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Ordinance - 2007-O0070 - Tax And Waterworks Surplus Revenue - 06/26/2007
Ordinance No. 2007-00070 ORDINANCE relating to CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION TAXABLE SERIES 2007 Adopted: June 26, 2007 1261694v.l LUB200/71009 Section 1.1 Section 1.2 Section 1.3 Section 1.4 TABLE OF CONTENTS ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Definitions ................................................................................................................ 2 Findings .................................................................................................................... 4 Table of Contents, Titles, and Headings .................................................................. 4 Interpretation ............................................................................................................ 5 ARTICLE II SECURITY FOR THE CERTIFICATES; INTEREST AND SINK.ING FUND; PRIOR LIEN OBLIGATIONS Section 2.1 Section 2.2 Payment of the Certificates ...................................................................................... 5 Interest and Sinking Fund ........................................................................................ 6 ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE CERTIFICATES Section 3.1 Section 3.2 Section 3.3 Section 3.4 Section 3.5 Section 3.6 Section 3.7 Section 3.8 Section 3.9 Section 3 .10 Section 3 .11 Section 3.12 Section 4.1 Section 4.2 Section 4.3 Section 4.4 Section 4.5 Authorization ........................................................................................................... 6 Date, Denomination, Maturities, and Interest .......................................................... 7 Medium, Method, and Place of Payment ................................................................. 7 Execution and Registration of Certificates .............................................................. 8 Ownership ................................................................................................................ 9 Registration, Transfer, and Exchange ...................................................................... 9 Cancellation ........................................................................................................... I 0 Temporary Certificates .......................................................................................... 10 Replacement Certificates ....................................................................................... 10 Book-Entry-Only System ....................................................................................... 11 Successor Securities Depository; Transfer Outside Book-Entry-Only System ..... 12 Payments to Cede & Co ......................................................................................... 13 ARTICLE IV REDEMPTION OF CERTIFICATES BEFORE MATURITY Redemption ............................................................................................................ 13 Optional Redemption ............................................................................................. 13 Mandatory Sinking Fund Redemption ................................................................... 13 Partial Redemption ................................................................................................. 14 Notice of Redemption to Owners .......................................................................... 14 (i) 1261694v.J LUB2O0/71009 Section 4.6 Section 4.7 Section 4.8 Section 5.1 Section 5.2 Section 5.3 Section 5.4 Section 5.5 Section 5.6 Section 5.7 Section 6.1 Section 6.2 Section 6.3 Section 6.4 Section 6.5 Payment Upon Redemption ................................................................................... 15 Effect of Redemption ............................................................................................. 15 Lapse of Payment. .................................................................................................. 15 ARTICLE V PA YING AGENT/REGISTRAR Appointment oflnitial Paying Agent/Registrar ..................................................... 15 Qualifications ......................................................................................................... 15 Maintaining Paying Agent/Registrar ..................................................................... 16 Termination ............................................................................................................ 16 Notice of Change to Owners .................................................................................. 16 Agreement to Perform Duties and Functions ......................................................... 16 Delivery of Records to Successor .......................................................................... 16 ARTICLE VI FORM OF THE CERTIFICATES Form Generali y ...................................................................................................... 16 Form of the Certificates ......................................................................................... 17 CU SIP Registration ................................................................................................ 23 Legal Opinion ........................................................................................................ 23 Bond Insurance ...................................................................................................... 23 ARTICLE VII SALE AND DELIVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS Section 7.1 Section 7.2 Section 7.3 Section 8.1 Section 8.2 Sale of Certificates; Official Statement ................................................................. 23 Control and Deli very of Certificates ...................................................................... 25 Deposit of Proceeds ............................................................................................... 25 ARTICLE VIII INVESTMENTS Investments ............................................................................................................ 26 Investment Income ................................................................................................. 26 ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.1 Payment of the Certificates .................................................................................... 26 Section 9.2 Other Representations and Covenants ................................................................... 26 (ii) 1261694v.l LUB200/71009 ARTICLEX DEFAULT AND REMEDIES Section 10 .1 Events of Default ................................................................................................... 2 7 Section 10.2 Remedies for Default ............................................................................................. 27 Section 10.3 Remedies Not Exclusive ........................................................................................ 27 ARTICLE XI DISCHARGE Section 11.1 Discharge ............................................................................................................... 28 ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12.1 Annual Reports ...................................................................................................... 28 Section 12.2 Material Event Notices .......................................................................................... 28 Section 12.3 Limitations, Disclaimers and Amendments ........................................................... 29 ARTICLE XIII AMENDMENTS; ATTORNEY GENERAL MODIFICATION Section 13.1 Amendments .......................................................................................................... 30 Section 13.2 Attorney General Modification .............................................................................. 31 ARTICLE XIV INSURANCE PROVISIONS Section 14.1 Municipal Bond Insurance ..................................................................................... 31 ARTICLE XV EFFECTIVE IMMEDIATELY Section 15.1 Effective Immediately ............................................................................................ 31 Exhibit A -Description of Annual Disclosure of Financial Information ................................... A-1 Exhibit B -Sale Paraineters ......................................................................................................... B-1 (iii) 1261694v.J LUB200/71009 AN ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2007 IN AN AMOUNT NOT TO EXCEED $12,000,000; 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 provisions of Subchapter C, Chapter 271, Texas Local Government Code, as amended, the City of Lubbock, Texas (the "City"), after giving proper notice, is authorized to issue and sell for cash its certificates of obligation (herein defined as the "Certificates") that are secured by and payable from the ad valorem taxes and other revenues specified in Article II of this Ordinance, and that are issued in the amount, for the purposes, and with the provisions set forth in Section 3 .1 of this Ordinance; WHEREAS, pursuant to a resolution heretofore passed by the City Council, notice of intention to issue the Certificates was published in a newspaper of general circulation in the City in accordance with applicable law; WHEREAS, no petition has been filed with the City Secretary, any member of the City Council or any other official of the City, protesting the issuance of the Certificates; WHEREAS, the City Council is now authorized and empowered to proceed with the issuance and sale of the Certificates, and has found and determined that it is necessary and in the best interests of the City and its citizens that it 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 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: 126!694v.l LUB200/71009 ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section 1.1 Definitions. Unless otherwise expressly provided or W1less the context clearly requires otherwise in this Ordinance, the following terms shall have the meanings specified below: "Authorized Officer" means the Chief Financial Officer and, in his absence, each of the City Manager and the Director of Fiscal Policy and Strategic Planning. "Certificate" means any of the Certificates. "Certificate Date" means the date designated as the initial date of the Certificates by Section 3.2(a) of this Ordinance. "Certificates" means the certificates of obligation authorized to be issued by Section 3.1 of this Ordinance and designated as "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2007." "City" means the City of Lubbock, Texas. "Closing Date" means the date of the initial delivery of and payment for the Certificates. "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. "Event of Default" means any event of default as defined in Section 10.1 of this Ordinance. ''Fiscal Year" means such fiscal year as shall from time to time be set by the City Com1cil. "Gross Revenues" means, with respect to any period, all income, revenues and receipts received from the operation and ownership of the System. -2- 1261694v.1 LUB200/710-09 "Initial Certificate" means the initial certificate authorized by Section 3.4 of this Ordinance. "Interest and Sinking Fund" means the interest and sinking fund established by Section 2.2 of this Ordinance. "Interest Payment Date" means the date or dates on which interest on the Certificates is scheduled to be paid until their respective dates of maturity or prior redemption, such dates being February 15 and August 15 of each year, commencing 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 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 in Section 3. 1. -3- 1261694v.l LUB2O0/71O09 "Record Date" means the last business day of the month next preceding an Interest Payment Date. "Register" means the Register specified in Section 3.6(a) of this Ordinance. "Representations Letter" means the Blanket Letter of Representations between the City andDTC. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. "SID" means any person designated by the State of Texas or an authorized department, office or agency thereof, as and determined by the SEC or its staff to be a state information depository within the meaning of the Rule from time to time. "Surplus Revenues" means the Net Revenues of the System in an amount not to exceed $1,000 remaining after payment of all debt service, reserve and other requirements in connection with the City's Prior Lien Obligations. "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 4.3 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. "Underwriter" means Morgan Stanley. Section 1.2 Findings. The declarations, determinations, and findings declared, made, and found in the preamble to this Ordinance are hereby adopted, restated, and made a part of the operative provisions hereof. Section 1.3 Table of Contents, Titles, and Headings. The table of contents, titles and headings of the Articles and Sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof and shall never be considered or given any effect in construing this Ordinance or any provision hereof or in ascertaining intent, if any question of intent should arise. -4- 1261694v.1 LUB200/71009 Section 1.4 Interpretation. (a) Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular 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 SECURJTY FOR THE CERTIFICATES; INTEREST AND SINKING FUND; PRIOR LIEN OBLIGATIONS Section 2.1 Payment of the Certificates. (a) Pursuant to the authority granted by the Texas Constitution and laws of the State of Texas, there shall be levied and there is hereby levied for the current year and for each succeeding year thereafter while any of the Certificates or any interest thereon is outstanding and 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 terms and this Ordinance. (d) The City hereby covenants and agrees that the Surplus Revenues are hereby irrevocably pledged equally and ratably to the payment of the principal of and interest on the Certificates. The City reserves the right to issue Prior Lien Obligations for any lawful purpose, at any time, in one or more installments. (e) The amount of taxes to be assessed annually for the payment of debt service on the Certificates shall be determined in the following manner: (i) The City's annual budget shall reflect (A) the amount of debt service requirements to become due on the Certificates in the next ensuing Fiscal Year and (B) the amount on deposit in the Interest and Sinking Fund on the date such budget is approved. -5- 1261694v.1 LUB2O0/71O09 (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 amowit 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. (t) 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 pennit, 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 2.2 Interest and Sinking Fund. (a) The City hereby establishes a special fund or account to be designated the "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2007, Interest and Sinking Fund" (the "Interest and Sinking Fund"), said fund to be maintained at an official depository bank of the City separate and apart from all other funds and accounts of the City. (b) Money on deposit in or required by this Ordinance to be deposited to the Interest and Sinking Fund shall be used solely for the purpose of paying the interest on and principal of the Certificates when and as due and payable in accordance with their terms and this Ordinance. ARTICLE III AUTHORIZATION; GENERAL IBRMS AND PROVISIONS REGARDING THE CERTIFICATES Section 3.1 Authorization. The City's certificates of obligation to be designated "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2007" (the "Certificates"), are hereby authorized to be issued and delivered in accordance with the Constitution and laws of the State of Texas, specifically Subchapter C, Chapter 271, Texas Local Government Code, as amended, and Article VIII of the City's Home-Rule Charter. The Certificates shall be issued in the aggregate principal amount designated in the Pricing Certificate, such amount not to exceed $12,000,000, for the purpose of paying contractual obligations to be incurred for the following purposes, to wit: (i) development, acquisition, furnishing, equipping, and construction of a conference/civic center including related parking at the northeast comer of A venue X and Mac Davis Lane in the North Overton Tax Increment -6- 1261694v.1 LUB200/71009 Financing District (the "Project") and (ii) payment of professional services of attorneys, financial advisors and other professionals in connection with the Project and the issuance of the Certificates. Section 3.2 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 forty 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 3.3 Medium, Method, and Place of Payment. (a) The principal of and interest on the Certificates shall be paid in lawful money of the United States of America. (b) Interest on the Certificates shall be payable to the Owners as shown in the Register at the close of business on the Record Date. ( c) Interest shall be paid by check, dated as of the Interest Payment Date, and sent United States mail, first class postage prepaid, by the Paying Agent/Registrar to each Owner, at the address thereof as it appears in the Register, or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the Owner; provided, however, that the Owner shall bear all risk and expense of such alternative banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. ( d) The principal of each Certificate shall be paid to the Owner thereof on the due date, whether at the maturity date or the date of prior redemption thereof, upon presentation and surrender of such Certificate at the Designated Payment/Transfer Office of the Paying Agent/Registrar. ( e) If the date for the payment of the principal of or interest on the Certificates shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated Payment/Transfer Office of the Paying Agent/Registrar is located are required or authorized by law or executive order to close, then the date for such payment shall be the next -7- l261694v.\ LUB2O0nt009 succeeding day that is not a Saturday, Sunday, legal holiday, or day on which banking institutions are required or authorized to close, and payment on such date shall for all purposes be deemed to have been made on the due date thereof as specified in Section 3.2 of this Ordinance. (f) Unclaimed Payments shall be segregated in a special escrow account and held in trust, uninvested by the Paying Agent/Registrar, for the account of the Owners of the Certificates to which the Unclaimed Payments pertain. Subject to Title 6 of the Texas Property Code, Unclaimed Payments remaining unclaimed by the Owners entitled thereto for three years after the applicable payment or redemption date shall be applied to the next payment on the Certificates thereafter coming due; to the extent any such moneys remain three years after the retirement of all outstanding Certificates, such moneys shall be paid to the City to be used for any lawful purpose. Thereafter, neither the City, the Paying Agent/Registrar, nor any other person shall be liable or responsible to any Owners of such Certificates for any further payment of such unclaimed moneys or on account of any such Certificates, subject to Title 6 of the Texas Property Code. Section 3.4 Execution and Registration of Certificates. (a) The Certificates shall be executed on behalf of the City by the Mayor and the City Secretary or any Assistant City Secretary, by their manual or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Certificates shall have the same effect as if each of the Certificates had been signed manually and in person by each of said officers, and such facsimile seal on the Certificates shall have the same effect as if the official seal of the City had been manually impressed upon each of the Certificates. (b) In the event that any officer of the City whose manual or facsimile signature appears on the Certificates ceases to be such officer before the authentication of such Certificates or before the delivery thereof, such manual or facsimile signature nevertheless shall be valid and sufficient for all purposes as if such officer had remained in such office. (c) Except as provided below, no Certificate shall be valid or obligatory for any purpose or be entitled to any security or benefit of this Ordinance unless and until there appears 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. -8- 126l694v.l LUB200/71009 (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 Underwriter, or its designee, executed by the Mayor and City Secretary or any Assistant City Secretary of the City by their manual or facsimile signatures, approved by the Attorney General, and registered and manually signed by the Comptroller of Public Accounts, will be delivered to the Underwriter 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 OTC on behalf of the Underwriter. Section 3.5 Ownership. (a) The City, the Paying Agent/Registrar, and any other person may treat the person in whose name any Certificate is registered as the absolute owner of such Certificate for the purpose of making and receiving payment as herein provided ( except interest shall be paid to the person in whose name such Certificate is registered on the Record Date), and for all other purposes, whether or not such Certificate is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. (b) All payments made to the Owner of a Certificate shall be valid and effectual and shall discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to the extent of the sums paid. Section 3.6 Registration, Transfer, and Exchange. (a) So long as any Certificates remain outstanding, the City shall cause the Paying Agent/Registrar to keep at the Designated Payment/Transfer Office a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of Certificates in accordance with this Ordinance. (b) The ownership of a Certificate may be transferred only upon the presentation and SWTender 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. -9- 1261694v.l LUB200/7l009 (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. 7 Cancellation. All Certificates paid or redeemed before scheduled maturity in accordance with this Ordinance, and all Certificates in lieu of which exchange Certificates or replacement Certificates are authenticated and delivered in accordance with this Ordinance, shall be cancelled and proper records made regarding such payment, redemption, exchange, or replacement. The Paying Agent/Registrar shall then return such cancelled Certificates to the City or may in accordance with law destroy such cancelled Certificates and periodically furnish the City with certificates of destruction of such Certificates. Section 3.8 Temporary Certificates. (a) Following the delivery and registration of the Initial Certificate and pending the preparation of definitive Certificates, the City may execute and, upon the City's request, the Paying Agent/Registrar shall authenticate and deliver, one or more temporary Certificates that are printed, lithographed, typewritten, mimeographed, or otherwise produced, in any denomination, substantially of the tenor of the definitive Certificates in lieu of which they are delivered, without coupons, and with such appropriate insertions, omissions, substitutions, and other variations as the officers of the City executing such temporary Certificates may determine, as evidenced by their signing of such temporary Certificates. (b) Until exchanged for Certificates in definitive 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 3.9 Replacement Certificates. (a) Upon the presentation and surrender to the Paying Agent/Registrar of a mutilated Certificate, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a -10- 1261694v.l LUB200/71009 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 (iv) satisfies any other reasonable requirements imposed by the City and the Paying Agent/Registrar. ( c) If, after the deli very 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 DTC. -11- 126 I 694v. I L UB200/71009 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 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 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 OTC 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 OTC as securities depository, is hereby ratified and approved for the Certificates. Section 3.11 Successor Securities 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 OTC and OTC Participants of the availability through OTC 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 -12- 1261694 v .I L UB200/71009 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 DTC, all payments with respect to principal of and interest on such Certificates, and all notices with respect to such Certificates shall be made and given, respectively, in the manner provided in the Representations Letter of the City to DTC. ARTICLE IV REDEMPTION OF CERTIFICATES BEFORE MATURITY Section 4.1 Redemption. The Certificates are subject to redemption before their scheduled maturity only as provided in this Article IV. Section 4.2 Optional Redemption. (a) The City reserves the option to redeem Certificates in the manner provided in the Form of Certificate set forth in Section 6.2 of this Ordinance with such changes as are required by the Pricing Certificate. (b) If less than all of the 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 4.3 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 Tenn Certificates to be redeemed, shall call such Term Certificates for -13- 1261694v.l LUB2O0/7!O09 redemption on such scheduled mandatory redemption date, and shall give notice of such redemption, as provided in Section 4.5. The principal amount of the Term Certificates required to be redeemed on any redemption date pursuant to subparagraph (a) of this Section 4.3 shall be reduced, at the option of the City, by the principal amount of any Tenn Certificates which, at least 45 days prior to the mandatory sinking fund redemption date (i) shall have been acquired by the City at a price not exceeding the principal amount of such Tenn Certificates plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (ii) shall have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to a mandatory sinking fund redemption. Section 4.4 Partial Redemption. (a) A portion of a single Certificate of a denomination greater than $5,000 may be redeemed, but only in a principal amount equal to $5,000 or any integral multiple thereof. If such a Certificate is to be partially redeemed, the Paying Agent/Registrar shall treat each $5,000 portion of the Certificate as though it were a single Certificate for purposes of selection for redemption. (b) Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with Section 3.6 of this Ordinance, shall authenticate and deliver an exchange Certificate or Certificates in an aggregate principal amount equal to the unredeemed portion of the Certificate so 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 4.5 Notice of Redemption to Owners. (a) The Paying Agent/Registrar shall give notice of any redemption of Certificates by sending notice by United States mail, first class postage prepaid, not less than 30 days before the date fixed for redemption, to the Owner of each Certificate ( or part thereof) to be redeemed, at the address shown on the Register at the close of business on the business day next preceding the date of mailing such notice. (b) The notice shall state the redemption date, the redemption price, the place at which the Certificates are to be 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) 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. -14- 1261694v.l LUB2O0/71O09 Section 4.6 Payment Upon Redemption. (a) Before or on each redemption date, the City shall deposit with the Paying Agent/Registrar money sufficient to pay all amounts due on the redemption date and the Paying Agent/Registrar shall make provision for the payment of the Certificates to be redeemed on such date by setting aside and holding in trust such amowits as are received by the Paying Agent/Registrar from the City and shall use such funds solely for the purpose of paying the principal of and accrued interest on the Certificates being redeemed. (b) Upon presentation and surrender of any Certificate called for redemption at the Designated Payment/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 4.7 Effect of Redemption. (a) Notice of redemption having been given as provided in Section 4.5 of this Ordinance, the Certificates or portions thereof called for redemption shall become due and payable on the date fixed for redemption and, unless the City defaults in its obligation to make provision for the payment of the principal thereof or accrued interest thereon, such Certificates or portions thereof shall cease to bear interest from and after the date fixed for redemption, whether or not such Certificates are presented and surrendered for payment on such date. (b) If the City shall fail to make provision for payment of all sums due on a redemption date, then any Certificate or portion thereof called for redemption shall continue to bear interest at the rate stated on the Certificate until due provision is made for the payment of same by the City. Section 4.8 Lapse of Payment. Money set aside for the redemption of Certificates and remaining unclaimed by the Owners of such Certificates shall be subject to the provisions of Section 3 .3 ( f) hereof. ARTICLE V PAYING AGENT/REGISTRAR Section 5.1 Appointment of Initial Paying Agent/Registrar. The Bank of New York Trust Company, National Association, is hereby appointed as the initial Paying Agent/Registrar for the Certificates. Section 5 .2 Qualifications. Each Paying Agent/Registrar shall be a commercial bank, a trust company organized under the laws of the State of Texas, or other entity duly qualified and legally authorized to serve as and perform the duties and services of paying agent and registrar for the Certificates. -15- 1261694v.l LUB200/71009 Section 5.3 Maintaining Paying Agent/Registrar. (a) At all times while any of the Certificates are outstanding, the City will maintain a Paying Agent/Registrar that is qualified under Section 5.2 of this Ordinance. The Mayor is hereby authorized and directed to execute an agreement with the Paying Agent/Registrar specifying the duties and responsibilities of the City and the Paying Agent/Registrar in substantially the fonn presented at this meeting, such fonn of agreement being hereby approved. The signature of the Mayor shall be attested by the City Secretary or any Assistant City Secretary of the City. (b) If the Paying Agent/Registrar resigns or otherwise ceases to serve as such, the City will promptly appoint a replacement. Section 5.4 Termination. The City, upon not less than sixty (60) days notice, reserves the right to terminate the appointment of any Paying Agent/Registrar by delivering to the entity whose appointment is to be terminated written notice of such termination. Section 5.5 Notice of Change to Owners. Promptly upon each change in the entity serving as Paying Agent/Registrar, the City will cause notice of the change to be sent to each Owner by United States mail, first class postage prepaid, at the address thereof in the Register, stating the effective date of the change and the name and mailing address of the replacement Paying Agent/Registrar. Section 5.6 Agreement to Perform Duties and Functions. By accepting the appointment as Paying Agent/Registrar and executing the Paying Agent/Registrar Agreement, the Paying Agent/Registrar is deemed to have agreed to the provisions of this Ordinance and that it will perform the duties and functions of Paying Agent/Registrar prescribed thereby. Section 5.7 Delivery of Records to Successor. If a Paying Agent/Registrar is replaced, such Paying Agent, promptly upon the appointment of the successor, will deliver the Register (or a copy thereof) and all other pertinent books and records relating to the Certificates to the successor Paying Agent/Registrar. ARTICLE VI FORM OF THE CERTIFICATES Section 6.1 Form Generally. (a) The Certificates, including the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Certificate of the Paying Agent/Registrar, and the Assignment form to appear on each of the Certificates, (i) shall be substantially in the form set -16- 1261694v.l LUB200/71009 forth in this Article, with such appropriate insertions, om1ss10ns, 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 Certificates, as evidenced by their execution thereof. (b) Any portion of the text of any Certificates may be set forth on the reverse side thereof, with an appropriate reference thereto on the face of the Certificates. ( c) The definitive Certificates, if any, shall be typewritten, photocopied, printed, lithographed, or engraved, and may be produced by any combination of these methods or produced in any other similar manner, all as determined by the officers executing such Certificates, as evidenced by their execution thereof ( d) The Initial Certificate submitted to the Attorney General of the State of Texas may be typewritten and photocopied or otherwise reproduced. Section 6.2 Form of the Certificates. The form of the Certificates, including the form of the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the form of Certificate of the Paying Agent/Registrar and the form of Assignment appearing on the Certificates, shall be substantially as follows: -17- 1261694v.l LUB200/71009 (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 TAXABLE SERIES 2007 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 ----------- 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 The principal of this Certificate shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Certificate at the corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office"), of The Bank of New York Trust Company, National Association, or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this Certificate is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the 1 lnfonnation to be inserted from Pricing Certificate. 2 Infonnation to be inserted from Pricing Certificate. l26l694v.l LUB200/71009 -18- 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 $ I ,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 $ ____ 3 (herein referred to as the "Certificates"), issued pursuant to a certain ordinance of the City (the "Ordinance") for the purpose of paying contractual obligations to be incurred for authorized public improvements (collectively, the "Project"), as described in the Ordinance, and to pay the contractual obligations for professional services of attorneys, financial advisors and other professionals in connection with the Project and the issuance of the Certificates. [The City has reserved the option to redeem the Certificates maturing on February 15 in the years ____ through __ _, inclusive, 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 thereof, within such maturity and in such principal amounts, for redemption. J4 [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: 3 lnfonnation to be inserted from Pricing Certificate. 4 lnsert optional redemption provisions, if any, and revise as necessary to confonn to the Pricing Certificate. -19- 1261694v.1 LUB200/71009 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 Certificates ( or with respect to Certificates having a denomination in excess of $5,000, each $5,000 portion thereof) to be redeemed by mandatory redemption. The principal amount of Certificates required to be redeemed on any redemption date pursuant to the foregoing mandatory sinking fund redemption provisions hereof shall be 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. Notice having been so given, the Certificates or portions thereof designated for redemption shall become due and payable on the redemption date specified in such notice; from and after such date, notwithstanding that any of the Certificates or portions thereof so called for redemption shall not have been surrendered for payment, interest on such Certificates or portions thereof shall cease to accrue. As provided in the Ordinance, and subject to certain limitations therein set forth, this Certificate is transferable upon surrender of this Certificate for transfer at the designated office of the Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar; thereupon, one or more new fully registered Certificates of the same stated maturity, of authorized denominations, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. The City, the Paying Agent/Registrar, and any other person may treat the person in whose name this Certificate is registered as the owner hereof for the purpose of receiving payment as herein provided ( except interest shall be paid to the person in whose name this Certificate is registered on the Record Date) and for all other purposes, whether or not this Certificate be overdue, and neither the City nor the Paying Agent/Registrar shall be affected by notice to the contrary. IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Certificate and the series of which it is a part is duly authorized by law; that all acts, conditions, and things to be done precedent to and in the issuance of the Certificates have been properly done and performed and have happened in regular and due time, form, and manner as required by law; that ad 5 Insert mandatory sinking fund redemption provisions, if any, and confonn as necessary to the Pricing Certificate. -20- I 261694v. l LUB200/71009 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. 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 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] 1261694v.l LUB200/71009 -21- 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 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 1261694v.l LUB2O0n1009 -22- NOTICE: The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of the within Certificate in every particular and must be guaranteed in a manner acceptable to the Paying Agent/Registrar. (e) The Initial Certificate shall be in the form set forth in paragraphs (a), (b) and (d) of this Section, except for the following alterations: (i) immediately under the name of the Certificate the headings "INTEREST RATE" and "MATURITY DATE" shall both be completed with the expression "As shown below"; and (ii) in the first paragraph of the Certificate, the words "on the maturity date specified above" shall be deleted and the following will be inserted: "on February 15 in each of the years, in the principal installments and bearing interest at the per annum rates set forth in the following schedule: Principal Installments Interest Rate {Information to be inserted from the Pricing Certificate pursuant to Section 3 .2 of this Ordinance) ) Section 6.3 CUSIP Registration. The City may secure identification numbers through the CUSIP Service Bureau Division of Standard & Poor's, A Division of the McGraw-Hill Companies, New York, New York, and may authorize the printing of such numbers on the face of the Certificates. It is expressly provided, however, that the presence or absence of CUSIP numbers on the Certificates shall be of no significance or effect in regard to the legality thereof and neither the City nor the attorneys approving said Certificates as to legality are to be held responsible for CUSIP numbers incorrectly printed on the Certificates. Section 6.4 Legal Opinion. The approving legal opinion of Vinson & Elkins L.L.P., Bond Counsel, may be attached to or printed on the reverse side of each Certificate over the certification of the City Secretary of the City, which may be executed in facsimile. Section 6.5 Bond Insurance. Information pertaining to bond insurance, if any, may be printed on each Certificate. ARTICLE VII SALE AND DELIVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS Section 7 .1 Sale of Certificates; Official Statement. (a) The Certificates shall be sold at negotiated sale to the Underwriter in accordance with the tenns of this Ordinance, including this Section 7. l(a) and Exhibit B hereto, provided -23- 1261694v.l LUB200n1009 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 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. l(a) shall expire at 5 :00 p .m., December 3 1, 2007, 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 Certificate 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 "Certificate Purchase Contract") which Certificate Purchase Contract is hereby accepted, approved and authorized in substantially the form submitted to the City and upon completion of the terms of the Certificate Purchase Contract in accordance with the terms of the Pricing Certificate and this Ordinance, the Authorized Officer is authorized and directed to execute such Certificate 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 of the Underwriter. ( 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)(l) of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended. The final Official Statement (the "Official Statement") presented to and considered at this meeting is hereby in all respects approved and adopted and the Authorized Officer and the City Secretary of the City are hereby authorized and directed to execute the same and deliver appropriate numbers of executed copies thereof to the Underwriter. The Official Statement as thus approved, executed and delivered, with such appropriate variations as shall be approved by the Mayor, City Manager, Deputy City Manager, any Assistant City Manager, Chief Financial Officer, Cash and Debt Manager or City Secretary of the City and the Underwriter, may be used by the Underwriter 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 -24- 1261694v.l LUB200/71009 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 Underwriter, 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 including, without limitation, the Purchase Contract. (e) The obligation of the Underwriter identified in subsection (a) of this Section to accept delivery of the Certificates is subject to the Underwriter being furnished with the final, approving opinion of Vinson & Elkins L.L.P ., bond counsel for the City, which opinion shall be dated and delivered the Closing Date. Section 7 .2 Control and Delivery of 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 Underwriter 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 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 perfonned by the Mayor and City Secretary, respectively. Section 7.3 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. -25- I 261694v. I LUB200/71009 Section 8.1 Investments. ARTICLE VIII INVESlMENTS (a) Money in the Interest and Sinking Fund created by this Ordinance, at the option of the City, may be invested in such securities or obligations as permitted under applicable law. (b) Any securities or obligations in which such money is so invested shall be kept and held in trust for the benefit of the Owners and shall be sold and the proceeds of sale shall be timely applied to the making of all payments required to be made from the fund from which the investment was made. Section 8.2 Investment Income. (a) Interest and income derived from investment of the Interest and Sinking Fund shall be credited to such fund. (b) Interest and income derived from investment of the funds to be deposited pursuant to Section 7.3(b) hereof shall be credited to the account where deposited until the acquisition or construction of said projects is completed or shall be transferred to the Interest and Sinking Fund as shall be determined by the City Council. Upon completion of the authorized projects, to the extent such interest and income are present, such interest and income shall be deposited to the Interest and Sinking Fund. ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9 .1 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 Fund, money sufficient to pay such interest on and principal of and interest on the Certificates as will accrue or mature on the applicable Interest Payment Date or date of prior redemption. Section 9.2 Other Representations and Covenants. (a) The City will faithfully perform, at all times, any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance; the City will promptly pay or cause to be paid the principal of and interest on each Certificate on the dates and at the places and manner prescribed in such Certificate; and the City will, at the times and in the manner prescribed by this Ordinance, deposit or cause to be deposited the amounts of money specified by this Ordinance. (b) The City is duly authorized under the laws of the State of Texas to issue the Certificates; all action on its part for the creation and issuance of the Certificates has been duly -26- 1261694v.l LUB2O0/71O09 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. ( c) Interest on the Certificates shall not be excludable from the gross income of the Owners for federal income tax purposes. ARTICLEX DEFAULT AND REMEDIES Section 10.1 Events of Default. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an Event of Default: (i) the failure to make payment of the principal of or interest on any of the Certificates when the same becomes due and payable; or (ii) default in the perfonnance or observance of any other covenant, agreement, or obligation of the City, which default materially and adversely affects the rights of the Owners, including but not limited to their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of sixty (60) days after notice of such default is given by any Owner to the City. Section 10.2 Remedies for Default. (a) Upon the happening of any Event of Default, then any Owner or an authorized representative thereof, including but not limited to a trustee or trustees therefor, may proceed against the City for the purpose of protecting and enforcing the rights of the Owners under this Ordinance by mandamus or other suit, action or special proceeding in equity or at law in any court of competent jurisdiction for any relief 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 10.3 Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the 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. -27- 1261694v.l LUB2O0/71O09 (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. ARTICLE XI DISCHARGE Section 11. 1 Discharge. The Certificates may be def eased, discharged or refunded in any manner permitted by applicable law. ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12 .1 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 nnaudited 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 ref ere need 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 12.2 Material Event Notices. (a) The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws: (i) principal and interest payment delinquencies; -28- 126 I 694v. J LUB200/71009 (ii) nonpayment related defaults; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax-exempt status of the 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 m accordance with Section 12.1 of this Ordinance by the time required by such Section. Section 12.3 Limitations, Disclaimers and Amendments. (a) The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an "obligated person" with respect to the Certificates within the meaning of the Rule, except that the City in any event will give notice of any redemption calls and any def easances 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 infonnation, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other infonnation that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any future date. -29- 1261694v.J LUBZ00/71009 UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. (c) No default by the City in observing or performing its obligations under this Article shall constitute a breach of or default under the Ordinance for purposes of any other provisions of this Ordinance. ( d) Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. ( e) The provisions of this Article may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (i) the provisions of this Article, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, 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.l 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; A TIORNEY GENERAL MODIFICATION Section 13. 1 Amendments. This Ordinance shall constitute a contract with the Owners, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains outstanding -30- 1261694v.J LUB200/71009 except as permitted in this Section. The City may, without consent of or notice to any Owners, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the written consent of the Owners of the Certificates holding a majority in aggregate principal amount of the Certificates then outstanding, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Owners of outstanding Certificates, no such amendment, addition, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Certificates, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the tenns 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 13.2 Attorney General Modification. In order to obtain the approval of the Certificates by the Attorney General of the State of Texas, any provision of this Ordinance may be modified, altered or amended after the date of its adoption if required by the Attorney General in connection with the Attorney General's examination as to the legality of the Certificates and approval thereof in accordance with the applicable law. Such changes, if any, shall be provided to the City Secretary and the City Secretary shall insert such changes into this Ordinance as if approved on the date hereof. ARTICLE XIV INSURANCE PROVISIONS Section 14.1 Municipal Bond Insurance. Information pertaining to bond insurance, if any, may be printed on each Certificate. ARTICLE XV EFFECTIVE IMMEDIATELY Section 15.1 Effective Immediately. Notwithstanding the provisions of the City Charter, this Ordinance shall become effective immediately upon its adoption at this meeting pursuant to Section 1201.028, Texas Government Code. -31- 126 l 694v. I LUB200/71009 PRESENTED, FINALLY PASSED AND APPROVED, AND EFFECTIVE on the 26th day of June, 2007, at a regular meeting of the City Council of the City of Lubbock, Texas. ATTEST: ~nOA<&c ~ REB CCA GARZA, City Sffl [SEAL] APPROVED AS TO CONTENT: By: APPROVED AS TO FORM: By: -32- 1261694v.1 LUB2O0/71009 EXHIBIT A DESCRIPTION OF ANNUAL DISCLOSURE OF FINANCIAL INFORMATION The following infonnation 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-l5 of the Official Statement. Accounting Principles The accounting principles referred to in such Section are the accounting principles described in the notes to the financial statements referred to in Paragraph 1 above. A-1 1261694v.J LUB200/71009 EXHIBIT B SALE PARAMETERS In accordance with Section 7.l(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 Underwriter: (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 amowtt of the Certificates authorized to be issued for the purposes described in Section 3.1 shall not exceed the maximum amowit authorized in Section 3.1; (d) the maximum maturity for the Certificates shall not exceed forty 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 tenn obligations. B-1 1261694v.1 LUB200/71009 MINUTES AND CERTIFICATION PERTAINfNG TO PASSAGE OF AN ORDINANCE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § On the 26th day of June 2007, the City Council of the City of Lubbock, Texas, convened in a regular meeting at the regular meeting place thereof, the meeting being open to the public and notice of said meeting, giving the date, place and subject thereof, having been posted as prescribed by Chapter 551, Texas Government Code, as amended; and the roll was called of the duly constituted officers and members of the City Council, which officers and members are as follows: David A. Miller, Mayor Jim Gilbreath, Mayor Pro Tern Linda DeLeon Floyd Price Todd Klein Phyllis S. Jones John Leonard ) ) ) ) ) Members of the Council and all of said persons, except N.A. thus constituting a quorum. Whereupon, among other business, a written Ordinance bearing the following caption was introduced: AN ORDfNANCE PROVIDING FOR THE ISSUANCE OF CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2007 IN AN AMOUNT NOT TO EXCEED $12,000,000; LEVYING A TAX AND PLEDGING SURPLUS WATERWORKS SYSTEM REVENUES IN PAYMENT THEREOF; APPROVING THE OFFICIAL ST A TEMENT; APPROVING EXECUTION OF A PURCHASE CONTRACT; AND ENACTING OTHER PROVISIONS RELATING THERETO The Ordinance, a full, true and correct copy of which is attached hereto, was read and reviewed by the City Council. Thereupon, it was duly moved and seconded that the Ordinance be passed and adopted. The Presiding Officer put the motion to a vote of the members of the City Council, and the Ordinance was passed and adopted by the following vote: AYES: 7 NOES: 0 ABSTENTIONS: 0 Minutes and Certification for Parameters Ordinance 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 June, 2007. cityS cretary City of Lubbock, Texas [SEAL] Signature Page to Minutes and Certification "' .., ') .., ) LUB200/71009 Dallas 1345923v.1 TRANSCRIPT OF PROCEEDINGS pertaining to CITY OF LUBBOCK, TEXAS $11,805,000 TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION TAXABLE SERIES 2008 Dated: December 15, 2007 Delivered: Jam1ary 17, 2008 Vinson&Elkins ATTORNEYS AT LAW VINSON & EI..ICINS LLP. 3700 TRAMMEU. CROW CENTER 2001 ROSS AVENUE DALLAS, TEXAS 75201.2975 TELEPHONE (214) 220-7700 VOICE MAIL 1214) 220-7999 FAX (214) 220-m6 "'I CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION TAXABLE SERIES 2008 TABLE OF DOCUMENTS DOCUMENT TAB NO. I. BOND DOCUMENTS ') 1.1 Certified Resolution Authorizing Publication of Notice of Intent to 1 Issue Certificates 1.2 Affidavit of Publication 2 1.3 Certified Ordinance Providing for the Issuance of the Certificates 3 1.4 Amending Ordinance 4 1.5 Pricing Certificate 5 1.6 Paying Agent/Registrar Agreement 6 1.7 Preliminary Official Statement 7 1.8 Official Statement 8 1.9 Certificate Purchase Contract 9 1.10 Specimen Certificate 10 1.11 Insurance Commitment 11 "\ 1.12 Insurance Policy 12 II. CERTIFICATES, LETTERS AND RECEIPTS 2.1 General and No-Litigation Certificate 13 2.2 Attorney General/Comptroller Instruction Letter 14 2.3 Receipt and Delivery Certificate of Paying Agent/Registrar 15 2.4 Rating Letters 16 Dallas 1345852v. I ) ) ) DOCUMENT Certificate of Insurer 2.5 2.6 Certificate Pursuant to Certificate Purchase Contract III. OPINIONS 3.1 3.2 3.3 3.4 3.5 3.6 3.7 LU8200nl009 Dallas 1345852v. l Opinion of Bond Counsel Supplemental Opinion of Bond Counsel Opinion of Underwriter's Counsel Opinion of Attorney General and Certificates Opinion of Insurer's Counsel Reliance Letter to Insurer Opinion of City Attorney -2- Comptroller's Registration TAB NO. 17 18 19 20 21 22 23 24 25 ) MINUTES AND CERTIFICATION PERTAINING TO PASSAGE OF AN ORDINANCE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § On the 11th day of May 2007, the City Council of the City of Lubbock, Texas, convened in a regular meeting at the regular meeting place thereof. the meeting being open to the public and notice of said meeting, giving the date, place and subject thereof, having been posted as prescribed by Chapter 551, Texas Government Code, as amended; and the roll was called of the duly constituted officers and members of the City Council, which officers and members are as follows: · David A. Miller, Mayor Linda DeLeon Floyd Price Todd Klein Phyllis S. Jones John Leonard ) ) ) ) ) Jim Gilbreath, Mayor Pro Tern Members of the Council and all of said persons, were present, thus constituting a quorum. Whereupon, among other business, a written Resolution bearing the following caption was introduced: A RESOLUTION AUTHORIZING PUBLICATION OF NOTICE OF INTENTION TO ISSUE TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTWICATES 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; NOES: ABSTENTIONS: Dallas 1346409v.l "I ) MJNUTES 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 11th day of May, 2007. City of Lubbock, Texas [SEAL] Signature Page to Minutes and Certification A RESOLUTION AlJfHORIZING PUBLICATION OF NOTICE OF INTENTION TO ISSUE TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION WHEREAS, the City of Lubbock, Texas (the "City"), pursuant to Subchapter C, Chapter 271, Texas Local Government Code, as amended, is authorized to issue its certificates of obligation (the "Certificates") for the purpose of paying contractual obligations to be incurred for the purposes set forth in Exhibit A hereto; and WHEREAS, the City Council of the City has found and determined that a notic~ of intention to issue certificates of obligation should be published in accordance with the requirements of applicable law; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK, TEXAS, THAT: Section l. 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. Toe notice as set forth in Exhibit A shall be published once a week for two consecutive weeks, the date of the first publication being not less than the fourteenth (14th) day prior to the date set forth in the notice for passage of the ordinance authorizing the Certificates. Such notice shall be published in a newspaper of general circulation in the area of the City of Lubbock, Texas. Section 3. This resolution shall take effect from and after the date of its passage. FINALLY PASS ED, APPROVED AND EFFECTIVE this 11th day of May, 2007. CITY OF LUBBOCK, TEXAS ., ) ' Exhibit A NOTICE OF rNTENTION TO ISSUE CITY OF LUBBOCK, TEXAS TAX AND WATER WORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION NOTICE lS HEREBY GIVEN that on June 14, 2007, 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 $12,000,000 principal amount of certificates of obligation for the purpose of paying contractual obligations to be incurred for the following pwposes, to wit: (i) development, acquisition, furnishing, equipping, and construction of a conference/civic center including related parking at the northeast comer of Avenue X and Mac Davis Lane in the North Overton Tax Increment Financing District (the "Project") and (ii) paying 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 swplus net revenues being limited to $1,000. THIS NOTICE is given in accordance with law and as directed by the City Council of the City of Lubbock, Texas. GIVEN THIS May 11, 2007. A-1 /s/ Rebecca Garza City Secretary CityofLubbock, Texas THE STATE OF TEXAS COUNTY OF LUBBOCK No. printed copy of the Legal Notice Avalanche.Journal on the following dateo. Inside Sales Manager LUBBOCK AVALANCHE-JOURNAL Morris Communication Corporation Subscribed and sworn to before me this FORMS8·10 __,~-=------day of .' THtSTATEOFTEXAS COUNTY OF LUBBOCK Before me Ashley C. McGaha a Notary Public in and for Lubbock County, Texas on this day personally appeared Krista Ramirez ---------------of the Southwestern Newspaper Corporation, publishers of the Lubbock Avalanche-Journal -Morning, and Sunday, who being by ma 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 Legal Notice · No. printed _copy of the -------------at Lubbock County, Texas and the attached Legal Notice Avalanche-Journal on the following dat~. Inside Sales Manager LUBBOCK AVALANCHE.JOURNAL Morris Communication Corporation is a true copy of the original and was printed in the Lubbock ~ lie/ 2-3,. J:t£Z7 3~'tcµw,jr::]Qt(.0~ in and for the State·of Texas my commission Expires 3/15/2010 Subscribed and sworn to before me this ____ L{ ___ ~ __ dayof {}Mu ot007 FORM513-10 (,{~•~;~~£~~ ASHLEY C MCGAHA •,· ~.-}.. .·.{} Notary Public, State of Texas ., -, My Commission Expires \! ~,;t,~i,\~t) March 15, 201 o ,I I NOTICE OF INTENTION TO \ ISSUE CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE I Ct~iifiC~'l'fSCP OBLIGATION NOTICE IS l<EREBY CIVEN · ~~.~. !~~hf':M'l:~"' Tcxa~ at 7:lO c,.m. ot Cl ,.,11010, meeU!'oil ot the Cltv CO!J11CH to be held In me C lty Cauru:11 Cham~ at'ffie : Municipal C«riol••· 161113th Street~ Lutit,ex:k~ Tex011 the rfflular mefllng plOC:. of,~ Cltv Councn. il"tf'nds to POS.S an or~tnanc::• au1tiorldnv the lssvonee of not to exceed $1 UOQ.QOO orl 001001 amount of f~~~~ ~ c:!~:lon fat" contractvo! obUQOtlons to be lncurr'~ far tha follD'Wlina """"""s.~wll: (ll development, acQui1oltian, ~~~~~~~1o::t':flln9. oAd coMettneetclvk: center inclucUng rthrted oar1dng at !he N>rlheGSI comer of A .. nue X and Mac; 0avr1 Lo~ In the Nortr\ 0Yer1on Tax lncrem.nt Flnanclog Dl•trlcr (Ille • Pn>lec:t•) end ( II i POYment of proJ .. s/0001 .. Mees of -crttornevs, tlncmck:11 odvl,or,, Clfld ofhet c,rote$Slot11aU1 In connection will, !he Profect ona me issuance: Dt th• Cerllf!cotes. TIie Cer!1flC01 .. SSKIII bear Interest at a rcte IT~ ~~"~~nrs~ hava a moxlmum mc11urltv oore of .not IOfff than fDf1y I ~1,% t":~n'::~.~J,og.~. PQY<lble fl"Qffl ,i-.e levy of a l.dl!'ffl ooa contln~lna OCI vaJOrem tax, I.Nied wltt,ln the 1 !:;~ll~sf~~leby ~:em 'wl!hlo lhf! City 1ut&ieo1 le OOY tne' ll"-lfec'esf un thl• wries Of ~Jflcateo m due and M ! =~r:c1:o~r:o'r~~1:~:e ' ma:tul'fl.. 03 co,n.o,1.zed trv SubCNl:Ptet' C .. Chci:ptcr 211 ~ Texm Lacczt Government I COde, OS amended, and from au ar a part of lbe sws:ih,s r1er ~-Of tne Cltv'> Waterworks $Yltet'n .. s.ud'I Pledge of SUf'PIUi nut nrv«nues belnr Jlinl™! 10 $1.000, TH Is NOT ICE Is Olvtn In acc:ordclnce with law and ,as dln:cttd by tho City Council of the C~ Of L.ulal>Ock, Tum. GI VEN TH 15 Mr,y 11,' 2007. It/ Rebecca Garza Cllv Secr-elcrv City ot Lu-k, r .... "\ I ., I ; MINUTES AND CERTIFICATION PERTAINING TO PASSAGE OF AN ORDrNANCE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § On the 26th day of June 2007, the City Council of the City of Lubbock, Texas, convened in a regular meeting at the regular meeting place thereof, the meeting being open to the public and notice of said meeting, giving the date, place and subject thereof, having been posted as prescribed by Chapter 551, Texas Government Code, as amended; and the roll was called of the duly constituted officers and members of the City Council, which officers and members are as follows: David A. Miller, Mayor Linda DeLeon Floyd Price Todd Klein Phyllis S. Jones John Leonard ) ) ) ) ) Jim Gilbreath, Mayor Pro Tern Members of the Council and all of said persons, except N .A. were present, thus constituting a quorum. Whereupon, among other business, a written Ordinance bearing the following caption was introduced: AN ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF LUBBOCK, TEXAS, TAX AND WATER WORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2007 IN AN AMOUNT NOT TO EXCEED $12,000,000; LEVYING A TAX AND PLEDGING SURPLUS WATERWORKS SYSTEM REVENUES IN PAYMENT THEREOF; APPROVING THE OFFICIAL STATEMENT; APPROVING EXECUTION OF A PURCHASE CONTRACT; AND ENACTING OTIIER PROVISIONS RELATING THERETO The Ordinance, a full, true and correct copy of which is attached hereto, was read and reviewed by the City Council. Thereupon, it was duly moved and seconded that the Ordinance be passed and adopted. The Presiding Officer put the motion to a vote of the members of the City Council, and the Ordinance was passed and adopted by the following vote: AYES: 7 NOES: o ABSTENTIONS: O 1272707_1.DOC MINUTES APPROVED AND CERTIFIED TO BE TRUE AND CORRECT, and to correctly reflect the duly constituted officers and members of the City Council of said City, and the attached and following copy of said Ordinance is hereby certified to be a true and correct copy of an official copy thereof on file among the official records of the City, all on this the 26th day ofJune, 2007. City of Lubbock, Texas [SEAL] Signature Page to Minutes and Certification ORDINANCE relating to CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION TAXABLE SERIES 2007 Adopted: June 26, 2007 126l694v.l LUB200nl009 ) Section 1.1 Section 1.2 Section 1.3 Section 1.4 TABLE OF CONTENTS ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Definitions ............................................................................................................... 2 Findings ................................................................................................................... 4 Table of Contents, Titles, and Headings ................................................................. 4 Interpretation ........................................................................................................... 5 ARTICLE II SECURITY FOR TIIE CERTIFICATES; INTEREST AND SINKING FUND; PRIOR LIEN OBLIGATIONS Section 2.1 Payment of the Certificates ..................................................................................... 5 Section 2.2 Interest and Sinking Fund ....................................................................................... 6 ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE CERTIFICATES Section 3.1 Section 3.2 Section 3.3 · Section 3.4 Section 3.5 Section 3.6 Section 3.7 Section 3.8 Section 3.9 Section 3.10 Section 3.11 Section 3.12 Section4.l Section 4.2 Section 4.3 Section4.4 Section 4.5 Authorization ........................................................................................................... 6 Date, Denomination, Maturities, and Interest ......................................................... 7 Medium, Method, and Place of Payment ................................................................ 7 Execution and Registration of Certificates .............................................................. 8 Ownership ............................................................................................................... 9 Registration, Transfer, and Exchange ..................................................................... 9 Cancellation ............................................................... ~. .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . .. . . . . . . .. . 1 0 Temporary Certificates.... . . . .. . . . . . . . . . . . .. . . . .. . . . . . . . . . . . .. . . . . . . . . .. . . . . . . . .. . . . . . . . . . . . . . . . . . . . .. . . . . . . . .. . 1 0 Replacement Certificates ....................................................................................... 10 Book-Entry-Only System ...................................................................................... 11 Successor Securities Depository; Transfer Outside Book-Entry-Only System .... 12 Payments to Cede & Co ........................................................................................ 13 ARTICLE IV REDEMPTION OF CERTIFICATES BEFORE MATURITY Redemption ........................................................................................................... 13 Optional Redemption ............................................................................................ 13 Mandatory Sinking Fund Redemption .................................................................. 13 Partial Redemption ................................................................................................ 14 Notice of Redemption to Owners .......................................................................... 14 (i) 1261694v.1 LUB2oonI009 "\ Section4.6 Section4.7 Section4.8 Section 5.1 Section 5.2 Section 5.3 Section 5.4 Section 5.5 Section 5.6 Section 5.7 Section 6.1 Section 6.2 Section 6.3 Section 6.4 · Section 6.5 Payment Upon Redemption .................................................................................. 15 Effect of Redemption ............................................................................................ 15 Lapse of Payment .................................................................................................. 15 ARTICLE V PA YING AGENT/REGISTRAR Appointment of Initial Paying Agent/Registrar .................................................... 15 Qualifications ........................................................................................................ 15 Maintaining Paying Agent/Registrar ..................................................................... 16 Termination ........................................................................................................... 16 Notice of Change to Owners ................................................................................. 16 Agreement to Perform Duties and Functions ........................................................ 16 Delivery of Records to Successor ......................................................................... 16 ARTICLE VI FORM OF THE CERTIFICATES Form Generally ..................................................................................................... 16 Form of the Certificates ......................................................................................... 17 CUSIP Registration ............................................................................................... 23 Legal Opinion ............................................................................................ : ........... 23 Bond Insurance ...................................................................................................... 23 ARTICLEVIl SALE AND DELIVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS Section 7.1 Section 7.2 Section 7.3 Section 8.1 Section 8.2 Section 9.1 Section 9.2 Sale of Certificates; Official Statement.. ............................................................... 23 Control and Delivery of Certificates ..................................................................... 25 Deposit of Proceeds ............................................................................................... 25 ARTICLE VIII INVESTMENTS Investments ............................................................................................................ 26 Investment Income ................................................................................................ 26 ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Payment of the Certificates ................................................................................... 26 Other Representations and Covenants ................................................................... 26 (ii) 126l694v.l LUB200nI009 ARTICLE X DEFAULT AND REMEDIES Section 10.1 Events of Default. .................................................................................................. 27 Section 10.2 Remedies for Default ............................................................................................ 27 Section 10.3 Remedies Not Exclusive ....................................................................................... 27 ARTICLE XI DISCHARGE Section 11.1 Discharge ............................................................................................................... 28 ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12.1 Annual Reports ...................................................................................................... 28 Section 12.2 Material Event Notices .......................................................................................... 28 Section 12.3 Limitations, Disclaimers and Amendments .......................................................... 29 ARTICLE XIII AMENDMENTS; ATTORNEY GENERAL MODIFICATION Section 13 .1 Amendments .......................................................................................................... 30 Section 13.2 Attorney General Modification ............................................................................. 31 ARTICLE XIV INSURANCE PROVISIONS Section 14 .1 Municipal Bond Insurance .................................................................................... 31 ARTICLEXV · EFFECTIVE IMMEDIATELY Section 15.1 Effective Immediately ........................................................................................... 31 Exhibit A -Description of Annual Disclosure of Financial Infomtation .................................... A-1 Exhibit B -Sale Par8IIleters ........................................................................................................ B-1 (iii) l261694v.l LUB200nI009 ) AN ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2007 IN AN AMOUNT NOT TO EXCEED $12,000,000; 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 provts1ons of Subchapter C, Chapter 271, Texas Local Government Code, as amended, the City of Lubbock, Texas ·(the "City"), after giving proper notice, is authorized to issue and sell for cash its certificates of obligation {herein defined as the "Certificates"} that are secured by and payable from the ad valorem taxes and other revenues specified in Article II of this Ordinance, and that are issued in the amount, for the purposes, and with the provisions set forth in Section 3 .1 of this Ordinance; WHEREAS, pursuant to a resolution heretofore passed by the City Council, notice of intention to issue the Certificates was published in a newspaper of general circulation in the City in accordance with applicable law; WHEREAS, no petition has been filed with the City Secretary, any member of the City Council or any other official of the City, protesting the issuance of the Certificates; WHEREAS, the City Council is now authorized and empowered to proceed with the issuance and sale of the Certificates, and has found and determined that it is necessary and in the best interests of the City and its citizens that it 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 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 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 CTIY OF LUBBOCK: 1261694v.1 LUB200/71009 ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section 1.1 Definitions. Unless otherwise expressly provided or wtless the context clearly requires otherwise in this Ordinance, the following terms shall have the meanings specified below: "Authorized Officer'' means the Chief Financial Officer and, in his absence, each of the City Manager and the Director of Fiscal Policy and Strategic Planning. "Certificate" means any of the Certificates. "Certificate Date" means the date designated as the initial date of the Certificates by Section 3.2(a) of this Ordinance. "Certificates" means the certificates of obligation authorized to be issued by Section 3.1 of this Ordinance and designated as "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2007." "City" means the City of Lubbock, Texas. "Closing Date" means the date of the initial delivery of and payment for the Certificates. "Designated Paymentrrransfer Office" means (i) with respect to the initial Paying Agent/Registrar named in this Ordinance, the Designated Payment/I'ransfer 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 OTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. "Event of Default" means any event of default as defined in Section 10.1 of this Ordinance. "Fiscal Year" means such fiscal year as shall from time to time be set by the City Council. "Gross Revenues" means, with respect to any period, all income, revenues and receipts received from the operation and ownership of the System. -2- l261694v.l LUB200nl009 "Initial Certificate" means the initial certificate authorized by Section 3.4 of this Ordinance. "Interest and Sinking Fund" means the interest and sinking fund established by Section 2.2 of this Ordinance. "Interest Payment Date" means the date or dates on which interest on the Certificates is scheduled to be paid until their respective dates of maturity or prior redemption, such dates bein:g 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 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 Sutplus Revenues made for the Certificates. "Project" means the purposes for which the Certificates are issued as set forth in Section 3.1. -3- l261694v.l LUB20Qnl009 ... ' "Record Date" means the last business day of the month next preceding an Interest Payment Date. "Register" means the Register specified in Section 3.6(a) of this Ordinance. "Representations Letter'' means the Blanket Letter of Representations between the City andDTC. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. "SID" means any person designated by the State of Texas or an authorized department, office or agency thereof, as and detennined by the SEC or its staff to be a state information depository within the meaning of the Rule from time to time. "Surplus Revenues" means the Net Revenues of the System in an amount not to exceed $1,000 remaining after payment of all debt service, reserve and other requirements in connection with the City's Prior Lien Obligations. "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. ''Tenn Certificates" has the meaning set forth in Section 4.3 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. "Underwriter'' means Morgan Stanley. Section 1.2 Findings. The declarations, determinations, and findings declared, made, and found in the preamble to this Ordinance are hereby adopted, restated, and made a part of the operative provisions hereof. Section 1.3 Table of Contents, Titles. and Headings. The table of contents, titles and headings of the Articles and Sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof and shall never be considered or given any effect in construing this Ordinance or any provision hereof or in ascertaining intent, if any question of intent should arise. -4- l261694v.1 LUB200nt009 ) "I Section l .4 Interpretation. (a) Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular number shall be construed to include correlative words of the plural number and vice versa. (b) This Ordinance and all the tenns and provisions hereof shall be liberally construed to effectuate the pUiposes set forth herein. ARTICLE II SECURITY FOR THE CERTIFICATES; INTEREST AND SINKING FUND; PRIOR LIEN OBLIGATIONS Section 2.1 Payment of the Certificates. (a) Pursuant to the authority granted by the Texas Constitution and laws of the State of Texas, there shall be levied and there is hereby levied for the current year and for each succeeding year thereafter while any of the Certificates or any interest thereon is outstanding and 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 terms and this Ordinance. (d) The City hereby covenants and agrees that the Surplus Revenues are hereby irrevocably pledged equally and ratably to the payment of the principal of and interest on the Certificates. The City reserves the right to issue Prior Lien Obligations for any lawful purpose, at any time, in one or more installments. (e) The amount of taxes to be assessed annually for the payment of debt service on the Certificates shall be determined in the following manner: (i) The City's annual budget shall reflect (A) the amount of debt service requirements to become due on the Certificates in the next ensuing Fiscal Year and (B) the amount on deposit in the Interest and Sinking Fund on the date such budget is approved. -5- 126 I 694v. I LUB200/71009 (ii) The amount required to be provided in the next succeeding Fiscal Year from ad valorem taxes shall be the amount, if any, that the debt service requirements on the Certificates to be paid during the next Fiscal Year exceeds the amount then on deposit in the Interest and Sinking Fund. (iii) Following approval of the City's annual budget, the City Council shall, by ordinance, establish a tax rate that is sufficient to produce taxes in an amount which, when added to the amount then on deposit in the Interest and Sinking Fund, will be sufficient to pay debt service on the Certificates when due during the next Fiscal Year. (f) If the liens and provisions of this Ordinance shall be released in a manner permitted by Article XI hereof, then the collection of such ad valorem tax may be suspended or appropriately reduced, as the facts may permit, and further deposits to the Interest and Sinking Fund may be suspended or appropriately reduced, as the facts may permit. In determining the aggregate principal amount of outstanding Certificates, there shall be subtracted the amount of any Certificates that have been duly called for redemption and for which money has been deposited with the Paying Agent/Registrar for such redemption. Section 2.2 Interest and Sinking Fund. (a) The City hereby establishes a special fund or account to be designated the .. City of Lubbock, Texas, Tax and Waterworks System Swplus Revenue Certificates of Obligation, Taxable Series 2007, Interest and Sinking Fund" (the "Interest and Sinking Fwid"), said fund to be maintained at an official depository bank of the City separate and apart from all other funds and accounts of the City. (b) Money on deposit in or required by this Ordinance to be deposited to the Interest and Sinking Fund shall be used solely for the purpose of paying the interest on and principal of the Certificates when and as due and payable in accordance with their terms and this Ordinance. ARTICLE III AUTIIORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE CERTIFICATES Section 3.1 Authorization. The City's certificates of obligation to be designated "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Tax.able Series 2007" (the "Certificates"), are hereby authorized to be issued and delivered in accordance with ~e Constitution and laws of the State of Texas, specifically Subchapter C, Chapter 271, Texas Local Government Code, as amended, and Article VIII of the City's Home-Rule Charter. The Certificates shall be issued in the aggregate principal amount designated in the Pricing Certificate, such amount not to exceed $12,000,000, for the purpose of paying contractual obligations to be incurred for the following purposes, to wit: (i) development, acquisition, furnishing, equipping, and construction of a conference/civic center including related parking at the northeast comer of A venue X and Mac Davis Lane in the North Overton Tax Increment -6- 1261694v.1 LU8200nI009 j Financing District (the "Project") and (ii) payment of professional services of attorneys, financi_al advisors and other professionals in connection with the Project and the issuance of the Certificates. Section 3.2 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 forty 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 3.3 Medium, Method, and Place of Payment. (a) The principal of and interest on the Certificates shall be paid in lawful money of the United States of America. (b) Interest on the Certificates shall be payable to the Owners as shown in the Register at the close of business on the Record Date. (c) Interest shall be paid by check, dated as of the Interest Payment Date, and sent United States mail, first class postage prepaid, by the Paying Agent/Registrar to each Owner, at the address thereof as it appears in the Register, or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the Owner; provided, however, that the Owner 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 Paymentffransfer 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/I'ransfer 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 -7- l261694v.1 LUB200/71009 ) ') 1 ) 'I succeeding day that is not a Saturday, Sunday, legal holiday, or day on which banking institutions are required or authorized to close, and payment on such date shall for all purposes be deemed to have been made on the due date thereof as specified in Section 3.2 of this Ordinance. (f) Unclaimed Payments shall be segregated in a special escrow account and held in trust, uninvested by the Paying Agent/Registrar, for the account of the Owners of the 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 p~yrnent or redemption date shall be applied to the next payment on the Certificates thereafter coming due; to the extent any such moneys remain three years after the retirement of all outstanding Certificates, such moneys shall be paid to the City to be used for any lawful purpose. Thereafter, neither the City, the Paying Agent/Registrar, nor any other person shall be liable or responsible to any Owners of such Certificates for any further payment of such unclaimed moneys or on accoW1t of any such Certificates, subject to Title 6 of the Texas Property Code. Section 3.4 Execution and Registration of Certificates. ( a) The Certificates shall be execµted on behalf of the City by the Mayor and the City Secretary or any Assistant City Secretary, by their manual or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Certificates shall have the same effect as if each of the Certificates had been signed manually and in person by each of said officers, and such facsimile seal on the Certificates shall have the same effect as if the official seal of the City had been manually impressed upon each of the Certificates. (b) In the event that any officer of the City whose manual or facsimile signature appears on the Certificates ceases to be such officer before the authentication of such Certificates or before the delivery thereof, such manual or facsimile signature nevertheless shall be valid and sufficient for all purposes as if such officer had remained in such office. (c) Except as provided below, no Certificate shall be valid or obligatory for any purpose or be entitled to any security or benefit of this Ordinance unless and Wltil 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. -8- 1261694v.l LUB200171009 > (d) On the Closing Date, one Initial Certificate reflecting the tenns set forth in the Pricing Certificate and representing the entire principal amount of all Certificates, payable in stated installments to the Underwriter, or its designee, executed by the Mayor and City Secretary or any Assistant City Secretary of the City by their manual or facsimile signatures, approved by the Attorney General, and registered and manually signed by the Comptroller of Public Accounts, will be delivered to the Underwriter 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 OTC on behalf of the Underwriter. Section 3 .5 Ownership. (a) The City, the Paying Agent/Registrar, and any other person may treat the person in whose name any Certificate is registered as the absolute owner of such Certificate for the purpose of making and receiving payment as herein provided (except interest shall be paid to the person in whose name such Certificate is registered on the Record Date), and for all other purpos~s, whether or not such Certificate is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. (b) All payments made to the Owner of a Certificate shall be valid and effectual and shall discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to the extent of the sums paid. Section 3.6 Registration. Transfer, and Exchange. (a) So long as any Certificates remain outstanding, the City shall cause the Paying Agent/Registrar to keep at the Designated Payment/fransfer 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. -9- 1261694v.1 LUB20on!009 j .., ) (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 3.7 Cancellation. All Certificates paid or redeemed before scheduled maturity in accordance with this Ordinance, and all Certificates in lieu of which exchange Certificates or replacement Certificates are authenticated and delivered in accordance with this Ordinance, shall be cancelled and proper records made regarding such payment, redemption, exchange, or replacement. The Paying Agent/Registrar shall then return such cancelled Certificates to the City or may in accordance with law destroy such cancelled Certificates and periodically furnish the City with certificates of destruction of such Certificates. Section 3.8 Temporary Certificates. (a) Following the delivery and registration of the Initial Certificate and pending the preparation of definitive Certificates, the City may execute and, upon the City's request, the Paying Agent/Registrar shall authenticate and deliver, one or more temporary Certificates that are printed, lithographed, typewritten, mimeographed, or otherwise produced, in any denomination, substantially of the tenor of the definitive Certificates in lieu of which they are delivered, without coupons, and with such appropriate insertions, omissions, substitutions, and other variations as the officers of the City executing such temporary Certificates may determine, as evidenced by their signing of such temporary Certificates. (b) Until exchanged for Certificates in definitive 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 fonn surrendered. Such exchange shall be made without the making of any charge therefor to any Owner. Section 3.9 Replacement Certificates. (a) Upon the presentation and surrender to the Paying Agent/Registrar of a mutilated Certificate, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a -10- l261694v.1 LUB200nl 009 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 (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 ofDTC. -11- 1261694v.l LUB200/71009 .... "'I - ) 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 OTC Participant with respect to any ownership interest in the Certificates, (ii) the delivery to any DTC Participant or any other person, other than an Owner, as shown on the Register, of any notice with respect to the Certificates, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than an Owner, as shown in the Register of any amount with respect to principal of or interest on the Certificates. Notwithstanding any other provision of this Ordinance to the contrary, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Certificate is registered in the Register as the absolute owner of such Certificate for the purpose of payment of principal of and interest on Certificates, for the purpose of giving notices of redemption and other matters with respect to such Certificate, for the purpose of registering transfer with respect to such Certificate, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Certificates only to or upon the order of the respective Owners as shown in the Register, as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of interest on the Certificates to the extent of the sum or sums so paid. No person other than an Owner, as shown in the Register, shall receive a certificate evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. Upon delivery by OTC to the Paying Agent/Registrar of written notice to the effect that OTC 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 OTC. (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 Securities 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 l 7(a) of the Securities and Exchange Act of 1934, as amended, notify DTC 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 OTC Participants of the availability through OTC of certificated Certificates and cause the Paying Agent/Registrar to transfer one or more separate registered Certificates to OTC Participants having Certificates credited to their OTC accounts. In such event, the Certificates shall no longer be restricted to being registered in the Register in -12- 1261694v.l LUBZ00/71009 ) ) .., ) the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Owners transferring or exchanging Certificates shall designate, in accordance with the provisions of this Ordinance. Section 3.12 Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as the Certificates are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of and interest on such Certificates, and all notices with respect to such Certificates shall be rpade and given, respectively, in the manner provided in the Representations Letter of the City to OTC. ARTICLE IV REDEMPTION OF CERTIFICATES BEFORE MATURITY Section 4.1 Redemption . The Certificates are subject to redempti~n before their scheduled maturity only as provided in this Article IV. Section 4.2 Optional Redemption. (a) The City reserves the option to redeem Certificates in the manner provided in the Form of Certificate set forth in Section 6.2 of this Ordinance with such changes as are required by the Pricing Certificate. (b) If less than all of the 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 4.3 Mandatory Sinking Fund Redemption. (a) Certificates designated as "Tenn 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. 1 (b) At least forty-five (45) days prior to each scheduled mandatory redemption date, the Paying Agent/Registrar shall select for redemption by lot, or by any other customary method that results in a random selection, a principal amount of Term Certificates equal to the aggregate principal amount of such Tenn Certificates to be redeemed, shall call such Term Certificates for -13- 1261694v.l LUB200nI009 '\ redemption on such scheduled mandatory redemption date, and shall give notice of such redemption, as provided in Section 4.5. The principal amount of the Term Certificates required to be redeemed on any redemption date pursuant to subparagraph (a) of this Section 4.3 shall be reduced, at the option of the City, by the principal amount of any Tenn Certificates which, at least 45 days prior to the mandatory sinking fund redemption date (i) shall have been acquired by the City at a price not exceeding the principal amount of such Tenn Certificates plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (ii) shall have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to a mandatory sinking fund redemption. Section 4.4 Partial Redemption. (a) A portion of a single Certificate of a denomination greater than $5,000 may be redeemed, but only in a principal amount equal to $5,000 or any integral multiple thereof. If such a Certificate is to be partially redeemed, the Paying Agent/Registrar shall treat each $5,000 · portion of the Certificate as though it were a single Certificate for purposes of selection for redemption. (b) Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with Section 3.6 of this Ordinance, shall authenticate and deliver an exchange Certificate or Certificates in an aggregate principal amount equal to the unredeemed portion of the Certificate so 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 4.5 Notice of Redemption to Owners. ( a) The Paying Agent/Registrar shall give notice of any redemption of Certificates by sending notice by United States mail, first class postage prepaid, not less than 30 days before the date fixed for redemption, to the Owner of each Certificate ( or part thereof) to be redeemed, at the address shown on the Register at the close of business on the business day next preceding the date of mailing such notice. (b) The notice shall state the redemption date, the redemption price, the place at which the Certificates are to be 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) 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. 1261694v. l LUB200nt 009 ) Section 4.6 Payment Upon Redemption. (a) Before or on each redemption date, the City shall deposit with the Paying Agent/Registrar money sufficient to pay all amounts due on the redemption date and the Paying Agent/Registrar shall make provision for the payment of the Certificates to be redeemed on such date by setting aside and holding in trust such amounts as are received by the Paying Agent/Registrar from the City and shall use such funds solely for the purpose of paying the principal of and accrued interest on the Certificates being redeemed. (b) Upon presentation and surrender of any Certificate called for redemption at the Designated Payment/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 4.7 Effect of Redemption. (a) Notice of redemption having been given as provided in Section 4.5 of this Ordinance, the Certificates or portions thereof called for redemption shall become due and payable on the date fixed for redemption and, unless the City defaults in its obligation to make provision for the payment of the principal thereof or accrued interest thereon, such Certificates or portions thereof shall cease to bear interest from and after the date fixed for redemption, whether or not such Certificates are presented and surrendered for payment on such date. (b) If the City shall fail to make provision for payment of all sums due on a redemption date, then any Certificate or portion thereof called for redemption shall continue to bear interest at the rate stated on the Certificate until due provision is made for the payment of same by the City. Section 4.8 Lapse of Payment. Money set aside for the redemption of Certificates and remaining unclaimed by the Owners of such Certificates shall be subject to the provisions of Section 3.3(f) hereof. ARTICLEV PAYING AGENT/REGISTRAR Section 5.1 Appointment of Initial Payjng Agent/Registrar. The Bank of New York Trust Company, National Association, is hereby appointed as the initial Paying Agent/Registrar for the Certificates. Section 5.2 Qualifications. Each Paying Agent/Registrar shall be a commercial bank, a trust company organized under the laws of the State of Texas, or other entity duly qualified and legally authorized to serve as and perform the duties and services of paying agent and registrar for the Certificates. -15- 126!694v.l LUB200nJ009 ) .., ) ) ) ) ) Section 5.3 Maintaining Paying Agent/Registrar. (a) At all times while any of the Certificates are outstanding, the City will maintain a Paying Agent/Registrar that is qualified under Section 5.2 of this Ordinance. The Mayor is hereby authorized and directed to execute an agreement with the Paying Agent/Registrar specifying the duties and responsibilities of the City and the Paying Agent/Registrar in substantially the form presented at this meeting, such form of agreement being hereby approved. The signature of the Mayor shall be attested by the City Secretary or any Assistant City Secretary of the City. (b) If the Paying Agent/Registrar resigns or otherwise ceases to serve as such, the City will promptly appoint a replacement. Section 5.4 Termination. The City, upon not less than sixty (60) days notice, reserves the right to terminate the appointment of any Paying Agent/Registrar by delivering to the entity whose appointment is to be terminated written notice of such termination . Section 5.5 Notice of Change to Owners. Promptly upon each change in the entity serving as Paying Agent/Registrar, the City will cause notice of the change to be sent to each Owner by United States mail, first class postage prepaid, at the address thereof in the Register, stating the effective date of the change and the name and mailing address of the replacement Paying Agent/Registrar. Section 5.6 Agreement to 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. Section 5.7 Delivery of Records to Successor. If a Paying Agent/Registrar is replaced, such Paying Agent, promptly upon the appointment of the successor, will deliver the Register ( or a copy thereof) and all other pertinent books and· records relating to the Certificates to the successor Paying Agent/Registrar. ARTICLE VI FORM OF THE CERTIFICATES Section 6.1 Form Generally. (a) The Certificates, including the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Certificate of the Paying Agent/Registrar, and the Assignment fonn to appear on each of the Certificates, (i) shall be substantially in the fonn set -16- 1261694v.l LUB200nt009 "\ ..., ., ) ) "\ ' ) forth in this Article, with such appropriate insertions, onnss1ons, 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 Certificates, as evidenced by their execution thereof. (b) Any portion of the text of any Certificates may be set forth on the reverse side thereof, with an appropriate reference thereto on the face of the Certificates. ( c) The definitive Certificates, if any, shall be typewritten, photocopied, printed, lithographed, or engraved, and may be produced by any combination of these methods or produced in any other similar manner, all as determined by the officers executing such Certificates, as evidenced by their execution thereof (d) The Initial Certificate submitted to the Attorney General of the State of Texas may be typewritten and photocopied or otherwise reproduced. Section 6.2 Form of the Certificates. The form of the Certificates, including the form of the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the form of Certificate of the Paying Agent/Registrar and the form of Assignment appearing on the Certificates, shall be substantially as follows: -17- 1261694v.l LUB200nt009 "\ ) ) ) (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 TAXABLE SERIES 2007 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 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 _jnterest to 2 be paid semiannually on February 15 and August 15 of each year, commencing 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/I'ransfer Office"), of The Bank of New York Trust Company, National Association, or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Iransfer 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 1 Information to be inserted from Pricing Certificate. 2 Information to be inserted from Pricing Certificate. 1261694v.1 LUB200nl009 -18- .., ., ., "\ ) \ registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expenses of such customary banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the purpose of the payment of interest on this Certificate, the registered owner shall be the person in whose name this Certificate is registered at the close of business on the "Record Date," which shall be the last business day of the month next preceding such interest payment date. If the date for the payment of the principal of or interest on this Certificate shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated Payment/fransfer Office of the Paying Agent/Registrar is located are required or authorized by law or executive order to close, the date for such payment shall be the next succeeding day that is not a Saturday, Sunday, legal holiday, or day on which banking institutions are required or authorized to close, and payment on such date shall have the same force and effect as if made on the original date payment was due . This Certificate is one of a series of fully registered certificates specified in the title hereof issued in the aggregate principal amount of $ ____ 3 (herein referred to as the "Certificates"), issued pursuant to a certain ordinance of the City (the "Ordinance'') for the purpose of paying contractual obligations to be incurred for authorized public improvements ( collectively, the "Project"), as described in the Ordinance, and to pay the contractual obligations for professional services of attorneys, financial advisors and other professionals in connection with the Project and the issuance of the Certificates. [The City has reserved the option to redeem the Certificates maturing on February 15 in the years ____ through ___, inclusive, 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. J4 [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: 3 Information to be inserted from Pricing Certificate. • Insert optional redemption provisions, if any, and revise as necessary to conform to the Pricing Certificate. -19- l261694v.l LUBZ00/71009 .., ) > ) 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 Certificates ( or with respect to Certificates having a denomination in excess of $5,000, each $5,000 portion thereof) to be redeemed by mandatory redemption. The principal amount of Certificates required to be redeemed on any redemption date pursuant to the foregoing mandatory sinking fund redemption provisions hereof shall be reduced, at the option of the City, by the principal amount of any Certificates which, at least 45 days prior to the mandatory sinking fund redemption date (i) shall have been acquired by the City at a price not exceeding the principal amount of such Certificates plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (ii) shall have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to a mandatory sinking fund redemption.]' Notice of such redemption or redemptions shall be given by first class mail, postage prepaid, not less than 30 days before the date fixed for redemption, to the registered owner of each of the Certificates to be redeemed in whole or in part. Notice having been so given, the Certificates or portions thereof designated for redemption shall become due and payable on the redemption date specified in such notice; from and after such date, notwithstanding that any of the Certificates or portions thereof so called for redemption shall not have been surrendered for payment, interest on such Certificates or portions thereof shall cease to accrue. As provided in the Ordinance, and subject to certain limitations therein set forth, this Certificate is transferable upon surrender of this Certificate for transfer at the d~ignated office of -the Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar; thereupon, one or more new fully registered Certificates of the same stated maturity, of authorized denominations, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. The City, the Paying Agent/Registrar, and any other person may treat the person in whose name this Certificate is registered as the owner hereof for the purpose of receiving payment as herein provided ( except interest shall be paid to the person in whose name this Certificate is registered on the Record Date) and for all other purposes, whether or not this Certificate be overdue, and neither the City nor the Paying Agent/Registrar shall be affected by notice to the contrary. IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Certificate and the series of which it is a part is duly authorized by law; that all acts, conditions, and things to be done precedent to and in the issuance of the Certificates have been properly done and performed and have happened in regular and due time, form, and manner as required by law; that ad 5 Insert mandatory sinking fund redemption provisions, if any, and confonn as necessary to the Pricing Certificate. -20- 126\694v. I LUB20onl009 '\ ) '\ ) 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 Swplus 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 truces 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. 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 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] l26l694v.l LUB20on1009 -21- Comptroller of Public Accounts of the State of Texas ' .J '\ (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) Fonn of Assignment. The Bank of New York Trust Company, National Association as Paying Agent/Registrar B~ --------------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 l261694v.1 LUB20onl009 -22- 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 fonn set forth in paragraphs (a), {b) and (d) of this Section, except for the following alterations: (i) immediately under the name of the Certificate the headings "INTEREST RA TE" and "MATURITY DA TE" shall both be completed with the expression "As shown below"; and (ii) in the first paragraph of the Certificate, the words "on the maturity date specified above" shall be deleted and the following will be inserted: "on February 15 in each of the years, in the principal installments and bearing interest at the per annum rates set forth in the following schedule: Principal Installments Interest Rate (Information to be inserted from the Pricing Certificate pursuant to Section 3.2 of this Ordinance) ) Section 6.3 CUSIP Registration. The City may secure identification numbers through the CUSIP Service Bureau Division of Standard & Poor's, A Division of the McGraw-Hill Companies, New York. New York, and may authorize the printing of such nwnbers on the face of the Certificates. It is expressly provided, however, that the presence or absence of CUSIP numbers on the Certificates shall be of no significance or effect in regard to the legality thereof and neither the City nor the attorneys approving said Certificates as to legality are to be held responsible for CUSIP numbers incorrectly printed on the Certificates. Section 6.4 Legal Opinion. The approving legal opinion of Vinson & Elkins L.L.P., Bond Counsel, may be attached to or printed on the reverse side of each Certificate over the certification of the City Secretary of the City, which may be executed in facsimile. Section 6.5 Bond Insurance. Information pertaining to bond insurance, if any, may be printed on each Certificate. ARTICLE VII· SALE AND DELIVERY OF CERTIFICATES; DEPOSIT OF PROCEEDS Section 7.1 Sale of Certificates: Official Statement. (a) The Certificates shall be sold at negotiated sale to the Underwriter in accordance with the tenns of this Ordinance, including this Section 7.l(a) and Exhibit B hereto, provided -23- 1261694v.l LUB200nl 009 ) 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 detennining 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 number and designation of series of Certificates to be issued, the fonn 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.l(a) shall expire at 5:00 p.m., December 31, 2007, 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 Certificate 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 "Certificate Purchase Contract") which Certificate Purchase Contract is hereby accepted, approved and authorized in substantially the form submitted to the City and upon completion of the terms of the Certificate Purchase Contract in accordance with the terms of the Pricing Certificate and this Ordinance, the Authorized Officer is authorized and directed to execute such Certificate 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 of the Underwriter. (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 15c2-12 under the Securities Exchange Act of 1934, as amended. The final Official Statement (the "Official Statement") presented to and considered at this meeting is hereby in all respects approved and adopted and the Authorized Officer and the City Secretary of the City are hereby authorized and directed to execute the same and deliver appropriate nwnbers of executed copies thereof to the Underwriter. The Official Statement as thus approved, executed and delivered, with such appropriate variations as shall be approved by the Mayor, City Manager, Deputy City Manager, any Assistant City Manager, Chief Financial Officer, Cash and Debt Manager or City Secretary of the City and the Underwriter, may be used by the Underwriter 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 1261694v.l LUB200nl009 i ' 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 Underwriter, 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 deliv~ry of the Certificates in accordance with the terms of sale therefor including, without limitation, the Purchase Contract. (e) The obligation of the Underwriter identified in subsection (a) of this Section to accept delivery of the Certificates is subject to the Underwriter being furnished with the final, approving opinion of Vinson & Elkins L.L.P ., bond counsel for the City, which opinion shall be dated and delivered the Closing Date. Section 7 .2 Control and Delivery of Certificates. (a) The Authorized Officer of the City is h~reby 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 Underwriter 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 performance of such duties by the Mayor Pro Tem and the Assistant City Secretary shall for the pwposes of this Ordinance have the same force and effect as if such duties were performed by the Mayor and City Secretary, respectively. Section 7.3 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. -25- l261694v.l LUB200nl009 .. ., ) Section 8.1 Investments. ARTICLE VIII INVESTMENTS ( a) Money in the Interest and Sinking Fund created by this Ordinance, at the option of the City, may be invested in such securities or obligations as permitted under applicable law. (b) Any securities or obligations in which such money is so invested shall be kept and held in trust for the benefit of the Owners and shall be sold and the proceeds of sale shall be timely applied to the making of all payments required to be made from the fund from which the investment was made. Section 8.2 Investment Income. (a) Interest and income derived from investment of the Interest and Sinking Fund shall be credited to such fund. (b) Interest and income derived from investment of the funds to be deposited pursuant to Section 7.3(b) hereof shall be credited to the account where deposited until the acquisition or construction of said projects is completed or shall be transferred to the Interest and Sinking Fund as shall be determined by the City Council. Upon completion of the authorized projects, to the extent such interest and income are present, such interest and income shall be deposited to the Interest and Sinking Fund. ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.1 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 Fund, money sufficient to pay such interest on and principal of and interest on the Certificates as will accrue or mature on the applicable Interest Payment Date or date of prior redemption. Section 9.2 Other Representations and Covenants. (a) The City will faithfully perform, at all times, any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance; the City will promptly pay or cause to be paid the principal of and interest on each Certificate on the dates and at the places and manner prescribed in such Certificate; and the City will, at the times and in the manner prescribed by this Ordinance, deposit or cause to be deposited the amounts of money specified by this Ordinance. (b) The City is duly authorized under the laws of the State of Texas to issue the Certificates; all action on its part for the creation and issuance of the Certificates has been duly -26- 126 I 694v. l LUB200/71009 .. .) "\ .. '\ 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. (c) Interest on the Certificates shall not be excludable from the gross income of the Owners for federal income tax purposes. ARTICLEX DEFAULT AND REMEDIES Section I 0.1 Events of Default. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an Event of Default: (i) the failure to make payment of the principal of or interest on any of the Certificates when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement, or obligation of the City, which default materially and adversely affects the rights of the Owners, including but not limited to their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of sixty (60) days after notice of such default is given by any Owner to the City . Section 10.2 Remedies for Default. ( a) Upon the happening of any Event of Default, then any Owner or an authorized representative thereof, including but not limited to a trustee or trustees therefor, may proceed against the City for the purpose of protecting and enforcing the rights of the Owners under this Ordinance by mandamus or other suit, action or special proceeding in equity or at law in any court of competent jurisdiction for any relief 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 10.3 Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the 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. -27- l 26 I 694v. l UJB2oom 009 ) ' 'I ) (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. l Discharge. The Certificates may be defeased, discharged or refunded in any manner permitted by applicable law. ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12.1 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 infonnation 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. Toe 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 12.2 Material Event Notices. (a) The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws: (i) principal and interest payment delinquencies; -28- 1261694v.1 LUB200nl009 ') ' ) (ii) nonpayment related defaults; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax-exempt status of the 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 m accordance with Section 12.1 of this Ordinance by the time required by such Section. Section 12.3 Limitations, Disclaimers and Amendments. (a) The City shall be obligated to observe and perfomi 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 ofth~ 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 widertakes 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. -29- 1261694v.l LUB200/71009 '\ 'I ,I UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIF[C PERFORMANCE. (c) No default by the City in observing or performing its obligations under this Article shall constitute a breach of or default under the Ordinance for purposes of any other provisions of this Ordinance. ( d) Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. ( e) The provisions of this Article may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (i) the provisions of this Article, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (A) the Owners of a majority in aggregate principal amount ( or any greater amount required by any other provisions of this Ordinance that authorizes such an amendment) of the outstanding Certificates consent to such amendment or (B) an entity or individual person that is unaffiliated with the City (such as nationally recognized bond counsel) detennines that such amendment will not materially impair the interests o(the Owners and beneficial owners of the ~rtificates. 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 12.1 an explanation. in narrative form, of the reasons for the amendment and of the impact of any change in type of financial information or operating data so provided. (f) Any filing required to be made pursuant to this Article XII may be made through the facilities of DisclosureUSA or such other central post office as may be approved in writing by the SEC for such purpose. Any such filing made through such central post office will be 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; A TIORNEY GENERAL MODIFICATION Section 13.1 Amendments. This Ordinance shall constitute a contract with the Owners, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains outstanding -30- 1261694v. l LUB200/71009 except as permitted in this Section. The City may, without consent of or notice to any Owners, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the written consent of the Owners of the Certificates holding a majority in aggregate principal amount of the Certificates then outstanding, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Owners of outstanding Certificates, no such amendment, addition, or rescission shall (i) ex.tend 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 13.2 Attorney General Modification. · In order to obtain the approval of the Certificates by the Attorney General of the State of Texas, any provision of this Ordinance may be modified, altered or amended after the date of its adoption if required by the Attorney General in connection with the Attorney General's examination as to the legality of the Certificates and approval thereof in accordance with the applicable law. Such changes, if any, shall be provided to the City Secretary and the City Secretary shall insert such changes into this Ordinance as if approved on the date hereof. ARTICLE XIV INSURANCE PROVISIONS Section 14.1 Municipal Bond Insurance. Infonnation pertaining to bond insurance, if any, may be printed on each Certificate. ARTICLE XV EFFECTIVE IMMEDIATELY Section 15.1 Effective Immediately. Notwithstanding the provisions of the City Charter, this Ordinance shall become effective immediately upon its adoption at this meeting pursuant to Section 1201.028, Texas Government Code. -31- l261694v.l LUB200/71009 ) ) ) ' , PRESENTED, FINALLY PASSED AND APPROVED, AND EFFECTIVE on the 26th day of June, 2007, at a regular meeting of the City Council of the City of Lubbock, Texas. -r 0~~-M-d- DA YID A.~Mayor ATTEST: [SEAL] APPROVED AS TO FORM: By: -32- l261694v.l LUB20Gni009 '\ ) ) ) 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 I above. A-1 1261694v.I LUB2oon1009 ) ) EXHIBIT B SALE PARAMETERS In accordance with Section 7.l(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 Underwriter: ( 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 authorized to be issued for the purposes described in Section 3.1 shall not exceed the maximum amount authorized in Section 3.1; ( d) the maximum maturity for the Certificates shall not exceed forty 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. B-1 1261694v.l LUB200nl009 ") ) ) ) MINUTES AND CERTIFICATION PERTAINING TO PASSAGE OF AN ORDINANCE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § On the 14th day of December, 2007, the City Council of the City of Lubbock, Texas, convened in a regular meeting at the regular meeting place thereof, the meeting being open to the public and notice of said meeting, giving the date, place and subject thereof, having been posted as prescribed by Chapter 551, Texas Government Code, as amended; and the roll was called of the duly constituted officers and members of the City Council, which officers and members are as follows: David A Miller, Mayor Jim Gilbreath, Mayor Pro Tern Linda DeLeon Floyd Price Todd R. Klein Phyllis S. Jones John Leonard ) ) ) ) ) Members of the Council and all of said persons were present except (all present:) , thus constituting a quorum. Whereupon, among other business, a written Ordinance bearing the following caption was introduced: AN ORDINANCE AMENDING THE CITY'S ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2007 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: o ABSTENTIONS: o RECUSED: l Dallas l34642Sv.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 certifi6d 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 14th day of December, 2007. Cityecretary ~o City of Lubbock, Texas [SEAL] Signature Page to Minutes and Certification ) "\ 1 ) AN ORDINANCE AMENDING THE CITY'S ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2007 WHEREAS, the City of Lubbock, Texas (the "City''), pursuant to Subchapter C, Chapter 271, Texas Local Government Code, as amended, and Chapter 1371, Texas Government Code, as amended, adopted an ordinance (the "Parameters Ordinance") on June 26, 2007, authorizing the issuance of its Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2007 (the "Certificates") and delegating to the Authorized Officer the authority to approve the amount, the interest rate, price and terms of the Certificates authorized thereby and to otherwise take such actions as necessary and appropriate to effect the sale of the Certificates; WHEREAS, the City Council of the City (the "City Council") has found and determined that it is in the best interest of the City to amend the Parameters Ordinance to extend the time pursuant to which the Authorized Officer may exercise the authority granted in the Parameters Ordinance to effect the sale of the Certificates as contemplated therein; and WHEREAS, the meeting at which this ordinance is considered is open to the public as required by law, and public notice of the time, place, and purpose of said meeting was given as required by Chapter 551, Texas Government Code, as amended; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOC~ TEXAS, THAT: Section 1. The findings and determinations set forth in the preambles hereto are hereby incorporated by reference for all purposes. Section 2. Section 7.t(a) of the Parameters Ordinance is hereby amended to provide that the authority granted to the Authorized Officer under such Section 7.l(a) shall expire at 5:00 p.m., June 26, 2008, unless otherwise extended by the City Council by separate action. Section 3. All references in the Ordinance to ''Taxable Series 2007" are hereby amended to read ''Taxable Series 2008," including the name designation of the Certificates in Section 3.1 of the Ordinance. Section 4. This ordinance shall take effect from and after the date of its passage. Dallas 1341344v. l ) ) PRESENTED, FINALLY PASSED AND APPROVED, AND EFFECTIVE on the /~ day of December, 2007, at a regular meeting of the City Council of the City of Lubbock, Texas. DAVID A. MILLER, Mayor ATTEST: ~ e,_Ql'..c.-c,,,. I 9---1. __..--, REECCA GARZA, CityS~ [SEAL] APPROVED AS TO FORM: By: JENNIFER TAFFE, Bond Counsel Dallas 1341344v.l ; .. J PRICING CERTIFICATE Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 Re: $11,805,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 (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 June 26, 2007 and amended by the City on December 14, 2007 (collectively, 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 .1 of the Ordinance, I have acted on behalf of the City in selling the Certificates to the Underwriter pursuant to the tenns of a purchase contract in substantially the form accepted, approved and authorized pursuant to Section 7 .1 of the Ordinance, for the sum of $11,532,991.85 (representing the principal amount of $11,805,000, less original issue discount of $185,703.00 and less an underwriters' discount of $86,305.15), plus accrued interest from the dated date and having the following tenns, conditions and provisions, all as authorized pursuant to Section 7.1 of the Ordinance: A. The Certificates shall be issued in the aggregate principal amount of$1 l,805,000, shall be dated December 15, 2007 (the "Certificate Date") and bear interest from such date, shall mature on February 15 in the years and in the principal amounts and shalt bear interest payable on February 15 and August 15 of each year, commencing February 15, 2008, at the rates set forth in the following schedule: Term Certificates Principal Interest Years Installments Rate 2018 $4,620,000 5.250% 2027 7,185,000 6.250% B. The Tenn Certificates are subject to scheduled mandatory redemption and will be redeemed by the City, in part at a price equal to the principal amount thereof, without premium, plus accrued interest to the redemption date, out of moneys available for such purpose in the Interest and Sinking Fund, on the dates and in the respective principal amounts as set forth in the following schedule: 1345934v.3 LUB200/71009 ) .. Term Certificates Maturing February 15, 2018 Redemption Date Principal Amount February 15, 2009 February 15, 2010 February 15, 2011 February 15, 2012 February 15, 2013 February 15, 2014 February 15, 2015 February 15, 2016 February 15, 2017 February 15, 2018 (maturity) $360,000 380,000 400,000 420,000 445,000 470,000 495,000 520,000 550,000 580,000 Tenn Certificates Maturing February 15. 2027 Redemption Date Principal Amount February 15, 2019 February 15, 2020 February 15, 2021 February 15, 2022 February 15, 2023 February 15, 2024 February 15, 2025 February 15, 2026 February 15, 2027 (maturity) $ 615,000 655,000 695,000 740,000 790,000 840,000 890,000 950,000 1,010,000 C. In accordance with the parameters contained in Section 7 .1 and Exhibit B of the Ordinance, the undersigned does hereby find, certify and represent that the foregoing terms of the Certificates satisfy the following requirements and parameters contained within such Section 7.1 and Exhibit B: (i) the price to be paid by the Underwriters for the Certificates shall be 98% 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 3.1 of the Ordinance and such aggregate principal amount does not exceed the maximum amount authorized in Section 3.1 of the Ordinance; (iv) the maximum maturity for the Certificates is 2027 which does not exceed forty years; -2- 1345934v.3 LUB200/71009 ") "'\ ) ., (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 .3 of the Ordinance. 3. The Certificates shall be insured by Financial Security Assurance Inc. 4. The Certificates shall be issued substantially in the form attached hereto as Exhibit A. -3- 1345934v.3 LUB20ont009 Executed as of the 19th day of December, 2007. Signature Page for Pricing Certificate '\ 1345934v.2 LUB200l71009 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 TAXABLE SERIES 2008 REGISTERED $, ___ _ INTEREST RATE: MATURITY DATE: CERTIFICATE DATE: CUSIP NUMBER: __ % February 15, __ December 15, 2007 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, 2008. 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 Trust Company, National Association, or, with respect to a A-1 1345934v.3 LUB200/71009 ) ) ) ' 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 Paymentff ransfer 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 $11,805,000 (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, 2018, in whole or in part, before their respective scheduled maturity dates, on February 15, 2017, or on any date thereafter, at a price equal to the principal amount of the Certificates so called for redemption plus accrued interest to the date fixed for redemption. If less than all of the Certificates are to be redeemed, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot or other customary method that results in a random selection the Certificates, or portions thereof, within such maturity and in such principal amounts, for redemption. Certificates maturing on February 15 in each of the years 2018 and 2027 (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: A-2 1345934v.3 LUB200/71009 ") Term Certificates Maturing February 15. 2018 Redemption Date Principal Amount February 15, 2009 February 15, 2010 February 15, 2011 February 15, 2012 February 15, 2013 February 15, 2014 February 15, 2015 February 15, 2016 February 15, 2017 February 15, 2018 (maturity) $360,000 380,000 400,000 420,000 445,000 470,000 495,000 520,000 550,000 580,000 Term Certificates Maturing February 15, 2027 Redemption Date Principal Amount February 15, 2019 February 15, 2020 February 15, 2021 February 15, 2022 February 15, 2023 February 15, 2024 February 15, 2025 February 15, 2026 February 15, 2027 (maturity) $ 615,000 655,000 695,000 740,000 790,000 840,000 890,000 950,000 1,010,000 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. 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 Certificates to be redeemed in whole or in part. Notice having been so given, the Certificates or portions thereof designated for redemption shall become due and payable on the redemption date specified in such notice; from and after such date, notwithstanding that any of the Certificates or portions thereof so called for redemption shall not have been surrendered for payment, interest on such Certificates or portions thereof shall cease to accrue. A-3 l345934v.3 LUB200/7l009 ) As provided in the Ordinance, and subject to certain limitations therein set fo~ this Certificate is transferable upon surrender of this Certificate for transfer at the designated office of the Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar; thereupon, one or more new fully registered Certificates of the same stated maturity, of authorized denominations, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. 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 pwpose 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, 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 pwpose 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-4 l345934v.3 LUB200nI009 ) ) 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-5 J34S934v.3 LUB200nt009 ) ) ) (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 STA TE 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-6 1345934v.3 LUB200/71009 The Bank of New York 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 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 form 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 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 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: 1345934v.3 LUB2oonl009 Principal Installments Interest Rate (Information to be inserted. from the Pricing Certificate pursuant to Section 3.02 of the Ordinance) A-7 ..., ) ) 1 ) '\ "\ ) PAYING AGENT/REGISTRAR AGREEMENT between CITY OF LUBBOCK, TEXAS and THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION Pertainingto City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation Taxable Series 2008 LUB20Ml009 Dallas 1345898v.l Dated as of December 15, 2007 TABLE OF CONTENTS Page Recitals .............. :••······················································································································· 1 ARTICLE I APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Section 1.02. Appointment .................................................................................................... I Compensation .................................................................................................. 1 ARTICLE II DEFINITIONS Section 2.01. Definitions ....................................................................................................... 2 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. WB200nI009 Dallas 1345898v.l ARTICLE III PAYING AGENT Duties of Paying Agent ................................................................................... 3 Pa)'IIlent Dates ................................................................................................. 3 ARTICLE IV REGISTRAR Transfer and Exchange .................................................................................... 4 The Certificates ............................................................................................... 4 Form 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 Documents, 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 ........................................................................................... 9 Successors and Assigns ................................................................................... 9 Separability ...................................................................................................... 9 Benefits of Agreement .................................................................................... 9 Entire Agreement ............................................................................................ 9 Counterparts .................................................................................................... 9 T ennination ................................................................................................... l 0 Governing Law .............................................................................................. 10 Execution ....................................................................................................................................... 11 Annex A-Schedule of Fees for Service as Paying Agent/Registrar LUB200nt009 Dallas 1345898v.l (ii) PA YfNG AGENT/REGISTRAR AGREEMENT THIS PAYING AGENT/REGISTRAR AGREEMENT (the or this "Agreement"), dated as of December 15, 2007, is by and between CITY OF LUBBOCK, TEXAS (the "Issuer"), and The Bank of New York Trust Company Bank, National Association (the "Banlc''), 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, Taxable Series 2008 (the "Certificates"), dated December 15, 2007, to be issued as registered securities without coupons; WHEREAS, all things necessary to make the Certificates the valid obligations of the Issuer, in accordance with their terms, will be taken upon the issuance and delivery thereof; WHEREAS, the Issuer is desirous that the Bank act as the Paying Agent of the Issuer in paying the principal, redemption premium, if any, and interest on the Certificates, in accordance with the terms thereof, and that the Bank act as Registrar for the Certificates; and WHEREAS, the Issuer has duly authorized the execution and delivery of this Agreement, and all things necessary to make this Agreement the valid agreement of the Issuer, in accordance with its terms, have been done; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE I APPOINTMENT OF BANK AS PA YING 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 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. LUB200n I 009 Dallas 1345898v. 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 Trust Company Bank, National Association. "Bank Office" means the Bank's office in Dallas, Texas. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Certificate" or "Certificates" means any or all of the Issuer's Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008, dated December 15, 2007. "Certificate Ordinance" means the ordinance of the City Council of the Issuer authorizing the issuance and delivery of the Certificates. "Fiscal Year" means the 12 month period ending September 30th of each year. "Issuer" means the City of Lubbock, Texas. "Issuer Request" and "Issuer Order'' means a written request or order signed in the name of the Issuer by the Mayor of the Issuer, or any other authorized representative of the Issuer and delivered to the Bank. "Legal Holiday' means a day on which the Bank is required or authorized by applicable law to be closed. "Owner'' means the Person in whose name a Certificate is registered in the Register. "Paying Agent" means the Bank when it is performing the 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 WB20Dnl009 Dallas J345898v. l 2 " J ) ) 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). "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 Chainnan of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Stated Maturity" means the date or dates specified in the Certificate Ordinance as the fixed date on which the principal of the Certificates is due and payable or the date fixed in accordance with the tenns of the Certificate Ordinance for redemption of the Certificates, or any portion thereof, prior to the fixed maturity date. ARTICLE III 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. WB200n1009 Dallas 1345898v. I 3 ) ... ;; '\ 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 docwnentation it feels necessary to effect a re-registration. Section 4.02. The Certificates. The Issuer shall provide an adequate inventory of unregistered Certificates to facilitate transfers. The Bank covenants that it will maintain the unregistered Certificates in safekeeping and will use reasonable care in maintaining such unregistered Certificates in safekeeping, which shall be not less than the care it maintains for debt securities of other governments or corporations for which it serves as registrar, or which it maintains for its own securities. Section 4.03. Form of Register. (a) The Banlc 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 follil which the Bank has currently available and currently utilizes at the time. LUB200nI009 Dallas 1345898v. l 4 "I ) ' (b) The Register may be maintained in written fonn or in any other form capable of being converted into written form within a reasonable time. 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 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 lssuer 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 Bank. 