,928,491) (187,546) lnteTeSI paid on bonds and odaer debt (2,523,574) (4,875,957) (1,725,452) Issuance of~ and G.O. bonds 7,041,314 43,534,276 59,949,300 lsswmce of capilal leases 1,239,763 1,868,123 586,738 -o J>assmger f~lity ~harges/capital g,ants Rebatable art,i1r1ge S09 2,419 869 Net cash provided ( used) for capilal and related fin!ltlcing activi~ {17,394,988} 15,248,942 38,687,470 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale$ and maturities of investments 52,768,247 35,479.002 19,541,109 c12,6s~> C Pun:hase of investmencs (61,380,798) (66,626, 779) (68,004,t 77) lnten:st earnings on cash and investments 2,765,622 1,652,960 1,731,838 12,682 Net castl provided (IISCd) for investing activiti,:s !5,846,929~ ~29,494,817) {46,731,230~ Net increase (dcause) in cash ai>d cash equi,..alent5 (185,345) (101,345) (53,403) 167,083 Cask and cash equivalents• begirrning of year 6n,237 125,438 113,870 1.134,085 Cash and cllSb equivalen!S • end of yeat s 491,892 s 24,093 s 60,467 s 1,301,168 Rttooclllarlon of operating Income (loss) 10 net casb ,.. -provkled (n~) by o,xnlhig adfviries: Operating income (loss} s 11,322,762 s 10,596,401 s 3,958,541 $ (457,278) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activi1ies: Depra:iation and amonization 9,732,413 8,387,182 5,432,048 Other income (clf.pcnsc) 2,601,189 536,445 107,762 200,000 Change in currenl assets and liabilities: C Aocoums receiilllblc (2,213,687) (101,382) 51,503 (180,057) lnv~tory 5,802 (4,649) Due from other govemmcn\s (187) Accomtls payable 869,426 330,877 1,398,846 110,051 Due toffrom other funds 119.245 (119,245) Other K=d elf.penses 74,823 82,258 24,552 Customer deposits 296,268 18,025 . C Ch.angc-in compensated absences and retiremenl benefi1s 471,881 276,635 124,773 Ni:1 ~" provided {used) by opm.ting activities Si 23,280.122 $ 20.121,60$ $ 11,098,025 s (446,529} S11pplemntal casb now 1arormatfoo: Noncash capital c:ontribwions :and 01her charges s 175,075 s 1,713,804 s 1,672,990 s See accompanying Noles to Basic flnancial Siarc-menlS. ,. I. 52 () Emle!J!:rise F11Dch Noomajor lalcrnal 0 EDterprbe Service Storm Water Funds Total5 Funds s 6,567,486 s 29,072,631 s 370,883,255 s 47,914,017 (3,024,665) (8,973,720) (271,586,888) (41,212,271) (1,663,955) (15,994,690) (42,705,453) (4,585,319) 905,910 4,351,306 133,580 0 1,878,866 5,010,131 60,942,220 2,250,007 4,519,160 7,759,137 320,880 (1,066,358) (3,876,215) (16,833,569) (2,S 13,3 S 2) (2,659,996) (2,703,658) 24,357 0 1,100,000 1.100,000 (1,066,358) (917,051} (10,678,090) (2,168,115) (9,390,965) (14,652,034) (66,996,561) (488,9&4) 0 1,566 1,374,442 I ,928,518 23,698 (38,175} (1,161,526) (2,744,899) (422,409) (1,952,507) (1,157,563) (22,453,868) (98,928) (147,51 S) (1,498,202) (1,958, 798) (5,973,895) (820,474) (9,945,457) (34,708) 7,434,060 11,085,260 129,044,210 426,360 417,060 4,161,619 8,273,303 4,934,692 4,934,692 1,738 724 6,259 (5,584,949) 3,617,625 34,574,100 (496,043) B 24,395,925 15,177,259 147,961,542 12,971,953 (20,645,455) (24,183,226) (240,853,117) (13,778,695) 938,913 700,199 7,802,214 1,168,728 4,689,383 {7,705,768} (85,089,361) 361,986 (83,058) 4,937 (251,131) (52,165) 139,936 147,808 2,338,374 79,672 s 56,878 s 152,745 s 2,087,243 s 27,507 '"'\ s 1,020,782 s (12,330,824) s 14,110,384 s 2,878,400 1,274,719 10,780,827 35,607,189 323,5.58 775,173 4,220,569 133,580 (65,769) 39,296 (2,470,096) (31,152) (89,814) (88,661) (171,614) 2,820,448 2,820,261 (533,492) 965,590 3,141,298 (720,721) 1,147,080 1,147,080 (488) '.) 24,876 152,893 359,402 (378,409) 68,017 382,310 157,750 741,706 1,772,745 216,853 $ 1,878,866 s 5,010,131 $ 60,942,220 $ 2,250,007 $ s 16,165,991 s 19,727,860 $ } 53 i _ . , . : ... "I; .. -#' ••• r ........... ~ . ' :,. ' • ~ ~·;•tr .),, ;. "'. . ' . .. . . . '.) ... .'1 " ' ' .. .,, ... ··~ .. . .. "'-..! " • ... /w ...... ' .. ::~ . ~ . . ... ' , .,, ,,-, -:.... I • • 'l' . . . ' i ....... .: ·1'·· ~ . f't •·\ I . . q · 'l\·, ,. : .. l :\-,/ . ,,_.,· 4 -!dv\'· . ·[ -·1·, ~- • • #0 ~ • ,l ' . \ c:ornprehensive i\nnua! Financial Report ... ,:: t" . -·r 54 n 0 0 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Basic Financial Statements (BFS) of the City of Lubbock, Texas (City) have been prepared iD conformity with accounting princip1es generally accepted in the United States of America (GAAP) as applied to government units, including specialized industry practices as specified in the American Institute of Certified Public Accountants audit and accounting guide titled 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 pronotmcements as well as Financial Accounting Standards Board (FASB) Statements and Interpretations, Accotmting 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 accoU11ting policies are described below. A. REPORTING ENTITY The City is a municipal corporation governed by a Cowicil-Manager form of government. The City, incorporated in 1909, is located in the northwestern part of the state. The City currently occupies a land area of 119.9 square miles and serves a population approximating 215,000. 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 cotporatc limits by annexation, which occurs periodical1y when deemed appropriate by the City CoW'Jcil. The City provides a full range of services, including police and fire protection; recreational activities and cultural events; construction and maintenance of rughways, streets, airport and other infrastructure; and sanitation services. The City also provides utilities for electricity, water, wastewater, and storm water 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 fmancially accountable. The criteria considered in determining activities to be reported within the City's BFS are based upon and consistent with those set forth in the Codification of Governmental Accounting Standards, Section 2100, "Defining the Financial Reporting Entity." The criteria includes 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 wiU on the organization; • The organization has the potential to impose a financial benefit or burden on the City; or • Tbere is fiscal dependency by the organization on the City. As required by GAAP, the BF$ present the reporting entity which consists of the City (the primary government), organizations for which the City is fmancial1y 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. 55 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. REPORTING ENTITY (Continued} BLENDED COMPONENT UNITS The Urban Renewal Agency (URA) bas been included in the City's primary government financial reporting entity using the blended method because, although it is legally separate, the URA is an arm of the City. The URA is governed by State law and was fonned to help eliminate slum and blight witlrin the City. The URA board oversees acquisition and disposition of real property and also designates and approves Urban Renewal Plans. The URA Board is composed of nine members appointed by the City Council. There are no separate financial statements available for the URA. West Texas Municipal Power Agency (WTMPA) is a legally separate municipal corporation, a political subdivision of Texas, and body politic and corporate, formed in 1983, governed by an eight member Board of Directors. The board consists of two directors from each participating city. One member is elected as the president who presides over monthly meetings. Directors serve without compensation. WTMPA has no employees and instead contracts for services to meet its general operating needs. 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. WTMPA may also panicipate in power pooling and power exchange agreements with other entities. WTMPA provides electricity to its four member cities with the City having a 92.7% interest in its operations. Each member city appoints two members to the WTMPA board, however an affinnative 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 comequently has majority voting control. As the City purchases approximately 92. 7% of the electricity brokered, WTMP A provides services almost exclusively to the City and is therefore presented as a blended enterprise fund. Separate audited financial statements may be obtained through the City. DISCRETELY PRESENTED COMPONENT UNITS The financial data for the Component Units are shown in the Government-Wide financial Statements. They are reported in a separate colunm to emphasize that they are legally separate from the City. The following Component Units are included in the reporting entity because the primary government is financially accountable, is able to impose its will on the organization, or can significantly influence operations and/or activities of the organization. Civic Lubbock, Inc. is a legally separate entity that was organized to foster and promote the presentation of wholesome educational, culrural, and entertainment programs for the general moral, intellectual, physical improvement, and welfare of the citizens of Lubbock and its surrounding area. The eleven-member board is appointed by the City Council. City Council reviews and accepts the annual budget. Separate audited financial statements for Civic Lubbock may be obtained from Civic Lubbock, Inc. at 1501 6111 Street, Lubbock, Texas. Market Lubbock Economic Development CGrporation, dba Market Lubbock, is a legally separate entity that was Conned on October I 0, l 995 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 opei:ations are funded primarily through budgeted allocations of the City's property and hotel occupancy taxes. Separate audited financial statements may be obtained from Market Lubbock at 1500 Broadway, Sixth Floor, Lubbock, Texas. 56 0 0 0 0 0 0 C C C C ,- I... () 0 0 0 0 0 City of Lubbock, Texas Notes to Basic Finaocial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNJFICANT ACCOUNTING POLICIES (Continued) A. REPORTING ENTITY (Continued) Lubbock. Economic Development Alliance is a legally separate entity that was formed on June 1, 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. Tue City Council appoints the seven-member board and its operations are funded primarily through budgeted allocations of the City's sales and use taxes. Separate audited financial statements may be obtained from Lubbock Economic Development Alliance, Inc. at 1500 Broadway, Sixth Floor, Lubbock, Texas. The Vintage Township Public Facilities Corporation is a legally separate entity that was formed on January 12, 2007 by the City Council to assist the City in financing, refinancing, providing or otherwise assisting in the acquisition, construction and maintenance of certam public facilities benefiting the Vintage Township Public Improvement District. The three-member board is appointed by the City Council. City Council reviews and accepts the annual budget. Separate audited financial statements are not available. RELATED ORGANIZATIONS The City Council is responsible for appointing the board members of other organizations and the City's accountability for these organizations does not extend beyond 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 organizations are not included in the reporting entity: Tue Housing Authority of the City or Lubbock is a legally separate entity. The Mayor appoints the five- member board. The Lubbock Health Facilities Development Corporation promotes health facilities development The City Council appoints the seven-member board. The Lubbock Housing Finance Corporation, Inc. was formed pursuant to the Texas Housing Finance Cmporation Act to fmance the cost of decent, safe, and affordable residential housing. The City Council appoints the seven-member board. The North and East Lubbock Community Development Corporation (CDC) was incorporated in February 2004 to effectuate change in North and East Lubbock. The North and East Lubbock CDC is a local entity that drives social change and 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 Lubbock Education Facilities Authority, Inc. is a non-profit corporation and instrumemality of the City and was created pursuant to the Higher Education Authority Act, Chapter 53 Texas Education Code for the pUipOSe of aiding institutions of higher education, secondary schools, and primary schools in providing educational facilities and housing facilities. The seven-member board is appointed by the City Council. The Lubbock Fire Pension J•und (LFPF) operates under provisions of the Texas Local Fire Fighters' Retirement Act for purposes of providing retirement benefits for the City's firefighters. The Mayor's designee, the Chief Financial Officer, three firefighters elected by active firefighters and two at-large members elected by the LFPF Board, govern its affairs. The Pension Fuod is funded by contributions from the firefighters and City matching contributions. As provided by enabling legislation, the City's 57 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE J. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. REPORTING ENTITY (Continued) responsibi1ity to the LFPF is limited to matching bi-weekly contributions made by the members. Title to assets is vested in the LFPF and not the City. The Texas State Pension Review Board is mandated to oversee all Texas public retirement systems in regard to their actuarial soundness and compliance with state law and the City cannot significantly influence its operations. Separate audited financial statements may be obtained from the LFPF or from the City. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The City's financial statements are prepared using the reporting model specified in 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 State and local Governments -Omnibus, GASB Statement No. 38 -Certain Financial Statement Note Disclosures, and GASB Interpretation No. 6 -Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. As specified by Statement No. 34, the BFS include both Government-Wide and Fund Financial Statements. The Government-Wide Financial Statements (GWFS) (i.e., the Statement of Net Assets and the Statement of Activities) report information on a1l 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 are primarily supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. All activities, both governmental and business-type, are reported in the GWFS using the economic resources measurement focus and the accrual basis of accmmting, which includes long-term assets and receivables as well as Jong-tenn 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 Governrnent~Wide Statement of Net Assets repons all financial and capital resources of the City. Jt is displayed in the 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: { 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 attnbutable to the acquisition, construction, or improvement of those assets. Restricted net assets are those with constraints placed on their use by either: ( l) extemally 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 defmition 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 wilh a specific function or segment. Program revenues include: ( 1) charges to custornen or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given 58 0 0 0 0 0 C C C C C C 0 0 0 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. GOVERNMENT•WIDE AND FUND FlNANCIAL STATEMENTS (Continued) function or segment; and (2) grants and contnbutions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. The genera] revenues support the net costs of the functions and segments not covered by program revenues. FWld Financial Statements (FFS) for governmental and proprietary funds are also part of the BFS. 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 ex.penditures/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 entCTprisc funds are reported as separate columns in the FFS. Other non-major funds are combined in a single colunm 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 focus and the accrual basis of accounting, as are the proprietary FFS. 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 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 colwnn 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 intemmd activity has been eliminated from the GWFS. for instance, 92.7% oftbe operations ofWTMPA representing transactions between W1MPA and Lubbock Power & Light {LP&L) have been eliminated for the GWFS presentation and for the electric business-type activities (BTA). Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City's electric, water and wastewater 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. Governmental FFS are reported using the current fmancial 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 conform 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 pwpose, the government considers revenues to be available, generally, if they are collected within 45 days of the end of the current fiscal period. 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 wen as expenditures related to compensated absences, and claims and judgments are recorded only when the liability has manu-ed. Because the governmental FFS are presented on a different basis of accounting than the GWFS, 59 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (Continued) reconciliations are provided immediately following each fund statement. These recoru:iliations explain the adjusbnents necessary to convert the FFS into lhc governmental activities colunm of the GWFS. Property taxes, sales taxes, franchise taxes, occupancy taxes, grants, licenses, court fines, and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when the City receives cash. Fund Accounting 0 0 0 0 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. 0 A fund is a separate accounting entity with a self-balancing set of accounts, which includes assets, liabilities, fund balance/net assets, revenues and expenditures/expenses. Governmental Funds are those through which most of the governmental functions of the City are financed. The City reports two major governmental funds; The General Fund, 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. 0 The Governmental Capital Projects Fund accounts for financing and construction of government capital projects, except for North Overton Tax Increment Financing Reinvesbnent Zone (TIF) capital projects and Gateway Streets Fund capital projects. Projects include public safety improvements, park C improvements, street improvements, purchase and construction of municipal buildings, and major maintenance, repair, and replacement of public buildings and facilities. Enterprise Funds are used to account for operations: ( l) that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be fmanced or C recovered through user charges; or (2) where the governing body has decided that periodic detem:unation 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: LP&L accounts for the activities of the City-owned electric production and dlstribution system. C The Water Fund accounts for the activities of the City's water system. The Wastewater Fund accounts for the activities of the City's sanitary wastewater system. The WTMPA Fund accowus for the activities of power generation and power brokering to member C c1t1es. Member cities in.elude Lubbock with 92.7% ownership, and Tulia, Brownfield. and Floydada comprising the remaining 7.3% ownership. C 60 () 0 0 0 0 ,... J City of Lubboc~ Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. MEASUREMENT FOCUS, BASJS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (Continued) The Storm Water Fund accounts for the activities of the storm water utility. 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 pw-poses. The Debt Service Fund is used to account for the accumulation of resources for and the payment of, general long-tenn obligation principal and interest ( other than debt service payments made by proprietary fimds). The Permanent Fund is used to report resources that are legally restricted to the extent that on1y earnings, and not principal. may be used for purposes that benefit the City and its citizens. The Cemetery Pennanent Care F1md acco\lllts for interest earned on principal funds and authorized disbw-sements for cemetery maintenance and improvements. Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital improvements (other than those recorded in the proprietary funds). 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 intema1 service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. AIJ revenues and expenses not meeting this defmition are reported as non-operating revenues and expenses. Enterprise Funds are used to account for services to outside users where the full cost of providing services, including capital, is 10 be recovered through fees and charges, e.g., Lubbock Preston Smith International Airport (Airport Fund), Citibus (Transit Fund), Solid Waste, Cemetery, and Civic Centers. lnlemal 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 Maintt:nance Fund, Print Shop and Warehouse Fund, Information Technology Fund, Risk Management, Health Benefits, and Investment Pool). D. BUDGETARY ACCOUNTING The City Manager submits a proposed operating budget and capital program to the City Council annually for the upcoming fiscal year. Public hearings are conducted to obtain citizen 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 61 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. BUDGETARY ACCOUNTING (Continued} a basis other than GAAP for the General Fund. with the main difference being that capital lease proceeds and related capital outlay are not budgeted. Budgetary control is maintained at the department level in the following cxpenditme categories: personnel services, supplies, other charges, and capital outlay. Management may make administrative transfers and increases or decreases between accounts below the department level without CoUDCil approval. However, any transfer of funds between departtnents, the legal level of control, shall be presented to Council for approval by ordinance before such funds can be transferred between departments or expended. 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 and Certificates of Obligation Debt Service) which, with cash and investments in the fund, is sufficient to pay all debt service due during the fiscal year. E. ENCUMBRANCES At the end of the fiscal year, encwnbrances for goods and services that have not been received are canceled. At the beginning of the next fiscal year, management reviews all open encumbrances. On October 1, 2008, 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 emrings. Records are maintained which reflect each fund's equity in the pooled account. The City's investments arc stated at fair value, which is based on quoted market prices as of the valuation date. Cash Equivalents -Cash equivalents are defmed as short-term highly liquid investments that are readily convertible to known amowrts of cash and have original maturities of three months or less when purchased. These investments present an insignificant risk of change in value due to changes in interest rates. Investments -IDvestments include securities in the Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, US Treaswy Notes, and Fann Credit Notes. Restricted investments include investments that have been restricted for bond financed capital projects and money restricted for claum in the Risk and Health lnsurance Funds. Restricted investments also include funds that have been restricted by bond covenants for debt service requirements and for passenger facility charges. 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 t.axes are due on receipt of the tax bill. On the following January I, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. The taxes are considered delinquent if not paid before February 1. Therefore, at fiscal year end all property taxes receivable are delinquent, but are secured by a 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 62 0 0 0 0 0 C C C C 0 0 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. ~ETS, LIABILITIES, AND FUND BALANCE/NET ASSETS (Continued) taxes to be collected in the subsequent 45 days. The City allocates property tax revenue between the General, certain Special Revenue. and Debt Service Funds based on tax rates adopted for the year of levy. The Lubbock 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 uncollecn"ble accounts. Enterprise Funds Receivables • Within the LP&L, Water, Wastewater, Storm Water, and WTMPA Enterprise Funds, services rendered but not bil1ed as of the close of the fiscal year are accrued and this amount is reflected in the accounts receivable balances of each fund. Amounts billed are reflected as accounts receivable net of an allowance for uncollectible accounts. Inventories -Inventories consist of expendable supplies held for consumption. Inventories are valued using the average cost method of valuation, and are accounted for using the consumption method of accounting, i.e., inventory is expensed when used rather than when purchased. Prepaid Itew • Prepaid items are accounted for under the consumption method. Mortgage Receivables • Mortgage receivables consist of loans made to Lubbock residents and businesses under the City's Community Development loan program These loans were originally funded 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, sidewallcs and other assets that are immovable and of value onJy 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 three years. These capital assets arc 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 lives as follows: Infrastructure/Improvements Buildings Equipment Water rights 10-50 years 15-SOyears 3-15 years 85 years Interest Capita1ization -Because the City issues general•pwpose capital improvement bonds, which are recorded within the proprietary fimds, the City capitalizes interest costs for business-type activities and enterprise funds according to the F ASB Statement No. 34 Capitalization of Interest Cost and F ASB Statement No. 62 Capitalization of Interest Costs. The City capitalized interest of approximately $4,190,000 net of interest earned, for the business-type activities and the enterprise funds during the current fiscal year. 63 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. ASSETS, LIABILITIES, AND FUND BALANCE/NET ASSETS (Continued} Fund Balance5 -In the fund financial statements, governmental fimds report reservations of fimd balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. · Restricted Net Assets -Certain enterprise fund and governmental activities assets a1e restricted for debt and federal requirements; 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 indenture requirements and passenger facility charges. Use of Estimates -The preparation of financial statements in conformity with GAAP requires management to make estimates and assurq>tions that affect the reported amowits 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. REVENUES, EXPENSES AND EXPENDITURES 0 0 0 0 0 Interest Income on pooled cash and investments is allocated monthly based on the percentage ofa fund's six- month rolling average monthly balance in pooled cash and investments to the total City-wide six-month rolling average monthly balance in pooled cash and investments. Bond Funds and other separate nonpooled cash are distributed to the fund where the cash and investment is recorded. 0 Sales Tax Revenue for the City results from an allocation of 1.5% of the total sales tax levy of8.25%, which is collected by the State of Texas and remitted to the City monthly. The tax is collected by the vendor and is reqlrired to be remitted to the State by the 20th of the month following collection. The tax is then paid to the City by the Friday following the second Wednesday of the month. Grant Revenue from federal and state grants is recognized as revenue as soon as all eligJbility requirements have been met. The availability period for grants is considered to be one year. lnterfund Transactions are accowited for as revenues, expenditures, expenses, or other financing sources or uses. Transactions that constitute reimbursements to a fund for expenditures/expenses initiaJly 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 tennination for employees in good standing for any available, unused vacation leave. Sick leave for employees is accrued at I 1/4 days per month with a maximum accrual status of 200 days. After 15 years of continuous full time service for non-civil service personnel, vested sick leave is paid on retirement or tennination at the current hourly rate for up to 90 days. Upon retirement or termination, Police Civil Service Personnel are paid for up to 90 days accrued sick leave after one year of employment. Firefighter Civil Service Personnel are paid for up to 90 days of accrued sick leave upon retirement or 64 G C C C 0 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. REVENUES. EXPENSES AND EXPENDITURES {Continued} tennination. The Texas Civil Service laws dictate certain benefits and personnel policies above and beyond those policies of the City. The liability for the accwnulated vacation and sick leave is recorded in the GWFS and in the FFS for proprietary fund employees when earned. The liability is recorded in the governmental FFS to the extent it is due and payable. Post Employment Benefits for retirees of the City include the option to purchase health and life insurance benefits at a subsidized premiwn. However, employees that retire with 15 years of service or Civil Service employees that retire who have a sick-leave balance in excess of 90 days wiJI be able to elect to continue receiving medical coverage in full 30-day periods for the term of the balance of their sick leave. Amounts to cover premiums and administrative costs, with an incremental charge for reserve funding, are determined by the City's health care administrator. Employer contributions are funded on a pay-as-you-go basis and approximated $2.3 million for FY 2008. Thc:se contnbutions are included in the amount of insurance expense reflected in the financial activity reported in the HeaJth Benefits Internal Service Fund. H. NEW PROUNCEMENTS The City will implement the following new financial accounting and reporting standards issued by the GASB. • Statement No. 49, "Accounting and Financial Reporting for Pollution Remediation Obliga- tions." The requirements of this statement are effective for FY 2009, but the effect of implementing the statement is unknown. • Statemr:nt No. 51, "Accounting and Financial Reporting for Intangible Assets." The requirements of this statement are effective for FY 2010, but the effect of implementing the statement is unknown. J. CHANGE IN ACCOUNTING PRINCIPLES Effective October I, 2007, the City implemented the following new financial accounting and reporting standards issued by GASB: • Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. Statement No. 45 establishes uniform financial reporting standards for other postemployment benefits (OPEB) plans, improves the relevance and usefulness of financial reporting, and supersedes portions of statements No. 12 and 27. The financial impact of the implementation on the City during the year is discussed in Note Ill. F. • Statement No. 50, Pension Disclosures. Statement No. SO amends the note disclosure and required supplementary infonnation standards of Statements No. 25 and 27. The pension footnote disclosure is discussed in Note Ill. E. NOTE II. STEW ARDSIDP, COMPLIANCE AND ACCOUNTABILITY A. RESTRICTED NET ASSETS Restricted net assets are only used for their intended purpose. For the majority of projects funded by tax ex.empt debt proceeds, the debt proceeds are used first, followed by unrestricted resources. 65 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE II. STEW ARDSIDP, COMPLIANCE AND ACCOUNTABILITY (Continued) B. GENERAL FUND BUDGET COMPARISON The General Fund FY 2008 amended budgeted expenditures and transfers out were $122,506,503 and actual expenditures and transfers out were $122,874,160, a difference of $367,657. NOTE W. DETAIL NOTES ON ALL ACTMTIES AND FUNDS A. DEPOSITS AND INVESTMENTS Deposits On September 30, 2008, the bank balance of the City's deposits was $3,018,670. All of the bank balances are covered by federal depository insurance or are fully colJateralized. Custodial credit risk is the risk that in the event of a bank failure, a government's deposits may not be returned. The City's deposit policy for custodial credit risk requires compliance with the provisions of Texas Public Fllllds Investment Act. 0 0 0 0 State law requires collateralization of all deposits with federal depository insurance, eligible securities. or a 0 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 interest. At September 30, 2008, bank balances were exposed to custodial credit risk as follows: Insured Uninsured and uncollateralized Uninsured and collateral held by pledging financial institution Uninsured and collateral held by pledging financial institution's trust department or agent in other than the City's name Investments $ 750,000 2,268,670 $ 3,018,670 At September 30, 2008, the City had the following investmeuts and maturities: September 30, 2008 Maturities in Years Type Money Markets Federal Home Loan Banks Federal Home Loan Mortgage Corporation Federal National Mortgage Association Fann Credit Note U S Treasury Note State Investment Pools • FairVaJue $ 21,520,865 72,100,888 22,026,380 9,240,630 15,012,5 JO 150,797 267,927,52J ~o:z 212 5~3 Less Tban 1 S 21,520,865 37,685,274 9,011,960 5,035,630 6,987,510 150,797 267,927,523 SHS 312 552 *State Investment Pools are considered investments for financial reporting. 66 1-S s 34,415,614 13,014,420 4,205,000 8,025,000 i52 660034 C C C C C 0 0 0 ~ ) City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) A. DEPOSITS AND INVESTMENTS {Continued) 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 (S) years. The money market accounts and investment pools are presented as an investment with a maturity ofless 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 invesonent 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. Treasuzy and U.S. agencies and instrwnentalities with the exception of mortgage backed securities. It allows ob1igations 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 maturity 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 investments pools authorized by the City Council. At September 30, 2008, Standard & Poor's rated the investment pools and the money market mutual funds AAAm. The senior unsecured debt for investments in FNMA and FHLMC are rated AAA by Standard & Poor's and Aaa by Moody's. Custodial Credit Risk• For an investment, custodial credit risk is the risk that, in the event of the failw-e 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 requires that deposits and repurchase agreements be held in an institution that has a rnininrum collateral level of 102% of the market value. FFCB, FHLB, FHLMC, and FNMA investments are held in the City's name in third party safekeeping by a Federal Reserve member financial institution designated as a City depository. The City shall maintain a list of authorized broker/dealers and financial institutions, wruch are approved by the Audit and Investment Committee for investment purposes. Concentration of Credit Risk -The City places limits on the amowit that may be invested in any one issuer with the exception of United States Treasuzy obligations. As of September 30, 2008, the City's investments constituted the following percentages of total investments: Investment Percentage State Investment Pools 65.67 FHLB 17.67 FHLMC S.40 Money Markets 5.28 FFCB 3.68 FNMA 2.26 U.S. Treasury 0.04 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. 67 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) B, JNTERFUND TRANSACTIONS Interfund balances, specifically the due to and due from other funds, are short-term loans to cover temporary cash deficits in various funds. This occasiona1ly occurs prior to bond sales or grant reimbursements. These outstanding balances are repaid within the following 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, 2008 the City had $12,938,877 in internal financing. These balances are assessed an interest charge and are repaid over time through operations and transfers. 1be following amounts due to other funds or due from other funds, including advances, arc included in the fund financial statements (all amounts in thousands): lnterfund Receivables (fbo1Wmds) Governmeotll Funds ProJ!riet2!l'. Funds lnterfund Payables (Thousands) Nonmajor Nomnajor General Government WTMPA F.n ttrp rise Totals Governmental Funds: Nonmajor Govemmcmal $ 1,409 $ 152 s $ 512 $ 2,073 Proprietary Funds: LP&L 9,009 9,009 Nonrnajor Enterprise 1,857 l,857 Totals $ 3,266 $ 152 $ 9,009 $ 512 $ 12,939 Transfers include I) 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 interfund transfers are reflected in the fund financial statements (all amounts in thousands): 68 0 0 0 0 0 C C ,... '- C C n 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) B. INTERFUND TRANSACTIONS (Continued) Jntufund Transfers In: (Tlaousallds) Governmental Funds: Funds Proprietary Funds Govt. Noranajor Waste-Storm-Nonma.jor Jntemal General Capital Govt Electric Water waler waler Enterprise Service Totals G encral Fund $ • S -$ 315 $1,796 $5,987 $2,894 $1,066 S 3,624 S 2,047 $17,729 Govt. Capital Projects 759 25 125 tlO 1,019 N onmajor Governmental 221 1,444 5,729 7,394 Proprietary Funds: LP&L Water Wastewater WTMPA 1,013 4,137 574 282 30 347 400 200 614 128 35 2,187 410 30 614 4,519 N onmajor Enterprise I n1ernal Service 321 321 Totals S 6,130 S 1,469 S 7 ~77 S 2,410 $6,387 S3,094 $1,066 $ J)H7 S 2,513 $34,223 Net transfers on the GWFS amounted to $4,703,317 from governmental activities to business-type activities. In FY 2008 the Civic Centers Enterprise Fund was created and $12,299,692 in capital assets net oflong-term liability was contributed from governmental funds to the Civic Center Enterprise Fund. This was netted against transfers of indirect cost allocations and PILOT transfers from business-type activities to governmental activities. C. DEFERRED CHARGES The total deferred charge of $2,811,110 in the LP&L Enterprise Fwid represents an advertising contract with the United Spirit Arena. The advertising (and amortization) began with the opening of the sports arena in fiscal year 2000 and will continue for 30 years. 