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 of this Section 4.06, the Issuer hereby instructs the Banlc to deliver fully registered Certificates in exchange for or in lieu of mutilated, destroyed, lost, or stolen Certificates as long as the same does not result in an overissuance. (b) If (i) any mutilated Certificate is surrendered to the Bank, or the Issuer and the Bank receives evidence to their satisfaction of the destruction, loss, or theft of any Certificate, and (ii) there is delivered to the Issuer and the Bank such security or indemnity as may be required by the Bank to save and hold each of them harmless, then in the absence of notice to the Issuer or the Bank that such Certificate has been acquired by a bona fide p~haser, 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. LUB200171009 Dallas 1345898v. I 5 ) ( d) Upon the satisfaction of the Bank and the Issuer that a Certificate has been mutilated, destroyed, lost, or stolen, and upon receipt by the Bank and the Issuer of such indemnity or security as they may require, the Bank shall cancel the Certificate number on the Certificate registered with a notation in the Register that said Certificate has been mutilated, destroyed, lost, or stolen; and a new Certificate shall be issued of the same series and of like tenor and principal amount bearing a number, according to the Register, not contemporaneously outstanding. (e) The Bank may charge the Owner the Bank's fees and expenses in connection with issuing a new Certificate in lieu of or exchange for a mutilated, destroyed, lost, or stolen Certificate. (t) The Issuer hereby accepts the Bank's current blanket bond for lost, stolen, or destroyed Certificates and any future substitute blanket bond for lost, stolen, or destroyed Certificates that the Bank may arrange, and agrees that the coverage under any such blanket bond is acceptable to it and meets the Issuer's requirements as to security or indemnity. The Bank need not notify the Issuer of any changes in the security or other company giving such bond or the 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 infoxmation 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 Heu 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 perfoxm 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. LUB200nt009 Dallas I 345898v. l 6 (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, 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 Banlc shall not be bound to make any investigation into the facts or matters stated in an ordinance, resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, certificate, note, security, or other paper or document supplied by Issuer. ( e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03. Recitals oflssuer. (a) The recitals contained herein and in the Certificates shall be taken as the statements of the Issuer, and the Bank asswnes 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 amowit due on any Certificate except as othervrise 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 otheiwise 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 Banlc. (a) Money held by the Banlc hereunder need not be segregated from any other funds provided appropriate accounts are maintained. WB200n1009 Dallas 1345898v. l 7 ) ) ) (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 aµy, 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 oomply 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 acoount 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 oollateralized 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 acoounts 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 oost 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. Intemleader. 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 oourt 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 oourt 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. LUB200n 1009 Dallas 1345898v.l 8 ' ) ) ) Section 6.02. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request. demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown below: (a) if to the Issuer: (b) if to the Bank: City of Lubbock, Texas 1625 13th Street Lubbock, Texas 79457 Attention: Director of Fiscal Policy and Strategic Planning The Bank: of New York Trust Company, National Association 2001 Bryan, 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. Titls 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. Counter;parts. 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. LUB20MJ009 Dallas 1345898v. l 9 ) .. ' Section 6.10. Termination. (a) This Agreement will terminate on the date of final payment by the Bank issuing its checks for the final payment of principal, redemption premium, if any, and interest of the Certificates. (b) This Agreement may be earlier terminated upon sixty (60) days written notice by either party; provided, that, no termination shall be effective until a successor has been appointed by the Issuer and has accepted the duties imposed by this Agreement. A resigning Paying Agent/Registrar may petition any court of competent jurisdiction for the appointment of a successor Paying Agent/Registrar if an instrument of acceptance by a successor Paying Agent/Registrar has not been delivered to the resigning Paying Agent/Registrar within sixty (60) days after the giving of notice of resignation. (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. Titis Agreement shall be construed in accordance with and governed by the laws of the State of Texas. LUB200nt009 Dallas 134S898v.l 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. CTIY OF LUBBOCK, TEXAS ----z::,?N.;tt.- ay. --~-+---------David A. Miller, Mayor ATTEST: ~~ Reh a Garza, City secretary Signature Page for Paying Agent/Registrar Agreement ) ) ) Dallas 1345898v.1 THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION By: Title: ASST VICE PRESIDENT \ ' . ) ANNEX"A" SCHEDULE OF FEES FOR SERVICE AS PAYING AGENT/REGISTRAR Dallas I 345898v.1 ) 7heBANK of NEW YORK .. $11,805,000 Lubbock, (City of), Tex.as Tax & Waterworks System Surplus Revenue Certificates of Obligation, Taxable, Series 2008 Acceptance Fee: Waived A one-time charge covering the Bank Officer's review of governing documents, communication with members of the closing party, including representatives of the issuer, investment bank:er(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. Annual Paying Agent Administration Fee: $500 An annual charge covering the normal paying agent duties related to account administration and bondholder services. This fee is payable annually, in advance, on the closing date and each anniversary thereafter. Extraordinary Senices / Miscellaneous Fees: By Appraisal The charges for performing extraordinary or other services not contemplated at the time of the execution of the transaction or not specifically covered elsewhere in this schedule will be detennined by appraisal in amounts commensurate with the service to be provided. If it is contemplated that the Trustee bold 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 will be provided at such time. Should this transaction terminate prior to closing, all out-of-pocket expenses incurred, including legal fees, will be billed at cost. If all outstanding bonds of a series are defeased or called in full prior to their maturity, a termination fee may be assessed ) ) • ··--· · at that limi;:. ': ·: ··.. . . ·. .. •· ,~ ,; ,. ;._,: · '-1 : .:.. :: ':): · ;·Mi~~ellaneoils •fe~s · may include, but are not -rrecessarily limited to the foliowing, 1 f"applicable:·=.uE;C·;filing ,fees;--> ,h ': • ,1 . , .... ,,:. \~:.. .. ·-ajon~y_market'.swe~p.fees, jl,Udi~or_coefumatio~fees, wire·transfer fees, transaction fees·to,se'ftl~;tii:1Id-party\ti:ades : .. · '· .. ·. . ,,>and r~concile~pt fees to: balance trust;a~cowi(t,alances to ,iliird-party inv~stment provider sta~~nts.J; . , . ";"i,. •.:•:1: ·:•1 , .... ·, . , . ; , , . , . Annual fees include one standard audit confinnation per year without charge. Standard audit ccmfirmations-include-,•.1-.-,,,._. , •., the final maturity ·date, principal paid, principal outstanding, interest cycle, interest paid, cash and asset information; '· interest rale, and asset statement information. Non-standard audit confirmation requests may be assessed an additional fee. Periodic tenders, sinking fund, optional or extraordinary call redemptions will be assessed an additional charge of $300 per event. Terms and Disclosures Terms or Proposal Final acceptance of the appointment under the Indenture is subject to approval of authorized officers of BNY and full review and execution of all documentation related hereto. Please note that if this transaction does not close, you will be responsible for paying any expenses incurred, including counsel fees. We reserve the right to terminate this offer if we do not enter into final written documents within three months from the date this document is 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. ) ) ) PRELIMlNARY OFFICIAL STATEMENT DATED DECEMBER 7, 2007 This Preliminary Official Statement is subject to completion and amendment. Upon sale of the Certificates described herein, the Official Statement will be completed and delivered to the Underwriter (defmed herein). Prospective purchasers must read the entire Official Statement to make an informed investment decision. IN THE OPINION OF BOND COUNSEL, INTEREST ON THE CERTIFICATES IS INCLUDED IN GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES UNDER EXISTING LAW. SEE '"TAXABLE STATIJS OF THE CERTIFICATES" HEREIN FOR A DISCUSSION OF TIIE OPINION OF BOND COUNSEL. NEW ISSUE: BOOK-ENTRY-ONLY Dated; DeceluberlS,2007 RA TINGS: Moody's Investon Service, lac. "_" Stao.dard & Poor's Ratings Services "_" Fitc:b Ratiags "_" Sll.635,000* See "OTHER INFORMATION -RATINGS" and "BOND INSURANCE" herein.. CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2008 Due: Febru.u-y 15, as shown OD the inside cover Principal of and interest 011 theS 11,635,000• City of Lubbock, Texas (the "City"), Tax and Waterworks System Swplus Revenue Certificates of Obligation, Taxable Series 2008 ( the "Certificates") are payable by The Bank of New Y one Trust Company, National Association, Dallas, Texas (the "Paying Agent/Registrar"). The Certificates are initially registered and delivered only to Cede & Co., the nominee of The Dcpositocy Trust Company ("OTC") pursuant to the Book-Entry-Only System described bercin. Beneficial ownen1hip of the Certificates may be acquired in denominations of $5,000 or integral multiples tbereot: Ne physical delivery of the Certificates will be made to lhe beneficial owner-s tbereof. Principal of and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distnbution of the amounts so paid t.o the beneficial owners of the Certificates. See "THE CERTIFICATES· BOOK-ENTRY-ONLY SYSTEM" herein. Intecest OD the Certificales will be cak:ulated on the basis of a 360-day year consisting of twelve 30-day months, will accrue from December 15, 2007, and is payable on February 15 and August 15 of each year, commencing February 15, 2008, until marurity or earlier redemption, to the registemf owners (initiaJly Cede & Co.) appearing on the registration books of the Paying Agent/Registrar on the last business day of the month preceding eacb interest payment date (the "Record Date") (see "TIIE CERTIFICATES -DESCRIPTION OF THE CERTIPlCA TES"). The Certificates are subject to optional redemption prior to their scheduled maturities at the option of the City (see ''THE CERTIFICATES-OPTIONAL REDEMPTION"). The Certificates ate payable from a combination of (i) the proceeds of a continuing, direct annual ad valorern 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 Waterwoib System not to exceed $1,000. The Certificates are issued puI11uant to the Constitution and general laws of the Stare of Texas, particularly Sllbcbapter C of Chapcet 271, Tex.as Local GoVfflllllCllt Code, as amended, Chapter 1371, Texas GovernmC11t Code, as amended, and an olditLance adopted by the City Council (the "Ordinance"). Proceeds fi-om the sale of the Certificates will be used for the pw-pose of paying contractual obligations to be inculTed for (i) the coustruction of a. civic/conference center, including meeting and support space and related parking (the "City Facilities") and (ii) professional services rendered in cormection therewith. In addition, a. portion of the proceeds from the sale of the Certificates will be used to pay the costs of is5Wlllce of die Certmcates. The City facilities are being developed in conjunction wiCh an adjacent full secvice, privately owned hotel containing not less than 300 rooms. The City Facilities will conlain ballrooms and such other meetiog and banquet rooms as may re3SOllllb!y be required to serve as the primary meeting space for the hotel The City Facilitieii will be leased to the owner of the hotel or its designee and will be operated as facilities open to the public. The site where the hotel and the City Facilities will be located is within the North Overton Tax Increment Financing Reinvestment Z.One (the "North Overton TIF"), and the project is part of tbe redevelopment of property within the North Overton TIP. See "AD VAL.OREM TAX INFORMATION -TAX INCREMENT FINANCING ZONES." The City has applied to several companies for bond insurance and will considei-the purchase of such insurance! after an analysis of the bids from such companies has been made. See ''BOND JNSURANCE" herein. The Certificates are offered when, as and if issued, subject to the approving opinion of the Attorney General of the State of Tciw and die opinion of Vinson & Elkins LLP ~ Bond Counsel, Dallas, Texas. Certain legal matters will be passed upon for the UndeJWritcr named below (the "Underwriter") by its counsel, McCall, ParlchW'st & Horton L.LP., Dallas, Texas. See "01lfBR INFORMATION -LEGAL MATTERS." Delivecy of the Certificates through The Depositoiy Trust Company is expected to be on or about Januaiy 17, 2008. MORGAN STANLEY • Preliminary, subject to change. ) ) 1 'I ) ) ) • PRINCIPAL AMOUNTS, INTEREST RATES AND PRICES CUSIP Prefix: 549187 $11,635,000* Tax and Waterworks System Surplus Revenue Certificates of Obligadon, Taxable Series 2008 (Due February 15) Initial Principal Interest Offering CUSIP Maturity Amount• Rate Yield tal Suffix (b) 2008 $ 205,000 % % 2009 355,000 2010 375,000 2011 395,000 2012 415,000 2013 435,000 2014 460,000 2015 485,000 2016 515,000 2017 540,000 2018 (c) 575,000 2019 (c} 605,000 2020 (c) 640,000 202[ (c) 675,000 2022 (c) 715,000 2023 (c) 755,000 2024 (c) 800,000 2025 (c) 845,000 2026 (c) 895,000 2027 (c) 950,000 l'Rlimillaty, subj~ to change . (a) The initial yields will be established by and are the sole respo11Sibility of the U.adc:1-writec, and may subsequently be c:hallged. (b) CUSIP DUmbe:rs have been assigned to the Certificates by Standard and POOf's CUSIP Service Bwa.u, a Division of The McGraw-Hill Co,npanics, Iac., and are included solely for the convenieoce of the regiscercd owners of the Certificates. Ncilbcr the City, the Financial Advisor, nor die Underwriter are respo,isible for the selection or c:orredDess of the CUSIP number$ set forth hemn. (c) The Certificates maturing on Fcbnwy I 5, 2018 and tb.=fter are subject to redcmptioa. at !be option of the City, at par w.lue th=f plus accrued interest oa Febnwy 1 S, 2017 or any date di=fter (see "THE CERTIFICATES-OPTIONAL REDEMPTION"). ) ) \ ) ) ) ) USE OF INFORMATION IN OFFICIAL STATEMENT For purposes of complianoe with Rule I Sc2-l 2 of the Securities and Exchange Commission, this document may be treated as a Preliminary Official Statement of the City with respect to the Certificates described herein deemed "final" by the City as of its date except for the omission of no more than the information permitted by Rule 1Sc2-12. No dealec, broker, salesman or other person has been authorized by the City to give any information or to make any representation other tl1an 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 offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or lo any ()l!l'SOD to whom it is unlawful to make such offer or solicitation. This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended as statements of fact, and no representation is made as to the correctness of such estimates, assumptions or matters of opinion or as to the likelihood that they will be realized. Ally 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 th~ has been no change in the condition of the City or other matters described herein since the date 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 Statement has been provided by the City and from other 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 warranty is made as to the correctness of such estimates and opinions or that they will be realized. The Underwriter has provided the following sentence for inclusion in this Official Statement The Underwriter has reviewed the information in this Official Statement in accordanoe with, and as part of, its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this b'ansaction, but the Underwriter does not guarantee the accuracy or completeness of such infonnation. NEITHER THE CiTY, THE FINANCL4.l ADVISOR, THE UNDERWRITER NOR BOND COUNSEL MA.KE ANY REPRESENT,ffION OR WARRANTY WITH RESPECT TO THE INFORMA110N CONTAINED IN THIS OFFIC!A.l STATEMENT REGARDING DTC OR ITS BOOK-ENTRY-ONLY SYSTEM THE COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY AND IS NOT INTENDED AS A SUMMA.RY OF THIS OFFER.ING. INVESTORS SHOULD READ THIS EN11RE OFFICL4L STATEMENT. INCLUDING THE ATTACHED 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 ................ _. .......................... 2 OfflCIAL STATEMENT SUMMARY .................... 3 CITY OFFICIALS, STAFF AND CONSULT ANTS .................................................. S INTRODUCTION ................ _ ................. -................. 6 DESCRIPTION OF THE CITY ............................ 6 FINANCIAL AND MANAGEMENT CHALLENGES ............................................. 6 THE CERTIFICATES ................................................. 6 DESCRIPTION OF 1HE CERTIFICATES ......... 6 PURPOSE. .............................................................. 6 AUillORITY FOR ISSUANCE ........................... 7 SECURITY AND SOURCE OF PAYMENT ...... 7 TAXRAlELIMITATION ................................... 7 OP11ONAL REDE1\1PTION ............................. __ . 7 NOTICE OF REDEMPllON ................................ 7 ~IJMENTS .................................................... 7 DEFEASANCE ...................................................... 7 BOOK-ENlRY-ONLY SYSlEM ........................ 8 Use of Certain Terms in Other Sections of this Official Statement .......................................... 9 Effect ofTenni.nation of Book-Entry-Only System ........................................................... 9 PA YING AGENT/REGISTRAR .......................... 9 TRANSFER, EXCHANGE AND REGISTRATION ........................................ IO RECORD DAlE FOR INTEREST PA Y.MENT 10 R.affiDIES .......................................................... 10 SOURCES AND USES OF FUNDS .................. 11 BOND INSURANCE ...... -............. ----11 FORWARD LOOKING STATEMENTS DISCLAIMER ....................... , ...... _......, .......... 12 DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS .............................. 13 FY 2003 FINANCIAL CONCERNS AND MD).. YEAR BUDGET AMENDMENTS ........... 13 SEPTEMBER 30, 2003 FINANCIALRESULTS14 FY 2003 AUDIT RESTATEMENTS, RECLASSIDCATIONS AND INTERNALCONI'ROLSISSUES ............ 14 CITY'S RESPONSES TO RECENT FINANCIAL AND MANAGEMENT EVENTS ...................................................... 1.5 FY 2008 BUDGET .............................................. 19 ADV ALOREM TAX INFORMATION,-............... 21 ADVALOREMTAXLAW ............................... 21 EFFECTIVE TAX RA1E AND ROLLBACK TAXRATE ................................................. 22 PROPERTY ASSESSMENT AND TAX PA Y}.{ENT .................................................. 22 PENALTIES AND INTEREST .......................... 23 CITY APPLICATION OF TAX CODE ............. 23 TAX ABAlEMENT POLICIES ......................... 23 TAX INCREMENT FINANCING ZONES ....... 24 FINANCIAL INFORMATION ................................. 25 2 FINANCIAL POLICIES ..................... ___ ,, ... 39 INVESTI\IENTS .......................................................... 40 LEGAL INVES'IldENTS .................................... 40 INVES1MENT POLICIES ................................. 41 ADDIDONAL PROVISIONS ............................ 41 TAXABLE STATUS OF THE CERTIFICATES ... 42 IN GENERAL ...................................................... 42 PA~ OF INTEREST .............................. 42 ORIGINAL ISSUE DISCOUNT ......................... 42 ACCRUAL :ME'IHOD ELECTION ................... 43 DISPOSIDON OR RETIREMENT .................... 43 INFORMATION REPORTING AND BACKUP WITHHOLDING ........................................ 43 TREASURY CIRCULAR 230 DISCLOSURE .. 43 OTHER INFORMATION ......................................... 43 RATINGS ............................................................. 43 Financial Guaranty Industry-Recent Events ..... 44 LIDGATION ....................................................... 44 INVESTIGATIONS RELATING TO CITY'S HEALlH INSURANCE AD~STRATOR .................................... 45 REGISTRATION AND QUALIFICATION OF CERTIFICATES FOR SALE ..................... 45 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN 1EXAS45 LEGALMATrER.S ............................................. 4S CONTINUING DISCLOSURE OF INFORMATION ......................................... 46 Annual Reports ..................................................... 46 Material Event Notices ......................................... 46 Availability of Information From NRMSIRS and SID ............................................................... 47 Limitations and Amendments .............................. 47 Compliance with Prior Undertaking,$ .................. 4 7 FINANCIAL ADVISOR ..................................... 47 UNDERWRITING ............................................... 48 FORWARD-LOOKING STATEMENTS DISCLAIMER ............................................ 48 MISCELLANEOUS ............................................ 48 APPENDICES APPENDIX A -EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2006 APPENDIX B -FORM OF BOND COUNSEL OPINION '\ ) ) "l ) ) ) ) ) OFFICIAL STATEMENT SUMMARY This swnrnary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement The offering of the Certificates to potential investors is made only by means of this entire Official Statement No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statemenl 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 l19.I square miles and has an estimated 2007 population of 212,365 (see "INTRODUCTION -DESCRlPTION OF THE C.ITY"). THE CERTIFICATES ....................... $11,635,000" Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 (the ''Certificates''), are dated December IS, 2007, and matun: on P ebruary 15 in each of the years 2008 through 2027, inclusive. PAYMENT OF INTEREST ............... Interest on the Certificates accrues from the dated date, and is payable februazy 15, 2008 and each August I 5 and February 15 thereafter until maturity or prior redemption ( see ''THE CERTIFICATES -DESCRIPTION OF IBE CERTIFICATES"). AUIHORilY FOR ISSUANCE ....... 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, Chapter 1371, Texas Government Code, as amended, and an ordinance adopted by the City Council ( the "Ordinance"). SECURITY FOR THE CERTIFICATES ................................ The Certificaes 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 Waterworb System not to exceed SI ,000. OPTIONAL REDEMPTION ............. The City reserves the right, at its option, to redeem Certificates having stated maturities on and after February 15, 2018, in whole or in part in principal amounts of SS,000 or any integral multiple thereof, on February I S, 2017, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE CERTIFICATES • OPTIONAL RED6MPTION"). TAXABLE STATUS OF THE CERTIFICATES ....................... In the opinion of bond counsel, interest on the Certificates is included in gross income for federal income tax purposes under existing law (see "TAXABLE STATUS OF TIIE CERTIFICATES" herein for a discussion of the opinion of bond cowisel). USE OF PROCEEDS ......................... Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations to be incurred for (i) the consti:uction of a civic/conference center, including meeting and support space and related parking and (ii) professional services rendered in connection therewith. In addition, a portion of the proceeds from the sale of the Certificares will be used to pay the costs of issuance of the Certificates (see ''THE CERTIFICATES - PURPOSE"). RATINGS ............................................ The Certificates are rated"_" by Moody's lnvestots Service, Inc. (''Moody's"),"-" by Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. (''S&P") and "-" by Fitch Ratings ("Fitch"). The City's underlying ratings on its presently outstanding general obligation debt are "Aa3" by Moody's, "AA" by S&P and "AA" by Fitch. The City also has issues outstanding which are rated "Aaa" by Moody's, "AAA" by S&P and "'AAA" by Fitch through insurance by various commercial insurance companies (see ''01HER INFORMATION -RATINGS"). BOOK-ENTRY-ONLY SYSTEM .............................................. The definitive Certificates will be initially registered and delivered only to Cede & Co., the nominee of OTC pursuant to the Book-Entry-Only System descnbed herein. Beneficial ownership of the Certificates may be acquired in denominatioDS of SS,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the beneficial owners thereof. Principal of, premiwn, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating memben; of OTC for subsequent payment to the beneficial owners of the Certificates (see "11IE CERTIFICATES • BOOK-ENTRY-ONLY SYSTEM"). ,,PAYMENT RECORD ........................ The City has never defaulted in payment of its general obligation tax debt • Preliminary, subject to cbaoge 3 ) ) ) ) ) -Selected Financial Information - Fiscal PerCapilll General Year Esti111ated Taxable Taxable Purpose Ended City Asses3ed Assessed Funded ~ P~ulation00 Valuation Valuation TaxDebt(t,J 2003 204,737 $7,342,344,867 $ 35,862.33 S 70, 188,204 2004 206,290 7,921,590,380 38,400.26 70,161,218 200.S 209,120 8,634,994,862 41,292.06 80,210,269 2006 211,187 9,346,6 I 3,951 44,257.53 87,231,945 2007 212,365 10,002,725,637 47,101.57 92,487,363 20<»JOO 212,365 10,897,210,S63 51,3 (3.59 98,129,904 {<l "'Sou=TbeCity. (bl Does no1 iDcludc ..tf""PPOll<d debt. «I Prdiminmy, subj<ct to change. lnclwles tho Cetti!icatcs. oo 2008 poplllalion i3 estimated. General Fund Consolidated Statement Summary 2006 :zoos 2004 Beginning Balance s 17,376,420 $ 12,694,525 $ 9,417,346 TotalReveuues 97,818,207 104,351,116 97,437,436 Total Expenditures 112,278,444 I 03,203,269 94,160,257 Ending Balance 19,924,711 17,376,420 12,694,525 Reserves & Designations Undesignated Fund Balance s 19,924,711 $ 17,376,420 $ 12,694,525 For additional information regarding the City, please contact: JeffYales Chief Finance Officer Cily of Lubbock P.O. Box 2000 Lubbock, TX 79457 Phone (806) 775-2161 Fax (806) 775-205 I AndyB~ham Director o rFiscal Policy & Strategic Planning City of Lubboclc P.O. Box 2000 Lubbock, TX 79457 Phone (806) 775-2149 Fax (806) TTS-205 I 4 Per Capita General Ratio Purpose Tu Debt to Fundtd Assessed Tax Debt"' Valuation <>1 $ 342.82 0.96% 340.11 0.89% 383.S6 0.93% 413.06 0.93% 435.SI 0.92% 462.08 !<l 0.90¾ 2003 2002 S 16,598,252 $ 16,716,042 91,753,809 92,490,374 98,934,715 90,594,059 9,417,346 18,612,357 s 9,417,346 il,255,041~ S (7,357,316 Matthew Boles RBC Capital Matkets 2711 N. Hasell A venue, Suite 2500 Dallas, TX 75204 Phone (214) 989-1672 Fax (214) 989-1650 o/. or Tota.I Ta:i: Tax CoUections Year 99.21% 2002 98.64% 2003 l00.28% 2004 99.71% 2005 99.02% 2006 CCI NIA 2007 "\ CITY OFFICIALS, STAFF AND CONSULT ANTS ) ELECTED OrnclA!S Date of Term City Council Installation to Office Exeires Occupation David Miller May,2006 May, 2008 Business Owner- Mayor Linda Deleon May,2004 May, 2010 Business Owner Council Member, District I Floyd Price May, 2004 May, 2008 Retired Council Member, District 2 Todd R. Klein (II June,2007 May,2010 Grant Consul1ant ) Council Member, District 3 Phyllis Jones May,2004 May,2008 Self-Employed Council Member, District 4 John W. Leonard, Ill May,2006 May,2010 Business Owner Council Member, District S Jim Gilbl'Qth May,2003 May, 2008 Business Owner Council Member, District 6 OJ Todd R. Klein waselectedJUDe 9, 2007, to fill !he Ullellpired term of District 3 Counci.lmmGuyO. Boren. SEUCTED Al>MlNJSTRATM SrAFF 'I Date of Employment Dale of Employment Total Govmunerit Name Posilioo in Cum2Jt Positioo with City of Lubbock S(mce Lee Ann Duni,ewd CityManaga-Sq,tem,er, 2005 · July, 2004 20+ Tam.Adams Deputy City Manager Augis,2004 Al.lglast,2004 23 Jeff'Yates QliefFinancial Officer Septamcr, 2005 Noven:i>ef, 2004 s Anita Burgess CityAlt!.xnty Dcl:mM, 1995 ~.1995 11 Rebecca0ar7ll CitySeaetary January, 200 I August, 1996 9 Andy Burcham Dirtaoc of Fiscal Policy Sq,1,cm,er.2005 NOV\ffl)C[, 1998 7 and Strategic Planning CONSULTANTS AND ADVISORS Auditors................................................................................................ , ...................................... BKD, I.LP Little Rock, Albnsas Bond Counsel ...................................................................................................................................... Vinson & Elkins L.LP. Dallas, Texas Financial Advisor ................................................................................................................................ RBC Capital Markets Dallas, T!lllas ) s ) ) ) ) OfflCIAL STATEMENT RELATINGTO CITY OF LUBBOCK, TEXAS Stl,635,000* TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIF1CATES OF OBUGATION, TAXABLE SERIES 2008 INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of SI 1,635,000• City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 ( the "Certificates"). Capitalized tenns used in this Official Statement have the same meanings assigned to such tenns in the Ordinance authorizing the issuance of the Certificates except as otherwise indicated herein. There follows in this Official Statement descriptions of the Certificates and certain information regarding the City and its finances. All descriptions of documents contained herein me only summaries and are qualified in their entirety by reference to each such docwnenL Copies of such documents may be obtained from the City's Financial Advisor, RBC Capital Marlcets, Dallas, Texas. DESCRll'TION 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 inCO!pOrated in 1909, and first adopted its Home Rule Charter in 1917. The City operates under a Council/Manager form of government wilh a City Council comprised of the Mayor and six council members. The Mayor is elected at-large for a two-year tenn ending in an even-numbered year. Each of the six members of the City Co u.ncil is elected from a single-member district for a four-year term of office. The terms of three meinl>en; of the City Council expire in each even-numbered year. The City Manager is the chief administrative officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, electric, water and sanitary sewer utilities, airport, sanitation and solid waste disposal, health and social services, culture-rec~n, public transportation, public improvements, planning and zoning, and general administrative se.-vices. The 2000 Census population fur the City was 199,564; the estimated 2007 population is 212,365. The City covers approximately 119.1 square miles. FINANCIAL AND MANAGEMENT CHALLENGES In recent y=, the City ellperienced a variety of fmancial and management challenges, and certain investigations and reports conducted or prepared by the City or its consultants found weaknesses in the City's general management and financial practices, bolh with the City in general and the City's electric utility system, known as Lubbock Power & Light ("LP&L''), in particular. The City is of the view that it has substantially addressed many of these conditions. Reference is made to "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS" for a discussion of these events and a description of how the City has responded to these events. · THE CERTIFICATES DESCRIPTION OF THE CERTIFlCATES The Certificates are dated December 15, 2007, and mature on Febnwy 15 in each of the years and in the amounts shown on the inside cover page hereof. Interest will be compubld on lhe basis of a 360-day year of twelve 30-day months, and will be payable on February IS, 2008, and on each August 15 and February 15 thereafter until maturity or prior redemption. The definitive Certificates will be issued only in fully registered fonn in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trwit Company ("DTC") pumwu to the Book-Enny-Only System described herein. No physical delivery of the Certificates will be made to the owners thereof. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of lhe amounts so paid to lhe participating membern of DTC. for subsequent payment to the beneficial owners of the Certificates. See "THE CERTIFICATES -BOOK-ENTRY-ONI.. Y SYSTEM" herein. PURPOSE Proceeds from the sale of the Certificates will be used for the purpose of paying contractual. obligations to be incurred for (i) the construction of a civic/conference center, including meeting and support space and related parking (the "City Facilities") 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 Certificates. The City Facilities are being developed in conjunction with an adjacent full service, privately owned hotel containing not less than 300 rooms. The City Facilities will contain ballrooms and such other meeting and banquet rooms as may reasonably be required to serve as the primaJy meeting space for the hotel. The City Facilities will be leased to lhe owner of the hotel or its designee and will be operated as facilities open to the public. The site where the hotel and the City Facilities will be located is within the North Ovmon Tax tncrement Financing Reinvestment Zone (the "North Overton TIF'), and the project is part of the redevelopment of property within the North Overton TIF. See "AD V ALOREM TAX INFORMATION -Tax Increment Financing Zones." • Preliminary, subject to change. 6 ) ) 'I ' ) AU111ORITY FOR ISSUANCE 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, Chapter 1371, Texas Government Code, as amended, and an ordinance adopted by the City Council (the "Ordinance"). SECURITY ANDSOURCEOFPAYMENT The Certificates are payable from a combination of (i) the proceeds of a continuing, direct annual ad valorem tax, levied within 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 exceed$ I ,000. TAX RATE LIMITATION All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem. tax rate to $2.SO per $ I 00 taxable assessed valuation for all City purposes. The Home Rule Charter of the City adopts the consticucionally authorized maximum tax rate ofS2.50 per $100 taxable assessed valuation. OPTIONAL REDEMPTION The City reserves the right, at its option, to redeem Certificates having stated maturities on and after February IS, 2018, in whole or in part in principal amounts of $5,000 or any integral multiple thereof; on February IS, 2017, or any date thereafter, at the par value thereof plus accrued interest to lhe date of redemption. If less than all of the Certificates are to be redeemed, the City may select the maturities of Certificates to be redeemed. If less than all the Certificates of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Certificates are in Book-Entry-Only form) shall determine by lot the Certificates, or portions thereof, within such maturity to be redeemed. If a Certificate (or any portion of the principal swn thereof) shall have been called . for redemption and notice of such redemption shall have been given, such Certificate ( or the principal amount lhereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Ageot/Registrar on the redemption date. NOTICE OF REDEMPTION Not less than 30 days prior to a redemption date for any Certificates, the City shall cause a notice of redemption to be ~t by United States mail, first class, postage prepaid, to the regisleR,d owners of the Certificates to be redeemed, in whole or in part. at the address of the· registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HA VE BEEN DULY GIVEN,' WHETHER OR NOT TIIE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, nm CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTAND[NG lHAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. AMENDMENTS lbe City may amend the Ordinanoe without the consent of or notice to any registered owners in any manner not deaimental 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 ofa majority in aggregate principal amo\lUt of the Certificates then outstanding, as applicable, amend, add to, or rescind any of the provisions of the Ordinance, except that, without the co~t of the registered owners of all of the Certificat=., no such amendment, addition or rescission may (I) change the date specified as the date on which the principal on any instalhnent of interest is due payable, reduce the principal amount or the rate of inten:st, or in any other way modify the terms of their payment, (2) give any preference to any Certificate over any other Certificat.e or (3) reduce the aggregate principal amount required to be held by owners for oonsent to any amendment, addition or waiver. DEFEASANCE The Ordinance provides that the City may discharge its obligations to the registered owners of any or all of the Certificates to pay principal, interest and redemption price thereon in any matter permitted by la'!'<. Under current Texas law, such discharge may be accomplished by either (i) depositing with the C.Omptroller of Public Accounts of the Stat.e of Texas a sum of money equal to principal, premium, if any and all interest to accrue on the Certificates 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 Certificates; provided that such deposits may be invested and reinvested only in ( a) direct, noncallable obligations of the U oited States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) non callable 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 7 ) ) investment rating fum not less than AAA or its equivalent, and ( c) noncallable ob ligations 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 equivalenl Under current Texas law, upon the making of a deposit as described above, such Certificates shall no longer be regarded to be outstanding or wipaid. After firm banking and financial anangements for the discharge and fUtal payment or redemption of the Certificates have been made as described above, all rights of the City to initiate proceedings to call the C-ertificates for redemption or to take any other action amending the temi.s of the Certificates are extinguished; provided however, the right to call the Certificates for redemption is not extinguished if the City: (i) in the proceedings providing for the finn banking and financial ai:rangements, expressly reserves the right to call the Certificates for redemption; (ii) gives notice of the reservation of that right to the owners of the Certificates immediacely following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. The defeasance of the Certificates may result in the recognition of a capital gain or loss. See "TAXABLE ST A TUS OF THE CERTIFICATES -DISPOSITION OR RETIREMENT." BOOK-ENTRY-ONLY SYSTEM This section describes how ownership of the Certifica!.e.s is to be transferred and how the principal of. premium. if any, and interest 011 the Certificates are to be paid to and credited by The DepositDry Trust Company ("DTC"), New York, New York, while the Certificates are registered in its nominee name. The iriformation in this se.ctio11 concerning DTC and the Book-Entry- 011ly System has been pr<IVided by DTC for use in disclosure documents such as this Official Statement. The City, the Financial Advisor and the Underwriter be/ ieve the :source of such information to be reliable, but take no re.spansibility for the accuracy or oompleteness thereof 'Ihe City cannot and does not give any assurance thaJ (J) DTC will distribute payments of debt service on the Certificates, or redemption or other notices, to DTC Participants, (2) DTC ParticipanJs or others will distrioute debt service payments paid to DTC or its nominee (as the registered owner of the Certificates), or redemption or other notices, to the Beneficial Owners, or thaJ they will do so on a timely basis, or (J) DTC will serve and act in the manner described in this Official StaJemerrL The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing witli DTC Participarzts are on file with DTC. OTC will act as securities depository for the Certificates. The Certificates will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or sucb other name as may be requested by an authorized representative of DTC. One fully-registered Certificate will be issued for each maturity of the Certificates, in the aggregate principal amount of each such maturity, and will be deposited with DTC. DTC, the world's largest depository, is a Iimited-putpose trust company organiud under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal ~e System. a "clearing corporation" within the meaning of the New Yorlc Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities &change Act of 1934. DTC bolds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity issues, cocpcn:ate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants• accounts. This eliminates the need for physical movement of securities Certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other o~anizations. DTC is a wholly-owned subsidiazy of The Depository Trust & Clearing Corporation ("DTCC'). DTCC, in tum, is owned by a number of Direct Participants of DTC and Membel's of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation, (NSCC, FICC, and EMCC, also subsidiaries ofDTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such a.s both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that cl.ear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Staodard & Poor's highest rating: AAA. The DTC Rulc:5 applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtce.com and dtc.org. Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC' s records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner'') is in tum to be recorded on the Direct and Indirect Participants' records . .Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Ownen are, however, expected to rec,eive written confimlations 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 own=hip interests in the Certificates are to be acoomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will oot receive certificates representing their ownership interests in Certificates, except iD the event that use of the book-entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee. Cede & Co., or such other name as may be requested by an authorized representative of OTC. The deposit of Certificates with OTC and their registration in the oame of Cede & Co. or such other DTC nomiMe do not effect any change 8 in beneficial ownership. OTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such Certificates arc ~led. which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain mponsible for keeping ~unt of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to lndi~ Participants, and by DiJect Participants and Indirect Partic.ipants 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 Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, sucb as redemptions, tenders, defaults, and proposed amendments to the Bond docwnents. For example, Beneficial OwnC1"1i o( Certificates may wish to a.,certain that the nominee holding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to lhe registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to OTC. If less than all of the Certificates within a matUrity are being redeemed. DTC's practi~ is to detennioe by Jot the amount of the interest of each Direct Panicipant in such maturity to be redeemed. Neither OTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificates unless authorized by a Direct Participant in accordance with DTC 's Procedures. Under its usual procedures, OTC mails ao Omnibus Proxy to the City as soon as possible after lhe record date.. The Omnibus Proxy assigns Cede & Co.' s consenting or voting rights to those Direct Participants to whose accounts Certificates are credited on the record date (identified in a listing auacbed to the Omnibus Proxy). Principal and interest payments on the Certificate3 will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. OTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail infonnation ftom the City or the Paying Agent/Registrar, on payable date in a.:cordan<:e with their respective holdings shown oo DTC's records. Payments by PaJticipants to Beneficial Owners will be governed by standing insb'llctions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name, .. and will be the responsibility of such PaJticipant and not of OTC nor its nominee, the Paying Agent/Registrar, or the City, subject to any statutory or regulatory requirements as may be in effeet ftom time to time. Payment of principal and interest payments to Cede & Co. (or such other nominee as may be requested by ao authorized iq,resentative of OTC) is the respo11S1l>ility of the City or the Paying Agent/Registrar, disbur,ement of sucll payments to Direct Participants will be the responsibility of OTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. OTC may discontinue providing its services as depository with respect to the Certificates at any time by giving reasonable notice to the City or the Paying Agent/Registrar. Under such circwnstances, in the event that a successor depository is not obtained, Certificates are required to be prinled and delivered. Subject to OTC' s policies and guidelines, the City ,nay discontinue use of the system of book-entzy transfers through DTC ( or a successor securities depository). In that event, Certificates will be printed and delivenld. U5e or Certain Terais ID Other Secilons of thb Official Statement In reading th.is Official Statement it should be understood that while the Certifi~ are in the Book-Entiy-Only Syslem. references in othet sectloos of this Official Statement to registered oWDel'S mould be read to include the person fur which the Participant acquires an interest in the Certificates, but (i) all rights of ownersbip must be ex~ through DTC and the Book- Entty-Only System, and (ii) except as desmbed above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. Information concerning OTC and the Book-Enlry-Only System has been obtained from OTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City, the Financ:ial Advisor or the Underwritet. Effe<:t of Termination of Book-Entry-Only SYJteDI In the event that the Book-Entry-Only System is discontinued, printed Certificates will be issued to the holders and the Certificates will be subject to tr3nsfer, exchange and registration provisions as set forth in the Onliunce and summarized under ''TRANSFER. EXCHANGE AND REGISTRATION" below. PA YING AGENT/REGISTRAR The initial Paying Agent/Registrar is The Bank of New York Trust Company, National Association, Dallas, Texas. In the Otdinance, the City mains the right to replace the Paying Ageot/Rcgisttar. The City wvenants to maintain and provide a Paying Agent/Registrar at all times until the Certificates are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or ttust company organized under the Jaws of the State of Texas or other entity duly qualified and legally authorized to serve as and petform the duties and services of Paying Agent/Registrar for lhe Certificates. Upon any change in the Paying Agent/Registrar for the Certificates, the City~ to promptly cause a written notice thereof lo be sent to each regi~ owner of the Ccnificates then outstanding and affected by such change by United States mail, fllllt c:lass, po5tage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Interest on the Certificates shall be paid to the registered ownen appearing on the registration books of the Paying Agent/Registrw at the close of business on the ~rd 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 regisiered owner =rded in the regislration books of the 9 Paying Agent!Registr.ir or (ii) by such other method, acceptable to the Paying Agent/Registrar n=quesled by, and at the risk and eitpense of, the registered owner. Principal of the Certificates will be paid to the registered owner at the stated marurity or earlier redemption upon presentation to the designated paymcnt/1ransfer office of the Paying Agent/Regislrar. 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 designated payment/transfer office of the Paying Ageiit/Registraf 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 lite date payment was due. TRANSFER, EXCHANGE AND REGISTRATION In the event the Book-Entry-Only System should be discontinued with respect to the Certificates, printed ~i.ficates will be issued to the registered owners of the CertificaleS affected and thereafter such obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender of such printed certificates to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Certificates may be assigned by the execution of an assignment fonn on the Certificates or by other inwument of transfer and assignment acceptable to the Paying Agent/Registrar. New Certificates will be delivered by the Paying Agent/Registrar, in lieu of the Certificates being transferred or exchanged, a.t 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 exlent possible, new Cmif1Cates issued in an exchange or transfer of Certificates will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Certificates to be canceled, and the written instniment of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Certificates registered and 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 Certificates surrendered for exchaoge or transfer. See "TiiE CERTIFICATES -BOOK-ENTRY-ONLY SYSTEM" herein for a description of the system to be utilized initially in regard to ownership and transferability of the Certificates. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Certificate called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Certifa:ate. RECORD DATE FOR INTEREST PAYMENT The record date ("Record Date") for the interest payable on the Certificates on any interest payment date means the close of b11Siness on the last business day of the preceding month. In the event of a non-payment of interm 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 m:eived 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 I 5 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United Stales mail, first c~. poscage prepaid, to the address of each Holder of a Certificate appearing on the ~stration books of the Paying Agent/Registzar at the close of business on the last bul.iness day next preceding the date of mailing of such notice. REMEDIES The Ordinance establishes specific events of default with respect to the Certificates. If the City defaults in the payment of principal of or interest on the Certificates when due, or if the City defaults in Ille observance or perfollllallCe of any of the covenants, conditions or obligations of the City, the failure to perform which materially, adversely affects the rights of the own=, including but not limited to, their prospect or ability to be repaid in accordance with the Ordinance, aod the continuation ~f for a period of 60 days after notice of such default is given by any owner to the City, the Ordinance provides that any owner is entitled to seek a writ of mandamus from a oourt of proper jurisdiction requiring the City to make such payment or observe and perform such covenants, obligations, or conditions. The issuance of a writ of mandamus may be sougl_it if there is no other avail.3ble remedy at law to compel performance of the Certificates or the Ordinance and the City's obligations ace not uncertain or disputed. The remedy of mandamus is comrolled by equitable principles, so rests with the discretion of the court, but may not be arbittarily refused. There is no acceleration of maturity of the Certificates in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinance does nol provide for the appointment of a trustee to represent the interests of the owners upon any failure of the City to perform in accordance with the tenns of the Ordioanc:e, or upon any other condition and accordingly all legal actions to enfon:e such remedies would have to be undertaken at the initiative ot and be financed by, the registered owners. On June 30, 2006, the Texas Supreme Court ruled in Tooke "· City of Mexia, 191 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 elear and unambigllOus waiver of aovereign immunity. Because it is not clear lhat lhe Texas Legislature has i:ffectively waived the City's immunity from suit for money damages, a holders of Certificates may not be able to bring such a suit against the City for breach of the Certificate or the Ordinance. Io Took, the Court noted the enactment in 2005 of sections 27l.151-.160, Texas Local Government Code (the "Local Government Immunity Waiver Act"), which, according to the Court, waives .. immunity li:om suit £or contract claims against most local governmental entities in catain circumstances." The Local Government Immunity Waiver 10 ) 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 conte:1:t of whether oontractua.l undertaking$ of local governments that relate to their bom:,wing powers are contracts covered by the Act. As noted above, the Ordinance provides that holders of Certificates may exercise the remedy of mandamus to enfo«:e the obligations of the City under the Ordinance. Neither the remedy of mandamWJ nor any other type of injunctive relief was at issue in Tooke, and it is unclear wftether Tooke will be construed to have any effect with respect to the exercise of mandamus, as such remedy has been interpreted by Texas courts. In general, Texas courts have held that a writ of mandamus may be issued to require public officials to perform ministe.rial. 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 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 minisu:rial duties necessazy for the performance of a valid contract to which the Slate or a political subdivision of the Seate 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 propeny within the City or sell property within the City to enforce the tax lien on taxable propeny to pay the principal of and interest on the Certificates. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code {"Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged so\lfCC 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. Chaple£ 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other I~ action by creditors or registered owners of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before il The opinio11 of Bond Counsel will note that all opinions relative to the enforceability of the Certificates are qualified with respect to the customary rights of debtors relative to their creditors and that all opinions relative to the enforceability of the Ordinance and the Certificates are subject to bankruptcy and other laws affecting creditorn rights or remedies generally. SOURCES AND USES OF FUNDS The proceeds from the sale of the Certificates will be applied as follows: SOURCES OF FUNDS: Principal Amount of Certificates ......................................................................................... . Net Original Issue Premium (Discount) .............................................................................. . Accrued Interest .................................................................................................................. . Total Sources of Funds .................................................................................................. . USES OF FUNDS: Deposit to Construction Fund ............................................................................................. . Acctued Interest Deposited to Interest & Sinking Fund ...................................................... . Underwriter's Discount ...........................................................................•..•........................ Cost of Issuance .................................................................................................................. . Total Uses of Funds ....................................................................................................... . BOND INSURANCE The City has applied to several companies for bond insurance and will consider the p14"chase of such insurance after an analysis of the bids from such companies has been made. {THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANKJ 11 FORWARD LOOKING ST A TEMENTS DISCLAIMER The statements oontained in this Official Statement, and in any other information provided by the City, in particular lhe infonnation under the heading "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS", that are not purely historical, are forward• looking statements, including statements regarding the City's e,:pectations, hopes. intentions, or strategies regarding the future. Readets should not place undue reliance on forwaro. looking statements. Al! forward.looking statements included in this Official Statement are based on infonnation available to the City on the date hereof, and the City assumes no obligation to update any such forward.looking statements. Although the City believes such forward.looking statements are based on reasonable assumptions, any such forward.looking statement involves uncertainties and is qualified in its entirety by reference to the considerations described below, among others, which could cause the actual financial results of the City to differ materially from those contemplated in such forward.looking statements. Any assumptions could be inaccurate and, therefore, there can be no assurance that the forward.looking statenwnts included in this Official Statement will prove to be accurate. The City cannot fully predict what effects factors of the nature described below may have on the operations of the City and flllallcial condition of the General Fund or its business.type activities. including LP&L, but the effects could be significant. The discussion of such factors herein does not purport to be comprehensive or definitive, and these matters are subject to change subsequent to the date hereof. With respect to LP&L, extensive infonnation on the electric utility industry is, and will be, available from the legislative and regulatory bodies and other sources in the public domain, and potential purchasen of the securities of the City should obtain and review such information. Among the factors that could affect the operations and financial condition of the City in genml, and its electric utility in particular, are the following: > Significant changes in governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission, the United States Environmental Protection Agency (the "EPA"), the United Stat.es Department of Homeland Security, the United Stat.es Department of the Treasury, the Texas Commission on Environmental Quality (the "TCEQ"), the Public Utility Commission of Texas (the .. PUC") and the Southwest Power Pool, Inc., with respect to: changes in and compliance with environmental and safety laws and policies affecting the City's water, sewer, stonnwater and solid waste funds; changes in and compliance with national and state homeland security laws and policies effecting the City's water, sewer, solid waste and airport funds; electric transmission cost rate structure; purchased power and recovery of investments in electric system assets; acquisitions and disposal of assets and facilities; and present or prospective wholesale and retail competition in the electric indusliy; > Unanticipated population growth or decline, and changes in marlcet demand, demographic patterns and the development of technology affecting the City's service area, its general government and public safety el(penditures and City revenue from: investorowned utility franchise fees, City utility and service fees sales tax reven1.1e5; and ad valorem tax revenues; > With fCSl)eet to LP&L; the implementation of o~ adjustments madi: to business strategies adopted by LP&L; competition for retail and whclesa!e customers by LP &L, particularly competition with Xcel ( as defined below) and its subsidiaries; access lo adequate electric transmission facilities to meet current and future demand for energy; pricing and transportation of coal, natural gas and other oommodities that may affect the cost of eoi:rgy purchased by LP&L; inability of various contractual counterparties to meet theirobligations to the City, and with LP&L in particular with respect to LP&L 's fuel and power purchase anangements; > With respect to the City's financial performance in general: leg ill and adminislrati ve proceedings and settlements; and significant changes in critical accounting policies. 12 .., DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS In the 2002 and 2003 fiscal years ( a fiscal year is referred to herein as "F:\'", with the year designation being the year in which the fiscal year ends; each City fiscal year begins on October I and ends on September 30), the City experienced a variety of financial and management challenges. In response to the events and circumstances that have created such challenges, the City has taken actions to address and correct matters, specifically employing a new management team in 2004, and the City is of the view that progress has been made in correcting these oonditions (see "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -CITY'S RESPONSES TO RECENT F£NANCIAL AND MANAGEMENT EVENTS"). The following discussion includes an analysis of the events that have occ:urred in the recent fiscal years, in paiticular, a summary of the measures taken in response to the challenges that have arisen, and a current description of lhe City's financial and mMagement position. FY 2003 FINANCIAL CONCERNS AND MID-YEAR BUDGET AMENDMENTS In FY 2003, the City's electric enteiprise fund, which operates as Lubbock Light & Powtt (referred to herein as "LP&L" or the "electric fund") incurred unanticipated net losses. During FY 2003, interfund loans were made to LP&L from the water fund and the General Fund. A number of fllctors contributed to the LP&L losses; a significant factor was that LP&L, unlike most other municipal electric utilities in TelCas, competes directly with Southwestern Public Service Company ("SPS"), a subsidiary ofa large investor owned energy company, Xcel Energy, Inc. In addition to the service area that has dual certification with Xcel, a small part of the City is also served by South Plains Electric Coopemlve ("SPEC"). The City, through LP&L, bas competed fur both wholesale and retail electric customers against investor owned utilities for over 80 years. nus competition bas existed despite the fact that the City is not within the transmission system governed by the Electric Reliability Council ofTaas ("ER.COT'). ERCOT was opened to retail electric competition through the adoption of State deregulation legislation lhat went into effect on JanUllt)' I, 2002. Prior to FY 2004, the City operated LP&L in a manner that was designed to recover administtative or indirect costs provided by the General Fund for LP&L (such as legal and financial services) as well as certain other gCDfflll transfers. Such transfers included a payment in lieu of ad valorem taxes, an allocation for indirect costs such as legal and financial services, and a oost of business transfer ( which approximates a payment in lieu of franchise taxes. In addition, prior to FY 2003 LP &L was required to annually transfer to the General Fund amounts to support economic development ince1tivt:$ in the City, a payment designated for infrastnl<lture use, a "gas tax" transfer, and a reimbursement of the street lighting expense incurred by the City. Over the ten year period from 1993 to 2002, the average a.Muai operating income of LP&L before transfers was $8 million, and during that period, LP&L transfers to the General Fund for payments in lieu of taxes and recovery of costs of business averaged S8 million per year. During the preparation of the FY 2003 City budgeu, it was evident that the am.ount of money triulsferred from LP&L to the General Fund would need to be reduced given the financial condition ofLP&L. Consequently, the FY 2003 budget trimmed $4.8 million from LP&L transfers included in prior year budgets. In Februazy 2003, during a period of extraordinarily high natural gas prices, City finance staff projected that, in the absence of corrective measures, the el~trie enterprise fund would have an operating loss of $24 million for FY 2003. In the Spring of 2003, the City Council amended the LP&L and General Fund budgets to eliminate $7.7 million in transfers from LP&L to the General Fund. City management then undertook a comprehensive review of the General Fund and other enterprise funds for the pl.llp()&C of identifying budget cuts throughout City government that would offset the Rduced LP&L transfers. Ultilnately, the City Council 1!dopted budget amendments during the Spring 2003 mid-yeM review that totaled $9. 7 million for the General Fund {be.reinafter referred to as the "2003 Budget Adjustments"), which represented approximately 10.5% of the original FY 2003 Genetal FWld budgel Other measures that were taken after the 2003 Budget Amendments to address the projected LP&L operating loss included incmises ill the fuel cost adjustment ("FCA ") for residential and small commercial customers, as well as for ilB two largest customers, which included Texas Tech University ("Texas Tech") and which accounted for approximately 10% of the energy sales ofLP&L. The City is a member of the West Tex.as Municipal Power Agency ("WTMPA"), a m1111icipal power agency that was formed by concurrent ordinances adopted by lhe governing bodies of the cities of Brownfield, Floydada, Lubbock and Tulia. Te,w (lhe "Member Cities") in 1983. WTMPA is a separate political subdivision under the laws of the State. In June 1998, WTMPA issued $28,910,000 ofib Revenue Bonds, Series 1993 (the "WTMPA Bonds"), to finance the cons11uction and acquisition of a 62 MW electric co-generatlon project (the "W'IMPA Project"). The WTMPA Project consists of a 40 megawatt ("MW") oombustion twbine generator (the "Massengale Uoit 8 tutbine") and the re--powering of an eitisting 22 MW generation unit, each located at the City's I.R. Massengale Plant Numerous issues, both open.tional and managffial. arose from the WTMP A Project AJ a result, the City embarked upon a series of internal financial and managemeot audits of the relationsbip between LP&L and W1MPA, as well as an analysis of the internal controls of the City with respect to LP&L. No malfeasance was uncovered with respect to the administration ofLP&L or WTMP A funds. However, the reviews concluded that the prevailing view that guided the administration of WTMPA affairs by the managaneot of LP&L, was that WTMPA was indistinguishable from LP&L ID April 2003, the WTMPA Member Cities (lndudiog the City) engaged Ernst & Yowig LLP ("E&Y") to conduct an audit of the records ofW1MPA and LP&L .. The final report of E&Y was delivered in May 2003, and .included findings of misallocation of costs among the Member Cities. The report noted that oo evidence of misappropriation of assets or intentional omissions of financial infonnation was discovered. The E&Y report found that the misallocations, adding an inte=t factor for such allocations, and an unbilled 5% management allocation that LP&L was entitled to under the power agreements, would result in a total amount owing to the City ofSS,590,746, of which the City owed itself, as a Member City of WTMP A, approximately 90¾ of the total amount. 13 '\ In December 2003, the City, WTMPA and the other Member Cities of WTMPA entered into a series of agreements styled the "Comprehensive Settlement Agreement". The Comprehensive Settlement Agreement provided for the reallocation of resources and costs among WTMPA Member Cities, resolved disputes relating to the composition and voting powers of the WTMPA Board, and settled disputed claims incurred by the City on behalf of WTMPA. The City believes the Comprehensive Settlement Agreement better reflects the historical manner in which the Member Cities have~ in energy activities. WTMPA has been classified as an enterprise fund of the City, which reflects the extensive associations between WlMPA and the City. In March 2005, the City delivered its Combination Tax and Electric Light and Power System Swplus Revenue Certificates of Obligation, Series 2005, in the aggregate principal amowtt of $23,055,000. A portion of the proceeds of this issue was used by the City to acquire the WTMPA Projecl WTMPA used the proceeds received from the City to defease all of the outstanding WTMPA Bonds. The City now owns and operates the WTMPA Project, as part of LP&L. SEPTEMBER 30, 2003 FINANCIAL RESULTS The General Fund ... As hereafter described in "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS - FY 2003 AUDIT RESTATEMENTS, RECLASSIFICATIONS AND INTERNAL CONTROLS ISSUES", the financial position of the City in FY 2003 was impacted by significant changes in the reporting entity and prior period adjustments and reclassifications of the City's FY 2002 financial statements. With respect to the General Fund, the beginning fund balance/net assets were restated from $18.6 million to $16.6 milliOIL The restatement was at1ributable to the write off of a receivable in the General Fund from lhe City's golf fund. In addition, the General Fund experienced a $7.2 miUion reduction in fund balance/net assets in FY 2003, the IIl(lst significant drawdown of lhe General Fund reserves in over ten years. The decrease in fund balance occucred because of the $9.3 million transfer to LP&L to ensure the ongoing operation ofLP&L and the payment of the senior lien revenue bonds issued by the City for LP&L In addition, the General Fund reduction in fund balance was a result of the forgiveness of originally budgeted payments in lieu of taxes, franchise fees and indirea costs of S4.S million &om the electric fund to the General Fund. The aggregate result of restatement of the beginning fund balance and lhe FY 2003 use of fund balance was a General Fund ending balance of $9.4 million. Coming in to FY 2003, the City had a fund balance (adjusted) of $18.6 milliolL The City has adopted a policy (lhe "General Fund Balance Policy") to maintain an unreserved General Fund balance equal to two months operating expenditures. At September 30, 2002 the General Fund balance exceeded the General Pwtd Balance Policy by S4.5 million. At September 30, 2003, the Geoeral Fund Balance Policy required a fund balance of $14.2 million. As a result of the FY 2003 events described above, the City was $4.8 million under the fund balance required under its policy at the close of FY 2003. The decline in General Fund balance limits the City's ability to mitigate future risks of revenue shortfalls and unanticipated expenditures. Reference is made to the infonnation hereafter presented under the headings "DISCUSSION OF RECENT FINANClAL AND MANAGEMENT EVENTS -CITY'S RESPONSE TO RECENT FINANCIAL AND MANAGEMENT EVENTS -General Fund and General Government Actions -General Fund Budgetaiy Actions" and "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -CITY'S RESPONSE TO RECENT FINANCIAL AND MANAGEMENT EVENTS -FY 2007 BUDGIIT", for a discussion of the results for the General Fund and a sum.mazy of the City's planning for FY 2007. The Electric Fund ... With respect to LP&L, the measures taken by the City Coimcil during the FY 2003 mid-year budget review yielded substantial results as measured by the projected opelllting loss of S24 million in February 2003. LP&L ended FY 2003 with a $6.3 million operating loss. Before taking into account transfers' from other funds, the eleclric fund reported a $9 million loss, the first such loss in over ten years. As a consequence of the operating loss, LP&L failed to meet its revenue bond rate covenant under which the City has agreed to set rates for the electric system sufficient oo produce oet revenues equal to I 00% of its senior lien bonded indebtedness. In FY 2003, LP&L produced $0.704 million that was available for the payment of debt service, which represents a 0.3 times coverage of average annual debt service and a 0.2 times coverage of maximum annual debt service, in each case after taking inoo account the issuance of City general obligation debt for LP&L that occurred in August 2003. Under the terms of its bond ordinances, the failure to meet the rate covenant, while significant, did not result in the acceleration of LP&L's debL Moreover, the failure did not materially affect LP&L's operations, as LP&L was able to make its debt payments after receiving a $9.3 million contribution from the General Fund, and LP&L has never defaulted in the payment of its bonded indebtedness. In making its debt payments. LP &L has not used any moneys set aside as a debt service reserve fund under its senior lien revenue bond ordinances. Since 2003, LP&L has met the rate covenant, and the City has not made transfers &om the General Fund to LP&L. Despite the relatively small operating income that resulted after taking into account the General Fund conlnbution to LP &L, total net assets of the electric fund decreased by $3.9 million during FY 2003, to $88.S millioa, as a result of a restatement of the beginning fund balance. The restatement reflected the write off of a $4.48 million receivable recorded from WIMP A in FY 2002, although the obligation was disputed by the other Member Cilies of WfMP A. As descnbed below under "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -CITY'S RESPONSES TO RECENT FINANClAL AND MANAGEMENT EVENTS -Recent Measures taken to Addtess Financial and Management Concems at LP&L", the WTMPA Settlements have resolved the disputoo .receivable. FY 2003 AUDIT RESTATEMENTS, RECLASSffiCATIONS AND INTERNAL CONTROLS ISSUES As was the case with other municipalities in the State and U.S., the implementation of Government Accounting Standards Board Statemeat 34 ("GASB 34") by the City in FY 2002 effected a substantial change in the presentation of the City's financial statements. Prior to the implementation of GASB 34, governmental accounting standards did not require the use of a government- wide perspective in the presentation of financial information; instead, fund accounting was generally IISed to present financial 14 ) "\ data. Under GASB 34, fund accol,lllling has been supplemented by government-wide statements and certain aspectS relating to the presentation of the fund level statements have been modified, as well, particularly with respect to the presentation of restricted and wu-estricted net assets within each fund. For additional infonnation regarding accounting policies that are applicable to the City, see Note I. "Summary of Significant Accounting Policies" in the fmancial statements of the City attached as Appendix A. The FY 2002 financial statements, and the City's financial statements dating to FY I 993, were audited by Robinson Burdette Martin Seright & Burrows, L.L.P. (the "Former External Auditor"). In keeping with the overall reassessment of its financial and management affairs undertaken by the City, in the Summer of 2003 the City conducted a request for qualifications for its external auditor and selected KPMG L.L.P. C'KPMG") to audit its FY 2003 financial statements. Consequently, the Former External Auditor guided the City through the initial year implementation of GASB 34, while in the second year of GASB 34 financial reporting, the City's finan<:ial statements were audited by KPMG. In 2005, the Cicy retained the se:vices of BKD, LLP, to prepare the City's financial statements. Audit Restatements . . . During the preparation of the FY 2003 CAFR, seven restatements to beginning fund balance/net assets were made to various fund level statements of the City. The restatements totaled $36. 7 million. These restatements represented an aggregate increase in net assets of the City of $2.56 million, as some affected funds had their begiruting balances restated to a higher figure, while other funds were restated to decrease their beginning fund balance. The General Fund was restated from a fund balance of $18.6 million to $16.6 million to reflect a write off for an account receivable, which as of September 30, 2002 had ceased to be collectible. Also, the electric fund's beginning fund balance was restated downward by $4.48 million to reflect a receivable from WTMP A that was uncollect11>le. Other enterprise fund restatements were made, including an $0. 8 67 million increase in lhe water fund beginning balance and a $0. 722 million increase in the sewer fund beginning balance, each of which wen: made to reflect a change in =unting treatment pertaining to the appropriate party that is responsible for reimbursement of fees collected by the City for new water and sewer connections. With respect to the impact on a particular fund asset, lhe most significant restatement in beginning fund balance occurred in the City's community investment fund, a fund used in prior years to account for economic development initiatives, which was restated from a beginning balance of $46.8 million to $36.8 million. The change was associated with an economic development grant made by that ftmd in FY 2002 that was originally reflected on the accounting statements of tbe City as a loan. In preparing the 2003 CAFR, it was determined that such transaction should be treated as a grant, not a loan. M a result, the receivable in the community in vestment fund for the $IO million amount was deleted as an asset of the fund ($6 million of the $ IO million grant had originally been funded through an inleffund loan to the community investment fuod from the water and solid waste funds). Two additional restatements of e,:isling fund balances were made with respect to two entities with which the City has long• standing contractual relationships: a coq>0rate entity that does business under contract with the City as "Cillbusfl, and WfMP A. In the 2003 CAFR, the accounting treatment of these entities was reconsidered, and each was added to the City's financial statements as an enteJprise ftmd. The result of the addition of each of these funds was an increase in net assets, in the amount of $12.3 million for the new transit fund, and $3.2 million for the new WTMP A fund. Audit Reclassifications . . . In the preparation of the FY 2003 CAFR, it was discovered that the portion of net assets shown in rertain of the financial statements, particulady with respect to the enteq>rise funds ( or business-type activities), had been mathematically incorrectly calculated in the FY 2002 CAFR. While the government-wide statement of net assets of the City included in the FY 2002 CAFR showed $37.9 million unrestricted net assets for business-type activities of the City, the fund financial statements showed an agg,egate amount of unrestricted net assets of the enterprise funds that totaled $19 5 .2 million of unrestricted net assets. The FY 2003 CAFR reports in the government-wide statement of net assets of the City $32. 9 million of wu-estricted net assets for business-type activities of the City and the fuod financial statements in the FY 2003 CAFR rq,ort an aggregate amollllt of win:stricted net assets for the enterprise funds that total $30.2 million (certain reconciliations are required to balance government-wide and fund level reports. thus small differences should appear between the two presentations). Internal Qintrols Issues ... In accord.'lnce with accounting guidelines, the extemal auditor customarily provides the governmental entity with a "management letter"' that includes a discussion of any material weaknesses in the audited government• s internal control sin!~ In its FY 2003 Management Letter (the "2003 Management Letter"), KPMG noted several weaknesses in the City's internal controls, including an overall internal control weakness in the City during FY 2003. In addition, lhe 2003 Management Letter noted deficiencies in the year end GA.AP financial reporting cycle, citing as examples the significant restatement of beginning net assets/fund balances and the reclassificatioos described above, as well as numerous adjustments that were required to be posted after the initial closing of the City's books for FY 2003. The failure to timely obtain finan<:ial statements from component units, including WfMPA, was also noled. KPMG recommended that the City review the personnel within the City's accounting department and the accounting staff within LP&L to determine whether sufficient qualified ~nnel were in place to provide accurate and timely closing of the City's books and preparation of annual financial statements. Other material weaknesses noted include the failure of the City to properly reconcile its cash balances, the failure of LP&L to meet its bond rate covenant, a lack of oversight or monitoring of contracts with other entities (fur example, WTMPA), and the failure of the City to abide by its General fund Balance Policy. CITY'S RESPONSES TO RECENT FINANCIAL AND MANAGEMENT EVENTS Following the publication of the LP&UWTMPA Management Audit and the E&Y audit, several key City officers and LP&L management peisonnel resigned. Between the beginning of FY 2002 and the close of FY 2003, some 29 persons who held senior management positions with the City left the City's employment, some on their own accord and others as a result of a reorganization of City govemmenl Since FY 2004, the City has implemented a number of significant steps to address both its 15 ' , " , , ) management needs and financial challenges. Certain of the measures taken by the City to strengthen City government in general, and to address its financial challenges, are described below. General Fund and General Government Actions > General Fund Budgetary Actions ... Prior lo FY 2007, the City had restored its General Fund balance, within a 2-year period, to roughly 20% of operating revenues. For FY 2007, preliminary projections indicate the General Fund balance will be approximately 18.4% oC operating revenues. FY 2007 Expenditures were in line with budget, however, revenues from municipal court fines, franchise taxes, and red light photo enforcement came in $2.5 million less than budgeted. causing a use of approximately SS00,000 of General Fund balance. The FY 2007-08 budget incorporates revmue adjustments addressing the shortfalls from the prior year, and has been approved with expenditures balanced to revenues. City management continues monthly assessments of lhe budgeted expenditures and revenues, a program which was fully implemented in the prior fiscal year. The City has restored its General Fund balance within a 2-year period to roughly 20%, of operating revenues. > Establishment of Audit and Investment Committee ... Through the adoption of a resolution in June 2003, the City Council established an independent Audit Committee composed of five members. The Audit and Investment Committee is charged with maintaining an open avenue of communication between the City Council, City Manager, internal auditor and independent external auditor to assist the City in fulfilling its fiduciary responsibility to its citizens. The committee has the powel" to conduct or authoriu investigations into the city's financial performances, internal fiscal con1rols, exposure and risk assessment. The committee is appointed by the City Council and informally reports to the City Manager. The establishment of the Audit and Investment Committee is designed lo serve as an additional check on the prq,aration of the City's financial stalements and to a void weaknesses in the City's internal controls, including the status and adequacy of information systems and security. The chairpef80n is appointed by the Mayor and the other positions are filled by a vote of the City Council At least two members of the Audit and Investment Committee are required to have a background in financial reporting, accounting or auditing, and at least one member is required to be a certified public acoountant, and at least one member is required to have an extensive background in investments. The current membership of the committee CODSists of Mike Epps, an Executive Vice Presid~t at American State Bank in Lubboclc, 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 Internal Audit at Texas Tech; and John Zwiacher, a member of the Board of Directors of LP&L. Mr. Epps is the cbair of the Audit and Investment Committee. > City Management Changes ... As reflected in "CITY OFFICIALS, STAFF AND CONSULTANTS -SELECTED ADMINISTRATIVE STAFF", the City has in place an experienced management team representing extensive government service experience.. This management team has implemented procedw-es that have addressed the general incernal control weakness cited by KPMG in the 2003 Management letter. Recent Financial and Management Actions at LP&L > Fuel Cost Adjustments ... As of 1Wle 1, 2007, LP&L no longer uses fuel cost adjustments to remain competitive with Xcel. Rates are now identical to SPS with a few exceptions, one of which is that LP&L now has a discoWlt tariff which allows its rates to be lower. > Establishment of Electric Utilities Board ... In 2004, several measures were taken to addtess concerns with lhe management and operation of LP&L, including; the City CoWlcil adopted an ordinance (the "LP&L Governance Ordinance'') (I) creating a new Electric Utilities Board (the "Electric Board") for LP&L (the new board replaces a former board that was advisory only), (2) reserving certain duties and responsibilities with respect to LP&L to the City C'-Ouncil (i.e., lhe powers to approve LP&L 's annual budget; set LP&L's rates; issue debt for LP&L; exercise the power of eminent domain for LP&L; and require the payment of an annual fee to the City), and (3) mandating the creation of certain reserve accounts by LP&L and restricting the lranSfer of revenues from LP&L to any other fund of the City, including, particularly, the Genera.I Fund, until such reserves have been funded; the City initiated a solicitation to the holders of LP&L 's senior revenue debt seeking approval to amend each LP&L bond ordinance to provide for the governance of LP&L by the Electric Boaro; the City, after obtaining the necessasy consents, amended the bond ordinances to provide for the governance of LP&L by the Electric Board in Janwuy 2005; the voters of the City approved a referendum amending the City Charter to require the establishment of the Electric Board; and the City Council adopted the LP&L Governance Ordinance on December 16, 2004. The LP&L Governance Ordinance provides that the Electric Board consist of nine members appointed by the City Council, and that the City Council consider extensive business and/or financial experience as the primary qualification for serving on the Electric Board. Electric Board mernbefs serve without compensation. Under the LP&L Governance Ordinance, the Board is given the authority, duties and responsibility to ( l) approve an annual budget and electric rate schedule for submission to the City Council for approval and, from time to time, submit to the City C,ouncil amendments to the budget and/or the electric rate schedule; (2) oversee the lllldit of the electric fund, and engage an accounting firm for that purpose; and (3) subject to applicable law, including the City Charter and Code of Ordinances, govern, manage, administer and operate the City's electric system, including contracting for legal and other services separate and apart from those provided by the City. In addition, the City Manager is required to consult with, and seek approval of, the Electric Board prior to appointing and/or removing the di.Jector of LP&L. In accordance with the New LP&L Governance Ocdinance, the director of LP&L reports to the Board. While the City Council retains substantial powers over the electric system, an additional goal of the City in establishing the Electric Board ill to develop local expertise in a pool of individuals who can provide a sharper focus by the City on the operation of LP&L than has occurred in the recent pasl 16 ... > Establishment of Reserve Funds for LP&L: Restriction on Transfers from LP&L ... The LP&L Governance Ordinance was amended in December of 2006. This amendment included, among other things, changes to the requirements regarding the reserve funds LP&L maintains. As amended, the LP&L Governance Ordinance requites the Electric Utility Board to maintain (i) sufficient operating cash to satisfy all current accounts payable and (ii) a general reserve fund that is equal to the greater of four months gross retail electric revenue as determined by talcing the average monthly gross retail electric revenue from the previous fiscal year or $50 million dollars. This general reserve fund shall be used for operational pwposes, rate stabilization and for meeting the electric utility demand of any rapid or unforeseen increase in residential and/or commercial developmenl Under the current LP&L Governance Ordinance, the City may not require the tran8fer from LP&L any fee equivalent to a franchise fee, a payment in lieu of taxes or other disbursement of the ne1 revenues of LP&L until (a) all bond debt service requirements have been funded (which obligation is senior in right to the obligation to fund the general reserve), (b) sufficient operating cash is maintained, and (c} the general reserve has been fully funded. Additionally, the amendment allows the Electric Utility Board, solely at their discretion and regardless of the funding obligations outlined above, to refund up to one million dollars ($1,000,000) to the ratepayers of the City's electric utility for marketing and competitive pwposes. The reserve amounts, franchise fees, payments in lieu of taxes and refunds to the l'lltepayer.; of the City's electric utility $hall be based on audited, unqualified financial statements from the most m:ent completed fiscal year. Subject to (i) provisions of State laws that govern municipal utilities, and which stipulate that a first use of the utility's~ revenues be used to pay operating ~es. and (ii) the obligations of the City with respect to LP&L's bonded indebtedness, it is possible that the Electric Board could devise a flow of funds for LP&L that is substantially diffom:nt from that set forth in the LP&L Governance Ordinance. To date, the Electric Board has not deviated from the flow of funds oontemplated under the LP&L Governance Ordinance. At the end ofFY 2fX17, LP&L partially funded its general reserve fund by lhe amount ofS25.4 million. LP&L has not funded all of the reserve fund established under the LP &L Governance Ordinance, as net revenues have been inadequate for a total funding of such reserve. Moreover, although the mere establishment of the funds does not imply that sucb reserves will be funded within any particular time frame, the City Council has evidenced its commitment that LP&L be given the opportunity lo regain financial stability without being obligated lo make transfers, othcT than for indirect business cost transfers, debt and projects. > 2008 Proposed Amendment to LP&L Governance Ordinance. ... Prior to FY 2004, the City operated LP&L in a manner, consistent with the pillCtice to requite its enterprise funds to make a payment in lieu of taxes to the City's General Fund, that provided an annual payment be made by LP&L to the City in lieu of ad valorem taxes and a cost of business u-ansfer (which tnnsfer approximated a payment in lieu of franchise taxes). In an effort to give LP&L an opportunity to regain financial stability, in 2004 the City adopted the LP&L Governance Ordinance which, as described above, mandated the creation of certain reserve accounts by LP&L and restricted the transfer of revenues from LP&L to any other fund of the City, including, particularly, the General Fund, until such reserves bad been funded. After FY 2004, the City required, and it is the City's cummt practice to require, a payment in lieu of taxes from each of its other enterprise funds. During its deliberations cooceming the FY 2008 budget, the City Council approved a budgeted $1,000,000 transfer from the net revenues of LP&L to the City's general fund (the "2008 LP&[, Transfer"). The FY 2008 budget was approved by the City Council on September 13, 2007. See "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS-FY 2008 BUDGET." The 2008 LP&L Transfer may not be made until such time that the LP&L Governance Ordinance is amended by the City Council. After audited financial statanents are available for September 30, 2007, LP&L and City Finance Staff will make a recommendation to the Electric Utility Board and the City Council that will outline a fiscally sound, graduated policy to begin the limited payment in lieu of franchise fees, while continuing to build the reserve to the required policy levels. > New Full Requirements Energy Agreement ... In June 2004, WTMPA entered into a 15 year full requirements wholesale power agreement (the "New Power AgTCCmCllt'') with SPS. The New Power Agreement became effective July l, 2004, and replaced a series of existing agreements between WTMPA and SPS and the City and SPS, wbicb bad expiration. dates in 2004 and 2005. Under the New Power Agreement, SPS or its permitted assigns is obligated to provide all energy requimnents for each of the Member Cities of WIMP A, including the City, during the lenn of the agr=nent, which tenninatts on June 30, 2019. SPS may tenninate the agreement upon the ooourrence of an adverse regulatory action under which SPS is required to sell generation assets, and WTMP A may terminate the agreement upon notice and during the final four years of the scheduled rennination date if WTMP A acquires an interest in replacement, coal-fired generation. Each party may require adequate wurances of performance whenever there is a rea.sonable basis therefor. The New Power Agreement represented a significant departure for LP&L. in that it reflected a long-term commitment to take all of its energy from SPS. The contract refl.ectod a decision of the City to abandon the role of power generator, although, as described below, in connection with lhe oonswrunation of the New Power Agreement the City has entered into two unit contingency agreements (the "Unit Contingency Agreement.,") with SPS that will require LP&L to maintain its generation units for dispatch by SPS. Among the implications for LP&L of the New Power Agreement are that LP&L has resolved its loog-te:nn power supply issues, and lessened its exposure to fuel price volatility, although SPS will pass through its fuel charges to LP&L on a monthly billing basis. SPS, in tum., may not pass its fuel costs through to its retail customers ill the City more frequently than once every six months under current State law that requires SPS to seek a rate order from the PUC before increasillg retail fuel cost charges. As a result, the New Power Agreement provides the possibility of both advantages and disadvantages to the City wilh respect to cash flow, particularly if the City determines fl> match its FCA to changes in SPS's fiiel adjustment, as it has generally done in the past According to information filed with various regulatory agencies. the City believes that over 60% of the energy that it pun:hases from SPS is from coal generation. This fuel mix was a significant factor in the City's determination to approve the New Power Agreement by WTMP A. In the event that gas prices should decline over the term of the Agreement, lhe City believes that SPS has the flexibility to switch a larger portion of its geueration to gu. including through the use of the City's gener.ition units in accordance with the Unit Contingency Agreements. 17 '\ ' With respect to the competitive posture of the City in light of the long-term commitment of the New Power Agreemoot, the City notes that under current market conditions, and taking into account the secondary benefits of the agreement, including future savings associated with reduced personnel and maintenance costs as a result of the shift from being an active electric generator to being a passive generator (fur SPS under the tmns of the Unit Contingency Agreements), the wholesale price of the purchased energy, togetht:f with the otha financial benefits of the Unit Contingency Agreements and the possible receipt of revenues under the new WTMP A gas agreement described below, permits the City to compete favorably with SPS. An additional benefit of the New Power Agreement is that it will permit the City to increase its efforts in developing LP &L's distribution business. In I ight of recerit rate structure changes implemented by both the City and SPS that require new developments in the City to fund electric infrastructure through a development charge paid when the development is platted, new principals in developments are choosing to install only one electric distribution infrastructure. Since this new development charge was implemented in FY 2003, all llllljor new developments in the City have selected LP&L as the electric distributor, which positions the City as a distributor of energy to those developments in the future, even though the retail provider of such energy could be a utility other that LP&L and'other electric providers could choose to build their own distribution infrastructure to serve the developments. Perhaps the greatest risk to LP&L from the New Power Agreement is that given the term of the agreement and the dynamic nature of electric competition, over time the wholesale price of the purchased energy will not permit the City to obtain the favorable margiru; thal are cum:ntly being achieved by the City. While the City does not believe that the area served by LP&L will be opened in the short•tenn to retail deregulation, as is the case in other parts of the State that could occur during the term of the New Power Agreement. While there are significant uncertainties as to how such deregulation, if it OCC\b'S, would be administered, it is possible that new retail tnefgy providers could enter the market during the term of the New Power Agreement. In addition, by tying its energy requirements solely to SPS, and though the other new agreements discussed in this section, the City has significantly increased its dependence on SPS as a counlerparty to vital agreements relating IO the operation and financial condition of LP&L. Counterparty risk is risk associated with the counterparty's financial condition, credit ratings. changes in business strategies and other quantitative and qualitative measures that could affect the ability of the countetparty to perform its obligatioris to the City. Both the long-term Unit Contingency Agreement and the New Power Agreement provides the City the right to demand cettai.n credit asSUfaOces from its counterparty if ii has reasonable grounds for insecurity regarding the performance of any contract obligation. > Other New Energy Related Agreements ... As noted above, in connection with the riegotiation of the New Power Agreement, the City negotiated the Unit Contingency Agreements, which consist of two agreements that dedicate the City's generation capacity solely to SPS, which, subject to certain customary conditions, including reasonable notice and nm times, bas the right to caJI upon one or more of the generation units owned or controlled by LP&L, from time to time to ll1ffl energy requirements of SPS. Including the WTMP A Project, all of the capacity of which, in accordance with the WTMP A Settlements, is dedicated to LP&L, lhe City has dedicated generation capacity of 219 megawatts 10 SPS under the Unit Contingency Agreements. The most fuel efficient units within that capacity are the 39 MW capacity of Massengale Unit 8 and the 21 MW capacity of the Brandon Unit I ("Brandon Station"). which is located on the campus of Texas Tecli (the "New Units"). The remaining capacity is in twelve older units (the "Older Units"). With n:spect to the New Units, SPS may dispat(:h those units during the term. ending June 30, 2007; the term of the Unit Contingency Agreement for the Older Units is fifuien years, matching the term of the Power Purchase Agreement, with an expiration date of June 30, 2019. Aside from the differences in units covered, the tenn of the agreements and certain termination provisions in the Older Unit agreement, ~h Unit Contingency Agreement is substantially identical. The Unit Contingency Agreements include a demand charge, which must be paid irrespective of whether SPS chooses to take energy from the City's units, and an energy charge that is based upon lhe output of any of the City's units that is dispatched fur SPS. While the amount of the energy charge will depend upon the energy taken by SPS from the City's generation units, if any, the Unit Contingency Agreements provide an annual minimum payment by SPS to the City ofS6.3 million. > Natural Gas Sale Agreement .•. Subsequent to its execution of the New Power Agrc:ernent, WIMPA and other parties entered into a series of agreements (collectively, the ''New WTMPA Gas Agreements'? under which WTMPA may acquire natural gas and effectively exchange it fur electric power to realize a cost savings. Under the New WTMP A Gas Agreements, WTMPA may pim:hase natural gas from Texas Municipal Gas Corporation ("TMGC") at below-market prices and sell the gas to SPS in return for a marlcet-priced credit (reduced by nominal administrative and incentive fees) against payments due from WTMPA under the New Power Agreement The net savings, if any, will be applied proportionately IO reduce the power charges of WTMPA's Member Cities, including the City. TMGC is a Texas nonprofit public facility corporation created fur the purpose of acquiring and producing natural gas =rves and selling its production to municipal entities such as WTMPA and LP&L The City's standby gas pw-chase agreement, mentioned above in connection with the Unit Contingency Agreements, is also with TMGC. Under the terms of the New WTMPA Gas Agreements, SPS is not obligated to plll'Chase gas from WTMPA unless natural gas produc~ dealers, or otha suppliers execute contracts to sell gas to TMGC's upstream gas provider, those suppliers offer to sell such gas on terms that SPS considers al least as advantageous as those available from other producers and dealers, and lhe aggregate quantities sold do not exceed either SPS's Texas gas requirements or the quantities available to wrMPA from TMGC at a discount from the offered prices or the quantities needed to generate wrMPA's electric requimnents. WTMPA's marketprice credit is based on the prices offered by the qualified suppliers, and its supply of gas is dependent on sales by the qualified suppliers at those prices. TMGC has secured contracts with five suppliers (ConocoPhillps, Coral Energy, NGTS, Concorde Energy, and Tenaska). There can be rio assurance that sufficient qualified suppliers will contract to sell gas, or that they will offer to do so on sufficiently advantageous terms, to supply all or any portion or WIMP A's gas requirements under the New WTMP A Gas Agramtents. In addition, the discount now offered by TMGC may be reduced as necessary to enable it to comply 18 ) ) i , , with financial covenants, although the discount has remained essentially constant for three years. For these and other reasons, there can be no assurance that WTMPA will be able to realize savings in any amount or for any term for the benefit of its members under the New WTMPA Gas Agreements. Nevertheless, the City believes that the New WTMPA Gas Agreements con lain sufficient economic incentives to induce SPS to qualify sufficient suppliers and to accept gas under the agreements up to the permitted quantities. and that the TMGC discount will continue to hold. For FY 2008, LP&L did not budget any revenues from WTMPA gas activity. > Wholesale Energy Agreement with Texas Tech.. .. lhe decision in the Summer of2004 to take greater amounts of energy from Xcel resulted in a dispute between the City and Texas Tech regarding a prior agreement with respect to the operation of Brandon Station, which is located on the Texas Tech campus. In response to mediation to resolve disputes under the prior agreement, the City and Texas Tech executed a new contract on April 28, 2005 (the "New Tex:as Tech Agreement"). In general terms, Texas Tech has agreed to continue to pw-ehase energy from the City at a price that will provide the City with a small rate of return, and is paying for energy usage at the rates provided in the New Teii:as Tech Agreement The City has agreed that steam produced at Brandon Stati<Jn, if any, will be delivered to Texas Tech at no charge. The City has also agreed with Texas Tech that it may term in ate the agreement upon reasonable notice to the City, in which event the City will wheel energy to Texas Tech in accm:dance with an energy delivery charge. The City is of the view that the New Texas Tech Agreement has resolved the dispute with its largest customer on terms that are mutually beneficial for the ~es- > Chief Executive Officer for LP&L ... Gary Zheng was appointed Chief &ecutive Officer of LP&L in September 2005. Previously, he had served as lhe Superintendent of Electric Distributions at LP&L and subsequently, from March 2003 until his recent appointment to CEO, as the Chief Operating Officer of LP&L He has moro than I 9 years of engineering and management experience in electrical utility business. Mr. Zheng, a registered Professional Engineer, is a graduate of the Univer.;ity of Southern California with a MS in Electrical Engineering, a MS in Computer Engineering and a PhD in Electrical Engineering. FY 2008 BUDGET General Fund ... The City Council adopted the FY 2007-08 budget and five year fon:caston Septmiber 13, 2007. The City's FY 2007-08 budget for the General Fund is balanced with $122.4 million in total revenues and expenses. The budget projects that sales tax revenues will produce 53.9% of total tax revenues {tax revenues rep=nt 79.39% of the General Fund's total operating revenues), while ad valorem tax revenue is budgeted lo produce 44.8% of total tax revenues. In FY 2008 the City's total tax rate was set at $0.45505 per $100 taxable assessed valuation, down from $0.46199 in FY 2007. The City's tax roll incr=ed $894.5 million, or 8.9%, from FY 2007 to FY 2008. The City Council, on June 12, 2003, passed a resolution affirming their support for uuth-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 lo provide that each year the tax rate should be adopted based on the actual needs of government This goal was affirmed in April 2004 in a resolution that stated the City Council has supported, as well as taken action, to provide tax relief to property owners within the City. 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. The FY 2007--08 Operating Budget was developed in consideration of the goals of the resolutions and, as a result, there was a S0.00694 decrease in the adopted tax rate. Total transfers to the General Fund from enterprise and internal service funds are budgeted to increase by $1.S million. Transfers out increased $3.2 million mainly due to the Cemetezy and Civic Centers moving to enteiprise funds, but need Genernl Fund assistance for operating purposes. On the expenditure side, administrative services and public worb budgets experienced decreases of three to six percent due to efficiency planning. Cultural and recreation services budgets decreased over 18% due to the movement of the Cemetery and Civic Centers to Enterprise Funds. Community services are four percent higher due lo scheduled charge increases for data processing and infonnation technology. Expenditures for public safety are $4.9 million greater than the amended FY 2006-07 budget, or a 6.5% increase. This increase is due to the City Council goal of increasing public safety officeni in Fire and Police. Overall, General Fund operating expenditures are budgeted to increase by $3.S million over the amended FY 2007 budget. [THE REMAINDER OF nns PAGE INTENTION AIL y LEFT BLANK] 19 ) "\ / ., I Enterprise Funds ... The following table (amounts in millions) il111Strates the nwenues, 11Se or contribution of net appropriable assets, and appropriation as approved in the City's FY 2007-08 adopted operating budget and five year forecast for the Solid Waste, Wastewater, Water and Electric Funds: Adopted FY 2007-<MI Adopted Planned Use Adopted Change FY2007-0S (Conlributlon) FY ?007-08 (rom Revenue Net Assets Appropriation Prior Year Solid Waste s 15,781,779 764,575 16,546,354 -6.6% Wastewater 22,088,059 1,549.231 23,637,290 0.4% Water 42,611,577 6,412,285 49,023,862 8.2% LP&L 135,436,074 126,597,820 -44.2% The decreased budget in Solid Waste is a result of lower fuel costs, motor vehicle and heavy machinery lllJlintenance costs, and master lease payments. Decreases in these areas are as follows ( in millions): fuel costs. ($0.3 ); maintenance costs, (SO. I); master lease costs, (S 1.1). No rate increase was needed in FY 2007-08. The increased budget in Water is a result of increased debt service payments for debt issued during 2006-07 and for increased Canadian River Municipal Water Authority ("CRMW A") costs. Increases in these areas are as follows (in millions): debt service.($3.8); CRMW A costs, (S0.4). The large inc=e in debt service _is mainly related to the acquisition of waler rights over the past two years. No rate increase was needed in FY 2007-08. See also "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -CITY'S RESPONSES TO RECENT FINANCIAL AND MANAGEMENT EVENTS -2008 Proposed Amendment to LP&L Governance Ordinance." [THE REMAINDER OF TIIlS PAGE INTENTIONALLY LEFr BLANK) 20 ) ) J 'I ADV ALOREM TAX INFORMATION ADV ALOREM TAX LAW The appraisal of property within the City is the responsibility of the Lubbock Central Appraisal District ( the "Appraisal District"). Excluding agricultural and open-space land, which may be caxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code (defined below) to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In detennining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and marlcet data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. Current State law further limits the appraised value of a residence homestead for a tax year to an amount not 10 exceed the lesser of (I) the market value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value nf the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property. Pursuant to an amendment to the State Constitution approved by voters on November 6, 2007 and enabling legislation that takes effect January I , 2008, the appraised value of a residence homestead fur a tax year may not exceed the lesser of (I) the most recent marlcet value of the residence homestead as determined by the appraisal entity or {2) 110 percent 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 yeal'S. The City may require annual review at its own expense, and is entided to challenge the determination of appraised value of property within lhe City by petition filed with the Appraisal Review Board. Reference is made to Title ( of the Texas Tax Code (the "Property Tax Code"), for identification of property subject to taxation; property exempt or which may be exempced from taxation, if claimed; the appraisal of property for ad \lillomn taxation pmposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution eArticle Vllr') and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain penonal property from ad valorcm taxation. · Undec Se<:tion 1-b, Article VIlI, and Stale 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 pefSOWi 65 years of age or older and the disabled from all ad valorem taxes thefeafter levied by the political subdivision; or (2) an exemption of up to 20% of the market value of residence homesteads. The minirnwn exemption under this provision is $5,000. In the case of residence homestead exemptioas granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes b.a.ve previously been pledged for the payment of debt if c:e5Sation of the levy would impair the obligation of the contract by which lhe debt was created . . State law and Se<:tion 2, Article vm. 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 Rlal or personal property with the amount of assessed valuation ~pted ranging from $5,000 to a maximum of S 12,000. Effective Janua,y I, 2004, under Article VIII and State law, the governing body of a county, municipality or junior college district, may provide that the total amowit of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older will not be increased above the amount of taxes imposed in the year such residence qualified for such limitation. Also, upon receipt of a petition signed by five percent of lhe registered voters of the county, municipality or junior college district, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or older or who are disabled. Upon providing fur such exemptioo, such freeze on ad valorem taxes is transferable to a different residence homestead within the taxing unit and to a surviving spouse living in such homestead who is disabled or is at least 55 years of age. If improvements (other than maintenance or repairs) are made to the property, the value of the improvements is taxed al the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax rate limitation may not be repealed or rescinded. The City has established such a limitation on ad valorem taxes. Article vm provides that eligible owners of both agricultural land (Section 1--0} and open-space land (Section l-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to limber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and l-d-1. Nonbusiness personal property, such as automobiles or light trucks, a£e exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. State law additionally provides for one motor vehicle owned by an individual and used in the coune of the owner's oooupation or profession and also for personal activities of the owner to be exempted from ad valorem taxation. 21 ... ) ) ') .. Article VIII, Section 1-j, provides for "freeport property" to be exempted Crom ad valorem taxation. Freeport property is defined as goods detained in Texas for I 7S days or less for lhe purpose of assembly, storage, manufacturing, processing or fabrication. Decisions lo continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal In addition, under Se<:tion 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 defwed 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 person who acquired or imported the property; (iii) is transported to another location in the state or outside the state not later than l 7S 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 inventory, dealer's vessel and outboard motor inventory, dealer's heavy equipment inventol)', 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 "frozen" at the value of the property at the time of creation of the zone. Other overlapping taxing units may agree to contnbute all or part 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 e<:onomic development Under the agreemenlS, a property owner agrees to construct certain improvements on its property. The City in tum agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. See "TAX ABATEMENT POLICIES" below. EFFECTIVE TAX RA TE AND ROLLBACK TAX RATE By each September I or as soon thereafter as practicable, the City Council adopts a tax rate per SI 00 taxable value for the current year. The City Council is required to adopt the annual tax rate for the City before lhe laler 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 tali: 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 !11Ce" 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 effooti ve tax rate until two public hearings are held on the proposed tax rate following a notice of such public hearing (including lhe requirement that notice be posted on the City's website if the City owns, operates or controls an internet website and public notice be given by television if the City has free access lo 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 CUITCtlt year lo the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy ( adjusted) from this year's total taxable values _(adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and opmltion tax levy (adjusted) Crom this year;s values (adjusted) multiplied by 1.08 plus a rate that will prodl.lCe this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition lo the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required lo be offset by the revenue that will be generated by the sales tax in the cWTent year. Reference is made to the Property Tax Code for definitive requirements fur the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAX PAYMENT Property within the City is generally assessed as of January I of each year. Business inventory may, at the option of the taxpayer, be assessed as of September. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October I of the same year, and become delinquent on February I of the following year. Taxpayers 65 years old or older are permitted by State law to pay taltes on homesteads in four installments with the first due on February I of each year and the final installment due on August I . 22 ' ) ) ) .. ) PENALTIES AND INTEREST Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Cumulative Month Penalty Interest Total February 6% 1% 7% March 7 2 9 April 8 3 II May 9 4 13 June 10 5 15 1uly 12 6 18 After July, the penalty remains at 12%, and interest increases at the rate of l % each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquenl on lhe homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow fur the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an aulOmatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankniptcy court In many cases post-petition taxes are paid as an adminislrati ve expense of the estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OF TAX CODE The City grants an e,,;emption to the market value of the residence homestead of persons 65 yeal'll of age or older of S 16,600; the disabled are also granted an exemption of$ I 0,000. The City has not granted any part of the additional exemption of up to 20% of lhe market value of residence homesteads; the minimum exemption that may be granted under this provision being $5,000. The City has established the tax freeze on residence homesteads of disabled persons and persons 65 and over. See Table l for a listing of the amounts of the exemptions described above. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property; and the Appraisal District collects taxes for the City. The City does not permit split payments of taxes, and discounts for early payment of taxes ace not allowed by the City, although permitted on a local-option basis by the Property Tax: Code. Since the 1999 tax year, the City has exempted freeport property ftom taxation. The City collects. an additional on~th cent sales tax for reduclion of ad valorem taxes. The Cily held an election on November 4, 2003 to increase this tax by one quarter cent, fur a total of three eighlhs of a cent. The rate increase became effective on October I, 2004. TAX ABATEMENT POLICIES The City has established a tax abatement program to encourage economic development. In order to be consideRd for tax abatement, a project must be located in a reinvestment zone or enteiprise 29ne ( a commercial projecl mus I be in an entetprise rone) and must meet several criteria pertaining 10 job creation and property value enhancement. The City has two enletprise rones, the Lubbock 2000 North Enterprise Zone, approximately 18.6 square miles, and the Lubbock 2000 South Enterprise Zone, approximately 15. 7 sq= miles. A third entetprise zone. the Lubbock International Airport Enterprise Zone expired in September 2005. In 2003, the Legislature made major changes to the statute goveming enterprise zones, including designating zones by block group based on poverty rate. The block groups that meet the criteria become enterprise zone eligible, but can only be used for tax abatement if the new 7.0nes are activated. The Lubbock 2000 North and South Enterprise Zones are grandfathered and will expire no latef than their original expiration date. At present, there are 17 active tax abatement agreements, principally for companies located in the northeast and southeast sections of the City. In accordance wilh State law, the City has adopted policies for granting tax abatements, wbich provide guidelines for tax abatements for both industrial and commercial projects. The guidelines for industrial and commercial projects are similar, except that qualifying industrial projects may receive a ten year abatement, while qualifying commercial projects are limited to five year tax abatements. Although oldec abatements made by the City were given full (100%) tax abatement, since 1997 the City has negotiated abatements on a declining percentage basis, with a portion of the tax value being added to the City's tax roll each year during the life of the abatement. The 23 "\ '\ City's policies provide a variety of criteria that affect the terms of the abatement, including the projected life of the project, the type of business seeking the abatement, with certain businesses targeted for abatement, the amount of real or personal property to be added lo the tax roll, the number of jobs to be created or retained, among other factors. Toe policies disallow abatements for certain categories of property, including real property, inventories, cools, vdlicles, ail'craft, and housing. Each abatement policy provides for a recaplllTe of the abated taxes if the business is discontinued during the tmn of the agreement, except for discontinuances caused by natural disaster or other factors beyond the reasonable control of the applicant. For a description of the amount of property in the City that has been abated for City taxation purposes, see "TABLE I -VALUATIONS, EXEMPTIONS AND GENERAL OBLIGATION DEBr 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 ("TIF') if the area constitutes an economic or social liability in its present condition and use. Other overlapping taxing units may agree to contribute all or a portion of their taxes collected against the "Incremental Value" in the TIF to pay for TIF projects. Any ad valorem taxes relating to growth of the tax base in a TIF above the frozen base may be used only to finance improvements within the TIF and are not available for the payment of other tax supported debt of the City and other participating taxing units. Together with other taxing units, the City participates in two TIFs, the Centtal. Business District Reinvestment Z.One (the "Downtown TIF') and the North Overton Tax Increment Financing Reinvestment Zone (the "Not1h Overton TIF"). Toe Downtown TIF covers an approximately 0.71 square-mile area which indlX!es part of the central busin= district and abuts the North Overton TIF. The base taxable valuesoftheTIF are trozen at the level of taxable values for 2001, the year of creation, at $J0S,858,2St. In FY 2007, the Downtown TIF had a taxable value ofSl61,582,4S0 before takiog into account tax abatements and exemptions. After tax abatements and exemptions, the tax value in the Downtown TIF was $155,747,677. 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 lhat the City will be the largest contributor to the lax increment fund if there is growth from the frozen base. The City Oniinallce establishing the Downtown TIF provides that the Downtown TIF will terminate on December 31, 2021 or at an earlier time designated by subsequent ordinance of the City Council. In addition to the Downtown TIF, the City enacted an ordinance in 2001 establishing the North Overton TIF. Each of the other Taxing Units in the Downtown TIF also participate in the North Overton TIF. The City ordinance establishing the North Overton TIF provides that the North Overton TIF wi11 1mninate on December 31, 203 l or at an earlier time designated by subsequent ordinance of the City Council. The North Overton TIF consists of approximately 32S acres oeac the Central Business District of the City. The frozen tax base for the North Overton TIF was eslablished as of January I, 2002 at $26,940,604. Io FY 2007, the North Overton TIF had a taxable value of $192,302,370 before taking into =unt tax abatements and exemptions. After tax abatements and e&emptions, the tax value in the North Overton TIF was $192,172,230. [1lfE REMAINDER OF THIS PAGE OOENTIONALL Y LEFT BLANK} 24 ) ) "I ) ) ) ) FINANCIAL INFORMATION TABLE 1-VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2007 Market Valuation Established by Lubbock Central Appraisal District Less Exemptions/Reductions at 100% Market Value: Residential Homestead Exemptions S 225,084,488 Homestead Cap Adjustment 58,787,272 Disabled Veterans 15,063,118 Agricultural/Open-Space Land Use Reductions 80,099,818 Pollution EKemptions 10,312,389 House Bill 366 163,705 Freeport Exemptions 86,375,634 Tax Abatement Reductions (I) 35,908,583 Tax Freeze Adjustment 195,219 Market Value Reduction for Protested Properties 83,710,458 2007 Taxable Assessed Valuation City Funded Debt Payable from M Va\orem Taxes: General Obligation Debt (as of 10.1-07) (2) $ 512,250,000 Plus: The Certificates 11,635,000 • Total Fimded Debt Payable from Ad Valorem Taxes Less: Self Supporting Debt ( as of I 0-1--07) (3) Waterworks System General Obligation Debt $ 129,198,872 Sewer System General Obligation Debt S7;270,700 Solid Waste Disposal System General Obligation Debt 12,630,290 Drainage Utility System General Obligation Debt 90,745,324 Tax Increment Financing General Obligation Debt 22,409,789 Electric Light and Power System General Obligation Debt 57,104,440 Cemetery General Obligation Debt 682.149 Gateway General Obligation Debt 41,849,527 Hotel Occupancy Tax Debt 1,218,634 Airport General Obligation Debt 6,652,912 General P\u'pose Funded Debt Payable from Ad Valorem Taxes (4) Unaudited General Obligation 1ntecest and Sinking Fund as of September 30, 2007 Ratio Total Funded Debt to Taxable Assessed Valuation Ralio General Purpose Funded Debt to Taxable Assessed Valuation 2007 Estimated Population (5) Per capita Taxable Assessed Valuation Per Capita Total Funded Debt Payable from Ad Valorem Taxes Per Capita General Puzpose Funded Debt Payable from Ad Valorem Taxes * Preliminary, subject lo change. (I) See "AD V ALOREM TAX INFORMATION -TAX ABATEMENT POLICIES." $11,492,911,247 595,700,684 $ I 0,897,210,563 $ $ $ 523,885,000 419,762,637 104,122,363 2,830,583 4.81% 0.96% 212,365 $51,314 $2,467 $490 (2) The statement of indebtedness does not include the City's outstanding Electric Light and Power System Revenue Bonds, payable solely from the net revenues of the City's Electric Light and Power System. (3) As a matter of policy, the City provides debt service on general obligation debt issued lo 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 Sttffls, Hotel Occupancy Tax projects, and Auport from surplus 25 i ) revenues of thffl Systems (see "TABLE SA-GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS," "TABLE 8B -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 Watetworks System General Obligation Debt has been issued to finance or refinance Waterworks System improvements, and is being paid, or is expected to be paid, from WatefWorlcs System revenues. The City has no outstanding Waterworks System Revenue Bonds but has obligated revenues of the Waterworks System under water supply conttacts. The City's Sewer System General Obligation Debt has been issued to finance or refinance Sewer System improvements, and that is being paid, or is expected to be paid, from Sewer System revenues. The City bas 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 System improvements, and is being paid, or is expected to be paid, from revenues derived from Solid Waste service fees. The City has no outstanding Solid Waste Disposal System Revenue Bonds. The City's Drainage Utility System General Obligation Debt has been issued to finance or refinance Drainage System improvements, and is being paid, or that is expected to be paid. from revenues derived from Drainage Utility System fees. The City has no outstanding Drainage Utility System Revenue Bonds. The City's Tax Increment Financing General Obligation Debt has been issued 10 finance or refuwtce construction of improvements in the North Overton TIF, and is being paid, or is expected 10 be paid. from revenues derived &om lhe Pledged Tax Increment Revenues. The City has no outstanding Tax Increment Financing Revenue Bonds. In FY 2008, based upon development projections that the City believes to be reasonable, but which are dependent in part on future economic conditions and other factor-i that the City catmot oontro l and as to which it can give no assurances, the City anticipates that tax increment revenues will be adequate to cover debt requirements on the existing Tax Increment Certificates of Obligation. In the interim, the City intends to malcc an intedund loan to cover the debt service, and if lhe projected development in the North Ovenon TIP proceeds as expected the City would ~ay such loan from revenues received in future years. The North Overton master plan projects additional debt to be issued by the City for infrastructure improvements In the TIF. If that occurs. there would likely be years in which the TIF would not produce revenues JI amounts sufficient to cover all debt issued for it, at least until the TIF has reached full build-0ut status. The City's Electric Light and Power System General Obligation Debt has been issued to fmance or refinance Electric Light and Powef System improvements, and is being paid, or that is expected to be paid, from revenues derived &om the Electric Light and Power System. The City has $19,010,000 outstanding Electric Light and Powei-System Revenue Bonds payable from a pledge of system revenues. Tile City's Cemetery General Obligation Debt has been issued to finance or refinance Cemetery improvements, and is being paid, or that is expected to be paid. from revenues derived &om the Cemetery. The City has no outscanding Cemet.ery Revenue Bonds. The City's Gateway General Obligation Debt has been issued 10 finance or refinance Gateway Streets improvements, and is being paid, or that is expected t.o be paid. from franchise fees. The City has no outstanding 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 that is expected to be paid, from hotel occupancy taxes. The City has no outstandiog Hotel Occupancy Tax Bonds. The City's Airport General Obligation Debt bas been issued to finance or refinance Airport i.mprovemeots, and is being paid. or that is expected to be paid, from revenues derived from the Airport. The City bas no outstanding Airport Revenue Bonds. (4) Prelimina,y, subject to change. Includes the ~ficates. (5) Sow= City of Lubbock, Texas. {1HE REMAINDER OF lHIS PAGE INTENTIONALLY LEFT BLANK} 26 ) TABLE 2-TAXABLE ASSESSED VALUATION BY CATEGORY Taxable Aeeraised Vaine ror P~al Ye3r Ended ~tember 30z 2008 2007 2006 %of ¾of %of Calcm!l: Amolltlt To~l Amo11nt Total Amount Tolal Real, Residenlia~ Single-Family s 6,321,729,050 55.01% s 5,889,918,195 55.53% s 5,517,769,30(; 55.SS¾ R=J, Residentia~ M1dti-Fami!y 931,507,661 8.11% 873,394,391 8.23% 795,689,400 8.01% Rea.I, Vacant Lots/Tracts 202,703,022 1.76% 186,939,508 1.76% 166,089,379 1.67% Real, Acreage (Land Oruy) 103,474,361 0.90% 104,443,417 0.98% 80,067,791 0.81% Rea~ Fann and Raneb Improvements 10,948,790 0.10% 10,601,986 0.10% 11,038,895 0.11% Real, Coouneteial and Industrial 2,246,869,059 19.55% 1,968,271,689 18.56% l ,827,90 I, 763 18.40% Real, Oil, Gas and Other Mineral Reserves 26,864,!SO 0.23% 28,446,050 0.27% 17,526,510 0.18% Real and Taogible P=al, Utilities 181,023,472 US% 179,562,657 1.69% ln,838,907 1.79% Tangible PCf"SOnal, Business 1,340,911,089 11.67% 1,245,600,988 11.74% 1,228,428,632 12.37% Tangible Personal, Other 13,018,766 0.11% 13,940,265 0.13% 14,527,171 0.15¾ Real Property, Inventory 41,291,828 0.36% 37,577,657 0.35% 26,685,491 0.27% Special fnventory 72,685,000 0.63% 68,621,321 0.65% 67,329,545 0.68% Other/ AdjUSllllet1ts !115,001) 0.00% 220,1n 0.00% 11499,616 0.02% Total Appraiso::I Value Before Exemptions s 11,492, 9 I l ,247 100.00¾ $ I 0,607,53 8,316 100.00% s 9,932,392,406 100.00% Less: Total Exanplions.lR.eductions !59S, 7001684l !6041s121679l 1sssi71s14ss1 Taxable Assessed Value $ 10,897,210,563 s \0100p2S,637 s 9,346,613,951 ) Tanble Aeenised Value for Fiscal Year Ended. Seetember 301 2005 2004 2003 % of %of %of Cal~!I Ami.,unt Total Amount Total Amouut Total Real, Residential, Single-Family s 5,169,490,706 56.09% $ 4,690,158,161 SS.SO% s 4,282,214,635 56.78% Real, Residential, Multi-Family 615,453,250 6.68% 561,569,488 6.64% 455,993,262 6.05% Real, Vacant Lotslfracts 137,411,731 1.49% 108,625,954 1.29% 93,473,144 1.24% "\ Real, Acreage (Land Only) 64,532,486 0.70% 6S,880,410 0.78% 59,644,917 0.79% Res~ Farm and Ranch Improvements 10,406,299 0.11% 10,835,088 0.13% 11,391,782 0.15% Real, Oimmercial and Industrial l,712,4S7,490 l8.S8% 1,638,846, 765 19.39% 1,370, 7;30,397 18.18% Rea~ Oi~ Gas and Olhcr Mineral Reserves 12,167,754 0.13% 8,923,810 0.11% 7,909,460 0.10% Real aoo Tangi"blc Personal, Utilities 173,908,469 1.89% 185,761,3-46 2.20% 192,138,423 2.55% Tang,"b(e Pcrsoaal, Business 1,226,369,118 13.31% 1,090,862,579 12.91% 974,534, 729 12.92% Tangible Personal, Other 15,465,413 0.17% 16,287,022 0.19% 15,336,364 0.20% Real Propcny, lnvento,y 9,863,035 0.11% 4,774,287 0.06%, 11,087,603 0.15% ) Spc,:ial Inventory 68,232,264 0.74% 68,663,514 0.81% 67,339,159 0.89% Other/ Adjusttneots 0.00% 0.00% 0.00% Total Appraised Value Before Exemptions s 9,215,758,015 100.00% s 8,451,188,424 100.00% $ 7,541,793,935 100.00% Lt$: Total Exemptions/Reductions 1sso,16J,1s3) {S29,5981044l (199,449,0681 Taitable Assessed Value s 8,634,994,862 s 7,921 .590,380 s 7,342,344,867 ) NOTE: Valuations shown are certified taxable assessed values reported by the Appraisal District to the City for purposes of establishing and levying the City's annual ad valorem tax rate and to lhe State Comptroller of Public Accounts. Certified values are subject lo change throughout the year as contested values an: resolved and the Appraisal District \!Pdates records. 27 '\ ) ) ) ) TABLE3A-VALUATION AND GENERAL OBLIGATION DEBT HISTORY Fiscal Per Capita General Ratio Year Estimated Taxable Taxable Purpose Tu:Debtlo Ended District Assesstd Assessed Funded Assessed Funded Debt Tax ~ Population"' Valuation Valuation Tax Debt<>• V al11atioo '-'1 PtrCaelta Yeai- 2003 204,737 S 7,342,344,867 s 35,862 s 70,188,204 0.96% s 343 2002 2004 206,290 7 ,921,S90,380 38,400 70,161.218 0.89% 340 2003 200S 209,120 8,634,994,862 41,292 80,210,269 0.93% 384 2004 2006 211,187 9,34<i,613,9S I 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"' 212,365 10,897,210,563 51,314 98,129,904 "' 0.90% "' 462 "' 2007 "'Swrcc,TocCity. "' Does not inclu.d< sdl·supp,:,<l<d debt. "' l're!iminary. ,ubjoct to dlange. lnduda lhc Caliliates. ~ 2008 population ;, ..tirmtocl. TABLE 38 -DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT The following table sets forth certain infonuation widi respoot to die City's general purpose and self-supporting general obligation debt. The City is revising its capital improvement plan, but the City expects to issue additional self-supporting general obligation debt within the three to five year time frame. See "ANTICIPAlED ISSUANCE OF GENERAL OBLIGATION DEBT." Fiscal Less: General Purpose Year Funded Tu Debt Self-Supporting Funded Tax Debt Ended Outstandiog at Funded Tax Outstanding 30-Sep End ofYear Debt at End or Year 2003 $ 295,935,000 $ 225,746,796 $ 70,188,204 2004 285,885,000 215,723,783 70,161,217 2005 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(0) 497,270,000 399,140,097 98,129,904 TABLE 4-TAX RATE, LEVY AND COLLECTION HISTORY Fiscal Tax Rate Distributioo Year End General E(onomic Interest and Tu Tu Percent CoUe«ed 09/30 Fund Development Siokio.& Fund Rate Levy C11rrent Total 2003 $ 0.43204 $ 0.03000 $ 0.107% $ 0.57000 $ 42,093,153 97.67% 99.21% 2004 0.41S04 0.03000 0.10066 0.54570 43,659,111 97.02% 98.64% 2005 033474 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 98.15% 99.71% 2007 0.36074 0.03000 0.07125 0.46199 46,068,744 98.12% 99.02% 2008 0.35380 0.03000 0.07125 0.45505 49,195,247 (In process of collection) 28 Tax Year 2002 2003 2004 2005 2006 2007 ) ) ') ) TABLES-TENLARGESTTAXPAYERS ~ Macerich Lubbock Ltd Wal-Mart Stores, Inc. Soulhwestern Bell Telephone United Supermarkets OFC PYCO Industries, Inc. Southwestern Public Services Co. Lubbock Property, LLC Almos Energy West Texas Division TYCO Fire Products Fountains Club Lubbock Acquisitions, LP TABLE 6 -TAX ADEQUACY 2007 Taxable Assessed V stuatiom $ 120,319,460 69,696,472 65,675,631 49,479,682 48,047,230 42,711,124 33,316,729 33,181,890 31,136,879 28,036,483 521,60 I ,580 %or Total Tuable Assessed Valuation l.t0% 0.64% 0.60% 0.45% 0.44% 0.39% 0.31% 0.30% 0.29% 0.26% 4.79% Average Annual Debt Service Requmnents All General Obligation Debt (2008-2034): $0.2671 per $100 A Vagainst the 2007 T~le AV, at 98.5% collection, produces $28,668,795 Cw $28,669,853 MaximimAnnual Debt Seivice Requiretrents All General <l>ligation Debt (2008): $0.4727 per $100 A Vagainst the 2007 T~le AV, at 98.5% collection, produces oo Preliminary, subject to change. Includes the Ccrtif"icates. TABLE 7 -ESTIMATED OVERLAPPING DEBT $50,734,166 00 $50,738,448 Expenditures of the Ya!io11S taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expendilllres. 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 Advisoiy Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accwacy or completeness of such information, and no person should rely upon such infonnation as being a,;ciuace or complete. Furtherm.ore, certain of the entities listed may have issued additional Tax Debt since the dace hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. Gross Debt Esti.uaa.ted % Overlapping Taxing Jurisdiction !As or 8/15/0n OverlaE!J!l!!I Debt Frenship ISD $ 63,897,346 79.41% $ S0,740,882 IdalouISD 275,000 6.93% 19,058 Lubbock County 85,720,000 83.32% 71,421,904 Lubbock County Hosp ital District 83.32% Lubbock [SD 140,956,725 98.49% 138,828,278 Lubbock-COOper ISD 46,264,571 "57.50% 26,602,128 NewDealISD 18.33% Roosevelt ISO 9,624,998 4.20% 404,250 Estimaced Overlapping Debt $ 288,016,501 The City ( as of I 0/ 1 /07) $ 523,885,000 (If 100.00% 523,885,000 (,) Total Direct & Estimated Overlapping Debt $ 811,901,501 As a% of 2007 Taxable Assessed Valuation 7.45% Per Capita Total Direct & Estimated Overlapping Debt $ 3,823 (I) Pi,:liowwy, subjcd to cbaoge. Includes the Certifu:atcs. 29 ) TABLE SA -GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS FYE 011tstaadlnjl Debt <., Tbe Cerllfleates <>1 Total 30-Sep Prinapai h1tenst Total Princle•I l11terat Total Debt Sa-vice (II 2008 s 26,410,000 s 23,351,202 $ 49,761,202 s 205,000 s 767,964 s 972,964 ·s 50,734,166 2009 26,580,000 22,285,203 48,865,203 355,000 621,()69 976,069 49,841,272 2010 26,635,000 21,188,661 47,823,661 375,000 601,800 976,800 48,800,460 ) 2011 27,4-00,000 20,012,638 47,412,638 395,000 581,528 976,m 48.389,166 2012 27,020,000 18,789,280 45,809,280 415,000 S60,06\ 975,061 46,784,341 2013 27,865,000 17,544,799 45,409,799 435,000 537,408 972,408 46,382,207 2014 28,800,000 16,226,779 45,026,779 460,000 S\3,442 973,442 46,000,221 20\S 26,915,000 14,951,645 41,866,645 485,000 487,948 9n,948 42,839,593 2016 27,oJS,000 13,699,943 40,734,943 515,000 460,796 975,196 41,710,739 2017 27,350,000 12,368,955 39,7!8,955 540,000 432,046 972,046 40,691,001 2018 28,055,000 11,025,273 39,080,273 575,000 401,549 976,549 40,056,822 2019 27,300,000 9,648.216 36,948,216 605,000 369,096 974,096 37,922,312 2020 25,420,000 8,384,564 33,804,564 640,000 334,670 974,670 34,779,234 2021 24,100.000 7,185,523 31,285,523 675.000 298,177 973,177 32,258,700 2022 21,720,000 6,055,443 27,775,443 715,000 259,464 974,464 28,749,906 2023 21,110,000 4,999,573 26,109.573 755,000 218,375 973,375 27,082,948 2024 19,560,000 3,977,491 23,537,491 800,000 174,7SS 974,755 24,512,246 2025 18,840,000 3,037,391 21,877,391 845,000 128,446 973,446 22,850,837 2026 15,295,000 2,193,350 17,488,350 895,000 79,289 974,289 18.462,639 2027 9,520,000 1,576,231 11,096,231 9SO,OOO 26,980 976,980 12,073,21 I 2028 S,225,000 1,216.219 6,441,219 6,441,219 2029 5,415,000 967,143 6,442,143 6,442,143 2030 5,735,000 712,173 6,447,173 6,447,173 2031 6,000,000 445,949 6,445,949 6,445,949 2032 2,195,000 260,438 2,455,438 2,455,438 2033 2,290,000 159,525 2,449Jzs 2,449,525 2034 2,400,000 54,000 2,454,000 2,454,000 s S 12,250,000 $ 242,317,603 $ 754,567,603 s ll,63S,OOO s 7,8~.860 s 19,489,860 s 774,057,464 Avmge Annual Debt Service it<quir=men1S All Oenml Obligation Debt (2008-2034); s 28,668,795 Maximum Annual Debt Se.vice Requirements All Clenmd Ob ligation Dd:,t (2008); $ 50,734,166 Gi Docs Dot inclwle laso'purdmc obliral~ "'\ l'l Pmimimry. subjecuo dla'1ge. TABLE SB-INTEREST AND SINKING FUND BUDGET Projected Cmlenl Purpose Ca,enl Obligation Debt ~ Rajuir=cnts, S<:pt=bc:t-30 ,2008 $ 11,452,465 w ) Fiscal Agent Fees 20,000 ln!ere$1 and Sinkmg Fund, September 30, 2007 $ 2,830,583 Interest and Sinking Fund Tax Levy@ 99¾ 7,420,094 Estimated Interest Earnings l,60lt774 Projected Balance, September 30, 2008 s 379,986 w (I) Preliminary, subjeet to cbange. 30 .., J ..___J \_J L,J J ..___J J ~J u J TABLE 9 -DIVISION OF GENERAL OBLIGATION DEBT SERVICE ll<>lldWiutt Dralaqe Tu 1:1-ioL11b1 woc .... orb -Dbpoul UID!t, leonmmt &P.awer C..ual Tatd 1'\'E S,,1lcm SJIC,m S)'lt..., 8Jsun Flaoada1 s,.c ... C.....wy G,1..,.,. BOT Airpo,t ... ,,,.... G.o. ...1.2::!!L. Dd>tll<rvlcc DebtScmee ».i,t8enlOI n.htSttria: Debt Senlce Dc!itScnko Delllllcmtc DcbtScnl<e Dd,tSenl~ Dtht S,n,ioe Dd>tScmcc°' D<btScnlce 200I s 14,614,035 $ 7,SlS,494 s 1.221.:m $ 4,361,006 s l.lll,739 s S,691,Wl s SS,094 s 3,010,090 s 96,458 $ 791,190 $ ll,452,465 $ S0,734,166 2009 14,541,094 1,299,226 1,094,635 4,365,128 1,137,314 5,621,468 SS,118 3,067,669 97,329 617,726 11,236,766 49,B41,2n 2010 13,271,009 6,710)33 l,"9,215 5,719,582 l,139,7lo S,BOS,217 5$,.235 3,067,564 97,31J 612,561 10,3£2,712 48,800,461 2011 13,176,312 6,619,345 1,150,165 5,717,470 l,8:JS,738 5l740~S97 5$,124 3,064,963 97,274 607,502 10,324,505 48,389,167 2012 12,2!12,729 6,311,843 1,140,244 S,115,S!n' 1,135,652 S,6SB,I04 55,2B 3,069,687 97,248 602,598 9,914,423 46,714,342 2013 12,.2-42,208 6,196,409 1,129,837 5,717,364 1,834,492 S,59<1,584 S5,234 3,067,074 97.323 S\16,767 9,8S4,915 46,382,207 lOU 12,201,782 6,0ll,322 1,113,813 5,713,256 1,834,275 5,Sll,156 H,217 3,063,095 97,280 589,805 9,784,222 46,000,221 2015 12.07',142 4,ISl,2!17 1,097,959 5,715,706 1,133,730 S,•lS,264 SS,227 l,066,066 97,:121 456,285 &,aSl,590 42,Sl9,59J 1016 11,821,612 3,349,590 1,IU,462 5,658,792 1,816,310 5,IOD,130 SS,223 l,066,2Sl 97,241 4SS,27S 9,151,114 41,710,739 2017 11,684,799 J,310,739 1,0,s,m 6,6:ZJ,104 1,139,470 4,912,114 SS,206 l,064,0ll 97,241 457,940 7,144,096 40,691,002 WU 11,464,423 3,043,444 !,OSl,944 6,641,005 1,133,674 4,844,6SS SS,204 l,067,461 97,317 4S6,04S 7,470,590 40.0SM22 1019 11,112,885 l,010,347 IH,90S 6,634,660 t,836,m l.]OS,644 SS,217 l,062,116 97,290 4S4,02S 7,464,272 37,922.lll 2020 8,669,363 2,287,404 8&2,657 6,646,Ul 1,839,224 l,lOS,oo:I SS,ll2 l,~,099 97,2.42 4SS,lll 7,476,068 34,779,214 2021 6,771,768 2,217,lll-l 17S,4SS 6,647,298 1,835,044 l.303,200 ss.210 3,067,528 97,327 456.969 6,861,502 32.258,700 2022 4,090,485 2,286,108 741.301 6,662,t12 1,834,299 l,:107,119 SS,23& l,06MS8 97,139 457,856 6,151,102 28,749,906 2023 1,795,822 1,960,610 744,166 S,191,\SS l,US,149 l,U?,113 55,204 l,068,U6 97,258 457,149 6,020,366 27,082,941 2024 l,794,348 l,956,293 741,lll S,839,240 l,lll,911 2,0U,874 SS.l<ll ],066,372 97,289 457.317 4,654,.511 24,512,246 202S l,059,616 1,909,117 470,625 5,842,131 l,S49,t94 2,020,922 Ss,207 3,06l,S7S 97,308 457,137 4,324,946 22,8S0,136 2026 2,'m,699 1,lll,919 470,673 ,.~ 04,74! 1,539,663 SS,212 1,924.10 97,lOS 2l2,lSl 3,355,324 18,462,638 2027 1,454,616 161,207 107,121 5,200.602 327,976 l,OSl,140 15,689 1,704,150 97,270 32,797 1,920,644 12,073,211 2028 4.738,319 1,702,900 6,441,211 .... 2029 4,731,638 1,103,SOS 6,442,142 2030 4,740,963 1,706,210 6,447,172 2031 4,740,044 l,70l,90! 6,445,941 2032 2,455,431 2,4SS,4l7 2033 2,449,SlS 2,449,524 =• 2,4S4,000 2,453,999 S I S419071tr1s ! 77~145 s I~~ S 14314831121 i 11i:11,690 s 82.!::l~lO s .;Pr,lim!a~,"'1,jcet10dulo. lidadetlh<C<itfft-. 11064~5 s 6516451!99 $ 1~991 s 917051121 s I S4i;l 811l6 s 77410$11,1.ti.,t ) ) ) ; "\ ; TABLE 10 -SELF-SUPPORTED DEBT Toe following details the revenues available and debt allocations for the self-supported gen en.I obligation debt of the City. See also Table 9. In addition to the funds detailed below, the City Council of the City approved ordinances designating debt issued for the Cemeteiy (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 9-30-06 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-08 Balance Available for Other Purposes Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30-08 Pe«:entage ofFund General Obligation Debt Self-Supponing <>I Each F"ISC&l Year 1he City aansfcis aD amount equal to debt ...,,;cc ~uilcmcacs on the Waterw«b Flllld general obUgalioa debt to a xgi,:galCd 8COCHIIII in lbc Watawodcs FUlld. THE SEWER FUND(•> Net System Revenue Available, Fiscal Year Ended 9-30-06 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-08 Balance Available for Other Pwposes Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30--08 Percentage ofFund General Obligation Debt Self-Supporting 00 bch r1S<81 Year 11,c City tran.,lm ""~ equal to dcllt sa-nee requirements on 11,e Sewer Fund gcoc,,,I obliption debt to a ~led """'lWlt in the Sewer Fund. mE SOLID WASTE FUND<" Net System Revenue Available, Fiscal Year Ended 9-30-06 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9·30-08 Balance Available for Other Purposes Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30-08 Pen:entagcofFund General Obligation Debc Self-Supporting (,j Eacb Fucal y .... the City ~ .., amOWJt equal to dobc ..,.;cc ffl!UircmcalS OD the Solid w .. ~ Fund -2 cbligatioD dcllt 10 a~ ICC<lUII! in the S-Olid Waste Fwld. THE DRAINAGE FUND (•1 Nee System Revenue Available, Fiscal Year Ended 9-30-06 Less: Requimnents for Revenue Bonds, Fiscal Year Ended 9-30-08 Balance Available for Other Putposes Requirements for Fund Geoeral Obligation Debt, Fiscal Year Ending 9-30--08 Pen:entage ofFund Gcneta1 Obligation Debt Self-Supporting (.of Each Fiscal Year 1he City tnmsfa,s m amount equal to dd>t sezvice ..,q_uuem=its on the Dminage Fund gell¢tlll cbligatiOD ddrt a, a S<grCgalcd IIXCIWII in lhc Drai,,age Fwul. THE ELECTRIC LIGHT AND POWER FUND 1" Nee Eleclric Light and Power System Revenue Available, Fiscal Year Ended 9-30-06 Less: Requirements for Reveoue Bonds, Fiscal Year Ending 9-30-08 Balance A vailab!e for Other Putposes Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30-08 Pen:entage of Fund Genem Obligation Debt Self-Supporting oo Eacb Fi,cal Year the CiQ, 1JaDSfcn m amouut <qual 10 d,l,t s,nricc n,qu~ on tho Bectric Ught and Power f'llnd gme,al obligation debt to a ~ted accouDt in the Elecmc Ugbt and Power FuDd. 32 $ $ $ $ $ $ $ s $ $ 18,277,614 18,277,614 14,614,035 100.00% 8,373,248 8,373,248 7,535,494 100.00% 3,913,968 3,913,968 1,228,255 100.00% 6,476,263 6,476,263 4,361,006 100.00% 28,689,792 3,429,060 25,260,732 S,698,341 100.00% ) ) j THE GATEWAY FUND!•) Net System Revenue Available, Fiscal Year Ended 9-30-06 Less: Requiremems for Reve11ue Bonds, Fiscal Year Ended 9-30--08 Balance Available for Other Pwposes Requirements for FWld General Obligation Debt, Fiscal Year Ending 9-3().08 Percentage of Fund General Obligation Debt Self-Supporting $ $ l'I Each r1$C81 Year die Cicy a,wfcr, an 811101Jnt cqwtl to debt ,e,vicc ,.quiromcnts on lhc Oat.way Fund gon,ml obligation dd>t r.o a seg,.pred a«o1Jnt in the Gateway Fwtd. THE AIRPORT FUND M Net System Revenue Available, Fiscal Year Ended 9-30--06 Less: Requirements for Revmue Bonds, Fiscal Year Ended 9-30-08 Balance Available for Other Purposes Requiremenls for Fund General Obligalioo Debt, Fiscal Year Ellding 9-30-0S Percentage ofFund Gelleral Obligation Debt Self-Supporting I>) Each f"...,.I Y<ar tbo City 1Jamfc,s an IIDOWU oqual II) d<bl oema, n,quu=ealS oa the AHport Fund gmcnt obliption debt to a scg,qatt,cia<CQWltin tbc Ailpon Fund. THE TAX INCREMENT FINANCING FUND 1"1 Net System Revenue Available, Fiscal Year Ended 9-30-06 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30--08 Balance Available for Other Purposa-1 Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30-08 _Perceruage ofFund General Obligation Debt Self-Supporting "' Eacb Fucal Year the City tmns&rs ao amount "'-ual r.o dd>t service ,equlromeots on the T"" ln=mcat rllWlCi.ng Fw,d f!CIICtll <>bliplioll debt ro a seg,egallld ac=t in the Tax lncr=cct Fioanci.ng Fuw1 Toe r=aindcr of rev=ie Deeded ro support Tu loc"""""1 F"IIIIDCing Fwid gmc,a1 ob~gation debt is nmremd fi<>m the Cicys Solid Wmrc Fwid. TABLE 11-AUTBORIZED BUT UNISSUED GENERAL OBLIGATION BONDS D1lte Amount Purpose Aadlorized Au1horiud $ s $ $ Issued To Date SewcrSystem 05121m $ 3,303,000 $ 2,175,000 W~rksSystem 10/17187 2,810,000 200,000 Street Improvements 05/01/93 10,170,000 10,166,000 Str= Improvements 05/15/04 9,210,000 5,269,000 Ovic C.enter/Audilorium Rm:>vation and Improvements OS/IS/04 6,450,000 Parle Improv=is 05/15/04 6,395,000 6,395,000 PolicdMllllicipal Court Facilities OSIIS/04 3,350,000 Library Improvan:nts 05/15/04 2,145,000 F~Stalions 05/15/04 1,405,000 1,405,000 Animal Shel~ R,emvations & lmprovemcrus 05/15/04 11045,000 S 46,283,000 1601000 S 25,770/t)0 33 5,526,200 5,526,200 3,070,090 I00.00% 2,877,208 2,877,208 791,190 100.00% 940,013 940,013 1,831,739 100.00% Uuissaed $ 1,128,000 2,610,000 4,000 3,941,000 6,450,000 3,350,000 2,145,000 8851000 $ 20,513,000 ) ) ) ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ••• The City Council adopted a resolution during the 1984-85 budget process establishing capital maintenance funds for capital projects. A capital improvement plan is made for planning pUl])Oses and may identify projects that will be deferred or omitted entirely in future years. In addition, as conditions chang~ new projects may be added that are no! currently identified. Under current City policy, for a project to be funded as a capital project it must have a cost of $25,000 or more and a life of seven or more years. For FY 2007-2008, the City Council approved $194.4 million in total expenditures for capital projects for all general purpose projects, as well as projects for the electric fund, water fund, sewer fund, solid waste fund. storm water fund and airport fund (up from $77 million in FY 2006-2007). The Capital Projects Fund budget for FY 2007-2008 also included an additional $562.6 million in future improvements for all City departments over the five succeeding fiscal years. The improvements included in the City's capital improvement plan are generally funded from a blend of bond proceeds, reserves or current year revenue sources. Ali shown in Table 11, the City has $16,771,000 of authorized but unissued bonds from the May IS, 2004 bond election. When the election was held, the City anticipated that the bonds wou Id be issued over the 2004 through 2008 time frame. The City typically issues voted bonds for general purpose City projects, such as stteets. parks, libraries, civic centers and public safety improvements. However, the City has incurred substantial unvoted tax supported debt to fund portions of the capital budget of the Electric Fund, Water Fund, Sewer Fund, Solid Waste Fund, Storm Water Fund, Tax Increment Fund, Gateway Fund and Airport Fund. As described elsewhere in this Official Statement, such enterprise fund indebtedness is generally anticipated to be self-supporting from enterprise fund revenues. The City anticipates the issuance of $185,400,000 ill additional general obligation debt within the next twelve months. TABLE 12 -OTHER OBLIGATIONS Governmental Business-Type Total Capital Lease Capital Lease Capital Lease FYE Minimum Minimum Minimum JO.See Paimeut Paiment Pal!!!!nt 2008 $ 1,694,843 $ 1,946,263 $ 3,641,106 2009 1,673,144 1,842,705 3,515,849 2010 1,522,290 1,748,474 3,270,764 2011 725,904 1,086,012 1,811,916 2012-2016 1,116,246 381,832 1,498,078 Interest ~896z71Q ~894!074) ~ 11790178Sl $ 5!835,716 $ 61111,,212 s I 11946,928 On January 8th, 2004, the City entered into a note agreement with the Department of Housing and Urban Development ("HUDj for loan guarantee assistance under Section I 08 of title I of the Housing and Community Development Act of 1974, as amended. in the amount of Si,000,000. The Note was issued to aid in the establishment of a Housing Rehabilitation Program in order to provide rehab options for low-to moderate income households on a citywide basis, pay professional services rendered in relation to such project, and the financing thereof: Under the terms of the Note, the City will make annual principal paymenl8 on August l, of each year beginning in 2005 through 2012; interest payments are due semi-annually. The Nole is a liability of the City• s Community Development Block Grant Program and debl service wiU be paid from this granL FYE Contract Revenue Bonds 30-Sep Princil!!I Interest Total 2008 $ 125,000 $ 28,300 $ 153,300 2009 125,000 23,300 148,300 2010 125,000 17,900 142,900 2011 125,000 12,188 137,188 2012 125,000 6,200 mdoo $ 625,000 s 87,888 $ 712,888 34 ) ) ) j ) PENSION FUND ... TEXAS MUNICIPAL RETIREMENT SYSTEM <>l(b) ••• All permanent, full-time City employees who are not firefighters are covered by the Texas Municipal Retirement System ("TMRS"). ThlRS is an agent, multiple-employer, public employee retirement system which is covered by a State statute and is administered by six tn&stees appointed by the Governor of Texas. TMRS operates independently of its m~ cities. The City joined ThlRS in 1950 to supplement Social Security. All City employees except firefighters are covered by Social Security. Options offered under TMRS, and adopted by the City, include current, prior and antecedent service credits, five year vesting, updated service credit, occupational disability benefits and survivor benefits for the spouse of a vested employee. An . employee who retires receives an annuity based on the amount of the employee's contributions over-matched two for one by the City. Since October 11, 1997, the employee contribution rate has been 7¾ of gross salary. The City's contn'bution rate is calculated each year using actuarial techniques applied to experience. Enabling statutes prohibit any member city from adopting options which impose liabilities that cannot be amortized over 25 years within a specified statutory rate. On December 31, 2006, the actuarial value of assets held by TMRS (not including those of the Supplemental Disability Fund, which is "pooled"), for the City were $199,865,768. Unfunded actuarial accrued liabilities on December 31, 2006 were S7 I ,S02,988, which is being amortized over-a 25-year period beginning Janll3I)', 1997. FIREMEN'S RELIEF AND RETIREMENT FUND ~1 .•• City firefighters are members of the locally administered Lubbock Firemen's Relief and Retirement Fund (the "Fund''), operating under an act passed in 1937 by the State Legislature and adopted by City fuefightm, by vote of the department, in I 941. Firefightm are not covered by Social Security. The Fund is govem.ed by seven trustees, consisting of three fuefightm, two outside trustees (appointed by the other trustees), the Mayor or lhe representative thereof and the chief financial offioel' or the representative thereof: E,i:eeution of the act is monitiJred 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" plM .. Actuarial reviews are perfonned every two years, and the fund is audited annually. Firefighters contribute a percentage of full salary into the fund. Based on the plan effective November t, 2003, the Fund's funding policy requires c:ontributions equal to 12.43% of pay by the ftrefightels. The City contributes on a basis of the ~tage of sala,y whicb is an annually adjusted ration that bears the same relationship to the firefightet'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, 2006 actuarial valuation assumes the City's contributions will average 19.75% of payroll in the future. As of December 31, 2006, che unfunded pension benefit obligation was S26,297,944 which is amortized with the e,i:= of the assumed total contribution rate over the normal cost rate. The number of ye.us 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 Dectmber 31, 2004 actuarial valuation, which Wied plan provisions effective November I, 2003, needed 20.6 years to amortize the ll!lfuoded pension obligation. The December 31, 2006 actuarial valuation was based on the plan provisions effective December I, 2005 and needed 35 years to amortize the unfunded pension obligation. OTHER POST-EMPLOYMENT BENEFTI'S . . . The City currently provides certain post-employment benefits to its employees, as described in Note m. K (Notes to the Basic Financial Statements) set forth in Appendix A.. 1be City inteDds to comply with the requirements of OASB No. 43 and 4S, with respect to the IqJOrting of post-employment benefits, ill accordance with the timelio.es set forth in GASB No. 43 and 4S. The City has retained the services of Gabriel, Roeder, Smith & Company to prq,aie the calculaliom required under GASB No. 43 and 45. 00 For historical illformation ~ die retimuent plam, sec MAPPENDlX A, EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR l1iE YEAR ENDED SBPTEMBER. 30, 2006 -Noce ID, Subsection 6 -R.etirem:nt Plalls". . OJ Soua= Tens MWUQipal RetiJcmeut System, Comprehenstw Annual FiMnci.al &pert for Year EN.led December J /, 1006. [TI{E REMAINDER OF THIS PAGE INTENTIONALLY LEFr BLANK] 35 ) j ) TABLE 13 -CHANGES IN N[T ASSETS Fiscal Year Eaded Se11tember JO<•> 2006 2005 ~ 2093 ~ REVENUES Program Revenues Charges for Services $ 9,632 s 10,583 s 12,713 s 13,888 s 9,369 Grants and Contributions 11,048 13,296 9,643 12,137 7,007 General Revenues Property Taxes 42,771 39,748 44,497 42,303 40,408 Sales Taxes 45,577 41,803 30,555 29,092 28,903 Other Taxes 4,447 4,242 3,793 3,712 3,681 Franchise Taxes 13,348 11,154 9,654 6,613 6,998 Grants/Contnl>ution.s not restricted (25) Other 11,292 5,742 4,274 3,834 6JJ.7 Total Revenues s 138,115 $ 126!568 $ 1151129 S 1111579 $ 1021568 EXPENDITURES Administrative Services $ 9,910 $ 8,220 $ 7,946 $ 7,ISS $ 7,293 Community Services 6,112 6,146 6,776 6,335 8,643 Cultural and Recreation 18,915 17,745 17,102 16,796 16,297 Economic Development 10,283 9,739 4,610 4,535 4,399 Fire 26,71 I 23,517 22,074 20,450 19,432 Health 5,014 5,040 4,SSS 4,343 4,173 Police 42,063 38,452 36,543 33,986 31,862 Other Public Safety 5,24-0 4,977 4,211 3,602 3,459 Streets and Traffic 11,850 12,466 10,570 16,371 9,913 Non-departmental 5,206 6,253 2,924 5,642 .5,015 Interest on Long-Tenn Debt 41326 31195 4877 3 373 31493 Total E:xpenditures s 145!630 s 135,750 $ 122,218 S 122,591 $ 113,979 Changes in net assets before special items & transfers $ (7,515) $ (9,182) $ (7,089) $ (11,012) $ (11,411) Special items (687) Transfers 9,607 151469 9 745 2,554 151668 Changes in net assets s 2,092 $ 6,287 s 2,656 $ (8,458) s 3,570 Net A=ts -beginning of year, as restated s 110,629 $ 1041341 s 1011684 $ ll01142 $ 1061572 Net assets -end of year s 1121721 $ 110,628 $ 1041340 $ 101,684 $ 110,142 <-I Audilled. Umts -inOOOs. Note: Data shoWII in Table 13 mlccts general govmimenlal activities reported in aa:ordance with GASB SlatemeDI No. 34. The 6.oaucial ~ inc:lude a xoaaagemcnt discussiou. and ana~is of die operatiog rtSults of such fiscal year, including restatemeots to bcgillaing flm.d balalll:cs and net a.ssets. 36 TABLE 13A-GENERAL FUND REVENUES AND EXPENDITURES HISTORY ) Flsca.l Vear Ended Scl!tember 30 ~ ~ 2004 2003 122! REVENUES Ad Valorem Taxes s 33,193,738 s 29,414,773 s 33,233,274 s 32,19•,087 $ 29,885,.252 Sales Taxes 41,778,534 38,319,5<11 30,554,632 29,092,032 28,902,649 fnnchise Taxc, 8,008,973 6,693,209 9,654,447 6,612,822 6,998,085 Miscellaa«>us TuCJ 1,027,352 <Jgl,327 939,456 848,816 820,S<n Licenses and Permits 2,250,635 l,953,666 1,982,281 1,875,118 1,475,451 lntergovemmental 408,997 480,648 428,459 348,787 351,878 Charges fur Servicea 4,78t,043 4,070,642 4,467,733 4,'US,591 4,472,094 Fees aDd Fines 3,981,978 4,015,402 3,675,856 3,672,509 3,069,362 Miscellaneous l,46S,215 1,S06,31S l,442,677 l,532,346 l,O.SS,237 In~ 921,742 349,236 334,730 285,756 433,393 ') Operating Transfen <•I 16,565,397 10,723,891 l0,3451945 15,023,466 Total Revennes aad Transfers $ 97,818,207 s 104,351,116 s 97,437,436 s 91,753,809 s 92,490,374 EXPENDITURES <leoeral Govcm.mcut s s 6,159,536 s S,633,469 s 5,111,151 s S,S96,868 Fillancial Services 2,139,492 2,333,469 1,969,413 1,958,051 Cultural and Recreation 13,986,576 Ecoaomic & Business Developmc11t 1,1-46,267 No.n-deparimcnlal 1,882,255 445,251 214,562 115,499 1,497,485 Admin/Community Services 9,356,059 . 18,330,SOS l8,IS6,4SS 17,837,076 17,997,152 Police 37,463, 74-0 33,919,626 32,400,371 30,321,182 28,905,651 f ire 2-4,638,814 21,943,267 20,613,077 19,Sl 1,797 18,632,109 Health 3,738,790 Otbcr Public Safety 4,287,806 Planning and Transportation 8,120,727 7,180,843 6,610,394 6,510,394 Street Lighting 7,439,045 2,214,291 2,185,286 2,078,277 2,168,620 Humm Resouroes 740,826 7S4,22S 780,S29 895,311 Debi Service P,iqcipal 1,009,368 Debt Semcc Interest and Other Cllarges 144,858 Capital Outlay 7,184,866 5,277,100 41S,S8S 378,059 •80,749 OpcntiDg Transfcn 3,912,645 4,212,915 13zSSS1338 S19Sl,669 Total E1tpmditures $ 112,273,444 $ 103,203,269 s ~.160,257 $ 98,9341715 $ 90,S~,OS9 Exiles$ (Oc6cieucy) of Revenues and Transfers over Expenditures s (14,460,237) $ 1,147,847 s 3,277,179 s (7,180,906) s 1,896,315' Capital lase Issued S,119,980 3,534,048 TraoMln 13,325,046 Tiansfcr Out (1,436,498) Fuad Balance at Beginning of Year 17,376,420 12,694,525 9,417,346 16,598~52 (<I 16,716,042 Fund Balao11C at Ead ofY ar s 19,924,711 s 17,376,420 s 12,694,525 s 9,417,346 s 18,612,357 Lesa: R.esenes aad Oesigualions (11l (i,2SS,041) Undcsignaled Fund Balance'" $ 19,924,711 s 17,376,420 $ 12,694,52S s 9,•17,346 $ 17,357,316 ti> For fiscal year 2005/06, the water, solid waste aad waste watm funds lraOSfcmd an amolllll sufficicut to cover the pro rata share of the City'• aeoen1 and adm.illistruive expenses and an amount repramting a pa~ ill lieu of ad valomll taxes. The waler, -wata ad solid waste funds trusfcmd an amount representing a fi:aochi,e payment equal to 6% of gross 1teeipts. The Electric s~ was not requited to mw transfers to the General FUlld for auy of the foregoiag purposes d4lriag the fiscal year. ll>I The City's financial policies rarget a Oenem FUlld midesignated balanoe of at least 20¾ of General fund ICYC1111CS. The uudesignated filQd balance is at 99% of die tug et established by the City's 1inaaciaJ pol.icic:s. (cl The "Fwd Balance at Bcgianing of Year" was rest&~ oo 1be City administralioa beli~ tmt the Ullaudited a-al F\llld balan0c for the period ending Sq,cember 30. 2007 wa apflll'.)umb:ly $19,136.979. 37 TABLE 14-MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, Chapter 321, Texas Tax Code, which grants the City the power to impose and levy a I% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Certificates or other debt of the City. In addilion, in January, 1995, the voters of the City approved the imposition of an additional sales and use tax of one-eighth of a cent as authorized by Chapter 323 Texas Tax Code, as amended. Collection for the additional tax commenced in Oc1Dber, 1995 with the proceeds from the one-eighth cent sales tax designated for the use and benefit of the City to replace property tax revenues lost as a result of the adoption of the tax. At an election held in the City on November 4, 2003, voters approved an additional one-quarter cent sales and use tax, with the proceeds to be dedicated to the reduction of ad valorern taxation, and an additional one-eighth cent sales and use lax under Section 4A of the Texas Development Corporation Act (Article S 190.6, Texas Revised Civil Scatutes), to be used for economic development in the City. The City began to receive p~ of these taxes in October 2004. Collections and enforcements of the City's sales tax are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, to the City monthly, after deduction of a 2% service fee. Historical collections of the City's local Sales and Use Tax are shown below: ¾of Equivalent or FYE Total Ad Valorem AdValorem Per JO-See Collected 00 Tax Levy Tax Rate Cal!itaM 2002 $ 28,902,648 73.45% $ 0.4183 $ 143.08 2003 29,092,032 68.80% 0.3962 142.09 2004 30,554,632 69.98% 0.3857 148. ll 2005 41,803,092 105.09% 0.4825 199.90 2006 45,576,582 109.10% 0.4556 214.61 2007 47,780,448 114.37% 0.4385 224.99 00 Exclwks bingo Wt receipts am! mixed '-erage lax. <b) Based on population estimates of the City. Effective as ofOctobef' 1, 2006, the sales tax breakdown for the City is as follows: City: City Sales & Use Tax City Sales & Use Tax for Property Tax. Relief City Sales & Use Tax. for Economic Development County Sales & Use Tax State Sales & Use Tax Total 38 $ $ 1.000 0.375 0.125 0.500 6.250 8.250 ) F1NANCIAL POLICIES Basis of Accounting ... The accounting policies of the City confonn to generally accq>ted 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 ("OFOA"). The GFOA has awarded a Certificate of Achievement for EKcellence 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, 2005. The City will submit the City's 2006 report to GFOA to determine its eligibility for another certificate. Comprelten.rive Annual Financial Report (CAFR) ... Beginning with the year ended September 30, 2002, the City's CA.FR has been presented under the Governmental AC(X)unting Standard Boan! ("GASB") Statement No. 34, Basic Financial Statements - and MaJtagement's Discussion and Analysis -for Seat.e and weal Governments, GASB Statement No. 37, Basic Financial Statements -and MaMgement's Discussicn and Analysis -for State and Local Governments: Omnibus, and GASB Statement No. 38, Certain Financial Note Disclosures. For additional information regarding accounting policies that are applicable to the City, see Note I. "Summary of Significant Accounting Policies" in the financial statements of the City attached as Appendix A. General Fund Balance ... The City's objective is to maintain an unreserved/undesignated fwld balance at a minimum of an amount equal to two months budgeted operating expenditures to meet unanticipated contingencies and fluc1uations in revenue. The City's General Fund currently has an unreserved/undesignated fund balance that is at 99% of the target established by the City's financial policies. Water. Wastewater. Stonn Water Solid Waste and Airport Enterprise Fund Ba/1111ces .•. It is the policy of the City to maintain appropriable net assets in the Water and Wastewater funds in an amount equal to 25% of operating revenues for unforeseen contingencies. The City's goal of appropriable net assets in the Solid Waste, Airport, and SIOml Water funds is an amount equal to IS% of regular operating revenues. With the exception of the Electric Enterprise Fund (as further described below), the City currently exceeds its policy on appropriable net assets for its various enterprise funds. See "DISCUSSJON OF RECENT FINANCIAL AND MANAGEMENT EVENTS -SEPTEMBER 30, 2003 FINANCIAL RESULTS." According to audited numbers for FY 2006, the target net assets by policy and current appropriable net assets for the Water, Wastewater, Stonn Water and Airport enterprise funds are as follows: Entemrlse Fund Taq:;et Net ,y,ea b! Polig: Al!l!roeruble Net As~ts• Water $10.5 million $19.2 million Wastewater $5.5 million $ 13.5 million Storm Water $LO million S 1 2.1 million Solid Waste $2.3 million $4.9 million Airport $1.0 million $3.0 million Electric Enterprise Fund Balance .•. It is the policy of LP&L to maintain appropriable net assets set by the City Charter. The LP&L Governance Ordinance was amended in December of 2006 to include. among other things, changes to the requirements regarding the reserve funds LP&L maintains. As amended, the LP&L Governance Ordinance requires the Electric Utility Board to (i) maintain sufficient operating cash to satisfy all current acoounts 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 $50 million do!~. This general reserve fund shall be used for operationa.l purposes, rate stabilization and for meeting the electric utility demand of any rapid or unforeseen increase in residential and/or commercial developmenL According to audited numbers for FY 2006, the total target net assets by ordinance and current appropriable net assets for LP&L are as fo \lows: Enterprise Fund LP&L Target Net Assets bf Policy $50.0 million • Based on Electric Utilities Board discretion. Appropriable Net Assets• $25 .3 million 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 lhrough th.e rates, fees and charges of each of these enterprise funds. For pwposes of detennining self sufficiency, cost recovery for each enterprise fund includes direct operating and maintenance expense, as well as indirect cost recovery, in-lieu of transfers lo the General Fund for property and franchise tax payments, capital expenditures and debt service payments, where appropriate. Rate increases may be oonsidered in future budgets as costs may wanant, including specifically the costs related to fuel charges that may affect LP&L and the cost of providing service. Debt Service Fund Balance ... A reasonable debt service fwld balance is maintained in order to compensate for unexpected contingencies. 39 ) Budgetary Procedures ... The City follows these procedures in establishing operating budgets: 1) Prior to August l, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to October I the budget is legally enacted through passage of an ordinance. 4) The City Manager is authorized to iransfer budgeted amounts between accounts below the department level Ally cransfer of funds between departments or higher level are presented lo the City Council for approval by ordinance before the funds are transferred or expended. Expendi~ may not legally exceed budgeted appropriations at the fund level 5) Formal budgewy integration is employed as a management control device during the year for the Convention and Tourism, Criminal Investigation, and Capital Projects Funds. Budgets are ad<Jpted on an annual basis. Fonnal budgetary integration is not employed for Debt Service funds because effective budgeta.cy control is alternatively acbieved through general obligation bond indenture and other contract provisions. 6) The Budget for the General Fund is adopted on a basis consistent with get1erally accepted accounting principles. 7) AppropriatiollS for the General Fund lapse at year-end. Unencumbered balances for the Qipital Projects Funds continue as auchority for subsequent period expendinm:s. 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 lhe following budget years beginning October I, 1983-88 and 1990-06. Insurance and Risk Management . . . The City is self-insured for public entity liability and health benefits covei:age. · Risk management purchases a $ I 0,000,000 excess insurance policy for liability claims in excess of $500,000, per occurrence. Aiiport liability insurance and workers' compensation is insured under guaranteed cost po \icies. The Health Benefits are covered by a self insured program wich a $18,845,756 cap and a Sl7S,000 individual cap. The City maintains insurance policies with large deductibles for fire and extended property coverage and boiler and machinery covernge. An Insurance Fund has been established in the Intemal Service Fund to account for insurance programs and budgeted transfers are made to this fund based upon estimated payments for claim losses. Al September 30, 2006 the total Net Assets of these insurance fim.ds were as follows: Self-insurance-health (SI 98,884) Self-insurance-risk management $3,397,295 The City obtains an actuarial study of its risk management fund (the "Risk F\llld") every year. In FY 2005, an actuarial sllldy was conducted that considered the types of insurance pro!J:ction obtained by the City, the loss exposure and loss history, and claims being paid or reserved that are not covered by insurance. The 2005 actuarial review recommended that the liabilities of the Risk Fund be increased to $6,479,000 from $6,437,000 to the minimum expected confidence level of the Government Accounting Standard Board Statement Number 10 ("GASB 10"}, which requiR5 maintenance of risk management l!6Stts 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 ofSI,688,000 over the recommended funding level Given the risk net assets balance, the City exceeds the minimum GASB IO requirement INVES1MENTS The City invests its investable funds in investments authorized by Texas law, including specifically the Public Funds Investment Act (Chapter 2256, Texas Government Code, and refem:d to ~in as the "PFIA"), in accordance with inveslrnenl 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 lo invest in (1) 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) oollateralized mortgage obligations directly issued by a federal agency or instnunentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United St.ates, (4) other obligations. the principal of and in~t on which are unconditionally guaranteed or insured by, or backed by the full fuith and credit of, the St.ate of Texas or the United States or their respective agencies and instrumentalities, ( 5) obligations of states, agencies, counties, cities, and othec-political subdivi,sions 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 lsrae~ (7) certificates of deposit rneeting the requirements of the PFIA lhat 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 F edera1 Deposit Insurance Co,:poration or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in the clauses ( 1) through ( 6) or in any other mannt:I' and amount provided by law for City deposits, (8) fully collaterafu:ed repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (I), and are placed through a primaJy government securities dealer or a financial institution doing business in lhe State of Texas, (9) bankers• acceptances with the remaining term of 2 70 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-I or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commen:ial paper that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized ~ii rating agencies 40 ) ") or (b) one nationally reoognized c~it rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (II) no-load money market mutual funds regulated by the Securities and Exchange Commission that have a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of 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 y=; invests exclusive[ y in obligations described in the preceding clauses; and are continuously rated as to investment quality by at least one nationally =gnized investment rating finn of not less than AAA or its equivalent, and (13) guaranteed investment contracts secured by obligations of the United States of America or its agencies and instrumentalities, other than the prohibited obligations described in the next succeeding paragrapb. The City may in vest in such obligations directly or through government investment pools thal in vesl solely in Sl.14:b obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally i:ecognized rating service. The City is specifically prohibited from investing in: ( 1) obligations whose payment represents the coupon payments on the outslanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no inte!C\!t; (3) col\ateralized mortgage obligations that have a stated final maturity of greater than JO years; and (4) co\lateralized mortgage obligations the interest rate of which is detemiined by an index that adjusts opposite to the changes in a marlcet index. Governmental bodies in the State such as the City are authorized to implement securities lending programs if: (i) the securities loaned under the program are collateralized, a loan made under the program allows for Cermination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (I) through (6) of the first paragraph under this subcaption, (b) irrevocable letters of cm:l.it issued by a state or national bank that is continuously rated by a nationally recognized investment rating fU'Dl not less than u A" or its equivalent, or (c) cash invested in obligations that are described in clauses (I) through (6) and (I 0) through (12) of the first paragraph under lhili subcaption, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the governmental body, held in the name of the governmental body and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a tenn of one year or less. INVESTMENT POLICIES Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasu.e safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed 1w pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of inveslrnent type, (2) preservation and safety of principal, (3) liquidity, ( 4) marketability of each in vestment, ( 5) di versification of the portfolio, and ( 6) yield. Under Texas law, City investments must be made "with judgment and Cafe, under prevailing circum:nan<:es, that a pefSOn of prudence, discretion, and intelligence would exeroise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (I) the investment position of the Cily; (2) that all investment officers jointly prepared and signed the report; (J) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group; (4) the book value and market value of each separately listed asset at lhe beginning and end of the reporting period; ( S) the maturity date of each separately invested asset; ( 6) the account or fund or pooled fund group ' for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it reildes to; (a) adopted investment strategy statements and (b) state law. No person may in vest City funds without express written authority from the City Council ADDfflONAL PROVISIONS Under Texas law, the City is additionally required to: (I) annually review its adopted policies and strategies; (2) require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to lhe entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of £inns seeking to sell securities to the City to: (a) receive and review the City's investment policy, (h) acknowledge that reasonable controls and procroures have been implemented to preclude imprudent investment activities, and ( c) deliver a written statement attesting to these requirements; (4) perfonn an annual audit of the management controls on investments and adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officec and investment officers; ( 6) restrict reverse repurchase agreements to not more than 90 days and restrict the inveslment of reven;e repurchase agreement funds to no greater than the term of the reverse repun:hase agreement; (7) restrict its investment in mutual funds in the aggregate IO no more than 1 5 percent of its monthly average fund balance, excluding bood 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 fuuds; and (8) require local government investment pools to conform to the new disclosure, rating. net asset value, yield calculation, and advisozy board requirements. · 41 ) j TABLE 15 -CURRENT INVESTMENTS As of September 30, 2007, the City's investable funds were in vested in the following categories: Book Value Estimated Market Value w Par o/e of Total %ofTotal Tn!!; Value Value Book Value Value Market Value United States Agency Obligations S 118,219,000 s 117,673,754 40.IS¾ s 118,045,822 40.22% Money Market Mutual Funds Cb> 44,014,150 44,014,150 15.02% 44,014,150 IS.00% Local Government Investment Pools 1'1 1312428,024 13 l,4281024 44.84% I31,428,024 44.78% S 293,661,174 $ 293,1151928 100.00% $ 293,487,996 100.00% 00 Market prices an: obtained fiom Advent's interface wilh FT lutcractive Data. No limds an: invested in mortgage back securities. The City holds all investmealll to maturity which minimizes Ille risk of market price volatility. <bl M011ey Market Fuods 1ft held at Wells F3Jg0 Bank, Texas N.A. <•> Loe.al government investment pools co mist of entities whose investment objectives are preservation and safety of priDcipal, liquidity aod yield. The pools seek to maintain a S 1.00 value per share .as n:quin:d by Ille Texas Public Fll<l<h lnvcsb:DeDI Act. TAXABLE STATUS OF THE CERTIFICATES The following discussion descnbes certain U.S. federal income tax considerations of U.S. persons that are beneficial ownen ("Owners") of the Certificates. This discussion is based upon the provisions of the Internal Revenue Code of 1986, aa amended ( the "Codej, applicable Treaswy Regulations promulgated and proposed thereunder, judicial authority and administrative intetpretations, as of the date hereof, all of which are subject to change. possibly with retroactive effect, or ~ subject to different inteipretations. Owners catlJIOt be assured that the Internal Revenue Service ("'IRS") will not challenge Ol\e or more of the tax consequences described herein, and neither the City nor Bond Counsel has obtained, nor does the City or Bond Counsel intend to obtain, a ruling from the IRS with respect to the U.S. federal tax consequences of acquiring, holding or disposing of the Certificates. This summary is limited to initial holders who purchase the Certificates for casb at their "issue price" (which will equal the first price at which a substantial portion of the Certificates is sold for cash to persons other than bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) and who hold the Certificates as capital assets (generally property held for investment). This summary does not discuss all of lhe tax consequences that may be relevant to an Owner in light of its particular circwnstances or to Owners subject to special rules., such as certain financial institutions, insurance companies, tax-exempt organizations, foreign taxpayers, taxpayers who may be subject to the alternative minimum tax on persorui.l holding company provisions of the Code, dealers in securities or foreign currencies., or Owners whose functional currency ( as defined in Section 985 of the Code) is not the U.S. dollac. Except as stated herein, this summary describes no federal, state, or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Certificates. Investon who are subject lo special provisions of the Code shou1d consult their own tax advisors regm-ding the tu. consequences to them of pun:has.ing, holding, oWDiDg, and dbposing of the Certificate,, indndillg the advisability of making any of the elections desc:n"bed below, before detenniniag wbetber to purchase the Certificates. For purposes of this discussion, a "U.S. ~n" means (i) an individual who, for U.S. federal income tax purposes, is a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation for U.S. fedenl income tax purposes, that was created or organized in or \ltlder the laws of the United States, and any state thereof or the District of Columbia or any political subdivision thereof; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its soun:e, or (iv) a trust whose administration is subject to the primary sup«Vision of a United States court and·which has one or more United States persons who have the authority to control all substantial decisions of lhe trust. If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds Certificates, the tax lrealment of a partner will generally depend upon the status of the partner and the activities of the partnc:n;hip. An Owner of a Certificate that is a partner of a partnership that will hold Certificates should consult its tax advisor. This discussion does not ~ any tax considerations arising under the laws of any foreign, state, local, or other jurisdiction. IN GENERAL Interest on a Certificate generally will be includible in an Owner's income as ordinary income at the time the interest is received or accrued, in accordance with such Owner's regular method of accoUDting for U.S. federal income tax purposes. PAYMENTS OF INTEREST Stated interest paid (and other original issue discount) on each Certificate will generally be taxable in each tax year held by an Owner as ordinasy interest income without regard to lhe time it otherwise accrues or is received in accordance with lhe Ownec' s method of accounting for federal income tax purposes. Special rules governing the treatment of original issue discount are described below. ORIGINAL ISSUE DISCOUNT Certain Certificates may be sold al a disoount below their principal amount. As provided in the Code and the Treasury Regulations, the ellcess of the "stated redemption price at matwity" (as defined below) of each such Certificate over its issue price will be original issue discount if such excess equals or exceeds a de minimis amount (i.e., one quarter of Ol\e pm;ent of the 42 ) ') Certificate's stated redemption price at maturity multiplied by the number of complete years to its maturity). A Certificate having original issue discount equal to or greater than a de minimis amount will be refmed to as "Tlll(able Original Issue Discount Certificate." Owners of Certificates that are not Taxable Original Issue Discount Certificates ("OID Certificates") will include any de minimis original issue discount in income, as capital gain, on a pro rata basis as principal payments are made on the Certificate. The stated redemption price at maturity of a Certificate includes all payments on the Certificates other than the stated interest amounts, which are based on a fixed rate and payable unconditionally at the end of each six-month ac<:rual period. Except as descnbed below, Owners of OID Certificates will have to include in gross income (irrespective of their method of accounting) a portion of the original issue discount of om Certificates for each year during wbich om Certificates are held, even though the cash to which such income is attributable would not be received until maturity of OID Certificates. The amount of original issue discounts included in income for each year will be calculated under a constant yield to maturity formula that results in the allocation of less original illsue discount to earlier years of the term of OID Certificates and more original issue discount to the later years. The foregoing summary is based on the assumptions that (i) the Underwriter has purchased the Certificates for contemporaneous sale to the general public and not for investment purposes, (ii) all of the Certificates have been offered, and a substantial amount of each maturity thereof has been sold to the general public in arm's-length transactions for a cash price (and with no other consideration being included) equal to the initial offering prices thereof stated on the cover page of this Official Statement, and (iii) the respective initial offering prices of the Certificates to the general public are equal to the fair market value thereof. Neither the City nor Bond Counsel has made any investigation or offers any assurance that the: Certificates will be offered and sold in accordance with such assumptions. ACCRUAL METHOD ELECfiON Under the OID Regulations, an Owner that uses an accrual method of accounting would be permitted to elect to include in gross income its entiro return on a Certificate ( i.e., the excess of all remaining payments to be received oo the Certificate over the amount paid for the Certificate by such Owner), based on the compounding of interest at a constant rate. Such an election for a Certificate with amortizable bond premium (or market discount) would result in a deemed election for all of the Owner's debt instruments, with amortizable bond premium ( or market discount) and could be revoked only with the permission of the IRS with respect to debt instruments acquired after revocation. DISPOsmoN OR RETIREMENT Upon the sale, exchange, or certain other dispositions of a Certificate, or upoo the retirement of a Certificate (including by a defeasance effected by the City or by redemption), an Owner will generally recognix.e capital gain or loss. This gain or loss will equal the difference between the Owner's adjusted tax basis in the Certificate and the proceeds the Owner receives, excluding any proceeds attributable to accrued interest, which will be recognized as ordinary interest income to the extent lhe Owner has not !)l"CViously included the accrued interest in income. The proceeds an Owner receives will include the amount of any cash and the fair market value of any other property received fur the Certificate. An Owner's tax basis in the Certificate will generally equal the amount the Owner paid for the Certificate. The gain or loss will be long-term capital gain or loss if the Owner held the Certificate for more than one year. Long-term capital gains of individuals, estates and trusts currently are subject to a reduced tax rate. The deductibility of capital losses may be subject to limitation. INFORMATION REPORTING AND BACKUP WITHHOLDING Infonnation reporting will apply to payments of interest on, or the proceeds of the sale or other disposition of, Certificates held by an Owner, and backup withholding may apply unless such Owner provides the appropriate intennediaiy with a taxpayer identification number, certified under penalties of perju.iy, as well as certain other information or otherwise establishes an exemption from backup withholding. Any amount withheld under the backup withholding rules is allowable as a cR:dit against the Owner's U.S. federal income tax liability, if any, and a refund may be obtained if the amounts withheld exceed the Owner's actual U.S. federal income tax liability and such Owner provides the required infonnation or appropriate claim form to the IRS. TREASURY CIRCULAR 230 DISCLOSURE THE TAX DISCUSSION SET FORTH ABOVE WAS WRITTEN TO SUPPORT 1HE MARKETING OF THE CERTIFICATES AND IS NOT INTENDED OR WRITrEN BY BOND COUNSEL TO BE USED, AND IT CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES TIIAT MAYBE IMPOSED ON A TAXPAYER BY THE IRS IN RESPECT OF FEDERAL INCOME TAXES. NO LIMITATION HAS BEEN IMPOSED BY BOND COUNSEL ON DISCLOSURE OF THE TAX TREATMENT OR TAX STRUCTURE OF 11IE CERTIFICATES. BOND COUNSEL WILL RECEIVE A NON-REFUNDABLE FEE CONTINGENT UPON THE SUCCESSFUL MARKETING OF THE CERTIFICATES, BUT NOT CONTINGENT ON ANY TAXPAYER'S REALIZATION OF TAX BENEms FROM THE CERTIFICATES. ALL TAXPAYERS SHOULD SEEK ADVICE BASED ON THE TAXPAYER'S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR nns DISCLOSURE IS PROVIDED TO COMPL y WlTII TREASURY CIRCULAR 230. OTHER INFORMATION RATINGS The Certifa:ates are rated"-" by Moody's Investors Service, Inc. ("Moody's"),"_" by Standard & Poor's Ratings Services, a Division oflbe McGraw-Hill Companies, Inc. ("S&P") and"_" by Fitch Ratings ("Fitch"). The City's underlying ratings 43 ') ) on its presently outstanding general obligation debt are" Aa3" by Moody's, "AA" by S&P and "AA" by Fitch. The City also has issues outstanding which are rated "Aaa" by Moody's, "AAA" by S&P and "AAA" by Fitch through insurance by various commercial in.surance companies. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective vi_ews 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 or all companies, circumstances so warrant Any such downward revision or withdrawal of such .ratings may have an ad~ effect on the market price of the Certificates. Fi.uaucial Guaranty Industry-Recent Events Moody's, S&P and Fitch {collectively referred to in this paragraph as the uRating Agencies") have each released stat.ements on the health of the financial guaranty industiy that cite financial guarantor.;• exposure to subprime mortgage risk as an area of stresi; for the financial guaranty ind us tty. In various releases, the Ratings Agencies have each outlined the processes that they intend to fullow in evaluating the effect of this risk on their respective ratings of fmancial guarantor.;. For some financial guarantors, the result of such evaluations could be a rating aff1n11ation, a change in rating outlook, a review for downgrade, or a downgrade. Potential investors are directed to !he Rating Agencies for additional information on their respective evaluations of the financial guaranty industry and individual financial guarantors, including any bond insum-of lhe Certificates. 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 lhe City that exceed $500,000. State law limits municipal liability for personal injury at $250,000ISSOO,OOO and property damage at $100,000 per claim. The following represents the significant litigation against the City at lhi.s lime. The City's insurance coverage, if available, contains either a $250,000 self-insured retention or a SS00,000 self-insured retention depending on the date of the occucrence. The City has been sued by a contractor who was not awarded the bid on a portion of the stonnwater drainage project The contractor bas alleged violations of the state bid statute and a violation of Section l 9S3. The plaintiffs took a nonsuit in stale court and re-filed the case in federal court The federal court dismissed the contractor's Section 1983 claims, and the contractor filed a Notice of Appeal. The Fifth Circuit court of appeals reversed the District Court and the District Court has reinstated the federal and state c la.i.mB. The case is set for trial in May 2008. The City Attorney believes there is insurance coverage for the Section 1983 claim, although there is a dispute with the carrier regarding (:()vetage. The City, its police chief; and two police offi= have been sued for violation of a citizen's first amendment rights when the plaintiff's film from his camera was conflSCaled by the police while the individual was photographing a children's basketball game. The matter has been dismissed on a plea to the jurisdiction and ihe plaintiff bas 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 City Attorney believes there is insurance for any potential damages. The City and a police officer have been sued by an individual on bebalf of him.self and bis 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 !hat the officer was operating the vehicle in a negligent manner and was speeding at the time of the aut.omobile collision. The defendants have asserted that the driver of the vehicle carrying the plaintiff's children was negligent in failing to yield the right· of-way to the police officer. The City filed a motion for summary judgment which was granted based on the fact the plaintiff did not file a claim with the City. The Court of Appeals reversed this 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 former police officer have been sw:d by a plaintiff as a result of allegations of ~priate sexual conduct after a police stop by the police officer. The officer filed a motion to dismiss under the Tort Claims Act citing provisions holding that the plaintiff cannot sue both the entity and the individual officer under the act, and the officer was dismissed from the case. The City filed a motion for summary judgment, which was granted and the plaintiff appealed the decision. The Appellate Court affinned the judgment for the City but remanded the case against the police officer. The City Attorney is of the opinion that insurance is available for the City. Toe City and the insurance oompany have denied coverage to the officer. Plaintiffs have sued the City and a police officef and Taser International as a result of an incident where a police officer tased a citizen while making an arrest The citizen subsequently died. The City filed a plea to the jurisdiction which was denied and the City appealed the trial courts denial of the plea. The Appellate Court also ruled in favor of the Plaintiff. The City has appealed Ibis decision to the Texas Supreme Court. A federal cause of action under Section 1983 has been filed alleging federal civil rights violations involving the same facts. Trial is set in the federal case in May 2008. The City Attorney is of the opinion that insurance is available for the claims. The City and a police oflioer have been sued by an individual who was tased during a traffic stop. The plaintiff bas alleged violation of his civil rights, as well as, violations under the Tort Claims Act. The City Attorney is of the opinion that insurance is available and that there are no significant injuries to the plaintiff. 44 "\ ' ) The city has been sued by ERAF Corporation alleging the city has wrongfully denied them a permit to operate a sexually oriented business. Plaintiff has asked the court to dismiss the case with prejudice. The City has been sued by Nortluidge Homeowners Association and Templeton Mongage Co1pOration seeking a declaration of rights as to various property interests at Lake Alan Heniy. At this time, Plaintiffs are only seelcing attorney's fees as compensation, though this could end up in the six figure range. A funner employee sued the City in October 2007 for wrongful termination. While the case is still in the early stages of development, the City, at this time, does not believe !here is a strong I ikelihood of recovery. The City believes there is insurance coverage in this matter. The City intends to vigorously defend itself on all claims. allhough no assurance can be given that the City will prevail in all cases. However, the City Attorney and City management are of the view that its available sources for payment of any suc:h claims, which include insurance policies and City reserves for self insured claims, are adequate to pay any presently foreseeable damages (see "FINANCIAL POLICIES-Insurance and Risk Management"). On the date of delivery of the Certificates to the UndeJWriter, the City will execute and deliver to the Underwriter 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 deliveiy of the Certificates or which wou Id affect the provisions for their payment or security or in any manner question the validity of the Certificates. INVESTIGATIONS RELATING TO CITY'S HEAL TH INSURANCE ADMINISTRATOR In 2006, the City hi.fed an outside independent auditing company, Benefit Plan Partners, a California company, (the "Auditor'') to conduct an audit of its contract (the "Administration Conlr.lct'') with its then cum:nt 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 ov«charges and errors by AAG during the teem of the Administration Contract, including overcharges possibly arising from unauthorized commissions laken by AAG, and possible payments to AAG by pharmacies as rebates. The outside Auditor eslimaled the aforementioned errors and overcharges lo be approximately $2,000,000. The Administration Contract tenninaled by its own terms in December 2006 and AAG has ceased to administer any claims for the City. The City ha8 hired another third party administtator lo administer the run-out claims which accrued prior to December 2006. The City also 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 coun to compel AAG to preserve and provide documentation relating to the Administration Conlraet and claims submitted by City employees during the term of the Administration Contracl It is the intent of the City to utilize such documentation to complete the audit by Benefit Plan Partnen of its contract with AAG to determine whether any further overcharges have OCCWTed. The City is aware of federal authorities investigating matters relating lo AAG and the Administration Contract, 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 AAG or the Administration Contract. REGISTRATION AND QUALIFICATION OF CERTIFICATES FOR SALE The sale of the Certificates has not been registered under the Federal Securities Act of 1933, as amended, in reliam:e upon the exemption provided thereunder by Section 3(a)(2); and the Certificates have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Cenificates been qualified under the securities acts of any jurisdiction. The City assumes no responst"bility for qualification of the Certificates under the securities laws of any jurisdiction in which the Certificates may be sold, assigned, pledged, hypothecatcd or otherwise transferred This disclaimer of responsibility for qualification for sale or other disposition of the Certificates shall not be conslrued as an intetpretation of any kind with regard to the availability of any Cl[emption from securities registration provisions. LEGAL INVESTMENTS AND ELIGfflll.lTY TO SECURE PUBLIC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Certificates are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized inveslments 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 Certificates by municipalities or other political subdivisions or public agencies of the State of Texas, the PFIA, requires that the Certificates be assigned a rating of"A" or its equivalent as to investment quality by a national rating agency. See "OTHER INFORMATION -RATINGS" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Certificates are legal investments for stale banks, savings banks, trust companies with at capital of one million dollars or more, and savings and loan associations. The Certificates are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City bas been made of the Jaws in other states to determine whether the Certificates are legal investments for various institutions in those stales. LEGAL MATTERS The delivery of the Certificates is subject to the approval of the Attorney General of Texas to the effect that such Certificates are 45 i ' ' "I ) "I "I valid and legally binding obligations of the City payable from sources and in the manner descnbed herein and in the Ordinance and the approving legal opinion of Bond Counsel. The form of Bond Counsel's opinion is attached ba-eto in Appendix B. The legal fee to be paid Bond CoLlllSel for services rendered in connection with the issuance of the Certificates is contingent upon the sale and delivery of the Certificales. The legal opinion of Bond Counsel will accompany the Certificates deposited with OTC or will be printed on the definitive Certificates in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be passed upon for the Underwriter by McCall, Parkhurst & Horton L.L.P, Dallas, Texas, Counsel for the Underwriter. The legal fee of such firm is contingent upon the sale and delivery of the Certificates. Bond Counsel was engaged by, and only represents, the City. EKcept 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 !hereto or undertaken independently lo verify any of the information contained herein except that in its capacity as Bond Counsel, such finn has reviewed the infonnation appearing in this Official Statement under the captions "THE CERTIFICATES" (exclusive of the infonnalion under the subcaptions "BOOK-ENTRY-ONLY SYSTEM" and ''USE OF PROCEEDS" ) and ''TAXABLE STA TIJS OF THE CERTIFICATES" and under the subcaptions "LEGAL MATTERS," "LEGAL INVESTMENTS AND ELIGIBIT.ITY TO SECURE PUBLIC FUNDS IN TEXAS" and "CONTINUING DISCLOSURE OF INFORMATION" (except for the subsection "CQmpliance with Prior Undertaki11gs") under the captio11 "OTHER INFORMATION" and su<:h firm is of the opinio11 that such descriptions present a fair and accurate summary of the provisions of the laws and instruments therein described and such infonnation confonns to the Oroinance. The legal opinions to be delivered coocurreatly with the delivery of the Certificates express the professional judgment of the attorneys rendering the opinions as lo 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 upo11, or of the future performance of the parties lo the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the tcansaction. CONTINUING DISCLOSURE OF INFORMATION In the Ordinance the City has made the following agreement for the benefit of the holders and beneficial owners of the Certificates. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Certificates. Under the agreement, the City will be obligated to provide certain updated financial infonnation and operating data annually, and timely notice of specified material events, co certain information vendors. lbis information will be available lo securities brokers and others who subscribe to ceceive the information from the vendors. Annual Reports The City will provide certain updated financial infonnation and operating data to certain infonnaiion vendors annually. The information to be updated includes all quantitative financial in fonnation 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 IS and in Appendix A The City will update and provide this information within six months after the end of each fiscal year. 1he City will provide the updated information to each nationally recognized municipal securities infonnation repository (''NRMSDl") approved by lhe staff of the United States Securities and Exchange Commission ("SEC") and lo any state information depository ("SID") that is designated and approved by the State of Texas and by the SEC staff. The City may provide updated information in full text or may incorporate by reference certain other publicly available documents, as pennitted by SEC Rule I Sc2-12 (the "Rule"). The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City wiU provide unaudiurl financial information and opera.ting 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 lo time pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by Maroh 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Texas (the "MAC") has been designated by the State of Texas and approved by the SEC staff as a qualified SID. The address of the MAC is 600 West &th Street, P.O. Box 2177, Austin, Texas 78768-2177, and its telephone number is 512/476-6947. The MAC has also received SEC approval lo operate, and has begun to operate, a "central post office" for information filings made by municipal issuers, such as the City. A municipal ~uer may submit its infonnation filings with the central post office, which then transmits such information to the NRMS!Rs and the appropriate SID for filing. This central post office can be accessed and utilized at www.DisclosureUSA.org ("DisclosureUSA "). The City may utilize DisclosureUSA for the filing of information relating to the Certificates. Materi.a..l Event Notices The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Certificates, if such event is material to a decision to purchase or sell Certificates: ( I) principal and int=t payment delinquencies; (2) 110n-payment related defaults; {3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (S) substitution of ~t or liquidity providers, or their failure to perfonn; ( 6) adverse tax opiniom; (J) modifications to rights of holders of the Certificates; (8) early redemption of the Certificates; (9) defeasances; (10) release, substitution, or sale of property securing 46 ) ) ) repayment of the Certificates; and (II) rating changes. (Neither the Certificates nor Ordinance make any provision for debt service reserves or liquidity enhancement) In addition, the City will provide timely notice of any failure by the City to provide infonnation, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice descnbed in this paragraph to the SID and to either each NRMS IR or the Municipal Securities Rulemaking Board ("MSRB''). Availability of Information From NRMSIRS and SID The City has agreed to provide the foregoing infonnation only to NRMSIRs, the MSRB and the SID, as described above. The information will be available to holders of Certificates only if the holders comply with the procedures and pay the charges established by such infonnation vendors or obtain the information through securities brokers who do so. Limitations and Amendments The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, oondition, or prospects or agreed to update any info11I1ation that is provided, except as descnl,ed above. The City makes no representation or warranty concerning such infonnation or concerning its usefulness to a decision to in vest in or sell Certificates at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its amtinuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Certificates 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 thal arise from a change in legal requirements, a change in law, or a change in the identity, nature., status, or type of operations of the City, if (i) the agreement, as amended, would have pennitted an underwriter lo purchase or sell Certificates, in the offering described herein in compliaqce 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 holden of a majority in aggregate principal amount of the outstanding Certificates consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) detenn ines that the amendment will not materially impair the interests of lhe holders and beneficial owners of the Certiflcaces. The City may also amend or repeal the provisions of this continuing disclosure agn:ement if lhe SEC a.mends or -repeals the applicable provisions of the Ruic or 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 th.is sentence would not prevent an underwriter from lawfully purchasing or selling the Certificates in the primary offering of such Certificates. If the City so amends the agreement, it has agreed to include with lhe next financial information and operating data provided in accordance with its agreement descnoed above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. Compliance with Prior Undertakings The City became obligated to file annual reports and financial statements with the SID and each NRMSIR in an offering thai took place in 1997. All of the City's general obligation debt reports and financial statements were timely filed with both the SID and each NRMSIR; however, due to an administrative oversight, the City filed its fiscal year end I 999, 2000, and 200 I electric and power revenue debt reports late to the SID and each NRMSIR. The financial information has since been filed, as well as a notice of late filing. The City bas implemented procedures to ensure timely filing of all future financial information. Under previous continuing disclosure agreements made in connection with LP&L revenue bonds, the City" com.mi~ to make prompt filings with the SID and eid= each NRMSIR or the MSRB upon the occunence of any "non-payment related defaults." The City's FY 2003 audited f11W1Cial statements were not available until mid-September 2004. Therefore, when the City made its annual disclosure filing with the SID and NRMSffis in March 2004, it filed unaudited financial stalements in accordance with its undertaking. Several references in that filing, including in the unaudited MD&A, in notes to those statements and in the statistical tab!~ reported that for FY 2003 LP&L had failed to meet its rate covenant (see "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -SEPTEMBER 30, 2003 FINANCIAL RESULTS -The Electric Fund"). Because there was an uncertainty as lo an amount by which the rate covenant would fail to be met, which was not finally determined until the audited financials were released in September 2004 (although the City had a reasonable belief prior to that time that the rate covenant bad not been met), the City waited until September 2004 to make its event filing of non-compliance with its LP&L rate covenant FINANCIAL ADVISOR RBC Capital Marlcets is employed as Financial Advisor to the City in connection with the issuance of the Certifi~es. RBC Capital Markets is the name under which RBC Dain Rauscher Inc., a broker-dealer, conducts investment banking business. The Financial Advisor's fee for services rendered with respect to the sale of the Certifacates is contingent upon the issuance and delivery of the Certificates. RBC Capital Markets, in its capacity as Financial Advisor, does not assume any responsibility for the information, covenants and Rpresentations contained in any of the legal documents with respect to the federal income tax status of the Certificates, or the possible impact or any present, pending or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Official Slalement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to lhe facts and circumstances or this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. 47 ....., } ) ) ' UNDERWRITING The Underwriter has agreed to purchase the Certificates, subject to certain conditions, and has agreed lo pay a purchase price reflecting the par amount of the Certificates, plus a net original issue premium (discount) of s_ less an Underwriter's discount of$ __ , plus accrued interest The Underwritef has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does 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 historical, are forward-looking statements, including statements regarding the City's eicpectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking staternents included herein are necessarily based on various assumptions and estimates and an; inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible in validity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors. and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such usumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. MISCELLANEOUS The financial data and other information contained herein have been obtained from the City's 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 Ix: realized. All of the summaries of the statutes, documents and r=lutions c.ontained in this Official Staternent are made subject to all of the provisions of such statutes, docwnents and resolutions. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. The Ordinance authorizing the issuance of the Certificates will also approve the fonn and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Certificates by the Underwriter. Isl Mayor City of Lubbock, Texas ATI'EST: Isl City Secretary City of Lubbock, Texas 48 "\ .... "') "\ APPENDIX A EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2006 ..... ., -, .. : . '' . January 3, 2007 . . ·. . .. . ·. P;.O.,Box 200f).,,-,lij2J;i ... 1;3th Street• Lubbock, 1X-79M,7 . (806} 775-30~ • Fax: {~6) 77~2051 ·i •• .·: -·-. : . . ,• .·\ . •. ! . ~ ··.: . ~ .. • . '• •' ... • . .' '. . . . . . .. •'·• ' ..... . · .. · ··:. '•· .... • , • ..,., •• , < ·'·. , .~-_.;°' [t.: ::;•;, ·;•;:,_. :' . :/ ',•,.1·:.::··.~~\.• ';, 1 '," l t: :, • I ,'. ,:,. . . ::--· . . Honorable May.or, City' Cotiiicil~ and Citizens of Lubbcfu(Texas:. . .. : . . _:. It is with much pride that we_sulm:tlt .the .C9mp~~nsive, Ann~. financial Report (CAFR) for the City of Lubbock, Texu"t6l~•'rISC~i' year; ~nd&i ·s~tebibci 30, 2006. The purpose of the CAFR is to provide the City Council, cititetls, and other inteJCSted. parties )Vith accumte·.and meaningful infonnation concerning the finantj_al condition an4 peifo~ce· ~r the Gity: .·10 .-addition/as· parf of the t~AFR revi~--Jm.l~;. m~en<,iehl· abditots have' verific;d ~t 1h~· City 'luis presented its· financi~· position fairly°i~ all ma'teiial tes}>ects. . ·.. : . . . ' , .. ·. ,.. · . · ,•-, ,;; 0 ." .. •• ~•,:.,•.•:.• •• I :"•,:i,•!,"•,••',I, •:: t,!:. l;I',;., 1 ,;,:•~.:•, • •~. \ ~~'.CAFR is ptes·ente4. ~th ni!mttg~ment;s re~iatlQ~·Qftiie· City's· fµiancci;~ rui<far sifh, ·management · assumes full · resportsibili_ty for the coiiJv.1.~~~.-~d . ~~ia~il~o/, (if .. ~11._)pe infonnation presented. To ensure a reasonable basis for'·m'akmg 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 anit'to\·i\mpii~ suffit i~nt reliable irt(o~~hn . for Jb.e,· p~Qn .of.~ .. ~ity'.s. finapc,i~---sta~ots · in confomtlty.-_with· • generally accepted .~ug~g prin~iples-(GA.AP) .. ·1;3~ause,the ,eo~. of intemal controls should not outweigh·Jheir . ~fi.~,-Jbe Gi~'s_.compreh~ive .fram:~ork. ofJnternal controls . .has· been ·d~signed to ·provide reasonable, rather than absolute, assurance that the :financial statements will -be free · from material misstatement. As management, we assert that. to the best of our knowledge and belief, . this. financial ·~rt is coµiplete.~d .reliable-in,:all mat~ respects. · · · ,. • ·, .. ·;-.. · ... :f. :-,.;~ .... ·. :~._-·. . .. ; .. ·. ~;~ ,:. ·:~ ... : .: .. -~--'!'• ·: .. · j , .. "=-••••••• ·:. :•. , •• ••• • ..•···•-:. Tho: Citr,s: financial-statemeµts: have .been· audited.~ BKD; LLP, a firm of licensed ·certified public accotlhtants. -The goal of the-independent .audit was to provide:reasonable assurance-that -tM. •financial . :statements· •.for. the Jatest: fistaJ -y~ · are free , of.· material misstatement. ;The independent· audit involved-~ining,:!.on 'a ·test basis;· evidence Sllpporting: -the; amounts · and disclosmes in.the financial ·statements; assessing. the accounting principles used and significant estimates: made by management; and evaluating the overall financial statement presentation. The L J ' ) ) .., \ HODorable Mayor, C:i1y Council, And CitizeDs of the City of Lubbock, Texas January 3, 2007 independent auditor concluded that there was a reasonable basis for mi4eµng: an unquali~~ . : opinion that the City's financial:· statements•: for the 'fiscal year ended S~~ 3(),. 2006~ ~ : · .. · _. fairly pr~ed in confortriity·wiih.-GAAP. ·Tiu,.'independent auditor's rtport is presdnted is~ · .. fust component of the financial section of this ~eport. _The independent audit of the City's financi~ ~ments is part Qf a broader, federally mandated "Single Audit", which is designed to meet the special needs of federal granting agencies. 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 admj.nistration offederal awards, and • Compliance with legal requirements. These reports are available in the City's separately issued Single Audit Report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City's MDM. can be fQund immediately foUowing tl,le report of the independent auditors. · · THE CITY AND ITS ORGANIZATION . -. . ~ ; : . -. ~· . . ,. :Population and Location · 0Tb~·1c_ity·i~ located hi-th~north~e·s~:p~ ~rtli~~~~ ~~~;ino~ ~ th~ So~a/i>~'~f Texas. The City currently occupies i land area of I 19.9 square miles and._serves a popul~tj.on of 212,.365 (2007 Planning Department estimated population). Lubbock is the 11111 largest Metropqlit.an Stati~cal. Area (MSA). in the State ofte,c~ and the 12th largest cicy. The Lubbock MSA includes t,ul)bQck and ~sb.y Co~t.ies. (S~w-ce . ¢ ranking:. ·2006· esrim~· .from -~ographics NQ~. ~fy:oduct of SR.Cf ' . -, ' ,', . ' ' .. , .. Form of Government and City Ser-rices .. . .... . . . The City was incorporated in 1909. The City,,is empoWered to levy a properfy tax cm both teal · and personal properties located within its boundaries: · It-is ·aiso empowered by state· statute ·to .extend its corporate limits by annexation, whichoc:cura periodically when deemed appiopriateby the City Council. · · ·, ., .. · · The City has operated under the councibmanager fomi:·of·government since 1917. Policy- making and legislative authority are vested-in a city cotD1Cil consisting of the mayor and six other memb~ ·Some of the City Council's ~nsibilities include .adopting onlinances. adopting the budget. appointing committees, and hiring.the City Manager~.City Attorney, and City Secretary. The City Man.ager is responsible for carrying ou.t .the policies and ordinances of the City Council, fo.r ov~.e.~·the day-to-day qpe:rations of.the. City~·andifor appointing the heads of the-various .deparmi~-'-Th~ City .Coi.w;~·is elected on .. a_Iion-partisan basi$:~ Council members seIVe:rour- •. ' . ;, : .. .-~ -·.... .•·•_;,fl,!,•',,., •... : .. ' .. 2 ) .... Honorable Mayor, City CoUDCil, And Citizens ofth.e City ofLubboclc, Teus Jammy 3, 2007 :Y~ staggered terms, with three council members elected every two years. The mayor is elected ·t:9 .. serv~. a two-year term .. Six of th.e-:1::9µncil members.are elected by. district. , The mayo1;· is elected at large. Th~, City provides· a full range of servicf!!! inelud.4ig public. safety. the construction and ~ntenan.ce of highways •. streets, and other.-.infras.tructtu:e. solicl-waste services,.and recreational actj.vities and ~ltural events. The City also provides public utility services for electricity, water, . wastewater, and storm water. Public safety includes police protection and fire prot.ection.. Police protection is provided through the Police Department •. which includes; with the adoption ·of the FY 2006:-07 Operating. 4~ sWQm po lie~ officers. The Fire Department op~~ l S fire stations and has· 311 swom fire fighters. • . , i , .·,., ••-. . . · ) ' • \o' ... ' '' r ~ • ' . ~l~c service in Lubbock is provided by Ll.\bbook Power-and Light (LP&L),.Xcel Energy, and Soµth Plains .Electric Coopqative.· LP&L. is. the mumcjpal-owµed electric company and has 68,836 meters in Lubbock ~th an average daily consumption of 4,259,994 kWh. LP&L has 14 substations, 1,011 miles of distribution lines, and 85 miles of transmission lines. Natural gas .~!?fViceisprovidedhyAtmosEnei:gy. •,,. -,' _-;-•. 1·:·• ·. • •. . ,.· ~tl; •. Lub~k .obtains 75% to . 8$0½: .~f\~· :drjnki~-wat~· stqiply. frQm. ~. ~~~ 1'4uniciw.tl Water ~utho&fy:.(CR.MW A).:·~ A CQnib~ .. surfa(:e wa~_.from Lake Meredith ·.@41 &l'Qun4 water fron;i Rob~ .. County. ~ .Jlleet tQe ~fcell:demands of Lubbock .and the other l 0 meinber citi~ of CRMW,,A. Lubbock secures the. :remaining 15% to 25% of its. water from.: its groundw~t_ec· righ~· j~ Bailey .and Lamb .CO~~: . The City provides water service· to ,78·,000 ~~~ell as well as the City ~f Shallowater; City. t>f •Ransom ~yon, Buffalo. Sp.rings Lake,: and Lubbook Reese Redevelopment Authority.': Th.e tap,\\~ity Qi.the City water transmission •system is 81 million ¢Jons per day with an average utilization of 39 million gallons per day. The City ~J14-00 miles of di$mo~on lines and-J~•a¢v~waterwel!.!;.with 83,269-acres of-Water rights. ~A· allocates .more lb.an ~l · billion -gallop.i;. of water. to· the City annually.-. Lake Alan Henw. bµilf by the -City i.µ.J99~ .• is COll$jq,~~-i ;third Wl'UCJ. .supply for future use. In order for the ·puy ~ util~ water from ~e Alan &my, future ,construction.is. required for-pump stations, a ,pipeij!Je to carry the watef ,to Lubb.~,;~~d a :new treatment plant· .. , The,.prelimi.n.ary CJJ~~g.for these improvements is-no~·-'!lllder oontract,;and should be completed by early 200~.·.. ... . . ., .. , . . . . .... , & ·:· •• •:., ••• F~r. ~ past ~everal years,-the City has· been p~ for fut!®' water needs. In Maxch 2003, the City COD.tr~ with Water'texas, lnc. to-.-~~uate and.m~e recommendations on bow the qty:can optimize existing and.potential w~er.supplies Qn ~ short-;•miQ-, and'long-term basis. In a ·report_ titled City of Lubbock St;rategic.Wat~.·-~/.an,, WaterT-exas repomd that-Lubbock has iµt_~-.-.wa(er supply,~d.willc continue to,~i:SO p~vided..thaUt tak~··steps to address its maximum day capacity limitations; addresses its ability to respond readily to drought, conditions at Lake Meredith; and strategically develops additional supplies giving due · consideration to ~aµ.d, ~ost. opportunity, -and e:ompetjl;lg.1)uQ~. n~s .. :.T.Q strategically, de:v:elop additi<mal . 'Y.~-~ supp.lies, the. City Council ~ta"lishe4 ~e,Lubbock-Water Advisory-ComtQission in July 2003,.with the primary objective of developing a 100-year -water supply plan. They have.since 3 ) J ) ) HOJJorablc Mayor, City Council, And Citiu:ns of the City of Lubbock. Tex.as Jamiary 3, 2007 achieve.d that object and continue to play an intricate role·in the City's long-term water planning efforts. :The 'City has also worke.d closely with,tlie Region O Planiling Group' in the preparation of the State W arer Plan that reflects Lubbock's wa~ supply needs and alternative§. · · ·' . CRMWA has secured ao ,additional -260,000 acres of groundwater' rights in the No~ Panhandle. Groundwater rights now totat·over 300,000·acres, with.an estimated• 15 million acre feet of water within those-rights. Co:ruiervative'proje.cticms usfug curreilt securechvater rights indicate CRMW A will be able to provide groundwater supplies through ensting inftastru.clilre through 2097. · Wastewater collection and treatment is provided within the city limits t6 residential, commercial, and industrial customers. ·The collection system consists of 960 miles of sanitary sewer ·as of January 1, 2006. 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 plan_t is 27 million gallon$. per day. The Ci~y has a contract for final design to upgrade the wastewater treatment plant for discharge quality effluent. · · · ·· · , · The City of Lubbock's drainage is primarily conveyed through the City's street system that discharges into more than 115 playa lakes. The subsurface drainage, via storm sewer pipes 'With curb inlets, conveys water to two small·intennittent streams·(Black.water Draw and Yellowhouse Draw) whiDh both converge at the upper reaches of the North· Fork of the Double Mountain Fork: of the Brazos River. The City's. municipal separate storm sewer system (MS4} is made .up·of 1,089 linear miles of paved and unpav.ed streets, 544· linear miles. of paved and: ·unpaved alleys, 1,188' storm sewer inlets, 70 miles or_sub~e ~torm ~ pi_p~,"three·d~tenti5>n basirts,-tt5_ playa l~es, and one pimip' station,· Maintenance of all -of the storm sewers · and street clea:iliri.g was funded from the Storm Wat.er Fwid during FY 2005-06. · During FY 2005-06 tb'e primary focus of the storm water fund was the construction of the South Lubbock Drainage Project -Phase I Main Trunk Line. This project remains approximately~~ year ahead of schedule and will connect m p1aya ·1akes during Phase I of the overall projecl Construction for the widening of 98th Street-from Slide Road to Iola Avenue began during FY 2005--06 and included the remainder of the South LUbbock Drainage Project trunk line atu1 a regional storm sewer designed to drain-two detention basins ·at 98tb Street arid Frankfutd Ave. The construction of the drainage charmel north of Andrews Park Lake was completed during FY 2005-06. Work continued on a FEM.A Restudy of two of~ playa lake systems and a new study was undertaken to master plan the n"Orthwest ·quadrant of the city and to look ·at other-options fi?r .flood risk reduction at Maxey Parle Lake. The other focus-was on the submission of the City's application for the Texas Pollutioirl>ischarge-Eliniination System (TPDES) MS4 peanitfor the City's storm water quality activities: Compliance wjth-the-Cify's MS4 permit is currently ~th the Environmental Protection Agency-arid co~ts of l1 different· programs that COiltiµued during the fiscal year. ' The City provides garbage collection and' disposal services to 63.638 residential customers and 2,937 commercial cus.tomers. One·of the City's tWci'lanMill sites. is designated as LubbocJc Landfill and -is a mmsfer station· i>nly.-, The ~orid sitc=:'is Lubbock's p~et landfill and"·is 4 ) ) "I ) Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas January 3, 2007 . designated as the West"Texas Regional Disposal .Eacility.· The West Texas Regional Disposal .-Facility opened.in 1999 and.is currently the:larg_est.landfill. in the State-of.Texas. With 1,260 acres, it is expected to serve the region for the next 100 years_ . . \: ·:# ·: Citibus is the public transportatipn ·pmvider .for .the City of Lubbock _and is -p~fess.ionally · managed by McDonald Transit .Associa~. Inc. :Cina.us provi~. :a Fixed'. Route ,:Service, . CitiAccess (paratransit system), Evening· Service, and Sp(:Cial Services. The Citi.Acce&S servi~e : is a.eurl>-to-curb service for disabled members of the community. The Citi"bus Evening Service ·.,-iiHlesigned to meet the ·n~ds pf both CitiA~e~s;.11nd -fu;ed roij~ipassengers .whcu~re transit .: dependent, ~d who woul!i hav~_no other -means of.tr~sportation· in~ evenings if the Evening .:-Service was not-provided.. Amajority:ofEv~g Servi~passengm work at night and use the .:Service .for transportatioJ;). to and from -their, jobs. Jn -addition, -Citibus. .offers route• service· for Texas Tech University, , ,. • - · Tb~ City bas a housing .and community ~~loptl)enf pro~ implementaj and administered · tnr9ugb funding."from. the-:Federal ColllJll.~ty D~velopµient Blo~ Grant PI-9~ HOME ·'fl;lvestment Partn~hip Pr;ogram, and-Emerg~y Slwltei: Gr;mt Program.. . Through these sources Qf funding, the City completed w~rk on oyer; :2c>O houses, assisted over 24,104 indfyiduals; and qeat.e.d 3 jobs tbrough ~ economic dev~lopPl,e\'.lt 19~ ~grmn. ; • . . . . .. • ... ~-~ ·. , ·. , '-\:' 1: :~ .. ~. ·':·•·1·' , , ,The-City also receiV.(:S tun.ding .from the Tex:~ .Oq,~ent of Housing:arul-.Conn~uuµty Affairs. These ~ds allow the city to. off.er additi~, ,prQ~ -to the c~tizens. Qf Lubl>ock. Through these programs, 216 households received assistance pi weatherizing the.q--~e,and/or.,mapng their home more energy efficient, l,200 households received utility assistance, 75 graduated · .. from the self-sufficiency program, and 12,000 residents.;r~eived referral assistance thrQugb the .. .Information and Referral Hotline.-· _. . . -, .. Community enricbm~t .and .cultura.L services·;.;e\1~; ,µiaj_or ;~ams .of th~ ,City~ The City owns and QJ)el'ates four libraries with over 391,718 volumes. The City also owns and maintains 77 p;u-Jcs m,.d 57 playgrowds. Extensive. recreational facilities include 4 swimming. pools. 54 ·tennis .courts, 30 baseball and. softball. fields-, .S ~>Y centers and. 5 ,seo,iora;~ers. : To -. further enhance quality of life-and to pwvide -_support · to the: tourism industry,· the. City also operates the Civic Center (convention. center), Lubbock .Coliseum; Lubbock-Auditorimn for ·the penonning arts, the Buddy Holly Center, and the-Silent Wings Museum. The City is responsible for the construction and maintenance of 1,015 iniles -~°f paved streets. The new Gateway Street Fund. by the City Council in 2_004,-allQcating 40% ofJhe .francbis~ fee reven:ue· and telecom Jµie charges to gateway corridor street projects; -The FY 200S-P6 budget for.-the Gateway Street Fund.includes the widening_ of,l\iilwaukee Avenue ftvm 34~ to-9.8111 Street, construction ,of-a T-.Z:. _thorou~are-~---on,."Erskine from ;Frankfurd · to Salem, C9J1S1roction of a T-2 th~J.'.Qughfaie. street·on Slide Rc;>,ad fro.l,ll Loop 289 to Erskine, and )Videoing . Loop .289 from South of tJ;ie, 41h Street Ult~e to.-south C)f~e: Clovis Roa4 in~ltange. constructmg a grade ~aration of Slide ,R.oad. _and LQop 2~9, widening of SliQ~ Roitd from .4lh -Stre~t' to Loop 289, improvements -~ the. 4~_ Str~t-and Loop 289. illterchange. and .. th.e . : •'•• -construction of the Quaker/Erskine/Loop, 289 in~hange .. These projects. support· substantial -commercial and residential development on the west side of Lubbock. 5 ) } - l ) ) Honorable M.ayor, City ConnciJ. And Citizens offuc: City ofLubbock. Texas January 3, 2007 Other major-road construction in Lubbock includes construction on 9g1b Street from Slide Road to Frankford Avenue and construction of the MarsturSharp Freeway l:fy the Texas Department of Transportation (rXDOT). This freeway will nm east from. West Laop 289 to link up with Interstate 27. The first phase of the projeci is completed and included widening Loop 289 from four to six lanes from 34!'.1 .. street to Slide R<>ad an:d rebuilding the frontage road system under the main lanes -three l~es. on each -side.-It also included -building ·t'fie. som Street overpass -arid extending soll:I Streei to F:i'aJlkford Avenue. -TXDOT· awarded the·bid for-the second phase ofthe Marsha Sharp ·Freeway that began construction in-May 2005. Toe· Marsha Sharp Freeway will benefit Lubbock by providing ·a western connection to West Loop 289 ensuring a more· efficient flow of traffic.·. throughout Lubbock. It will also reduce the congestion on north/south · and east/west major arterials l!Dd·provide faster ~ss-to all points in Lubbock. specifically Texas Tech University,. the cem:ral business district, education ·centers, and medical &cilities. The entire project is expected to cost $360 million and be completed sometime after 2015. · One of the key components of Lubbock's transportation system is-•the Lubbock Preston Smith Intemational'Aitp'ort located 7 miles north of Lubbock's central business district on 3,000 acres of land adjacent to Intemate -27. The airport is operated ·as a-department of-the City and includes a 220,000 square foot passenger tenniilal building. The airport bas two commercial service runways; one 11,500 feet in length and one 8,ooo•feet in length. · The airport's·third general aviation runway is 2,869 feet in length. Air traffic control services include a 24-bour Federal Aviation Administration.control tower and a full range of instrument approaches. The airport is currently served by'tbree major passenger airlines arid two major cargo airline$ having ovet 80 commercial flights per day. The City ofLubbo~ annexed two areas during'FY 2005--06. ·0ne bf the areas annexed included 95.1 acres located north of Erskine and west of North Milwaukee that is under developme:tit as Shadow Hills Estates. The other area annexed was 66.1 acres south of 981h Street and west of Avenue P that is now under development as the Stonebridge Community. The City is· :firumcialJy accountable for a legally separate civic · services corporation and an economic· development corporation. both of which are reported separately within the City's fmanciai statements ·as discretely presented CQmponent units. Additional infonnation on these legally separate entities can be fourul in the notes to the financial statements. Annual Budget Process The annual budget serves as the foundatioo fur the Citys•financiaJ planning and control. All City departments are required to submit requests for appropriation. to the City Manager in June' of each-year. The City Manager uses these requests as the starting point' for developing a proposed budget 'fl'.te ·City Manager then:. presents' ·this, proposed budget to the ·City Council for review · before August 3 I. . The City Council is required to hold public heatings on the proposed budget and to adopt a 'finai·budget' no later thari September030;· t1te close of the City's fiscal year. The appropriated budget· is prepared ·by fund and ·department · Department directors · are heJd accountable for managm8• • their dep·ai'tm.ents on total· appropriation basis. · Transfers. ·of appropriations · between: funds•· and departments 'reqbiies the approval of the Cjty Council. ' ·.:'· . .1·:· ... ) ) ) HonOta,hle Mayor, Ci!¥ ~oil, And Citizens of the City of t.ubbock, Texas Ianuary 3, 2007 ~-to-acnutl compari~ris are prqvi~ in this-report for •the General_. Fund as part of the J;,~i~~ialstatem~. . .. _ ,,, .,., ,:;·;.: ._ ... '·. -. . --.... i00Nomc·90Nnrrti>N 1~.oUTWOt .. I'. • ._.; •. • • • • •• -.• • '• • • l ,; • ~; :•; • .: ; ' ••: •.'• • , > {' • ' •• ' • • • •. • • The infonnatio~ pres~ted m tne ii~anciai stat~ent{ii .perhaps .best :qndei:stoo4 .w~ ii :is con·sidered within the context of the Lubbock;s loc.a;t econ.omr, The foUowiog informati~ is pl,'Ovj~~-tQ highlight a brpad r,mige._of eqoljomfo·,foxces.~:sµppQ~Jhe Ci~.~~ -~~_ons. , : . -.; t&saI Economy . : ; " . :':i . ·, .. : . ! .·.:.:•. ·: ,, . ,: .-.. · . Lubbock has a stable economy wjth historically -slow and steady· wowtb, ·which has· cobtinued ihrqugh .Septemb~ ,20M. :Lub~~'s i.~e~y;~~ ~eiil.i~b.as ,~,~ecfi.,v:er .the:tliist zo years. which mitilinizes the· effects ofb~in.(!SS cycles· ex.p~ei\®4 by iIRU~d®,:sect.qn.:_~. . Th~ South Plains· is one of the most p,~uctive .. QUltural areas iii~; JJm~:S~~~ · In.-.~®g;· almost 12¾ of th~ natiott'4 ootton crop 3:0-d 4"3:°{o: of the state's' cottok'ci-cip W~· prbatited 't>y faimers in ·tbe.·SO'i.\~r4_.l.ligb,P,Wx$.: ~~:·;~r:~~~~t};-~ .. ~-So~:~hJ?I@~-~istrie(,is .' ~~~f¥ tQ .. tQtal 2.S._ riµl~~n ~ t~ri{)_Qot :d~:il.0~i¥-;Om'~~.sf~~·p~?1¢tiAA ~--»,~:-<;>f' ~-~gthepeak:~~~e~~-: .. ·/-.::-· ~:·;'._<}', ',,,. ',•, ,·:-. ·. ·,'. '.·,·:.-,., ,•;, .. ';· :, . Lubbock bas strong manufacturing, who~e-?,tid.retair trade; s~,. and gov~,~~irs:: .. --"~-· . · di . . . . t . f .. . ,i:. ·.. .• . · . -• ·. l .<: .-'>.'QQ tk ~~~tu.rets are .(l;'. .Y.etse.-~:up;c;> .~.lH~Y~,)V~Q.~~p,?rt. ~~ Y. "'~-,,.,~9 -~. A central location and !l-Q~-~:·U:~O~~R~~i09w.t'l:i-l!AA:~J:,~~ck',~-®:\!"~1qp~t ·4S. a regional warehousing an~ dis~bu~on oente.f;' •:YWP-~;-~·:'s,~·AA:~:-n:)ajor;Iel!I#-~ center and health..oare provider for a region: of more than a. hhlf million people, A breakdo-wn of the percent of emploYrnent .b~ l>Y.iMu.$1:cy,¢.a~lt-~ ~en pnw,i~ below, which gives a ""snapshot'' of the industry base.o.(Lu~~~;,;•) , t --[:'· : . ::--·. .. :'•-· ·< .. . ;~ ( .... -:; . . .. .'• •. . . ' .. ~. . .... .. . .7 ) ) ) .. :...-..; ... . . ~ .. _ .. . Honorable Ma~; City Co'tmcil. And Citizem or the City ·or Lubbock.-Tens 1anuary3,'JJ'J<tl Two maj-or compoii-ofthe·local eeei:irimy are edueatfon-and health_¢¢· services. Lubb~ is h0t11e to ~ee· univ.c:rsities and one community college; Texas· Teoh ·university; Lubboclc Christian Unive~ty., '.o/.iY~ Baptist Umve~ity ..:. Lu~~k Center. a_nd ~uth Pl• College. Total e~l~ept'~ all 1;n$he.r .~d,ucati~n ~tlit!-00$ ~ ~-~b.~~ fQt Fajl ~9.06-is 42.241. 'fhi$ is a slight deor~e. from, ffiee''ei#011J'.hebt-for• .. t,atr of ioof .. ,'The av~1ahi1ity of the. Schoo~ ~ Lubbock is an ~dded adv~tage for our industries~ they_ provide· a ~aey. ~ of-I~r !<:>r theirs~ful·.~tiQn: · ··· · · · · ·' ;; . ' ·,: .~~ The healthcare )aid SQ.daJ services: seotQr: is' ·also· a· "li~ com~t 9f thcf Lubbock economy, This sector employs more than i.8;000 people, whose payroll of more than $628 million and related co.li.bi:butions provide a substa:ntial 1lDJ;NlCt to the Lubbock area · · (Source: 2004 County ~usiness Patte.ms) Other cliinmt -~-,trend: Wormation has been provided: betow?·. which gives. a picture of the overa1icityeceii0my~: · :· · ' • · · · · · .... ·· Lubbo'ok ~Index. The Lulibock Economic-'md.e.x. is ~gn.ed to represent_ the general oollCti.tian of the Lubbock ec6riomy by traokmg ·1oca1: '~Omiri'· growth ,fates-. · It is b~e4·ilt· l00.0 ·m. January 1996. The eoonomi~ ~ fur S~emb'el' 2906 was 128.9, which is 2:7% improved· over the index for September' 2005. The Lubboclc Eoo.noaoo··Jmiex ·Mnai'rul·at a reeoro Ievet_dtrough -September 2006, suggesting that .the ove"~ 1.l;ib~ ~*~;~~·t!)_-~~nµ at:i:~ ~-e ~e~-.: ' . .. . (Source! ·Ll.ibbook'Economf~ lndex' September 2'00~· ,. •. · · : · . - 1.fS HO· UIS Lubbock·Bconomie Ifidex January 1996 to Septem.oer2006. JOO .. . .... .. .. .... . .... ... ~~ ,re~ ,,.,. ·./'. ~/':. _::::"!i :l ;~::.:~-~ .'./. . ~of, ._.pf ,;1.,. / ~ .,. . . . ·. ?~· . (T ~" . '."'11-1996 ......,.i• ~1998 :....,_tm +:200.n ~~2001 -..-2a~i -e-20~ ~~~+~--~-~~ · .... ~ .. -.... ,•· '• . '• . . . . ..., ') ) ) ) Honorable Mayot, City Co.uoo.il, Alld Citizens oftbe City of Lubbock, Tex;as J1111U&°y 3, 2007 Building "Penn.it Valuations. J'••, .. €onstruction continues to make:a ·strong -contribution to the"L\ibbock:econonzy ·eveil,~ugh the ·'W.lue. ofall buildi11gc~it.s•.issued ~.(at.in 2.~·is 4Qwn .b~ 5Alr,o,·fr.o:tn last ~~:s to~-throJ.1gh Sep~l?.er', ·. Th~ ·$333.:i million m buil_c,ling p~ts ism~ tbJ;oµ,gh·~~ fimt-~ ~~~-~f 2906 is sllgbtly down from the record setting levels that have been seen io. tbe.c;ity:O\'er-:1helast ~ years. . . (Source: Economic-and Demographic Oveiview: Building Valuations -10.. Year Tren~ f Original Source of Data: Blnldjng·Inspection Statistical Report) · '_. .. ·: _. ·· ·r ; $500.D : ·, $45M·' $400,0 ,l_ ____ __:.. ________ ._.!!!!!i!.~:.:..:_ . ::t·; ·: .: -___ .. _. ·-~ C . 'M \l ·;-, ........... . ~ ~-0 -1--.. -ti!~,::.~~-~ ~~:T.:.~-.::.----~-,.~--.__-_rt!!:.-:._-_-_-_-_-_-_-_-..... ---_-_-'--_-_-_-_-_-_-_-_ == $2QP.0 ~ ·$100:0 +---ls.---___;:;;__ ________ :..._ ___ _ $\00.Q +-----•._,.: ........ _--'--_._. ____ . -·----~---" ........... $50.0 ---.-· .. ::-.. ,-._ .. -.... --~.-... ,.-,-.,--. -•. -,-.--,-; .-.,,-'., -.------- $0.0 +--..---'--,,-_;_,.-;._,.---,..~.;....,..--_;__--,-_.:..,-- 19:96 ,1m 1~ 199;9 2000 2001 · ?002 ~ . ~ -. . ' .......... · ... ·-•.. . .... . ... . . . ' .. ,: ... . · ... ~ . r ... ·~;: . . ·:·• . . . _J:,... :.:· .· .. ~or.4 -new residen~ J>e~ts.a~ bY;il4.3~-thr~~:S~~~ 2~ .. wben: compa,red to tlw. '.'Saple peri9(1 ~;iOOS;:;•The ,$)54-.:4:~il.litji,l in ~~4eiit:ial ·9Uildu.Jgpi~}~_ed .for the·firs_t 9 montbs.-~r 2006 is-~ligh~y do~· fro\:ifthe' t~roJ e~~ev·e}#.~~l-~ 200s. Average lioni~ sale price Y~-to~~e. $btigb;1Sei)~l)efl006 '.~--µ'jp'euea, .by. 4;7¾ :from September. 2005 to Stptembet.2006> · ·~· · •;i-· ·---~ . :.' Yf--t ,. · · ·-~ .. · :: ~ - (S(;!)$e: &on.omi.c ~ n:··=·'~---'~ Ov.«vi~:· Bfillaini'-V~ti ~} .. ::10-Year-Txend / ·odmun Source of"DiW'.; B~i~~i£ne.ii~ Siatisti~-'~jf~ .. ~~~ Estate tentef at tcx~A & M Univers1~; tubbock:I?;~~lat ~~usmg .Act{v.ityl~;q)Ortr·, .. ' . ·sa1es-Tax Collections .Siites ~ .PQll~tioris for 'Sijte.Wi1iei'2~ w.~~ °2:~2¾· i : . ···rbv~f.6~~tht, S~. -~~:2005 sales WC"co~~-Y~-~ sa1.·:. ~·iat:~'.-'.tliiotf tis tfuough,..i.~~ '.• .r ··7;9._,0/4 im ve<l .. · .. .. .. .:· ..... -~----~; J). ·.· ., . -~ ..... ,., .. , ... -~ ,,.·{1/ •.. pr0 ~t tlte · ~ame period ID: 2()05. (Co.µn~ed .in the month,. the, s¥es°'~ :WU._ ~ll~~r}W~, ~e ~onth .1.t, ~' paid. Does not um~de -~l~ tax ooll~ed· by the C1fy of Lubbock arul ·n~' ~Otted t9 O?Q'.ip1t0UerofPublic Accounts) · ·.c-.·.,.;, .. -'•·=·,) (~ ·-' .. ·• •. _,. '(Source: . Economic and _Detriogr.apbic Overvi~w; Monthly Sale,s Tax '-Colleciidhs' ~ 'Chletidai . :¥eat + 'City of Lubbock. :I ~·~urcc·-of. ,Data: Siat~ (?4)ii'tptrollcl: ·of.'l'ublic-A@unts-- -,Ml~on~storicaJSun:umu;y~·-··: · .. ,·.'. .·. .. , • .. ··.,, .. : .. ,. __ . ·. . ,_. ·. •" 'l:• • • .. 1. • • • "\ ) ) } ) Hanorable Mayor~ City Council, Aod Citizens of the City of Lubbock, Texas January 3, 2007 Tourism/Visitor Related Indicators ·Lodging 'tax-receipts in.creased .frotn $2;4. niillioi! ·i»-:-~l>t# -200~ .to ·-$-2.5 ~lion; in Sep~ber. .-2()06 •. This:·is a y~~~e. mer~-tlJrQ.\l~ S~r -2f>q6. 0£ 3.~/4. ~ boaroittgs--at ,Lttbboclc:Pr~a· ~tli fnteriialiona:1; .M~oii~1so.-'in-cteased: fa :2006 by 3;-1 %.over the-sa.meperjod ~iyear. . -~ ·.' . . . •' . . . . . . .'._ ' •:. : . · .. : . .. : . . . . . . . : (Source: Ltµ,bock ~nomk Index) Employment .... ' ' ..... The total non-agriealtura.1 emplo~t estimate tor Septeinber2005was 1271600. This was .5% improved over $epteinber of Iast.y.~ .. Th.~-w~.{iqQ: in.OR people empto~ in September 2006 than ~ the same ~erfod of .2005. ~ uo~l~:y;n1e~~ ta~ .fu.r the Lubbo.ck MSA in Septemb-er.-2006 was ~.8%, 4t1t l.~':'7estin ~e·St_ate of T~. ~~_cally .L~bb~ck h~ a low rate of unetnplo.~~t that-if genm'aUy 1 % ~ l% below the national iate :arrd. about 1% below the rate f'o.rTexas. . ·~ _._. .... ,. ,, .:." . · . · ·· (-SO · e! Lubbock &onoon·:. and Bern~ -0v: --·ew. i ©pgi . l Soutte . f ii ta· Texas· w~~ CoJJllnission) ~'< . ., ': . .. '• . e . ·., .et\4 . . . ·.:· . na . .. Q a . 5%-r:-. -------------:~-j;idl"~~~--., ,,r_:.i,ii .. ·. . ~% 3%• _; . ' 1%' ·,: -• : ., • : ~. • • • '.· • ·• :. • •• ': i • ;!%, 1%' 1~ . ··.: i~ •.. :·. .O¾ tcfs·,~J:fmr:-.~:di~~i;fJ:~1:!1J!!~-1•~~1't,~ -~~~u:. . .-.•.• , •. , . ,'LY.~ ~,"!:'.I':' • . . ,.·~. ~e~.~ .. ~ .P,.ew. . . . e iubbd6k ~-·at~ •·clf~ i# ·:z<».s ·-«r iiio~-~-ptJi Lubbock° and .Cl'Qsby Q>Wl~~. •··:i· :.,.: ... -... . .·. ··--. ·.·: .. . :.• E:c9!omic D~elopmeot .. . : . . ' . Economic deveto;m~:j~ a priority-for tb.~City of~~~-In . .1995_1 the City Council created Market Lubbock.. Jric;,· a,-non-protit ooq,oration. to ov~.:~¢.nic--&rtre!opment fur the:!)ity: Market ~ocJ(..Ino~.fs-ii.fnde4 wi.Ui tbi4e cents of.~e_pt9Pi;ify'-~.~ocatfon. bf October ~-004.- . . ·•,· 10 "'\ ) ) ) Hononble Mayo£, City Council, Aod Citizem of die City of Lubbock. Texas Jamwy 3, 2007 the Lubbock Economic Development Alliance (LEDA)1: an-economic development sales tax corporation, assumed the responsibility for economic development in Lubbock. LEDA program .strategies 'include .business retention, business reci'Oitment. workforce development. foreign trade ,:zon~ an&the bioscience initiative.·· L£DAismnded bya 1/8 ·cem ·economic'development sales ·.tax.-~ Total. estimated revenues .for LEDA for FY -2006-07 are $3,905,080; J?uring the last year, : through their business · •retention, expansion.: and ···~on : prograins; · LEDA ass1sted 13 companies-in the creation of 295 new jobs with an estunated annual payroll of $9.2 million and capital investment of $2;3 million. · ·· · .,,~~-.-~,,,:: .... ~ , .. __ '.1·,it • :, ·: •::::~ .'••·· ,.-•;::.:/:i ){ '· ' .. l;he. ~ity' ~ Business. D~~~op~ent Dep~t wpqs 9losely with L~A to provide the support ~eeded to ~$1 in th.cir eco~J:Qic deve1QPinellt pt'oj!'Cts,. QQ.Siness Development is responsible . Jo,r #ac~ ~ majn~ni~ economic .~,~~9graplp._c:·inf~nn,ati9n,fo.r:t;be City, assisting with citi-.r.elat~ _business issues, the enterpri~-:~ .. and:tax.;abatement programs; the two Tax lricrement Financing ll~~Y~Qlt Zopes,.• and -~l -.PubliC'. hnprovement ,Districts. Business Development also works with retail and commereial projects that do not fit the criteria required by.~!'. s,tµe ~~.econ.omic development s~~:~.~rpof!ltions .... • · · .. • • 4 . • • Deveiopment Initiatives Overton Park · ... ·• ,-.-.. O,V-~n Park_ is a _3_~-a~ ~evi~~za~'!Il. pro~~ :~t. ~ .. ~~~! iI) ~~~-.of Lub~k and bas 0been_ called_ the largest pn~ately fund~. !~VI~911. proJ~ ~ the, J.;rruted. st,tes. Overton Park'is the compleie revifaJintion of a.blighted area·~~-~ ~o!m O,v~on. . . . . ·· .. · ..... ~ -.:.. . ' ·.·· ~--· ·-• .. ::~ ... ; u •' • • o • o • I • / t •. • o • :,: • _, •• •• Overton ·Parle has .developed muc~ fa,st~.-~ ~ti~i~~~-It ·.is_p!9jp.c~aj that, th~. build-out. ~f ·tbiifpublic/private project wm occur ~v,i:ir ,a,sev'~.,.y~:pe#og._ -~dmg,,tq_,the latest Project and Filiance Plait f~i"'tij~ l':lorih Ov~~;t:irlc.~~~enf ~¾~:~~v~~eni.Zone (Tl;RZ), ~ae.-~''pl.amied expenditures of'·¥P.~~$-~If:S4l.J. ttiillion:. fo(public .infrastructure iinprovt::mmts. which will result" in fut;ure' :developriient/redeve)~pro:en( that. ,wjll increase the -~~l~ 'val~e by a?P!o~ely .$53~-~~i~n:• ~ye~'.tJi~' ?'§n~~~ 30~.}µ~~: .'P1: 200~ ~sed valµe·oe the North Overton TIRZ was $1 ~,?,4 nupi!)Ji. w:~ph 1.s a s, 58.5_ m1.llionmc~ over the 20t'fa··base year value. . . ·· '· . ' ' . . ,, •;' I• :•--'; • ::. To-date, three student-oriented apartment ~mplexes have. been. co~plcte!i a1Qng with Toe Centre, a $26 million, 618,opo square foot project thlit':incltides the 'coilStnldion of a multi--story a~ent complex built over an up.sc*-. re~ sho,pP,ing ~e~. an~ mote ~. 226,000 square feet ~f parking. Also comp~eted ~ City':B~ ~~~u~, ~-tb~·n~ 2p:Q,900 square foot Wal- Mart'i1ear·4th s~ arid Avenue Q. · j\ r~H~entef)f)J~ent l9 $e *#v W~-Marl is nearing ~ii:ipletion ~ wiJJ'houstfs'everal diff~t..tetiu1·busi_~~~--C~I!S~qn 1V3S completed on the fiist•condominiums in Overton Paik dimn_g .:?Q06 azj~f'ro.~?n .~f tJie ~ $U>.gle-family ho~·will ·begin in. the iiext few ·months. ConBttucl:ioft' ~l be~ on· a n'ew· hotel/conference center project in early:ioo1: A new retail center t.df~t to the: h6teitcoiifuz:ence ~ter wiil begin constructiol) in February 2007. The. project, :as Ii whi>le., is rumiing about three years ahead of schedule with much of the construction now expected to be completed by the end of 2008. ) ) ) Honorable Mayor, City Council, And Citizens of the City of Lubbock, Texas January j, 2007 North & East Lubbock Community Development Comoration . . Whil~ Lubbock, -~w dupng the. l11$t ·50 y~ North ,and . East ·Lubbock -~xpcrienced an. out- migration ~fpeople ... fr~~-19§0 to ZOOO, the,area;s-populatfon decreased.-by-47%. 1h response to the deteriotatiQn of North. and East L~, •the City of Lubbock ueated the North '& East t,ub~~-Coll!~tY.. Qev~Jopmer~rco_~i~n (CDC))o o~and promote development-in the area and c~mmitted. to-providing. funding, to.. the CDC. for four }'eats. The·. North and East Lubbock CDC has experienced· significant progress in their projects• during the past year. King's Dominion is a new single-family housing project with five home bµycrs who have closed and moved into then-new homes, and five niore houses -are under coiislruction. 1be CDC 'has also placed three clients ·into scattered site-·devefopriie.trt; ·one client's home is ·prese~Y. ~~er construction, and an additional three clients have been approved for· mortgages within the tatget area. The North and East Lubbock -CDC has originated $1,079,643 in mortgages for King.'s Dominion and an additional $702,187 for scattered site· developments thls Y~-.. The CDC also awarded Som.etrun' Fresh Cleanets, a North and East Lubbock business, a $40,000 micro-enterprise loan and has :i:eceived a grant from the US Department of Health and Human Services, Office of Community Services to go towards the develo~ent of the Parlc~y Place Shopping Center. Central Business District Tax Increment Reinvestment Zone The City of Lubbock Central Business District. {CBD) has been developed cmr the years typically with office,·retail, and·goverrunental agency uses.. Like many cities in the last ten to twenty years, retail w · #ioved to shopp~g ·areas"·au.a:4ther areas outside ~e CBD and office --··· <Tevelopnient has s~gnated.. 1n an eff~>rt to ~er:se that n:end. and to stimulaie . ~er development downtown, the City established a CBD Tax Increment Finance Reinvesbnent 2.one (TIRZ) on December 3, 200 l. The °J!~oard of ~e _CBD TIRZ create<;I a project plan th_~t hlcludes projects that ~• -~sist· rede~el~ment in the ~B.b. · Qaj:I~ ~e revised Project Plan and finance Plan, it is_ expected ~t the CBI? TIRZ J?lapn~ expenditure of almost $10.4 million for public infrastructure improvements ~ill result iri future ·developmeut and re4evelopment in the CBp TIRZ which"will ~crease the ~le.value by approximately $1~'.9 mjllion over the zone's 20- year life.· The 2006 appraised value of'the Central Business District .TIRZ was $137 .8 million which is an increase of $31.9 million over the 2001 base year value. ·· ·· Central Lubbock Siabilization and Revitalization Master Plan • • • , I • • ~ ' ., , ,• I , • • •, • The Central Lubbock Stabiliza!ioil ~d ~yi~)izati~ ~er Plan .k a compreh~ve ~ide·f~ future~~ ~d-J?rosperity for~ ~tral "(,~b~ Area.--~~ pi,.t,. ~ d~eloped '?t'ith the assistance of Qowd Evans A~liates th¥ough ·a· public prOCC$S bringing together local residents, local employers, city staff, mµ1· niajor stakdlolders. This plan .is in~ended to provide a framework for futute development in C~~ Lubbo~k ~d to be a "living dQc~nt" evolving to ~s any unforeseen· future concerns· or strategi~. ,. M a reslJlt of the plan. the 34th Street Business Ass<>?-iation, made up of.bus~ owners on °34th. Street, was fonned in 2005. . . . '•, ·.: . ' ,. , . . . . 12 ) ) ., ) ) Honorable Mayor, City Council, And Citizens oflhe City of Lubbock, Texas January 3, 2007 Other Residential/Commercial Development Growth in commercial and residentia1 construction ·has been occurring' at a pheno~enai rate over the~~~ years. During the J>B;St year, C9.~~ on ~eral.ne\\:' re..sidential.developmc;nts started in Lubbock. The Willow .Bend Project,. is be.mg ~ on the NQrtb..side of Lub~k with an expected inv~tm,ent of $111.3 ~ill_i~D:·., ~Q~ 'i>9u,n.-~ .bei.tig ~~ed·.~ong .Quaker Avenue and is projected to have inv~$J1~t ~-n~.dev~lppmeµt of..$.iQ0.9 million. ,Yin..tage Township is another residential/comm~rci~ dey~~p~ent qnderway .. am;l ~ a ,n~w. conece~. iu irQ.IP,Jµunity developIJ?.~t tb~t .will . J,lave, an.1• esq~~ . $35(); , mi.lli~ · investment in. ·.J1ew d~velopment The co~tructjon. of Mil,~~~: /1.._ venuei~ ,a, pu'1!ic/priv~. partn~hip: ~en the City of Lubbock and developers who own pr~y ~q_pg the;: ~rrjdor.~.js -~pec~ed.to generate a total investment in new commercial/resi4ential d.evelopinent of approxim~y $8_44 million in the next five to tco years.· Canyon ·West bas ~dj, started developni~t of its. oiltc;loor m.ali'on Milwaukee.Avenrie wjth the constnictioti .. ,m,f openi~g'of a ne~ Target .store~ Other commercial projects already plarined or \llld~ay in :canyon Wes(are Main Event and Crack~r Barrel. . .· · . . '_.·.• ' : . . . . . . . Other projects underway or abnost completed in Lub~~~ ~lud~ a new M~k~ __ Str~~-~ ~8~ Street. a new Wal-Mart in Southwest Lubboclc, Gr.Ice Clinic,'and Quaker Averiue'Medical Center. .. : ., :, ... . ': Downtown Redevelopment Commission • • • ~. • . • • • • ~ • . ' .. . «I'> • The. City Council created the Downtown. Redevelopment Commission {Commission). in May 2005. to develop an-action plan for the redev.elopmeni of the downtown area. The Commission·is composed of ele~n members .that .are -citizens of:Lubbock and stalceholders--in the downtown ~a. After collecting in.formation on· .the··issues· in. th~ 1downtown area as well as: ongoing activities, the Commission drafted a fund-raising action pum for the development of a downtown master plan. Over the last year, the Commission has raised $324,000 for the master plan from private sources and the Central Business District Tax Increment Financing Reiovestment Zone. The Commission hired EDAW to draft the downtown master plan and they began.work'On°the p!i,n in July 2006. ~A W .. ~mp~e~ th~ ~essm~fl~hase.iµid have ~8UA the .V.isio.rµng fhase of the p.fOject. The Commission is expe¢ting tile Downtown Redevelopment Plan · to-be -~rt)p.l~ed by the seoo~ qua;tet.-~f 2007. .. .. . . . ' : . : . . , . . Lu~~ock Entertainment and Arts facilities-Task Force The Mayor created the Lubbock Entertainment and Arts Facilities · (LEAF) ·Task ·Force in September 2006 to look at Lubbock's current and future needs for public facilities. The task force is made up of 15. Lubbock citizens whose responsibilities include a review.of existlng pµblic facilities to determine if they meet__c~ ~d .~re ~~. ~ well,~ ~N~ng whether there is a need for upgrades to the existing facilities or construction . of new facilities. DEAF will-'complete itS work in 'early January 20?ra.nd· in:ibinit ·a ie¢6mm~ded pian of ~t ti~fto the 'Citr:Ct>UJ}cJ1. · · ' ·: · · · · ·. · · 13 ) ) .., ) ) Honorable MayOI", City Coull(:il, And Citi:z.en·s of the City of Lubbock, Texas January 3, 2007 FINANCIAL INFORMATION Loog .. term financ~~ pl~°:ning . -·, ._,, .. , · The' City ~es -:35·:.. year rate models for 'toµg-rangct plarming ·m. $,e General' ·Fund and all enterprise~$: These models aie' ~ed on·:curren(proj~ts_ ~ 'P,olicies and are 'driven by t_h~ idea -that the·:rate should. be annually adjusted 'to reflect tne serv.i~.--needs of the citiie~. Because o(ilils philOSQphy, trudates in •tfie mod"els are amrilally·mmmeclto leave as·litlli::: exce·ss as p<5ssible, after.allowing fodinaneiallysouiid net-as~t~rves, as·established by Citf Council :Policy;· The 'models, in assocui.tion with' '#}e_: City's· "5-year F:o~ecast", provide anticipated trend~ given current policies.'. These' foi'Wani lookinjj"jnodels provide _a basis for budget discussion and policy ·ctecision-making. • · · · During fiscal year 2003, the City f~ed,-~ 'bti.zeiµ; Advisqry Committee ~ survey City-wi~ infrastructure needs and priorities. Th~ co~ dev~~ped a ~x-year program for fu.~e capital needs for which general oblimi,tion l:>o~-.have ~~_or _will be il!su~. The bond issuance was approved by the citizens of Lubbock in a bond election held in May 2004 . Cash-management policies and practiees Cash t~mporarily idle during the year was invested in certificates of deposit, obligations of the U.ti;,;~_wy. U.S. Agencies, money market mutual funds, and state investment pools. The maturities of the investments range from I day to 3-1/l years, with ·an average maturity of approximately 10-1/2 months. The ave.rage yield on investments was 4.35% for the City's operating funds and 4.70% for the Cjty's bond funds. Investment income is-offset by decreases in the fair valu.e-of investments. Deccy:ases·in {ajJ valµirduriilg the c~ year, however; do.'n~t necessarily represenntends that will continue; nor is it always possible·t.o realize-such amounts. especiaJly in the case of temporary changes in the fair value of mvest:ments that the City intends to hold to maturity, rusk management During• 2006, the Ci~ continued its use of third 'party workers' oompensa,Qon coverage. The current coverage provides for· coverage to begin with the initial doilar of daims .. The City is primarily self-insured for medical and dental coveragi Stop loss· covemg~ ·of $150,000. per insured per year is currently maintained with a third-party i_n,sui:er to mitigate risk associated with medical coverage. Additional information on the City's.-risk manageri'ient aclivities can be folihd in the notes to the :financial statements. Pension benefits The' Ci_ty s~ri~. ~ multipl~~J>lOY.~ ~ybrip._ de_fin~-l?en~&t .pei,,sion. p~ for i~ employees other tl).an firefight_ers. ~l:i yeal", an.in~ependent !1-Ctuary engaged by the_plan calculates the amount oftlie.annual contribution that the City must make to the plan to ensure that the plan-will be able to fully meet its obligations to retired employees on a timely basis. As a matter of policy, the City fully ftmds each year's. annual required contribution to the pension plan as detennined by the actuary.-As'a result of the City's conservative funding policy, ·the City has succeeded as of -14 J ") Honorable Mayor, City Council, And Citb:cns of the City of Lubbock, Texas January 3, 2007 December 31, 2005, in funding 74.6% of the present value of the projected benefits earned by employees. The remaining unfunded amowit is btj.ng sysumaticaH.y funded over 25 years as part of the annual required contribution calculated by the actuary.· 1 • The City also provides benefits for its ftrefighters. Thes~ benefits are ~vided through a single- employer defined benefit pension plan, the Lubbock firemen's ~Rel,i~f an~ Retirement Fund (LFRRF), which is administered by the'B'oard of Trustees of the I;,FRRF. The City contributes an amount that is determined by fonnula and is an1icipated t.o ~verage 19 .9 percent of firefighter's pay annually. ,· \ ~·' The City does provide 25% to 60% of post retirement -health and de~tal. care benefits for retirees or their dependents: •. . · · . ,I Additionai infonnation on the City's pension arrangements and post ~~p1oyment benefits can be found in the notes to the financial statements. : ·..l. • I•, I '• f Aw ARDS A1'tQ ACKNOWLEl:}GEMENTS' The Government Finance Officers Association (GFOA) .awarded a C~rtificate of Achievement for Excellence io Financial Reporting to ~-City.of-Lubbock for~ comprebensi~e .arinual financial report for the fiscal year etide<fSep~Hi6er 30, ZOOS. Thi. City rcapplie'lf fQi~~s prestigious award last year after a one-y~)apse. · In 9rdet ro· be ~warded a Certjficate of Ac~ievement, a· governmental unit must publish an e3$ily _,tea4able ·and efficiently :{>~ized OOl!lpt.ehensive ~ual financial report, whose_ contents conro:mi to program st:ancbi4s; :· Such rewrts must satisfy both generally accepted accounting_: principles and applical;,lcf legal requir~ments. >· ; , _.<. · ·>·; :'.. A Certificate of Achievement is valid for a· period, of pne.:.year only. We believe ~W' current rep9rt continues to conform to the Certificate of Achievement Program requirements and we are ~bf?itting 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. Excq,tional and tireless effort was invested by the Accom1ting Department. We would particularly 1ike to thank Pamela Moon, Director of Accounting, and the Senior Accountants, and Accountants for their cowitless hours of work on , ~--fµl~~ report. W~ __ wo~4 µke,, '°-:~~'.~ appreciation to ~I members of the . department's who assisted with and contributd to the ·prq,aration of this report. Credit is also giv~n to Ci_ty Council and the Audit ~mmittee for their interest and support in planning and · conducting the operations of the City of Lubbock in a responsible and progressive manner. RespectfuIJy submitted, Ja~ Lee Ann Dumbauld City Manager : lf- J y A. Yates Chief Financial Officer 15 ) 16 .• . . ' ) ) ) . .. ~ '• .. ' . ' .. "._: :. \ ~: : :,:.;·\:-' · '.> : .• :: ·: ·> .. ·. . : .. · . . ·.• . ·. -... ·.: · ... :· ··.· • • 1, • ·. ··; • ·::: . . . . ·:,• . ' ,. . . :· · ..... , .. \.. . . I • • ~•• • • ..... . ·. : . ·. •' . : .. .·, ..... : .. . .. . . . . . .. . ' . : . \ ; •,,. •• o M . ·•·\•::-·,.,.· : . . . . •, ~: 10 ~ • • • : Certificate of Achievement .for Excellence in Firtancial ·R~porting Presented to City of Lubbock Texas . °FQ1' its 9omprehensi~e·Annua1 Financial Rq,ort ... . . for .the fiscal Year Ended ' . . . , ' ~ept~ber 30, 2005 · A Certifiu~ .of Achievement for Bxcellcooe in FinaDcial ·_R.cportiug ~ pr~ by the-Oovemment Finance Offietn · :' ;Asl;ocutipn ofdie United Stak.s and Canada to gtn·CliiDJQlt units and public employee ~t sy&tems whose comprehensive amruaJ finmcial i:cpor($ (CAFRs) acllieve the highest standards in government accounting and financial reporting. President 17 . , . ... . '• :: .. ... , -~ :\-._ •: ) ) ) : I I \ -·. ~ . /• .. : . . . . . . .. '"'. . -~ ... ··~·-·.. ·.. .. \ lndependent'Accourrtants' R&portoifFina~claJ Statetne'rrts.'·' ··· '..' .·. ······' -·.··and·supp1ementary'lnfo~~iori'. · · · ·. :· ., _, __ '::_ · :·.·· :· : .-, · • -• '.. • : : • : • • • • • • • ' -• •, • • ~~ ' ' • ' • •' • ; ~ . • • .. ,,., .. . . . ~. . , .. ·:. ;: :;_,• ,• . ' .. ·,. :.-.-.:;, "!f •.: _,,_ ·: : .. :-: • • • I , ' • •' ' /, ; , ••,:I• '~ ••~I• • .' ' ,: _' ; • • • The Honorable Mayor and City Cauncil City of Lubbock. Texas • ·-·· , .. J • ! ~ ' •,. ", : ' ' . :· .. ., .• · :' ' . : . '• 'i•' ' ~ .... ,. ' • t .. .' • '.-~~i· : .. ,:;-::t-;.~-: : .. • •. , · ..... ". ?.·~-;~-?·-"!''.· .· ·•': ,; ·.,.•f~ .... i•'·,-... :;'" We have audi~ the: aceqJllpagying, firJ~~a.Ic$le,ments of.the goycmmen'tal ~cti:vitie~· .the bu•siness•type'· ~v~!i~ $e .aggr~~e ~sc~t;eJx P.~ii~d,t;~J:IPn~ .units. ~b major.fund,.and.'Jhf aggreg~te_-,; ',,;, .·, • remaiajng ~d infonnaµoµ of.~. Cj.ty,~·fI.~u,bbpc)c, T~ 111 of' ari(,l,for.the·year-.-~nd~:.S.eptcmbeti•30;~ ·::, 2006, which collectively comprise tlte City's basic fiuancial statements as listed in the table of contents_...· These fimnclal statements aie the rcspo11S1bility of the City's management. Our responsibility is to eq,r.~ OJ>ini?ns on ,tll~.e JinlU.'lciJl:$1.~1$ b.~:o~:<>W audit.·-,Wc di~ .not audit:thc:financi~. :i. ·. ,,. ·, ·i .- statements. o.f. civic L~b~ Inc.;,N~C;t l,\lb,b.o<ils:,.Econ6mk. llevdopment,Corporation dlb/a '~ · :· · Lubbo~:~• Lubbock E~~Q~ 0.ev~Jopment~lli;mce, ~hjc:Jt~omprisethc: irggreglife. disc,retely :.~--.-. ,, , p~t.e4. comp.oneJJt:units,! • 'f.b_e:·fina~~!~:~1!3in~ .qf,~ese-.entities w:ereaudited;·bY. :0tber-t.11diwrs ·,-1 .. ,.. who~ r~porcs thereon ~v.c,.beefl,fii"?,lsh~JQ ~~~w: opinion;.1nsoiar 1'5. it ielates to tile'amounts • .,: · ,. included for such entities, is based solely on the reports of the other auditots. , .;;<: .. '·: .. ,:,-, ... :, ,,,. ·.,, ·· 'o/,~.conQ\ICtEd ~ur audit~ .accordance with ~diting ~&lrds genci'a)ly acceptcd<iri !the Un.i~ States o.f · America ~d the.s~dard.~.iw.p.U.cable,~ fin,mtjahu.dits oo~tained irrGo:vernment.4uditlng-:Stan4ei:~. , .. · issued by the Comptroller General of tbt United States. Those standards require.that:we plan anq petfurm the audit to obtain reasonable assuran~ about whether the financial statements are free of material misstatement. 1be financial 'StatmJeilts-9f tbe component units Civic Lubbock, Inc.; Market Lubbock Bconotnic Development Cosporatid-n'dlbla Market Lubbock; Lubbock Economic Development Alliance and tbe major fund West Texas Municipal Power Agency, were no1 audited in accotdance with Government A udiJ.ing &andards. An audit includes examining. on a iest basis, evidence supponing tbt amounts and disclosures in the financial statements. An audit also includet ~ing the:accoiintmg ··· ·::.. · principles used and significant estimates made by management, as wc:U u· evaluating tbeiovmlHinanciaJ statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the repons of the other auditors, the financial statements referred to above present fairly, in all material respects, the t1'Spective financial position of the governmental activities, the business-type activities, the aggregate discretely prcscntcd component units, each major fund, and the aggregate remaining fund infonnatfon of the City of Lubbock, Texas. as of Sept.ember 30, 2006, and the respective changes in financial positioD and cash flows. wbere applicable, thcreoffor the year then ended in conformity with accounting principles generally accepted in the United States of America. 200 E. 1111"'--1'.0. Boa '306 «lO W. Clf,lidAllfflll. Slb2500 P.0.Bgr3tQ ,_.Fb:11.M~ .50131l!-IO'O fa,, !il)t 872-1251> Arif 1M; M 71811 o83D8 171153M172 Fax 1ml SM-21<1$ ·-19' ") ') -·i The Honorable Mayor and City Council . Page2 In ~rdance with Government Auditing Standards, we: have also issued our report dated December 22, .,·2006. on our cq~5i~ti.Qn_.qf qi.e; q~t~.i11•·,'-:,qpirql over f.i.natt~!al ~ortiAg amd.:<J~ tem ofits comp.i.ance with certain:j,rovisions_ofJa~l"'[~Ons..~tra~.jlD.d .. grant agreements and other matters. The pucpose of thal report is to deiiciibe the' scope· o't our testirtg 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 fulancial reporting or on compliance. Thai report is an integral part of an audit pcrfonned in accordance with Government Auditing Standards and should be co~dered in. ass_essing tl:!e results of our audit. .... .. ·.,., .. ,, . .. . ·:. _ .. · The accompanying management's discussion and 4nalysis as listed in the table of contents is not a required part of the basic financial statements but is supplementary infonnarioo required by the Govemmetna1 A~unting Standards Board. We have ap'plied•certam limitedprocedurc;s, which consisted principally.ofinquiries of management reginting the meth~ ofm~ureinen_t and p,esentation ofthc_.n:quircd supplementary infonnation. However, we did not audit ~'information and express ·no opinion on it. · '· .' · · ",:; · · · · · · ·· · Our audit was conducted for the purpose offonning opinions on the financial statements that collectively comprise the City's basic financial statemtnts. · The accompanying supplementary infonnation •is presented for purposes ohdditional analysis and is not a required partofthe basic financial statements. Such infonnation· has been subjected to me auditing procedun::ii'applied in the audit of the basic financiat statements and, in our opinion, is fairly stated, in all material respects, in relation ·to the basic financial statements taken as a whole. T_he a,c:compa!l)'.ing _information ia ~ i_!ltro~ct~.lJ' and .statistical sections ·as'fisted in fhe table of con:'ten~ bas not .been subjected to tlie-procedllres applied 'lh ·ille audit oftliebasic-financiaf staterncnfs and.' . .. .. , ., " accordingly, we-express no opini01ron it · · · " · De~~r 22, 2006,.~cepHor Note-V _ as IO which die date is January Io, 2007. .. . .... -:...· ~ -~-... .. :· .. ~ . . .. ~.-· ·.: ..... .: _:.· '.·~; .. ' . , . City of L~bboc~ T~as Man_age.ment's Discussion ud ~alysis For ~e Year E~ded September 30, 2006 . 4,s. ~~,g~~~ .o~ ~-qJY of Llil>bock, T~s (City). we offer readers this ·.narr.a.ti'?~ overview •and . ~-1>'.~ .o~.~e ~~cia_l~vi~ of the qity. for the-fiscal year ended Septeµll>cf}Q. Z()Q6. . · · \~~~~-~~ ~f~~ ~$1 ~~~ to ~-cmsid.er_~·inf~~~-~~-ii! the ~~l leltc:!:.~~tm,~ o~ez:-~ons_of.~ .COJUP.re~ive A,:mµal F~ Report:(<MFR) e.g., combining -~~~_.~9, ~ ~stical section~ conjunction with Uris discussion and analysis. , .'. ~ , ' ... ' .,_ ••1"' .. :'. J .-lijua~ci~.~igh,U~~ . . . . , ',: • j' • ... ··. ' . . •• ,J . .. .. ._.,. . :rhese .financial. highlights summarize the City's financial position and operations as·'presented in more detail in tbe.B~c-.financial Stat.emcnts (BFS}, as listed in the accompanying Tablc-:of.€ontents. •'•1 • ~. '.:.'" ..... .-; -~. 1 ' .... ; ,' 0 , , •, • j:,•,:, ~"-~··. :. • ' • · , ... :-'The assets of the City ·exceeded its·'liabilities at September 30, 2006 ·by $58-3·:S milliort'(net • .. , =;,assets).,·Ofthls amount, $97.8 million• (unrestricted net assets) may be used·to meet-the City's . . • ,: ... ·ongoing"obligttions to citizens and creditors. · · · • -= ·· ; · ··= · · ·· '~ .·· Th~·City's t~bi'nit·~-,~~ by $3_8.0 million as a ~t of opexatiQn~:~;,~Jiscal year . .• I!!• , ... Tbe.-ending-unreservt4 fund balance -for the General Fund·was $19.8--rnilliori•or approxifflately , ·, ... _.,;:. 20.2¾ of total Genem Fund.revenues;· an increase of.$2.S million over the pri<11"-year amount, ~...,. -·,,!1 i •, • •• '•• ~••I :_': .:1. i, • ... ,,.,.,,: •. ,: , .•·.• "''" '0! .. '. : ,•••:' . •• · • ;• .. : .. ! ·•~-:~•;_:: •• , ,.~•:•. •:•~~,/ :: : •• , •. :.~.'. ;!J,l;,9f ~ :ci~:~.¢~~ -~-~ ~ ccm\>~nede~ ~d ~~l~_~f,$~§.~.;mll!i~ . . , . ·;,·: P'f,~.~tQ.ia:1.,~t,$~~-8 . .-ml~o,.11s!l~~p!ef(?rspend~_attbc~•s.~~AA9~· ,,:: .-•·:.i .,·:: •. ·::,, · All ofthe·City•s:bu~iness4ype'llctivities reporte~.'.t ombined'endingnet' ~~ o'f$470:-81niillion: Of this total amowit,. $71.7 million is availablc'fonpeoding at theCity's·'discretiori.' · · · · " :~ .. ·.\\~·~~::r:~pr~~~~~ ~~\~ in~~~-;~~ ~?~~-~Ii~ fro~:~~;·~-~~i~,~::~ . .3 • ..... ,_.,. 'Du:ri1ig•·FY 2006,,·the' City is~ued $79:7 million: m. debt fat 'various' capital·1>ro1ects'aod·,ssiicd ··.,' ···,$18:hxnllion in 'debtto'refund $18.0 'million-m outstanding. debt. The ·qty also j>artic'ipated_in : .-: : · . tbe·tssuance of$18:6 million of contract revenue bo.liOS with the Caru!idian Jliver Municipal W:ater · ,·.·.,·•Authority,··· · · · . ·. . _,·.; _., . :· . .. . . ' .. : . . ;;~ .. ,' .... Overview of the Financial Statements Buie-Fi»andal Statements.. Manag'ement's Discussion and ADalysis (MD&A:) is ~e4 to strve -~ an ilitroduclion,·to 'the City's BFS'. -'The BFS ·are cptnprised of three components: 1) 'G~t-:Wide FiriancOO Statements·(GWFS};2) Fund Financial Statements ·('FF'S); and 3)'Notes·to Basic l'~ Statements {Notes); This CAFR also corttains other suppletlieidary·infotmati~ iJ:l ~dditlon ~o 'i::b.e'BFS. • :• \ ~ •• :.',. • ,.· , • , ••,, ,., -•• :. · ' : • -_ • • --· •• ·•-.--~•••• :•-.". l . .,_•:••:t• . ·Governineilt~'Wlde Financial Sbiternellfs. The GWFS, shown on pages 37-39 of this rqiort,._ cdn~ fhe statement qf net assets and the statement of activities, descn"bed below: · · ·' · · ·' ·' · llie·'slaldniJit:ofhd asseis i>resents}yµormaiion'on all ofthe·(pity's~ ~ i¥il~~J~~g ~.ital assets and slioit-and' 1ong4efm,liabilities). with ·t1ie diff~ oetween · '.t&~ twcr~~-~ :,i;e, 'cissets-'tisiiig' ~ aocrual·basis.·: Ovei' ·time, incxca~ 'or deat!ases ui' net assets ~e u ~•iiseml "indi~tor :ofwnethcr the fuiancial position of the City is improving or deteriorating. . . . . 21 ·-· ' City of Lubbock, Te%as Management's Discussion and Analysis · For the Year-Euded September 30~ 200() The statement of activities-presents a comparison between direct expenses and .program rev¢lues for each of the City's furictiODS ·or programs (referred-to as ·"aciivities"): · Drmct ·e$Cnses are ·those .that are specifically associated with an activity and are therefore clearly identifiable wjth that ~vity. ProgtJUD -revenues include cbai-ges paid by-the recipient of the goods or services-offerecfby the_prog:raiffm itddftion to grants and· cfultnbutions that are restricted to meeting thC: opc:ratio~·-or· ~i~ ~ts :~r a particu1ar activity. Revenues that are not directly related to a specific .activity ate'preserited as· general revenues. The comparison of direct expenses with revenues fi-om activities identifies the ~t to wm,~h each activity is self-financing. or alternatively, draws from any City generated peral "iev'enues; · 'Ihe governmental activities (activities that are principally supported by taxes and intergovernmental revenues) of the City -include ·administrative services, comnnmity services, cultural and recreation. economic and business development, fire, health, police, other public safety, streets-and traffic;-arni-non-departmental. The busincss~type activities (activities intended to recover all of their costs through user fees and charges) offi!e.Ci-ty iQCl~ Elcctr:fo.(LP&L), Water, Wastewater, Solid Waste, Stonn Wat.er, Transit, and Airport. All cban~ in -net. as$el"$ are reported as soon as the underlying event giving rise to the change occurs (accrual basis). regardless of the timing of related cash flows. Tbus,· revenues·and eq>eru;es are reported in this statement for some items that will only ~lllt in cash flows in future fiscal peii~ such . as uncollected taxes 'and· earned but unused vacation-leave. . Component Units. .The GWFS include not only the City itself {the "primary government''), but also three-legally separate entities (the .... component units): Market Lubbock Economic Development Corporati<?Jli d/b/a M•t Lubbock, Inc., Lubbock Economic ~1opment A).liance, an~ Civi~ Lubbock, In.6., for·wbich the City is'fmanciaJly accountable. These entities provide economic developJll~t services and arts and cultural 1i'ctivities foi the City. Financial "infonnation for these componeilt units is reported s~tely in the GWFS in .Qrder to differentiate them trom the City's financial information. None of these component units are. 9pnsidered ~jor f.()lllpOhent-mrits. · :-.. · · · ,-· hnd Tirun&cial Stateblents. Afiind is defined' as a 'fiscal and accounting ei\tity with a ~1f-l>iiancing set of accotmts recording cash and other financial rcsowues, together with aU related liabilities and residual eqµiti.;s or .J>.a~, ~d cl;langes therein, which are segregated for the purpose of carrying on specific 8.Cfivities or ~ttairiing Qertain objectives ~ acx:ordance with special regulalioos; restrictions, or limitations. rtte pi:incipal ~le of fun~ iJ;r. the new finantjal reporting ~ is to demo~trate fiscal accountability. The City, as with other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements, : .. ' .. ,~ ~I>.~(~ FFS ~~ 9t_l. iµajor funds. Major ~-are ~ that meet ~,c,nteri.J (a. percentage of a~ l~aWities, ~ or expenditures/expenses of fund -category and .of the, govemmenW and -~sc ~-~mJ>ined), or those that the ~ chooses to report as maj9r ~ds gi~ ~ejr qualitative signjfical)~e.: N:~jor fan4,s are a~~-and ~hown in~ ~gle ooli,nnn ~-the appropriate financiaJ statements. Combining schedules ofnonmajor funds are included in the CAFR following the BFS. All of ¢e ~s of (be Qty ':3l1 be-divi~ into three categories: govemm,entaljiauls, proprietary.funds, and fuluciaryjunds: ' ' . ' . . ' GQYen,mentfll. FFS~ Governmental funds are _used to accoµnt_ for ~tially the same fl,mcti~ reported '8 go~ activities· fn ijie GWFS. However, unlike #,e GWFS, govemrnenb!} :fF!i f~ ~ near-~ in:flo~ aJ?d outtlows of speq4able res.o~~ as ~~11,~ on balances of sp~~le ~ 4"'.81l;(ble at the end of the City's fiscal year. Such infomtltlion is useful in i;val~ting ;thc;<City's ne.ar-term financing requirements. 22 '' .-: -~ '• ' '•·• •' "'• • ••~•' 1 •., ~ :,.1, ••.J • '• ~• ,.._",.,,.,.-, ~ .. • ,._. •• ',• 'lP ' • oil., '• • •, • .' • ,~•••:.•--,\~ ... ...,_.o_,.:01.,l••• ,,...;..•., :•••~ •• :::,.,:--. ~.:-...•.>,•',''.'.'·-;_,•:"'·•••.:~./-,• .. _..-¥£ii:: ••.•'~.Ii ,J~;~.".",•·•.•.;.t,•'•;,.JJ':.1•:<•'•••,",'.•"'.'."."·!~ • :-:-~ :-,,-....,~ •.:..:.~~-..t.._ .. .,.;..;;..~ •• ,·..;J&., __ _::,,;....._\;: . .t~··-~·:--~•;.·:tl:.::· ...• i.·.:•· •:. ~ ..• 'lo,.· .. ·•• ,..... . ' -· -, City of Lubbock, Tens Management,s Discussion and Analysis For the Year Ended September 30, 2006 · 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 usefid to co~--thc• informati9n ~tc;d for go~·-funds with similar information -~ for ~~~t-~.cJ.M.~~s i~.~ QWS:: ~ doing ~•;~C'fll may~~ un~. ~,i~~ impact ,of.,~ il~~ ~anc~g. _d~~-.Reconcili~tions are provided fo/ ~1h the go~. µmd balaiice sheet and the· govemmentlll fund sta,tement .of revenues, expen(iiiui:es, and cl!anges in ;fu.nd balances to facilitate the comparison between governmental funqs and governmental activities. The City maintains 31 individual go~~enta(funi:ls: Information is presented separately in the governmental fund balBDCe sheet and in the goyem~tal fund statement of revenues, ex.penc:litw:es, and changes in fund balances for the General Fund only. The General Fund is considered to be a major fund Data from the other govemmen~ _fuqds. ~ combined into -~-~gle ~ggregated presentation. The City adoplS a bµ4$~t annually for the Gen~i fµnd and all other fi.mds. A budgetarY, comparison statement has b~ provided. f<i; ~-Geti<!ral F~d to dein,(?~tme ·compliance with, this budget It is presented in the : .}:'.F~-:foll<Sw:ing,:~ statement .Qt :i:evenues, exp~ditute~ and changes· in fund balances. The-goVCJllJ'JlQltal ;Ff$,~an be foµ,n_d,.on pages 40,43 of tms repro:t. . . . , , , :: :·. ;~.,_\}/:; ... ~:-.. \~~-:~:{~·--·-~--·" ···{ ~-<;·1 ~; ,,.,, .... ·:·:· . ·-,, ' . . . ·.; . . .. ·. . ' .. 7h.!piiitiuy FF.$..~ The Citymaintains two different types of proprietary fuDds. Enterprise funds arc-used J A.~Ort ~:sa.nte.~008 p~sented as.busil\ess-type activities-in-the GWFS. Enterprise FFS -provide --:::·ihe_~· type;e!iiiformati~ i$. the-GWFS, only in more detail. The City.uses entcq>rise fun&to acco'UD.t ·rm-· its Electric"(LP&L)',' Wat.c1: Wastewater, West Texas MUDicipal Power Agency (WTMPA)vStorm Water, Transit, Solid Waste, and Airport activities, of which the first five activities arc-·considered to be 'll]ajor funds by .. th:e City and are presented separateiy. The latter three-activities are considered nonmajor ,thnd.s by the-City·and are combined into a single aggregated presentation. 0 •: ••• • • _; __ ~_~::•::~... ',. ·: • ••• •• ' _,. .. ,:.,•.:·· • • • • .. ~-..... ',;;'! ·.rnt~(!/ !f!!1dce fu¥s ~--~ ac;:dQ_~g ~ce ~d. to accumula~ an!l ;ulocate costs iritemally among 'the-Cii),;s various functions: "The City u·ses mtemal service funds to account for its fleet of vehicles • . ~e.xit.intotmation,sy~~; i:is~ •;management, -,print-shop, and·cenu:al warebou~ !11£li:vities ainqng .<l~_.·_,lJie.~~ ~"l{i()e4by.the ~t~J service-funds benefit both. governmental anti"b~~-type a~5>-~-}.lccor,Jingly, 1hey_ have,been ~luded within governmental activities and,·business.type ac:;tMP.c;s.. asapproPJ'.iati;c.in..tbe G,WFS. All internal service fw.ds are combined into a single aggre~ p~~~ in.1P.~ propri~tary pts. l,leconciliations are provid~ for both ~ proprietary:fund sta~t _Q(~.~-~:~d Aic proprietacy fund,<St?~ of revenues, expenses, and-changes in fuQd,n:et•assc:ts to facilitate the comparison between enterprise funds and business-type activities. The proprietary FFS can be found on pages 46-57 of this report. ·-: ,;:-;: ;~ !:i .:.•·.; ni;,, : ' .' • • · • · · . .: • ·:·.:-··' •.., P .r._~_,_F~ _Fi~uci~ f~ds ·are. used to. account for resoun:es held for the. benefit-of parties outside the government. Fiduciary funds .are not reflec~.in $e GWFS because the resources. of those funds are not available to support the City's own programs. The City had one agency fund. which was closed in FY 29()~'... . : .. .-. . : . ·: .. . : . . . ' • • • ' ~--' • • • • Notes to Basic FinandaJ Statements. The Notes provide additional information. that is essential to a full ~djgg-~(~. ~ JXOvi~ in_ the GWFS and FFS. ~ notes can be found .OQ pages. ~9:-'94 .of Ibis ~n--·: .. ,,: .. ·.... : :•"·. ' . . ; ,:,.' . ,-··: · ... ·.·!. = .... ~ ,'\tot," , .•• , •• : : • • •', ;: I • I • -• • • • • • ,' • ' • • • • • .. ' • Required. SrippJemenwy Infonmiio• Other Than MD&A... The City bas J)(Cscnted _required supplementaiy information relating t.o ifs progress in funding its obligation to provide pension benefits to its employees in the Notes t.o the BFS. 23 ..., . i · City of Lubbock, Te:1as Management's Discussion and Analysis For the Year Ended September 30, 2006 Government.Wide-Financial Analysis t•.' .