69 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE DI. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) D. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2008, was as follows: Primary Government: Governmental Activities Beginning Balance Increases Decreases Ca pit.al Assets Not Depreciated: Land $ 9,056,284 $ 1,216,338 $ 1,238,454 Construction in Progress 40,759,945 42,767,016 16,711,163 Total Capita J Assets Not Depreciated 49,816,229 43,983,354 17,949,617 Capital Aisets Depredated: Buildings 65,604,748 148,293 21,352,638 Improvements 01h er than Buildings 231,108,317 19,979,475 4,264,979 Machinery and Equipment 68,762,656 7,807,656 12,382,438 T 01a l Capi1al Assets Depreciated 365,475,721 27,935,424 38,000,055 Less Acmmulated Depreciation: Buildings 33,575,928 1,784,067 14,100,591 I mprovem:nts 0th er than Buildings 119,815,172 9,505,742 2,795,500 Machinery and Equipment 48.221,912 6,667,058 8,616,434 T 01a\ Accumulated Depreciation 201,613,012 17,956,867 25,512,525 Total Capital Assets Depreciated, Net 163,862,709 9,978,557 12,487,530 Governmental Activities Capital Assets, Net $ 213,678,938 $ 53,961,911 $ 30,437,147 Depreciation expense was charged to functions/programs of the governmental activities as follows: Governmental activities: Administrative Services and Gaieral Government Community Services Culnnal and Rea-cation Services Economic and Business Development Fire Heahh Other Public Safety Police Streets and Traffic Internal Service Funds Tola I depreciation expense -govemmenla1 adivities Transfer in lo accwwlated depreciation -govcrrurental activities Increase inacrumulattd depreciation · governmental activities 70 $ 524,279 138,044 3,245,553 481,235 1,359,866 313,159 532,832 2,545,.551 7,771,812 265,779 17,178,110 778,757 $ 17,.956,867 0 0 Ending Balances $ 9,034,168 66,815,798 75,849,966 44,400,403 246,822,813 0 64,187,874 355,411,090 21,259,404 C 126,525,414 46,272,536 194,057,354 161,353,736 S 237,203,702 0 C 0 () 0 0 0 .., City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) D. CAPITAL ASSETS (Continued) Business-type Activities Beginning Balance Increases Decreast$ Capital Assets Not Depreciated: Land $ 31,962,807 $ 1,238,453 $ 89,122 Construction in Progress 90,515,665 61,225,550 24,067,811 Total Capital Assets Nol Depreciated 122,478,472 62,464,003 24,156,933 Capital Assets Depreciated: Buildings 98,005,752 22,755,074 Improvements Other than Buildings 769,665,416 25,525,413 2,569,115 Machinery and Equipment 166,693,910 19,712,468 6,447,317 Total Capital Assets Depreciated 1,034,365,078 67,992,955 9,016,432 Less Accumulated Depreciation: Buildings 35,546,976 17,063,888 Improvements Other than Buildings 293,396,223 22,518,048 694,486 Machinery and Equipment 89,834,350 15,183,983 6,244,299 Total Accumulated Depreciation 418,777,549 54,765,919 6,938,785 Total Capital Assets Depreciated, Net 615,587,529 13,227,036 2,077,647 Business-type Activities Capital Assets, Net $ 738,066,001 $ 75,691,039 $ 26,234,580 Depreciation expense was charged to functions/programs of the business-type activities as follows: Business-Type Activities: LP&L Water Wastewater Stonnwaler Solid Waste Airport Transit Civic Centers Cemetey Internal Servi~ Total depreciation expense -business-type activities Transfer in 10 accumulated depreciation -business-type activities Increase inaccurmlated depreciation -business-type activities 71 $ 9,599,079 8,387,182 5,432,048 1,274,719 4,233,675 4,205,461 1,509,962 813,674 18,055 57,779 35,531,634 19,234,285 $ 54,765,919 Ending Balances $ 33,112,138 127,673,404 160,785,542 120,760,826 792,621,714 179,959,061 1,093,341,601 52,610,864 315,219,785 98,774,034 466,604,683 626,736,918 $ 787,522,460 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE lll. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) D. CAPITAL ASSETS (Continued) Construction Commitments The City of Lubbock has active construction projects at fiscal year end. Water Projects include the acquisition of the right-of-way necessary for the construction of a pipeline to transport water from the Lake Alan Henry reservoir to the City. Another project related to bringing Lake Alan Henry online are costs associated with the final design of an intake pump station, a 65 mile transmission line, transmission pump stations, and a 24 million gallon per day water treatment plant. Wastewater projects include the design and construction for plant improvements to the Southeast Water Reclamation Plant. These improvements will produce stream quality effluent to be discharged into the North Fork of the Double Mountain Fork of the Brazos River for potential reuse. Construction of Fire Station #17 has begun. This new fire station will maintain the current service level of our fire protection services throughout the city. Work continued on a Gateway Street Project that will construct a T-2 thoroughfare street on Erskine Street from Frankford to Salem. The completed project will provide for three lanes of traffic in each direction plus a continuous left tum lane. Projects Commitments S~nt-t~Date Commitl.ments GovemIIEntal Capital Projects $ 92,714,556 $ 56,632,482 $ 36,082,074 TIF Capital Projects 38,520,171 17,106,456 21,413,715 Gateway Street Projects 26,795,200 3,443,571 23,.351,629 LP&L 21,497,813 17,341,462 4,156.351 Water 89,249,756 40,635,808 48,613,948 Wastewaicr 87,688,073 30,488,082 57,199,991 Solid Waste 3,503,900 818,893 2,685,007 Airport 23,157,941 13,097,475 10,060,466 Stormwater 56,729,500 45,744,166 10,985,334 internal Service Fund 1,600,000 835,799 764,201 Total $ 441,456,910 $ 226,144,194 $ 215,.312,716 E. RETIREMENT PLANS Each qualified employee is included in one of two retirement plans in which the City participates. These are the Texas Municipal Retirement System and the Lubbock Fire Pension Fund. The City does not maintain the accounting records, hold the investments or administer either retirement plan. Summary of significant data for each retirement plan follows: TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS) Plan Description The City provides pension benefits for all of its full-time employees (with the exception of firefighters) through a non-traditional, joint contn"butory, hybrid defined benefit plan in the state-wide TMRS, an agent multiple-employer public employee retirement system. 72 0 0 0 0 0 C C C 0 0 0 0 !J City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE 111. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) E. RETIREMENT PLANS (Continued} Benefits depend upon the sum of the employee's contn'butions to the plan, with interest. and the City-financed monetary credits, with interest. At the date the p]an 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 contnbuted by the employee, with interest, prior to establishment of the plan. Monewy credits for service since the plan began are a percent (100%, 150%, or 200%) of the employee's accumulated contnbutiom. 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 City Council, 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 20 years of service regardless of age. A member is vested after 5 years. Contributions The contribution rate for employees is 7% and the City matching ratio is currently 2-to-l, both as adopted by the City Council. Under the State law governing TMRS, the actuary annually determines the City contnbution rate. This rate consists of the nonnal cost contribution rate and the prior sezvice cost contnbution rate, both of which are calculated to be a level percent of payrol1 from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which is the obligation of the City as of an employee's retirement date, not at the time the employee's contnbutions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his/her retirement becomes effective. The prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 30-year amortization period. The projected unit credit actuarial cost method is used for detennining the City contnbution rate. Both the employees and the City make contnbutions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one- year delay between the actuarial valuation that serves as the basis for the rate and the ca1endar year when the rate goes into effect ( i.e. December 31, 2007 valuation is effective for rates beginning January 2009). Actuarial Assumptions The actuarial assumptions for the December 31, 2007 valuations are as follows: Actuarial cost method: Amortization mclhod: Remaining amortization period: Asset valuation method: Investment rate of return: Projected salary increases: Includes inflation at: Cost of Living adjusoncnts: Projected unit credit Level percent of payroll 30 years-closed period Amortized cost 7% Varies by age and service 3% 2.1 % (3% CPI) 73 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE Ill. DETAIL NOTES ON ALL ACTMTIES AND FUNDS (Contim1ed) E. RETIREMENT PLANS (Continued) Payroll Growth Withdrawal rates for Male/Female FlsalYear Ending 9/30/06 9/30/07 9/30/08 Annual Pension Cost $ 10,904,031 10,903,717 11,369,691 3% Mid/Mid Percentage ofAPC Contributed !00 100 100 Net Pension Obllgatioo $0 0 0 As of December 31, 2007, the most recent actuarial valuation date, the plan was 61.4% funded. The actuarial accrued liability for benefits was $326.0 million, and the actuarial value of assets was $200.0 miUion, resulting in an unfunded actuarial accrued liability (UAAL) of $126.0 million. The covered payroll (annual 0 0 0 0 payroll of active employees covered by the plan) was $70.9 million, and the ratio of the UAAL to the covered 0 payroll was 177.5%. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, will present multiyear trend infonnation about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. The City of Lubbock is one of 827 municipalities having the benefit plan administered by TMRS. Each of the municipalities has an annual, individual actuarial valuation performed. All assumptions for the December 31, 2007 valuations are contained in the 2007 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153. LUBBOCK FIRE PENSION FUND (LFPF) Plan Description The Board of Trustees of the LFPF is the administrator of a single-employer defined benefit pension plan. This pension fund is a trust fund. Jt 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 the LFPF. The LFPF provides service retirement, death, disability and withdrawal benefits. These benefits fully vesl after 20 years of credited service. A partially vested benefit is provided for firefighters who terminate employment with at least IO but less than 20 years of service. Employees may retire at age 50 with 20 years of service. A reduced early service retirement benefit is provided for employees who tenninate employment with 20 or more years of service. The LFPF Plan, effective December 1, 2005, provides a monthly normal service retirement benefit, payab]e in a Joint and Two--Thirds to Spouse fonn of annuity, equal to 68 .92% of final 48-month average salary plus $335.05 per month for each year of service in excess of 20 years. 0 ..... '-' A firefigbter has the option to participate in a Retroactive Deferred Retiiement Option Plan (RETRO DROP) which provides a lwnp sum benefit and a reduced annuity upon temrination of employment. Firefighters must be at least 51 years of age with 21 years of service at the selected "RETRO DROP benefit calculation date" C (which is prior to date of employment termination). Early RETRO DROP with benefit reductions is available C 74 0 0 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) E. RETIREMENT PLANS (Continued) at age 50 with 20 years of service for the selected "early RETRO DROP benefit calculation date". A Partial Lwnp Smn option is aJso available where a reduced monthly benefit is detennined based on an elected lump sum amount such that the combined present value of the benefits under the option is actuarially equivalent to that of the nonnal 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. LFPF has the authority to provide, and has periodically provided for in the past, ad hoc postrerirement benefit increases. The benefit provisions of this plan are authorized by the Texas Local Fire Fighter's Retirement Act (TLFFRA). TLFFRA provides the authority and procedure to amend benefit provisions. Contributions Required and Contributions Made The contribution provisions of this plan are authorized by TLFFRA. TLFFRA provides the authority and procedure to change the amount of contributions determined as a percentage of pay by each firefighter and a percentage of payroll by the City. While the actual contribution rates are not actuarially determined, state law requires that each plan of benefits adopted by LFPF be approved by an eligible actuary. The actuary certifies that the contribution commitment by the firefighters and the City provides an adequate financing arrangement. Using the entry age actuarial cost method, LFPFs normal cost contnbution rate is determined as a percentage of payroll. The excess of the total contnbution rate over the normal cost contnbution rate is used to amortize LFPFs unfunded actuarial accrued liability (UAAL), if any, and the number of years needed to amortize LFPFs unfunded actuarial liability, if any, is detennined using a level percentage of payroll method. The costs of administering the plan are fmanced by LFPF. Annual Pension Cost For the fiscal year ended September 30, 2008, the City Annual Pension Cost (APC) for the LFPF was equal to $3,889,208 as descnbed in item 4 in the table below. Based on the results of the December 31, 2006 actuarial valuation of the Plan effective December I, 2005, the most recent biennial actuarial valuation, the Board's actuary found that the fund had an adequate financing arrangement based on the current level of the firefighter contnbution rates and on the assumed average of City contribution rates. The funding policy of the Fund requires firefighters to contribute 12.43% of pay. The City contributes based on a fomwla which causes the City's contribution rate to fluctuate from year to year. The December 31, 2006 actuarial valuation assumes that the City's contributions will average 19.75% of payroll in the future. The AnDual Required Contribution (ARC) by the City for the fiscal year ending September 30, 2008 were based on the results of the actuarial valuations as of December 31, 2004 and as of December 31, 2006 using the entry age actuarial cost method and were determined in compliance with the GASB Statement No. 27 parameters. The actuarial methods and assumptions used for these two valuations as follows: 75 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) E. RETIREMENT PLANS (Continued) Valuation Date Actuarial cost method Amortization method Amortization period of ARC Asset valuation method Actuarial assumptions: Investment return Projected salary increases Inflation Cost-of-living increase Payroll increases ARC as percent of payroll 12/3 J/2004 Entry age Level percent of payroll, open 21 years S-year adjusted market value 8% 4% plus promo1ion and longevity 4% 0% 4% Budget rates 12131/2006 Entry age Level percent of payroll, open 30years 5-year adjusted market value 8% 4% plus promotion and longevity 4% 0% 4% 20.42% The following shows the development of the Net Pension Obligation (NPO) as of September 30, 2008 I. Annual Required Contributions {ARC) 2. Interest on NPO 3. Adjustment to ARC 4. Annual Pension Cost (APC) 5. Actual City contributions made 6. Increase (Decrease) in NPO/(asset) 7. NPOl(asset) at October I, 2007 8. NPO/(asset) at September 30, 2008 S 3,908,048 (68,985) so 145 3,889,208 (3,S40,468} 48,740 (862,311) S (813,571 l_ Further details concerning the finaucial position of the LFPF and the latest actuarial valuation are available by contacting the Board of Trustees, LFPF, City of Lubbock, P.O. Box 2000, Lubbock., Texas 79457. A stand- alone fmancial report is available by contacting the LFPF. Fiscal Year Ended 9/30/06 9/30/07 9/30/08 Trend Information Annual Pensiou Cost(APC) $ 3,208,595 3,530,944 3,889,208 Percentage of APC Contributed 100.0% 98.4 98.8 Net Pension Obligation (Asset) $(920,722) (862,311) (813,571) As of December 31, 2006, the most recent actuarial valuation date, the plan was 84% fimded. The actuarial accrued liability for benefits was $164.4 million, and the actuarial value of assets was $138.1 million, resulting in an unfunded actuarial accrued liability (UAAL) of $26.3 million. The covered payroll (annual payroll of active employees covered by the plan) was $17 .3 million, and the ratio of the UAAL to the covered payroll was I 52.1 %. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, will present multiyear trend infomJation about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 76 0 0 0 0 0 0 C C C 0 C '.) .... J City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) F. OTHER POST EMPLOYMENT BENEFITS (OPEB) Plan Description: The City sponsors and administers an informal single-employer health/dental plan. Texas statute provides that retirees from a municipality with a population of 25,000 or more and that receive retirement benefits from a municipal retirement p1an are entided to pw-chase continued health benefits coverage for the person and the person's dependents unless the person is eligible for group health benefits coverage through another employer. The State of Texas bas the authority to establish and amend the requirements of this sf.atute. The City does not issue stand alone financial statements of the health/dental plan, however, all required information is presented in this report. Funding Policy: The contn'bution requirements of plan members are established by the City and may be amended as needed. Retiree medical/dental coverage levels for retirees is the same as coverage provided to active City employees in accordance with the terms and conditions of the cunent City Benefit Plan. Employees who retire with 15 or more years of service or Civil Service employees that retire who have a balance in excess of 90 days sick leave are eligible to continue receiving medical coverage in full 30 day periods for the term of their sick leave balance. The City contributes 33.89% to 58.83% of the monthly premium for the refutt only health premium and 7.88% for the retiree only dental premium. Plan members may purchase retiree health/dentaJ care coverage for eligible spouses and dependents at their own expense and receive a benefit from the blended premiwn rate from all of the employees participating in the City's health insurance plans. The City is not required to make contributions to the plan on behalf of the re~ and funds the plan on a projected pay-as-you-go financing method. The plan has 499 active participants who pay monthly premiums between $272/$22 (medical/dental) for single coverage and ($320/$27) medical/dental for family coverage. Amiual OPEB Cost and Net OPEB Obligation: The City's annual OPEB expense is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially detennined in accordance with the parameters ofGASB Statement 45. The ARC represents a level of funding that. if paid on an ongoing basis, is projected to cover normal cost each year and amortize any wifunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for the year, the amowit actually contributed to the plan, and changes in the City's net OPEB obligation: Annual required contnbution Interest on net OPEB obligation Annual OPEB Cost Total annual employer contribution (pay-as-you-go) Increase in net OPEB obligation Net OPEB obligation -begimring of year Net OPEB obligation -end of year $6,636,899 6,636,899 (2,281.379) 4,355,520 $ 4.355.52Q The components of the ARC calcuJation reflecting a 30 year amortization period is as follows: Nonnal Cost Amortization of transition obligation Interest cost ARC 77 $3,221,541 3,415,358 S 6.636.899 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) F. OTHER POST EMPLOYMENT BENEFITS (Continued) The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2008 is as fol1ows: Percentage of Annual Fiscal Year AnnualOPEB OPEBC0s1 NetOPEB Ended Cost Contributed Obligation 09/30/2008 $6,636,899 34.4% $4,355,520 Funded Status and Funding Progress: As of October 1, 2007, the most recent actuarial valuation date, the plan was not funded. The actuarial accrued liability for benefits was $81,918,738, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $81,918,738. The covered payroll (annual payroll of active employees covered by the plan) was $88,185,412, and the ratio of the UAAL to the covered payroll was 92.9%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts detennined regarding the funded status of the plan and the ARC of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presenred as required supplementary infonnation following the notes to the fmancial statements, will present multi•year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. However, since this is the first year of implementation there is no trend information to report. Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and asswnptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and 0 0 0 C 0 0 C the actuarial value of assets, consistent with the long-tenn perspective of the calcularions. C In the October 1, 2007, actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial asswnptions included a 4.5% investment rate of return based on a long tenn rate of investment, a 3% annual salary increase projection, and an annual healthcare cost trend rate of JO% for 2007 and then reduced by decrements to an ultimate rate of 4.5% after fifteen years. The UAAL is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at September 30, 2008, C was twenty-nine years. G. DEFERRED COMPENSATION The City offers its employees five 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 tennination, retirement, death, or unforeseeable emergency. The plans' assets are held in trust for the exclusive benefits of the participants and their beneficiaries. 78 C C 0 C 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) G. DEFERRED COMPENSATION (Continued} The City does not provide administrative services or have any fiduciary responsibilities for these plans; therefore, they are not presented in the BFS. H. SURFACE WATER SUPPLY Canadian River Municipal Water Authority The Canadian River MunicipaJ Water Authority (CRMWA) is a Conservation and Reclamation Authority established by the Texas legislature to construct a dam, water reservoir, and aqueduct system for the puzpose of supplying water to surrounding cities. The Authority was created in 1953 and comprises eleven cities, including the City of Lubbock. The budget, financing, and operations of the Authority 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, 2008, the Board was comprised of 18 members, two of which represented the City. The City contracted with the CRMW A to reimburse it for a portion of the cost of the Canadian River Dam and aqueduct system m 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 fiscal year 1999, long-tenn debt was owed to the U.S. Bureau of Reclamation for the cost of construction of the fac1lity, which was completed in 1969. The City's allocation of project costs was $32,905,862. During fiscal year 1999, bonds in the principal amo1D1t of$12,300,000 were issued to pay off the construction obligation owed to the U.S. Bureau of Reclamation via CRMWA in the amount of $20,809,067. The difference of $8,509,067 was a discount in the remaining principal provided by the U.S. Bureau of Reclamation to the member cities. This discount has been recorded as a deferred gain on refunding and is being amortized over the life of the refunding bonds. At September 30, 2008, $1,363,690 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 capital assets and are being amortized over 85 years. The cost and debt are recorded in the Water Enterprise Fund. In 2005, the Canadian River Municipal Authority issued $48,125,000 in Contract Revenue Bonds. The City of Lubbock shared in tlris issue in the amount of $17,960,000. The Canadian River Municipal Authority issued a new Contract Revenue Bond, Series 2006 in April 2006 in the amount of $49,075,000. The City of Lubbock shared in the issue for $18,573,906 and other costs of$492,465, and received depreciable assets ( water rights) valued at $19,066,371. These assets and liabilities are recorded in the W atcr 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 !mown as Lake Alan Henry. The BRA, which is authorized by the State of Texas to provide for the conservation and development of surface waters in the Brazos River Basin, issued bonds for the construction of a 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 1991. The BRA revenue bonds were refunded in 1995 and 2005, lega1ly defeasing the BRA debt. The new debt is in the City's name and is no longer BRA debt. The Lake Alan Henry dam and facilities assets 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. 79 0 City of Lubbock, Texas Notes to Basic F"mancial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACTMTIES AND FUNDS (Continued) 0 I. LONG-TERM DEBT GENERAL OBLIGATION BONDS AND CERTIFlCATES OF OBLIGATION: Interest Maturity Amount Outstanding Rate% Dated Date Issued 09-30-08 5.39 10-01-93 02-15-14 $ 2,550,000 $ 780,000 0 5.20 10-01-93 02-15-14 1,470,000 225,000 5.14 10-01-93 02-15-14 19,215,000 2,895,000 4.71 01-01-98 02-15-18 10,260,000 1,545,000 4.36 01-15-99 02-15-14 20,835,000 12,900,000 4.58 01-15-99 02-15-19 15,355,000 770,000 4.77 04-01 -99 02-15-19 6,100,000 305,000 4.71 04-01 -99 02-15-19 12,300,000 6,820,000 0 5.37 09-15-99 02-15-20 24,800,000 1,085,000 5.54 03-15-00 02-15-20 7,000,000 310,000 4.90 02-01-01 02-15-21 9,100,000 815,000 4.81 02-01-01 02-15-21 2,770,000 280,000 5.25 06-01-01 02-15-31 35,000,000 2,335,000 4.68 02-15-02 02-15-22 9,400,000 3,700,000 0 4.71 02-15-02 02-15-22 6,450,000 2,535,000 4.70 02-15-02 02-15-22 1,545,000 1,270,000 4.62 07-01-02 02-15-22 2,605,000 2,045,000 3.18 07-01--02 02-15-10 10,810,000 1,855,000 4.42 07-15-03 02-15-23 11,855,000 3,655,000 4.47 07-15--03 02-15-24 9,765,000 8,425,000 4.48 07-15--03 02-15-24 680.000 585,000 0 4.47 07-15-03 02-15-24 3,590,000 3,095,000 4.87 07-15-03 02-15-34 40,135,000 6,060,000 4.47 07-15--03 02-15-24 3,795,000 3,275,000 4.60 08-15-03 04-15-23 8,900,000 7,130,000 4.60 08-15-03 04-15-23 13,270,000 4,810,000 4.37 06-30-04 08-01-12 1,000,000 500,000 4.09 09-15-04 02-15-24 2,025,000 1,590,000 ,.. '-.. 4.08 09-28-04 02-15-24 3,100,000 2,370,000 3.58 09-28--04 02-15-20 22,620,000 18,385,000 3.89 02-15--05 04-15-25 23,055,000 18,040,000 3.94 06-15-05 02-15-21 49,615,000 49,615,000 4.26 08-15-05 02-15-25 46,525,000 41,700,000 4.82 07-01-05 02-1 S-21 43,080,000 37,215,000 4.27 07-15-05 02-15-25 7,265,000 6,510,000 C 4.58 04-15-06 02-15-26 76,950,000 73,435,000 4.58 04-1 S--06 02-15-26 2,740,000 2,645,000 4.S4 05-15-06 02-15-31 18,830,000 I 8,770,000 4.42 01-01-07 02-15-34 54,020,000 51,485,000 4.42 01-01-07 02-15-34 25,255,000 24,625,000 4.88 08-15-07 08-15-27 1,155,000 1,125,000 4.88 08-15-07 08-15-27 60,820,000 58,825,000 C 6.45 12-15-07 08-15-27 11,805,000 11,805,000 4.22 01-1 S-08 08-15-27 52,900,000 52,900,000 4.80 04-15-08 08-15-27 2,035,000 2,035,000 4.42 04-1 S-08 08-15-27 80,485,000 80,485,000 2.45 06-01-08 08-15-27 22,615,000 22,615,000 Total $ 902, 7501000 $ 656,180,000 (A) (A) Excludes ($7,841,525) net deferred losses on advance refundings. net bond premiums and discounts, and bond issuance costs -($3,900,807) business-type and ($3,940,718) governmental. Additionally, this amount includes $457,126,347 of bonds used to finance en1CTprise fund activities. C 80 0 0 0 0 0 0 City of Lubbock, Texas Notes to Basie Financial Statements September 30, 2008 NOTE DI. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) I. LONG-TERM DEBT (Continued) At September 30, 2008, management of the City believes that it was in compliance with all financial bond covenants on outstanding general obligation bonded debt, certificates of obligation. and water revenue bonded debt. LP&L REVENUE BONDS Balance Final Amount OUtstaodlng Interest Ra!!.(%) Issue Date Maturi!! Date Issued 09-.30-08 4.25 to 6.25 1-01-98 4-15-18 $ 9,170,000 s 4,600,000 3.10 to 5.00 1-15-99 4-15-19 14,975,000 5,900,000 4.00 to 5.25 7-01-01 4-I 5-21 9,200,000 5,980,000 Total $ 33,345,000 $ 16,480,000 * * Balance outstanding excludes $376,493 of net deferred losses on advance refundings, bond premiums and discounts, and bond issuance cos1s. Interest Rate(%) 3.983 4.25 to 5.0 Issue Date 09-30-05 04-30-06 OTHER REVENUE BONDS Final Maturity Date 09-30-25 02-15-27 Amount Issued $ 17,960,000 18,573,906 Balance Outstanding 09-3M8 $ I 6,299,167 17,651,677 $ 36,533,906 $ 33,950,844 * *Balance outstanding excludes $365,241 discount and deferred losses on bonds sold or refunded. The annual requirements to amortize all outstanding debt of the City as of September 30, 2008 are as fo11ows: Governmental Activities Bminess--Type Activities Fiscal Genwal Obligation Bonds General Obligation Bonds Revenue Bonds Year Princ~al Interest Principal Interest Principal Interest 2009 $ 9,478,486 $ 9,832,982 $ 23,446,514 $ 21,319,399 $ 3,016,932 $ 2,448,196 2010 9,876,223 8,853,219 24,318,777 19,572,553 3,062,637 2,.315,474 20ll 10,249,465 8,407,095 25,010,535 18,526,832 3,110,359 2,181,036 2012 10,327,340 7,940,486 24,882.660 17,439,327 2,828,634 2,040,891 2013 10,593,204 7,463,337 25,666,796 16,326,550 2,896,718 I ,911,990 2014-2018 53,884,423 29,805,852 124,025,575 64,730,247 15,694,414 7,414,609 2019-2023 53,170,710 16,938,528 107,634,292 36,593,050 13,265,992 3,616,585 2024-2028 36,673,802 4,856,312 82,846,198 13,397,027 6,555,158 651,232 2029-2033 4,800,000 315,620 16,895,000 2;2,29,607 2034-2038 2,400,000 54,000 Totals $ 199,053,653 $ 94,413,430 $ 457,126,347 $210,188,592 $ 50,430,844 $ 22,580,013 81 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) I. LONG-TERM DEBT (Continued) Capital leases were used to acquire equipment and vehicles. The interest rate on the leases ranged from 1.5% to 3.8%. The annua1 requirements on capital leases of the City as of September 30, 2008, including interest payments of$3,052,943 are as follows: Governmental Business-Type Total Capital Lease Capital Lease Capital Lease Fiscal Minimum Minimum Minimum Year Payment Payment Pa1ment 2009 $ 3,316,870 $ 4,715,877 $ 8,032,747 2010 3,090,580 4,697,08 I 7,787,661 201 I 2,031,415 3,963,893 5,995,308 2012 1,429,893 2,773,922 4,203,815 2013 910,279 1,689,579 2,599,858 2014-2018 2,768,721 2,469,736 5,238,457 Less: Interest (l,:l25,2SZ} (I,727,692) (3,052,944) Toti! $ 12,222,506 $ 18,582,396 $ 30,804,902 The carrying values on the leased assets of the City as of September 30, 2008 are as follows: Accumulated Net Book Gross Value Depreciation Value Governmental Activities s 16,8 l 3,621 s 3,144,099 s 13,669,522 Business-type Activities 27,085,294 2,713,112 24,372,182 Tola! Leased As,,ets $ 43,898,915 s 5,857,211 $ 38,041,704 82 0 0 0 0 0 0 0 0 C 0 0 0 0 0 n 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30~ 2008 NOTE ID. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) L LONG-TERM DEBT (Continued) Long-term obligations (net of discounts and premimm) for governmental and business-type activities for the year ended September 30, 2008 are as follows: Debt Payable Debt Payable Duein 09/30/07 Additions Deldloas 09/30/08 one year Goverumaa tal activities: Tax-Supported - Obligation Bonds $ 160,388,370 $ 46,605,151 $ 7,939,868 S 199,053,653 $ 9,478,486 Bond Discounts/Premiums 2,315,924 1,844,019 219,225 3,940,718 Capital Leases 10,916,970 3,783,379 2,477,843 12,222,506 2,934,SS& Coolpensatcd Absences 17,228,753 8,002,065 7,306,975 17,923,843 6,806,236 Post Retirem:nt Benefits 2,& 13,759 2,813,759 insutllnCe Oaim Payable 2,469,382 19,333,090 20 ,.046 ,766 1,7.55,706 1,599,299 Arbitrage Payable 676,052 105,305 570,747 Total Governme11•a1 activities S 193,995,451 $ 82,381,463 s 38,095,982 S 238,280,932 s 20,818,609 Baslnc55-type activities: Self-Supported - Obligation Bonds 352,486,630 1 23,234,849 l&,59S,132 457,126,347 23,446,514 Revenue Bonds 54,208,174 3,777,330 50,430,844 3,016,932 Bond Discounts/Premiums 314,988 4,182,809 1,338,720 3,159,077 Capital Lmses 13,049,379 8,273,303 2,740,286 18,582,396 4,164,910 Oosure/Post Clo= 3,531,611 238,955 3,770,566 Compensated Absences 5,357,820 2,977,390 2,727,526 5,607.684 2,838,245 Post Retirement Benefits I .541,761 I.541,761 Insurance Oaim Payable 3,258,788 4,443,470 4,856,579 2.845,679 1,420,757 Arbitrage Payable 565,015 6.613 354 571.274 Total Business-type activitiH $ 432,772,405 $ 144.8 99,150 $ 34,035,927 S 543,635,628 s 34,887,358 Payments on bonds payable for governmental activities are made in the Debt Service Fund. Bonded debt is subject to the applicability of federal arbitrage regulations. Accrued compensated absences that pertain to governmental activities will be liquidated by the General Fund and Special Revenue Funds. The Risk Management Internal Service FUDd will liquidate insurance claims payable that pertain to governmental activities. Payments for the capital leases that pertain 10 the governmental activities wiU be liquidated by the General Fund and Capital Projects Funds. The total long-teJm debt is reconciled to the total annual requiremeDts to amortize long-tenn debt as follows: Long-term debt -Govemmerual ."'.ctivities Long-1cnn debt -Business-iype Activities Intercsr T oral amount of debt J,csf: Bond di:;co unr~/pn=iums Less: Cap ital leases Less: Oosure/post closure Less; Co mp ensa red ab sco s,e,; Less, Post relimnm1 benefos Less: I nsurance claims payable Less: .'\rbitragc payable T otaJ othci debt Total furore bonded debt requirements 83 s 238,280,933 S4J,635,628 JZ?,182,035 (7,099,795) (30,804.,'Xl2) (3,770,566} (:B,531,528) (4,355,520) (4,601,385) (1,142.021} $ 1, 1(1) ,.098,596 (75,305,717) S 1,0:U,792,879 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACflVITIES AND FUNDS (Continued) I. LONG-TERM DEBT (Continued) New Bond Issuances In January 2008, the City issued $11,805,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008. The Certificates were issued at a discount of $185,703. After paying issuance costs of $219,297, the net proceeds were $11,400,000. Proceeds from the sale of these certificates will be used for the purpose of paying contractual obligations to be incurred for construction of a Civic/Conference Center. The proceeds of the debt are recorded in a Capital Projects Fund. In February 2008, the City issued $52,900,000 Tax and Wastewater System Surplus Revenue Certificate of Obligation, Series 2008. The Certificates were issued at a premium of$2,851,567. After paying issuance costs of $686,897, the net proceeds were $55,064,670. Proceeds from the sale of these certificates will be used for the purpose of paying contractual obligations to be incurred for Wastewater System extension and improvements. The proceeds of the debt are recorded in the Wastewater Fund. In May 2008, the City issued $2,035,000 General Obligation Bonds, Series 2008 and $80,485,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2008. The General Obligation Bonds were issued at a premiwn of $110,554. After paying issuance costs of $36,832, the net proceeds were $2,108,722. Proceeds from the sale of these bonds will be used for street improvements and costs associated with the issuance of the bonds. The Certificates of Obligation were issued at a premium of$4,714,285. After paying issuance costs of $1,082,542, the net proceeds were $84,116,742. Proceeds from the sale of these certificates will be used for the purpose of paying contractual obligations to be incurred for i) various public improvements including fire, parks. nrunicipal building, solid waste, dramage, street, electrical, water and wastewater improvements and ii) professional services rendered in connection therewith and costs associated with the issuance of the Certificates. The proceeds of the debt are recorded in various Capital Projects Funds. In June 2008, the City issued $22,615,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2008A. After paying issuance costs of $76,733, the net proceeds were $22,538,267. Proceeds from the sale of these certificates will be used for the pwpose of paying contractual obligations to be incurred for construction of Lake Alan Henry Pipeline. The proceeds of the debt are recorded in the Water fund and are held in escrow by the Texas Water Development Board. Proceeds from debt issuances are primarily capital related and are included in net assets invested in capital assets, net ofrelated debt. Advanced Refuodings The City issued advance refundings to retire a portion of the City's outstanding debt to lower the debt service requirements. The net proceeds from the issuance of the Refunding Bonds were deposited with the Escrow Agent 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 will be used to purchase direct obligations of the United States of America. Under the escrow agreements, between the City and the Escrow Agent, the escrow funds are irrevocably pledged to the payment of principal and interest on the Refunded Bonds. 84 0 0 0 0 0 0 0 0 0 0 0 0 0 '.J City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) J. CONDUIT DEBT The City issued Housing Finance Coiporation 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 public facilities. The bonds are secured by the property financed. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. According)y, the bonds are not reported as liabilities in the accompanying fmancial s1atements. As of September 30, 2008 there were seven series of Lubbock Health Facilities Development Corporation Bonds outstanding with an aggregate principal amount payable of S260,695,343. The bonds were issued between 1993 and 2008. Also as of September 30, 2008, there was one series of Lubbock Education Facilities Authority Inc. Bonds outstanding with an aggregate principal amount payable of $8,455,000. The bonds were issued in 1999. K. SPECIAL ASSESSMENT DEBT The Vint.age Township PFC, a discretely presented component unit of the City. issued special assessment debt for acquisition and construction of certain public facilities benefiting Vintage Township. The PFC issued $3,472,000 in special assessment debt and had $3,394,000 outstanding special assessment debt as of September 30, 2008. The City collects assessments and forwards the collections to the bondholders. The City is not obligated in any manner for special assessment debt and is not liable for repayment of the debt. As the PFC completes construction of certain public facilities, the assets are donated to the City. As of September 30, 2008, $1,200,000 in completed construction costs was contributed to the City. The PFC has a deficit in net assets invested in capital assets, net of related debt which is a result of the debt held in the PFC name while the assets are donated to the City and held in the City name. L. 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 Ftmd generates its revenue through charges to other departments, which are based on costs. In 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 claims outstanding prior to April 1999 continue to be the City's responsibility. The City's self-insurance liability program is on a cash flow basis, which means that the servicing contractor processes, adjusts and pays claims from a deposit provided by the City. The City accounts for the liability program by charging premiums based upon losses, administrative fees and reserve requirements. In order to control the risks associated with liability claims, the City purchased excess liability coverage in September 1999, which is renewed annually. The policy has a $10 million annual aggregate limit and is subject to a $250,000 deductible per claim prior to October 1, 2005, and a $500,000 deductible per claim since October 1, 2005. For self-insured coverage, the Risk Management Fund establishes claim JiabiJities 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 nrust be estimated varies depending on the coverage involved. Because actual claim costs depend on such complex 85 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE 111. DETAIL NOTES ON ALL ACl1VITIES AND FUNDS (Continued) L. RISK MANAGEMENT (Continued) factors as inflation, changes in doctrines oflegal 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 clll'Ient estimates that reflect recent settlements, claim frequency, and other economic and social factors. Adjusttnents 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 insmance policy was purchased from an outside insurance carrier. The policy has a $250,000 deductible per occurrence, and the boiler coverage insurance deductible is up to $500,000 dependent upon the uniL 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 premiwn 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 the Internal Service Funds. M. 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 insurance prcmiwns are generated from each cost center based upon the number of active full-rime employees. The City's plan is self-insured under an Administrative Services Only (ASO) Agreement The City purchases excess coverage of$175,000 per covered individual annually and an aggregate cap of$19,l 88,006. The insurance vendor based on medical trend, c~ history, and utilization detennines the aggregate deductible. The actuarially determined calculation of the claim liability is $1.45 million at September 30, 2008 for all health coverages including medical, prescription drugs and dental. The City also provides full-ti.me employees basic term life insurance. 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 at a reduced rate. Employees may also elect, at their cost, to participate in several voluntary insurance programs such as a cancer income policy, voluntary life and personal accident insurance. N. ACCRUED INSURANCE CLAJMS The Risk Management and Health Benefits Fwids establish a liability for self-insurance for both reported and unreported insured events, which includes estimates of future payments oflosscs and related claim adjustment expenses. The following represents changes in those aggregate liabilities for these funds during the past two years ended September 30: 86 0 0 0 C 0 0 C C 0 C 0 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE m. DETAIL NOTES ON ALL ACTMTIES AND FUNDS (Continued) N. ACCRUED INSURANCE CLAIMS (Continued) FY 2008 FYl007 Workers' compensation and liability reserves at beginning of fiscal year s 3,258,788 $ 5,260,976 Claims e,q>enses 4,443,470 2,907,050 Claims payments (4,856,579) (4,909,238) Workers· compensation and liability reserves at end of 6 seal year 2,845,679 3,258,788 Medical and dental clai~ liabi lily at beginning of fiscal year 2,469,382 2,761,156 Claims expenses 19,333,090 17,307,683 Claims payments Medical and dental clai~ Jiability at end of fiscal {20,046,766) ( 17,599,4522 year 1,755,706 2,469,382 Total self-insurance liability at end of fiscal year 4,601,385 5,728,170 Total assets to pay claims at end of fiscal year 17,510,106 14,293,590 Accrued insurance claims payable -current 3,020,056 4,344,914 Accrued insurance claims payable -noncurrent 1,581,329 1,383,256 Total accrued insumnce claims $ 4,601,385 s 5,728,170 O. LANDFILL CLOSURE AND POSTCLOSURE CARE COST State and federal laws and regulations require the City to place final covers on its landfill sites at closwe and to perform certain maintenance and monitoring functions for thirty years thereafter. Although closure and postclosure care costs will be paid onJy 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 recognizes a corresponding liability) in each period based on landfiU capacity used as of each balance sheet date. The $3,770,566 included in landfill closure and postclosurc care liability at September 30, 2008, represents the cumulative amount expensed by the City to date for its two landfills that are registered wider TCEQ permit numbers 69 (Landftll 69) and 2252 (Landfill 2252), less amounts that have been paid. Approximately 93.3 percent of the estimated capacity of Landfill 69 has been used, with $780,572 remaining to be recognized over the remaining closure period, an estimated two years. Approximately 3.6 percent of the estimated capacity of Landfill 2252 has been used to date, with $25,055,779 remaining to be recognized over the remaining c1osure period. estimated at over 80 years. Postclosure care costs are based on prior estimates and have been adjusted for inflation. Actual costs may differ due to inflation, deflation, changes in technology, or other regulatory changes. The City is required by state and federal laws and regulations to provide assurance that financial resources will be available for Jandfill closure, postclosure care, and remediation or contairunent of environmental hazards. The City is in compliance with these requirements and has chosen the Local Government Financial Test mechanism for providing assurance. The City expects to finance costs through normal operations. 87 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE W. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) P. DISAGGREGATION OF ACCOUNTS-FUND FINANCIAL STATEMENTS Aa:ounls Receivable Summa2 Coart Property Fin~ Dama;e Pavin; Misc. Govenmeatal Funds: General Fund $ 3,229,541 S 268.333 $ 283.795 $ 126.405 $ Total $ 3,229,541 $ 268,333 $ 283,795 $ 126,405 $ Accounts Receivable Summa2 General Credit Balance at Cons•mer Card Misc. 09/30/08 Proprietary Funds: LP&:L $ 21,226,784 $ . S 367,212 $ 21,593,996 Water 6,081,279 6,081,279 Wastewater 2,759,263 2,759,263 WTMPA 899,013 899,013 Stormwater 1,031,468 1,031,468 Nonmajor 3 918170 546 3918716 Total $ 35,915,977 $ 546 $ 367,212 $ 36,283,735 Allowance for Doubtful Accounts Summary Balance at 09/30/08 Governmental Funds: General Fund $ 2,798,969 Proprietary Fu.nds: LP&L 2,723,698 Water 1,082,716 Wastewater 461,429 Storm Water 206,103 Nonmajor 638,003 Total $ 7,910,918 88 0 0 Balluu:e at 0 09/30/08 3,9081074 3,908,074 C 0 0 C 0 0 0 C 0 0 ') City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE III. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) P. DISAGREGATION OF ACCOUNTS -FUND FINANCIAL STATEMENTS {Continued) Govemmentll Funds: General Fund Govt. Capital Projects Nonmajor Proprietary Funds: LP&L Water Wastewater wrMPA Stormwater Norunajor lnternal Service Total Voudlers $ 833,893 120,890 463,522 1,619,115 687,152 413,535 132,188 384,802 865,053 $ 5,520,150 Accounts Payable summary AttOIIDts $ 1,952,776 1,112.601 3,707,404 211,428 1,533,108 2,246,435 9,725,988 487,802 1,951,474 888,516 $ 23,817,532 Miscellaneous $ $ 735,871 1,546 116,083 181,896 100,575 l0,079 1,146,050 Balance at 09/30/08 $ 3,522,540 1,233,491 4,172,472 1,946,626 2,402,156 2.760,545 9,725,988 619,990 2,346,355 1,753,569 $ 30,483,732 Q. DISAGGREGATION OF ACCOUNTS -GOVERNMENT-WIDE Governmental Accounts Rec:eivable Interest Receivable Net Receivables Taxes Internal Service Receivable Receivables Balance at 091.J0/08 AdMtles $ 1,109,105 $ 342,559 $10,088,559 $ 32,983 $ 11,573,206 Business-type 31,171,786 703,553 Activities Total $ 32,280,891 $ 1,046,112 $10,088,559 $ Aaiouots Payable Attounts Internal Service Payable Payables Govemmmtal Activities $ 8,928,503 $ 1,160,489 Business-type Adivities 19,801,660 593,080 Total $ 28,730,163 $ 1,753,569 R. FUND CLOSURES 5,541 31,880,880 38,524 $ 43,454,086 BalantEat 09/30/08 $ 10,088,992 20,394,740 $ 30,483,732 Jn fiscal year 2008, City Council terminated the automated traffic signal enforcement program. As a result, the Red Lighl Camera fund was closed. 89 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE IV. CONTINGENT LIABILITIES A. FEDERAL GRANTS In the nonnal course of operations, the City receives grant funds from state and federal agencies. The grant 0 0 programs are subject to audits by agents of the granting authority to ensure compliance with conditions O 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 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 injmy to $250,000/$500,000 and property damage to $100,000 per claim. The following represents the significant litigation against the City at this time. Depending oo the date of the occurrence, the City's insurance coverage, if available, contains either a $250,000 or a $500,000 self-insured retention depending on the date of the occurrence. As of September 30, 2008, the City has $1,048,856 reserved on general liability claims. Oscar Renda Contracting, Inc., et al v. City of Lubbock: The Plaintiff is a contractor who bid to perfonn a contract for the City of Lubbock. Oscar Renda asserts that they were not awarded the contract because they had filed a suit against another public entity. City of Lubbock filed a motion for summary judgment and it was granted by the trial court. However, the Fifth Circuit of Appeals reversed the decision of the trial court and remanded the case back to trial in a split decision in August 2006. The City of Lubbock has filed a petition with the United States Supreme Court in an effort to get them to review the case. The City's request was denied. The City filed a motion for summny judgment and it was granted in April 2008. The case is on appeal to the Fifth Circuit of Appeals. Charles Emmanuel Bosler, as Surviving Parent of Courtney Nicole Bosler, as Guardian of Colton Bosler v. Travis Riddle and The City of Lubbock: Plaintiff sued the City of Lubbock and Officer Travis Riddle on behalf of himself and his children arising out of the death of his teenage daughter and injuries to his son from an automobile accident with Officer Travis Riddle. Plaintiff alleges that the officer was operating his vehicle in a negligent manner. The City filed a motion for summary judgment based on the fact that the Plaintiff did not present his notice of claim to the City of Lubbock within six ( 6) months of the date of the accident. The Plaintiff never filed a notice of claim and filed suit seven (7) months after the dale of the accident. The Plaintiff claims that notice was not necessary in that the Defendants had actual notice of the incident. The trial cowt granted the City's swnmary judgment based on the fact that the Plaintiff did not file a claim with the City of Lubbock within six (6) months from the date of the accident. The Plaintiff appealed this decision to the Court of Appeals and the Court of Appellate reversed the trial court ruling as to the City of Lubbock but affirmed the ruling as to Officer Riddle. The case is set fortrial on June 1, 2009. 90 C 0 0 C C 0 C 0 0 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE IV. CONTINGENT LIABILITJES (Continued) C. LITIGATION (Continued) L.J. McCallan, Jr. v. City of Lubbock, et al: A lawsuit was filed in late November against the City of Lubbock and three Lubbock police officCIS pertaining to an incident in which a suspect was injured with a taser utilized by one of the Lubbock police officers. Plaintiff is suing the City and the officers under the Civil Rights Act and is also suing the City under the Texas Tort Claims Act. The case is in federal court and has not been set for trial. Plaintiff does not appear to have suffered lasting physical injuries as a result of the tasmg. Two of the individual officers have been disnrissed. Ackers v. City of Lubbock, et al Plaintiff sued the City, its Police Chief and two police officers for violation of bis First Amendment rights. Plaintiff alleges that his First Amendment rights were violated when the film from his camera was confiscated by police while he was photographing a children's basketball game. The City filed a Plea to the Jurisdiction which was granted by the trial court. Plaintiff appealed the case to the appellate court and the appellate court remanded the case to the trial court reasoning that a Plea to the Jurisdiction was not the proper procedmal mechanism. The case is set for trial in August 2009. Estate of Tommy Zobor v. City of Lubbock and Atmos Energy A lawsuit was filed in October 2008 by the Estate of Tommy Zohor. Zohor died as a result of an accident with an Atmos Energy truck. A City patrol car was responding to a call with his lights on As the patrol car came up behind the Atmos Energy truck the officer "bwnped" his siren and the Atmos Energy truck made a left tum to move out of the patrol car's path. The motorcyclist, Tommy Zohor, was proceeding in the opposite direction and coUided with the Atmos truck. Templeton Mortgage v. City of LubbO<!k, Garza County, Kent County and the Texas Attorney General's Office Plaintiff seeks a declaration as to certain rights regarding the restrictive easements at Lake Alan Henry as well as other areas such as the use of water. The City will file a motion for smmnary judgment by February 2009. This is not a damages case, but the court has the authority to grant attorneys' fees to the prevailing party. The trial is set for spring 2009. Templeton Morta;age Corporation & Mark Brown v. City of Lubbock This case involves some of the same facts and arguments as the Templeton Mortgage v. City of Lubbock, Garza County, Kent County and tlle Texas Attorney General's Office. In addition, the Plaintiff is seeking $100,000 in damages to his property because of the rising and falling of the water at Lake Alan Henry. The City is waiting for the outcome ofth~ Templeton Mortgage v. City of Lubbock, Garza County, Kent County and the Texas Attorney GeneraJ's Office case. 91 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE IV. CONTINGENT LIABILITIES (Continued) B. UTIGA TION (Continued) In Re: ICON Benefit Administrators, L.P., American Administrative Group, Inc., Health Smart Preferred Care, L.P. and The Parker Group, Inc. v. City or Lubbock In the fall of 2006, the City requested an audit of the claims administration perfonned by the above-named entities on behalf of the City of Lubbock. American Administration Group, Inc (AAG} and ICON refused to give the City the necessary documents to perfonn the audit. The City filed a pre-arbitration discovery petition in March 2007 in an attempt to obtain the documents necessary to perform this audit. Prior to a hearing scheduled in February 2008, the court referred matters to arbitration. The arbitration is schedu]ed for October 26, 2009. ICON and the other Parker companies are claiming that the City breached its contract with them by hiring an inswance broker in 2006 and by providing confidential information from ICON/AAG to third parties. The: City is also being sued for disparagement, harassment, performing an inappropriate audit, seeking confidential infonnation, and other allegations which the City believes are not actionable. The City claims that ICON/AAG and HeahhSmart breached the contract with the City by not providing the City with the same discounts and prices as provided by Blue Cross as agreed to in the contract and for applying the discounts and administering the contract improperly. ICON and AAG v. Joella Mullin, Stanley Self, Andrea Davenport, Lee Ann Dumbauld, Scott Snider, Leisa Hutcheson, David Miller, and unknown others ICON and MG sued the defendants for various torts including civil conspiracy, misappropriation by preparing an wtlawful proposal to the City ofLubboc.lc, wrongful interference with contract, interference with prospective contractual relations, business disparagement, defamation and violations of the Local Government Code. Dumbauld, Snider and Hutcheson are employees of the City of Lubbock and David Miller is the fonner Mayor of Lubbock. Discovery has begun. Robert Smith v. City of Lubbock Robert Smith is an employee of the City of Lubbock who was involved in an auto accident with another vehicle. Mr. Smith suffered injuries in this accident and filed a claim against the other driver. The other driver had only minimum limits of insurance as required by the State of Texas and the insurance company tendered the policy limits to Mr. Smith. However, Smith claims this money was insufficient to cover his damages. Smith sued the City of Lubbock under the City's UIM coverage claiming that the City owes him for his damages under that insurance. He asserts he is entitled 10 over $600,000. Jerry R. Avery, Erika Cleveland, Joy Elliott, Donna Mc:Millian, and Diana Melcher v. City of Lubbock (Lubbock Power & Light) Plaintiff's filed suit in December 2008 against the City of Lubbock/Lubbock Power & Light alleging damage to personal property from an electrical surge (electric appliances, computers, etc.) and related expenses (spoiled food, hotel expenses, etc.). The estimate of damages received by LP & L from the Plaintiffs is approximately $39,300 but could reach $60,000. The lawsuit is in its initial stages and the City (LP&L) has answered the Plaintiffs' petition. 92 0 0 0 0 0 0 C C C 0 C () 0 0 0 0 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE IV. CONTINGENT LIABILITIES (Continued) B, LmGA TION (Continued) Weatherbee d/b/a Sudsy Springs Car Wash v. G. Greenstreet, Inc. and City of LublH>ck Plaintiff filed suit against the City of Lubbock, along with the contractor who constructed the building, for the destruction of a building. The plaintiff's building was damaged after a wind storm. It was damaged to the extent that the City believed that it constituted a hazard to the public and after giving notice to the plaintiff, tore it down. Plaintiff does not seem to dispute that the building was damaged and that some work needed to be performed to alleviate any hazards. However, plaintiff contends that the City should not have tom the entire building down in order to a1leviate any danger. The City's damages should be limited to $250,000 Diaz v. City ofLublH>ck Diaz is a City police officer who was suspended without pay in May 2007 after an indictment was entered against her. This indictment was dismissed in late 2008. Diaz, pursuant to civil service law, bas petitioned the Civil Service Commission for back pay. The back pay is approximately $100,000. Lamont Veatch Lamont Veatch tripped and fell over a rope at the Colisemn resulting in a broken shoulder. Mr. Veatch died during smgery to repair hls shoulder. 'The roping was a barricade set up by ABC Rodeo. Sexton Enterprises Sexton Enterprises allege that the City of Lubbock Council wrongfully awarded a contract that Sexton bid for to another company. C. SITE REMEDIATION The City has identified specific locations requiring site remediation relative to underground fuel storage tanks and historical fire training sites. One of the sites referred to below as LP&L Plant l, represents a liability equally shared by both the City and LP &L. As of September 30, 2008 the City identified three locations that pose a probable liability. The City recorded the liabilities for the three locations in the enterprise funds as follows: • LP&L Plant 1 $173,909 -this represents LP&L's portion of the liability only • LP&L Cooke Plant $467,869 • WesTex Aircraft $100,000 The City recorded the probable liabilities in the government-wide governmental statements as ronows: • LP&L Plant 1 $173,909 ~ this represents the City's portion only • CFR Training Facility $124,706 • Fire Training Academy $854,918 • South Fueling Facility $136,748 93 City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2008 NOTE IV. CONTINGENT LIABILITIES (Continued) C. SITE REMEDIATION (Continued) The City bas identified elevated levels of nitrates in the ground water beneath the Lubbock Land Application Site (LI.AS). which is attributed to the hlstorical land application of treated wastewater effluent and also impacted by the activities of individuals and other entities. As a result. the Texas Commission on Environmental Quality has issued an Agreed Order that requires the City to remedy the situation. The Order calls for, among other requirements, pwnping an annual average of 1,580 gallons per minute from 16 groundwater wells on the LLAS in order to eliminate a mowid of groundwater under the LLAS. The groundwater, that is high in nitrates, is discharged into a surface water lake system where it is remediated naturally. An effluent land application management plan and groundwater monitoring program was also established as a result of the Order. Phase I of the project to construct additions and improvements to the City's wastewater re.clamation plant that will treat the sewage to higher quality in the future and address the nitrate issue is complete. Phase II began in the spring of 2008 and will be complete by 2011. Owing FY 08, the City held discussions with TCEQ to consider terminating the Agreed Order and to incorporate the remaming requirements for remediation into the main wastewater treatment permit Because the groundwater mound under the LLAS has been eliminated in accordance witb the requirements of the Order, there is an opportunity to tenninate the Agreed Order and to continue addressing any residual concerns as part of the pemrit. The City is encouraged by the initial discussions and believes TCEQ will approve this in the near future. The City expeets that the remediation of nitrates will continue for some time after the new plant is built, but the length of time and total expense are not estimable. Since the remediation is probable, but not estimable and it is likely that we will terminate the Agreed Order, the City has not accrued this remediation. The remediation and monitoring costs for the next fiscal year are included in the FY 2009 budget. The City plans to implement GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, in FY 2009. This authoritative guidance requires that remediation liabilities be measured and recorded as the sum of probability, weighted amounts in a range of possible estimated amounts. Consequently, the City plans to secure an engineering finn to detennine the amormt of the potential exposure, exploring various methods of addressing the remediation. The potential exposure for one remaining location is not readily determinable as of September 30, 2008. In the opinion of management. the ultimate liability for this location will not have a materially adverse effect on the City's financial position. 94 0 0 0 C 0 0 0 C 0 C 0 0 0 0 0 APPENDIXB FORMS OF BOND COUNSEL OPINIONS 0 0 0 0 () 0 0 0 0 0 This page intentionally left blank 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Vinson&Elkins [FORM OF OPINION OF BOND COUNSEL] [Closing Date] $23,185,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2009 WE HA VE represented the City of Lubbock, Texas (the "City"), as its Bond Counsel in connection with an issue of bonds (the "Bonds") described as follows: CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2009 dated March I, 2009, issued in the principal amount of $23,185,000. 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 HA VE 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 so1e1y upon the transcript of proceedings described in the following paragraph. We have not assumed any responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in connection with the sale of the Bonds. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein. IN OUR CAPACITY as Bond Counsel, we have participated in the preparation of and have examined a transcript of certified proceedings pertaining to the Bonds, on which we have relied in giving our opinion. The transcript contains certified copies of certain proceedings of the City, an escrow agreement (the "Escrow Agreement") between the City and The Bank of New York Me11on Trust Company, National Association, as escrow agent (the "Escrow Agent"), a certificate (the "Sufficiency Certificate") of the Escrow Agent verifying the sufficiency of the deposits made with the Escrow Agent for defeasance of the obligations being refunded (the "Refunded Obligations"), customary certificates of officers, agents and representatives of the Vinson & Elkins LLP Attorneys at Law Austin Beijing Dallas Dubai Houston London Moscow New York Tokyo Washington Trammell Crow Center. 2001 Ross Avenue. SLSije 3700 Dallas, Texas 75201-2975 Tel 214.220. 7700 Fax 214.220. 7716 www.velaw.c:om 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) Firm 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 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 pohtical 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 I 986, 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 could 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 -2- 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 () 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 Sufficiency Certificate. If such representations or the Sufficiency Certificate 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 inc1udable in gross income from the date of original delivery, regardless of the date on which the event causing such inclusion occurs. Except as stated above, we express no opinion as to any federal, state or local tax consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or disposition of, the Bonds. Owners of the Bonds should be aware that the ownership of tax-exempt obligations may result in co11ateral 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 as to 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. -3~ Vinson&Elkins [FORM OF OPINION OF BOND COUNSEL] (Closing Date] $58,705,000 CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES2009 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 2009, dated March 1, 2009, issued in the principal amount of $58,705,000. 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") and the Pricing Certificate executed pursuant to the Ordinance. WE HA VE 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 Vinson & Elkins LLP Attorneys at Law Austin Beijing Dallas Dubai Houston Lorldon Moscow New York Tokyo Washington Trammell Crow Center. 2001 Ross Avenue. Su~e 3700 Dallas. Texas 75201-2975 Tel 214.220.7700 Fax 214.220.7716 www.velaw.eom 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 () 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 OPJNION 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 Jaw, 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 hmited by general principles of equity which permit the exercise of judicial discretion. IT IS OUR FURTHER OPINION THAT: (I) Interest on the Certificates is excludab1e 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 I 986, as amended (the "Code"), and, as such, interest on the Certificates is not treated as an "item of tax preference" to be included in the computation of ·'alternative minimum taxable income" for an individual or a corporation. Furthermore, interest on the Certificates is not treated as includable in the "adjusted current earnings" of a corporation 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 detennined to be inaccurate or incomplete or the City fails to comply with the foregoing -2- provisions of the Ordinance, interest on the Certificates could become ineluctable 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 op1mon 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 Certificates 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 Certificates). 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 as to 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 inc1udable in gross income for federal income tax purposes. -3- 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 RBC Capital Markets® 0 0 0 0 0 0 PURCHASE CONTRACT RELATING TO $23,185,000 $58,705,000 City of Lubbock, Texas City of Lubbock, Texas General Obligation Refunding and Improvement Bonds Tax and Waterworks System Surplus Revenue Certificates of Obligation Series 2009 March 13, 2009 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: Series 2009 MORGAN KEEGAN & COMPANY, INC (the 11Authorized Representative"), MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, MORGAN STANLEY & CO. INCORPORATED, AND SOUTHWEST SECURITIES, INC ( collectively, the "Underwriters"), offer to enter into this Purchase Contract ( the "Purchase Contract") with the CITY OF LUBBOCK, TEX4S(the "City") for the purchase by the Underwriters of the City's General Obligation Refunding and Improvement Bonds, Series 2009 (the "Bonds") and the City's Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (the "Certificates" and together with the Bonds, the "Securities"). Titls offer is made subject to the City's acceptance of this Purchase Contract on or before 12:00 p.m. Central Time on March 13, 2009. 1. Purchase and Sale of the Securities. (a) The Bonds. (i) Upon the terms and conditions and upon the basis of the representations set forth herein, the Underwriters, jointly and severally, hereby agree to purchase from the City, and the City hereby agrees to sell and deliver to the Underwriters an aggregate of $23,185,000 (representing the original aggregate principal amount of the Bonds). The Bonds 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 Bond Ordinance (as defined below). ) ) ) (ii) The purchase price for the Bonds shall be $24,315,479.27 (representing the principal amount of the Bonds, plus original issue premium on the Bonds in the amount of $1,243,042.45, and less an Underwriters' discount on the Bonds of $112,563.18) plus accrued interest from their dated date to the date of the payment for and delivery of the Bonds. (b) The Certificates. (i) Upon the terms and conditions and upon the basis of the representations set forth herein, the Underwriters, jointly and severally, hereby agree to purchase from the City, and the City hereby agrees to sell and deliver to the Undetwriters an aggregate of $58,705,000 (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 B hereto and shall be issued and secured under the provisions of the Certificate Ordinance (as defined below). (ii) The purchase price for the Certificates shall be $60,515,887.81 (representing the principal amount of the Certificates, plus original issue premium on the Certificates in the amount of $1,175,876.95, and less an Underwriters' discount on the Certificates of $354,989.14) plus accrued interest from their dated date to the date of the payment for and delivery of the Certificates. (c) MORGAN KEEGAN & COMPANY, INC, as the Authorized Representative, represents that it has been duly authorized to execute this Purchase Contract and has been duly authorized to act hereunder as the Authorized Representative. All actions that may be taken by the Underwriters hereunder may be taken by the Authorized Representative alone. 2. Ordinance. The Securities shall be as described in and shall be issued and secured under the provisions of two separate ordinances adopted by the City on February 26, 2009, authorizing the issuance and sale of the Bonds (the "Bond Ordinance") and the Certificates (the "Certificate Ordinance", and, together with the Bond Ordinance, the "Ordinance"). In the Ordinance, the City Council of the City delegated the authority to the City Manager and the Chief Financial Officer ( each an "Authorized Officer") to establish the pricing terms for the Bonds and the Certificates, respectively, through the execution of two separate Pricing Certificates dated the date hereof ( collectively referred to herein as the "Pricing Certificate"). The Securities shall be secured and payable as provided in the Ordinance and the Pricing Certificate. 3. Public Offering. It shall be a condition of the obligations of the City to sell and deliver the Securities to the Underwriters, and of the obligations of the Underwriters to purchase and accept delivery of the Securities, that the entire principal amount of the Securities authorized by the Ordinance and as set forth in the Pricing Certificate shall be sold and delivered by the City and accepted and paid for by the Underwriters at the Closing. The Underwriters agree to make a bona fide public offering of all of the Securities, at not in excess of the initial public offering prices, as set forth in the Official Statement; provided however at least ten percent (I 0%) of the principal amount of the Securities 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. 2 ) ... 4. Security Deposit. Delivered to the City herewith is a corporate check of the Authorized Representative payable to the order of the City in the amount of $821,200. Such check is a common "Good Faith" check for the S~urities, and such check may be applied toward any obligation of the Underwriters owing as a result of the failure of the Underwriters to accept delivery of the Securities as provided herein. The City agrees to hold such check uncashed until the Closing to ensure the performance by the Underwriters of their obligation to purchase, accept delivery of and pay for the Securities at the Closing. Concurrently with the payment by the Underwriters of the purchase price of the Securities, the City shall return such check to the Authorized Representative as provided in Paragraphs 7 and 8 hereof. Should the City fail to deliver the Securities at the Closing, or should the City be unable to satisfy the conditions of the obligations of the Underwriters to purchase, accept delivery of and pay for the Securities, as set forth in this Purchase Contract (unless waived by the Authorized Representative), or should such obligations of the Underwriters be terminated for any reason pennitted by this Purchase Contract. such check shall immediately be returned to the Authorized Representative. In the event the Underwriters fail ( other than for a reason pennitted hereunder) to purchase, accept delivery of and pay for the Securities at the Closing as herein provided, such check shall be retained by the City as and for full liquidated damages for such failure of the Underwriters and for any defaults hereunder on the part of the Underwriters. The Authorized Representative hereby agrees not to stop or cause payment on said check to be stopped unless the City has breached any of the terms of this Purchase Contract. 5. Official Statement. The Official Statement, including the cover pages and Appendices thereto, of the City, dated March 13, 2009, with respect to the Securities, as :further amended only in the ~er 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 Underwriters in connection with the public offering and sale of the Securities. The City confirms its consent to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement, relative to the Securities, dated March 5, 2009 (the "Preliminary Official Statement"), in connection with the preliminary public offering and sale of the Securities, and it is "deemed final" as of its date, within the meaning, and for the purposes, of Rule 15c2-12 promulgated under authority granted by the federal Securities and Exchange Act of 1934 (the "Rule"). The City agrees to cooperate with the Underwriters to provide a supply of final Official Statements within seven business days of the date hereof in sufficient quantities to comply with the Underwriters' obligations under the Rule and the applicable rules of the Municipal Securities Rulemaking Board. The Underwriters will use their best efforts to assist the City in the preparation of the final Official Statement in order to ensure compliance with the aforementioned rules. If at any time after the date of this Purchase Contract but before the first to occur of (i) the date upon which the Underwriters notify the City that the period of the initial public offering of the Securities has expired or (ii) the date that is 90 days after the date hereof, any event shall occur that might or would cause the Official Statement to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circwnstances under which they were made, not misleading, the City shall notify the Authorized Representative, and if, in the opinion of the Authorized Representative, such event requires the preparation and publication of a supplement or amendment to the Official Statement, 3 ) "I ) the City will at its expense supplement or amend the Official Statement in the form and in a manner approved by the Authorized Representative and furnish to the Underwriters a reasonable number of copies requested by the Authorized Representative in order to enable the Underwriters to comply with the Rule. To the best knowledge and belief of the City, the Official Statement contains information, including financial infonnation 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. 