-' As not¢ earlier; ·net assets serve as a useful indicator of the City's financ~l ~~ F~ th(C!tk;·~~ ex.~ecded -liabilities by $~83.5 mi1lfoo. (net assets) at the c~e of the ~cal year .. This:~~ ~ ~~ ·exceedtng·liaoilities·by''$S-45.5 milliori· (net·arseis) at the end of tbe-pri6t'·f~t·year. ·Ma result ~f ·operations, !otal net~ increased by $38.0 million during ~e period. . .. ' . -.,., ; ' . ' · .. ' . . . •.•· ·· · Current ai1d other assets Capital assets Total assets Cummt liabilities Noocumnt liabilities Total liabilities Net assets: lnvi,stcd in capital assets, .net of-i:elated debt Restricted · Unreslricted r~~~ .. asse~ City of Lubbock Net A~s September30 · · · (in. OOO's) · Governmental Activities Busiaess--Type Activities Total 2006 $ 124,446 160,550 284,996 35,197 137,073 172.275 76,483 10.149 26.089 .. ·. '. :'$ ·t 12, 7-21 H6;ocu· 138,614 254,635 16,837 127,16!> 144,006 2006 . 200S 203,858'. 170,9'5 700,154 637,444 904,012 808.389 54,322 .. 2s;sos 378,896 348;03'6 433,218 373;541 · 32i,3(j,J· ' · 286,966 ·stio;;04· · 1iis,osa· 1,189,008 1,063.024 . ·:' &9,519 . . . ''42,:142 SlS.9'14' 415;1.05 60S;493 · 517,S47 32,330 380,149 363.227 456,632 . 44S,5S7 8,770 18,915 26;276 29,064 · ,35;046 19.529 71.730 45,345 -97.819 64,874 By far the largest portion of the City's net assets, 783%, reflect its investment in capital assets, e.g., llllld, bu tidings, infrastructure, machinery, and equipment, less any related debt used to acquire ~ose·assets that is still outst3nding at the close of the fiscal year. The City u~ these capital assets to provido sertices to citizens; consequently, these assets are not available for future spending. Although the City's investment iB capital.assets is reported net of related debt, it should be·noted that the ~urces needed to repay this debt must be provided ,from other sources, since the capital assets themselves cannot li'e IISed to liquidate these· liabilities. · . . .. An additional portion of the City's net assets, 5.0%, represents resources that are subject to ~al reslrietions· on how they may be used. The remaining balance of unrestricted net: a~ of $98: 7 'inillioil may be used to ineret· the City's ong~mg obligations to citizens ~ creditors .. ' . . . ' ' . . .. , .. The City also reports positive balaru:es in all three categories ofnet assets for the City as a whole, as well -as f~ its separate governmental activities and business-type activities. the City~s: govemniental activities experienced an increase in net assets of $2.1 million. while riet ass·ets increased by $6.3 million during the prior fiscal year. The increase in FY 2006 is primarily due to higher than expected sales tax collections due to better than anticipated retail sales and an. increase in ftancb~ ~-~from-~w~~~iesduetoincreasedfuelandelectricprices.· ·. . 0 •• • .•.• • .• ••·• •·• .,, 24 '1•' • •• :, City of Lubbock+ Tesa:S · Mtnagement's Discussion and Analysis For the Year Ended September·30, 2006 The •City•s •busin~-type.activities experienced an· increase in net assets of S3S9 iniHion.-during the ' current fiscal year as compared to a decrease of$7.6 million during the prior-fiscal.year, ,The increase in net assets was budgeted to meet City Council and LP&L Board goals of minimum unrestricted net asset balances. . : -·• .. ·. -, -· --.. , .. ·•: .:•.,:, :: ; , Rnenaes: Progr.iiW~: · .. ~ for'sefviccs . ~ngpts and comributioos --.Qpital'pts:and i::ontri&utlons OalefafRiMnues:c· ~talct.s.•,,. -~~-• •.'. .. .. " . 0th.er~-. '. . . .. ~~-. ln~~amiilgii Other ToialrevenlllllS Exj,eD9es': . .. . ' . . · · Adrninist:Qrtlw sernres '0>inmcmity.aervi0e4 . , Qlltural and recreatipn , -~ d.fJWlopme,\t "Fire . Health Poli~- Othci' public satety SUeeU and-traffic Non-departrnenta Tnlaest on long--tmn debt Elec:trlc Wattt Se'M:T Solid Waste StomJWater Tran.sit Airport Tow E,cpenses amnge in nut assets before ~ i&etns nhnnsfers Special items Transfers 0,aogeinnetassets Net asseis . begiMing of year Net assets. end of year aty ol LubbocJt.Ow,ges ua Net Assets - . For tb~ Year ~ded September JO .(111,qWs) · -. · 0ovei-n~tar · Activities $ 9,632· 10,203 . 84S' 42.m .4$.571 4.447 13).48 4,394 6.898 138,115 9,910 6.ll2 18,9.l~ .10,283 26,711 . S,014 41,063 5,240 1 l,&50 5,206 . 4,326 145,630 (7,515) 9,(IJ1 2,092 11;629 s n . 10.583 13,296' 39,74& 41.~ 4,242 11,154 • 1,633 ·' 4,110 8,220 6,145 l?,74S 9,739 23,517 S,040 '38,452 4$'1 12,467 6,253 3,195 m,1so (9,181) 15,469 6,288 104~ 11 ' .. Business-.. . . . . ··::. Tjpe . Activities 2006 2GoS 2006 2005 313,782 &,3S2 17,625 6,140 4-J,Tl 350.176 213,0'27 32,830 21,274 14,97) 5,175 9.349 1,m 304,623 4S,SS3 (9,607) 35,946 47&843 794 272,902 ·323;414 283,485 . · 1',156-_- -· ~,206 1~ss·· '· · 21,452 · '1&;470 . ' S,206 ;;_;-~•. . . . . '· . 42,771 . -39,743 .• :4~.577 .. ·. ... 41,803 . . . . .4,,W . 4,242 . •. ·-·. ..l~J.48 11,154 ... · t1~t· .' ..... )0;~34. 5,391 ·1-148 . · .. ll,17S S,498 ' •,•t •• •' ., . 7- : ~: . i;,''.t-9.,9}0. :-, , ... · •. 6,112 ·. ~-: . ._.,1$,?15 ... ,,,10,2~. :: .'.26,7.1.1. -. '. ' .s'otir· . • • '. ' .... ' ' > • · ~ ... ' 42,063 --~.. . . ,.. 5,1)«>' ·.. ·n:ioo ' ' • . . 'S".2(16 192,90'.2 2&,738 17,&04 14,695 5,S86 9,003 S.ISJ 276,879 14,531 (6,637) (15,469) (7,575) a 4,326 213,~ 32,SJO 21,274 14,971 S,17S 9,349 1:W, 45o,2S3 38,038 38,038 545477 sC:sis 8,220 6,145 17,745 9,739 23,517 5,040 38,452 4,971 12,467 6,253 3,195 192,902 28,738 17,804 14,695 S,586 9,003 S,lSJ 412,629 S,350 (6,637) (1,287) 546,764 545,477 Changes in Net Assets. Details of the above summarized infonnation can be found on pages 3g..39 of this report. 25 ) City of Lubbock, Texas Management's Discnssion and Analysis For the Year Ended Septeniber 30, 2006 Go.'ver~ental activities.. Govemme:o.tal activities increased the City's neussets by $2.l million. Key: elements of the increase include: •. .,. · •. · . . . . ··· · ·. . . . .. ;, •'. .-.. ·•· . --.. ' •• •, '. ; ,' • • Transfers to/from business-type activities during the fiscaJ year increased governmental activities n.et assets by $9 .6 million. During the prior fiscal• year these 'transfers increased governmental activities net' assets by approximately $15.S 'tm11ion. This is a iiet di:crease of $5.9 million in resources to govcnµnental activities. Transfers from the business--type activities included payments in lieu of taxes, franchise fees. and indirect costs of operatj.,_>ns for centralized services such as payroll and p~hasing. . • .. T~l -~ increilsed by $9.9 million from the prior year primarily due to ~ .spen~_ip public .~fety fimctio~. City Council has continued .to be committed to public safety and has allocated.more resources to public safety than other areas in the government .~~ expenses increased $3.2 million and police expenses increased S3.6 million in PY 2006. Adininis1ntive exp~es increased $1.7 million due to moving facilities management from an internal service fund to-tbe General Fund. These expenses were previously spread to many different functioos. Interest on long- term ciei,f increased $ 1.1 million due to new· debt issuances. These were o~ by a. $1.0·:million decrea!(e: in non-departmental functions, which was mainly due to Federal Emergency M',ariag~t Admi:nistfation (FEMA) expenses incurred in FY 2005 wh11e hosting evacuees froµt Louisiana and southeasttexas dur:ing Hurricanes Katrina and Rita. · • Revenues increased by approximately sn.s· million. Grants and contributions. decreased by $2.2 million, partially due to decrease .in FEMA and other emergency management funds. The property tax rate was reduced to $.44720 per Sl00 assessed vaJue in FY 2006. down from the $.45910' per $100 -~ value rate in FY 2005; however, property tax revenues increased $3.l nriilion due to ~~-~ts. Sales tax revenue increased $3.8 million in FY 2006 .due to an improved economy.· Franchise taxes increased $22 million, primarify due to increased costs on gas and el~inc bills t<>,: <;o,nSUID«S and an increase in the franchise ra.t.c from 2.0% to 5.0% percent on one eleciric oo~y;, Investment income increased $2.8 million due to increases in interest rates !1Qd improved cash bala.11ccs. Other revenues increased $2.8 million due to developer contributions in the Gateway Capital ·Project Fund. · 26 ., •• !~ ·~: .~' • ·:: .. •• :·: .. , •• •• : -·~ ·;:.: ·: • •• !~ .. •" ., ••. •. ' . ~ , ..... :. ::· '.~-. ::·. ,• \. "( ·.·.. . ... • .; .. , ...... ' . ''':"" .... --.. . ' l 'i .. ~ -< .. City of Labbock, T~xas Management's Discussion and Analysis For the Year Ended September 30, 2006 This graph depicts the expenses and program revenues gencrat.cd through the City's 1,-arious governmental activities. E:1pense5 •11d Program Rrvenlles • CoYtr•meatal Activities $45,000 BExpeoH $40,000 535,000 $30,000 S2S,000 520,000 SlS,000 S10,000 SS,(100 so \\ i i 1 ".:, ~ '1~ \ \ 1; ~ (' ~~ ~\ ~ \ ~ '~ a ~ " ,t, '1~ "-a. 'I! ~ ~ ~ ... \ ,_ ~~ \ .. \. .... ' ~ ~ \~ ~ \ \ '\ ~ \ ~ " "' ~ \ ,. 27 ) ) ) City ofL11bbock, Texas Management's Discussion and Analysis For the Year End~d September 30, 2006 The following graph reflects the source of the revenue and the percentage each source represents of the total. Rn·ir:nues by Source -Governmental Activities Charges for Services 7.0¾ Grants & Contributioos--- 8.0% ]llvestmeot Earnings 3.20/o Fr.anchise fees 9.6% Other Taxes 3.2% Mlscenaneous 5.0% SalesTuu 33.0% Property Tans 31.0% Business-type activities. Business-type activities increased the City's net assets by $35.9 million as a result of operations. Key elements oftbe increase include: • Charges for services for business-type activities were $313.8 rmllion in FY 2006, an increase of$40.9 million. Expenses for business-type activities were $304.6 million in FY 2006, an mcrease of $27.7 million. • Electric operations accounted for $33.8 million of the increase in charges for services. Electric operations include both Lubbock Power and Light (LP&L) and West Tells Municipal Power Agency {Vv'TMP A). Because of the interfund acti~ity between LP&L and WTMP A, approximately one third of the combined electric revenue ·was eliminated for the entity wide statements. Operating revenues consist principally of the retail sales of elec1ricity to residential, commercial, and government customers, and off-system sales to wholesale power customers. LP&L charges a base rate for electric service plus a fuel cost adjustment rate for electric service. While the base rate has remained consistent between years, there have been many fuel cost adjustments during FY 2006 which have 28 City of-Lubbock, Twts Management's Discussion and Analysis For the Year.Ended September 30; 2006 .. rP!JJ11Ul!l9vely, i i~l!Se.d .. ,the •. r~ charge.d to -~ers. · AJso, .. WTMP A gas . gpes::to third .parties , j_qc~:fro~;1~,.2 million in-fY. 2QOS .to $76.2 million in FY -W06,,:agaiR ·due1to :fuel. cost adjustmen1S. Electric operation e,cpenses increased $20.1 million, from $192.9 millioh-in FY 2005 to $213.0 million in FY 2006. The increase in expenses is primarily due to the nation's increased fuet an'd"energycosts in.FY:2006; w~i~hdee~·both LPtLand ~A.cost of power . . ; . ··.:' ,;. ' : . . ·:· . ; .. -~ ,~(• • 0• I ~•,..,••,•,,: •• '••• ,," ~.• .·. •.:• . . . •,• '•'··.•;:. 1 • .._,,, .:,',,;,lp'l,4,• ',: ;··: . . ~ .... -: ......... :"• -·· ...... . ' .. · -' •• : •• .' t •• . :··· .. ·, ·-: _.,.:·,, .... , . ::,• 'l, ,.•:: : • :,•l • ,,,'':. .. -.,. -i.~ ... '\ : .. : • •• : . ,',,.:·•:. ·:.. :,:· .. .. •,,, : ·, , :·,:: '! i: "'"#,I!'.'.: . . i: .......... ~, .~: ..... : ... : . ·.•.-·:•:,•,: :,·: ... -... .,. .... . i'','• .... 1 . ]• :: . . . . ·. :··, •, . ·' . • r:, ~. • '. . • : . ~ .. 1 ~ : •• . ,:•·. .. •:·•;.' '• ;": .. 29 i l' \ ~ity,': o.f Lubbock, Tens Mu-ge.i:nea-r~,~~ssio» and Analysts For the Year En.ded September ·30{ 2006 ._; •~,follqwinj~~ ~~~ me::~eii,w;:So~ g~era~ li.y ~ ~~11cti~ti~;: :~ .. ~t.¢d . . ,eai:tjer;::tl.jese,:ilGfi¢dei•inoltide ·LP&t, Water/W~at:ei; Solid W"1Ste; ·T~jjkWI'Ml>~-~ , .,:az,as~,W~·-Ptama~.:-· !·' ·. . ' . , .·., .. :·, ·, ... ,:i, .,,· .. :.;·;.,;'.·, ·,>:•. , :·.··, .•· ... ~.·;~::-·~:·:·,.::·• .. t.'•· ·t,: ... i •,, • :, c~s.::!.; :.:_!'Rewttii~:by-Souree _;~B~sm~fyp~A~tftitr':·::. ···: ·, .. .' ·· :."". :, .,:: . · .... : ... ,•. ·· .... :·;,:• . . '• ... ~ ; :. !•,· ... ! • i; .' •• -.. . •, .. ~ . .. - •.'·' •• • ( :· •, i_ ·,, '.-•(: ' . ! .. · ••. : .... ' . .-. ' ': . : '.. • -~. :-:: .......... .;·' .. ;, ...... Financial Alia)ysls of,tJle City,s Funds Grmnnmen'!{il Ju,ufs._ The focus of tbe City's ~talfiin<f:S is to provide inf~ott.on near-tetm infl~ o~~~-~ of ~~le ~OIJ{~es. _Sucb ~on is useM ~~g·dje ~ii),'i financing requi:retnents. rn particular, unreserved fund balance serves as a. usefi.tl' measute of'ffie City's resoutces aV'lilabl4; for ~ding at the end of 1he fiscalyear; At the en<i:of-~· fiso.a:J. jeer, ~ Gity's. goycmme.Jital funds reported coinbilled ~-ti)nd ~~ of $96.8 milli~, ~ fu. ·S85.2 ;million at the end ~fdie prior fiscal year: This increase .is.-pr.i~ the re$Ult .of debi isitl°aj:l~ f')t pjtrk ~it/Ll proj~ which rts.ult~ tu an·.b\ctease ~(tiina bill• b.f .Si.S mi)lk,,o. Ais~ ~ec~ff$'~ w~ibe.re.sutt ~f.qp~on8 ot~ ~eral F~ ~-~~~ in~ 'by:~3 -~liO!\-Of~ endin( BP~· fund ~ance~ $39:·8 mit~:~_-4.U~ ~ constituted ~e.¢ fund balance whieh -~ available for. Spen<tiilg at th-c 0.ey's. ~on. ·'flus cqared to $25.~ ttljllJ~ 0r 30.4% at the.end of)'he prior nscal.year. ·The remainder of ~~d~ i~ ~~:~ wtic.~~ it .ms .. ~9Y ~.cgmmjtttd tq pay de~t seivice, t1se in~¢ i)f ll!iP.f9vcd capital projects; OJ is JeStricled for other pun,oses-. · · n,e ~eral ~~-ip:~ ~~ o_peratius fipld of~ c_ity. Ju.f,he cmd o.f the fiscal Y.ea:f ~ ~d ba:iance-ii'l' tli.t-~ ~p;was approximately ·s1~.lhnilli~ ~mpared t.o s11 ~ nulliJn 1-G:ifie ~ils: ' :.,;,• : . . . . . ·. . .•· . ' .. . . . 30 ,•t • • ... ' . . •~ •• •• • ':~ ••.•••,:• 0, .. N..;,,: .. ,~•;_• ~• i•, ... :•••,:::,•,•_•,, .. •ww:_..;:::;.P, ...... :_::,•• ' . ··. . . .. .:. ::~ . ... . ,~ . , \ ,,.,.:,, ~ity,of~µI?~~ T~~ .. ,,:·····: M~•gt:~~~t's Di~ussiQl:I and J.\n~~is . For the Year Ended September 30, 2006 • • !: ,; ;•,,t. , ... ,.~;,•,·t~:~:~• ,:·:~1~:,:~·-: ~:t· "j•t•::-.. .'."> fiscal year, representing an increase of approximately $2.S million. Tota1 fund ba!a:hce (reserved and \?C~,--c). w~.$~?:~ ~P.~.~--~e e:n:d of~e,~J~ ~~-~Jl.7:4 ~Pp,t~J1e ~ ~f~, · Fi~:~sca1 ~ .. '~.-a'..~_<iff:b.e Geli~ ~1:rs.1iqlJ.i<:lity;'it is ~sef/:tl to ·~~PP-~~-=· ~balaiice arid 1:9ta1'fiind l5ahmce to total mnd_revenue.s. _u~ ~hiµaijif ~v.4 .. iQ+¾ ,. . .. \· .. ... . . ' .... ~ .. . . . . . .~. -. . .-;, ... , . , . . '. '. ,,, . }, ;/ of total Genera1 Fund revenues. which is ari improvement over '19.7% of total General Fund revenues in the_ prior year. :ro:taI_ .~db~ w~_20:_4% of total General ~d xevenues .. cOOff~.to .19.~ ~ -~-: . ~t}i~:,,~_;,· :-· ·:":·':;·.. .._;;: '~,: .... :-.. : < ' . .-... ·,:. . . . .·· :·.·. '. ··' . ' .:. ' ··.·:. ·; .. :.-. ·.: ... ,: .. _.,_;;~ ·•::. l,'.,; ,r-:r;: ,., ·:·.,fa~··· The'dty~~..-:-' · • · -., fiiods· · · ovic1e· ~ciitiaiiy t1ie fune ·~ 'or ~tiofi t~fui<i-,:~:' urms~butm·thoTe'dttail~~ .. -~ .• ·: ·· .. . .. ::;:·:: '· .·="' •' ,.-:-:.·:-:•<.>,/.'"_:.: Unrestricted net assets of the major proprietary funds at the end of September 30 are sho~ ~ with amountspresentedinOO0s: . .. ···,· . .:·~:, __ · .-.. ·.··.'\.:\:·,.··.:,.' .,·,·._'_.:; 2006 Electric Fund $ 32,141 WatttFund 10,878 W~Fund 9,593 W'JMPA l,307 Stormwater IQ,022 . ,:. -~·:·:·c ·,--..~. · :-:·:.,}.,ii··:. :.1:~··$, ...... ~ •, 6~~J ', .:.;: :• "I 1, ~(::•,~· •' :',•~;;~~••1•,••: l'-~J O '• '.:.'' I 2005 ., .. 1;4,.\Sl '-6,8U "5,964' 1,314 · 7,420 . ... ·, ,35..,~.7-, · .. . . . • • •• ~. • , .., : • ? • • •' .. ·, :: .. ' ·.~' '•' ., ' ',.,, ··: .. ·, .· ... ....... :. . . . . . .. . :·~ .. ' ' t •• •• '. ·.. , ' •• ·.' , : ::·: •.'; :,:"";t·t· '~: l .;.. I ,,', • • 0 ,,•'t ,, .. , _:.• .. ., ••; ,•}' I •'. , '• ,' • Tbtf•liP&L'Fwtd·-iftaeased-UJm:Strictr:d net assets'by··s1s.O· millioo.•;compared ta'm· ~'of'S1.1 : million during the prior year. This is mainly due to the results of operations and 1J:ie·'~isiori by City'.···. Councn not to charge for payments in lieu of taxes and .franchise fees until adequate cash reserves are established. Increase in net assets w8S'Sl6.4 million fu FY200!i'ana $3.0un1lioti' in ·FY'2004-0S.·. •.:. The.Wati:r Fund-ref!~ a-:curreat year increase in unr.estricted net assets of near]t $4:f million compared ~•a.~i;e·of.$7.3-million during the_prior year. In the cuxrent year.·revenues'weie'.hl~ than-.e,q:>.ected· due -to mcrased, water usage, while in prior. year · the· Water ·Fund had, a:. loss·-due :to termination of an interest rate ~ agreement. · · ·. ..-· · ·. · < •• ·: • · ~-~,W:as~_.Fl.,lµd .~~ a •~i.year in~ in .unrestripted net assets of approximatcly·s.3.6 mill~ co~ to a. SA~i~~ during 1be prior year .. In CUJ}"ellt year, revenues·were higher th'1, ~p~t¢ due to ~ dispF.ge; of a higher volume of witer consuniptiOI\. ... ,_. · . · : . ·· . , ~\v~A Fund had -~ ·slight decrease in unrestricted net assets. ~ pri~ ~--~~;s' change~-. decrease in unrestricted ~ assets of $.4 miilion,. primarily as a result of operations. ,•l.1.'':'1..,'.j •,:~~\::; ., .. :.!_~·.1·•,· :,;:•:~r.:,:•.·· ,.,·. ,.· .... ·,.· ·. •; ,•:, ··~: ,· ., .. ·•,,.\ ,·:;-,., • ,,·-.i ·i'? ,1:•:i " 11te·storm Water ~-~~-~)~~~:in ~cted riet ~~ Qf ~.6. ~li~•dwin& the . .fi~ year compared to a $6.f'inillioxdncrease· in the ·prior· fiscal year. The increase is due to the result of 0~n°~~\' ··-··.<::; ' i· ' , ':·,·· •. •," ! ••• • .··r:" ... ~·'. •-:•· • : • • :-.... • • •~ • • "'• • t ,-• I •,: • •• • ~.--• .. ·-~? •'•' ·. )• · .. '; '·. ·: ' ·•!•-~·::J~•··" ; .... . '. . . :, .. : .: .... ·:: \ :· . .: ... -~ . -~; \ . 31 ) City of Lubbock, T~· Management's DISCUSSJOD im,d ~~ For the Y dr End~ S~pteiQber 30; :ZOO~ Ge,)e~ ;Fund Budgetary Highlights .•: . . , . ootex-eii:~-~~~·origµial budget and 1he final~ b~wi~-~~iY,~.5-~~)ri • :· . '!·l•,fu''' ·,.'<,'.~\~iid' tiansfurs out. The inhin reas,on for'~ k.~'was budgetbig fc;>r pui~e ~ ,•; ~ •.·• , ..... •' ... •' . . . " ..... ,. . ,.,,-.... . .. ,. •" / ... ~ ....... , ., ·of~¢.ry'~de:gu@i:l,.eri.tthroughtlie~~of~j~l~. .: .. ,.·, __ .. ,. :_ ·.:,·:,;.-,., .. ' .. , ~-"". ---:,--,.::"•~--:-•:•: .,-••-••••• ~ •--.,•11..---•••••, -~ •>' • ••• -•••• ••-•••• •••••-•--r • •• ••• • ,I•• • ~ •••,. 1 , ,• ••, • , , • • Rev~u~s iti tbe''C3dti!ful 'Pund 'exceeded budget by $4.3 fuillion priinarily''cfue 'tr> ~f~ ~\~.¥ sales tax collections and fumcbise fees. The Genc:ral Fund ended the fiscal year with expenditures and =~t~~~~or~~~~=~ ·:e~~f6~;;::::-=i:~~~ following additional controls to ensure more stringent 'budget control: · • Biweekly Budget Forecasting and Manager Review Position Control Management System arid Requisition Review • Biweekly Overtime Reporting and Management Review • General Ledger Reconciliation Policy · · • Centraliz.ed Facilities Management, and Utilities Budgeting • hnproved Monthly Management Reporting to City Council • Changes in the Home Storage of Fleet Vehicles Capital Assets and Debt Administration Capital assets. The City's investment in capital assets for its governmental and business-type activities at September 30, 2006 amounted to $860. 7 million. net of accumul11ted depreciation. This was an $84.6 million increase -over the prior fis<lal year'.s balance of $776.1 million. net of accumu13ted depreciatiOI!- ~ ~v~~,c:aeita'l ~sets includes land, buildings ~d impr~ts. t;qujp~-~onstruction-i:n progress, mid ~$Ire. -, ,•. Major capital ~ events during the fiscal year included the following: • MaQy large ~ projects progressed due to dedicated funding from the J(j(:al fumcbise tax; which ~ 2%-·of lbe· 5% fumchise fea; to fund Gateway Street Projects'. · The largest Gat.ewa.y Street Project c.ontin~ with 'the construction of a T-2 thoroughfare street with $12~6 ·million-expended in the fiscal year on Milwaukee Avenue .from 34th Street to 98th $wet · · • Large, amounts.·of existing infrastru.c1ure. and reconstruction of roadways ·Has been ~Rshed . within the North Overton Tax Increment Financing (T]F) ~ves~t Z-one. The' funding for these projects comes from. taxes generated from the increment oi property valuati6n growth 'w'ii:bin 1he TIF. The funds used to finan~ the projects are generated within the zone. and do not impact~ or fees to citizens outside the TIP. · · · . ,. ' . . ' · · ; ' ; .J ••• i • The Water FWld acquired $19.1 million in water rights from the Canadian Municipal Wat.er Rj.ghts Atithority-aril:I continued work on numerous water lme cll:ange. 9uts and· e:x.tensi~ . . .• . . . . · ... -\ ' . . ~-.. ' -.... . . . ·; . • Approximately 38,000 square yards' of new paving was construct.ed at the Lubbock Preston Sritlth . International Airport to help serve air carrier aircraft. This project also involved removal and installation of nevr.taxiway lighting and drainage improvements. Expenditures on this. projtlct totaled $~n million during the fiscal year. Expenm:rures to date on the project total $10.5 million. . . 32 , .. ...... ~ .• -:·.' ·.·. ', \-:,~·,. ~"\ .·.'. .• ': :---:~:: •• , •. _i.._-:..., ... ' ) -., ) City of Lubbo« Tew Managem.ent'.s Discassion and Analysis ,p~ tbe Year Ended· September 30, 2006 • The City contiDues work on;a 'flood relief project.linking.South Lubbock's chain of playa labs with an U11derground drainage system, ~ding $12.8 million during the fiscal year. Expenditures to.date · · · --on Ult project tx>tal-$26. l million. . . · .. · · · · .,.•~ -:,.. 1,,. ~ j· :,••':'. ;!.,...,~1 •. t~'t~.:.: :,i_;,:;, .... •.' -;". •" •... .., .• ,.I•',•;. • , .; • ,":, •• • ••• \ • • ...__,.-:, ;· At the end oftbe fiscal year, the City has construction commitlJlents of$159:7 million. • ·t · City of Lu.bl>o.ck Capital Assets ; •. i ;,··-;.: • ."'. • • .• ·• •• , ;• .. "';._·1·.-:.-~ •:: . :(Nd (!.f .Ac~.-a•lated Depnelatio•) S_eptembier 30 . :~ ·. : :-:·: :, I••' •t t (la OOO's) : .· ..... ~ Governmental .. ,.,.. •.... ' A.(tivltiM .: ... ' Basiness- Type : Activit~" · · · •.' ·· ! '., -... ~ta ... '····t •. ·.·,·' '\ . ":.,. · · '., •'• ' 2006 ;,-r .. '··20os . .. · 200&"·. '100s · • , .. ,2006· ·.•·'''·· '200S ., Land .-, · ~, • 8,971 ..... -s,9s·1 31,949 . 31,949 · · · ·40;920 40,~o Buildi11gs '.'· . . · · , • 29,870 · 28,146 . · 64,092 · 65,'951 , ,, 93-,962 ·' ·, 94,097 Improvements other .. ,-~qujJ.dpig~ •.,, .· .. ,, -S0,443 43,895 .,389.~74 ~~.~~~ 439,?J1. , 39J,288· Machinery ~d oqufpment 20~~15 .-· ·19,.829 .. 77,9..9~ ~~.7!,~ .· ,, ,•: .~8.~~8.: · :· 83,S48 Construction in progress so;6.so· . 37,793.. 0 136~646 128.432 187,296 1661225 To1al S 160.549 1381614 100;1s4 6371444 · 860,703 776,058 -;~~~al·~o~ti~.•~~-~~&tt~ c~tal-~ ~ ~ ~~ 6ll i>a~:12~1.S qf~~~: .. · ··." .1 .. . ::-:•!:. ' .. .I,, ! . :r--~ ·.:: . ,. . .. : .... ·~ •_,., ..... ,:: w.. . ... General' ~biiplion· bonds Rtv=.ue bonds Total ':-.· ' .. : ··» ., ·. .. ;._ .. . ! ,'.',; I • • i • ·,·. '.· ·.'' ~~--' . . ;..: .. .. ! . -~ ' . .;·, ,., ,: , .. BllliJii~· . ... : . Gov~rmbritai ' "l)pe. · •.: .. ; :-: -·. -~. . Activiti• Acti•ltlu T.otal$ .... 2006 . . . .26.05. . · -. 2006 .. . · 2065 • ... : l006. . :.• ·: ·• .,, 2:005 .:, , . • S 124,457 I 02,720 .123,568 286,750 448,025 389,470 SS,072 42JI00 . .581079 . 42,800 , .. . S 124,457 • . \021720 · 381,647 ·· 329.SS0 506;104 . ·· .. '4l2,'2.70 ~; .;_,,: '.' !. : , •• : .:, .... ..... • •• ·•: • .•:, .;... \• ;:, • ·,1 ,' ,·.· • •• •• ·There is no direct ~~t.limitation.in the City·Charter or under State law. The City·~tes lDldel' a Home Rule Charter tbat limits.the maximum tax rate for all-City purJ>()SeS to $2.50:per·Sl{)O of assessed valuation. The Attorney General of the State of.Texas pemiits an ellocation of $1.50 of the $2.50 -~ Wt.1.ilte f« .ge;r:icml:obligatiQll bO'Dds debt sen>ice;,-The CMrerrt interest,and smldng:,fwid tax. nteper·SiciO of assessed valuation is.$0.06094, which is sigoificantlybelow-the'maximum a:llowabJe tax rate. . .--:1/.S..f'i!~, .. ::.:•:: ·. ~ ... ~~).:.!..~ :•_.;.1,.; •• :-·-·· ••• • • •; .. ,·: •• ,-.::• •• :•:: .. • ~ •,:,: •·.:.;::':t :_ !" .• A$·4:~.ep~lier}0;-2006i, the·.City's total outstanding debl bas increased by $73Jhnilliori"6i-f 1.) % over &-priQ£. ~-)"Cal',.· The:~ jn -o~ .debt js attnl>uted ·to :tbeaissuailce •of ·S28.S. milffon in ~t;J .otriiet ,by. ~:'jJ1ay.ment 1)f scheduled debt service totaling-$25.3' IID1li00.' and the istllan~· of -$18.8 .milllon..of:debt'f.o defeasc debt ~$18.0 .million. _. · · · · ... ·· · · · ,, ; · ·., · :i: . ·•;;, .. ·· • 33 .i · CityofLu.bbock, Texas Management's Discnssion and Analysis For the Year Ended September 30, 2006 During tbe fisqal year; the City issued 1he fo1lowihg -bonds and certificates: ·, ·• • • ' :· .:•: ;. ', • ,• .I •, ·.:\_.-;,··• ;: \.; ' • $2.7 million of General Obligation Bonds, Series 2006 were issued:to . fund the current capital improv~ plan. This issuance was the thizi;l installment of the_ $30.0 mi~lion capital improvement debtissuanceapprovedbyvetefsin-2004.--..... , •·. · --~: ---... ··, :'· " •· • t'l7.0 rm1lion·of Tax and Waterworks System Smplus Revenue Certificates of Obli~on, Series 2006 were issued· to finanoe projects in Wat.er, Wastewater, Solid Waste, Storm Water, Airport. Tax Increment Financing , Lubbock Power· & tight, and Gateway Streets; as well as Parlcs, Streets and Municipal Building projects throughout the City. • $18.6 million in bonds were issued by the Canadian Rjver.~1,1IUcipal Water Authority(~ A) for ... Lu~•s sbart ~fthc,$49.i rmlliQR CRMWA..Co~ Revenue.Bonds, Series 2006 {Coajunctive Use Groundwater Supply Project) for the purchase of ·water rights. The City of Lubbock is· contractually obligated to pay the debt service on these bonds over-a 20 year period:- • $18.8 million of General Obligation ~ding Bonds, Series 2006 were issued to defea$e ·$1~.0 m11lion ·µi outstanding bonds in order to achieve interest savings. · · All bonds ~ssued during the fiscal year were insured to provide a lower c~ of in~~ expens_e for the City's taxpayers. It is 1he City's policy to ev,aluate each bond issue 'to determine 'wn.etb.er. it is economically feasible to purchase bond insurance. On November 22, 2005, the City of Lubbock received a rating outlook upgrade ·from · ••sfabt~" to "po~!h'e" ~ ~oody's Investors Secyi~. The Ot.:Y CUIIeiltly uajntains an "AA-" rating from Standard & Poor's and Fitch Ratings, Inc. aruJ .. an 14Al"' rating-from -Mdody's Investors Service for 'general obligation debt. An three rating agencies have placed' the City on a positive outl.oo~ which indicates the poSS?bi1ity of a rating upgrade in the near tenn. On De~ber 21, 2005, LP&L received a rating upgrade from "BBB-" to "BBB" from Standard & Poor's. The LP&L revenue bonds· are currently rated .. BBB" by Standard & Poor's, "BBB+" by Fitch Ratings, Inc., and "A3" by Moody's Investors Service. Additional information about the City's long-term debt can be found on pages 81-86 of this report. Econoanic Factors an~ the Ne~ Ymal Year's Budget a,ncJ Rates . . . . .. . -' ' • A~ the end of the City's fisca] year, the unemployment rate for the Lubbock area was 3.8%. This is tbe same rate as September 2005. This compares favorably to the state~s unemployment rate of.4,7 % and the national rate of 4.4 % for-September 2006. · · • Re~1 • sales figures are only available lhrough· the. third quarter -of· FY · 2006. Total n:tarll . sal~ refleeted a 7.3% increase for that period· over the same period in 200S. · · : · :. . . . • The number of building permits for new construction decreased nom 2,222 during FY 2005 to 2,052 in FY 200.6 •. or about a 7. 7% decrease. This. compares to a 20;S% decrease during the ptk)i" period. B\lilding permit values for new construction deci:eased .from $388.4 million iu -FY 200-S to $376.2 :rru1lion. in 1'Y 2006;. or about a 3.1 % decrease. The number of rie.w ·construction: permits· and new construction valuations hit an all-time high in FY 2004;--The current.numbers are still much intprbved over years prior to FY 2004. 34 .. ,, City GiLubbo(k, Texas Management's.-Discossjon aqd .Allalysis For the Year Ended September 3~ 2006 •· Total o.c:cupancy, in. local hotels and motels improved an,d the local occupancy ~ tQtal~ neirrlY $3.4 •··,· .... million:;a4.6°/ci:increaseoverlastfiscalyear. -.. -: . . •• •, •:, :-· • • : • 1~•.. '.-' • • ,1• ~ ~-· 6 .... j ...... • City Council again decided to support the operations ofLP&L by forgoing transfers for payments in lieu of wees and franchise fees for the upcoming fiscal year. The City·<Coi.mcil intends t9.:con1,in11e this support until such time as LP&L has adequate monetary reserves as set by City ordiDance. · :.~.,····••:.~1 .. :·~· ~:.rr.~.~:'"'• .. : ~ .· .·. -... . .-·~·rr:..:.,-·~ ,! .~;i-... ,. ~ .. ~ · .. :··., .t• : .. ,: •. ·f:: .. ·--:-r:.·~:-:).,!·· -Alld~fil,.ctors-were·considered in preparing_the City.ofLubbock•s budget fQ.r~i9<)7 .. .,_ .,· · ~: i ··~ F/ 2~7 the Ci; adopted a $.00444 'mer~'~ the G~~ i~4 .. :~ ;~-;-~~~/'.ik General Fund increase wm bring an additional $1.7 million increase in revenue from both property value growth and the adjusted tax rate, The additional revroucs will help cover medica1 insurance inflation costs, a $1,200 cost of living adjustment for all employees, increased fuel costs, and 29 public safety positions added mid-year of FY 2006 that will have the full effect of cost in FY 2007. • During FY 2007 the City adopted a $.01035 increase in the Debt Service Fund real estate tax rate. In the last several years, City Council has adopted a number of capital improvement projects to address changing community needs. The bonds for these projects were sold in 2006 and related debt service begins in FY 2007, necessitating an incicase in the interest and sinking fund tax rate. • In. FY 2005 the City adopted a mastei-I.ease program to replace public safety vehicles and other equipment that bad been neglected. The cumnla.tive effect of master leasing the last two years will increase debt service payments on master lease obligations in FY 2007. • The City has prepared a 5 year projection of utility rates for Water. Storm Water, Wastewater, and Solid Waste Funds. The Wat.er Fund will 'experience an increase in rates as the City a~vely · seeks to obtain wat.er rights, plans on adding infrastructure to transport water to the City, and maintains existing infrastructure. The Water Fund rates wil1 increase 11% in FY 2007 and are expected to rise over the remaining 4 years to fund debt service on wattt capital projects. The Storm Wam-Fund will incur debt as the City focuses on infrastructure through the South Lubbock Drainage project end oogoing maintenance. Storm water rates 1lre adequate for the future debt and are not expected to increase until FY 2010. The WastewaterFlJn9 and Solid Waste Fund are also expecting slight fee increases over the next S years due to operational cost increases and increased debt service. • At the March 23, 2006 City Council meeting, the City Cotmcil approved the "Policy on General Fund Unrestricted Fund Balance and Appropriable Net Assets for All Other Funds"'. The policy targets an unrestricted fund balance in an amount equal to at least 20% of regular general fund operating revenues. The policy targets appropriable net assets in the Watec and Wastewater funds in an amount equal to 25% of regular operating revenues, appropriable net assets in the Soijd Waste, AiJport and Stonn W8ttr funds in an amount equal to 15% of regular operating revenues, and appropriable net assets in the lntemal Service funds in ·an amount equal to 8% of regular operating revmues. Ftmds that have budgeted utilization of net assets that ~ the appropriate target policy includ~ $3.0 million in Water Fund. $1.S million in Wastew.ater Fund, $2.Z million in Solid Waste Fund, and $2.2 million in Storm Water Fund. The City has not plapned any use of General Fund ftmd balance in FY 2007. The LP&L Board has set their umestricted :net assets goal to be $50 million, or 4 months of operating expenditures, whichever is greater. In FY 2007, LP&L has budgeted to increase umestricted net assets by $19 .3 million: .35 I. ) ) ) aty-ofLubbocl4 Texas ·Management's Discussion and Analysis · For the Year Ende_d September 30, 2006 • LP&L FY 2007 base rates will be consistent with FY 2006 rates, but the fuel cost adjustment rates ·: ~l vary.based on ·supp1ier cost. -Orie ·or the main suppliers of fueJ.to L.P&.Vfu!s·applied for,a 15% increase in rates. and if approved, could increase fuel ·costs up to 15% m 'early 2007·,. This·may cause electric rates to increase in FY 2007. ·-... ··:·; +~ ....... :;~ . ··T -~·.· ·r~ · ............ /.,1;.~.• ·-·-··· • ~-.. . . ' . . . . .:.: •• ,. ·-·· ••• ff•-..... • • .',.:..,;\,• ··-'--·:.!.'-_· .... -.:. .. .:. -· __ :,.. . . · ~u·es-ts fdr Information o : • ,•• ;3;, • :, • •• I ' ,'. : • •,• ' • o ~ • •:, ! ' : •••' ~ I O , • ,: ' I ~ " , •.. :•: ·: '\ ' . .. ·; .! . :~•. : ., This financial report is designed to provide a general overview of the City of Lubbock•s finances. Questions concemmg any 'of the information provided in the report OT requests for additional-tmancial information should be addressed to the Chief Financial Officer, City of Lubbock, P .0. Box 2000, ··Lubbock, Texas, 794'57'. · · -,. ': ·· . , · · ,,Y'' •• .. • .•. , \ ··:· .. ,. _ .. .- 36 ) ) City or Lubbock, Texas Statement of Net Assets September 30, 2006 Govtnm1eutal Business-type ' ..... ..,· ~ .... · Activltles Activities Total Component Ullits "'i .e .. , ...... , _ASSETS ·,,:,~~~cquivalenls •.. ~ lnwMenlS . '·' ...... s 21,577,1~.~•('· ,$ 37,135,183 33,373,806 27,620,285 (2,009,936) . . •·• l9,0i3;367 ltoce~cs (Del of'allow...ce for om::otlectibles) ln-l!Jalwe DIie lnlrn olher f:OVUNIICllls o..e froll'IO!hea ln""'cories _, '. ~ in property Ptepeld expcnn:, ·.,_:-,.~-' • .,, -~ Wld cash equria!cn\< .,;_:i, ~ R.~ Mortpp ~•Illes ~ j .!,,. : 'I~• • • ••• • . '.·.• ! . .... , .. . ~ .... . ·; ':?~IP_if-lwe1$(!1aof~ulaledikprecialion):. c ," .:· .. ' .. NoiMsepm:iable DcpRcilble : ,' ~·-.. · .. ~ ... ~ : :. ,i:-:,: / '·: :, •• *.' ;~;.. :. : LIAIIILITJES ··'-~p~ /. ". ~ .... ·. 11,719,391 2,0()q,.9J6 3,4~-7~.& 2,3_~ .. ~~,6. 2-tl.,q52•. ~;103 _. 9~~-:- •.~~-- S2,9~~l~- 124,69,4 .. ,it;:.,;.:.'·: .• : .. S,SJJ,.3_30. , ·t.:?: ·.,. S9,6i(~' · 100,9_n~;4 . .•.'(.·:. -· ... 1,863;690 3,ll6,0SS 18,915,606 80,658,361! 106,010 168,594,938 S31,SS9,SS2 3,rrn,m ... , ., ~., .S,66'6;12.1 .. -16,869,683 • • ' t~. : • 6,953, 79!> 3,ISS,693 ACUllocl ~ Accrued inlonst ~: : :: :i,,:;M •, 959,4:ii•: 4)61,554 -~~~~.dP.Sits :'~'.. ':: --:, __ :·.'. :. ____ ... /;~!:':·'::. ..2,990,665 ::.'~~-·:.'··'..':.· .. ~-t •",(\',•,I .'• • ','.)• _.. •• •.. ,' : .:., .. ~-~•dCf ~ue;~-•illlin.one year:. .··\ .. ~:.:,~Jt' :.{. 5~~?!:~t.}).,:\. Coonpematcd •bl- Aa:rucd inslnllCZ clti1115 COntracts ail6 kases i,i:i,a-,,le Bqnd,~ N~_IJ!lf;,illllel'.~·il! more than 9J1eyac: ., :·•',• .. C~'lod tblellc# '·. . . .-· .· . Ll·~oil~anc1·~~~~-: - Ac<Md!nsi,r,,iioecbims C~md I-payable Sc,ndtP")'3ble TOIII lialrirniu NITASSETS IIM$1ied iii capilll _.., not oCldlled debt RISlrictcdfcr. l'as5Cllgef ftc~itydlarp Debt~ CinllllPfl)p,!$ Prilnaly govemmml~ u~ ToialllCIIS'Sel.9 .. .. See aec:ompanyiflg Notes to Basic Financial Statemenl$ "t!"' s 6,133,264 2,512,041 l,4i6°,999~ · 6,367 i599 · , ' 2,571,79.S 2,~,632 . J,974,403. 20,053,550 • .: 2,794,001 .. : . :·.· 3,299, t3I 249,115 6,-103";560 120:598;'98'1 112.214,tBs . } .--. . ' .. .~ .. -....... ' ' ,4;ooz:;16 · ·.6,145;719 . .c .. ·• •• -~ r -.. U1089J97 ..... $ 11;1211026 37. . 2,816,344 6,414,565 363,571,365 433,217.381 . 380,)49,135 · -:, l,630,62S 15,284,981 ·•.1 . ·, 7117291712 47017941453 S 58,712,622 S S.,950,665 S2,387,J73 .·· , .. 22~,144 39.339,676 .. , .1.on.s95 s 3,487,'.Z78 4,233,546 ., ... ,. . 3_;328,107 ·• 208,103 920,112. 22,913.182 133,646,394 f. -~ •••• ' .• !12,158 53,490. 176,852 230,704 . ~ , .7.,~,000. S,813~30 ~J6,74S 632,-487,386 3,017,111 1,189,007,745 22,536,404 10,109,492 5,220,976 2,990,66.S 5;1'76,'605 8,705,059 4,956,673 . . ' ... _l,~04~9 829,241 16,77S,~44 1;01i,211 'i62,J01f . '7,133~046 .. : ;: . 3,401,402 1,412,685 26,421,149 · ' :, ' . ··, ' 12,920,774 3,299,131 3,06S,4S9 12.518,125 484,170,352 605,492,266 456,632,469 3,630,625 J9,287,SS7 6,145,719 9718191109 S83J151479 t,241,971 10,968,228 2,164,396 100,000 s 3J4~720 S,801,ll6 ) City of Lubbock, Texas Statement of Activities For the Year Ended Sep_tember _30, 2~-~6 . Primary government: Governmental activities: Administrative services Community services . Cultur.11 and rcc;reation Economic and business development Fire Health Pof'tce Other public safely Streets and traffic Non-d~tal Interest on Jong-h:1111 dc:bt Total gov,ernmental ac:tiviUc:i; Business-type activities: Eledril: WatCI" Wascc:water Solid Waste Stormwater Tr;ansil Airport Total bu5inc:ss-type activities Total primary government Component uits: Civic Lubboclc, Inc. Market Lubbock, Inc. ;t;,: ... : ' ,. ~:. . . •. "". ': ;• \"• Charges for El:pedleS . ··. . . .. Smit'eS • ~.' ~ • J - ·. ·. _ .. -,•• --. $ 9,910;392· · ~·-· .. ;. .· 6,112,1'93 . 18,9[5,265 10,283~007 26,711,389 5,Ot'3,691 42,063,023 5,239,386 l l,&49,4~ 5,206,309 4,32~1:ts 1451630~79 213,026,628 32,830,~ 21,273,796 14,97.~,42~ S,111,?3~ 9,3!~).~~- 7,9%,69l 304,622;38Q $ 450.252,659 $ i,m.ow 6,350.?-16 $ 54,3'.S<i 2,590,241 188,856 13,165 7_µ,113 209,251 4,984,968 494,312 374,629 9,6311891" 226,373,638 37,330,953 21,087,364 13,948,861 6,348,461 :3~,~1 5,424,016 313,781,734 $ 323,413,625 $ 1,703,598 96,728 Operating· Capital ~nu l(Dd Grants and Gontrihutio'iiir-' · · Cootrihile£ons $ $. ··• .... ,. S,677,-113 668,25! 36,632 ., l,~8,999 386,165 · 17,452 104,8&5 2,283,899 . 86,614 397,054 nt,962 '39,300 844,9:30 59,296 2, 754,55 I 31,740 . 3,808,242 .2J,633 7,294~_~,. . _ . 96).605 . U,040,385 8,351,605 171624.lll $ .. l§.SSS,%8 . $. 18,4$.,741 $ 249,220 '•• $ 6,082,671 Lubboek Eamom!e Development Alliance Total component units 2,638,367 . -:· •' '•• •, 61!35, 1.60 • l t•• •1•1 • $ 10,761,090 $ Ocncral revenues: Property taxes Salc:sfllXcS Occupaocy taxes OtherT~ Franchise Tms ln~t~ MiscdJaneolls Transfc,s, net l,SO0J26 $ 12, 767,0SJ. . · =$======== Total gc:rietal revenues, special items, and transfct'S Change. in .net assets Nc:t assets -beginning .. ·. · ·\ .. ::'-.00.~.:-~•;,_ .. . -·:.-. ·::· ·: .'.··::·· .. / )f '. .. :· ·. :· ~ ... t See~ Notes to Basic Fllllll1cial Statcmenli ..... •.,., 38 ·:.•.· ., Net (EXpenses) Revenues and Cb1nps in Nff Assets Primary G~vemment Covffllmeatal Bwiot$5-type Activities · ~,-.-: Acthi6es " ;. · Total Componcnt Uoils $ (9,856,036) $ (435,020); (15,656,166) ' . cio,094, 1si)· •. ·· (26:574,973) ·, (3,262,579) (41,070,553) ... 84996" :· t .· ~ (I 1,210,99~)" ... -~\ :, ,; ,: . (2,S47,7~1}. ." I ,., ' ,' I . \ .. S (9,856,036) S (435,020) .: • .. ; .. ._... . · .. ,; (15,656,766) _:: '-: ·· :_ . . (I0,094,15~) .-.. ~ (26,574,978} . ,,_. (3,262,579) · ',•: (41,070,553)· .. 84,996 (11,210,999) . \ (2,547,7.1). (4,326,128) ·..,,.· · ___ _ (124,949,995) .•. ' · 1•.'1. ,,.,-.:---.• --:---.-. -.• , ' (4,326,128) ! ----- (124,949,995) ,:ij ,'. :1,··.13,341,010 ._-.· .. 13,3.47,01.0 7,314,798 7,314,798 • • -.• ,. ' 13 "'21 810··· · ., r .. 3 62-I 81"0 .... ,: .. _,. '. : 7.: ',' J ... · ..• ~.lo •. ·~ .•• • • • .. .. ) • .~;,:.:.~·1.~-. ·.· ·: (1,000,927) (1,000,927} 1,205,566 • '.; ·. . 1Jl4,199,_ -----,---· ;. : 9,433,314 --e----:-:-.,...·,.,... . '' .. · 35,135,710 (124,949,995) · 35,135,770 · ;~ \ .'· . ~ 42,770,826 . 45,576,582 · 3,410,92~- 1,036,283 ~ 13,348,364 4,393,782 6,140,436 6,898,288' ' 4;277,297 1,205,S66 1,.214,199 9,433)14 35,135,770 (89,814,225) ~ • ' ~ I 42,770,826 45,516,582 3,410,920 1,036,283 13,348,364 ' · '.1 :: 180,gll (171,317) 3,796,7'.13 3,806J87 10,534,218 14.735 ll,17S,S8S 9,607,t.fi •:: .. ~.~-.:'.~(9~6!YJ,2l'I) ~·--· · __ · _____ .. :-_ ................... . 127,042,256 810,522 127,852,778 ·, 14,735 2,092,261 .. ' ."35,946,292 . 38,038,553 , . .:.-~ '3-,821,022 110,628,765 434,848,161 545,476,926 . 1,986,094 s 112,1211026-. ·,:·s 410,194,4s, • ·-s ss3,51s,419 \'.·.s:,_,.:'.°s,$07.,116 \, ·•.· • -: ' ...... ,.·:~:.-it .... ·.!' _·,.,. ::=-. . . .. .. ,. • '·t .... ,_ .. • .. . ·:. .. -.-: ';•: .. \ / ... ,.._: ... ,.,•J .. , .. , :;,,-;I .•. -·•.•, '-';,, ·;: .-., ......... ' •::· .. : ,,: ... . : · .. ': .... ·.\ ... :•, •.. : . ' . '~.' : .... ' "'!. •• : ,·: •• •• :·· ·-:: ~,~-.-:" \,: ; .:,, .... \ . ,-.. . ,., .: · .... •• ' ..... '• •,1• • •I *• ... · : . ,/ •--;-•• ' .... ' .•.: ,•;: • ·I .. ; . ,:• I ,•; ',, ',•;, • ,-: '1:, "t• •, ' . ' ' ) "\ } City ofLub~ Texas Balance Sheet Govemmenul Funds September 30, 2006 ASSETS· Cash and cash equivaltnts InvestmCllts Taxes recei,able {net) Accounts receivable (net) Interest receivable Due from olhct funds 01ic from other govenunents Due from O!hers lnvcstmellt in property lnventoJY Restricted c:ash Restricted invest?ncnls Mortgage receivables Total assets LIABILITIES Accounl$ payable Due ·1o mber funds Al:Cnled liabilities Accrued interest payable Deferred revenues Toral liabiliries FUND BALANCES ReseMdfor: Prepaid items/mventory Oebtsetvlce Capital projects Special revenue -grants Perpetual care Unreserved, reported in Ocaera.llbnd Special revenue funds Total fund ba1aruie Total liabilities and fund balances ,.,,·'•·\' < ., .. ;· ,;:• <"",.'\1:.t!': .: .: ' ~,; •:, . '· ~-.: .. ; ·' . •.:., .· .. , .... ::i·: . .. ; No11m•jGI' ,, .. :· .. ,, .. • .. · Total . .. "Gcmiiiineiitai ..... . -Gi,~IQffltai Gc,aeral Fund Funds .Fuilcb .:· _:., ::t . . " -~i~:;,3~; ·;. -~- $ 8,456,7~., s 11,897,583 $ 7,605.360, , 10,344,S78 17,949;93,f 8,642.511 5,17,184 9,159.~~' 1,825,656 34),907 2.167,5(i3 ·' 336,741 49,698 386~~ 2,415,681 631,346-3,047,('tp 3,487,278 3,487,2?& .. 797,380 1,375,633 2,173,013 208,103 208,iln. 168,964 168,~. .. ·4;002,57.6 . "• 4,002,576 S0,430,838 50,430,838 .. 5,813,330 .. S,813,330 s 30,249,047 $. 89,099.964 $ 119,349,011 s 3,285,899 .. ·.·$ 2,199,53.3, · .. s S,~S,432 2,62'lm, 2,621,995 4,303,221 l,713,02~" · .. ., . .. · 6,016,245· · · ' · · 206,557 206,551 2,735,216 S,454,344 8,18?,560 10,324,336 12,195,453 22.S19,789 ... 168,964 l61f,964 -3,0lrl,539 3,081,539 · 52,331,096 52,331,096 1,392,508 i,392,S08 89,220 89,220 19,755,747. 19,755,747 20,0101148 2_~.0~0.1_~ .. . . ,16~~U-19~.711 .. '. 9.6,829,222 . .. .' .. · .. ~:\L•:$~--~~,W~Mt :_ .t.··,:a9.099,964,:·.': :,=s.· i1~,34!1,o_~:1 ..... ;<:·,:-.:~~>·_. See accoinpanying Notes to Basic Financial Sf.atemcnls 40 :;.,, •, ) ) Cily of Lubbock, Texas Reconciliation of the Balance Sbeet.· of.Governmental Funds To the Statement of Net Assets September 30~ 2006 , ', .. ., Tatal fuod balance~ g~vemmentil.l.'fundi Amounts reported for governmentaiaciivities in dui:state:menhifnet assets are different because: .. : .. •:. ,:· Capital assets used in governmental activities are not finaticlal resources and therefore are not reported in lhe funds. -·, :,-'.' , ' .. ·: ' ; ; . ~ .. .,,.' Internal setl'.ic.e fiu!ds (ISF's) ai:e u;;ed. by maaag~ent.tfcharge the costs of certain activities,, s.11ch. ~ ~urance and ,e1eimmunicatio~ tp. ~ividual funds. The portion of !he ~ets and liabillti~ o.( the JSFs pri~~ ~~ govermnental funds are incluikd.~ governmental acti.vitjcs in the statemeut of J1et assets BS follows: . ~ . • . . :. ~ .. , ~ . ,. ' . Net assets ., . ' ~-. :-.· .. .... 1 . $ 96,829,222 ·:·•· :... • •• f -~··. ' .. ·:.\ ;: . .. , ... ,: -,~·. ;i1:1•,-., .. : · '.3,100,464 Net book value of capital assets Compensated absences . : )' ~ ... ' -~--: ... · . (906,088) 61,808 1,584;904 ·· Amounts due from business-type ISFs for amounts ~erctwged •' ::-:-.. ,_. :;, :.-.:-:•, ,' Certain liabilities-are not due and payable in the cummt period and therefore are not reported hnh1r'funds, Those IW>ilities are as follows: ·· .: . .,., · ' ... ,;·•· . General oblipti9n ·bonds . , : :. :, ..... . Capita1 I~ ~le Compe~ ~~ces . Accrued iliteiest on general obligation bonds Arbitrag~ payable . -~·. ; .. • :: : r,:•• Environmental remediation .:.·· .:,•·: : ·: -:.:;::; Bond ~urns are recognized as Bil othe.r financlog source in the fund statements but the preip_i~s,are amortized ov~ the life of the .f?o~t~ the government-wide statements. · I,' a, • " • ; .:: ; Actual City contnl>uiions to the:fire-figbtets peosie1ii .ttili;t fund is ~ !ban the actuarially deteiminild requiml «1ntribution. .Thb:wili te,q11ce ~ fimding requirements and is not recognized as an asset at the fund level but is a piq,aid expense in the. Statement ofNet Asse.15. Revenue earned but unavailable in the funds is defem:d.. Net assets of governmental activi~~ . . '·, _,. .. . ... · .. ::::·.-: ... . .. : .. ·. See accompanying N~es to l:lasic rmall(;ial Sllilemalls. :.41 ... ~-.. . $ ·: :~-.. -. . ~ ..... '.' ... , .. : : '··:· ... .--•·:i:j·_,.: (124,457,2~Q) (7,S3Q~?) (16,2~.037) (7S48~ .-r,· · · ·:(I.Sl~7l6) .. ' . (922,555) ,, .. •,,:,· .... (2,3~J~ii) ... :'. . ·.:' · 920,722 ····· l;Q12,957 :· . ·L:~-l ;.:~.;. ·~·. \. ,112.721,026 i:• .. .., .. . ;. '::, :· . . ~--1•,, . ·····••t· ••!··- ) ) City ofLabbock, Texas Statement of Revenues, Expenditures and Changes in Fund Bab.nces Governmental Funds For the Year Ended September 30, 2006 REVENUES Taxes Franchise ~ Fees' and 'fines Licenses and permits lnlergovemtnental Cbarges fgr services lnterest Mistdlaneous Total revenues EXPENDITURES Cu~t Administrative =vices Comrmmity services Cult1mil and recreatioo Economic: and business devclopmcnl Fire H~ p~~ Other public safety Streets· ai,d craffic Non-dl:partmmlal .Debt service: Principal Interest and ocher charges Capital outlay. Total cxpcnditun'.5 . Excess ( deficiency) of revenues over (under} eicpenditu= Onm.R FINANCING SOURCES (tJSES) ~term debt issued ~i! ~:im (disceunt)· Capital leases Transfi=rs in Transfers out Net other fmanclng sources (uses} Net change in furid ba1anccs . Fund balan\:eS • beginning ofyc;ar Fund balanees-·endoryear . '! S 75,999,624 8,008,97'3 3·,981,978 2,250,635 . ,• IJ08:997 4,781~043 ?21,742 .. 1/4;5~15 97,818,207 9,356,059 13,986,576 1,146,267 24,638.814 3,738,790 37,463,740 4,287.806 7,439,045 1,882,255 1,009,368 144,858 .. 7.184,8~ UWS,444 .. : .. ··: S,119,980 13,325,046 (1,436,498) 17,008,S2& 2,548,291 17,37(),4:ZO S 19',924,711 Sell accompaning NDtCS IO Basic F'uiancial Slatanalts ,42 No!!~l!!r:•: Governmental Funds S 16,865,905 5,339,391 10,639.396 · · 1,307,162 2,953,198 S,501,042 42,606,094 5,932,820 1,409,701 8,973,916 908,623 9,l}~J ... 360,056 527,745 2,376.525 6,324,040 3,996,563 28,460,783 60,1~1023 (17,m,929) 27,526,113 620i860 5,352,042 {6,&40,909) 26,658,106 9,080,177 67,824.334 $ 76,904,511- • ··•·1• .... : ••,,:,t To~;· .. - Govel'1Ulle11tlll ,U~ds .. $ !12,865,.529 13 ,348,364- 3,981,978 - 2,25-0,63S 11,048,3 !>3 · 6,088,205 3,374,940 .. 6,%6;1Sl 140,424,301 9,356,059 5,932,-320 IS,396,271 · 10,120,183 24,638,814 4,647,413 .. 3 ,~ 71!,~,. I 4,647,S62 7,966;790 4.258,no 7,333,408 4,141,421 35,645,649 1 ?2,4S467 · (32,038,166) 27,5~6,lll ~,860 5,119,980 18,677,088 (8,277,407) 43,666,634 . 11,628,468 8S,200,754 . ::· ··:.· .. ~····, ·.!.f.:" .. ·, ··~·' ·-·., ) City.ofLubbock, Texas Reconciliation of the Statement ofRevemles, Expenditures and Changes In Fund Balances of Governmental Funds To the Statement of Activities F:or the Year Ended September 30, 2006 . Net change in fund balances • total governmental funds Amounts reported for governmental activities in the statement of activities are different because: OovemmentaJ funds report capital oQtlays as expenditures. However, in the Statement of Activities the cost of those assets is alloca1ed over 111m' estimated IISeful lives and rep~ as ~ciation expense. This . ii the. amount by which capital oo11ays of $35,645,649 e,a:eedc,d depreciation C?f $ p,29 I ,42S in the current .. ·: ... ~e,rii;,if. :·: :'"' .. :,·,_.,, . . \\ , Bo~~ ~s provide current financial resources to g1)Ven11neotal funds, but issu.i,ng~~.bt inmases long• ·; ·; '. '. tmn 1iabilities in the Statement of Net Assets. Repayment of bond principal is an -cx~itule in the . : :'_ ·:· : ~tal funds, but 1he n:payment reduces lon&•tenn liabilities i.n ~c ~!]l ofN~ Assets. This is · .. / 'the·amountbywbich procccdsof$Z7,S26,l13 exceeded ~aymen\s ~ dd>_t 'ck(~~of$S,719,l02.· Capital lease transac(lons provide current financial mourees to governmental Ii.Ind& and repayment of princlp_al ls an expendituR. This is the amollllt by which proceeds of SS, t 19,980 exceeded repayments of Sl,544,306. .. ; . S «11,628,468 . 22,354,224 . •:, (21.737,011). (3,575,674) . . BoDd premiums are recognized as an other financing source in the govem.Jllen1!11 funds, ~ut are «u1Sidnd <-: .. i)lp~ assets on the Stalmlent ofNet Assets. PraJiiwns are amortized~ ~'~f'e of the bonds. n,1s is. . : . . . . . ,: ....... < -:1Jic amOUl)t by which bond premium issued ofS620,860 exceeded amort#.a.lioµ,i>f.:$~9,2'.52. ;-, . : ,· . · .. ·r,-..:/,it':... ,.·,.~. . . · .. :.·· . -; //.):/:.;· ':. : . ,:.:: '.'-· . {4!1~.~g~) . . :. ,:\. \:\-.,,Estimated long-term liabilities are recognized as expenses in the Statement-of' Adiyiti~ as~. but are · . ·:·.' · · ~ · ·· , : · '. · .. ~_gnjzed.when cunent financial resources are used io the governmental .fwi~. ~. · .--. . : .' ; . . . . . · ,:. \ / · · .... ·_. ·.·• ... ;:i\rt>iblgepayablc . . · · ·;· ., . ,. (l:S1;7J~): · ·',::. · :.c~p~ed absences · .. , '·· (~24.~i2) · .. · . · ·. Envhynmental remediation (922,55$) .. Property taxes levied and court fl.QC$ and ,~ earned, but not available, are defemd in·tbc governmental . . ··•fllP.,~, but are recognized when earned (net of estimated uncollectib1C$) ill the Stat.erpcnt of Aaivities. Tbis, . ·:amount i$ the net di ange in def med property taxes and court fines and fees for tlie yr-.; Actual City con11jbutlons to the fire fightds pension trust fund are greater than the actuarially determilled Net Peasion Obligation (NPO). This amount is recognized as an expenditure at the fund level but is -~ when overpaid and reduces expenses on the Statement of Activities. · · .' · ln•J service fuqds are used by management to charge the costs of ccnain activities, sudl as inswancc • ~ leleeommurucations, to Individual funds. The net revenue (expcm,c) of certain intcmal service fimds u · · : · .reported with governmental activities. .. ·· (2,759,845) :-. (l.724,658) • ! •• Ac=uc<I Interest is recognized as ~ in the Stataaent of Activities at incurred, but is rccogJlized . . •. : -~ cum:nt financial teSOUl0e$ arc used in the governmental funds. This amount is the net change in tho ',, •1,eccrucd int~ this year. (i~,2.~5) ·. \.<'"#e ~~ dfect of various ~aneous nnsactioos ill\lO!ving capital assets (e.g .. nles and trade-ins) is to . ::-: :· · · ·'. · · · · d~ net assets. . · : -.;. , · (152,027) Change in net mets of governmental activities .. ;<-s ... ·. . ;on;u~ 43 . ·. ·:. :: :-.:·. ; . .· . . . . . · .. :· ~--.. . . . . ~:·.: : .. No Text ) City of Lubbock, 'l'eus Budget Comparison Statement General Fund For the Year Ended September 30, 2006 ... · •:-. REVENUES Taxes Franchise laxes . . . '·~. . Fees and fin= Llcenses·Md permits lnter~vemmental Oiarg~ for ,ervk:es lnlereSt . : : Mis!)C:llaneous T6tai menucs . ' : ~-. EXPENl>ITURES Current: Admi11istta1ive semee:s Cultural and recrc:atioo Economic and business ~opment Fite Health Police Other pUblic safety Stre:ets and traffic N~~ Debt service; Principal .. ·. ln~l'!I-" o~~-. · · Capital_~-- Total ~~ditmes. ; ·. : . .' ExCC$$(deficiency) ofw,enues over: (under) i:xpendi~ : · ... . •, .Origiisal Budget, Final Badget $ 73,888,ll0 $ 73,888,110 .. 6,886;~~ , 6,916,000 3,7g2,36<?,. 3,868,099 . J . 2,qM_12·.:· 2,351,155 ,.- .·-., <· .. ·.: ; ', : 406,63~ 406,638 4,53.0,123 4,347,518 660,073 660,073 1,066,411.. 1,081,411 ,. l. •••• :·"' 9'3,390,733 : ·,.-·· ' '93,SJ9,()04 "/.:-~ .... ·. 8,87.?~~7., 13,393,317 1,180,867 24,4~6Ji77; . · ... 3,634,~,,: -.. · . 38,80i;89ii ... 4,361;6.IS ' 8,281;641· -.. 1,422,064 · 9,036,722 13,393,317 1,173,897 24,623,844 3,649,443 38,802,898 4,413,756 6,981,641 672,294 ;. : . ""'=•• l : 1,044•682 . '. ,: : _: ·:. • :·'.:.. .• • ;:'.i· ./ i '. :;_-.' . • 1S0,606 .. ·' .. ' .. '. 4&6;290<-.·: 8,028,860 · .. · .IQ4,913.179.•. . : 111,971,960 (11,522;646?-I (I 8,452,956) OTIIER FINANCING SOlJRCES (USES) Clpi1a1 leases 6,210,000 Transfers in 12,371,843 12,548,843 Transfers out (849.200l (IJ83J88) Net olhcr financing l501ll'CeS (uses) J 1,522,643 I7t1_7S~S Net chmge in filPd balanQC:S (3) (977,7-01) Fu11d balances -beginning of year 17,376,420 17,376,420 Fund balances -coo of year $ 17J76,417 ! 16,398?19 See accompanying Notes 10 Basic F'manclal ~ 45 . ••,• Variance with Flaal Budget· Positive Amial Amoonts (Neptive) $ $ ,·!,,,: ·; 75,999,624 $ 2,111,514 8,008,~ 1,0;9f,973 3,981,978 , 111,'79 2,2S0,63S . .. Cl.OQ,520) 4os,m ., ... ~59 4,781,043 4~~,S.25 921,71~ .. .~6M69 1,465~1S. 383,804 4l!i9,203 971818~07 , . ... :-:9;356,0~~ .~' ..... (3t~j37) 13~~,~j~ · ·. . ... (s9_3;is9) 1_.\~1, , .... ·., • ~.630 Z4,638,8I4 . . .· ,04,970) 3,738,790 , " .. . . :(81),347) 37,463,740 ... J,339,158 4,287,806 U.S,950 7,439,045 · (457,404) l,8&2,255 (1;209;961) ·:•· •.· J,009,368. ••, . ·. 35,314 , .. •144,858 .· -·. •.: S,748 7,184,866 · . : 843,994 ·H2,218,444 . ·, · (306,484) (14,460,237) ,32':12,719 S,J 19,980 (1,090,020) 13,325,046 776,203 ~I 1436,498} {152,9102 171008;S28 ~466,727} 2,543,291 3,525,992 17,376,420 19,9241711 s 3,52S.,992 } City of Lubbock, Texas Statement of Net Assets Proprietary Funds September 30, 2006 . : . ~ .. Enkrprlse Funds .......... , .. .. : .•.• --, .. : ..•• ·:-~-.:-... •. • ··· ---.,.:,:.:,.\ ·'.',·:-:_ · .lllectric:--···0::;,,~:......:+?Wa'2t' ·Wa,~ter ASSETS ··• •. •,• current assets: . . . .. ~.· ~ :·. ~ . ·: :: . : Casb and cash equivalents ::., ; .. $ 14,436;'691 ·$ 6,167,041 $ 4,990,325 · Investments ', • ' ;l•,;· •• 14,329,165 5,362,0SO 4,338,932 Accounts m:eivible 15,545,253 4,292,453 2;:J,57,674 Interest reaii v.ible 53,91'9 25,851 17,612 D~e 1i1;,QJ, others 70,919 145,.322 Due from other funds - lnven~ries 246;5-3':r ,' ; 273(!_79 Tola! cum:nl assets 44,611.s·ot"·: ·· -J 6,192,293 II,749,S6S N onc:unenl assctS: Restricted cash and c:,ash equivalents 4,455,759 6,1:36,977 2,937,014 Restricted inveslments 3 669·ns · 21,029,028 16,435,385 ' ' . Restricted in[e('eS( receivable 3,611 Restricted accounts receivable 23,640 24,090 Defimed charges 3,fY771777 Total noncum::nt assds ll,202j714 27,193,256 19~9.6,489 Capital assets: .. ; ,, ' . , .. '\ .... :.:, .... : .. Land 756;714:., 12,724,350 J2,S78,77S Construction in progress· 8,814,299 32,078,S !19 , 8,377,603 Buildings 8,054,8·)1 21,640,589 24,013,170 lmp=ts other Chan building$ 180,986,045 261,578,561 114,818,170 Machinery and equipment· 53,267,250 31,342,138 17,684,958 Less accumulaled ilqim:iation {l 09,872,65 Q {90,024,387) !63,919[710} Tow capital 8S$dS 14b006:~s, 269J39,8S0 113,552.956 TO!II noncurJcnt ~d cap~--~ . l53J®,242· ·296,5331106 132,949,445 ···: - Total assets .. $ 197,820,743. S 312/725J:99 $ 144,699;310· • .. ' . . ·,•, '• . : .. :. ..... !.•,· •?... ;_._'; ~-.. ,,.";'" . •• ',"l•••~u ' I>•• See accompanying Noles to Basie Financial Statements . · .. ,.·i-.\···-... _...,_.. . •.•..•. '-.:;: WTMPA $ '1,296,219 366,253 1,800,814 6,173,451 9,636,137 25,200 (25,200) s 9liJ36,737 '. S ,~;Q.~9~8 5,22g,922 689,268 4,529 11,936,647 .. 1jSs,i10 21,504,033 lS,169 '22,877,972 283,337 65,636,nl '64,580 . 8,353,591 ~~~~1,~,: (9,252,045) 67,918,692 90,796,664 Nonmajor E11terprise ·hJtcts:· S :-:i,~,342,33S· .. 2.,975,896 -~,917,543 9,665 1,647,449 1,540,853 663,001 13,0~,742 •• o;,••. '·."":.· _,:. . ' . ·:-4)n1,'086. 9,370,844 18,676 13,4]6,606 • .. s,~jS3s .·.lJ,Q83,879 ,. 42'11.9035 ,, ... , ~--·.). 98,576,429. S~,9?.7:i,38 . ·····'·· .. (117,037,649) J0S,334,467 1 l!,75)1073 : ' :, .. Total Eaterprht lntemal Service ·hulls !pn4~ $· ~ · 3~~6,.539 , ··32.;601,lS& ... -.2.7,503,005 111,576 . l,863,690 .p14,304 l-,IB3,.S13 l~_,W,785 . : i1B:915;.606 72,008,528 37,456 ' .. , .. 47,730 3,077,777 . 94,087,097 • • ••• "t •. ~ ~. : · .. JJ.~8,711 ··JJ~,991,151 ·;.95).~i,'JBS •.··'"'-··· ... ,·~ .. -o64,312,196" ·. ·1.60,J29.~42 (39'o;ij 1,652) 69&,152,43.3 :.7W39.530 ·. '. ' $.,=:.2,l.1_1,746· .. ·-1,836,_077 . . ~ . ~ ·. ~: .. ,-q,488 , ', . -1,96,843 1,975,630 __ 6,pt,784 11),07,028 30,350 · .'·f 15,168 ll,3S2.,546 : I ;•.~5;.'.J43 , .. i.,.:~SS,076 ;--:J.~~~is ··64~,86&. ·" ·?;~lh4~2 (1,sosJa2) 2,908,14S l4,2(iQ,69 l $ 102,7,3,311 $ 131,347,81S $ 899,463~15 $ 201392,475 • '<_,"?;· .. :.,' •.'\ ••,• I .. ".:~ .. : /. ,. .· }·.' '~ ·. :::'.' ~ \ .. 41 :. ·. :• ·. ~ : . ~ .·· :. . ... .... -. I' '., :: ·."l.,, ·. ';• ·,•-\l,' • •," • • ., ·."': . ' ••,· . •.·, . . . ..,. . ; • • :,, ., ~ ' ~ • , ,. : • j "• ~ I -:, ' , ...... .. . . . ... : •, . .· ) ") ' J City of Lubbock, Texas Statement of Net Assets Proprietary Funds September 30, 2006 Enterprise ~ds .; . ·. ,- .. : .. . ;,·, .. ~ . .-:•: • . E,l~ic-···-····"·' .wa.ter · · · · .. Waste-,ter-.. LJABILmES Cwre11t liabilities: Accoun~ payable $· 1,035,206 $ 2,635,560 s· 1,066;886 · Accrued liabilities 1;535,678 '165,716 · 129,143 Acrnied intertst payable l,405,988 1,501,852 473;697 Due to other funds 6,173,451 CUstorner dq»sils ......... .-: 2;924,883 -s~.110 Compensated aQSellctS 1,076,262 512,60'1 269,716 Ac:crued insurance claims Leases payable 32f,414 248,255 509,081 Bonds payable 5,6231977 7,503,179 4,460,688 Total current liabilities 20,096,859 12,655,874 6,909,211 Noncurrent liabillties: Compensated absences 1,385,951 421,359 209,448 Accrued insurance claims Landfill olosurund post closure c~ •'•, -' ., .......... _ ... Leases payable 1,274,449 1,020,101 1,187,000 Bonds payable 65;369,133 1'48;948,252 · S4,3 IS,110 Rebatlble arbilrllgt: -11J38 . 152669 31,805 Total nOTIClllTent liabilities 68,040,871 i50,405,381 ss;'i43.J._tj4 Total liabilities 88,t37,730 16.11061,255 ,: .. • . 62,652,515 NETAsmITS lnveslcd iu capillll asscu, net of related debt 73,086,733 132,649,09·1 69,S16,462· Restricted for: Passenger faciliiy charges .. ,, .. 1,_ .: ._ Debt service 4,45S,759 6,136,977 2,937,014 Unrestricted 32,140,521 10.878,076 9,593,259 Tolal net assets $ !09,683,013 s .14916641144 $ 82!046,735 Sec accompanying Notes 10 Bask Fmancial StatemeolS. 48 · .... Wf.MPA-:--·· S ~.3~,910 8,329,910 . . .. . . ~29,910 1,306.827 S 1,306.827 . . ' . . . .. • J.: ,:••_. \·:~:.;:,:.t.;,,_.•:¼•••,-~t.'; •• ""/ •~ •.~••,''";•:-, :-:-,,~:~-:t:•:•~ :•/•:. • :•: '-~•••:••:\:::~:~.::'.!.!.:'.:•~::-~:~' ~!~?' ': ,...:,•:, "'.: _1,:-=.::'• •'r~::~':::.:~:~'.~~ .. •-: '&.•!• ~~~~~~-:~•::..~~:~,_:;i~:•.~:i.°'~ ,•:~,:. l ,!,, ) . : . . . Eiiierprise Fuds Nonmajor Enterprise '' Storinwater Funds $ · ... \ 146,437 _ $ .:·.. . :· .. 27),37 i,919,467 1;n>s,111 213,475. 1,927,~00 7,072' 431,693 : : : . · _666,542 . . . ·, .': .: ·. ,·, S0,4S3 21,145 706,244 . . . . . 1,540,083 . 925,623, "};;~\[if[;!~~:_·;::: ·:~::;:: \ ·>:.:.>·JJ,~~ .,_ ·.2.467,085 _: ... · ,\76,8.04,'339 18,063,340 • : ·:-0•• ':.' ·' ·:· ••• ·, -~ : • 12.378 .. \ .'· · 80,376,488 ',,"•,.: . .. ·. · 10,976,138 .. · , ,· 1,353,770 • ~ -r, • ... .-: ·-: 10,021.,915 <::" ~· . .:': .. ;···_ .. •., '. : .$. .22,356,823 •I•:•_'•,.-•,': ' •,' . .... '• . ;·. -_~:~ ·.: '·. •:" ~ . . . ........ , '• . ·24,321,089 31,646,834 92,543,019 3,630,625 396,461 · .J,630,876 $ · 100.200,981 total Enterprise Fu11ds S · 16,.133,466 3,052,945 4,2~~~54 8,1_00,~SJ 2.,990,665 µ70,756 1,806,139' 20,053,550 58,769,526 ... : .. ~ \ •' I' ,; • •• ~•,:•••p • ' . . . ... .~ . . 3;299,131 6,029,655 .,· ' 3'63,?0J),]74 :71,191 315~435,266 434,204,792 378,771,443 3,630,62S 15,284,981 67,571.474 S 465,258,523 llltemalSenice Fllnds · $ 917,506 117,747 38,B~S ~ 228,0$6 4,956,673 168,264 6,427,131 : .... ·. . ·, ~. '·!· ,·: :. .. .\ .. :, .. . ~-' ,• ' ,., ·';.• r ...... _:~·:~ :.?·-) . .-i =· >-.'~\ :-: 293,677 : ·.:.-. . · ... :-.. 3,065,4~9 . . ·. ! . 384,910 3,744,046 10,171,177 2,354,971 7,866,327 .·. S 10,221,298' 49 . .· ;·· -· ·-; .. : :-. ... :::-. . : . ,· · .. / . · •,. . ::·· . ··.:. .· . . ,, •.· . ·,•:' .: . . ·.· .... . . ' . . ·•: ...... ·.• •i: :·· ...... •_.\_, .... •. ,, . /,.• .. . ";. '\ ·· .. , :. ··.: •.. : ':!, "·· •,.:•. ••• •, I : . .. _.; . • .... ... ! •·! .. 'f • ••••• ~. :.: ':' ... : ... ;_ ·:-:,. '·. ~\'. ' . : .: ... , .... ) "\ ' ) ) City of Lubbock, Texas Reconciliation of the Statement-of Net-Assets-.Proprietary-Funds To the Statement of Net Assets September 30, 2006 . ,. ,,.': .;, Total nei assets -proprieta,y funds . • . . ' ·: ·'"· ·:· Am~nts repl>ited f~ business--type' activities in the Statiment.ofNet Assets are different because: . '• Internal service funds (ISFs) are used by management to charge the costs of certain · ... : ··:.; 'i': .:activities, stjchflS i$urance_ and. telecomfuunicai;ij>~~ ~~filvicluaI funds. The portion of · · assets and liabiiilieii oftbe ISFs ·primarily serving enterprise funds arc included in business- type activities in the Statement of Net Assets as follows: Net asseis of business-type ISFs Amounts due to governmental ISFs for amoun~ overcharged Net assets of business-type activities ··:. :: '-:: ·:-:" .: . ': .', . ' : \ '• -~ • .. ; ~: ·. ,.,,. . . -"::.·.: .,:: :. : See IICC:Olftpallying Notes 10 Basic Fi1151cial Swcments. 51 ' . ~.,. . '~ ,• ' ... ...... . \,.• ... . :. ~ S 465,258,S23 .1 •• • ',;;· 7, 1:20,834 • .. · (1,584,904) $470,794,451 •t•, ·· .. •. ••.;· .... •• ·-.-.... ,:. · .. ··. "; . . · .. ·-·. ·-· ' ·.· . • • ,t,, . ••,• · .. .. -.· .. ; City ofLubbod(, Texas ) Statement of Revenues, Expenses and Changes in Fund'Net Assets Proprietary Funds For The Year Ended September 30, 2006 Enterprise Funds ) ~rte W;,ter W a,stelirl!~r .. WTMPA .. OPERATING REVENUES ..... ' ' '. -.................. ,_ ... ..... , .. ···--·· -·-···-··-~ Charges for s~ces (net) S 212,074,481 $ 37,330,953 S 21,087,364 s 183,322,521 Miscellaneous I ... ~ . -.. ~ Total operati t1g revenues • 1:i'12;014,4$1' . 37;330',9'53 21,087,364 f33,322,.521 OPERA TING EXPENSES Personal services 10,718,282 5,910,861 3,816,414 Insurance Supplies 884,891 1,210,729' 972,075 Materials. Maintenaruie 1,907,683 2,458.357 1,176,302 Purchase of fuel and power 167,854,029 183,149,178 Colkction expense 1,482,000 926,172 Other services and charges 4,072,409 9,658,448 6,887,394 503,655 Deprcci111ion and amortization s,m9t7 711181132 5,462.027 Total operating expenses 1941410JII 27,838,527 19 ,24-0.384 l 8316521833 Operaling i11«1me (lo:;:s) 17,664,270 9,492;426 1,846,980 (330,312) NONOPERA TING'REVENU[S (EXPENSES) In tercst earnings 1,063,573 1,321,864 844,020 16,565 Passenger fac::i!ily chargcs/Fedcral grants 59,296 -I Disposition of assel$ (463,749) {110,320) 92,221 Miscellaneous 2,042,509 407,216 · 128,000 PaS!-lhrough grant payments ~. Interest expense i).301J09} {4,775,332} {2,064JOS) Net nonopttating revenues { expenses) (658,876) (3,097,276) (1,000,064) 16,565 I~ (loss) bc:f~ contributions and trans.fm 17,005,394 6,395,150 846,916 (313,747) Capital contributions 2,154,551 3,808,242 Transfers in 637,075 663,221 620~8 306,756 Transfers out {lJll~~ (4,874,264) (2,62J.Jm Change in net assets 16,430,903 · 4,93!,658 2,651,999 (6,991) Total net assets -beginning 93,252,110 144,725,486 19,394,136 l,3131~U8 Total net assets· ending $ 109,683,013 $ 149,664,144 $ 82!046,735 s 1J061827 See accomp:anying Notes to Basic Fmancial Statements.. 52 I', ' •~•M•-•••· 0 0 • • •,• ,• -•• '+,,• •,.-.......... ~ .. ,r , ... d ,.,. ) ·' ... ,. s 6,34~.~6] . ::· .. · . E11terprise Funds Noa·~~ior Ea~i$e "Funds s 22,641,318 I 12,610 . ''6z348r46 I 2.21753,92& · l_l,782,232 80,572 2,803,942 5,680 3,331,02 I . . ... ; '504,732 .· :-~,. --, . 512,832 . • :. <. · _.,'-:212,us·. ::., .. : : ·.~;91·1,3·s9 Total En11rprlsc · Fuads $ 482,805,098 '.I. 1121610 . 482,917!70& 33~09°6",269" : ., . 5,952,209 &,879,043 3SM03,2!),7 ·s.,4l5;736 . 2~,2.f.S,41 o . : ·, .. ::: . -..i34 514. : . ! .. ·.· .. 3·497 448' ,.• ... J5•,., ., ,, ·---~'""' :: :: . : \'. 2,0~6,093. : ..... : ·:-'· ·J t,838,864 .. _· ·-------,. 30:4i~:9i, ~s9_.oi_~_~i2 ·:··_. ·· .A,292,168 ;.. · :,_ .:, (9,084;936) . · ........... • ..... , . __ ..,....,.,..,. .. . . :." -~:·t·: ' . 23,880;796. · .. : .. ~·: .. ~:.: ' f,618,842 180,359 .. · (3~096,082) ·0.296,ss.1) .. · · _: , 893,718 8,697,882 · 16,774 :· 973,645 (437,313) · · (432,527) . · 9,712.179 '. 2,995,481 · ·. 627,24_3 I 1,062,018 849,200 (907.3-!0) · .. (3,100,079) : •• 1 • ·t~S,.l,?7 .. ":'. '. ·, \ 9;438,382 • ; ' • • • I •:·, . 20,268;646 C .. : .. : _.·: .,··:·.·. .. ··-: S,7~8,?g2 8,7$.7,178_ (465,074) 3,731,729 (437,313) (13,669,455) 3,675,647 27,556,443 17,624,811 3,076,490 (12,716,616) 35,541,128 429,717,395 Jntwnal Service . Funds $ 39,460,.284 39,460,284 4,199,269 22,296,187 94,876 9,907,836 2,l80,JS7 :2,569,214 32;oss -41J69-,687 (2,)0!1,403) 901,559 31,740 69,239 427,892 {863} 1,429,567 (679,836) 119,897 32,915 r~i4102. (l,319,494} li~0.79'2 · S 22.3"~.823 S : 465,2SS,523 ·. S · J0,221,398 , .. .... . ·.·. ...... 51 • . ' •'\ ,. . .· .. . ~-. '. . ,: . .... ' : .... :•1 .. .• •• _.:'_=··., ' . . .. •' : f .: .',.:, • . . . . . . .. ... :.>._,. -~ :/:'.· ': .. : ··:. •, .:_.. ·!•, ·:: •• ': : _; • :' • . : .. '. ,/,:_-.. : -~ . ·. ::·. ',\'· .. :: : ·. /.-.".< . . . ;· · .. :. ' .... .. · •.• ::· .. : .... ; ·: .-~ ...... .'. ·;_· (.~/~ . . .. :· · .. · .. '•. ·. : . ' : ~ ,.:.· ... •:,~~.::. _:' :.,.::.: . . .: . ' . ·:· . ' I•• . ••' : .· No Text ) ,·•··. City of Lubbock, Texas .. ,: Reconciliation of the Statement of Revenues, Expenses and Changes in Fund Net Assets ~ Proprietary Funds 'i'o7the Statement of Activities . '. . ··;: F.of )~e Year Ended September 30, 2006 ,,:, · · · .. · Net change in fifud net assets • total m~rise fluids ... : ... ; • ~-:: •• : I Amounts reported for busines~type activities in the ~ent of activities are different · because: : · · · · ........ "' . Internal service funds (ISFs) are used by management to charge the costs of certain· . .··· activities sw:h as fleet services, 1:C11tral warehousing activities, management informarion activities, etc. to individual funds. The net revenue ( expttise) of certain I SFs is reported with business-type activities. ' Change in net assets of business-type activities ·. :·• •<'1\ • ,: ' 1" •f • • I • , 1 .1 ... s 35,541,128 " .,· ._ l • ,:~ • . • . ~. -. . ·-~ .· ·"'' · '-$ · ~S.946.291 , ..... •• J• • ,. , •• t •• • • I;-.•: ,,_ ,•·' . :·· . . .. . . .. : -:-. . .. . . -·. •· .. . •. •, .. ··- ':• ... ·· . • • ,,I • 55 ) ) ) ) City Of Lubbock, Texas StatemeatofCasb Flows Proprietary Fands For tbe Year Eoded September 30, 2006 ,WcscTeas EleolJ'io Waki" .. '•,_. wufff'2rei ~~id~l'oml' l<Reilg:(\\'TMPA} CASH FLOWS fKOM OPDATl1fG ACTJ\'lTIES R.ccci;,ts from.,.SIOm<:!$ s 211, '132,604 $ 37..lW~l $ 21,IS4,689 $ ~117, 743. 764 l'a),nanti to iuppi'=,. (184,633,458) (13,074,362) ', (9.i98,476) (l 18,068,136) ~-tocmploY= -~ .. ··~-··---·---• (10,713,282) (S,910,61) (3.816,414) -Oilier i=ipts {pay_,1Sj .. •' :1 ,. .,-:----"•:·1mw---"•-~---·~'35'&;192-::--··" ·:--··"•··~---····-·"·~·,:··.,·-··•· · · _ .... · -... NI!!. a,h provided (used) by opon,.ti~ aci;vtli.0$ 17,959,624 18,m~ 8,l?6.aE Q14,Jn} CASH FLOWS FROM NONCAPITALAND IIELAn:D fflll,\NCING ACflVITiEs Tnnsfcrs i<1 r,o., other funds 637/115 663,221 620,238 306,756 · ~°"' 10 Oilier fw,d,s (1,21,1,566) · (4.&'7.4.26-1) (.2,623,.397) Sbon-lml itnerfl,nd bonowinc:o 6,173,4Sl (14.5,322) Op,tali"8 pus l'lly,rlCD!sreotl~)""'~{IO}'fro"10lhcrlur.!s Nol• l)IO'll4c:d (osed}0 bf-,c;apital and rclalcd financint 'ai:cMl;os ~5981960 (4Jll1043} B,14!,•81) 306,756 CAffl FLOWS FROM CAJ'tTAL AND RELATEI) PINANCIJIIC ACTMTIF.S I"""'-of co,pital assets (11,965,276) (29,900,154) (6,312,263) Sale ofcapila1 asse1a 131,729 118,078 ISl.221 Rccdpts (pey,ne,,1S) oo lea$U (34,338) 1,268,356 1,278,169 l'rinc:ip,J paid cm bondJ w Olher dcbl (5,289,070) cs.m,ool) (3,932,162) Band iEsuan<A: cost pucl {36,963) (236,741) (85,600) r.-p,.;d'1f'""""""'boo>& (3,131,934) (1,533,126) ln\ffl$1 paid on bonds IIQd odicr debt (l,.727,081) (1,839,429) lsma°"" of reve,mo. G.0. hoods, and Olpital ltascs 7,732,563 34,•18,322 14,98S,740 hss=gcrfacjlilyobarF>fcopilalgrams Rcbalable~ IS,669 31,806 Cort1ributad cap/1111 329.§85 1,199,940 Na C&Sh pnrvidcd (used) far capital and rdau.1 finaacinc: a<ti>ilics {12.593,28~ {4~99~ S,4781423 CASH n.<>WS FROM l'NV£S'l1NC A.C11Vl'l'lES Pn,cee,ls from ,ales and rmtaridc ofi~ 7,678.162 21,210,S34 14,471,4'4 P~ of bwattlle,u (17,998,344) (33,308,076) (26,219,184) (366,253) llllel'at """""'3' oa cash aid~ 1,028.9.21 !JI 11182 911,370 16~65 NCI cab pro-ri~ l>f (W for) ID.-aiD& activities 1!J21J6Q (I0,7863~ {10~3~ (349.683)' l'let joc:,asc (de,:rca,o) iD c:ash 111d aw, oquiwlcms 1,674,034 (682,168) 779,844 (367,304) Cash ood cut, oqaiY&leriis. lqiimi,,g of :,ear Cash and cul, cqcaivalenls •end of r-s J7J18,4l6 u 1~4so $ 12.98~186 12.304.018 s 7,147,495 7,f[J:.7J39 J :~~ Rcaadlia11"11 oropcn""C iocome(less} to aet oast, provided (IINd) ..,. opemlo:c ~Clf,ricies: Operating i=,,,., (loa) s 17,664,270 s 9,492.426 s 1,846,980 s (330.312) AdjllSlmeltlS to r=neilc ope,a!i,,g income {loss) to l><.lcadi pnwidod (U$Cd) by opeqtil1a activiries: Dtpmdation •11<1 &DIOfflDlion 8~17 7,l lS.132 S;-462,027 Olhctu,coine(e,q,cmc) 1,578,760 356,.192 136,4(13 Olar,gc in cumm asscu and liabiHlios: Accounl& receiviblc (341,877) (178.692} 67,325 (704,146) IA-, 8,977 (58,173} • DIIC: fio111 o1hcr pwc<WMn!S (28,475) Accoanbpayable (ll/114,04)) 1,752,655 702J)46 (4,415,303) Due from odlen S.,125,989 ()(flor acx:n,,d expenses 242,!H3 (7,190) 20.373 C.IOmcr IJeposit,: 656,l lO 2.9,3SS 1-ilt co,,,,pcn1rll:d tbscllCtS 2Sl.s97 47.CIOO 41048 Not e.sh provl<l~d (U$Cd) by Opel'aCi,le IClivilles s 17$59,624 $ l!!,523~ s ~6,262 s '324.ml Soppk....,tll easli Aaw lllforn,alioo: Nc,,,eashcapital ~ mid odcer~ s s 1,509,919 s 2,337.901 $ Sec ICCiOIIIJ)II~ ~ 10 Basio f'"llll'!Cial S-S. 56 ••• ~ •••••• .l,! .: :"t•(··;-• . · .. --•. ..:..:· •-.. -··.·--.·:•;,, .....• ; ... ,.,_ ...... ~ ......... _~ ... : ........ ··._·-:--..!:.~-···. ·······-··' ...... , .. , .. · • •, • ·•·· ...... ~.•.;-.~i\.rA•..i ~,~. -;:.:-~~-•.:. ~• •• 1 .. ) ) ·; £ •• •.• 1·· ... s ....... 6,JIS,127 (213,843) (868,4SO) !§.684 S,24S,083 (907,310) (4,500,000). (5,407.310) (13,982,108) 1,058 .. t-'.:' ::~~_':';0 •• ·.·:_ ~19,9l3,52.1) . . ... :,, : . . . . ('Z~0.030) ·. ·:)(\)\/ .. ~-:· t ·~~). ... , ., ": .. '· 27 011.321 'i:'.' ;.·'(:(: :: : : .-•, . .' . . - . :·. ·. . :: . :. · ... (10,282J62} l,360,7S7 · .-(2.009,595) J.109.580 1,060.742 ... . : ·.· (9,3",842) 1617S6,S40 ··• :. · ·• .. s====""""11""12.;,;;;,;69=B= ·: .... ·s 4,292,36& ~··. . ... . • ... ••• ·:: '.1 • .. ' ,. 384,Sl4 .. 86,684' (32,734) :1.66,346' -140,703 1).!11 . ' .. :: '$ . -•.· .... ,------=-s,m.083 . . , .. \,. . : ~. ~ .. .'·. '.". . .'[t\)b.~-~ _·. llti,lerprlse 111-.ls s s $ s $ Odio 1'0A111ajor ~ Fuad1 21,686,091 (10,097,933) (I 1,690,1179) 98SJSl 883,431 849,200 (3,100,079) 1,071,633 · 1,294.,964 (I.S40,8S3) 4,S74.86S s Tolab 48S,78S,l36 (40:S ,:m,20$) (33;004,116) 3,143,451 so,363~3 . .. 3,076,490 : (12,716.616) ·2,S.99,762 7,294,964 (11S4018S3) (l'A§.2S3) (26,285,549) (8&,445,3SO) 97,017 500,104 . . . 2,SJ;lll7 (2.392,124) ·. : ... : (37,S0&,580) bWHI lkrvlce Fntll s 39,453,127 (38,617,334) (4,199,269) som (3,312,694) .. .. 32,915 (7.92,•70) (l~,80&). .. -.. ... "J •• (819J:63) . · ~41,615) ... _.· ... ;: ,: (690.~~ ::: -·. ·,.:_,._::·.':t,,761,;141} (294.0I~ . · · . .' '· (4,U0,S2~ ·· .: :-· 9.4~,160 : . . •, 9).~17. 106 .. , ·. 965',605 : : . 96S,60S · · 12,378-. . . .. ·59 8'3 11$~1~ i;S91'.643 (t414,826)· : (29,929,049) 679,890 l0,806,~ ' SS,S27.S32 16;&24,689 (IS,S~IO) . · (95,463,762) (16,511,IOS) 29S,OS9 • s,~677 887,W Q.760.626) Ql19S3JS3) 1~11177 (S,717,lSfi) (13,696,592) (2,320,990) 13.~ 1~.-a s 68,858.737 5511§.14S $ 4.43~716 211 lr,726 (9,0&4,936) S 23,880,796 S (2,109.403) . &.497,443 30;43S,OJ8 322,038 900,66S 3,051,764 · 'S0,782 (733,2S7) (1,923,98 I) . (7,157) (S4.SS6) (103,752) ~-8~,619) (124,114) (IS2,S89) : 51_.j~ ,• 1,017,~S9 (11,750,440) S,125~ <•~~,890) 131,917 627,886 300 615,765 332.935 ffl,787 lt'»9 ..83,•ll .s so,563,253 s .. fl.31;694}. :s J.'47.8:20 s"·:•·, 119.897 . ·r"· .. · . .. ... . ... ·• ... . : _ _. · .. ·. : ·, •' ., . -~. -·, .·-.·-.::_-:., .. '" ,•..-:- 57 . , ': _.:.,-.-·• . -:· . ' .. ::•·. .: .. •••• ••1 M .\ 0 ',; •: .. ~· .. : .. .. , . ''\\;;: . ·: .. ' .·••.,.•. . . . . :\:. '• :. . . '. · .... '••. . . . ,_.. ~ •. ' . :: ·: :.: : ·: .... · ..... . . :'_,:. ',.' .. : '\. . . . • .. • : ! -~ ~\1 .:-. I•:• 0 • .. . .. . . :: -: ·, . ; ', '• .. ,· . .. , . :·t ....... ~ .. ~ . .. .. : .. . . . . . . ·=·· ....... '. .. . . . , ... .. .... . . . : .. ... J? ... :1' : .: . . ·•:-; •.' .· . ... ; -. .·:-. ·,• . . . ~-: . .. . . ·' ,•;,•..: -I .•:; .. ' ... .-·. · .. ··"::' .... : . . . .. .. : .. ~ .... :: .. : . --:. ,. ) ) ) ) ) ) City of Lubbock, Texas Notes·to Basic Financial Statements SeptemberJ0,2006 NOTE Ii :SUMMARY OF-SIGNIFICANT ACCOUNTING POUCIES, ·: , : · :· ~: ! The Basic FinancialSlatements (BFS) of the City of Lubbock, Texas{City) have ~,P.ftpm;eil in. ~fonnjty with Accounting Principles Generally Accepted in the United States of America (OMP) as applied to government units,· including specialized industry practices as specified -iri · lhe. /\"ibencilb''imtitute bf·€fflified Public Accountants audit and accounting guide titled State and Local Guvemmerils. The Governmental Accounting' Standards,· Board (GASB) is the· acknowledged "standard~g-','bodS''·foii•,esfablishiQg · governmental -accountintf~d · financial reporting principles. -With respect, to proprie1ary· activities -.related,to , 'b(fsine"ss~·aetivities'·and ~teqjrise '.funds; inclu<ling·component units. the Cify·iq,pliei; all aj;plicablc-GASB 'pton~uncemeirts''as-well a.U'i-ial Accounting Standards Board (FASB) S~enis-~·Inte,pretatiom, ·1tc&iintmg Principles Board'(~) OpiDions and Accounting Re's'eatch -Bulletii!S"'of.':the C,ommitteefon : A(:co1inting 'Pn:lcedure,~ issued on· or bdore November 30, 1989, unless those pronoum:ements-conflict with or corrtradict GASB pronouncements., The more significant accowrting policies are·descn'bed below:-· · · · '•• .: ,•··. : ··,·; \: :: 1<1 .:·; • -.:,!:~:. The-!City:\is-a.•municlpal-~rporation governed by a Co1D1ciJ.Manager form, of-government. .The.. City, incorp~.h 19.09; is:located in :the. :northwestern part of the state. The City .an-rent!y occupic;s•,a land area of.ll9il '.Square miles and serves•a,populatidri exceeding 211,000. The City is.:eziipoweitd to levy-a property tax ·on ,bothireal and.personal propeniesiOQ!ted within its boundaries. Jt is also·ernpowcred·by. state·st,ature to · ext~_its ~rpo~-!i~its_ by ~xation, which occurs pe_riodically When ·c1eeme.(Uppr6priate;byJhe City •·Coull'ClLr.::t;;·,..:1 ,;.:_. :.·· .. _ .... , :: .· •·:··,·,. : •. · -:~., ·. ,:; . -.:t;~,~---._.,-,_t.1 .. : . ·.~;-r•'.:r."=•'· ._.--.:.:.-.:-' .· · · .. :i ·1._.1 -.;· ••• '":() •.:! . '. .'. j~ . .-· ..••••• · The City Pf<!.vidts.·a.full range of services, inelud-ing police and fire protection;··recreatio.naJ ·activities:,and · cilltural ~ ·~1tuctioinnd mairitenance· of·highways; stteets, and -other'infi'astriictun:;;ilii!i sabiWion · • servicts':,, the-City also ·provides utilities for electricity, water, wastewater, wi.d 'stor.mwirtet.-as ~ll an ptibtic ,-transportation.System/··· .. · · . · ·• ... , .. ·., · -1.,,,, ,-, .····· .... , .... -,., .... • ,!.:-_:~l!' ":.i':,,,.•!,~, ~".:-:-;•'.: .·,,,;•.': ,. : I'., t. • I.}~)• •••• : •• ;, • :••, ";f• • ,'. ._ '. !;!~•: 0,', .,-•,::; ~ The BFS present the City and its component units and include all activities, organizatioJis;-'ai:J.d functions fur which the City is considered to be financially accountable. The criteria considered in detmnining activities to be reported within the City's BFS are based upon and consistent with those7 5et· fortli.' iii'the· Codification· of Governmental Aooounting Standards, Section 2100, "Defining the Financial Reporting Entity." The criteria include whether,· . · ·. 1 :-: :'.: • • ·,,·:·"· '" _;. ·•• :· • • ,:, . i.:.,: • .. :: .i ·.,.~' :· ..... · ·;. · ..... 1•: · : • · • '· • ' ... · , , •.,' • • : , •• , " ... -: • ' '. ·.,:.: .. ,Tfie org:tnizatio.rds legally separare (can sqe and be sued in its own name), ,. .-, • :\:'; • ' . .-; : · ·. ,,.. The'Ciey-holds'the'corporate powers of the organization. . .., .-:, · · ··<r • The City_ appoints a voting majority of the organization's board, • The City is able to impose ils will on the organization, .. •' :· Tlie·orgariizarion has·tlie po'tenti.il t<dmpose a financial benefii orbiJrdeii on tne· City, or· · ' · ' '·. ·· •· ·.Thertis~l~dcntyby1beorgmizationon·thecity. . ·· · ''" · : ' .. ·' .. :' . . • f· 1-:: ·..,,, •, '; ," . ., . :~. • ' • . · , ' • . " • 1" , ' • ... ~ .' . ·.•.': 'As .. ·i'&juired' by'GA:AP/~·~FS presbn_t the TCl)Orting entity which_co.nsi~·'.i:if''~.City (the·~ government), organizations for which the City Is financially accountable, and other···mgauizations for whieh _the8. _FSn~~, ~~1_s.ignifk;anced_ ....... ,. ~ r~f.~1. _ir relatio~p with the City are such ~ excl~i<1t~I~ -~ th:e ~~~s to 11v JJUS ea ~g DrlllCO!IIP ete.: . · · -· -.... · · •'! .,_ ..•. ., •. i. • • •' • ·:· ,•·•::· •• • • .. . -~ .: .... ·:·: • ;: : • .•~ • l •• • .1 ., • •,:, •, • ' •• • : 't •!" • I •• ;.; • t 59 ) ) City ofLubbo~ Texas Notes to Basie Financial Statements September 3@, 2006 NOTE I. SlJMMAR\f<Jli':SIGNIFJCANT:ACCOONTJNG).'10UeJES:(Coirtmued).';. ' ··. ·' ':A.. ltEPORTING ·ENTITY CCoitlinned) '~-:"~·::•._:;1·~ .. ~ •. ' .:~. d ::, . ... ' · ... ~· . ·.· ' -: .. ; . :;· ..... BLENDED-COMPONENT.UNITS . ',.' ...... .-·.,,_HO•O ..... 0 • ........ ,J•••·• _..,•_.!:., ••.--•~ •-·-••••• .. • 0 ., .. , ~:· ' ~ \ ,:: . ",".. : .:, : .·.· .... ' ; • • • •••• ·• • t•' • ·: .•......... ,,.-.· ~: '' The ,Urban Ren~l Agen.cy.(URA) has-been included in the ~ity's. fiJ\ancial~g entio/ \Yi#tjn ~e primary government using the blended-metfwd bec4use, although it~ l~-~~ ilS:~~ ~-~ ·infettwined.with the City that it is, in substance, a part of the City,,,The tfM·,W,IIS.(OJ;med w. ~e urban renewal• ~i~ including,rehabilitation of housing. acquisition. of IIQus.hlg;'and disi>O!!itiqn .o.f.land-: ~ URA Board is coorposed .of niiJe members appointed by the Mayor: }'ith the CQDSmf. of·the Oity p;,,mcii, and acts only in an advisory capacity to.the City Cooncil. All powers to govern tbe 1)RA are belcl by~ City Council There .are no separate financial statements available for the URA. ·: : : · · West Texas Municipal Power Agency (WTMPA) is a legally separate m~i~ipal<::.~~;a.political subdivision ofTexas, and body politic and corporate, funned in I 983, governed by an eight member Board of Directors. The board consists of two directors from each city. One member.is elected as the president who presides over·monthly meetings. Directors serve without compensation. WTMPA ~110 mnployees and icistead C011ftaCtS w:ith the City for general operations. WTMP A ma, eogage in the business of geoeratioll, 1ransmissfon, sale, and exchange of electric enagy to the four participating public entities: Lubbock, Tulia, Brownfield,. and Floydada..· WTMPA may also participate in power pooling and power exchange agreements with other entities. WTMPA provides electricity to its four member cities with the City having a 92.2% interest in its operations. Each member city appoints two members to the WfMP A board, however an affinnative .vofe .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 n:gulations. The City maintains the-"majonty. jn mten:st" vote based on Kilowatt purchases, and conscq~ently has majority voting control. As lhe City purchases approximately 92.2% oftbe electricity brokered, WTMPApro.vides s.emca almost exclusively to the City and ~ tberefonl presented as a blended enterprise fund. Their sepmte audited financlai statements may-be obtaioed through lbe City. ··· ·· .. D_IS.C~TE,LY-P.RESENTED COMPONENT UNITS The financial data for the Component Units are shown in the Government-Wide J:inancial Staicm~ .They are reported in a separate column to empha.,izc that they are legally separate from the City. The followhlg Component UnitS are incl!lded.,in ~. reporting, entity because the .pri~ .govemmeo( is· financially accounlable, is able to impose its will on the organization, or can significantly influ«lCC operations and/or activities of the organization. "> ' . -. . . ._ ' . Civic Lubboc.~ l'.nc. ~ a legal.If separate entity that was organ~ W, ~ ~ ~ the,_prescmtation of wholesomE; educational, cultmal, and entertainment programs for tpe genera,l ~o~ .~el~ physical improvement. and welfare of the citizens of Lubbock and ks sun-ounding area. The eleven-member board is &J?P?ioted by tpe Ai>'.:C~cj~: «;-itY .Council apPl'()'l'.es the annual.~~~ . ~epl!f,lte ~ ~ f9l' ClYlc Lubb<ic!(II).ay ~ .ob~,~~ tom th~ at lSOI 6"' street. Ll!.bbQr.tc:, :r.exas. . . .. . ' ~ . -. . .. ': . . . , .. . . . .Miirtcet Liibbocl< t~uom~ ·i>eveiopment Corporation, dbs 'Market~,;:'~-~'~ a l~ly .$~ ~~ty that was funned on October IO, 1995 by the City Council to aeatc, manage. operate, and supervise programs ~d activities to promote, iwist, and enhance economic development w:ithin and around the City. The City Council appoints the seven-member board and its operations are runded primanly through budgeted allocations of the.City's p_rqperty and hotel occupancy taxes. Separate financial statements may be obtained from Market Lubbock at 1500 Broadway, Sixth Floor, Lubbock, Texas. ·60 ·. _:}:.••::._.,-.-:•·;··•:,;~\:~\-.:.:/-.!··~-: •: ~ .. ·, l •., • ., : ~ •• • •· • •• '• ..... :;:,. +· ... ' . t-.'. ~ ..... ' ·. : • • • ft -• ---••• • ... s., ... •••• .,~;," ...... ,.v _,.J,,':. ; ... ... . ·-· --.. ··-·.. .. City of Lubbodc, Texas Notes to Basic•.FinanciaJ. Statements · September 30, 2006 . NOTE I. SU~V-QF·Sl~NIFlCANT ACCOUNTING POLlCIE;S (Co~tia,~) · A. REPORTING ENTITY (Continued) Lab'bock.Econonilc Dev~lopment Ai.6ance is a legally separate entity that ~ .. formed on:1~~.:l. 2004. by · the City ofLuQbock to·create, inanage and supervise programs and activities to promote,.assist,•8IJ((.enhance . economic· development.within:1U1.d around the City. The City Council appoints-the :Se.ven-ine{rlber.bo!ll'.d and its:,operations are .funded priman1y. through budgeted allocations of the City'.s, salflS :Nld use .ta'!~ ~-. financial statements•may be:obtained from Market Lubbock at 1?00 Broadway, Sixth· Floor.LubbQCk, Texas. ·:, J:.;·· i,";i:: ~-1:~1··:•.;:,•,•. ~~. ':_;j ,1,.t.,.; • .... t\: ~:~·· :,• \ ·-·~ . ·. '.t ···\-..· RELATED ORGANIZATIONS · ~. . ' ·t,..' .• ·:, -·~1 ... >: :" ··: .* .,::',:•··. • • • • • •• , • ·: ; _., :··."' • ·r: .. ,· .: •,.. The: City Coum:iHs-.responsible for. appointing the members of the boards .of:o,her organiz.atiorJS ·imt the· C!l:y.li;acc~tabmty,for these organizations .do not ext.end beyond making board .. appointments. • ~Citr': Council is not able to impose its will on these entilies and there is no financial bencnt. fR.butden relati.®,llhip, Bonds issued by these organizations do not constitute ~debtedness of the City. The following related organfzat1o~;arenotincludedin·therepoJt,ing entity. : •. •0:::·'. : ·,:: : •• ,:: :•.,:•:;::·,, • , .::.:.:-•;f,1,:,;~,~ ....... -:.,1.:M,: .. ,;~:-•.:;i. :•1 •·.::• /::.••,•· 0 • 0 '; ·.:•=1''",:1~:. ••','!°':;••~.:~·,• •. The.,Housi.ng.:Ailthonty cir!t~e City of Lubbock (Authority) is a legally separate·.~1!1icy. The:.J\,l.'a)'.Qr - appoil!IS.~1'.1·.~:V.\l,ffl.llJDb.er:poard: · ···· .. ·,, ,.-·· ~:,.:• · ·,'ci'·: · ·•' . The ,L11b~k. ~lth,.:Faci.lities.,l>evelopment Corpor:ation promotes health facilitiC$·.-development. . City : COIUl~ii p_ppoint,s1he sevtm-member·l,ward. •·:···, :c' ·• ·:,····: -.. ··,., .·•····, I• ','.;:: •: ,'•; • •• ! : ' '• •• j ,° -~' : •, • . ;_.!):,.-·i :!,.-,'i ,"·!f, .:~··;•:,;1;•• '!', ·:• •. .;,• -'"''!.,:••~/, ,I•~· -•:··:• ',• 1'·•:·• Th!' J ,til?!>o.i;~,IJ~qSW,g ,.ti.mince ·Corporation, Inc. was formed pursuant. to: the Texas Jf~ng Fimmce., · Colll~0~£.A,ct; :ta,~ce.tbe. cost of decept, safe.; 111\d affordable resideotial housing, ;The Mayor~-,. thes~an'!.ember.})~;•, .. ' .. · . .. · ·; ':·'. , , '.·:\ '· !, , .. ~ .• :• · ,. I ! I , • .'~-: -~ • ' • Nortll and East Lubbock Community Development Corporation (CDC) was formed from !he ~.mmCJ\dation 9f-the.mayort$:commission_fonned in M.ay 2002 to examine the conditi011'of·No~ & East , LubbO#<.,:lnCQ1Jlorated:•ip,F~ ;W04, the CDC ~gan work,to eff'eauatc,change; fa,,NGrth•and East . Lubb~/I'be Nonh ~ ~ J:.nb~k Community Development Coiporation is il 1~ emit)' that drive.s.social c~~;.proiµotes aufy,Jiomy:~. empowennent by increasing the supply of ~ity and,afforda;ble housing,,. geiie~g .cconomi<;, activity, a;ll!1 ~!)Ordinating the efflcient delivery of social services,::Ule: City·COUllCil.: appo~ .. JWO. ~j:!11bers of 1!11 c~-member board. The City Council is not able·to. impose :its .will .011 ,the :: entii.yand~isno~ial .. ~enrelationship. . •:: . .: . !·,:.: ,: ::,.-"';.·, •·: • !:i·~·-.•.:\"•:·.· ":. :· •,.··::~; ~~--. ,.:,:. '•::--.::.•~:•;:•-· ... 1:,,,, .' • Th!!,_L1,1!J~~.-~.~cation FaclHties Authority, Inc.. is a non-profit corpoiatio1umd· in~ity'.of. the . Cil)-';!Ui4-was created ~t ~ the Higher E.ducatioo Authority Act, Qapter 53. l'exas a,dutalion. Code for the:, PIJTTl0$e, of ~idirig Jnstitutions of higher education, secondary school, and primary. schools in prpYiding edt!~a1 ~cihti~s and,h~iwl (aci!ities. The seven-member Boarcl'is appointed.by the Qit;y Council. .::• • •.; • ; • •:,.' • : • • • • ~; • • ' • ·•• • ,, .-,. ' , I' • • The Lubbock Firemen's Retin:mc:nt and Relief .Fund (Pension Trust Fund) operates under provisions of th~ . .lfir,~n~$ ~lit~f ~. Reti~ent Laws. of the Sta~ of IfruS for purposes of providing tetiremem: benefits for.;tfi~ :City's firefighters. 'Qte Mayor's designce, the Dire«or of.Fis;cal P.lanning,.thre~1ir;efightersJelected by m!l!P~ of tlle f)ension Trust ·Fune! and two at-large members elected by the •i3®rq, .. goVJ:lm:i:ts,~1rs; l.t is •· fun~. by ~trlQutions. fr:o~ me firelighters and. City matdiiog .contributions. , .As provjd.e.d by ·enabling:· le~,~!'O; f:h~.,City'.:s ~ibilit)'. to the Pensi011-Trust f-Und,fs·limited to matclling UlQDlhly.~1,utiODS ,: m.~~ .. Jix th{).m,~~-.TitJe..to assets is vested in the }Jension Trust Fund 1111d 11ot in,the City. The,S~· Fire.in,:nls .. ~ens~n.. COJIW!,issiori, is .the governing body over. the Pension Trust Fund .and,:the :City·•c:aJJnqt ., signifiamtly influence i1s operations. Their separate audited financiaJ st.atements may. be obtained through. the· City. 61 ) ) \ City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2006 NOTE I. S'UMMARY--OFSiGNIFICANT ACCOUNTING pOl,JeIES'(Coritlii·u~· B. GOVERNMENT-WIDE AND FUND FlNANCJAL STATEMENTS. · · ;,: .. ' .. : ....•... _ .. 1-'he~ial.s~prepar.ed using me.repm:tiog mo.deLsp.ecifitd-in.GM.B.~~-N.2.:~:4.::-..... ·-.... -......... . Basic--'--Finaricidl-' !$tattitten,s, -· dird Management's · DiscuS.sion and A.na!J,m , . .:· for .:Suit,:·· and J,ocal. Gdvernmellh, GASS Staremeut ·N-o.'37 -Baste Financial Statemeri4 -· and MtZfl'agem~ti.lJisCIIS3ion:'l11'ld A.n'alysi$ :_ For·:Statf! and Lcx:ol Governments -Omnibus, GASB Statement No. 38 . .,.....Certain ·P-171(1ncial Slotemint Note' Disc/0$Urlis, and GASB futerpretation No. 6 ~ Recoghitioli and Me,muemoit of Certain · Liabilities and &penditures in Governmental Fund Financial Statements .. As specified by Statement No. 34, the Basic F"mancial Statements (BPS) include both Government-Wide and Fund F.irtanclal Statements. In FY.· 2006 the City adopted lhe proyisions of GASB Statement No. 44 -Economic Condllion Reporting: 1114 Statlsttcal •Se'ction. .. ·••This 11ew ~an! improves the understandability and usefulness of statistical section· inf0f1J!ation t,y. addressing,. ·the comparability problems that have· develOJied.·•in practice mid by-adding· inforn_iadon fro~-the n~ fi~al reporting model. · · · ·•-(, •• j The Government-Wide Financial Statements (GWFS) (i.e., the Statement of Net Assets·IJld.the Stat:emtnt of ActivJties)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 prese.on:d within these statements. The effect ofinterfund activity bas been removed from dJese statements by aO~ation·ofthe activities of the various internal service funds to the govemroenlal and bus~type activities on a fund basis based on the pred0R1ina1Jt users of the services. Governmental activities, which are primarily supported by taxes and· intergovernmental revenues, are reported separately from business-type activities, which rely tb a significant extent on fees and charges for support. All activities, both govemmi:ntal and business-type, are reported in the •GWFS using Ille ec0notrue ·J'eSQuroes measurement focus-and Che-acc:rwtl basis of accounting, which includes long-tenn assets and receivables as well as long-term debt and, obligatiom.:The·GWFS fixus more . m,i ~.~.\ili..~_ity' c;,f.1ht: ~ity as an entity ~d the change in ~ financial poslti~ifl~lting fi'om•t1te· activities of the fiscal period. The Oovemment~Wide Statement of Net Assets reports all financial and capital resources of the'City, excluding those reported in the fiduciar.y fund. It is displayed in the fmmat of assets tess liabllitics equals net assets;·wilb'the assets and, liabilities shown in order of their relative liquidity. Net-assets are required to be displayed in·dxree ·c:omponents:, (I)· invested io capital assets net of relafed',debt, (2) l'estricted;and (3) wiresuicied, · Invested-in-capital· asset& net· of related debt equals· capitaJ assets net of-· liccutnuhrted depreciation· and :reduced by outstanding balauces of any bonds. mortgages; ·oot.e.1; or other borrowings that are attributable to the acquisition, construction. or improvement of those as.sets: R.estric:ted net usets are those with constraints placed on their~ by either: (I) externally imposed by creditors (such as through debt covenants); yamors. · contr.i'buto.ts; or. laws or regulatiOnS of other goventnimts: or (2) • ~'sed by law through oonstitutional provisions or enabling legislation. All net assets not oflleiwisin:lilSSffied as invested in capital assets net of-related debt or restricted, an: shown as wirestricfed. · Reservations 'br.'desrgnaticns .of'ilet . assets imposed by the City, ·Whether by administrative policy or legislative actions oftbe City Council that do not otherwise meet the definition of restricted oet assets, are considered unrestricted in the GWFS. ~~.. • : • • • I' • ~-+ • • The 6ovemmeat ... Wide-Stateme'nt of Activities demonstrates the degree to ·which the direct-expenses for a given: function or·-segment is offset by program revenues. Direct expenses' 'are dioscltbai are cleai'ly identifiable, with · a specific function or segment. Program revenues include: (1) ctuuges 'to cusfumm or · applicants. who piirc•, ilse, ·or-directly benefit from 'goods; services, or {irivi1~ provided &ya gimt functio1ror segment; -and (2) grants and contnDUtions that are restricted.to n:feeting !he. dperatiorial or capital requirements of'a particular function or segment Taxes and other items' not properly· incltided· ~ong·. progranr revenues ·w:e i;'eported instead as general revenues. The general.revenues support the nea·oosts ofihe functioifs'and-segments noc coYeted by:program revenues. ·: · · ·. ··'; · :, ··. = ' 62 .. :· .• ,,·., ,'",:.!::~""4-•~., ..... ,. : •• ,_ .•.. ' :••·. ,.,: ...... . City of Lubboclc;Texas Notes to Basic Financial Statements September 30,-2006 NOTE L SUMMARY-OF SIGNIFICANT ACCO'ONTING·poIJCIES (Coa1iiiiled) · ,. Also part of the BFS are Fond Financial Statements (FFS) fur governmental fund$, proprietary funds, and the fidi.iciary fund. everi tlio~gh lhe latter is exclu(led from the GWFS-The foai& of d1HFS is on majot funds:; as· defuied'by GMB-'S~tit l'loi:3<t. GASB Statement No. 34 sets forth minilmim'i!tfttna for ddentiinatioo o~·riiajritfuii~ i:e.;'lfp~tlige of assets; liabili~es. revenue, or expenditutesT~'~-~~ cmegocyi'~-~--oMhe~govemmenfM';and··~-funas· combined": However, it also gives•-to~ the "oplion 'of' displaying-ofber•l'wiifs 'm .. 'major funds.' The City CID elect .to add so.me funils·a.s'majot"'Wiids bccaiise'-bf outstanding debt or colllillimity focus. Major individual govemmental funds end major indi~ual ~e funds are reported as ;eparate columns in the FFS. Ocher non-major funds are combined hi•· single cobbil. in the approf){iate_FFS. . . :.~•;·'!:, . .-,,~·,\ ~·:i-: ,' ::\~\t:::•!1'1t' ',)_; .. ,., .• ' ., ·1."irr• ;o' ,: ~--!' ·~ .• · .. : ', .. · c. · ·.~MwJ:IBEM.t~ rocv_s~ BAsis oF AccoUNTINc. AND FINAN¢¾t -~AJ'l~NT · · .. · --.~.:-~+.11~~-'-~~:;',~'.;:·:-:(·. ,, ... ,, . : · .... . :. ;·' _ .. ,_ .... :,,'.·;·:;· ,---~ ' , ·· . Fund Financial Statements • .,.-• ·:·· • :-:,. 0 ·~ '.'··:.·•4f ,! •• ;,·· .; •• •• 'f1ie,")GWfS':'aiei;~rted'--i_isiri,!(ihe 'economic re.sources measui:enienf focu.d uicf die\'•,l,~~•f>iisiil ·:or accounting, as are the propriewy FFS. The City's fiduciary FPS iiicltides"ciniy' aii. ligem;y:fimci•ifiat ii.,es' die acaual h;asis.of.ac~unting. However, because agency~ report only assets an~ _ _liabil~es. ~is ~d ~ nht·1iav'e a.!lri~enf~ Revenues are .recorded when earned and ·i)qjenses fl t#oid'ed-_wf.ieiJ a liability is intiffte4i' regai'dlcss°' oftbe· tiriifug of related cash flows. Prt>pt.rty' tax.es are· recogrilze-a as temiies in tJte yeaz: for whim . they are leyied. Gr.ants and similar items arc recognized es revenu~. u __ soo,n as all. eb~}!!J~~~-~~-~,~~~~~~-~et'.; _:·: ~;. / '.._:··. . . . ... -. ·,:;;.: .··','.·.;;_''.~_-,_,'.:}_:f)'.'(~:i~/.~-/i: Becausftlit ·eriterptise tunils'ai-e':coml>med into a·smgle business-type actfyities'oohmirl ~ti t1te ·c;wrs;:ceitiun· interflmd licavities ·bi,tween tHesi, fiili·~ ere;eJiminated in 1he consolidation for th~ GWFS; but ire'~ .bf the:_ fiidc!, •fuiumns••ii(die·j:n:ot>z-l'.etafy rn: '.I;i,e·_~jfect of imet-fubd activity· ¥s'licu(~matea)~''tfle·' OWFS:"~Foir~te;'-92:2% ottlie operations of WTMPA representing ~~-betwten ·W'I'MPA:~hlr Lubbock Power & Light have been eliminated for the GWFS presentation· and for the electric Bf.Ar exceptions to this genei:a) rule are payme~lieu of taxes and other charges be~ tJ)e Ci~•s. cJ~c. water-and wastewatet'·filiictioiis and various other fimctions of the govenl!tletit. ·E.liminiition o(thele• ~ would distort die direct costs and program revenues reported for die various fimeticlliii concenieit • ': · ,, ~,,, '. Governmental PFS are reported using 1hc current financial.resotlJ'Ce$ measurertieiif·foc:us and lfitt6odified accrual basis of accountmg. This is the traditional basis of accounting for governmental fimds. This presentation Is ~saryt(l)To'demonstrate legal mid covenant compliance, (2) 1D demonstrate~~ and uses of liquid resources. and (3) IO demonstrate how the City's actual wient1;es an!f expenditures COIUOpn- to the annual btidgeu Revenue1fare recogriized as soon as they arc both' uieasurable'and a~lablc. Reveuue.1 are consid~te,crt'i,-')e~iJafjje-wbett they are collectible within Che cummt period 6t soon~ dia~ilef to pay liabilities o_f the cwrent peri~ For-1his· ~ose. the govermne.nt considers. revemies to ·1,c avlli1ab1e. generally, if the1 are collected within 45 days of the end of the current fiscal petjod, ~ fhe cxceptiou of s111es· axes winch-are· ~iderechcrbc(available if they' are collected within 60 :days· of yeai':~ :'1'hetjty ~nsiders the giant availability period to be oue year for revenue rec:ogoition. Bxpenditures g~'are reconkd when a liability is ineum:d, as under accrual accounting. However, debt service expenditures, as well as expenditures iclated to compensated absences, and claim& and judgments are rec:orded oaly when the liability has matnttd. Because lbe govemmentaJ· FFS are presented on a diffi:n:nt basis of accounting than the GWFS, reconciliations are provided immediately following each fund statement. These recouciiiatious explain the adjustments necessary-to convert the FPS into the govemmeotat activities oolwnn of the GWFS_ 63 ) City of Lubbock, Tew Notes to Basic Financial Statements September 30, 2006 NOTE I. SUMMARY OF SIGNIFICANT'ACCOUNTING J)()LICIES (Continued) C. MEASUR.EMENlFOCl!~ BASIS OF A_CCOU.NTING; AND KJNAiNCIAL STA'J;El\:fEN:l' ··. · · PRESENTATION (Continued) ----· · p;~: ~~ ~~-~~; ft.an~.~ taxes, OCC11paney taxes, P.l~ Ii,~ -~~:. f?s,....;._~an-'-.. -4-'-in'"". terest-.. -... --'· ... ~-------·· •· • ·-·"· .. ~.i~~. W\th ~~,~.~,period are all considered to ~ susceptj'f?lc •!«?. a.~l'-alW .ha~ -~. r~gni~d 115 ~~~-of ~e current fiscal period. .Only the pofiion. of special.~~nts,r~i~ble d~- wi.th,in,. .@:e ewrent ~_petjod .is cop~idcred to be susceptible to aa:N~l 8$ _revenue of tJ:!e ~ period.. All . other~~te¢.s-~.considered to be m,easurable and available only when the C~ty.rec,efyes ~ . • •• • • ~ •, :., I Fu11JI Acm!lntqag The City uses funds to report its fmanciaJ position and trn: results of its operations. Fund accounting segregates ~4's-.according ~ their ~~<l~ pmpose and is designed to d_em~ ~l.C01Ppl~c;e and to aid financial iriaiiagement by segregating transactions related to cmain governiiieiltal.~pris o(aclivities. A fund is a separate accounting entity with a self--balancing set of accounts, which inclucl'es assets. liabilities, fund balaJlc~net assets, revenues and expenditures/expenses. . , .. Governmental Funds~ those through which most of the governmental ~ODs oftQ~ City are financed. The City~-~ major governmental fimd: · :1 . : ~ Ge~eral :Fuci. The 0~ Fund, as the City's primary operating fund. ~ts ,for all financijd ,J"t$0nn:es of the general govemment, except those required to be~ for in.,~~ fund. Enterprise Fu~ds are used to account for operations: (l) lhat are ~-8P4. ~ in a lllf!llnet ;m"iua.r to private business enterprises where the intent of the governing body is that the costs (expeiises, includmg dei:?~~.f9fprQ~dlng goods.or servi~.to the general pu_\>lic Ol.\--!l .~o~.t.~i;1.~ .. ~ ~- recovered through user.~; or (2) where the governing body has deci/fed tluit' periocfic de~nati(!\i of revenu~· ~ expenses _incu~ and/or net income is appropriate (or Cl!PitaJ ~l!fc:nance, public ~llcy, IOall;_llgem~ (:01?,~ql, accouiJtability, or other pUIJloses. The CftY. ,epoi:ts the .follc,wing ,~jor enterprise full(ls: ,..Tla;·E~trfc ~od -~~~ for the 3':tlvities of Lubbock Power & Llght (,LP&L)• the City:O~~- efectric procJ11~1>~ an~ qistn"buti.on system. . . • . • . . . Y!Je W •t~r Fun~ 8,«lOUJ}ts, for the activities of the City's water sys.tcm. The 'W~l~~-hnd ·accounts for the activities of the City's sanitaiy ~ syst.en;i • . rii'.~-)'!es.i f~x.9:s M;~i~pid Power Agency .(W'.TMPA) Fu1,1.d ~--~-the· a~v.ities 9f power ,~.~.liQll ~ pow.er brokgmg to ~ember cities. Memb;er ~ ~ LubbQCk with 9'.Z" ~~. ~. ~ia,.B~9eld, aod Floydada comprising lhe mpaining 8% t/Wll~~ ,. : . · . · .... , · . '.f'1~.$to~~~~ Fu~d acoounts fut the ac;tivities of,lhe stonnwater .utility, ~ch ~~d~. st~~r.- ~in!lge, ~ t!te .City, .•.·:• . • : I ... _ ~' . 64 ...... , ...... . OM_, 0 0 ,o o, ,. '• ; . '·· ' .. . ·~ '°'•M-~-v..: .. ,, .... ,, 0 ........ , 0 • -w. ---..~· .••• ' ' , City of Lubbock, Texas Notes to Basic Fmaaclal Statements September 30,-2006 NOTE. I. S~Y..OF,SIGNIFICANT ACCOUNTING POUCIES (Continued) · C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT fflESENTA TION (Continued) · · · · · · 0 • •• ,,,,•,", • A ', ••j \ \ •'" •• .. ,• • .. '' ... 11i~.ci~~~tstf!e r~j~ ~~niaJO! funds: : . i' ·•... . : .... .. :- :;·,-; '.i.>~.'-: \ , ~.: ", ,,\\,' •. : ~-;1,•: ·:: •• .. ·· . -~~ ... GoJ.er:nm·e~ta!F:unds ... _. ,,! . Sp.~_I ~evenpe ~!114-.,-e -~cd to accow,t for the proc;ecds of spcciti(; rw~ SO\llCClS { .... ~ . ,.$~~-,~·~-major capitaJ projects) that. are legally restricted.~-~ fo.r ~i~ed purposes.. ;· • .. ~ • .. • · ... -.~. • . · ( ~-- The Debt Service Fund is used to account for the accumalation ofresourccs,~:l!flil-~e.~~4?Jl ~f, general long-tenn obligation principal and interest (other than debt service payinenll! made 'by proprietary -.-~)'., :.,·.--;, .......• .,_.· ,~: •! ;: :•-_·:;· .• • .. ·. ', ••• •• •• , ,, ·::·;·~:~~w~ . .-~-i.~1~·~~~;.'.,;,:·~ ~-8CCQllllt fur. 6nanci~i te$OUl'CeS to ~;-~~~~i~~ th~'~1siii~ ~ construction of major capital improvements (other dnm those ROOrded ~the~ fu!ids). . , .. :' Proprietary Funds distinguish op~g. reveJJues and ~ ~.-non:9~,:~~:.-0~1.ng revenues, and expemes genen.Uy result.-~ providing liel'viccs and producing ·ana· aeliverlng' goods in ,~~~!?--: ~•--~.pr!~}'D!'l4~~ prin~ ~ operations. The principal~ revenµes of the ,qlise1J~,friil-~Jl?.d,~!~f:~t~n:;1 =o ~F~~!~~-f't~ pa£,~· .P.~tJtl&,,~~,~-~,J~~~-~-. ... . . ··. ~ . JnclJ .. e;~,.Q.:-~~:'"1 :~ adm!nlstnltive expenses, and depreciation oo capital assets. AJl revenues and .~ JU*-:~--ihis defin1tion are reported as non--operating revenues and expensea. ·-.-~·. ~: ::.: "ft': ~~,,-~:-~"!'::-·:• 1•·:· ,'-:t:· •• ; ,.: •. ~ . • •• • , • ~-. ··.-! ·•: ' . .--~•:,.~ ..... :~,! ·~•,,.: .=·1! ·,i ... ,-,~~J~e ~~~.--~:-~~ ~t-for services to.outside u~ whe,i;c ~ fµI.I ~.of:providuig ... ~-~;~~t-~~ ~-~9.°pe ~ through f~ and.~ e.g.,,~ Pteston.8-nith . , ~J~~ ~~(~.Flln!i), Gitj.bus, arulthe,Solid Wastefuud., · .. ' ,.·. :,. ... ,, ;,• .. ,, .. : -:, ... · Internal Service F11nds are 'used to account for services provided to other~~; -~~i~ ~f:tb~ _. ,'. -~~Cll~. P,!)O_,.~ g~~~ Ofl. 8_ oost :fC~ ~.is ,(i.e,._ -~-Ma~~ 1.uml, .. 9~-Y/~~~,f~.~rint Shop F)md, Sclf-Jn$'1l~'ancd'un\1. et_c-)• . : . , ,. .' ., ; ,.,,;, .",if : . • •· , . : : ; .-•.. • •• :. • .,-·_::·' ••• -:t :: =-~ .. ~ • ., . -.• :.·. ·•. . .~:··.: . !•' 'i, , ..•. ! ! '~ .. '• .. Fiduciary F11nd is an Agency Fund that i$ used to account for assets held by the City as an agent for privak ~¥~,-Th!~.~-~~~-in:l!Y-2006 and is not part ~f the govmunent-wide _finaocials.· ,. ; . . : ; , . D. · · aiiootiA~x\(g;;qtn:rnNG -· , · ,_. /. -~ .. ·:·.:= ... ·'·.:·. ·=: .... ·;~: i ~i·:.·.·',_-,.:: _-::,.~:-:._.:.;,~,: ,;: · ::. ; ."_ ., · bu and · _. · .· ....... ···~'.th~~·-,;: .-.. : ,--,-:· ~-~~)l~•-• .. ,·~~~~ __ dget capitalimpro~p~ , .. @ll,~iJ afuniall)i for fhc 1.1pcoiiimt· fiscal year. "Pubhc hearmgs. are ~nducted io-o~ ~ co~ts, and:thc budget is legaHy enaGted through passage of an o~ by City Council. City Council actioo is also ~-t.-~~~~~)'. ~1"!~ :1'~:~ .. AJJcd~ ~~!~ in,~;budget ~ -.~~'""'~-~-~-. g ~-.amend ~ wbk-Ji-~Yt-~i~!ISffli.for I .. ·1w ambc:meif . . f~.;.;;..;,, . . • "ons to the annual bud 1he, . . ·e-· . • ep,'.f .. "C' .. ,~.;-. (~,.".'~·~-~~---• ' get~ -~-~.lb --~ mi~~~ ~~-.'?,~;aJ~~ -~with~~ for~e Genenl Fuod.,.~~l:is--tained at th~.d~ezit .l~l iµ.~.fo~ ~1tme categories: persomael semces, suppllAA ,Qtfter,~,,lllid . . . :,:· ... ·: · .. : .. ':. ~·.) .. 65 City of Lubbock, T.exas Notes to Basic Financial Statements Septeml:ier 30, 2006 NOTE L :-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Coiltion'ed) D. B®GETllY ACCOUNTING (Continued) .. .. · .. • -1 ••• ... ····-1 • • ., 1 • capitalwotttlay~p•· ~ent-may,malce ·administralive t:ransfers-and ,increases..or.-decreases-in.-accoimts..witqin-.,. .... ·-····-........ ' • ·categories without Council approval, as long as expen~ do ·.not exceed buage:ted apj)r(jpnat'iiSiis "afthe fund Jevel, the legal level of control. All annual operatlng appropriations lapse at the end ~ the fiscal ~- Capital budgets do not lapse at fiscal year end but remain in effect until the project is colnpl~-ancl"c{osed: frhddilion to the tax: levy for genenrl operations, in accordatice with ·State law, 'the City" Council sets an ad vawrein tax Jevy· for ·a sinkinidiiilcf (General Obligation Debt Service) which, with casli mcf investmenu in the fund, is sufficient to pay all debt service due during the fiscal year. · · ·· E. ·. EN~M:BRANCES At the end of the fiscal year, encumbrances for goods and services dlat have not been received ate ·caitce1e4 At the begimung of the next fiscal year, managen)ent reviews aJI open en~ During the J:iudget revision prdcess.. encuml:irarices may be re.-establishe"d. On October-I, 20o6/tii.J G~eral Fund had no significant amounts ofopen encumbrances. . . F. ASSEJS, LIABILITIES.AND FUND BALANCE/NET ASSETS' ........ :•, . -". •• !- Equity· la Cash and lttvestments ~ The City pools the resources of the various funds fu order to facllitate'the milhagement of cash and enhance investment ~ Records are niaintainl!d-which ·reflect each fintd's equity in the pooled account. The. City's investments are stilted at rair w1ue, which is based on quof.ed market piicesas ofthe valwit.ion-date. · · ·· · · ·· · ' • ~· • • . . : : ! Cuh Equivalents -cash equivalents are defined as short-t~ highly liq~ inve~~ th.at.~ ~1y converuule to known amounts of cash and have original maturities ,of three months dr ·1ess when puichased which present an insignificant ·rtsk of changes in value because qf changes in· hUeteit ·rites. -~roted cash includes cash equivalents that have been 'restrimd by bona covenants for debt service requireriterits and passenger facility ~ . . . ·.•.,· Investments -lnvesfmcnts include ~ in the Federal Home Loan :Sanks," Federai H~me Loan Mortgage Corporation, and Federal National Mortgage Association. Resmct.ea investme;nts mclude investments that have been restricted for bond lirumced capital projects and money J"C$tri'cted for claims in the Risk and Health Insurance Fnnds. • .-:•, : ..... ,:: :· ·;. '- Property Ta:a: Receivable -The· value of all real artd business property loattt<I. fu. '• 111lcity is 'iissessed annually on J311uary I in conformity with subtitle E of the Texas Pro~ ~.e. ~-~ m:e,.le~ed on October I on those assessed_ values and the taxes are due on receipt ofthe· taic 1:nll. Ort.tbe" foflo'Wing January I, a~ lien_~ to _property to secure the payment of all taices, penal~ ~d ~ u~ ~~ Tl'ic taxea··are ,considered delinquent if not paid before febriiaty' l. ~ at fiscal ·year erut all P"O""'rtv taesreceivible-iiredelin"quent,'butaresecure"dbyataxifoir.' • · .. ·. -·= ,/.Hi· ~--,, .. • :. ,r~--., . ' ,•;.. • • t i. . ,:' ' \. . . ' . .. : ,!' : ,., -~ f~,-:· -•. At ihe·'OWFS lcveJ;"propert:y'tax revenue is reoognized .. ~ levy. Jrr·····~'tiirit!lthli' Cify records' propi:ttytaxes'ieceivabfe tipoi:t-Jevy"iind defers tax ~ti'I tiled are«,]~ 6i-''~Wifable.' Foi~ fiscllfyear, ·the ~-reoogil~ rmii:tue in the amount of ~es 'co~ecflld -~g '!he ~ ~lt6 ~ .estimate 'of taxes:fo. be Cltillected hrthe subsequent 45 days. The Ci1y allocates ... • erty ta revenue·~ the GeneraJ, ~•,Speciai ·Revenue, and Debt·Semce Funds based on tax !:: ·aaopie<i t'oilh~· yeaf ~rfu,yy ... ·Tiie Lubbock ~I Appraisal District assesses property values, bills, CQllects, and remits the property taxes to ,·. 66 City of Lubbock, Texas Notes. to. Basic Financial Statemeats, September 30, 2006 NOTE L SUMJ\ilARV Qf.Sl~NJFICANT ACCOUNTING P;OU:Cn:8 (~ntiu1:1ed) F.-ASSETS. LIABILIT~.-~ND FOND·BALANCE/NET.ASSETS• (ColJ.tin~ecf\, . · .··. ·. the; City .. /fbe ·City adjll.$1s ilii:.:all!:l:wa~ for uncollectible taxes and deferred-tax ~eat f':!Scal ~ ~~:- baseq upon_.histon~I collecµc,m ~~. To write off property ~es m;e_i~I~, the City e.limnmles,the. ~htalil,e:aruJ, rec:{qc.es,the alJ~ance fm:.uncollectible aooounts. . , ... ,: · .... :,' ,,·: ... · . ... .·.•· .... ~~v • . :: ,:· •· .. ,-:-~:'•i?..(:···,·~ .. ~1:::;,. ·.:· .. ·~ '.~:,,,·:-:: ~ Enterprise Funds Receivables -Within the Electric, Warer, Wastewater, and WTMPA Enterprise Funds, servi~~~~re4, l?utnqt. btlle4 as of l)l.e close of the fiscal year are accrue4 and th~·amol!Q.l ,i~-refl~.,io.: the ~unts. ~ivaple ;bal~~-of.each .fund.. Amounts .billed are reflected as accouq.tS r~iva~~ net.~f ~ allowan~-for:~ncoll~le-.11-~rs. . ·. . , . · .·. '..·•:·, ,~ • .. :• •:::':·, · Jn~;~~-. l~;~~ri~ ~~~lor expendable supplies held for consumpqon.. ~~~--~ ~~-t, using the average cost method of vaJuatioa, and are accounted for using the consumption method of accounting, i.e ... inventory is expensed when used rath~than when purc:has:d • ··'. ·.··,. , ::< :-·'.-:·;_:: P~pal.4.··l.~111.~ •_Pr.epajd~iµ:e a.ccQun~d for under the consumption metbo<;I. , . ,· .· . . ... ,., ,,. , ":1 , .•• ,: ;./::·'i·;: .;,:,· :, · ... ·..... . . . . .,., • :. .. M~rtgaig~Jucejvab!es-.~.~1ntga~.re_c!livables consist of loans made~ Lub~ ~i4.ems-l!fl4.,lnts~ses- •~·ilh!'l:',Ci1:y,s, CornmifnitY. ~lopment Joan 'Program. These -loans were-. original,ly. fun~e4. pri.m~Jy. through grants ~i~ from,tfie W~, Department of Housing and UrbarJ ~lop,m~. ,. ·,., ·, "• . .-.: , . . . ,. : : Ci!p,~1~~-~n~-,~p,r~~io.a. ~ Capital ilSSCtS, including public donuqn in.&asmi~. (~. b.t:idg~ · sid~~~ ~:~~;t~.~.iromovab~ and of value only to.-the-c;ity):1!,re ~-as..,~:Withan• ilJiSic!-1.· ~yi(j!,l!l.l ~.o( man: .~n,$5,000 and an estimated useful life in excess· ot;~ y,i:m.; ~ pap~, assets are reported in the GWFS and the proprie1ary funds, Capital assets are.-~ at co~. or ~timated historical cost if purchased or constructed. Donated assets are recorded at the estimated fair value on the date of"ona#~,. _,:,:·:•i,,:;.=,, • .:• .. • • . . · ;-;.•.:,,;1 ., .;• ... _,, ,-.·· ,···, ·,:: • • :}:•·.:,.;! \,;•~·. ~ , ' •' ·'.1 '1• • •:, ' Major oi:itlays fur capital assets and improvements are capitaliz.ed as the projects are constructed. The cost of nonwu ~~.&n~·~Jhat do not add to the vaJue of the asset or ma~lly,ext~d.the-~·-liv~. are. i!ot ~i~.1.~ 1'48J,r ~~ei:i!:S iR capitalized and depreciated over the .~ng. us~l .Jiveii of; $._i;:re.~c;i.~Pit~l~,;·: i:•. ,:·.. , · .... • . . .. ,:, .. ~ ··~.:.i?:i~;, . .:·/: \.:· ';J~..,:"-~ 00 \ • : :• , • ._ : • ., ' • ",r•;_,_ "'. • ,:. •; ;.· •• •. '. l De~on,is, COJ21pµted ',ISm_g. th~ ~&ht-line method over the estimated _usefulliVef.as fol.l~ws: .,., . · .... '' •.• -~ •:1 .. ;·. ·:· . ;_ lnfrasuuctuidlmpnmmws B11Jldiogs . 'Equipmeni' ' ::water tights • ;i;.• • 0 ,1! 10-50 years IS-50ycars 3-15 years liSyears Interest ·Capitaliutic:in · -· Because tlie City is~ general-purpose · c:apilal ~eat bonds, wliich' are' recorded ~in the propriewy funds, the City capitali?.es interest ct!sls for business4:ype activities an<t · enterprise fimds according to the Financial Accowiting Standards Board (FASB) Statement No • .34 CapttallzatfQ7f':of lntti'est Cos, .. and FASS Statement No. 62 OopitalizatiOl'i of lltlell$i Costs. Th1f city.: capitalized·intere:st,ofapproximafeiy $961,000 net of interest earned, fot the busm~·activitiefaiid'the ent~~se:~ds iluring,tbe•currehtfiscaJ year. . ' .. : .... ; ' .:•;'.'i, •·:,' '.• .-"-,-~-.·~.-:',•1... 'r/ .· • ... •.~ , . ~ . ~ ·:· .. :·:·: •1.:· . .,. . •. 67 City of Lubbock, Texas Notes to Basic Financial State'me.li:ts September 30, 2006. NOTE L SUMMARY OF'SIGNIFICANT ACCOl.lNTING POLICIES (Confftltied) ~ . .. F. ASSETS. LIABil.ri.US, AND FUND BALANCE/NET ASSE':i'S '(Contiuli:edl· · .. : .. :.,/ :. ·. _;_ '. - ..... ' . , .... rustr.@eci:..N:eL:Assets,_;,,:,arta.in:::enietprise fund. and. ,gQvernmentai:.actMti~ :~t$. JWLt~ii.t~AL!t>.t ccinstiiicti.&r and ileb~'cohsequently, net assets· have been restricted. fot t1tese· atnounts. Tile ·exc:ess· of <ither- restricted assets over related liabilities are included as restricted tiet assets for bond· procee~-bond'-bid'entun:s : : ... :::--: :, .. requirements, atld passenger facility charges. . -~:~~ .: .. • ·• '. :· i-'-.• .:· •. {,. . . ,,··:, ,, · ... •,,•.,••,.'') •••il Use ·of .. ~atu ·:.:. The' preparation of financial statements in canfonnity· witli 'acc6unting 'jjrmciples geneia.lly accepted in the United States of America requires management to·matce ~~-assumptions that atfect the reported amounts of assets and liab11ities and disclosure of contfugerit assets· and ·liabilities at the date of the financial statements and reported amounts of revenaes and expenses/expendmm:s during the reporting period: Actual results could differ from those estimates. · · .. · · .. .. : ., ~ «· G. REVENUES. EXPENSES AND EXPENDITURES lntenist Income on pooled caslranirinvestments is allocated monthly based on the·percentagc ofafund's six0' month rolluig average monthly balance in pooled cash and investments to the total citywide six--month rolling amge-monthly balance in'pcioled cash and in~bnents, coo:ept forc:ertain·Fiduciary Funds, ·tettain' Special Revenue 'Funds, Capital Project Funds, and certain Internal Service-Funds. The mtf:rest income on pooled cash and investments of these funds is reported in the General Fund or the. Debt Service Fund: Sales Tu Re1tenue· for the City ~tilts from an allocation of 1.:5% of the total· sales' tax ievy of 8.25%, which is collected by the S~ of Texas and remitted to the City monthly. The tax is collected by the vendor and is requm to be remitted to the State by tile 20th of the month following collection.· Toe·tax is then' paid to the C!!t!ifthe1~·orthe·tle~ month. · ·" ·--·; · · ·'" · · ,·,., .. ., ··· ·· '· · •••-• ••~• ••• •-••• •••••• ""~•~•••••• u • •Y• '.',, • •, •::,:., • .-,.:•,u~•:.ft,'::• :.,,, •••~•-•••• Grant Reve11ue from federal and state grants is recognized as revciwe as soon as aJI eligi'bility requirements have been met. The availability period for grants is considered to be one year. lnterfon'd'Ttitnsa-ctions are accounted for as revenues, ~ expenses, or qlhei financing sources or uses. · Transactipns that constitute reimbursements to a fund fut expenditures/expenses· initially made from that fund that are properly applicable to another ftmd, are recorded as expenditui-t!i/e,q,enses·'fn':the reimbursing fimd and as reduetions of expenditures/expenses iu the fund that is reimbursed. In addition, transfers are miuie between funds to shift resources from a -fund lega!ly··alithoriztd tofeeeive re-Venue-to··a fund authorized to expend the revenue. • •• ,I ' • • -• Compensated Absences consi~ of.vacation leave and sick leave. Vacatioil~ve of 10-20 days is granted to all regular employees dependtmt upon the date employed, years of •Service, . an~ civil service status. Culfflltly, ap to 40 houn of vacation leave lDll}' be "carried over" to the next calendar year. The City is obligated, to ~ .pawi~~t-upon retirement or temrination fur employees· in.good standing-fQr any available; uoused~qal~.. ... . .... ··,:.·:•· Sk:t, I~~~ f~_~loy~ is~,~ 1-¼ days per month with a maxim~ ~~ui~~~-~~oo'~ Mler 15 ~ of.,;Q~us _fWl.tiro.e. $e1Vice for non-<:ivU service ~nnel, :vested sic;k l~Y!) ~paid;oi,, ~t or temunation at the current hourly rate for up to 90 days. UJJOP. ~-~ term~on.•.~Ml -~ 'Personnel (Polke) are paid for up to 90 days accrued sick leave after one year of employment. Civil Service Personnel (Flreflgbters) are paid for up to 90 days of accrued sick leave upon retirement or temtination. The Texas Civil SCIVice-laws dictate certain benefil.$ and pemmnel-policies above and beyond those policies of fl!eCity .. 68 City of Lubbock, Texas .Notes· to ·Basic; FJnancial Statements Sep1elllber 30, 2006 NOTE L SUMI\U.RY·OF· SIGNlFICANT ACCOUNTING POLICIES (Co.uti.itued) · ~ :' r .. , ,. G. REVENUES, EXPENSES AND EXPENDITURES £Contino~-. ·. ·_-· .' . · ,:, :·:'·': ;·;,::-·. The liability for the ~ulMed;_.vacatj.oq and sick ~ is . .recorded m ~,.G.~· ~d.:in ,d}e ,~ {Qr proprietary fund employees when earned. The liability is recorded in the governmental FFS to the extent it is 4~1?-~d~ayable. . ._ .... , .. Pm Employment Benefits for retirees of the City of Lubbock include tbe··opiioi?tlfpuictiase ~ and life "ihsuflmee be.nefits. at their OWD expense. However, 'employus that retire with ''is y,ears"l:if'service 'or Ci\11 Service empfoyw' 'tha't"-rei:ire:'wha' have· a siek~leave balance· in excess •of 90 'l?isJ".iY:', ~ ~~~1p··to1 elect to .~,~u.e-_receiving medical toverage in full 30-day periods for the tenn of the'ba!an&·of their sick leave. ·Xttioilffts to cover premiums and administrative cosis, with an incremental charge for reserve funding, ce detennined by the City's health care administrator. Employer coottibution., are funded on a pay-as-you-:go basis and approximated $1.4 ~illi~ for,. f~~-ioos. These pontn'b~ ~ .~I~ ~ th~. ~ P.f insurance expense reflected in the financial activity reported in the iiealtn lnsuranc:e Internal Service Fiiod. . . . NOTEJl. St~W~~~·-,.~~--~e>l\d:tLUJCE AND ACCOUNTABILITY . . •.<· ...... A. RESTRiCTED NET ASSETS . ~·· j,.:: ••• Restricted net assets are'·ot1ftilSCd for their intended~ For projcctdinae.d'~ tax '~ debt proceeds, the debt proce'lds'~used first, dlei'1°imrestricted resources are used. ...,•: · ·, :".f,_,.,.:·'. '.·f-~· . • • i" "\ "•. 'J • :·-·.!:. .. u. N~iissET1rohiif~AilNcE Dmcrf · , ;," ,, ;"· ... , s ~ - -,: ~-·.~• ... ,,;J,\:;:.;~~:,, . ::.ix . .-,:..:.~ .· ,':". ~ .:-:;·!i-t.~~~ ·: : . · ,:~i-:,:.:,--/,:~:. The dd/cit of $198,884 in ~~di Benefits 1mcma1. Sen-ice Fund is due to unusually higb healllt. clajm.~vity in FY 2006 •. 1~ ~pues ~:~:~ser departm~-~ based on predetennin¢ tller. :;1J!c ,bc:al,tl .P.(es ha.w bern IU"lal11atedin f'Y 200710~~-~~rcddiclts.·. •·, ...... ,., ,;;~ ,.-~-, ,, C. G~ FUND.·#~if~pVERAGE . The Oeneral Fund FY 2006 amended budgeted expenditures and tnmsfeJS out were Sli3,2SS,54t'iuia•8':Ulal ~~~~\~~OU{ w.er,e..Sl,l), 7.14,9.42. an overage of.$4.S9,394 •. Mmmgement bas rec.endy-issued new policies fordepaitmcntal-review ofbudgels. · ·:. :;·,.:" ...... : ... ·--:·:·' .... •· . · · • ~ ;;i • .: ··.• ·:· .. , ... 69 ' I '\ ) City of Lubbock, Texas Notes ta Basic Financial Statements September 30, 2006 NOTE m ;· DETA1L'Nto/l'ES ON ALL ACTM'i'IES AND FUN.US (C6nifoued) ;, A. CASH AND DEPOSITS (Co1dihu.edl" . . ..... _.,;, .• ,.~ • • c1.1 , ·. ;-,nru.-·i.:':.:..1-.1.,:..1· • •· · ...,...,..,-~ ----=-•..:....:.c.·risk.· · ···r,·~•~-.-. ,(t ... ,: , . : . ... •• .. -... .. -. ... • ......... -,,;t-.XOptemoei:.30,:.:GUUU, ..... W\,..,...aitces. W3S-.,,.,J"""-.. to CW<UJIU"1 .w-.L as. Oauws. ____ ..... ____ .... ____ ·----· __ .............. •·•· .. . . ~~ ··~··J ·i .•• . ." .. ::;~:.;•,·:·:•' ., .. ; : . ·, ' . . '.' •', •·,•·.·: .. ·. ·.'·, ... ·:"·••:.· lllSUl'Cd . . . . -: '' ·s·" ·400,000 _ .... Ugi,:-s.~.~d!.u~GOll~t1Hzed . _ . :·· :, . ·:,. .,.. "_.:.; .. U~~su-~t(~1~11~~-id~Y.P.~&l~S~1113!:19~insti~Oll. . . .. . .. ,. ,.,,, ... : 2~~ . U!Ul)_sl!_i;cd ~ ~Ila~ held .by pf~g_ing tinancl.al iostitutic;m's tnist ~~t !>:1'. &ge!!t io ~ , . , . . . th.an lhe City~J P.i!/M . . , . .. __ _ . .. . . . P!W$8 Jnvesiments· At Se~bet: 3_0, 20~ .• th~ ·city '}ad: !he f9llowing inv~enlS and.~tles: . . . ,·. •,•, ,..... . .. . .. •• o • I • September 38, 2006 . R~~~• Federal Home Loan Banlcs Federal Home Loan Mortgage Corporatiofl Federal National Mortgage Asoociation Farm-Credit Nott Feif~Hoinc-Loan :SU:Jl· Up Nole-:. · Money marlcct rnutua.1 funds .,. State Investment Pools 0 •con~. casll. cquivali;nl for ~nancial r~ing. Fair Value S 1,796,529 9,929,600 I 0,579,1(14 Less Tha11 l S 1,796.,529 · 9,gi9,690 8,591,7Q4 ' . . 1-5, ._,,Money Dl8llcct muluai-tw1ds and State Investment-Pools BtC considered casli equivalents for financial rqioitfnt, unless restricted for boDd fiPanccd capital projects and claims for Risk and Health Irisurance l'Uods.: · · · · · · lnttJest Rate Risk -As a means ·of limiting its exposure to' &ir value losses· liri~ing from ris~ interest .rates, the City's investment policy limits investments to those that can be_ h~ld t(? D'!Jl;1UritY !!!Id by. l~!fj~g final maturity to no more than five (S) years. The money market mutual tuhds-and investineni pools an,-presented as an investment with a maturity ofless than one year be(:ause they are redeemable in full immediately. · • , Credit Risk • Credit risk is the ti$. that the issuer or other cowi.t~ to an investment will Jm fulfaJl its <ibligatioof 'niij··G:rtYs po,Iicy ali~ investment iit .difeei obligati~s ·of ~c1· oth_~· Qbi~i>N! ~-~ ti1 ~-of'tite u-.s.-· · ;; · ifut u.s. ·· ·e's and inslrumeutiitities with the ··... . ' ... of m .... tiamHeciirities: It a11offlattons of mZ ~-~ s~·.o&exas:~·its .~1b,~ states, agencies, 0011Dties, cities, md other political subdivisions TIited not less than A or its equivalent. It may ~~ in~t;S~. -~ ~!Jr.--~~~ . r~ ~!'I\~. --~ co!la~!1,ed c!lltifi~.-9:f 4eposit. a;>~al p~ ~-~-~ wi1h "~ ~of27~ days~.f~_ftom.~ date of~ AAA~~ ~~ mouey ~et mutual funds regulated by_ the Securities..a.i:td Exchange Commission, and AAA.'.i-ateit; c:onsiant''doilar' in~ts pools authorized by the City CoonC11. At September 30, 2006, Standard & Poor'5 rated the investment pools and the money market mutual funds AAJ\rn. The senior unsecured debt for-investments in FNMA and FHLMC are rated AAA by Standard & Poor's and Moody's. 70 1,.,,,, J.t,,1ti ::. ...... \~.• ..... •:\M'• • 00 \ •• ,•~•, .. •~0 • ' 't' • ) City of Lubbock, Tens Notes to Basic Financial Statements Septeinber·30,-2006 NOTE Ill. DE-TAR, NOOES·ON ALL ACTIVITIES AND FUNDS (Conthutid)I ~ .. ' A. DEPOSITS AND INVESTMENTS (Continued') . ·=· .,: . . •.: Cmt.odiai-Credit Risk·-~.For;!II!,-,iqw.s1ment, custod~.creditrlsk is.the risk that, in the event.of~.fai.J.tµ,"O.of!he counfelJ)llrt)', ~ City ~ll not ~ 11ble to recover tile valtJC of.its investment or.~~ s.t/Clltjties ~~ W ·tbe,possession ,()f, 11D .ou,side.pany. ·TI!e-City required that deposits and rep~~~.~ h~M-.in;,~ ·in.stiWti~tbatJ1~ 11 ,minjmam :c.ollateral. level of.J,02% -of the, JJWket value. --~:~.C. ~4.-f..W:M. ;~tinents ·~.lielil in the City!s name in third party safekeeping by a Federal i~ei.m.~ finiqcilJ) institution designated as a City depository. The City-shall-IQIWU!UD a list of .a~qtized lir.o~~r/dea,ers, an!l financial instillltions, which are approved by !be Audit Committee for mvest:nent pUJpOSeS: ~ ,, ···-~--........... • ...... ,. ':4.:-·-r...:;:~":i_:~: :,-:_-. o :. • 0 0 ,., ._ • 0 Concentration of Credit Risk -The City places limits on the amount that may be invested in any one issuer wf1b the ex,cepti9n of Un~ . .&i~ -11"~ obligations. ~t September 3~ 2006; the-City's investments . ~-the:-0foliowhig percentages of total investments: repurchase agreem-~---0.7%, FHlB -S.2%, ·FHU4C.~::0,4%, FNMA: -13.7%, FFCN -0.7%, Money Market Mutual-Funds -13'.45%, and -State . Investmeii.i"Pools ..:.62.28%:· ... '' ... -. :·,;· .. si·o1:, . : ·. !:;~r;~;1; ~ .. ::;:.~; ~ .. :.:- f'.(Rign Cum:ncy Jt,isk.-ThisJis]c relates.to adverse affects on the fair value of an investment froJ;!l.~ in · •-e.?.tmangentes. T!le City has no foreign currency risk. ,. ;.: ..... ,;, ... , • .. • , .1• •, B. INIERFUND TRANSACTIONS .. - , ·Inleri'und balances, specifically the due to and due from other funds, are short-terin loans to cover tempo,nu:y · ·. :eash deficits in various funds. This occasionally occurs prior to bond sales or grant reimbursement!!.. Th~e outstanding balances are repaid within the following fiscal year. · ~ . • •. _ _':Jnterfund balances, specifically advances to and from other funds, are longer-t.enn loans.to cover Council . '·directed internal financing of certain projects. At~ 30, 2006 the City had SJ0,7~i,33f iii°~ . · : .fu!au.~ing, : These balapceure .asses~ an ~ charge and are repaid over time throu~ operii!iom and ::::_tninste,,:":.°. .: ·: ·:' .. \ .,:,-: ' : ., : .. ·... . ,, '. The following amounts due to other fimds or due from other funds, including advances, are included in the fimd financial statements (all amounts in thousands): . • : I ~' •• • ; • ,: •, •: :. ' lntafDnd Payables ffhousands) Govenm,ental Fll11cb: Nonmajor Gove,nmental Proprietary Funds: Electric Noomajor Enterprise lntemal Sen-ice Totab .;=--. .:.~ : •. : •. ~.' • :.~._::_':,. .. ,•:l~::::; ._:, lnwrfir~ Receivables (Thousands) : .. .. .. , Governllie•tal ·hods PropritU!Z Fli~i& , .. i . .. No12m1jor Norintajor . . . . General Government WTMPA Eaterprlse .Totals s 450 $ 631 s $ 1.5'.f I $ 2.~ 6,173 6,173 1,927 l,9'1:T 39 ;J9 $ 2,416 $ 631 s 6,173 $ l,SU $ 10,761 71 ' City of Lubboek:, Texas Notes to Basic Financial Statements September 30; 2006 NOTE Ill. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS:(Cootinued). . · , , '·. , ',·.· B. INTERFUND TRANSACTIONS {Continued) · · · ---, __ ,, ··· .... --.. • ·· -N~sfers-ef-~-~bllSllless-type-aetMties-te-gavemm:ental~ties,::.down.:$$..9. :irulliori-from .. --- 'ih~prior' year;'15n·the··goveriiment-wide ~tement of activities is·prlniarily the:result oM). debt·serv~ paytll~~ iiiarle from .the·debt service-fund, but funded mmi m'-t,peiat:ing·fimd:--2}'subsidy :~ers--ftom iiii~cted fwlas; aruf3) ti'.ansn:rs to move indirect cost allociations, paymeoiii,jn· iie1tof tax~ !(PIL01');. and_ ·~d1ik teei to·:the geitera{ fund or other funds as appropriate. The fallowing iriterlund iransfm arc·mtect.ed iif'thefuruffinancialstatements(alfamountsmthousands): . . ·'·"··" ,,.·., .. . ~ .. .~ . '·: .. •,: ,' lnterrulltl Transfers Out: {lbo11sands) lnurfulld Trarisfen 111: (Tbousands) · Governmental Funds: Gi:nei'al'Furicl: . No111najor Governmental Proprietary Funds: Electric Water Wastewater Slonnwalcr Ceverammtlll · Funds Nonmajor · General Oov, Electric $ -s 723 s 880 587 4,632 2S 312 S2I 620 WflteT $ 4,649 225 . ··., ..... :,, ••• ,: ~~ .... 0# • Proprletal")'-~liw·,,.. ·. · ;, · · . , : :. Storm-Nori~-•. ln!Ual. Sewer ,waier ~ Service : Tctals ... ;··.,-:.··:·. $ 2;623 $ '907 ·s 2;828 $' '7?°4 s· H.324 30 73,-!i,3S2 : ·.' too 637 142 663 ' -QO -; . WTMPA • -3!)'.7 . • -· --. 307 :.~ii~i~;;pijt:·::. ''.::.~-~~9:"" .. . . .. ..... _ ... -~---: .: . ''.·.:~:-,:.·. -.. -:~~:'.?.: ... :::·:~:.-~:849 Jntcmal Service Funds -33 33 Total ' _$.,....1-,4--36,,_..,$_6,..,..8,...;;4.=..I -S_J_,2_12_$...:,_4,87_4_$_2._6_23_S_907_:.__,.S-3..:.., l;..00 __ $_792.....;......,$,..._ ;..2_1,7l!~S . : ~ C. · DEFERRED CHARGES The totaJ deferred charge of$3,077,777 in the LP&L Enterprise FUnd represents an.advertising contract with the United Spirit Arena. J.'he ~".~ (and amortil.ati~) b;egan. .~ith the opening of the sports arena in fiscal year2000 and will·!X!_~@:nµ:·for30 years. · · · · .. , . . . ,,-. , . D.· CAPITAL ~ETS-' · -,: • 1'•,• Capital as.set activity for thi year ~~ded September 30, 2006, was· as follows: _., • ,.J , 72 ' ' I•• ;, '.:•_.•_.., :.'..,j .'-••: " _ .. •· .-....... -1•·'" • ... :·, •. r .•1·•.1.,: •. •,.•., ·• .·~~-. -: ... ·G .... ··:.· .. , .. •.·-'•,-.,..i...• .. ~: •·;r··~.· ·,· · ... -~ . . .. . . . . .. ,, .. ,,-.. 0 000,0• ••• -•oo o~,• 0 ,_,N~,,..,,,,. __ , .. ,, City of Lubbock,·Texas Notes to B'asic·Fioalicial Stattments September 30,2006 NOTE m. DETAIL NOTES 'ON ALL ACTIVITIES AND Fi)NJM;'(Contilnred) · D. CAPITAL ASSETS {Continued} Primary Goverament: Begi~ning BalaDCt • locnasu .. ,,, ·, "t11 ·:! , .. ,, 'E11dingi-'· Decreases · BalanU$ ·, · .. t ·, ~:••: ~ ( •• ::._.-; •• • • C.p'ii::-t Amis Not D'epreciatelf: -~;:(,:".',:~~ .... ·::.:·.~.}.:- c~~~ti~ in Props, . . ... .. $ __ ~1~Sl~IQO .$. __ 20,354 -S .· , ... · --~ '$-··8,97·1,454' 37,793,428 27,701,223 141844,29B 5MSO,3S3 Toti! Capilltl Assets Not Dep~iated 46,744,528 27,721,577 14,844i2-98·""·r ?$9;~2l;ffl · .. .. ,t:. .... ·. ;.••·:" CapitalAsseb Depr,eci;ittil: · , ... ·-. -.. · : -:-: ·:i·,·,·.,,.,., ·:·. · Bllildilip.:,:: .·' .. _., ·... ·-·. ;, 57,~~.M~S. 1 ·. :. -~.~74,134 330,543--·:<-'60.9.49';63C> _ ~m~~~-~~-r.tha"nB.uild~ ._..-. · 13~~~,~9 ·-_~:-11~0,452 ···9l4,361 -· .. ··147;00s;o1s·· MIIChinery and Equipment 6iJ,242,876 8,065,957 3,336,666 64,972,167 Total Capital AsselS Dcprccialed 254,247,?ll 23,260,543 ·4,581;5'76· '· '272$6~8'7$' --~·.,:·~·-.:·1· • -:--:-/:··.:.1.: ,·~1 .. ~-i..·.·-.' bess.A,e:¢u.m'u.lated Depmiation: • ·.-... ,· -·\,; ;_,_. ,.::·,::.-... .-, ..... '.": '",.;·'.:-.,_:,,.,~-,,:, B.uildi~ .. ''.'-·1,;•J::l\:i .,::: ., .. -, .. 29,459;813'.·•·.,< 1,934,827 jJ4,587: ·-.,:, ~l,080,413"'1 lfn~~Olhet'.'thaii°Bµilili,;gs . ~ ·_'.:;_ .. ··92·503:f60-\ . 4834434 •'115-:X,6•" '9'6;~288' Machiiiety aidBquipm,;irt ... ' . .. . . ... . 40'.4i4:6s·s·· . 1:os1:454 3, llS,466 44,356,~3 :ro~~~u~.a~_Oep~~ .... ·.i ··,:··. 162,.378,28~,:: :lJ,826,715 : .. _, '4,2t1~9S9" · :.,,:111,999,044· ·. :::~ .. :;. ... ,~·."··-:· :·.;.,_.:._-:.·;:,· · -·•· ~:.:_:~-·:.•;:_. _-.. -1-:~::~~i:·r-•···_., ··.·= .. -'··••:t,.- to~feapiia1AssetsOeprcci~ied, Nei .. 91,869:623 9,433,828 375,617 ]00,927,834 Oovcrmncntal Ac:tivitics Capital As.wts, Net $ 138,61_4,lSI S 37,155,405 S 15,.219,915 S 160,s49,64J • : , • ·:• -•• • • • .-•• • • • • ·-,1-: .. =· •.. , . "t .... ·, s. ·--, ·. . ... i.. . -. ... .. . _ 2. Depreciation expense was charged to functions/programs of the governmental activities .a;;. fo~~;. . .. . ,. Governmental activities; ·.· .. · · Administrative Services · · ', ComrmmityServiccs··:'· , .... , Cultural and Recrdlio_n Strviccs Economic and Developnat Fi~ ·,•· Health 01her Public Safety Police --:• Street and Traffic E!nii.~ng Non-Departmental . ·:-. ::, ·. : · Internal Service F~n<h . . .. Total depreciation expense -goverlllbelltal activities Transfer in to ~lated depreciatic>n-govemmaital activities Inerease in accumulated dq>reeiation -governmentaf activities 73 $ 386,871 144,:336 3,JSl,006 146,397 1,213,165 271,771 496,369 3;16:3,233 ;, . · .,. · ' ,,•'·.' ' '1.: --•,t ··:•; 3 791 '173 • • •• I .. ! • , .. . ,.· '321,104:'-: . . .. 130,646 IJ,422,071 404,644 $ 13,826,715 ,..,;. ..... .. - City-ofLubboc~ Texas Notes t~ Basic Financial Statements · SepteJDber 30, 2006 NOTE ID. Dl;,T~IL .ISO'.}!ffi ON ALL ACT1VlTIES AND F{JNDS (ConthauedJ .· D. CAPITAL ASSETS (Continued') Busi~~Iy.pe.Actidtw..:. ......... . Cap¥. A:ss.~ts Not Depreciated: BegiaDing BalalllU I• \ i: • • • '• '• : -~••.: '(, •• :• • ~~ . . ·····-·•····· ..... _,_.;.__ _ _:.:..~·-'"·.:'--'-· . ...:_·· ............. -.. Ending . l)ei;rea~ ... : Bala,n-, : S · $ 31,948,711 Land.1.·:. .... .. . , .... Conw'iid:ion in Progress $· 31,948,711 S 12s,4J2,179 s8,4ts,600 S0,201,SS2 13.6,646,227 S0.201,SS2 168,594,'93! Total Capital Assets Not Depreciated .. 16(1,380,890 58,415,600 Capit~-~ Depreciajal: · B'uiidiiij:s' · · .. I mpro\lcments Other than Buildings M~incey and Equipment Total ,Capl!a!-Assets Depreciated Less ·.,_«Ull!Ulated Depnciation: Buildings lmprovellllln!S Other than Buildings Mac:hi~ and Equipment Total Accwnulatlld Depreciation 97,027,146 605,412,170 138,670',688 841,110,004 31,075,692 258,019,184 74,952,427 364,047,303. 483,657 59,621,,921 27,169,630 . 87,275,208 2,342,667 17,325,603 12,051,269 ·31,725,539 97,510,803 375,396, 664,658,695 4,116,964 16J,'l23,354 .. · .... · 4;492,360 ..... 923;892,lm ,;""" . · ·159,373· 3,280,169 .. 3,439,542 33,418,359 275,185,414 83,729,527 Total capital Assets ~ated, Net 4771062,701 SS,S49,669 ··l,052.BU. · ·· Sll,SS9,SS2 B~Type Activltles.Caj,itiil ~-Net $637,443.591 $113,965,269 $ S t,254,.370 $ 700,154,490 . . Depreciation expense was chargod w· functions/programs of the business-type activities as follows: Business-. Type Activities: Eledric Water Wastewater Stormweter Solid Wask Airport Transit Internal Se:rv1cc .. Total depieciation expense -·J:i!ls\~typc activities Transfer in to accumulated dcpreeiatioo -business-type activities I~ in accumulated~~: business-type activities 74 $ S,839,58S 7,llS.132 5,462,027 3l4,Sl4 . 3,875;$,19 3,281,317 1,340,312 191,442 . 30,493,148 1.,232,391 .. S 31,72S,5~9 ··\:--_.{t··~.::.~•M::;~,?-l:'•-~:· .-::... ; ••• ·.·.~.s.. ......... ~.::?.~·:::·····,'·•. ' ) ) City.o(~ul!l>1>ck, Tex~ Notes to ~asic Fm~~tjal $ta.tements September-30, 2006 NOTE III. D~TAlLNO~·ON ALL A(?J;IVITIES AND~ (Cpn~n.o~J: D. CAPITAL ASSETS (Continued) Construction Commitments ' j. •• ~ :" t :nae City _of Lubbock ~as active construction proj~ at ~cal year end. The Parks D~~~~oJ~ include a 12-field faslp1tch softball coillplex. The City continues to work on a illlge street proJec:t mvolving ,,Mil~e,aAv~®1~ 34~ ~~tt,!)~s~·s,r_eet .. llli§.proje¢ is in.the ~~.ProJe<;t.s.~ .· •••! • • • • • ,r•":, •• • •• ,. •• •'j•••• • • •' /., ' •,;)••, ;:;~,i•• •~•'-.';••,•ft:~: •••:i.; -~1 \:•: :,0 -:••••••f"~ :,•••,.\•, -~ • ! :,, •;' '• •• •; • ••~,I _., •••,'•::-•._•i•,•,,:,~'1:. •,_•••,:• •,~. Water projects inclu~~-'~.e. •pe,!1!8•r.~d <:O,Il.smiction ,of.~.-~. pump,:~.tiQ!-1: ~ ~~ , JA!~.: ·~Jlle recompaction of 9glh Street from Slide to just beyond Frankford A venue is a major wastewatc. project The C,ity:is b~~· w.orltjJ;lg !I.~~' airport to co~~q~,900 .squ~ yar~ _of _n~-~v~~ro, ,~I~ ~~~ .. ajr:F-!!W~ aj~a~ .. ,. ~tc!J.l'!JJYl3~.,qlX'J'~ CO~l.!e i~• ~~qn ?JO Vt!f!Y: !arge., con,rtructi%»f0i~: ,:'.ql~ µi:~ ~j~ • pro~i~es for .f!OO!I i,~f.fo~ Ql.app ~ark ap4 tl,\e:~~~playa lakc.s .. i.tnmed~Iy,,,;u~.~.}'1,e-)1i!~onif; p:r:c,ject :,P~~i~~:(w the, co~ct.1.~ .9f ~ fJp!)d ~~f:P.!llj~ f~ soutj:l :LJ!.W?ock's c)Ja:i~()f Pl~.~~· . .-..... _, ,· ,: :·: ....... ,,•:: ·: .. ~,,;; ·':• ,: . ._ .... ,, ~~1~ii" ... · ·.:-...... ,· .......... ,• .. ··.~·::·':,.' .. ,·.·~.--,,,:.,_·~.-.·.· .. ·-1a.: .. ,.'.~ .. ·.·.::·· .. ·:··._ .. ··: .. ",:_.':_ ,'·'·"•:;~·.'."""•>• ... ,-· .. _;·,:.1,•,;.•,·.···-_; ':·.·_. ",.f? .. J!•i : .... ~... :'!'-~ • •-. · -P.rojects • . " Commltme,,ts Spe&to-Da.11' .......... _Cont°DiltfJljen~ . , (,, '.-~itti~i ::,, ··, . '.,~;,.·.:: ... :. ,. : $., .\ jjP,$,33.J:, .$ 11553,720 ... _$ .. ,: •n·t . ,lS4,6J8., ........... , . i~.Jmrove.m~ts,.-· ·,, .. , ,.:, •., · ... · •: .i?~!4~~Ik · s.11~.16~_.;.·'; .. ·,:-,_·;_~1.s~.i,s..i·;:.<.;·.;. ·:~tiinprovCl))Cll!S;--·,··•·,-,. , ·.·. · ,:... :. --:,2(>;'.133,129· ·l0,~91),'fM ·:~,•.: 1,,, l~,1~3;41~..:.: 1 r: -Oeoer~l!apital Projects.:· .. · · ·. · ,,,.,92,!i,0OO · ,·.: 6;57S · ·:,·.,' -.-~.:· ..... , .. 9i-8A25·,·: ,,. ;, ,,GenetalF'aciUtiesfmprovenients" ,., . 4,456,673'-2;259,430 :.,"'·,' ::•,2;191·~3 .. , · · . ·, Tax Increment Fund Capital Projects 24,1:31,566 6,517,19.5.' ··' · .. , i• •.'11.,S!M,g7i , · · ·.·., Ga1eway SnmProjects : 23,349,000 19,684,371 3,664,629 · ·E1ecinc ·· -i~:·:.~:,·:·:; •· · 26,476l192.-· · s-;,14,299 ·•·::·-·( .... 11J661·;s93:••·· "Waiir=••r,·,·. ·:•·· ... ·:. · · '··71,421;'032 3i;oi$;s99 i· • ,: ·39;342_;.t33 · · -. ,. · ·'w~M · 11,400;000 · s~311;003.-=·· · ·9;0'1:ljifi : ·· Soli.d'Wastc 7,215,680 991,100 ~,Zl4,S8ll'" · ,. ·. Airport 30,994,699 20,092,779 10,901,9,20 .. Stounwater 83,688,018 65,636,771 18,0SJ;¼f· . . ~~~:11,.Sel?:~ i:;tlll!i , .. . • . . . 1.,Qoo.oOQ . . (>ss~QM ... mm:. . . . , r.~ ·,-::,,•.•;._. '-. .$' '.3~,0'4-8;7t>_8.,.$ ; 186.,)08,071 ,s., -1,59,,7.10;~37. ,,•· -.. ~ ·, ~ .... ... •', ·'.i· '•.-.•. . ~ ·. ~ .. ,. ·•. . . : . : 0 :: ., MO ' 0 "'O • < E. , ·. R·E'.l:IREMENT· PLANS ..... : •• : •i,'•'•, ~:'"f,,":'•.' .. :-· .. ·• • ' -:i '•i • I .,. : • , , • ' • :. , _' ' , I , ,, ' • : ,, :., '',,'• 0\. ;(:•!, :,. Eacn .qualifle4-e(!lplQYee is. inclu~.in. qne ~ftwo ~~t plans in which the City of Lubbook participates. · Thes'! , are . .$~ .Texas , Municipal . ~irem~ System (rMRS) and the LuJ:ibock: Firemen's -R:cliC!f and Retinmtent.F~ .. Q,.FRRF}·. Jhe City .. does .not·majntain the. 11ccounting• records,·:hold.thc hi~ents;or adm.i~ister.eitli.~retkement plan· .. _,·:.:.. .:--,· ·, •·:. ,, :-.. -... , ·, ,.,, ,. •;~ ·,:. ··,., •• ;~ ·-••'! •·...... • '··, • ' " ~'111lmaty of ~gnificant data for each retirement plan follows: . :···.· .. ',, ... :- 75 ' '\ ) ) ) ) ) ) City ofLubboc~ Texas Notes to Basic Financial Statements September ·30; 2006 NOTE m. »t!TAJI.l'NOTES ·oN ALL ACfIVlTIES AND :il'ON'bs (Continued) E. RETIREMENT PLANS (Continued) :· .... · · -· .. -· ...... . ...... · .. .'.J:EXAS MUNICIU-L.REDREME!!f.IS'VS'.l'EM (.l'MRS) P.biiDescrip(ion'. . .. ,• • • •~•. •,' ,l:'. ,: . ' -. ,:_-• o •••• ,• •••n-•••--~--•--••-••n•-~-,,.,..,_ -Y•A ~••• ... ._ '-•••-•-,,.,.,,,, • l ·•: •,I ' :;;,,· .. •• '•. ·.·_ 1 "' : -•• ·• . . : . : .. ~-... -:; .... The City'" pr<Wi~ penskin benefits for all of its full-time llilipl~ (with the exception ·of fitefighteis) through a .non-traditional, joint contributory, hybrid defined benefit plan in the st.a»wiclc TMRS, one of 811 itdrninisfcied by TMR.s; · an agent multiple:-:empJoyer public employee ittil'eniem system. . .: · · ·· · . ' ' •: •. ••, •••••-'. • ' , • ;,•,·:.• •,,':.'; ••• ••••··• .• r • Benefit$ qepencf upon 'the Slim of the employee's oontributions to the'plan, witfi'intei'est, imd. the City-finailced mo.netaiy-credits, ·.with i'nteitst. At tfle date the plan began, the City ~ 'n1i:Jlletaly· credit,; for service reooered before·~ pJairbegiut of a theoretical amount eqllal to two time.i-~ wriul.d iJ11Ve 'tieeD contnl>Uted by the employe~ with futerost,prior to estai>flsliment'l)fthe plan. ·"Monetary mcffls fur·servict since the plan began are a p~t ilOOo/o, 1500/a, or 200%) of the employee's accumulated contn~. IP addition, the City c:an grant·~ 'eiften as 8JUlually, another type ofmcnetaij credit referred to as an updated scmce credit which is a' diC9teiica!. amowtt wlik:b, wheit added to the empioyeds acamiulatecl'.t&tdbutions and the monecary .credits for service since the plan began, would be the total monetary credi1s and emplojiee eontri6titio'ns accumulated with interest if the current employee contribution rate and Cily-·iDatching ~ had afways been m exbtentc and if the emplayee's salary had always been the average ofhisulary in lhe last three year5 that are one year before die effective date. At retirement, lhe benefit is calculated ·as iftbe sum of the employee's accwnulated contn'butions with interest and the employer-financed, monetaiy credits .with interm were tlSed to purchase·an arut11ity. • •, I • • ', •• •• • ' • ~ ' The plan P,IY\'.isiJ)llS are adopted __ by tl)e governing body of the City, wilhln the opti~ available iD ~-• statutes g~~ll'!8 rMRS and ~in ~ adUarial constraints--also in the statutes. Members can retire ~ ages 60 and ~ye w~th. S or more Ye.l!l'S of service or with 20 years of service regardless of age. A rqember is vested after. 5 years. · Contributjol,lS. The contri~'ution r-.ie for the emplQyees is 7% and the Cjty matching-ratio is currently 2 to I, both as adopted by the go..vemli,'g.b6dy of the city. Onc!ertbc state Jaw governing TMRS, the actuary annually determhies the City contribution rate and the prior service cost contn'butioii rate, both of which ate cal"ctdated to be a level percent of payroll from year to year. The nomuil cost contribution rate f'uumces the cmrently aooiaing monet.ey credits due to the City matching percent. which are the obligation of the City as of an employee's retirement date, not at che time the employee's contributions are made. The noimah:risf oontnlrution rate is the actuarially detcnnined percent of payroll necessary tn satisfy the obligation of the City to each employee at the time his/her'tetircment becomes effective. TIie prior service eontiibutiob rat.e-ai:oortizi:s the uofiirided · foverruillted) actuarial liability (asset) over the remainder of the plan's·:iS-year ~ period. The mi-it cmditactwiriat cosfmedtod•is used-for-detennmmg the City comribuiion tat.a. :S-olh·ttte employees and the City make contn'butiQDS monthly. Since the City needs to know its oontributiOb rate in' advim~ for budgetary P',UJIOSes, there is a one-year delay between the actuarial val\iation that serves as the basis for the rate and the caJendar year when the me goes into effect (i.e. December 31, 2005 valuatioll' is effective for rates beginning J81UlaJY 2007). 76 . . .. ." •• I .:.:~.:•: ~:: ./:·:•:.-:~-::•0.~~:,-•i _..: -.... .,, ,:,,,.~..i..:.,.~-.:•-.'• •~:,/,•!:'--:..,,:~:• .. : ~•: ) ) City of-Lubbock. Tex.as Notes to Basie; Fi'11JDc~I Statements Septetnber·30> -2006 NOTE m DE'I'.AIL NOT-ES ON AU, ACTIVITIES AND FUNDS.(~atinued) ,.. . ·· ·, E. RETIREMENT PLANS (Continaed) --...... ,:·:·~··, ·::,, . -~ -~ ...... ·; :: ": •::.-~ .,_••·· .. . : ·~··.' . \;f" .. -• The actuarial assumptions for the December 31, 200? valuations are as follows: ·-:::.··.: . ;''• . '.,.::: . -1; i' ..... ~ ...... • • •' • ··.-~ : ·11:>' '! .Unit.c;ml~ . • Levcl,p~tJJf payroll __ 1~· mrs-9~p~od . : Amortited ciist 7% Nooe ''3.S%· ..... . None .... · • •• ~ •. i ''"'•·•.•~ •'i l ....... , ,;,•:'i :: .. : • ,:: .•. ,j .· . ,-• : ). . • . --~ ! .:· '•\ · . . . ". ...... :~ =· .. a.,,,: .-; .. ,., ... •·.