6. Representations, Warranties and Agreements of the City. On the date hereof, the City represents, warrants and agrees as follows: (a) The City is a home rule municipality and a political subdivision of the State of Texas and a body politic and corporate, and has full legal right, power and authority to enter into this Purchase Contract, to adopt each Ordinance, to sell the Securities, and to issue and deliver the Securities to the Underwriters as provided herein and to cany out and consummate all other transactions contemplated by each Ordinance, the Pricing Certificate, the Escrow Agreement relating to the Bonds (the "Escrow Agreement") and this Purchase Contract; (b) By official action of the City prior to or concurrently with the acceptance hereof, the City has duly adopted each Ordinance, has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations contained in the Securities, the Pricing Certificate and this Purchase Contract and has duly authorized and approved the perfonnance by the City of its obligations contained in each Ordinance, including, without limitation, the submission of a transcript of proceedings to the Public Finance Division of the Office of the Attorney General of Texas (the "Attorney General") for the approval of the Securities; and each Ordinance, the Escrow Agreement and this Purchase Contract constitute legal, valid and binding agreements of the City, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights 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 of Texas or the United States (including regulations of its agencies) applicable to the issuance of the Securities 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 orto the knowledge of the City it is otherwise subject, that would have a material and adverse effect upon the business or financial condition of the City; and the execution and delivery of the Securities, the Escrow Agreement 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 4 "I 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 Securities hereunder will have been obtained prior to the Closing, except for the approval of the Securities by the Attorney General and registration of the Securities 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 form and substance consistent with the administrative rules of the Public Finance Division of the Attorney General, which will permit the review of such transcript and the approval of the Securities by the Attorney General, and the registration of the Securities by the Comptroller on or before the Closing, as required by Section 8( e)(7) 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 Underwriters, sell or issue any additional bonds, notes or other obligations for borrowed money payable in whole or in part from ad valorem taxes, and the City will not incur any material liabilities, direct or contingent, nor will there be any adverse change of a material nature in the financial position of the City; (g) Except as described in the Official Statement, no litigation is pending or, to the knowledge of the City, threatened in any court affecting the corporate existence of the City, the title of its officers to their respective offices, or seeking to restrain or enjoin the issuance or delivery of the Securities, the levy, collection or application of the ad valorem taxes (and, with respect to the Certificates, the ·swplus net revenues (the "Pledged Revenues") of the City's Waterworks System, the pledge of which is provided for in the Certificate Ordinance) pledged or to be pledged to pay the principal of and interest on the Securities, or in any way contesting or affecting the issuance, execution, delivery, payment, security or validity of the Securities, or in any way contesting or affecting the validity or enforceability of either Ordinance, or contesting the powers of the City, or any authority for the Securities, either Ordinance, the Pricing Certificate, the Escrow Agreement or this Purchase Contract or contesting in any way the completeness, accuracy or fairness of the Preliminary Official Statement or the Official Statement; (h) The City will cooperate with the Underwriters in arranging for the qualification of the Securities for sale and the determination of their eligibility for 5 investment under the laws of such jurisdictions as the Authorized Representative designates, and will use its best efforts to continue such qualifications in effect so long as required for distribution of the Securities; 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 Securities, the Ordinance and the Escrow Agreement contained in the Official Statement acc\ll'ately summarize certain provisions of such instruments, and the Securities, when validly executed, authenticated and delivered in accordance with the Ordinance and sold to the Underwriters as provided herein, will be validly issued and outstanding obligations of the City entitled to the benefits of, and subject to the limitations contained in, the Ordinance; (j) If prior to the Closing an event occurs affecting the City that is materially adverse for the pwpose for which the Official Statement is to be used and is not disclosed in the Official Statement, the City shall notify the Authorized Representative, and if in the opinion of the City and the Authorized Representative such event requires a supplement or amendment to the Official Statement, the City will supplement or amend the Official Statement in a form and in a manner approved by the Authorized Representative; (k) The financial statements contained in the Official Statement present fairly the financial position of the City as of the date and for the period covered thereby and are stated on a basis substantially consistent with that of the prior year's audited financial statements; {I) Any certificate signed by any official of the City and delivered to the Underwriters shall be deemed a representation and warranty by the City to the Underwriters as to the truth of the statements therein contained; (m) The City has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon; and (n) The City will not knowingly take or omit to take any action, which action or omission will in any way cause the proceeds from the sale of the Securities to be applied in a manner other than as provided in the Ordinance or that would cause the interest of the Securities to be includable in gross income of the holders thereof for federal income tax purposes. 7. Closing. By 10:00 A.M., Central Time, on April 8, 2009 (the "Closing"), the City will deliver the initial securities certificates of the Securities (as provided for in the Ordinance) to the Underwriters and the City shall take appropriate steps to provide The Depository Trust Company ("DTC") with one definite securities certificate for each year of maturity of the Securities, and to provide the Underwriters with the other documents hereinafter mentioned. On or prior to the date of Closing, the Underwriters shall make arrangements with DTC for the Securities to be 6 l "'I ) ) immobilized and thereafter traded as book-entry only securities and on the date of Closing the Underwriters will accept such delivery and pay the purchase price of the Bonds and the Certificates, respectively, as set forth in Paragraph I hereof in immediately available funds. Concurrently with the payment for the Securities by the Underwriters, the City shall return to the Authorized Representative the check referred to in paragraph 4 hereof. Delivery and payment as aforesaid shall be made at the office of the paying agent/registrar for the Securities, as identified in the Official Statement, or such other place as shall have been mutually agreed upon by the City and the Authorized Representative. In addition, the City and the Underwriters agree that there shall be a preliminary closing held at such place as the City and the Underwriters shall mutually agree, commencing 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 Underwriters with a complete Transcript of Proceedings on the business day preceding the Closing. Drafts of all documents to be delivered at the Closing shall be prepared and distributed to all parties and their counsel for review at least three business days prior to the Closing. 8. Conditions. The Underwriters have entered into this Purchase Contract in reliance upon the representations and warranties of the City contained herein and to be contained in the documents and instruments to be delivered at the Closing, and upon the performance by the City of its obligations hereunder, both as of the date hereof and as of the date of Closing. Accordingly, the Underwriters' obligations under this Purchase Contract to purchase and pay for the Securities 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) each Ordinance and the Escrow Agreement shall be in full force and effect, and neither Ordinance shall have been amended, modified or supplemented and the Official Statement shall not have been amended, modified or supplemented, except as may have been agreed to by the Authorized Representative; and (ii) the net proceeds of the sale of the Securities shall be deposited and applied as described in the Official Statement and in each Ordinance; ( c) At the time of the Closing, all official action of the City related to the Ordinance and the Escrow Agreement 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; 7 ( e) At or prior to the Closing, the Underwriters shall have received each of the following documents: ( 1) The Official Statement of the City executed on behalf of the City by the Mayor and City Secretary, 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 Underwriters. The Ordinance shall contain the agreement of the City, in form satisfactory to the Underwriters, that is described under the caption "Other Information -Continuing Disclosure of Information" in the Preliminary Official Statement; (3) the Pricing Certificate, having been duly executed on behalf of the City by an Authorized Officer; ( 4) The Paying Agent/Registrar Agreement (with respect to each or both series of the Securities), having been duly executed on behalf of the City and The Banlc of New York Mellon Trust Company, National Association, as Paying Agent/Registrar; (5) . The Escrow Agreement(withrespecttotheBonds),havingbeenduly executed on behalf of the City and The Bank of New York Mellon Trust Company, National Association, as Escrow Agent; ( 6) The opinions pertaining to the issuance of the Securities, dated the date of Closing, of Vinson & Elkins L.L.P. ("Bond Counsel") in substantially the form and substance set forth in Appendix B to the Official Statement; (7) Opinions with respect to the Securities, dated on or prior to the date of Closing, of the Attorney General, approving the Securities as required by law and the registration certificates of the Comptroller; (8) The supplemental opinion, dated the date of Closing, of .Bond Counsel, addressed to the City and the Underwriters, which provides that the Underwriters may rely upon the opinion of Bond Counsel delivered in accordance with the provisions of paragraph 8( e)(S) hereof, and opining to the effect that ( a) the Purchase Contract has been duly authorized, executed and delivered by the City and (assuming due authorization by the Underwriters) constitutes a binding and enforceable agreement of the City in accordance with its terms; (b) in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions "The Obligations" ( exclusive of the information under the subcaption "Book-Entry-Only System" and "Sources and Uses of Proceeds"), "Tax Matters" and the subcaptions "Legal Investments and Eligibility to 8 ) '\ Secure Public Funds in Texas," "Legal Matters" and "Continuing Disclosure of Information" (exclusive of the infonnation under the subcaption "Compliance with Prior Undertakings") wider the caption "Other Infonnation" in the Official Statement, 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 Securities, such infonnation conforms to the Ordinance; and ( c) the Securities are exempt from registration pursuant to the Securities Act of 193 3, as amended, and each Ordinance is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended; (9) An opinion or opinions of McCall, Parkhurst & Horton L.L.P., Underwriters' Counsel, addressed to the Underwriters, and dated the date of Closing in substantially the form attached hereto as Exhibit C; (10) 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 or delivery of the Securities, or the levy, collection or application of the ad valorem . t.axes and, with respect to the Certificates, Pledged Revenues, pledged or to be pledged to pay the principal of and interest on the Securities, or the pledge thereof, or in any way contesting or affecting the validity of the Securities, the Ordinance or the Escrow Agreement, or contesting the powers of the City or the authorization of the Securities, the Ordinance or the Escrow Agreement, or contesting in any way the - accuracy, completeness or fairness of the Official Statement (but in lieu of or in conjunction with such certificate, the Underwriters may, in their sole discretion, accept certificates or opinions of the City Attorney that, in the opinion thereof, the issues raised in any such pending or threatened litigation are without substance or that the contentions of all plaintiffs therein are without merit); (iii) to the best of their knowledge, no event affecting the City has occurred since the date of the Official Statement that should be disclosed in the Official Statement for the purpose for which it is to be used or that it is necessary to disclose therein in order to make the statements and infonnation therein not misleading in any respect; and (iv) that there has not been any material and adverse change in the affairs or financial condition of the City since September 30, 2008, the latest date as to which audited financial information is available; (11) An opinion or opinions of the City Attorney addressed to the Underwriters and dated the date of Closing substantially in the form and substance of Exhibit D hereto; 9 (12) 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 Securities, it is not expected that the proceeds of either series of the Securities will be used in a manner that would cause such Securities to be "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; (13) Evidence of the rating on the Securities, which shall be "Aa3" by Moody's Investors Service, Inc. (''Moody's"), "AA+" by Standard and Poor's Corporation, a division of the McGraw-Hill Companies, Inc. ("S&P"), and "AA" by Fitch Ratings ("Fitch"), shall be delivered in a form acceptable to the Underwriters; and (14) Such additional legal opinions, certificates, instruments and other documents as Bond Counsel or the Underwriters may reasonably request to evidence the truth, accuracy and completeness, as of the date hereof and as of the date of Closing, of the City's ,representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance and satisfaction by the City at or prior to the date of Closing of all agreements then to be performed and all conditions then to be satisfied by the City. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are satisfactory to the Underwriters. If the City shall be wiable to satisfy the conditions to the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Securities as set forth in this Purchase Contract, or if the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Securities shall be terminated for any reason pennitted by this Pmchase Contract, this Purchase Contract shall tenninate, the security deposit referred to in Paragraph 4 of this Purchase Contract shall be returned to the Authorized Representative and neither the Underwriters nor the City shall be under further obligation hereunder, except that the respective obligations of the City and the Underwriters set forth in Paragraphs 10 and 12 hereof shall continue in full force and effect. 9. Termination. The Underwriters may terminate its obligation to purchase at any time before the Closing if any of the following should occur. ( a) (i) Legislation shall have been enacted by the Congress of the United States, or recommended to the Congress for passage by the President of the United States or favorably reported for passage to either House of the Congress by any Committee of such House; or (ii) a decision shall have.·been rendered by a court established under Article m of the Constitution of the United States or by the United States Tax Court; or (iii) an order, ruling or regulation shall have been issued or proposed by or on behalf of the Treasury Department of the United States or the Internal Revenue Service or any other agency of the 10 ) ..... J 1 '\ ) ) 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 Securities 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 Securities on the date hereof and other than as disclosed in the Official Statement, in such a manner as in the judgment of the Authorized Representative would materially impair the marketability or materially reduce the market price of obligations of the general character of the Securities. (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 ofl 93 3, as amended, or qualification of any indenture under the Trust Indenture Act of 1939, as amended, in connection with the public offering of the Securities, 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. ( c) (i) The Constitution of the State of Texas shall be amended .or an amendment shall be proposed, or (ii) legislation shall be enacted, or (iii) a decision shall have been rendered as to matters of Texas law, or (iv) any order, ruling or regulation shall have been issued or proposed by or on behalf of the State of Texas by an official, agency or department thereo~ affecting the tax status of the City, its property or income, its securities (including the Securities) or the interest thereon, that in the judgment of the Authorized Representative would materially affect the market price of the Securities. ( d) A general suspension of trading in securities shall have occurred on the New 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 Authorized Representative, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the final Official Statement ( exclusive of any amendment or supplement thereto). 11 j ) (g) An event described in Paragraph 6(j) hereof occurs that, in the reasonable judgment of the Authorized Representative, requires a supplement or amendment to the Official Statement that is deemed by them. in their discretion, to adversely affect the market for the Securities. (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 "Aa3," "AA+" and "AA," initially assigned to the Securities by Moody's, S&P and Fitch, respectively, shall occur prior to the Closing. 10. Expenses. (a) The City shall pay all expenses incident to the issuance of the Securities, 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 Securities; (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 incwred incident thereto; and (vi) the premium, if any, for municipal bond insurance policy pertaining to the Securities. (b) The Underwriters shall pay (i) all advertising expenses in connection with the offering of the Securities; (ii) the cost of the preparation and printing of all the underwriting documen~; and (iii) the fee of McCall, Parkhurst & Horton L.L.P. for such finn's opinion required by Paragraph 8(e)(8) hereof. 11. Notices. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing at the address for the City set forth above, and any notice or other communication to be given to the Underwriters under this Purchase Contract may be given by delivering the same in writing to MORGAN KEEGAN & COMPANY, INC., 4400 Post Oak Parkway, Suite 2670, Houston, Texas 77027, Attention: Ms. Debi Jones. 12. Parties in Interest. This Purchase Contract is made solely for the benefit of the City and the Underwriters (including the successors or assigns of any Underwriter) and no other person shall acquire or have any right under this contract. The City's representations, warranties and agreements contained in this Purchase Contract that exist as of the Closing, and without regard to any change in fact or circwnstance occuning subsequent to the Closing, shall remain operative and in full force and effect, regardless of (i) any investigations made by or on behalf of the Underwriters, and (ii) delivery of any payment for the Securities hereunder; and the City's representations and warranties contained in Paragraph 6 of this Purchase Contract shall remain operative and in full force and effect, regardless of any termination of this Purchase Contract. 13. Severability. If any provision of this Purchase Contract shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any 12 ) ff you agree with the foregoing, please sign the enclosed counterpart of this Purchase Contract and return it to the Authorized Representative. This Purchase Contract shall become a binding agreement between you and the Underwriters 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, Morgan Keegan & Company, Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Stanley & Co. Incorporated Southwest Securities, Inc. By: Morgan Keegan & Company, Inc. Authorized Representative ACCEPTANCE ACCEPTED pursuant to a motion adopted by the City Council of the City of Lubbock, Texas on the 26th day of February, 2009 and executed this ~y of March, 2009. By: Authorized Officer City of Lubbock, Texas ) ) EXHIBIT A Schedule of Maturities, Interest Rates, Yields and Redemption Provisions $23,185,000 City of Lubbock, Texas General Obligation Refunding and Improvement Bonds, Series 2009 Maturity Principal Interest Rate Yield (February 15) Amount (%) (%) 2010 3,065,000 5.000% 0.950% 201 I 3,525,000 5.000 1.720 2012 3,440,000 5.000 2.100 2013 3,360,000 5.000 2.560 2014 3,370,000 5.000 2.960 2015 665,000 3.250 3.170 2016 1,170,000 3.500 3.400 2017 1,160,000 3.750 3.590 2018 1,160,000 4.000 3.780 2019 640,000 4.250 3.980 2020 130,000 4.125 4.250 2021 135,000 4.250 4.410 2022 145,000 4.375 4.550 2023 150,000 4.500 4.680 2024 155,000 5.250 4.840 2025 165,000 5.250 4.960 2026 175,000 5.000 5.010 2027 185,000 5.000 5.090 2028 190,000 5.000 5.130 2029 200,000 5.000 5.170 Optional Redemption. The City reserves the right, at its option, to redeem Bonds having a stated maturity on February 15, 2020, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2019, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. A-1 ) ) ) EXHIBITB Schedule of Maturities, Interest Rates, Yields and Redemption Provisions $58,705,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation Series 2009 Maturity Principal Interest Rate Yield (February 15) Amount (%) (%) 2010 $1,510,000 4.000% 1.050% 2011 2,575,000 4.000 1.720 2012 2,695,000 5.000 2.100 2013 2,835,000 5.000 2.560 2014 2,980,000 5.000 2.960 2015 3,135,000 5.000 3.170 2016 3,265,000 3.500 3.400 2017 3,390,000 3.750 3.590 2018 3,525,000 4.000 3.780 2019 3,675,000 4.500 3.980 2020 2,275,000 5.250 4.200 2021 2,400,000 5.250 4.360 2022 2,530,000 5.250 4.500 2023 2,665,000 5.250 4.620 2024 2,810,000 5.250 4.770 2025 2,960,000 5.250 4.900 2026 3,120,000 5.250 5.010 2027 3,285,000 5.000 5.090 2028 3,450,000 5.000 5.130 2029 3,625,000 5.000 5.170 Optional Redemption. The City reserves the right. at its optio~ to redeem Certificates having stated maturities on and after February 15, 2020, in whole or in part in principal amounts of$5,000 or any integral multiple thereof, on February 15, 2019, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. B-1 ) ) \ ) ', EXIIlBIT C Proposed Form of Underwriters' Counsel Opinion of McCall, Parkhurst & Horton L.L.P. April 8, 2009 Morgan Keegan & Company, Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Stanley & Co. Incorporated Southwest Securities, Inc. c/o Morgan Keegan & Company. Inc. 4400 Post Oak Parkway, Suite 2670 Houston, Texas 77027 Re: $23,185,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES2009 $58,705,000 CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2009 Ladies and Gentlemen: We have acted as counsel for you as the underwriters of the securities described above (collectively, the "Securities"), issued under and pursuant to two separate ordinances (collectively, the "Ordinance") of the City of Lubbock, Texas (the "Issuer"), authorizing the issuance of the Securities, which Securities you are purchasing pursuant to a Purchase Contract, dated March 13, 2009. All capitalized undefined tenns 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 Securities and we have assumed, but not independently verified, that the signatures on all docwnents and Securities that we have examined are genuine. Based on and subject to the foregoing, we are of the opinion that, under existing laws, the Securities 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 ofl 939, 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 March 13, 2009 (the "Official Statement") and because the information in the Official Statement under the headings C-1 ) ) ' , "THE OBLIGATIONS -Book-Entry-Only System," "TAX MATTERS," "OTHER INFORMATION -Continuing Disclosure of Information -Compliance with Prior Undertakings" and Appendices A and B thereto were prepared by others who have been engaged to review or provide such information, we are not passing on and do not ass~e 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. [n the course of our participation in the preparation of the Official Statement as your counsel, we had discussions with representatives of the Issuer, including its City Attorney, Bond Counsel and Financial Advisor, regarding the contents of the Official Statement. In the course of such activities, no facts came to our attention that would lead us to believe that the Official Statement ( except for the financial statements and other financial and statistical data contained therein, the infonnation set forth under the headings "THE OBLIGATIONS -Book-Entry-Only System," "TAX MATI"ERS," "OTHER INFORMATION -Continuing Disclosure of Information -Compliance with Prior Undertakings" and Appendices A and B 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, "\ EXHIBITD Opinion of the City Attorney April 8, 2009 Morgan Keegan & Company, Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Stanley & Co. Incorporated Southwest Securities, Inc. c/o Morgan Keegan & Company, Inc. 4400 Post Oak Parkway, Suite 2670 Houston. Texas 77027 Re: $23,185,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BoNDS, SERIES 2009 $58, 705,000CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2009 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 securities (collectively, the "Securities"), pursuant to the provisions of two separate ordinances ( collectively, the "Ordinance") duly adopted by the City Council of the City on February 26, 2009. 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, 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 know ledge, 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 D-1 ) 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 Securities 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 ofmy 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 know ledge, 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 offi~es; (b) seeking to restrain or enjoin the issuance, sale or delivery of any of the Securities, or the levy, collection or application of the ad valorem taxes and, with respect to the Certificates, the Pledged Revenues, pledged or to be pledged to pay the principal of and interest on the· Securities; ( c) contesting or affecting the validity or enforceability of the Securities, the Ordinance, the Pricing Certificate, the Escrow Agreement or the Purchase Contract; ( d) contesting the powers of the City or any authority for the issuance of the Securities, or the adoption of the Ordinance; or (e) that would have a material and adverse effect on the financial condition of the City. 3. I have reviewed the information in the Official Statement contained under the caption "Other Information--Litigation" and such infonnation in all material respects accurately and fairly summarizes the matters described therein. This opinion is fwnished solely for your benefit and may be relied upon only by the addresses hereof or anyone to whom specific pennission is given in writing by me. Very truly yours, D-2 ' REGISTERED No.1 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $3,065,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: 5.000% MATURITY DA TE: February 15, 2010 BOND DATE: March 1, 2009 CUSIP NUMBER: 549188 CHl The City of Lubbock (the "City"), in the County of Lubbock, State of Texas, for value received, hereby promises to pay to CEDE&CO. or registered assigns, on the Maturity Date speci The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Paymentffransfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record " . REGISTERED No.2 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $3,525,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: 5.000% MATURITY DATE: February 15, 2011 or registered assigns, on the Maturity BOND DATE: March 1, 2009 CUSIP NUMBER: 549188 CJ7 The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Paymentffransfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment!fransfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered· owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) REGISTERED No.3 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $3,440,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: 5.000% MATURITY DATE: February 15, 2012 BOND DATE: March 1, 2009 CUSIP NUMBER: 549188 CK4 The City of Lubbock (the "City"), in the County of Lubboc~k,of Texas, for value receive.d, hereby promises to pay to ~, C~D:t .. ~~ ·t e ci~,,,,umof THREEM ~ FORTY THOUSAND DOLLARS unless this Bond shall H een sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record \ 'l REGISTERED No. 4 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $3,360,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: MATURITY DATE: BOND DATE: CUSIP NUMBER: 5.000% February 15, 2013 March I, 2009 549188 CL2 The City of Lubbock (the "City"), in the Co .. ~f Texas, for value received, hereby promises to pay to ~ ,~ \ or registered assigns, o ~ ~ve, the sum of THREE MI REE HUNDRED SIXTY THOUSAND DOLLARS unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized tenns used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) , ) .. REGISTERED No.5 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $3,370,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: 5.000% MATURITY DATE: February 15, 2014 BOND DATE: March 1, 2009 CUSIP NUMBER: 549188 CMO The City of Lubbock (the "City"}, in the County o. f Lubbock,N Sate f Texas, for value received, hereby promises to pay to c i CE~,~·~ <, or registered assigns, on~ ~-\: of THREE MILLI H D SEVENTY THOUSAND DOLLARS unless this Bond shall have een sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until pa}ment 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 three hundred sixty (360) day year of twelve (12) thirty (30} day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"} of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) REGISTERED No.6 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $665,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: 3.250% MATURITY DATE: February 15, 2015 CEDE&C BOND DATE: March 1, 2009 CUSIP NUMBER: 549188 CNS or registered assigns, on the Maturity D e ~~ SIX ~~ SAND DOLLARS hereof shall have been · ovided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Paymentffransfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Paymentrrransfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ') 1 ) REGISTERED No. 7 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $1,170,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES2009 INTEREST RA TE: MATURITY DATE: BOND DATE: CUSIP NUMBER: 3.500% February 15, 2016 March 1, 2009 ~ 549188 CP3 The City of Lubbock (the "City'), in the Co'i[ _, of Texas, for value received, hereby promises to pay to c.\ \ .. \ ,._ or registered assigns, £~ above, the sum of ONE MILL HUNDRED SEVENTY THOUSAND DOLLARS unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank ofNew York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) ) '\ "I ' REGISTERED No. 8 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $1,160,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: MATURITY DATE: BOND DATE: CUSIP NUMBER: 3.750% FebruarylS,2017 Marchl,2009 549188CQ1 received, hereby promises to pay to ~ it· or registered assigns, o d above, the sum of ONEMI .E HUNDRED SIXTY THOUSAND DOLLARS unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ., ) ) j ) REGISTERED No.9 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $1,160,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: 4.000% MATURITY DA TE: February 15, 2018 The City of Lubbock (the "City"), in the BOND DATE: unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated PaymentlTransfer Office thereof Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) ) ) REGISTERED No. 10 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $640,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RATE: MATURITY DATE: BOND DATE: 4.250% February 15, 2019 Marc received, hereby promises to pay to ~ ~ "o~ o. or registered assigns, on ~y Date specified above, the sum of SIX HUNDRED FORTY THOUSAND DOLLARS USIPNUMB 549188 CS7 unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record '\ ) ) ) REGISTERED No. 11 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $130,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES2009 INTEREST RATE: 4.125% MATURITY DATE: February 15, 2020 BOND DATE: CUSIP NUMBER: March 1, 2009 exas, for value unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) ) ) ) 'I REGISTERED No. 12 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $135,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES2009 INTEREST RA TE: 4.250% MATURITY DATE: February 15, 2021 BOND DATE: March 1, 2009 CUSIP NUMBER: 549188 CU2 The City of Lubbock (the ''City"), in the County of Lubb Texas, for value received, hereby promises to pay to O ~ ONE H 1!1;,.: ·; TH '-FIVE THOUSAND DOLLARS unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) ) ) ) ) REGISTERED No.13 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $145,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: MATURITY DATE: BOND DATE: CUSIP NUMBER: 4.375% February 15, 2022 March 1, 2009 ~49188 CVO The City of Lubbock (the "City"), in the County~f C!it~ exas, for value received, hereby promises to pay to \ ~ ~ ~ coi\ or registered assigns, on th ove, the sum of unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/fransfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) ) ) ) REGISTERED No. 14 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $150,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: 4.500% MATURITY DATE: February 15, 2023 BOND DATE: March 1, 2009 CUSIP NUMBER: 549188 CW8 The City of Lubbock (the "City''), in the County of L~~f Texas, fur value received, hereby promises to pay to a. I\., 1\,~umof HOUSAND DOLLARS unless this Bond shall ha n ooner called for redemption and the payment of the principal hereof shall have been paia or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized tenns used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal arnowit of the Bonds, interest may be paid by wire transfer to the bank accowit of such Owner on file with the Paying Agent/Registrar. For the purpose of the payment of interest on this Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) ) ) ) REGISTERED No. 15 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $155,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERlES 2009 INTEREST RA TE: or registered assigns, on t ONE MATURITY DATE: BOND DATE: CUSIP NUMBER: r-PIVE THOUSAND DOLLARS unless this Bond shall have een sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance {defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall .be the person in whose name this Bond is registered at the close of business on the "Record ) ) ' REGISTERED No.16 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $165,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RATE: MATURITY DATE: BOND DATE: CUSIP NUMBER: unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated ·Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) ) REGISTERED No. 17 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $175,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RATE: 5.000% MATURITY DATE: February 15, 2026 The City of Lubbock (the "City"), in received, hereby promises to pay to ONE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS SIPNUMBE : unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/fransfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record REGISTERED No. 18 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $185,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: 5.000% MATURITY DATE: February 15, 2027 BOND DATE: CUSIP NUMBER: unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Paymentffransfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) REGISTERED No. 19 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $190,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: MATURITY DATE: BOND DATE: CUSIP NUMBER: 5.000% February 15, 2028 March 1, 2009 49188 DB3 received, hereby promises to pay to ~ ONE H r NINETY THOUSAND DOLLARS unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for witil 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 three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February I 5 and August 15 of each year, commencing February 15, 20 I 0. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/fransfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/fransfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record REGISTERED No. 20 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $200,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2009 INTEREST RA TE: 5.000% or registered assigns, on MATURITY DATE: BOND DATE: February 15, 2029 unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office") of The Bank of New York Mellon Trust Company, National Association, as Paying Agent/Registrar or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/fransfer Office thereof. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, 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 Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record ) ) ) ) ) Date," which shall be the last business day of the month next preceding such interest payment date. If the date for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated Payment/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 which 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 and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. Notice of such redemption or redemptions shall be given by first class mail, postage prepaid, not less than thirty (30) days before the date fixed for redemption, to the registered owner of each of the Bonds to be redeemed in whole or in part. In the Ordinance, the City reserves the right in the case of an optional redemption to give notice of its election or direction to redeem Bonds conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected owners. Any Bonds subject to conditional redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an event of default. Further, in the case of a conditional redemption, the failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default. As provided in the Ordinance, and subject to certain limitations therein set forth, this Bond is transferable upon surrender of this Bond for transfer at the Designated Payment/Transfer Office of the Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to the -2- l549573v.l LUB200/710l5 ) "\ ' "\ ) Paying Agent/Registrar; thereupon, one or more new fully registered Bonds of the same stated maturity, of authorized denominations, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. precedent to and in the issuance of the Bonds have·been properly done and performed and have happened in regular and due time, form and manner, as required by law; and that ad valorem taxes upon all taxable property in the City have been levied for and pledged to the payment of the debt service requirements of the Bonds within the limit prescribed by law. -3 - 1549573v.1 LUB200nl015 ) ) ..... IN WITNESS WHEREOF, the City has caused this Bond to be executed by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Secretary, and the official seal of the City has been duly impressed or placed in facsimile on this Bond . -4- l549573v.l LUB200/71015 ) .., .) "\ CERTIFICATE OF PA YING AGENT/REGISTRAR The records of the Paying Agent/Registrar show that the Initial Bond of this series of bonds was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, and that this is one of the Bonds referred to in the within-mentioned Ordinance . Dated: Authorized Signatory -5- I 549573v.1 LUB200/710 I 5 ) '\ ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or typewrite name, address and Zip Code of transferee): ______________ _ and Dated: Signature Guaranteed By: Authorized Signatory 1549573v.l LUB200/7IOI 5 -6- e within Bond and appoints ooks kept for registration NOTICE: The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular and must be guaranteed in a manner acceptable to the Paying Agent/Registrar. No Text REGISTERED No. 1 United States of America State of Texas Cowity of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WA TERWORK.S SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 REGISTERED $1,510,000 INTEREST RA TE: 4.000% MATURITYDATE: CERTIFICATEDATE: CUSIPNUMBER: February 15, 2010 March 1, 2009 549188 DD9 or registered assigns, on the Maturity Date speci:fi unless this Certificate shall s o led for redemption and the payment of the principal hereof shall have r provided for, and to pay interest on such principal amount from the later of the C · te ate specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 day year of twelve 30 day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized tenns used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Paymentlrransfer Office"), of The Bank of New York Mellon 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 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 2009 REGISTERED $2,575,000 INTEREST RA TE: 4.000% MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2011 March 1, 2009 549188 DE7 CEDE&CO. or registered assigns, on the Maturity Date_~J?ecified ab TWO MILLION FIVE HUND~dl IV SAND DOLLARS unless this Certificate shall have e s ~-~or redemption and the payment of the principal hereof shall have been !R--} vided for, and to pay interest on such principal amount from the later of the Certifc:Ute specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 day year of twelve 30 day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon Trust Company, National Association, or, with respect to a successor Paying AgenVRegistrar, 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 '\ ) REGISTERED No. 3 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 REGISTERED $2,695,000 INTEREST RA TE: 5.000% MATURITY DA TE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2012 March 1, 2009 549188 DF4 CEDE&CO. or registered assigns, on the Maturity Date specified ab TWO MILLION SIX HUNDR unless this Certificate shall have!j c for redemption and the payment of the principal hereof shall have been p vided for, and to pay interest on such principal amount from the later of the Certific ate specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 day year of twelve 30 day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized tenns used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon 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 '\ ) ) 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 2009 REGISTERED $2,835,000 INTEREST RA TE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: 5.000% February 15, 2013 March 1, 2009 549188 DG2 The City of Lubbock (the "City"), in the County of Lubbo~~\xas, for value received, hereby promises to pay to ~,' CEDE TWO MILLION EIQJ TY-FIVE THOUSAND DOLLARS unless this Certificate shall ~een sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon 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 ) REGISTERED REGISTERED No. 5 $2,980,000 United States of America State of Texas County of Lubbock ) CITY OF LUBBOCK, TEXAS "\ ) TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION INTEREST RATE: 5.000% SERIES 2009 MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2014 March 1, 2009 549188 OHO or registered assigns, on the Maturity Date spe · unless this Certificate ss n called for redemption and the payment of the principal hereof shall ha id or provided for, and to pay interest on such principal amount from the later of th 1cate Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 day year of twelve 30 day months, . such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 cmporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The Bank of New York Mellon Trust Company, National Association, or, with respect to a successor Paying Agent/Registrar, at the Designated ~ayment/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 REGISTERED REGISTERED $3,135,000 No.6 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 INTEREST RA TE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: 5.000% February 15, 2015 March 1, 2009 549188 DJ6 The City of Lubbock (the "City"}, in the County of Lu~~ Texas, for value :~:~::~=~~~:,:~:~ly o.,:EDE: ~~ of THREE MILLION ON -FIVE THOUSAND DOLLARS unless this Certificate sh~ n so ner called for redemption and the payment of the principal hereof shall have n or provided for, and to pay interest on such principal amount from the later of the cate Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 day year of twelve 30 day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon 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 REGISTERED REGISTERED No. 9 $3,525,000 United States of America State of Texas County of Lubbock , CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION INTEREST RA TE: 4.000% SERIES 2009 MATURITYDATE: CERTIFICATEDATE: CUSIPNUMBER: February 15, 2018 March l, 2009 549188 DM9 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 sUITender of this Certificate at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The Banlc of New York Mellon 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 REGISTERED REGISTERED No. 10 $3,675,000 United States of America State of Texas County of Lubbock 1 CITY OF LUBBOCK, TEXAS ) TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION INTEREST RA TE: 4.500% SERIES 2009 MATIJRITY DATE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2019 March 1, 2009 549188 DN7 The City of Lubbock (the "City"), in the Cowity of Lubbock, ~Texas, for value received, hereby promises to pay to CEDE & C\,.. l,::., or registered assigns, on the Maturity i1\\11i, 1ii- THREE MILLioi!Q Y-FIVE THOUSAND DOLLARS unless this Certificate sha ~~n sooner called for redemption and the payment of the principal hereof shall have n paid or provided for, 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon 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 ') ) 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 2009 REGISTERED $2,275,000 INTEREST RATE: 5.250% MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2020 March 1, 2009 549188 DP2 The City of Lubbock (the "City"), in the County of Lubbock, S}\ate f Texas, for value received, hereby promises to pay to CEDE&CO. TWO MILLION TWO -E THOUSAND DOLLARS unless this Certificate shi en s er called for redemption and the payment of the principal hereof shall have d or provided for, and to pay interest on such principal amount from the later of the ertificate Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 day year of twelve 30 day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon 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 .., ) REGISTERED No. 12 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 REGISTERED $2,400,000 INTEREST RA TE: 5.250% MATURITY DATE: CERTIFICATE DA TE: CUSIP NUMBER: February 15, 2021 March 1, 2009 549188 DQO The City of Lubbock (the ''City''), in the Cowity of Lubbo~~xas, for value received, hereby promises to pay to CEDE & CO:\.,..~ or registered assigns, on the Maturity Date i il a 'fi~·n 'f OUSAND DOLLARS unless this Certificate shall sooner called for redemption and the payment of the principal hereof shall have b i or provided for, 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon 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 '"I J ) REGISTERED No.13 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES2009 REGISTERED $2,530,000 INTEREST RA TE: 5.250% MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2022 March 1, 2009 549188 DR8 The City of Lubbock (the "City"), in the County of Lubbock, State of Texas, for value received, hereby promises to pay to CEDE&CO. TWO MILLIONS SAND DOLLARS unless this Certificate shall soo r called for redemption and the payment of the principal hereof shall have at or provided for, 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 pa:yment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 day year of twelve 30 day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance (defined below). 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 Mellon 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 ) ) 1 REGISTERED No.14 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 REGISTERED $2,665,000 INTEREST RATE: 5.250% MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2023 March 1, 2009 549188 DS6 The City of Lubbock (the "City"), in the County of Lubbock, ~tat f Texas, for value received, hereby promises to pay to ~, CEDE&C ~,;- TWO MILLIO -FIVE THOUSAND DOLLARS unless this Certificate sha en sooner called for redemption and the payment of the principal hereof shall have paid or provided for, 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon 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 ') ) ) REGISTERED No. 15 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 REGISTERED $2,810,000 INTEREST RA TE: 5.250% MATURITY DA TE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2024 March 1, 2009 549188 DT4 The City of Lubbock (the "City"), in the County of Lub~~~as, fur value received, hereby promises to pay to CEDE""~ or registered assigns, on the M-:nC.V sum of TWO MILLI~~ TEN THOUSAND DOLLARS unless this Certificate shall ~een sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Banlc of New York Mellon 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 .... ' ) ) REGISTERED No.16 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 REGISTERED $2,960,000 INTEREST RATE: 5.250% MATURITYDATE: CERTIFICATEDATE: CUSIPNUMBER: February 15, 2025 March 1, 2009 549188 DUI or registered assigns, on the Ma TWO MILLI unless this Certificate shal been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon 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 ) ) ) ) REGISTERED No. 17 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS REGISTERED $3,120,000 TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION INTEREST RA TE: 5.250% SERIES 2009 MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2026 March I, 2009 549188 DV9 principal hereof shall have been paid or provided for, 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 February 15, 2010. All capi~lized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Paymeniffransfer Office"), of The Bank of New York Mellon 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 ) REGISTERED No. 18 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 REGISTERED $3,285,000 INTEREST RA TE: 5.000% MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2027 March 1, 2009 549188 DW7 The City of Lubbock (the "City''), in the County of Lubb~~&T. exas, for value received, hereby promises to pay to ~ ~~! t CEDE or registered assi!llls. on the Ma~~ of THREE MILLIO~ r IGH1Y-FIVE THOUSAND DOLLARS unless this Certificate shal;;:J been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Payrnentrrransfer Office"), of The Bank of New York Mellon 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 ) ) ' j ) REGISTERED No. 19 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES2009 REGISTERED $3,450,000 INTEREST RATE: MATURITY DA TE: CERTIFICATE DATE: CUSIP NUMBER: 5.000% February 15, 2028 March I, 2009 549188 DX5 received, hereby promises to pay to ~ or registered assigns, on t ~eabvve, the swn of THREE MILI.: R HUNDRED FIFTY THOUSAND DOLLARS unless this Certificate shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, 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 February 15, 2010. All capitalized tenns used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon 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 REGISTERED REGISTERED No. 20 $3,625,000 United States of America State of Texas County of Lubbock ) CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION INTEREST RA TE: 5.000% SERIES 2009 MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: February 15, 2029 March 1, 2009 549188 DY3 The City of Lubbock (the "City"), in the County of Lubboc.:..t of Texas, for value received, hereby promises to pay to CEDE & C'eri.1\ ~ 1, or registered assigns, on the Maturity ~~ THREE MILL~ ~t-FIVE THOUSAND DOLLARS unless this Certificate bee sooner called for redemption and the payment of the principal hereof shall h~. · een paid or provided for, 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 February 15, 2010. All capitalized terms used herein but not defined shall have the meaning assigned to them in the Ordinance ( defined below). 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 Mellon Trust Company, National Association, or, with respect to a successor Paying Agent/Registrar, at the Designated Paymentlfransfer 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, SWiday, 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 $58,705,000 (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 authori~lic improvements for professional services of attorneys, financial advi o s in connection (collectively, the "Project"), as described in the Ordinance, an ~ ctual obligations with the Project and the issuance of the Certi~ February 15, 2020, in w m ~, ·r respective scheduled maturity dates, on The City has reserve! ertificates maturing on or after February 15, 2019, or o L~, at a price equal to the principal amount of the Certificates so called fo~ 1 n plus accrued interest to the date fixed for redemption. If less than all of the Ce~-are to be redeemed, the City shall detemrine 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. 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. In the Ordinance, the City reserves the right in the case of an optional redemption to give notice of its election or direction to redeem Certificates conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amoW1t equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected owners. Any Certificates subject to conditional redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an event of default. Further, in the case of a conditional redemption, the -2 - 1549592v.1 LUB200/71015 ' ) failure of the City to make moneys and/or authorized securities available in part or in whole on or before the redemption date shall not constitute an event of default. As provided in the Ordinance, and subject to certain limitations therein set forth, this Certificate is transferable upon sUITender 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. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Certificate called for redemption where such redemption is scheduled to occur within forty-five (45) calendar days of the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the regist of the uncalled principal balance of a Certificate. The City, the Paying Agent/Re · t tlie person in whose ose of receiving payment as name this Certificate is regist herein provided ( except•~• registered on the Recor overdue, and neither the contrary. ai n in whose name this Certificate is ther purposes, whether or not this Certificate be e Paying Agent/Registrar shall be affected by notice to the 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 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 purposes; and that the total indebtedness of the City, including the Certificates, does not exceed any constitutional or statutory limitation. -3- 1549592v. I LUB200/7101 5 ) ) 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, Texas -4- 1549592v.1 LUB200/71015 ) CERTIFICATE OF PAYING AGENT/REGISTRAR The records of the Paying Agent/Registrar show that the Initial Certificate of this series of certificates was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, and that this is one of the Certificates referred to in the within-mentioned Ordinance. The Bank of New York Mellon Trust Company, National Association as Paying Agent/R Dated: -5 - 1549592v.l LUB200/71015 ) ) 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: --------: and all rights hereunder and hereby irrevo attorney to transfer n:J re~on htteoC Mfu fitls ~~\j'I Dated: ______________ _ Signature Guaranteed By: Authorized Signatory 1549592v.1 LUB200/71015 -6- 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. i "I ) 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 infonnation:· 1. This certificate relates to the City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (the ''Certificates") and the City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009 (the "Bonds," and collectively with the Certificates, the "Obligations"). Capitalized terms used herein and not otherwise defined shall have the meaning assigned thereto in the respective ordinances (each an "Ordinance," collectively, the "Ordinances") of the City Council authorizing the issuance of the Obligations. 2. The total tax supported debt of the City, after giving effect to the issuance of the proposed Obligations, is $685,435,000. 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 2008, being its latest approved official assessment rolls is $11,673,074,132, which amount is net of the amount of any exemptions to which property otherwise subject to taxation was entitled pursuant to applicable provisions of the Constitution and laws of the State of Texas. 4. A true and correct copy of the debt service schedule for the Obligations 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 under the heading "FINANCIAL INFORMATION," 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: Tom Martin, Mayor Jim Gilbreath, Mayor Pro Tern Lee Ann Dumbauld, City Manager Andy Burcham, Chief Financial Officer Rebecca Garza, City Secretary Linda DeLeon ) Floyd Price ) Todd R. Klein ) Members of Paul R. Beane ) the Council John W. Leonard III ) '7. No litigation of any nature has been filed or is now pending to restrain or enjoin the issuance or delivery of the Obligations 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 Obligations, and so far as we know and believe, no such litigation is threatened. I53999iv.l LUB200nt015 ) "'I ' 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 Obligations have been repealed, revoked or rescinded. 9. There has not been filed or presented to the City Secretary or the City Cowicil any petition protesting, challenging or otherwise questioning the issuance of the Obligations. 10. The Ordinances were duly adopted by the City Council on February 26, 2009. 11. A true and correct statement of the revenues and expenses of the Waterworks System for fiscal years 2004, 2005, 2006, 2007 and 2008, together with a true and correct statement of current rates and charges for the services of the System, is attached hereto as Exhibit A. 12. Except for the pledge of income and revenues of the System to the payment of: (i) water supply contracts with the Canadian River Mwiicipal Water Authority, (ii) the Certificates, and (ii) the obligations set forth in Exhibit B hereto, none of the City's debts or obligations will be secured by a lien on and pledge of the revenues or income of the System. 13. None of the Refunded Obligations were ever purchased by or held in the interest and sinking fund created for their payment and redemption; none of the Refunded Obligations are now held in or owned by the sinking fund created for the purpose of paying off or redeeming any of the Refunded Obligations; none of the Refunded Obligations will be taken up and paid for with money in said sinking fund; and, there is no money in the sinking fund with which to pay principal of any of the Refunded Obligations. · 14. obligations. The . City is not in default in the payment of principal and interest on its debt 15. The descriptions and statements of or pertaining to the City contained in its Official Statement pertaining to the Obligations (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 Obligations and on the date of the delivery, were and are true and correct in all material respects. 16. 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 circwnstances wider which they were made, not misleading. 17. 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 witrue in any material respect. -2- 1539991v.l LUB20Dnl015 ) ) ' 18. There has been no material adverse change in the financial condition and affairs of the City since the date of the Official Statement. 19. The undersigned Mayor and City Secretary officially executed and signed the Obligations, including the Initial Obligations delivered to the initial purchasers of the Obligations, by manually executing the Obligations or by causing facsimiles of our manual signatures to be imprinted or copied on each of the Obligations, 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 Obligations. · 20. The Obligations, including the Initial Obligations delivered to the initial purchasers of the Obligations, are substantially in the form, and have been duly executed and signed in the manner, prescribed in the Ordinances. 21. At the time we so executed and signed the Obligations 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. 22. We have caused the official seal of the City to be impressed, or printed, or copied on each of the Obligations; and said seal on the Obligations has been duly adopted as, and is hereby declared to be, the official seal of the City. [EXECUTION PAGE FOLLOWS] -3- 153999lv.l LUB200nt015 EXECUTED AND DELIVERED this ~ V C; l ~) 2 ool . MANUAL SIGNATURE STATE OF TEXAS COUNTY OF LUBBOCK § § § OFFICIAL TITLES Mayor, City of Lubbock, Texas Before me, the undersigned authority, on this day personally appeared Tom Martin, Mayor of the City of Lubbock, Texas, known to me to be such person who signed the above and foregoing certificate in my presence and 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 J'/~ ~ /A.meh,_ ;Lo()'/ · [SEAL) 1539991 v.1 LUB200/7 IO 15 ELISA SANCHEZ Nola/}' Pimhc, State ot Texas My CommlSSIOn &pims 11-07•2011 Signature Page for General Certificate ') ) EXECUTED AND DELIVERED this ,A f c ·, \ ~ ) ,J...()o1_ . MANUAL SIGNATURE \ STATE OF TEXAS § § COUNTY OF LUBBOCK § OFFICIAL TITLES City Secretary, City of Lubbock, Texas Before me, the undersigned authority, on this day personally appeared Rebecca Garza, City Secretary of the City of Lubbock, Texas, known to me to be such person who signed the above and foregoing certificate in my presence and 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 21/-fj 4"'f of Jv1ar-ch, J.. OD f [SEAL] 153999Jv.1 LUB200/71015 LINDA 8 HART Noterv Public, State of Texas My eomm11111on expires JUnt ao, 2011 ~S#J Notary Public, In and for the State of Texas Signature Page for General Certificate J ) EXECUTED AND DELIVERED this A f ~-\ 'if I d\ ~() q • MANUAL SIGNATURE STATE OF TEXAS COUNTY OF LUBBOCK § § § OFFICIAL TITLES Chief Financial Officer, City of Lubbock, Texas Before me, the undersigned authority, on this day personally appeared Andy Burcham, Chief Financial Officer of the City of Lubbock, Texas, known to me to be such person who signed the above and foregoing certificate in my presence and 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 ,a~t:J ~ ~ V1'.1lMcJ1 JorFt. Notary Publi&h In and for the State of Texas [SEAL] Signa.ture Page for General Certificate 1539991v.l LUB200/71015 Exhibit A See Attached. A-1 City of Lubbock, TX Finance Departmenl Waterworks System Condensed Statement of Operations Fiscal Year Ended S::!!tl!mber 30. 2008 2007 2006 2005 REVENUE Operating Revenues $ 42,527.445 35,454,426 37,330,953 33.306,786 Non-Operating Revenues 2.123,853 1,746.843 1.678,056 883.824 Gross Revenues 44,651,298 37,201.269 39,009,009 34,190,610 EXPENSE Operating Expense rn 23.543.862 I 8.781.580 20.720.395 17,619.668 Net Revenues $ 21,107.436 18.419.689 18,288,614 16,570.942 Number of Water Meters 78.156 77,388 77,147 75,876 2004 31,907,893 539,413 32,447,306 20.550.379 11,896,927 72,500 H) Op.:r:uing expense includes construction repayment costs and operation and mointenan~c charges paid 10 C-anadion River Municipal Waler Authoriiy and excludes depn:cia1ion and capital ci.p,:ndirurcs. Note: The City has no outstanding or authorized Wat<!!'Works System Reve11ue Bonds. however, there is S 162,511,542 of general obligation debt ourstanding which was issued for water system purposes on which annual d<?bt service is provided from revenues of the System. --.) ) Monthly Water Rates City of Lubbock, TX Finance Department On September 26. 200 I the Lubbock City Council adopted a four year 12% total increase in water rates. On September 26. 2002. the Lubbock City Council added a fifth year mte incl\:<lse of 3%. On September 13. 2006. th.: Lubbock Cily Council adopted a roughly I!% increase in water rates, effective October I, 2006. On February 28. 2008. the Lubbock City Council adopted a roughly 16% increase in water rates, effective March I, 2008. On March 9. 2009. the Lubbock City Council adopted water rate increases. effecth-e April I, 2009. that are d~igned to CO\ler water expenses for 2008-09 and 2009-10 fiscal years and that fully fund the debt seT\licc for a number of major water supply projects. Effecti\lc Base Rate "' 04/01/09 3/4" meter 18.00 I" meter (single family residential) 30.0S l" meter (other than residcmial) 30.05 Flow Rate Cha~c 12er 1.000 Gallons Block! Block 2 Block 3 Single Family Residential 2.67 4.29 5.93 Single Family Residential lrrigntion n/a 4.29 5.93 Multi-Family Residential, Commercial and Public 2.67 4.29 5.93 Non-Residential Irrigation nla 4.29 5.93 Schools 2.67 n/a n/a Whoksalc 3.47 5.58 7.71 '11 The Bos., Rate is for water ser1ice: Base Rates •hown are fora 3/4" wo1er rnt1er and a I" rnct"1' fo,,...idential and cmnmcr,:ial custom..s: higher Base Rates appl~ to meters mnging from 1.5" to JO''. ) Exhibit B Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2008A, dated June 15, 2008, issued in the original principal amount of$22,615,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2008, dated April 15, 2008, issued in the original principal amount of $80,485,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008, dated December 15, 2007, issued in the original principal amount of$1 l,805,000 Tax and Waterworks System Surplus Revenue Certificates ofObligatio~ Series 2007A, dated August 15, 2007, issued in the original principal amount of $60,820,000 Tax and Wateiworks System Surplus Revenue Certificates of Obligation, Series 2007, dated January 1, 2007, issued in the original principal amount of $25,255,000 Tax and Waterworks System_Surplus Revenue Certificates of Obligation, 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 (Limited Pledge) Revenue Certificates of Obligation, Series 1999, dated January 15, 1999, issued in the original principal amount of$15,355,000 B-1 153999lv.1 LUB200/7l0l5 ) ... ) ) The Attorney General of Texas William P. Clements Building 300 West 15th Street, 7th Floor Austin, Texas 78701 Attention: Public Finance Division Comptroller of Public Accounts Thomas Jefferson Rusk Building 208 East 10th Street, Room 448 Austin, Texas 78701-2407 City of Lubbock, Texas February 26, 2009 Attention: Economic Analysis Center Re: City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 and City of Lubbock, Texas General Obligation Refunding and Improvement Bonds, Series 2009 (collectively, the "Obligations") To the Attorney General: The executed Initial Obligations for the captioned series have 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 Obligations have received your approval and are ready for delivery to the Comptroller of Public Accounts for registration, this letter will serve as your authority to insert the date of your approval in the General Certificate and deliver the Initial Obligations 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 Obligations are finally approved by you, unless you have been advised otherwise. To the Comptroller: The approved Initial Obligations 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 Obligations as required by law and by the proceedings authorizing such Initial Obligations. Following registration, you are hereby authorized and directed to notify and deliver the Initial Obligations to Vinson & Elkins L.L.P., Dallas, Texas, which has been instructed to pick up same at your office. Dallas 1540748v.1 ") ') i Please also deliver to Jennifer Taffe at Vinson & Elkins L.L.P., Dallas, Texas, three copies of each of the following: 1. Attorney General's approving opinion; and 2. Comptroller's signature certificate. Very truly yours, CITY OF LUBBOCK, TEXAS By: Tom Martin, Mayor -2- Dallas 1540748v.1 "\ ' ) FEDERAL TAX CERTIFICATE I, the undersigned officer of the City of Lubbock, Texas (the "City''), make this certification for the benefit of all persons interested in the exclusion from gross income for federal income tax purposes of the interest to be paid on the City's General Obligation Refunding and Improvement Bonds, Series 2009 (the "Bonds") and the City's Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (the "Certificates of Obligation," and together with the Bonds, the "Obligations") which are being issued and delivered simultaneously with the delivery of this Federal Tax Certificate (this "Certificate"). I do hereby certify as follows in good faith as of the date hereof (the "Issue Date"): 1. Responsible Officer. I am the duly chosen, qualified and acting officer of the City for the office shown below my signature; as such, I am familiar with the facts herein certified and I am duly authorized to execute and deliver this Certificate on behalf of the City. I am the officer of the City charged, along with other officers of the City, with responsibility for issuing the Obligations. 2. 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 150 of the Code. This Certificate is being executed and delivered pursuant to sections 1.141-1 through 1.141-15, 1.148-0 through 1.148-11, l.149(b)-1, l.149(d)-l, l.149(g)-1, 1.150-1 and 1.150-2 of the Regulations. 3. Definitions. Each capitalized term used in this Certificate has the meaning or is the amount, as the case may be, specified for such tenn 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 terms in the Code and Regulations unless the context clearly requires otherwise. 4. Reasonable Expectations. The facts and estimates that are set forth in this Certificate are accurate. The expectations that are set forth in this Certificate are reasonable in light of such facts and estimates. There are no other facts or estimates that would materially change such expectations. In connection with this Certificate, the undersigned has to the extent necessary reviewed the certifications set forth herein with other representatives of the City as to such accuracy and reasonableness. The undersigned has also relied, to the extent appropriate, on representations set forth in the Issue Price Certificate of Morgan Keegan & Company, Inc. (the "Underwriters") and the certificate of RBC Capital Markets Corporation (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 City is issuing the Obligations pursuant to the ordinances each adopted by the City on February 26, 2009 for purposes of authorizing the issuance of the Bonds and the Certificates of Obligation (the "Obligation Documents") (a) for the purposes of funding the Project as described more fully in the Official Dallas I 545131 ) ... .) "\ "'\ Statement prepared in connection with the offering of the Obligations, (b) to provide funds that will be used to refund currently and redeem the entire outstanding principal amount of the City's Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1993 (the "Series 1993 Certificates of Obligation"), the City's General Obligation Bonds, Series 1993 (the "Series 1993 Bonds''), the City's Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1998 (the "Series 1998 Certificates of Obligation"), the City's General Obligation Refunding Bonds, Series 1999 (the "Series 1999 GO Bonds") and the City's Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 1999 (the "Series 1999 Revenue Bonds," and collectively with the Series 1993 Certificates of Obligation, the Series 1993 Bonds, the Series 1998 Certificates of Obligation and the Series 1999 GO Bonds, the "Prior Bonds")), pursuant to the escrow agreement dated March 1, 2009 between the City and The Bank of New York Mellon Trust Company, N.A. (the "Escrow Agreement") and (c) to pay the costs of issuance of the Obligations. The primary purpose of each transaction undertaken in connection with the issuance of the Obligations is a bona fide governmental purpose. The Project is described as follows: various public improvements and public purposes, including, in the case of the Certificates of Obligation, solid waste, drainage, water, street, electric, park, fire, and City Hall. The Obligation Documents detail all relevant aspects of the application of the proceeds of the Bonds and the City's program to refund the Prior Bonds. Specifically, all of the Series 1993 Certificates of Obligation maturing on February 15, 2012 through February 15, 2014 inclusive, in the aggregate amount of $225,000, all of the Series 1993 Bonds maturing on February 15, 2012 through February 15, 2014, inclusive, in the aggregate amount of $2,895,000, all of the Series 1998 Certificates of Obligation maturing on February 15, 2016 through February 15, 2018, inclusive, in the aggregate amount of $1,545,000, all of the Series 1999 GO Bonds maturing on February 15, 2010 through February 15, 2014, inclusive, in the aggregate amount of $11,030,000, and all of the Series 1999 Revenue Bonds maturing on February 15, 2010 through February 15, 2014, inclusive, February 15, 2016 and February 15, 2019 in the aggregate amount of $6,200,000 (collectively, the "Refunded Bonds") will be called for redemption and retired with proceeds of the Bonds. The Refunded Bonds are being redeemed in order to achieve a present-value savings in the debt service payable by the City. The Bonds are a current refunding of the Refunded Bonds. 