· ,.-'Ai'•f . , An.11aaSPensio11 .·:Ci,11trlllt1tio11.,·c ... · . ..-i •.:,•:•-v.• .. !: :·· · _.,;,s:,;::epte.c;. a:;· mber=::;:...::30;._ __ . .--...a··Ces='-;t ___ ......_ ___ M ... a;;;.;d..::_e_,,_ ·-::-,·.. ., .:,-,; • · . ............ ·' :·•··"2004-,: · '"•$'8,708,S67 -· t-,'703,867 .'.-'--• .. ;•=•·.,·r•:'. .. · ,:;-.,,,:· 2005 9,933,373 9,933,373 ·,_•.i-J0,904,0ll .··.J0,9.04;031 ·.; ·,:•,.:,·,.'J ,,:r,,:,'•\•i'.a".''.., ::,·· · .. ,·· .;'::·:.=. -,.· :.· ;•}·'""..:.'lrn:,.._: •• _. --·•: ••• .,.,, 1•.·":;._ :. · ;._\;.. •.····· ·.··":·-:' i;·.-:.~ · ... _::£,: ::.~·-.·, ..... . •••••\-.~.:..;•JS,:/•...-.. ~•!~~•,•••• t,;:,:,t,~ '-:-; • " • ,:: • •:;" I • •,••;_ •• .~••'/ :;.:•: •.': :),'*"'. ; "••-:_•'_' f: •, '\ :,-}l :. ··\' : ri 'n•~:··.· .. :.; ,q • ~;_. ·;::.' ~:,:. ~·· ~-!Wi}-~4:· .. 'Ai RE'f~T•jt~·: :·. !_ ,,.,;··J:, ·:• ;:. :-.. ,-..1 ·. i,>i:1•. ·····•'' ·, "·1·,,,, iri.itit-m1r'. ·'m&··~o:uuorActuit "'·"'"fl'i.lAii.rifJJi··=-'::,' ·.,:.~ ·. _ .. ,.,,_ t:?!~J~{~~~~?·~~~~wu_,,l~~~f-~~:~~~~~-~~~-~!~f ··._ .' .... ' ~\ , ·r...-·: • ·=· •:•, • I• .. : • • ' ,t ,·~; .j •· {. ....... , 1 • '\ .~:"!. \:.. : . ·.-~.ot;, .. , .... Achar.if!-Y•luur .. Dteem'bet"'Ji ·,:· . . ~-. . : ·, . . . ... ~ \ . \ 2003 $ 182,884,133 2004 186,398,54S 2005 19S,046i632 0Mor•·· ·Dectillbeii 31-· · '·~rii.11,1 -~ed Payioll; · , .. 2003 $ 57,577,743 2004 ~l,931,003 -· 2005' ,·. · ,: ; ' ·. ;.. 65'424 9lt ',·' :_. • ... -.. ~ •• j • • .. ~•". -<i; . \. .... : ' ... ' - Actua,;at, . .~,;~_; 239,809:.434 .. · 248,432,807 261,430.1~ UAALua% . or Covered . .. ' Piiyroil . .. ' . 93.9% 100.2% 101.~·· . .. . · ,• ',, . ···! · Unful'llt•cf• : ' : · ' · · Aduarl1I ."~~'\.-, .. •, ... P~e : .. -~bl~~f ·.,; ···=·:, .· Flinded •. . .. , : . (!!.UL) ... . .. ;.. .. .. . . , : ... S6,!J)Zl!',2S_I '~-. '"•'-' 62,034,262 . ' ' ' 763%. ·' 75.0% 74,.6% •. . ·§6)83.<l16· .. , .. , , .. •:· ., ·, •:;,. ·: ·,~~··' ,•,:,._'J• .,·. • :i •: ' l • • • ~. ·: J • : 'i '. • ~: •• ,. I;; ·.• •'. ' .. l': • The c~:~;.~~~-~ .. ~~ ~~-~~:1 numicipal~~~~ the-~fit pian·•~~ ~-~-k~:~~ miinfcipalities ha~ ~~l;~ividual actiaarial valuation pcnoip\~: _~II~~-for lbiD~ ti; iWOS valUation$ ,are-•cOD'faifiecHoth~ 2005· TMRS 'Comprehensive Aimual F'JJiaiieial .RCi)oi'.f.. a 'eijpy of ~fob may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153. ·.·• · ,:·· :,, ·· ·'' · · .. ' ... ••;~:; 1.-'J ) \ ) City ofLubbock, Texas Notes to Basic Financial Statements September'3O~ 2006 NOTEm. DETAILNOTES'ON ALLACTIVITIESANDFCJNifs-(Coutidu~)" ,.: E. RETIREMENT PLANS (Continued) ----'---·· ----------LUBBOCK EJREFIGH'IER'S RELIEF AND RETIREMENT FW"U)_0,1!.IUU):...,,..:..::_~. ·_:, .... ,y· _ _:, _ _."·-'--' ••••• _ •• • • • ........... . Plan Description .,·.:,_ The Board of Trustees of the LFRRF is the administrllior of a si~le.empfoyer·4efiiied benefit pension plan. This pension fund is a trust fund .. It is repartee by th_e City as a rel~ed 61gai~zation aiid ts not considered to be a part of the City financial reporting ~tiiy. Firefighters in the tubbo~ Fite ~ are covered by theLFRRF. . . The LFRRF provides service retirement, death, disability and withdrawai ·be~f~ ~ benefits fully vest after 20 years of credited service, A partially vested benefit is provided ror firefighters who terminate employment with at least 10 but less than 20 years of service. Employees may retire at age 50 with 20 years of service. A reduced early service retirement benefit is provided for employees who terminate employment with 20 or more years of service. · The LFRRF Plan effective November 1, 2003 provides a monlbly nonnal . service retirement benefit, payable in a Joint alld Two-Thirds to Spouse fon,i.1:,f an.nulty, equal to 68.92% of rmal 48-mo11th average salary plus $335.05 per month for each year of sezviceJn excess of 20 years. A firefighter has the optioJi 11> participate in a Retroactive Deferred Retirement :(:)ption Plan (RETRO DROP) which provides a Jump sum benefit and a redt1c:ed annuity upon 1emtination of employment. Yu-dightera must be at least SI yeam of age with 21 years of service at the selected "RBTRO DROP benefit calculation date" (which is prior to date of emplO)'llle!Jt ~moii). Early RBTI.tO DR<;,P with benefit reductions is available at age 50 with 20 years _of ~~ .. fl>r_the selected ueariy RETRO DROP, ~--~~on date".. A Partia1 ~~~"~t#e·~~:~tzeni~r~t~e~l~~li'~~J:J that of the normal fonn of the monthly benefit. Optional forms are also available at varying levels of SW'ViVing spouse beacfi~ instead of the standard two-thirds fonn. There is no provision for automatic postretiremmt benefit increases. LFRR.F has the. authority to P£Ovide, and~ periodi~'~ded for iii_~ 1)1\St, ad ~oc ~tirem~t benefit n:t~e!¥s-· The be~),.~~ons. of this plan-a~ authorized by the Texas Looi.I Fire Fighter's Retirement Ac:J. ('nFFRA). TLFFR:A pl"OVldes the authority and-procedure to amend benefit provisio11$. · · · · · ' · Contriblltioos Required and Contributions Made The ~tn"bution provisions of this plan· are auth.orlzcd by TLFFRA. ~ .. ,Pl':O~des the a~ty and procedure to change lhe amount of .contributions determined as a percentage pf PM' by each firefigb,ter.aed a percentage of payroll by the City. · -. . • ::i,• Stat.e law requires that each plan of benefics adopted by LFRRF be app:o~ _by an eligt"ble ~-The actuary certifies !hat the contn"bution commitment by the firefighters and the .City provides an adequate financing arrangement. Using the en.by age actuarial cost method, LFRRF's normal eost contn1ra1ion rate is dew,ni~ as a ~ of ~~JJ, The excess of the toW .contribatio~ ~ over.-~ tJOnDal: .cost ~tn1!u!Jc_Jp me is ~ ·;o ~·1ze·-LFRRF's un.ful)(led actuarial accrued Ji.abllify. (UAAL), if~. ·amf:the m-llD~ of~ ne~ed to !1Jll0r1ize LFRRF's unfunded actuarial. .liability, if any~~ .detenninea using a level ~ofpayrollmethod. · . • • ,.-.--· . · . ·. •· · The costs of administering the plan en:: fmanced by LFRRF. 78 ) ) City of'Lubbock,-Te:us Notes to Basic Financial Statements September-30,:2006 NOTE ID. DJTA,IL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) • 'r .: :. E. RETIREMENT PLANS (Continued) .Aun:cral.Peruiou,CQSt:;:,·.•.,.:,-., _.:: ,. : ···_ ., · .,. · .. ",' •'• : : . . . .. ':_~-·. . . .:,,. ; .. i• ••·• .. ••,' ',j' •l \,, ,,.:-:,;:,. :• :•••:, ,! For the fiscal year ended September 30, 20.06; ~ City.of Lubbock'!. Annual Peosion,Cost· (AP.O).for;.the Lubbock Fire Fuod was equal to $3,208,595 as described in item 4 in the table below. Based on the results of the December 3 J, 2004 actuarial valuation oflhe-·Platt Effeaiv'e November 1, 2003, the most recent biennial actuarial valuation, the Board's actuary found that the fund had an adequate tiJlanciQg arrangement, as describeMii,tbe~ below;'bisea;on'1he'fi.xed level of''the .firefighter contnbution rates md on the assumed tevei af City contn"butiou ~: B~ on the.Plan Effuci:iv'e November I;:'2003.,'.miw.i-funding policy reqiijzeiftohtnbutioos equal to-l2;43% of pay by the 'firefighters. Contn'butions byi1he City are based on a fonriwa;".whieh causes ~e City's-·contn"bution rate to'fttlefuate from year to year • .-Thc'l,)ecembez 31, 2004 actuai:iil valtlllt.ion assumes that 1he1City's contributionr wiD .average 19¾ of payron in die futwc. Therefore, based on lhe December 31, 2004 actuarial valuation of the Plan Bff'ective November 1, 2003, the Annual Required Coritn1rutions'(ARC} lird ·o:or'actuariaDy 'det.ermined b\lt are equal to the City's actual contnoutions beginrt1ng~)ainwy .. 1;' 2005. ; This' actuim1 'valuation satisfied the parameters of the Govemmental Accounting Standards Board (GASB) Statement No. 27. Prior to J~uary 1, 200.5, the ARC were ~'ictuarially determined but, based on the December 31, 2002 aotuariaJ valuation. were equal to 1hc Ci~'.-t'.~f~t=~'bations in calendar year 20%. ~ ~l!l-~~on also satisfied the paqmeters of Of.~~-·-•~,..-.-. tNo.27. . . , .. __ . •, •.".• •;,.";•:. ;,'-~,"":.•.:·: • 'f: • •~ '••••.' , • r ... --;,•.,..\. _,:; {;"rf;;"ir~J-. Tbe'.f1>-J~ s~ f!,e, 4e;Yelopm,ent9f the Net ~~i~ Obligation (NPO) as of ~eptember 30,;20()6; . '{t~""~,..;;'W.,cf / :: '. . •i;• . '.' ; ;;) ;1.1:< 4. · Annual-Pennon Cost CAPC) 3,2os,-s95 · 5, ~al City_coaln'butions made (3,220,205) 6. Increase (l)eQea.se) in NPO/(uset) . . . _ .; _(.l,l,.~l~) 7. NPOl(asct)atOctobetl,2005 .. · .. . _ ....... ;'(999~1~2) 8. NPO'(assct)atSeptember ~,2006 . ., .' ._·: :,: .. :.~:.J_sa;£,~) ~ ~-:~•.:,,,!.,,-,.,-•' , ••... -. •·;'.:. :· ·• .. · '. :·,, • . • :· ·-:-."C'~ ... J,'i''\~:,,(: .. The ARC for the periott'October f, 200S through' September 30,.2006 was based,on fhe.J)ecember 31, 2002 and tlle December 31, 2004 actuarial val~ons. The entry age actuarial cost m~od was used with the nonnal cost calculated as a level percentage of payroll. The actuarial value. of~! m-•~·va1ue smoothed by a five--year deferred recognition method, with the actuarial value not more than 110% or less tba,r-9Q%-,of,.the.; market; -value :Qf • uscts; · The, actuarjal: assumptions inc!udec:l'· jq,·:eu . inveitmerit:·• . ~tipi,._ otSo/4 per,yeer (nct·of·exp~es), projected atary, increases including· prorilotion• Bnd Joii~ a.~-~7'-' per,ycar . .ov~u JO-year.career, and no postretiremmtcost-of..Jiving~ .An·iDflatioil as~en.of.4-%-peir ~ ~.inctudtid in the. inveslment retmn and-salary incn:ue •assumptiOOS: '··llit UAAL is ilmortiztad with the: excess of the assumed total contnoulion rate over-the, ndhnaI cost ·iate;: .:m.·e number of years needed to amortize the UML is detenniDed using an open. level.pm:entage of payroll ~.~1Jg ~at,~pa.~U will increase 4%pcrycar, and~ 24.7. years.as ·ofthd>etemW;r 31~ ~00'2 actuarial valuation and 20.6 yean as of December 31, 2004 actuarial'vaJ-oation;··botJi'f>ad oil-dJe:ptan provislons effective November l, 2003. 79· ) ' ) City of Lubbock, Texas Notes• to Basic Financial Statements September30,2006 NOTE ID. DETAILNOTES··oN ALL ACTIVITIES AND FUNDS (Continued}" E. RETIREMENT PLANS {Continued) .:• .·.,:~· :; ... ~. :: .·.· ~_:: :,•• :::.:.~.· . _ __ ....... ___ .. _____ ..... _ .. .f.urther derails con«ming..tb.e..financial po.sition.of the .LERBF .and. !he..~~· are avai_@liJL_ _ ___ .. _____ . __ . . · by contactini the Board of'frustem, ~' City of Lubbock, P.O. Box.2000, Lubbock, Texas 794S7. A . ·,5tand-aJone tinanclal·repot_t is'~table by-couta~g ·lbc LFR,RF. ,· '· '· ·;: :. ' ,.•' · ·-·· ·' ·· -.• · · ·· · · • ,:; : •• -, ~. • .-,_;: : • •• ~ • ••• , ·p , I•., : .. (· ·• ,'.r:. } ; ,,, ;•y ., 'i. ' : •• ~ -! ·•... ·' : _}· ·'·.;.. !:. t '• 'I ' , ,•,-.••• •; • :•.,f . ~I-Year Ended ' 9/30/04 . 9/30.lOS 9/30/06 , .... ,. Tr-end lnfor-matioo .· -An11ual ~ Cost . (APC} $. 2,582,713 3,016,942 3,208,595 101 o/o 1-00 100 . . . N'et-~pn.Ob~ption ._.. . ,(Asset). · · . (897,648} . (909,112). - (920,122} ;6.1121.ysis,o.fFu~ing ~ . I,uquired S~pplementary Inrormation (Uuudited) :: V.A#J. ~ii.di~g ' -~v• ~tage·or Actuarial Actuarial EatryAge A.etnarial Accrued Liability (AAL)(b) Unrandetl AAL (UAAL) /hPdiag exws ·(b-a) Aanaal Clvered Vafliiition ·VaJiie of Ftinded Ratio (alb) 0,v&cc1 , Pa,ro11 Date A.1st ts (a) PaYJ'OII (c) 4 ((IH)lc) 1113 J.19f).'.1i''. , $119,660;7!8 12/31~ 1~. lll,261,775 )2/31/04 S . · 130,174,984 114,67$,049 127.SSQ,414 143,991,975 (4,985,739) 16,588,639 l-3,816,991 \04j¾' 37.0 90.4 1. Ero,~ and demographic ~ons were revised. 2. ·~~in plan benefit provisions effective Deccmbc:t I, 2()01. 3. Rcfiecis changes in plan benefit provisions cffcc:tive November I, 2003. 4. The oov= payroll is based o,i estimated annualiied salaries used io the valuation. 5. -Dcmotniplilc asaomption was revised. · · · · · ·' · ·.. · · F. DE-FERREi> COMPENSATION • \. r . \r, ·, • ' :· ... · .. ·_.;·: The City .otl:~ .its.employees two deferred compensation plans in.acwrdance'.with lnttmaMievenue q,de ("IRO:}.:Section.457. -~ plans, awilable tD all City employees. permit<them to defer a::portion of.their ~,UQtil future ,y~. · The deferred. compensation is not aV811able ·nr-empleyees:· liiJtil· termiriation; r.edremeQt. deadl,·onmforeseeable emergency. The plans' assets ·~•held·m tnt.stfot the exclusive benefits of the:participal!ls ~ their beneficiaries. ' ... . '·. . ,. . . •' : . ~~ •: . . . . . . ••, ' . . . ~ . :· . ;. ' The· City ~-not.· provide· administrative services pr have any fiduciary responsfbilifies. for-th~ pllim; th.ereforce, they an: ilot presemed•in the BFS: · · · 80 •' .. :~!.:,:,I' .. :;:.: :-~· ..• -.. -~.:. : ... ~~-. ~--._,.,:·,~ :·. ~ ·--:-= . ... . :.:: --~: :{ •.. · · •.. :· ..•... ·• ~-• ... • :. .. -.. :~-•• t' •••• "':~ '• . ;, ... ",\ .. ·, •,/_.!: .. : ..... ~~~~~ .• :-,, •• \r, .... :.1.'-.• ., . . .. . . ...... ~-' . '' ) City of Lubbock, Texas Notes to Buie-Financial Statements Sep'tem:fier 30, 20()6: NOTE m. DE!l'AIL Nons·oN ALL-ACTIVITIES AND'FUNDS (Coatiuueti)'"'_: . : ~-.- G. SURFACE WATERsuPPLY Canadian River Municipal ·water Aittluirity : · · ~ ~ '• : ' •,. ~' .... ~-. •!I••~~•••:•:_. ,: ,I ~- The Canadian River M~N1t.lWater ~~:(CRMWA) is_a'.¢onsen'ation ~; Rcclamati~ :~ulhority establ_bhed by the 1'.~:µgisl~ to C~?'.\1tt" a dam, water re_s~~o~, and aqu .. t -~ystem for_fbe~se of supplying water .~q ~unding cities. _.)~e _,:'-uthority was ~led. in 19S3 ~4.~ses e!~~ cities, including the City of. L!Jb~ck. The bud&et,. ~~cing, and ~ons of lhe ApQlQrjty are governed by a Board of Directors sel.~ by the gov~jng. bodies of each of thc;:-•member cities,··.each,city being entitled to one or two members:-dependent upon popu~tion. At September-:ro,· ·2006, the Boffll was compcised of I 8 members, two ofwhiCQ:represented the City."·. ···:" · ,· •,. · "· !( ' ~ ~ ',I •, .~. ,.: _ '. , ' ' ', J ''J • • .. , The City contracted Wltn ilie CRMW A io" ~urse it for a portion of the COM of thei Canadian. River Dam and ~ueduci systen(f~;~~ge for surf~~:~. The City'~--~--~ share t~.(~~ flxed lm,d variable operating and reser~t¥1~nts are record!14 . .as,an expense of o~~ung surface.~, "":,f?,:0, ;-. • • •• .. • I • :• •,~ • • • • •• • Prior to FY 1999, ltmi:~i:u debt was ow~ to.the U.S. Bw-eau _ofRec,Jamation for.the cost of COJlStWCtion of the facility, v.iiich ~'.~leted in 1969:·. ~ City's allocati® of project costs:was-$32,90S,862:• During FY 1999, bonds in·~:p;iiitjpal amowit of-$12,300,000 werdssued.to pay offtbe'C4'i)s1ruction'obligation owed to the U.S. B~\i;pf' Reclamation,via<C!RMWA in the amoinit of S20,809;06-7l 1be difference of S8 509 067 was· a d~·in the rema· . . . . . ·pat ri>vided -i.., the U.S. Bureau of Reclamation to the • ' . . . ~ ~ p ",T . . ... •· ... •I' . member cities. Th~'rdi~'bunt bas been recorded:as a defe:md ····• 'tin refunding~ ••: tiebJg am~ over the rife of the~~:~. At Septini~:~o. 2006, ~~;q7.1 remain~:!i.~6jtized. ~ mmual prineipa) and intet~f~ts are inclu~e~f ~. the disclosores_~ .~tiier City ~~--1908-fenn .#t The above cost for the ri~.l.\!..¥,,recon:led _ss cap~ assets and arc J:!eing 11!D(>rtlzed OV!lf ~ years. TM:cost and debt are reoorded in ~~}Xl}ter Enterpnse F~. , .· . . . , :·· . , : . ;,:_ji':..-;NJ ·•· ••;: •.. •·.. .. • ,:.:. ·. In 2005, the Canad~D:lUver.Municipal Authorityissoed $48,125,000 in Contract Rtmiue Bonds.: The City ofLubboclc shared intbi&issue in the amount ofSJ7,960,000. · : ··· · · ·: ~" -:~·;:.·:~;,; .. ·.• •. ,:·p .~. The Ctnadian Rivet·_Moij~I Authority i~'a new Con~~ Bond, ~~:S-~006 in ~J.'2006 io the am~ of $49,~1!1090.1 The City of_.LJJ~9ek shared in theJ~~e for $18,57,3~6 and ~,costs of $492,46S, and receiy¥,.#~iable "5sels. '(Wll~ rights) valued at.$19,066,371.. lb~,_,ets arttilJiabilities are m:orded in the W~!F-&,lerprise Fund._: . _ Brazos River Authority 7 Lake Alan Henry · .• •• i. • • : During 1989, the City entered into an agreement with the Brazos River Authority (SRA) for the construction, maintenance, and operation of the fact1ities• ~-as Lake Alan Hr:rirY<Tbe BRA. •wtii~ is authorized by the State of Teus to proviacror the conservation ind d~lopmeot o.f ~oe waters in1.tfle 8.razos Riyer Basin, issued bonds for. the ,~on .or a dam ~d Jak~ ~ilities on ~e So(nh Fork of_!li.~ pouble MoW?~n Fork of the Brazos River." ~'BRA JSsued $16,970,000 m revenue bood.s in 1989 and $39,685,000 in reveoue bonds in 1991, ~~. ~--~ded in ~ly 199~-, The asset. Lake Alan Henry dam an<Macil.ities, are recorded as capital wets 1111d are being depreciated over 50 years. The financial activity, along w(th related obligation, is accounted for in the Water Ente,prise Fund. ·. :· .. -:··· ')• I••• s1·-: '\ ) Qty of Lubb1:jck, Texas Notes to Basic Financial Statements September ·30, 2006 NOTE III. DET!\D.; NJ)TES ON ALL ACTMTIES AND ·FONDS (Continued)',,. H. WNG-TERM DEBT ·-.. · ·-········· · -·---.. -Gmt!E&AL-OBblGA:i:ION-BONDS ANJ>-CERT.IF.ICA'f.E.SORQBLIG.A.-&U,,..Q~?i.-.::-..--'-' ~-~'---·---·--.. -·-..... . ; loJe~ .. ct . . Iss.ue . , Mab,lrity . AlllOunt . . , , Oil.,~.· . ,,n,djqg_. '· · ···gi12~-... · · Ji~ ... · Date' · ·· ,. ,,, .. s:39· i'o-.oi:93· · 02-t's~1• ·'s ~tooo s · ·1;oot,ooo _,. · ·s:20 • . .,,· '10-01:.91 · 02-r>l-' ·,1,410,000 .. m,;ooo · s:14 · • · ,·. ·10-01-93 02-15-14 l'9;2iS,OOO ·2,89s,.OOO ,' .: . 4.91,,-.· • 01-1-s-.97 02-1s-o9 t7;S3o;ooo · s,us;ooo · · · · · • . . 4.61 01-01~98 trl-l'5-08 1,3301000 .: · 320,000 ·· · ·' · · 4.71 01-01-98 02-lS-18 10,260,000 2,575,000 4.36 01-16-99 Ol-lS-14 20,835,000 16,710,000 4.58 OHS-99 02-15-19 15,3S5,00Q 2,319,0()!) 4 4 : .. 11 7 · :. 1 . . .. m.J 1 :9j! 9 .. 02 @: 1 1t 1 t~ 6,100,000 9~s.qoo . _ ... .,....,, 7 "' ,, 1~0,0()0 . . ~060,000. S3? ~15.:§9 '02-15-20 14,800,000 . 3,100,000 5.54 03-15-00 02-JS-20 7,000,000 875,000 4;90 02-01;01· 02-1.5-21 9,100,000 1,560,000 4.81 02-01-01 Ol-lS-21 2,?70,000 560;000 S.25 .o&0\-01 02-1 S-31 35,000,000 3,710,000 4.68 02-13°02 02-1s.22 ·9,400,000 · 3,410,000 4,71. . 02-iS.-02 02-IS-22 6,450,000 S;SOS,000 4.zjf 02-lS~:i _ 02-0l-llSS-- 22 22 1,545,0Q!) 1,385,\)QO 4.6~ 07-QHl2 · 2,605.000 2,2S0..QOO ·.,,. J.rs ·•01..ai..m Q"i-1s.10 1·0.~i.o.~o 4,635,ooo . .if.42 ... 01~t,s:.oj 02-15-23 11,835,000 I0,•,15Q:O.O .~ -'"~•-:41'" -~~~ -t>1="tS=03· ______ :·.--•02-1-s--M -•-, ..... -.. 9;ns,00fl -'-· -- -·· 9;uo;ooo- 4.4& 07-1 S-03 02-15-24 685;000 : 635,000 .. 4.47 07-1 S-.03 02-15-24 3,595,000 3,355,000 4.87,, 07-15-03. 02-15-34 40,135,000 38,710.000· · · 4.47 07-1.S--03 01-15-24 3,800,00.0 · 3,550..000 4.60 08-15-03 04-15-23 8,900,000 7,&10.000 ... !:i · : ... 0 0 .,.6-8_• 3 I~.-, o.1 0 -.,:!St:?-l32 13,270,000 _ll,65~000 11-V't ,..,, 1,000,000 1~:000.. ", 4.09 '· · 69-28-04 02~1s-24 2,ozs,00.0 1,ru,000 4.08 ·09-2t-il4 02-1s-24 3,100,000 · -z.sss OOQ'' 3.58 09-23-04 02-15--20 22,620,000 22,100:6® 3.89 02-1.S-OS 04-15-2:5 23,0:55,000 21,470,000 J.94 06-1.S-OS 02-15-21 49,615,000 · 49,615;000'' 4.26 08-15-0.S 02-15-25 46,525,000 44,950,000 4.8l .07-IS-OS 02.-15-21 43,080,000 ·41,380,000 4~ 07-IS-9S 02-)5-25 7;26~.oqc> _ 7,035,000 .. .fslf .o+(s-06 02-15-26. 76,9,$0,Q(!O .76'.SO,-C,OO., · , .. 4:ss .. · ~,~ 02-1s-26 2,1~0,q110 2,14().000..., . . ~-~--.;,··:_.'; ~~S.-i.ry_~,· o.i-1.s-31 1~8301000 ._1~sfo.~o ,.. · Totlil:· . $ 605,275,000 ' $ ', ~~·~;000(~).,' I :~ ' ' •. 1,; , I • •• • , ~ • ",• (A) Excludes ($4,264,274) net defcmd losses on advance rcfimdings, net bond premiums and discounts. and bond issuance costs -(Sl,906,682) bus~type and ($2,357,592) governmental. Additionally, this amount includes S323,5{i7,720 ofbouds used to finance cnlelprise fund activities. 82 . ' : ... ; :··.··:: ..... ;..:.~ -;::_:.~:._;:~~:::::·.'.':::--.~::-~-~-.:• ·: ·:.~-:~..,-~:-·:~-..,:.;._: .:_,:· ... : .. _;. -·. r, •·• :1 •• ,. , ... , ,•.·:.:.:· •• ,,,_, .; .. ~ , .,._._ •... :-•• ~'"''•/-.. .,. .... ,:.:.,.,, ,:~ ~:.;i"..: -~~--'.4~r-~ .. -;~. , .. : .. ,, ··--.... -' . '. . . . .. ,... .... .-:-........ ) . } City of Lubbock; Texas Notes to Blisic·Financial Statements September 30, ·2006 NOTE m. DE~AIL NOT~ ON ALL ACTIVITIES AND FUNDS (Centinu~) · lL WNG-TERM DEBT(Continued) At September 30, 2006, 11uuuigement of thc•City believes that 'it was in ·compliance with all financial bond covenants on outstandillg· general obligation bonded debt, certificates of obligation, and water revenue tionded debt . -•. • .. 1 • • • ~ • ..... ; .• . ,. : : . ; •· :·... . u-•t'; ... ~:.:Y: . ~-:, . r' .-... -.: 'LP&L.RMNUE. BONDS... . . ... ,, .... -.· ., .... I•.:'\'. }-: Fl11•l Interest Rate(_"lo) , Lnae D.ate -Maturity Date . AJl!OUDt Issued Ba~n_s:e Oats~l!~ng 9-30-06 4-1S--08 4~15-18 4-15-19 S 13,560,000 · !>.,170,000 14;97s,ooo s 1.~s:000 s.s~,(!QQ· 7,ill,000, 3.80 to 5.50 ·. .. · !•6-15-95 4.25 to 6.25 . -· ', ~ 1-01-98 3. IOto 5.00 . ·1-15--99 4.00 to S.2S .. : .-~-:--01-01 . 4-15-21 ~,.aoo.ooo 6,900.0~ Total · -,·"· :.·: :_ .: • ••.•• ~·/:' •,., .. ,!'::: ....... . · · s -~9ijfooo · •• , ' ,, 11 •• ' ' C, _i t ,'f , ~ . Sll,910.0Q0 • • Balance outslllnding ~eludes $274,845 of net defem,d losses on advance mundings. bond prcmiwns and dlscounts, and bond issuance costs.. : · , ,·.. . ·,. . ' · · • • ., .. : .. ''!:i;··--, ..•.. , :; :: ._()THER~~_!J(:'NDS .... r,·~ . •' , ... ,' :· ... .,, .. -. . ........ . llite~t 'Ii.ti{¾) · ·· :wu'e fute , . ·i.-983 · • ·. · ·.· •' ~().-OS •, 4.25 U> s.o 04-3°"96 •.,... . .... _.·.•., Fi:•• ·;, : Maturity Date : 09-30-25 · • ,. . 02-U-27 • Balance outstandia~ cxdudes ($461,839) dis<:ount and d~fernd losses on bonds sotd·OI refunded. ... :·(~~:i.:t:_.\_', .. _./l~:r.:_~'~\:'" .... •~-_.-.-;~_.,·.•~ . •·:_·· _~ ..... ·::-::,..·~:· ~ ......................................... . The annual requirements to amortize all outstanding debt of the City as of September 30; ~OO(i'iire 'as follows: .).';_:;;. ·. :., . ~. Aitlvit( . ':"VY.".111...-i . . es · FISCIII Cea~l"()bllption Boacb : ·Vear-_Princlpa! ··late~ 2001 ·,·~.367,599 ·'s/J70:J07 .... 2:CX)8 ••. • ·:-:6-.SJt0.93,. . .. ~~.849 · ·::· 2009· ... · ·\~tss;'$f·. /·4,994,544.. · 2010 6,677,160 4,718,846 201 l 6,892,527 4,428,865 2{!1272016 33,9;4-3,446 17,559,698 1017·20~1 ~Z,6SS~3 · .. 9,91~,808 2022a2026 24).49,619 . 2,482,180 2027-2031 . ·••' . W2-2036 · ... ;, = -;. toia!s ·• -S 1~1451,280 S' S5,342,097 Gcl!tral Obligation Bonds Pri oapal · · ':, · .. lnter;vst 16,182,401 · ·1s,6l7,69S 1,7,019,907 ... 14,101,110 11;004;03{ .... '.)3,406,654 17,147,840 12,696,672 17,557,473 11,942.950 86,021.S54 47,795,579 79,014,127. -27,439,606 46,720,381 .. ·12,003,0S8 19,835,000 ' · '4,279,800 7;065,000 · -' 541,625 $ 32-3,567,720'1 :S 159,824,743 !_;"•.~.1.;:.!· : · · '''Prfacipal •.-·,i::.•." 01itterest '·· · ··3 tn t,\9 · .. , ·3 0211os . 3!fuj3f-.,,,Z6l;_W4· ,, ... ,-:i~ld'.ir·.,. ·'2,~~ 3.~rn, ... , .. in~,414 J,11~,,,359;,: ·, · ._,2,181,036 14,172,099 ! 8,860, 16S 14,887,~ I& ,.;,v .• S,OB9,9SS J0,891,UI : ·: ,:.'J,655,657 · 'S90,;586 · · .. :•:0·: 29,529 ..•• •• :~~--. , .. ::!,-: : s· jS,019;32i :?s· -2s,214,7t4 CapitJ!l'leases·W~ ~ ~-•.cq~ ~~.ip,nimtt and veh~l'~: .. Tbe'.~ ~eon the J.~ '~J'~~:_io_o/4. to· 4';3%. "The lmniw ffltllirmients'on capital lea~es of the City as of September 30, 2006, Including interest ~ ofS1,790,78S are as follows: · 83 ) .. ,._ "--~--··· . ) ) ) ......... City of Lubbock, T~as Notes to Basic Financial Statem·ents September 30, -2006 NOTE m. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) ''.· < : '. ' .. IL LONG-TERM DEBT (Continued) ~:.' . . . ,II•' Got:i;Ll'.!!!!£.~tal -~--Baslness-Type ~-. .:Total --... --... ~ .. _., ........ . ) . ·• ... Capital Leasll \•,' Capital Lease Capita,1,Lease ,: ,.;.,•~ . Fiscal Minimum Milal1111u11 Minimum ',•, .• .. Year Pazment Palment Paiment 2007 1,6!14',843 · 2,277,756 3,972,599 2008•· 1,694,843 1,946,263 3,641,106 ··ioof 1.673, 144 1,842,705 3,Sl!i,849 2oio 1,522,290 1,7•8,474 3)-10,164 201-1 725,904 1,086,012 1,811,!H6 201,2?l016 1,ll6,246 381,832 1,498,078 Less:·· Jnlerest (896,71 Q (894,0741 (1,790,785} rotat ·$ 7,S;i0,$59. s 8,388,968 s 15,919,527 :··,: ... · The (:8n}'ing values on the leased assets of the City as of September 30, 2006 are as follows: Govcmi:nental Acei.vities Bu~ness-ijipcActivities Total Lciised Assets $ s Accumalated Net Pook Gross Value Depreclatiot1 Value 12.350,672 $ J,363,34S $ 8,987,327 12.093,791 211 S8.891 9,934,906 24.444,469 s . s,s22,i.l6· s · · 1s.~J.3 '· Long-term obligatioµs (~et· of discQ,Ullts and premiums) for goven:unemal and business-type activities for the year ended September 30; ·2006 ace·as·follows: . . Go.~en~I activities: Tax.:Supportcd • Obligation Bonds Capital~ ···: Compensated Absences ,·.. iruuriuice daiin Payable Boni! Disi:oDrifs/P~iums Arbi~ Payable Total ~mmeotal aetivitie, • • •, I •,\',. . Bmiims-Ty~ activities: · Self-SupPQtt,ed• . : .. · Ob!igailcin .Bollds "°'btPapblc · · Ddic Payable, Due-ia' 9/30/2805 Additions Ddetions 9/30ll006 OIIC year . S 102, 720,269 $ 27,526,113 S S,789,102 $ 124,-1.57,i&:0 $ 6,367,599 3,954,8&5 S,119,980 . 1,s«;3<i6 '. --:,,;sg0Js9 .. 1,426,999 · ·,) 6,288,365 -6;313,086 .6.,341,414 ·.,: 16,260.031 6,1)3,264 2,140,260 19,060,9.56 iS,610,060 .. , :j;'16.!,iS6 2,.512,041 1;86S,.984 ~20,MO _129,'252 2_.357,!!92 t.51,716 1s.r,r16 $ 127,169,763 s 58,792,711 s )2,444,134 $ . I SJ,S 1.$,340 $ l6;4~,903 286,749,731 70,993,887 34,(75,898 323,567,no 16,.182,401 . 42,800,000 18;573,906 3,294,584 ·-s-s,im,322 j,871,149 1,3.54,576 8,ISS,734 1,124,342 8,388,963 1,974,403 3,073,391 · 225,740 3,299,131 ~ 5,000,765 2,5B2,6S9 2,217,628 5,365,796 2.s11~•795 3,235,231 · :·4.,47'6,153 S)HJ,916 2,444,6:tl Rovenue Bonds· Capital~cs etosure/Post Closure Com~ Absences t~ccctaim.Payable · · · ·: · Bond Discotmtsil'remiums 6,501,.89& . 2,SSS,443 64&,300 ·1-,297,066. · 1,906,682. Arbilrage f'.ayablf: Total Business-Type adlvitleJ 71,191 71,191 $ ·348,035,809 S 104,489,648 S 46,SSS,611" s: :.to.s:,'93?,186· s 21,0'44,380 ·· .. ·,.,. ,• .... f'"•. • .. , .. : ·1·, ..... .t , .. •;,-.-.,.;. j..,~ ... ~ •' •••• -.. ~:-••• ~. ,\:., •...... ~ ••• :.: ...•.. :. ,:, • : •• \ .~. ,: ..... .,r.~· J.4.'~~ .. :-..,: .. .; .:,...;;.: • .:. .. ~., .. -· . ··•~ ...... ·-·· . . -··-·· ........ . ) ) ) City ofLubboc,k, T~s Notes to_Basic_FiDancial Statements Septe,nber 30, 20~6 NO'R III. DET,UL.NOTES·ON ALLACTIVITIFS AND FUNDS·(Co~ti-11oecl) · =· • H: LONG-TERM DEBT {Continued) . :•J '.-~· ..... t :~ .. Payments on bonds payable for governmental activities are made in the Debt Service.f:im4.0_Bonded d~~ is subject to the applicability of federal arbitrage regulations. Accrued compensated atiserices · that pertain to goyer.D111~t;lt,a~~~ wi!!-.b.e .Jiquidated by the General F.uµd and Spec~ ~~ue_ ~s. .. : 'the~ -~~,~~=f:.,r:~~1e:~ ~~!t::go~~~~·1~~4~~; Oe11~_.Ftnt!,i,!Ul-Q..Cap~.f1'9jec~Funds.-., , .·.-. . .'!.,;, .. ,,.,: .. ·,. ; :.:;~.·1 ·.~~-~;1!_·?. ~:.:"",' .. ·· .. ·,: . . :·' ·· -': '· · ·· .. , .. ! .1,;:fl· ·,-:•.,;: .•., :::. · ·,·· .Thll tol;al._ h?~g,-.tenn de~_t ~ t~nciled to the. total ~ requirem~ts to amortize 191}$;;~~ ~~~ \\!3 f~J~~~: ' I• i• • • , <' ~ • • , ···--·· .... ; .·:;'. Long-t=n debt -Govemmentil Actrrities Lolig-tem1 debt -BlllrinC$S-type Actmtiea ,'•-:.;_-.~;-):Iii~:,·•:,-,,-:,,,• ' _.. ,_._ · · _.. -~,i''. .·l:,:rolll!..anioum: of debt· .• • :1, :· , \ ·'..·:: .. ·. · ~ :'Ner gams/losses, prernium~/discounts tm·};~ payable · Less: Capllal ~ Less: ln$lUale;C claims payable Lc.ss: Compcnsatrd 2hscnsei: ',,,, • ·,, ',•: ••• •:.1·.Lcss: Closui:-e-/postcfoMC ~; • -: •··,:. ··. .,,_., :-Z:otahnlierdcbt·--:·:,.-· '. ; · ... $ ,.,:·· ,,· 155,518)40 40$,939 ,786 . · 243,381,559 .. : '• ', 'I•,•:'",,• •.. ,','. • ·, : ... ,;: .,,1: .. · . . $ 802,8)9,4$85., ; :,~ ! .-:-: . ·' .. (4,264,274).· '· ,';. •;:. ·:.; · :: •.-.: :•.,. (7.22,907) ,.,·:· (15.919,.527) (8,022,132) (21,625,W) ·· .. ·;.,·· "-~,299,1.31)·:,,:,;_:; :·.:_::'':> · .. ·' '••::: :: ·, · ,·1: · ::' . ·• ,._ .. , ·• , .. , -i.-Tot:11. mnnc bonded debt ix:quhan~ts · ,,; .. _.,_,: ,_:·.~-((53,353,80'4): ·• ·: , ,,._,, ... :.,,,'-; ::J,,;.~7.49.-435~1 ·_.,. ,,,;'!•i, ')'':,, ,l•i•••• •, •• ; : ~ • ~• •\ :. I:• I • ~ • '. ._ • • • I • • . ,"· .'.~ .. ;-: : :-:.,:,; ; :·. •, '~. ~; )"~ :, '.-: .. : .. • ,,._:·; -~:·.~ _ ••• 1°1-: .:-.-.~. -:·1--:-.· ', fll -~~,ri).,2006.,·. ~e;_ .G_ity , ~ll.~, $76,9~0,000 Tax. il!ld Waterworlc$, System . Surpl1:1S, ,Rey~ue .G~1.1:ate.s ~ oM/ 'on Series ioo6. The'. 'eitificates were lssued at a ·. . ium ofS,(580 . "'s.'. .. '• . a '. ·. ' ' ce .. •'-'g_atj __ ., " .. • .•. G, . ~-.. •.·.,.~ -~P~~-~-ws.~f~f.,ts1_!,},~~~ ~~,.n~( f~mh.w~ $78,9S5\000.: Pr~.frwef fu,e ~~ i:it~.~~:j W~ ~~~~~~~-~ ~ cfGaiiT:=:a:Wa~~~~~;:~~ costs associated with the issuance of die ~ficates. The proceeds of lhe debt an ·recorded in' various Enterprise Funds and Capital Projects Funds. ---~"':±~::~•, ,.! '. ;,, .. _.. _. .... _, ._ TJ)~'-'pty .&4<>, ,~~ ~?40J)0(1-,.,Qeneral Obligation ~-~ 2906 ill April ipo6..-: · ·'Pie. G~cral Q):,_l_i~o!J; 13_~,w_eri:_ issue4.~ a. premium of $8,076. -Mer paying~ ~ of.$14,7~,-the .net pnx:eeds were $2,715,000. Proceeds from the .sale of~ ~ will be-~-for. ~~_ag,-51J'e.el improvements irn:luding drainage, curbs, gutfi:rs. landscaping. sidewaJks, curb ramps, utility line relocation ~,tr-d.ff~•sign3!~on.-an.d the-acquisruo.n of land and,-rigb(s-of-way md fur .. acqui_ring·and.~ving laQd rpr-~-~;-.Th~ pro~,of:the debt~ recorded m various Capita] Proje(;ts-Funds,-·-'. , -·.· · .. : . · ,,, !J>'" ·,\ •• ·,. • .' ·.: • • •• ·' The Canadian River MuDicipal Autboiity issued a Dew Contract Revenue Bond, Series 2006 in Apnl 2006 in the amount of $49,075,000. The City of Lubbock shaRd in that 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 Wat.er Enterprise Fund. 85 "\ ' ) ) City of Lubbock, Tew Notes to Basic Finaliclal Statements September 30, 2006 NOTE m. DETAIL NOTES ON AtL Acrrvn1ES AND· FUNDS;(C~utiuued) H. WNG-TERM DEBT (Continued) .... ····:Alf~~~~~iip._··:, .:.. .. -······ --·· .. ----~----··---.... ·--.: .. .-,. ··.· .· .,·: .. ~~~-:-~---'~-----·-•-•-·---- 1'h~ Cit)' isstied 'iu,''a~·re~ing tor~ a p(iition of the qty'iroo¢timifmg debt-w_t~·tllt''debt ~ reqil~·~n sucll !riifebttdnesi. The netj,r~ from ~·issuaiice.-onlie'ltt/~mg:,5'orids ~ deposited' witir. iht Escrow Agent (JP MorgaJt Chase Bank,' 'Natioiiat Associ1iti9iif·iri: aii' ·abio·uiit necessary to accomplish the discharge and final pa)'Illell1 of die R~fimded Bdrli:ls oii·,•thei; sch'edliled l-'edemption date. These funds will be held by the Escrow Agent in a special escrow fimd and used to puichase direct 'ootijittiohs of the Unfted States of America. Under the C!ICl"OW igteeiri-between the City and JP Morg&t Cba.se Bank, the escrow funds are irrevocably pledged to the payineut of principal and interest on dte Refimded Bonds. In May 20-06, the City issued Genetal Obligation Refunding Bonds, Series 2006 ("Refimding Bonds") with a par value ofSI 8,&30;000; The Refimding Bonds refunded $18,015,000 c»rtstM<ting.bonds. They were issued at a net premium of $272,244 and had $20&,013 issuance c:osts. As a result of the refunding, the Cjty decreased its total debt scrvioe requimnents by $702,199, which resulted in an economic gain of $450,705 and an accounting loss of$862,823. The debt transactions are recorded in an Ent.erprise Fund. L CONDUIT DEBT The City issued Housing F'mance Corporation Bonds, Health Facilities Development Corporation Bonds, and Education Facilities Authority Bonds to provide financial assistance to privaw sector entides for the acquisition and~~~ •of facilities deemed to be in the pubJic: interest. The bonds are secured by the property tmanced. . Upon repayment of the .bonds, ownership of the a<:qUired facilities tranm to die ~te- sedor entity seived by the bond issuance. Neilher the City, the State, not any politiC$1 subdivision thereof is obligated in any manner for rep!l)lDfflt of the b(in(k. Accordingly, the bonds are oot reported as liabilities in the aw,mpanying fmancial statements. · · · " · · ·' · · As of Sqifeoiber JO, 'ioot'i, there were five series of Lubboek H~th Pacilitie$ Dcvelopme1i(Co~ B~ o~ng with~ aggre&ate principa1 ~ payiw1e of'S273,890~1. The bon.ds ~e 'is'siitia ~1{'i993 anii'ioo's.' Aisb ·as ot Septeinber 30' 2006, ~ was one"sdi~s' of~ EdQcirtfun Facilities~ ii;:c. _·Boil'& o~ing with an aggregate prfucipal amo~ . . . 61~·otSS,63S;()()(). 'The bclhds ~~ h'1l999. . .. . .• : _ .. · . . ~ '' .. . .. . . · . . J. RISK MANAGEMENT : . '•• The Risk ·Managiiiimlt· J'.und was established to account· for liability claims, i.vmkefs ~on claims, and premiwns 'ffir'property/casualty insurance coverage. The Risk Management Fund'generms its rm:nuc lfirough ~to oilier depamrients,, wruch arc based on costs. · . · ' . . · " _. _. · · ' '· .. . · .. ~ ····" ;,.•:t .·· ·-r . . . .. . . ·. . . . . .· .. , :. •:.· .. ,·.: :. . ~-: .. ·•J, . : In April 1999,.the City purchased W<>Jka's'· compensation coverage, with no•ileduc:tJlJ!o; fri>m a tbi:n:fparty. Prior to April 1999' the City-was self-insured for worker's compensation· cfaims.' · Arr, claims o~g prior to April 1999_ continue to be the responsibility of the City. --. ~ . ., .... · ' . :-.'· :, ' .... \ '•• :·' 86 . . --~= :;•:••-::.:..t•~•,~:~;:17~].~-~-:r:~r. -~ :~-~•!..• :-::::,i:!-~-:~i.~:~.~-:.::~_-:::::.:~•.H-'•::,,:•r ••· ,•i/ .. ; :: :· •:-••:., ~•.-,:!.~:: _.;•, ' -~1: .... :. ~-.. :.i,-..,;.::i_:~-.::,.:., ,,;..-_:; ~ . .'.,:! ·-.. \~ .: • .-,'i. 1,:,;',j. ';.~:.• ,.~f.1-""'~·..:L,\•~-'I \;,,t.,,.JI,. .~._:.,:,_.,, .. : -~ ••• OIO -• > ,, ... __..,, .. 0, .. 0 0 0 0, >, •• .:., ... •--··•••••M-••·• .. •-· ) City oF·Lobboek, Texas ·Notes to Basic Financla1'State1t1ents Sep~euiber 30, 2006 NOI'E Ill Dli:T AlL NOTES"'ON ALL ACTMTIES AND FONDS (dmtinued) J. RISK MANAGEMENT {Coptinued} ·nie Citys tel!Linsiltarice iiability progranf Is on a cash flow basli;wbich means ihat\he'~erviciiig coninictor processe's,:~justs'alid pays claims from a deposit provjded·by the City.· The City ·11.C<louDts for the liability ptogopn'by cbai'gii'.ig'premiums based upon ~-admioisffativfties aod'reseive'reqiiliemeiJfC in' order to control the risks associated with liabilli:y claims, 1he Cily ~'~~ 1.~ility ~e. i~. ~tember 1999, which is renewed annually. The policy bas a SJO million.amiual aggregafe'.1fihi1t•ana 1s-su&Ject to a $2SO,000 deductible per claim prior to Odober 1, 200,S, and a SS00,000 deductt'ble per c~ s_in~.qct.o~~ '\~~~t•!,:-::,_::· ~:;,,:-;-:--_,:,,:'._'.':,: ;'',. . . , .. ·· : .. · ·:.· ·.· i-~-· ... :--.: < . '• ;.,.::-.-·\,,:~:-.· :•",· .· .;·: '·_·.:·: :' For self-'insured·covtrage',:-tnit'Risk Management F'imd'eslablishes clahn liabilities based on estimates'ofdle ultimate cost of claims (including future claim adjustment expenses) that have 'be«ih~ 'but not settled, and of claims that have been incurred~ not reported (JBNR). The length of time for which such costs must be estimated.~ a~ding .on tbd coverage involved. Because actual claim costs ~d ~ ~ch complex factors as inflapon. changes ·m doctrines of legal liability, ·and ilainagc awards, tile jiro,e'~ ~· ~ computlng claim Jiabiliiies·'does not ru,cessaruy·resu1t in an exact amount, particularlyfor·nabiliiy'co\t&age. Claim liabilities ~-~puted periocu c;al!y using a variety of ICtllarial IIJld statistical ltlclmiques-to produce current estimates tJi.il!~~ ~nt se~cw,ffl..ts. ~laim. frequency, and other economic and sitcial <~,-:'A.dj~nts to claim liabililics-are'-charged l:ir ci'(!dited to~ ia tfie petjod in..wbich 1hey.are ~~-.. -. -:' . . ·"·•.~ ;.-.:. ~. .( '•·:··· . ·"':-.: ~ .-... Additionally;' properly· and boiler· coverage is accounted for in the Rjs]c Management Fund. The property insurance policy was purchased from an outside insurance carrier .. The poµC)'.~_a,$259,009. ~1,te per occumnce, and lhe boiler cover:age_ insurance dediittibie··is-iJi:do· $SOO,OOO'''&ptnde1k'~ lbe unit. Premiwns ~ -~~~ to funds ~;upon estimated premiums for the upcoming year. :-! : • · ~·' .. :, "·:~ ... ..... ·_;:,·. ~·: . . Other small. '.in-Wl'll!l~ policies, ·such• as surety bond coverage and miscellaneous floaters, are also accounted for in lhe Ris1c Managemein Fuii<L Funds are chvged based oo premium amoonts and administratiye charges. The City h~J•4•D!> signiricant~ons in insurance ooyerage during the &c~ J.ear, Settlettieots in the current yealiiid: ~c6:ling rwo· )leais have · not exceeded insurance. coverage. The City accounts for aIJ insurance al,tivjty .in Iotemal ~ice Funds. J.: :; :' .•r ::-:· ....... ·~ :·. :, :,·, ,: . :· : . . .. ' . K. HEALTH INSURANCE ;L:.1,,,:.v.f."~ . ·: :. · :.: . . . . ~=-.. ...._ The City provides·· me<Sical and -dental' iris'uiance for all full-time employees 1hat are acco~ for in the Health Benefits Fund. Revenue for the health insw:an,ce preqµurns are ,generated ~.~-~ center based upon the DIJJ!J~. ~f active IW!-~e:.~lo~ 1be City;s 'plan is self-insured' under an .A~istrative Services anry (ASO) Agreemeut. The ASO Agreement provides excess c:overage of Sl7S,000 per covered individual ffl!W'Y.-~. ~ aggregate ·cap of $18,845, 757~ · The ln:iurimce vendoi ~ oo m'ooical trend, claims history; i¢d 'utilization detennines_ the aggregate deductible. The contnct requires ati lBNR reserve of approximateiy1iJniU!ioii • • ,.' • • •:; : : • ! • :••: ?I:_: •• !.. • • •• : ! .;: ; :.•l • • : • The City, .also {>!Ovi~ fi,dl-timc CmJ?.~Jiasic ,~ •Ufe ~ Re.veiiij.e$ J'oi tJ!.c.· life· i~ ~~~JfQtti ~ cflsf .c~~ ·based. llpOI> tbe n~. of_~ye anp~ .. Th~ life 1nsuranp:.policy . a val_(le ~£$10,000 f)e!:~pl~. . . ·, .,,... -. . .. . .. \\":.:{: !t:~-! ·,:]'.'>li,t·\·'•:. ,.•:._. .. t.· :-· · . , .. ~ ···. ! .. · 1 "· • • •• •.··. • • • ••• FUiiltim'.o'··:':·:~oyecs'may eldet to ptlrclJase'mcciicia'mltl dei!lhl ins~ for ei· '6~-~is:;.-J tbid · su6s1d!ies~j,remfums-to reduce'the c(j~ to einpio~ Employees :r.:~ ~cci~ ~-: sewiah'olitiitiuy insurance prograin.i sucii'as ·a· cancer' incom~ policy, voluntary· life, and persona£'~ insurance: Voluntaty wurance prodocts are fully paid by the employee. -· · 87 ' : . j, City of.Lubbock,. Texas Notes to Basic Financial Statements Septem~er 30, 2006 NOTE Ill Dll;T,AJL_ ~O}l:S Q~ ALL ACTIVITIES~ FUNDS (Con(iuoetl} -; · K. HEALTH INSURANCE lContiDued) ____ .............. ..R,etitjng_ ~.J:nlW,~~niw»..JOOti.Q!_llll!1_JJ~taf insurancesiu~d a re<;luced amowrt ofl~---.. _______ .. i_~JJntnce_ on _the~fyes a.n,4 ~ljgl'b_~ -~ef1el\~-_ The _ret4e_e pays a: P.Oltj~n of ttie premium; .1;0S1S. but. tlie Cio/,,Sl__lb$idi~.~~ ~u~ l?y abo.ut SI--~ ~illion 8Jl1lually. Th~lifl: i~. ~ .fi:!DY. PJid by .the ~. ,; ~ : • : .. : • • -: ''.•, ;,, • ,• • •~·• I • ,•' ',' : .:. ·, -i : ... : =-·,: ., • • .~ The Self.Insu~ce F~ds ~b-iish\1 liability for self-insuram:~-fur both -~e~d -~d---~~rted in,sured events, which .includes estimates of both future payments of losses and related claim adjustment e:xpensea. The following repres_~ ~es in ~ose aggregate liabilities for the Self7I~ Funds d~· the p;ast two years ended Septernbq 30: . · · ·. · . : FY2006 .. FY20~ ... W9lWS ~ and Liability-Reserves at , ._liegi~gof~-~ .. aaims Expenses Claims Payments Workea' Compensation' and Liability Reserves at end of fiscal year Med~ and Denial Oaims LJabjlity at beginning of fiscal~ ~~ Oai~ Payments Medical and Dental Oaims Liability at end or fiscal~ Total Self-Insurance Liabi lily at end of fiscal year Total Assets to pay claims at end of fiscal )'Pa' · · ·'Accrued·insufarici: clam; pa)'llble fum ralrimd assel5 • ·::·-~'•:·,-·: .'··.' ~ ~-dajmspa)3blc-llOIIQJrTeflt T~aoaued i_flSl!Illl]CCc:laim; $ 6,501,89& 3,235,231 (4,4?6.153) 5,19Jf}76 2>.W,2f>O 19,060,956 (18,64J),060)= ' 2,761,156' 8,~,132 11,237,066 ·4;~673' 3,065,459- $ 8,022,132 · M. LAN~~L 9,0SU~E AND POSTCYlfilJRE CARE cps1 .. . . •,: .. . ., '• ., ' . ' ~· ··., .. , .. ' $· 6,436~854 · · · 4,658,359 (4,591,3.1-5) 6,501,898 ·2,3$f,536 17,432,646 ::-·(17,446.m):· 2,340,260 8,842,158 . , : '• \ . ·. ·:· .. 12,646,638 3,943'.86, • ' ·- -4;898,291. " $ 8,842,.l~ State and fedetat laws and regulation:frequire the City to place 'final covers· ~n ~ -~_(di s~ ,~--i]iey ~ accepting waste aod to perfonn certain maintenance and inofiltoring functions at the sites for thirty years after clos_ure. ~!though. closure ~d Post!:Jos.ure ~ ~ will be paid only_ near or aft.er the date lhli:t the )~ts, · a ·'··· ti •-· 'die. Ci' · ·· · a ·on of these cJomre and · 1ostire · as o · ' · ·· · ' · stop __ ccep __ ,ng~--, .. o/~. {'Ortl .. · . ·'· ~ ~ --~~ (~~ -~~ a'j:Orre~ridfng l~ility) ~ ~ch period base4 O!l. landtpl ':&~~ used ~--~-~!ili baLu!ce sheetd'ate.· ' . . ___ .. ,.. . , . , .. _ . __ : .... _ •. · . _,, ... ,.,.,, .. 88 ~·-... \,·,'t :.'.,'••:t:'~~--=.:.::_. _ _: •1:-}:i.:.~---~=-.,.~._ .. _:-:~i...:i:;::: . . City of Lubbock, Texas Notes to Basic Financial Statements Septe.mber 30, 2006 NOTE III. DETAILNOTES:ON,ALLACTIVUIESAND FUNDS (Continu~)i: ·, .,, · · M. LANDFILL CLOSURE AND;POSTCWSURE CARE COST (Continued), :' . :. ·.,;;:, 1 • • • _ • , ., , , • •, .,· l ~ •, , •,: .!. ,4 The S3,299,lll included in landfill closure and postclosure.care.tiability llt·September 30, 2006, represents the cumulative amount expensed by the City to date for its two landfills that are registered under TCBQ pennit numbers 69 (Landfill 69) and 2252 (Landfill 2252), less amounts that have been paid. Approximately 92 percent of Jhe estimated caP11Ci1;Y of i.ao.dtill 69 has been used to date, with $806,525 renwning to .be recognized aver the remaining closure period, which is estimated at two years. Approximately 2.7 percent of the estimated capacity of Landfill 2252 has bc,en used to date. with $23,900,641 remaining to be recognized over the remaining closure period, which is estimated at over 80 yean .. P.QStclosure care costs are based on priOT estimates and have been adjusted for inflation. Actual costs may be different due to inflation, deflation. changes in technology, or changes in regu],ations. The City is required by state and federal iaws and regulations to provld~ assutance that financial resources will be available t.o provide for closuii, postcloS'W'e care, and remediation or containment of environmental hazards at its landfills. The City is· iit compliance wilh these requ.ireinents and has chosen the Local Government Financial Test mechanism for providing this assuraiicc: The City expects to fmance costs through nonnal operations. : ~ . N, DJSAGREGATION OF ACCOUNTS-FUND FINANCIAL STATEMENTS ~ernli!.~.~ ~cflvltiei: Oell~,fUAA . Nonm1jor . Total .. ··. '•' I Property CDurt Fiaes .. .D!l;IQle Pavfng Miu. . ,$ .,.,4,3~,8S9 $ _25~940 S 319~1W.. '! S . .. ~ -.... S 4.394,&59, $ 258,940 $ -329;7~ $· AccoHts Recmable &munary Geoeral Credit Co1111umer Card Miii. 175,317 S S,158,896 34J:.N7 .. , ., . 341,907 S11J24 ... $.,, 5,S00,8()3 :;:: .,.: :•· • ·:·~·-.: f ', '\ ., ~ . .• Balance at ,tJO/Oo ':..,;, Su.s~_Activitles:_ . LP&~ , . . $ 16,472,414 $ -$ 81,008 $ 16,SS3~4221 ,' ·:··: _ ... ,•1· : Wata w~~----··· Stomiwaier-. · WTMPA Nonmajor 4,737,.859 2,445,149. 115,559 1,800,814 3,142.939 5,791 ~o 4,73&,109 ... . :· 2,44S,'14f : .... - .· -775.559' 1,800,814 125 3,148.855 29,374,734 s 5,791 $ 81,383 S 29,461,908 To1al S a::::c,,,==:==!==:::==,=========::::::..!======~===== -89 ') .... ' . \ I L City of Lub~k, Tens Note, to Basic Financial Statements September 30, 2006 NOTElli. DE'l"AffiNOTES ON ALL ACTIVITJES AND,FUNDS (Continued) N. DISAGREGATION'OF'A.CCOUNTS-·~ND FINANciAL'ST ATEMENTS/Contirt~ed}. •· -·· . .1,.1_ :_·:: _ :~:.:.~_:::·., : ... : ... :>_._~_:,_·:· :,.L., ,. _ Alla.'ll'.~#lcir.. !hl.lil>tf1th\~l!.!1.~-.~-i!_i.qQ!Jn: • .,.·.:.:.. __ .. :: _. ::::.. -· :.a . .'.:_:~::..~ __ ;'._ .. ·-_ .. . . . .. .. . ~ ,• • ·..-{.. .: r .' ,: : '· , ••• , ; .::. -.. .. "' : ." I ~r .. • ~ . ;, ,, : · ·: · .'· Governmental • •• • •• • •:. ••1 • Gfflerai Fund Nonmajor Bw.iri=s-Type LP&L Water Wast.ewater ~~ WTMPA Nonmajor Total ,$ s Balante'l!,t ·. ·. • .... ·,. '::.· :, .. •., : ., "9/JOI06 -· :,, --.. , ··.' . . . . ,. .:. ·-~-~ ·:· ' ' :, : ~ . 3,333,240 .. .. , ~' 1,008,169 44S,65(1 187,475 86~91 231Ji2 ~ ~.' SJ921143 ., Accomits Pa2 tt1e su-!!I Balaa'tt'at .. I'•• .. vci~chen 9!10/06·' .. Aecou•h Miscellaneous vovenimehtiii/ .. ... .. QCQC{al ,Fund $, .6,8,014 s 2,l&S,258 $ 4-09,627 $ 3,285,899 Nonmajor 1,022,563 t,000,889 176,081 2,199,533 Basi!lffl-Type.: LP&L -.'.4.90;SI4. 272.557 272,135 1,035,206 Waler ,. 331,lO.O 2,179,886 124,574 2,635,560 . Wastewater t49:,Sn ·155,616 161,633 1,066;886 $to~ ~~.1,29 .l,075,828 14,880 . 1)~6.437' . ' . WTMPA ·. 8,329,910 8.,329,910 .. Nonma)Qi. .. %~1 lz'7281886 94,330 11919~7··· Total :··· · $ 2,833,7~ $ 17.S31,890 s· 1,253,260 s 2I,61B;898. .. .• ,._. ,. . ·'·· .·. 90 :,.,•-... "":'"''•·· ') ) City·ofLubbock, Texas Notes to Basic Financial Statements September 30, 2006 NOTE m. DETAO.. NOTES ON ALL ACTMTIES AND FUND .(Continued}.· O. DISAGREGATJON OF ACCOUNTS -GOV.ERNMENT-WJDE Net.llec:eivabJ,:s. . ... ,. .. ,-,; .-.-.,:.·• . .-, .. ,.-.,. ,: ··,•,;·, ''.•··_. ,,,..-, Taxes lnterlialServi~ · Balana!'at" Gover11mental Rec:eiviibl~ · .. R.ei:eiv~M;,' .. :·: _;', '. '.§f.i.~ .; .... · S,184 .. ,~.J1,71?iJ9I.. .. ~ •• ! . • ••. ·r • '• ; ; i •. •.• ' • \. ' '; '.J.~:~ :·~;;;.;_::·l.;~?~~'.:',' ~ ~·: -~:'6,34~ ,$ ~,JS9,69S $ Activities 27,503,005 111,576 Total $ 29,670,S68 $ 497,9.25 $ 9,159,695 $ ·.:~;1f).(:','•:·'~27~~2(),its ·~'. 1 i,488 .. $ 39;339)>16 ' ' • ' •• !1 I • • • "'.' • "! > ~ r' ,' • I, • •• < ',•• ........ ~:_...,.,,. .~.:" : :: ·:·.. . . • t ~ • ·~ : • ; •. -·::.' i, . .. ' •i: ••• ,.'• . ·-:··.~ . 1: ·•,• .• · Accouats Payable ,\. ~-!,.•••-;•.•: .1.1:, :··•·•.~,:: .·•~ 1;_'_-•' •' -----,.---------,,-,-,..-._. "; l:,' ::• :~· • ..•• •:1 A~11ts Internal Service Bi!lall~ at .. ,. . , !,.• Governmental Payable Payahles ·,:1 -'1.30J116. ;,.. , ... i · _, ·, ... · •. --~-------=------------ ..... -. ,: .. 1 co <~~itt11:S·:·,;•:· ., , S ·:5,485,432 $ · • · Buslizess:.type ,, .. · .:. : · · ,, .. 181,289 · S ·S,'666,121 ,_. ...... • ,_;,;,:: ·. : . ~ .. , ·• : . ·: . : . . . , \ I , ••,:·· . ActMtia 16,133,466 736,217':; 16,869,683 " __ ..,:__,:;. _____ a,.._ __ ........ ___. __ _ !~-',;,s-:,.-,:·•···$ 21,618,893. s _ 917,506 .s~.s~~4\l4 .. , ; . ,. ,.: ' , ; : ! ,:, : ; • i . .-• • : • ; • ! : '. :' • : , : • ' • ~ J I ', , > • NOTE IV,;•CONTINGE~T:LIABil..ITmS • '., T, • ~. • ,I ,t ••• •:" \ ~• •• I I ~ ,·:·· . -·:•,• • : • .. i ,I,: : : • '. A. FEDERAL GRANTS . ,\ ~,(.;.;~.•!:·/.~·. ·;~·.•.·.:.•• .::'+L:~:;:. , In the.rioi:m~I course of operations; the City receives grant funds ·&om various federal and state agmcies; The ·grant•.pi'Ograms iue"subject tlJ audits .by .agents of the granting authority to· easure compliance 'with ixmditioos p'~ent to the. granting ~f-~ds. · :Anyiiability for n,imbursement whidnnay arise:-as the ~It 'of.audits of gnbitscis't!Ot'belte'led·.to·beslgnificant. ·. , ··· .. , • ,,,,, .. _. ... · '. B. LITIGATION n"t;:;•: •,,:••:. ••~-~~~i,,•, ,•,••f,•, •••,J••~ ,• •,'.:••• :~ •::,•; The City is cum:ntly involved in the followmg lawsuits whidi couJd have an impact on the financial position if the City is found liable. . ·, ·.· Cmu-Jes. E:1Dmanuel .. Bosler,--as. Surviving.Parent of Courtaey Nicole, Bosler, as.Guardian of-•.cottoa Bosler v. Travis Riddle and The~ of Lubbock: · . , ,,. . .. Plaintiff sued the City of Lubbock and Offit.er Travis RiddJe on behalf of himself and his children arising out · of ine death of his teenage daughter and injuries to his son lrom an automobile accident with Officer Travis Riddle. Plaintiff ~lieges that Officer Riddle wu operating his vehicle in a negligem manner and was speeding at the time of the collision. The Defendants asserted that the driver of the vehicle carrying the Boslet cbildml, which was the mother, was negligent in failing to yield the rig.ht-of-way lo Officer Travis Riddle. 91 C C C C ( C r ( ( < ' \ .. City of Lubbock, Tens Notes to Basic Financial Stat-ements September 30, 2006 NOTE IV. CONTINGENT LIABILITIES (Continued) B. LmGATION (Continued,) ,,· .... ~·. ---~= -~-----------. notice of c~yp -~ filed ~ ~v~ (7) months ~r ~ date _o,f ~e ~dent .. ~~ ~~intiff claims that notice was not necessafy io that-the Defeildants bad acfual n"<ifice of the incia'ent. . • -' : · •: • • • •• 1 •• •· The trial ~-~nted the· city•s Summaiy Judgment based on the fact that the Plaintiff did ~ file_-a·cu,iim with the -<:;.icy ofLuhbock ~in six (6) months from the date of the accid~t. The P~aintiffhasap~c!~Jhis decision to ·tne·Coiirt of Appeals. · · · · . ·., . . . . . . . .,, ~ Martha Dillon v. City of Lubbock: Plaintiff ls suing the City of Lubbock for injuries arising ii-om an automobile accident with a City .of Lubbock driver. The City of Lubboclc driVl:'l' ~ ~ting an a_lley when he "T~Boned" lhc vehicle driven by Martha Dillon. The Plaintiff Jwhm~ane previous back surgery, undergone rehabilitation, and had recovered from the previous back surgery fu rettirii'to work full-time. She had been working full-time for approximately three (3) weeks before this accid_ent occurred. As a result of this accident sbe--has undergone ·other procedures including another back surgery at the end of October. According to her treating physician, who is. a well respected local physician, ·her prognosis for being able to return to worlc on a-full-time basis is not very good. Grace Nunez and Juan Nanez, et-al Y. City of Lubbock and Taser International, Jnc.: Plaintiffs are suing the City of Lubbock and Taser Intemational arising from the City of Lubbock's police officer's use of a taser in arresting Juan Nunez. The City of Lubbock polioo officer ·utilized• a tam ·ju arresting Juan Nunez and Nunez died after the taser was utilized. •,, '!'.he City of Lubbock's Plea to the Jurisdiction asserting that the City has no liability under Section 101.i>.S7 of the Texas-'J'.ortClaimsActhas been denied by !he trial court. The City has appealed the decision to:the,Qm.11 of Appeals.· A ~ <:Me•vdth simUar. facts to the present case was decided by the. Waco Court of Appeajs in City·ofWaco-v. WiOiams. In that c:a.se the appellate court ruled.that the City-of W,aco·ha.d immunity under this scenario. This was a 2-l decision· and it is anticipated that the Plaintiffs. will appeal thc·-City .of W-aco case to the Texas Supreme Court. · ', . , ~,:.' ... Grace Nunez anil Juan Nunez, et all v. City of l,pbbock, OlfECer Matt Doherty and Taser lafematfoaal, Inc.' .. · ·· ·.' · · ,. · · · ·_ ... · ·. ·· . : ,., This lawsuit presents the same fact situation as deacribed in the previous Nunez lawsuit The diffem1ce is ·that i:Bis·lawsuitalleges civilrigbts-violatiom against the City and Officer Matt-Doherty. 1be suit ~,filed on-December 22, 2006 ln the Amarillo Division of the Northern District. · ·' .-., · · · . -··· ,•• .. -.. ( ( ( ( City of Lubbock, Texas Notes ·to Basie Financial Statements September .30, 2006 NOTE IV. CONTINGENT LIABILITIES (Continatd) B. LITIGATION (Continued) Oscar: ltenda .CQn.tr:a~ili~Jnc.$ etal v. City or Lubbock, et al: .. •.4 • -:. : • ' : ••• ! • ; • • \ •" • ~ • • • '1,,.-:, •; ,: ,l • ' ; ' ' ·:. • The Plaintiff is a contractor who bid to perform a contract for the City of Lubbock. Even-though Oscar Renda Contracting's bid was over $2,000,000 less than the company who received the award from the Cey of Lub}1ock, ~,,R1lqda,,Conmictjng was n!)t awarded such bid. Oscar ~.asserts that the;-~ it WI! oot awarded ~·bid was ~iuse.j_th~ tiled a suit against sno!her J)\lbliC:entl1y in:~l-~1*-fdiJ!g·one ot:its construction projects. They base lb.is on the filct that litigation and the co~ of litigation with non-local contractors was menti9J1ed-M.~ tune th~. bld was. a~ in AugustJ2o06.,,:Cit)' .9f Lubb~ fiJ~ a Morion for Summary Judgment alid it was granted by the triaJ coort. However;~ F~:Ciro\lit.qf-App~~ reyersed the decision of the trial court and remanded the case back to trial in a spij~-~isi~ Jn NJ~t;21!(l6. The City of Lubbock has filed • petition with the United States Supn:me Cowt in an effort to get'them to review the case . ....... ·-1,.: Layne Stanford v. City ofLobbock .. and Lub~ CMI ~rvice.Co.mm~ie~;. · ..... ,.: ,•.-. : Plaintiff. a fire fighter, filed suit under the Civil Service Act allcg4'.lg:t1~ ~. ~~1iy :~~:~,promotion. He asserts that the Fite Chief wrongfully passed him over for a ))T'OJn?~ipij_~~~.h~.:~,cti&fSed, ~ut not convicted, of DWI. · · · · · ·. · • :: • . • ) t ; •:. •! • I ,•; ~:•• •' The trial court ruled in lhe Defendant's favor. The case is currently OD appe~t D~g~ are.~.~-.to attorney's fees and back pay. · · ... ·· · · · · '·' · ,L.,I. ~cC:allsq,:~r •. v._City of.Lubbock, eta I: · ., ..... ·:\. • .. : : .,. ' . •, .. •, : i l. :. i •• ~ ' • •• l'""• ', •s. • A lawsuit was filed in late November against the City of Lubbock and three Lubbock police officers 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. At this time we do not have much information as we have yet to miew the police reports, the investigation by internal affairs, or review the video of the incident. However, it does not appear that there were any significant injuries to the plaintiff. Terry EUerbrook v. City ofLubbodc Plaintiff is a current employee of the City of Lubbock alleging claims of age discrimination, whistle blower claims, retaliation and damages because he was moved from one position to another position within the City. Also, the Plaintiff is asserting open meeting violations by the City. Mr. Bllerbrook is employed as the Director of Solid Waste and is curteQtf{ earning more money than he was in his prior position. Discovery is ongoing. This case is pending the 237 District Court and is set for trial in ~ 2007. The City is denying the allegations aud claims made by the Plaintiff. 9-3 C ( C C C ( .. City of Lubbock, Texas Notes to Basic Financial Statements September·30, 2006 NOTE IV. CONTINGENT I,.IABILITIES (Continued) C. SITE REMEDIATION . •--..... •· .. -. •-. -· -The Gity.bas.identified-specific .l.~ons requiring-site-remediatiQll..relatwe ~ un~etgr.<>Ulld:.fueutotage..tanks.. ·--····· . ··-·. -.- and historical fire training sites. One of lhe sites referred to below as Lubbock Power & Light (LP&L) Plant 1~,repre.,ciits·•.~bili.tyequa]Jysharedl;,yboththeCityandLP&L..-· · ·1 • ••• ::~· • ·:: ·.~. •• • .: ,; ••• •· '-' ,:, ' ,, .. l •. ~ • • • •• As :of 'September, 30, .. 2-006 the City identified three locations that posed"::a pnibablf: liab~itf Toe City recorded the·liilliilities for the three locations in the Enterprise Funds as.~nows~' · -> 1 .. ,. • ,' •• I • • •~• •, • •' • • 'LP&.L 'Plant ·1 ($236,000) ~this represents LP&L's portion of the liability onff ' ' • l:.P&L Cooke Plant ($539,000) - . • ~ wesi'ex'Aircraft·{$3oo,ooo) The City recorded the probable liabnities in the govemment-wido govmunental statements as follows: • LP&L Plant I ($236,000)~ihis represents the City's portion ooly • Police f'.lling Range ($30,000) • CFJt T~ Facility ($'114,2i0) • Fite Totining Academy {$338,335) • South Fueling FaCJlity ($204,000} The ppten.t,ial exposure for' one remaining )~011 is not readily detenoinable 11S of Sep~er 30, 200(;. In the opinion of management, the ultimate liability for th.is locatioo wtll not ha.vi a mai:crially adverse effect on the City's financial position. . . . . . NOTE V. SUBSEQUENT EVENT On January 10, 2007, the City sold $54,020,000 General Obligation Reftmding Bonds and $25,255,000 Certificate of Obligation Bonds. . .. , .•;, 94 C ( C C ) .,-: A'PENDIXB: -·, , FORM OF BOND COUNSEL OPINION < ( • • -•••••••••--••·• •• ,._. • • .,. .• •• • • rn•••-••••••r •'"-~ •~• ,,,-•••• .. •• • • ••~•-•• _,,._,. ••••••••••••-r, • -••••-• ,, .. ,-.. ••"'••-•••r -••--••-• -•••• .. ••"'-•• • ...... ., • .,,,, ••• •• • ••-•-••••--•-• • •• • ••--•• • .-• ••., ••••· -•• - This page intentionally left blank < (. ' ··•:• ' J .-. • • : •• :,J • #,,: : .• .• : . ' :-~,.• .. .-: l . I • ; ' .... t· ,.? ••••• : ... ··:: •. _.l : I •: .. [CLOSJNG DATE] i . :. ·: •• ~. ·,.,;. .. ,.. ,·· t, .{',:-·...;1 , •• \ :i·•:: .: .=:, :; ...... ~ : .... , . The Certificates mature, bear interest? are ._~bj.~t!~~~PJpfi,o~: P.P.9f. :«! _J:q?t¥rity and may be transferred and exchanged as set out m the Certificates and m the ordinance adopted by -~::P1Yt..;C~~9,½ 9f tl}~-~-~ }tl,ltJ;tQrjAf;lg i~~j,r:.issuan~~: .(the . "Or~P.C'')~.and .tJl<i. Pricing Certificate executed pursuant to the Ordinance. . . : . , ;,;,;.. _ ·: ... , .... , ... , ,;, .. , :·,.: ·:' : .·•,,:.~ 1½:~J~Hf~~~ ~~ 9t:x-~: i~ _Bo,:i;id C<m~i;el fpr ~e, ~kp),µ,1)0~ o(.~dering an .Q~m~o~yliUl.;~ ,t~ Ji~Li-}~W!!Y-.. ~~-yaµ_~!:Y. -0~ ~-~; C~p~t~ -~~e_l. #1,~,.Co~tu~.o~ --~ laws of the State of Texas and .with respect to the treatment of in~.-Q)1: ~e ~rti:6.ca~.s. ,fqr federal income tax pmposes. We have not investigated or verified original proceedings, records, ~ oq~~C?! matepa~;-but.~_v~ r~ll.~,-~_QJelY:.up.on.tb(: traµswprofj>~<lescrib.ed in the Jo~~w~,P-~m-aP~:: ·\\:'(?.::~v:e .. ~~ as~umed,any reSPQDSibility, ~tb-,~ct· to-the fiQanciaI .. CQ.n4!tjon, pr,-cap~i.U,ti~~;9f tp.~ ,City Qf-Jhe discloMe thereQf;~ ~JW.~OA-w;itb.f:1.te saleJ>ftJie ,J::~n;iti,ca.~~ : . PU!, ~J.~)ri :~pne;ctiQ~qvjtb,: th.e. C.ity.'s·. OffitjiJJ i~~~~l';p~ .for -used.n connection with the sale of the Certificates bas been Jimited 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 proc·eedings Vinson & Elkins LLP Attomey9 ll I.aw Austin Be,]ing OallD!I Dubai Houston London Moscow WewYr;,rk TokyO Wasllinglon Tramrntll Crow Cenler, 2001 Rass A-, Suite 3700 O..Das, TelC8$75201-2976 Tel214.220.7700 F'u214.220.n1a www.w.,.com .i I < of the City, customary certificates of officers, agents and representatives of the City and other public officials, and other certi.ned showings relating to the authorization and issuance of th~ Certificates. We have also examined executed Certificate No. l of this issue. (A) The transcript of certified proceedings evidences complete legal authority for the issuan~e 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 le~ly binding obligations of the City; and (B) · A c~ntinu~ ad val_oterii ~ ~ -~ .ta:fB~.le p_n;,p~ within the City, necessary ·to pay th~ inte_re-st on and· piincipal of t!ie Certificates, has been levied and pledged irrevbcably· for such pmposes, within the limit prescnbed by law, and the total indebtedness of the ·City; ·mcluding the Certificates, does not exceed any constitutional, statutory ·or other limitations. In addition, the Certificates are further secured by a limited pledge (:r;i.ot to exceed $1,000} of the surplus n~t revenues of i:he . city's Waterworks Sys~' as ciescribe4 .in the Ordinance. · TI:I~ RIGHTS OF THE OWNERS of.the C~cates -~ subject to the applicable provisions of ~ federal banltiuptcy 1~.ws ~ any o~~-~~lar ~ws affettm,g ~e .:rights of creditots of political subdivisions ·generally, and may be limited by general .printj.ples of equity whicli-pe.rmit the exercise of judicial discretion. ·· · · · · -· ·-· · · · rt IS OUR FURTHER OPINION THAT: . . .. Interest on the Certificates is not· exchrdable from gj-oss ·income for federal income tax pmposes under existing law. . . . . . Except as · stated above, we ~press· ·no · opinion· as 'to an'y federill, state or· 1oca1 tax consequenbes resulting· from.the acquisitfon. ownership ·or dJ.sposition··of, or receip~ oi·acc.rtiafof interest on; the Certificates. : · · · · · · · · · · · ' · · · · · • · · •. 'fhe opinions set 'fortli above are based on existing law, which is subject to cbailge. Such opir:iimis are further based'on our knowledge of facts as of the date hereof. We:11Ssiime no duty to update ·or supplement these: opmfons to reflect ariy facts or circumstances· tMt lriay 'her_eafter come to our ·attention or' to· reflect ·any changes· i:ri any law that may hereafter occut· Pi: \;bcoine effective. · · · ' · · · · · · · ,. , · . · , · .. •.· . r'-. ,:·-- -2'-'I ~. •' .. ······ . . . :' • 0t :-:,~·•]:~:.~•,: J,.~:": i'~1 :•/ •• r •• , •. • • ••, :-•,.?:•:• .. ~\.::;•~•:,:';,, ••;: •; ~.¥,.~2.t,:.,:::::,•;.:::.~-:::"•l•r: 0 '..•,:~• ~-••• .~: :.~~:L ~~2.~:•i•'.:'.~::>~:, ::•,':1.,.,:~•:•~=:I::':-: ~~ •.~~~.;.:-•:•., • ~-• No Text OFFICIAL STATEMENT DATED JANUARY 17, 2008 IN THE OPINION OF BOND COUNSEL, INTEREST ON THE CERTIFICATES IS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES UNDER EXISTING LAW AND THE CERTIFICATES ARE NOT PRIVATE ACTIVITY BONDS. 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. NEW ISSUE: BOOK-ENTRY-ONLY Dated: January 15, 2008 RA TINGS: Moody's Investors Service, Inc. "Aaa" Standard & Poor's Ratings Services "AAA" Fit<:h Ratings "AAA" $52,900,000 Ste "OTHER INFORMATION -RATINGS" and "BOND INSURANCE" herein. CITY OF LUBBOCK. TEXAS TAX AND WASTEWATER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERJES1008 Due: February 15, as shown on the inside cover Principal of and interest on the $52,900,000 City of Lubbock, Texas (tile "City"), Tax and Wastewater System Surplus Revenue Certificates of Obligation, Series 2008 (the "Certificates") are payable by The Bank of Ne~ York Trost Company, National Association, Dallas, Texas (the "Paying Agent/Registrar"). Tile Certificates 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 Certificates may be acquired in denominations of$5,000 or integral multiples thereof. No physical deUvery of the Certificates will be made to the benefidal owners thereof. Principal of and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which. will make distribution of the amounts so paid to !he beneficial owners of the Certificates. See "THE CERTIFICATES -BOOK-ENTRY-ONLY SYSTEM" herein. Interest on the Certificates will be calculated on the basis of a 360-day year consisting of twelve 30-day months, will accrue from January 15, 2008, and is payable on August 15, 2008, and each February 15 and August ! 5 thereafter until maturity or earlier redemption, to the registered owners (initially Cede & Co.) appearing on the registration books of tile Paying Agent/Registrar on the 18.'ll business day of the month preceding each interest payment date (the MR.ecord Date'') (see "THE CERTIFICATES -DESCRIPTION OF THE CERTIFICATES"). The Certificaces are subject to optional redemption prior to their scheduled maturities at the option of the City (see "THE CERTIFICATES - OPTIONAL REDEMPTION''). 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 Wastewater System not to exceed $ I ,000. 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, Chapter I 371, Texas Government Code, as amended, and an ordinance adopted by the City Council ( the ''Ordinance''}. Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Wastewater System and (ii) professional services reridered 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. The scheduled payment of principal of and interest on the Certificates when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Certificates by FINANCIAL SECURITY ASSURANCE INC. (see "BOND INSURANCE"). The Certificates 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 manen will be passed upon for the Underwriters named below (the kUnderwriters") by their counsel, McCall, Parkhurst & Horton L.L.P., Dallas, Texas. See "OTHER INFORMATION -LEGAL MA TIERS." Delivery of the Certificates th.rough The Depository Trust Company is expe<:ted to be on or about February 12, 2008. Morgan Keegan & Company, Inc. Morgan Stanley Merrill Lynch & Co. Southwest Securities PRINCIPAL AMOUNTS, INTEREST RATES AND PRICES CUSIP Prefix: 549187 $52,900,000 Tax and Wastewater System Surplus Revenue Certificates of Obligation, Series 2008 (Due February 15) Initial Principal Interest Offering CUSIP· Maturity Amount Rate Yield (a) Suffix.~) 2009 $ 1,765,000 4.000% 2.670% 6QO 2010 1,830,000 3.500% 2.700% 6R8 2011 l,895,000 3.500% 2.790% 6S6 2012 1,960,000 3.250% 2.890% 6T4 2013 2,025,000 3.250% 2.980% 6UI 2014 2,095,000 3.250% 3.100% 6V9 2015 2,165,000 3.500% 3.200% 6W7 2016 2,245,000 3.500% 3.320% 6X5 2017 2,325,000 3.625% 3.420% 6Y3 2018 (c) 2,430,000 5.000"/o 3.520% 6ZO 2019 (c) 2,550,000 5.000% 3.620% 7A4 2020 (c) 2,685,000 5.000% 3.690% 7B2 2021 (c) 2,820,000 5.000% 3.770% 7CO 2022 (c) 2,965,000 5.000% 3.840% 7D8 2023 (c) 3,115,000 5.000% 3.900% 7E6 2024 (c) 3,265,000 4.200% 4.200% 7F3 2025 (c) 3,420,000 5.000% 4.020% 7GI 2026 (c) 3,595,000 5.()00% 4.080% 7H9 2027 (c) 3,780,000 5.000% 4.120% 7JS 2028 (<:) 3,970,000 5.000% 4.160% 71<2 (a) The initial yields will be established by and are the sole responsibility of the Underwrilers, and may subsequently be changed. (b) CUSIP numbers have been assigned ID the Certificates by Standard •nd Poor's CUSIP Service Bureau, a Division of The McGraw-Hill Companies, Inc,. and are included solely fur the convenience of the registered owners of the Certificates. Neither the City, the Financial Advisor, nor the Underwriters are responsible for the selection or correctness of the CUSIP nwnbers set forth hereio. (c) The Certificates m.lUring on Febnwy IS, 2018 and thereafter are subject to redemp<ion, al the option of the City, at par value thereof plus accrued in1ereS1 on February ! S. 2017 or any date thereafter (see QTHE CERTIFICATES -OPTIONAL REDEMPTION"). USE OF INFORMATION IN OFFICIAL STATEMENT No deale.-, broker, salesman or other paron has been authorized by lhe City to gi11e any information or to make any representation other than those contained in Ibis 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 lo be used in an offer to sell or the solicitation of an offer to buy in any stale in which such offer or solicitation is not authorized or in which th.e 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 whicll are not intended as statements of faet, and oo representation is made as to the correctness of such estimates, assumptions or matters of opinion or as 10 the likelihood that they will be realized. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivety of this Official Statement nor any sale made heTCunder shall, under any circumstances, create any implicati 011 that there has been no change in lhe condition of the City or other matters described herein si nee the date hereo[ See "011IER INFORMATION -CONTrNUING DISCLOSURE OF INFORMATION" for a description oflhe City's undertaking to provide certain information on a continuing basis. The information set forlh or included in this Official Statemenc has been provided by the City and fi-om other sources believed by che City to be reliable. 11,e information and eq,ressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale heTCunder shall ere.ate any implication that there has been no change in the financial condition or operations of the City described herein since the date h.ereof. This Official Statemen1 contains, in pan, estimates and matters of opinion that are not intended as statements of fact, and no representation or waminty is made as to the correcbless of such estimates and opinions or that they wi 11 be realized. The Underwriters have provided the following sentence for inclusion in this Official Statement The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investois under federal securities laws as applied 10 the-facts and circumstances of this transaction, but the UndefWriters do not guarantee the accuracy or completeness of such information. NEll'HER THE CITY, THE FINANCIAL ADVISOR, THE UNDERWRITERS NOR BOND COUNSEL MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING OTC OR ITS BOOK-ENTRY-ONLY SYSTEM THE COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY AND JS NOT INTENDED AS A SUMMARY OF THIS OFFERING. INVESTORS SHOULD READ THIS ENTIRE OFFICIAL STATEMENT, INCLUDING THE A.ITACHED APPENDICES, TO OBTAIN INFORMATION ESSENTIAL TO MAKJNG AN INFORMED INVES'l'MENT DECISION. Other than with respecl to information concerning Financial Securily Assurance Inc. ("Financial Security") contained under the caption "BOND INSURANCE"" and Appendix C, "SPECIMEN MUNICIPAL BOND INSURANCE POLICY" herein, none of the information in Chis Official Statement has been supplied or verified by Financial Security and Financial Security makes no represenlalion or warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the Certificates; or (iii) the ta,,; exempt status of the interest on the Certificates. TABLE OF CONTENTS USE OF INFORMATION IN OFFICIAL STATEMENT--------1 TABLE OF CONTENTS .... -... ·-····--·----2 omCIAL STATEMENT SUMMARY_,, ___ ., ___ 3 CITY OFFICIALS, STAFF AND CONSULTANTS ...... _ .. _______ 5 INTRODUCTION------... -.. -•M.., .. ,_ .. 6 DESCRlPTION OF THE CITY ...........•................ 6 FINANCIAL AND MANAGEMENT CHALLENGES ............................................. 6 THE CERTIFICATES·-···-.. ···-... -.................. -.. -6 DESCRlPTION OF THE CERTIFICATES ......... 6 PURPOSE ............................................................... 6 AUTHORITY FOR ISSUANCE ........................... 6 SECURITY AND SOURCE OF PAYMENT ...... 7 TAX RA TE LIMITATION ................................... 7 OPTIONAL REDEMPTION ................................. 7 NOTICEOFREDEMPTION ................................ 7 AMENDMENTS .................................................... 7 DEFEASANCE ...................... -.............................. 7 BOOK-ENTRY-ONLY SYSTEM ........................ 8 Use of Certain Terms in Other Sections of this Official Statement .......................................... 9 Effect of Termination ofBook•Entry•Only System ........................................................... 9 PA YING AGENT/REGISTRAR .......................... 9 TRANSFER, EXCHANGE AND REGISTRATION ........................................ I 0 RECORD DATE FOR INTER.EST PAYMENT I 0 REMEDIES .......................................................... 10 SOURCES AND USES OF FUNDS .................. 11 BOND INSURANCE----•"-----·--· ll BOND INSURANCE POLICY·····················-···· 12 FINANCIAL SEOJRITY ASSURANCE INC .. 12 FORWARD LOOKING STATEMENTS DISCLAIMER-------·-13 DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS •... -.... -...... _, __ 14 FY 2003 FINANCIAL CONCERNS AND MID- YEAR BUDGET AMENDMENTS ........... 14 SEPTEMBER 30, 2003 FINANCIAL RESULTS .................................................... 15 FY 2003 AUDIT RESTATEMENTS, RECLASSIFICATIONS AND INTERNAL CONTROLS ISSUES ............ 15 CITY'S RESPONSES TO RECENT FINANCIAL AND MANAGEMENT EVENTS ................ -..... _ ............................ 16 FY 2008 BUDGET .............................................. 20 AD VALOREM TAX INFORMATION ___ 22 ADVALOREMTAXLAW ............................... 22 EFFECTIVE TAX RA TE AND ROLLBACK TAX RA TE .......................... -..................... 23 PROPERTY ASSESSMENT AND TAX PAYMENT .................................................. 23 PENAL TIES AND INTEREST .......................... 24 CITY APPLICATION OFT AX CODE ............. 24 2 fm TAX ABATEMENT POLICIES ......................... 24 TAX INCREMENT FINANCING ZONES ....... 25 FINANCIAL INFORMATION .... _._., ......... ____ , .. 26 FINANCIAL POLICIES _______ 40 INVESfMENTS---------41 LEGAL INVESTMENTS .................................... 41 INVESTMENT POLICIES ................................. 42 ADDITIONAL PROVISIONS ............................ 42 TAX MATTER$, ___________ 43 TAX EXEMPTION ....... : ..................................... 43 ADDITIONAL FEDERAL INCOME TAX CONSIDERATIONS .................................. 43 Collateral Tax Consequences ............................... 43 Tax Accounting Treatment of Original Issue Premium ....................................................... 44 OTHER INFORMATION·--------·-44 RATINGS ............................ -............................... 44 Financial Guaranty Industry -Recent Events ..... 44 LmGATION ....................................................... 44 INVESTIGATIONS RELATING TO CITY'S HEAL 111 INSURANCE ADMINISTRATOR .................................... 45 REGISTRATION AND QUALIFICATION OF CERTIFICATES FOR SALE ..................... 46 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS46 LEGAL MATTERS ............................................. 46 CONTINUING DISCLOSURE OF INFORMATION ......................................... 47 Annual Reports ..................................................... 47 Material Event Notices ......................................... 47 Availability oflnfonnation From NRMSIRS and SID ............................................................... 47 Limitations and Amendments .............................. 47 Compliance with Prior Undertakings .................. 48 FINANCIAL ADVISOR ..................................... 48 UNDERWRITING ............................................... 48 FORWARD-LOOKING STATEMENTS DISCLAIMER ............................................ 48 MISCELLANEOUS ............................................ 49 APPENDICES APPENDIX A· EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2006 APPENDIX B · FORM OF BOND COUNSEL OPINION APPENDIX C -SPECIMEN MUNICIPAL BOND INSURANCE POLICY ]. i· i. ,: \ omCIAL STATEMENT SUMMARY This summary is subject in all respects to the moo: c:omplek infonnation and definitions contained or incorporated in this Official S1atemenL The olfering of the Certificates IO potential investors is made only by means of this entire Official Statement No person is authorized IO detach this summary from this Official Statement or to otherwise ui;c: ii without the entire Official Statement. THE CITY ........................................... The City of Lubbock, Texas (the "City") is a political subdivision and municipal corpora.lion of the State, located in Lubbock County, Texas. The City covers approximately 119.1 squre miles and has an estimated 2008 population of 21•,847 (s~ MINTRODUCTION -DESCRJmoN OF TIIE CITr). THE CERTIFICATES ....................... $52,900,000 Tax and Wastewater System Suiplus Revenue Cenificates of Obligation, Series 2008 (the ~certificates"), are dated January IS, 2008, and mature on February IS in each of the yurs 2009 through 2028, inclusive. PAYMENT 011 INTEREST ... _ .......... Interest on the Certificates accrues from !he dated date, and is payable August IS, 2008 and each February 15 and August 15 thereafter until maturity or prior redemption (see ''THE CERTIFICATES -DESCRIPTION OF TIIE CERTIFICATES"). AUTHORITY FOR ISSUANCE ....... 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, Chapter 1371, Texas Government Code, as amended, and an ordi11ance adopted by the City Council (the "Ordinance"). SECURITY ......... , ................................ The Certificates are payable from a combination of (i) the proceeds or a continuing, direct annual ad valorem tax, levied within the limits prescnl>ed by law, on all la.Xablc property within the City, and (ii) a pledge of surplus net revenues of the City's Wastewater System not to uceed S 1,000. OPTIONAL REDEMmON ............. The City reserves the right, at its option, to redeem Certificates having stated maturities on and after February 15, 2018, in whole or in part in principal amounts of SS,000 or any integral multiple thereof, on February IS, l017, or any dat.e tha'eafler, at the par value thereof plus accrued inteoest to the date of redemption (see "THE CERTlFICATES - OPTIONAL REDEMPTION"}. TAX EXEMPTION ............................ In the opinion of bond counsel, interest on the Certificates is exeludable from gross income for federal income tax purposes under existing law and the Certificates are not private a<:tivity bonds. See "TAX MATTERS-TAX EXEMPTION" herein fora discussion of the opinion of bond cowisel, including a description of alternative minimum tax for corporations. USE OF PROCEEDS ·····---·"· Proceeds from the sale of the Certificates will be used for the purpose of paying contraclllal obligations to be ineum:d for (i) improvements and extensions to the City'$ Wastewater System and ( ii) professional services rmdered in connection therewith. ln addition, a portion of the proceeds from the sale of the Ccrtificales will be used IO pay the costs of issuance or the Ccrtifi.cates (sec '"THE CERTIFICA -ms • PURPOSE,. RATINGS ........................ -.................. The Certificates are raced "Aaa" by Moody's lnvegtors Service, Inc. 1 M00<1y's"), "AAA" by Standard & Poor's Ratings Services, 11 Division of The McGraw-Hill Companies, Inc. ("S&P") and "AAA" by Fitch Ratings ("Fitch"), by virtue of an insurance policy to be issued concumntly with lhe delivery of die Certificates by Financial Security Assunnce, Inc. (see -aoND lNSURANCE"). The City', underlying ntings on its presently outstanding genernl obligation debt are M.Aa3" by Moody's, "AA'' by S&P and "AA" by Fitch. The City also has issues outstanding which are rated MAu" by Moody's, "AAA" by S&P and "AM" by Fitch through insurance by various commercial insurance companies (sec "OTHER INFORMATION -RATINGS"). BOOK-ENTRY-ONLY SYSTEM---------···· The definitive Certificates will be initially registered and delivered only to Cede &. Co., the nominee of DTC pursuant to lhe Book-Entry-Only System described herein. Beneficial ownership of the Certificates may be acquired in denominalions of $5,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the beneficial owners thereof. Principal of, premium, if any, and intCf'CSt on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distnl>ution of the amounts so paid to the participating mem~ of DTC for subsequent payment IO the beneficial owners of the Cenifica.tes (see "THE CERTIFICATES • BOOK-ENTRY-ONLY SYSTEM"). PAYMENT RECORD········-·-········· The City has never defaulted in payment of it5 general obligation tax debt 3 -Selected Financial I arormation - Fisal Per Capita General Yeu Estimated Tasable Taxable Purpose Ended City Assessm Assessed Funded 30-Sep Pop11l1tion "l Valuation Valualloa Ta:i:Debt(l>I 2003 204,737 $7,342,344,867 s 35,862.33 S 70, 188,204 2004 206,290 7,921,590,380 38,400.26 70,161,218 2005 209,120 8,634,994,862 41,292.06 80,210,269 2006 211,187 9,346,613,951 44,257.53 87,231,945 2007 212,365 10,002,725,637 47,101.57 92,487,363 2008 214,847 10,897,210,563 50,720.79 98,504,904 ~' Soun:e: Th< 01)1. "' Do<> n01 ioclock: sclf-$Upl)Olled debt. General Fund Consolidalffl S1ateme111 Summary 2006 2005 2004 Beginning Balance $ 17,376,420 $ 12,694,525 s 9,417,346 Total Revenues 97,818,207 104,351,116 97,437,436 Total Expenditu= 112,278,444 103,203,269 94,160,257 Ending Balance 19,924,711 17,376,420 12,694,525 Reserves & Designations Undcsignatcd Fund Balance s 19,924,111 S 17,376,420 S 12,694,525 For additional information regarding the City, please contact: Jeff Yates ChiefFinance Officer Cicy of Lubbock P.O. Box 2000 Ulbbock, TX 79457 Phone (806) 775-2161 Fax (806) 775-2051 Andy Bun:ham Director of FiSClll Policy & Slr.ltegic Plaooing City of Lubbock P.O. Box 2000 Lubbock, TX 79457 Phone (806) 775-2149 Fax (806) 775-2051 4 Per Capita Gener•! Ratio Parpo.e Tax Debt to Fanded Assessm Tax Debt''> Val11atfon "' s 342.82 0.96¾ 340.11 0.893/, 383.56 0.93% 413.06 0.93% 435.51 0.92% 458.49 0.90% 2003 2002 $ 16,598,252 $ 16,716,042 91,753,809 92,490,374 98,934,715 90,594,059 9,417,346 18,612,357 {1,25Sl041l s 9,417,346 S 17,357,316 Matthew Boles RBC Capital Markels 2711 N. Hascll Avenue, Suite 2500 Dallas, TX 7 S 204 Phone (214) 989-1672 Fax (214) 989-1650 ( •I.of Total Tu T:u Collections Year 99.21% 2002 98.64% 2003 100.28% 2004 99.71% 2005 99.02% 2006 NIA 2007 , \ < CTIY OFFIOALS, STAFF AND CONSULTANTS ELECttD Omc1AL'l Date of Term Cill:'. Council Installation 10 Office Ex2ires Occupation David Miller May,2006 May, 2008 Business Owner Mayor Linda Deleon May,2004 May,2010 B11Siness Owner Council Member, District I Floyd Price May, 2004 May,2008 Retired Council Member, Diztrict 2 Todd R. Klein 111 June, 2007 May, 2010 Grant Co11511]tant Council Member, District 3 Phyllis Jones May,2004 May,2008 Sclf-Em(lloyed Co1111Cil Member, District 4 John W. Leonard, Ill May,2006 May, 2010 Business Owner Council Member, District S Jim Gilbreath May,2003 May, 2008 Business Owner CoWlcil Member, District 6 111 Todd R. Klein was el<>Ctod June 9, 2007, to fill the wie,.plrcd tenn of Dislrict 3 Co11ncilman Qa,y O. Benn. SELECTED ADMINISTRA TIVI: STAFF Date ofrir4>IO)'llJOlt Date of~loymen1 TocalGovemira:nt Name Position in Cumllt Position with Crty of Lubbock Service Lee Ann Durrbauld City Manager Septeni)er, 2005 July, 2004 20+- TomAdams Deputy City Mmiaget" August, 2004 August, 2004 23 JeffYatcs OliefFinancial Officer Septmt,c:r, 2005 Novem,er, 2004 5 Anita Burgess Cily Allomey Oeceni>er, 1995 I>ec:ad)a-, 1995 II RdJcreaGam Qty Secretaiy January, 2001 August, 1996 9 Andy Burcham Dim:uirofflsc:al Poocy Scpteid,er, 2005 Nomrber, 1998 7 and Strategic Planning C0NsuLTAl'ITS AND ADVISIOAS Auditors-----·················································································· ................................... BKD, LLP Little Rock, Arkansas Bond Counsel ............................... -.................................................................................................... Vinson & Elkins L.L.P. Dalla$. Texas Financial Advisor ........ , .............................................. ,, .. ,. ................................................................... RBC Capilal Marti.els Dallas, Texas 5 This page intentionally left blank OFFICIAL STATEMENT RELATING TO CITY OP LUBBOCK. TEXAS $52,900,000 TAX AND WASTEWATER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2008 INTRODUCTION This Official Statement, which iRCludes the Appendices herelo, provides certain information regarding the issuance or $52,900,000 City of Lubbock, Texas Tax and Wastewater System Surplus Revenue Certificates of Obligation, Series 2008 (the ''Certificates~). Capitalized tenns used in this Official Statement have the same meanings assigned to such temts in the Ordinance authorizing the issuance of the Certificates except as otherwise indicated herein. There follows in this Official Statement descriptions of the Cenificates and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in !heir entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor, RBC Capital Marl.els, Dallas, Texas. · 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 form of government with a City Council comprised of the Mayor and six cowicil members. The Mayor is elected at-large ror a two-year lerm ending in an even-numbered year. Each of the six members of the City Council is elected from a single-member districl for a four-year term of office. The terms of three memben of the City Council expire in each even-numbered year. The City Manager is lhe chief adminislr.l.live officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, electric, water and sanitary sewer utilities, aiiport, 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 lhe City was 199,564; the estimated 2008 population is 214,847. The City covers appro:<ima.tely 119.1 square miles. FINANCIAL AND MANAGEMENT CHALLENGES In recent years, the City experienced a variety of financial and management ehallenges, and certain investigalions and reports conducted or prepared by the City or its consultants found weaknesses in the City's general management and financial practices, both with the City in general and the City's electric utility system, known as Lubbock Power & Light CLP&L ~), in particular. The City is of the view that it has substantially addressed many of these conditions. Reference is made to "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS" for a discussion ofdlese events and a description of how the City has responded to these events. THE CERTIFICATES DESCRIPTION OF THE CERTIFICATES The Certificates are dated January 15, 2008, and mature on February 15 in each of the years and in the amounts shown on the inside cover page hereof. Interest will be computed on the basis of a 36Cklay year of twelve 30-day months, and will be payable on August 15, 2008, and on each February 15 and Augusl I 5 thereafter until maturity or prior redemption. The definitive Ce?1ifieates will be issued only in fully registered fonn in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trusc Company ("DTC") pwsuant to the Book-EnlJy-Only System described herein. No physical delivery or the Certificates wiU be made lo Ille owaen thereor. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Certificates. See "11-IE CERTIFICATES -BOOK-ENTRY-ONLY SYSTEM" herein. PURPOSE Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations to be incum:d for (i) improvements and extensions lo the City's Wastewater SySlem and (ii) professional services rendered in connection therewith. In addition, a portion of the proceeds from the sale of the Certificates wi II be used to pay the costs of issuance of the Certificates AUTHORllY FOR ISSUANCE The Certificates are issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271 of the Tei<:as Local Government Code, as amended, Chapla 1371, Texas Govemmem Code, as amended, and an ordinance adopted by lhe City C:Ouncil (the "Ordinance"). 6 SECURITY AND SOURCE OF PAVMENT 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 !he City's Wastewater System not to e;,;ceed S 1,000. TAX RATE L1MITATION A II taxable property within the City is subject to the assessment, levy and co\lectioq by the City of a continuing, direct annual ad valorem tax 51.1fficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable 10 the C iry, and limits its maximum ad valorem laK rate to S2.50 pe,-$100 taxable assessed valuation for all City purposes. The Home Rule Charter of lhe City adopts the constitutionally authori~d maximum tax rate of $2. 50 per $ I 00 taxable assessed valuation. OPTIONAL REDEMPTION The City reserves the right, at its option, 10 redeem Certificates having stated marurities on and after February 15, 2018, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on Fcbrua,y 15, 2017, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. Ir less than all ofrhe Certificates are to be redeemed, lhe City may select the maturities of Certificates 10 be redeemed. If less than all the Certificates of any maturity are to be redeemed, the Paying Agent/Registrar (or OTC while the Certificates are in Book-Entry-Only fonn) shall detennine by lot lhe Certificates, or portions thereof, within such maturity to be redeemed. If a Certificate (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Certificate ( or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to aocrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on !he redemption date. NOTICE OF REDEMPTION Not less than 30 days prior lo a redemption date for any Certificates, the City shall cause a notice of redemption to be sent by United States mai I, first class, postage prepaid, to the registered owners of the Certificates to be redeemed, in whole or in part, at the address of lhe registered owner appearing on lhe registration books of the Paying Agenl/Registrarat the close of business on the business day neKt preceding lhe date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HA VE BEEN DULY GIVEN, WHETHER OR NOT IBE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HA VlNG BEEN SO GIVEN, THE CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING 1HAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TOACCRUE. AMENDMENTS The City may amend the Ordinance without the consent of or notice IO any registered owners in any manner not delrimental to the interests of the registered owners, including the curing of any ambiguity, inconsistency, fonnal defect or omission theiein. In addition, the City may, with the written CODsent of lhe holders of a majority in aggregate principal amount of the Certificates then outstanding, as applicable, amend, add to, or rescind any of the provisions of the Ordinance, except that, without the consent of the registered owners of all oftbe Certificates, no such amendment, addition or rescission may (I) change the date specified as the date qn which the principal on any installment of interest is due payable, reduce Ille principal amo1Dtt or lhe rate of interest, or in any olher way modify the tenns of their payment, (2) give any preference to any Certificate over any other Certi fie ate or (3) reduce the aggregate principal amount required to be held by owners for consent to any amendment, addition or waiver. DEFEASANCE The Ordinance provides that the City may discharge its obligations to the registered owners of any or all of lhe Certificates to pay principal, intr:rest and redemption price thereon in any matter permitted by law. Under current Texas law, such discharge may be acoomplished by either (i) depositing with the Comptroller of Public Accounts of the State of Texas a swn of money equal to principal, premium, if any and all interest to accrue on the Certificates 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 Certificates; provided that such deposits may be invested and reinvested only in (a) direct, noncallable obligations of the Uniled States of America, including obligations that are unconditionally guaranteed by the United Slates of America, (b) noncallable obi igations of an agency or instrumentality of the United States of America, including obligations that are =nditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognu.ed investment rating firm not less than AAA or its equivalent, and (c) noncallable obligations of ll state or an agency or a county, municipality, or other political subdivisioo of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment niting firm not Jess than AAA or its equivalent. Under cum:nt Texas Jaw, upon the making of a deposit as described above, such Certificates shall no longer be regarded to be outstanding or unpaid. After finn banking and financial arrangements for the discharge and final payment or redemption of the Certificates have been made as described above, all rights of the City to initiale proceedings to call the Certi licates for 7 redemption or to lake any other action amending the 1emis of the Certificates are extinguished; provided however, lhe right to call tM Cenificates for redemption is not extinguished if the City: (i) in lhe proceedings providing for the finn banking and financial arrangements, expressly reserves the right to call the Certi fie ates for redemption; ( ii) gives notice of the reservation of lhat righl lo the owners oflhe Certificates immedialcly following the making of the firm banking and financial arrangemenls; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. BOOK-ENTRY-ONLY SYSTEM This section describes how ownership of the Certificates is to be transje1Ted and how the principal of, premium, if any, and interest on the Certifu:ates are to be paid 10 and credi1ed by The Depository Tn,st Company ("DTC"), New York. New YorA;. while the Certijica/e.s are regis1ered in its nominee nome, The information in this section concerning DTC and the Book-Entry- Only System full been provided by D TC for use in disclosure documents $UCh as this Official State,ment. The City, the Financial Advisor and the Underwriters believe 1he source of such informal ion to be reliable, hut lake no responsibility for the accuracy or completeness /hereof. The City cannol a,id does not give 01')1 assurance that (/) DTC will di.stribute payments of deb/ service on the Certificates, or redemption or 01her no/ices, to DTC Paflicipanls. (2) DTC l"ankipants or others will distrihule debt service paynrents paid to DTC or its nominee (os lhe registered owrier of lhe Certifica1es), or redemption or other notices, to the Beneficial Owru!rs, or Iha/ they will do so on a time(y basis, or (3) DTC will serve and act in ihe manner described in this Off,cial Stalemenl. The currenl rules applicable to DTC are on file with the Securilies and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Parlicipants are on file wi1h DTC. DTC will act as securities depository for the Certificates. The Cenificates will be issued as fully-registered securities registered in lhe name of Cede & Co. (DTC's p,annership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Certificate will be issued for each maturity of the Certificates, in the aggregate principal amount of each such maturity, and will be deposited with DTC. DTC. the world's largest depository, is a limited-pwpose llust company organized 11nder lhe New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pwsuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity issues, corporate and m1111icipal debt issues. and money market instruments from over 100 COIJJltrics that DTC's participants (''Direct Participants") deposit wilh DTC. DTC also facilitates the post-lrade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entiy transfers and pledges between Direct Panicipants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U .S. securities brokers illld deal en;, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidi;uy of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in tum, is owned by a number of Direct Participants of DTC and Membm of the National Securities Clearing Corporation, Fixed Income Clearing Cotporation and Emerging Marlcets Clearing Corporation, (NSCC, FICC, and EMCC, also subsidiaries ofDTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, aiid the National Association of Securities DealerS", Inc. Access to the DTC system is also avai I able lo othen; such as both U.S. and non-U.S. securities broken; and dealers, banks, llust companies, and clearing COJJ)lmltions that clear through or main lain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest nting: AAA. The DTC Rules applicable to its Panieipants are on file with the Securities and Excbange Commission. More information about DTC ~ be found at www.dlcc.com and dtc.org. Purcbases of Certificates under the DTC sys1em must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Bond (~Beneficial Owner; is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their pun::hase. Beneficial Owners ate, however, expected to receive written tonfirmations providing details of the lr.UISaction, as well as periodic statements of their holdings, from the Direet or Indirect Participant through which the Beneficial Owner entered into the lransaction. Tninsfers of ownership interests in the Certificates are lO be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership intcrests in Certificates, except in the event that use of the book-entry system for the Certificates is discontinued. To facilitate subsequent transfen, a!I Certificates deposited by Direct Participants with DTC are registered in the name ofDTC's partnenhip nominee, Cede & Co., or such other name as may be requested by an authorized representative ofDTC. The deposit of Certificates with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certlficates; DTC's records reflect only the identity of the Direct Participaiits to whose accounts such Certificaies are credited, which may or may not be the Beneficial Owner.;. The Direct and Indirect Participants will remain responsible for keeping accouru of their holdings on behalf of their cuscomers. Conveyance of notices and other communications by DTC co Direct Participants, by Direct Participants to Tn~irect Participanls, and by Direcl Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among lhem, subject to illlY statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Certificates may wish to lake certain steps to augment the transmission to them of notices of significant events wilb respect lo the Certificates, such as 8 redemptions, tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Ownen of Certificates may wish to ascertain that the nominee holding the Certi ficales ror their benefi1 has agreed to obtain and transmit notices to Beneficial Owners. In the allemative, Beneficial Owners may wish lo provide their names and addresses to the registrar and request tbat copies of notices be provided directly to them. Redemption notices shall be sent to DTC. lfless than all oflhe Certificates within a maturity an: being redeemed, DTC's practice is to detenn ine by lot the amount of the interest of each Direct Participant in such maturity to be rtdeemed. Neither OTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificaces unless authorized by a Direct Participant in aocordance 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 lo whose accounts Certificates are credited on the record date (identified in a listing anached to the Omnibus Proxy). Principal and interest payments on lhe Certificates will be made to Cede & Co., or such other nominee as may be iequested by an authorized representative of OTC. DTC's practice is to credit Direct Participants' acoounts 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 011 DTC' s records. Payments by Participants lo Beneficial Owners will be governed by standing instructions and customary practices, as is lhe case wilh securities held for lhe accounts of customers in bearer form or registered in "street name,~ and will lie the responsibility of such Participant and not of OTC nor its nominee, the Paying Agent/Registrar, or lhe City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments to Cede & Co. ( or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent/Registrar, disbursement of such payments to Direct Participants wi11 be the responsibility of DTC. and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and lndilWI Participants. DTC may disconlinue providing its services as depository with respect to the Certificates at any time by giving reasonable notice to the Cily or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is oot obtained, Certificates are required to be printed and delivered. Subject to DTC's policies and guidelines, the City may discontinue use of the system of book-ent,y transfers through DTC (or a successor securities depository). In that event, Certificates will be printed and delivered. Use of Certain Terms in Other Sections of this Ofllcial Statemelll In reading this Official Statement it should be understood lhat while the Cerbficates are in lhe Book-Entry-Only System, references in other sections of lhis Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Certificates, but (i) all rights of ownership must be exercised lhrough DTC and the Book- Entry-Only System, and (ii) e~cept as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. lnfonnation concerning DTC and the Boole-Entry-Only System has been obtained from OTC and is not guaranteed as to accuracy or completeness by, and is not lo be construed as a representation by the City, the Financial Advisor or the Underwriters. Effe<:I ofTermia.atioll ofBook-Elltry-Only System In the event that the Boolc-Ent,y-Only System is discontinued, printed Certificates will be issued to the holders and tile Cenificates will be subject to transfer, exchange and registration provisions as set fortb in the Ordinance and summarized under "TRANSFER, EXCHANGE AND REGISTRA llON"' below. PAYING AGENT/REGISTRAR The initial Paying Agent/Regisuar is The Bank of New York Tnist Company, National Association, Dallas, Texas. In lhe Oroinance, the City recains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registnr at all times until tbe Certificates are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the laws of lhe State of Texas or other entity duly qualified and legally authorw:d IO S(:TVe as and perform the duties and services of Paying Agent/Regisll'1lr for the Certificates. Upon any change in the Paying Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice thereoflo be sent to each registered owner of the Certificaces then outstanding and affected by such change by United States mail, first class, postage prepaid, which DOtice shall also give tbe address of the new Paying Agent/Registm. Interest on the Certificates shall be paid to tbe registered owners appearing on the registration books of the Paying Agent/RegistraT at the close of business on the ~ Date (hereinafter defined), and such interest shall be paid (i) by check sent United States mai~ first class, postage prepaid, to the address of the iegistered owner recorded in lhe registtation books of the Paying Agent/Registrar or (ii) by such other method, acceptable to the Paying Agent/Registrar requested by, and at the risk and expense of, the registered owner. Principal of the Certificates will be paid to the registered owner al the stated maturity or earlier redemption upon presentation to the designated payment/transfer office of the Paying Agent/Registrar. Jf 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 lhe city where the designated payment/transfer office of the Paying Agent/Registrar is IOcaled 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 dale shall have the same force and effect as if made on the date payment was due. 9 TRANSFER, EXCHANGE AND REGISTRATION In the event the Book-Ent,y-Only System should be discontinued with respect to the Certificates, printed certificates will be issued to the registered owners of the Certificates affected and thereaftet-such obligations may be IJ'aJISferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrendet of such printed certificates to the Paying Agent/Registrar and such transfer or exchange shall be without expense or sen,ice charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registralion, eKchange and transfer. Certificates may be assigned by the execution of an assignment form on the Certi ficiltes or by other insburnent of transfer and assignment acceptable to the Paying Agent/Registrar. New Certificates will be delivered by the Paying AgenC/Registrar, in lieu of the Cenifi cat es being 1ransferred or exchanged, at the designated office of the Paying Agent/Registrar, or sent by United StaleS mail, first class, postage prepaid, to the new regi stercd owner or his designee. To the ex ten I possible, new Certificates issued in an ei<change or transfer of Certificates will be delivered lo 1he registered owner or assi~ of the registered owner in not more lhan three business days after the receip1 of the Certirtcates 10 be canceled, and the written instrument of lran$fer or request for exchange duly ei<ecuted by the registered ow,,er or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Certificates registered and 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 Certificates surrendered for exchange or transfer. See "THE CERTIFICATES -BOOK-ENTRY-ONLY SYSTEM" herein for a description of lhe system to be utilized initially in regard to owneiship and transferability of the Certificates. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Certificate called for redemption, in whole or in pan, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall nol be applicable to an exchange by the regislered owner of the uncalled balance of a Certificate. RECORD DATE FOR INTEREST PAYMENT The record dale (''Record Date") for the interest payable on the Certificates on any interest payment dille means the close of business on the last business day of lhe preceding monlh. In lhe 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 Dale") will be established by lhe Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice oflhe Special Record Date and of the scheduled payment date of the past due interest ("Special Payment Dalen, which shall be 15 days after the Special Record Date) shall be sent at least five bu:;jness days prior lo the Special Record Date by United States mail, first class, postage prepaid, to the address of each Holder of a Certificate appearing on lhe regis1ration books of the Paying Agent/Registrar at the close of business on the last business day next prccedi ng the date of mailing of such notice. REMEDIES The Ordinance establishes specific events of defa11lt with respect to the Certificates. If the City defaults in the paYlllenl of principal of or interest on the Certificates when due, or if the City defaults in the observance or performance of any of the covenants, conditions or obligations of the City, the failure lo perform which materially, adversely affects the rights of the owners, including but not I imited to, their prospect or ability lo be repaid in accordan<:e with the Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any owner to the City, the Ordinance provides lhat any owner is entitled to seek a writ of mandamus from a C()l1rt of proper jurisdiction requiring the City to make such payment or observe and perfonn such covenants, obligations, or conditions. The issuance ofa writ of mandamus may be SO\lght if there is no other available remedy al law to compel perfonnance of lhe Certificates or the Ordinance and the Ci1y's obligations are nol 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 malurity of lhe Certificates in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinance does not provide for the appointment of a trustee to represent the interests of the owners upon any failure of the City to perfonn in accordance with the terms of the Ordinance, OT upon any other condition and accordingly all legal actions lo enforce such remedies would have lo be undenaken at the initiative of, and be financed by, lhe registered owners. On June 30, 2006, the Texas Supreme C011rt ruled in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006), that • waiver of sovereign immunity in a contractual dispute must be provided for by statute in "clear and unambiguous" language. In so ruling, the Coun 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, a holders of Certificates may not be able 10 bring such il suit against the City for breach of the Certificate or the Ordinance. In Tooke, the Court noted the enactmenl in 2005 of sections 271.151-.160, Texas Local Government Code (the "Local Government Immunity Waiver Act"), which, acoonling to the Court, waives "immunity from suit for contract claims against most local governmental entities in certain circumstan<:es. M 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 coun constr\ling lhe Local Government Immunity Waiver Act in lhe context of whether contractual undertakings of local governments that relate to their borrowing powers are conCracts covered by lhe Act. As noted above, the Ordinance provides that holders of Cenificates may exercise the remedy of mandamus to enforce the obligations of the City under the Ordinance. Neither the remedy of mandamus nor any other type of injunclive relief was al issue in Tooke, and it is unclear whether Tooke will be construed 10 have any effect with respect to the exercise of mandamus, as such remedy has been interpreted by Texas courts, In general, Texas courts have held that a writ of mandamus may be issued to require public officials to perfonn ministerial acts that clearly pertain to their duties. Tex:as cowts have held I.hat a ministerial act is defined as a legal duty that is prescribed JO and de lined with a precision and certainty that leaves nothing to tbe exercise of discretion or judgment, though mandamus is not available lo enforce purely contraclllal duties. However, mandamus may be used to require a public officer to perfonn legally- imposed ministerial duties necessaT}' for the performance of a valid contract to which the Stale or a political subdivision of the State is a party (iricluding the payment of monies due under a oontract). Even if a judgment against the City could be obtained, it could not be enforced by di=t lery and execution against the City's property. Further, the registered owners eannol themselves foreclose on property within the City or sell property within the City to enforce the tax lien on taxable property to pay lhe principal of and interest on the Certificates. Fllflhermore, the City is eligible to seek relief from its creditors under Chapter 9 oflhe U.S. Banlcruplcy Code (uChapter 9''). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, lhe pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recogniied as a security interest under Chapter 9. Chapter 9 also includes an automalic stay provision th al would prohibit. without Bankruptcy Court approval, lhe prosecution of any other legal action by creditors or registered owners of an entity which has sought protection under Chapter 9. Therefore, should the City avai I ilSelf of Chapter 9 protection from creditors, the ability to enforce would be subj eel to the approval of the Bankruptcy Court (which could require l)Jat the action be heard in Bankntptcy Coun instead of other federal or stale coun); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in adminil>lering any proceeding brought before it. The opinion of Bond Counsel will note lhat all opinions relative to the enforceability of tbe Certificates are qualified with respect 10 the cuslomary righls of deb1ors relative lo their crcdilors and that all opinions relative to the enforceability of the Ordinance and the Certificates are subject to banktuptcy and other laws affecting creditors rights or remedies generally. SOURCES AND USES OF FUNDS The proceeds from the sale of lhe Cerri ficates will be applied as follows: SOURCES OF FUNDS: Principal Amount of Certificates. ........................................................................................ . Original Issue Premium ............................................................................................ -........ . Accrued Interest ............................................ _ .................................................................... . Total Sou= of Funds .................................................................................................. . USES OF FUNDS: Deposit to Construction Fund ............................................................................................. . Accrued Interest Deposited to Interest & Sinking Fund ...................................................... . Undenvriter's Discount ...................................................................................................... . Cost of Issuance (including bond inswance premium) ....................................................... . Total Uses of Funds ................................................................................. ____ , [TifE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) II $52,900,000.00 2,85 1,566.S0 175,562 72 sss 927 ]29 22 $55,000,000.00 175,562.72 318,456.44 433 110.06 $55 927, I 29 22 . ( BOND INSURANCE BOND INSURANCE POLJCY Concurrently with the issuance of the Certificates, Financial Security Assurance Inc. ("Financial Security") will issue its Municipal Bond Insurance Policy for the Certifica1es (the "Policy"). The Policy guarantees lhe scheduled payment of principal of illld interest on the Certificates when due as set forth in the form of the Policy included as 8Jl exhibit to this Official Statement (see APPENDIX C, "SPECIMEN MUNICIPAL BOND INSURANCE POLICY;. The Policy is nol covered by any insurance security or guaranty fund eslablished under New Yorfc, California, Cohllceticut or Florida insurance law. FINANCIAL SECURITY ASSURANCE INC. Financial Security is a New Yorlc domiciled financial guaranty insuran<:e company and a wholly owned subsidiary of Finmcial Security Assurance Holdings ltd. {"Holdings"). Holdings is an indirect sub$idiary of De)(ia, S.A., a publicly held Belgian coJJ!O'llion, and of Dexia Credit Local, a direct wholly-owned subsidiary of Dexia, S.A. Dexia, S.A., through its bank subsidiaries, is primarily engaged in lhe business of public fmance, banking and asset management in France, Belgium and other European countries. No shareholder of Holdings or Financial Security is liable for the obligations orFinancial Security. At Sepcember 30, 2007, Financial Security's combined policyholders' surplus and contingency reserves weic approximately S2,69 I ,965,000 and ilS tolal net unearned premium reserve was approllinu.tely S2,201,808,000 in accordance with statutory acQOUnting principles. At September 30, 2007, Financial Security's consolidated shareholder's equity was approximately $2,975,654,000 and its IOtal net unearned premium reserve was appro11imately $1,721,678,000 in accordance with generally accepted accounting principles. The (;()llsolidated financial s1atcments of Financial Security included in, or as exhibits to, the annual and quanerly reports filed after December 31, 2006 by Holdings with the Securities and Exchange Commission are hereby inwrporated by reference into this Official S~tcmcnt. All financial statements of Financial Security included in, or as exhibits to, documents filed by Holdings pursuant to Section 13(a), 13(c), 14 or IS(d) of the Securities Exchange Act of 1934 af\er the date of this Official Statement and before the tenninalion of the offering of the Certificales shall be deemed incorporaced by reference inlO this Official Statcmc:nt. Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance Inc.: 31 West 52nd Street, New York, New York 10019, Allention: Communications Dq,artment{lelephone (212) 826-0100). The Policy does not procect investors against changes in marlcet value of lhe Certificates, which market value may be impaired as a resuh of changes in prevailing interesl rates, changes in applicable ratings or other causes. Financial Security makes no rcpresentalion regarding lhe Certificates or lhc advisability of invesling in the Certificates. Financial Security makes no represcnlalion regarding the Official Statement, nor has it participated in the preparation thereof, excq,I that Financial Security h~ provided 10 the City lhc information presented under lhis caption for inclusion in the Official Stacement. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 12 FORWARD LOOKING ST A TEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other infonnation provided by the City, in particular the information under the heading "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTSn, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or s1ntegies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statemenlS included in lhis Official Statement are based on information available to the City on lhe date hereof, and the City assumes no obligation to update any such forward-looking slatemenls. Although the City believes such forward-looking statements are based on reasonable assumptions, any such forward-looking statement involves unce,tainties and is qualified in its entirety by reference to the considerations descnl>cd below, among oOiers, which could cause the actual financial resu Its of the City to differ materially from those contemplated in such forward-looking statements. Any assumptions could be inaccwate and, therefore, there can be no assurance that the forwanl-looking statements included in this Official St.atement will prove 10 be accunte. The City cannot fully predict what effects factors of the nature de sen bed below may have on lhe operations of lhe City and financial wndition of the General Fund or its business-rype activities, including lhe City's electric enterprise fund, which opentes as Lubbock Power & Light (referred to herein as MLP&L" or the "electric fund"), but the effects could be significant The discussion of such factors herein does not purport 10 be comprehensive or definitive, and these mallefs are subject to change subsequent lo the dale hereof. Wilh respect lo LP&L, extensive infonnation on the electric utility indusby is., and will be, available from the legislative and regulatmy bodies and other sources in the public domain, and potential purchasers of the securities of the Cil)' should obtain and review such information. Among the fac!O!S that could affect the operations and financial condition or the City in genetal, and its electric utility in particular, are lhe following: > Significant changes in governmental policies and regulatory actions, including those or the Federal Energy RegulatOI)' Commission, the United States Environmental Protection Agency ( the "EPA"), lhe United States Department of Homeland Security, the United States Department of the Treasury-, lhe Texas Commission on Environmental Quality (the -rCEQ"). lhe Public Utility Commission of Texas (the "PUC") and the Southwest Power Pool, Inc., with respect to: changes in and compliance with environmental and safety laws and policies affecting the City"s water, sewer, stonnwater and solid waste funds; changt:S in and compliance with national and state homeland secunly laws and policies effecting the City's water, sewu. solid waste and airport funds; electric b"anSlllission cost rate structure; purchased power and recovery or investments in e!eclrie sysiem assets; acquisitions and disposal of assets and facilities; and present or prospe,:tive wholesale and retail competition in the electric indusll)'; > Unanticipated population growth or decline, and changes in market demand, demographic patterns and the development of technology affecting the City's service area, its general government and public safety expenditures and City revenue from: investor owned utility franchise fees, City uti lily and service fees sales lax revenues; and ad valorem tax reveriues; > With respect IO LP&L: the implementation of or adjustments made to oosiness stnitegies adopted by LP&L; competition for mail and wholesale customers by LP &L, particularly competition with Xcel ( as defined below) and its subsidiaries; access to adequate electric transmission facilities to med cumlnl and fu!llre demand for energy; pricing and transportation of coal, natural gas and other commodities lhat may affect the cost of energy purchased by LP&L; inability of various contractual counteiparties to meet their obligations to the City, and with LP&L in particular with respect to LP&L's fuel and power purchase arrangements; > With respect to the City• s financial perfonnance in general: legal and administracivc proceedings and settlements; and significant changes in critical accounling policies. 13 DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS In the 2002 and 2003 fiscal years ( a fisc:a.l year is referred to herein as "FY", with lhe year designation being the year in which the fiscal year ends; each City lisc:a.l year begins on October I and ends on September 30). the City experienced a variety of financial and management challenges. fo response 10 the events and circumstances thal have created such challenges, the City has taken actions to address and 1:9mx:t matters, specifically employing a new management team in 2004, and the City is of the view that progress has been made in oorrecting these conditions (see "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -Cl1Y'S RESPONSES TO RECENT FINANCIAL AND MANAGEMENT EVENTS"). The following discussion includes an 11J1alysis of the cvenls that have occurred in the recent fiscal years, in particular, a summary of lhe measures taken in response to lhe challenges lhat have arisen, and a current description of the City•s financial an<I management position. FY 2003 FINANCIAL CONCERNS AND MID-YEAR BUDGET AMENDMENTS In FY 2003, LP&L incum:d unanticipated net losses. During FY 2003, interfund Joans were made IO LP&L from lhe water fund and the Genera I Fund. A number of factors contributed to the LP&L losses; a significant factor was that LP&L, unlike mosl other municipal electric utilities in Tex.as, competes directly with Southweslem Public Service Company ("SPS~), a subsidiazy of a large investor owned energy company, Xcel Energy, Inc. In addition to the service area that has dual certification with Xcel, a small par1 of die City is also served by Soulh Plains Elcclric Cooperative ("'SPEC"). The City, through LP&L, has competed for both wholesale and retail electric customers against investor owned 11tili1ies for over 80 years. This competition has existed despite the facl that the City is nol within the transmission system governed by the Electric Reliability Council of Texas ("ERCOT"). ERCOT was opened to retail electric competition through the adoption of State deregulation legislation lhat went into effect on January I, 2002. Prior 10 FY 2004, the City operated LP&L in a manner that was designed to recover adminislllltive or indirect costs provided by the General Fund for LP&L (such as legal and financial services) as well as certain olher general transfers. Such transfers included a payment in lieu of ad valorem taxes, an allocation for indirect costs such as legal and financial services, and a cost of business transfer (which approximates a payment in lieu of franchise taxes. In addition, prior to FY 2003 LP&L was required to annually lransfer lo the General Fund amounts to support economic development incentives in the City, a payment designated for infrasuucture use, a "gas tax" transfer, and a reimbursement of the street lighting expense incurred by the City. Over the ten year period from 1993 to 2002, the average annual operating income ofLP&L before transfers was $8 million, and during that period, LP&L transfers to lhe General Fund for payments in lieu of taxes and recovery of costs of business averaged SS mi Ilion per year. During the preparation of the FY 2003 City budget it was evident that the amowit of money lransferred from LP&L to the General Fund would need to be reduoed given the financial condition ofLP&L. Consequently, the FY 2003 budget trimmed $4.8 million from LP&L transfers included in prior year budgets. In Febniary 2003, during a period of c1tlraonlinarily high natural gas prices, City fllWlce staff projected that, in the absence of corrective measures, the electric enterprise fund would have an operating loss of $24 million for FY 2003. In the Spring of 2003, the City Council amended the LP&L and General Fund budgets to eliminate S 7. 7 million in b'allsfers from LP &L to the General Fund. City managemenl then undertook a comprehensive review of the Genernl Fund and other enteiprise funds for the purpose of identifying budget cuts throughout City govemmenl that would offset the reduced LP&L transfers. Ultimately, the City Council adopted budget amendments during the Spring 2003 mid-year review that totaled $9. 7 million for the General Fund (hereinafter referred to as lhe '°2003 Budget Adjustments"), which represented approximately I 0.5% of the original FY 2003 General Fund budgel Other measures that were taken after the 2003 Budget Amendments to address the projected LP&L operating loss included increases in !he fuel cost adjUSlment eFCA ") for residential and small commercial customers, as well as for ils two largest customers, which included Texas Tech University ("Teiw Tech") and which accounted for approximalely 10% of the energy sales ofLP&L The City is a member of the West Texas Municipal Power Agency ("'W1MPA"), a municipal power agency Iha! was formed by conctlJTellt ordinances adopted by the· governing bodies or the cities of Brownfield, Floydada, Lubbock and Tulia. Texas (the "'Member Cities") in 1983. WTMP A is a sq,arate political subdivision under the laws of the State. In June 1998, WfMPA issued $28,910.000 of its Revenue Bonds, Series 1998 (the MWTMPA Bonds"), to finance lbe constroclion and acquisition of a 62 MW electric co-generation project (the "WTMPA Project"). The WThfPA Project oonsists of a 40 megawatt ("MW") combustion luibine generator (the "Massengale Unit 8 turbine'') and the re-powering of an existing 22 MW genernlion unit, each located at the City• s J .R. Massengale Plant. Numerous issues, both operational and managerial, arose from the WTMP A Project. As a resull, the City embarked upon a series of internal financial and management audits of lhe relationship between LP&L and WTMPA, as well as an analysis of the internal controls of the City with respect to LP&L No malfeasance was uncovered with respe<:I IO the adminislration ofLP&L or WTMP A funds. However, the reviews concluded that the prevailing view that guided lhe administration of WTMP A affairs by the management of LP&L, was that WTMPA was indistingu.ishable frc:,m LP&L. fo April 2003, lhe WTMPA Member Cities (including the City) engaged Enm & Young LLP ("E&Y'') 10 conduct an audit of the records ofWl'MPA and LP&L The final report of E& Y was delivered in May 2003, and included findings of misallocalion of eosts among the Member Cities. The report noted that no evidence of misappropriation of assets or intentional omissions of financial information was discovered. The E& Y report found that the misallocalions, adding an interest factor for such allocations, and an unbilled S% management allocation that LP&L was enlitlcd to under the power agreements, would result in a total amount owing to the City ofSS,590,746, of which the City owed itself, as a Member City of WTMPA, approximately 90"/o of the total amounl 14 In December 2003, the City, WTMPA and the other Member Cities ofWTMPA entered inlo a series of agreements styled the "Comprehensive Settlement Agreement". The Comprehensive Settlemenl Agreement provided for the reallocation of resources and costs among WTMPA Member Cities, n:solved disputes n:lating to the cornposition and voting powe.3 of the WTMPA Board, and settled disputed claims incumd by the City on behalf of WTMPA. The City believes the Comprehensive Settlement Agreement better renects the historical manner in which the Member Cities have engaged in energy activities. WfMPA has been c lassilied as an enleiprise fund of the City, which reflects lhe extensive associations between wrMPA and the City. In March 2005, the City delivered iis Combination Tax and Electric Light 1111d Power System SUIJ)lus Revenu1: Certificares of Obligation, Series 200S, in the aggegate principal amount of $23,055,000. A portion of the proceeds of this issue was used by the City to acquin: the WTMP A Project. WTMP A used the proceeds received from the City to def ease all of the outstanding WTMPA Bonds. The City now owns and operates lhe WfMPA Project, as part ofLP&L. SEPTEMBER 30, 2003 FINANCIAL RESULTS The General Fund ... As hereafter described in UOISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS - FY 2003 AUDIT RESTATEMENTS, RECLASSIFICATIONS ANO INTERNAL CONTROLS ISSUES", the financial position of the City in FY 2003 was impacted by significant changes in the reporting entity and prior period adjustments 1111d reclassifications of the City's FY 2002 financial statements. With respect IO the General Fund, the beginning fund balance/net assets were restated from $18.6 million to Sl6.6 million. TIie restatement was atlributable 10 the wrik off of a receivable in the Gm=I Fund fiom the City's golf fund. In addition, the Gcnem Fund experienced a $7 .2 million reduction in fund balance/net assets in FY 2003, the most significant draw down of the General Fund reseJVes in over len yea,s. The decrease in fund balance occurred because of the $9.3 million transfer lo LP&L to ensure the ongoing operation or LP&L and the payment of the senior lien revenue bonds issued by the City for LP&L. In addition, the General Fund reduc;tion in fund balance was a result of the forgiveness of originally budgeled payments in lieu of taxes, franchise fees and indirect costs of S4.8 million from the electric fund to the General Fund. The aggregate result of restatement of th1: beginning fund balance and the FY 2003 use of fund balance was a General Fund ending balance of S9.4 mfllion. Coming in to FY 2003, the City had a fund balance (adjus1ed) of SI 8.6 million. The City has adopted a policy (the "General Fund Balance Policy") to maintain an unreserved General Fund balance equal to two months operating expendilures. Al September 30, 2002 the General Fund balance exceeded the General Fund Balance Policy by S4.S million. At September 30, 2003, the G(:neral Fund Balance Policy required a fund balance of $14.2 million. As a result of the FY 2003 events described above, the City was $4.8 million under the fund balance required under its policy at the close of FY 2003. The decline in General Fund balance limits the City's ability lo mitigate future: risks of revenue shortfalls and unanticipated expenditures. Reference is made to the infoonalion hereafter presented under the headings uDISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -CITY'S RESPONSE TO RECENT FINANCIAL AND MANAGEMENT EVENTS -General Fund and General Government Actions -General Fund Budgewy Actions" and ~DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -CITY'S RESPONSE TO RECENT FINANCIAL AND MANAGEMENT EVENTS -FY 2007 BUDGEr, for a discussion of the results for the General Fund and a summary of the City's planning for FY 2007. The Electric Fund ... With respect 10 LP&L, the measures lalcen by the City Counc:il during the FY 2003 mid-year budget review yielded substantial results as measured by the projected ope1111ing loss of$24 million in February 2003. LP&L ended FY 2003 with a $6.3 million operating loss. Before taking into account transfers from other funds, the electric fund reported a $9 million loss, the first such loss in over ten years. As a consequence of the operating loss, LP&L failed to meet its revenue bond rate covenant under which the City has agreed to sci rates for the electric system sufficient lo produce: nc:t revenues equal 10 I 00% of its senior lien bonded indebtedness. In FY 2003, LP &L produced SO. 704 million that was available for the payment of debt service, which represents a 0.3 times coverage of average annual debt service and a 0.2 times coverage of maximum annual debt service, in ea<:h case after taking into account lhe issuance of City general obligation debt for LP &L lhal occurred in August 2003. Under the tenns of its bond ordinances, the failun: to meet the rate covenant, while significant, did not result in the acceleration ofLP&L's debt Moreove£, the failure did not materially affect LP&L 's operations. as LP&L was able to make its debt payments after receiving a $9.3 million contribution from the General Fund, and LP&L bas never defaulted in the payment of its bonded indebtedness. In making its debl payments, LP&L has not used any moneys set aside as a debt service: reserve fund under its senior lien revenue bond ordinances. Since 2003, LP&L has mel 1he rate covenant, and the City has not made transrers from the General Fwid to LP&L. Despite the relatively small operating income that resulted after taking into account the General Fund tonlribution to LP&L, total net assets of the e\eclric fund decreased by $3.9 million during FY 2003, lO $88.5 million, as a result of a restatement of the beginning fund balance. The restatement reHected the write off of a $4.48 million receivable recorded from WTMP A in FY 2002, although the obligation was disputed by the other Member Cities of WTMPA. As described below under "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVEm'S • CITY'S RESPONSES TO RECENT FINANCIAL AND MANAGEMENT EVENTS -Recent Measures taken 10 Address Financial and Management Concerns at LP&L", the WIMPA Settlements have resolved the disputed receivable. FY 2003 AUDIT RESTATEMENTS, RECLASSIFICATIONS AND INTERNAL CONTROLS ISSUES As was the case with other municipalities in lhe State and U.S., the implementation of Government Accounting Standards Board Statement 34 ("OASB 34") by lhe City in FY 2002 effected a substantial change in the presentation of the City's financial stalemcnts. Prior to the implementation ofGASB 34, gove£nmental accounting standards did nol require the use ofa government· wide perspective in the pttSCntation of financial information; instead, fund accounting was generally used to present financial 15 data. Under GASB 34, fund accounting has been 5upplemented by government-wide statements and certain aspects relating lo the presentation of the fund level statements have been modified, as well, particularly with respect to the presentation of restricted and unrestticted net assets within each fund. For additional infoJlllation regarding accounting policies lhat are applicable IO the City, sec Note L '"Summary of Significant AccOllllting Policies .. in the financial statements of the City attached as Appendix A. The FY 2002 financial statements, and the City's financial statements dating 10 FY 1993, were audited by Robinson Burdette Mutin Seright & Burrows, LL.P. (the "Fonner External Auditor"). In keeping with the overall reassessment ofits financial and management affairs undertaken by the City, in the Summer of 2003 the City conducted a reqUC$1 for qualifications for its external audilOJ and selected KPMG L.L.P. ("KPMG") to audit its FY 2003 financial statements. Coosequently, the Fonner fatemal Auditor guided the City through the initial year implementation of GASB 34, while in the second year of GASB 34 financial reporting, the City's financial statements were audited by KPMG. In 2005, the City rclained the services of BKD, LLP, to prepare lhe City's financial statements. Audit Rescatemenu ••. During the prepa'3tion of the FY 2003 CAFR, $even restatemenrs to beginning fund balance/net assets were made I(> various fund level statements of the City. The restatements totaled S36.7 million. These ~ents iqnesented an aggregate increase in net assets of the City of S2.56 million, as some affected funds had their beginning balances restated to a higher figure, while other funds wm restated to decrease their beginning fund balance. The General Fund was restated from a fund balance of Sl8.6 million to Sl6.6 million to reflect a write off for an .account receivable, which as of September 30, 2002 had ceased to be colleclible. Also, the electric fund's beginning flllld balance was rcstaled downward by $4.48 million to reflect • =eivable from WTMPA that was uncollecril>le. Other enterprise fund restatements were made, including an S0.867 million increase in lhc water fund beginning balance and• $0.722 million increase in the sewer fund beginning balance:, each of which were made to reflect a chango in accounling lrealment pertaining to the appropriate party Iha! is responsible for reimbursement of fees collecled by the City for new water and sew« connections. W ilh respect to the impact on a particular fund asset, the most significant restatement in beginning fund balance occuned in the City's community investment fund, a lund used in prior years to account for economic development initiatives, which was restated from a beginning balance of $46.8 million to $36.8 million. The change was associated with an eoonomic development grant made by that fund in FY 2002 that was originally reflected on the accounting statements of the City as a loan. In preparing the 2003 CAFR, it was determined that such transaction should be treated as a grant, not a loan. As a result, tbe receivable in lhe community investmmt fund for the SI O million amoWlt was deleted as an IIS1!Ct of the fund (S6 million of the SI O million grant had originally been fundtod through an interfund loan to the community investment fund from the waler and solid waste funds). Two additional reslalemalls of existing fund balances were made with respect to two entities with which the City has long• standing contractual relationships: a corporate entity that docs business under contr9ct with the City as "Citibus", and WTMPA. In the 2003 CAFR. the accounting treatment of these entities was reconsidered, and each was added to the City's financial statements as an enterprise fund. The result of the addition of each of these funds was an increase in net ilSSC!s, in the amount of S 12.3 million for the new tran5it fund, and S3.2 million for the new WTMPA fund. Audit Recwsjfications ... In the preparation of the FY 2003 CAFR, it was disoovcml that the portion of net &$$Ct$ shown in cenain of the fin1111ciat statements, particularly with respect to the enlelprise funds (or business-type activities), had been mathematically incorrectly calculated in the FY 2002 CAFR. While the government-wide statement of net assets of the City included in the FY 2002 CAFR showed $3 7 .9 million unrestricted net assets for business-type activities of the City, the fund financial statements showed an aggregate amount of unrestricted net assets of the enterprise funds that totaled $19S.2 million of unrestricted net assets. The FY 2003 CAFR repons in the government-wide statement of net IISSCts of the City S32.9 million of unrestricted net assets for business-type activities of the City and the fund financial statemenlS in tile FY 2003 CAFR report an sggregate amount of unrestricted net assets for the enterprise funds 1h11 tolal S302 million (certain m:oncilialiOD$ a,e ~uired IO balance government-wide and fund level reports, thus small differonces should appear between the two presentations). Internal Controls Issues .. .In accordance with accowuing guidelines, lhe external auditor customarily provides the governmental entity with a "management letter" that includes a cfiscussion of any material wealcnesses in the audited government's internal conirol slruciure. l11 its FY 2003 Management Letter (the '"2003 Management Let:td'), KPMG ooted sevcnl weaknesses in the City's internal controls, including an overall internal control weakness in the City during FY 2003. Jn addition, the 2003 Management Leiter noted deficiencies in the year end GMP financial reporting cycle, ciling as examples the significant rescatement of beginning net assets/fund balances and the reclassifications described above, as well as numerous adjustments that were required to be posted after the initial closing of the City's books for FY 2003. The failure to timely obtain financial statements liom component units, including WTMPA, was also noted. K.PMG recommended that the City review the personnel within the City's aocounting department and the aocounling staff within LP&L to determine whether sufficient qualified penonncl we-re in place to provide accurate and timely closing of the City's books and preparation of annual financial statements. Other material wealcnesses noted include the failure of lhe City to properly reconcile its cash balan~ the failure of LP&L to meet its bond rate covenant, a lack of ovenight or monitoring of contracts with other entities (for example, WTMPA). aod the failure of the City to abide by its General Fund Balance Policy. CITY'S RESPONSES TO RECENT nNANCIAL AND MANAGEMENT EVENTS Following the publication of the LP&UWTMPA Management Audie and the E&.Y audit, several key City officers aiid LP&L management personnel resigned. Between the beginning of FY 2002 and the close of FY 2003, some 29 persons who held senior management positions with the City left the Cicy's employment, some on their own accord and others as a result or a n:orpnil:ltion of City govemment. Since FY 2004, lhe City It.as implementod a numbeT of significant steps to address both its 16 management needs and financial challenges. Certain of lhe measures talcen by the City to strengthen City government in general, and 10 address ils financial challenges, are described below. General Fund and General Government Actions > General Fund Budgetary Actions ... Prior lo FY 2007, the City had restored its General fund balan<:e, within a 2-year period, to roughly 20% of operating revenues. For FY 2007, preliminary projections indicate the General Fund balance will be approximately 18.4% of operating revenues. FY 2007 Expenditures were in line with budget, however, revenues from municipal court fines, franchise taxes, and red light photo enforcement came in $2.S million Jess than budgeted, causing a use of approximately 5800,000 of General Fund balance. The FY 2007-08 budget incorporates revenue adjustments addressing the shortfalls from the prior year, and has been approved with expendirures balanced to revenues. City management continues monthly assessments of the budgeted expenditures and revenues, a program which was fully implemented in the prior liscal year. > Establishment of Audil and Investment Committee ... Through lhe adoption of a resolution in June 2003, the City Council established an independent Audit Committee composed of five members. The Audit and Investment Committee is charged with maintaining an open avenue of communication between the City Council, City Manager, internal auditor and independent external auditor to assist the City in fulfi Uing its fiduciary responsibility to its citizens. The commiltee has the po wet to conduct or authorize investigations into the city's financial performances, internal fiscal oontro Is, exposure and risk. assessment The committee is appointed by the City Council and informally reports to the City Manager. The establishment of the Audit and Investment Committee is designed lo serve as an additional check on the preparation of the City's financial statements and to avoid weaknesses in the City's internal controls. including the status and adequacy of information systems and security. The chairperson is appointed by the Mayor and the other posiliOIIS are filled by a vote of the City Council. At least two members of the Audit and Investment Committee are required to have a background in financial reporting, accounting or auditing, and at least one member is required lo be a Gerti fied public accountant, and at least one member is required lo have an extensive background in investments. TIie current membenhip of the committee oonsists of Mike Epps, an Executive Vice President at American Siate Bank in Lubbock, Jim Brunjes, Senior Vice Chancellor and Chief Financial Officer for the Texas Tech University System; RJ. Givens, a real estate agent in lhe City; Kim Turner, lhe Director of Internal Audit al Teus Tech; and John Zwiacher, a member of the Board of Directors of LP &L. Mr. Zwiacher is the chair of the Audit and Investment Committee. > City Management Changes . . . As reDected in MCITY OmCIALS, STAFF AND CONSULT ANTS • SELECTED ADMINlSTRATIVE STAFF", the City has in place an experienced management team representing extensive government service experience. This management team has implemented procedures lhat have addressed the general internal control weakness cited by KPMG in the 2003 Management Letter. Recent Financial and Management Actions at LP&L > Fuel Cost Adjustments ... As of June I, 2007, LP&L no longer uses fuel cost adjustments to remain competitive with Xcel. Rates are now identical lo SPS with a few exceptions, one of which is that LP&L now has a discount tariff which allows its ntes tobe lower. > Establishment of Electric Utilities Board ... In 2004, several measures were taken to address concerns with the management and operation of LP&L, including: the City Council adopted an ordinance (the "LP&L Governance Ordinance") (I) aeating a new Eleclric Utilities Board (the qElectric Board") for LP&.L (the new board replaces a fomier board lhat was advisory only), (2) reserving certain duties and responsibilities with respect to LP&L to the Cily Council (i.e., the powers 10 approve LP&.L's 8111111.al budget; set LP&L 's rates; issue debt for LP&L; exm:ise the power of eminent domain for LP&L; and require the payment of an annual fee to the City), and (3) mandating the creation of certain reserve accounts by LP&L and restricting lhe transfer of revenues from LP&L to any other fund of the City, including, particularly, the General Fund, until such reserves have been funded; the City initiated a solicitation to the holders ofLP&L's senior revenue debt seeking approval lo amend each LP&L bond on:linanoe to provide for the govemance 0£ LP&L by the Electric Board; the City. after obtaining the neces=y oonsents, amended the bond ordinances to provide for the govc:mance of LP&L by the Electric Board in Januaiy 2005; the voters of the City approved a refCfendum amending the City Charter to require the eslablishment of the Electric Board; and the City Council adopted the LP&L Gov~ Ordinance on December 16, 2004. The LP&L Governance Ordinance provides that the Electric Board consist of nine members appointed by the City COIIDcil, and that the City Council consider cxtensi ve business and/or fina,icial experience as the primary qualification for serving on the Electric Board. Electric Board members serve without compensation. Under the LP&L Governance Onlinance, the Board is given the authority, duties and responsibil ily to (I) approve an annual budget and electric nte schedule ror submission to the City Council for approval and, from lime to time, submit to lbe City Council amendments to the budget and/or lhe eleciric rate schedule; (2) oversee the audit of the electric fund, and engage an accounting firm for lhat purpose; and (3) subject 10 applicable law, including the City Charter and Code of Ordinances, govem, manage, administer and operate the City's electric system, including contracting for legal and other services separale and apart from those provided by the City. In addition. the City Manager is required 10 consult with, and seek approval of, the El«lric Board prior lo appointing and/or removing the director of LP&L. ln accordance with the New LP&L Governance Ordinance, the director of LP&L reports to the Board. While the City Council retains substantial powers over the el~tric system, an additional goal of the City in establishing the Electric Board is to develop local expertise in a pool of individuals who can provide a sharpet-fOCllS by the City on the operation ofLP&.L than has oeeu~ in the rooent past. 17 . ( > Establishment of Reserve Funds for LP&L· Restriction on TransfetS from LP&L ... The LP&L Governance Ordinance was amended in December of 2006. Th is amendment included, among other things, changes to the rcquiremmts regarding lhe reserve funds LP&L maintains. As amended, the LP&L Governance Ordinance req11iies the Electric Utility Board to maintain (i) sufficient operating cash to satisfy all current accounts payable and (ii) a genem\ reserve fund that is equal to the greater of four months gross retail electric revenue as determined by taking the average monthly gross retail electric revenue from the previous fiscal year or SSO million dollars. This general reserve fund shall be used for operational purposes, rate stabilization and for meeting the electric utility demand of any rapid or unforeseen increase in residential and/or commen:ial developmenl. Under the culTellt LP&L Governance Ordinance, the City may not require the transfer from LP&L any fee equivalent to a franchise fee, a payment in lieu of taxes or other disbursement of the net revenues of LP&L witil (a) all bond debt service requirements have been funded (which obligation is senior in right to lhe obligation lo fund the general reserve), (b) sufficient operating cash is maintained, and (c) the general reserve has been fully funded. Additionally, the amendment allows the Electric Utility Beard, solely at their discretion and regardless of the funding obligations outlined above, to refuncf up to one mi Ilion dollars (SI ,000,000) to the ratepayers of tile City's electric utility for marketing and competitive pwposes. The reserve amounts, franchise fees, payments in lieu of taxes and refunds lo the ratepayers of the City's electric u.tility shall be based on audited, unqualified financial statements from the most recent completed fiscal year. Subject to (i) provisions of State laws that govern municipal utilities, and which stipulate !hat a first use oflhe utility's gross revenues be used lo pay operating e:otpenses, and (ii) the obligations of the City with respect to LP&L's bonded indebtedness, it is possible thal the Elecbic Board could devise a flow of funds for LP&L that is substantially different from that set forth in the LP&L Governance Ordinance. To date, the Electric Board has not deviated from the flow of funds contemplated under lhe LP&L Governance Ordinance. Al the end of FY 2007, LP&L partially funded its general reserve fund by the amount ofS25.4 million. LP&L has not funded all of the reserve fund established under the LP&L Governance Ordinance, as net revenues have been inadequate for a total funding of such res~. > 2008 Proposed Am,;ndment lo LP&L Governance Ordinance .... Prior to FY 2004, the City operated LP&L in a manner, consistent with the practice lo require its enterprise funds to make a pil)'ment in lieu of taxes to the City's General Fund, thal provided an an,iual payml!flt be made by LP&L to the City in lieu of ad valorem taxes and a cost of business transfer (which transfer approximated a payment in lieu of franchise taxes). In an effort to give LP&L an opportunity lo regain financial stability, in 2004 the Ciiy adopted lhe LP &L Governance Ordinance which, as described above, mandated lhe creation of eeriain reserve acoounts by LP&L and restricted the transfer of revenues from LP&L to any other fund of the City, including, particularly, the General Fuod, until such reserves had been funded. After FY 2004, the City required, and it is the City's current practice to require, a payment in lieu of taxes from each of its other enterprise funds. Duong its deliberations concerning the FY 2008 budget, the City Council approved a budgeted $1,000,000 transfer from the net revenues of LP&L to the City's General Fund (the "2008 LP&L Transfer"). The FY 2008 budget was approved by the City Council on September 13, 2007. See "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -FY 2008 BUDGET.ft The 2008 LP&L Transfer may not be made until such time that lhe LP&L Governance Ordinance is amended by the City Council. After audited financial statements are available for September 30, 2007, LP&L and City Finance Staff will make a recommendation 10 the Electric Utility Board and the City Council that will outline a fiscally sound, graduated policy to begin the limited payment in lieu of fn111chise fees, while continuing to build lhe reserve to the required policy levels. > New Full Requirements Energy Ag,:eement ••. In June 2004, WTMPA entered into a 15 year full requirements wholesale power agreement (the "New Power Agreementn) with SPS. The New Power Agreement became effective July I, 2004, and replaced a series of e,iisting agreements between WTMP A and SPS and the City and SPS, which had expiration dates in Z004 and 2005. Under the New Power Agreement, SPS or its permitted assigns is obligated to provide all energy requirements for each of the Member Cities ofWTMP A, including the City, during the tenn of the agreement, which tenninates on June 30, 2019. SPS may terminate the agreement upon the occuTJence of an adverse regulatory action under which SPS is required to sell generation assets, and WTMP A may terminate the agreement upon nolice and during the final four years of the scheduled termination date if WTMP A acquires an interest in replacement, coal-fired generation. Each party may require adequate assurances of performance whenever there is a reasonable basis therefor. The New Power Agreement represenllld a significant departure for LP&L, in thal it reflected a long-term commitment 10 take all of its energy from SPS. The contract reflected a decision of the City to abandon the role of power generator, although, as described below, in eonnection with the consummation of lhe New Power Agreement the City has entered into two unit contingency agreements (the "Unit Contingency Agreements") with SPS that will ffilUire LP&L to maintain its generation units for dispatch by SPS. Among the implications for LP&L of the New Power Agreement are that LP&L has resolved its \ong·term power supply issues, and lessened its exposure to fuel price volatility, although SPS will pass through its fuel charges to LP&L on a monthly billing basis. SPS, in tum, may not pass its fue I costs through to its retail customers in the City more lrequently than once every six monlhs under CU1Tent State law that requires SPS to seek a rate order from the PUC before increasing retail fuel cost charges. As a result, the New Power Agreement provides the possnnlity of both advantages and disadvantages to the City with respect to cash flow, particularly if the City detennines lo match its FCA to ehanges in SPS's fuel adjustment, as ii has generally done in the past. According to information fl led wi 1h various regulatory agencies, the City believes that over 60'¼ of the e11e1gy that it purchases from SPS is from coal generation. This fuel mix was a significanl factor in the City's determination to approve the New Power Agreement by WTMPA. In the even! th.at gas prices should decline over the term of the Agreement, the City believes that SPS has the flexibility to switch a larger portion of its generation to gas, including through the use of the City's generation units in accordance with the Unit Contingency Agreements. 