6. The Prior Bonds. (a) No portion of the purchase price of any of the Prior Bonds was provided by the issuance of any other issue of obligations. All of the original and investment proceeds allocable to the Prior Bonds have been expended, Other than to the extent any of the Prior Bonds def eased outstanding bonds of the City, no portion of the proceeds of the Prior Bonds was used to pay the principal of, or interest on, any other issue of governmental obligations. In addition, other than to the extent of preliminary expenditures (i.e., architectural, engineering, surveying, soil testing, reimbursement bond issuance, and similar costs that are incurred prior to commencement of acquisition, construction, or rehabilitation of a project, other than land acquisition, site preparation, and similar costs incident to commencement of construction), no -2- Dallas 1545131 ') '\ 1 portion of the proceeds of the Prior Bonds was used to reimburse the City for any expenditures made by the City prior to the respective issuance dates of the Prior Bonds. The City has maintained a debt service fund for the Prior Bonds (the "Prior Debt Service Fund") and has on hand in such Prior Debt Service Fund certain amounts that were to be used for the payment of debt service on the Prior Bonds. However, the City has created a new debt service fund (the "Debt Service Fund") under the Obligation Documents for purposes of the payment of debt service on the Obligations as described in the Funds -Debt Service Fund subparagraph. The balance in the City's debt service fund (the "Overall Debt Service Fund") for all of its currently outstanding ad valorem tax supported tax-exempt obligations (not including the Obligations) (the "Outstanding Bonds") as of the date of this certificate is approximately $1,640,009. Not more than $35,278.68 (the "Allocable Cash") of the aforementioned amount in the Overall Debt Service Fund is allocable to the Refunded Bonds, such allocation being based on the relationship of the original principal amounts of the Refunded Bonds and the Outstanding Bonds that are general obligation bonds ($13,925,000/$647,335,000 or 2.15 percent). 7. Use of Amounts Allocable to Refunded Bonds. Other than amounts described in The Prior Bonds paragraph above, there are no amounts on hand that represent proceeds of the Refunded Bonds, replacement proceeds of the Refunded Bonds or accumulated earnings on such proceeds. Toe amount of the Allocable Cash, plus an additional $544,721.32, for a total of $580,000, deposited in the escrow fund established pursuant to the Escrow Agreement (the "Escrow Fund") and used on the date hereof to purchase United States Treasury Certificates of Indebtedness and Notes, State and Local Government Series, the proceeds of which will be used to pay the principal of, and interest and redemption premium, if any, on, the Refunded Bonds. 8. Amount and Expenditure of Sale Proceeds of the Obligations. (a) Amount of Sale Proceeds. The City sold the Obligations to the Underwriters for $84,841,367.08, which price does not include Pre-Issuance Accrued Interest. The Sale Proceeds of the Obligations is $85,308,919.40, based on the amount set forth on Exhibit A hereto. The Sale Proceeds of the Obligations represent the Stated Redemption Price at Maturity ( excluding Pre-Issuance Accrued Interest for those Obligations the interest on which is paid at least once annually) of the Obligations, plus Original Issue Premium. No portion of the purchase price of any of the Obligations is provided by the issuance of any other issue of obligations. (b) Expenditure of Sale Proceeds. The Sale Proceeds of the Obligations will be expended as follows: (i) The amount of $21,548,103.81 will be deposited in the Escrow FWld and used on the date hereof to purchase United States Treasury Certificates of Indebtedness and Notes, State and Local Government Series (the "Escrowed Securities"), the proceeds of which will be used to pay the principal of, and interest and redemption premium, if any, on, the Refunded Bonds. No portion of the proceeds of the Obligations is expected to be used to pay any interest on, or principal of, any issue of governmental obligations other than the Obligations and the Refunded Bonds. -3- Dallas 1545131 ) 1 (ii) The amount of $467,552.32 will be allocated on the date of issuance of the Obligations to the payment of Underwriters' discount or compensation. (iii) The amount of $320,468.27 will be disbursed to pay other Issuance Costs on the Obligations. (iv) The amount of $62,972,795.00 will be deposited in a 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 Obligations will be financed out of the City's available funds. (c) Reimbursement. Other than the amount of (i) $100,000 and (ii) preliminary expenditures (i.e., architectural, engineering, surveying, soil testing, Bond 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) not in excess of 20 percent of the Issue Price, no portion of the amount described in the Amount and Expenditure of Sale Proceeds of the Obligations - Expenditure of Sale Proceeds subparagraph above will be disbursed to reimburse the City for any expenditures made by the City 60 days prior to the date that the City adopted the resolution dated October 23, 2008 (the ••Declaration"), describing a portion of the Project the ("Reimbursement Project"), stating the maximum principal amount of obligations expected to be issued for the Reimbur~ement Project, and stating the City's reasonable expectation on that date that it would reimburse expenditures for costs of the Reimbursement Project with proceeds of an obligation. The Declaration is not an official intent to reimburse that which was declared as a matter of course, or in an amount substantially in excess of the amount expected to be necessary for the Reimbursement Project. The City 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 the Temporary Periods and Yield Restriction -Project subparagraph and the Compliance with Rebate Requirements paragraph below. The 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 Obligations (and that is directly related to capital expenditures financed by the Obligations), the City will only expend proceeds of the Obligations for (i) costs that would be chargeable to the capital accounts of the Project if the City's income were subject to federal income taxation and (ii) interest on the Obligations in an amount that does not cause the aggregate amount of interest paid on all of the Obligations to exceed that amount of interest on the Obligations 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 Obligations or (B) the date that is one year after the date on which the Project is placed in service; and/or (iii) fees for a qualified guarantee of the Obligations or payment for a qualified hedge on the Obligations. (e) No Sale of Conduit Loan. No portion of the sale proceeds of the Obligations has been or will be used to acquire, finance, or refinance any conduit loan. -4- Dallas 1545 I 3 I ) (f) No Overissuance. The proceeds of the Obligations will not exceed by more than a minor portion ( as defined in the Minor Portion and Yield Reduction Payments paragraph below) the amount necessary to accomplish the governmental purposes of the Obligations and, in fact, are not expected to exceed by any amount the amount of proceeds allocated to expenditures for the governmental purposes of the Obligations. (g) Allocations and Accounting. The proceeds of the Obligations 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 Obligation, if earlier. The allocation of proceeds will be made by consistently employing the direct-tracing method of accounting. No proceeds of the Obligations will be allocated to any expenditure to which proceeds of any other obligations have heretofore been allocated. The City will maintain records and documentation regarding the allocation of expenditures to proceeds of the Obligations and the investment of gross proceeds of the Obligations for at least six years after the close of the final calendar year during which any Obligation is outstanding. 9. Pre-Issuance Accrued Interest. The City will also receive from the Underwriters on the Issue Date of the Obligations Pre-Issuance Accrued Interest from the Dated Date through the Issue Date in the amount of $400,060.57. Such amount will be deposited in the Debt Service Fund, and will be disbursed on the first interest payment date for the Obligations. 10. Expenditure of Investment Proceeds. The best estimate of the City is that Investment Proceeds resulting from the investment of any proceeds of the Obligations pending expenditure of such proceeds for costs of the Project will be retained in a project fund and disbursed to pay or reimburse Project costs in addition to those described in the Amount and Expenditure of Sales Proceeds of the Obligations paragraph above. 11. Transferred Proceeds. There are no transferred proceeds with respect to the Bonds because all of the proceeds of Refunded Bonds have been or will be expended prior to the first dates on which amounts are disbursed from the Escrow Fund to pay principal of the Refunded Bonds. 12. No Replacement Proceeds. Other than amounts described herein, there are no amounts that have a sufficiently direct nexus to the Obligations or to the governmental purposes of the Obligations, 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 Obligations 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, reserve fund, replacement fund, or similar fund reasonably expected to be used directly or indirectly to pay principal or interest on the Obligations. (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 Obligations, or to a guarantor of part or all of the Obligations, such that such pledge provides reasonable assurance that such amount will be available to pay principal or interest on the Obligations if the City encounters -5- Dall~ 1545131 ) ) 7 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 Obligations. (c) No Other Replacement Proceeds. There are no other replacement proceeds allocable to the Obligations because the City reasonably expects that the tenn of the Obligations will not be longer than is reasonably necessary for the governmental purposes of the Obligations. The Obligations would be issued to achieve the governmental purpose of the Obligations independent of any arbitrage benefit as evidenced by the expectation that the Obligations reasonably would have been issued if the interest on the Obligations 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 Obligations is not greater than 120 percent of the weighted average estimated economic life of the portion of the projects financed by the Obligations, 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 talcing into account the respective costs of each of the assets financed by the Obligations; (b) the reasonably expected economic life of an asset was detennined 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 determination are not greater than the reasonably expected economic useful lives of the projects financed by the Obligations allowing for normal wear and tear and assuming prudent and customary maintenance; and ( d) land or any interest therein has not been taken into account in determining the average reasonably expected economic life of such Project, unless 25 percent or more of the net proceeds of any issue is to be used to finance land. 13. Yield on the Obligations. For the purposes of this Certificate, the Yield on the Obligations is the discount rate that, when used in computing the present value as of the Issue Date of the Obligations, of all unconditionally payable payments of principal and interest on the Obligations, produces an amount equal to the present value, using the same discount rate, of the aggregate issue price of the Obligations as of the Issue Date. For purposes of determining the yield on the Obligations, the issue price of the Obligations is the sum of the issue prices for each group of substantially identical Obligations, plus Pre-Issuance Accrued Interest. For each group of substantially identical Obligations, 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 Obligations is taken into account for purposes of computing the yield on the Obligations. For each group of substantially identical Obligations, the issue price is the first price at which the Obligations were sold to the Initial Purchaser. The Initial Purchaser intends to hold the Obligations for investment purposes. The Obligations are not being offered to the public and are not being issued in exchange for property. -6- Dallas 1545131 ) .., The Yield with respect to that portion of the Obligations, if any, subject to optional redemption (other than the Certificates of Obligation scheduled to mature on February 15, 2020 through February 15, 2025, inclusive and the Bonds scheduled to mature on February 15, 2024 (the "Yield-to-Call Bonds")) is computed by treating such Obligations as retired at the stated redemption price at the final maturity date because ( a) the City has no present intention to redeem prior to maturity the Obligations that are subject to optional redemption; (b) no 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 Obligation is subject to optional redemption within five years of the Issue Date of the Obligations; (d) no Obligation subject to optional redemption (other than the Yield-to-Call Bonds) is issued at an issue price that exceeds the stated redemption price at maturity of such Obligation by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity of such Obligation and the number of complete years to the first optional redemption date for such Obligation; and (e) no Obligation subject to optional redemption bears interest at a rate that increases during the term of the Obligation. Yield with respect to the Yield-to-Call Bonds is computed by treating such Obligations as retired at the stated redemption price on the dates that produce the lowest combined yield on the Obligations because the Underwriters have represented that such portion of the Obligations is issued at an issue price that exceeds the stated redemption price at maturity of each such Obligation by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity of each such Obligation and the number of complete years to the first optional redemption date for each such Obligation. Such lowest yield determination is made separately for each individual group of Obligations. The Yield on the Obligations is calculated in the manner set forth above. The City has not entered into a hedging transaction with respect to the Obligations. The City will not enter into a hedging transaction with respect to the Obligations 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 Obligations from gross income for federal income tax purposes. 14. Temporary Periods and Yield Restriction. (a) Pre-Issuance Accrued Interest. The amount described in the Pre-Issuance Accrued Interest paragraph above represents Pre-Issuance Accrued Interest on the Obligations 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) Current Refunding. The amount described in paragraph 8.(b )(i) will be used within 90 days of date hereof to pay principal of and interest on the Refunded Bonds. Therefore, such amount may be invested for an allowable temporary period. ( c) Project. The City 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 City or a related party pursuant to which the City is obligated to expend at least five percent -7- Dallas I 545131 ) ') of the sale proceeds of the Obligations on the Project. The City reasonably expects that work on or acquisition of the Project will proceed with due diligence to completion and that the proceeds of the Obligations will be expended on the Project with reasonable dispatch. The City reasonably expects that 85 percent of the Sale Proceeds of the Obligations 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 higher'' than the Yield on the Obligations, except as set forth in the Minor Portion and Yield Reduction Payments paragraph below. The City reasonably expects that any amount derived from the investment of moneys received from the sale of the Obligations and from the investment of such investment income will not be commingled with substantial other receipts or revenues of the City 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 Obligations, except as set forth in the Minor Portion and Yield Reduction Payments paragraph below. 15. Funds. (a) Debt Service Fund. Pursuant to the Obligation Documents, the City has created Debt Service Funds (the "Debt Service Fund") and the proceeds from all taxes levied, assessed and collected for and on account of the Obligations are to be deposited in such Fund. The City expects that taxes levied, assessed and collected for and on account of the Obligations 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 immediately preceding bond year or one-twelfth of the principal and interest payments on the Obligations 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 Obligations 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. Amounts on deposit from time to time in the Bona Fide Portion and the Reserve Portion are allocable between the Obligations and any other obligations of the City secured by the Debt Service Fund on the basis of one of the methods set forth in section l.148-6(e)(6) of the Regulations. The portion of the Reserve Portion allocable to the Obligations will not exceed at any time the least of (a) ten percent of the stated principal amount of the Obligations ( 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 Obligations), (b) the maximum annual principal and interest requirements of the Obligations, and (c) 125 percent of average annual principal and interest requirements of the Obliga.tions. 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 Obligations, except as set forth in the Minor Portion and Yield Reduction Payments paragraph below. -8- Dallas 1545131 "\ ) (b) Project Fund: Amounts on deposit in a project or construction fund will be invested and disbursed as set forth in the Obligation Documents and the Temporary Periods and Yield Restriction -Project subparagraph of this Certificate. 16. Minor Portion and Yield Reduction Payments. All gross proceeds will be invested in accordance with the Temporary Periods and Yield Restriction paragraph and the Funds paragraph above. To the extent such amounts remain on hand following the periods set forth in the Temporary Periods and Yield Restriction paragraph and the Funds paragraph above or exceed the limits set forth in the Funds paragraph above, the City will invest such amounts at a restricted yield as set forth in such paragraphs; provided, however, that a portion of such amounts, not to exceed in the aggregate $100,000 (the "Minor Portion"), may be invested at a yield which is higher than the Yield on the Obligations and, provided further, that the City may satisfy the yield restriction requirements by making yield reduction payments to the federal government in accordance with Section 1.148-5( c) of the Regulations. 17. Issue. There are no other obligations that ( a) are sold at substantially the same time as the Obligations (i.e., less than 15 days apart), (b) are sold pursuant to the same plan of financing with the Obligations, and (c) will be paid out of substantially the same source of funds as the Obligations. The City hereby elects to treat the Bonds as part of the same issue as the Certificates of Obligation, which were sold and issued on the same date as the Bonds pursuant to a single offering document, as permitted by Section 1.150-l(c)(4)(iii) of the Regulations. 18. Compliance With Rebate Reguirements. (a) General. The City has covenanted in the Obligation Documents 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 Obligations, within the meaning of section 148( f) of the Code be rebated to the federal government. Specifically, the City will (a) maintain records regarding the investment of the "gross proceeds" of the Obligations as may be required to calculate such "rebatable arbitrage earnings" separately from records of amounts on deposit in the funds and accounts of the City which are allocable to other bond issues of the City or moneys which do not represent "gross proceeds" of any bonds of the City, (b) calculate at such intervals as may be required by applicable Regulations, the amount of ''rebatable arbitrage earnings," if any, earned from the investment of the "gross proceeds" of the Obligations and (c) pay, not less often than every fifth anniversary date of the delivery of the Obligations and within 60 days following the final maturity of the Obligations, or on such other dates required or permitted by applicable Regulations, all amounts required to be rebated to the federal government. The City will maintain a copy of any such calculations, and all documentation necessary to produce such calculations or necessary to establish qualification for an exemption from the need to produce such calculations, for at least six years after the close of the final calendar year during which any Obligation is outstanding. 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 Obligations that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in a smaller profit or a larger loss than would have resulted if the arrangement had been at ann's-length and had the yield on the issue not been relevant to either party. -9- Dallas 1545131 ) ..., ) ) ) (b) Two-Year Spending Exception. The City hereby makes the elections, if any, set forth below for purposes of the two-year spending exception from arbitrage rebate: ELECT ~ • • • DONOT ELECT • NIA TI • • • 1. To use actual facts to apply the proV1s1ons of paragraphs (e) through (m) (excluding (f)(l)(i)) 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 Obligations 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 Obligations. Section l. l 48- 7(j)(l) 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 Obligations fail to satisfy any of the semiannual spending requirements for the two-year rebate exception. Section 1.148-7(k)(l) of the Regulations. The City reasonably expects that at least 75 percent of the "available construction proceeds" of the Obligations, within the meaning of section 1.148-7(i) of the Regulations, will be allocated to "construction expenditures," within the meaning of section l.148-7(g) of the Regulations, for property owned by the City. 19. Not an Abusive Transaction. (a) General. No action taken in connection with the issuance of the Obligations will enable the City 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 Obligations over any period of time, notwithstanding that, in the aggregate, the gross proceeds of the Obligations are not invested in higher yielding investments over the term of the Obligations), and (ii) issue more bonds, issue bonds earlier, or allow bonds to remain outstanding longer than is otherwise reasonably necessary to accomplish the governmental purposes of the Obligations. To the best of our knowledge, no actions have been taken in connection with the issuance of the Obligations -10- Dallas 1545131 ') ) ) ) ) other than actions that would have been taken to accomplish the governmental purposes of the Obligations if the interest on the Obligations 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 Obligations). (b) No Sinking Fund. No portion of the Obligations has a tenn that has been lengthened primarily for the purpose of creating a sinking fund or similar fund with respect to the Obligations. (c) No Window. No portion of the Obligations has been structured with maturity dates the primary purpose of which is to make available released revenues that will enable the City to avoid transferred proceeds or to make available revenues that may be invested to be ultimately used to pay debt service on another issue of obligations. 20. No Arbitrage. On the basis of the foregoing facts, estimates and circumstances, it is expected that the gross proceeds of the Obligations will not be used in a manner that would cause any of the Obligations to be an "arbitrage bond" within the meaning of section 148 of the Code and the Regulations. To the best of the knowledge and belief of the undersigned, there are no other facts, estimates or circumstances that would materially change such expectations. 21. No Private Use, Payments or Loan Financing. (a) General. The City reasonably expects, as of the date hereof, that no action or event during the entire stated tenn of the Obligations will cause either the ''private business tests" or the ''private loan financing test," as such terms are defined in the Regulations, to be met. (i) No portion of the proceeds of the Obligations will be used in a trade or business of a nongovernmental person. For purposes of determining use, the City will apply rules set forth in applicable Regulations and Revenue Procedures promulgated by the Internal Revenue Service, including, among others, the following rules: (A) Any activity carried on by a person other than a natural person or a state or local governmental unit will be treated as a trade or business of a nongovernmental person; (B) the use of all or any portion of the Project is treated as the direct use of proceeds; (C) a nongovernmental person will be treated as a private business user of proceeds of the Obligations 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 City has not taken and will not take any deliberate action that would cause or permit the use of any portion of the Project to change such that such portion will be deemed to be used in the trade or business of a nongovernmental person for so long as any of the Obligations 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 purposes of interest payable on the Obligations). For this purpose, any action within the control of the City is treated as a -11- Dallas 1545131 ) ) ) deliberate action. A deliberate action occurs on the date the City enters into a binding contract with a nongovernmental person for use of the Project that is not subject to any material contingencies. (iii) All payments of the debt service on the Obligations 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 governmental purposes and (B) that has a unifonn tax rate that is applied to all persons of the same classification in the appropriate jurisdiction using a generally applicable manner of determination and collection. No portion of the payment of the debt service on the Obligations will be directly or indirectly derived from payments (whether or not to the City or any related party) in respect of property, or borrowed money, used or to be used for a private business use. Furthermore, no portion of the payment of the debt service on the Obligations 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 Obligations will be directly or indirectly used to make or finance a loan to any person other than a state or local governmental unit. Except to the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use gross proceeds of the Obligations 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 (A) 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, (B) capacity in or service from such property is committed to such person or entity under a take-or-pay, output, or similar contract or arrangement, or (C) 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 City does not reasonably expect that it will sell or otherwise dispose of personal property components of the Project financed with the Obligations 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 Obligations 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 -12- Dallas 1545131 1 (iv) The City is required to deposit amounts received from such disposition in a commingled fund with substantial tax or other governmental revenues and the City reasonably expects to spend such amounts on governmental programs within 6 months from the date of commingling. Furthermore, the City will not sell or otherwise dispose of all or any portion of the Project in circumstances in which the foregoing requirements are not satisfied unless it has received an opinion of nationally recognized bond counsel to the effect that such disposition will not adversely affect the treatment of interest on the Obligations as excludable from gross income for federal income tax pmposes. (c) Other Agreements. The City will not enter into any agreement with any nongovernmental person regarding the use of all or any portion of the Project during the stated term of the Obligations 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 Obligations as excludable from gross income for federal income tax purposes. 22. Weighted Average Maturity. The Weighted Average Maturity of the Obligations set forth on Exhibit B attached to this Certificate is the sum of the products of the issue price of each group of identical Obligations and the number of years to maturity ( determined separately for each group of identical Obligations and taking into account mandatory redemptions). divided by the aggregate Sale Proceeds of the Obligations. 23. Record Retention. The City will retain all pertinent and material records relating to the use and expenditure of the proceeds of the Obligations until six years after the last Obligation is redeemed, or such shorter period as authorized by subsequent guidance issued by the Department of Treasury, if applicable. All records will be kept in a manner that ensures their complete access throughout the retention period. For this purpose, it is acceptable that such records are kept either as hardcopy books and records or in an electronic storage and retrieval system, provided that such electronic system includes reasonable controls and quality assurance programs that assure the ability of the City to retrieve and reproduce such books and records in the event of an examination of the Obligations by the Internal Revenue Service. 24. Obligations are Not Hedge Bonds. Not more than 50 percent of the proceeds of the Obligations 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 City reasonably expects that at least 85 percent of the spendable proceeds of the Obligations will be used to carry out the governmental purposes of the Obligations within the three-year period beginning on the date the Obligations are issued. Not more than 50 percent of the proceeds of each issue of which the Refunded Bonds are a part was invested in nonpurpose investments (as defined in section 148(f)(6)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of section 149(g)(3)(A)(ii) of the Code, and the City reasonably expected at the time each issue of which the Refunded Bonds are a part was issued that at least 85 percent of the spendable proceeds of each such issue would be used to carry out the govenunental purposes of such issues within the corresponding three-year period beginning on the respective dates of issue of such Refunded Bonds. -13- Dallas 1545131 ) [EXECUTION PAGE FOLLOWS] -14- Dallas 1545131 ) EXECUTED as of this 8th day of April, 2009. Attachments: Exhibit A: Exhibit B: Exhibit C: Issue Price Certificate Certificate of Financial Advisor Reimbursement Resolution CITY OF LUBBOCK, TEXAS By:~~ Title: Chief Financial Officer Signature page to Federal Tax Certificate ) ) ) ) ) ) EXHIBIT A ISSUE PRICE CERTIFICATE I, the undersigned officer of the representative (the "Representative") of the group of 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 Obligations. 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 A is attached (the "Federal Tax Certificate"). I hereby certify as follows in good faith as of the Issue Date: 1. 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 Underwriters. I am the officer of the Representative charged, along with other officers of the Underwriters, with responsibility for the Obligations. 2. The Underwriters have made a bona fide public offering to the public of the Obligations at the issue prices to the public set out on the inside cover of the Official Statement dated March 13, 2009, prepared in connection with the offering of the Obligations (the "Official Statement"). The issue prices set forth on the inside cover of the Official Statement were determined on the sale date based on the reasonable expectations regarding the initial public offering prices. The issue price for each maturity of the Obligations, represents the first price (including original issue premium and discount and accrued interest to the Issue Date only) of the Obligations 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 Obligations is $85,708,979.97 (the "Issue Price''), which price includes Pre-Issuance Accrued Interest in the amount of $400,060.57. The initial public offering price described above does not exceed the fair market value for the Obligations on the sale date. The term "public," as used herein, does not include bond.houses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers. The term "sale date," as used herein, means the first day on which there is a binding contract in writing for the sale or exchange of the Obligations. 3. The City 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 Obligations 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 Obligations as excludable from gross income for federal income tax purposes. [EXECUTION PAGE FOLLOWS] Exhibit A-1 Dallas 1545131 EXECUTED as of this 8th day of April, 2009. MORGAN KEEGAN & COMP ANY, INC. By: ~ Title: =• Signature page to Issue Price Certificate 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 Obligations. 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: 1. I am the duly chosen, qualified and acting officer of the Financial Advisor for the office shown below my signature; as such, I am familiar with the facts herein certified and I am duly authorized to execute and deliver this certificate on behalf of the Financial Advisor. I am the officer of the Financial Advisor who has worked with representatives of the City in structuring the financial terms of the Obligations. 2. The Issue Price (including Pre-Issuance Accrued Interest) of the Obligations, based on the representations set forth in Exhibit A to the Certificate to which this Exhibit is attached, is not more than $85,708,979.97. The yield on the Obligations, based on such Issue Price is not less than 4.168531 percent (the "Yield"). For purposes of this certificate, the term "yield" means that yield which is computed as described in the Yield on the Obligations paragraph of the Federal Tax Certificate. The purchase price of the Obligations used in computing yield on the Obligations 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 Obligations to be 8.9668 years, as set forth in the Weighted Average Maturity paragraph of the Federal Tax Certificate. 4. To the best of my knowledge the statements set forth in the Not an Abusive Transaction paragraph of the Federal Tax Certificate are true. 5. The City 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 Obligations 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 Obligations as excludable from gross income for federal income tax purposes. [EXECUTION PAGE FOLLOWS] Exhibit B-1 Dallas 1545131 EXECUTED as of this 8th day of April, 2009. RBC CAPITAL MARKETS CORPORATION By: t,<...{~ fln_ Title: M"'"'"-.)i"-) a't•<i'4/ Signature page to Certificate of Financial Advisor Besolutioa Ro. 2008-R0400 October 23., 2008 Itea Ho. 5.2 RESOLUTION EXPRESSING INTENT TO FINANCE EXPENDITURES TO BE INCURRED WHEREAS, the City of Lubbock, Texas (the "Issuer") is a political subdivision of the State of Texas authorized to finance its activities by issuing obligations the interest on which is excludable from gross income for federal income tax purposes (''tax-exempt obligations'') pursuant to Section l 03 of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, the Issuer will make, or has made not more than 60 days prior to the date hereof, payments with respect to the acquisition, construction, reconstruction or renovation of the property listed on Exhibit A attached hereto; WHEREAS, the Issuer has concluded that it does not currently desire to issue tax-exempt obligations to finance the costs associated with the property listed on Exhibit A attached hereto; WHEREAS, the Issuer desires to reimburse itself for the costs associated with the property listed on Exhibit A attached hereto from the proceeds of tax-exempt obligations to be issued subsequent to the date hereof; and WHEREAS, the Issuer reasonably expects to issue tax-exempt obligations to reimburse itself for the costs associated with the property listed on Exhibit A attached hereto. NOW, THEREFORE, be it resolved that: Section J. The Issuer 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 acquisition, construction, reconstruction or renovation of the property listed on Exhibit A attached hereto from the proceeds of tax-exempt obligations to be issued subsequent to the date hereof. Section 2. The (ssuer reasonably expects that the maximum principal amount of tax-exempt obligations issued to reimburse the Issuer for the costs associated with the property listed on Exhibit A attached hereto will not exceed $152,698,209. ADOPTED THIS 23rd day of October , 2008, by the City Council of the City of Lubbock, Texas. CITY OF LUBBOCK, TEXAS TOM MARTIN, MAYOR An-EST: ~4••~ RECCAcfARZA, CITYSECARY I i Resolution Bo. 2008-80400 EXHIBITA CITY FACILITIES Visitors Infonnation Center Library Renovations• MwiicipaJ Auditoriwn Renovations• Civic Center Renovation• Police Department and Mwiicipal Courts Renovation• City Hall System Repair New Fire Station No. 17 GATEWAY STREETS Overpass -Loop 289 at Slide Road Gateway Streets Right-ofwWay Coordination Slide Road from 4th Street North to Loop 289 Quaker Avenue and 114th Street Indiana A venue -103rd to Fann to Market 1585 Ash Avenue -Farm to Market 1294 to County Road 5800 98th Street, Frankford A venue, and Milwaukee A venue Milwaukee Avenue 100th Street to Farm to Market 1585 Lubbock Business Park Boulevard STREETS 34Hi Street and University Avenue Intersection Reconstruction' Traffic Signals North and East Lubbock Residential Street Infrastructure Street Maintenance Program PARKS Park Pavilions Park Playground Replacement Tax Increment Finance Water, sewer, electric, drainage, park, and street improvements and extensions, including utility relocations, sidewalks, amenities, street lighting, and landscaping, all located within the City's North Overton Tax Increment Financing District. SOLID WASTE Leachate Evaporation Pond STORM WATER Vault Replacement Stonn Sewer Repair and Replacement Northwest Lubbock and Maxey Park Project Cost Estimate $ 4,590,000 250,000 5,000,000 1,450,000 1,002,500 300,000 162,671 12,500,000 500,000 4,144,000 2,000,000 1,000,000 5,600,000 2,000,000 1,500,000 585,000 1,395,000 200,000 575,000 8,932,000 214,000 400,000 1,896,402 250,110 300,000 600,000 1,000,000 I WASTEWATER SYSTEM Electrical Fa£ility Sewer Line Replacements Installation of Sewer Lines Ahead of Street Paving Sewer Tap Replacements Water Reclamation Plant Replacements South Lubbock Sanitary Sewer System Expansion Southeast Water Reclamation Plant Improvements Phase III Lift Station Rehabilitation Sewer Lines Ahead of Sharp Freeway Major Sewer Lines Replacement WATER Supplemental Water Supply for Lake AJan Henry Water Treatment Plant Improvements Pumping System Improvements Parks Conversion to Ground Water Water Line Replacement Water Lines Ahead of Street Paving Water Meter Replacements and Program Lake Alan Henry Raw Water Line/Pump Stations Lake AJan Henry Water Treatment Plant and Tenninal Reservoir Eastport Water Renovation Irrigation Automation and Control Systems Airport Industrial Area Water System Improvements ELECTRIC Canyon West Infrastructure Setvice Distribution UndergroWld Electric Service Distribution Distribution Transformers · Substation Transformer Replacement MASTER LEASE PURCHASES Cost Estimate $ 140,000 660,000 350,000 650,000 950,000 1.000,000 1.000,000 310,000 1,000,000 1,000,000 500,000 1.100,000 222.390 500,000 550,000 360,000 5,980,891 41,000,000 500,000 1,250,000 1,422,960 2,200,000 600,000 300,000 3,500,000 2,200,000 500,000 $128,692,924 Scheduled Master Lease purchases for various city departments include $ 24,005,285 the purchase of vehicles, machinery, electronics, computer hardware and software, and other necessary equipment TOTAL $152,698,209 -Oeneral Obligation Bonds. The,c pmjccts were approved by thc votm in an dection held in May 2004. I Vinso11&Elkins Steven H. Gerdes SGerde5@velaw.com Tel 713. 758.4516 Falt 713.615. 6500 CERTIFIED MAIL RETURN RECEIPT REQUESTED 7002 0860 0003 5313 9526 District Director Internal Revenue Service Ogden, UT 84201 April 17, 2009 Re: $81,890,000 City of Lubbock, Texas General Obligation Refunding and Improvement Bonds, Series 2009 and Tax and Waterworks System SUJ))lus Revenue Certificates of Obligation, Series 2009 Dear Sir: Enclosed please find an originally executed Form 8038-G (Information Return for Tax-Exempt Governmental Obligations) for the above-captioned bond issue. Please acknowledge receipt of the Form 8038-G by stamping and returning the copy of the Form 8038-G attached to the self-addressed, postage-paid envelope that we have provided. · cc: Meagan Horn Leslie Morgan Terri Lambert Vinson & Elkins LLP Anomeys a1 I.SW Austl11 Beijing Oellas Dub.al Housten London Mos<:ow New York Shanghai Tokyo Wash111gro11 Very truly yours, 2601 Via Ffflma, ~ 100 AI.IS!ln, TX 78746-7S68 Tel 512.542.8400 filix 512.542.8612 www.velaw.com Fann 8038-G lnfonnation Return for Tax-Exempt Governmental ObligatJons (Rev. Nowmber 2000) • Under Internal Revenue Code section 149(e} 0MB No. 1545-0720 • See separate Instructions. O&panmant cf tht Trnsury Caution: ff /fie issue price is und8r $100,000, 11se Form 8{)38-GC. lnlamll R-Ser.lea I l'irtttl Reporting Authority If Amended Retum, cheek here • r 1 1 lasl.lei's name 2 Jnuen empJoyerlclamlfic.tlon numb« Citv of Lubbock. Texas 75-6000590 3 Number and alreet {or P.O. bolt If mail i9 not delivered to atreet address) Room/suite 4 Reportnumber P.O. Box 2000 3nl s City, cown, or post ctnce, stale. ancs ZlP code & Date ol isllue Lubbock. Texas 79457 Acril°S.2009 8 CUSIPnumber 7 Name or iuueGe~ Oblig!tion Re~ding ~d ~rovemf~ ~onds S~t$ 2~~ Tax and Waterwor s ;vstem umlus evenue ert1 cates o b iaati.on. enes 09 549l88DC1~ 5491&8DY3 9 Name and title 01 ollk:er or legBI representelhoe whom the tRS may call ,or !JIM! tnrormallon Andv Burcham.. Chief Finance Officer 10 ~-~e,Of offil:«llrlegai~ (806) 775-2149 t:Paitll:I Type of Issue check aonllcable box(esJ and enter the Issue pric;el See instructions and attach $Chedule 11 D Education .................................................................. 11 12 • Health and hospital . . . . . . . ' . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 D TransportaUon • • • • • • + • • • • • • • • + • • • • • • • • • • • • • • •••••• ~ • • • ••• ' • • • • • • ' •••••••••• ' 13 14 D Public safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... _ • . . . . . . . 14 15 0 Environment (including sewage bonds) ............................................ 1$ 16 D Housing ................................... ................................ 16 17 0 Utilities ..•................................................................. 17 18 ~ Other. Describe• Streets2 Parks2 Drainage1 Utilitics1 Fire2 Cit}'. Hall; etc 't s-,~-19 If obligations are TANs or RANs. check box• D If obligations are BANs, check. box .. .-... •• -· ·"'~-t~~.~ ~:·1 ; .. ~~---i·, ~ r 20 lf obligations are in the form of a lease or installment sale, check box . • . . . . . . . . . . . . . .• •• . . "ctr•' .::ft ' ·'-'t ·¥t ~-j.v'~ er: --;.• .' ,,,._ ~ .. /..· .,., ct ··-~ .... ~. --· -•~ ..... C. J.;Pilrt lff'I Description of ObllaatJons. (Complete for the entire issue for which this form Is being filed.} (•) Flt1al maturity date (bl lasue price (C) Smted redemptiOl'I price at maturity (d) Weigl)ted (e) Yield IW&lage maturily 21 2/15/2029 $ 85.308 919 $ 81 890.000 8.9668 veers 4~1685 % I Part fV~ Uses of Proceeds of Bond Issue (Including underwriters' discount) .22 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , 22 400~061 23 Issue. price of entire issue (enter amoont from line 21, column (b)) ....................•..... 23 85.308.919 24 Proceeds used for bond issuance costs (including Ul"lderwriler.s' disc;ount) 2<1 788 021 .r-'t 25 Proceeds used for credit enhancement. .......................... 25 0 < 26 Proceeds allocated to reasonably required reserve or replacement fund .. 26 0 ,...; 27 Proceeds used to ourrently refund prior issues . . . . . . . . . . . . . . . . . . . . . 27 21.S4R 104 .. 1 28 Proceeds used to advance refund prior issues . . . . . . . . . . . . . . . . . . ... 28 0 29 Total (add lines 24 through 28) ..................................................... 29 22.336.125 30 Nonrefundini:i proceeds of the Issue {subtract line 29 from line 23 and enter amount herel ........ 30 62.972.794 IP8)1.YI Description of Refunded Bonds (Complete this part ol'IIY for refunding bonds.) 31 Enter the remaining weighted average maturity of the bonds to be currently refunded, . , ... ~ .... • 3.8813 years ----==......._ ........ _ 32 Enter the remaining weighted average maturity of the bonds to be advance refunded .... , . . . . . . • y_ears ______ ....,,..._ 33 Enter the last date on which the refunded bonds will be called . . . . . . . . . . . . . • . . . . . . . . . . . . . . • _ _.M=a,.._y,..1...,2'""'. 2...,0""0""'9...__ 34 Enter thedate(sl the refunded bonds were issued• 11/18/1993: 2/12/1998: 3/4/1999· 5/12/1999 1 ·PJirt VI I Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141 (b)(5) ......... 35 (0) 36a Enter the amount of gross proceed& invested or to be invested in a QIScllleed investment contract ( see inSlruclions) . . . • 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 loans lo other governmental unils . . . . . • . . . . . 37a (O') b If this issue is a loan made from the proceeds of another tax~exempt issue, check box • D and enter the name of 1he issuer•----------------------and the date of the iss.ue•-------- 38 If the issuer has designated the issue under section 265(b)(3)(B)(i)(III) {small issuer exception), checi<. box ............ • D 39 If tfle issuer has elected to pay a penally in lieu of arbitrage rebate, check box ............ , . . . . . . . . . . . . . . . . . . . . . • D 40 If the issuer has Identified a hedge, check box ....... , ...............•....•........ , •................... • Sign Here Under pe s of perjury. t declare Iha! t llave uam,ned !his return and accompa11ying Khedutes and statemenle, and IO lhe best of my krloWledge and belief, lheyaretrue. rtect. plete Andy Burcham • 4/8/2009 • Chief Finance Officer Signalure of issuer's thoriled teprosentaliV'l! Date Type er print name alld tiUe For Paperwork Reduction Act Notice, see page 2 of the Instructions. 1sA Form 8038-G (Rev. 11.2000) STF FED6403r • Complete Items 1, 2, and 3. AJ:v:, CXJmplele 118111 4 ff Restrfcted Delivery Is desked. • Print your name and addlass on the nwenie so that we can ratum the card to you. A. Signature X B. RaClelved by { Printed Name} • Agent •Addte!lse .. C. Dale o1 Oellvely • Attach this card to the back of the maltplece. or on the fmnt If space pennlts. 1. Artlcie Al1Cfrll!l.!ed l<r. D. 19 deffvaly addren different from 1111m 17 • YM If YES, enter den-y addftlss below: • No Oistric t Oireclor Internal Rc-.,enue St'1Yil.~ Center Ogd,·n. UT IW'.?01 3. Service Type .'1.reertllled Mall C ~ Mall • Reglslal9d • Return Receipt fot Merchaoolaa • ln!wrtld Mall • C.O.D. "· R1lst!lottld DelMlry1 ~ Fee} • VI!$ 2. .Artiefe Number (Ttansfat from $0/\.'fce labeQ 7002 O&bO 0003 5313 952b PS Form 3811, Febrvary 2004 Drim6stlc Retum Aecelpt "'9lf ~ ,+.1,zill-.is~ •·•·•· .. -• .. ·········-··~·~-·--IIJZt>8 J.(l 'll:'IJ'llo •ON JtOB Oil IO .l."P.r.t.) M!M:IS ,'mll;M,'llf lfflUJIUf _,, f'ON 'Jdll' ''""" .IOl~!O l:J!JIS!O 0.1.w• I ~1== t---------,~-Pie) 8e:f~W11191l &O,IPIUl\»O sl~ ~,11.1ns W.lls.(S S~l1!,\\ pmr 1111.l pue ru;,t~t\KlulJ pm llt!Jl)tlf\l."l!f (p,1p/~OIJ '1Ui!J,1,IO:J J.?1/1.'Jl)~tl/ ON .',IJIIQ /ll'!'J Jfl!,'i)ILJ()Q) ldl3~3~J .. lltfVtJ 031.~UJH:> J~lf,JJS jHl'.,Od ·s·n 1~11540 ..... -..I C Cl co ru ru QC QI QI ,,.. (I" co gg Cl CJ IJJ LfJ l.n f.n lLI UJ I=--' t,-1 I.a.I I.a.I +I .JJ f;n UJ ru ,ru II"" IT' ; RECEIPT AND CERTIFICATE OF DELIVERY OF PA YING/AGENT REGISTRAR AND ESCROW AGENT The undersigned, authorized representative of The Bank of New York Mellon Trust Company, N.A., as Paying Agent/Registrar and Escrow Agent, hereby makes the following acknowledgments and certifications in connection with the issuance and delivery of $23,185,000 principal amount of City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009 (the "Bonds"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Ordinance authorizing the issuance thereof adopted by the City Council of the City of Lubbock, Texas (the "Issuer"). The undersigned hereby: 1. Acknowledges receipt of $24,428,139.77 from Morgan Keegan & Company, Inc. (the "Underwriter"). 2. Acknowledges and certifies the application of the amount described in paragraph 1 hereof as required by and in accordance with the Closing Instructions attached hereto as Exhibit A prepared by RBC Capital Markets, the Issuer's Financial Advisor. 3. Certifies that the Initial Bond for the Bonds, registered by the Comptroller of Public Accounts of the State of Texas and representing the aggregate principal amount of the Bonds, was delivered to or upon order of the Underwriter and was duly canceled this date upon delivery of the definitive Bonds to the Underwriter through The Depository Trust Company. 4. Acknowledges receipt of the Federal Securities described in the Escrow Agreement, and certifies that all funds required by the Escrow Agreement to be deposited to the Escrow Fund have been so deposited. DATED: April 8, 2009. 1550089v.1 LUB200nI015 THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Paying Agent/Registrar and Escrow Agent By: fJo1~ Title: Assistant Vice President •• Bond5 Dated: Settlement Date: Qos1ng: RBC Capital Markets• DELIVERY, SETTLEMENT & CLOSING PROCEDURES for City of Lubbock, Texas (the "City") $23,185,000 General Obligation Refunding and Improvement Bonds. Series 200, March I, 200, Wednesday, April 8, 2009 The closing on the above-referenced bonds (the "Bonds") will be held on Wednesday, April 8, 2009, at 10:00 A.M. (the "Closing") via teleconference by Vinson & Elkins L.L.P., Attn; Jennifer Taffe (214) 220-7941. Those parties expected to participate include: lam Mr. Andy Burcham Ms. Chelsea Pigg Mr. Matt Boles Mr. Derek Honea Ms. Debi Jones Mr. Buddy Kempf Mr. Chad Runnels Ms. Jennifer Taffe Ms. Pat Blue Jitte{Role company Chief Financial Officer City of Lubbock Senior Financial Analyst City of Lubbock Financial Advisor RBC Capital Markets Financial Advisor RBC Capital Markets Undeiwriter Morgan Keegan & Company, Inc. Underwriter Morgan Keegan & Company, Inc. Underwriter Morgan Keegan & Company, Inc. Bond Counsel Vinson & Elkins L.L.P. Paying/Escrow Agent The BankofNewYork Sgurces and Uses of Funds sourw of Funds Principal Amount of the Bonds Net Original Issue Premium on the Bonds City Transfer of Prior l&S Funds Accrued Interest on the Bonds Total Sources uses of Funds Deposit to Project Fund Dcposil to Escrow Fund Underwriter.;' Discount Costs of Issuance Deposit to Interest & Sinking Fund Total Uses fh9IK (806) 775-2149 (806) 775-2985 (214) 989-1672 (214) 989--1671 (713) 840.3602 (214) 692-9866 (214) 365-5565 (214) 220-7941 (214) 468-6511 series 2002 $ 23,185,000.00 1,243,042.45 580,000.00 112,660.50 S 25,120,702.95 $ 2,645,000.00 22,128,103.82 112,563.18 122,375.45 112.660.50 S 25,120,702.95 Ill (806) 775-2051 (806) 775-2051 (214) 989-1650 (214) 989-1650 (713) 840-3694 (214) 692-1851 (214) 692-1851 (214) 999-7941 (214) 468-5143 ) Receipt or Funds City of Lubbock, Texas -GO Pagel I. On Wednesday, April 8, 2009, Morgan Keegan & Company, Inc. (the "Underwriter") will wire transfer to The Bank of New York, ABA#021000018, GLA 211-065, TAS 437877, Re: City of Lubbock GO/CO, Attn; Pat Blue (214) 468-6511, the amount listed below. The Underwriter will call the closing room with a Federal Wire Reference Number and time of such wire as soon as loossible on Wednesday, April 8, 2009. Proceeds of Bonds Plus: Accrued Interest Less: Underwriters' Discount Total Wire Amount from Underwriter: $ 24,428,042.45 112,660.50 112.563.18 S 24,428,139.77 2. On Wednesday, April 8, 2009, the City will wire transfer to The Bank ofNew Yortc, ABA #021000018, GLA 211-065, TAS 437877, Re: City of Lubbock GO/CO, Attn: Pat Blue (214) 468-651 I, the amount listed below. Total Wire Amountfrom City: Total Receipts of Funds: Djsburseinent or funds S 580.000.00 $ 25,008.139.77 1. On Wednesday, April 8, 2009, The Bank of New York will deposit to the Escrow Account for the City the amounts as listed below for purposes of purchasing U.S. Treasury Securities -State and Local Government Series that will be used to defease certain outstanding obligations of the City as part of the Bonds. U.S. Treasury Securities ("SLGS") Initial Escrow Cash Deposit Deposit to Escrow Account: $ 22,128,I03.00 0.82 $ 22, I 28,103.82 2. On Wednesday, April 8, 2009, The Bank of New York will wire transfer $2,798,147.87 as a deposit to the Project, Costs of Issuance and Interest and Sinking Funds to JPMorgan Chase, ABA# 021000021, Account Name: TcxStar Participant Services, Account Number-TEXSTAR CLEARING/ AC-9102733343, OBI: 00015S212009000, FFC: 2009-000 (2009 GO). Deposit to Project Fund: Deposit to Cost oflssuance Fund: Deposit to Interest and Sinking Fund: Total Deposit to City: $ s 2,645,000.00 40,487.36 112,660.50 2.798,147.86 3. On Wednesday, April 8, 2009, The Bank of New York. will wire transfer $34,452.52 to U.S. Bank. Minneapolis, MN, ABA #091000022, Account Name: RBC Capital Markets, NC #l-602-3009-7208, FNOOOl6030, Attn. Derek Honea (214) 989-1671 for the following purpose. RBC Capital Markets' Fee & Reimbursable Expenses: s 34,452.52 4. On Wednesday, April 8, 2009, The Bank of New York will wire transfer $45,135.57 to JP Morgan Chase Bank, N.A., ABA #021000021, Account Name: Vinson & Elkins L.L.P. Domestic Account, Account #001-01687987, Ref: Invoice #25299887, Billing Attorney: Ben Brooks, for the following purpose. Vinson & Elkins L.L.P. Fee & Reimbursable Expenses: S 45,135.57 ·, ) Receipt of funds City of Lubbock, Texas-GO Page3 !5. On Wednesday, April 8, 2009, The Bank of New York will retain $2,300.00 for the payment offees listed below. Escrow Agent Upfront Administration Fee: Redemption Notice Fee Paying Agent Administration Fee: Total Paying/Escrow Agent Fee: Total Disbursement of Funds: Return of Good filth Check $ s 300.00 1,500.00 500.00 2,300.00 S 25.00S,139.77 Upon closing, the RBC Capital Markets will immediately return via overnight mail the Good Faith Deposit in its possession to Morgan Keegan & Company, Inc., 5956 Sherry Lane, Suite 1900, Dallas, Texas. 75225, Attn: Buddy Kempf. 'j RECEIPT AND CERTIFICATE OF DELIVERY OF PAYING/AGENT REGISTRAR The undersigned, authorized representative of The Bank of New York Mellon Trust Company, N.A, as Paying Agent/Registrar, hereby makes the following acknowledgments and certifications in connection with the issuance and delivery of $58,705,000 principal amount of City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (the "Certificates"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Ordinance authorizing the issuance thereof adopted by the City Council of the City of Lubbock, Texas (the "Issuer"). The undersigned hereby: 1. Acknowledges receipt of $60,813,287.88 from Morgan Keegan & Company, Inc. (the "Underwriter"). 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 RBC Capital Markets, the Issuer's Financial Advisor. 3. 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 duly canceled this date upon delivery of the definitive Certificates to the Underwriter through The Depository Trust Company. DATED: April 8, 2009. LUB200nt015 Dallas 1550081_1.DOC THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Paying Agent/Registrar By: ~l/M~ Title: Assistant Vice President . , ) ) ) • . .. .., Bonds Dated: Settlement Date: C1osing: RBC Capital Markets• DELIVERY, SETTLEMENT & CWSING PROCEDURES for City of Lubbock, Texas (the "City") $58,705,000 Tax and Waterworks System Surplus Revenue CertifKates of Obligation, Series 2009 March I, 2009 Wednesday, April 8, 2009 The closing on the above-1derenced certificates (the ncertificates") will be held on Wednesday, April 8, 2009, at I 0:00 A.M. (the "Closing") via teleconference by Vinson & Elkins L.L.P., Attn: Jennifer Taffe (214) 220-7941. Those parties expected to participate include: .f!m Jitle/Role Company l.b2D.; Ill Mr. Andy Burcham Chief Financial Officer City of Lubbock (806) 775-2149 (806) 775-20S1 Ms. Chelsea Pigg Senior Financial Analyst City of Lubbock (806) 775-2985 (806) 775-2051 Mr. Matt Boles Financial Advisor RBC Capital Markets (214) 984).1672 (214) 989-1650 Mr. Derek Honea Financial Advisor RBC Capital Markets (214) 989-1671 (214) 981J..1650 Ms. Debi Jones Underwriter Morgan Keegan & Company, Inc. (713) 840-3602 (713) 840-3694 Mr. Buddy Kempf Underwriter Morgan Keegan & Company, Inc. (214) 692-9866 (214) 692-1851 Mr. Chad Runnels Underwriter Morgan Keegan & Company, Inc. (214) 365-5565 (214) 692-1851 Ms. Jennifer Taffe Bond Counsel Vinson & Elkins L.L.P. (214) 220-7941 (214) 9\l9-7941 Ms. Pat Blue Paying/Escrow Agent The Bank of New Yortc (214) 468-6511 (214) 468-5143 soun;es and uses ec funds Sources or Funds ~mes~2 Principal Amount of the Certificates $ 58,705,000.00 Net Original Issue Premium on the Certificates 2,175,876.95 Accrued Interest on the Certificates 287,400.07 Total Sources s 61,168.277.02 UseaofFunds Deposit to Project Fund $ 60,327, 79S.00 Underwriters' Discount 354,989.14 Costs of Issuance 198,092.81 Deposit 10 lnleresl & Sinking Fund 287z400.07 Total Uses s 611168~77.02 ) ' Receipt or Funds City of Lubbock, Te:ms-CO Pagel I. On Wednesday, April 8, 2009, Morgan Keegan & Company, Inc. (the "Underwriter") will wire transfer to The Bank of New York, ABA #021000018, GLA 211-065, TAS 437877, Re: City of Lubbock GO/CO, Attn: Pat Blue (214) 468-6511, the amount listed below. The Underwriter will call the closing room with a Federal Wire Reference Number and time of such wire as soon as possible on Wednesday Aoril 8, 2009. Proceeds of Certificates Plus: Accrued Interest Less: Underwriters' Discount Total Wire Amount from Underwriter: Disbursement of Funds $ 60,880,876.95 287,400.07 354,989.14 s 60JU3.287.88 I. On Wednesday, April 8, 2009, The Bank of New York will wire transfer $60,677,561.65 as a deposit to the Project, Costs of Issuance and Interest and Sinking Funds to JPMorgan Chase, ABA# 021000021, Account Name: TexStar Participant Services, Account Number -TEXSTAR CLEARING/AC-9102733343, OBI: 000155212009001, FFC: 2009-001 (2009 CO). Deposit to Project Fund: Deposit to Cost of Issuance Fund: Deposit to Interest and Sinking Fund: Total Deposit to City: $ 60,327,795.00 62,366.58 287,400.07 S 60,677,561.65 2. On Wednesday, April 8, 2009, The Bank of New York will wire transfer $81,747.48 to U.S. Bank, Minneapolis, MN, ABA #091000022, Account Name: RBC Capital Markets, NC #1-602-3009-7208, FNOOOl6030, Attn. Derek Honea (214) 989-1671 for the following pufJlose. RBC Capital Markets' Fee & Reimbursable Expenses: S 81,747.48 3. On Wednesday, April 8, 2009, The Bank of New Yorlc will wire transfer $53,478.75 to JP Morgan Chase Bank, N.A., ABA #021000021, Account Name: Vinson & Elkins L.L.P. Domestic Account, Account #001-01687987, Ref: Invoice#25299887, Billing Attorney: Ben Brooks, for the following purpose. Vinson & Elkins L.L.P. Fee& Reimbursable Expenses: S 53,478.75 14. On Wednesday, April 8, 2009, The Bank of New York will retain $500.00 for the payment of fees listed below. Paying Agent Administration Fee: Total Disbursement of Funds: Return of Good faith Check S 500.00 S 60.813.287.88 Upon closing, the RBC Capital Markets will immediately return via overnight mail the Good Faith Deposit in its possession to Morgan Keegan & Company, Inc., 5956 Sherry Lane, Suite 1900, Dallas, Texas, 75225, Attn: Buddy Kempf. ) ... I ) ) ) ) ) March 9, 2009 Mr. Jeffrey A Yates Chief Financial OffiC&l' Lubbock P.O. Box 2000 Lubbock, TX 79457 Dear Mr. Yates: FitchRatings lll Cofigress Aven 11e. Suite 20 I 0 T 512 2 I !, 3 7 31 ! 888 ;;!62 48~0 Austin. TX 78701 ,wiw.fitchr.atmgs.corr, Fitch Ratings has assigned one or more ratings and/or otherwise taken rating action{s), as d8talJed on the attached Notice of Rating Actlort. Ratings assigned by Fitch are based on documents and Information provided to us by issuanl, obllgors, and/or their experts and agents, and are subject to receipt of the final closing doct.lmenta. Fd&h doee not aucllt or verify the truth or accuracy of sucl1 lnfom'lation. Ratings are not a ,ecommendation or suggestion, directly or indil'8Ctly, to you or any other perscm, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment. loan or security or any issuer. Ratings do not comment on the ad8quaCy of market price, the &1.11tabl1ty at any Investment, loan or security tor a particular investor (including withotJt limitation, a.ny accounting anfilor regulatory treatment). or the tax-exempt nature or taxabilify of payments made in respect of any lm.testment• loan or aacurtty. Fitch i& not your advisor, nor Is Flt<:h providing to you or any other patty any financial advice, or any legal, auditing, accounting, appralaal, valuatlon or actuarial services. A rating should not be viewed as a replacemer.rt for such acMce or servk:es. It is important that Fitch be provided with all information that may be material ·to its ratings so 1ha1 they continue to accurately reflect the status of the rated issues. Ratings may be changed, withdrawn, suspended or placed on Rating Watch due to changes in, additions to or the inadequacy of information. Ratings are not recommendations to buy, sell or hOld securities. Ratings do not comment on the adequacy of market price., the sUitabililY of any sec:urily for a particular in\/8St0r, or the tax-exempt natui:e or ~ility of payments made in regpect of any security. The assignment of a rating by Fitch shall not constitute a ~nt by Fitch to use its name as an &xpert In connect!~ with any registration statement or other fbing under U.S., u.K., Of any othet relevant-eecurities laws. We are pleased to have had the oppor.tuntty to be of service to you. If we c:an be of furlher assistance, please feel free to contact us at any time. -SM/am Enc: Nofioo of Rating Action (Doc 10: 120073) Sincerely, ~1117 Steve M. Murray Senior Director U.S. Public Finance Notice of Rating Action ... OutlooW Bond Description RatlngType Ac:tlon !!!!!!I Wldch !!!!!!! ~ Ll!t>bock (TX) GO rfdg & lmprov bond$ ser 2009 Long Tem, New Rating AA RO:Sta 06-Mar-2009 l.l.lbbock (TX) tax & WIMl<s sye sutplus rev clfs of~ LongTem, NewRallng AA RO:S1a 08-Mar-2009 ser2009 Lubbock {TX) (North Overton) 1alc & tax inaement r&v clfs of oblig aer 2003E (insured: MBIA Insurance Corp.) Long Term Affirmed AA RO:S1a 06-Mar-2009 Lubbock (TX) combination ta.JC & swr sys swpkJ& rev Long Term Affirmed AA R0:8'a 06-Mar-2009 ' clfs of obliQ ser 2002 Lubl:)oct {TX) combination WC & WbWks sys au,plu& rev Long Tenn Affiffned AA RO:Sta 08-Mar-2009 etts or obllg ser 2002 Lubbock {TX) combination tax & wtrwks sys SlJfPlus rev ctfs of oblig ser 2005 (lnsu red: Financial Security l..oogTerm Affinned AA RO:Sta 06-Maf .2009 Assurance Inc. (FSA)l ) Lubbock (TX) GO bonds ser 1999 LoogTerm Affirmed AA RO:Sta 06-Mar-2009 Lubbock (TX) GO bonds aer 2000 LongTe,m Affirmed AA RO;Sla 06-Mar·20CHI Lubbock (TX) GO bonds ser 2001 Long Term Affirmed AA RO:S1a 06-Mar-2009 Lubbock (TX) GO bonds aer 2001 (Insured: MBIA Long Tenn Af6nned AA AO:S1a 06-Mar-2009 '. Insurance Con).) Lubbock (TX) GO bon<IS ser 2002 Long Tenn Afftnned AA RO:Sta OMAar~ LUbbOck (TX) GO bonds ser 2002 (inBVred: Financial Guarantv Insurance Comr>anv) L.ongTem, Alfilmed AA R0'.$18. 06-Ma,•2009 Lubbock (TX) GO bonds aer 2003 (insured: MBIA Long Term Afflnned AA AO:Sla 06-Mar-2009 ) lnsuranw Corp.} Lubbock (TX) GO bonds ser 2004 (illllured: MBIA Long Term .Affirmed AA RO:Sla 06-MaJ.-2009 Insurance Con>.) Lubbock (TX) GO bOnds ser 2005 (Insured: MBIA LOngTerm Aflbmed AA RO:SW. 06-Mar-2009 Jn&Ufance Cotp.) Lubbock (TX) GO bond& 981' 2006 (insured: Financial LongTem, Affirmed AA FIO:S1a 06-Mat-2009 Guaiantv Insurance Company) Lubbock (TX) GO bond& ser 2007 (insured: Fananeial LonqTerm Affirmed AA RO:Sw 06-Mar•2009 Security Assurance Inc. (FSA)) Lubbock {TI() GO bonds &er 2008 (insured: Flnanaal Long Term Affirmed AA RO:Sla 08-Mar-2009 ~rttv Aeeurance Inc, (FSA)) lubbocl< (TX) GO lfdg bonda ser 2002 (tnsured: MBIA Long Term Affirmed AA R0'.S1a O&Mar-2009 11\SUrance Corpj l.utlbock (TX) GO tfdg bondS ser 2004 (i119Ured: MBIA Long Term .Affilmed AA RO:Sta 06-Mar-2009 ll1$lllB008 Com.} Lubbock (TX) GO lfclg bonds ser 2005 (insured: MBlA Long Term Affirmed AA RO-.Sta ~ Insurance Corp.) LubbOCk (TX) GO rfCfg bood8 ser 2006 (Insured: Long Term Affumed M RO:Sta 06-Mar-2009 ) Anancial Guarantv Insurance Company) Lubbock (T')() GO rfdg bonds ser 2007 (insured: Long Term Affirmed M AO:Sla .06-Mor~ Financial Security Assurance Inc. (FSA)) Lubbock (TX) lid pt«ige tax & wtrwk$ sys rev ctls of Long Term Affirmed AA RO:S1a 06-Mar-®09 obliQ set 1999 (Doc 10: 120673) Page 1 ofS Notice of Rating Action ' Outlook/ Bond DNctlptlon Rating Type .Action Rating Watch Eff Date NOIH Lubbock {TX) tax &, elect Ugh1 & pwt sys suri,lus rev clfa Long Term Affirmed AA RO:Sta 06-Mar-2009 ot obllg &er 2005 (ll'l8llred: MBIA l11111.1ran08 Corp.) ) Lubboc:k (TX) tax & .iect llght & pwr sys surplus rev elf$ Long Tenn Affirmed AA RO:Sta 06-Mar-2009 of oblig ser 2005 (insured: Ambac Assurance Colp.) Lubbock (TX) tax & elec1 light & pwr sys surplus rev rf<lg bonds set' 2003 (insured; MBIA lnaurance Corp.) Long Term Afflnned AA RO'.Sta 06-Mar-2009 ) Lubbock {TX) 1ax & munl drainage util sys surplus rev LongTem, Afflmled AA RO:Sta 06-Mar-2009 ctfe of obllg ser 2001 (lnaured: Financial Guaranty Insurance Company) Lubbock {TX) tax & munk:lpal drainage util sys surplus Long Term Affirmed AA RO:Sta o6.Mar-2009 rev ctf8 of obllg ser 20030 (Insured: MBIA lnsuranc:e Cofp.) ) Lubbock (TX) tax & solid waste sys surplus rev ctfs ol Long Term Affirmed AA RO:Sta 06-Mar-2009 obJIQ ser 2001 lubbc)ct (TX) tax & sotkl waste sys surplus rev clfs of obHg ser 200SC (Insured: MBIA Insurance Corp.) Long Term Afllimed AA RO:Sla ~r-2009 Lubbod< (TX) tax & swr sys aurplu& rev clfa of obllg ser Long Tenn Alfumed AA RO:Sta 06-Mar-2009 1999 Lubboclt (TX) 1llX & swr sys surplus rev ctfa of oblig ser 2002A (insured: MBIA Insurance Corp.) Long Term Affinned AA RO:Sta 06-Mar-2009 Lubbock (TX) u & swr sys eurplu& rev dfs of oblfg ser 20038 (insured: ~IA Insurance Coro.\ Long Tenn Affirmed AA RO:Sla 06-Mar-2009 Lubbodc (TX) tax & wastswtr sys sutpius rav ctfa of Long Term Affillned AA RO:Sta, 06-Mar«i09 obllg aer 2008 (insured: F'mancial $eaJrity Assurance Inc. (FSA)) ' Lubbock (TX) lalC & WUWb sys surplus nw ctfs of Oblig Long Term Affirmed AA RO'.sta 06-Mar-2009 serl99eA LubboclC (TX) m & wflWka sys surplus rev ctfs of oblig ser 2003A (Insured: MBIA Insurance Corp.) Long Term Affirmed AA AO:S1a, 06-Mar-2009 Lubbock {TX) 1aX & wttwks sys surplus rev cits of oblig Long Term Aflhmed AA RO:Sta 06-Mar-a>o9 ser 2006 (insured: Financial Guaranty lnaW'ance } Company) Lutibocl( (TX) tax & wtiwks sys su,plus rev ctfs of obllg ser 2007A (Insured: Financial Security Assurance Inc. t.ongTeim Affirmed AA RO:Sta 06-Mat-2009 (FSA}) Lubbock {TX) 18ll & wtrwi<s sys surplus rev clfs of oblfg eer 2008 (Insured: Financial Security Assurance Inc. Long Tenn Affirmed AA RO:S1a 06-Mar-~ (FSA)) Lubbocl< {TX) tax & WIIWlcs sys surplus rev clfs of obllg ser 2008 {talCable) jin&1Jred: Financial 6ec<Jrlty Long Tenn Affirmed AA RO;Sta 06-Mar-2009 As81Jrance Inc. (FSA)) Lubbock (TX) lall & wtrwlcs sys surplus rev rfdg bonds Long Tenn Affirmed AA FI0.918 OS.Mar-2009 S8I' 1999 Lubbock (TX) tax & wtrwkS ~ys &Urplus ~v rfdg bonds Long Term Affirmed M RO:S1a Q6.Mat•2009 ) ser 1999 (in&uted: MBIA Insurance Corp.) Lubbock (TX) tax & wtrwks sys surplus rev rfdQ bonds Long Term Affirmed AA AO:S. 06-Mar-2009. ser 2005 (Insured: Financial Security Assurance Inc. lFSAll (Doc 10: 120673) Pagf12.of 3 Notice of Rating Action Rating !Yr Action l.1Jbbock (TX) tax & wtrwrks sys surplus rSY C1fs of oblig Long Term AffllT!led ser 2004 (lna\.lred: MBIA Insurance Corp.) Key: RO: Rating OutloOk, AW: Rating Watch; Pos: Positive, Neg: Negalive, Sia: Stable. Evo: E\IO!ving {Doe 10: 120873) Page3of3 ' ) ) ) .., ) Thr McGraw·H,I/ Co:·.µon:,s STANDARD &POOltS March 9, 2009 City of Lubbock 1625 13th Street P.O. Box 2000 Lubbock, TX 79457 Attention: Mr. Andy Burcham, Chief Financial Officer 500 North Abllf ~ Uncoln PIiia, Svfte 3200 Danas, TX 752111 tel 214 871-1-402 rele!ance no.: 1048068. Re: US$S8,650,000 Lubbock, Texas, Tax and Waterworks System Surplus Revtnue CertificaJes, Series 2009, dated: March 1, 2009, due: February 15, 20.29 Dear Mr. Burcham: Pursuant to your request for a Standard & Poor's rating on the above-referenced obligations, we have reviewed the infonnation submitted to us and; subject to the enclosed Terms a11d Co~fiol!s-. have assigned a rating of "AA+". Standard & Poor's views the outlook fo'r this rating as stable. A copy of the rationale supporting the rating is enclosed. The rating is not investment, financial, or other advice and you should nqt and cannot rely upon the rating as such. The rating is. based on information supplied to us by you Qr by your agents but does not represent an audit. We undertake no duty of due diligence or independent verification of any infonnation. The assignment of a rating does not create a fiduciary relationship between us and you or between us and other recipients of the rating. We have not consented to and wi11 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 ratin~ nor is it a recommendation to buy, hold, or sell the ob1igations. 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 inform its own client~, subscribers, and the public of the rating. Standard & Poor's relies on the issuer/obligor and its counsel, accountants, and other-experts for- the accuracy and completeness of the information submitted in connection with the rating. This rating is based on financial information and documents we received prior to the issuance of thjs letter. Standard & Poor's assumes that the documents you have provided to us are final. If any subsequent changes were made in the final documents, you must notify us of such changes by sending us the revised final documents with ~he changes clearly marked. To maintain the rating, Standard & Poor's must receive all r.elevant financial in:fonnation as soon as such infonnation is available. Placing us on a distribution list for this infonnation would facilitate the process. You must promptly notify us of all material changes in the financial -~I.\:._; L-~ ·.,l{L1 _1 :~ H •!; •, ) Mr. Andy Burd1am Page 2 March 9. 2009 information and the documents. Standard & Poor's may change, suspend, withdraw, or place on CreditWatch the rating as a result of changes in, or unavailability of, suGh information. Standard & Poor's reserves the right to request additional information if necessary to maintain the rating. Please send all information to: Standard & Poor's Ratings Services Public Finance Department 55 Water Street New York, NY 10041-0003 Standard & Poor's is pleased to be of service to you. For more information on Standard & Poor,s, p1ease visit our website at www.standardandpoors.com. If we can be of help in any other way, please call or contact us at n,ypoblicfinance@staudardandpoors.com. Thank you for choosing Standard & Poor's and we look foiward to working with you again. Sincere! y yours, Standard & Poor1s Ratings Services a division of The McGraw-Hill Companies, Inc. fh enclosures cc: Mr. Derek Honea Mr .. Matthew Boles ) ) ) ) rl-.c McGraw·H1// Co:;:;,c;:le, . · • STANDARD &POO~S March 9, 2009 City of Lubbock 1625 13th Street P.O. Box .2000 Lubbock, TX 79457 Attention: Mr. Andy Burcham, Chief Financial Officer 500 Nol1b Abnl Sll'8t Uncoln PIUI; Sult93200 0abas, TX 75201 tel214 811·1402 Aliafence no.: 1~ Re: US$23,670,000 Lubbock, Texas, General Obligation Refunding and ImprovememBonds, Series 2009, dated: March 1, 2009, due: February JS, 2029 Dear Mr. Burcham: Pursuant to your request for a Standard & Poor's rating on the above-referenced obligations, we have reviewed the information submitted to us and, subject to the enclosed Terms and C<?nditwns, have assigned a rating of" AA+". Standard & Poor's views the outlook for this rating as stable. A copy of the rationale supporting the rating is enclosed. The rating is not jnvestment, financial, or other advice and you should not an:d cannot rely upon the rating as such. The rating is based on information $Upplied to us by you or by yqur agents but does not represent an audit. We undertake no duty of due diligence or independent verification of any information. The assignment of a rating does not create a fiduciary relationship between us and you or between us and other recipients of the rating. We have not consented to and will ilot 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 permission to you to disseminate the above-assigned rating to interested parties. Standard & Poor's reserves the right to inform its own cli~nts, subscribers, and the public of the rating. Standard & Poor's reties on the issuer/obligor and its counsel, accountants, and other experts for the accuracy and completeness of the information submitted in connection with the rating. This rating is based on financial information and documents we received prior to the issuance of this Jetter. Standard & Poor~s assumes that the documents you have provided to us are fina1. If any subsequent changes were mad~ in the final documents, you must no.tify us of such changes by sending us the revised final documents with the changes clearly marked. To maintain the rating, Standard & Poor's must receive all relevant financial information as soon as such information is available. Placing us on a distribution list for this information would facilitate the process. You must promptly notify us of all material changes in the financial Mr. Andy Burcham Page 2 March 9, 2009 information and the documents. Standard & Poor's may change, suspend, withdraw, or place on CreditWatch the rating as a result of changes in, or unavailability of, such information. Standard & Poor's reserves the right to request additional information if necessary to maintain the rating. Please send all information to: Standard & Poor's Ratings Services Public Finance Department 55 Water Street New York, NY 10041-0003 Standard & Poor1s is pleased to, be of service to you. For more infonnation on Stand~d & Poor~s, please visit .our website at www .standardandpoors.com. If we can be of help in arty other way, please call or contact us at gypublicfinagse@standardandpoors.com. 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 of The McGraw-Hill Companies-, Inc. fh enclosures cc: Mr. Derek Honea Mr. Matthew Boles , '..\:-U.\fUt ;l(')f ,~I,, March 24. 2009 T\-1r. Andy BLm.:ham CFO City of Luhhot.:k P. 0. Box 2000 Lubbock. TX 79457 Dear Mr. Rurcham. Moody's Investors Service 600 North Pe:.1rl St. Suite 2165 Dallas. r.