18 With respect lo the competitive posture of the City in light of the long-term commilment of the New Power Agreement, the City notes tbat under current market conditions, and talcing into account the seconda,y benefits of the agreement, including future savings associated with reduced petS<>nnel and maintenance costs as a result of the shift from being an .active electric generator to being a passive geoerator ( for SPS under the tenns of the Unit Contingency Agreements), the wholesale price of the purchased enetgy, togelher with the other financial benefits of the Unit Contingency Agreements and the possible receipt of revenues under the new WIMPA gas agreement described below, pennits the City to compete favorably with SPS. An additional benefit of the New Power Agreement is that it will permit the City to increase its efforts in deveklping LP&L's distribution business. In I ight of recent rate structure changes implemented by both the City and SPS that require new developments in the City to fund e\eclric in frastructurc through a development charge paid when the development is platted, new principals in developments are choosing lo install only one electric distribution infraslructure. Since this new development charge was implemented in FY 2003, all major new developments in the City have selected LP&L as l)ie electric distributor, which positions the City as a distributor of energy to those developments in the future. even though lhe retail provider of such energy could be a utility other that LP&l and other electric providers could choose 10 build their own distribution infrastructure to serve the developments. Perhaps the greateSt risk to LP&L from the New Power Agreement is Iha\ given the lenn of the agreement and the dynamic nature of eleclric competition, over time the wholesale price of lhe purchased energy will not pennil the City to obtain the favorable margins that are currently being achieved by the City. While the City does not believe that the area served by LP&L will be opened in lhe short-term lo retail deregulation, as is the case in other parts of the State that could occur during the term of the New Power Agreement. While there are significant uncertainties as to how such deregulation, ir it occun, would be administered, ii is possible that new retail energy providers could enter the market during the tenn of the New Power AgreemenL In addition, by tying its energy requirements solely to SPS, and though the other new agreements discussed in this seclion, lhe City has signifi~tly increased its dependence on SPS as a counterparty to vital agreements relating to the operation and financial condition of LP&L. Counterpart)' risk is risk associated with the countetparty's financial condition, credit ratings. changes in business strategies and other quantitative and qual i13tive measures that could affect lhe ability of the coonlerparty to perfonn its obligations to the City. Both the long•tenn Unit Contingency Agreement and the New Power Agreement provides the City !he right to demand certain credit assurances from its counterpart)' if it has reasonable grounds for insecurity regarding the perfonnance of any contract obligation. > Other New Ene{gy Related Agreements •.. As noted above, in connection with the negotiation of lhe New Power Agreement, the City negotiated the Unit Contingency Agreements, which consist of two agreements that dedicate the City's generation capacity solely to SPS, which, subject to certain cuslomary conditions, including reasonable notice and ron times, has the right to call upon one or more of the generation units owned ot controUed by·LP&L, from time lo time to meet energy requirements of SPS. Including the WTMPA Project, all of the capacity of which, in accordance with the WTMPA Settlements, is dedicated to LP&L. the City has dedicated generation capacity of 2 I 9 megawatts to SPS under the Unit Contingency Agreements. The most fuel efficient 1111its within that capacity are the 39 MW capacity of Massengale Unit 8 and the 21 MW capacity of the Brandon Unit I ("'Brandon Station"), whii:h is located on the campus of Texas Tech (the "New Units''). The remaining llllplKlity is in twelve older units (the ''Older Units1. With respect to lhe New Units, SPS may dispatch those units during the tam ending June 30, 2007; the tenn of the Unit Contingency Ag.-eement for the Older Units is fifteen yea,s, matching the tenn of the Power Purchase Agreement, with an expiration &le of June 30, 2019. Aside from the differences in units covered, the term of the agreements and certain tennination provisions in the Older Unit agreement, each Unit Contingency Agreemem is substantially identical. The Unit Contingency Agreements include a demand charge, which must be paid irrespective of whelher SPS chooses lo take energy from the City's units. and an energy charge that is based upon the output of any of the City's units that is dispatched for SPS. While the amount of the eneigy charge will depend upon the energy taken by SPS from the City's gene1"3tion units, if any, the Unit Contingency Agreements provide an annual minimum payment by SPS to the City of $6.3 million. > Natura\ Gas Sale Agreement .. .Subsequent to its execution of the New Power Agreement, WTMPA and other parties entered into a series of agreements (collectively. the "New W'IMPA Gas Agreements") wider whieh WTMPA may acquire natural gas and effectively exchange it for electric power to realize a cost savings. Under the New WfMPA Gas Agreements, WTMPA may purchase na.rural gas from Texas Municipal Gas Corporation ("TMGC') at below-mmet prices and sell the gas to SPS in return for a market-priced credit (reduced by nominal administrative and incentive fees) against payments due liom WTMPA under the New Power Agreement. The net savings, if any, will be applied proportionately to reduce the power charges of WTMPA's Member Cities, including the City. TMGC is a Texas nonprofit public facility corporation created for the pwpose of acquiring and producing natural gas reserves and selling its production to municipal entities such as WIMPA and LP&L. The City's slandby gas purchase agreement, mentioned above in connection with the Unit Contingency Agreen,entS, is also with TMGC. Under the terms of the New WTMPA Gas Agreements, SPS is not obligaled·to purchase gas from WTMPA unless natural gas producers, dealers, or other suppliers execute conlr3cls to sell gas to TMGC's upstream gas provider, those suppliers olfel" 10 sell such gas on lenns that SPS considers al least as advantageous as those available from other producers and dealers, and lhe aggregate quantities sold do not exceed eilher SPS's Texas gas requirements or the quantities available to WTMPA from TMGC at a discount from the offered prices or the quantities needed 10 generate WTMPA 's electric requirements. WTMPA's malketpricc credit is based on the prices offered by the qualified suppliers, and its supply of gas is dependent on sales by tbe qualified suppliers al those prices.. TMGC has secured contracts with five suppliers (ConocoPhillps, Coral Energy, NOTS. Concorde Energy, and Tenaska). There can be no assurance that sufficient qualified suppliers will conlract to sell gas, or that they will offer to do so on sufficiently advantageous teims, to supply all or any portion of WTMPA 's gas requirements under the New WTMP A Gas Agreements. In addition, the discount now offered by TMGC may be reduced as necessary to enable it to comply 19 with financial covenants, alth011gh the discount has remained essentially constant for three years. For these and other reasons, there can be no assurance that WTMPA will be able to realize: savings in any amount or for any term for the benefit of its membas under the New WTMPA Gas Agreements. Nevertheless, the City believes that the New WTMPA Gas Agreements contain sufficient economic incentives to induce SPS to qualify sufficient suppliers and to accept gas under the agreements up to the pennil1ed quantities, and that the TMGC discount will continue to hold. For FY 2008, LP&L did not budget any revenues from WTMJ>A gas activity. > Wholesale Energy Agreement with Texas Tech ..• The decision in the Summer of2004 to take greater amounts of energy from Xcel resulted in a dispute between the City and Texas Tech regarding a prior agreement with respect to the operation of Brandon Station, which is located on lbe Texas Tech campus. In response to mediation to resolve disputes \Jlldcr the prior agreement, lhe City and Texll.\ Teeh executed a new contract on April 23, 2005 (the "New Teitas Tech Agreement"). In general tenns, Texas Tech has agreed lo continue to purchase energy from the City at a price that will provide the City with a small rate of return, and· is paying for energy usage at the rates provided in the New Texas Tech Agreement. The City has agreed that steam produced at Brandon Station, if any, will be delivered to Tex.as Tech at no charge. The City has also agreed with Texas Tech 1h11 it may terminate the agreement upon reasonable notice to rhe City, in which event the City will wheel energy lo Texas Tech in accordance with an energy delive,y charge. The City is of the view that the New Texas Tech Agreement his resolved the dispute wilb its largest customer on terms that are mutually beneficial for 1he parties. > Chief Executive Officer for lP&L ... Gary Zheng was appointed Chief Executive Officer of LP&L in Seplcmber 2005. Previously, he bad served as the Superintendent of Electric Distributions at LP&L and subsequently, fro.m March 2003 until his rtcenl appoinlment to CEO, as the Chief Operating Officer of LP&L. He has more than 19 years of engineering and management experience in electrical utility business. Mr. Zheng, a registered Professional Engineer, is a graduate of the University of Southern California with a MS in Electrical Engineering, a MS in Computer Engineering and a PhD in Electrical Engineering. FY 2008 BUDGET General Fund •.• The City Council adopted ~ FY 2007-<IB budget and five year forecast on September I J, 2007. The City's FY 2007-08 budget for the General Fund is balanced with Sl22A million in total revenues and expenses. The budget projects that sales tax revenues will produce 53.9% of totll tax revenues (tax revenues represent 79.39% of the General Fund's total operating revenues), while ad valorem tax revenue is budgeted to produce 44.8% oftoeal tax revenues. In FY 2008 the City's total tax rate was set at $0.4SS0S per St00 taxable assessed valuation, dowu from $0.46199 in FY 2007. The City's tax roll increased S894.S million, or 8.9%, from FY 2007 to FY 2008. The City Council, on June 12, 2003, passed a resolution affirming their suppor1 for truth-in-ta>.ation. The goal of this resolution is to allow the citizens to be bellcf informed about the real needs of City government and if the increased revenue from iDCtUScd appraisal values is truly necessa,y. 1bc resol111ion goes on to provide that each yCM the twt rate should be adopted based on lbe actual needs of government. This goal was affirmed in April 2004 in a resolution that stated the City Council has supported, as well as taken action, to provide tax n:lief to property owners within the City. In addition, the City Council recog,iized the need for the City to be aulOnOmous in Its ability 10 provide lbe public safety, health, and quality of life for its citizens. The FY 2007--08 Operating Budget was developed in consideration of the goals of the resolutions and, as a result. Ihm: was a S0.00694 decrease in the adopted tax rate. Total transfers to the General Fund from enterprise and internal service funds are budgeted to increase by $1.S million. Transfers out increased $3.2 million mainly due to the Cemetery and Civic Centers moving to enterprise funds, but need General Fund assi3tance for operating purposes. On the expcndituze side, administrative services and public works budgds experienced decreases of three lo six percent due to efficiency planning. Cultunl and rec::reatian seivice.s budgets decreased OYef 18% due to the movement of the Cemetery and Civic Centers to Enterprise Funds. Community services arc four pcn:ent higher due to scheduled charge increa$C$ for data processing and information technology. Expenditures for public safety are S4.9 million greater than the amended FY 2006-07 budget, or a 6.S% increase. This incrcue is due to tbc City Council goal of inc;mising public safety offiocrs in Fire and Police. Over:all, General Fund operating expellditures arc budgeted to increase by S3.S million over lbe amended FY 2007 budget. (THE REMAINDER OF nus PAGE INTENTIONALLY LEFT BLANK] 20 Enterprise Funds ... The following table (amounts in millions) illustrates the revenues, use or contribution of net appropriable assets, and appropriation as approved in the City's FY 2007-08 adopted operating budget and five year forecast fo~ lhe Solid Was1e, Wastewater, Water and Electric Funds: Adopted FY2007-Cl8 Adopted Planned Use Adopted Chnge FY2007-08 (Contribution) FY 2007-08 from Ret'enue Net AsselS ApE!!friado11 Prior Year Solid W3$IC s 15,7&1,779 764,575 16,546,354 ~.6Y. Wastewat« 22,088,059 1,549,231 23,637,290 ·0.4% Walet' 42,611,577 6,412,285 49,023,862 8.2% LP&L 135,436,074 126,5'17 ,820 -44.2% The decreased budget in Solid Waste is a result of lower fuel costs, motor vehicle and heavy machinery ma.intenance costs, and master lease payments. Decreases in these areas are as follows (in millions): fuel costs, ($0.3 ); maintenance cos IS, ($0.1 ); master lease costs, ($1. 7). No rate increase was needed in FY 2007--08. TIie increased budget in Waler is a result of increased debt service pay men ls for debt issued during 2006-07 and for increased Canadian River Municipal Water Authority ("CRMW A ft) costs. Increases in lhese areas an: as follows (in millions): debt service, S3.8; and CRMWA costs, $0.4. The large increase in debt service is mainly ielated to the acquisition of water rights over the past two years. No rate increase was needed in FY 2007-08. See also "DISCUSSJON OF RECENT FINANCIAL AND MANAGEMENT EVENTS • CITY'S RESPONSES TO RECENT FINANCIAL AND MANAGEMENT EVENTS-2008 Proposed Amendment to LP&L Governance Ordinance." [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 21 AD VALOREM TAX INFORMATION AD VALOREMTAX LAW The appraisal of property within the City is the responsibility of the Lubbock Central Appraisal District (the ~Appraisal District"). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal Dislrict is required under the Property Tax Code (defined below) lo appraise all property within the Appraisal District on the basis of I 00% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, di fl'erent methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the melhod considered most appropriale 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 (I) the mosl recent market value of the residence homes1ead as determined by the appraisal entity or (2) II O percent 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, <:onsisling 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 lo challenge the detennination of appraised value of property within the Cily by petition filed with the Appraisal Review Board. Reference is made to Title I of 1111: Texas Tax Code (the "Property Tax Code"), for identification of property subject to iaxation; property exempt or which may be exempted from taxation, if claimed; the appraisal or property for ad valorem taxation purposes; and lbe procedures and limi rations applicable to the levy and collection of ad valorcm taxes. Article VIII of the Stale Constitution (" Artie le VIll") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article Vlfi, and State law, the governing body of a political subdivision, at its option, may grant: (I) an exemption of not less than S3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from al! ad valorem taxes thereafter levied by the political subdivision; or (2) an exemption of up to 20% of the market value of residence homesteads. The minimum exemption wider this provision is S5 ,000. In the case of residence homestead exemptions granted under Section 1-b, Article vm, ad valorem taxes may continue lo be levied agail1$1 the value of homesteads exempted where ad va\orem taxes have previously been pledged for the payment of debt if cessation of the levy·wou!d impair the obligation of the contract by which the debt was a-eated. 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 .inned forces; the exemption applies to ci !her real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum ofSI 2,000. Effec1ive January l, 2004, under Article VIII and State law, lhe governing body of a county, municipality or junior college district, may provide that the 101a\ amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older will not be increased above the amount of taxes imposed in the year such residence qualified for such limitation. Also, upon receipt of a petition signed hy five percent of the registered voters of the county, munkipaliiy or junior college district, an election must be held to determine by majority vole whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or older or who are disabled. Upon providing for such exemption, such rr- on ad valorem taxes is transferable lo a different residence homestead within lhc taxing unit and to a surviving spouse living in such homestead who is disabled or is at least 55 years of age. If improvements (other than maintenance or repairs) are made to the property, the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements wilh the new amounl of taxes then serving as the ceiling on taxes for the following years. Oru:e established, the tax rale limitation may not be repealed or rescinded. The City has established such a limitation on ad valorem taxes. Article VIII provides 1ha1 eligible owners of both agricultural land (Section 1-d) and open-space land (Section I-cl-I), 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 lhe basis of its productive capacity. The same land may not be quali lied under both Section 1-d and I -cl-I . Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the govcming body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are ex.empt 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 also for personal activities of the owner to be exempted t'rom ad valon:m taxation. Article VIJJ, Section 1-j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for lhe purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue 10 tax may be reversed in the future; decisions 10 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 tangilile 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 Ill a location in the stale in which the owner of the 22 property does not have a direct or i ndireet ownership interest for assembling, storing, manufact11ring, processing, or fabricating purposes by the person who acquired or imported lhe property; (iii) is transported lo anolher location in the state or oulSide the state no( later than 175 days after the dale the pe,-son acquired lhe property in or imported the property into the srate; and (iv) does not include oil, natural gas, pe1ro\eum products, aircraft, dealer's motor vehicle inventory, dealer•s vessel and outboard motor inven!OJ}', dealer's heavy equipment inventory, or retail manufactured housing inventory. The City may creale 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 ~ing units may agree to contn1>11te all or part of future ad valorern 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 lhe zone in excess of the "frozen value" are not available for general city use but are restricted to paying or financing Mprojeet costs" within the zone. Sec "TAX INCREMENT FINANCING ZONES" below. The City also may enter into lax abatement agreements to encourage economic development. Under the agreements, a property OWTier agrees to construct certain improvements on its property. The City in tum agrees not to levy a lax on all or part of the increased value attributable to the improvements until the expiration of the agreemenL The abatement agreement oould last for a period ofup to 10 years. See "TAX ABATEMENT POLICIES" below. EFFECTIVE TAX RATE AND ROLLBACK TAX RATE By ~ch September I or as soon thereafter as praclicable, lhe City CoWlcil adopts a tax rate per $ I 00 taxable value for the current year. The City Council is required 10 adopt the annual tax rate for the City before the later of September 30 or the 60lh day after the date the certified appraisal roll is received by the City. If lhe City Council does not adopt a tax rate by such required date the tax rale 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 mainlenance and operation expenditures and (2) a ra~ 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 adopled by the City Council that exceeds the lower of the rollback tax rare or the eflective 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 i r the City owns, operates or controls an internet website and pub] ic 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 lbe rollback tax rate the qualified voters of the City by petition may require that an election be held lo determine whether or not to reduce the lax rate adopted for the CUITellt year to the rollback tax rate. "Effective lax rate" means the rate lhat will produce last year's total lax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation orlast year's laxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will prodUce this year's debt service from this year's values (unadjusted) divided by lhe anticipated tax collection rate. The Property Tax Cooe provides that certain cities and counties in the State may submit a proposition to the voters to autboriie an additional one-half cent sales tax on retail sales of taxable items. Tfthe additional tax is levied, the effective tax rate and the rollbaclc tax rate calculations are required to be offset by the revenue that will be generated by the sales lax in the current year. Reference is made to the Property Tax Code for definitive requiremenls for the levy and c:oUection of ad valorem laxes and the calcularion of the various defined tax rates. PROPERTY ~ESSMENT AND TAX PAYMENT Propeny within the City is generally assessed as of Jan1131')' I of each year. Business inventory may, at the option of the taxpayer, be assessed as of September. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October I of the same year, and become delinquent on Febnwy I of the following year. Taxpayers 65 years old or older are pennitted by State law to pay taxes on homesteads in four inslallments with the first due on February I of each year and the final installment due on August I . 23 PENALTIES AND INTEREST Charges for penalty and interest on tbe unpaid balance or delinquent laxes are made as follows: Cumulative Cumulative Month Pen•lly Interest Total February 6% 1% 7% March 7 2 9 April 8 3 II May 9 4 13 June 10 s 15 July 12 6 18 After July, the penalty remains al 12%, and interest increases at the rate of I% each month, In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total lax penalty and interest charge. Under certain circumstances, laxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject lo lhe City's lien may be sold, in whole or in puc:els, pursuant to oowt order 10 collect the amounts due. Federal law does not allow for the collection of penalty and int=! against an estate in bankntptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes inlo effect wilh lhe filing of any petition in bankruptcy. The automatic stay prcveiils governmental units from foreclosing on property and prevents liens for post'f)etition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes arc paid as an administrative expense of tbe estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OFT AX CODE The City grants an exemption to the marlcet value of the residence homestead of persons 65' years of age or older of S 16,600; the disabled are also granted an exemption oUI0,000. The City has not granted any pan of the additional exemption or up to 20% of the market value of residence homesteads; the minimum exemption that may be granted under this provision being SS,000. The City has established the tax freeze on residence homesteads of disabled persons and persons 65 and over. See Table I for a listing of the amounts of the e,i:emptions described above. Ad valorem wees aie not levied by the City against the exempt value or residence homesteads for the payment of debL The City does not lax nonbusiness personal property; and the Appraisal Dislrict collects taxes for the City. The City does not permit split payments of taxes, and discounts for early payment of taxes are not allowed by the City, allhough permitted on a l<lcal-option basis by the Property Tax Code. Since the I 999 tax year, I.he City bas exempted freeport propeny from taxation. The City collects an additional one-eighth cent sales lax for reduclion of ad valorem iax.es. The City held an election on November 4, 2003 to increase this tax by one quarter cent, for a total of lhree eighths of a cent. The rate increase became effective on October I, 2004. TAX ABATEMENT POLICIES 1be City has established a we abatement program to encourage economic development. lo order to be considered for tax abalement, a project fflU$t be localed in a reinvestment zone or enterprise zone (a commercial project mttst be in an enterprise zone) and musl meet several criteria pertaining to job creation and property value enhancement. The City has two enterprise zones. the Lubbock 2000 North Enterprise 2.one, appro,dmate\y 18.6 square miles, and the Lubbock 2000 South Enterprise Zone, appro11imate\y 15.7 square miles. A third entaprise zone, the Lubbock International Auport Enterprise Zone, expired in September 2005. In 2003, the Legislature made major changes to the statute governing enterprise zones, including designating zones by bloclc group based on poverty rate. The block groups that meet the criteria become enterprise zone eligible. but can only be used for tax abatement if lhe new zones are activated. lbe Lubbock 2000 North and South Enterprise Zones are grandfalheml and will expire no ialer than their original expiration date. At present, there are 17 active lax abatement agreements, principally for companies located in the northeast and southeast sections of the City. In accordance wilh State law, the City has adopted poi icies for granting tax abatements, which provide guidelines for tax abatements for both industrial and commercial projects. The guidelines for industrial and commercial projects are similar, except lhat qualifying industrial projects may receive a le1l year abatement, whik qua Ii fying commercial projects are limited to five year tax abatements. Although older abate=ts made by the City were given full (100%) lax abatement, since 1997 the City has negotiated abatements on a declining percentage basis, wilh a portion of the tax value being added to the City's tax roll each year during the life of lhe abatement. The 24 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 lhe abatement, with ceftain businesses targeted for abalcment, the amowit or real or personal property to be added to the tax roll, the number of jobs to be created or retained, among other factors. The policies disallow abatements for certain categories of property, including real property, inventories, tools, vehicles, aircraft, and housing. Each abatement policy provides for a recapture of the abated taxes if lhe business is discontinued during the lerm of the agreement, except for discontinuances caused by natunil disaster or other factors beyond the reasonable control of lhe applicant For a description of the amount of property in the City that has been abated for City taxation purposes, see "TABLE I -VALUATIONS, EXEMP'TIONS AND GENERAL OBLIGATION DEBT." TAX INCREMENT FINANCING ZONES Chapter 311, Texas TaK Code, provides that the City and other taxing entities may designate a continuo11S geographic area in its jurisdiction as a tax increment financing zone ("TIF'? if the are.a constitutes an economic or social liability in its present condition and use. Other overlapping taxing units may agree to contribute all or a portion of their tall.es collected against the "Incremental Value~ in the TIF to pay for TIF projects. Any ad valorem taxes relating to growth of the tax base in a TIF above the frozen base may be used only to finance improvements within the TIF and are not available for lhe payment of other tax supported debt of the City and other participating taxing units. Together with other taxing units, the City participates in two T!Fs, the Central Business District Reinvestment Zone {the MDowntown TIF") and the North Overton Tu: Increment Financing Reinvestment Zone (the "North Overton TIF'). The Downtown TIF covers an approximately 0.71 square-mile area which includes part of the central business district and abuts the North Overton TTF. The base taxable values oflhe TIF are frozen at the level of taxable values for 2001, the year of creation, al $105,858,251. In FY 2007, the Downtown TIP had a taxable value of$161,S82,450 before taking into account tax abatements and exemp1ions. After tax abatements and exemptions, the tax value in the Downtown TIF was $155,747,677. In addition to lhe City, the County, Lubbocl< County Hospital District and lhe High Plains Underground Water C-Onselvatioo District (collectively, the "Taxing Units") participate in the Downtown TIF. Given the relalive tax rates of the participants, it is anticipated that the City will be the largest contributor to the tax increment fund ifthere is growth li'Oln the frozen base. The City ordinance establishing the Downtown Tll' provides that the Downtown TJF will temiinate on December 31, 2021 or at an earlier time designated by subsequent ordinance or the City Council. In addition 10 the Downtown 11F, the City enacted an ordinance in 200 I establishing the North Overton TJF. Each of the other Taxing Units in the Downtown TIF also participate in the North ~rton TIF. The City ordinance establishing the North Overton TIF provides that the North Overton TIF will terminate on December 31, 2031 or at an earlier time designated by subscqm:111 ordinance of the City Council. The North Overton TIF consists of approximately 325 acres near the Central Business District of the City. The frozen tax base for lhe North Overton TIF was established as of January I , 2002 at $26,940,604. In FY 2007, the North Overton 11F had a taxable value of $192,302,370 before taking into account tax abatements and exemptions. After tax abatements and exemptions, the tax value in the North Overton TIF was $192, I 72,230. {THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK} 2S ( FINANCIAL INFORMATION TABLE 1-VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2007 Market Valuation Established by Lubbock Central Appraisal District Less Exemptions/Reductions at 100% Market Value: Residential Homestead Exemptions Homestead Cap Adj ustmcnt Disabled Veterans AgriculturaVOpen-Spacc Land Use Reductions Pollution &emptions House Bill366 Freeport Exemptions Tax Abatement Reductions (I) Tax Freeze Adjus1men1 Market Value Reduction for Protested Properties 2007 Tuable Assessed Valuation City Funded Debt Payable from Ad Valonem Taxes: General Obligation Debt ( as or l -1--08) (2) Plus: The Certificates Total Funded Debt Payable from Ad Valorcm Taxes Less: Self Supporting Debt (as of l-1--08) (3) Water,,.orlts System General Obligation Debt Sewer System General Obligation Oe,bt ( 4) Solid Waste Disposal System Gener.al Obligation Debt Drainage Utility System General Obligation Debt Tax lncwnent Financing General Obligation Debt Electric Light and Power System General Obligation Debt Cemetery General Obligation Debt Gateway General Obligation Debt Hotel Occupancy Tax Debi Airpon General Obligation Debt General Purpose Ftmded Debt Payable from Ad Valorem Taxes $ 225,084,488 58,787,272 15,063,118 80,099,818 10.312,389 $ s 163,705 86,375,634 35,908,583 \9S,219 83,710,4S8 524,055,000 52,900,000 129,198,872 I 10,170,700 12,630,290 90,74S,324 22,409,789 57,104,440 6&2,149 41,849,527 1,218,634 6,652,912 Unaudited General Obliga1ion Interest and Sinking Fund as of September 30, 2007 Ratio Total Funded Debt 10 Taxable Assessed Valuation Ratio Genera I Puqx,sc Funded Debt to Taxable Assessed Valuation 2008 Estimated Population (S) Per Capita Taxable Assessed Valuation Per Capita Total FUflded Debt Payable from Ad Valon:m Taxes Per Capita General Puipose Funded Debt Payable from Ad Valorern Taxes ( I) See "ADV ALOREM TAX INFORMATION -TAX ABATEMENT POLICIES.~ s 11,492,91 r ,247 59S, 7001684 S I 0,897,.210,563 s $ s S76,955,000 472,662,637 I 04,292,363 2.830,583 5.29% 0.96% 214,847 SS0,721 $2,685 $485 {2) The statemenl of indebtedness does POI include the City's outslanding Electric Light and Power SySlem Revenue Bonds, payable solely from lhe net revenues of the City's Electric: Light and Power System. (3) As a mauer of policy, the City provides debt service on general obligation debt issued to fund improvements lo its Waterworks System, Sewer System, Solid Waste System, Drainage System, Tax Increment Finance Reinvestment Zone, Electric Light and Power System, Cemetery, Gateway Slreels, Hotel Occupancy Tax projects, and Airport from swplus revenues of these Systems (see "TABLE SA -GENERAL OBLIGATION DEBT SERVICE REQUIREMENTSt "TABLE SB -lNTEREST AND SINKING FUND BUDGET PROJECTION," '"TABLE 9 -DIVISION OF GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS," and '"TABLE 10 -COMPUTATION OF SELF-SUPPORTING DEB"r). 26 The City's Waterworlcs System General Obligation Debt has been issued to finance or refinance Waterworlcs System improvements. and is being paid, or is expected to be paid, from Waterworks System revenues. The City has no outstanding WaleTWorks System Revenue Bonds but has obligated revenues of the Waterworks System under water supply conir.«;ts. The City's Sewer System General Obligation Debt has been issued to finance or refinance Sewer System impJOvemenlS, and that is being paid, or is expected to be pa id, from Sewer System revenues. The City has no oulstanding Sewer System Revenue Bonds. The City's Solid Waste Disposa 1 System General Obligation Debt has been issued to finance or refinance Solid Waste System improvements, and is being paid, or is expected IO be paid, from revenues derived from Solid Waste service fees. The City has no outstanding So lid 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 lhat is expected 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 becl1 issued to finance or refinance construction of improvements in the North Overton TIF, and is being paid, or is eiq,ected to be paid, from revenues derived fTOlll the Pledged Tax Increment Revenues. The City has no outstanding Tax Increment Financing Revenue Bonds. In FY 2008, based upon development projections lhat the Cily believes to be reasonable, but which are dependent in part on future economic conditions and other faciors thal the City cannot control and as to which it can give no assuran<:es, ttle City anticipates that tax increment revenues will be adequate to cover debt requirements on the existing Tax Increment Cet1ificates of Obligation. In the interim, lhe City intends to make an inlerfwid loan to cover the debt service, and if the projected development in lhe Nol1b Overton TIF proceeds as expected the City would repay such loan from revenues received in future years. Toe North Overton master plan projects additional debt to be issued by the City for infrastructure improvements in the TIF. If that occurs, there would likely be years in which the TIF would not produce revenues in amounts sufficient to cover all debt issued for it, at least until the TIF has reached full build--0ut 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 that is expected to be paid, from reve11ues derived from the Eleclric Light and Power System. The City has $19,010,000 oulstanding Electric Light and Power System Revenue Bonds payable from a pledge of system revenues. The City's Cemetery General Obligation Debi has been issued to finance or refinance Cemetery improvements, and is being paid. or that is expected to be paid, from teVenues derived frorn 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 that is ell.peeled to be paid, from franchise f«s. The City has no outslllnding Gateway Fund Revenue Bonds. The City's Hotel Occupancy Tax General Obligation Debt has been issued to finance tourism projects, and is being paid, or that 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 lo finance or refinance Airport improvements, and is being paid, or that is e)lpected lo be paid, from revenues derived from the Airport. The City has no outstanding Airport Revenue Bonds. ( 4) Includes the Certificates. (5) Source: City of Lubbock. Texas. [THE REMAINDER OF THIS PAGE fNTENTIONALL Y LEFT BLANK) 27 < TABLE 2-TAXABLE ASSESSED VALUATION BY CATEGORY 2008 Tauble Al!enlisotl Val•e ror F"oscal Year £11,Jod Seetembrr 30,, 2007 2006 ¾of %of %of Calel2!}: Amount Toca! Amoonl Total Amount Total Real. Residential, Singlc-fffllity $ 6,}21,729,050 SS.01% $ S.889,913,195 SS.SJ¾ $ S,517,769.306 SS.SS¾ Real, Residential, Multi-Family 931,507.,~I 8.11% 873,394,391 8.2)% 195,689,<WO 8.01% Real, Vacant Lots/Tracts 202,703,022 1.76% I 86,939,.508 t.16% 166,089,379 1.67% Rea~ Acreage {land O,,Jy) 103,474,361 0.90¾ 104,443,417 0.98% 80,067,791 0.81% Real, Farm. and Ran<h lmprovcmenlS 10,948,790 0.10% 10.601,986 0.10% 11,038,895 0.11% Real. CMVllefeial and Industrial 2,l.46,869,059 19.SS¾ 1,968.271,689 13.56% 1,827,901,763 18.40% Real, Oil, Gas and Olhct Mineral Reserves 26,864,IS0 0.23¾ 28,446,050 0.27% 17,526,SI0 0.18o/, Real and Tmgiblc Personal, Utilities 181,023,472 1.58% 179,562,657 l.69o/. 177,838,907 1.79% Tangible Personal, Business 1,340,911,089 11.67", 1,245,600,988 11.74% 1,228,428,632 12.37% Tangible Personal, Olher 13,018,766 0.11% 13,940,265 0.13% 14,527,171 0.15¾ Real Propc,ty, Jn~e111ary 41,291,828 0.J6¼ 31,511,651 0.35% 26,685,491 0.27% Special h,venuny 72,685,000 0.63% 6&.621,321 0.65% 61,329,545 0.68% 0111'"1Adj11Stmen1S (l 1S1001~ 0.00% 220,192 0.00% 1,499616 0.02% Tocal Appraised Value Before Exemptions s I l ,492,911,247 100.00% $ I 0,607,Sl8,3 I 6 JOO.DO% s 9,9J2,3n,406 100.00% I.=,; Total Ei<emptions/Rcductions {59.S,700,684) !604.! 12,679) 1sss.11s,4ssi Taxable Assessed Vatuc: s 10,897,210,563 s I0,002,'725,637 s 9.34616Jl,9Sl 2005 Tuablt ~!raiml V•ln for Fiscal Year l,adc,I ~fflll>cr l!t 2004 2003 %of %0( %of Cat~!X Amount Total Amount Tola) Amount Total Real, Re.sidaitial, Sioglc-f amily s S,169,490,706 56.09% s 4,690,15&,161 55.S0¼ s 4,282,214,635 S6.78¼ Ru!, Rclidential, Multi-family 61S,4S3,250 6.68% S61.569,488 6.64% 4SS,993,262 6.05% Real, Vacant LotsfflllotS 137,411,731 1.49% I0&.625,954 1.29% 93,473,144 1.24%. Real, Acreage (Land Only) 64,532,486 0.70% 65,880,410 0.78% S9,644,9n 0.79% Real, Fam, and Rand, Improvements 10,406,199 0.11¾ 10,835,088 0.13% 11,391,782 0.15% Real, Commercial and lndoslria! J,712,•57,490 18.58% 1,638,846,765 19J9% 1,370,130,397 18.18% Real, Oil, Ga$ and Otbc:r Mineral Reser.cs 12,167,754 0.13% 8,923,110 0.11% 7,909,460 0.10% Real and Tangtl>le Pc,sonal, Utili~ 173,908,469 1.89% 185,761,346 2.20% 192,131,423 2.SS% Ta11g>"ble Personal, B..sillC5S 1,226,369,118 13.31% 1.090,862.579 12.91% 974.534,729 12.92% Tang,"ble Persoaal, Other 15,465,413 0.17"/4 16,287,022 0.19% 15,336,364 0.20% Rt.II Property, Inventory 9,863,035 0.11% 4,774;).87 0.06% 11,087,603 0.15% Special Inventory 68,232,264 0.74% 68,663.Sl4 0.81% 67,339,159 0.89% Olhc,/AdjUlllncllts 0.00% 0.00"/4 0.00% Tot.ti Applllised Value Btfo,e Exemptioos s 9,215,758,015 100.00¾ s S,451,ISS,424 100.00¾ $ 7,541, 793,935 100.00% Leu: Total Exernptionsllttductions j580.763,153) jS29,S98,044! jl99,449,068) Taxable A""'8ed Value s 8,634,994,!162 $ 7,921.S90,31JO s 7,342>1•.867 NOTE: Valua1ions shown are ,;crtified lllable assessed values reported by lhe Appraisal District to the City for pu.rposes of esiabli5hing and levying the City's annual ad valorem tax nte and to the Sta.te Comptroller of Public Accounts. Certified values are !!Ubjcct lo change throughout the year as contested values are resolved and the Appraisal District updates records. 28 TABLE JA-VALUATION AND GENERAL OBLIGATION DEBT msTORY Fiscal Per Capita Genenl lbtlo Vear Esti,noled T1ub1t TaJable Purp,se Tai Debt to E,,ded City AsRssed ASlessed Funded Assasecl Funded Debr Tu ~ Paj!!!latioa •• V"1u•tio" Valaalic>11"' Ta1DebtM Valuation ru PerC•l!ita"' Year 2003 204,737 s 7,342,344,867 s 35,862 $ 70,IU,204 0.96¾ s 343 2002 2004 206,290 7 ,92 I ,S90,380 38,400 70.161.218 0.89¾ 340 2003 2005 209,120 8,634.994,862 41,292 80.210,269 0.93% 384 2004 2006 211,1&7 9,346,613,95 I 44,258 87,231,945 0.93% 413 2005 2007 212,365 I 0,002, 725,637 47,102 92,487,363 0.92% 436 2006 2008 214,847 I 0,897,210,563 50,Tll 98.504,904 o.90"/4 458 2007 l•t Sautoc:TheOC)'. "' c-ool ind,m <elf_,.,..,,_ oo RCM.lndcd to DC2l'C5I d~bt. TABLE JB-DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT The following table sets rorlh certain information with respect lo the City's general purpose and self-supporting general obligation debt The City is revising its capital improvement plan, but the City expects lo issue additional self-supporting gene,al obligation debt within the lhree to five year time frame. See "ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT." Fiscal Less: General Pnrpose \'ear Funded Tax Debt Sel[-Sapporting Funded Tax Debt Ended Outstanding at FulldedTax Outstanding 30-Sel! End of Year Debt at End of \'ear 2003 s 295,935,000 s 225,746,796 $ 70, 188,204 2004 28.S,885,000 215,723,783 70,161,217 2005 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''1 550,545,000 452,040,096 98,504,904 "' Projec1od. TABLE 4 -TAX RA TE, LEVY AND COLLECTION HISTORY F"iscal Tu Rate Distn'botion YearEad General Economic Interest and Tax Tax Percent CoDected 09/30 Fond Develoe:ment Sinkin& Fund Rate L!!)! Current Total 2003 s 0.43204 s 0.03000 s 0.)0796 S 0.57000 S 42,093,153 97.6~/4 99.21% 2004 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 98.15% 99.71'/4 2007 0.36074 O.o:JOOO 0.07125 0.46199 46,068,744 98.12~. 99.02% 2008 0.35380 0.03000 0.07125 0.45505 49,195,247 (In process of collection) 29 Tax Yeu 2002 2003 2004 2005 2006 2007 TABLES-TEN LARGEST TAXPAYERS ?007 %or Total Taxable Taxable Name Assessed Val uali2n Assessed Valuation Macerich Lubbock Ltd. Wal-Man Stores, Inc. Southwestern Bell Telephone United Supennarkeis OFC PY CO I nduslries, Inc. Southwestern Public Services Co. Lubbock Property, LLC Atmos Energy West Texas Division TYCO Fire Products Fountains Club Lubbock Acquisitions, LP TABLE 6-TAX ADEQUACY $ 120,319,460 69,696,472 65,675,631 49,479,682 48,047,230 42,711,124 33,316,729 33,181,890 31,136,879 28,036,483 $ 521,601,580 Average Annual Debt Service Requirements All General Obligation Debt (2008-2034): $0.2960 per$ I 00 AV against the 2007 Taxable AV, al 98.5% collection, produces Maximum Annual Debi Service Requirements All General Obligation Debt (2009): $0.5030 perSIOO AV against the 2007 Taxable AV, at 98.5%collcction, produces (,) lneludco lhc Ccr1ificalll$, TABLE 7-ESTIMATED OVERLAPPING DEBT 1.10% 0.64% 0.60% 0.45% 0.44% · 0.39o/o 0.31% 0.30% 0.29% 0.26% 4.79% $31,763,762 (,) $31,771,907 $53,977,902 ,., $53,990,775 Expenditures of the various taxing entities within the temtory of the City are paid out or ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrow in~ to finance their expend i~s. This statement of direct and estimated overlapping ad valorcm laX bonds ("Tall( Debt") was developed from information contained in "Texas Municipal Reports-published by the Municipal Advisory Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no J)CJ$OII should rely upon such information as being acC\lrate or complete. Furthennore, certain of the entities listed may have issued additional Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be detennined. The following table reflects the estimated share or overlapping Tax Debt of the City. Taxing Jurisdiction Fn:nship !SD $ Idalou !SD Lubbock County Lubbock County Hospital District Lubbock !SD Lubbock-Cooper ISO New Deal !SD Roosevelt ISD Estimated Overlapping Debt The City (as of 1/1/08) $ Total Direct & Estimated Overlapping Debt As a% of 2007 Taxable Assessed Valuation Gross Debi iAs of l/11082 138,102,346 275,000 85,720,000 140,956,725 46,264,571 9,624,998 576,955,000 "' Per Capita Total Direct & Estimated Overlapping Debt 30 Estimated% Overbpping Overlapeing Ddlt 79.41% $ 109,667,073 6.93% 19,058 83.32% 71,421,904 83.32% 98.49% 138.,828,278 57.50% 26,602,128 18.33% 4.20% 404,250 s 346,942,691 [00.00% 576,955,000 "' $ 923,897,691 8.48% $ 4,351 TABLE 8A -GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS FYE Oo!Sbodln,: Del,t "' Th~ Crrtlllcatts Toral lo.st! Prin<il!!!! locerut Tecal rria<!fal l111lt:res:t Totat Debi Senioe 2008 s 26,410,000 s 24,119,166 s 50,222,277 s 1,365,•88 s l,Ji;S,488 s Sl,587,765 2009 26,940,000 22,906,272 49,907,366 s 1,765,000 2,305,.!U 4,070,536 S3,9TT,902 2010 27,015,000 21,190,460 •a,866,398 1,830,000 2,238.211 4,068,211 52,934,609 2011 27,800,000 20,594,166 48,45•,901 1,895,000 2,173,024 4,0£8,024 52,522,924 2012 27,440,000 I 9)49.341 46,SS0,018 1,960,000 2,108,011 4,068,011 50,918,029 2013 28,310,000 18,082,207 46,452,831 2,025,000 2,043,255 4,068,255 SO,Sll,086 2014 29,270,000 16,740,221 46,070,791 2,095.000 1,976,305 4,071,305 50,142,096 2015 27,410,000 IS,09,.193 42,910,326 2.165,000 1,904,174 4,C69,)74 46,979,700 2016 27,.SSS,OOO 14,160,739 41,776,980 2,245.000 1,827,199 4,072,199 •S,1149,179 2017 27,900,000 12,!!01,001 40,762,905 2.:m.000 1,745,771 4,070,771 44,833.676 2018 28,635,000 11,426,822 40,124,560 2,430,000 1,642,880 4,072,880 44,197,440 2019 27,915.000 10,017,312 37,993,060 2,550,000 1,518,l!NI 4,068,380 42,061,440 2020 26,075,000 8,719.234 34,849,720 2,685,000 1,387,SOS 4,072,505 38,922,225 2021 24,795,000 7,483,700 32,328,491 2,820,000 1,249,UO 4,069,880 36,398,371 2022 22,460,000 6,314,906 28,818,568 2,965.000 1,105,255 4,070,255 32,188,823 2023 21,900,000 5,217,948 27,154,886 3,IIS,000 9Sl,2SS 4,068,lSS 31,223,141 2024 20,400,000 4,152,246 24,581,866 3,265,000 806,815 4,071,815 28,653,681 2025 19,730.000 3,165,837 22,917,703 3,420,000 652,7~ 4,072,750 26,990,453 2026 16,245,000 2,272,639 18,531,163 3,595,000 477,37S 4,072,37S 22,603,538 2027 IO,S:30,000 1.603,211 12,137,794 3,780,000 293,000 4,073,000 16,210,794 2028 5,225,000 1,216,219 6,441,219 3,970,000 99,2SO 4,069,250 10,510,469 2029 5,475,000 967,143 6,442,143 6,442,143 2030 S,735,000 712,173 6,447,173 6,447,173 2031 6,000,000 445,949 6,445,949 6,445,?49 2032 2,195,000 260,438 2,455,438 2,4SS,438 2033 2,290,000 159,525 2,449,525 2,449,525 2034 2,400,000 54,000 2,454,000 2,454,000 s 524,0SS,OOO s 250,172,464 s 774,848,047 s 52,900.000 s 29,873,519 s 82,TTl,519 s U7,621,S6S A~ Annual Debt Scrvict R<quirancnts All Gcr>enl Obligalion Deb< (2008-2034): $ 31,763,762 M,wm,m Ann,al Deb< S<nice .R,:quin,rr,cnls All Gcnml Obligation Debi (2009): $ 53,977,902 "'Do.s-includ<~obliptiom. TABLE 8B-INTEREST AND SINKING FUND BUDGET ... Projected General Plirpose Gneral Obligation Debi Service Requirements, Sq,trrnber 30 ,2008 s 10,940,576 ·! Fiscal Agent fcq 20,000 i~ ln\e!"e$l and Sinking Fltnd, September 30, 2007 s 2,830,583 lntercsl and Sinlcing Fund Tax Levy@ 99% 7,420,094 .,, Estimated lntc=t Earnings l,601,n4 Projcacd Balance, Septentbcr 30, 200& $ 891,375 31 TABLE 9 • DIVISION OF GENERAL OBUGATION DEBT SERVICE S.lldW•,1c Dralnag:e Tu Electric Lfaht Waurworkl Sewu Dl,po,al Udlll)' lncnmenc & Pawtr Geoeral Tolal FYE Sy,1cm S)'ll<m S)1tem Syllem Fln•nrioa Sy,tem c,mott')' Gattw•y IIOT A,lrpo,t Purpo1r G.O. ~ DrbtSenice Pcbt Servlee ''' DtblServko Dtbl S.n>loe DebtS...,le< D,b1s,n1,. Debi sm1 .. D,t,t S.n>loe Debi Scl"\'lct Dobc Sen,!tt Debt Som'° Dol>t S1rv1<e 2008 s 14,614,0H s 8,900,982 s 1,228,215 s 4,161.006 s l,Sll,ll9 s S,69IIJ41 s Sl,091 s ),()10,090 s 96,4S8 I 191.190 s 10,940,516 s 51,581,165 2009 14,s-41,094 ll ,l69,i62 I ,o94,6ll 4,)65,818 l,!37,))4 "628.461 SS,218 ).()67,669 97,329 617,726 ll,l02,UC Sl,977,902 20\0 1),211,009 10.m.m 1,169,llS 5,719,Sll l.!19.720 !.80S,217 s5.m l,067,564 97,ll) 612,561 I0.448.6S0 S2.9l4.609 201 I ll,176,)!l 1(),687,)61 1,150,IU 5,717,470 1.m,m S,140.591 Sl,224 J,064.961 97,274 607.lOl I0.l90.ll9 52.l22.9l4 2012 11,292,719 10.449.859 1,140.244 5.115.&97 1.m.m S,6S8,804 55,213 ),069,617 91,24i 602,591 10,000,099 50,918,019 2013 lll42.l08 10,264.664 1,129,137 l,717,364 1,814,492 S,l90,5'4 SS,2l4 l.067,074 97,)l) 596,167 9,925,519 S0,521,016 2014 ll,201,ltll 10,102,627 1,\ ll,lll l,11l,ll6 1,834,215 S,Sl 1,156 SS,217 l,06&,095 91,210 S89,80l 9,!54,792 50,142,096 2015 12,075,142 8,122,671 \,09l,9l9 S,JIS,106 l,!Jl,730 l,4lS,264 ss,m l,066.066 91.)28 4l~.28S 8,924,32) 46,919,700 2016 11,82\.612 7,421,719 l,ll!.462 S.658.192 l,8J6.ll0 l,100.Sl0 ss.m l,066.28J 97,248 m.21s 9.ll7,HS 4H49.119 2017 11,684,799 7,JSJ,509 l,o9l.S12 6.629,104 1.839,410 4,912,514 l5.l06 ).064,01) 91.248 4S7,940 7.6\6.000 4UlJ.676 2018 1) ,'464.42) 7,116,124 1.082.944 6,641,0ll I.B)l,674 4.844.685 SS,104 l,061.461 97.)17 456,045 1,SJ8,l21 44,197,440 2019 11,111,185 7.078.727 888,905 6,6)4,660 l,!l6,lll l,l0l,644 ll,l 17 J,062,8)6 91,190 454,025 7,SJS,020 42,061,440 2020 8,669,l6l 6JS9,909 182,07 6,646,tll l,ll9,l24 lJ0l,002 ss.m l,065,099 97,242 45S,82l 7,$46,554 11.m.m 2021 6,771,761 6,lSJ,274 875,tl8 M47,298 l,lll,044 l,103,201 ll,ll0 l,06l,S28 97,)27 456,969 6,9ll,l~ 36,m,m l02l 4,090,415 6,}ll,06) 741,101 6,662,al! 1.!14,2~ l,307, 189 ss,m l,06Ml8 97.H9 4ll,Sl6 6.219,76) 12.m.m lOll ),79S,822 6,018,86l 744,266 '.!91,IH I.Sll, \49 l,ISl,lll ll.204 l,068.156 91.258 4Sl.80 6.092,lOl ll.2ll,141 2024 l,194,JO 6,0ll,101 741,88] S,!39,240 1.Sll.91 I l.0ll,874 SS.20! l.Q66,ll2 97,289 4S7,Jl1 4,724,118 28,651.1181 20lS J,059.676 5,981,867 470.62! l,842,lll 1,549,994 l,0!0,922 ll,lO! l/l6l,51l 97,)08 457,1)1 4,191,812 26.990,0J ..,, "' 2026 2,77),699 l,404,294 '70,67! 5.146,906 8)4,745 1,SJ9,66l ll,212 1,924,841 91,lOS 232,ll! l,423,148 22.603,Jla 20l7 1,454.616 4,.134,lOl 107,lll 5,200,602 127,976 l,Ojl,140 IS,6M 1,704,150 91J10 Jl.797 1,985,226 \6,210,794 2028 4,069,lS0 4,7lS,ll9 1,702.900 IO,SI0,469 2029 4,738,638 l.70l,S0S 6,442.14) mo 4.740.963 1.706.llO 6,447,17) lOll 4.740,044 1,705.905 6,44j,949 2032 2,455,438 1.4SS,4l.3 26.ll 2,449,m 2,449,525 20l4 2,4.S4,000 2.4H,OOO 1!41907,875 s 160.66.1.66) s 18,344,191 S 14).413,121 s )l,911.690 s 12.932,210 s 1.064.695 s 65,645,499 s 1.944.991 s 9.70$,821 s Jll,001,720 S 1157 ,621,1~~ Ill lftr:hldea lht Ctttiriwt:1. TABLE 10 · SELF-SUPPORTED DEBT The following details the revenues available and debt allocations for the self-supported general obligation debt of the City. See also Table 9. In addition to the funds detailed below, lhe City Council of the City approved ordinances designating debt is.sued for the Cemeteiy (a wlit of the City's General Fund) to be supported by sales of crypts and niches at the City Cemeteiy. THE WATERWORKS FUND"' Ne1 System Revenue Available, Fiscal Year Ended 9-30-06 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-08 Balance Available for 01her Pmposes Requirements for Fund Gc=al Obligation Debt, Fiscal Year Ending 9-30--08 Percentage of fund General Obligation Debt Self-Supponing 1'1 Each f"tteal y.., lho City 1nmsfcrs an amount <qu>I 10 dcbucmc,e ""l"in:mcnts on the Wor"""°"'s Fnnd i:a,cnl oblig,.tion deb, to• scg,<pt<d ...wnl in the Waterworks Fund. THE SEWER FUND'"' Ncl System Revenue Available, fiscal Year Ended 9-30--06 Less: Requirements for Revenue Bonds. Fiscal Y car Ended 9-30--08 Balance Available for Other PU1Jl0scs Requirements for fund General Obligation Debt, Fiscal Year Ending 9-30--08 Percentage of Fund General Obligation Debt Self-Supporting "' l:ad> fiscal Year lhc: City a-amfm m amount equal to debt service Rquirtm<111$ on 11\e Sew« Fund goixnl ollligation cldrt 10 o sq;n:gatcil xeow11 m lhe S.-FUl>d. The City expects.,......,, yeafs S.-f...,d =--iucs will be sulf,cle.,1 10 co.... lhe dd>1 stnicc tc11uitcn1C111S ont•• Sewer Fund g,,ncral obligatioo debt. THE SOLID WASTE FUND'" Net System Revenue Available, fiscal Year Ended 9-3 0--06 Less: Rcquircments for Revenue Bonds, Fiscal Year Ended 9-30--08 Balance Available for Other Purposes Requirements for Fund General Obligation Debt, Fiscal Y car Ending 9-30--08 Percentage of Fund General Obligation Debt Self-Supporting "' Eacb F'oscal Year tho Cny inns(.,. an amo,mt equal 10 ~"""~requirements oa 1he Solid WO$Co Fund g,:ncnl ollligi,tion dd,1 to a sogregaed aceounr io 1h< Solid Was~ Fund. TIIE DRAINAGE FUND lo> Net System Revenue Available, Fiscal Year Ended 9-30-06 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30.08 Balance Available for Other Purposes Requirements for fWJd General Obligation Debt, Fiscal Year Ending 9-30-08 Percentage of Fund General Obligation Debt Self-Supporting 14> Eacli FIKOI y..,,tho dty lr10>Sfcts "'amount equal to del>t scr<ico l'Cll•.....,.,ts on 1ho D,ainqe Fund genual obHptioo, del>t to • ~•cd accaunt in dtc Drain.ge fwid. THE ELECTRJC LIGHT AND POWER FUND'" Net Electric Light and Power System Revenue Available, Fiscal Year Ended 9-30-06 ~ Requiremcllts for Revenue Bonds, Fiscal Year Ending 9.30-0JI Balance Available for Other Purposes Requirements for Fund General Obligation Debt, Fiscal Y car Ending 9-30-08 Pctccntagc ofFimd General Obligation Debt Self-Supporting '" Exh Fi,al Y.., rhe Cil)' ,nmfcn on ""'°""' oqual ID deb< ...-.ice n:qu;,-on the Ela:rric LigJ,t an6 Powe< Fund 33 $ $ $ $ $ $ s $ s s 18,277,614 18,277,614 14,614,035 100.00% 8,373,248 8,373,248 9,255,947 100.00% 3,913,968 3,913,%8 1,228,255 100.00% 6,476,263 6,476,263 4,361,006 100.00% 28,689,792 3,429,060 25,260,732 5,698,341 \00.00'¼ THE GATEWAY FUND"' Net System Revenue Available, Fiscal Year Ended 9-30-06 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-08 Balance Available for Other Purposes Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30-08 Percentage of Fund General Obligation Debt Self-Supponing s s •• Each Fi,oal V oar Ille City mnsferun .,,, .... equal IO dcb1 ...,,;.., '"'l"in:merus oo du, (l11my fund ga,en,1 obliga~on debt to a scg::rcp?cd aocoun1 in ?he Galt.way Fum:I. THE AIRPORT FUND''' Net System Revenue Available, Fis,;al Year Ended 9-3 0.06 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-08 Balance Available for Other Purposes Requirements for Fund General Obligation Debt, Fiscal Year Ending !)-30--08 Percentage of Fund Gener.ii Obligation Debt Self-Supporting IRl Each Fisa! Y car Ille. City a-ansf~ an .amount equal IO deb1 savio: ~virm\elltl on 1hc Ai:pan Fund gaxral obligation dchc 10 • ~ad accOIW in the Airport Flmd. THE TAX INCREMENT FINANCING FUND"' Net System Revenue Available, Fiscal Year Ended 9-3~6 Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-08 Balance Available for Other Purposes Requirements for Fund General Obligation Debt, Fiscal Year Ending 9-30-08 Percentage of Fund General Obligation Debt Self-Supporting (IJ £ach :F'tJat Year the. City 1ransfers .an a mo uni equal tc debt ierVace rc,quiremen&s on Che Tu. bacrcmau Financ:ing Fund ~ obligation dcbe 10 o _...led aocc,um i,, the Tu blcr<mall Finsneiog fund. The mnoinder of """""°needed to support Tax Jnaancnt Firumeing Fund gencnl obliption debt is lrlnSfenm from the City> Solid Wasle Fund. TABLE II -AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS Date Amount Pun,ose Authormd Authorized $ s $ $ Issued To Date Sewer System os121m $ 3,303,000 $ 2,175,000 Wa!erMllb Syslem 10/17/87 2,810,000 200,000 Street!~ 05/01/93 10,170,000 10,166,000 Street lrnprovementS OS/15/04 9,210,000 S,269,000 Qyic Ccnttr/Auditoriwn Renovalion and I~ OS/15/04 6,450,000 Parl(lnq,rovements 0.5/15/01 6,395,000 6,395,000 PolicdM1111icipal C.ourt Facilit~ 05/IS/04 3,350,000 Library ~ OS/lS/04 2,145,000 Fire Stalions OS/IS/04 1,405,000 1,405,000 Animal Shelter Renovalions & Jn-..irovem:nts 05/15/01 1,045,000 100,000 $46,283,000 s is, 7701000 34 S,526,200 5,526,200 3,070,090 100.00% 2,877,208 2,877,208 791,190 100.00% 940,013 940,013 1,831,739 100.00% Uabsued $ 1,128,000 2,610,000 4,000 3,941,000 6,450,000 3,350,000 2.145,000 885,000 $20,Sl3,000 ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ... The City Council adopted a resolution during the 1984-85 budget process esiablishing capital mainlenance funds fOT capital projects. A capital improvement plan is made for planning purposes and may identify projects that will be deferred or omitted entirely in furure yea.rs. In addition, as conditions change, new projects may be added that are not currently identified. Under cum:nt City policy, for a project IO be funded as a capilal project ii must have a cosl of $25,000 or more and a life of seven or more years. For FY 2007-2008, the City Council approved Sl94.4 million in total expendirures for capital projects for all general purpose projects, as well as projects for lhe electric fund, water fund, sewer fund, solid waste fund, stonnwater fund and airport fund (up from $TI million in FY 2006-2007). The Capital Projects Fund budget for FY 2007-2008 also included an additional $562.6 million in future improvements for all City departments over the fl ve succuding fiscal yean. The improvements included in the City• s capita\ improvement plan are generally funded from a blend of bond proceeds, reserves or current year revenue sources. As shown in Table II, the City has $16,771,000 ofautborized but unissued bonds from lhe May 15, 2004 bond election. When the election was held, the City anticipated that the bonds would be issued over the 2004 through 2008 lime frame. The City typically issues voled bonds for general purpose City projects, such as streets, parks, libraries, civic centers and public safety improvements. However, the City has incurred substantial unvotcd lax supported debl to fund portions ·of the capital budget of the Electric Fund, Water Fund, Sewer Fund, Solid Waste Fund, Stonn Waler Fund, Tax Increment Fund, Gateway Fund and Airport Fund. As described elsewhere in this Official Statement, such enterprise fund indebtedness is generally anticipated to be self-supporting from enterprise fund revenues. The City anticipates the issuance of$ l l 9,400,000 in additional general obligation debt within lhe next twelve months. TABLE 12-OTHER OBLIGATIONS Govemmental Business-Type Total Capital Lease C aprtal Lease Capital Lease FYE Minimum Minimum Minimum 30-Sej! Pa;t:ment Pa;t:ment Pat!!!:nt 2008 s 1,694,843 $ 1,946,263 s 3,641,106 2009 1,673,144 1,842,705 3,515,849 2010 1,522,290 1,748,474 3,270,764 2011 725,904 1,086,012 1,811,916 2012-2016 1,116,246 381,832 1,498,078 Interest {896,711) 18941074) !1,790,785) s 5,835,716 $ 6,111,212 $ 11,946,928 On Januruy 8, 2004, the City entered into a note agreement with the Department of Housing and Urban Development (~HUD'') for loan guarantee assis&ance under Section 108 of title I of the Housing and Community Development Act or 1974, as amended, in the amount of$1,000,000. The Note was issued to aid in the eslablishment ofa Housing Rehabilitation Program in order to provide rehab optioJlS for low-to moderale income households on a citywide basis, pay professional services rendered in relation to such project. and the financing thereof. Under the terms or the Note, the City will make annual priooipal payments on August I, of each year begiMing in 200S through 2012; interest payments are due semi-annually. The Note is a liability or the City's Community Development Block Grant Program and debt service will be paid from this grant. FYE Contrm Reveisue BoPds 3!§ep Princi(!al Interest Total 2008 $ 125,000 $ 28,300 $ 153,300 2009 125,000 23,300 14S,300 2010 125,000 17,900 142,900 2011 125,000 12,188 137,188 2012 125,000 6,200 131,200 $ 625,000 $ 87,888 $ 712,888 35 : ( PENSION FUND •.. TEXAS MUNICIPAL RETIREMENT SYSTEM ,,x,, ... All pennanent, full-time City employees who are nol firefighters are covered by the Texas Municipal Retirement System ("TMRS"). TMRS is an agent, multiple-employer, public employee retirement system which is covered by a State statute and is administered by six truslees appointed by the Governor of Texas. TMRS operates independently of its member cities. The City joined TMRS in 1950 to supplement Social Security. All City employees except firefighters are covered by Social Security. Options offered under TMRS, and adopted by the City, include current, prior and antecedent service credits, five year vesting, upda1ed seo-ice credit, occupational disabi!i ty benefits and survivor benefits for the spouse of a vested employee. An employee who retires receives an annuity based on the amount of lhe employee's contnl,utions over-ma1ched two for one by the City. Since October 11, 1997, the employee contribution rate has been 7% of gross salary. The City's contribution rate is calculated each year using actuarial techniques applied 10 experience. Enabling statutes prohibit any member city from adopting options which impose liabilities th.al cannot be amortized over 25 year.; within a specified statutory rate. On December 31, 2006, the actuarial value of assets held by TMRS (not including those of the Supplemental Disability Fund, which is "pooled"}, for the Cicy were $199,865,768. Unfunded actuarial accrued liabilities on December 31, 2006 were $71,502,988, whiefl is being amortized overa 25-year period beginning Jan1181)', 1997. FIREMEN'S RELIEF AND RETIREMENT FUND (.,> ••• City firefighters are members of the locally administered uibbock Firemen's Relief and Retirement Fund (the "Fund"), operating under an aet passed in 1937 by the State Legislature and adopted by City firefighters, by vole of the department, in 1941. Fire fighters are not covered by Social Security. The Fund is governed by seven ln!Stees, consisting of three firefighters, two outside trustees ( appointed by the other trustees), the Mayor or the representative thereofand the chief financial officer or the representative thereof. Execution of the act is monitored by the Firemen's PenMon Commissioner, who is .appointed by the Governor. Benefi ls of retired firemen are detennined on a Mformula" or a "final salary" plan. Actuarial reviews are perfonned every two years, and the fund is audited annually. Firefighters contribute a percentage of full salary into the fund. Based on the plan effective November I, 2003, the Fund's funding policy requires contributions equal to 12.43% of pay by lhe firefighteJS. The City contributes on .a basis of the percentage of salary which is an annually adjusted ration that bears the same n:lationsliip to the firefighter's contribution rate lhat 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 31, 2006, the unfunded pension benefit obligation was $26,297,944 which is amortiwl with the excess of the assumed total contribution rate over the nonnal cost rate. The number of years needed to amorticie the unfunded pension obligation is detennincd using an open, level percentage of payroll method, assuming that the payroll will increase 4% per year. The Dcoember 31, 2004 actuarial valuation, which used plan provisions effective November I, 2003, ~ 20.6 years to amortize the unfunded pension obligation. The December J I , 2006 actuarial valuation was based on the plan provisions effective December I, 2005 and needed 35 years 10 amortize the Wlfunded pension obligation. OTHER POST-EMPLOYMENT BENEFITS ... The City currently provides certain post-employment benefits to its employees, as described in Nole m. K (Notes to the Basic Financial Stalements) set forth in Appendix A. The City inlends to comply with the requirements of GASB No. 43 and 45, with respect to the reporting of post-employment benefits, in accordance with the timelines set forth in GASB No. 43 and 45. • The City has retained the services of Gabriel, Roeder, Smith & Company 10 prepare the calculations required under GASB No. 43 and 45. iii For historical infonnation concerning the mirement plans, see "APPENDIX A, EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2006-NOie Ill, Subseciion E -R.etiu""81 Puins". "" Sou=: Texas Municipal Retirement Sy-stem, Comprdte,ui.,,, Annual Financ;,,/ Report/or YODr Ended Decn,,bu JI, 2(X)6. [THE REMAINDER OF IBIS PAGE INTENTIONALLY LEFT BLANK} 36 TABLE 13 -CHANGES IN NET ASSETS Fiscal Year Ended Se!!tember 30 <•l 2006 2005 1lli 2003 2002 REVENUES Program Revenues Charges for Services $ 9,632 $ 10,583 s 12,713 $ 13,88& s 9,369 Grants and Contributions 11,048 13,296 9,643 12,137 7,007 General Revenues Property Taxes 42,771 39,748 44,497 42,303 40,408 Sales Taxes .iJS,577 41,803 30,555 29,092 28,903 Other Taxes 4,447 4,242 3,793 3,712 3,681 Franchise Taxes 13,348 I \,I 54 9,654 6,613 6,998 Grants/Contributions no! restricted (25) Oilier 11,292 5,742 4 274 3 834 6,227 Total Revenues s 138,115 $ 126,568 $ 115,129 $ 111,579 $ 102,568 EXPENDITURES Administrative Services s 9,910 $ 8,220 s 7,946 s 7,158 $ 7,293 Community Services 6,112 6,146 6,776 6,335 8,643 Cultural and Recreation 18,915 17,745 17,102 16,796 16,297 Economic Development 10,283 9,739 4,610 4,535 4,399 Fire 26,711 23,517 22,074 20,450 19,432 Heailh 5,014 5,040 4,585 4,343 4,173 Police 42,063 38,452 36,543 33,986 31,362 Other Public Safety 5,240 4,977 4,211 3,602 3,459 Stteets and Traffic 11,850 12,466 10,570 16,371 9,913 Non-departmental 5,206 6,253 2,924 5,642 5,015 Interest on Long-Term Debi 4326 3,195 4,877 3,373 3,493 Total Expenditure$ $ 145,630 s 135,750 s 122,218 $ 122,591 $ ll3,979 Changes in net assets before special items & b'aJ!Sfers $ (7,515) s (9,182) $ (7,089) s (11,012) $ (11,411) Special items (687) Transfers 9607 15,469 9,745 2,554 15,668 Changes in net assets s 2,092 s 6,287 $ 2,656 s (8,458) s 3,570 Net Assets • beginning of year, as restated $ I I0,629 s 104,341 $ 101,684 s 110,142 s 106,572 Net assets • end of year $ 1121721 $ 110,628 $ 104,340 $ 101,684 s 110,142 . ( w Audited. Units ~ in 000.. Nocc: Data shown in Table 13 mlcct5 gcncnl governmental activities rq,oncd in accord2'>c* with GASB Statement No. 34. 11>e financial Sl3ten1Ct11S include a maaagement discussion :and analysis oflhc operatillg result$ of such fiscal yc:ar, including restatements to beginning fund baJancu and Oct asselS. 37 TABLE llA-GENERAL FUND REVENUES AND EXPENDITURES msTORY Fiscal Y e,,r Ended Sej!letnber 30 2006 ~ ~ 2003 2002 REVENUES Ad Valorem Taxes $ 33,193,738 s 29,414,nJ s 33,233,274 s 32,194,087 s 29,885,252 Sales Taxes 41,77&,5]4 38,319,SOI 30,554,632 29,092,032 28,902,649 Franchise Taxes 8,008,973 6,693,209 9,654,447 6,612,822 6,998,085 Mis<:etlaneous Taxes 1,027,352 982,327 939,456 848,816 820,507 Lictnses and Pmniis 2,250,635 1,953,666 1,982,281 1,875,118 l,47S,4SI lntergovemmernal 408,997 480,648 428,459 · 348,787 3Sl,87S Charges for Se.vices 4,781,043 4,070,642 4,467,733 4,945,S91 4,472,094 Foes and Fines 3,981,978 4,015,402 3,675,856 3,672,509 3,069,362 Miscellaneous 1,465,21 S l,506,315 1,442,677 1,532,346 1,058,237 lntorCSI 921,742 349,236 334,730 285,756 433,393 Operaring Transfers <•l 16~5,397 10,723,891 10,345,945 IS,023,466 Total RcvenU<S and Transrers s 97,818,207 s 104,351,I 16 s 97,437,436 s 91,753,309 s 92,490,374 EXPENDITURES General Govcmmem s s 6,159,S3<> s 5,633,469 s S,717,ISI s 5,596,868 Financial SCfVices 2,139,492 2,333,469 1,969,413 1,958,051 Cultural and Rcacation 13,986,576 Economic & Business Oevelopmen1 1,146,267 Non-<leprtmental 1,882,255 445,251 214,562 175,499 1,497,485 Admin/Community Services 9,356,059 \8,330,S03 18,156,455 17,837,076 17,997,152 Police 37,463,740 33,919,626 32,400,371 30,321,182 28,905,651 Fire 24,638,814 21,943,267 20,613,077 19,511,797 18,632,109 Health 3,738,790 Other Public Safety 4,287,806 Planning and Transportation 8,120,727 7,180,843 6,610,394 6,510,35'4 Stteet Lighting 7,439,045 2,214,291 2,185,286 2,078,277 2,168,620 Human RCSOUT"CeS 740,826 754,22S 780,529 895,311 Debt Service Principal 1,009,368 Debi Service lme=i and Ocher Charges 144,858 Cllpital Outlay 7,IM,866 5,277,100 415,585 378,059 480,749 Operaring Transfers 3,912,645 4,212,915 13,555,338 S,951,669 TObl Expenditures s I 12,278,444 s I 03,203 ,269 s 94,160,257 s 98,934,71S s 90,594,059 Excess (Deficiency) of Revenues and Transfers over Expenditures $ (14,460,237) s 1,147,847 s 3,277,179 s (7,180,906) s 1,896,315 Capil3) I.ease Issued 5,119,930 3,534,048 Transfer In 13,325,04(; Transfer Out (1,436,498) Fund Balance at Beginning of Year 17,376,420 12,694,SlS 9,417,346 16,598,252 C<I 16,716,042 Fund Balance at End of Year s [9,924,711 s 17,376,420 s 12,694,52S s 9,417,346 s 18,612,357 Leos: Resefvcs and Designations 1~1 (I ,2SS,04 I) Undesign31ed Fund Balance "' s 19,924,711 s 17,376,420 s 12,694,525 s 9,417,346 $ 17,357,316 '"' For foscal year 200SJ06, the water, solid waste •nd waste "'111<:r funds transferred an amount sufficic:nt to cover the pro n,ta shaR of the City's general and administrat~ e,,:pcnses and an amount representing a payment in lieu of ad valomn laXes. The water, waste waler and solid waste funds transfemd an amount ~resenting a franchise payment equal lo 6% of gross receipts. The El«tric Syscem was noc miuired lo make tnnsfCI"$ IO the Geoenil fund for any of the forq:oing purposes during the 6scal year. '"' The City's fmaodal policies target a General Fund undesigi,atcd balance of at least 200/4 of General Fund revenues. The undesignaled fund balance is at 99¾ of the target established by the City's financial policies.. ~> The *Fund Ba.lance at Beginning of Year" was =tated. 161 The C'ny adimnistration believes that the unaudited General Fund balance for die period ending Seplem~ 30, 2007 was approximately SI 9,136,979. 38 TABLE 14-MUNICIPALSALESTAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, Chapter 321, Texas Till< Code, which grants the City lhe power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to lhc payment of the Certificates or other debt of the City. In addition, in January, 1995, the voters of the City approved lhe imposition of an additional sales and use lax of one-eighth of a cent as authorized by Chapter 3Z3 Te,i:as Tax Code, as amended. Collection for the additional tax commenced in October, 1995 with the proceeds from lhe one-eighth cent sales tax designated for lbe use and benefit of the City to replace property tax revenues lost as a resu Ir of the adoption of lhe tax. At an election held in the City on November 4, 2003, voters approved an additional one-quarter cent sales and use lax, with lhe proceeds to be dedicated to the reduction of ad valorem taxation, and an additional o-ighth cent sales and use tax under SectiOll 4A of the Texas Development Corporation Act (Article 5190.6, Texas Revised Civil Statutes), to be used for economic development in the City. The City began to receive proceeds of these taxes in October 2004. Collections and enforcements of the City's sales lax are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits lhe proceeds of the tax, to the City monthly, after deduction of a 2% service fee. Historical collections of rhe City's local Sales and Use Tax are soown below: %of Equivalent of FYE Total AdValorem AdValorem Per 38-Sel! Collected lol Tax Levy Tu Rate Capita"' 2002 $ 28,902,648 73.45% $ 0.4183 $ 143.08 2003 29,092,032 68.80% 0.3962 142.09 2004 30,554,632 69.98% 0.3857 148.11 2005 41,803,092 105.09% 0.4825 199.90 2006 45,576,582 109.10% 0.4556 214.61 2007 47,780,448 114.37% 0.4385 224.99 l'J Exchldes bingo ta>< receipts and mixed be,torage tax. (b) Based a, population estimll .. oflhc City. Effective as of October I, 2006, the sales tax breakdown for theCi1y is as follows: City: City Sales & Use Tax City Sales & Use Tax. for Property Tax. Relief City Sales & Use Tax for Economic Development Cowity Sales & Use Tax State Sales & Use Tax Total 39 s $ 1.000 0.375 0.125 0.500 6.250 8.250 ( ( . ( FINANCIAL POLICIES Baris of Accounting _ .. The accounting policies of the City conform lo 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 Reponing to the City for each of the fiscal years ended September 30, 1984 lhrougb September 30, 2002 and September 30, 2004 lhrough September 30, 2005. The City will submit the City's 2006 report lo GFOA to detennine its eligibility for another certificate. Comprehensive Annual Financial Report (CAFR} ... Beginning with the year ended September 30, 2002, the City's CAFR has been presented urider the Governmental Ae<:ounting Standard Board ("GASB") Staternen! No. 34, Basic Financial Sratemenls • and M;magement's Discwsion am/ Analysis -for Stare ond Local Governments, GASB Stalement No. 37, Bask Financial Statements -and Management's Discusifon and Analysis -for State and local Govemmenu: Omnibus, and GASB Statement No. 38, Certain Financial Nore Disclosures. For add i lional information regarding accounting policies that are applicable to the City, see Note I. "Summary of Significant Accounting Policies" in the financial statements of the City attached as Appendix A. General Fund Bakmce ... The City's objective is to maintain an unreserved/undesignated fund balance at a minimum of an amount equal to IWO months budge!ed operating expenditures to mee1 unanticipated contingencies and 0uctualions in revenue. The City's General Fund currently has an unreserved/undesignated fund ba\anoe that is at 99% of the target established by the City· s Ii n.aneial policies. Waler. Wastewater. Storm Water. Solid Waste and Airport Enterprise Fund Balances ... It is the policy of the City to maintain appropriable net assets in the Water and Wastewater funds in an amount equal to 25% of operating revenues for uoforeseen contingencies. The City· s goal of appropriable net assets in the Solid W astc, Ai lpOit, and Stonn Water funds is an amount equal to 15% of regular operating revenues. With the exception oftbe Electric Enterprise Fund (as further described below), the City . currently exceeds its policy on appropriable net asselS for its various enterprise funds. See "DISCUSSION OF RECENT FINANCIAL AND MANAGEMENT EVENTS -SEPTEMBER 30, 2003 FINANCIAL RESULTS." According to audited numbers for FY 2006, the target net assets by policy and current appropriable net assets for the Water, Wastewater, St0nn Water and Airport enteipri se funds are as follows: Entemrise Fund Tar1et Net Assets by Policy AJ!l!rol!riable Net Assets Water $10.Smillion $19.2million Wastew,ater $5.5 million Sl3.5 million Storm Water $1.0 million $12.I million Solid Waste $2.3 million $4.9 million Airport Sl.0 million S3.0million Electric Enterprise Fund Balance ... It is the policy of LP&L lo maintain appropriable net assets set by the City Cbarter. The LP&L Governance Ordinance was amended in December of 2006 to include, among other things, changes to the requirements regarding the reserve funds LP&L maintains. As amended, the LP&:L Govenwice Ordinance requires the Electric Utility Board to (i) maintain sufficient operating cash to satisfy all current a«ounts payable and (ii) maintain a genenl 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 lhc previous f~I year or SSO million dollars. This gcnenl reserve lurid sball be used for operational purposes, rate stabilization and for meeting the electric utility demand of any rapid or unforeseen increase in residential and/or commen:ial development. According to audited numbers for FY 2006, the total target net assets by ordinance and CWTenl appropriable net assets for LP&L are as follows: Enttmrise Fund LP&L Target Net Assets by Policy $50.0 million • Based on Electric Utilities Board discretion. Al!promisble Net Assets• $25.3 million Enterprise Fund &,,em,es ••.. It is the policy of the Chy lhat each of the Eleetric, Waler, Solid Waste and Sewer funds be operated in a manner lhat results in self sufficiency, without the need for additional monetary transfei-s from other funds (although the Electric System received transfers from the General Fund during FY 2003). Such self sufficiency is to be obtained through the rates, fees and ehaiges of each of these enterprise funds. For purposes of determining self sufficiency, cost recovery for each enterprise fund includes direct operating and maintenance expense, as well as indirect cost recovery, in-lieu of transfers to the General Fund for property and franchise tax payments, capital expenditures and debt service payments, wh= appropriate. Rate increases may be <:ODSidered in future budgets as costs may wamnt, including specifically the costs related to fllel charges that may affect LP&L and lhe cost of providing service. Debt Service Fund Balance ... A reasonable debt service fund balance is maintained in order to compensate for unex~ted contingencies. 40 Budgeuirv Procedures ... The City follows these procedures in establishing operating budgeis: I ) Prior to Augusl I, the Cily Man ager submits lO the City Council a proposed operating budget for lhe fiscal year commencing lhe following October I. The operating budget includes proposed expenditures and the means of financing them. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to October I the budget is legally enacted through passage of an ordinance. 4) The City Manager is authorized 10 transfer budgeted amounts between accounlS below the department level. Any lr.lnsfer of funds between depanments or higher level are presented to the City Council for approval by ordinance before tltc funds are transferred or e~pended. Expenditures may not legally exceed budgeted appropriations al the fund level. 5) Formal budgetary integration is employed as a management concrol device during lhe year for the Convention and Tourism, Criminal lnvesligation, and Capital Projcds Funds. Budgets are adopted on an annual basis. Formal budgetary inlegration is not employed for Debt Service funds because effective budgetary contr0\ is alternatively achieved through general obligation bond indenture and Oilier contract provisions. 6) The Budget for lhe General Fund is adopted on a basis consistent with generally accepted accounting principles. 7) Appropriations for the General Fund lapse at year-<nd. Unencwnbered balances for the Capital Projects Funds continue as authority for subsequent period expenditures. 8) Budgetary comparison is presented for lhe General Fund in the combined financial slatement section of the Comprehensive Annual Financial Report The City has received the Distinguished Budget Presentation Award from lhc GFOA for the following budge I years beginning October I , 1983-8 8 and 1990-06. Insurance and Risk Manaeemenl ..• The City is self-insured for public entity liability and health benefits coverage. Risk ma1Jagement purchases a $10,000,000 excess insurance policy for liability claims in excess of $500,000, per occurrence. Airport liability insurance and workers' compensation is insured under guaranteed cost policies. The Health Benefits are covered by a self insured program with a $18,845,756 cap and a $175,000 individual cap. The City maintains insurance policies with large deductibles for fire and extended propeny 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 10 this fund based upon estimated payments for claim losses. Al September 30, 2006 the total Net Assets of these insurance funds were as follows: Self-insurance-health ($198,884)• Self-insurance-risk management $3,397,295 • Unaudited net assets in the self insurance health fund as of September 30, 2007 are $3,837,330. The positive fund balance is a result of savings realized from a change in lhird party administtators and networlc beginning January I , 2007. The City obtains an actuarial study of its risk management fund (the MRisk Fund") every year. In FY 2005, an actuarial study was conducted that considered the types of insurance protection obtained by the City, the loss exposure and loss history, and claims being paid or reserved that are not covered by insurance. The 2005 actuarial review recommended lhat the liabilities of lhe Risk Fund be increased to $6,479,000 from $6,437,000 10 the minimum Cllpected confideru;e level of the Government Accounting Standard Board Statement Number IO ("GASB IO"), which requires maintenance of risk management assets al a level representing at least a 50% confidence level that all liabilities, if presented for payment immediately, could be paid. The Risi:: Fund has net assets restricted for insurance claims of $1,688,000 over the recommended funding level. Given the risk net assets balance, the City exceeds the minimum OASB 10 requirement. INVESTMENTS The City invests its invest.able funds in investments authori2.ed by Texas law, including specifically lhe Public Funds lnvestmeril Act (Chapter 2256, Texas Government Code, and referred to herein as the ~PFIA j ; in accordance with investment policies approved by the City Council of the City. Both slate law and the City's investment policies an: subject to change. LEGAL INVESTMENTS Under Teus Jaw, the Cily is authorized to invest in (I) obligations, including lettm of credit, of the United States or ii$ agencies and instrumentalities, (2) direct obligations of the State ofTexas or its agencies and instrumentalities, (3) co\lateralized mortgage obligations directly issued by a federal agency or inslrumenlality of the United States, the underlying security fur which is guaranteed by an agency or instrumentality of the United States, (4) olhet-obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and cn:dit of, lhe State of Texas or the United States or their respective agencies and instrumentalities, (S) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating finn not 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 tile Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are seeurtd as to principal by obligations described in lhe clauses (I) lhroogh (6) or in any other manner and amount provided by law for Cicy deposits, (8) fully collateralized repun:hase agreements that have a defined termination date, are fully secured by obligations described in clause (I), and are placed through a prima,y government securilies dealer or a financial inslitution doing business in !he State of Texas, (9) bankers' acceptances with the remaining term of 2 70 days or less, i r the shon-1erm obligations of the acoepting bank 41 < or ies parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized coot rating agency, (10) commercial paper that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally =ognized credit rating agencies or (b) one nalionally recognized credil rating agency if the paper is fully seeured by an irrevocable letter of credit issued by a U.S. or slate 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 less and include in their investment objectives the maintenance of a stable net asset value of SI for each share, ( J 2) no-load murual funds registered with the Securities and Exchange Commission that: have an average weighted marurity of less than two years; invests exclusively in obligations described in the preceding clauses; and are continuously rated as to investment quality by at least one nationally recognized investment rating finn of not less than AAA or its equivalcnl, and ( 13) guaranteed investment conU'aCCs secured by obligations of the United Stales of' America or i Is agencies and i nslrumenta!ities, other than the prohibited obligations described in the next succeeding paragraph. The City may invest in such obligations directly or through government investment pools 1hat invesl solely in such obligations provided Iha! the pools are rated no lower than AAA or AAAm or an equivalent by al least one nationally recognized rating service. The City is specifically prohibited from investing in: (I) obligalions whose payment represents the coupon paymentS on the outstanding prin<:ipal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) co\la1eralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a ma rte et index. Governmental bodies in the State such as the City are authorized to implement securities lending programs if: (i) the securities loaned under the program are collateralized, a loan made under the program allows for tenn inalion at any time and a loan made under the program is either secured by (a) obligations that are described in clauses ( l ) through ( 6) or the first paragraph under this subcaption, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating finn not less than "A~ or its equivalent, or ( c) cash invested in obligations that are described in clauses (I) through (6) and (10) through (12) of the first paragraph under this subcaption, or an authorized investment pool; (ii) securities held as collateral under a Joan are pledged tO the governmental body, held in the name of the governmental body and deposited at the lime the investment is made with the City or a third party designated by the City; (iii) a loan made under lhe program is placed tbrough either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less. INVESTMENT FOLICIES Under Texas law, the City is required to invest its funds under wrillen investment policies that primarily emphasize safety of principal and liquidity; lhat address investment diversification, yield, maturity, and the quality and capability of inveslment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups. All City funds must be invested consistent with a foro1ally adopted "Investment Strategy Statemenr that specifically addresses each funds' investment. Each Investment Strategy Statement win describe its objectives concerning: (I) suitability of invesbneot type; (2) preservation and safety of principal; (3) liquidity; ( 4) marlcetability of each investment; (5) di veni fication of the ponfolio; 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 Ille person's own affairs, not for speculation, btll for investmenl, wnsidering the probable safety of capital-and the probable income 10 be derived." At least quarterly lhe investment officen of lhe City shall submit an investment report detailing: (I ) the investment position of the City; (2) that all investment officers jointly prepared and signed the report; (3) the beginning marlcet value. any additions and changes lo market value and lhe ending value of each pooled fund group; (4) lhe book value and marltei value of each separaicly listed asset at the beginning and end of lhe reporting period; (5) the maturity date of each separately invested assei; (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 lo; (a) adopted invcsbnent strategy statements and (b) state law. No pem>n may invest City funds without express written authority from the City Council. ADDmONAL PROVISIONS Under Texas law, the City is additionally required to: (I) annually review its adopted policies and strategies; (2) require any inveslment officers' with personal business relationships or relatives with !inns seeking 10 sell securities to th!= entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of Jinns sed.ing 10 sell securities 10 the City to; (a) receive and review the City's investment policy, (b) acknowledge that rnsonable controls and procedures have been implemented to preclude imprudenl investment aclivities, and ( c) deliver a written statement attesting to these requirements; (4) perfonn an annual audit of the management controls on investments and adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) n:slrict reverse repurchase agreements to 1101 more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repun:hase agreement; (7) restrict its investment in mutual funds in the aggregate to no more than 15 percenl of iCs monthly average fund balance, excluding bond proceeds and reserves Estimated Fair Book Value Market Value and Other funds held for debt service, and to invest no portion of bond proceeds, reserves and funds held for debt service, in mutual funds; and (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculalion, and advisory board requirements. 42 TABLIIS-CURRENTINVESTMENTS As of Sep I ember JO, 2007, lhe City's investable funds were invested in the rollowing categories: Book Value Estimated Market Value"' United Slates Agency Obligations Money Markel Mullllll Funds "' Local Govemmcnt Investment Pools'" Par Value s 11s,21 ~.ooo 44,014,150 131,428,024 S 293,661,174 Value S 117,673,754 44,014,150 131,428,024 S 293,115,928 %ofTotal Book Value 40.15% 15.02% 44.84% 100.00% Value S I !8,04S,822 44,014,150 131,428,024 $ 293,487,996 ¾ofToCal Market Value 40.22% 15.00% 44.78% 100.00% c,\ Markel prices are obiained from Advent's interlace wi&h FT lnlCnletivc Data. No fimds are invcsled in mortgage backed securities. The City holds all investments IO manzrity which mini mius the risk of mmcct price volatility. I"> Money Market Fundsaz.: held ol Wells Fargo Bank, Texas N.A. ~) ~I govemn"rmt inw:strnc:nt pools consist of entities whose inves!menl objeclives are p<eseWJtion a,,d safety of priDCipal, liquidity ar>d yield. Tbc pools seek to maintain a $1.00 value per share as n:quired by the Tens Public Funds Investment Ae1. TAX MATTERS TAX EXEMffiON In lhe opinion of Vinson & Elkins L.LP., Bond Counsel, (i) interest on lhe CertificaleS is excludable from giuss income for federal income lax purposes under existing law and (ii) interest on lhe Certificates is noc subject to the alternative minimwn tax on individuals and corpora.lions, except as described below in the discussion regarding lhe adjusted current earnings adjusiment for corporations. The Internal Revenue Code of 1986, as amended (the "Code"), imposes a nwnber of requirements that must be satisfied for interest on state or local obligations, such as the Cenificates, to be excludablc from gross income for federal inoome tax purposes. These requiremenis include 1 imitations on the use of bond proceeds and the source of repayment of bonds., limitations on the investment of bond proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of bond proceeds be paid periodically to the United States and a requirement that the issuer file an infonnation report with the lntemal Revenue Service. The City has covenanted in the Ordinance that it will comply wilh these requirements. Bond Counsel's opinion will assume continuing compliance with the covenants of the Ordinance pertaining to !hose sections of the Code Iha! affect lhe exclusion from gross income of interest on the Certi fie ates for federal income tax purposes and, in addition, will rely on representations by the City, the City's Financial Advisor and the Undc:rwritas with respect to matten solely within the knowledge of lhe City, the City's Financial Advisor and the Underwriters, respe,;:tively, which Bond Counsel has not independently verified. If the City should fail to comply with the covenants in the Ordinance or if the foregoing representations should be delernlined to be inaccurate or incomplele, interest on lbe Certi.licates could become taxable from lhe date of delivery of lhe Certificates, reganlless of lhe date on which the event causing Sllch taxability occurs. The Cede also imposes a 20% alternative minimum tax on the ~altemative minimum laxable income" of a COl)IOration if the amounl of such alternative minimwn tax is greater than the amount of the c:oiporation's regular income tax. Generally, .the alternative minimwn taxable income of a c:orporation (other than any S corporation, regulated investmenl oompany. REIT, REMIC or F ASIT), includes 75% of the amount by which ii$ "adjusted current earnings" exceeds its Olher "alteroalive minimwn taxable income." Because inlefest on tax-exempt obligations, such as lhe Certificates, is included in a corporation's "adjusted current earnings," ownmhip of lhe Certificates c:ould s1.1bjecl a co,poration to alternative minimum tax consequences. Except as stated above, Bond Counsel will express no opinion as to any federal, slate or local lax consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or disposition of, the Certificates. Bond Counsel's opinions are based on existing law, which is subject lo change. Such opiniOTtS are further based on Bond Counsel's knowledge of facts as of the date !hereof. Bond Counsel assumes no duty lo update or supplement its opinions IO reflect 11ny faclS or cimunstances that may thereafter come to Bond Counsel's attention or to reflecl any changes in any law that may !hereafter occur or become effecti vc. Moreover. Bond Counsel• s opinions are not a guarantee of result and are not binding on lhe lntemal Revenue Service (the "Service"); rather, such opinions repn:senl Bond Counsel's legal judgment based upon its review of existing \aw and in reliance upon the representations and covenan!S referenced above that it deems relevant to such opinions. The Service has an ongoing audit pro~ 10 determine compliance with mies that relate 10 whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whelher or not the Service will commence an audit of the Certificates. If an audit is ~. in accordance wilh its current published procedures the Service is likely to treat the Cily as lhe w:payer and the Owneis may not have a right IO participate in such audil. Public awareness of any future audit of the Certificates could adversely affect the value and liquidity of lhe Certificates during tile pendency of the audit regudless of the ultimate outcome of the audit ADDfflONAL FEDERAL INCOME TAX CONSIDERATIONS Collatenl Tax Consequences Prospective purchasers of the Cenificates should be aware that the owneffllip of tax exempt obligations may result in collateral federal income tax consequences to financial institutions, life insurnnce and property and casualty insurance companies, cenain S 43 ( < ( ( ( r ' 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 lo purchase or carry lax exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempl obligations and individuals otherwise qualifying for Che earned income credit. In additiori, certain foreign corporation.s doing business in the United States may be subjec1 to the .. branch profits tax" on their effectively connected earnings and profits, including tax exempt irilerest such as interest on lhe Certificates. These categories of prospective purchasers should consult lheir own tax advisors as to the applicability of these consequences. Prospective purchasers of lhe Certificates should also be aware that, under lhe Code, taxpayers are required to report on lheir returns the amount of tax-exempt interest, such as interest on the Certificates, received or accrued during the year. Tax Accounting Treatment of Original Issue Premium The issue price of all or a portion of the Certificates may exceed the stated redemption price payable at maturity of such Certificates. Such Certificates ( the ··Premium Certificates") are considered for federal income tax purposes to have "bond premium" equal to the amount of such excess. The basis of a Premium Certificate in the hands of an initial owner is reduced by lhe amount of such excess that is amortized during the period such initial owner holds such Pn:mium Certificate in detennining gain or loss for federal income tax purposes. This reduction in basis will increase the amount of any gain or decrease the amount of any loss recognized for federal income tax puiposes ori the sale or other taxable disposition of a Pre mi um Ceni ficate by the initial owner. No corresponding deduction is allowed for federal income tax purposes for the reductiori in basis resulting from amortizable bond premium. The amount of bond premium on a Premium Certificate that is amortizable each year ( or shorter period in the even I of a sale or disposition of a. Premium Certificate) is detennined using the yield to maturity on the Pnlmiwn Certificate based on the initial offering price of such Certificate. The federal income tax consequences of the purchase, ownership and redemption, sale or other disposition of Premium Certificates that are not purchased in the initial offering at lhe initial offering price may be detennined according to rules that differ from those described above. All owners of Premium Certificates should con.suit their own tax advisors with n:spec:t to the determination for federal, state., and local income tax purposes of amorti:ted bond pmnium upon the redemption. sale or olhei- disposirion of a Premium Certificate and with respect to lhe federal, state, local. and foreign tax consequences of the purchase, ownership, and sale, redemption or other disposition of such Premium Certificates. OTHER INFORMATION RATINGS Upon the issuance of the Policy by Financial Security, the Certificates shall be rated MAaa" by Moody's Investors Service. Inc. ("Moody's''). "AAA" by Stmdard & Poor's Ratings Services, a Division of The McGraw•Hill Companies, Inc. ("S&P") and "AAA" by Fitch Ratings ("Fitch"). The City's underlying ratings on its presently outstanding general obligation debt are "Aa3" by Moody's, "AA" by S&P and "AA" by Fitch. The City also has issues outstanding which are rated "Aaa" by Moody's," AAA" by S&P and "AAA" by Filch through insurance by various commercial insurance companies. An explanation of the significance of such ratings may be obtained from the company furnishing Che rating. T,be 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 lime or that they will not be revised downward or withdrawn entirely by any or alleither or both of such.rating companies, ifin the judgment of any or al!either or both companies, circumstances so wanant. Any such dowriward revision or wilhdrawal of such ratings may have an adverse effeet on lhe marlcet price of the Certificates. Financial Guaranty Industry-Recent Eveo1s Moody's, S&P and Ficch (collectively referred to herein as the "Rating Agencies'') h.ave each released statements on the health of the financial guaranty industry that cite financial guarantors' exposure to subprime mortgage risk as an area of stress for lhe financial guaranty industry. In various releases, the Ratings Agencies have each outlined the processes that they intend to follow in evaluating the effect of this risk on their respecli ve ratings of financial guarantors. For some financial guarantors, the ~It of such evaluations could be a rating affirmation, a change in niting outlook. a review for downgrade, or a downgrade. Potential investors are directed to the Rating Agencies for additional infonnation on their respective evaluations of the financial guar.mry industry and individual financial guarantors. In a November 5, 2007 press release, Fitch stated lhat there was a ~minimal probabilityff that Financial Security may experience erosion of its capital cushion under Fitch's updated stress analysis and that "due lo minimal SF COO exposure and [aJ strong initial capital cushion. Fitch anticipates no capital or rating issues resulting lrom its updated capital review of Financial Security." On December 14, 2007, Moody's affirmed the "Aaa" rating of Financial Security with a stable outlook. On January 17, 2008, S&P affinned the ~AAA" rating of Financial Security with a stable outlook. LITIGATION The City is involved in various legal proceedings related to alleged pcr.;onal and propeny damages, breach of conU'3et and civil rights cases, some of which involve claims against the City that exceed $500,000. State law limits municipal liability for personal injury at $250,000/$500,000 and property damage at $100,000 per claim. The following represents the significant litigation against the City at this time. The City's insurance coverage, if available, contains either a $250,000 seJf.insured re1en1ion or a $500,000 self.insured retention depending on the dale of the occurrence. 44 The City has been sued by a contractor who was not awarded the bid on a portion of the stonnwater drainage project. The conlraclor has alleged violations of the state bid statute and a violation of Section 1983. The plaintiffs look a nonsuit in state court and re-filed the case in federal court. 1be federal court dismissed the contractor's Section 1983 claims, and the contractor filed a Notice of Appeal The Fifth Circuit court of appeals reversed the District Court and the Dis1ric1 Court has reinstated lhe federal and state claims. The ease is set for trial in May 2008. The City Attorney believes lhere is insurance coverage for the Section 1983 claim. although lhere 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 camer.i. was confiscated by the police while the individual was pholographing a children's basketball game. The ma lier 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 10 the trial court. Plaintiff is not seeking monetuy damages except for attorney• s fees. The Ciiy 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 lhe plaintiffs teenage daughler and injuries to his son from an automobile accident with the police officer. The plaintiff alleges that !he officer was operating the vehicle in a negligent manner and was speeding at the time of the automobile collision. The defendanlS have asserted that the driver oflhe vehicle c;anying the plaintiff's children was negligent in failing 10 yield the right· of-way to the police officer. The City filed a motion for summary judgment which was granted based on the facl the plaintiff did not file a claim with the City. The Cowt of Appeals reversed this decision and remanded the case back for lrial. The City has appealed lhe 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 fonner police offtcer have been sued by a plaintiff as a result of allegations of inappropriale sexual conduct an« a police stop by the police officer. The officer filed a motion to dismiss under the Tort Claims Act citing provisions holding that the plaintiff cannol sue both the entity and the individual officer under the acl, and the officer was dismissed from the case. The City filed a motion for summaJY judgment, which was granted and the plaintiff appealed the decision. The Appellate Court affirmed the judgment for the City but remanded the case against the police officer. The City Attorney is of the opinion that insurance is available for the City. 1be City and the insurance company have denied coverage to lhe offic;er. Plaintiffs have sued the City and a police officer and Taser lnternalional as a result of an incident where a police officer tased a citizen while making an arrest. The citizen subsequently died. The City filed a plea to the jurisdiction which was denied and the City appealed the trial courts denial of the plea. The Appellate Court also ruled in favor of the Plaintiff. The City has appealed this decision to the Texas Suprmie Court. A federal cause of action under Section 1983 has been filed alleging federal civil rights violations involving the same facts. Trial is set in the federal case in May 2008. The City Attorney is of the opinion that insurance is available for the claims. The City and a police officer have been sued by an individual who was tased during a lraffic stop. Toe plaintiff has alleged violation of his ci vii rights, as well as, violations Wider the Ton Claims Act. The City Attorney is of the opinion that insurance is available and that there are no significant injuries to the plaintiff. The city has been sued by ERAF Corporation alleging the ciiy has wrongfully deuied them a pennit to operate a sel!.ually oriented business. Plaintiff has asked the court to dismiss the case with prejudice. The City has been sued by Northridge Homeowners Association and Templeton Mongage Coiporation seeking a declaration of rights as to various property interests at Lake Alan Henry. At this time, Plaintiffs are only seeking attorney's fees as compensation, though Ibis could end up in the six figure range. A former employee sued the Ciiy in October 2007 for wrongful tetmination. While the case is slill in the early stages of development. the City, at this time, does not believe there is a strong likelihood of recovery. The City believes there is insurance covenige in this matter. The City intends lo vigorously defend itself on all claims, allhough no 3SSllf3l1CC can be given thal the City will prevail in all cases. However, the City Attorney and City management are of the view that its a"ailable sources for payment of any such claims, which include insw-ance policies and City reserves for sdf iD.SIIJ'Cd claims, are adequate to pay any presently foreseeable damages (see "FINANCIAL POLICIES -Insurance and Risk Management'"). On the date of delivery of lhe Certificates to lhe Underwriters, the City will execute and deliver 10 the Underwriters a certificate to the effect that, except as disclosed herein, no significant litigation of any nature has been filed Of is pending, as of that date, to restrain or enjoin the issuance or delivery of the Certificates or which would affect the provisions for their payment or securicy or in any manner question the validity of the Certificates. INVESTIGATIONS RELATING TO CITY'S HEALTH INSURANCE ADMINISTRATOR J n 2006, the City hi,ed an ow side independent auditing company, Benefit Pbn Partners, a California company, -(the "Auditor''• to conduct an audil of its contract (the -Administration Contract") wilh its then Cllmnt health illSUflnCe administrator, American Administrative Group, Inc. ("AAG;. The Administration Conlracl provided for AAG's administration of all City employee claims on the City's self.insured health insurance. The Auditor foond numerous possible overcharges and enors by AAG during the term of the Administration Contract, including overchatges possibly arising from unauthorized oommissions taken by AAG, 45 < < and possible payments to AAG by phannacies as rebates. The outside Auditor estimated the aforementioned erron and overcharges to be appro•imately $2,000,000. The Adminislration Contract tenninated by its own tcnns in December 2006 and AAG bas ceased to administer any cl~ms for the City. The City bas hired another third party administrator to administer the nm-out claims which aocrued prior to December 2006. The City also selected Blue Cross Blue Shield to be lheCity's new health insurance administrator beginning January 2007. In March 2007, the City tiled an application with the State district court to compel AAG to preserve and provide documentation relating to the Administn1ion Contract and claims submit~ by City employees during the tam o( the Administr2tion Contract. It is the inlent of the City to utilize such doc;umentation to complete the audit by Benefit Plan Partners of its contraet with AAG 10 determine whether any further overcharges have occurred. The City is aware of federal authorities investigating matters relating to MG and the Administntlon Contract, including investigations conducted by the Federal Bureau of Investigation. No subpoenas at this ti me have been directed at or issued to lhe City in regards to the investigations involving AAG or the Admmistration Contract. REG1STRATION AND QUALIFICATJON OF CERTIFICATES FOR SALE The sale of the Cenilicates has not been registered under the Federal s«wities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Certificates have not been qualified under the Securities Ml of Texas in reliance upon various exemptions contained therein; DCK have the Certificates been qualified under the securities acu or any jurisdiction. The City assumes no raponsibility for qualification of the Certificates under the securities laws of any jumdiction in which the Certificates may be sold, assigned, pledged, hypothccalcd or otherwise transfened. This disclai~ of responsibility for qualification for sate or other disposition of the Certificates shall not be construed as an interpretation of any kind with regard to the availability of any C/temption from securities registration provisions. LEGAL INVESTMENTS AND ELIGmILITY TO SECURE PUBUC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Certificates are negoliable instruments governed by Cbaptcr 8, Texas Business and Commerce Code, and are legal and authoriud invesuncnts for insurance companies, fiduciaries, and lrustees, and for the sinking funds of mWlicipalilies or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Certificates by mWlicipalilies or other political subdivisions or public agencies of the State of Texas, the PFJA, requires !hlll the Certificates be assigned a rating of"A" or its equivalent as lo investment quality by a national rating agcncy. See "OTHER INFORMATION• RATINGS" herein. In addition, various provisions of the Tew. Finance Code provide thal, subject to a pradent investor stAndard, the Certificales are legal investments for state banks, savings banks. tJUSI <:ompanies with at capital of one million dollars or more, and savings and loan associations. The Certificates are eligible to secure deposits of any public funds of the State, its age11eies, and its political subdivisions, and are legal security for those deposits tO the exteru of their marlcet value. No review by lhe City bas been made of the Jaws in other slates to determine whether the Certificates are legal investments fo, various institutions in those stale$. LEGAL MATTERS The delivery oflhc Certificates is subject IO the approval of the Attorney General ofTexa.s IO the effect lhat such Certificates are valid and legally binding obligations of the City payable from sow-ces and in the manner clcscrihecl herein and in the Ordinance and the approving legal opinion of Bond Counsel. The fonn of Bond Counsel's opinion is atcacbed hereto in Appendix B. The legal fee to be paid Borul Counsel for services rendered in connection with the issuance oflhc Certificates is contingent upon the sale and deliVCI)' o(thc Certificates. The legal opinion of Bond Counsel will ~y the Certificates depmiled with DTC or will be printed on lhe defmitive Certificates in the event of the discontinuance of the Book-Entry-Only System. Cei1ain legal matters will be passed upon for the Underwriters by McCall, Pukhurst & Horton L.L.P ., Dallas, Texas, Counsel for the Underwriters. The legal fee of such finn is eontingcnt upon the sale and delivery of the Certificates. Bond Counsel was enpged by, and only represents, the City. Except a.s noted below, Bond Counsel did not take part in the preparation of the Official Statement, and ~uch finn has not assumed any responsibility with respect thereto or undertalc:en independently to verify 3Jly of the infonnation contained hemn except that in its ~ty as Bond Counsel, such firm has reviewed the informaiion appearing in this Official Statement 1mder the captions '°THE CERTIFICATES"' (excl11Sive of the infonnation under the subeaptions "BOOK-ENTRY-ONLY SYSTEM" and "USE OF PROCEEDS") and "TAX MATTERS" and under the subcaptions uLEGAL MATTERS," ~LEGAL INVESTMENTS AND EUGIBIUTY TO SECURE PUBLIC FUNDS IN TEXAS" and "CONTimJJNG DISCLOSURE OF INFORMATION" (ei1cep1 for the subsection uComplianoe with Prior Undertakings") wldet' 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 inslnunents therein described and such information conforms lo the Ordinance. The legal opiruons to be delivered concurrently with the delivery of the Cc:rtif1<:1tes ex,rcss the professional judgnlent of the attorneys rendering the opinions as to tlte legal issues ei1plicitly addfCS.Sed therein. ln rendering a legal opinion, the attomey 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 lo the transaction, nor doe, the rendering of an opinion guarantee the oulcome of any legal dispute that may a.rise out of the transaction. 46 CONTINUING DISCLOSURE OF INFORMA TJON In the Ordinance lhe City has made lhe following agreement for lhe benefit of the holders and beneficial owner.; of lhe Certificates. The City is required to observe the agreement for so long as it remains obligated lo advance funds to pay the Cenificates. Under the agreement, the City wiil be obligated to provide certain updaled financial in fonnation and operating data annually, and limely notice of specified material events, to certain information vendors. This information wi II be available to securities brokCJS and others who subscribe to receive the information from the vendor.;. Anaual Repom The City will provide certain updated financial information and operating data to certain infonnation vendors annually. The information IO be updated in eludes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statemenl under Tables numbered I through 6 and 8A through I.Sand in.Appendix A. The City will update and provide this information within sill months afier the end of each fiscal year. The City will provide the updated information to each nationally recognized municipal serurities information repository ("NRMSIR ") approved by the stalT of the United States Securities and fachange Commission ('"SEC") and IO any stale infonnation depositoiy ('"SID") that is designated and approved by the State of Texas and by the SEC staff. The City may provide updated infonnation in full text or may incorporate by reference certain other publicly available docwnents, as pemiitted by SEC Rule 1 Sc2-12 (the "Rule"). The updated information will include audited financial statements, if the City commissions an audit and it is completed by the req11ired time. If audited financial statements are not available by the required time, tbe City will provid,e unaudited financial information and operaling<data which is customarily prepared by lhe City by lhe required time, and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in aocordance with the accounting principles described in Appendi:it A or such other accounting principles as the City may be required to employ from time to lime pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by Ma,ch 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Te..as (the "MAC") has been designated by the State of Te..as and approved by lhe SEC staff as a qualified SID. The address of the MAC is 600 West 8th Street, P.O. Box 2177, Ausrin, Texas 78763-2177, and its telephone number is 512/476-6947. The MAC has also received SEC approval to operate, and has begun to operate, a "central post office" for infonnation tilings 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 lo the NRMS1Rs and the .appropriate SID for filing. This central post office can be accessed and utilized al www.DisclosureUSA.org (~DisclosureUSA "). The City may utilize DisclosureUSA for lhe filing of infonnation relating to the Certificates. Material Event Notices The City will also provide timely notices of cenain events to cerlain infonnation vendors. The City will provide notice of any of lhe following events with respect to the Certificates, if such event is material to a decision to purchase or sell Certificates: ( I ) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reDecting financial difficulties; (4) unscheduled draws on credit enhancements reDeeting financial difficulties; (S) substitution of credit or liquidity provider.;, or their failure to perfonn; (6) adverse iax opinions; (7) modifications to righls of holders of the Certificates; (8) early redemption of the Certificates; (9) defeasances; ( IO) release, subslitution, or sale of property secwing repayment of the Certi licates; and (I I) rating changes. (Neither the Certificates nor Ordinance make any provision for debt service reserves or liquidity enhancemenL) In .addition, the City will provide timely notice of any failure by lhe City to provide information, data, or financial statements in accordance with its agreement described abo.-e under u Annual Reports." The City will provide each notice described in thu; paragraph to lhc SID and lo either each NRMSIR or the Municipal Seellrities Rulemaking Board ("MSRB"). Availability oflaformatioa From NRMSIRS and SID The City has agreed lo provide lhe foregoing infonnalion only to NRMSIRs, lhe MSRB and the SID, as described above. The information will be avrulable to holders of Certificates only i r lhc holdets comply with lhe procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. Limitations ud Ameadments The City has agreed to update information and to provide notices or material events only as described above. The City has not agreed 10 provide other information lhal may be relevant or material to a complete presentation of its fmancial TCSU]ts of operations, condition, or prospects or agreed to update any infonnation that is provided. except as described above. The City male es no representation or w.ammty concerning such information or concerning its usefulness IO a decision to invest in or sell Certificates at any future date. The City disclaims any coniractual or lort liability for damages resulting in whole or in ~ from any breach of its continuing disclosure agreement or from any m.tement made pursuant to its agreement, although hold= of Certificates may seek a writ of mandamus lo compel the City IO comply wi 1h its agreemenl. lbe City may amend its continuing disclosure agreement from lime IO time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, OT a change in the identity, nature, status. or type of operations of the City, if (i) the agreeme,it, as amended. would have permitted an underwriter to purchase or sell Certificates, in the offering descn'bed herein 47 < . ( in compliance with the Rule, talcing into account any amendmenlS or interpretations or the Rule to the date of such amendment, as well as such changed circumstaoces, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Certificates consent to the amendment or (b) any peiwn unaffiliated with the City (such as nationally recognized bond counsel) detennines that the amendment will not materially impair the interests of the holders and beneficial owners of the Certificates. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are in valid, but only if and to the extent that the provisions of th is sentence wou Id not prevent an underwriter from lawfully purchasing or selling the Certificates in the primary offering of such Certificates. If the City so amends the agreement, it bas agr«d to include with the next financial infomiation and operating data provided in accordance with its agreement described above under ~Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating dala so provided. Compliance with Prior Undertakings The City became obligated to file annual reports and financial siatements with the SID and each NRMSIR in an offering that took place in 1997. All of the City's general obligation debt reports and financial slatements were timely filed with both the SID and each NRMSIR; however, due to an administrative oversight, the City filed its fiscal year end 1999, 2000, and 2001 electric and power revenue debt reports late to lhe SID and each NRMSIR. The financial information has since been filed, as well as a notice of late filing. The City has implemented procedures lo ensure timely filing of all future financial information. Under previous continuing disclosure agreements made in connection with LP&L revenue bonds, the City committed to make prompt filings with the SID and eilher each NRMSIR or the MSRB upon the occurrence of any "non-payment related defaults." The City•s FY 2003 audited financial statements were not available until mid-September 2004. Therefore, when the City made its annual diselosun filing with the SID and NRMSIRs in March 2004, it filed unaudited financial statements in accordance wilh its undertaking. Several references in that filing, including in the unaudited MD&A, in notes to those statements and in the statistical tables, reported that for FY 2003 LP&L had failed to meet its rate covenant (see "DISCUSSION OF RECENT FTNANOAL AND MANAGEMENT EVENTS -SEPTEMBER 30, 2003 FINANCIAL RESULTS -The Electric fund"). Because lhere was an uncertainty as to an amount by which the rare covenant would fai I to be met. which was not finally determined until the audited financials were released in September 2004 ( although the City had a reasonable belief prior to that time that the rate covenant had nor been met), the City waited until September 2004 to make its event filing of non-compliance with its LP&L rate covenant, FINANCIAL ADVISOR RBC Capital MarkelS is employed as Financial Ad visor to the City in connection with the issuanee of the Certificates. RBC Capital Markets is the name under which RBC Dain Rauscher Inc., a broker-dealer, conducts investment banking b11Siness. The Financial Advisor's fee for services rendered with respect to the sale of the Certificates is contingent upon the issuance and delivery of the Certificates. RBC Capital Markets, in its capacity as Fin8ncial Advisor, does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Certificales, or the possible impact of any present, pending or fotwe actions taken by any legislative or judicial bodies. UNDERWRITING The Underwriters have agreed to purchase the Certificates, subject to cc:J1ain conditions, and has agreed to pay a pwehase price reflecting the par amount of the Certificata., plus an original issue premium of$2,851,566.50, less an Underwriteis' discount of $318,456.44, plus accrued interest. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transac1ion, but the Underwriters do not guarantee the accuracy or completeness of such infonnation. FORWARD-LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other infonnation provided by the City, that are not purely historical, are forward-looking statements, including slatements regarding the City's expectations, hopes, intentions, or sltalegies regarding the furure. 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 fotward-looking statements. The City's actual results could differ materially from those discussed in such forward-looking statements. ~ fOfWafd-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainlies relating to lhe possible invalidity of the underlying assumptions and estimates and possible changes or developments in S()Cial, economic, business, indUSIJY, mari.et, legal, and regulatory' ei rcwnstances and conditions and actions taken or omitted to be taken by third parties, including customers, supplim, business partnm and oompetitors, and legislative, judicial, and other govemmenral 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 ac,;urately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement wi II prove to be accurate. 48 MISCELLANEOUS The finanda\ data and Olher information concained herein have been obtained from lhe City· s records, audited financial statements and other sources whicb are believed to be reliable. There is no guarantee lhat any of the assumptions or estimaies contained herein will be realized. All of lhe summaries of the slatutes, documents and resolutions contained in lhis Official Statemcnl arc made subject to all of the provisions of such statutes, doc:umcnts and resolutions. These summaries do not purport to be complete statements of such provisions and reference is made 10 such documents for further in formation. Reference is made to original documents in all respecls. TIie Ordinance authorizing the issuance of the Certificates will also approve lhe form and C(lntent of this Official Statement, and any addenda, supplement or amendment lherelo, and authorize its further use in the reoffering of lhe Certificates by the Underwriters. ATTEST: Isl R"beg;a Ggng City Secretary City of Lubbock, Texas 49 Is/ David A. Miller Mayor City of Lubbock, Texas ( . < APPENDIX A EXCERPTS FROM ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2006 Thi.s page intentionally left blank Janwuy 3,.2007 P.O. Box 2000 • 1625 13th Street• Lubbock, TX 79457 (806) 775.3002 • Fax: (806) 775•2051 Honorable •Ml:iyor, City Council, and Citizens of Lubbock, Tcias: It is ~ith mueh pride·~ ,je ~ub111it the Com~~ensive ~\I~ ;J-'inancial RePQrt (CAFR) for tile Chy of"Lubbocl.t, Te~ f()r the fiscal year ended ~eptemJ:>er'30, 2006. The pwpose of the CA.FR is to. provi4e the :Cify Council, citizens, and other intere:ited ,parti_t,S with acourate and meAAingful infu~tkm. j:()nc:eming the financial ,ondition an~ perl'onnance. of the City. In addition, ,tS, part ~f the: ·qAFR review pro~ss; .independent ·auditors have verified that the City has presented its ~cj~ position fairly in all material respects. The ~-R i, p'~~4, Ym4 management~s ~res!'ri~Qn .l?f t4e. Citfs ~ces.. ~ i$ ~:uch, m~ement ~es f\ul rt~ponsibi1ity for the riorttpl~ and relia'bilit)i of all ·tne inf<>~ation presen~ To ensure a reasonable basis for making th~se representations, City management has established .a .comptehensive intemal, control frameW<?tk that is dC$igrie.,d both to pr.otect the, Ci¢. assets from ,oS;S. theft, or misuse and to compjle sufficient reliable infortr:mtjon for me preparaJ:ion o( .the City.$ financial statements in coof'om.Jty With g~y aooepted aoc·Quntmg. principl~ (GAAP), Because the cdst bf int~-'CQntrols should no_t otrtweig~ their benefits, the City's ~~i.ve framework of intenial oo_litrols bas been designed to proYide rell39nable, rather than abso.l\lle. assµmn~ that the. .financial statements will be free frc)m m~terial ~teine~j. As managemeni we assert that, to the best of our knowle4ge and bei(ef.• this financial repori'ti! ~mpiete and reliable in all material -respects. The Citr1~ firtan:oial statements have been audited by BK.D, LLP, a tinn of licensed ~fitd public a<:countants. :n:fo · gojll of the independent audit was ~o p.rovide· ffil&onable assurarice ~at the financial stat~eiits for the latest fJScal year are free of material misstatement. The independent aiu.lit'in~dl~ ~inin& on a test basis, eyidence supporting the amounts a;nd disclosures iri the f.i~cial statements; assessing the a-coounti.ttg prmeiples used end signifi~t estimates made by management; and evaluating the-overall financial statement presentation. The lloilorablc Mayor, City Council, Al\d Cili.%cns of the City of Lubbock, l'exas January l, 2007 independent auditor concluded that there was a reasonable basis for rendering an unqualified opinion that the City's financial statements for the ~al year ended Sep,temJ?er 30, 2006, are fairly presented in confonnity with OAAP. The independent auditor's reporl i& pres:ented as the fust component of the financial section of this ~ort. The independent 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. The standards governing Single Audit engagements require the independent auditor to report on several facets-of the granting agencies financial processes and con~ls: • Fair presentation of the fmancial statements, • Internal .Controls inv?lving the admjnistration of federal awards, and • Compliance with legal requirements. These reports are available in the City's separately issued Single Audit R.eport. GAAP require that management provide a namtiw introduction, overview, and analysis to accompany the basic financial statements in the fonn of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed t.o CQm.ple_rnent '.MD&A ajid ·shoutd l)e ~ in conjµnction with it. The City4s MD&A ~ be fo\llld immediately follo'Wing ~ ~P-~rt .ofthe it)dependent auditors. TllE CITY AND ITS ORGANizATtON Pt1l>1tlatlop 8Jid Loc!ation ~ Ciu, i~ lQ~ed in 'the northwesre,m part of the ~~ ~IIUIIQ?Uf ~:\Yll as tb,t SQ~ ,pJ~ of' Texas. The City ~_untJ1tly occupies a land area of 119.9. sp .mites ~d sezyd ~ pbP,utati~ ¢ 212,36~ (2007 ;Planning Department cstitnkted pop'1fatrpn). Lub~oc,k is· the 1l 1t1 -~it Metropolitan Statiiilcat Area (MSA) in the-State ofTelC.as and the 12• 1,argest city. l'beLubbock ¥SA · in~lu~es, Lubbock and Cl'Q$by U'lunties. (Source of unku,.g: 20~ '-eslhnates. fiom llemo"hios Now, a product of SRC) Form of Govenim~nt a.nd City Services .. • . ft Th!;l City was i1J4»tj,ora~ in 1909. The City i$ e:in;powc;a,-ed. to hwy a. property tat on QQtb ~ and personal prope_tties located within its boll{ldaries. 'It ~ ~ empowered by st!lte. st$t~ to -extend its eo~e limits by annexation, :which OCOlll'.S periodically when. deemed apprQPriale·by the Chy Council. · The d;ty has· operated tmd~ the council-manager fo.nn 0£ gevemrn~ sin~ Ull·7~ Polley~ making and legislative authority are ve:sted in a city council COX1$lsting of the ~yor and@c.-other members. Some of the City CounciJ!s respo~biliti~ ~clu~.apopting !)rdipance$, ~pptmg ~e budg«1 appointing co.t;ntnittees, and biringJhe City Ma,nig~i-. Cjty At!(>mey, amJ qty:~~- The City l\,{aoager is ~p~nsible for curying out the.~es an.d Qtdi~~es of tpe ~ity Ci>vn~'lt for ovetii~ing the 4iy .. to..day operatio~ ~f the City,.~~ fC?+ JIP~ the. be~. ¢t_,be vatj~ departments. Th~ City Council is elected .on a non~ basis. CQuncil membeti s~ four- 2 < f . \ . C ·, Honorable Mayor, City CounciL And Citizens of the City ofLubboclc, Texas January 3. 2007 year stasgered terms, with three colU)cil members elected every two Y.eafs• The mayor is elected to serve a two-year term. Six. of the councii me~bers are el~ted by 4istrict, The ~aj,or is elected at large. The City provides a full range of services including pubtic safety. the construction and maintenance of highways, streets. and othor infrastructure, solid waste services, and recreational activities and cultural events. The City also provides public utility services for electricity, water, wastewater, and storm water. Public safety includes police protection and fire protection. Police protection is provided through the Police Department• which includes, with the adoption of the FY 2006-07 Operating, 422 sworn police officers. The Fire Department operates l S fire stati~ .and l:ias ll 1 ·sworn fire fighters. · Electric service in_'4ibbock is provided by Lubb~k Pow¢. and Liglrt (LP8'L), Xcel Energy, and South Plains Blettrl.c Coopttative. LP&L i's the municipal-<,~ ele.ctt.ic ¢'0~any arid ~ 68,836 meters in Lubbock with an averag;e·daily consumption of4;2,S,9.,9.94•kWh. LP&L has 14 substations, 1,011 miles of distribution lines. and 85 miles of transinissi~ lines. Natural gas service is provided by A~o·& Energy. · Currently, Lubbock _9b_~ 75~. ~ .~sro of .i'8 ~n.$-~ ~pply ~I;!,) ~ ll!V:~ Mµnicip~ Water Al:i~W fCR¥W:N.; QRMW4 ®6lb!#~ ~e\t~ ~-~¢ ~e~t.Jt and .ground water from Roberts Cb~fy to riieet the w.at.C!li ~ds ofl.tib'.bock end th~ other 10 member citi~s ·of prud\y A. Lub.hQc"• secures .. the r~~ ts·% t'Q. 25% o{its wat~ from J~ · groundwater rights in Bailey and Lamb ~ounties. The Ci~ pro.:vides water smricc to 78,000 meters as well as the City df Shallowater,. City of R1msom_ Cawon; ~ffalo Springs Lak~ an,d Lubbock Reese Rooevelopment Authority. The capacity of' the eity ·""8:ter transmm;ion system is 81 rnillion gallons p~ -day with an av~ge utilization of 39 ~il ~tons per day. The Qo/ has 1,400 miles Qf distribution linehnd 14.6 active water w~ With ·81fl'6S acres of water J,igt.ltii. CRMWA iillo~ ·trio~ ~ 1 r ;billion ·gaH~s ofw,t~-,ti) ihi" Gitj' arltj~ly. ~· .(j~ Henry, built.by th~ Cjty in 1!»3, ls (l.()nsidered a third wat~f.~9i>,ply lot future• use. In oi:der !Qr the City to util~ \Vat~ ~ni I.alee tU3D Henry, fu~ ~trj.i~ is reg'1ired fo.r pump staff~~; a pipeline to cairy the watet io wbbock, ·and. 'a new 1ffati:nent plant The preJinuiiiry engineering• for these impt'Qy~tnen~ is now undet contract and: shQutO. be completed by eaily 2008. For the past several years, the City has been planning for ~ w~ter needs. In March 200~; the Ci~y contracted with w~crrexasl In¢. to evaluato and ~ :~mmendati~ on how ·~~ -City~ optimize ~is~:~po~~ water s11pplj~:01U~ri~f~~~; and ~Qng-~-b~s~ ·~ a rcpoit ti~ Cit, of Lfib.b.Q~ $i,lt#Jegic Water Plan. W~ejt~· tepbrted that bibbock bas adequate W!lier $UJ)ply arid will continue to no so pro~ tfuit -it ~ steps to address: its maximum day capacity Iiinitaiions; addresses its ability to ~nd readily to drpu.gbt conditil:>ns .at Lake Meredith; ~ strategically develops additional supplies giving due consideration to demand, ®st~ opportunity, and ~mp~1ing budgetary needs. ~To strategically develop additional water supplies, the City Council established the Lubbock Water Advisory Commission in July 2003, with the primary objective of developing a 100-year water suppJy plan. They have since 3 Honorable Mayor, City Council, And Citi7.ens of the City of Lubbcck, Texas January 3, 2007 achieved that object and continue to p1ay an intricate role in the City's. long-term water planning ·efforts. The City has al~ worked closely -with the Region O Planning Group in the. preparation of t!ie State Wat~ Plan that reflects Lubbock's wa~er supply needs and alternatives, CRMWA has secured an additio~ 260,000 a~ of groundwater rights in th~ Northern Panhandle. Gtound:watc;r rights now total over 300,000 acres, with an .estimated 15 million acre feet of wate.r within thou rights. Conservative proj~tiorts using cunent &~ured water rights indicate CRMW A will be able to provide groundwater supplies through existing infrastructure through 2097. Wastewawr coll~tion and treatment is provided within the city l~_its to resid~µal. co~~ial. and iiidustrial customers. The collection system consists of 960 miles of sanitary sewer ,as. f)f Janlllll'Y 1, 2006. The ·wastewater treatmeµt plant has a capacity of 31.S million gallons per #Y (permitted capacity) and an av~ge utilization of approximately 23 million gallons per day. The-peak \:\titizatio~_of the w~~ater, trratment plant ~-s 27 ipillion gaQons per~>'· the City has a contract for. final dl'Sign tQ upgrade the :wastewater treatment plant for disdwg~ qJ.lality effluent. · The City of Lubb~k's drainage is prunarity oonveyed through the City's street sys~ that discharges in..to m~te than 11 S playa lakes. the subsurface dtainage. via srorm sewer pip,es With ·c~.~e.t~·. ~nvey~ wa~ to ~o, ~,~~ttent sji;eams (8.~ater 0~ an9-YeU~~~e .Qtaw) ~~ ~tli ~~y~rge ~t th_c,;_ ':!P;~t:ceacij,-o~~ ~~~ F~rk pf~~-~UQ~ ~o.qqtti;~\fCU:k of the· ~s JUver. ·The-City's. mUQic1pal sop~e !ltonn ,SfJ!!-1.ff/C sysre.m, (¥.S4)._1$ riiade: \JP .. ~f- 1,089 Une;ir mil~ of pa.ved and _u.npaved· streets, 544 linear miles, of.paved -~~ liripa't'.~.all~ 1,188 stoan sewer i!,llets; 70 mites of sut:>sumoe st<>t$ s~er. pip~.~ d.etetttion bas~: llS plaY'_ lak~ ~ "()ne pump . station. MamtenanC1i!. of atl of the. stom>. ~eta and stte.et -clewnns was fund«\ from the .Stonn Water Fund during FY 2005 .. 06-. '· During ~ ~QS-0~ ~~ ~ fc;)cus o.f -~ ~tormwator fr:md -w~ th~ ~~~ ¢' ~e $P.µtb LuJ,bO:~ ~age Pti)j~. -?base IM~ Tt1Ull,c µii~ ~s p_roject ·renwns· ap~t~y:Oli~ year $~ Q,f s·~ed_\tle •IIXld ~11 oonnect. ~ p4ya J4e$ _duriug Phase l of tl!,e Qv6ia,U p#,j_~, Co.nstruc.tio.r,, £c)r .the_ Whl~g of 98tti S~ ~ ·$lid¢ ~~ tQ Iola Avenue began <(uiitjs ·JN '2005..().6 and, in~l~ the .~er of the;: ~th L\Jl>oock D~e Project ~ lih~ and a l'Qgianal &term ~~ ·desl8tled tQ ~ two .detentio.n. basitts .at 98th Street and Eranktow AVA The cons'ttuotion ot the drainage .channel nor.th of Andrews Parle Lake was completed durint FY 2oos .. 06. Work oontinued on a FEMA Restudy of two of the playa lake. systems .and a-new study. was und~~ to master plan the no~wcst ~t of the -city ·and to look at oth~ options {Qr flood risk fe(lm;tiop at ~ey Parle Lalce. Th,¢ o~cx fc>cus wa,s on the sub~ioQ ·of-ihe Cit.f's appli~ati~.r01'.·~ ~ P9l),µtion Pi$9barge' ~AAtj<:>n;Sys~ (1'PI)~) ~4 p~l fot:'tb.~ City'& ~ ~~tet':quality a¢tiviti~ .. CQ~J.i.aAce \Y.i~·i the Cjty':9 MS4 p.emtit ~• Q~~ w,ttb the &~~l .Protec.non Ageri¢y and oons~ts of l1 different programs t1i~f cpntinued. during the fiseal_j~. The City provide.s .garba,ge .collection 1llld dis~ _SeiYices to. 6.3,638 residential ~-ustom.ers and 2,937 commercial customers. One i:if the City's tw.o landfill sites. is designated as 'Lubb.oc,k Landfill and is a transfer station only. The 11eoond site is Lubbock'.s premier landfill .attd is· 4 ( . ( llonorable Mayor, City Caun<;iJ, And Citii.ens of the City of Lubbock. Texas January 3, 2007 designated as the West Texas Regional Dispos~l Facility, The West Texas Regional Disposal Facility open~ in 1999 and is currently the largest landfill in tlie. State of-Texas. With l,260 acres, it is e:i~cted to ~rve the region for the next 100 years. Citlbus is the public transportation provider for the-City of Lubbock and is professionally managed by McDonald Transit Associates, Jnc. Citibus provides a Fixed Roule Service, CitiAccess (paratransit system), Evening Servi.~e, and Special Services. The CitiAccess service is a cum-to-curb sen-ice for disabled tnembers of the c·onununity: The Citibus Evening Service is designed to meet the needs of both CitiAccess and fixed route passengers. 'WhQ are transit dependem, a11d who would have no other means ·of ~~rtatio.n in the ev-ening$ ifth.e Ev.~ing Set\lice was. not provided. A majority ofBveriing Service passengers work at mgbr and ~ '.tli~ seivice for n-ansportation to and from their jobs. In additiott. Citibu+r o.trffl rotLte servfoe for Teicas Tech University. The City . has a housing and comm~ty development ptopim jl;nplemented -~d administered tbrou~ funding from the Federal q,rnmunity ~lopment Bl®k: ·Orant Propm; HO'MB ·Investment· Partnership Program, and ·Emergency-Shelter ~t Program. Through ~ese sow-ees of funding. the City complet~ work on over 250 houses, ~ecrov-er '24,104 'individ~ and created 3jobs through an economic development loa1i-p~gtam. · · · The l"it also receives fundirto from the Texas O-rtm·i)nt t;fl{m,ii!i ... ·· gb;d ,~ ·. ·tu Affair&.. • Y 'J , ""Ct , . v.r,.~ ,,, . , .\ ,;"''l!l"'t"$ ,. . •. . . ':'PU-•.!: ... ', .•• ·These funds ·al~ow the city to offer ad~tio~ p~ .to tli.~ ~· ~£ f#bbb<:k-~~ thes.e ·programs, 216 households received -assistance in )'ieatlienzjlig thei:r home ·and/or making their home mQI'O energy efficient, 1.200 bO}!Sehol!is. i:ecei~ :Utility assisia'p.ce, 75. gr_adua~ from the self•sufficlency• program, and 12,000-r-esideri~ reeeiv-ed riterral 4'8Sistimce ,through ·the Infonnation and Referral Hotline. Community enrichment and cultural services· are ·a1so maJor ~grams of tire City: The City· owns and operates four libraries with ovet 391,718 vQhunt$. Tite City also o_wns and m~* 77 :park$· ~d S·7 playgro~s. Extensive rectoational f~Uitj~ :,nciuae 4 ·~ P.C?Olst 54· tennis courts, 30 baseball and SQ.ftbaU fields, s community ~nfets aµd 5 SCIQ.iof centers, To further enhance qwdity of life and to provide ·suppo1(' -to the ·tqurl:sin industq., 1}le City ~$o· operates the Civic Center (convention center), Lubboelc ·¢<,Usei:tin., :L~b~ck Auditorium for 'ihi; performing arts, the B:uddy Holly Center, and ·the. Silent Wings·~~ . . the City is responsible for the construction and maintenance of 1,015 ·miles of paved streets. The new Gateway Street Fund bY· the City Council in 2004; all~uhg 40% of tt,.e franehise,feie revenue and teleoom ijne cl,w~s to ~~._Y corri~t ~ p~~. 1]1e FY 2005-06 bµdge_t for the Gateway Street Fund mclQdes ihe widening of Milwaukee A.venue from. 3411) tQ 9&11! Street. construction of a· ·T-2 triotoughtare street bn ·&slqiii, ·from Piarucfotd to S~,, eonstructioµ-of a T•2 ~oiougbfare ·stm;t on Slide R!)ad froni. ~ 289 to Erskine, and widening Loop 289 from South of the 4111 Street interi:hange to :~µth of tbe. Clovis Road ~gt constructing a grade separation of Slide Road. and LoQp 289, widening of' Slide Road ~in. 4 Street to Loop 28~, improvements at the 41!1 Street and Loop-289 interchange; and ·the cons1ruction of the Quaker/Erskine/Loop 289 interdtange. These projeets support substantial commercial and residential development on the west side of Lubbock. 5 Honorable Mayor, City Co\lllCil, . AAd Cidzens of the City of Lubbock, Texas Jenuary 3, 2007 Other major road construction in Lubbock i~ludes construction on 98m Street .from Slide Road to Frankford Avenue and constru~on of the Marsha Sharp Freeway by the Texas Department ,of Transportation (TXDOT). This .freeway wil,l ,;un east fro~ West Loop 289 to link up with Interstate 27. The first phase of the project is completed and included widening Loop 289 from four tQ six lanes from 34th Street to Slide Road and rebuildi.ng the frontage road system under the main lanes -thr.ee lanes on each side. Jt also included building .the 50111 Street .overpass and extending 50th Street to Frankford Avenue. TXDOT awarded the bid for ·the s.econd phase of the M~ha Sharp Freeway that .began construction in May 2005. The Marsha Sharp Freeway wilt benefit Lubbock by providing a western connection to West Loop 289 en~ a more efficient flow of traffic: througnQut Lubbock. It wi_ll a~so reduce the congestion on north/south ~d east/west major arterials and pro\'.i,de faster ace~ to all points in Lubbock. specifi~ly Texas Tech l.lni~ersity, the cen~ business distri~ C!C;lucati.on centers, and medical facilities. The entire project is expected to cost $360 million 1µ1d be completed sometime after 201S. One-.0£ the ~y components: ~.Lubbock's ~r:tatipn .&):'$tem. is the Lub~k Pr~st9n Smith InterMtional Airport located :1 miles north of.i,ubbock'.s central business district on 3,-000 acres ot'land adjacent ,to Interstate 27, The akport i~ operaieci':.as a-department of the city Md includes a 220,PPQ -square (ooJ p~sengcr tcmwia) ·J;iuiiding. The' aitport has two ~cial servic.e run~ys; one 11,590 feet in length ~d ~ne 8!~:9.0 f~ !A length. , The airport'~ third generai aviation ~way is 2,86Q feet·ip lllllgth. Air~e c6lili'ol $ffl'.i~s ~hide~ 24-hour Federal Av~ A&.m.Jiistraj:iQ~ ~~~l tow~ ~.a_f\llf ~~~~in$~~' app~ac~. TJ1¢ air.po.~.~ currtntlY. sqve4 by tlµ'~ ~jQI: ·P¥Set\8~ ~_es a¢.~ ,miijot catgQ airlines baiting ov,er -80 ooinxnerili•I .flights. per~- The Ciiy of Lubbock mncxcd two areas during F,Y 200.5..(16. One of tbe areas anneXied included 95.1 acres looated north of Erskine and west of North Milwaukee that is under development~ Sbado~ Hills Estates. The other area annexed wu 66.1 ac~ S()uth of 98111 Street and wes,t of Avenue P that is: now under ~elopment'as the Sionebndge Community. The City is ~~ly. ~µn~le {pr ~ l~i!Jiy ~ ~ivi¢ servi~ :~rapOll -· ,~ economic .developu;1erit bOrpoiitiop.. bo1b of which ·~ iqlo.qe4 sepantoly Wi~ the City'~, fin~.ai ..... en~ as di59~~ly preseu~ ~i:npone.ru. µii,its. ~ditional infonnati~ 0-1 tb.C$e legally. sepvate entities Qlll'). ~.fo.1.md in 1he·notos w tbe.financiahtatements. · Anpual Badget Process The ann~ budget serv~s as th:e foundation for ~c Citys financial plannµig and control. . All Citi' ~~--111e·req~ ~o $Ubtrut-,J:QqUC$l$ ,fQrffll)pat\Qn. to Ute CUy M:anag!'t" ip 1µne of each Y¢¥· ·Th~:City ~~-g~ USe$ th~~ue/1~ ~.'~~point for:devel6ping,a.~#cf budget, 'Th~ City ·MAAt~ ~h~ pre_~ this.piw.~ ·budget to the City Council 1'.or revi~ ~fore. Augu$t ~l, ~ ·city CQuncil i~ requjr!=d tq ~ld pj.iblio hearings on the p10P,<>sed buds,~ and to idop~ a &.I ~wig.et no later than ~ten)ber -30. the close of the City's fiscal ~-Th~ appropriated bddge.t is prepared .by fund •and department. Department direct.ors are hel~. accountable for managing their department.s on ta.tal appropriation basis; Transfers of appr<>}'riEl,tio~ between funds and depittbnen~ -~uires ·the approval of the City Council. 6 HofiOrable Mayor, CityCowicil. And dtizem ~f-ttie City ofLubboclc; Texas January 3, 2007 Budget-to:-actual. comparisons are provided in this report for fue: ·0enegi1 Fund as part of the basic~:~~ts. ECONOMIC CONDITlON AND OOTLOOJC Thf!: infOJ.'IIijl_~n presented in the financial statements is perilaP§ .~ _lPl~od_ ·when i( -i~ «:!~iderep within tbe context of the tubbock's local economy. The· following information is ,J>IO'Vided to htgb:light.a broad range·ofeconomfo furees that·suppoffthe·~1ey's·opedwons. · .Local Economy ~'1~k ltU: a stable economy with histo~y .slow and ·steady gm.win, which bas-coJ,ltitj.u(id. tbro'O.gli S~tember,-2006. Lublrock~-s agm_wtutally lmed e:co~thfll.P jli~~~:o.ver .thejhi -n:r..: · ·-··· ·_ .. ~:1:-i.·: ·· •· •tmi1:es· ·the eiff',.." o"b.•.-..;..es··s· ,c c1-~.:...:.....,....,i.,..-,.,.• ~:.-.:..1,..i,.:,...:....,.....-,. · ~u~, '.W4Jl!W \lUD. -"' ~ \I: _...,._..,,__ .Y, ~ .-..y,W..~ ll,(• ~~1~~,--~ ~~p~;P.~-is Oil:~:of the most P,reductive agricultural areas itt -~ ~fi4· ~~:c lx,.,:'~,. :~~ ii% .<>f the nation's cotton crop and 43% of the state~s \&ttan, crop ·Me ptoauc.ea fij ~-in Ul~,S~ Higb Plams District. Pro'du· . ~6n m,:tM~ $.gb 'P~.,L\is.tnetis. ~~eii1td . ..J.,i~ ·.··tlioil b~ .tbr'2006 down '4~: ~~,,;..:,.._:~.:~.;~--: ;, -~111oe;i« '"><lti,.j.. ·.-,-"T"'1 .. "1""'. _JQ.li'!ll .. t.tlj_ . , .. , .. .. . . ., ... ~. . · · -~, .._~ ~.!o-;;J~!!':H~~~~ ..... •.. . ~ .• ; .... ,~;if.~ P~'~'\ll?tlg ~n. ======-===~ ~~~ w~qusing _and di$tn1>ntion :~tell', Lubbock-._$~_.• .. ~OP.-.~'~· '~:sifl1eiilt1i-care provid~ for a-re~on ·or more than a halfmillioii~1e. A "ffiQkaoi~Tdif :the ..;.....;., of ..mi-lJO: . ent base b. : .. "n~, cat! .. , -·:bjs u-~Yi"~: t;eTu· . -· -,,:di, 'bi' .. ., . ,p .... .,...,.. , ..,..,, . ~ "t ~-... :1 egoiy . -I!•"· -~ __ w., " .... , . o-~ a ~-sh~, t)ftAe ~4¥3tn' ~:of Lw,~ck , · [PERCENT EMPi.C>YNENY BJISEBli' INDtJ~ cmi'iORY) .:.•.::- :~~ -~-~~ . . P.i!f~,..~w ·_.•~-~.,,, ... - . --- 7 Honorable Mayor, City Courie~, . And Citrlens of the City of Lubbock, Texas Janwuy 3, 2007 Two major components of the local economy .8{e education and health care. setvices, ~bock is home to three univemties· and one conimumty ·college; Texas Tech Univ.~t}i, Lubb.®k ebrlstiaµ University~ Wayland B.tist 'Qniv:~_itt-LUQ~-Center and S~uth PJ.ai;iis Col~e. TQtal e.tJIGl)ment for~ higher edu~on ~tiJ9.tj.~ in Lubboo~ for Fall 2~ i~ 4i~t. TIA's' is• a sli_gbt decrease from •the ~~ent for Faµ.o( ZOOS. The avai~ility of the sob.oQls in "Lubbock is an added adv'aritage for our industries as they provide a ready source of labor-for their-successful operation. · The healthcare :and soci~ semq~ '$~0~ is also a vital. c:pippo~~ of the Luhbpql,c ~~y. This ~ employs more than 1,3iooo people. whose payroll of more than $628 million -and related ·conuibutions provi:de a subs'tailtial inl~t to the tubbeck .area. (Sour.ee: 2004 County Sushi~ flUtetllS) ~~-~ an~, t;rcJ)d -~~~~i:m ~~-b~ pro.i~ecd below, whieh gi_ves ~ ~ o_t ~ ccoY.erall ctw, economy;, Lubbock ~mic index. The t;~bQck Ecoriomib ,Jndex-is~~ ,m ~resent:tlie :Fleral eondition bf~-~ ecoiwnfb#traelqrt~ aa~.-&~oo.mktato~~~ ;It. u..~:-11_ :tOOA !~1.'Gdd~ um. --~-. · · · ·-.......... ,1.-, for ~~b:et 2'.l:Vl6 ~., 1:0'.8~9 •<•bi¢hi • ·2mt,:.i11f •:ved a~er-•the-.=~~...;,· :ro ·, ~®nUC ~?\ , ~.t'c ... ,. ·"""' ..... ~ -~--t ~-.... ~ . ~-.. pm_ ........ , ..... -.,., '.$ep~~:2Q0'.5. . Tlie Lliobock B®Jidmic'Index ;•~: &t.,a-~~\!el tiugli Septemb'er.2006;-:sii§geslilig that -~' vctan~bock · ·: 'ii ·fflf~~lto~ilt.a-~~ teet. ··· · ✓· .Q_ • ·-~1:>®k&.9 •iy-4 -s·· .. ·.~,}')MK .. ·.· . . ... 1~~-4..-.. '··----.. -~--"""·~~ --~~-~J. t-ubWck~C) Index :r· ... , : . ;•.nn-_" L,.;,SlMu~L.'..;;._ 'll.ln-t:_ . ... ~ :t;:,7.l,l ~-~l:'.~<il,l~ "-· I_~ ...... --------....,...-----------------, : r: ; ~--~l!:::!1~~~~~:;;:.t!==~~~~ ~~~~f-~~~--=ti-i-i-i-i""1H _....tJ!l6 ~im ~ms -••h'ffl ....,._idoo ~2001 -ti-1ooz ~2003• ~iil04 -~·200s +·i006 ,8 ( ( ( ( ( ( Honorable Mayor, City Council, ·And Citizem of the Gty of Lubbock, Texas 1anuary 3, 2007 Building Permit Valuations. Conmuction.continues to ·mroc,i a. $hong iontritiuti:&i ·ti) ~-Lub&ck economy ~en ·tholl8h tfie-. value 6f'all buildiil' ... miitldssiled·'S'o''far th 2.006 is 6()Wn ,..-, S..8~ fu5m las1 · ~s tota}.:throi~;,;t., . ' g~ . ' ., . .., . ' . "-J ' .,. . year ' , ... .',~ . . Septemb.ct~ the, $333:2 million µib.uiJding permits issu.M througi,.•thc;, first nin~·months'of z'OO~ is slightly down from the record setting levels that have· been seen in the city over th~ la$t fe\Y• years. . {Source: Economic and Dem~gnq,bic Over.view: Buildin-S Valuations -10-Year Ttend / Qriginal So:urce of Data: Building Inspection Statistical Rwort) $500;0. ::: .MWi ,·' 'S35();() ismo+-=-------.SZ1Er--~r-":~~~!!!!I!..----~ :;¥ ~-0 .t~ii~~;~~~~l~~t~:~::::::::::::::::::= ~ Ji0Q',9, ~ J'U,t(O -l---ll~-----:=...------------- $~ +------,.,,....,....,,.----,.~----,------- ,$0;0 +-------..-'---.--~--.--------..-----,..--.-------, ToW ~ew •~~~~~-:~~~~;~y l4j~~ ~: ~~ ·2~ wh~ :~P~: ~- '~:~e-p~~ ~.20QS,~ ~·$.1~4f4~911 -~ resid_~tial ~tfll~-~ts issued,fc:n-,the;:~, 'riiQirtlis 0£2006 u:~ ~ m$'ihe •rd ~'iw~ of:2®j 1:nrGitgii~oos~ Av•~ :i.~,·· "":i-.·, ··• e ·... .~+i:--.-... e .. ~.~, .~~1;.ei ,,nn..::'. i.:.;;..,-!~~-'-'•r: 4,1°~-:limn .<i.-,,;.;.;.i.: •·~. WJ'41C !>lW< ptl¢. ,'~,;,,~. -._"!'~ --~ "'~ --Ji'\', u:;·. . lO ,_y_e,t' ·19JJfJo $q,tgnber 2®.§,,. . . ' .. . • , . ,_ ·:' . .. : . . .($~~ ~i,,~l~· :~ EW~-·· ~e.w,, .. : :a_.,mw~,-,1 v~,~W! -.-~(f~_.,~ '!F_~ !. •.~gliial ~· of 11>ata:. :,,,w1 ;·:, :~·e9tion$~eai ~d Dur~ .J$te. ~ ~ ~ iA & M U.m~!·Lir6'tictc1fKmdciitiiil-Housiiig Mti~~bttt . -. . .. ~SAies Tog Collections :Sates tax.colleeiioiiS tor :s~ tooli .. 'Were 2.82% iqi~¼,d ~v.et-·tbe:.September ~:S-:sat~ 'tjxZ · ·Uect~ '~ear:.~~:Ml~ tii m11~0.ns. tbiQ.µgli .~bJ:i'~-~'1.mic· mmt®at ~v# 00 ~ ~~ pe(iw·-jh·~l .~~·~iii~ ~n.th:th~~;·~-;~ ~#~ ~a.i~th.~:~tii: # was paid. ~ not hicl~e '~~ ~ ooUected by ~ Ci,w of ~.book and 'DOl ~~,w '~otnPttoUer of:Pubtic Accoun~). {S6uroe.: Econo~ 'a# Q'el#~liic G>Yeivie.w; Monthly: Sates· ~ .Co~~ -Cal'endar Y~·.:. Cjty :of'~ j ~-~o-~ pf Data:· ·Staft ~'@llet 4f Pµ.~hc'. .Ai:®~-= .Allocation lfi~cal Sumtila:tf'} · · 9 H~I~ Mayor, City Council, .. Aild Ciliuns of-the. City of Lubbock. T-exas January 3, 2007 TourismNisitor Related Indieators L,qdging :~-~!& inc~~ .from $2:4 -nµlliQn 'in Sep~ber 2.09$.,,to ,l!!t:~ _ mil.µo,~.:W· September 20Q6. Thjs js a ~-t~te increase tlirough .Septem,bel' .20.0~ of 1~%. ~ljne· boardingt -~i Lubbock Preston· Smith Jri.tematignal Airport also increased in 2006 by ;3,i¾''over the,same·p-er.iod last)ear. (Source: ~J>bpck Eoonomic. Index) Employment "The to"tal nen-agricuJtural employment estimate for September 2.006 was l2¥llCL Tbis,~as -.5¾ ttbpt'PVM ;QY.ei' :Septenib.~ o:f ~ -year. ·Th~~ ·wm 00.0 more p~ople emplof:ed. in Sep.te,ri)b~ iPQp ~ -~Jhe. ~-,f~f Q.f 2Q95, ~ ,-un~pl9ym~~ ~~e f9r ~~ Ll:lb.1?.~k, ~A JP $.ep~.®6.6 w.as :¼;~, 4.-\owgt m the~te·.of T~. ~~ncaJly LubPQ9k -~ • \ow,~ .of un6dipi~rit,-that,1s;genem11y lo/o ~-2% belbw· the national rate.:and about f¾ ~fow"tli~~te:-tor·T ····-.,, . -· .. , -.. , ;®,: ~~oc.lf ~#~rnic, a_n4 De¢~giJPhic. '0vri¢.w l Original s-o~ ~f ~atil': •~~ti Worla'.o.fPe ~~i;sloµ) $~~-----------~-4,14',........,----....... ,•.,.; . --· ... ·.._ ~lo-. -·,;, ~A-·.; -.-,_,.· .• 1'L'r o '• • • • --~-. . ., ,. J.o:;ro -~r "': ..:~. ' . . . . i ">2.,. -1~, m ..,......,._ ._....,.1.-_.,_,..~-·~-.,,_-,11--.11h-__..,....,.. .. _ ... , --ii .,11' • • .,.. • I' -; ;~ ,. 1' ,:. (. ;,. 1-~ __ :._ ': . -·· .,. _:::,, .. ' ffi . ' i~. }~ ... _, ~~-~ .". 1ffl :: 1998-'-ltff .. -2000: .. 1001'' 20,Cli .. 2Ji.D3 . 40!).j, i!PQS; :••.•,l, ••• • • •• ....,,·•; •.;~ '• ~~ :-~••: -•• Note: 'JM·~ogy .for ~culatj.ng :the.u,n~loY!Qent rate was ~,:ill -~f,-:'--if.lfi~;:w -R~ ~ · >,., ~e-~~tf,ft;~ :~;·tire iieW ~~ -~- .,t.1¼~ MSAr -~: = in iioos: l6 ~tii~.'6ot1t· Luti$ocl ilia" ~ -~t(~. . . Economic:'b.eY,iopm¢Dt. Boono~ ~~~~ ~ ~ i>nc¢w•ror~e.¢~w-~r-~~ ~ Hi9~. the Gity ~\19~~l¥ Market Lubbock'..· ·hie,; -a non-profit ·rorporanon. to, ov~-:eoonomic: cie.velopnient-rer: t1ie -~ ~,Lubbo.ck.Jtt., is~fimtlti4 WJ,"th three cents;ofthe p~lal allocation.. ln ~b~ 2Q04; 10 ( ( ( ( l{onorable Mayor, City Council, And Citizens of the Cily of Lubbock, Texas January 3, 2007 the Lubbock Economic Development Alliance (J:,BD_A), an economic dev'elbj)rnent sales tax corporation, assumed the responsibility for economic development in Lubbpck. t.EOA program strategies include business retention. busin_ess recruitment, workforce development. foreign trade zone, and the bioscience initiative. LEDA is funded by a 1/8 cent economic development sales tax. iotal estimated revenues for LEDA for FY 2006-07 .are .$3,905,080, During the last year, through their business retention. expansion, and attraction · programs, LlIDA assisted 13 companies in the creation of295 new jobs'with an estimated annual payroll of $9.2 million and capital investment ofS2.3 million. The City's Business Development Department works closely with LEDA to provide the support needed to assist in their economic developineat-projects. Business. 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, the two Tax Increment Financing Reinvestment Zones. and all P-~lic lntptGvement Districts. Bu.sines, t>e_velopment also works wiUt r~~I artd co~~ial ~~ that do not fit the crjteria t'.eq\lire.d by the $te for economic developmen,t s.ales ta~(«>tpoi:'ati.~~- Development lnltiadves Ovej;tonPark Oven.on P.ark is a 300+-acre I'eYi~zation pJoj~ that i$ ~d~ay in tbe heart ef umbOQ~ an.4 h!IS be:en called the largest privatel)'~~ed_¥vi~ti-;>n proj_~ in~~ United States. Overton Park .is .the e<>mplete revitalization ~fa bli~ ~ e&leclNo_rth Ovcuion. Overton Pad: has developed much faster than anticipated, it is projeoted that the build•out of this public/private .project will 09(:Ul' -o,v~ .a seven .. ye~ p~od. Acco~ to the ·1atcst Project _and ,Fi~ce Pl!l):1 for the No$ ~QJ'l Tax ln~ ~cins Reinvestment Zone {TIRZ). ~~ ar.e i,tantt~ 'exper,.d.itl#.s 9f a~~.i:m.~tl!l;j $.41,'1 -~ (Qr pUQlic fufrastajctw,"t ~¥~~enis, whic~ wit, t~sult 'iri Mure d~elop~=~~~ej}t thii,t will increase ~ ~~ie value by approximat~ly ,$53_0 ~lliQn ,oi/cr'the ZQne•s 30..~ar-lite. Th~ 2006 appntis~ \'ll111r 9.fth.e N~ pv.ertqi;i TIRZ was $1$SA milUon, which l$ a Sls~.~ .million mcimse ov~ th.'Q 2002 base year value. To-date, three student~riented apartment complexes, have been COinplete.d along with The Centre, a $26 million, 618,000 square foot project that includes the,constniction of a multi-story apartment complex built over an ups,cale retail shopping centc( lQld more -than 226,000 square fe.~.of~ Al® ·oompleted ~e City ~ank;S~-~ Jh~ new 200,~ S(}\1$ foot Wat- M~ :n~· 411i Streef ~ Av'eQue Q, .. A ~etilil .®ntcr lidj~ l9" tlic n~ ·wa1-Mart is n~g .~mpletion and Will .bouse,sev"e:rat diff•t retail l;u~ ·consttuctiori was completed on tlje first cx,ndommiums Jn C'.>V;er_ton ~ -~_url,ng 20Q6-.atid-~0,n '¢ Uie. first single-family .bo~es will ~egin in the -next f¢i.v months. C'onstnictjpn will~-on a new hoteUconferen~ center project in early 2007. A new retail ~ter adja®iit to th~ botellconf'ereo.ce center will begin construction in February 2007. The project, as a wh~1~ is running about three years ahead of schedule with much oi the construction now expected to be completed by the end of 2008. Hononb\e Mayor, City Council, And Citl2.Cns of the City of Lubbock. T cxas January 3, 2007 North & East Lubk9Pk Community Development Comoration While Lubbock gteW d~ing ~e last 50 years1 North and East LubbocJ<, experienced \lll out- mi~tion of people ... Froin 1960 tp 2000" the area's population dec~~d by 47%. In response to the deteriQration of No$ ~d East Lubbock, the City of Lubbock created th,e North & East Lubbock Community. Development Corporation (CDC) to oversee and promote .development in the ittea and ~mmitted to providing funding to the CDC for four years. The North and East Lubbock CDC has experienced significant progress in their projects during the past year. King's Dominion is a new single-family housing project with five home buyers who have closed and moved into their new honies, arid five more ho\lSes are under construction. Tue CDC has aJ:so placed thre.e clients into soatterM site development, one client's home is presently ~~er construction. and.an additional three clients have been approved for mortgages within .tl;i~ target area. The North •and .East Lubbook CDC has originated $1,079,643 in tnortgilges for King's Oominioll and an-~ditional $702,187 for scattered site developm~ts this year. . . , . The CDC also aw.arded Some'thin' Fresh Cleaners, a North and East -Lubbock busln~, a $40~000 ·micro-enterprise ~oan and has received a grant from the US Department of Health and Human Se)'Vices~ Office of Community .Services to go towards ihe development of the P.tid-way Pl~ee Sh_opptns Cen~er. .. Central Business Dilttrict-Tax.Incre$9t R,einvestment Zone The City ·of Lti~'ek Ceritr'at Business Oistriot (CIID) has been !ieveloped Qv~r ·tl2 years typically with offi~.: retail, and _gQV~trime$.l agency qse~ L~e many cities i_n tjte l~t -~~-'tQ twenty years_ retail bas mov.ed to shopping areas and other areas outside the CBD -and _offi¢e development has stagnated. , In an eff011 to reverse that trend and to stimulate further deyelopipent ·do.wntowh. the City estabfisl)ed a CBD 1'ax increnient Finance Reinvesttneni ~e (TIR:Z) on. Deo.embeJ 3;:2-001. The Board·.af the CBD TIRZ creaied a p.rQject plan 1hat'me1u~ -pr.oj¢Clll th3:t_ \'lill -~~(tt4e'\'.~l,9pn,.erit ja tbb ·cao. Under the ~ised ProJ~ -Plan .ari~ Fi@i~: Pl~. it is ~d ~ t&e C$D ~ pl~ ex~~ of almost sut.4 mntfon for ·p~\lic: infrastructut¢ lui:pit5xemeQts will result in -~ developme~t ~a rede~elQpmerit in~ ($p ~, whj~ will_ i~e,as(d,le.:t;ax~le: value by ap.s>.ro•te.Jy $122.9 mill~on.Q~ the ~~e.•s. Z~ y.ear life; The zoo·6 ap~ed -vab1e or the Central Business District T1RZ was $13 7 J million which is an increase of $31.-9-million o:ver the 2001 base year value. Central Lubbock ·stabilization and Revitalization Master Plan The Centnt.l Lttbbo.ek Stabillz.ation and Revitaliution Master Plan is a oonipreheiisive guide fol' ftrt\ite gro~-~ ~~j -~.r '~~ Central L,~bo6ok ke,. To.e plan was_ d~elgp_~ ~ ibe assistance of (Jou~ '~~ A!fili~~ fl1rough a public j)toces.s :bruigil;ig toge_ther lQCal mj~n($, lo.<i¥ employersf ~I~ $tilf, abd maj~r.s~eJ;lolders. This plan i~ it;itend~ to provl~ ~ ~~w~.rk for future devek>pment irj ~tral Lubbock~ to be a "living document" evolving to .. address any unfoi:es.een futtire concetns or strategies. As a .result of the plan, the .34th Street Susittess Associatio~ made up ofousiness owners on 34th Strc:et, was. formed in 2005. 12 ( ( ( ( ( ( ( ( Honorable MB)'Of, City Council, And Citi7.cms oflhe City of Lubbock, Texas January 3, 2007 Other Residential/Commercial Development Growth in commercial and residential construction has been occwring at a phenomenal fate over the past few years. During the past year, constnwtion on sever.al new residential developments started in Lubbock. The Willow Bend Project, is being constructed on the Nodh side. of Lubbock with an expected investment of $177.3 million. North Point [s being constructcchlong Quaker Avenue and is projected to have investment in new development of $200.9 million. Vintage Township is another re$tdential/co1t1nteroial development underway and is, a new con~pt in community development that will have an estimated $350 million investment .in new development. The construction of Milwaukee Avenue is a public/private parm,ership ~een the City of Lubboc.k and developers who own property along the corridor that is ex~~·~ generate a. total investment in new commerci~Vresidential devel~pment of ~proximately S.844 million in the next five tQ ten years. C@y~n West has already s~ developpierit ofi~.outdj,or mall on Milwaukee .Avenue wtth the construction and. openins of a it~ Tuget sto& Other commercial projects already planned or underway in Canyon. West are Main Event .and Cracker- Barrel. Other projects underway or almo·st comp.letcd in Lubbock include· a DyW Mat\«¢ S.t.reet· <>n 9~111 -Street, a n~w Wal-Mart in Southwest Lubbock, Grace Clinic, and Quakel'.' Avenue 'Meaice,t· Cenuir. Downtown Redevelopment Comfuission '.l'be 'Sity Council c~o.~d the Downtown Redeve:lopment Commissi'on (Commission} in May 200S to develop an action plan for· the red·evelopment of tht, downtown .. area. The Commission is- composed of eleven members that are citww of Lubt>ock--and stakeholders in the downtoWn atea. After collecting' info'rma:iiort Ob the iQUes in the· downtown area. ~-Well as ongoing. a.ctivitie,, .the Commission 'dr~ a fund-raising action plan for the develqpment of.a ~~lOWD master plan. Over the l~ yea,r, ~e Commission h'as raised $32:4,000 for the i:m.tSter plab from Private sources and the ~tr41 B~ District Tax lncrem.QDt P•frig Re!n".~t ~e. The ~ommissio.o hired EDA. W to 4taf\ the downtown master plan and they began ,W<Srk ·011 ttle plan Jn July 2006. EDA W oompl~ted the Assessmeut .Phase and ,have. begun tbe Visioning Phase of the project. The Commissi~;--~ ·expecting the DowotowJJ R.ede.v~lopment Plan· .to .f» completed by1he second quarler,of-20.07. Lubbock Entertainment llnd t\rts Faciliti¢s Task F.on;e The ~)'Of Creal~ tqe Lt.lbb.ock ·Entertainment and Arts Facilities (L~AF) Task Force ~ ~:eptember 200!> to lo~"·a~ ~t;ib®~.'$ oµrrcnt and~ ne~ •for public-facilities. The ~k, fc)fce is made µp of 15 Lubbo~k ,.citizens whose re.sponsibili~ inolude a review o(~tifig public faciUties to dete~;e. if .tb..W rn.~t current and_ fulute 11.~, ~-~ll as estal,lishing whether there is a need for upgrade,s to the existing facilities: or construction of new facilities. LEAF "'.Jll complete its work in early January 20'?? and. submit .a recommended plan ofaction to the City ·council. · 13 Honorable Mayor, Cil)' Couneil, And Citizens orthe City of Lubbock, Texas January 3, 2007 FINANCIAL INFORMATION Long-term financial planning The City uses 35 -:year rate models for long-range pl!llllllng in the General Fund and all enterpri~ funds. These models ffl based on current projects $11.d policies and are driven by the idea that the rate shQuld be annually adjusted to reflect the service needs of the citizens. B~a~ of this philosophy, the rates in the models ~ annually trimmed to leave as little excess as possible, aft~r allowing 'for financially sound net-asset reserves, as established by City Council p·oticy. The models, in associ.ation with the City's "5-year Forecast•·, provide anticjpated trends given current. PQlicies. These forward looking models provide a basis for budget discussion and policy decision-making. During fiscal year 2003, the City form.¢ 'the Citizorts Advisory Committee to survey City:-wide infrasti;Uctute t1eeds and· pri.oritfes, The committee developed a six-year prog,am for future capita) needs for which general obiigati'on bonds have ·been or will be issued. . The bond issuarlqe was"approv.ed by the citizens of Lubbock in a bo~tl electjon held in ~y 2004. Cash m~nagt~el;'! polici#;i·.88~ nractl~s Cµsh temporarily idle during the year was invested in •certificates of -deposit, q_bligaijons fif 'th:~ u.~. Treasury, l!,~. Agenci~I money market mutual funds, and s~t~ inVC$itment w.ots.-T-h~ 1_naturit1.e~· _of the inv~~JI~ range, f?;Oin 1 day to 3 .. 1~ ye.rtfs, ~14 ~ p.Vmgi;. iua.tw.itY :f)f' approxin:latcly IO~i/2. months. The average yield on inves~nts' wits •t~53/o 'fot the' Cit~ operatfug fun~ an~ 4.1..00/4 ~ ·the qfy's bo1.14 ~els. lqvc$blleQt in¢ome-is .Qffse:~ by-d~~ ill the fa\F value c;f in.vestments. J)ecrea.ses lh fair value during "the current year~ bow~et. do ,~t nccessa~ily. reprtsent ~mis that will eontinue; nor is it al.wars possible to realit.e such, am~. especially, In th~ case of temporary. changes in the fair value: of investments· that the City .intends to°hold to maturity. · · · ' . Risk. management Duriqg 2006, the <:1w ~ntinued its use of-thlrd party workers' compensation coverage. The current coveJj"ge. prov}des for coverage to begin with ~ ,initial aqtlal' Qf claims. The City· is. pri,mll,rily _self-ihsurt4 for .rt.iewcal tlJld dental coyerage. St!,p -1o_ss. cq~erage of $250,000 p~ insured _per y:cat is curtehtly m.aintained_ with a \bird•~ insqrer to··mitig.!lte risk associit~ witl:i medical coverage. Additional infonitation on the Cify.'s ri.sk-~ge.itt¢nt activities can be toun.d in the notes to the financial statements. Pension bcncilits: the City sponsors·. a mu,ltfpl~-employer hybrid defined benefit pension p1an for its employ.~ o.ther than firefighters·. Each year, an •independent actuar.y engaged by the plan calculates the amount· of the annual QOntribution that the City must make to the plan to ensure that the plan will be able to fully meet it.s obligations to retired employees on a timely basis. As a m·atter ofpolfoy1 the City fully funqs each year's annual required contribution to th:e pension plan as determinedby the actuary. · As a result of the City's conservative fundln$ J).()licy• the City has succeeded as-of 14 < ( ( ( < ( Honorable Mayor, City Councl~ And Citizens or tho City of Lubbock, Texas J1111Ulll)' 3, 2007 December 31, 2005, in funding 74.6% of the present value of the projeeted benefits earned by employees. The remaining unfunded amount is being systematically funded over 25 years as part of the annual required contribution calculated by the actuary. The City aJso provides benefits for its firefighters. These bel)..efits are provided throug~ a sing!~ employer defined benefit pension plan, the Lubbock Firemen's Reli~f and Retirement Fund (LFRRF), which is administered by the Board of Trustees of the LFRRF. The City contributes an amount that is determined by formula and is anticipated to average 19.9 percent of firefighter's pay annually. The City does provide .2S% to 69°/o of po.st retirement health and dental care benefits fur.retirees or theit depertdents. Additional information on the City's pension arrangements and post emplo.yment benefits. can be found in the notes to the financial statements. A WARDS AND ACKNOWLEDGEMP!NTS· The 9overnment Finance Officers Association (GFOA) awarded a Certificate of A.chi~l/.em~.nt for Excellence in Finan~ial Reporting to 1he City of Lubbi?,ck for its ~9mprehensiye ~ ftnancjal report for the fiscal ye11r ende<l September 30, 2005. The City ~l:\.PPli~ for tbis p~tigious award last ~ -after ,a o.ne-year, . lapse. In order to be a.wai4~. a Certiftcate of Achievement. a governmental unit must. publish an easily readable, md. effio~endy. ~d comprehensive annual financial rePori. whose contents confonn to prosram, stan&lrds:· Such reports must satisfy both g~era1ly accepted accounting principles and app1k:abJe. le¢ requirements. · · A Certificate of Achievement is valid for a _period of one,-year only. We believe out· current report continues to conform to the Certificate of Achievement Program requirements and we 4U'e submitting it to tlie OFOA to determine-its ~ligibility for another certificate, The pr,eparation oftbis report w.owi:l noJ ~ve been possible withput the ~fficient and dedicated ~rvfoes of the entire staff of the fimmce Division. Exceptional and tireless effort was inv.ested ~Y the Accounting Oepartrnfflt. We would pamoularly like to thank Pamela tdoon, Director of Accounting, and the ·senior Accountants, and Accountants for their oountless ·hours of work on this financial report. We ·WO\lld like· to ~pre$$ our ,appr-eciation to aU members-of the departments who assisted with -and ~ntribtj:tcd. to the preparation ·of this report. Credit is aJSQ gi\ien t~ tity Councii and tm, Audit Co~tee for '1lelr' i~ and sup~x1 itt planning and cond~cting the o~ons of the·City•:of tub.bock in a responsible and progressive manner. Re$,RecU\illY sub.mitted, tfol~ Lee Ann Dumbauld City Manager 15 . ( ( . '. ( 16 Certificate of Achievement for Excellence in Financial Rep.orting Presented t~ City of Lubbock Texas Fo.dts .Comprehensive Annual FiiI~cilJl lleport for die•'Fiscal Y• Ended . .. . . . : ·. Soptember 30, 2005 A Cerlifio.n: of Achi~c fOl Eiccdlcnce in F.lal R: . · ,.';.i,.;,,-if · .~ .• . ~ ~tlit OoVtllJm.cllt Finance 0~ cpo.~. 1)1C8CJ1,~ .. ,. . ,· ' A$100Jatlon ofthc United Siates and Canada 10 ~etnmoot aniiu,uf pnblic employee retirement ~ •~~9')Dll)tebensive llllnual fillalld.al rep()$ (cAFR.s)ac:hleve the bipt ~ in gowrnmi:ct BCtolQlting . . ., and financial reporting. ~~~ Executive Director 17 ( : ( Independent Accountants• Report on Fl11anclal Statements aod Supplem~ntary Information Tbe Honorable Mayor and City Council Chy ofLubboclc, Texas We have audited the accompanyi11g financial s~rcmcnts of the ·govcmmcntal activitlts, the buslileas-type activities, the ~gii!e diserctt:,Y p~ettfed comp'onc'1t units; ~ch major fund, '"1ffld the 11:kgropte rcmainitig:&nd lnfom1iidob ·otthe·CityQf'~'\lbl)ock, 'fe~ a.Jof liiid fot the·felr ~ndeil ~ 3Q; 2006j which collectivoly comprln the Clty1s basic financial ttatemeats u 1~ m the' table of contents. Theae financial statements are the rcsp:0nstl>ility of the City's. management. Our ~n~ibilfty ia to expre$S opini<>ns: 011 ~ rina"ci_al 1i:~enis based 011 our audit. We. did, n~ .audit~ finan~ . s~t.,,mcn~ 9fCM~ L,ulffi.~ ~"•• M~.t ~u~~ Ecoi:io(mc D~cl9AA1i,J\t .~tatioll dl.b/li Mitket Lu~~lli,d t.,ubbq~ ·~nonij_c ~t~~_A!Uancc:, w.t,.i~b ~-~e,~~ ~•~,~'4i~~~Y'. ... prtsen.ted ~om~nent uni?, Tfto.~cla).·..tatements of!l(e!e ~•ili~~~:~~~;~t,~er ~~.t!>~ whos.c rq,orts ~11 liave S'een ~mrisJl~d lo Ill, ~dour opinioa11.n~~ es it ~f# fchnc.~ts includtd t'or 1iucb entities, is based solely on the reporu of"the othtraudi~ We conduot.ed our audit in acco~e with audltlflg standards gencralb(-accepfed 111 the .tJnited State.a ot America and tbo standatds appUcabl~ to ,fin~ial audits con.taln_cd-ln ~ i.ill~St~th, is~ed by the Co!11RttQller General oftbe Ur,.lted SJatcs. Those standudi ~h;'c·th~rwe plllft. 111.a·pcrfonn lho.a\ldlt to~ reaaonablt ~oc about whether the financial s.la~t$ an, ~ of material ml~stattment. Tbe. fi.~~cial ~.gu 'drthe component units Civic Lubbl).cJc. Jnc::; Mirkot Lu~bObk Economic Development CorpO',rititm d.lbi'a Market Luobock; Lubi>qdc ~ot1omii: ~opmem Alliance 11nl d:lem~or fund West Tew Municipal Power #.gency, Wt.rellOt-audit~ in ~a.nee wilh Ck>vemment Atldithlg Sta;uJmrd~. An audit inductes examining. on a le'Bt~Js. ev~d'enu su~ns the amounts·and disclosures in thefi.nancial siatemerits. An audin1lso inC,udes~~tns·~e a@utnb,g principles used and s.ignifi.cant cstiffllltn made by mana,gement. as wetl u cvaluatlnl!tbe overan f'm~tal statement presentation. W~ believe that ow .audit and the rcpot1$. of cbe other iuctitora p!'Pvi.de t rcasona.bte basis for our opinlons. In out opinion, based on ouraudit and 1~e rq,ons of !he other aud~, the financi.aJ !tatoriW\ls refemd .to above presenl fairly, in all material respects, the respective financial .posfti~ of the govenime111il activities, the blJSinus-typc -«ivid~ die agsugae discretely prcsenl.ed COfllPOnent units. each major fund, and the igares,atc rcmainlng f\tnd infonnation of the City of Lubbock, T~ as o(-septembcr 30, 2006, and lhe respective ohangc, in financial position 111d c:asb nows-, wb~ applicabl~ tncrcof for the year then ended in ~onfonnity with aocoimting principles generally accepted in the Unitod Siates of America. 2001. ,,11;.,,,. P.O.bl308 ,-a,r,AA'l'1•11G1G lll>ll)&,t172 F,or~IWll,11 19 ·- The Honorable Mayor and City Council Page2 In accordance with Govenune,u Auditing Sto11dard1, we have also issued our report dated D~mber 22, 2006, on our consideration of the Cit)''& Internal conuol ~ver tiM11cial reponing and our te~ of its ·conipll~c with certain provl$ions otlaws, regulations, ~ntracts and grant agri:!ements and olher matters. The purpose of 1hat report is to dOSQ'ibe the scope of our testing ofintemal control o)ler financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal conlrol over financial reporting or on compliance, That report is an integral part of an audit perfonncd in accordance with Gowrnmenr Auditing Standards and should be considered ill assessing the results of our audiL The a~ompanying managemeni's discussion and fmliysis as listed int~ 1ablc of'COntcnts i$ not a ·~quired pirt~f tho ba$ic fimi~ja\ smtements but is s\lpplcmc11tary infonnation required b)' the Oovci:nn,,enlal A,c~!JUn!ins Sijtndards Board. We have applied certain .lhn~ted p~urcs, whlclt consisted pri~l~ly of biqulri!ls of~11gen:icnt ~!'ding the ~c~_of-me.a$urcm~t &Qd presentation of th·e required siiw,lementary Information; However, wt•4icfnouudlt thoimonnatlon and expren no opinion on lt. Our·audit WQ ~~icd 'for"~ ~ of.fanning opini~s Oil the .fin~ciel iii"wtncmts thit.cot1ei;:tl\•e1y ~.,.th,ci C(iy!s ~ic ~iniJiclat. ~em.itn~. nic accom~•nyfog Jdpp~~4!ritarr{li,~on 1$ pr&CAie~f fori ·· ~ afs4dltiqilal anal :.ls-and ~ ·not a requi~ ~()f .. ~ b4-i~ 6.~cial i~mts. Su~h info~ii .~88 ~ ~bjet~d to i lludltingproccidu~ «p~ll~ lil lb~.iudlt ~f f,tic }fasi~ f~aiil;iaJ st•tc~c~ts,~d; m'oiir:opiiion/ls fii.irly slated; i!l all material rcspeots.1~·retad~[iwtjie'basictln~af . siaiemcnts taken as a whole.' · · ,The~~~~ lnfon,natlOI). iA the lntr:oductory .and statisti~ ~o,ns,.as lii,.e:d· ~J'.l. ~ :~ble q( CQnJents 11,as_ rre~ ~Je¥~.~ ~.~~ appli~ in 'the audit ~(ti.le basic fi~~ial ~ta~ts and. ~~inS,y, we·~~ no op1"19.'! on. it. Pee~ 22, 2006, ~ept .fot N.Q~ V. as ~o w~iih .ihe ·dat~• i$' 111'!uary 1~. 2oij7 20 ( ( ' ( ) City of Lubbock, Texas Mauagemeot,s Discussion and Analysis For the Year Ended September 30, 2006 As management of the City of Lubbock, Texas (City), we offer readers this narrativ_e overview and a.Jlalysis of the financial a_ctivities of the City for the fiscatyear ended .September 30, 200·6. We ehcourage readers ofthcse financial statements to consider the information included 'in the transmit1Bl letter and in the other sections of the Comprehensive Annual Financial Report (CAFR} e.g.. combining statements and the statistical section in conjunction with this discussion and analysis.· Financial Highlights These financial ):ughliP.ts SUDl!Dll,nZC the City's financial position and operations as presented in more detail in the Basic Financial Sta~entS {BFS), as listed in the accomp.~yiq 'taple of~ts. • • • • • • • 'the wets of the City ox.cecd~ i~ liabili{ies a~ S~ 39, 2006 by $583 ,5 i)lillion (net ~i~). Ofthis .. ~\in'7 $97.~.@l.iori (~~ n~ •~) niar·b:~ µ~d'til ~ the Citi•s · · in · obli · tions f() cl,tizeni Ibid creditors. ~ " ga . '. . . .. . ·• . . , .. The City's total net assets inbreased by $38:o million as .a ~t -of operations :du:tiag the fi~ year. The ·ending unreserv¢ ~db~ for tp.e General Funtl :w~·Slf,8 niilU-. Q1' approxirnatc;ly 20.2¾' of tota1 General Fund reve~ues; an increase of:$2'.S tni1lion .over t1te·i)rior·~•'amov:nt. · , . . ,· . ~ . . . . . AU of 1he :City!s.g~tal funds,reported ~mb.lned ~-iui,d :~~ ol$9.U.million . .Olthis total amounti $39,8 miilion is a-vailab1e tor-spendlng at the .City~s discretion: All of the City;s business-type .ac:tlvities reported· combined ¢n:ding n~ assets ot:S470.8 million, Of this total amount, S7l.7 million is avai'table for spending at·thc City's discretion. The City's propriewy nindB net a,ssets increased by $3$.6 million tom $ff2.'J/i million 0-$465.3 million: . ~ FY 2Q06, the:,Cii)I, issued $79.7,_~ilµon ~ .debt tor ~~us .~.it;al ~~ .~d i~ s, s.s :millicm .i,n de~.t w~ .fli;Q ~ in outstan4irig -~~~'-Toe R~ . ~ ~ ~ th~ ~oe .01'$18:6 triillfo~~f ®n~ ~et1ue bonds·'\".J~ ~ ~an :f verM~~ W~ A~thorliy. . . Ov'erview of tbe Financial.statements Bast~ ~eW S~(e.qum&i ~~,~ ·Jj~~ssiQ» ,a_nd Afl.lJsI~ ~) ~:.~~ to icirve .~ 81'! 'il\~,1ori 10 the City~, BPS. ~ BPS arc ~sti! of tlm .. ~ents;" }) ()()~t-Wi~ Fi~l sta~ts (GWf.S); 2). ~ -~c.ial Sta~ts (FF$)/'ilid a) :N~( ~-II~ Fi~ial Sta~_ls (Notes). This CAFR als:o ~~ Qther supplementary'.~~ in ~di.tion ·.t9 the BPS. Go'fernntent-wtde Finauclal Statem:~~ts. ith$ OWF-,S, thown on pages ~7-39· of this report, ~tain ~ sf(dtment of net assets and the statemMt of actWftles, clc:scrlbed below: · · · The statement of ne1 QSSe/S presents infonnation on all o! the City's assets; and li.abi1ilies· (including capital assets and short• and long-term liabiiities.), with. the dift'etcoce, beiween the. tw.o reported as net as~ts w.ing .. cb.c; accrual basis. Over time, ~• or dcoreases in net assets ffl\,'e as a ~1 indicator ofwhethtr the fin;mcial position of the .City i9. improving or deteriorating. 21 City of Lubbock, Texas Management's Discussion and Ailalysls For the Year Ended September 30, ?006 The stateme,it of ac(lv1tles pre84mts a comparison between direct expenses and prograin revenues for each of the City's f1.111Ctions or p1'o~ (i:cf!)fflld tq as .. acUvities"}. Oireci exponses arc 1hose that m specifically ~sociatcd with an activity and are theretore clearly idcntifi~hle with that activity. Program revenues include chattes paid by the recipient of the -goods or services offered by the program. in .addition to grants and contributions that are re1.lrioted to meeting the operational or capital requirements of a particular activity. Revenue$ that 11.fC not di~tly related to a specific activity are ·presented as general revenues. The comparison of d~t expenses with revenues from a(ltivities identifies the extent to which each activity is self-financing, or alternatively, dnlws from any City generated general revenues. 'l'he governmental 11etivities (activities that arc principally supp~d by taxes and intergovernmental revenues) 0.f the City in-elude ~dmjnlstni.tive services, cQmmunify services, cult.u,ral and recreation, economic an~ business de\'tlOt>tQctt\ firt, health..pl)li~. other p,ublic saf~~. strteiS and traffic, and nort-departmernal. "Pbe busincss•type' activities (activities :intended to recover all ohheir costs through user fees and charses) of me City ibQlude Electric (LP&L); Wa~1 Wastewater, So1id.Wa$t0, Stonn Water, Transit. and Aixport. All c:bllnse~ in net asms are reported as .~ 11s the under¼$• event giving rise to the change oocun (acar;ua] ·basis:)~ regardless or the timing of related cash fiow.s, Thus, ~ucs an~ expenses are rq,ori~ in ··tllis ~t for $0!"lC iteq1$ that ~11 -only ;e.sult in cash flows in tutu:re ftSCal periods, suoh u uncollected taxes and earned but un~·wcati.on leave • . ~mponent. tl~~ TM Ji)VfS ~lude 1,19~ ,Pt\ly.1b~ CiJY )t~ ,~ .'~ .goYt:mntent':), ~ .a~ tbte·e lcpijy. ~ .. ~tities .(the,. ''.compon~t ~it,s): Market l.,u~ock J~oonomic De~lopment ·eon,oiatie,n, 'Cllb/a ~Lubbo9lc. If!o., L!,lbbocl&onomio Devel~t AJlianQei and Civic: Lu~b®k. 'Ii>¢., tar Whliili tlie ~iti ~ ~!IJI)r .~().\ihJa~t~. ~.~tt~.proY.iqi econ.9mtc deyeti)ptnent smti~ ind· arts and culturil actiil:ities fot tlie City. F.inancjal infomiati® for-'th9C component units ii rcpo~ ~ly in ·~ Gw;FS in otF ta djffetollti~te th~ trQm the City'1 fi,nancia.l information. Npnc of ~~:~P.(;)nen~ uni~ ~.consid,~ major~~~ units. . . Fiiilcl FblanclUl siaum~lit'.s. Afandh. de'finc.d a:s a fiscal and accounttngtntitj'·with a self-~lancing,set of acccmnts ~ ~ and ~ ~clal resources, together with a11 ~lated liabilities and' rcs1dua1 equiti$.or balinc~s, and Qhanges therciJ.l. ~ch are. segregated -for the purpose of carrying on spc9ific ·acu~tie$ or •ttai.nins ~ertauH;bjectives-jnacOOTdance with fiPCQial regutanons, reslrlctions, or limitati:ons. The ·principal role of funds in ~. ntw .. tinancial reporting model is to demonstrate fiscal accountability. The City, ·as with other state and local ·gQ~ts. uses fund accounting to ensure and demonst,;atc complianco with financc•telated logal ~q~ts; ~ fQCUS of ~o FFS. i,s Of) JtMl.jor.~4$-~ji,r 1\.mds . .are those that n:,cct minitn1.im criteria, (a p~~taae ilf a~ tiabil~, ·~ue. or '.~ih'@.s/expenses of fund cateioii an_d of the-governmental arid .,~se lbnds. eomb'i.ned), .or tho.ie tlial ~ City .chooses to report as n:ia.io.r ~ds given .1hcir qualit:ative ~n~: N~~ t_un~~ ~ ·~. arid *~ in a single column irl' lhe appn,ppate financial stat¢nlents. Combining sphcdulc:s of ~j6r funds are included in the CAFR folt~g the. BFS. All ()f ]i ·~t funds .of ~· Ci~ earl. be 4i~ }tj~ ~ !=ategories: gove:n,m~al.fo.ri(#, iroprietary funds., ~d . 'iduaary fim4s. · · · .Qo~rn,nenud FFS. ~vemmental fi:iq:ds are used to aceoµnt for essentjally the· same functions reported as governmental activities in the C.fWPS, ·Jiowcver1 unlike the GWFS, ·governmental FFS focus on near~ ·term inflows and outflows of spendable resources, as well as on ba1ances. of spendable reso\D'Ces available at the cud of the City's fiscal year. Such information is useful in evaluating the City's near-term iinancing req~ 22 ( ( < ( City of Lubbock, Texas Management's Discussion and A11•1s For the Year Ended September 30, 2006 'Because the focus of governmental funds is narrower than that of the GWFS (modified ~111111 v~ accrual basis of accounting, and current financial resources versus economic resowws), it is uscM to compare 1he information pr'CS(,nU:d for governmental funds with silnil!IJ' information presented. for govemmcntal iictivjti~ in the GWFS. By doing so, readers may.~w,derstand the: long-term impact pf the near-tenn financing decisions. Reconciliations are provided for both the gov~111errtal fund balllltce sheet and the governmental fund Statement of revenues, expenditures, and changes in fund balances to facilitate the comparison between governmental funds and g0111ltiUntntal activities. The City maintains 31 individual governmental funds. I:nfonnation is pn=scnted separately in the governmental fund balance sheet and in the governmental fund statement or revenues, expenditure~ and changes in fund balances for the General Fund only. The General fund is considered to b.e :a major fund. Data from the other governmental funds are combined into a single aggregated prc$en~tl01:1. The City adopts,,,~ bu~~t~uallY, for the General fund~~ other ilmd_s;:A ~ C9l1)parison ~ent bas be.eJl moYic¼l (<>l' the-~ }'.und to de!nori~trate _c.ompij~ with ~ b~gct. Jt ~ presen~. in the PF$ (ollpW,ing the" &Wet,ient of revenues, expenditures, &:Qd changes m i®d balances. 'l'.be, goll.em~;tl 'FF$~ ~f found Qn p#ges 40-43 of this. report. · . Pr;ptft/4,y PF$. 'Fb.itCity maintains, t~o d/.ffez:eµt .types ofptopri~t:$ty ~ds. Q;l~t /ilil4s, ~ :~ to :repojt, ~¢ ~ ~ons present¢ as DWi!nes&-t,pc activiGcs in. tb~ q~. ~~n~¢ PF~ })1'9jde ~ ~ tvPe. o(mfo~tion as the GWFS, only bi J®i:e dewl, IJ;,hi ~-. ~tpristd\'i:Q:/;!s ~ ~i for :l~ Bleqtrio {U'@'.,), Water, Wsstewatet, We;st Texas ~~icipal J.>~'Y'et -,\~_tiW -~A). $~ W~~~, ~~t Solid Waste, and Airport ac~vities, yf which ~e• fim ~\1: ·~j~ ~--~i~ ti;> '1.?'e ~]<it •fim~ by ttie City and Ille presenttd separately; The tatter tnree'~\lities-~ consideted,1li>nftutj.or t\mcfs: by~ Ci~ and are combined into•a sing.leag~gated p~tatim Internal 8~ funds are an accounting device used to accumulate and· allacate costs internally among ·the City's wious functions. The City usei. internal serv.i~o funds to account for its t1ect of whiclcs, management information systems,-risk management; print shop; and cen~ ~011se acii~tiea• among othffl. 'The ·seivioes provided by the mtcmal scrvi~ .tunds 'benefit ~th ~l IPld.~~~ ,m~s.. end ~g{y, they _have ·been •incluct«l within· :io~ ~9~-~-~.~MYPe •C!iviti.~-s. apptoprlate, in the OWFS.· All inte;mld service funds~:~~~·~ ii,-:~~ ... @!eel preson~ijon 'in •the proprietary PFS. Acc.~oiliati~ ~provided.for botb-~·,r.oprt~ ~ ~ of.net assets an~ the proprietary fund $8umient 'of ~ven~s, ~.~:ana ~ •i:li ~ net ~ w f~Ja~ ~ ~son bctWeen e:ntelprise funds~ busj~5S-iype :acuvli_ies. The~ta!Y FFS can lie. r~ on pages 46-57 of this report. ~-F:F$. Fidu_ciary fun~ are~ to a¢eoum ~ ~un:er ht:ld for the ~etlt pfparti~ ou~i~ the go~t. Fiduciary funds arc notTCflectcd in•~ OWFS because ~ ~i'of -~se ftlnds ~ not.available co-support the City's own programs. The City had one agency fund; which ~s closed in FY ·2006. ' Notes to Basic FlPAnclal Staiements. The Now provide additional ili1'ormati® that is cm~tial tQ a full und~g of the data provided in 1he-OWFS and FPS. The notes Cllll' be-found on page& 59-9.4 of this -repQft. R!!41i.wed Supplementary Information other Thui ~A. The Cl'ty bas: ~ requ#'ed S'WP~tal'J infonnation relating to. its pr<1grtss in funding its obligation to .provide pensi~ benefits to its employees .in the Notes to the BFS. . . - 23 City of Lubbock,Texas Managemen.t's Disc:uuion and Analysis For the Year £11ded September 30, 2006 Gov.er.nment-Widc F".mancial Analysis As noted earlier, net assets serve as a useful indicator of the City1s financial position. For the City, assets exceeded liabilities by $583.S million (net assets) atthe close of the-fiscal year. This compared to assets ex.ceedll\g llabllities by $545,S million (Ml i:weu) at the end of the prior fiscal year. As a rem.ilt of operations, total. net assets increased by $38,0 miliion during tho period. Ci.lrtcn,t an4'.othe~ assets t::apital qots Total asriots C!mnt ll-.bi1lde5 Nciil,~IJ;ll,.llitics Total .. il~ Nii!~: In:¥~ i!.l-~J1ita\:a:ssots, riet:ofrellitQd debt Restricted 1:i'nrmdctod To~lnet~ City or Lubbock Net Asseis 'September 30 (lnOOO's) Covemmental B11sh1t1s•Type ~dMUes Acll\lltle:t 2006. 2005 2006 200!' S 124~ 116,o:21 203;858 11q;9.4s '1601"'° 1S816'1,4 !~154 631~ 2841996 2541635 904j012 80&~89 '35.,~91. 1~~7 54;3~ 2S~9s 137107! !27it69 318i8!)6 !48103:6 172~5 144,00.§ 433;218 373,,541 16;4B3 ai,10 380,1•? 36~;227 ·I0,149 ,,j.w l8'91S 26,21-6 261089 12iS29 71i2·30 4SJ4S $ 11l~21 I ro~'29 410,194 43.4is'.4s · Total 1006 2005 328;».1: i86,f66 860,7.04 ??:610s.l 111891008 11063'!024 · $9,519 4),34l su;,m 475~5 6051493 51-7154!7 4~,63.2 445,SSi :z?/0~ 3.5,o46 97.819 -64'1§24 S&3~1S 54S1477 By-far tho-ta:rsest portion of the City•& net a.ssets, 73,3¾, refl~ its investment in ciapit,-1 assets, e.g., land; b.~ldings, :~tructur.ei mac~i.and «Jui~~ 'lest any rolat~ debt~secl 1¢ acquire those,8$Sets tbat ~ ~til_l ,~ at the olosc 9.t-~ ~-~•-~· The Cit)'-uses t~ose capital ass~~ P,">Vide.seivlces to c*zcns;,~~~dy1 ·these asse~ 41'.0·~ a~iltbl~.for f1mn .spending. Alth9,Ugh the.City's i!l~tment in pa~ ~ ~ n.,ported n~ ~f ~~ deb~ It s_h011ld be no~ tllai the reso~ needed to repay this d~:bt m~-be provided &om other SQ;!irces. !i~Q:e ~e ~ital a._uets Sh~lyes:~not be used ·t(> liquidat~ tliese l;a.bil!tles, An additional ponioQ of the City's net llS"IS, 5.0%, represents l't$0Ura:B that are subjed to external re5ti,ioti.On$ ,ort ~w ihey may ~ used~ 'The remaining b~cc of u.~eted n~ 11,1~ ofS9S:7 million mJY bl,.·us«fto meet the City's ongoing ~ligations to citizens and ore-ditors. Tlio City alSC> reports PoSitivc bal~cef in l)JI .~e :ta~gorie~ of n:ct asset& ro·r the City as a whole, as well as.'wr its separate govemmentaJ activities and business-type activities. The City1s governmental activities experienced.an increase in ·net assets of~.1 million, while net assets· increased by $6.3 million durirg the prior fiscal year. The increase In F1' 2006 is primarily due to higher than el(pected sales tax collections due to better than anticipated Rtail sales .and an increase in franchise taxes from power companies due to increased ruel and elCQtric prices. 24 ( City of Lubbock, Texas Management's Discussion and A.li.alysis- For the Vear Ended September30,·20·06 The City's business-typo activities experienced an inctcase in net assets of $35.9 million during the current fiscal year as compared to a decrease of $7 .6 million during tht prior f'iscal year; Tho i,nc~ in net assets was budgeted to meet City Council and LP&L Board goals of minimum unrestricted net asset fuilan¢s, ary or Lubtio.:k Oiangcs In Not Assets For tilt Year Eodcd September 30· (ln000'$) Buslnes.,.. Gavemllllllltlll 'fyp: ' Ae1Mtita Adivilid Totalt ~.n~i 2006 1005 2006 2(1()5 2006 200S fug,w~: Cl!.ar,ges for~' s 9,632 10,58-3 313,712 272,902 323,41,J 283,48' ~napnts:and ~lbvtfo:ns IQ.203 13:296 8.352 S·l56 1,;~:i, 21,452 .Clpiial grio_li.aJlil c_oncribull0!1,S 8'45 17,625 5~06 18,47Q: S,206 ~~ -~-'' 42;171 ~ies=,·· 4S,S77 ~~ 4,447 13,3,18 • lnWS!ffii.mt Ollfflln,gs' 4,394 Other 6898. i-~ 138-IJS -~Yel0MC)e$ 9;910 -8;220 ~ ~,~o B-,220 Olnuit ;-'' 6,112 6,145 1l:!!; 6,145 Oiifuratm:~ . 18.915 n,14s .• l?,74S '··· ...• ~Qff ~dcwlqinlent 10~ .9.73? lG~ 9,739 .r.U'Cl '26,711 2"5.17. • um~ 23,517 J:fAAIIIJ $,014 s.~o , ~.~l4 5,o,10 Police 42,063 38,4$2 ~ 3&,~52 :Othj:r publio,~ S,140 4P:,7 ·si240 4;m Sinieti"'and -&aftic · l i;ISO 12;467 l'~~ 12;467 Non-depllin• s~. 6,253 s~ 6,253 IIINonlong«m debt 4,326 3,195 4),26 3,195 2lcctric 213,027 192,902 213t~ 1~902 w• 32,130 28,13~ 32.130 2,;738 ~ 21,274 17,804 21,274 17,804 $olid-W• 14,?11 14.695 J4,97j 14,69S ~ 5,175 5~86 S,115 S,586 l'iwit 9,349 9;(!03 ~;349 'Si,09l .AtrpQrt 1r!!J.. !zlSl 1.991 s11sI TocaJ~ 145.§30 135.750 304,623 276,879 450;'2'3 412,629 Oianso uf~ ass.er. bofcre s~i~~ ~ (7;515) (9,181) 45.SS3 14,S31 38,0Ji :S,3SO Spidalitin (6.631) (6.(,37) Ttansfm 9lJJ1 1S1469 {9,607) !15146~ Changcln•a.udS 2.cm 6,288' 35,946 <7;s7s) 3.;038 (1,287) Net~-• bqlming,of )'m' 11'~629 104~1 434,848 m:423 =J71 546764 'Net~• ondof~ $ Il;Jaf lib§ ;rnr,194 ,8.JR 311J 13 ~:w, Changes in Net J\sffls. this report. Details of the above summarized information can be found on pages 38-39 of 25 City ofLubbocl4 Texas Mutagenient's Discussion and Analysis For the Year Ended September 30, 2006 G!Jvermnental activities. ·Qovemmegtal activities increased the City's uet assets by $2.1 million. Key elements of the increase include: • Transfers to/from busin~s-type activities during the fiscal year increased govcmmcntal acti~ties net assets by $9.6 million. During the prior n!l<:al' year these transfers increased governmental activities net assecs by approximately $15.5 million. This is a net decrease of $5.9 million in resources to go~tal acrivilics. Tl'ansfer$ from the business-type activities included payments in lieu of taxes, frant:hise fees, and indirect costs of operations for centra.li7ed servi~ such as payro11 and p~ing. • Tocal expense$ increased by $9.9 million from the prior year primarily due to increased gpending in public safety functions. CitY, Council w. contin~ to be committed to pu}>lic safety an.d h$s allocated more f®µr¢eS to public safety~ other areA$ bl the go~~t. ~re _e~~~ $3.2 nu1lion and J>C?lice ex~se~ incrw,ed $3._6 million in FY 2006~ ~~v,e ~~ ~ $1.7 i,niltio~ due to moving C.Cilities ~gement from an internal ~-~(~ ~:.tl)"e .Oen~ Fund. The·se ~e~ w~ p~v.i~y ~ to • clifterent funolions. tnt~~~{Qll ~g~ term tiebt loorc~d $1. 1 t'rtilllon· due to ~w ~t issuim~. ThC"se were: :offset ·by a $1,0 ~on d~ in non-depaf1rnental functions, wtifoh was mainly due to Federal Einer.gency ~gentenf Administration (FEMA) c~ jncurred in fY 2005 while hosting cwcuees &on,: I..Qufsiiina.'"and south!)IISt Texas during Hlll'ri0$\ts Katrina~ Rita, . . . ·. • Remiues incrc&Sl!d by approxima1~ly :$1 i..s milJum.· Otattts and oontribµ"tlon~. ~ ~ ~;2 million, partially due to decrease: ,in F£MA and other lffl1ergency ~gemcnt fund&. ~~ tu ntc-was reduced to ·$.44120 P.et SIOO' assessed value in Pi 2006,. down fro1'l the ~45910 per $100 &SSQsscd value rate in FY 2905-; however, prope,:1:¥ _tax revenues increased' $3.-1 ·million due to increased ~ssmcnts. Sales tax te\'._Cl).Uli, increased $3.8 million. in FY i00-6 due ~ '° ~ economy. Franchise tax~ in~ $2~ '1iillion, priman1y. due~ increased costs on gas and c:l~ bill$ to c.onsumel'S and an ir1Qrea$e· ln the. fi'aoolise Tale from 2.0% to $;00-/4 ~t on one ~c company. lnvestrn(mt incoµie increasl!d ~JI million .duo to increases in inter:esI ra-aj ~ ~d cash balQl\CCS. Other rev~ues in~ si.$ million due· to developer contrl'l?utio* i,n iji~ ~y Capi~ ·Projoot Fund. ' 26 < ' ( . ( ) City ofLubb~ Texas Managemeiit'-s Dis~n and :Analysis For the Year· Ended Sep~mber ·301"2006 ™$ graph depicts the expenses and program revenues--generated through the City's various :goveinnicnhil..11Ctl\lities. · · · · · $45,000· ·S40,000 ·~·(5;000 ,$1'.0;00& . ;$.$.O()Of ·$0· 27 City of Lubbock, Texas Manage.~t's J;)isc11ssi!,>n and Analysis For th~.: t:e_ar E_nc,~ &~ptemb~r 30, 2006 The·tottowirig,pph rc;fl¢~ ~~ ~-f~ rev~~e ~ thc_percc:ntage. each 59~ n:p~_ts;:of fl.ie- total. Grmts& q!~~~·ttJ.-:,,--_ 8.0% o.t11e.r:·nxes, -"3it. ·'. MbceUanc:ous ·$,0% $a1's Tax~. 33.0% Pco_perty·Taxe:s \11,G_¾ ,• :~~f~r servi~ for:~~es·w~.~l3.8~i0Ji;-~-'.ff,~.(i;¢~~ ot~,~ nu~ Expenses-tor busi,n~-~~ wm. $304.6,mjlliQn m:FY ~QQ~,-~:in~ Qrs21:1 ·riilllt&t, -' ' --~ Sleotac ~QnS ac.cowi~ •·fbr ;ug,s iii\flli~ of the ~ id ·c'Jw-ge$i ~ ~ci~. Electric- ;~_~ns ~Jl?,de ~ ~~~--~~-~-4~~.(l,.P&L) ~ W',estt~~~f~~!=t. -.~A). Bccause-ofthe.in'teduria. a:ctM¥Ybetween LP&L,and ~A; ~:timatelrone'tliird. ~f.tl).e ~UJed .el~~c; Jtjep~e ~ e.ljµitmt.;d f« tlle ~tity wide~ QP,~ ~\'®~~ consist prinelpally · of i:be tetaii sai~ of -~~~ity to residential" co~; ;,rid· ,go~t -~-1tnd c:M~wstcm sab ·-to M®~e -· · customers-. LP&L. c~· a -ra ·. for . ·,-: ' -, ' . -... : .. power ' .. . . -.--. ,. .. -· te', - et.,c service plus a NCl·~sfadjus~t ~ for electric service. W!we the ~:~-~~ed ~.orisis.tent be:tween years. ~ere have b«n· niaiiy. ~ cost adjustme.n~' ~g FY '2®6 which have 28 ' (' ( ( I .. < ) City or Lubbock, Texis Management's Discussion alid Analysis For the Year Ended September 30, 2006 cumulatively increased the rates charged to customers. Also, \VTMPA gas sal~ to .third panl_es. ittcreased from $65.2 million in FY 290s to $76.2 mlllm, in FY 2006, ·again due to fuel· cost adjustments. Electric operation expenses increased $20.1 million, ftom $192.9 million in FY 2005-to $213.0 million in FY 2006. The increase in expenses is primarily due to the nation's inl)reased fuel and energy costs in FY 2006,which affected bothLP&Land WTMPA cost of power. • Revenues were also up slightly in most of the City's other enterprise funds, with the Water and Wastewater Funds accounfi11g ·ror 'the largest inQrease, .Water \ISilgc, which effects both · Water and Wastewater Funds, increased due to drought conditions. Water rates also increase<l 3¼ in FV 2006. Construction activity-was alSil hiighedn FY 2006 and contractors contributed $6.6 million in Waror and Wastewatet assets, $2.4 mQte than prior year. • Operating grants, capital~ and··~ntributi~-continue to be a significant revenue sowae for b11siness.-cype activities dtirtn:g·tb1t r.urrent ,fiscal ):'car'; pn)ducina, nearly $26.0 m_illiofrin rev~nue. This is a $ 12.6 million inc~ .~er pdQr ~--support of $1~.4 miUi_on. The Airp.~ Fund {ncun-cd tlJt. largest inc~ .duo .t• ~Mng fod~'mt,s of $1-2~0 million for av~n· apron and taxiway improvemen~. In tljt, P.tlor: ieat·llje-j.{~r( m;ei)t:ed $2.2 mntion in federal gt1nts. .the Water and Wastewater Fund_s .. a~o.~i~ Mditl~ ~loper contri.~tions. • £x.pense~ in Water ll!'ld W~~~(#.l ~ri-J~ l~ ar ~I by $7.~ ~Ilion ov~ ~h~_P.(1~ f15~ ¥OM, In FY i~Ot! the W@-;S~ _f.Qtt~· ~id.-~'t. '!l'J..ll~i, -~I' ~ Waw Roso_~ .¥~sw P~!- ,ese fun~ ~1_~ ~u~ ~~ '~JijiJ,.~ ~~~ utilitf costs w ~-~eir_plant$ .'~lll' tp. µi'e higher fuel an_d electr1cal costs. 1111? W~ iqfd-Watet Ftmds also had an Jddluona:1 -Sl,S million in depreciation expense, Whleh i~ .dl_~lfy attn)uted to the ~nt capita.I ac~vlties that are now placed in service and depreciated. 29 City or ~gbbock, Texas Mio:1age.,~ot~s Discussion and Analysi~ For. ~f/ Year Ende4 September ~O, 2006 ~ fyl!1>-\llljng;,~~~p~ ~~e~ generat«l ~~. ~-!msines"S-~ ~ti"11!~-.~·~~~ earliei,these: activitiesc,mclude lP.&t, Water~ ·wastewater, &lid Wast.e. Twisit. WTMPA. ~ aridStpnn-Wa,~:~ge. :Revenues. by S(lurce -Business-type ActivJdes 30 ,Misce.llaneous 1.2% ~t,sand .• ·Q1.3ttlmJ~c,)'As. s.'Q.¾; ---·-.~~ i ' :· \.lii~i ',' ~--11 .14'/4- ·143/a· '· . ., : < ,, \ ) City of Lubbock,. Tex~ MRaagement's Discussion and Analysis For the Year Ended September 30, 2006 ' fiscal yeu, representing an increase of approx.imately $2.S million. Total fund balance (reserved and unreserved) i.va$ $19.9 million at the Cl)d of the fiscal year compared to Sl7.4 millio.n at tlte end of~ prior fiscal year. & a measure pf the General fund'& liquidity, it is useful to compare bo~ unrc~ fund balance and total fund balance to total fund reyenu~ tlm~served fund balanct repre~ted 29.2% of total General Fund revenues, whioh is an improvement over 19. 7% of total General fund revenues in lho prior year. Total fund ~alanoe was 20.4% of total General Fund revenues compared to 19.8% in the prior year. Prop~ Jum/s. The City's· proprietary funds pro~de essentially the same type Qf infonna~on tound in lhe GWFS, but in more detail. · Unrestricted net assets of the major proprietary funds at ~ end, of September 30 are $ho.~ next wi~ amounts presented in 0OOs: · · lOOlli 2005 Electric Fund s 32,141 -l.4;.'151 WaterPimd 10,&78 6,&:18 ~astewate-fund 9,$93 S,9~ WTMPA 1,307 l+3l4 Stormwatct 10,022 7;420· $ 63,941 _)s~~7· The µ,&L Fund i~~ umt.stri.ctcd n~ ~ by $18,9 t@tion ~d to an. ~ Qf ~M million during the. prior year. This ts ma~ly due tQ the.' results .¢ ~rations :arid ·the-~jsiQ? ·by-Cit;. Council nor to charge !or payments in lieu of taxes ~d ~·chbo fees until ~ui.te cash-~~ -ore established. increase in net asset$ was $16.4 millfon .m FY 2006 ~~ s3:o rm11ion in "FY z~S: .. ·· 'Fhe Wffl Fund roflcc~ a current year_ ir1¢1'e:Ue .in umes~orcd net useu of t1tarlf-$4~1 ¢11.lton (:()mpatcd to, a :decreast otS7 j million during the prio-r -~· In the-currtnt .year, revenues ·were higher than expegted due to increased wat.er usage; while ·in prior YeJt ~e Water Fund had a i()ss .d\10' to termination of an intei:cst rate swap agreement. -· The Wastewater Fund reflected a eutl'Mt ~ar mere~ m ~.lrie.te.d net ass~ ~f ~tel't $3.~. million.compared to _a S,:4 million 4ecreasc duiiqg t.be:p.iior· year; Jn ~utretit'year. ~were::~~ than e~~ due to the discharge .of a higher vol~ of>wt:tet consumption. 1'hc WTMI>A Fu,td fi.ad a S.llght decrease U.), ~c~d r,:~ ~~-The prij:¢ -'&Qal i.,, ~~ -~.a, d~ in unrestrio'ted nets assets of S.4 rnilli($. ~ ~ a iesult of:operati!)llS. · The Storm water f~-~cnced an inOl'eaS¢ in ~tricted ~et a_suts of S2,6 million 'during~ fiscal year compared to a $.6.1 million increase in the prior nscal ~. The increase is due to the 'teSUlt of opert1tions,. ·-· 31 City Of Lubbock, Texas Management's Discussion and Analysts For the 'Vear Ended September 30, 2006 General Fund Budgetary Highlights Differences betwml..~ original budget and the final amended budget were approximately $7 .S mi'liion in increases to expenditw:" imd transfers out. The main reason for the increase was budgeting for l)Ul'Cbase of machinery and equipment through the ·issuance of capital leases. Revenues in the Gen.era! Fuod exceeded budget by $4.3 million primarily due ·to higher th.an expected sales tax collections and franchise fee.s. The General Fund ended the fiscal year with expenditure! and transfers out of $459,394 more; ~-budget,ed. The primacy reason for this overage was related to lµgher tNn anticipated energy and fuel CO$tS across all departntei,ts. The City Manager has implemented the following additional CQntrols to ensure more stringent budget c<>ntrol: • Biweekly B:udget' Porcca$ti118 arid Manilger ~w • Position Cpntrol ~g~t S~ ·arid Rc:<{ui~tion Review • Bi~kJyOv~~~.~~•~~tRe~~ • General Legget: ~~jl~~t!~m f~Uey, . • Omtralir,ed :Faciliti.e{~,:fanage~-airid'TJtilitiC$ Budgeting lmprov.e~Monthly ~iR,ct?~_g:tii City·Council • Changes in.tlle. Hpme-Storag,e -~f i-:t~ Vehicles Capital Mse(s and Debt Adm.lnlath.tton Capital· assets. The Cl.ty~-s inve~tmt!Qt in C;ipttal ~ for i1S ·govemmentaJ attd bu•s-t.ype activities at .Septeinbet 30, 2006 amounted to $860.7 ~llicm1·net of accumulated depre~i.ation: This wa-s .an SM.6 million ~ over tl\e prior fiS:4al ~•:s ba1arioe of $776,1 nullion, net of ae<;umut~ ~.eiliion. This Ul\'.C.S~~t ln ,!='-pita.I .. $s.ets; trt~I~ ~d, ~~ ~d improyemerits, egu~ @~ti~ in Pro and itifi~ · · · · · · · · · ··· grefS,. -. . .. Major capital ¥.i~ ·~ve,i.ts d\!t-ing ~~sq~l ~i®luiiec:l.~e fqllowill8: • Many ~ l~t. ptoj_~ts. ~~·4.llC; ~ dtcfu;a~ f~ding fti>µ1· the lQCSl ~ ~ wi?,ich eanna~ -i~ of the ·$% ~~~~.to ~d ~~Y S~t Project$. The ~g~t (tat~ ~t:reet l\'9j~ _cOQ.tin~ ~'th tlic: ~~Oil .gt a,T.~ .~oroughl'~ street wit~ $1:2;6. m,iJlion .eitJiended Jn the fis~ year on Mi.l~ee' A~uc ffom 34fh: S~ to·9$th Street, • L e amounts-of ·stm •·~ 1111d recotisttuction of road ha$ -~ ac:CODi lisbed ~ ·-. . ~ .ll . .. . --. ways . .. .. . . p within,~ North Ov.erton ~ ~t ~~ '(TIF) Reinvestment Zone, tlie· M.~s for ~* projects 'oQtnes from ta,xes ~~~the 'fucrcmentofpropCJ'tY valuation gro~ Wl~ the TIF, The nmds ~ to ~cc the projects :~ ren~d within the zone, a,nd do.~ot im~ct ~s or fe.es to:¢i~ ou~t~·die>'•TIF. . . . . . . . . . " • The Wattr Fund acquir~ $19.1 !JlilliQn ii?. water rights from the Canadian Municipal W~ Rights A'utboritS-'81.ld coritiriued wOJ'k on·n~ WJter line change outs and extensions. . . ' . . ~ . '·' . ' . • Appro1'iinaiely 3~.oon square yatds 'of new paving was ~onstructcd at the Lub~ck Preston ·Smith .lo1ernational Airport to help ~ .-air curior aircraft. This project also involved ~val and install~ of new taxiway lighting:anp. dramaae improvements. Eic.penditures on ~s proj«t totaled $9.7 million -du:rill8 the 6sc11l year. &pendi~res to date on tlie project totat $10.5 million. 32 < C ( ( ) ' City of Lubbock, Texas Management's Discussion and Analysis For the Year Ended September 30, 2006 • The City continues work on a tlood relief P!'Qjcct linking South Lubbock's chl\in ot"playa ~s with an under3r0und ~m1ge system, spending $12.8 million during the fiscal year. Expenditures to da~ on tlie projc:ct total $.26.1 million. At the end of the fiscal year, the City has construction commitments of$I S9.7 million. Cit)' of LAbbo~k ca,ltAI Amts (N11t vf Aecamwlaied Depreciation) Scptombor 30 Govn11mc111&1 Aetlvltru (h1 OOO's) 1006 20'0S Land $ 8,971 8,9S 1 .el uiidlngs 29 ;870 18, 146" Ba1l11en- Type AetlviUcs 2006 %005 31,949 31,94"9 64,'092 65,951 lmprol!'oments.other ~'ban bufl~liigs, 5.0.,443 43J9S :JS9,474 34?,j93 439.~l? "11chittecy and equipment 2(MlS 19,129 17,99:3 6.3,71.9 .9.i.fiP$ G_1>11struction in pro~9S S0.650 37, 79-3-l,36,M6 12M~2 lt·7.296 Total . . f 160.S-49 138,614. · 70011$.4 637,444 ,86<>j'103' Additional infonnatl.on,ab¢ut :the cit)f's 98!)ital asse~ ~an 'be (owd on pages 72-7~ of:tbis ~ort. Long-term debt. A s~_ofthe C.icy'~ ~~outstanding de~t follows: _Clb' -~ L11~1>ou Qutn.ndlll.~ D~b, 'G'rllual ObUptl.011 alid R"tV.eru B11nd1 September 311' . G~ncrat 01llipllll11 boll.ds Rovenwi bortih .. Tot.l (In 000/J) Coviil'tllllb11&I ActWldti S )24,4:57 102,720 $ 124,4.S7 IOZ,.72.0 ' 2006 .:ioos 32Mc1S 2!6,7SO ss;o-n 42,aoo 3811647 329.S.S0· 100f zoos 448,025 )89,4"?0 58'.079 42;800 There is nodirec.t debt limitation in the City Chartci'-or under State la-w. The City ~ \indeta &me Rule Charter that limits the maximum tax -rate for all City purposes to $2.SO pet' s·100· '6f isse'ssed valuation. The Attorney General of the State of Texas permits an allocation of SI.SO of~ $2.50 ma.xi~ ~ rate ·fO.r ·general obligati,9-tt ~d$ debt . .,vice. l'be. current ini=st * s.inid,?,g ~ tax• rate per $100 of~ valuation is $0,060.94i ~ch,b •i1icantly below the·nwdrilunt -.Jf~wab.lcftax m~. , ~ of ~er )·o. m6, ~-City's tot!d out$Wlding de'bt bu ~ by· $73.8 milliotrot,:17,.l ¾ ov:et the prior tiscal y., The m~e in oµtstanding d.:bt is--Uributcd to the issuanee of $98,,:.~:in debt, ~fts.et by tltc ~ayment 'of ~heduled debt sen.'lce totaling S2S.3 million. and th~ ~ ~f S:iU milliOfitof debt~ ~ef~se debt of S 18,0 tmllion. 33 City of Lubbodc, Texas Management's DJscasslon and Analysis For tbe Year Ended September 30, 2006 During the ti&eal year, the City issue4 the following bonds and certifica~: • $2,7 million of General ObHgation Bonds. Series 2006 were issued to fund !he current capital improvements plan. This issuance was the th~ installment of the $30.0 million capital improvement debt issuance approved by voters io 2004. • $77.0 million of Tax. and Waterworkg Sys.tem Surplus Revenue Certificates of Obligation, Series 2006 were issued to finance projects in Water, Wastew.ater, Solid Waste, Storm Water, Airport, Tax Increment Financing , Lubbock Power & Light, and Gateway Stre~ as well as Parks, S1reets and Municq,al Building projects tbrougnotat the City. · • $1 &.o milli'on in bonds were issued by the canadian River MunJcip.al Water AutboritY (CRMW A) for Lub®_C~'s share .IJf the $49J rnilli<Sn CBMWA Con1ract Revenue Bonds, Seri~ 2006 (ConjUJ10tive l;Jse Groundwa~ 8'1pply Project) for •the: purchase <If ·water righ,Js. the City of Lubbock is· contractually -01,Ugated to par:thc debt ~cc.on these bonds-over a 20 ~ear pen~ • $18.8 million of General Obligation Refundjng Bonds-, ·Setics 2006 were: issued 1'.Q dcfease $18.0 million in outstanding bonds in order to achieve interest savings. All bonds ·is.sued during the fi&9U year were insure4 tQ provide a iowcr cost of interest ~~ f.or die City>, ·iaxp,y~. It is the Ciiy~s ~liey to ~luate· _each bond i$sue io ~e whetbet it 1s eiX)liomicaliy feasible to purchase·bond in_$Uiance. On N9vembet 22, 200S, the City of Iii~ receNed a rating outlook upgnic:it: ttmn "fliab_le" ~ "positive" .ftoin MOQdy's Invest()TS .S~ce. ~: g~ ~~tly ¥,uuai~ an~¥-" ci~. ~ S~dard & Poor's and Fiwh lbting.s, Jne. and an "Al" rating from MQ()dy's. Investors Service for general o~Ugation debt. All three ratint ag¢c~es fi!lve ~teed th~. City ~ ii po$itivc 9trilo'ok. whi~ Uldicatcs the possibility of a rating upgrade irt the ne&!=·~. On D~ 21, :zoos-, l,P&i,_~ived , ratiita upgtade from "BBB--'' to "BBB" fivin S~datd & Poor's, ~ LP&L revenue ~~ ~ c\lffl:r!1:1y rated •1BBB" ~ Standard &-Poof's, ··BBB+-"by Fitch ~1:ingS, ~; and ... A3 .. by M!>9dY's Jnwston Service. Additional in(orination about 1ht City's l(llig•term. debtciin be found on pagea.ijl-86 of~ rq,ort Economic Fac:torund 1he Nut Fistal:Y'8r'i Bqc;lg1$t and Rates . . . . . . • At th~ end of the City's fiscal year~ the unemployment rate for me l:.ubboc:k area~ 3.8%. Thjs is the same rate as September 2005. This·09IDPar~.davorablyto the: state's unemploymentmte of 4.7 ¾ and the national ra~ of 4.4 o/o for September 1a~. • Retail. S!llcs figure& are. only aw~bl; .tbrpµgh the third quarter: of ·FY 2006. Total retail sales , refleoted a 7.3% increase for that period oY«: tho,A,m~ llfflod in 2005. • The nurol)er of building pc::nnits for new conslnlCtion decreased from 2,222 during FY 2005 to 2.0S2 irt FY 2006, or about a 7.7% ~. Thi~ CQllll)8res to a 20S¼ decrease durinJ th~ prior period. IMlding,-pernµt ~ues for: new ~ti9IJ decreased from.$38S,4 million in :f\" 20.05 to $376,:Z mi~ion in Fi ~ or about a 3~ 1 % -~~-The number of n~ 9~$tnioti.Qn pe#nits and, new conscuotion valuations hit an all-time high in FY 2004. The current nWJ#rs ~ still mucJi. ilnproved o_vetyeir$ prior to FY 2004. 34 < ( ( < ( ( ( ' City of Lubbock, Texas Management's Disc11Ssion and Aklalysis For the Year Ended September 30, 2006 • Total occupancy in local hotels and motels unproved and the local o«upancy ta:< totaled needy ·s3.4 million. a 4.6¾ ~ over last fiSQ&J year. • City Council again decided to support the operations ofLP&L by forgoing transfers (or payments in lieu of taxes and franchise fees for the upcoming fiscal year. The City Council interrds to continue this support until such rime as LP&L has adequate monetary reserves u ,ct by City ordinance, All of these f~s were constd~ in prcparlng the City of Lubbock's budget for FY 2007. • During FY 2007 the City adopted a $.00444 'increase in the General Fund property tax rate. The General Fund increase will bring an llddltional $1,7 million inc.tease in revenue from b.eth property value growth ltlld the adjusted tax rate. The 1¢,ditional revenw:s will belp cover medical insurance u,uJatio.n co~, &,$1,200 ~st o(·living adjustment for all emplo~~ •. ~sed ~1 ~. and 29 public safety ~olis' added mid-ym Qf FY 2006 that will have•tbe full effect of cost in FY 200?. • During FY 2007 the City adopted• $.01035 iucr-caso in the Debt Service Fund real estate tu.Rte. In the last several years, Pity Councii has adopted a n\lfflber of capital improvemem. proj~ to addrc~ changing ~ity needs. The bonds for these project$ wero sold in 2006 and related debt service begihs in 'FY 2Q07, Meemtating an increase in the mterest and sinking fund tax r.ate. • In FY 2.005 the City adopted a. master lease program to replao'e. public safecy vehicles and other equipment that had.been neglectc4. The cumulative effect,of nwter le~ing the last two years wiU increase debt service payments on master lease obligation, in F.Y 2007, • The City bas prepare~ a 5 year projection of utility nws-for Water. Stonn Wa.ter, Wasttwater, and Solid Waste Funds. 1'be W.ater Fund will experienQC 8.11 increase in rat.es as the City aggt'C$Sively seeks to obtain wa~ ri_;bt&, plan$. oc adding infrasuiiotute to transport water to ~ Cityi ~ maintains ~g iQfrasiructure. The Water Fund rates will in~ l i % in' FY 2007 •and are. expect~ to riR ovet the ·remaining 4 years to fund debt servi~ Q1l water capl~l projects.. The Storm Water F~d Will incur debt aa the City focuses on~ lhroueh, the South Lubbock Drainage project and ongob,lg 1J!&Ultal\OC. Storm water ~ art'J tdCCN&1e for t,he future debt aud are ~ e,;pecied IX> I~ witiJ FY 2010. The Was~• F1.1nd and, 89lid W~ Fund are -1so ~. slight fee .hic,eases over the next 5 years due to opemio1la1 cd~ increases and increased debt ~ee. • At the Ml!tch 23. 2006 Ci.ty Council m.ee~. tne City Co:uncil approved lhe "Policy on. G,eneral FUlld Unrestricted Fund ~8®0 and ApprQpriable Net Assets for All Other Funds". The polloy tar,ets.4tt u:nre"Stricted fund balance in an amount equal to at least 20% of regular general fund opaiujng reveaues. The policy targets appropriable net assets in the 'Water and Wastewarer funds in an amoUbt equal to 25% ot Mgwar·operating reve11ues; «ppmpriable net wets in the Solid Waste, Airport and Storm Water funds in an amount equal to 15% of reaular· operating .revenues, and appropriable net assets m the Intcmal s_ervicc iund$-m an amount equal to-8~ ot' r~gwar operating revenues. Fun4s that have budg~ utiliDti~n of net usets that e;.ceed t4e ~priate target policy. iti_eludj:l $3,0 million in W~r fup.d, Sl.S million in Wast~ Fwid, $2~ million in Solid Waste Fund, and $2.2 million in Storm Wat.er FlUld.. The City has not planned any: use of General Fund fund baw,ce in FY 2M7. Tile Ll>&L ijoard bas set their unrestricted net assets goal to be SSO million. or 4 months C?f operating expenditures, whichever is greater. In FY 2007, LP&L has budgeted to incre~ \ltlJ'fflrictcd nei ~ by $19.3 million. ,35 City of Lubbock, 'l'eXS$ Management's Dls-cussion a.nd Analysis For the Year Ende,d ~eptqnber 30, 2006 • LP&L FY 2007 We rates will be consistent with FY 2006 rate$, but the fuel cost adjustment ntes will VarJ ~ on $uppli1;1 ®St, One of the main suppliers of fuel ~ LP~ has applie$1 far a 1$% increase in rates, and if approve<!, could increase fuel costs up to l5% in ~ly 2007. This ~y CAI/,~ elcctri.c i;ates to increase in FY 2007. Requests for Inf~rmat.oo Thi& financial report is ,#lsigned to provide a general overview of t1,1e City of Lubbocjc's finances. Qu()Stions. coiu:cming any uf the information provided in the repprt or req~ts ~ additional fin!I-JlQial infonnation should. be attdressed to the Chief financial Officer, City of L\lbbock. P,O. Box. 2000, Lu~bock, T~, 7'}457. 36 ( < C ( . ( City of Lubbock, Texas Statement of Net Assets September 30, 2006 Connrnc:ntal Prima!}'. CvYel'llmtnt· Bu1l11ess-type Compon,11t Activities ActMtles Tobi U11ltt ·ASSETS Cub liml cub oq11i..ieili1 $ 2l,5?7,439 s 3-7.-l3$',183 $ 38, 711,.622 s S,9S0,66j ) lneoslfflOIIIJ 19,013.367 33,313,806 52,387,173 22S,144 Roceiwbloa (nat ohllow~ tot -lleollbl1$) 11,719,391 2Ui20,2B.S l9,339,676 1,052,895 1oteMelbal~~ 2,009,936 (2,009,936) Due rrom lllllCI aovcrnmonts 3,487,278 3,487,278 Poe fr'Olll ~hei. 2J6!1,8.S6 1,863;69D 4,233,S46 ln~IOIIOrics 212_,o,2 3,116,0S!i 3,321,107 82,1,a lnvescmen1 In ~rty 20.8,103 208,103 '· l'Jcpold •")Klllm no.;m 920,722 53,490 llatrieled ~: CNh -,i4 whC!lllil'it~ 4,002,576 18.9.IS,~06 22,~l&,182 1-,,~.as.2 lnvc,.~ Sl.98 7.;dj; 80,6l8,16t 133,646,394 R.accinbln 124,694 I0.6i010 23~,104 7MPM>9. Monpgon,cc~· ·5,Ui1;3~ S,813;,.».0 ClcNlal iSICU(nd of~~ S9,(l2i,807 N<ltl-<leprocl~c 168,594,~38 228,2_ I&, 1.4i t,;404,?99 llcpr'cciablo I00,!127,334 Sll;S.S9;SS2 632;487,386 829:,241 Pertlfed~ 3;{m11n 3,01111-1-1 Tcic.i-284,22S1!111 90410111-834 I I I 89i001174S 16i,?lSili! tfADIUl1!8 A.~Jlllyiblc ~~.721 16,869,613 22,S36.,404 1~18,218 ~~ 6,9S3i199 3,.155;693 l0,l0!l.49.2 1~( ',• ,; ~ " ~iatcnttl:'l}'l1'1!' 9!!M~ 4,lfil,S.54 5J20,976 ~~ 2;990'.~6,S 2.99,0.6.6~ 1.illOWCd ~lie s,1'16,~~ ,,i7&~os-7,133,046 HcnClltt~I 1iabl!i~~t4ue ~cfll_d Oflt,)'tll': CQfNII~,-~~ 15,l33,264 2;571;·m 8;105;0S9 ~IDMlllce.ct4llllJ 2~t2,041 2,444,63; 4,9.56,673 ~ Mil !easn payt\lle t·,426.m M174,40J 3.,401,402 1,iI-2,685 Bol11Ss~ 6;3.61;599 20;0S3,'50 26;,421~149 N.,..,,.,_ llabJllclo8 dill In ll!PisJII~ ~ ,,.,.r. ~~ tQ,126;#:.3--~'794.001 12,9lo.774 r.ondnh®'UIOMd ~in·we '3;299',.\31 3~.131 A«l'IICjfl-~•11111 249.,-11:5 2.816,344 3,!)61,4~9' ~ Conlltlltutld le-.= i,a.v.111, 6;103.560 ~.414;$GS 12.m,12s 1,241,971 llondaJl'IYll!1k> 1201~siai9a.1 363~1~5 4841110.352 Toll! llabllit~ 112¢1;-drs 433ai1~a1 60S~266 1111~8~$ NET~. 1-.tod in capltll ~!!Cl ¢maced debt 76,4J;334 380,149,lJS 456,632,469 2,164,3P6 Rt,stric\od for. l'aucnpr racllit)' charges 3,630,625 3,630;62S Mlsell'ico 4,002,576 t-s,214.981 19,281;S.S? OCllllll'IO&tlllm, 6,14S,7i9 6,145,719 P1iftl1ry~ope~j~e/!i 100,000 Urimlrlcltd 26~89;391 7117291712 9718191109 3~21720 Toial "'4 ISIOI$ $ 112,121,026 s 470,7!>4i4 53 s S83JIS,479 S· s;ao1,116 So: llll90mpan)'Rlg Naci:, io Bale FillOllllW Statement, 37 City of Lubbock. Texas Statement or Activities For the Vear Ended Sei,tcmber 30, 2G06 Prhnary pnraweat; Governmental IIC'livilie!: Adminislmi Vii KNKC$ Commllllity services Cullural and recreation Economic and business development Fi~ Health PoUce Qlher ll,4ib~-safcty StN~)UIUI fnffi~ N®-dep~.cntal lnt.circst on lon&:.remi debt To.IQ! jom11111atalaotMtics Biis~ accMth,s: El~ Water w~(~ Soll~W~ Stol'(llwater: TrlillSII ~-. T(l(!II w,i-~:acdvltlas ToW ~rimiihove~i · Con,ipj)ntll~ iiaJ._-: Clvic ,Lub!lock. ·1nc. Market l(lbbock,. .Inc. L11bbod: Etonoll'IIG Dove lopment Alllanco Tl:llal ~mpo~i llllliJ s 9,910,392 s 54,356 6,112,193 18,9lS,26S 2,590,241 I 0,283,007 188,856 26,711,389 13,16S 5,013,691 722,113 42,063,023 209,251 5,239,386 4,984,968 I 1,3491496 49,4,312 S,206;309 374,629 413261128 145,630,219 9-63lj891 ·213,Q26;628 ·226)73,63& 32,830,QQl 31j3~,953 2l,273}7.9o 2;1,087,364 14,971,421 13,~48,861 5,174,63S 6,348,461 9,349,206 3,268,441 7,996;692 Sj4241016 30416221380 913.781z'734 S 450~16S9 S 32314131625 - $ 1,112;001 $ ~350,71.6 2,638;367 1;103,598 96,728 S 10,'161.090 S =========== l,800JU . Qcnerel reva\UCS; Propertyiaxes Salcstaxa_ ~Pll:1!~!aJlcs Other td'c::i r•b~ 1'u Invcsinioit ~lngs Mlstdiancous Ttl!nSf'cr.s, net Operatlng Gnat.and Contrlb11tlon1 $ 5,677,173 668,258 36,632 1,028,999 316,165 · 17,452. 104,88~ 2;283,8~ 1012031463· 31,740 7,294,964. 96'S.605- $ 11JSS,068 s 249~ 6;im,6?J ·s Cii43S~l60 1~16?2()si Tola! lfflerel mc!lllos, special items, llllcl ITwfas Chaagainnetuseis Net ~ • beginning Net !Ullets • ~ii)& ~ ewompmaying Notes lo Dasie financial Statmncnti' 38 Capll1I Cnnband Coatrlbudoni s 86,614 397~0S4 321,962 391300 844;930 2;1S4,5SI 3'-~8242 ' ~~ . ' , . 21,633 111040.38S l1~~1Bll . $ lMff,741 ( ( Net (£11po11se$) Revmuct a,wl Ch11a1~ ill Nel Asseu P rl11111rl Governmeat · Governmental 81Uintss-typt ) Af!Mllcs Aell.vltlcs Totil Component U11lb $ (9,856,036) $ $ (9,856,036) $ {435,020) (4JS,020) (I.S,656,766) ( I 5,656,766) ( l0,094, IS I) (10,094,151) (26,S'.14,978) (26,574,978) (l,262,S79) (3,262,579) (41,070,Sm (4 I ,070,S:'53) .. 84;996 84,996 ( 11.210,999) (I 1,;110,999) (2,S47,UI} (2,S47,78I) • (926,\28~ {41326,128) (1241949 ,99S) (11.4;949.995) 13;347,010 1'3;341;0l0 7,3'14;798 7.314,7H 3,621,810 i,621,810 ;. (l,0!)0,927) (1,000,927) 1,205,566 1,205,566 1,214,199 1,214,199 91433,314 91433Jl4 3Sr13S17?0 351135,770 (124,949,995) 3S,13S,770 (&9,814,225) 180,Sll _(f7IJ17) 3119§.P'h 3,~87 42,779,826 42,770,826 45,576,582 45,576,582 3,410,920 3,410,920 1,036,283 1.036,283 13,348,364 1~1348,364 4,393,782 6,140,436 10,534,218 14,~5 6,898,288 .. ~,2?7,297 11,l7S,S8S 9,6071211 !916071211! 1271042,256 &1'01522 12718ai!1778 1417•35 2,092.2_61 3S,9.!t~,292 38.038,S~l 3,fll;022 11016281765 434it481161 54514761926 l.9SM94 $ 11217211026 $ :4101794j453 S .S83iSJ:Sl479 $. $,307~!16 39 City of Lubbock, Texas Balance Sheet Governmental Funds September 30, 2006 NoiunaJor Total Covemll)C!nt•I Go¥ern 111ental < Gene,-al'Fund F•nfb Punda ASSETS Cash arul cash equivalents s 8,456,7S4 s ll,897,583 s · 20,354,337 lnvcsuneRU 7,605,360 10,344,578 11.949,938 Taxes receivable (net) 8,642,Sl I 517,184 9,159,695 AGC.ounts rc:cclvable (net) 1,825,656 341,907 2,167,563 ( lntorffl n:ccivabt~ 336:741 49,608 386,349 Due Crom olber fllnds 2,•lS,631 631,346 3,047,027 Due-ll'om Dlher·govell)fflents 3,487,278 3,487,278 D~ l'rom othCl1 797,380 1,375,633 2,17~,013 l.n~~l In propcny io&,103 208,103 ln\>entor.y 168,964 ICIS.964 Re511'ietcil wh 4,002,s76 4,002,S76 . ( ~~ll'icted ln~nta 50,430,838 S0,43O,838 Mortgage fC!l:1;:iv,bles -,5,813,330 , . S,&13,330 Totalius& s 30f349,041 $ .89.099,964 s I 19;J49,0l l LIABILITIES A«olll\tsptyable $ 3,21S,899 $ ·2,199;533 -s 5,48S,432 Due 10 olhcr funds. 2,621,995 2,621,99$ A~cd liabilllies 4~0~,221 1,713,024 ·6;016'24S ~ 1• pa)'lble 2~,S57 296·.ss1 Dcibtn:d icvcriu~ . .2j73S~l6 Si4S4J44 8.189$60 Total Htblllllcs i 0,32,l,336 12, 195,453 22,$19,789 l'UND SA.LANCES ~Rlr: P,-epJIII itemsftnvcnt°" 168-..~4 •~.964 Debi SCNiqe 3,~1,539 3,081,539 eai,ita1 projects $2,331,096 52,3-31,\)96 Speclo/ tor.CI\IIO • granlll 1,392.S0& 1,392,S,O! PoipotWII_ AR 89,'220 S9,220 Un~ rtpOl'tcd· In General fucid 1917SS;747 19,75.S,747 S~l-~\IC 1im4s 201010,148 20~010,148 tow fund bat1111cc J91924.7jl 76.904.SII 96;829,222 Total llabllilics and lull\i balances s 30;249,047 $ 89.09.9.964 s l 1~1349,01 l See IIC®mpan)'ing NOICS to Blsic Finanoial Stmcmcnts 40 ) City of Lubbock, Texas R.econciliation of the Balance Sheet of Governmental Funds To the Statemc11t of Net Assets September 30, 2006 ) Totlll fund balance • govornmental funds $ 96,829,222 Amounts reported for govemmcnta I activities in the staierncn.1 of ~t assets arc dirreren1 because: Capital assets used in governmental activities are noi financial resources and therefore are not reported in the funds. 160,549,641 Internal service funds (ISF's) are used by management to charge the costs of certain activities, such 11.1 insurance and telecommunications, to individual funds, The portion of the asseu and liabilities of the JSP's primarily son1ng governmental funds an: included in govenunental acti vitieJ in the Statcmenc of net asscu ~ follows: Net assets 3,1~;464 ) Net book value of·capltal ·assecs (906';088) Compensated abscnCCJ 61',8(18 Amounts due ih>m business-t)'pC ISFs fQr amounts unde~acgod 1;~84;9.04 Cei:fain liabiljti_eiare iiofo~e and PAY.able in the cum:nt period and t1im! fo_~ UO:n.<it: nii,ort~· tn·the 11.mds. those liabilitJes .ire as follows: O~ral obllgetion bon'ds (ll24,437.28Q) Caplial leases paxabtc (1,.530;559) Com¢n'lla1ed absences· ( I 6",260;03-7.) Act;I\led interest on general obligation bonds -q~) Arbitrage payable (JSl,71~ Environmental Feliled iation (§~s,s) ) Bond prcmiµms arc r.ecqgn~ 11$ an olhel' .flnanc!ng source In the tw:,.d-ata1e1n• but tbc·premilim$ ate lim.Qdlzed over the life of the bonds in the governm,ent-widc Slatcl'(lents. ~i1,:S.~) A~al City colllrl"butlons to the f1rc flgbtei's pension ll'llSt-fund is greater than the a~tuvially dele.onin~ requlRld eontributi011. 'Thia will redace ~ funding . 1'$quitemcnts •~ l's not recogriii.cd as an asset at the fund le~I hilt is a·prepaid ) expense in.the $t41tnie'ni ofNet Assets, no,122 Revenue earned buc unavailable in che fllnds Is deferred. "Ji112~51 Net assets ofgo~Ull activities ,$ Ui!'nl10U See accompanying H OICS to B&sic Pimmcllll S1111Cmen1& 41 ( City of Lubbock, Texas Statemcnl or Revenues, Expenditures and Changes in Fund Balances ( ' Governmental Funds For the Year Ended September 30, :2006 Noninajor Totll Govtnime11tal Gove.-nnieatDI ( General Fund Funib Fundl REVENUES Taxes $ 15,999,624 $ 16,865,905 s '92,865,529 fraitctlisc Wle9 3,008,973 S,339,391 13,34&,364 Fees and lines 3,981,978 3,981,978 Licenses and permllll 2,250,635 2,250,63S C lntcrgo\'Cmmental 408,997 10,639,396 11,048.393 Ch111ge1 for s«VJ~ 4,781,()43 1,307.162 6,088,205 lntcrcst ~21,742 2,95.3.19.8 3,874,940 Mi.soellancous 11465.~U· sjo11042 61966().S1' ToW,-reyenucs 97 ~3-18,207 4t.§0'6,f»:4 140,424.30 i EXPENDITURES C Currcn1: Administrative tl:tviccs 9,3S6,059 9;3S6,0S9 commlillilY Je1Vll:e.!i SP,2,820 s;imja20 Cul1Ullll an'd r~reation 13,986.$76 1,409.10'1 lS~96~-7, ~nomic ~-busincis _de~i:lopmc11t h·i.'". • ,• 8,973~H5 1,14~($7 10,120,;18'3 Fire. 24;638,814 l·4,~li.~1'4 C Henllh 3,7~$•'1.90 908,623 4,6411•19 Poll«! 37,463,740 913,25! 38~76,_991 OlherpubUc·~ 4,2~7.806 36MS6 4;64'1,.6J s~_iind~c 1,,439.~, S27,74.S 1~-~-?'1p N~W 1;sa.z#~ 2,376,525 4).5$,1lQ Pclit seniicc: t,bp~\,6! " Prlllcipal 6,324,040 7;33'3A.QS lnl¢tCSl and ~ clw;cs t44;8$8 3,996,563 4,141.42-l C1191W. outlay 711841866 2!&4601783 3516451649 Total expc11ditllm' 11291~444 60,1841023 1744_62,'467 EkCCSS (llclklcncy) ~t tmnucs over (un.~·•~ (14,460,237) (17.$771929.-) 02,038.166) ( QTHKRFmAN(:ING S01,JRCES (US_ES) Long~d~b~-~. 27.526~113 27,526,113 Sand p,anillm (dlSCOllllt) 620,860 620;~ CipitalJcam S,ll9;980 S;ll9,980 Ttanil'onl m 13,.-32~;04,6 ,,)52,042 18,677,0'8 C funsfetS out lli3~49!l ~61840,ml (8J77.~~)7) Net~ financmg. sources (uses) l7&Q81S2S 26,6581106. 43.§66-§34 Net~ in l\lnd bablnccs 2;S4µ9t 9,080,177 , 1 l,62~,468 fund 1)111~ • b~'1n'°'ing of )ffl' .17~76;420 67,824.334 ss,~0.154 Fund balances • ~ or yaar ,$ 1!>1924,711 $ 761904151 I $ 96,819,222 ( Sec •ccompaninJ Notes 10 J3&!1c Flnenci!ll s~ 42 ( Cit)' of Lul)boek, Texas Retonclllatlon orthe Statement o(Rtven11es, Expendltv.res and Cbanges Ia Fund Balaica of Governmental Funds To the Statement of Activities For the Year Ended September 3O~ 2006 Net change in fund bal&nee:i$ • to cal govcmmcotll funds Amounts reported rw governmental .cllvll!cs In the sutcmcnr or aeUvitl~s arc dlm:telrt because.: OoYcmmcntal f\JIICb report capital outlays as ~penditures. However, In the St,tement or Activitia the QOSt of !hose as$el$ is all~ed ovet their estimated ll30ful lives UK! reported u dep,rcc;iation oxpenso. This is lhe amount by which c.pltal outll)'sofS3S,64S,649 e,ccccdcd dcpteciafiOI\ oUJ3,291,'2S In the Curt'C8t period. B.orid PfQC~S prov!4e ~rrent financial res~ iii sov:emm~tal f®!fs, but ~tnJ debt incmscs looa- tenn liabi I itiss in the Statement of' Net As!cb. Rq,ayment of bond prlnciipal' ls an. expenditure In the govemmenlil Ciinds. but th~ repaymcnt:reducet lona•lerm tlabllltles kl tbe Swemcnt of~ AM,ds. Tbl5il thumoont by'Mllob ptoeeedioU27,126,1 lJ exoeodcd:rtp11Y(IIO!lb end d~t debcnce of$j,789,l02. Capi11I leaso lran51ctions provide current financial reJO!ln:es co aovanmcntaf f\incb and rcpa)'J'Otnt of prlnc:lpaJ Is an ~pe,ldlture. This Is the: amount by l'ttllch-pr~ ofS.5, 119,980 ~ rcpaymcats of S 1,544,306. B0!'/1 ~ ~ leQlt~~ IS IUl ~!bc:t 1!~iliu~,l\le. Ill uic~ f\wb, but are conslclcrcd c1.1,rcrr94' M$CCI Ql1 the $tili.criicnt ofN'et Asset,. ~•a1:11 llfJlOrti~-o.v11t1hl llfo Qfthe bonds. This is -~-•ujit ~~le!\~~ '~i1tm ~;iii' ~~;a60·i,x~ ~~~ at.i1~~,2~i ... EltHIWOd 'long-term liabiiltlos • tecognizcd as e1<~1!S in the Si~ ct ~ctlvitil!S u oamed, but are l'eoj)&fll7,!d f>'hon-<:Uffll!U flnwlal rtsOU(Ce;t.wused la tilt~• flmds. t,tbJiragop_~lc Compcnsafcd ablcnc.cs 8l'wl1011monial ~edlaiion Property fllXCS ieyfed am! OOUR fillt4 ftl'ld !'cu. eamod, butnot 1vallablc, ITC clefctrcd In die ~tal l\mda, but.~ reooarrizd when etmrd (net o(~matcd uni:oll~ibl~ In ·Cho ~ of"~Citivitie$, -Thia Mi0unt:411i.e lift'~~~ lo ;icfctr'oil j,io~ ~ ind COIM't fmes and tees for the yat. · · · lcsu.r c~ .col!IJ:lbliilons (0 the •fire tlahtcr'f pwlon triast flllld IIRI a,att,rh tho ~Y ,dd~lAcd ~et PeMi911 ObJlption lNPO). This amo1111tir reoosnlud l!S an expeadJturo "itie ~ lei.Ye! but Is '!!_arued',\\'hen o-mpa1d apd redum expenses on the Statcmcntof'AGl!vities. Intema1.fflV~ fu~ are used. by management IO ch111e the costs or certain ~ such m lluuranoe w tdecomM1111klltlan1, t9 illctMdual fllilds. The net l'C\/tl\lie (expenu) or ccruin lntemat setvice ftlildf is re_pol1t\d wlth aovernmecnal aellvitles, M:fflled~ 'iS ~,nlzed u expenses in the Statcrnetit of A'1tivilles .s i~ but Is recogr,lied wfl~ ql{~t fi(l~i41 l'050W'CCJ arc used in tho governmental funda. This amOUtli Is die nee change In tbc acctilcd Jiue,est thi, fW• ~ 119! effect fl(~fls Ji!.~IIIIOOIIS transaetions inY9lving cap!~~ (e~ Slllel~ lnde-lu) £s 1o ~as~ net ass~. Oange ~ net usdS of~vcmmcntal activities 43 S 11,6.28.-461 l2,JS4.22' (21,731,011) (J,57$,674) (IS~,714) cW.m,) (922,555') $ . 2.ogw1 . ( City of Lubbock, Texas Budget Comparison Statement General Fund For the Year Ended Seplember 30, 2006 V1rla11ce with ) Pinal Budcet • Posltlv.e Orlglaal B udgct ll'iaalB11~t Actual AmOIIOU CNt1ailw! REVENUES Taxes s 73,888,) 10 $ 73,888,110 s 75,999,624 s 2,l ll.S14 Franchise IIIXes 6,886;000 6;916,000 8,008,973 1,092,973 Pees and fin~ 3,782,866 3,868,099 3,981,978 113,&79 Licenses 'and pemlits . 2,170,512 2.3Sl,1SS 2,250,635 (100,S.20) lntcrgovemmonw 406,638 406,638 408,997 2,3S9 Charges fer servlus 4,:530,123 4,:i47,Sll 4,781,043 43~,525 lntel'Q$. 660,073 6~,Q13 921,742 251,669 Mjsccll~ 1106614H 'r~~uc, 93.190,733 !10&1141 I n1s1,;004 11465~1S . 97,818,207 383,11'04 •,199.2&3' EXPE.NDITURI.S Cummt: Adrnlnlstru!ve sorvkes 8,877,967 ~.o:ii;,~2 9,356,059 (3,J,,33'~ Cultural and rcgcatlon IJ,3,93,3 l 7 13,393,317 1~86,S'l.6 (S?l;259-) ~nDtnlc arid bu$illeaf develQl!Diml 1, HIQ,Sii'l l,1'73,~ 1,146,2'1 27,630 Fite; 24,466,277 24,~,844 24,638,814 (14,"970) Health 3,634,443 3pl9,il43 3,738,79<> (8,9,347) Police 38,802,89$ 38,.,2,89& 37,463.740 1,339,~5& Other public saCCI)< ,.361,615 ~;41,3,156 4,237,806 l2,S.950 ~ and 1raffle 8i281,641 6;98-1 !641 7,439,-o4S (457,404) Non~ l,"22,~ 672,29,4 1,&K2,2SS (li209196l) ~b~som¢e: 1.~.i~ Ptlncipal 1,,009.,368 ,~.;,~ lnicm,t.i olliet~aiacf 150,606 144,858 .5,74$ Capital outlay 4.8~29.0 _t02s;i60 711841866 f13z9t4 Total expcmdllum 104!213~79 Hlj!nl~ 11;21a,,444 (3(!$4$4) £xcoss (dofl.oillllcy) of ltYChl.lCS ~er (under) tllpelldltures (11,522,646). (llj-0%;956) (14;460,237). 3,992,119 01'HER FINANCING SOURCES (USES) C~ltall~ 6,2iO,OOO 5,119,~B~ o.~.~;~.Q-> Trilnsf~in 12,371,843 1l.54ik3 13,325,046 77~;2Q3 Ttwfcn 0111 {849~00} (!;3&3~8ll (1,436,498! psi9iol Net odicr fitU1Dcil!g '°u~ ('!ses) 11,522,643 17d2512'5 17,008,528 ·!46:6;n:o Nci change in l\md baJan:ocs (3) (917,701) 2,548,291 3,525,9.92 Fl!fld bal~ • beginning of,y=cr 17z276,420 . 11d,ei•20 17~7~420 <Und balances • end or )'1:81' $ 17,376,417 s 16,398,719 $ 19,924,711 $ 31525,992 Sec ~ying Nol~ to Basic Filtallcial Slatcinmls 45 Cl.ty of Lubbock, Texas Statement of Net Assets Proprietary Funds September 30, 2006 Enterprl!e Fund$ ( Elettrt, Water WQteWater WfMPA ASSETS Cuncnt assets: Cash arid.cash equivalents $ 14,436,691 s 6,Hi7,041 s 4,990,325 $ 1,296,219 [nffllments. 14,329,105 5,362,l>S0 4,338,932 3'6,2Sl ( A.C00\11\ii rccelv~ble tS,S4S,253 4,29l,4S3 2,257,674 1,800,814 tntmsi ~iwble 53,919 25,SSl 17,612 Dliciroin1i1m 70,919 l4S,322 ~ fton\ other ftlnds 6,113,~l l~yc!1tOrl~ 2%J33 2731979 Tocat•ctltrmaSSCIS 4416.ll,SOl 16,192'.,293 11.749,865 9,636j131 " NontUl'l'Clll ll$Sd3: Rt.mi~~ 111\d cash equivalents 4,4SS,7S9 6,136,977 2,937,014 ~~e'd in~men!S 3,1$69,238 21,029.028 16,435,385 R&°ltlC!cd '(lltc~ rccel~le 3,611 .. ·R~I~ accounts ~vabtc •·. 23,640 Z4:,-090 . ~cbargos 310771777 Tota111011current osscis ua02.114 271193~56 1913961489 Capllal~~CS;: 1411d 756,714 12,12:4,350 12,57.l,f?S Q>n$11'U\1tlon In progress 8;314,29!.I ~M78,S99 a,37M~ ,. Building~ 8,05!4,Stl 21,640,589 24~013.,110 l~IJ other than bulidlnp U0,986,045 261;S78,.S61 114,Slt,170 MIICbJnd!)' 11111 cq~ S~1267,2j0 31,342,138 l7,~S4,9-S8 25,290 L!;ss ~unuilited qcprccl!'Clon ('I 091SZf:z65 l l (90j0241387} i63.219i720) qs·.2®) Toj#.Cl!Pltal ~ l43J006d61 . 26913391BSO l 13.SS.219S6 T~.~--... iind !al~ J S3,209Af2 2'96,§3.31 l 06 132,949,44.S ,., ~--"Pl. ' Tof41 asset,· ·S 1~71820i74l S 312(725-1399 S l4416~~i0 $ 9;63§731 46 E11terl!rlff F1111ds ) Jllonm•Jor Ent~rprlse Total Enterprise tatffllal Semce Storm,ralllr Funds Fi.1uls Funds $ 6,013,928 $ 3,342,33S $ 36,246,539 s 2,111,'746 S,223,922 2,975,896 32,601,158 1,836,;on 689,268 i,917,$43 27,503,00S 4,S29 9,665 111,576 U,4.8 1,647,449 ~,!6~;690 l!il.6;84l l,S.10,853 7.714,304 ,1~1sljo 663.001 r11131st3 11,936,647 Jj,096,742 107.22);?85 6,13.1.784 1,358,770 4-,021,086 li,915,606 ~ 21 1504;03,3 9,370,844 72,Q0S,528 I 1;207~028- 1$,169 lB,~76 ~_1if,56 47,:130 30~3Sb ltS;tti~' 3.0771777 • 22,877.972 13,4,16,6~ 94z087,0~ tt,MM4o 2.83)37 S,605,535. 31,948,711 65,343 6S,6361771 21,033,879 13S,99f,JS I ,6ss,076 '64,SSO 42,129,035 9s,mtas l,6(!~,"~111 8,3'3~9I 9S,576,429 664,31!2; 796 649,1!68 2,832,~SS 54,977,238 160t129;242 7;'737t422 (9~S2~5} {I 1"/,03716492 ~31io1131;m1 f118bl1•Sl §7.911.692 105z2.l4.461 698115~433 21901114S 90,196,664 m;m,01.1 79;z32,SJO. I 4,l(i(),691 $ 102.733,31 I $ 131;8471815 $ 8991463,3 lS , $ :Wf!~47.5 47 City or Lubbock, Texa~ Statement C)fNet Assets Proprietary Funds September 30, 2006 Ea1er2riso Funds < .Eltctrlc Water Watcwaccr WfMPA LlABlLmEs C11rrcnt liabllltics: A~unls payablci $ 1,035,206 $ 2,635,560 s 1,066,886 S 8,329,910 A~t:4 liabllltlt$ 1,S35;678 165,716 129;143 ( Accrued lntm:st payabl o 1,405,988 l,S0I,8S2 413,691 D11~ to Qlhcr funds 6;1:73}lSI C&istomcr dcposi~ 2,"924,8~3 S8,710 ~~ abselltes 1,0?i~ "S42;602 ~60f716 AQQIUCd lnauranc.e daims ~ payable 32J;4l4 248,2$$ S(l9,08i ~onds payable 51623/)77 115032179 4,4601688 TOia! curm1t:IIDblll1!es 20,09(i,859 t216SS,814 ·6.909,211 8,3.29,!)1.0 NOfldimnl liablfkics: Comj)msalcd !absences 1,38.5;951 42·1,359 209,448 ~acrucd insu~ce clalm.s Lan.dt'JU closute and post ~ cw Lc:ases _payable 1,274,449 1,020,IOt 1,187,000 Sonds-Pf1ynhlc 6S13~9;l33 I 48,948,252 ~.31$;110 Rtballlb!c orbl1rage 11,138 lS,669 :Jl18!6 • Total noncu~nt liabUlties 63.04(),111 1s.o,49,,n1 ss.'143i364 • Total liabllltles 81,137,730 1.63;061125-S 62,652,575 8,329!910 NETMSETS lnveated In .CJl)ltal ~ :n;t ·o,-~1111:d debt 1l.086}il3 (.32,649 ,-09 l 69,St.6.462 Rcsv~for. Pa.uenger focility charges - Debi :icrvlcc 4,455,159 6,136,977 2,931,014 tJl\lfflricted 3211401521 1018181076 9,593~59 1)06,827 ' . s 1;3..06,827 Tola! net IIISCIS $ 10916$31013 $ l491664,l44 $ 82104~735 $Ce ~panying Nole$ lo Basic Financial Statements. 48 Eaiterl!riM Funds ) Nonmajor tnterprbe Tota.I Enterprise lnrc,11111 Service Slormwater Funds Fll.lldl Fulids $ 1,146,431 $ 1,919,467 $ 16,133,466 $ 917~ Z7;J,3'J 1,19S,171 3;0S2,94S 111;747 s ~~§.,$42 2_13,475 4j61,~S4 1 1,9.21·,000 8,19(),.451 38,HS ·! ~ ~ 7,072 2,990,66S ~ 50;483 431,693 2,370,756 ~S.056 4,!lS$;iS73 21,145 706,244 1;s~,1J9 168,264 l:,-541)1QS:l 92Sj623 2010.S31SSO ;~ 3;,!s.tp7 ',?25,!1.•5 58j1.69J36 6.427(131 .• :b. 1 ·~ ~.m 29.Jin ~ 4J9,'ISS 2,535,115 ~ i,o6SA59 3 ,. 3~99!J.31 J,:299;1U I _ ~l,~O 2;4:6'.71085 6,~,655 3!14,910 ~ ?§,8~~~ ts;~J,340 363,S~;l74 ::< * 1i~,s. 7J·, 191 :,; I 16;~4;S61 2itJ2 I 1089 37~43jJ66 3,744,046 .80,i761481 31,646,834 434,204,792 10.171,177 . 10,n6,1sa 92,.543,019 37$,771,443 2,JS4;97I ~ l " ~ ,;6~0,625 3,630,62$ ~ l)SB,770 3.%461 lS,284,981 ~ 19jOll;9iS 3,l10jt'i6 6'1,571.474 7.866z3-27 ii g " s 22:356.823 $ l 00.200,9.&1 $ -465.258.523 $ Hl.221.298 ::i.. :,: ~ fl i~ \~ :~ :~ ,❖ ~ } 49 ·, ' i ~ ( ( . ( } City of Lubbock, Texus Reconclliadon of the Statement of Net Assets-Proprietary Funds To the Statement of Net AssClts September 30, 2006 Total net assets • proprietary tunds AmollnlS reported for b~inm-lYJ)c actMtlC$ In the Statement of Net Assets arc different because: lntcnial service funds (ISFs) are ascd by management to cbqc the cosu of certain tctlvlties, such u lns11r1111.ec and telecommunications, tB indivldoal filnds. The portion of assets and liabilities oftbc ISFs primarlly serving enterprise I\Jnds are included i11 busineu type acdvitic.s in lhc Statement ofNctAssOU a, follows: Net assets of business-t)pe ISFs Amounts. qilc to govcm_inental ISP, for amolltlts ovud!arged Net wees of busines.1-type activities Sec -=ompanying Noccs 10 ~o Financial Si.tcrnenq, 51 S 465,258,523 7.l20,f34 (1.SSA,.9.04) S·-4103794.ijJ CUy of Lubbock, Ttus Statement of Revenues, Expenses and Changes in Fund Net Assets ( Proprietary Funds For The Year Ended September 30, 2006 Enc.arprln Funds Elec:trlc Wnler Wastew•ltr ( WTMPA OPERA TINO REVENUES Charges for $QrViccs (net) $ 212,074,481 s 37,330,953 S 21,037,364 s 183,322,521 Misccllaneou~ Total opctatln a revenues 212,074,481 37$30i2S3 2'1i087.J64 · 18313221521 ( OPERA TING EXPENSES Pcrsopal 5Cl'\'ltt.i 10,718,282 S,910,&61 3,$16,414 Insurance - S,\Jppli~ 884,891 ~;2Ul;129 972,~75 Mllerilll5 ,. MalntenDMe 1,901,683 2,4S8,3S7 l;t'16.-30Z Puii:haso of f~cl •11d, S)l}WCI' 167,354,029 .:.. 1:83,14!1,J 78 Collccilo11 Cl<pe,nsc l,432;®o 926,l't2 Other iel'Vl«S and ch.nrccs 4,-0,72,409 9,6S&.448 6887!~ '~03,655 ,. , O(lpre<;!atiort and 11moltizauon S19J1i917 7ilt81Hl 5146~02? Total opcmin;~ 124,410.211 '27;8:J81S27 JS!~40.!34: · lf1a833 • .r J Dpcialln& in«\mt (loss) 17,664,210 9,492,426 . 1.,1146,980' (330:,312) NONOPERATING JU;VENUES (IDQ>ENS~) Interest earning,. l,D63,573 1,321;864 844,020 •~.S.6$ Passtnger faclllly llbarg~l!l!1Cral grants 59,?96 Dispoaltion oJ ~ (463,7il9) {lt'0,320} 92,lll Mhecllaneous 2,042.S09 407;fo; 128,0@ { Pu:Nh!O.tigh &t8Jlt paymenu lnlemte~ QJOIJ09) !~77Sj332l Q1~1soa Net oon~\ng rcv~nucs I~.scs) (658~876) (3;097,276) {1,000.064) l61S6S llfQlme (Joss) before oon1ribittions ind ll'allsfen 17,005,394 6,39~11}0 146,916 013,747) Capillll con1rit,uti°™ 2';'7$4,$5.l 3,808.242 Trunsfcnr in 637,075 663.221 {;20,2·38 106,156 Ttans(ct$ out fl,2111~ {4,874~64l ~IQ3,397l Cht111&e I~ net ll$$CtS 16,430,903 '4;!Ja8,6S8 2.!~1.~ (6,991) Total net asK~ • beginning 93,252;110 144,725,486 79,394.,736 1,3131818 Total net assets • ending s 109!683.013 s 149,6641144 $8210461-71S $ \;306i827 52 E11tereritt F1111dl } Nonaaajor TotAI Enterprise I ntcrnai Service Storn,~•l~r Enterprise hn.da F11n.d1 Fanda s 6,348,461 s 22,641~~18 s 482,805,098 ·s 39,460,284 1.1216\0 t 12,610 6,348.461 2.2,753,,92$ 482.917,708 39,1§0,284 868,480 11,'78~,2,)2 33.096;'269 4,JW,269 ~ ., \ 22,296,187 80,572 2,803;942 S,952,209 94,876 9,907,836 S.,680 3',3;1,021 8,879,049 2,186,157 3St,O()g,207 ~: s04,'i32 S{2,83l .s~~is.736 . ;~ ·.. : . . .~ .... •,,. 26~5..410 2,569,214 :: 2l~Jl5 ~-~J.li3,89, f 384~l4 ·s~~1:i44B so~gto.ta 321Z,OU 0 ~ ·2,0561093 . 3li8ai864 . 45''00~!1li. 41~69.6&7 I 4,29i,368 (2,0&<l;l)j"6) 23,!801796 a,•109,403) -: ~ \! ~ 1,618,342 893_.718 -S;7.Sf,5B2 901.SS9 ~ aj~9j;s~ ~7S7;l78 31,740 ~ '(4iij,()74) al tM14 69,239 ~ _t13;64S •. ' 18.0,359. 3,7.3.1,,729 427,892 " I (43-7.313) (417,313) ~ Q,0%i0&2l (-43~5272 f13;66MSSl (863) ~ ., (1,29§.881) ~;712,179 3,675,647 l,429,So7 ~ ~ 2;99-5,481 ~27~43 2j,S56,443 (679,836) ~ 'l ~ ll,062,01~ l'?',624,811 119,897 i 8.49,200 3,076,490 32,915. ~7.llOl !31l001079l p2171616l6} (192.470). > ~ 2,_0$~,1?7 9,~~t~i~· 3S,~•41,128 0.3 l~~9.4) ') ~ ~~ :, 20.~68,646 90, 762,5.99' 42917171395 11154o;i92 ~ ., ,. ~ ~ $ 221lS6it23 $ I 00j20:0198 t . S, '46S~S31$23 $ 101221.2?8 j .•.• ,, ;; ;( ~ ,, t~ ., 1 r~ ,, ,": :0 <i 53 ~t ~ p ,: ( < ) ) ) City of Lubbock. Texas Reconciliation of the Statement of Revenues, Expenses and Changes in Fund Net J\.Mle~ -Proprietal)' F1tnds To the Stlllement of Activities For the Year Ended September 30, 20116 Nd change lt1 fund net wets -total enterprise funds Amoun.ta rtp0rtod for businC!s-typc activities In tM sllltcmcnt of 1c1Mtics arc dift'er¢ttt be(:ause: lntemol service funds (ISFs) are used by management to charge the costs or cenain aalvitles such as fleet llefVi~. central ~OWiing activities, managmicn1 infot1t1ation activities, etc. to individual funds. Tbcnet rcveuuo (expense) of ccrcaln lSFs is reported with business-type aw viUes. Change In net assc~ of business-type actlyities See accompanying Notes IO Basic: Fb)ai,ci~ Stilieincnts, 55 S 3S,S41,12S ( City Of Lubboek, Teras Statement or Cash Flows l"roprletll ry Funds ( Fot the Yt11r Ended September 30, 2006 WCitTesaa ~lnlel!i•IP,unr Eloctrie }!•kt Wa.le>fatOr A&!!!.!ImMPAl CASH FLOWS '1/aOM OPERATING ACrlVITIES ~;p1,r"'"'.-" $ l I I. 732,604 s J1,IS2,261 $ 21,IS4,689 s 187,743,764 ( Ptyme111110 ~lcl'I (184,63),451) (13,074J62) (9,191.416) (118,068,.1 J6) l'tYfM1\IS IO ,..plo)-ffl (10,118,282) ($.910,861) (l,816.•14) oi11e, ,-1pu~ts) 11S7fi760 356,192 136.!63 No1 i:e,11 pro.-/de4 (•,eel) bJ op,:tllinJ Kii\lilicr l7,95916i.. 11,523~30 BJ76~2 ~24J72) C~ FLOWS FIIOM NONc;.l'l'l'AI.Al'ID Rtl.ATED nNA ~CINC ACl'IVlTIES Tfilns(m ia JI01111>1hcr funds 637~07S Ul,221 620,238 *7S6 ,-_fi:t$Cl<il10t>1"-l'lll>d$ (1,2 I j _566) (•,&?4,u4) (2.623,3-n) C SllOf\-~mi in~rllllll ~ f,i73ASI (14$,322) C)pel'AUl'llgnnlJ Pa)'lll<QU rtc10..-.'(111oda)u tclvinca (IOJ(li'GIII Oilc( (11111K Hclcill1r)HOVWc4( .. ,Q 111 ~tw !WI rcl,ld ~,~illes SJl!l,960 •{412U104;!l Q;oi4814&1l 3~756 C.\S_ll·~!-QW$ "1~ ~,rr~;UID-11.£.LATID FIHIJ•ICIN(MC'l'N~ C Plll'C/lllla of e,-piW usets (II ,96S ,276) (29,900,lS•) (6)1:u&,1) $alt OfOllplli 6'$0tl 13117l9 118,0'll 152.221 Raci,flllo<,.i'Jrl<nll).~•IWl:I, ()4,338) 1,268)56 1,218,169 Princll)jll pold °" ~ ond oU,a, ~ (S,28J,070) cs,,1 1,00J) (3.932,.1&) l!Gndl~• pu.f , (36,963) ('216,741) (8S,600) l~paldOlllq'OIIUObc,o.d, (J, I 3 I ,9.l4) UJ33.ll6) 1-pa~:onbonili and o!ktdi:bl a.721,(181) (l,839,4~ baii,p litnmi,1111,Q,O. ~,.,,4111pj1t,I~ 7,732,$_63 3i1,41Ul2 14,9SS;740 PWCIIOCI' foi:ilil)' chlltp'ciipii.J pllll ( Rot.tabl, arti<~ l5M9 31,806 Contnlllllc~ oopi~I . 329;6~ 1,199,9"10 NQc~ l)!v,jo/td tvte4> ror .. ~a114 ~w.od ~.,;,,.in$ o«iomicl {1~93,2!!1.) {4J07,995} SJ1t423 CASH FL(IWll FR(IM lilVtstlN<l ACffilTUS l',ooeed! 11,,in •·•rwl ... ~atlnvalmctila 1,678,162 ll,2L0,S34 14,47lilM ~~Gtln-11 ... (17,998~) (3S.3~8,0'l6) ~6)19,114) (3~am: lnrcrcti·~oncull lfld.l~•nit \102S19-21 l,!I 11181 9?1.;!111 l~S ( Wei ollh p!Ol'iiled.byjuHCt r«l ~ldlvltlois !9,291~61} (10,786,360) 110;12~60l rn @o ~ 1-(-MK) 11! IIQh llidci.l.oq'M'I~ . 1.614.034 ("2,1'8) MU4'1 (361).04) -~•'ldculo~-~til'~ U~416 i ~~! 1:rs 1~'3ffl ~wf:;\sh~-~el~ ' u.~;a,g ! 7 7 ff i I tpj ~ . ~lilll1onf11jM1"111111&1'1 .. ,.,~ID•OC cab Pf9Vl"4cl (,ltd) bf optrall"J~ Opmtiiif illllCNna (lail). . . $ 17,664,270 s 9,492,426 s 1,846,980 $ (3)0,312) ( A~Wlhtellll,. ~ ~1,111•· ~(loii) 1o nc1 em pmlcio6(uodl bY4~~tff1~: ~~;atj,,,., •rid.~ 8.~72,917 1,u8,t32 ~,462,027 pl!latin_.(~) · 1,111;760 3$6;~ Jl6,46,l ~ illoPn'\,111 .... ....i li.wlll~IIJ: 1,«ow1J1t(~• .. · (l.41,l77} (11.8;ffl) 61,325 (104,746) bt-ioir 1,977 (~8.113) D.utr_,at1itt~ (la,47S) -p,Jllbl• ( I l,074,043) l,7S2,6$S 70l,046 (4,41$)0.1) ( Dua r.o.. odu:n $,125;989 OlhorlC0111ed...-%42~13 (7,190) l0,373 Clllionwdcpoii.11 6S6,ll0 ~)" I~ in compm.lld""'-lSl.597 47~ 41041 Net wi~(llll)d)b)'opellliaa~lvhi~ s 17,25!>~• s 1§.523,230 s •~16,261 s @24,2?2} s.,,,.._io1 .... l1qw, ~•ck!ir. NotoclJ!to1ll11l-41tuilClllilllllllllhtr-~ s S· 1,509,919 s 2,337,901 s ( See 1ocompc11)'in1 Nolc1 iollu!o f;wiotal ~ 56 ( ' , l!llat,,,lx """"" Otller Nonmajor lnum•I £111wp,lK Set>~ S,.,:awflcr Fwtdl. TM.to Pead, } 6,315,127 s 21,686,091 s 41S,7i5,l36 s 3g,4.s3,127 (lU.~3) ( I 0,05'7 ,933) ( 40S,34 f,lOl) {311,617,33'1) (868,460) (11;6PO,Offl (]3,004,116} (4,l~,269) ~614 2RSJSl 311•3~SI S0,782 ~J~.m 183,•Jl S0,563,263 (3,312,694} ' 349,200 3,076,490 3.2.915 (907,ll0) (3, 100,07?) (Ii. 116·,616) g~ ... 1~ (4,50¥.00) 1,071,6)3 2,S99,t6l 2',108) 7.l'l4,964 ?,294,964 (l~!?.,8S3) !•,~as~ . " ,s.•ou101 u14.86.S (1.2&6,1Sl) (119.363) (!3$82,'10&) (U,235,S49) (S8,4•S,JSO) C,69.~) l.!1$8 91.011 S00.104 ~ff,).1>$ . l,S)2,IB7 482;63'1 M.~.,i1) ~,391,124) (37.~~ .. -~-~ .C•li6U) .~»,49) . (~.082) ('/;761;-142) i&t0J~.2i . (i~,!1{6) '(,t"°:'1M> 10/iµ 9;'-t~~ ~i~JM06 ~5 965,605 12;m U,gSOl8 S.9,11.53 121$91,ikS :-(lllj212.l62.l rM1,<,126) (29,~.049) 619.890 :: ; ~-· '' ~ 10,10~.~ 1,360,751 55,'2?,532 16,124,619 ~00);59.S, us;~~fO) "~;463,162) (16,511, 10$) ., ) 'l;?®,ffl! m,0,9 SJ!82~71 m,m . ·,• Way !!, 160;626) (33,9'3J.'3) 1;201,111 •' .. ; .. '(?~8'1) (S,7-17,1$6) ( I 3,696)92) (2,3l0,$111Q) $ ·ir,0 I 13.~77 &8J!5!!,,132 4,432,716 ,7 691 'Ji42i $ ,s,m114S s ;iu,m ) .s '4~ s (9,084.936) s 23,880,796 s ·(2.109,403) l84,$l4 8,497,'148 l0,43S,038 sµ.os~ ·,~ 900,66, 3,0SS,164 ~.ffl (.1~1l4) (7J3,2$.7) ( 1,923.~ I l (//1,W (s4JS6) (]03,7.S2) ()80;619) fflJ46 (!~;p~) (I s2;5a9) s·i,;u l,917l~ (11,750,440) '. ·.•,, S,12S;989 ~0,703 131~.7 6U,886 (I.~~ .. ~ .1,wj lOO j1S,76S 332.93; .,n,,s? 13,939 ,s . ~.24,.083 s 183,4JJ I t Sl•.S6l,2§3 s (!J12;6ffi s . & s ta41m $ 119,$ 51 I ' ( ( ( ( ( City of Lubbock, Texas Notes to Dasi~ J1'ioancial Statements Septembel' 30, 2006 NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Basic Financial Statements (BFS) oft~e City of Lubbock, Texiu (City) havl! bean prepated in conformity with Accounling Principles Ocnerally Accepted In the United States of America (GA.AP) u appli~d to government units; including specialized industry praclius as specified in the American Institute of Ccnified Public Accountenl3 audit and acc!)Untjng guide titled State and Local Governmenu, -The Oovemmental Accounting Siandards Board (G~SB) Is the acknowledged standard-setting .1?-od>'. for establishlng govei'l\menta 1 a,;:co.1mru1g !UJd fmanc.ial reporting. principles. With respect t!J propri ~tafy actM.tlei related to busin~ss--type actMtles .lirid enterprise funds, including component units, the City applies all appli~le GA.SB pron0\incllll'lenl3 as well as. Pinan~lal Accoullting Standards Board (IV.SB) Statements. and In~ons-, Accounting Princi\,les (loan:I (~B) Opinions and Ac:counting Research Bulletins of .the Comni.i~ on Accounting Procedlli'e, ~-ed .on or before November 3.0, I 989. unll:$$ tho~ pconouncom:onts contu~ with <1r CQntradl¢t GASf3 P.tODouncemenu. The more signiiicaili at«>uriting poNclos arc· dcscilbc'd b.clow. · · · A. e1PosnN& ·mtrrx The City Is II mli.nfoipal co.rp<>f1WQl'i goven,ed by II Coll!ICil-Mariager fo.nn of go)l~e~u. TM Ctfy; fn.~tatM in 1909; lsf~a1ed In the northwestern pare ofthe·swo_. Tho City ourffliift ·occu~l~ a land area of 1 19'.1 ~ ~ilet Md_ ~es a po_pula1i011·e~ins 211,000. Tho City ,s empo~ to~~~ !IIX on both tea [ ati:d Pi:t$:Ol'li l propertje, l®aCed ~thin Its ~uncwles. ft ~ itso .emp.~ bj s,taio. sbltµ,te-tq ,C tena it½ totp·· • Uinjis by ~exatfon Which occur, nMc)dicaJlu WMA ,f~-ed '"'™""'" .... "°'! Ole: C-i'v '~ .-, ' . . . . ,. . ! .,-. J • ' ..,..,..._ '"¥1" .. "'I'!'~ "I " .. •v 'CoulfcJI. . . . Th_e Cicy pro,vfdes a tull -range of scr:vt~. including police and flui prot~• recteadoof -acllvitlK _and ~ulM'ttl. ownts; ~ion ~nd maintenan<:e of highways, me~, end other infr~; imd witation servl#,., The City lilso provms utilities for clecirlclty, water, wastewater, ind stomi~ as ~ au pubiic ~on st~ .The. BFS present the: Ciiy and i~ component units and include all acti'vitiea, ~. and nmctl.01!$ .for .which the City Is c~idmd to ~ financially accountable. l)le critetia g,nud.~d lit -~g activities i6.be r~P,911~ :Within the Cfty,'s B.FS are based upon and consistent wtih tho~c set forth In lb" Qodfflcatfon of G:Qliemiy~ ,Accqunun, ~a, ~u.on. 2100, "DIJfli,tng the Fl1tq~'t1il q.,-por_iifjg/!i'l!l'Y, .. 1'he tfitcri,a i11¢l11dirwtietlier: • "f:he organiutj~ I$ legally separate ( CA!l sue and be sued In Its own name), • The City holds file corporate r,owcn of tho organization, • T!ie City appoints a ~ing-maJorlty of the organization's-bpllJ'd. • ~Q C!tY 41!~1~ ~J~ l~ \yi!J~n tlil! ~llliZ{ltion. • Tho_ "'rtanJ¥.~n ~u. ll!e, po1~J 1o_ m¥~ ll fman~ial ~e~t-0t b~r~~ on th~ City, or • ~e,e Is f!SCII ~e~cy·by tho Otglinizatio11 cm the City. As roquircd by G~P, die BFS pl'fflnt the reporting entity w~ ~nsists of lhe City (the. primll')I go~ment\ ori;aoizatio~ tor ~ich ~ ~ify b f'lnanolally ac9011,Allbll). ~ oilier organiationJ For whiel!, th.~_.~ l!td ~lgglfl~cc .of 1heJr ~~hip with Ute Gil)' '8": suob ~-~~-ciiuld cause the r;,.!'S eFS io b~:mtsleadllt$ or ~plcte, · · · .. · ·· --•~· · 59 City or Lubbock, Texas Notes to Ba$ie Financial S~temeuts September 301 2006 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLlClES (Contlnaed) A. REPORTING ENTITY (Continued) BLENDED COMPONENT UNITS The Urban Renewal Ageney (URA) has been inolud1'd in the Cilts fm11nclal reporting entity within 1he primacy government using the blended method because. lllthouah it is leg.ally separate, its ope~ons t,e so inlettwilled wi~ thi, City that it Is, In aubstanc.i, a p.ari of the Ci1)'. The URA was I~ tO. pn,vidc ut?'!I. renewal services including rehabilli.tion of h.o.wiing. acqiiisitlon or h()U$ing, and disposition of la.Del. The URA Board Is c.omposed or nine membcr,l appointod by thc'Mayor viilh ibe CQllSellt of the Cny Cc\llicil. b:i ac1S only in a.n advis()J')' capacity to tl)e City Council. All.~owe11 to gc>vem the URA arc held by. the City Councl 1. There are no separate financial slatoments available fur the URA. \Vest TCJas M1111lelpal Power Agency (WTMPA) Is a J~ga)ly separato munic.ipul corporation, a.pomi~ subdivlslon qf.Tex'~ 'and bQdy politic. lltRi Cbrporate, funned in 19~1 iGv.eniod by an elghfmembif Bi,ard 'of Directors'. :J'he b~ consists of two dlrcoton; &oni cac:h city, Qna.11;1Cnl.bQ'..b .~eciechsthe_~i.dc¢ who presilk;s-o~r monthly mee~ngs. [j~~ :\CJ'VJ:1 withouf ~ •. \V11t'WA has_ no ~ .~ r~ ~~ with t~ City for ~n~ Qpe111tlw •. ~.A .IU.aY oo~gci In tlie b~.-s of ~-on.: ~~lssi(!II, salQ, and .~ch~ '{)f cl~ ~gy U> ~ fp:ur ~_l~frq; publ~e-C;SJµtics: Ll!,b\i~• 1)dja. B.rownfleld. an~ ·FIQy~da. WT:MP:A·ni!Y;'•~ wµcip,te,~ ~ .PoOllng O'ltd 'POVW' ~:~~~ with other cntltlC$.: . W'l'MPA"provides elcctrlclty to lis to11r member citfes with die City havillg· a-9ta% interest_ In Its .operations. Bach fMJl\bBt c~ appomn two me~~. lo ~' ~A board, _h~WQV._~ .an, affinnlitl~ ·yqtc: of die "mtj_orlty In fntetesi" is _requlredto.:~P.P.ro.~ thp 'op,eratirig ~g~ apprt>~ .. qijij:iil ~roj~ appr~ ,deb; )~!,141).c'C, ~ appto,V'e 1111)' ~imdm.c~ ~ wrMP). l\ilcs and [!lgulitf011$. ttj~ t!i>' maintail\s. the "ntajoniy' ill i~t" vote ~~ ol), l<ilowiut pu~s,: Md. p6ns•entty ha.. majorjty ¥9lin& control. As the City pul'Chases approxlmately 92.2% of"tho. ~iccttlclty: brokered, WTMP A provides ·servl~ almost exclusively to 1.ho City and is thet<lfore pnsented as I blended enteq,rise fund. Thei, separate audited fin!'l1C;l~I &ta\~~ts Ill~ .t,e o,blilu,!i4 Jhro1Jlb Ille, Clry. DISCRETELY p~~~TED COMPO~N'r l>'N;rrS The financial data for iiic Co~llcnt Units aro shown in the Govenu;ent-Wide Financial: Stateine.nts,. ~ are, reported in a s~ cQ\umn to emphasize !bat they .ic lcplly ~le from the City. ttie fol!owin& Component Unhs arc; includc{l 111 tbe r~ c,ntlty bec:aQso the Pf!!l\11)' govef!Ullent !s ~'8liy aC4X>lllltablc., b able to impose Its will on the organi~ or ~ a!cn~tly in.Ouence opei:at.iorit Ud/pr activitiCS' of die organization. · · · · · Civic Lqbb®l<. Inc. i$ 1l l~~.lly ,epanlfe ~ty ~t \YIIS, ~rpnl~ ~ f~ ~d ~~ the presenta~J>J wholesome ~ucat!?nal, cu~t, and enterialn!Uetit pMgtams for ·.!Ji~ atl~i'al morat, ifttellectual, ph~~ Improvement, 41\d \;'(Olfar11 of the citizens of Lubbock ·1111d iii ·su~~ 3"a. The eleven-membet board is appointed by lhe City Council, City C<lllllcil ap~ves tho annual budget Separate financial slatcmonts for Civic Lut,bo.ctc.~y ,l)c-9btalri~ tom them ._t 1S01 ~-S~, ~ t~. · Market Ltibb®k Eeo11°"'fe'Dcvolopment Corporation, db• M~rRt't 'Lol>bock. Is a legally iep-~ that was fonncd on October to, 1995 by the City Council ta crcato, muage,· 0pera1e. and &Uperviso ~&iams. ll!ld 11:tivities to promote, assist, l!lld enhance et0n0mic development within and around 1he Cil)'. The Cily Council appoints the seyen,mcmbcr board and its OP,Bfl!tions are funded primarily lhrougl\ ~.udg~ alloc:atio_ns of the City's property and hotel occupancy taxes. Sep~te financial sllltcments may be, obtain~ from Market Lubbock at l 500 Broadway, Sixth Ploo.r, Lubbock, Texas. 60 ( ( ( ( ( ·, < ' < . ( : ( ) City of Lubbock. Teias Notes to Basic Financial Statements September 30, 2-006 NOTE I, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contlnued) A. REPORTING £NTITV ccontlaued) Lubbock ~nomlc Development Alli1Dce ls a legally sepvate entity that was fo.rtned on Iunc I, 2004 by the City of Lubbock to i;;reate, manage and supervise programs llld activities to promote, as.~ist, and enhance ecooomic developmcnt wilhln 1111d aroond _the Cis:y. Tho City Coon.cil appoints the seven-member board and iu openitions are fund~d primarily through budgeted al locatiol\S of t~o City's sales and use taxt.11. Separate finartc;ial stiterncnts ma)' be obtained from Maricet Lubbocli at 1500 Broadway, Sixth Floor, Lubbock, Ttxas-. RELA.1'£D ORGANIZATIONS Th~-:c1cy C9,wtcil is resPQnSible tilr IIPl'Qlrrtlng th~ membcn o'f tho boards or other orpniz.ation~ but die Cltys 11ci;oi,tntAbUlty for these orga11i~lons do not ~ ~d m~g_ board 11P{IOfntrnents. -the-Ciiy Council 1~ !lot able tr;i itnpose its will on th*: cntidaa and theni is no fananclal bfinoflt or burden ~latlonship, &Qnds-i~ued by th~ ()l'gattlzations do-not coDStituce ~ebtedness of the City; The following related Q:IP!i)~tions,are not 'included In ihe reporiing ~ The' Oi,µ5tng Au~llorlty or the City of Lubbiltk (f.\-1.llbority) is a 1citUY separate entity. The Mli}'Or ap~1_irta ~o'fitc-~ber tioatd, . . . . The.:t.11bb~k H~ltll f1c1Utlcs Developme_11t .Corpo~••lon promot~ health facilities development. City ~cit ~p~irtts the ~~ber ~- The-t;11,~ek Housing ·11nance Corporatlop, ~c. WiS, formed pumiant to the Tcxis Housing. Finance (::Ol'l)Oratl~ Act. to finance tho c;ost ofder:Mt, safe, Qd affordable residential hoU$iilg. Tl)e Mayor appOilrts die •~n,-meniber b()ard. · Ne>rth •'Id Jim Lubl>oc;k Com!ll,ucuty Dcvejopment Corpol"llti~a (CD"f;) was Conned li'om the ~rtietld!lt\dn of.the ma)'9r'l cominlssloo fQJm.ed Ir\ Mi)-2002 lo !OOlll1liie ilk, ooildltlon ofNonb k Ba$t Lu~boQk. l!loorpfflled in Pebruary 2~\ ~ '_Cf?C· began ·work to eft'e'C~le .charige . in North and Bli5t Lul>boc,k; Tho 'Monti I,. ·Bast Lubbcx:k ~~Utll~ .Dc~l~t dotporadon Is a l®al.cntfiy dl&J drlYdt social ctiaJJ&e; P.ronicites auto~ ~ -~iint w jlicieuini_·ih• -~i, ·or-'.q\jll!t)i· ~ jff~te bousfu8, ~Ing e<ionoJ!liC ~vlty, and cootdlci,a6ng the cftickllit delM:i:y of fllc.iml',~~ The City Council ippolnts two 'montbers or an-eleven.imcMbcr '6@'<1. ··ttje City Council .Is not able io Impose' Us wtn · oo the eatlty'81ld there Is DO financial bcncfltlburdcn ~latlonslup. . . Tl)e:l,,ubl>'ock ~ucotlon Fa\i_)lt~: ~1:1jho'rit)', hl't. Js· a noli~~ corporatr~ 'tii~ l~ity ,of Che Clir. ~d was Q'Olt<lcf ~•1. to dj,:( 1-iig)l'or ~~011 Alilhorlty Ac:t. ¢h'P.ter 53 Tmii e.d!i~on Cock for the ~-of lli~ng 'instirution"$ -Ofbjgl;er:•eduoation, scconda?)' ·sehool, -and~ ccbol>Is in provk'llnS oducttlonal filcilltlcs'and housing fac:flltles. Tho S(!YC11-1~ember Board Is ~lntedby·lhe City Council. '.fh~;L111i6ocll.Flrc111~•• Retirement &!!d !Wltf.11U!ld (Pciasl.on T~t ~9.) ~~ ~er.provisi~ of :~~-Fi~~'~ ReUef and 1™lrcri!ot1C: ~~~ ~rtJici Statv or texas, ror pu~~ of'i)'.!i:i'Vldrng ~ benefits fckthe Cit)'•s fire6ghtm. n'e May~•u~tlie-Ditec1qrofFi&ea1. Platirting. ~Srengli.tcr8·'electcd ~ ~hors of ihe Pension Trust Fund and ~· at-lar~ members elected by·the ~ govetn ·Its affairs. It is (u·~ by coatributions from the tuof~~ and City 1?18tclib\g CQntrllM~. As provided by enabling JetlslatiQn, ~e Cily'.s-respcmliibilit.y 1(j 'lbe· Pension Trust Fund it 'limited to-niatctilrig monthly contriblnlons ~-t>, the members. Title to iwct:s is v~icid In lb.e Paislon Trust Fund and .not 'iil lb6 City. The ·state Firemen's Pension Commission Is the govemlng body over 'the Pension 1'rlist "Fluid and the' City Ql!OIWt . •lgniflcantly influence its opcnlfioos. Their $epllrate lllldited finandal state meats tQ&y be oblaittcd th.ro11gh the City. 61 Cit)' of Lubbock, Texas Notes to Basic Finam::ial S1atements September 30, 2006 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING r.OlJCIES (Continued) B. GOVERNMENT-WIDE AND FUND FINANCIALSTATEME?;TS The City's financial .statements are prepared 11sing_ the reporting model specified lo GASB Swcmcnc No. 34- Boslc Financial Statements -and Manogrment', Dilcusslon and Analysis -for State and Local Gavemmen/1, GASB Statement No, 37 -Baste Financial Statemenu • and Ma,u,gen,e,u'.r DfJC1111/011 and Analysis -For State and Local G_over111nent1 -Omnib\1$, OASB Statm.ent No. 38 -Certain Fin,ancial SJamnent Note Discl03ures, and OASB lnt«prclation No, 6 -Rteognltfon am( Measuremenl o/Certflin Liohllitles and £xpuidltur~ l1iGovernm1ntal Fund Financial Sratemtllls.. As s~lfied by S1.atemcnt No.''34, the Basic Pinaru:lal Statements (BFS) include boch Oovemmcnt-Wide,,end Fund F!Tlllllcial Statemeats. la PV 2006 the City adopted the proylsions of OASB Statement No. 44 -&onomfc CondiJI® Reportfng: 11!1 Statis,ical S~qt/on. This new starxlllld iip,proves tho ~dability and ~sc~I~ of stati#lcal &e«IQII Information b)' ~rwlng tho .~mpirability problems -that have deye!Qpc~ in ptactice-and \)y ~!lg ln(qnnailqn fi'oin !he ncw,tin_anclal te-portin~ model. · · · The Oovernmeqt•Wldo financial Stalcn'lents (OWPS) (Le,; tho $1atti,)e~ of 'H~ A~la Jll)d ihc s~~ of Actlvltlu)report in~nnalion Qn all ofthenon-fiduciary·~iviijq ofthe.CJty and fta blended cornporie1ttu11iis as a wltole, The diS:i:~}' ~ miaponenc units are also ~ly p~ntcd wilhm these slatcmeiJ~. Tho effect' of intedunci acti'lity )111& been· nimoved ,from· ~ Mateml!iiS by" aUtlc'atlo~ ·o-r che atilvitl~ of il_t6 various lntctnal serYi,cc funds ~ the governmental and bu$ine»-typc activitf@ on a fund b~s ~ on the ~~ usel'!l .of tl)c serv.!~-.G(?y,errunental -act!Yl~Cl$t .Wfilch •~. ~ ~~po~ by-~~~ !~<WChUnental reViibues! .an;-reJ>!;i,rted separa~ly Jrom-~us.l~~~ ~J~iea.,._~i~-~~ to •. ~~-ti~ .~t on fcl!s ~d,chargC$ for auppon. All actlYIUes, poth ·go~ffll!ll~l'al ai:td b$1ness'1)'P.~, ~ repb%1 ·lr!. the· -OWFS ~ing the C(;(?~mlc roso~ m"~urement fo~ l!nd Ille acctl!Af liasii of a,ccq.\Qlting. whioh lncl11dcs long~ assets a!li{ receivables as well as• !orig-team debt and o,bligadom •. The GWF,S tocm illClre on the ·s11m1~iUty of the City as an entity and Ute Q:bange in agarega_~ flnariciai po,rilion rcsulling lrOm ·eie IIQIIVJlles of 1hc tisc:uJ periot;L The Govemtnent•Wide Slatetn'enl of NB!. ~ :eporl$ aJI ~I !ind capllll t\W>~~ of .\he-Ci.~. excludlng·tll~ reported i~.the M.ucillt')' fund, IC Is dJspll)'od hnhe form:1:&;ofllSllcts tcssJiabllltlerrequafi.11et :~~. will) ~.as~ and l~abµlticub~~ in .order.elf.~. 1:11aii~-u,~ty. ~.~ a1;iue.qµif#. ~.:bq 4l§pl~ -m· ,~ cp~119~1s: Cl• ~~c:<1. in. -~Ital ~(i. 1_1et ·ot ~Ja~ -(2) ¢.11ri~cd; Jml (3) ~lctf:d. lnvtitcd. i_~ capital oss'ets" net of. 111~it ¥# • ~bil· ~ txai of •~~ depteclatio~. ~4-rodu~ed by ~ian4ing balatt!.c,$ of an)" b<m$, ,~~ ,iJOfeS. or Ol~·borrownags-~ .are attributable to the a<:quisition. eonstJuctlon, or imprO)'emeut of,1hose.isse.ts,' Restricted net as$etS '#t thoso wlth,~int5 ptace<J,on lheir ~·by. ol1hor; (I) ~ly ~-ey creditors (such~ thro_qgh deb.t • co~ts).· :v.AA~; ~~I~, .. ~ l~. ~ .regulations .of Q!be, .~~ ~ :(2) ~ by 1-w through co.nsJitution~tP,l'OYls~s or:ril!llng leg~~. ~t nct~ ~~crwt~ C!~lii,ed ~ j1_1~~ ta, caplial a~ nci of"l~ed ~ebi pr·restticta~ arc ihowi;ic ilS ~ ~rwqi:ln& .or de$JgnJ~ otnet asselS imposed.by lhe-C1ty, whi:ther by a4lnlnlstrative pollcy or lcglilatwc ictlonuf.the,Cit)' CouncilUult do 1101 otherwise meet the definidon ot'restricwd net assets, are tonsid.eftd unmtricted in the G\1/FS. The o~~~t-~_de $.~tem~~ ~f A~vities de~~~'~-~-~hlch th~-~~ f9r a given lbnclion. or segment I~ offset by program rev~~. ~ ~ .re th°" th_ac· ar6 c~l)' identifiable wUh I SJ)CJ)llie func\il?fl or-se.&me'!t, Pi:ogram '~ include: (l) charges. to CU$t0atffl or applican!s 1¥ho ~. ~ •. ~r ~teelly j,cfl¢it &om go<l!is; -~Qe#. QI: ptj-vileJ~. p~ by a ··g1wn ~io.l\ or segmenl; ·and (2, ;gr&\rtl and ~oution,s lbo,t • J1,stricted, 'io ~!111g Ille opejatlonal or capJial requiremen~ of a parti~ar ~ or scmoent Tam ~ ~ ~s not p,-opcrly lnclud~ amoitg program reve1t11cs Ill: reported .instead as general revenues. ·TIie ~~ revenues SUppi)n lhe net c:o5II of'che functions and segments 1tot ~vcr<id by.program re\lomKIS. 62 ( ( ( ( ( ( ( ' 'I ) City of Lubb®kt Tens Notes to Basic Financial Statements September 30, 2006 NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. GOVERNMENI•W-DE ANDnJNo FINANCIALSTA![EMENTS(Cont11ged} Also part of the BFS are-Fund Financial Statements (FPS) (or govcnunenlal f\mds, proprietary funds, and 1.bc fiducillf}' fund, even though the !suet Is excluded from the OWFS. Tho~ of the FFS b on major funds, as dellnM by OASB Siatemeut No. ~. OASB StatemenfJilo. 3·4 sets forth inudmum criteria l'or determination or major funds, i.e., a percentage of assets, liabilitic:11, revenue, or expendl~expenses of fund c:aicgory 'and of the governmental and enterprise funds. combined. However, It also ,$Ives governments the option ·or dlsplaylng other funds as major funds. The City can elect to .add somo 6uµls u Major funds &oca11S4 or outstanding debt or community focm. Major lndividu.al govenul1Cl1ia1 fund$ and major Individual cnterp~ funds are reported as separate columns in the FPS. Olhcr nori-tr1aj Of ful1ds are combltted In a single column ill the appropria1c Ff'S. C. ME'AfilJREMENT FOCUS. BASIS OF ACCQ'UNTiNG • .uio:irrNAN'CJAL STATEMENT PRESEN'fAVQN . Fund Frnanelal Sutentl!llts ~ OWFS ar,e re_ported 'uslbg me econotrilc resoiirces inc_~ent. ~ and .Jh~ ~ ball,~ of •~unl.iqg, as .are the proprl~iy FF$. ·ne ·city•s fiduc:1$')' f PS,fu'Cf~aos q'~ly 1ft rig~ iµttd that ~ the 1GCJ¥1I ~~ .of il(:.COunti_11&, Howevi:r, be,cau,sc ag~ (wids_ ~~ ~~· llll(l .fu\~l~, 1;11~ filr)~: 4~ not have a measurc1Mnt..fo¢1is.' ~~iles Are rll4lbl'd;ed wiw. ~ed itla• ~es aro recordecfwltezi ·i llabillty is inc:~ i-e1garcU:cs, of the timing of related culi'tlowi; Propcriy~~·are:rec'ognized m mcnues in the -~ for whieh they arc levied. G~ls and ~imHar ltoma are ~81111.!0d as r~onue as $OOII as all eligibili~ r'eq\lirements have been met. Because ijle enterpr~ funds are combined in~ :as~le bus:tneu-~ actitffles-col~ ·o~ ili,e OWJ'!S, ceiuln inte$nd ilct:Mtles between these funds are ~liminated hi tho consoll~ tbr die·:GWFS, but arc lncludod ht th,o fll4~ columns in_ ti)~ proprietary 'FPS. The effect of m,~flmd aotivfty hu ~ el;iminated fiom thi:. QWFS. Form~, 92,2% Qt' 1he opetat!OJIS ot~A ~~ciiji!\g ~cm~ WTMPA and l.iibboolc ·Power & Llgh1 ·havo bttn elfmla!lted ·for the GWF'S ~ fflld tor tbe electric BT.A. Exceptions to -th~ gfinentl n1lc 1re payments•in-lleii 'Of taxes an'il o~ ~ bctwceit 'the Clty't oloctric, water and wastewater functions and vtrlous other fun'cdons oflhl!·JOffnimeiit Elimmation of these charges would distort the dire¢t CO$t$ and prQgram ~naes reported for the various flincmON c;oncemed. Governmental FFS aro tepO.rttd using the ~l fil!Mc:ial ~,es rn~t f~ Md .the modified ~Ill basb of accO@tlng. This• 11 ~ _?nldidOlllll bas~ of ~: for JO~I fund's. Toh prescn1atlotl ls·necessary, (I) 10 demonstrate legal and coveztan1 camp!Janc!e;-(2) to ~te the sources f!nd ~ of liquid resourcos,. and (J)to demonslrate hQw ~e City's.~.~ue.s. i.mci .. ~enditures confonn to the ~I budget, R.evenuet1 ~ reeognl7.e? IS $00n a, they lire both 111CUui:11i:\t• ~d ;available. Re~s are ~11sJdcrcd to be avanable whcb Jhcy ~ collcCllblo within the~ ~ or s.®n ~ ih«eai\er to ~y lia'liiliti¢5 of the current perj~ Po(thls -~e, 1be go~t ~~.~lilies' to' be a~te; g~r.tlly, if they a.re collec~ within 45 ~.of the end oftbe c;lli'l'ent-fi~tf)eriod.'•wilh the ~cepuo,n.ot s11lcs ta,c~ whldl ate ~i-4 » 1,e available if they 11re collected within 60 days of year end. The City CONldcn the grant avllilabilit)'. period to be one year tor roven~ te«ignltion. ~ditwea g«i~tally arc recorded when a llabUity is inCWTcd. as under accrual accounth,g. ~vcr, de.bt service cxpcnditum., as .well as e,i:penditurcs rtbted oo compensated absences, at1d claims and Jud~ att recorded only when the liability fl115 matured. Because the governmental FFS are pmentod on a d~ ~ of'accountlng lhan the 6 WFS, reeonc:il iations aro provided immediately following each fund sta.to.ment. These reconciliations explain thci adjustmen~ n~ry to convcn tho FFS Into the govemmental activities (;olurnn of lbe GWFS. 63 City of Lubbock, Texas Noteli to Basic F~anclal Statements September 30, 2006 NOT£(. SUMMARY OF SIGNlFICANT ACCOVNTING POLICIES (Co11tinued) C. MEASUREMENT POCUS. BASIS OF ACCOUNJJNG; AND FINANCIAL STATEMENT PRESENTATION {Coating@ Property tax~s, sales taxes, franchise tax:es, ocwpanQY taxea, grant.!, licenses, court fines, and lntetest associated with the current_ ~s<)II), period arc all con$ic1eJed to be· S\ISCQptiblc to accrual and have been re<:ognized as revenues Qr the cumm rasccat perlQd. Only the portion of spec;.ial assessments m::elvable du~ within the C\ln'ent "ti5':l\l peri~ ill consii!~d to be susceptible to accll&a.l as rovenue of the current period. All- other rm11ue Item&" ~ ~onsl4~d to: be m~asurablc: aad. available onl~ wlwn the City rcccl\fC$ cash. F11nd Aecount1n1 The City \lSCS f\Jnds •~ report its fUW10ial position and the results of its operations. Fund accounting segregate~ funds.according to thelt. l~ded pWJ19SO and ls:designd ~-demOM!nte legal c.Qtl\ptian_~ and. •-~ aid financial man~B,Ml!eni b)' atgrtBAfing.~ctiOIIS ~-laied to certaln govcmmc~I t\inctlOM .or. 1c.tiylde$. A r\ili~ ls.a. &epal'.llhil aec<>urrtms e,:itli}i ~itb a ~ff;balll!icing •et•9f~unts. which incliJ®s iwets, llabilltios, fund balance/net"aascts, ·rwem.t~s ana ~~n:dlturcs/cxponses, _Coven:imsnW pupd~ aro thoso throug)t ~i~h mosr of 1he goffllilllental funcii0ns -of tho City m financed.: The City ~m·<)lte;.major.go~:tai; tl,u)d: The: ~lie_~t ll'ij~II,. :the G~I; F.1111d.,.~ t)io pi!)"•: prfm~ ~~t!na ~c,1, ac4;ouri~ tor _all ~1ill ~re~: of tltfi'nwil sby~ent ~c$1)t:11i·~'4' required tii be -~d tiir in 8.lt~lhcr lbii<f, ' , ' -' Enccrprlac Funds m.e uted to fflloun_t f<lr operation,: O}lhat llr6 fin&R¢d. i!,nd Q)lffl~ in !I mae1n~-~i.1111111.t 19 private ~11$~ ~nferptj_s·~ where fhc Intent of tno governing body i• ~ tM cost'$ ·c~, til,dlil!linl deptec,fatj~ of~~~!~!~$ g~ o/ -~~ (O_ tJi.~-~. pub,ljc ~ a ~nl!l~B. basis ~ ~-~ q_r· -recov~ itJfP,Ugh ¥,er. ~~;_ or.(2) ~ere th~ ~mg ~ 1'-Qekled 1m1t ~"!'Ol~-d~~ -~ revenues eamcd(ox~ ·m~~ and/or net-Jncotne I~ appropriate for Cl))ital mamtenlinc:c, publle. policy~ managem.en1 c:QIUl'OJ, .a~ow;(ability .. w .otber ~ Tho -C.itY. ~"' ,11,.e following ~or en~· fu,i_(IS: . 'Thd ~lectije Flin.4 ~I:$ for ~ activttics 9T Lubb.oqk ~ll:I' ~ Light ~&.L), Qi.e Citj-owncd dectrlc prod~ end distnl>ution:~. · ·-' · · The Water F.'lla~~~UII~ ~r ~-!' ~MiteS' of~ C!!Y's.wat~ sy9~. n~ \)':a.ne~~r Fu~d 'l!l;coµpis f~r tho .!l~tlviii~ cif11i,c c~,, ~itlicyl \Yaskwator sYstcm. Tb,e Weit. Tf~t ~li~lcJ,_al f.ower Agency (WTMPA) f'u~!l accw.,ni~ for the ~vitiea of"~ gcn!)rati~ ~d. po_w¢tbro~-~-member citi~. _t-fffl}bc:r o\t~ m_11,ll!«!F l,.l,l~k wlth 92~ OWJ\~Pt andl)s,r .Brown"fl.ol~ a'iid -~&lda c::ojnprisliJ& tlio reltiai. ' . ···"&%~ • -.-.. ia. ..... ·· ....... ,. -., . . . . ~-... _ .·. P. -The Stormwater_ tuad accounts for the ~lvitlcs of the stormwatcr utllicy, which pro'llides st~wr drainage for ~ Cfty:._ 64 ( r '- C ( ( ) ) ) City of Lubbocki Texas Notes to Basic Financial 'Statements September 30, 2006 NO'l'E I. SUMMARY OF SIGNIFICANT ACCOUNTlNG POUCIES (Coatin'llff) C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING. A;ND FIN,ttl'i'CJAL S'l'ATEMEtff PRESENTATION (Continued) The City ropons ihc following non-major runds: Goyernt11ental Fwnds Speelal Revenue Funds arc used to aocount for the pro1!0eds otspeolflc rcvc,i~ sources (other'lhan special assessments or major capical projeots) that are legally n:stricted to expenditure11 for speclfiod purposes. The Debt Sfltvi" Fand Is used lo account for the l!CCUltl\llatlon ofmQ~ for, IIJ(! tho.~t O.t &~,en-a\ long-tam obligation principal and intei:est(other tfuul_ d~bt service pil)'incn~-~c. br ~P.l'l.~ ftln~). C11plt41 ProJ(lets. Funds arc. used to acCO\lllt for fwancial ~ to be, used for ll1e ~silion: or C01U1tUctlon of major capllal improvements (other than those rccoriied In. tile -propri_~ funds), Pmp(fctary F1mds dLstlngulsb opcratliig rcvcnuo ;and expenses &cm li~peritini. i~~ Qperatin& re\f4flues and. expenses generally ·result from ,proVid~ im,ioo,\ and produqmg and d,ellverlng ~)11 ~~~i:i witll a_propricuio/ fµnd•s,prinoipal ~ ~~ :fhe: ~I _4:1p.e~ ~-.o.f~ Cf~i' . I--l\:in<fs_ • . 'd . ftfle Ci"'' ,!...,_.:.I -• .;...,t.... .c...J..,: ·;L.;;.; · . .,;, """•"t6iil, . ,f'ot aaiq ari.d " -ices, .,.$tn~~ ,an~ ••.1l!ww111,11•-,~TL\/U l-lteCU!IIIS~\Vlilll' «'.S .• ,. _ .W'!'. Oper•dpg oxpenses for enterprµe flinds and internal secvicc funds liidu<!e :i_M ~ of'ta1~: anci. ~~ admll\1slrat!Vo e~. and deprcciatloo on capt~ assets. All ~wnues and ~ not ine6.tlng 1h14 definition 'ate roporllld as non-operating revenue's and ~nses. · ' · ·Enterprise ·rands are used to aecinint :for ~ to outsfd!'I dsen1 where the Ml .cost• of proyfcfloa :Servicet. Including capita\, . b to b:e rcco~ -~ fffl llld dlal'gei ~.g., Lu~¥· ft'fflOU Smith Intmati6ttal Ab'.p,Ort (Aitpol't Fll!ld)! Citib_us, and the Solid Waste Fund. h1ter~•• SerYlte Fuads an: ~-to IICCOIIIIC'for ,erv~ provided.to ~r ~111 imenofoa:of-1h~ · ~ts or to odler govctmnenll on a cost rol~bUtsetnebt basis (l.o.; 'Fleet ~ Full.ct, Cciti.tra! Warehouse Fund, Print Sl)op Fund. Self-f~ l\'und, etc.). F'jduclaey Fund ls an Agency Fund that is used to account for asset1 hold by lhe Ciiy .as .an agcnt ·ibr.pdVlde' organliailoris, Thi$ fund dosed In FY' 2006 lild 11 not part of the gomumertt-wido finanoiais. . . D. BUDGETARY ACCOUNTING Tho €1ty_Mallager submits a proposed operating: budget and caplrat .lmprovcmem plan 101he &'\r Coul\cil _&11~~11.II~ f9r the UJ)C(!millg (i~ ~-PubJJc, hcarla$S'~ ~~ to·o~-~~ ~IS, 111d ~ blljfget is leg111Jy enacted through passage 'Of an ordinance by City Couneil, ¢ity ~I action ls· .also req111i'ed for lhe approval Qf -1Y tiipp~ental _,;proprlaiia(d. All -~ aimo_unli ~ fi1 du budget emnparison 11atcn11,mt refl~ the original budget aitd'lhe IUlfood~lf~udget; wbfcll haW bccii.adj'usted f'ot. leg1Uy authoril.ed supplemental approprillQOns Co lhc annual budget during die .trscal :year. The operatillg budget is adopted on a basis tonsistent 'wkh .OAA.P fur tho <knetat FIIM-B~ conirol is maintained at tho dopartment level In the followinfcxpffld1twe,categ0rics: personnel semces.-•J.Ics.·ocher i:~ and 65 City or Lubbock, Texas Notes to Basic Finandal Statements September 30, 2006 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. BUDGETARY ACCOUN11NG (Continued) capital outlay. Managcm~t may make admini&trative lr.Ulsfers 1111d increiises or decreases In a;ccounts within "tegorles without Council approva~ as long 1111 e)qicnditurts do not exceed budgeted. i1ppropriations at lh1! fund level, the legal level of comrol. All annual operating appropriations lapse at the end of the liscal ycar. Capital budgets do not lapse at fiscal year end but remain In cff'eol until the project is complotcd and closed, In additiqn to the tax le\lY for ~11!,1 operatjqll&j in 11cwr,danl:e with ~a law, th~ Cit).' Council sets an ad v11\orc:m tax-levy for a siq)dng nmd (General Obligatioo. Do_bc Service). which, with-oash and in~~ts m the fimd, is s11ffieicnt to pay all debt ·serviee dut dutjn,g the fiscal year. E. ENCUMBBA,N.C£S At lhe end of the llscatyear, .¢neµmbranees-for gOQds ~d fi:rVli::es that have not been received-are ~«ile41. At the beginning .or the nelrt fis~·seit, ~t roviawl all opert encutnbranecs. During the budget revision process, encumbranoes' ma.y be ~tabli&hed. On October l, 2006, the Genenl Fund had no sign ifkant amow,.ts ofopgn ,encumbtancQS, F, ASS§l§, LJAB[JdJ_c,,,@ FlJ_ND !AJ.Al'(GYJNJiT A\ssnJS Eq1.dty. lfl. O.