< 75201 We wish to inform you that on Man..:h lJ, :?009. ivfoody\; Ruling ( '0111111illl!C reviewed anlt .issigned a Aa3 rating to thi: City nf l.uhhm:k · s ( i-:ncral Ohligation Refunding and Improvement Bond~. Series 2009 and Tax :1ml W:ilL'rwnrb Systems Surplus Rt:vcnuc Cc1tilic:.ih.::; of Obligation. Series 20119. ln ,mkr ti.ir us w maintain Lhc c.:urn:.ncy ol' our r.Jtings. wi: n.:q111:sl 1hm you pmvi<lc:: on~oinu disclosure. includim.! annual flnam:ial rmd srn1is1ical inlorrmllion. Moody's will monitor the rating nnd reserves the: right. al its sole disi:rction. to revise or withdraw th!! rating ~t any time in the futurl'. The rnting as wdl ,is any revisions or withdrawals thcrcn(will he ruhlidy disseminated by Mm)dy' s through normal print and cb.:lronic 1m:dia and in response to verbal rc~Jll~sts Lo Moody's raling·s dl.'sk. Should you have: any qu.:sfoms regarding the above p!c:1st.: do not he~itatc to contact me or the analyst assigned to this transaction. Kristin Button at 214•220-4383. Sincerely, ' ' ; . •. ," .... ~ Douglas Bentnn Vil:e Pre$idcnt/Sl!nior Cr~·d it Ollii:1:r cc: Matt Boles RBC Carita! Markets 2711 N. Haske!! Av~ Cityplace. Suite 2400 Dallas. TX 75204 D8/mjd CERTIFICATE PURSUANT TO PURCHASE CONTRACT We, the widersigned officials of the City of Lubbock, Texas (the "Issuer''), acting in our official capacity, in connection with the issuance and delivery by the Issuer of its City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009 (the "Bonds") and its City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (the "Certificates," and together with the Bonds, the "Securities"), hereby certify that: 1. This Certificate is delivered pursuant to the Purchase Contract, dated March 13, 2009 (the "Purchase Contract''), between the Issuer and Morgan Keegan & Company, Inc., Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Southwest Securities, Inc. (the "Underwriters"). Capitalized words used herein as defined terms and not otherwise defined herein have the respective meanings assigned to them in the Purchase Contract. 2. The representations and warranties of the Issuer contained in the Purchase Contract are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof. 3. Except to the extent disclosed in the Official Statement, no litigation is pending or, to our knowledge, threatened in any court to restrain or enjoin the issuance or delivery of the Securities, or the levy, collection or application of the ad valorem taxes and, with respect to the Certificates, Pledged Revenues, pledged or to be pledged to pay the principal of and interest on the Securities, or the pledge thereof, or in any way contesting or affecting the validity of the Securities, the Ordinance or the Escrow Agreement, or contesting the powers of the City or the authorization of the Securities, the Ordinance or the Escrow Agreement 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, 2008, the latest date as to which audited financial information is available. LUB200n IO 15 Dallas 1548747v.l DATED: April 8, 2009. Mayor City of Lubbock, Texas ~j~ Chief hlancial Officer City of Lubbock, Texas Signature Page for Certificate Pursuant to Purchase Contract Dallas 1548747v.l \ ) SUFFICIENCY CERTIFICATE OF PAYING AGENT/REGISTRAR PERTAINING TO REFUNDED OBLIGATIONS The undersigned, authorized officer of The Bank of New York Mellon Trust Company, National Association, hereby certifies that it is the paying agent/registrar ("Paying Agent/Registrar") with respect to the obligations listed on Schedule I hereto (the "Refunded Obligations") issued by the City of Lubbock, Texas, and further certifies that the following amounts representing interest on the Refunded Obligations are the true and correct amounts of interest which are due and payable on the Refunded Obligations on May 12, 2009 (the "Redemption Date"), to wit: Tax & Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1993 Redemption Date Principal Amount Interest Total Amount Due 5/12/09 $ 225,000 $ 2,175,000 $2271115.00 General Obligation Bonds, Series 1993 Redemption Date Principal Amount Interest Total Amount Due 5/12/09 $ 2,895,000 $ 27,985.00 $2.222.285 OQ Tax & Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1998 Redemption Date Principal Amount Interest Total Amount Due 5112/09 $ 1,545,000 $ 15,868.44 Sl ,560,868.4~ General Obligation Refunding Bonds, Series 1999 Redemption Date Principal Amount Interest Total Amount Due 5/12/09 $ 11,030,000 $ 119,800.21 $] 111~2.800.21 1546840_1. DOC ) ) Tax & Waterworks System Surplus Revenue Refunding Bonds, Series 1999 Redemption Date Principal Amount Interest Total Amount Due 5/12/09 $ 6,200,000 $ 67,275.17 ~6,261 215 I 2 Receipt is hereby acknowledged of a certified copy of the ordinance (the "Ordinance") and a copy of the Pricing Certificate contemplated therein, authorizing the issuance of City of Lubbock, Texas, General Obligation Refunding and Improvement Bonds, Series 2009, and calling the Refunded Obligations for redemption, such receipt constituting notice of redemption of the Refunded Obligations. It is hereby certified that the Paying Agent/Registrar will give notice of redemption with respect to the Refunded Obligations at the times and in the manner specified in the ordinances authorizing the issuance of the Refunded Obligations. [Execution Page Follows] 1546840_1.DOC Dated: ~::>I, 2009. 1546840_1.DOC The Bank of New York Mellon Trust Company, N .A., as Paying Agent/Registrar By:___.__.,~~t ~~'------- Authorized Officer Title: AaStSTANT V!CE PR!ESIDENT SCHEDULE I SCHEDULE OF REFUNDED OBLIGATIONS Maturity Refunded Call Series Date Obligations Date Tax & Waterworks System (Limited Pledge) 02/15/2012 $ 75,000 05/12/2009 Revenue Certificates of Obligation, Series 1993 02/15/2013 75,000 02/15/2014 75,000 s 225,000 General Obligation Bonds, Series 1993 02/15/2012 $ 965,000 05/12/2009 02/15/2013 965,000 02/15/2014 965,000 s 2,895,000 Tax & Waterworks System (Limited Pledge) 02/15/2016 $ 515,000 05/12/2009 Revenue Certificates of Obligation, Series 1998 02/15/2017 515,000 02/15/2018 515,000 s l,S4S,OOO General Obligation Refunding Bonds. Series 1999 02/15/2010 s 2,960,000 05/12/2009 02/15/2011 2,930,000 02/15/2012 1,785,000 02/15/2013 1,685,000 02/15/2014 1,670,000 $ 11,030,000 Tax & Waterworks System Surplus Revenue 02/15/2010 $ 620,000 05/12/2009 Refunding Bonds, Series 1999 02/15/2011 620,000 02/15/2012 620,000 02/15/2013 620,000 02/15/2014 620,000 02/15/2016 1,240,000 02/15/2019 1,860,000 $ 6.200,000 "') ) ) ) SIGNATURE IDENTIFICATION AND AUTIIORITY CERTIFICATE OF THE BANK OF NEW YORK MELLON TRUST COMP ANY, N.A. I, the undersigned, Rosalyn Y. Davis, do hereby certify that: 1. I am a duly elected and acting Assistant Treasurer of The Bank of New York Mellon Trust Company, N.A. (the "Bank"), and I am duly authorized to execute this certificate on its behalf. 2. That certain Escrow Agreement between City of Lubbock, Texas and the Bank, dated as of March 31, 2009 (the "Escrow Agreement") was duly executed on behalf of the Bank by Pat Blue, who at the time of executing and attesting the same were and are now duly elected and acting Assistant Vice President, of the Bank and authorized to execute, attest and deliver the Escrow Agreement as evidenced by the resolutions or Bylaws contained in Exhibit "A". The Resolutions or Bylaws contained in Exhibit "A" were duly adopted and are in full force and effect as of this date. There follows the names, offices and true and correct signatures of the aforesaid officers: Pat Blue Designation Assistant Vice President WITNESS my hand and seal of The Bank of New York Mellon Trust Company, N.A. this 31st day of March, 2009 Name~ Rosalyn Y. Davis Assistant Treasurer ) ) ) THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. I, the undersigned, Barbara J. Parrish, Assistant Secretary of The Bank of New York Mellon Trust Company, N.A., a national banking association organized under the laws of the United States (the "Association") and located in the State of California, with a trust office located at 2001 Bryan Street, Dallas, Texas, DO HEREBY CERTIFY that the following individuals are duly appointed and qualified Officers of the A~ciation: Officer Title Sigmng Autboritl:'. Deborah A. Bennett Vice President A, C2,J Bryan Griffin Vice President A, C2,J Charles Hicks Vice President & Assistant Secretary A, C2,J Kathleen A. McQuiston Vice President A, C2,J Robert Patterson Vice President A, C2,J Cathleen M. Sokolowski Vice President A, C2,J Michelle L. Baldwin Assistant Vice President A, C3, J Patricia D. Blue Assistant Vice President A, C2, J Jason Stephens Assistant Vice President A, C2, J Rick M. Adler Assistant Treasurer A, C3, J Rosalyn Y. Davis Assistant Treasurer A, C3,J Elizabeth Power Assistant Treasurer A, C3, J Deirdre A. Steven Assistant Treasurer A, C3,J Shannon Straty Assistant Treasurer A, C3, J I further certify that as of this date they have been authorized to sign on behalf of the Association in discharging or performing their duties in accordance with the senior and limited signing powers provided under Article V, Sections 5.2 and 5.3 of the By-Laws of the Association and the paragraphs indicated above of the signing authority resolution of the Board of Directors of the Association. Attached hereto are true and correct copies of excerpts of the By-Laws of the Association and the signing authority resolution, which have not been amended or revised since July 1, 2008 and are in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of The Bank of New York Mellon Trust Company, N.A. this 25th day of March 2009 . . ,J _/ n-L/. 9{._/&;'-/.__£,._,,-...__ -:J-. / a:& "£.,:..q./7 Barbara J. Parrish(-1\.ssistant Secretary ... Extracts from By-Laws Of The Bank of New York MeUon Trust Company, N.A. As Amended January 20, 2005 and July 1, 2008 ARTICLEV SIGNING AUTHORITIES Section 5.1 Real Property. Real property owned by the Association in its own right shall not be deeded, conveyed, mortgaged, assigned or transferred except when duly authorized by a resolution of the Board. The Board may from time-to-time authorize officers to deed, convey, mortgage, assign or transfer real property owned by the Association in its own right with such maximum values as the Board may fix in its authorizing resolution. Section 5.2. Senior Signing Powers. Subject to the exception provided in Section 5.1, the President and any Executive Vice President is authorized to accept, endorse, execute or sign any document, instrument or paper in the name of, or on behalf of, the Association in all transactions arising out of, or in connection with, the normal course of the Association's business or in any fiduciary, representative or agency capacity and, when required, to affix the seal of the Association thereto. In such instances as in the judgment of the President, or any Executive Vice President may be proper and desirable, any one of said officers may authorize in writing from time-to-time any other officer to have the powers set forth in this section applicable only to the performance or discharge of the duties of such officer within his or her particular division or function. Any officer of the Association authorized in or pursuant to Section 5.3 to have any of the powers set forth therein, other than the officer signing pursuant to this Section 5.2, is authorized to attest to the seal of the Association on any documents requiring such seal. Section 5.3. Limited Signing Powers. Subject to the exception provided in Section 5.1, in such instances as in the judgment of the President or any Executive Vice President, may be proper and desirable, any one of said officers may authorize in writing from time-to-time any other officer, employee or individual to have the limited signing powers or limited power to affix the seal of the Association to specified classes of documents set forth in a resolution of the Board applicable only to the performance or discharge of the duties of such officer, employee or individual within his or her division or function. Section 5.4. Powers of Attorney. All powers of attorney on behalf of the Association shall be executed by any officer of the Association jointly with the President, any Executive Vice President, or any Managing Director, provided that the execution by such Managing Director of said Power of Attorney shall be applicable only to the pelformance or discharge of the duties of said officer within his or her particular division or function. Any such power of attorney may, however, be executed by any officer or officers or person or persons who may be specifically authorized to execute the same by the Board of Directors. Section 5.5. Auditor. The Auditor or any officer designated by the Auditor is authorized to certify in the name of, or on behalf of the Association, in its own right or in a fiduciary or representative capacity, as to the accuracy and completeness of any account, schedule of assets, or other document, instrument or paper requiring such certification. ) SIGNING AUTHORITY RESOLUTION Pursuant to Article V, Section 5.3 of the By-Laws RESOLVED that, pursuant to Section 5.3 of the By-Laws of the Association, authority be, and hereby is, granted to the President or any Executive Vice President. in such instances as in the judgment of any one of said officers may be proper and desirable, to authorize in writing from time-to- time any other officer, employee or individual to have the limited signing authority set forth in any one or more of the following paragraphs applicable only to the performance or discharge of the duties of such officer, employee or individual within his or her division or function: (A) All signing authority set forth in paragraphs (B) through (I) below except Level C which must be specifically designated. (Bl) Individuals authorized to accept, endorse, execute or sign any bill receivable; certification; contract, document or other instrument evidencing, embodying a commitment with respect to, or reflecting the terms or conditions of, a loan or an extension of credit by the Association; note; and document, instrument or paper of any type, including stock and bond powers, required for purchasing. selling, transferring, exchanging or otherwise disposing of or dealing in foreign currency, derivatives or any form of securities, including options and futures thereon; in each case in transactions arising out of, or in connection with, the normal course of the Association's business. (B2) Individuals authorized to endorse, execute or sign any certification; disclosure notice required by law; document, instrument or paper of any type required for judicial, regulatory or administrative proceedings or filings; and legal opinions. (Cl) Authority to accept, endorse, execute or sign or effect the issuance of any cashiers, certified or other official check; draft; order for payment of money; check certification; receipt; certificate of deposit; money transfer wire; and internal transfers resulting in a change of beneficial ownership; in each case, in excess of $100,000,000 with single authorization for all transactions. (C2) Authority to accept, endorse, execute or sign or effect the issuance of any cashiers, certified or other official check; draft; order for payment of money; check certification; receipt; certificate of deposit; money transfer wire; and internal transfers resulting in a change of beneficial ownership; in each case, in excess of $100,000,000*. (C3) Authority to accept, endorse, execute or sign or effect the issuance of any cashiers, certified or other official check; draft; order for payment of money; check certification; receipt; certificate of deposit; money transfer wire; and internal transfers resulting in a change of beneficial ownership; in each case, in an amount up to $100,000,000. (C4) Authority to accept, endorse, execute or sign or effect the issuance of any cashiers, certified or other official check; draft; order for payment of money; check ) certification; receipt; certificate of deposit; money transfer wire; and internal transfers resulting in a change of beneficial ownership; in each case, in an amount up to $10,000,000. (CS) Authority to accept, endorse, execute or sign or effect the issuance of any cashiers, certified or other official check; draft; order for payment of money; check certification; receipt; certificate of deposit; money transfer wire; and internal transfers resulting in a change of beneficial ownership; in each case, in an amount up to $5,000,000. (C6) Authority to accept, endorse, execute or sign or effect the issuance of any cashiers, certified or other official check; draft; order for payment of money; check certification; receipt; certificate of deposit; money transfer wire; and internal transfers resulting in a change of beneficial ownership; in each case, in an amount up to $1,000,000. (C7) Authority to accept, endorse, execute or sign or effect the issuance of any cashiers, certified or other official check; draft; order for payment of money; check certification; receipt; certificate of deposit; money transfer wire; and internal transfers resulting in a change of beneficial ownership; in each case, in an amount up to $250,000. (CS) Authority to accept, endorse, execute or sign or effect the issuance of any cashiers, certified or other official check; draft; order for payment of money; check certification; receipt; certificate of deposit; money transfer wire; and internal transfers resulting in a change of beneficial ownership; in each case, in an amount up to $50,000. (C9) Authority to accept, endorse, execute or sign or effect the issuance of any cashiers, certified or other official check; draft; order for payment of money; check certification; receipt; certificate of deposit; money transfer wire; and internal transfers resulting in a change of beneficial ownership; in each case, in an amount up to $5,000. *Dual authorization is required by any combination of senior officer and/or Sector Head approved designee for non-exempt transactions. Single authorization required for exempt transactions. (Dl) Authority to accept, endorse, execute or sign any contract obligating the Association for the payment of money or the provision of services in an amount up to $1,000,000. (D2) Authority to accept, endorse, execute or sign any contract obligating the Association for the payment of money or the provision of services in an amount up to $250,000. (D3) Authority to accept, endorse, execute or sign any contract obligating the Association for the payment of money or the provision of services in an amount up to $50,000. (D4) Authority to accept, endorse, execute or sign any contract obligating the Association for the payment of money or the provision of services in an amount up to $5,000. (E) Authority to accept, endorse, execute or sign any guarantee of signature to assignments of stocks, bonds or other instruments; certification required for transfers and deliveries of stocks, bonds or other instruments; and document, ) instrument or paper of any type required in connection with any Individual Retirement Account or Keogh Plan or similar plan. (F) Authority to accept, endorse, execute or sign any certificate of authentication as bond, unit investment trust or debenture trustee and on behalf of the Association as registrar and transfer agent. (G) Authority to accept, endorse, execute or sign any bankers acceptance; letter of credit; and bill of lading. (H) Authority to accept, endorse, execute or sign any document, instrument or paper of any type required in connection with the ownership, management or transfer of real or personal property held by the Association in trust or in connection with any transaction with respect to which the Association is acting in any fiduciary, representative or agency capacity, including the acceptance of such fiduciary, representative or agency account. (11) Authority to effect the external movement of free delivery of securities and internal transfers resulting in changes of beneficial ownership. (12) Authority to effect the movement of securities versus payment at market or contract value. (J) Authority to either sign on behalf of the Association or to affix the seal of the Association to any of the following classes of documents: Trust Indentures, Escrow Agreements, Pooling and Servicing Agreements, Collateral Agency Agreements, Custody Agreements, Trustee's Deeds, Executor's Deeds, Personal Representative's Deeds, Other Real Estate Deeds for property not owned by the Association in its own right, Corporate Resolutions, Mortgage Satisfactions, Mortgage Assignments, Trust Agreements, Loan Agreements, Trust and Estate Accountings, Probate Petitions, responsive pleadings in litigated matters and Petitions in Probate Court with respect to Accountings, Contracts for providing customers with Association products or services. (N) Individuals authorized to accept, endorse, execute or sign internal transactions only, (i.e., general ledger tickets); does not include the authority to authorize external money movements, internal money movements or internal free deliveries that result in changes of beneficial ownership. RESOLVED, that any signing authority granted pursuant to this resolution may be rescinded by the President or any Executive Vice President and such signing authority shall terminate without the necessity of any further action when the person having such authority leaves the employ of the Association. ) Vinson&Elkins April 8, 2009 $23,185,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2009 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 AND IMPROVEMENT BONDS, SERIES 2009 dated March 1, 2009, issued in the principal amount of$23,185,000. 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 HA VE represented the City as its Bond Counsel for the sole purpose of rendering an opinion with respect to the legality and validity of the Bonds under the Constitution and laws of the State of Texas and with respect to the exclusion of interest on the Bonds from gross income for federal income tax purposes. We have not investigated or verified original proceedings, records, data or other material, but have relied solely upon the transcript of proceedings described in the following paragraph. We have not assumed any responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in connection with the sale of the Bonds. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein. IN OUR CAPACITY as Bond Counsel, we have participated in the preparation of and have examined a transcript of certified proceedings pertaining to the Bonds, on which we have relied in giving our opinion. The transcript contains certified copies of certain proceedings of the City, an escrow agreement (the "Escrow Agreement") between the City and The Bank of New York Mellon Trust Company, National Association, as escrow agent (the "Escrow Agent"), a certificate (the "Sufficiency Certificate") of the Escrow Agent verifying the sufficiency of the deposits made with the Escrow Agent for defeasance of the obligations being refunded (the "Refunded Obligations"), customary certificates of officers, agents and representatives of the Vinson & Elklns LLP Attorneys at Law Austin Beijing Dallas Dubai Houston London Moscow New York Tokyo Washington Dallas I S49204v. l Trammell CIQW Center, 2001 Ross Avenue, Suite 3700 Dallas, Texas 75201-2975 Tel 214.220.7700 Fax 214.220.n16 www.velaw.com ) V&E 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) Firm 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 RIGHTS OF THE OWNERS of the Bonds are subject to the applicable provisions of the federal bankruptcy laws and any other similar laws affecting the rights of creditors of political subdivisions generally, and may be limited by general principles of equity which permit the exercise of judicial discretion. IT IS OUR FURTHER OPINION THAT: (1) Interest on the Bonds is excludable from gross income for federal income tax purposes under existing law; and (2) The Bonds are not ''private activity bonds" within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"), and interest on the Bonds is not subject to the alternative minimum tax on individuals and corporations, except that interest on the Bonds could 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 -2- Dallas 1549204v. I V&E 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 Sufficiency Certificate. If such representations or the Sufficiency Certificate are determined to be inaccurate or incomplete or the City fails to comply with the foregoing provisions of the Ordinance, interest on the Bonds could become includable in gross income from the date of original delivery, regardless of the date on which the event causing such inclusion occurs. Except as stated above, we express no opinion as to any federal, state or local tax consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or disposition of, the Bonds. 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 deeined 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 detennine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given as to 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. -3- Dallas i 549204v. I '\ ) ) Vinson&Elkins April 8, 2009 $58,705,000 ClTY OF LUBBOC~ TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2009 WE HA VE represented the City of Lubbock, Tex.as (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 2009, dated March 1, 2009, issued in the principal amount of $58,705,000. 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'') and the Pricing Certificate executed pursuant to the Ordinance. WE HA VE 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. Vinson & Elkins LLP Attorneys at Law Austin Beijing Dallas Dubai Houston London Moscow NewYor1< Tokyo Washington Dallas 1549206v .1 Trammell Crow Center, 2001 Ross Avenue, Suite 3700 Dallas, Te,cas 75201-2975 Tel 214.220.noo Fax 214.220.7716 www.velaw.eom ) ) ) V&E 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 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, as such, interest on the Certificates is not treated as an "item of tax preference" to be included in the computation of "alternative minimum taxable income" for an individual or a corporation. Furthermore, interest on the Certificates is not treated as includable in the "adjusted current earnings" of a corporation 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 provisions of the Ordinance, interest on the Certificates could become includable in gross income -2- Dallas I 549206v. l "\ ) ) V&E 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 Certificates 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 Certificates). 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 as to 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 1549206v. I .., ' ., Vinson&Elkins April 8, 2009 City of Lubbock, Texas P .0. Box 2000 Lubbock, Texas 79457 Morgan Keegan & Company, Inc . Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Stanley & Co. Incorporated Southwest Securities, Inc. c/o Morgan Keegan & Company, Inc. 4400 Post Oak Parkway, Suite 2670 Houston, Texas 77027 Re: City of Lubbock, Texas General Obligation Refunding and Improvement Bonds, Series 2009 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 Ladies and Gentlemen: We have served as Bond Counsel to the City of Lubbock, Texas (the "Issuer") in connection with the issuance of its $23,185,000 City of Lubbock, Texas General Obligation Refunding and Improvement Bonds, Series 2009 (the "Bonds") and its $58,705,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2009 (the "Certificates," and together with the Bonds, the "Obligations"), issued pursuant to the provisions of two separate ordinances duly adopted by the City Council of the Issuer on February 26, 2009 ( collectively, the "Ordinance"). This opinion is delivered pursuant to the provisions of Section 8(e)(8) 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 March 13, 2009 (the "Purchase Contract") between the Issuer and the Underwriters named in such Purchase Contract; Vinson & Elkins UP Attorneys at Law Austin Beijing Dallas Dubai Houston London Moscow New Yori< Tokyo Washington Dallas 1549198v.1 Trammell Crow Center, 2001 Ross Avenue, Suite 3700 Dallas, Texas 75201-2975 Tai 214.220.TTOO Fax 214.220.7716 www.valaw.com .., ) ) V&E (c) a copy of the Pricing Certificate, dated March 13, 2009; (d) a copy of the Official Statement dated March 13, 2009; and (e) such other agreements, documents, certificates, opinions, letters, and other papers as we have deemed necessary or appropriate in rendering the opinions set forth below . In making our review, we have assumed the authenticity of all documents and agreements submitted to us as originals, conformity to the originals of all documents and agreements submitted to us as certified or photostatic copies, the authenticity of the originals of such latter documents and agreements, and the accuracy of the statements contained in such 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 Obligations 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 Obligations to register the Obligations under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act. 2. Except as to the extent noted herein, we have not verified and are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the information contained in the Official Statement. We have, however, reviewed the statements and information in the Official Statement under the captions "The Obligations" (except for the subcaptions "Book-Entry-Only System" and "Sources and Uses of Proceeds") and "Tax Matters" and the subcaptions "Continuing Disclosure of Information" ( except for 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 summary of the provisions of the laws and instruments therein described and, with respect to the Obligations, such information conforms to the Ordinance. 3. The Purchase Contract has been duly authorized, executed and delivered by the City and (assuming due authorization by the Underwriters) constitutes a binding and enforceable agreement of the City in accordance with its tenns. The addressees may rely on our opinions, dated as of the date hereof, delivered in connection with the issuance of the Obligations to the same extent as if such opinions were specifically addressed to them. -2- Dallas 1549 I 98v. I V&E This opinion is furnished solely for your benefit and may be relied upon only by the addresses hereof or anyone to whom specific pennission is given in writing by us. Very truly yours, -3- Dallas 1549l 98v. l ") ~WOFFICES M~CALL, PARKHURST & HORTON L.L.P. 717 NORTH HARWOOD SUITE 900 700 N. ST. MARY'S STREET SUITE 1525 DALLAS, TEXAS 75201-6567 SAN ANTONIO, TEXAS 76205-3503 T£L£PHONE: 214 75-4,9200 FACSIMILE: 21• 754 ·92 50 Morgan Keegan & Company, Inc. TELE,.HONE: 210 22!5·2800 FACStMILE! 210 225-2984 AprilS,2009 Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Stanley & Co. Incorporated Southwest Securities, Inc. c/o Morgan Keegan & Company, Inc. 4400 Post Oak Parkway, Suite 2670 Houston, Texas 77027 600 CONGRESS AVENUE SUIT£ 1800 AUSTIN, TEXAS 78701-3248 TELEPHON£: 512 478•3805 FACSIMILE! Stl! 472-0971 Re: $23,185,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2009 $58,705,000 CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2009 Ladies and Gentlemen: We have acted as counsel for you as the underwriters of the securities described above (collectively, the "Securities"), issued under and pursuant to two separate ordinances (collectively, the "Ordinance") of the City of Lubbock, Texas (the "Issuer"), authorizing the issuance of the Securities, which Securities you are purchasing pursuant to a Purchase Contract, dated March 13, 2009. 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 Securities and we have assumed, but not independently verified, that the signatures on all documents and Securities that we have examined are genuine. ) ) Based on and subject to the foregoing, we are of the opinion that, under existing laws, the Securities 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 March 13, 2009 (the "Official Statement") and because the information in the Official Statement under the headings "THE OBLIGATIONS -Book-Entry-Only System," "TAX MATTERS," "OTIIER INFORMATION - Continuing Disclosure oflnfonnation -Compliance with Prior Undertakings II and Appendices A and B 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 the headings "THE OBLIGATIONS -Book-Entry-Only System," 11TAX MATTERS," "OTHER INFORMATION -Continuing Disclosure of Information -Compliance with Prior Undertakings" and Appendices A and B 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, i "\ ") ATTORNEY GENERAL OF TEXAS GREG ABBOTT April 6, 2009 THIS IS TO CERTIFY that the City of Lubbock, Texas (the "Issuer") has submitted to me City of Lubbock, Texas General Obligation Refunding and Improvement Bond, Series 2009 (the "Bond"), in the principal amount of $23,185,000, for approval. The Bond is dated March 1, 2009, numbered T-1, and was authorized by an Ordinance of the Issuer passed on February 26, 2009 (the "Ordinance"). The record of proceedings included the Ordinance and a Pricing Certificate relating to the Bond. I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. I express no opinion relating to the official statement or any other offering material relating to the Bond. Based on my examination, I am of the opinion, as of the date hereof and under existing law, as. follows ( capitalized terms, except as herein defined, have the meanings given to them in the Ordinance): (1) The Bond has been issued in accordance with law and is a valid and binding obligation of the Issuer. (2) In accordance with the provisions of the law, including an Escrow Agreement dated as of March 1, 2009, firm banking arrangements have been made for the discharge and final payment or redemption of the obligations being refunded upon deposit of an amount sufficient to pay said obligations when due. (3) The Bond is payable from the proceeds of an annual ad valorem tax levied, upon all taxable property in the Issuer, within the limit prescribed by law. ( 4) The proceedings conform to the requirements of law. Therefore, the Bond is approved and, pursuant to Chapter 1371 of the Government Code the proceedings are approved. POST OFFICE Box 12548, AUSTIN, TEXAS 78711-2548 TEL:(512)463-2100 WWW.OAC.STATE.TX.US An Equal Employm,,it Opp,rtuni,y Employa , l'rinud on 11,cyrl,d l'aptr ) ) ) '"'I City of Lubbock. Texas General Obligation Refunding and Improvement Bond, Series 2009 · - $23, 185,000 -Pa e 2- The Comptroller is instructed that she may register the Bond without the cancellation of the W1derlying securities being refunded thereby. No. 48946 Book No. 2009-B JCH "') ) ) ) OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Jonathan Gonzales, D Bond Clerk~ 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 6th day of April, 2009, I signed the name of the Comptroller to the certificate of registration endorsed upon the: City of Lubbock, Texas General Obligation Refunding and Improvement Bond, Series 2009 and certain related documents ("the Proceedings"). the bond is numbered T-1. dated March 1. 2009, and that in signing the certificate of registration I used the following signature0 /"' J ·~"~,i) IN WITNESS WHEREOF I have executed this certificate this the 6th day of April. 2009. I, Susan Combs,'"5EqWI2lller--ef ublic A\.ccounts 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 75386. GIVEN under my hand and seal of office at Austin, Texas, this the 6th day of April, 2009. ~~ SUSAN COMBS Comptroller of Public Accounts of the State of Texas J ") 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 General Obligation Refunding and Improvement Bond, Series 2009 and certain related documents (''the Proceedings") the bond is numbered T-1. of the denomination of$ 23.185.000, dated March 1, 2009, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates and Proceedings were registered electronically in the office of the Comptroller, on the 6th day of April. 2009, under Registration Number 75386. Given under my hand and seal of office, at Austin, Texas, the 6th day of April. 2009. SUSAN COMBS Comptroller of Public Accounts of the State of Texas '") ) ') P.O. Box 2000 • 1625 13th Street Lubbock,Texas79457 (806) 775-2222 • Fax (806) 775-3307 April 8, 2009 Morgan Keegan & Company, Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Stanley & Co. Incorporated Southwest Securities, Inc. c/o Morgan Keegan & Company, Inc. 4400 Post Oak Parkway, Suite 2670 Houston, Texas 77027 Office of the City Attorney Re: $23,185,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2009 $58,705,000 CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2009 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 securities (collectively, the "Securities"), pursuant to the provisions of two separate ordinances ( collectively, the "Ordinance") duly adopted by the City Council of the City on February 26, 2009. Capitalized terms not otheiwise defined in this opinion have the meanings assigned in the Purchase Contract. In my capacity as City Attorney to the City, I have reviewed such agreements, documents, certificates, opinions, letters, and other papers as I have deemed necessary or appropriate in rendering the opinions set forth below. In making my review, I have assumed the authenticity of all documents and agreements submitted to me as originals, conformity to the originals of all documents and agreements submitted to me as certified or photostatic copies, the authenticity of the originals of such latter documents and agreements, and the accuracy of the statement contained in such documents. ) .., ) ) ) Based upon the foregoing, and subject to the qualifications and exceptions hereinafter set forth, I am of the opinion that under the applicable laws of the United States of America and the State of Texas in force and effect on the date hereof: 1. 2. 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, ordinruice, 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 Securities 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 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 Securities, or the levy, collection or application of the ad valorem taxes and, with respect to the Certificates, the Pledged Revenues, pledged or to be pledged to pay the principal of and interest on the Securities; ( c) contesting or affecting the validity or enforceability of the Securities, the Ordinance, the Pricing Certificate, the Escrow Agreement or the Purchase Contract; ( d) contesting the powers of the City or any authority for the issuance of the Securities, or the adoption of the Ordinance; or (e) that would have a material and adverse effect on the financial 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 truldn o~Cs, A <;J [{(~~ an 1ver, 1ty ttome1/~ -......_,,, ~