~b and ir\Yatmenll -. ~-:Ctt>t~.ls tho,~,of~-vylo,U! fund~ pl ordCl'·IO, tacin~ ~ maoa&emeat of ~h an~ cilM}).~ il!_Vlls•t ~i!l&s. _ll@rds -~ mi\.i~laiq~ whlO.b: r&fleci each ~~ti equilY. ht:the poolod ~~llllt. Th~ Cit)'',s-lnv~nnilnts arc,~ at_ fli1t' Y~!IB. w11.l~h ls ~ased on-qli~li ma,rlc~ prices as 9f the v.alua!,iOJ,l, date. Cash Equl,alen.b -Cash equivaltnts arc defined. at short-term highly liquid i_11ve.strr11.mt$ that are; readily e(!nve1-1.tblc to known 1imoµii~ or cash ·111\d have~• m~ltl11s -ot dvee fl!o.~ or less when pu~ whi¢h p~ent -~ i~i~98f)t tjs!{.~f 1:~ i,l ~ ~~ i,f ~ges ~ urtoti~ r• ~hi~ ~sh incl!Jde.s c~h equiv*i;it, 11:ud ·have ~en .ctod' l>)' ~d, menantil for ~~ ~ rcqul~~ imd pllSSC~r facility-cl\a[JCS ... l11v~1~ents -in.•~-iqcludo .. 50¢Urlt~ In the Federal Home .J.:.aan ~ Fedota! Homi,, LQa,!I Mortgage Corp9,tati.on, ~il Pec!_ertl ~onal ~9fl8B&~ ~iati_!>J!,. ~~ in~ -~I~~ Investments ~t have J:,e:en ffl.lrl~ for bolld ~ cap.ltal i,rt>jecti and-mcinoy rcscric;tcd. for c~ in-th~ Rbk lliUI Hcaltll Insurance F,llllds, , Property 'Tu R~lv.abk "' TbQ \'al"c c,f all teal aut1 bimness. ~ ki,llllted in ~ :City is ~ ·ana,ua,lly on Januarx 1 in ~~~ty 'Vitb Subt(tle e of iho' Texas Propetfy Code. Property taxes are_ l11vicc$ on October t on 1h9se iis~ val~ ~ 1bc taxes arc du~ oo rsulpi of the tu: bill. 01l ~ f'QHowh,g l!UlUaly I, 4' ttx. Hen •~ to proport)I to se~ure·tlw payment of all ~ei., pea'altiea, and inlere&t ultima~ly lmi¼-~d, Tho • ~ col\.\~ ~ti~qUCJ1t-ihiot J>Uk1 bewrc. i;:cbniafy t, Therdore. at fiaca1 tear end au propeny- iaxcs r"'lvable are ,dc]!Aqil~ft•;but ai,,scx:~ by a l,alC lion. I At ch\l 0WF$ ~. pro~-tax: ~~~ Is recognize«! ~~n ~. Jn: -~mm-I fund$, the City (ee(lr4°,9_ propmy taxc., recei-~lc 11pon.loY)' and defen. tax revtminintil tho.wt('$ are collctted or mila~lc, For =II fiscal year, the-City n.:,co_!ni~: tt11enue in the am.ount of t(IXe1,.QOllectcd .d.uriog tho year plus an ~imale of taxes. to be ~Uected in ll:ie.-su'bieqilent 45 day,. The City al~te,_property tax [j\lenue ~ l(ie Genera~ ccna~ S~lal tovcnuc, ~ D~bl s«rv.lce Funds basod .on tax ,aie$ ~ for 1he year of levy, The Lubbock Ceml Apf)l'i$al Distrl~t ~es property values, bills, collects, and remits the property ,laXcs to 66 ( (. r \, ) ) ) City of Lubbock, Tuas Notes tG B-asic Financial Statements September 30, 2006 NOTE I. SUMMARY: OF SlGNIFlCANT ACCOUNTXN'-G tOLICIES (Contlnlled) F. ASSETS. LIABILITIES. AND FUND BALANCE/NET ASSETS CCpntln11ecJ) the City. llle City adjusts the allowance fur uncotl«tiblc taxct and deferred tax revenue ai fi.'ICal year end based upon historical colloction ClQ)Cricnce. To wriic afl' property taxe$ ~elvable, the City eliminates the receivable and reduces the all~e fur uncoUecb'ble accounts. Enlerprlse Fundi Recelvabl~ • Widiin the ijlewic, WllllH', Wastewattt, and WTMPA Et1terprlsc Funds. S(l!'Vlc6s rendered but not blUcd -as of tlie close} of lhe fiscal )'W m, accrued l!ld !his amouRt is reflected 'in the &eto'llllts receivable balances of each filrid. Amounts billed are reflected as ~ts rcceiwb(e.nct of an. anowance for uncollecrible accounts. Inventories -Inventories, consi:Jt of eicpondable supplies-held fQt consumption. lnvemorlcs are valued at cost using the average oost method ·or Ytduauoa, and are ~led f'or ~Ing the consumption method of ac«!Ullting, I.e., inventory Is 6Xpl!losed when used •rather than when purcbmed: firepalil Items· Prepaid items &n:!·~a~tea--forundet-thOOnsump~ ~. Mortgage Rece1vabloll -M~ receivables consist of'. I~ ma~ to Lut,boc:k _resnlenls and bu$!ness.cs .under. tho· City's Communiiy _~c_lopmenl loan proa,am. ~csc loans. ~ origlnall.)'. fundod primarily througfi.grants recelved &ort1 tho :U.S. Department otlfou,ing and ~-De~ment. · Capital Assets abd Depi'ecl$UcS!i1 -Cipjtal ~ illqudi~ -p~tc di'lllla,hi illfrastruttin (str.cet.t bridges, ~ldewallcs and 01hcr osseU thit ·are inimovible and .of val~ only _l9 the City) are ilet'ined as :asslru. widi· an inithtl;,lndividual cost ofmo_ro ~an $5,000 and an estimated uscthl_,lifc ~ ~, ot1brce >'.~· ThcsQ eapjral _assets are ,ep<>rted in the OWf'S and the propfietat)'. rund$. Ct,pilaJ asseta -~ t~ot'd.ecf at-oQSt, 0.1' ostii'IIA~ h_~brlcal CO$! If purchased or oonsuii.cted. Donaf:ed assets are ~ord¢ at die-estimated f'alr value on ~o ~~ 1>f don.iio11, MaJ~. outlays for capital ass.els attd. !mlJrOVements·.are capitallled as the projects tm1 cx,nstructed. The cost ot l'\Qffli.,l ll'\IW\te~ .and l'llpa~ tlllrt do h9t l!l4"t!! the Yalue of lbe. • :cif ~UY. ~d .th&_. live.a, .4ie. not. ~apical~. Major lm~iuenl.J: ~ ~ltallflOd w .ileprecl~tt ~ die ·temalnlpg ~ftil, I~ of the rei,ted capital' assets. Dcprcciatlott ls computed using the ~gbt-llne mothod over the es1lm.ated 11$Ct\tl Jives as folli,ws: lQt~t Oipttallutio11 -Be~ the 'City iswcs general-pwposo 'capitiil i'1!P,rOVement bortds, which :are ~orded within fha pl'O)>rletary ~. ifie• Olty ciipltali1.cs ~ ~ for "busln0$$-~ ·icthitief·~ ente1pdso .funds ac.o~n1ing l9 -~ Fin~al ·Accolllldng Standards. Soard (P~SB) Siaterncnt .No. ,34 Capilall:lltlon of l~~t C¢t i,nd FA$B. ~~!lt No .. S .Copll.aluail011 o/lnferUJ ,C~I,. The .Cirj caplla\~d in~~t ~ approx~~~ S~i'.m ~ qflri,ti:n!st Clilnc(j, (9r ~o ~~4Y~ ai:tiyidcs Jlnd ·the en~i,e ftu:lds during the ~ ft¥ca._l ~- 67 City of Lubbock, Texas Notes to Basic Financial Statement& September 30, 2006 NOTE L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES {Continued) F. ASSETS, LIABlLJTJES. AND.FUND BALANCE/NET ASSETS (Continue© Restricted Nee Assets • C~ln cntcrpris:c f\md and governmental activities 8SM!l3 11H restri«cd for construction Bild debt; consequently, netllllSllts have been reslricted f.or those amounts. The excess of o~or restricted iuscts over related \\ab ilttics ~ mc:luded as restrk:ted nei assets for bond pt_OCeeds, bond indctrtlrres require men ta, and passet1ger facility charges. Use or Estimates -The· preparation of flnaoclal staccmcnts in conrormity wilh aqco\lJ1tiP.g prl~c:iples generally accepted ·in the United States of· AmeriC!I reqtrir~ management to make C$timalDS and assumptions thal affect lho reported amounts of assets and liabllitics an.d disc:losure of conti~ weis and -liabllltlea-.-at the date of the financial srotctnei.rts and reported amounts of revenues and expenses/expenditures during tlici reponing period. Actµal results .co,1(1~ 4jfrer. _from !hose 11stimates. G. REVENUES, EXPENSES AND EXl!tND.rrt,gs 1111crcst1n~me on pooled ~ an~ m~~·-18 all9cated monmty ~cd-91\ tho ~ .. or a_f.uliJj's.:six• month rolling average monlhlj.: pitlan~ in. poo~ ciub and Investments to tho total citywide abt•mo111bfo_Ufug average nwnthly b•I~ in pooled ~li'ind iilws.tmeirts, -except fur c:crtaln Fid.uclar.y Funds, cel'tllp Sp'licial Reven~ Funds, ~Jtal Proj~ .. ~ aru! .certain lntetnal Sorvioo Funds. The iJiffl'CSt ,ini:QIJ1e on poolc<I cash and invcstmen\'$ otll)!)se ·f!ln<b h r.e~ 'IMbo O~neral ·fund .at ibo Oebt Serv.lce0Filnd. ~ltsT•x Re~l!tie (oi; th~ ;Ci~r,~ ~ .ajt ~~0!1 of l.~"~~·t.fQ~I sales:~~ oU..-~%,~~ Ill collected by the State CJf.1'~·iod rem~ to the Ci'ty monthly •. Tho tax js eoJtected b)' ~~Lfor:amt.i reqult'ed co l>c rcmiued to the ·swc-by'thc·2ooi o£tbe month following ·collection. Tlicc-.tax ls then paid 10·111c- Ci1y by 1ho lo.th oflilo Mxt-inonth. Gra111 Revenue from fed'~.al ~ci st~ pu Is~ as ~oue u ~011 as an ellglb~ ~ll'ir~ have been met. The availabjl~ peri~d for .grants is considered to be «ie year.. lnterrund Tn!mMllOM~ ~le4 fotu tefflMICS. cxpendjturcij .expenses; .or qQ,.cr, tinanclng sou~ 9r uses. Transactlori.s th~~l~.Nlm~u~.DQI ~-•· t\llld f9F, ~ttl&teS!'~ f_njtiallt:~e. .• tha1 fund that are properly appbC!llble ~ ·another. f\uic;I. ~ cecoraed as expem;l1~oxpoftl~ . !!i. ~- reimbursing fund and as rcducti.ons. of o;q,cnditures/expcnscs in tho t\lad 1hal Is reimbursed. ltt additJQn, transfers are made between: Aindi to af:tlt\ ~-&om a l\lnd .legally ~b:cct:to romve revenvo to.a fund a11thQl'lzod to ~nd the reve,iue. Coaipwated Ati.scnces c:~ of ~lpi, ~wand .sick leave, V~1t leave 9f'. 10-20 days is Jjran~d 10 all regular ernployee1 aepenclont upon 1bc date employed, ~ ol StrVIC:O, ·anf civil sctyic:o ~•· Currently, up to 40 hours of vacation leave may be "carried over'! to the next calendar year. The City Is oblip1ed .to make pa~ uppo miremem or ~n for cmployccs in-good standlng.for.any,availabl~ unused ~ii~~~ · · · · ' Sick leave ror emplo)'Ces is l)cciiled at 1-¼ da;ys ~ month wilh a' itw,(lmum BCCJU1l status of2!)(i d_ll)'S • .-\1\er .IS yein of conliliu_oua Ml. time seivlec tor nolk:ivil _service pmomiel,.~~-sick leave is paid on ~c or termbiatfon at th~ current· ~ rate .for up to 90 dayl. U'PQn retirement or tenninatlon, Civil Servlc,c ~el. (Polic'e) are-paid (or ~ to 90 days ac:c,ued aiclc kavo .. lier one year of employment. Civil Sffltioe P11rsonnel (f'ircfightm) ·an.: J>!ll~ fqr up to 90 days pf accrued $1~ leave ~ retirement or tcrminatiori, The Tew Civil Service laws dictalll certain benefits mid per:wnncl policies above and beyond those policies of the City. 68 C C ( ( ( . ' ) City of Lubbock, Texas Notes to Basi~ Finaucial Statements September 30, 2006 NOTE l, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) c. REVENUES. EXPENSE3 AND EXPENQJTURF.S (Continued) The liability for lhc accum11latcd wcation and sick leave is rcco~ in the GWFS and in the FtS for proprlct31')' i'und employees when earned. ~ liability is recorded in the govcmmenlal FFS to the cx1cnt It Is due and payable. Post Emplo7mc11t Benoflll for retirees of Ille City oCLubbock include the option to purchase health and llf'e insll!'Mce lxlncfiU at their own oxp.enso. However, employees tha1 retire with IS YnD of service or ClviJ Service employee, that retire who bve a aiek~le~ve balance. In cxcoss of 90 days will be able ·co elect· to contuwc roceivins medical coverage In full Jo.day periods for the ienn of che balance or their sick leave. Amounts to co1/er premiums and admini.,traiive cosis, with u illcremental charge for rcsuve funding. arc determined by lbe City'$ hc1dtb care administrator. Bmploycc contributions are nrnded 011 a pay.u-you-go b.uis and ap(>J'Ql<imated S 1.4 IJliUion. for .fiscal 2005, 'Ibcae contril>Utl.ons lll"C included in the llll\,OJJlll of lnsuruco cxpcose• rotl~t~!l In the finan~I J!ltivity r:eported in ~ Hoalth Insurance Internal Service Pund; NOT.It D. STEWARDSHIP, COMPLIANCE AND ACC0UNTABILITV A. B:W:8JC[£D NET ftSSETS Restricted net assets are only !Jitd for their In~~ purpose. For proj~ funded b)' tax ~empe debt ptocoeds, the dobt p,oueds 111! ~ fmt, Iba\~~ rosourcos are used. B. NET ASSET/FUND BALANCE D~FIITT TI)o deffcil of·SiH,884 ln ihc llciil!h Benl;filS lnlealal Serv!ce: FWtd is d~ to unusually /!lgh lu$llll claim activity, In FY 2006. Tbci ~en~ cllaiged co IISCI' ~artmCIIU Vftle. ~d on predeler=locd l'lleS. The bcallh tale, ~ .\,ten teCY&lllllcd iii FY 20<1110 prcve11t lllu.e1ldlclts. C. ·OE~RAL lWffl) BUDGET OVERAGE Th, OcAeral Fund PY 2006 \lntn~ b11.dgel¢ ~11.d~ aad J1ansi'cn out m $l l3 . .Z5~J4j I.ad ~tDaf e~ and 1l'lnSfffl ~-were St 13,71-4;94Z ID offi"lgo of.$459.,394. ~tfluJCCentlj issued nr:w pollcles for departmcn1al ro\lk!W of~dgets. NO'n: m. ·DE.TAIL NOTES ON ALL ACTJVITIUAND FUNDS A. DEPOSIT§ AND INl'.!§TMENT§ Deposits 0n September 30, 2006, the b(ln.k balance.~flhc City1s, ~ was $3,002,928.: At! of Ibo bank balances are <<i~_~y_t'elferal ... l!Q.I)' las~ Qf.CGllltel';il~ Custodial ~I ritlc. f.a ~ns~that.in thoevem ot • ~ fli~ 11ovemcn~•s ~its m.r.~ ~ ~ to it. 11ie ctty•s ~k ll(!l~ for~ crtdJt ~ l'.tqu..lres ~pl!aai,ce w,th the 'pl:ovf.tlons ofa:we Jaw. State Ii, .~quires eollat~Uon Qf ii.1.t depo$~ w.ilh fedeill dcpositwy ~. e'Jig~}o ~ties, or ·a ill~ W.ni:! h•vin& ~ _a_weiiato valpc at least equal to the amOllnt of th~ ~It$. ~. city'• hlvcstmollt 'P.ohey rcq1111'CS 1hc inmimum <onatel'll Je-41 t9 be 102.% e>f matkot value of principal Ud accnied imeros1. 69 City ofLubbO(?k, Te1.as Notes to Bash: Financial Statements September 30, Z006 NOTE m. DETAIL NOTES ON ALL ACTlVITIF.8 AND FUNDS (Contblucd) A. CASH AND DEPOSrrs lC09tlnue4l At September JO, 2006, bank balances was exposed to c:ustodlal cr«lit risk as follows: IIUl.ltcd S -400,000 Un insural and un~latcralip:d (J_11insu~ 11114 -colllllCral hcld by plciiglng fln81\clal lrutltutfon 2,CiO:Z,928 Ut1l 11J11~ and 1:0ll lllcral held by pledging fltianclat lnstitu1ion' s trust dcpartlllCllt or ageot la other than the City's 11amc Investments At September )O, 2096, the·Ci1rllad the ·to)towlng investments and m\\tllli;ies: Type R~hasi; Agreel\\Cftts·• Fc«i$1 :ffo.!M tA;iai). aann ·~cdmil Home~ Mci~c _Corporo.tlon . Federal Naliooal MortNC /.SS(ICial!Oll . fllml Ctodll N~ F,cidcral H~·Loan S~c'p Up 'Note MOIJC)' mai'kCt mutual Mils •• Slate ln~lJIICftt-'PQOll •+ •Co11$14eml ~ cq9iv.alent for 1inonci_ld RJlci~ns. September 3~1,lQOG. MauriJ1nlh Ypn lip Fair V1lue Th11•.I t-5 s 1;796,529 s 1,796i$2,9 9,.929,.600 9',n!l,'$,)0 10,$79,104 i;S91/i04 S 1;!'8?;400 l6,S48,440 30,6QS,(!40" ~~43!100 J,980;QOO l,~80.@ 3,978,600 1,'9Sf1~ ~m,~ 3S,926mt ~S.,9~018 JM,306Jll S2~.llMS l§UO.MI! UU...l lA;§Am 12.m-~ u Mocii,y mol'lc.el il\µtµlil lilnds;illd'Siill~ 111v11:1fmClll Pools ue considacd'c:uh cqulva!im\.1 !1,r l'lnaoclal ~ uri_~ l'C$1riQtOHor bond fU1M~ C$J>ii-J projcwi and clllims f« Risk md Hcllth.ill:1:Urenc<: Funds. lntcrert Rllte Rh~ • Au ~ oflimitlng Its CXl)O$UR to (ait ·Yalile losses arising &om rising ililmst races, the City•, investment policy "liufits investment, to lhoso that ca11 tie held 19, maturig, and by tlrriillag fmai IJIClt11rlty to no m~ than flV6(5) years. Tho mo1tey market m~I l\md$ ~ in~~t poots.~ ~ ~ an inveiStmen,t ~ith a maturi~ of less than one yw because they arc r~.ible in Ml illlll)e&afely. Credi! Rlsk • Credle -risk is the rwk th~ the is!ruCf' or other CQllll~ to an inYeSimenr will not ful6ll its .obligatiOn.';. Tii.~ C~•s J!Qlfcy at!~~ invesimep,t ill dir~ o~ligali!)IJUifll!ld ~er ~bli~ti~ ~. I!!' 1o principal of th6. ~.S, ~ and U.~. ~jcs and ~~it~~ ·~ ~ ~fort_ ~f~ backed stCUri~ It aUows"obligatl~ otid~ctit in tho Stffl ~tr'cw,or fti"iigcitclet and Obi~~ of states, agencies, oountiea; 'c itios, and other political subdivisions rated not"1es., ihllP'. A or its equivalent; It ,nay ,also invest jn ~ll~ ~~\~ ~purchase agre~ts, _ Ml~. _colla~Uzcd een~ ,of_ .~it~ commercial papci'-.i ~ .~q),tanccs. with a slated maturity 9£~70 d;ays <>~ ~ ftortl Ibo ~.ot"i.$"~~" MA-rited, no-l~d 11!6JliiY ~et inutual funds regplatci:I by the ~ti~ !li,d ~cli:ali:ge Comm.iss.l~ -~a AAA-ratod, cons1int ·dollat ·"invcscmtnts pools authorized by lho City· Council. At September 3-0, 2006; Siandard &. Poor•~ rated the investment pools and lhc money market mutual funds AAAfn. The senior unsecured debt for, investments in FNMA and FHLMC are rated AAA by Standard & Poor's and Moody's. 70 C C ( ( ( ( .., ... City of Lubbock, Texas Not~ to Basic Ymancial Statements September 30i 2006 NOTE ID. DETAIL NOTES ON ALL ACTlVITlES AND FUNDS (Coatinaed) A. DEPOSITS AND INVESTMENTS (Coutinaed) Custodial Credit Risk -For an investl1lent, custodial credit risk is the risk 1hat, in the'evertt. of the failure orthe- countetparty, the City wilt aot be able to recover~ value of its investmertt or·collattral. securir~•thatare in the possession of an outside party. The City requhd that deposits ~d repuichase ~ be held in an institution lhat has a minimum coll~! levd of 102% of the market value, FHL'B, FHI.MC, and FNMA iovestmeots are held in the City's name in 1hird party safekeeping by a Federal Reserve member finaocia1 institution designated as a Citf depository. The City shalt maintain a list of authorized broker/deal#S. and financial institutions, which are approved by die Audit Committee tot invescment purposes. Conc:enlration of Credit Risk -Th:e. City plai;e,s limits on the amount that may be Inv~ ill uy ~ ~ widl ~ eicceptioo of lmited States lir.a:sury-obl~. Al Septerobc;r 3~, 2006, the Cilys iD~ constitulcd the following ~ of total iQVe$'tmenls; repurdlue agmments -O.?'K, FHLB -S.2~ P"HtMe· -0.4o/.-_ FNMA -t3./Jo/o, FreN ~ 0.1-.%; Moacy· Market:~ Funds -I.US%.. ~ Stare 1nves1mcnt Pools -62.lr/4. · Foieign Currency Risk -This ns)c.reJates to adverse 'lffects on the fair value ·of an investment from:changes in exchange nites. The City has no foreign cttn'eiJey risk. B. INT.ERFUNI> TRANSACTIONS lrlterfund balances, specln'Cllly~due to md duo from QU!er. fiqtds, are short-tennJoans ~ coyer tempor1II)' c1sln~efic:its in variollS tilllds.. This occasic:lnally ~ pr;ior-to bQnd sale$ or grant reimbursements. These outstanding balances. are tepaid within. the fQllowib8 fiscal year.. lntemuld balan0e$, specifically~-to and"ft:om othec funds, are loager-tcnn loans to.cover ~u directed internal f111811Cing of CtlWll.projceu, At September 30. 2006 1he 'C"lo/ had .Sto;761,3ll· 'in.iotemal financbtg, These. balances·• usessed an:fnterilst' dlargt and are repaid bvu time '1brough operations and transfers. The fo11owing amOW1ts due .t!) Qiher funds OI.' chit. ~m other funds, including advances. • ~eluded .in tho filDd fiuancial statements ( all IIDOWlts in thousands): JateduDd ,Juednblel {l'boUS1111b) G.ove.n(llleo.bl F~JldJ Pro~l'aac& lnterCuad Payables {TbOIUIDds) Noam.ajor No11111ajor Geant G~ WTMPA E•terprlse Totall, Governmental Funds: Nonmajor .Govcrmneatal $ ·450 s 63.I s s l,54'1 s ~622 Propridary Fli11dst .Eledric 6,173 6,173 Nonmajor Enterpri~ 1.m l,1J27 lnlCmal Semcc 19 39 To!als s 2,•,16 :S 631 $ 6,173 $ t,m s 10,761 71 City of Lubbock, Texas Notes to Basic Financial Statements SeptemberJ0,20-06 NOTE IIL DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Contln11ed} D. INTERFUND 1'RANSACTIQNS (Cnntlnued) N ct transtors of $9,607 ,ll I from bus.in.cS$•1y.pc activities to governmental activities, dm,in $5. 9 million fn;,m the prior )!ear, cin tile governqicn~wide $1atemcnt of activities is primarily the result· of I) debt ~I~ paymen~ mode. from •du; deQt service fund, but funded from ~ open.ting limd; 2) .subsidy lfanSfe.ts ft'u.n, unrestri~ "'"'ds; and 3) trwfcrs to movo indirect cost allocations, paymencs in· lieu :of taxes {PiLo'l),-and franchise fees to the &eneral fund or other funds as appropriate. The foll.owing inlerfund transfers arc rcflcCIN In the t\ind flnaru:ial scat em ems (all amount& in thous1111ds ): Govern.me,tal lnterfllnd Transfers 011.ti (T1tousanda! 'Fu11ds ~erlttlrl Fu nd1 ~~ s~~ ij~or ~. I nte.rfllnd~1111Jfct, Qenm1 <Jov. Eiocitit WIiier Soviet . Wit« Bii+ -Touts .. ''i· ., . ) .ht (Thc,w11cls! Govei-n1111mt1I Pund.t: General F.lllld :$ • $. 723 $ 880 S 4,649 S 2.623 s 907 S 1,82& s 714 :s 13,124 Nonm~or'O_~vi:mmcncal 587 4,632 15 3Q '7$ ,,3~2 r roprlellry Fu11d,: 10Q 631 tlccttl¢ . 312 22S ·watllr S2l 1,42 .: .. ~ Wutc;~~ 620 ~~ Srormwatcr ,,. WTMAA 307 3~ Nonmajor'Bntcrprisc 849 149 lnl~ ~iccfulidt 33 " Tola! s 1,436-$ 6.841 s 11212 $ 4,874 $ ·2?623 $ 907 ·S 31100 $ m S' '211785' C. b§Efil!Bf;Q tH~RQH Tho t~tal doferre"d c!larje ,of, $3.~1777 In the LP&L Eotcrprisa fund repr~til 111 ~vettising ~~ wltfi. the U11tt«t Spirit Mena, ·Th• lldveij~itlg (mid amortization) be&Oll with the opening of the sports anma in' fiual year 2000 .and will eontinue tor 3.0'years. · , ·o. .CAP,TAL tiSSlT$ Capita.I ~ct a~lvily -fur tho~ erided September 30, 2006, was as follows; 72 C C C C C C C c C j -, ' ) City of Lubbock, 'l'exas Notes to 'Basit Financial Statements September 30, 2006 NOTE Ill, Dl!:TAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continaed} D. CAPITAL ASSETS {Continual) Primary Government: Governmental ActMIIQ CaplUI Al~tt N'61 Dtprtd11t.cl: Land Construclloil In Progras To\AI Capt Ill! Allll~ Not Depreciated Caplttt Auei, DeprtclaUd: Buildings l111provemen~ other than Bul!i,liilgs Moeh 11\efY and l!qllip111em Tot111 CapjlQI A$Set$ DcprciCillled Len Ac~umulattd DeP,m:~n; Bulrdiiit~ 1!1'1P~~-Odler fh?n' Bulldlng1 Machinery and Bq1dprne111 Total Accumulated Oeprcciitioll To)al Caphal Assets Dqmciatcd, Net <lovc:mni~t•I Aclivtttos Cap11111 ~ Nd $ Beg.lnairig Baltnee 8;9Sl,100 31,793,428 46,744,528 .51;~,04:$ j'g5j9_sj99.0 6~.4~876 252411~11 29;4S9t873 ~-~160 4M-1416SS 16Zl18;288 91 869,623 . P~:6 4,1S1 lncream l>e.:re•ICI · s 20,~.S4 $ ... $ 8,1>7-1,454 27,7012:23 141844;9$ S0.6-S0,3$3 ·21,121,.577 14,844.298: 59,"62U07 60.949.~'6 3,674;134 33,0,343 11.~z~M~ 9·14jd1 147,~0~075 BiJ6St9S.7 a;sJG,666 ~9it&61 . ~3i~6os, 4,~8la3'76 2:ll~~s7a.· t,914,82.7 4,-3)4/134 :n,98(1 nsao~ .1h~8~;1•3 ~iS~2;2S8 i,0511454 3111Sj466' 44;3$6-;643 t3';s2&,11s 4·;205,!S!J. · )111;9519,044 9,433 8 375,617 00·~27 tl34 S J?,lSS,40~ S IS~l~ S :h'i0;~9.,64 I Depreciation expense was ch.!rged tQ functions/P.f'081"11US of the govemmemat lletivltles.u fol~:. Oovcmmcntal ftfflvlll'cs: Allmlnlstnllivc Services Community ScrviQCS Cultl!l'll and ~j011.•-Sccv!ceJ E~mlc and Otv~opnxal Flrt Heallh Othcit Public Satet, Police Sf!eC! and Traffic Engineering Non•Oei,~1 · lnttmal Service Funds To11I depreciation e,q,cnso • governmental a«ivides frunsfgr In tel ~11111ulmcd~~lado11, • go~tal actMUcs ln«we In accumulated c!epreclalion -go~tal actl\'ltlcs 73 S .3B6,117'1 1,44,336 MS-t,006 l,lt~;3~7 1,2i•3,165 ,i7.t,7'7I 4?.6)69- 3,i~3~~3 ·3,1~1,l73' '3i7~l04- l30~646, 13,422.,()11 :40.4'.644 S 13j826,71.5 City of Lubbock.i Texas N'otes to Basic Financial Stat~ents Scplcmber 30, 2006 NOT£ 01. DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Condnued) D. CAl'ITAL ASSETS (Continued) Bu,mm-Typt Activities: Decreases Caplt«I A111eu N~t Depreciated: 'Endi.ig Balanca Land S 31.,948,711 $ • S • S JI ,948,711 Consiructian in Progress l:Z8,432.i79 ,53,lll!i,600 !i0.:Z0l,.552 136,646J.l7 Total ~'!P!IBI AsStU. Nol Depreciated 160,380,890 58,41S.600 SG.201.SS2 168,594.938 C•plilll Asseu Depnclaled: Buildinp lmp,oycmenti Olher.'lhan Buildings M-cll_i~ 1114 Equipment Toial CAAf~l ~ De~ Less Accu('ll'ul~ied. l.)epriclallDn: Butid{i(g{. . - lnlj)ro\'C~9f:$ Olher than Bui\dlngs M4~h.lnerji lQll F.411tpnient 'foijl -~lated Ocprccladon 97,027,146 605.,.412,170 l3&,67().-o88 &411lli).QOA 3{~075,692 2~~~0t9,}.84 . 1•19S2A. 21 364;047,303 4~3,657 59,621,~I ·2.1,J'ti9,630 2,342,6sr 17,3:lS,603 12,0$7.;2_69 ·.U,725',639 37S,3~ 4··1i564 ' . 1$?,l73 3;i80,l69 97,.Si0,803 ~.6,58,615 161;723,354 33,418;3,S!> 27S,11S,4J4 'g3;?291s21 392,333.300 'foll! ~•pjlll ~ Di:pr~iiWXI, Net 47'M62;70I ss.sii~),669 l;OSU1.8 s31,ss9,.ss2- Bu,i~Typu\ctMt-iQC&pital Assets, ~ot -$637;443.S.91 $113;96S,2j9 $ $954.370 $ ?00,1S4,4?0 Oep~lirtion expense WIIS-chirged lO funalionslprograms of,he btismess~ ~~~ &;-'follows: Business-'r)'pe Actlviltcs: ijli;ctric Watei w~c, SIOrmw1IICI' Sollcl.WU!e ~- Tl'Wit lntcmal Suvklc Tolit d~iation ciq,ense • busfnc;ss-iypc ,Wlvitics r,ans.rer In lo ~C!lmuJa1cd dcp~i.uon -~~ activitle$ lnereasc in acdlmu!ated d~IJ!iloo ,_ ~!-)'pe actb-itki 74 S S,839.$.85. '1,l 18,Jl2 Si4~2.~7 3l4,'l4 3,f.7~81_9 3,2ii.:U"7 Jj•0,3il 19.1~44:2 30,49'3,143 1.2-32.3-9 l C C C C C C C C C J ') ) City or Lubbock, 'f exas Notes to Basic Financial Statements September 30, 2006 NOl'E m. OET AIL NOTES ON ALL ACTIVITIES AND FUNDS (ColitirJ.oecl) D. CAP IT AL ASSETS (Contipged) Constr'l!ctlon Commltmenls The City of Lubbock has active coll$truction projects at fiscal year end. Tho Park, .Department projcctS includ& a 12-field f'astpitcli sofiball complex. The City continues to work ou a large street proj«;~ involvfug Mil~uke~ Avenue from 341h Streirt to 98111Street . This project is inthcOatcwaySlreetProJect!I Fund. Water projects 'Include lh,c design and constn1etlon of a new pwnp sWion in $0.l.lthwest Lub~ The recomi,acti9n of 98111 Street ti'Oit! ·slide to just beyond Frankford Avenue is a major W!l5Ce~ proJC!ct.. The City is busy Working at the airport to oonstruct 38,000 •square yards of new paveJJU!Crt to help ~rv.e air ~ 11ir,;rat\s.. Skirinwa'tor openitrotl! tontinuo to work on two very large construction p~; 1:Jie fi1'&f PfQi.ec1 pro~ldcs for flood relief lbr Clapp P-atk and the eleven pllya lake$ imrnediatety-up.ttre&m. -The second project provides fur Ille cons1111ctlon<,f~·f100d celiefprojcot for soqth Lubbook'sdwn of~laya lllkes; 0Tlgfnal a.im_ai-..a• PtoJett& Con11111tme11t1 S!?,!;l)t-tG-Dace . eommitfi · ·,aes Piibli6'S~ s 1,703,338 $ 1,$53/mO i ·[5.4}618 Parle lmprowments 27,149,311 8,§2Q;169 18-,silJ .42 Sttel:t-tMp~ents 26,133,199 10;999,:;?14 1-5~133,4}~ ~-t1A~{clil:P,ro.Jects 92~,()00 6:~'5 j1•.~t 13~'1«iellltic:,,1mprovc.ments 4,456;673 2,~~.4~.« -2ii91~43' Tax lacwnenl'Pund.Capital Projoets 24,131,~.66 6tS31,t9S 1;,.194J1i Ol\eY!'&)' $~ ~ 23,349,000 19,6~.m .. 3->~64.~~ 5l~tifo . 26,~'76,191 8,Bl4~ )'.7,6~HPJ: w.ier. 71,421,032 3~,0?:.~99 )!>,3~43'3 Wwwoti:r 17,400,000 sJ11;003 ... ,;0;22;397 SoliitWaste 7,215,680 991,100 ~_.m~sao A\rpon 3M94;(>99 20,0?2,779 1 o.YO 1;'20: Slormwater 83;688,018 65;636,'711 liQSt;t47 In~ hr(icv Fun.d l~.QOO 655,016 j441-924 TQtll $· 346,048,708 $ 1-86;308,0?l ·S I S!>,140,63:7_ E. n1:11•m1.MEt!! PJ.6~S Eaoh q11allf1ed employee Is il'IOludod In on~ of two retlnmient plans in \.Wic::a tbi:, Oiti of 1,Ailiboek pa,(lcfpate$. Thl!SG· ai:c ~e Tww Municipal -Retiromiml Syuem (TMRS) and the Lllbl>o!;k F.irem.cn~s .Relict -and R.edl'eriiellt Pu,id _(L.F!UlF). 'The City toes it0t· main.tam the tu:coi.rntfng ~-ltdtciitl'K; In~~ ot ~m·ln• cilher retlmnelll plan. . . Summary•ohignlfi~t data for each ~rcrnent plan t'ollows: 75 Ci~ of Lubbock, Teus Notes to Basic FlnRneial Statements September 30, 1006 NOTE Ill, D~AIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) E. RETIREMENT PLANS (Continued} TEXAS MUNICIPAL RETIREMENT SYSTEM (fMRS) Plag DcscrlpflOD The City provides J)fflSion 1>.cner.its for all C!f Its 1\111-timc employees (with the ~~on of fn-efi&h(et$) through a ~on-traditional, joint conlributoiy, hybrid doflned benefit plan in me staco-wide TMRS, one of a 11 administered by TMRS, an agent mutdpl.6<-eniployer pu~lic employee rctircmcm :iy,tc;m. Beneflts.depeftd upon lhe $\Im of the !lffll)loyec', contr!buti~ to lhc. plan, 'h'.itb ~ and the Cl~-:finanu.d m~ ~. with lncorest.-At dto date tho plan ~gan. Ille Cit): ~ntcd m.~ 9ffiiits ~or ~ rel!,d.~ed ,bcf«e ·the pl~n be&lll) ob 'Cboor«i~ am~\l!lt~~, w two t_~ ·\\-flat W.1,Wld ~ ~ ~niri~ ,b)' ~ emplo)'Ce; ·wltb Interest. prior to 'establi~~ ot1hc:.plan. Monetiry' ~its:for mice sjllee the ·p1ao be'g41n arc~ pCl'l1cnf(IOO%, 1303/9, or 200¾) of the employee's :lillClimulaied ,contrlbiitiooa. lrt addition, the, Clay ~ grant. as oft1m 11$ lUUloolly, another tY,pe of monetary credit refemd to as in updated ser:,Ice c;redit which is a t,heotetica) amqunt _ ~ilb, ~en added. to. 1¥. emp,Joyoots, .aocum~.I~ ~,ntrltiut_i~!lll. and tlie monetary cre;dfts fot ~ervice slnc::e ~ p1'tl began, wquld .be: the ti;al blO~ cto4it,s ~d employee ~~ribu.tloijs· ._1.,11a1cd with kltmlU if tho c,urtw emp• contr}btJtlon ra~ and ~ ma,tohlng :~lit hail•lways bCfll itt exi$Ccnce and ifthe emplo:yee's salai)' ha:d always been thu.vera~ otlds,.falaiyln lhe•last .three y.em lhJt ere one y,e11r ~.(ore 1tte e~lvo. dato. At. tc;dremctit. tb,c-·~efit:ia· ~(.\lluied ~ if;tbc 1wn of the eniplo.y,eo'j ~ulatoa conti:lti~ns 'With in.~re#t ~<l the ~mpioyer-~ m~ -~lii with b:tiere$t wen used to purchase an ~uity. ' The pllsn pr-0vlsioos arc adopted by the governing bo<ly of the City, within the optl9ns avatla!Ae in lbe state stat\ltcs govcrninJ TMRS ~ within lho,a'1tuarial conscralnCs also. m dto,statutos. Membct$ Clll1 r.eelre al·\l&CS 60 11nd aboye with S or mote y~ ~ service or wnh 20 Y(ffl. of s~oe ~gardlesa of 11ge. A member Is ycstcd ,1ter 5 )'!11!1- Contrlbutloils 'ibc coffllil,ullo!I rate. !'or the ernploycti js ~ ~ the Citr ~ !'l!i~. is. currtntfy l. 'to I, l,j;ith· 1IS adopted bi the goveming·~)' o~th.o ~i~: 'Qnc;I~ 9ic ~te !aw·~ming ~, ~ licuia,y ~lly dcte_nnln~ tho City contnoutlon rate and lhc prlor service 'cost contribution rii!:m, boib ,of·whicb ~ ~ to be I level pctcont of pa)t01I from Fl to ·year.. The ·oormal cost contribution ititc ·~. d\C ·cu~tl)' accruing monet.,ry credlll due lo tho City matching percenr, which ate the o~li&alip.o of,tbe City as r,C an employoe's redremcnt daie. not at the tlme dao ~lo~'s contributions are made,' 'ibe -nonual ,coat contribution ~ is the ~any determined percent of j,ajroft 1teCC$$.al')' to satisfy 11w ol?f~a,i.iOtt ~ti¥, ~ 'i~ ~ employee at lhe ,ime hlslhet r~ b.~~ ~ve. 'flt~ prior~ COlt~icm • .~ the unfurided (ov.erfunded) i0fllar.i411.iabilit)' . .(llsset} ~r-tlle retlillinder o(thc pla11.'s ~-).'C'ai' ~~.t)l9riod. The unit c'Y4it ~al ~ .m~od I~~. rot ~~g the City coim.i~~~' · ,llotli;~:~~ and lbe: City, make conln'butl~ lilOIU.ht>', S~ dto City n.ceds to know ~ contrlb.!ld!m ta,te ~-~~:fQt ~· puipo$es, there is .a one-year del~y between the actllarial valuation (bat mya .as l~e .J,asis-fQr tho'ratc and 1he 1:alcnitar year when the rate-goes in1Q at1ec1 (i.e. Deo6mber 31, 200s valilatj~ is eff~'io f'.or rites bosllUling January 2007). . . . 76 C C <: C C C C C C C '"'l J i ) ') J City of Lubbock, Texas Notes to Basic Finandal Statements September 30, 2006 NOTE DL DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Coit1lnued) It. RETIREMENT Pl.ANS (Continued) The actuarial Msumpt\ons for the December 31, 2005 va\11ations nre as follows: ,u.or Qecembtr3J 2Q03 1004 1005 AH.t Deunibtr31. 1003 1.9.04 20,?S "Acfuarial,cost method: i\rnotli7;ation method: Unh<:mlit Romaining amonlrallon poriod: iN~cl, pqwnt of payn>II 25 yean-open paiod Amortltcd ~ Asset valuation mtthod: lnVC11tmcnt rate of rc:ti,m: Ptoi@tcd.:~ i~: llillludc~ th~atlon at: ~ Qt Liv/~ ~JIISl.m'.cnts: "'°' Scpiiimbtt 30 ioo4 20QS 2006 ~•ji!'ffl)-Va.lu~ or Amts $ 182,884,183 ~6,3!)11,545 l!l.S,046,632 A~_aua I Co vend · Payroh · $ 57,577,743 61,9.3;1.003 6$,42,,91f 7% None J;,5% None An nuil Pcn&ion Cost $ s;,oa,u, ~.!m,373 l0;904,031 A<laari.l Afcniod Lbbllity 239,809,434 248,432,807 25 l,430,J 08 .~AI\.L~• "/4-01.Covered i"gro11 98,9¾ 100;2'.l\ 1.Ql.5.% Contl'lb_uHiln M•de· 8,70U61 9,933,373 10;904.Cl'l P.ei'ce11ta1e Funded 76.l¾ 7S.o¾ '14.6% Unftfnilcil Amwi•I A«.rlled i;uitiltHi (YAAL) !6;92!1,25'1 6'2,034;W ~83,476 The ·critx Qf•~b~ &. ~e of 81 I mllrtielp~~ ~ng, the .~t p,hii) adml11j~ by TMl.{S, E4~ ~f thd muni~liif~ ~ ~ ai!ntla~ lndiVldual ~~91 ~.IU.-tfon ~ed. AU ,as~~ (QJ' tl!c ~~ 31, 2005 vnluatlons w con~d in th~ 200S TMRS Comprehensive AMual Financial Reprm, a i:opY of wb.idi may be obtained by writing to P.O. Box 149153, A\1$tin; Texas 7J!714-9153. · · ·· · 77 City of Lubbock, T~as Notes to Basic Financial Statement!! September 30, 2006 NOTE ID. DE'l'AIL NOTES ON ALL ACTIVlTIES Alm ~S (Contilllled) E. RETIREMENT PLANS CC11ntlnued) LUBBOCK FIRRFIGHTER'S RELIEF AND RETIREMENT FUND (LFRR.F) Plan Description The Board of Trustees of the LPRRF is the administrator of a single-emplo~ dcfin~ benefit ~nslon plan. This pensiQn fund is B trust fimd, II is repo11ed by the City as a relate_d organimioq. and b not i.oru;ldered to be a part of the City fUU1m:ial repor1ing entity, Firefight.ors in the Lubbock Fire Department aro covered by die I,;FRRF. The LFRR.F provides service retirement, d~, disability and withdrawal benefits. Th~p benefits fltUy vest aftot 20 ~ of .::rcdited 'ffl'ice. A partially vested bone fit is provided for firof i&)iCffl Who torminato employment with flt least to but less· than 20 yC81'S of service.. Employees may rotiro at:iige ,,o with 20 yean o(seriice, A reduced oarty service reticement benefil Ls provided for ·emplo~ -~()Jern\lnate. ~loymottt ~th ·~o or more years of servke. The .L'-~ Plan of'fc~ No.'(c;mber 1, 200j P!'QVid~s a monthly norm.I sen<k:c ~enl beneflti payable iii a -~oJn(•® Two-'Oiirds to. Spou.se;fonn of-arui~!~. ~ual to 6S.9.l% ot fl_nal:4S.m~Ch average 111,lary pl11$ S3l~;9s pei' rbonlh t'Qr eaoh year o_f sel'Yice in ex~fof20 years. ~ • • • ' • ' •• • ... A firefighter has l)te option to partlr.:lpat~ ~n·J.~~ive_De~ R.e~ent PPli.o.nJ'lan (RETRO. Daom !:'Vfilch P,J"Ovldes a lump sum benefit.and arc~ m.nuity upqn.~ln,~ri~ qC~mploy~t.. fir~_f~tcrstn)lSt ~e •. .,,"SI years of 11ge With 21 y~ .ori~ce .at the se.lecrea "RBll'R.9 pRo~ 1:len#it 9111c11latio11 d!!(c" (~!ch Is prior to date of emploYJnent termlnatJon). Early RE't-RO DRpP with 1:iea,.cfit _rd~otlons is mllllble afiige $0 with 20 years of sen-ice fdt;rfie ule~ "early RETRO-DROP ~ cak1\ikstlon date". A Partial Lump Sum.option i$ obo available. where-ia~d montbly benefit i$.~ined ~ on an elected lutn~ s_wn ~t sui:b t1w the ~blne:d present ~liie otilte bonef'ilS under tlie pt>tfon: ~-a~_ilJy equiv11lellt tq :di'at (ir the l'.l(limal form ·or the monthlf lienlifit,. QP.donal to~ ~ also available at ~Ing !mis or ~utvlvlng spou&ll bonofllS Instead of the ~atd two-thirds form, There is no prov.illon fOI' automatic pQ$1tetffflnent benefit lacccases, LFRRF Ima tho_ IUlhority to provide, .and bai pcriodlpally pRWld~ for la t!_i• pa,,t,· ad hoc postretiremblit benefit l~, Tho benefit provis.lons Of ~hu plan ue wth()fi:,,ed by 1111? T~ J;oeai.Fi_re F~a ~t Act ('(f..FFR,\), TLFERA prQVlde.s the «uihority and proc.edure to amend ~·flt provisions. Conlrlb.u.llons Required and Contdbutl,oA,S-Made The contrlbutl_on provisions of this .plat1 mi authorized by TLF'PR;A_. T1.FFRA Pl'QVi~ ~c authority and pi'ocedure·io dlinge the amount ofcoritrlbuttons determined as a ~ttage pfpiy &y ¢ic1\ flfl!llightor 'aod a p~e of payroll by the City. · · · ·· • - ~~~ law requires that -c~ plan of·b~,itfits ad.~P~ by ~ ~ eppro~ ~ -~ ,~ligible act\lefy. , Th,- :~-cct1ifies that tho ciontribulion .CQUlmiftne)lt b)' ·die firoiightm ~ ~ City provtdes an adequat& fu11nc1ng arrangomcnt. Using the entry age _.aciuarial ~ mcthoo, LFRRF's normal C0$1 ~bucion rate is ·determined as a ~tage of pa)'roft. · Tbe· excess. or the total ~ttlb11tion. rato . over the DOl'lt'lal . cost oonrrlbution. rate I~ ~~ 10 •lll.?rl,la.-L~W, unfullded ~ ~·. ~illty. (UA~.}. if any, and the ·number of~.,._ needcid ro antortlfe, LJ~~ SU®~9<1 ac1•I Uabflit)', lf'any, is determined wing a level ~e-ofpayro.11 method. Th~ coses tif administering the pla11 arc finanocd by LFRRF. 78 C C -.c C C C C C ) ') 'l City ofLubboclG Teias Notes to Basic Financial Statements September 30, 20G6 NOTE DL DETAIL NOTES ON ALL ACTMTIES AND FUNDS (Condnued) E. RETIREMENT PLANS (Continued) For the fisail )IC&r ended September 30, 2006. lhe City of LubbQck's Annual Pension COsc (APC) for the Lubbock Fire Fund was equal to $3,208,595 as described in ltei:n 4 In the table below. Based on Ille results of the December 31, 2004 actuarial valuation of the Plan Bffec:tive November 1, 2003, the most recent bic1111ial actuarial v~uatiot!, Ibo Board's ·~ found ~ the ftmd had an adequate financing arrangement, as descrl~ in the paragraph below, b~d on Ifie fixed levef of,~ 6refightet contribution ~ and on the msumod level of City contrlbulion ntCll. Based on die Plan Eff'cctive Noyemt,w I, 2003, LFRRF'a lunding policy requires ~OJltrlputions equal to l:2.43% of pay by ihe. (~tm. Conlributlons by the City are based on a fonnul&i .which causes the City's i;ontrlbutlon ra~ t~ fl~~ "(rom rear toy_., TK, l>ecembet 31, 2004 lllrtUarial valilatiOl:I ass11.111es that the Citt• conlribllti0!1S'',Vill •veta&~ I to/• of payroll In tlle future: Therefore, blued on lhc ~ber JJ, _20():119.(uarill._~l!/1~. of.file Plan flffilctive November l, 2003, Ibo Annual Reqplred Contni,uti~? (A~C). are -~ ~~.ally ~-ID,~ but are cqu·at to· the: City's -al contributions begiMfng Janua,y 1, 2005. This •-~ "'1jiatlot1 aatisfied the panllJ!ctors of the O~ntal Accounting Stancla_rds 'Board (GASB) Statement No, 27. Prior· to January I, 2005, 11,e ARC were not-licturially ·detennined but, based on the Decembet 31i'2002 actuarial valuaJi()JI, were .equal to the City-'$ ~ (lontdbutlons in calendar year 2004. T1m: acluar.lii -v.aluatfon also satisfied the: parameters of GAS8:,S~No.27, ni. fbllowlng s.hows lhe 4evoloprnent of.the Net PW'lon Ob1J8atf0ft '(NPO) as ot Seprmber 30, 2006: I, Annll\11 R~ur.iw Contrlbutll)J1S (MC) l. lnlcresl .on NP('J 3, Ai!JuSl.mQntlO~ 4. Anmia1 Pcl!flon Cost (APC) 5, ~ City. COl!il'lbutloos made (i, ~ (Oocrcaso) in NJ>O/(~) 7, NJ>o/(llffll) a( Qcloba I,_ -200J s. NJ>Ol(111Sec) a1 Septe111bcr ,o. 2006 The Al',C fot Ule-pdriod Qctol)et I, lPQS·throl,lgb ~ptei,nb~ 3~, ~ WI$ based on ~ ~~ :11. Z002 arid the I>ecembor. -3 l, 2004 actuarial va1uatlons, TM entry age actulrjal cosr mecbod was ~ wtth, lhe notnial cost calculated as a level perunf118C of _paynill._ ~ ~ ,-Ille of U$41t., • ~ -~tllld s~~ by a five-)'CV ®(erred aw,gnltlon mciho(l,_wtth the actµarial :valua not lllOl'C'tban HO% or toss 1han ~ ¢ fJI!! .mark.et value, of UMU. ~ ~ as.,il!riptl~ included .~ •-,i ~ .. mum ~sumpt!ol\ Of 8-% ~ y'oar (net of expenses), ptoJe&d:~ ~ Jnoluding ·~-~ kiage,,lty 1veiagmg Jl,7% per yeju' over a 3D-yeat career, and no·p.o~t ~-of-U\iing adjustments.· :Aa ~ ~Otl-of 4¾ per year was illclll~d "io the -in~ mum ·and salary in~ . .,.pliciris;' 'l'Jie UAAL IJ _a,p.Qrtiied: -wilh the Cl«:CS5 of tho Ell~ tofaJ· ®nlri?iutlon rate om :the mill COSf rate. Tlie ~~ 'ofyean ncedod to amor:tiu the_ tJAAL is 4etm:mni:d using an open, lev~t ~fago c)f payroll ~. ~ns that ttie· payroll will incrcm-·4¾ per ~,-and was 24,1 years as of the ~bcr-j 1-, 2002 actuarial valua1lo:ti and 20.6 years as of December 31, 2004 actuarial valuatioti, both· based on -~ plan .provlslorts efl'eetive November I, 2003. . . 79 City or Lubbock, Texas Notes tD Basic FJnandal Statements Seprem.berJ0,2006 NOTE m. DETAIL NO~ ON ALL ACTIVITIES AND FUNDS (Continued) E. RETillEMENT PLANS <Contlnuw) Mer d~talb concerning the fmancial ~ition or the LFRRF and the latest actuarial valuation arc available by contacting the Board of Trustoes, LFAAF, City of Lubbock, P.O. Box 2000, Lubbock. Texu 79457. A sund..tonc financial ~port i$ avai.lllble by QOIJtac:l\Jlg !ho 1..FRRF; Flical Yt11r Ended ~n0/04 W30/05 9/30/06 Trend lnronnatlon Annu.11 f.ffltkln Colt (Al'9 $ i,,il,113 .l,0\6,942 3',2()8i,95 Percenbl!gt of A.PC Contributed 10J % 100 100 . .Anafysls orPundlng trognisi; rtet Ptl'iiO!f Obligation (A"stct) (897,6'18-) (909,1 ll) (920,722) Required Supplementary lnfot'IIUltlon (Uma11dited) ·l~l/00 1.2 l2.!31/02 1,3 12/3l104 -~ Actuarial V1lueof A.sads(a) Slf!l,660,188 111,261,7.75 l~,174,984 tr4615,Q49 127,85.0.414 143;99J,97,5 ,1Jntundcd ML (UM.L) /l'1111dlne eJCi:cu (IMI) ( ... ~,139) 16,$$8.639 .13,816.991 Fvndtd Ritt. (d/bl 104:3" 81.0 90.4 I, Booaoiltlc Md demographic lffllmJit~-wc,c rcvlscd, .. 2, Rell-~ .in pllll beMffi ~OIIS-o8'ocllvc Decembc!'. 1. 2001. Ann.VIII Covertd P•)'!!ll (i:)4 12,W,913 13,521',366 14:711',~ 3. Rdle$ ~es ii!. pt1111 belltfli pnwisi.oiis etrecti\le·Novcml!Cf l, 2003. 4. The,covem! p.r.rolf 1s based i,q uclmate:d annualWld salaries used la tM valuation. 5, ~llanP.h(G~lllllp!i!!ll WU~ F,, PU.ERR.ID cw,,rENSATION OAAI.J Fu~lilg Eneon•• hfflfl~~ 1ir Covmd ~•)'l'OU «fa)/c:) ~:~ity ~lfcn ill!, C!J!ployc~.-~ ~: '¢ompmsa~a plans ID ~ with I~ Re.ven1:1e Code ~~ Soction 45-7:-~ .,_ -~~ t~ -.II Cily empJO)ffl. ~it .lbem to. defer a portion flf tlic1r· ~-until future ye~rs; ·1'11¢ ~~ 9.0m~cio 1£ not· avaDabli: to omployees until ~ir\ation; ~~f;. deal,b; or•~nJ~~~eanqency. TIie plw' assets 11e held in mut ror-cbe exclusive bencflt!:of tljp~ipants~~~~~. Tb\!l <;:Jty cloes not prc,yi& ~vc ~Ices pr have any fi!luciary l'C$poosibili~lcs for tMSe plwt tnei'olofei lh~ ~ 119t presc_nt<:d ~ ~:BFS; 80 C C C C C C C C 0 Cily of Lubbock, Texas Notes to Basie Financial Statements September 30, 1006 NOTE nt. DETAIL !lfOTES ON ALL ACTIVITIES AND FUNDS (Cootidued) G. SURfACE WATER SUPPLY Canadian River Municipal Water Authority The Canadian River Municipal Water AuthorltY (CRMWA) is a Conservation and Rechsmation Authority established by the Texas Legislatun: to cilll!ltruct a dll.td, watet mervoir, attd a<jUcduct 5>'Btcnl for the purpose of supPl)'lng water to surro11ndi11g cities. The Authority WM ~ted in 1953 and ,comprises el$Ven l:ities, incl\lding tho City of Lubbock. Tua budget. fJIW\Cing, and opetadons of the Authorlly ~ gov~ by a Boan:! of Directors· selected by the govlll'lling bodi&!' of each of tho member ci~les. each .ciey'bemg !mlitled 10 one or two members d~ndont upon population. Al September 30, 2006, -Ute Boatd wu comprised of 18 members, two of which represented the City. · · The City Qontracted with lhe CRMW A to relmb\!Uo it for , poni!,iQ qf !lie .cost ¢ f4!I' ¢rmacliM Rf~ .Datt! -~ aq~~ct S)'St~ )n e~t!,Ja:~c for surface ~~: -pie City's. {)W qtia ii]w.'e _or~,..1 ~~~d and ~16 opmtillif111id'rcaetve assessments are ncotded 11& an:experifo i;,f0b~j1.l\ngs11rfaco Wlffl', · · · Prior Jo II.\' 1999, long•tenn d~b1 w~ owed~ the.U.S. Bureau of~t11D18.ti~ f'or~ ~•t.of consttuoj:ion of the. laoilily, whjch was-GO'mpJeted In 1969. Tho C~s .alloqatiQ/1,C?.f-}3°1'.0Jcct ~ ,was-~~~9.0_Si862. 0.~il( F¥ 1999, l,oi!dJ In the principal amount or SlM'®.WO wet:e ie~lld to pay r;tff .tw ~~~ ~µption owe'il, to the• U,S. Bure11J1 ot Reclamation \Ila tlKMWA Jn· -~ wolint .ot .SZ0,$09 J)67.i . 'Fite ~-•of. S8,509",0IS7 :was 1,1, di~U;nt in the· remaining principal pl'Q\'ided by •'CM JJ;S, a·~~ ti ~l.amatlon .to .. tJ,,e ~),et c.i.tt~s. ~is di~Hias been~~ ~ a. ~rrtd gain Qb ~ding and .is ~ ant~~ OV!if the life of the m\tndlng bonds. Al Scptomtier. 3'0, 20061 $4,091-1071 ~ ~-Ttio -~ual prlo:•I 1U1d interest payments are included in die ·®closures fyr o~ City rel~ !oiit~ 'de~ T)le abovo cost for tlic rlgh~ arc recorded as capital assets and 11re b(hig' amortized over 81.yem. The cost:aD.d debt are r~ed in.the Wa.ttr-Enterprise Fund. In 2005. tho Canadian River Municipal Authorlt.y ~ ·$48, 125,9()0 fu Contraet Rbvoruio Bon~. ~~ City of LIi~ shared in. lhis.1$s11e io the amoQDtOf $17 ,960,0Db, ' > '. '' ~ • The Canadlatt Rlvet Municipal Aulhority J~ a n.eiw Contract Reveano Bond. Solie.~ 20Q,6 in April-2006 ~ tho :anto1U1t of S49,07S,j)OO. The City of Luli~lt shared In the issPO (or Sta,573,-906 ~ other eosll of $492..4.ti.5, !ind received d°eprecillble assets<~ right~,) valued at ti.~~,371. ~-~ts anif llablllties are ~rdcd Ill ~ wa., Entcrprls11 Fund. · · · Brazos lUv1r APQ&orlty • L11ke Alan Henry nuring 1989, the Olly ~terod Into ~ agreeme!ll·~. tia.e Brazos lU~ ~thority ~~, ~t ~-~~ rnai'nt~ce. and OJ)Q'll!lcil! of the facilitiea lcnQWQ, :is-Lake Alan Hei!IY-.'tbe BRA, ~ 1, alitltol'iW by'~ State of Texas to provide, for lhe conserviition 81\ifd_evclopment of •~·waters .in th,e B~s RiVGtl B~in, issui:d t,onds tor 1ho construction of' a dam ,Md lako t\ciliticnm the Soll1h Fcrk c,f d.; ~ Mo•o:Fork .Q,f.~ P~s· JliVer, 'n\e BRA issued $16~10,aQO 'rri ~~~Ile ~iii In i'9~ IJid $39~-~~QOO iii tive'D\IC. boitdi, bi l~l. wbich were refunded In July 1995, Th~ aiiset, Lalcc Alan Henry 11am arid racilities, are reco~e'd. 8$ cap Ital assets and arc 'bein~ dtprubited over 50 years, The financial aciivf~, a!Qrig with ~ltted oblication, is ~eel for i11 the Water Enterprise Fund'. , 81 -\.. City of Lubbock, Texas C Notes Jo Basie Financial Statements September 30, 2.006 NOTE m. DETAIL NOTES ON ALL ACTlVlTIES AI'ID FUNDS (Continued) H. LONG-TE,8M DER:[ C GENERAL OBLIGATION BONDS AN:0 CBRTIFlCA TES OF OBLIGATION: lolertSt luu.o M•b;•.t1ty Amou11c O111!U1 ndlng lbt4i% .nm PJls IHm ~ "39 IO-OMIJ 02•\S.14 $ 2,550,000 s 1,040,00() ,.'le 10-01-93 02-15--14 1,470,000 2.25,000 H4 10.01-93 02•1~M4 19,21S,OOO 2,8!>$,000 C ii.Pl 01-1,-sn oi-1,-osi 17,SJ0,000 S,22S,000 4.61 01-01-98 02-15-08 U301DO0 320,000 ~-71 Ql-01·28 02-l~l8 l 0,26!),000 2,57S,®O ~.36 01-15-99 02-1$.\4 20,135,000 16,110,QOO 4.$8 01;1s-9,9 02~1$-li l~,355,000 2,310,~ ~:fj 04-01'•99 -~2-1:5..19. 6,10l1;000 9l5,QOO 4,'11 ~'°~ 02-ts-~,, l2,3d0,Pl10 8,0®;0QO s.3:7 .0.9-U-99 Ol•l'S'.20 24;800,000 3, 100,(!()0 C 5.$,4 03-U--00 O~lHO 1,00Q,000 37S,000 4;90 02-oi-01 02•tS-Zl ~.100,000 l,S60i000 4-61 1)2-0H)I ~15-21 2,710!0!)0 s~,00!! !::: -06--01:-01 02-tNJ 35,l)0(),000 3,710,000 iu,.1;,02 02-lM2 M®,000 8,4;70,000 . •-;: Ql:,U,02 ·02-iS::22 ~ .. ~;c~ s.a~s.ooo 4,71. ,f;10 02~1.S.:02 ,02-i%;µ 1,su:000 t,38Sf~ 4;62 0'1.-Dl-02 ~1~n 2,6.05;~ :Z-,250,0~ C 3.ll 07-l)l•Q2 {)2-lS-10 .I 0181Q,!J(}() 4,63MOO 4;42 O'l~lS.03 02-tS,.23 II ,885il;K>O I0,4J°.SOOO 4.,47 01-lS-03 O:Z.l5~2~ 9,7'75j000 9,13_(),(!00 ,(.4( o·MS-03 02•1~~ ~;000 ~,,ol)Q 4.47 07-15-03 :::t: 3,S9~,000 JJSS,000 4,81 Oi-15..0J -'0,.135-,000 ~710.000 4i47 07-1$-03 02-15,14 MOO;-OQO 3~5.0,~ 4,6:Q 08·15--0] Qol,.15-23 $.900,000 7.S.1 liil)oi() C ~60 08~1~3 QHH3 13,270,000 I t,6$°S;ooo {~1 ()6.JQ.04 *~1-12 1,000;000 ·7~1i;OQO 4.09 ~2'4• ot.1,.:24 2_,0:ZS,000 1,,u,000 4.08 09-28-04 o-2-15-"24. 3,100;000 2,Sfl-,®'() :us .09-2~ Pi-1,.20 22,620,000 2ZIQO,OOQ ).19 02-IS.OS j)4-l,s,;2S 2J,0$MOO 21.410.000 3-.94 06-l~OS ~15-21 •9;615,000 49J1 S.«>() •.26 og...i~s 02-1;.;25 ~.52!,000 44,9$0,0Q() ·c ffl Q7-l~S ~-~-ii 43,080,000 41;380.;0QO 4,27 01-15--05 QR,1$-2S 7,265,000 7,,03S,(l0() 4.58 O,II.IS-06 02-1~26 76,950,.000 76",9SQ~0 4.~8, 114-U-06 02•1S.ti<l :i;14q;-ooo .2.~,(!09 . .f,8~ Os-1,:.oi; ~~r~~r Ul,830,000 18.83MOO-... .;, Totll S -60Sa:!5z000 s 448,02$.-00Q(A) C (A) Eicdudes ($4,2~,274) net .d~ INSCS on advanc;o ref'11ndings, nol bond pranium:s 8l!d dlscoants, ond bcmd lS$11111Jcc: costs • (Sl,906,~·82) b!19iness-typo and ($2,357,592) 11ovmuncnfal, Addll{o_nally, lhls ID\Ollnt inc 1 I/de$ S32:l,567, 121) of ~rte!$ used to finaticc ezucrr,rise fund lldivitiGS. C 82 C J ) City of Lubbock; Texas Notes to Basic Financial Statements September 30, l006 NOTE m. DETAIL NOTES ON ALL ACTMTIES AND FUNDS (Continued) ff. L9.tm:IERM DEBT ccontlnucd) At September 30, 2006, managment of the City bclle\16f that it was in compliance with all financial bond ~venants on outstanding general obligation bonded debt, c.ertifigms of obligation, and water revenue bonded dcbL I nlel'fl( Rate(%) 3.&0to5.SO 4.2S ~6.2S J.IOtoS.00 .f.00 to S.25 '!'oil! h,ue'D11.te 6-1~9S 1·01·98 1-1~ 7.01~1 LP&L REVENUE BONDS Final !\bturftJ Date 4-IS-OS 4-:15•18 4-l'S-19 4•15•:Z-I Amou.11t luued S l :J,560,000 !>,170.000 1ii,m;P09 9,200jcioo $ 4e9,.Mo Balance Ouut.11c!ing 9-30-06 S l.~~.000 ·5,52-0,000 7,525,000 6,900,000 ·i2u10,ooo • * Oahlnce ourslaading eKcludes $274,845 of nee dofem!d 111$1101 oa Jl(lvancie refl;lndlngs, )Kmd premiums !'!Id discoUnt$j ll.ll4 bond lSMnCe costs. · I nttrut.Rate(%) lm 4,:l$to5.0 luu, Date ,09-30-05 04-3G-C6 OTHER REVENUE·DOl'fl>S B11laru:t Alitou111 Outst.11dl111 ldaed 9-30.of ' 11,96010;00 l7,.m,417 l8.S73,906 l8,S73,90S S3§;5338 . ,s¥,1~.,22.. • ' B1illillc:e·oii!stand!ilg ~µdc,5($461,839) dlseo11nt and~~ losses on bonds sold or refundccf. • • • •' I • The annual nqulrements to amorli~ all outslandlng debt of tho CIIY as or September 30, 2Q06 are as f<flro.ws: Go\lffllmtn111I Acchictea ~Tfpe Acti'Vid:es ~ General 'Obllpt1on Bonds Q11epl ~bl~o(J.Botl(lf ~~li~~: \'d~ 'Priil'.eif!I IAt~ rdndPRl . . hitfflst Principal I~~~ 2007, 6,367.~?.9 5.970,307 iG.112,401 JS,6,'1?;695 3,8~1 • .1~9 3'~1;~-~, 4,(~S,493 s_.z~.1•i l 1~1fl ~,907 l4;io1.I 10 3,m~,1 ·:z;~i:t~ 2009 u,:s,9.6~ 4,994,S44 f?~037 i 3,4;06;654 3.oi6.932 :1mJ~ 2010 ~,677,160 4,718,~ t?,14'1,'40 l~;ffi 3,0§~7 -~!~e4 2011 6,8~S27 4,423,86~ 11;s~1,471 1 l,942,9S0 3,,110,3~9 ·2J.U,036 2012-~.14 33,943,446 17,559,698 ~MJ,-ss4 47;79~;S79 14,812',~ U6<i,16s 20~,:~} 32$S'S,~73 9~16,808 ~Jt.t.i7 j7.43?',606 14,887,118 :5@119.!9~5 2~2026 24).49.619 2,412,iso ~1.20:3•1 .1tOQ3,<J58 I0-,851l,1H t,6$SlS? ..• ! 2021~~:;1 ,· l~1B3S,000 ~;ln,soo 590,586 ~,n9 2032;2036 ,,. .... 1;0.&S:000 S41,62S Totals s·_ I2•,4.s:1;2so s ss1342,097 S 323,S67, 720 $ IS9;824;748 s 58,079,322 S._28,lliJ, 71-4 ~ltal l~ases w.ere ~ to acquire-equij>ment and v~icJes, i'hc iiul'.Clt rate on tile I~ ranged 1'-om 2.0.% to 4,3¾;' The ann1111f ~uimncnts on eapilal Teases oflho •city as of September 30, 2006, includiiig interest . payments ofSl,790,1&S are as follows: 83 City orLubboc:k, Texas Notes to Basic·Financhd Statements September 30, 2006 NOTE Ill, D'ETAU, NOTES-ON ALL ACTIVlTil';S AND FUNDS (Continued) H. LONG-TERM DJRT(Conljn!td) Gover11nc11tal Bus Ill HS--Typo Total Capital Lean C.pltal Ltase: C1pltal Le:H~ FIKIII Minimum Minimum MlalmilP1 Year Paimeiu Pa~mcai raiment 2007 1,694,843 2,:m:m 3,972,S99 2008 1;6~180 1,946,163 3,641,106 2009 l,613,-144 l,842;70S 3,St,,849 2010 :l,S-22.2.90 J,748,4-74 3,270,764 2011 i2S,9O4 1,08(j,Q12 1,8-1 i,916· 2-012.2016 1;ut.1246 :l8i,8j2 1;498.078 l.CS$! lntorcst -~~11i2 ('94,0:'14t fl /190, 1ss2 To1aI ',t 11S.J.l>1i-B s 8~&8,968 .$ IS,919,52? Tho·C11rrying values on-ihc leased assets of.tlie titY, as:of~~r 30, 20.06 11,1'e a., toi,lm: · • Accpmu~ted !l!'d:Biiok Govcmm~nla1 A-ccivltles B11$in<:$$--Type AetMt.lC$ To(al Leased 1\3~ . ONin ·Vah,e l>fpre:tladon V•tu, Long-term obligations (no~. ot'~lscouin:s -~~ premfiirtu:) ~ govtn1montal ana busl~~ activitj~_-for·the rear ended Sep1cmbe·r·3O, 2006,~ at-rot~: n,'l!C.~•-llle ~t. "IY,a;llto 011, In Go~er}!mentll ~Illa; Tax-S11ppo.W • ObllB!lllon Bonds ~""~ ·CQmpenmC4 A~ l11S11ranco Chlil!t Payable Bond-D~IJ/PcomltmU . A.r:biln!SO PllY'tblt. 'r~ ~emmeiital 111ci~klt1 B114lneu-Type 1ctlVlllt1: Se1tSupportcd - OblltatH)n Bonds ~iio8olldi dp(tal~ Cfoslll'CIPosc Closu~ Qliupel!SDICd-Ab~ lliS\IIBM¢. Clii11t Peyabl~ &Ad Dlscouiall/Premlwns Atblll'llge Payable Total Busma,-Type ~ctMtle., !H'Jllttoo5 Addklon, belctl•• 9/30,llOOfi ont.year 286, 'MP., 7l I ~:Q0.0® l,3~~,S76 -3;.013\391 .s.~.m i~q~,198 zm,+-4• S 34&.03!,.!09 S 21,526; 113 S !,119.;980 6,313,086 19,~.~.,6 620.860 lSl,716 S,789.IOl l·,$44;3,06, 6J41;414 18,640;~0 ·1~.iS2 S 32,444,134 i0,99J,187 34,17~.~8 lli~7~;906 3,294,S.84 1,1,1,m l,t24,342 m;?4o ~6S9 2.21M28 3,135,:231 4,416,1S3 648,300 1,297,066 71il91 i 104148511641 i 46,585,611 84 S '124-"4~7 ,280 S -r;:sa!)i~9. 16~.~.~1 ·Z,161.l,& 2;357~~. ui;1f§ 3l3,S61,'1® ·Sf~019.3~- •~.H.8 3,~99i13:_1 S,365,796 SJ.~,916 IJO'~&t-2: • 711191 6,361,599 :u26,• 6.U~ 2J:1l,(Ml 16,t.U.-401 3.811,i 4!>· -l,f14l'~ -is.11.1~s 2,444,632 S '.40~39;786 s 17,0411,380 C C C C C ·c ·c C C C City o!Lubbock, Texu Notes to Basic Flnanelal_Statements September 30, 2006 NOTE lil. DETAIL NOTES ON ALL AC'IWrtmS AND FUNDS (Conthtued) H. LONG•TERM DEBT {Continued) Pl.)l'IMnts on bonds payable for governmental activities are made in the Debt Service Fund. Bonded-debt is subje<:t to thli apPlicability of fcckrnl arbitrage regulation&. A1N1Ued IXllllpet\Satcd absences lhai pcn:aht to governmental activities will be liquidated by the Ocneral f'und .and Special Revenue funds, The lik Managemont Internal Service Fund will Uqiitdate illsilnmcc cla!111S payable !hat pertain to gav~l ac:tivities. Payments for the Qapltal leases that penain to th.e governmental activities will bo liquidated. by the General Fund l!Jld capital Projects Funds. The tocal loog-tenn debt is reconciled IO lhc r.otal OMUal req:uimncnta to 1llDortize long•teno debt as foll~; Lollg-wm debt • Gcwcmmenlal Acuvilict J.oiittcgn del!I • l)udnCH•l):!)e A$:tivitiH r~~ To&l~ofikbt Net g,.lna/lo,ac>, ~vcfucQU.U. Leu: Atblrtttt P'l"ble 1.t:ooi,C,pillllbm l,c,,s: (1U111iin~ cl_lWl'la pA)'Qble la&: Ccimpc:timcd obsemts l,c1111:_ Clotrui:w'.PQat dotUtc: T<?tai o,h.ti' debt '!'ot!il l\iflU.li bof!d~ d~'b( ~ New Bo rad Issuances t \S3,518,)40 405,!l,9,7,~ 2<4,3)810:,59 (4,264,274) (22.2.'m) (15,91-9,527) (B.o!Z2,m) (21,625,$33) 'Q~,131) S 802,11$9)8S Ill. A-pr!I 20Q61 ~~ Clty issued $76,950~000 Tax aod W:iterwo,rks .System SurplJ.IS Reyeaue CerJjfic_ates 9f 0.bliptio~ -S\1ri•s 2906, The 'Certificaltis.~ -~~ .fl~ a ~illl'.I\ 'of $2,SB0.24S. Aj\_er paying r,uµ~ coats: of S~41,l0t, tbo .net prooeeds were S18,98S~OOO. Pro~.ftom -the sale or these· certificates will be used for ~r.c. Muliicip~J Bulldl~ parks; and CCJnctmi ~ycments, ~ repairs, an~ aolid ~ ~. wasteWater, parks, strtcts, LUbbc>ck Po,W. & Liglit and econ~mic dtsvel~t Pf(>j~ ll'.ld coses assotlated wid) the issua!l<le of tne Certifica~. 'T:he ~ of lhc ilobt are ft<lotd® In vartoli~ 'Ent«prlse·Futids,AAd Capital Proj¢¢ia'Funds. . . -- the City also ~~d '2,740.000 O~erJl Obligation Bonds, ~ies 2006 1n April 2006. 'Ille ~ral _01?:ll_gaclo~ B'.0114' i¥m Issued at a ~remhnn or SBJl7~. -Mer payin.g issuance costs of .St4,l~6.-Cfji, ri_Q p~ we.re $2,715,000. Proceeds from the salb qf ~-~f~tes ,,;UI be ~d for ~ng strett improvements lnoluding drainage. curbs, g~. I~ sldcwalb; curb ramps, utility line 'telocatioil anil 1faffio signafj~ and· the atiitlisitiort 6f land add-~f-way mid for 11Cquinilg. and ~viils· 'taiid for park pwposes. The proceeds of the debt iiie.-rec~ ;;,: vari.oll.\;qipital Prqjeots Fun!ls. The Canadian River Mu!)i9ipal Authodty issued a new C<lntract R!)venUe Bond, Series 2!JQ6 In April 2006 In the aino11111 ofS49,075,000, The City of Lubbock shared in that issue for S18,573,906 and o1hor cq.fts (j( $492,465, 1llid ~JYed deprcclable assets (water ri~)-valued at $19,066,371. Thts, assets and liabilities ate recorded in the Wat.er EnterpriJC Fund, 85 City o·r Lubbock, Te,:as Notes to Basic Financial Statements September 30, 2006 NOTE m. DETAILNOTES ON ALL ACI1VITIES AND FUNDS (Continvcd) H, LQNC-TERMDEBT cco111Inued) Advanced Refllndlng$ The Cily issued an adv1111Ce refunding to retire ·a ponion of the City's outswding ~ebt to lower the debt service requiremenu on such indebtednen. The ~-proceeds from the issuance of the Refunding Bomb werll deposiied with tho Escrow Agent (J'P Morgan Cbase Bank, Nlll\Oual Associatloo.) in Ill amc,unt necessary to aci:omplisb th(! discharge 1111d final payment of t!:lc Reflmdcd Boru.is on their sc:hodule4 redemption date. These funds will be held by the &crow Agl!flt in a aj,ociai escrow fund and used to purchase direct obllgaiions of the United S~ of America. Under the escrQW apm~, beCween 1he·City and JP Morgan ~e Bank, the DSCrow &nds are im'locably pledged 10 lhc payment ofprmeipe.t and lntercs1 on the Refunded Bonds. In May 2006, ~ City iss1Jed General ObU@tlon gelundin&:B~ Serles 2~ ('-l~dlng_.8,~s'!) :iYI~ ._ par value of $18,8.30;000. Tho ~fundlng•Bofflls l'Cfunded $18i0 lS,000 o~,py~ 'Tlfoywere ~su¢cl at a net prcmiUOj of $272,244 and bad $208,Q 13. j~ CO$!$, As fl ~It of the ~ lhe: ~- decreastd hs total debt service ~iremOD.!S by $702, I ~9, whi~ resulted In Ali!. e.c~o Pin~ $450, 70$ and an aeoou11ling loss of$362,823. Tbe debt ii'wactloos aro rociardcd In &n B~,Pu~. I, CONDUIT DEBT The d~ issued_:ftousin3 Finance Corp_oration Bonds, f{~th Faoilidcs-~~lopment .. ~ 8.onc!s. ·and- Education Pacllitlu A!lthority Bonds to provide ~ial ~ to. privl!to-,~ ~~~ f# ~ acquisitiol'.I _and con..struetlon of fMllilies declMd to \le i,11 the public ill~ 'J'.be, b_otids '~ ~-II>' Ilic property finllIICCd, U~n ~paymtJ1tot'1be l».nds, owuet}hlp of the a<:q11lrcd flti:ilttios ~f~:Uo t11o:MYato- sec1or entity served by the. borul issuance. Neither tho .City. 1he State, noran.)' political subdivistori lltll'COf is obligated in ll'ly manner for ~yment of the bonds. A~lngly; the b.onds.. are not reported.-, iiilbllities. Ia toe ac«1mpanying fll1ancill.l statetoents . . As of SCpttlmber 30, -2006, 1here -were five SffleS of Lubbock Hctatth P~cil--Do-V9l~-GorJjOraticm Bonds puwandlng with an aggregat~ prlnc_lptil, az_uoiw payahkl 0£-$273;&9.0,99:~. '1'1¥r ~o~ .~ .ts.qed. ~n 1993 and 200s. Also at Qf September ®, 2Q06, th* was one-·scrlcJ of Lil~ Edilcaflan Facllltlcs.1\uthori.tf{nc. ·Bonds o~_g with~~ principal~ ~1~_.ot;$.8,~$ii)Oq, ~ bonds wete Issued In· 1999. · · · · · · J. BJSIC MANAGEMENT The Risk Management }:und was established io account·for •llabllity· claims; .wc,4er•~ c;:(lltlpenSalion ekllms, and pre,niums for propertykasualty ~ ~-The. Risk ~ement Fund sea~ Its rovcnue through charges to other depanmenCJ, whld).~ b&1e,d on eo;su. In April I~,~~ City pl!J'Chased-worket$1 ~on co~age, .with tt9 ~lo; fm!ii~-~ ~~ Prior to April 1999 tbe City was self'-lnsu~ r~ ~•1 compensation claJm,s. ,Any claim o~ P.riorto April 1999 continue to be the mpanslbillly of the City. 86 0 i' - C C C a C C C ') City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2006 NOTE lIL DETAIL NOTES ON ALL ACTIVIT:IES AND FUNDS (Contiriucd) J. RISK MANAGEMENT {ContJnyed} The Chy's selC-imuranco ltability prQgram is cm a c:ash flow basis. which means that the scrvlclng contractor J)fOCeSS8$. adjusts and paYJI claims from a dcp!,slt pr.ovldcd by the City. The City accotinLs for the 11-1illity ~ by charging prerniw'ilJ based upon iosses, admilllstratlvc tees and reserve requirements. In order to c;o11trol the risks associated wi 1h I iablli!Y c lllims. 1hc City purchased excess liability coveraac in Scpldllber 1999, which is renewed a1111ually. The policy has • $10 million annual aggregate lirnit and is subject to a $250;000 dcdµctible p~ chiirn prior Jo .Q~ober t, lOOS, 111d a SSOQ.000 deductible per t;lalm sineo OctP,~~r ,, 2005. For self-insW"Cd ooverage, the Ride Minc1&em.ent Fund establishes c:taim liabilities based on t1stimatcs of~ ultimate c;os~ or claims (Including t\nuro elalm adjustmet1t expenses) that ha~.c. been n:l)l)rted buc not seitlod, and of claims tJiat ~v.e ~¢11 inourred b,µt not reportig (IBNlt}. Tll,c J~gth ¢'time: for which s11cb COSG must ~~ ~Bled ~ies dependfrig-qn lite ~~cf.il\voJ~. ~~ ~ c:;t&~. ~I, dc~n~ ~-~~ ®!')Plex raotois M infl8'1on. ~~sin ~ ot-~~ial Uabllity, and~•~ th'c Ill'~ ~ed in~coipp,µtmg claim liabilities docs not necessarily ~.It in an -exact· amount, parti&ilarly for liabl)ity. coverage. Claim liabilitiC3 aro rocompu~ 11Cri~~.us£ng.• ~ of ~I~ statistical techniques to"~ current estimates that l'!!flett re()e.11i s,;ttto111~.~ claim ~ency,,&Dd Q~ econom.ic and soc!al ~. Adjustments to claim lil,billtlos aie charged or otcditcli tq ~e.in tlle_perlod in w,hfoh.~ Ne i~.-· Additionally, property. and.·tiojJcr coverag_e. ts .aceQUnted for ia the JU$k Managcmen.t Fund. The .P,roperly i11slll'811ce pol fey was plll'Chasc!f-. .n outside ~cc ~let\ ~ po,!C>:,~ !l $250,000 d~&lo per occurrence, and lhll bQilcr cove!'lge ~ce ·dc:~ible is !JP i.o ssoo;opo dependent upou the unit. Premiums arc charged to funds based uiioJl ~~cd prem.lU111! tor•:1)i·e iiP;comlng year. Othor small insurance policies, $1.leb as surety j)ond cov~ and misccllancallS floaters; are also ICCounted for in. !he Risk Manageme..nt Fund, Fundii ani ~barged~ on premiwn .lUl1!:1Unts-"' 11drnmis~ti~ cll&raQS; Tho Ol!Y ha$ 11114, II(! ~!gnipcan.t.~ ~ insilrqnct wv«age during lite ~I year, Sfflle~ i~ ihe cunwit yw and pr¢cedlns two ~rs liavc not ~~d ~ co,vuage. The City IIOCO\!!lb W/: all tnslll'allCe a<;rivity in l~~l Service f.urld,. K. HEALTH -INSURANCE The City prowl!is medicaf Jim! dcnuil ·~ for aU filll-dme cmpJoyocs ihat arc accounU~ (or ,\n'{lli Healtl_t.~cfits Fw1d. Revenue for tbc h~lih ~~ ~ ~ .~ ~m oacli eoJ.t _, ~ upon tlie. 11um~jf .uti.ve tilU-tirno en,;plqyee£. . The-Citts pl1111 is scl(-insurcd under an A~o Services Only (A~~)-~ement rite A8g ~eot pr~l9es·~~~ ~e of$175,000.J10!.~ individual 81Ulll8Jiy ~ in aweaati! C4P qr Sl4,14Si7S7. Tlie ~CCI ~ridQt basw ~ med!~~ claims histoJy, l!li<f \!ltt~. detemiinel lhe ~ dcduel.lole. Tbe c:onlrict reqliircon mNR ~-ff approximat~i)' $2,3 tnlllion. The City also provi_dcs fi:tll•i!Jne ~19yffl basic lC!ffl Hfo lns!,l,rance. Revenu~ for the life lnSUfllZICC prcmh1ms. ~ •lso .g~ratc~ from cad\ CO$t a:itlm: 11,asea 11~ ~ nUJ!lbet 4?f active employees. i1ie liCe insunina: pQlicy·has •. ~ value of $10.000 per c.mpl~. Full•I~ en,tPloy~. IJM,lr ci®t ,to P.utchaso ~lea.I 81\d denll!l ~c:e ror eligible dependellt$ and ~e.Ctty subsidizes d~~t ~~illlnf! ~ ~m:o .lbe co.SI w, emp~es. ~ployc:5 may also elect to partii)l~ill several vol111itru:y in&IU'liace pro·grams such as a cancer il\QJmo policy, voliaritary life, u.nd pmonat ll<idi!eiit insurane1. Voluntary Insurance products ate fuUy pa.id by the employee, · 87 City of Lubbock, Texus Notes to Basic Financial Statements 'september JG, 2006 NOTE Ill, DETAIL NOTES ON ALL ACTIVITIES AND FUNDS (Continued) K. HEALTH INSURANCE (Continued) Retiring City employees may elect to retain med.ital and denial Insurance and a r«luced ~unt of ll(e insurance on themselves and· eligible dependents. The retiree pays a portion of the ptWOiilm C<i!rt&, bl.It the City subsidies r~ premiums by about Sl.3 million annually. Tnc life insurance is fuliypai<(by th¢ reiltee, L. ACCBJIBD INSURANCE CLAIMS The Self-ln$'.llrancc Funds establfsh a tlabillty for self-insurance for both reported and unreported insllred cvenis, which includes C$1ima1cs or both future payments of losses aud related claim_ adjustment cxp,cm~. The f:ollo~ ,~~I!-4 ~ges in l;bosc gegate tiabi\itios for lhe Sclf~~surance P~ ~~,tho p~ two ii~ ~<1~ ~ept¢mber 30: FY2ilo6' w.~ ~~'atid~!l&~lll $ 6;501,898 $ ~JJ· . ~~. )'ear . ,, tii_stsS: ~~ 3,235.231 ~ Payment$ (41476,1'S3) (4~59313l~ ~~and Li'al,ility ~ at end of . : ~F SJ,IJJ,976 %501/~8 Mo41~. 8(i(I Den~ Qaim, Llai,i,iitY at bcgfnning of 2,~S.,4$.U ~~ 2,340,2® Oai.RL'l Expinses 19,060,956 1.7.43~~ 0al111S'~ (1.8,640.060) ~l-7;41,6;9222_ ~Ci!'l ·8/)d Dental cairns LiabiJitY:&t enlf.off~.-year ~7611156 ~340~. Totai Scl(-tnsurapce·Liabiiio/ at aid of fisQII )"eel' s,oi.;132 ~S42;fS8 ~ ~to p_aycfaims ai cridof~ ~ 11.23 7,066 12.MGJilf . ~;j~cla&ris:~·8Qmrcstl'kred-.s(U• aimW 4;956;61.3 3t~~l ~~_pl~~.~ -3,065,459 4t89&~ Totalec:aued·~ dalim s &,012,132 5 ,8,842.158 "'· Li~lllJ~ CLo~J.!Bti AN.Q PO§IC~gARE COST Suite and fedcrnl laW$ and regulailons requiro the City to place 'final covers -on i1S Iand_tihite:a when ~cy·~op .a~tme-~ Md -~ pctrol'm cel'blin ln!li~lllllce. and.monitoring furwuons at the ~-for thirty years ,after 1;~; ~\thous~ c;losure and Pl?Sl!-!os~~ ~~ will ~ paid only n~ or after tile -~ dl& la,ndfiJls ·ttoir ""~~~-~ the Cicy -~ f ~~ oftl_ics~ clOS&lre and postclosute ~~ u ~ -~· (and recogniilng a co1TCSpond1ng liab1h\)') in ~ p11rlod based 'On tandfill ~ty use_d !Ill b!eacli ba)anu shccnlatC: · · · · · · ·" · · · · · 88 0 C C C .o 0 C C C C ) City of Lubbock, Texas Note~ to 8asic Financial Statements September 30, 2006 NOTE Ill. DETAIL l'fOnlS ON ALl., ACTWlT'.CES·ANi> FUNDS (Continued) M, LAN;DFILL Cl.-OSURE AND ,POSTCLOSUR£ CARE COST {Conti1111cdl The S3,Z99, 131 included in landfill c:losuro arid postc:los\U'O caro liability at September 30, 2006, repl'C$ents the cumulative amount eiq,ertsed by the Chy to date for its two landfills that are registered under TCEQ pennit numbtrs 69 (Landfill 69) and 2252 (La\ldflll 2252), less lllll0Wll$ that have been paid. Approxim~ely 92 percent of the estimated capacity of Landftll 69 ha$ been used tQ .date, with S806,S2S remaining· to be rcoognized over die remaining closure period, wh!ch ill estimated at two ~ars. Approximately 2. 7 ptrec!nt of the estimated upacil)' of Landfill 2252 has bcell 'Wied to date, with $23,900,641 rernaining to be recognized over the remaining closure period,.which is estimated 1110\'$1' 80 years. Pouclosurc·utc costs·~ based on prior estimates and h•ve been e,djus~ for inflntlon. Act!lal c;osts may be diffment duo to inO.tiOll. def!alion, chang~ in technology, or changes in reg11lailo~ The City is required by state and federal laws •and regulat!ons to prov!de asslll'Sllco that f~aocial resou,rce.\ will be eivailable to provtd~ for closu~, poj~ cato, an,d rcmodlali!)fl or tontainnielit ot enviro~ hllZards at Its landfi_lls, The City i~ ill ·eoi:npl~ With tho~ .-equ.i~~IS -~d has _cf:io,sea_ lhe Local Government Financial Test mechanism fQI' pi:9vidi1ig !his ilss~R«-l'b11 City expects :to ljnance CQsts 1hrou&fi norm,11 operations. N. PJSAGREGATION OF f&COUN:J'S .. FUND FtNANCJAL STATEMEtff:S Aceoonb R-iY1b1•·summa!l Co11rt P.ro~l'.ff ~ltc. Bil11ilce tit Goverr,melitjl Aetivl~: Fi!!!! O.cnag, Piwh111 ~ Oeneral Fun'd $ 4,3~,859 s 258,~'40 $ 329,780' s. J!i:S,Sl7 $ 5,l~3t896 Nonmajor I ' 3411901. 341,907 Total s .. 13941859 s -~s,940 $ 329,780 s 517r84 s s.soo;so3 Accoaisiiitt'et1v1lilc SiillHlmlY Ge11cral <?titdlt lbl11)C~~t Con,um~ cw Mire. 9/3GIOG B111t11en•type ACCMlies: 1.P&L s 16,472,414 $ s si,0()8 s 16,S53,~ Water 417371$S9 ~ 2SQ 4;1.~J;l® Was1cwat~ 2,445.-,!'49 2,445,14~ Storm* '175,559 11S,SS9 WTMPA 1;800,814 l,8'(I0,8i.4 Nomnajor 31142-1939 51191 125 3114811SS Total s 29i314,734 s. :S,791 $ 81,313 S 29.~l.908 . 89 City of Lubbock. Texas Notes to Basic Financial Stateme_nts September 30, 2006 NOTE m. DETAIL NOTFS.ON ALL ACTIVITIES AND FUNDS (Continued) N. DlSAGREGATION o:,ACCOUNTS w FUND FINANCIAL STATEMENTS (Coatlaug,d) AH11wa11« £or DlNlbtlul Ac~•U Summary =t:~ s Noii~o.r-· Bu11ncs;..Ttpe: UP&t. Water Wastewat~ ~to1n,1w~~ W1¥PA .N~~ Total $ qo~1 General FWld Nc:11•1mlljor BIISinCS> 1)pc LP&L Wlitllf Wuiewater :storm~ WTMP!'\ Nonrnt\]~ Tollll B•l•i:ice at 9/30/06 S 3,333,240 1,008,169 445;656 18M1S 86,291 231J12 $ 5J92,143 ~cWltlllt Pttablt Sl!Almar,t Vouebers Aceoolltl Mtseel!IIO.tGUI 60,-014 $ 2,i8~$ s· 409.627 1,02i;~63 1,ooo;z:a9 17§.()81 490,5l4 272,l~S _i,2,~~1 3"3t,100 2,l'19~86 124;574 14~~577 '1ss.~16. 161,633 ·55,729 1,0,s.us 14,880 8,329,910 '96-~s• ·$ 1;72&t86 -941330 2,833,748 t7.531J190 's 1,153,260 90 Dal•A«at 9/'J0/06 $ 3,285,.899 2,199,533 1,035,206 2,635,560 l,066,886 l,l~,437 8,329,910 $ l,919A67 21.618.898 0 C C C C C ·c C C C 'J City of Lubbock, Texas Notes to Basic Financial Statements September 301 2006 NOTE DL DETAIL NOTES ON ALL ACTIVITIES AND FUND (Continued) o. DISAGRECATION OF ACCOUNTS -GOVERNMENT-WIDE Accouiits Interest Recelvablt Reet1v1blc 0 o,er11mental ~eilvillea s 2,167,563 s 38(,,349 B111 lne:ss-l1pe Acllvllln 27,503,00.S lll,576 Tolal $ 29,670,56.8 $ 497.925 Affllaail Payable QJVllmmntal Activities $ 5;48S;432 B~!'cst;1fpc Adlvltla t~,13),466 To)al $ 21,618 .. 98 N'OTE rv. CONTINGENT LIADii.rrms A. FEDERAL GRANTS Net Recclnble, Tua lntcmal Service Recetvable iueelv,11blft. $ 9,159,695 s S,784 51104 $ 9,159,69S s 111488 ,\~ .... ~ P:•Z!~i• latcnwServke lhlan~at fa}'llbles ,1.10/(l~ s 181,289 $ S.6(i6}121 736,217 iUii~,683 s 9l7,S06 S 22,5.36,404 li.l"n~tit 9,'JOJOCi :S J:J,719.391 271620~85 S l9J39ie!i76 In the 119m1at ~~ .~, ~iOf\S, ~ City re,~i:vea .sran~ fbncb trom. va.riou;i (c4~ral ~d s~ -age.n~its •. Th.!! grant programs· are JUb~t to_ ~udit, by agimta qf tbc. ~ ~-to c~urc :c«nP.lian~--~ •ftf~ p~edim,t to ~e granting of ;ftuids. Atty liabillty tbr reJ1111>ilrsemeln'~ch may '~. a ~.~t of ~t.,: !)f grant$ is notwllo~ to ba $ignlfu:ant. -. B. LltuiATJON The City i!f cumntly Involved in'tbe following lawsuits whieh could navo an Impact on 1ho ffila6ciat 1>9sldori if the Cit)' L, found liablo, .. Cli•rtu E~marnrel ~~r. a, Siarv:lv,l_llg P11re11 ot Cogrtae! l!'.fliole ~ler, u ~•••rdJai'i Of .¢Qttlt11 Bosler v. Travb IUdcJl.e a~d the ~lij•or tlibboek: PlalntHT-sued die City, of Lubbock and Otlh:er Travis Riddle on.bebaJfaflumsclfand his d,ildren.arWng out of the death of hb tectl!lge-daughtcr and injuries to his .son fi'om an aut9mobila a"idcnt with Offim' !~vis Riddle. l'laintitf al~ges· that Off!Cef Riddle was QPmting llis vehicle In a negligent manner ancl waupeedmg at tbc time of lhe ·coll~ioa. The De&ndanlS asserted !hat. the drtv.cr of lhc vehlcl~ ca,ry.ing :die Boiller children, which wu Ibo m.01her, was negligent in failing to yield the ri_ght-of•way to Officor Trilv11 Riddle, · 91 City of Lubbo~k, Tex:M Notes to Basic Financial Statements September 30, 2006 NOTE IV. CONTINGENT LIABILITIES (Continued) B. LITIGATION (Continued) The City filed a Motion for Summary Judgment based on lhe fac1 !Mt Ille Plaineiff 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 anci'fil~ $11it !CVen (7) months aftor the date oflho accident. The .Plaintiff claims that notice was not necessary in that too Def'lmdants had actual notice of ihe ln!;ident, The trial ~urt granled the City's Summaiy Judgment based on the fact that ibe Paintiff did not file a claim with the Ci~ of Lubbock within she (6) months li'om the date of.the accident. The Plaintitfhas appealed this decision to the Gourt of Ap~s. Martha DIiion v. Cllf otL11bJ,oek! Plaintiff ls sujngthe CitY, of Lubboc:k for injlll'ies arising from an aµt~obile acc~ent whh & ci~ of Lubbock driv~. -The City :o( Lubbock driver wq exiting au .alley wlicn he "t·Bohed" ~ 'lCll:iol~ ~ by Martha Oi11on. 'i'hc Plaintiff had undc!raom, previous bAclt ~e:ry, ~rgono s:ehablllwlon, an:d had recovered .&am the prev.low liack. slirgtey to ~tum to work full-time. She had been working full-time ~ approximately threo (3) weeks be(ott Ibis accident-~. As a result ~f this .~tderit she. ~. u11dcrg9,~ other p~~~ \n9ludmg e.nothtlJ' b.a,ek ·~ro, al the en4 of Qcto.lx!~. ~~ritlng to lier treatfttg physlclari, who is .!l w~ll rcspcc(ed local ~lcJa?. hcr~_inosls for being ·a1>te to roiuni to work 011 a fulJ,.:eimc buis is ooi Y!=lY good. · · · • -· ·' · Gru11e N,an~ and Juan Nunez,. et al r, City of Lubbo~k and Taser IJ!~matlo~,It Inc..: P\a~Jift\ are slling the City df Lubboc'k aqd Taser J.ntemational arising fi'Qm dlt City IJf LubbQck'$ police offlcet1.s use of a wer in alTClillng Juan Nunez. The Clfy of Lubbock police om= lltilized a ·tascr In arresting Juan Nunez and Nunez died after the laser w8ll utilized. The CII)! ~.fLllbbQclc,'s Pica to die Jurisdicdort assertln; 11\ai ah~ (;ity has ao liabllhy undtf !;~cm l~L057 of tha:.T~ Tort,C~lm, Aa ~as .t,ecn denied .!>Y ~e ttialcoi:i!i, Th~ City h.as appealc~ ~ 4~i,ion fl).t,!ui Court ·of Appeals,'· A ~t:case wttb similar facts.to the piesent'Gise was decided by tlici Waco Court or Appeals in ¢iJy ~ Wtrc,q v. W,11.ll~IJIS. In that case the apj)Oliatc ~.11.!1 1111!'-d 1hat tho City of Wac:o had immunity UDder .1h.is ~afiQ. Thia wu a 2.1 decisiQ11 ~ it i$ l!llficijiat~ tli\lt tl:ie: Plaintiffs IYill ~~ tlie. Caty df )Yi~ Ci$C-to the T¢c'a& _Supreme Cou!'l ·draee Nunez and Juan Nanez, et all v, Cit, or Lubbotkt Officer Matt llollerty and Taser iuternit~nal,)n~ This laWS\111 p~nls lhc samo fact silWllion as described in _the prnio'123 Nunez lawsi.Iil. The dijl'erence ia !hat thls ~11~: allF~ c~I rights vlolation•s agajnsl th~ l;ity an4 Officer Matt Dohcrtti The suit was filed on:J;)ecembot 22; 2.006 in the Amarillo Division of the ,Northern· blstdct. · · . 92 0 0 C C C 0 C ·c 'C 0 C ') City of Lubbock, Texas Notes to Basic Financial Statements September 30, 2006 NOTE IV. CONTINGENT LIABILITIES (Conti1111ed) B, LITJGATJON (Continued} Oscar Read• Contracting, Inc., ot al v. City of Lubbock, el 11: The Plaintiff is a contractor who bid to perform a coniract for the City of Lubbock, Even thO)Jgh Oscat Rtn~ Contrllctlng's-bid was over S2,000,000 less than the compllll)' who rccei~d the awatd from 1he City-of Lubboc:k, Oscar Renda Contracting was not awarded such bid. Osi:«r Renda 8$.Serts that 1be ie'asOf.1·:it \\'.1'5 .. n~t awarded the bid was ~cause It has filed ·a suit against anolhcr public eotie)' In £1 Paso regarding .Qne ~.t:iti col\$1r\lctlon projects. They base this on the t\ict that litigation and the co.rt of litigation with non-!Oj:al contractors Wis mentioned at-the lime the bid was awarded in August i2006. City of Lubboclc ,fi!M 11-Modon for Summory Ju~t and it ·was gzantod 'by the trial t:owt. However, the Fifth -C!roult !If.A~. ~x~ed ihe decision .of the-trial comt·and te1t111:1ded the case back 101rial in a q>lit dcGisian in~-~~. 'J'h.e City or Lubbock has file4 a. petition wi(h rtte Unibld Staics Supreme Co,urt in an effort to 8!11 them Jo reyl~ ~ ~. '' -. ' ' ' Layne Sladord-V, Oty of Lubbock aad Lul>l;lock Civil.Service Comml$Sloo: Plai_ntiff. a ti_~ tighter, fU~ ~it under the C[".11 Service Act all~ging hew~. :wro11&f.\l!IY de11i~ 1J~tnilftQ!l, He assem 1{1ilt lhe Fire Chl~'fwrongfuUy pa$$ed him over for ·a prd~otion Jjecausc haw-, 9h~~·~~;_npt convicted; of DWI. · · ,: · · ·· Tbe ~l11 ~ in ,~~ ~ ~ns fQ whelhc!r h~ was enlitle\i to hax,e 'his ~ heard, by a thli:d~~~. examiner. H6 ~~r.is tflat ·sitl,ce !tie City refused to allow the cll$e tq be ~ard ~Y a hcarlnJ •!!\et~ Ii'~ •is entil Jecho me j,romot101>. · · · ·• · --- The !rial ooun Nied in tho Defendam's fav<>r. Tho case Is (:Wffl'ltly 01' appeal, Damages ~ llntl~d io aitomcy•s ~ and back pay. LJ. ·McCalhin, Jr, f ,.:City· or Lubbotk. ct al: A law&uil ~ flied i1J lafc No.vember agahut the City of Lub.boclt and dlree Lubbock polic.o ofljcm pertaining to an Incident: in which ·a s1.1spcet was Injured with a wer Ullllzcd by one of tho L1ib.bock p,&llco officers'. · · · Plaintiff' is s~ing the cit)' .and the officers under the Civil R!gltts Act aa,d i,., also sui!lg lho City und~_.the Tew T.ort CIII~ ~~ •.. ·~ this, timt! we do not have milch fnformitfoo ~ :we. have yet to ~i~ .d:io. ~~ repi?\1$, ~ i~ve~d&@d~ by Internal aff'arrs, or review the video ofthl hlclcle!ii. However, it d~ no\'~ that Uiere were el!.)i iit~i lnj urios to the plaintiff. Terry Ellerbrook "• City of Lubbock: Plaimjt'r is ·a:c:~ni:~loyec otthe City of Lubbock a.lie~ claims pt ligo. di.mimnatlon, ~• blo.\\i~ elairn'_i retiiliatlon and damage; b~·ho was moved from one pqsltlon 10 another position witflfu tbe Cey. Also, the Plaintiff'. ls asserting o~ meeting violations by .the City. Mr. Ellerbrook is Cl'DJlloycd l!S th_c Director of Solid W~ ~ is cu.tm11ly earning more m.oney ~n he WaJ in ~Ls prior po5ltion. D~VCI)' is ongoing, Tois case is pci\ding !ho 237"' District Court and is ~ foi' trial in A~t 2007. The Cit)' is den:>:ln& 1he allegations •nd clalms ~~ by the Plaintiff. 93 City ofLubbockt Texas- Notes to Basic FinanciatStatements September 30. 2006 NOTE IV. CONllNGENT LIABILITIES (Co11ti11ued) C. SITE REMEDlATION The City has identified ~me locations requiring sile remediation relative to undergro1md fuel storage tan!l's and historical fire training site:.. One of the sites referred lo below as Lubbock: Power&. Light (LP&.L) Plant 1, rq,rcsents a liability equally shared by both the City and LP&L. As of·September.30, 2006 die City identified three locations. lhat posed·a probable liability. The City recorded tbe liabilities for the Jhree locations in the Bnteiprlse Funds. as follows: • LP.&L Plant' I ($236,000)-this repr:esents LP.&L's portion of1he liability only • LP&LCooke Plaiit($539,000) • WesTex Aircraft ($300,000) 1Jie cyy n:cordcd the probable liabilities in 1he government-wide go.vemm• state111entsiis•f'ollows; • LP&i. Plant I ($236,000)-this repn:sents the: City'& ~oa.·only • Police Firing'.Range ($30,000) • CFR 't'raining Facility ($114,220) -Fut Touning Academy ($'338;335) • So~th F.ue~ Faci,ity {$204,:ooo) The poteritiaJ e~ for one remaining location is not readily detenninabla'•a$ of.Se,ptember ;JO-; 2006. In the opini&:c;f man.agement, the ultimate liability for this location will not bllvea materially .'ad\lerse·etrect oii. th: Cityis fihanciill position. NOTE V-. SUBSEQUENT.EVENT On January 10, 2007, the City sold is4,020,0® Gim.eral Obligati9I!-Rpfunding B"onds and $2S~25S,OOO Certificate of Obligation Bonds. 94 0 0 0 0 0 0 ·C ·c 0 0 C APPENDIXB FORM OF BOND COUNSEL OPINION ') 0 0 C C C This page intentionally left blank C C ·C C C C ') Vinson&Elkins [Form of Opinion of Bond Counsel] [Closing Date] $52,900,000 CITY OF LUBBOCK, TEXAS TAX AND WASTEWATER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2008 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 WASTEWATER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2008, dated January 15, 2008, issued in the principal amount of$S2,900,000. The Certificates mature, bear interest, are subject to redemption prior to maturity and may be transferred and exchanged as set out in the Certificates and in the ordinance adopted by the City Council of the City authorizing their issuance (the "Ordinance''). WE 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 materiai but have relied solely upon the transcript of proceedings described in the following paragraph. We have not assumed any responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in connection with the sale of the Certificates. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Certificates has been limited as described therein. IN OUR CAP A CITY as Bond Counsel, we have participated in the preparation of and have examined a transcript of certified proceedings pertaining to the Certificates, on which we have relied in giving our opinion. The transcript contains certified copies of certain proceedings of the City, customary certificates of officers, agents and representatives of the City and other Vin"°" & Elkins UP Attorneys at Law Austin Beijing Dallas Ovbai Houston LOl>lfon Mosa,w New YOtlc Tokyo Washington Dallas 1201430v.2 Trammel Crow Center. 2001 Ross Avenue, Su~e 3700 Dallas, Texas 75201-2975 Tel 214.220.TTOO Fax 214.220.n16 -.-.elaw.com V&E public officials, and other certified showings relating to the authorization and issuance of the Certificates. We have also examined executed Certificate No. I of this issue. BASED ON SUCH EXAMINATION, IT IS OUR OPINION THAT: (A) The transcript of certified proceedings evidences complete legal authority for the issuance of the 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 Wastewater System, as described in the Ordinance. THE RIGHTS OF THE OWNERS of the Certificates are subject to the applicable provisions of the federal bankruptcy laws and any other similar laws affecting the rights of creditors of political subdivisions generally, and may be limited by general principles of equity which pennit the exercise of judicial discretion. IT IS OUR FURTHER OPINION THAT: (1) Interest on the Certificates is excludable from gross income for federal income tax purposes under existing law; and (2) The Certificates are not .. private activity bonds" within the meaning of the Internal Revenue Code of 1986, as amended (the "Code''), and interest on the Certificates is not subject to the alternative minimum tax on individuals and corporations, except that interest on the Certificates will be included in the "adjusted current earnings" of a corporation (other than an S corporation, regulated investment company, REIT, REMIC or FASIT) for purposes of computing its alternative minimum tax liability. In providing such opinions, we have relied on representations of the City, the City's financial advisor and the underwriters of the Certificates with respect to matters solely within the knowledge of the City, the City's financial advisor and the underwriters respectively, which we have not independently verified, and have assumed continuing compliance with the covenants in the Ordinance pertaining to those sections of the Code that affect the exclusion from gross income of interest on the Certificates for federal income tax purposes. If such representations are determined to be inaccurate or incomplete or the City fails to comply with the foregoing -2- Dallas 1201430v.2 0 0 C C C 0 C C C ·c C 0 V&E provisions of the Ordinance, interest on the Certificates could become includable in gross income from the date of original delivery, regardless of the date on which the event causing such inclusion occurs. Except as stated above, we express no opinion as to any federal, state or local tax consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or disposition of, the Certificates. Owners of the Bonds should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to financial institutions, life insurance and property and casualty insurance companies, certain S cozporations 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 otheiwise qualifying for the earned income credit. In addition, certain foreign corporations doing business in the United States may be subject to the "branch profits tax" on their effectively-connected earnings and profits (including tax-exempt interest such as interest on the Bonds). The opinions set forth above are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement these opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather, such opinions represent our legal judgment based upon our review of existing law and in reliance upon the representations and covenants referenced above that we deem relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Certificates. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the City as the tax.payer. We observe that the City has covenanted in the Ordinance not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Certificates as includable in gross income for federal income tax purposes. -3- Dallas 1201430v .2 0 0 0 .Q 0 This page intentionally left blank: 0 C C C C C 0 APPENDIXC SFECIMEN MUNICIPAL BOND INSURANCE POLICY 0 0 0 0 0 This page intentionally left blank. 0 0 0 0 0 C 0 0 D ) l·'S -.\ FS;\ \'~f ', .. f' .. .: -;.~, ...,._ •. t ·-• f.~~, n :1 zl~,E~,:-~~ !'°~l J '";' f •1-4. ', " !. I 1_.•\ y ~· f. " .. , . I t > J,;i !\ t BoNOS:}v ,:i ! 'r'i \ •; .. · " v~. ~ ·r,.-i ,·\;_.t ,··.;3 , , ·: 1:s ~, vi,;~ J< .... :, ...... '1t'Ki ... ~ •. 4 f~.!~ t S 1 _;;--iSA. \..t~ >i ,., f '!'~~ 'IM~lsh \1Sl .f,1 \.:6' f ... "' i-~"' v i;:1. ~,:"•: .. \ •.. fS4 1-S:-. t -;,-~ i&l \~d '.'., i .... tf ~-·""~ F~-': i I (.0 •-~ ;::·~;~. t.. ... C! l .... 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'!\.' 3: ,.~. t '"'"" .. ~ ~ '· .. \, '•f ''i V11 'c:"(: • \ '._'l FSr\ H:;-\. f ",,~ t s~l \-b-·t 'V :• l BSA ;}•\ ,rSJ. VS.•: \. ',/. '• "' \. ··x '• ;t! ..... -~ ' ... ·. ... -.,1 ~.,. \. ,, '. . , : ,, i ..., .. ,.. . f"" ... -~ I r ( • ( ~ -... ~ •1 • r ' . \. .• , I f "\..-:" i ,l •• ... ' ; .... -~ .. ,· , > • ~->,; l t ·, ; ·' . -· •. ~ I• •., l ,s1.-~-t .. ~ ~ 'f~~f \t.~1- 1, ...• .... ,., . ' \ .. ~ . " -' ! • ~ ,.. . ~, ·" 6 • • • .,. ,. I L . "' ~·· .... ;..: ·1 i ... \ "!:l . l . , .. ·~. ~ --' t : ,.\ -. . ·• ..... ) ., . ~ , ~-.-. ~ ., . ~ ,, t· .. ,.~ ~·1;~.?\ f: .\. : • -1 ';. '-·> v.• ~:~! ~ ,.\ ~ 1 . ; !· ~.,.::;. FS1-\ f ~. \ \· ~---'i \ ~ t'S ;t, F; ~- ' I•, • ~ ~-.. t '•' .... --. ... ,1-,.,. ' • I ·,. { . . . .. ). ~ ; ., . C '\I 'I " '\/" ~ ~ ·~ 7" ~(.,. t_"t~\ •'-.f ~~:t • i . · 1 ,4 .... 1 1t· :.; \. ;; ~-:· ,.-l, \ \.J ... , ... ~:! 1 ., .:\- ~/'\.:: ,··~ ' I. ,i..,~ \·1..; i !' .t:,, l"~.t FU \-S-j i:SA. 'I'~.-! l-···s~ V:~ i,; ; •• f~.'-,. L:, , !~! "'{~i.i ~-f\ 1·:_) ;,.,,, ~-,., ". t-~ YS.l '{r·.; ~ "t"'--1• v .;i ,~<.;~ l'~\ t-s a'c • :-d r' .:J ~· .q ' ''l<J : •. ·I ' : \ . ·. i ·~ .,! ...... \.•''\. ~ ;'II •• 5 r~--~ \'t:: ., ~ .... ~.~\ t!~ ! J ~ ;'" .• ~.,f. .~ t '.~ \. ··~,j ~~--~ n~,\ \·\;.I \-~d 0 0 C C C C C .( C C ( ) ) RBC Capital Markets PURCHASE CONTRACT RELATING TO $11,805,000 CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2008 December 19, 2007 The Honorable Mayor and Members of the City Council City of Lubbock P.O. Box2000 Lubbock, Texas 79457 Dear Mayor and Members of the City Council: MORGAN STANLEY & CO. INCORPORATED (the "Underwriter"), offers to enter into this Purchase Contract (the "Purchase Contract") with the CITYOF LUBBOCK, TEX4S(the "City") for the purchase by the Underwriter of the City's Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 (the "Certificates"). This offer is made subject to the City's acceptance of this Purchase Contract on or before 10:00 p.m. Central Time on December 19, 2007. 1. Purchase and Sale of the Certificates. Upon the terms and conditions and upon the basis of the representations set forth herein, the Underwriter agrees to purchase from the City, and the City hereby agrees to sell and deliver to the Underwriter the Certificates in an aggregate principal amount of $11,805,000 (representing the original aggregate principal amount of the Certificates). The Cerri ficates shall have the maturities, interest rates and be subject to redemption in accordance with the provisions of Exhibit A hereto and shall be issued and secured under the provisions of the Ordinance (as defined below). The purchase price for the Certificates shall be $11,532,991.85 (representing the principal amount of the Certificates, less original issue discount on the Certificates in the amount of $185,703.00, and less an Underwriter's discount on the Certificates of $86,305.15) plus accrued interest from their dated date to the date of the payment for and delivery of the Certificates. 2. Ordinante. The Certificates shall be as described in and shall be issued and secured under the provisions of an ordinance adopted by the City on June 26, 2007, as amended by the City on December 14, 2007, authorizing the issuance and sale of the Certificates (the "Ordinance"). In the Ordinance, the City Council of the City delegated the authority to the Chief Financial Officer ) to establish the pricing terms for the Certificates through the execution of a Pricing Certificate dated the date hereof ( the "Pricing Certificate"). The Certificates shall be seemed and pay able 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 Certificates to the Underwriter, and of the obligations of the Underwriter to pmchase and accept deli very of the Certificates, that the entire principal amount of the Certificates 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 Underwriter at the Closing. The Underwriter agrees to make a bona fide public offering of all of the Certificates, at not in excess of the initial public offering prices, as set forth in the Official Statement; provided, however, at least ten percent (100/o) of the principal amount of the Certificates of each maturity thereof shall be sold to the "public" (exclusive of dealers, brokers and investment bankers, etc.) at the initial offering price set forth in the Official Statement. 4. Security Deposit. Delivered to the City herewith is a corporate check of the Underwriter payable to the order of the City in the amount of $116,350.00. Such check is a common "Good Faith" check for the Certificates, and such check may be applied toward any obligation of the Underwriter owing as a result of the failure of the Underwriter to accept delivery of the Certificates as provided herein. The City agrees to hold such check uncashed until the Closing to ensure the performance by the Underwriter of its obligation to purchase, accept delivery of and pay for the Certificates at the Closing. Concurrently with the payment by the Underwriter of the purchase price of the Certificates, the City shall return such check to the Underwriter as provided in Paragraphs 7 and 8 hereof. Should the City fail to deliver the Certificates at the Closing, or should the City be unable to satisfy the conditions of the obligations of the Underwriter to purchase, accept delivery of and pay for the Certificates, as set forth in this Purchase Contract ( unless waived by the Underwriter), or should such obligations of the Underwriter be terminated for any reason permitted by this Purchase Contract, such check shall immediately be returned to the Underwriter. In the event the Underwriter fails (other than for a reason permitted hereunder) to purchase, accept delivery of and pay for the Certificates 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 Underwriter and for any defaults hereunder on the part of the Underwriter. The Underwriter 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 December 19, 2007, with respect to the Certificates, as further amended only in the manner herein provided, is hereinafter called the "Official Statement." The City hereby authorizes the Ordinance and the Official Statement and the information therein contained to be used by the Underwriter in connection with the public offering and sale of the Certificates. The City confirms its consent to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement, relative to the Certificates, dated.December 7, 2007, as amended (the "Preliminary Official Statement"), in connection with the preliminary public offering and sale of the Certificates, and it is "deemed final" as of its date, within the meaning, and for the purposes, of Rule l5c2-l2 promulgated under authority granted by the federal Securities and Exchange Act 2 ' ) of 1934 (the "Rule"). The City agrees to cooperate with the Underwriter to provide a supply of final Official Statements within seven business days of the date hereof in sufficient quantities to comply with the Underwriter's obligations under the Rule and the applicable rules of the Municipal Securities Rulemaking Board. The Underwriter will use its best efforts to assist the City in the preparation of the final Official Statement in order to ensure compliance with the aforementioned rules. If at any ti me after the date of this Purchase Contract but before the first to occur of (i) the date upon which the Underwriter notifies the City that the period of the initial public offering of the Certificates has expired or (ii) the date that is 90 days after the date 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 circumstances under which they were made, not misleading, the City shall notify the Underwriter, and if, in the opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will at its expense supplement or amend the Official Statement in the form and in a manner approved by the Underwriter and furnish to the Underwriter a reasonable number of copies requested by the Underwriter in order to enable the Underwriter to comply with the Rule. To the best knowledge and belief of the City, the Official Statement contains information, including financial information or operating data, as required by the Rule. Except as disclosed in the Official Statement, the City has not failed to comply with any undertaking specified in paragraph (b )(S)(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 the Ordinance, to sell the Certificates, and to issue and deliver the Certificates to the Underwriter as provided herein and to carry out and consummate all other transactions contemplated by the Ordinance, and this Purchase Contract; (b) By official action of the City prior to or concurrently with the acceptance hereof, the City has duly adopted the Ordinance, has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations contained in the Certificates and this Purchase Contract and has duly authorized and approved the performance by the City of its obligations contained in the Ordinance, including, without limitation, the submission of a transcript of proceedings to the Public Finance Division of the Office of the Attorney General ofTexas ( the "Attorney General") for the approval of the Certificates; and the Ordinance and this Purchase Contract constitute legal, valid and binding agreements of the City, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles 3 ) } 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 Certificates or any applicable judgment or decree or any loan agreement, note, order, agreement or o1her instrument, except as may be disclosed in the Official Statement, to which the City is a party or to the knowledge of the City it is otherwise subject, that would have a material and adverse effect upon the business or financial condition of the City; and the execution and delivery of the Certificates and this Purchase Contract by the City and the adoption of the Ordinance by the City and compliance with the provisions of each thereof will not violate orconstituteabreachof or default under any existing law or administrative regulation, or any judgment, decree or agreement or other instrument to which the City is a party or, to the knowledge of the City, is otherwise subject; ( d) All approvals, consents and orders of any governmental authority or agency having jurisdiction of any matter that would constitute a condition precedent to the performance by the City of its obligations to sell and deliver the Certificates hereunder will have been obtained prior to the Closing. except for the approval of the Certificates by the Attorney General and registration of the Certificates by the Office of the Comptroller of the State (the "Comptroller"), 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 Certificates by the Attorney General, and the registration of the Certificates by the Comptroller on or before the Closing, as required by Section 8(e)(6) hereof, but subject to the discretion of the Attorney General with respect to the issuance of his approving opinion; ( e) At the time of the City's acceptance hereof and at the time of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading~ (f) Between the date of this Purchase Contract and the Closing, the City will not, without the prior written consent of the Underwriter, sell or issue any additional bonds, notes or other obligations for borrowed money payable in whole or in part from ad valorem taxes, 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 Certificates, the levy, collection or application of the ad valorem taxes or the surplus net revenues ( the '.'Pledged Revenues") of the City's Waterworks System 4 '\ ) pledged or to be pledged to pay the principal of and interest on the Certificates, or in any way contesting or affecting the issuance, execution, deli veiy, payment, security or validity of the Certificates, or in any way contesting or affecting the validity or enforceability of the Ordinance, or contesting the powers of the City, or any authority for the Certificates, the Ordinance or this Purchase Contract or contesting in any way the completeness, accuracy or fairness of the Preliminary Official Statement or the Official Statement; (h) The City will cooperate with the Underwriter in arranging for the qualification of the Certificates for sale and the detennination of their eligibility for investment under the laws of such jurisdictions as the Underwriter designates, and will use its best efforts to continue such qualifications in effect so long as required for distribution of the Certificates; provided, however, that the City will not be required to execute a consent to service of process or to qualify to do business in connection with any such qualification in any jurisdiction; (i) The descriptions of the Certificates and the Ordinance contained in the Official Statement accurately summarize certain provisions of such instruments, and the Certificates, when validly executed, authenticated and delivered in accordance with the Ordinance and sold to the Underwriter as provided herein, will constitute legal, valid and binding agreements of the City entitled to the benefits of the Ordinance and enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; (j) If prior to the Closing an event occurs affecting the City that is materially adverse for the purpose for which the Official Statement is to be used and is not disclosed in the Official Statement, the City shall notify the Underwriter, and if in the opinion of the City and the Underwriter such event requires a supplement or amendment to the Official Statement, the City will supplement or amend the Official Statement in a fonn and in a manner approved by the Underwriter; (k) The financial statements contained in the Official Statement present fairly the financial position of the City as of the date and for the period covered thereby and are stated on a basis substantially consistent with that of the prior year's audited financial statements; (1) Any certificate signed by any official of the City and delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the truth of the statements therein containe~ and (m) The City will not knowingly take or omit to take any action, which action or omission will in any way cause the proceeds from the sale of the Certificates to be applied in a manner other than as provided in the Ordinance. 5 'I ✓ \ 7. Closing. At 10:00 A.M., Central Time, on January 17, 2008 (the "Closing"), the City will deliver the initial securities certificates of the Certificates (as provided for in the Ordinance) to the Underwriter and the City shall take appropriate steps to provide DTC with one definite securities certificate for each year of maturity of the Certificates, and to provide the Underwriter with the other documents hereinafter mentioned. On or prior to the date of Closing, the Underwriter shall make arrangements with The Depository Trust Company ("OTC") for the Certificates to be immobilized and thereafter traded as book-entry only securities and on the date of Closing the Underwriter will accept such deli very and pay the purchase price of the Certificates as set forth in Paragraph 1 hereof in immediately available funds. Concurrently with such payment by the Underwriter, the City shall return to the Underwriter 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 Certificates, as identified in the Official Statement, or such other place as shall have been mutually agreed upon by the City and the Underwriter. In addition, the City and the Underwriter agree that there shall be a preliminary closing held at such place as the City and the Underwriter shall mutually agree, commencing at least 24 hours prior to the Closing; provided, however, in lieu of this pre! iminary closing Bond Counsel, as defined below, may provide the counsel to the Underwriter with a complete Transcript of Proceedings on the business day preceding the Closing. Drafts of all documents to be delivered at the Closing shall be prepared and distributed to all parties and their counsel for review at least three business days prior to the Closing. 8. Conditions. The Underwriter has entered into this Purchase Contract in reliance upon the representations and warranties of the City contained herein and to be contained in the documents and instruments to be delivered at the Closing, and upon the performance by the City of its obligations hereunder, both as of the date hereof and as of the date of Closing. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase and pay for the Certificates shall be subject to the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following conditions: (a) The representations and warranties of the City contained herein shall be true, complete and correct in all material respects on the date hereof and on and as of the date of Closing, as if made on the date of Closing; (b) At the time of the Closing, (i) the Ordinance shall be in full force and effect, and the Ordinance shall not have been amended, modified or supplemented and the Official Statement shall not have been amended, modified or supplemented, except as may have been agreed to by the Underwriter; and (ii) the net proceeds of the sale of the Certificates shall be deposited and applied as described in the Official Statement and in the Ordinance; (c) At the time of the Closing, all official action of the City related to the Ordinance shall be in full force and effect and shall not have been amended, modified or supplemented; 6 .... ' ) ' ) ( d) The City shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; (e) At or prior to the Closing, the Underwriter 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 Secretaiy 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 Underwriter, and the Ordinance shall contain the agreement of the City, in form satisfactory to the Underwriter, that is described under the caption "Other Information -Continuing Disclosure of Information" in the Preliminaiy Official Statement; (3) the Pricing Certificate, having been duly executed on behalf of the City; (4) the Paying Agent/Registrar Agreement, having been duly executed on behalf of the City and The Bank of New York Trust Company, National Association, as Paying Agent/Registrar; (5) The opinion pertaining to the Certificates, dated the date of Closing, of Vinson & Elkins L.L.P. ("Bond CoW1sel") in substantially the form and substance set forth in Appendix B to the Official Statement; (6) An opinion or certificate with respect to the Certificates, dated on or prior to the date of Closing, of the Attorney General, approving the Certificates as required by law and the registration certificate of the Comptroller; (7) The supplemental opinion, dated the date of Closing, of Bond Counsel, addressed to the City and the Underwriter, which provides that the Underwriter may rely upon the opinion of Bond Counsel delivered in accordance with the provisions of Paragraph 8( e )(5) 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 Underwriter) constitutes a binding and enforceable agreement of the City in accordance with its terms; (b) in its capacity as Bond Counsel, such finn has reviewed the information in the Official Statement under the captions or subcaptions "The Certificates" (exclusive of the information under the subcaption "Book-Entry-Only System"), "Taxable Status of the Certificates" and the subcaptions "Legal Investments and Eligibility to Secure Public Funds in Texas," "Legal Matters" and "Continuing Disclosure of Information" (exclusive of the information under the subcaption "Compliance with Prior 7 ) ) Undertakings") under the caption "Other Information" 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 Certificates, such information conforms to the Ordinance; and ( c) the Certificates are exempt from registration pursuant to the Securities Act of 193 3, as amended, and the Ordinance is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 193 9, as amended; (8) An opinion of McCall, Parkhurst & Horton L.L.P., Underwriter's Counsel, addressed to the Underwriter, and dated the date of Closing in substantially the form attached hereto as Exhibit B; (9) 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 Certificates, or the levy, collection or application of the ad valorem taxes or the Pledged Revenues pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof, or in any way contesting or affecting the validity of the Certificates or the Ordinance or contesting the powers of the City or the authorization of the Certificates or the Ordinance, or contesting in any way the accuracy, completeness or fairness of the Official Statement (but in lieu of or in conjunction with such certificate, the Underwriter may, in its sole discretion, accept certificates or opinions of the City Attorney that, in the opinion thereof, the issues raised in any such pending or threatened litigation are without substance or that the contentions of all plaintiffs therein are without merit); (iii) to the best of their 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; and (iv) that there has not been any material and adverse change in the affairs or financial condition of the City since September 30, 2006, the latest date as to which audited financial information is available; (IO) An opinion of the City Attorney addressed to the Underwriter and dated the date of Closing substantially in the form and substance of Exhibit C hereto; ( 11) Evidence of the ratings on the Certificates shall be delivered in a form acceptable to the Underwriter, which shall be "Aaa" by Moody's Investors Service, Inc. ("Moody's"), "AAA" by Standard and Poor's Corporation, a division of the McGraw-Hill Companies, Inc. ("S&P"), and "AAA" by Fitch Ratings ("Fitch"), as 8 ) ) ) ) a result of the issuance of the municipal bond insurance policy described in clause (12) below; ( 12) A copy of the policy of mW1icipal bond insurance issued by Financial Security Assurance Inc. with respect to the Certificates; (13) Such additional legal opinions, certificates, instruments and other documents as Bond Counsel or the Underwriter may reasonably request to evidence the truth, accuracy and completeness, as of the date hereof and as of the date of Closing, of the City's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance and satisfaction by the City at or prior to the date of Closing of all agreements then to be performed and all conditions then to be satisfied by the City. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are satisfactory to the Underwriter. If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Certificates as set forth in this Purchase Contract, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Certificates shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate, the security deposit referred to in Paragraph 4 of this Purchase Contract shall be returned to the Underwriter and neither the Underwriter nor the City shall be W1der further obligation hereunder, except that the respective obligations of the City and the Underwriter set forth in Paragraphs 10 and 12 hereof shall continue in full force and effect. 9. Termination. The Underwriter may terminate its obligation to purchase at any time before the Closing if any of the following should occur: (a) (i) Legislation shall have been enacted by the Congress of the United States, or recommended to the Congress for passage by the President of the United States or favorably reported for passage to either House of the Congress by any Committee of such House; or (ii) a decision shall have been rendered by a court established under Article m of the Constitution of the United States or by the United States Tax Court; or (iii) an order, ruling or regulation shall have been issued or proposed by or on behalf of the Treasury Department of the United States or the Internal Revenue Service or any other agency of the United States; or (iv) a release or official statement shall have been issued by the President of the United States or by the Treasury Department of the United States or by the Internal Revenue Service, the effect of which, in any such case described in clause (i ), (ii), (iii), or (iv), would, in the reasonable judgment of the Underwriter, materially impair the marketability or materially reduce the market price of obligations of the general character of the Certificates. 9 ) ) ) \ (b) Any action shall have been taken by the Securities and Exchange Commission or by a court that would require registration of any security under the Securities Act of 193 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 Certificates, or any action shall have been taken by any court or by any governmental authority suspending the use of the Preliminary Official Statement or the Official Statement or any amendment or supplement thereto, or any proceeding for that purpose shall have been initiated or threatened in any such court or by any such authority. (c) (i) The Constitution of the State of Texas shall be amended or an amendment shall be proposed, or (ii) legislation shall be enacted, or (iii) a decision shall have been rendered as to matters of I exas law, or (iv) any order, ruling or regulation shall have been issued or proposed by or on behalf of the State of Texas by an official, agency or department thereof, affecting the tax status of the City, its property or income, its securities (including the Certificates) or the interest thereon, that in the judgment of the Underwriter would materially affect the market price of the Certificates. ( d) A general suspension of trading in securities shall have occurred on 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 Underwriter, impractical or inadvisable to proceed with the offering or delivery of the Certificates as contemplated by the final Official Statement ( exclusive of any amendment or supplement thereto). (g) An event described in Paragraph 6(j) hereof occurs that, in the reasonable judgment of the Underwriter, requires a supplement or amendment to the Official Statement that is deemed by them, in their discretion, to adversely affect the market for the Certificates. (h) A general banking moratorium shall have been declared by authorities of the United States, the State of New York or the State of Texas. (i) A lowering of the ratings of" Aaa," "AAA" and" AAA," initially assigned to the Certificates 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 Certificates, including but not limited to: (i) the cost of the preparation, printing and distribution of 10 ) ) ) \ the Preliminary Official Statement and the Official Statement; (ii) the cost of the preparation and printing of the Certificates; (iii) the fees and expenses of Bond Counsel to the City; (iv) the fees and disbursements of the City's accountants, advisors, and of any other experts or consultants retained by the City; (v) the fees for the bond ratings and any travel or other expenses incurred incident thereto; and (vi) the premium, if any, for municipal bond insurance policy pertaining to the Certificates. (b) The Underwriter shall pay(i)all advertising expenses in connection with the offering of the Certificates; (ii) the cost of the preparation and printing of all the underwriting documents; and (iii) the fee of McCall, Parkhurst & Horton L.L.P., Underwriter's Counsel, for such firm'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 Underwriter under this Purchase Contract may be given by delivering the same in writing to Morgan Stanley & Co. Incorporated, 6300 Bridge Point Parkway, Suite 250, Austin, Texas 78730, Attention: Mr. Ajay Thomas. 12. Parties in Interest. This Purchase Contract is made solely for the benefit of the City and the Underwriter (including the successors or assigns of any Underwriter) and no other person shall acquire or have any right under this contract. The City's representations, warranties and agreements contained in this Purchase Contract that exist as of the Closing, and without regard to any change in fact or circumstance occurring subsequent to the Closing, shall remain operative and in full force and effect, regardless of (i) any investigations made by or on behalf of the Underwriter, and (ii) delivery of any payment for the Certificates hereunder; and the City's representations and warranties contained in Paragraph 6 of this Purchase Contract shall remain operative and in full force and effect, regardless of any tennination 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 jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any constitution, statute, rule of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstances, or ofrendering any other provision inoperative or unenforceable to any extent whatever. 14. Choice of Law. This Purchase Contract shall be governed by and construed in accordance with the laws of the State of Texas. 15. Execution in Counterparts. This Purchase Contract may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Purchase Contract by signing any such COWlterpart. 11 ) ) ) l 6. Section Headings. Section headings have been inserted in this Contract as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Contract and will not be used in the interpretation of any provisions of this Contract. 17. Status of the Underwriter. The City acknowledges that in connection with the offering of the Certificates and the discussions and negotiations relating to the terms of the Certificates set forth in this Contract: (a) the Underwriter has acted at arm's length, is not an agent of or advisor to, and owes no fiduciary duties to, the City or any other person; (b) the Underwriter's duties and obligations to the City shall be limited to those contractual duties and obligations set forth in this Contract; and (c) the Underwriter may have interests that differ from those of the City. The City waives to the full extent permitted by applicable law any claims it may have against the Underwriter arising from an alleged breach of fiduciary duty in connection with the offering of the Certificates. [Signature page follows.) 12 ) ) If you agree with the foregoing, please sign the enclosed counterpart of this Purchase Contract and return it to the Underwriter. This Purchase Contract shall become a binding agreement between you· and the Underwriter when at least the counterpart of this Purchase Contract shall have been signed by or on behalf of each of the parties hereto. Very truly yours, THE UNDERWRITER Morgan Stanley & Co. Incorporated By:~ Name: _°$..,:,,..,._::;I:2,~U!.,:.uiL...._...1.1¼t+c.JaL..!,,;~ ... ,__ ___ _ Title: 11:y J?ho; J,,.f ACCEPTANCE ACCEPlED pursuant to a motion adopted by the City Council of the City ofLubbock, Texas on the 26ch day of June, 2007 and executed this~ day of December, 2007. ~y: ) ) EXHIBIT A Schedule of Maturities, Interest Rates, Yields and Redemption Provisions $11,805,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 Maturity Principal Interest Rate Initial Yield (February 15) Amount (%) (%) 2018 $4,620,000 5.250% 5.3300/o **** **** **** **** 2027 $7,185,000 6.250% 6.450% The City reserves the right, at its option, to redeem Certificates having stated maturities on and after February 15, 2018, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2017, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. The Certificates maturing on February 15 in the years 2018 and 2027 (collectively, the "Term Certificates") are subject to mandatory redemption prior to maturity in part by lot, at a price equal to the principal amount thereof plus accrued interest to the date of redemption, on February 15 in the respective years and principal amounts shown below: TERM CERTmCATES MATURING FEBRUARY 15, 2018 REDEMPTION DATE February 15, 2009 February 15, 2010 February 15, 2011 February 15, 2012 February 15, 2013 February 15, 2014 February IS, 2015 February 15, 2016 February IS, 2017 February 15, 2018 {mallrity) REDEMPTION AMOUNT $360,000 380,000 400,000 420,000 445,000 470,000 495,000 520,000 550,000 580,000 A-I TERM CERTIF1CATES MATURING FEBRUARY 15, 2027 REDEMPTION DATE February 15, 2019 February 15, 2020 February 15, 2021 February 15, 2022 February 15, 2023 February 15, 2024 February 15, 2025 February 15, 2026 February 15, 2027 (mawrity) REDEMPTION AMOUNT $615,000 655,000 695,000 740,000 790,000 840,000 890,000 950,000 1,010,000 ) ) ) ) ) EXHIBITB Proposed Form of Underwriter's Counsel Opinion of McCall, Parkhurst & Horton L.L.P. Morgan Stanley & Co. Incorporated 6300 Bridge Point Parkway, Suite 250 Austin, Texas 78730 January 17, 2008 RE: $11,805,000 TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2008 Ladies and Gentlemen: We have acted as counsel for you as the W1derwriters of the Certificates described above, issued under and pursuant to an Ordinance of the City of Lubbock, Texas (the "Issuer"), authorizing the issuance of the Certificates, which Certificates you are purchasing pursuant to a Purchase Contract, dated December 19, 2007. All capitalized undefined terms used herein shall have the meaning set forth in the Purchase Contract. In connection with this opinion letter, we have considered such matters of law and of fact, and have relied upon such Certificates and other infonnation furnished to us, as we have deemed appropriate as a basis for our opinion set forth below. We are not expressing any opinion or views herein on the authorization, issuance, delivery, validity of the Certificates and we have assumed, but not independently verified, that the signatures on all documents and Certificates that we have examined are genuine. Based on and subject to the foregoing, we are of the opinion that, under existing laws, the Certificates are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as amended. Because the primary purpose of our professional engagement as your counsel was not to establish factual matters, and because of the wholly or partially nonlegal character of many of the determinations involved in the preparation of the Official Statement dated December 19, 2007 (the "Official Statement") and because the information in the Official Statement under the headings "TIIE CERTIFICATES -Book-Entry-Only System," "TAXABLE STATUS OF THE CERTIFICATES," and "OTIIER 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 assume B-l ) ) ) 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 f aimess 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 "TIIE CERTIFICATES-Book-Entry-Only System," "TAXABLESTATUSOFTIIECERTIFICATES," and "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. RespectfuJ ly, B-2 ) ) ) ) EXHIBITC Proposed Form of Opinion of the City Attorney January 17, 2008 Morgan Stanley & Co. Incorporated 6300 Bridge Point Parkway, Suite 250 Austin, Texas 78730 RE: $11,805,000T AX AND W ATERW0RKSSYSTEMSURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2008 Ladies and Gentlemen: I am the City Attorney for the City of Lubbock, Texas (the "City") at the time of the issuance of the above referenced Certificates (the "Certificates"), pursuant to the provisions of the ordinance duly adopted by the City Council of the City on June 26, 2007 and as duly amended by the City Council of the City on December 13, 2007 (referred to herein collectively as the "Ordinance"). Capitalized terms not otherwise defined in this opinion have the meanings assigned in the Purchase Contract. In my capacity as City Attorney to the City, I have reviewed such agreements, documents, certificates, opinions, letters, and other papers as I have deemed necessary or appropriate in rendering the opinions set forth below. In making my review, I have assumed the authenticity of all documents and agreements submitted to me as originals, conformity to the originals of all documents and agreements submitted to me as certified or photostatic copies, the authenticity of the originals of such latter documents and agreements, and the accuracy of the statement contained in such documents. Based upon the foregoing, and subject to the qualifications and exceptions hereinafter set forth, I am of the opinion that under the applicable laws of the United States of America and the State of Texas in force and effect on the date hereof 1. Based on reasonable inquiry made of the responsible City employees and public officials, the City is not, to the best of my knowledge, in breach of or in default under any applicable law or administrative regulation of the State of Texas or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City is party or is otherwise subject and, to the best of my knowledge after due inquiry, no event has occurred and is continuing that, with the passage of ti me or the giving of notice, or both, would constitute such a default by the City under any of the foregoing; and the execution and delivery of the Purchase Contract, the Certificates, and the adoption of the Ordinance and compliance with the C-1 ) ) ) ) 2. 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 Certificates, or the levy, collection or application of the ad valorem taxes or the Pledged Revenues pledged or to be pledged to pay the principal of and interest on the Certificates; (c) contesting or affecting the validity or enforceability of the Certificates, the Ordinance or the Purchase Contract; ( d) contesting the powers of the City or any authority for the issuance of the Certificates, or the adoption of the Ordinance; or ( e) that would have a material and adverse effect on the financial condition of the City. 3. I have reviewed the information in the Official Statement contained under the caption "Other Information--Litigation" and such information in all material respects accurately and fairly summarizes the matters described therein. This opinion is furnished solely for your benefit and may be relied upon only by the addresses hereof or anyone to whom specific permission is given in writing by me. Very truly yours, C-2 ) ) ) REGISTERED No. 1 United States of America State of Texas County of Lubbock CITY OF LUBBOCK, TEXAS TAX AND WATER WORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION TAXABLE SERIES 2008 REGISTERED $4,620,000 INTEREST RA TE: MATURITY DA TE: CERTIFICATE DATE: CUSIP NUMBER: 5.250% February 15, 2018 December 15, 2~07 549187 6N7 The City of Lubbock (the .. City"), in the Cowity of~~ of Texas, for value received, hereby promises to pay to CEDE~,~ or registered assigns, on the Maturity D ·fi~' ~sum of FOUR MILLION ENTY THOUSAND DOLLARS unless this Certificate s~ een sooner called for redemption and the payment of the principal hereof shall hav · d or provided for, and to pay interest on such principal amount from the later of the 1ficate 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, 2008. 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 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 WATER WORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION TAXABLE SERIES 2008 REGISTERED $7,185,000 INTEREST RA TE: 6.250% MATURITY DATE: CUSIP NUMBER: February 15, 2027 SEVEN MILLION unless this Certificate shall ha 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, 2008. 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 Trust Company, National Association, or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this Certificate is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expenses of such customary banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Certificates, interest may be paid by wire transfer to the bank account of such Owner on file with ) ) \ ' the Paying Agent/Registrar. For the purpose of the payment of interest on this Certificate, the registered owner shall be the person in whose name this Certificate is registered at the close of business on the .. Record Date," which shall be the last business day of the month next preceding such interest payment date. 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 ~a nt shall be the next succeeding day that is not a Saturday, Sunday, legal hoh~· day on which banking institutions are required or authorized to close, and payment c all have the same force and effect as if made on the original date payment w e. This Certificate is one of a series rJ.f · cates specified in the title hereof issued in the aggregate princip un o ,000 (herein referred to as the "Certificates"), issued pursuant to a din the City (the .. Ordinance") for the purpose of paying contractual 1 o urred for authorized public improvements (collectively, the "Project'~ Ordinance, and to pay the contractual obligations for professional services s, financial advisors and other professionals in connection with the Project and the issu f e Certificates. The City has reserved the option to redeem the Certificates maturing on or after February 15, 2018, in whole or in part, before their respective scheduled maturity dates, on February 15, 2017, or on any date thereafter, at a price equal to the principal amount of the Certificates so called for redemption plus accrued interest to the date fixed for redemption. If less than all of the Certificates are to be redeemed, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot or other customary method that results in a random selection the Certificates, or portions thereof, within such maturity and in such principal amounts, for redemption. Certificates maturing on February 15 in each of the years 2018 and 2027 (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: -2- ) Tenn Certificates Maturing February 15, 2018 Redemption Date Principal Amount February 15, 2009 February 15, 2010 February 15, 2011 February 15, 2012 February 15, 2013 February 15, 2014 February 15, 2015 February 15, 2016 February 15, 2017 February 15, 2018 (maturity). p60,000 380,000 400,000 420,000 445,000 470, $ 615,000 655,000 695,000 740,000 790,000 840,000 890,000 950,000 1,010,000 The Paying Agent/Registrar will select by lot or by any other customary method that results in a random selection the specific Tenn 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. 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 Certificates to be redeemed in whole or in part. Notice having been so given, the Certificates or portions thereof designated for redemption shall become due and payable on the redemption date specified in such notice; from and after such date, notwithstanding that any of the Certificates or portions thereof so called for redemption shall not have been surrendered for payment, interest on such Certificates or portions thereof shall cease to accrue. -3- ) ) ) ) ) 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 redem.heduled to occur limitation shall not be applicable to an exchange by the e of the uncalled within forty-five (45) calendar days of the transfer or exchan~e t · ed, however, such principal balance of a Certificate. ~ The City, the Paying Agent/Registrar, I ay treat the person in whose name this Certificate is registered as the hereo o purpose of receiving payment as herein provided ( except interest shall , on in whose name this Certificate is registered on the Record Date)f o ;;. oses, whether or not this Certificate be contrary. overdue, and neither the cs· a gent/Registrar shall be affected by notice to the IT lS HEREBY CER D AND REClTED 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. -4- City Secretary, \,,, City of Lubbock, Texas .,._ ... ,. ~- [SEAL] \ ) . -5- ) ') ) ) ) \ 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. any, Dated: Authorized Signatory -6- ) ) ) ) ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or typewrite name, address and Zip Code of transferee): ______________ _ Dated: Signature Guaranteed By: Authorized Signatory Dallas 1353182v.1 -7- 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. \ ) STATEMENT OF INSURANCE Financial Security Assurance Inc. ("Financial delivered its municipal bond insurance policy wi principal of and interest on this Bond to Th Association, Dallas, Texas, or its succes Said Policy is on file and available a copy thereof may be obtained F ') "I ) \ FFSA MUNICIPAL BOND INSURANCE COMMITMENT FINANCIAL SECURITY ASSURANCE INC. {"Financial Security' or "FSA") hereby commits to issue its Municipal Bond Insurance Policy (the "Policy') relating to whole maturities of the debt obligations described in Exhibit A attached hereto (the "Bonds"), subject to the terms and conditions set forth in this Commitment, of which Commitment Exhibit A is an integrated part, or added hereto (the "Commitment'). To keep this Commitment in effect after the Expiration Date set forth in Exhibit A attached hereto, a request for renewal must be submitted to Financial Security prior to such Expiration Date. Financial Security reserves the right to refuse wholly or in part to grant a renewal. THE MUNICIPAL BOND INSURANCE POLICY SHALL BE ISSUED IF THE FOLLOWING CONDITIONS ARE SATISFIED: 1. The documents to be executed and delivered in connection with the issuance and sale of the Bonds shall not contain any untrue or mlsleading statement of a material fact and shall not fail to stale a material tact necessary in order lo make the information conlained therein not misleading. 2. No event shall occur which would permit any underwriter or purchaser of lhe Bonds, otherwise require<:!, not to be required lo underwrite or purchase the Bonds on the date scheduled for the issuance and delivery thereof ("Closfng Date"). 3. There shall be no material change in or affecting the Bonds (including, without limitation, the security for lhe Bonds) or the financing documents or lhe Official Statement (or any similar disclosure documents) to be executed and delivered in connection with the issuance and sale of the Bonds from the descriptions or forms thereof approved by Financial Security. 4. The Bonds sh.all contain no reference to Financial Security, lhe Policy or the insurance evidenced thereby except as may be approved by Financial Security. BOND PROOFS SHALL HAVE BEEN APPROVED BY FINANCIAL SECURITY PRIOR TO PRINTING. The Bonds shall bear a Statement of Insurance in lhe form provided by Financial Security. 5. Financial Security shall be provided with: (a) Executed copies of all financing documents, any d!sclosure document (the 'Official Statement') and the various legal opinions delivered In connection with the issuance and sale of 1he Bonds (which shall be dated the Closing Date and which, except for the opinions of counsel relating to the adequacy of disclosure, shall be addressed to Financial Security or accompanied by a letter of such counsel permitting Financial Seairity to rely on such opinion as if such opinion were addressed lo Financial Security), including, without limJtatlon, the approving opinion of bond counsel. Each of the foregoing shall be in fonn and substance acceptable lo Financial Security. Coples of all drafts of such documents prepared subsequent to the date of the Commitment Cblacklined to reflect all revisions from previously reviewed drafts) shall be furnished to Fmancial Security for review and approval. Final drafts of such documents shall be provided to Financial Security al least lhree (3) business days prior to the issuance of the Policy, unless Financial Security shall agree to some shorter period. (b) Evidence of wire transfer in federal funds of an amount equal to the insurance premium, unless alternative arrangements for the payment of such amount acceptable to Financial Security have been made prior to the delivery date of Iha Bonds. (c) Standard & Poor's Credit Marl!.et Services, Moody's Investors Service Inc. and Fitch IBCA, Inc. will separately present bil Is for lhei r respective fees relating to the Bonds. Payment of such bills by the Issuer should be made directly to such rating agency. Payment of the rating fee is not a condition to release of the Policy by Financial Security. 6. Promptly after the closing of the Bonds, Financial• Security shall receive lhree completed sets of executed documents (one original and either Q) two photocopies (each unbound) or (iij three compact discs). 7. The Official Statement shall contain the language provided by Financial Security and only such other references to Financial Security or otherwise as Financial Security shall supply or approve. FINANCIAL SECURITY SHALL BE PROVIDED WITH FOUR PRINTED COPIES OF THE OFFICIAL STATEMENT. '\ ' '\ EXHIBIT A TERM SHEET FOR MUNIClPAL BOND INSURANCE COMMITMENT Issuer: City of Lubbock, Texas Principal Amount of Bonds Insured: Not to Exceed $11,635,000 Name of Bonds Insured: Tai< and Waterworks System, Surplus Revenue Certificates of Obligation. Taxable Series 2007 Date of Commitment: December 11, 2007 Premium: .23% of total debt service on the Boods Insured Bond Counsel Opinion -Language Requirements: Expiration Date: Friday, February 15, 2ooa• The approving opinion of Bond Counsel shall Include language to the effect tt\at the Bonds are a full faith and credit obligatioo of the Issuer, the payment for which the Issuer is obligated to exercise its ad valorem taxing power, within the limits prescribed by law, upon all taxable property within the Issuer. FINANCIAL SECURITY ASSURANCE INC. Authorized Officer 'To keep the Commilment in effect to the Expiration Date set forth above, Financial Security must receive a duplicate of this Exhibit A executed by an authorized officer by the earlier ol lhe date on which the Offtclal Statement containing disclosure language about Financial Security is ci1C1Jlated and ten days from the Date of Commitment The undersigned agrees that it the Bonds are insured by a policy of municipal bond insurance, such insurance shall be provided by Financial Security In acoordance with the terms ol the Commllment. l:ILEGAL IMUNIS\STATES\TX\100809_C.doc i ) PROCEDURES FOR PREMIUM PAYMENT TO FINANCIAL SECURITY ASSURANCE INC. Financial Security's issuance of its municipal bond insurance policy at bond closing is contingent upon payment and receipt of the premium. NO POLICY MAY BE RELEASED UNTIL PAYMENT OF SUCH AMOUNT HAS BEEN CONFIRMED. Set forth below are the procedures to be followed for confim,ing the amount of the premium to be paid and for paying such amount: Confirmation of Amount to be Paid: Upon determination of the final debt service schedule, fax such schedule to Financial Security Attention: Michael Caldiero, Assistant Vice President Phone No.: (212) 339-3468 Fax No.: {212) 857-0313 Confirm with the Individual In our underwriting department that you are In agreement with respect to par and premium on the transaction prior to the closing date. Payment Date: Method of Payment: Date of Delivery of the insured bonds. Wire transfer of Federal Funds. Wire Transfer Instructions: Bank: ABA#: Acct. Name: Account No.: Transaction No.: The Bank of New York 021000018 Financial Security Assurance Inc. 8900297263 100809 CONFIRMATION OF PREMIUM WIRE NUMBER AT CLOSING Fmancial Security wHI accept as confirmation of the premium payment a wire trans1er number and the name of the sending bank, lo be communicated on the closing date to Audrey A. Udit, Paralegal. {212) 339-3548. ) "I .. ) I , ". ·..,, ' . '. ~ ~ .. >,. In the event the Insurer is unable to fulfill its contractual obligation under this policy or contract or application or certificate or evidence of coverage, the policyholder or certificateholder is not protected by an insurance guaranty fund or other solvency protection arrangement • SECURITY •, FINANCIAL l!l!l ASSURANCE® ISSUER: City of Lubbock, Texas BONDS: $11,805,000 in aggregate principal amount of Tax and Waterworks System, Surplus Revenue Certificates of Obligation, "Taxable Series 2008 MUNICIPAL BOND INSURANCE POLICY Policy No.: 209703-N Effective Date: January 17, 2008 Premium: $46,645.02 FINANCIAL SECURITY ASSU.RANCE INC. r'Financial -Security"), for consideration received, hereby UNCONDITIONA.LL Y AND IRREVOCABLY agrees to p;;iy to, the trustee (the "Trustee") or paying agent (the ''Paying Agent'') (as set' foith in the documentation providing fodhe issuance of and securing the Bonds)· for the Bond.s, fot th:e Qenefit ~f tl;le O-.ynerS1or; ,a~ t~e~~lectipr:i,of Fi1;1aoci_al Security, directly to each Owner, subject only to. the terms of this Poli~ (which includes each endorsement h"ereto), that pbrtiori of the prl'ncipal of and fnte~t ~oi:i'· the Bdnds fhfil '.~ha'II 'beboi'A'~.·Elue,for Payment but shalf,be uppaid by.reason of ~onpaymeryt by:th~ Issuer. . t , . \ , t' t . \ r' t· -. \ •, • >-' ...... _., ~-t.., ,:, .. • ,,. \ <' ... ' ~ . ! •.., I . -. i ,.,,,. • I ·• "'-~ .... .. ' ... : : -,., I .. ' i· ·.,...,. • ~.\; • !,~ •· : A. \ :::·. ( ~ ·,., -: \ ·•, . ·•, ~ ., . ;-... ' .-, ., '. I I• ~ Page 2 of 2 Policy No. 209703-N United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final. nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to Financial Security which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. Financial Security may appoint a fiscal agent (the "Insurer's Fiscal Agenr) for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the lrJsure,r"s. Fiscal Agent. From and after the date of recFiP.t of su~h notice by the Trustee and the Paying Agenr (a) copies of all notices required to be delivered to Financial Security pursuant to this Policy shall be, simultaneously delivered to the Insurer's Fiscal Agent 'l!nd to Financial Security and shall not be deemed re~eived until_ received by b_oth and (~) all_ pay!llents, ~quired to be rr.ade by Financial Security under-thts Policy may be made directly by FinanGial' Securify or by the Insurer's Fiscal Agent on•behalf (?f fina11,eia1.~e~urity,. The Insurer'~ Fi~~I Ag~ntA th~ ag~nt o(Financial Security _only and the Insurer's f;iscal Ager.it shall m no event be hable to any pwner for·any act of the Insurer's Fiscal Agent or any'failure of Financial Security to deposit or cause·to""b'e deposited sufficient funds to make payments due.u"de_r thit\~lirY· , To the full es< extent permitted by applicable law;, Financial Security agrees 1101 to assert, and hereby waives, onlt for t1;1e .i:,~nefit of each ,Owner, all rights (wn!=!t!:ier, by c_ou_nterclaim, setoff or otherwise) and defenses (inclading, without limitation, the clefense of frauoJ, whether acquired by subrogation, assignment or dtilerwi~ •. to\.tiie"•e.xtent that such rights,and"defens)!s•i may; 6e available lo Fih.ancial Securi_ty to avoidipayment of jts obligf:!tion~ under this PoUcy .in ,accorda_ni?e witp the eXPress provision~ of this Policy_ ' . · · · · • l • ' . t _ , !~is ~qJ~qy ~Is, !ort~ i[l fpll ~h~ 1.:1ndertaking. of_ ~in_:ir:i~_ial Sec~ri!Y, ,~d ;h~!I, n<lt be modifi_ed, ' a!lerei:I or affected"DY any'~ther agreement or instrument\ mdodingrsl\y, mbruffcatron or amendment therefo. , exc'!;!pq!~. ~e te~et)t ~XP,{~s!y ·1J10.difie;d b,y af!-.eqdq~eri\ertt<M~t(!.;fa);, any premium P.ai~ in r~s;iect of ~hi~ Pel& js ~.orir~fu.P.d~~le ~r a~y ~~~i;;on ~tl_c!.l~o~v~r, µ,cf~.dlng payf!1~nt, or provision b~ing made ttor· paymehl·, 1of tlie'.:Bonds .pnor to l matunty, .and' (l:i)-. ih1~·P0lity 1m1iyindt l,;a tcanceled or rel/ol<ed. ~~~c;r6~i i~~~t~~ii~:~J·~lJr;o~~?~:i;a:Jtl~t~ ~ IN~U~CE SECURITY F4ND . • ~ :. \ '" ~ ,· ,. ~ I \ \ • ,; j \ • • : •; .. , , · Jn,willl~,~ "."tteseot, F.!~ANQIA\-SEPURI~ h$$URANyE!JijC~ ha&.ca,used this Policy to be executed on its 6ettalf by its Aulhorized Officer. • · . ~ -'., \: :: ., ., .:~ ! .. -· ·., ' .. ~ ·f ~:. '··. ~ ,! • • .. • • ., J t---• t .. ,., • , • ;_ ·-; ·~ ~-.. r·. ' • \-1.,. ·i ~ •, A su1'sidiaiy of FiRancial Security A~surance Holdings ltd. 31 West 52nd Stre.et, New York, N.Y. 10019 ' • "I I • • • \• • • ~ !. ,. .... ~ Folm\500NY (5190) , · ..._ ' t ., ,.· ' . ; . ' -r-'. • '~ I ' ·; \ .: ·f ' ' . .. ' t ' ' ' i ,-f (212) 826-0100 .. ) '\ GENERAL CERTIFICATE We, the undersigned, Mayor, City Secretary and Chief Financial Officer, respectively, of the City of Lubbock, Texas (the "City"), do hereby certify the following information: 1. lbis certificate relates to the City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 (the "Certificates''). Capitalized terms used herein and not otherwise defined shall have the meaning assigned thereto in the ordinance (the "Ordinance") of the City Council authorizing the issuance of the Certificates. 2. The total tax supported debt of the City, after giving effect to the issuance of the proposed Certificates, is $524,055,000 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 2007, being its latest approved official assessment rolls is $10,897,210,563, 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 Certificates and all other outstanding indebtedness of the City payable from ad valorem taxes is set forth in the table entitled "General Obligation Debt Service Requirements" of the City's Official Statement 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: David A. Miller, Mayor Jim Gilbreath, Mayor Pro Tern Lee Ann Dumbauld, City Manager Jeffrey A. Yates, Chief Financial Officer Rebecca Garza, City Secretary Tommy Combs, Deputy City Secretary Linda Deleon ) Floyd Price ) Todd R. Klein ) Phyllis S. Jones ) John Leonard ) ) Members of the Council 7. No litigation of any nature has been filed or is now pending to restrain or enjoin the issuance or delivery of the Certificates or which would affect the provisions made for their payment or security, or in any manner questioning the proceedings or authority concerning the issuance of the Certificates, and so far as we know and believe, no such litigation is threatened. LUB20M 10009 Dallas 1345881 v. 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 Certificates have been repealed, revoked or rescinded. 9. There has not been filed or presented to the City Secretary or the City Council any petition protesting, challenging or otherwise questioning the issuance of the Certificates. 10. The Ordinance was duly adopted by the City Council on June 26, 2007. 11. The City has appropriated an amount of presently and lawfully available funds of the City which will be sufficient to pay debt service on the Certificates on February 15, 2008, and such appropriated amount will be deposited to the Interest and Sinking Fund created for the Certificates. 12. A true and correct statement of the revenues and expenses of the Waterworks System for fiscal years 2004, 2005 and 2006, together with a true and correct statement of current rates and charges for the services of the System, is attached hereto as Exhibit A. 13. Except for the pledge of income and revenues of the System to the payment of: (i) water supply contracts with the Canadian River Municipal Water Authority, (ii) the Certificates, and (ii) the 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. 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 Certificates (the "Official Statement"), and any addenda, supplement or amendment with respect to such descriptions or statements thereto, on the date of such Official Statement, on the date of sale of the Certificates and on the date of the delivery, were and are true and correct in all material respects. 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 circumstances under which they were made, not misleading. 1 7. Insofar as the descriptions and statements, including financial data, of or pertaining to entities other than the City and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the City believes to be reliable and the City has no reason to believe that they are untrue in any material respect. 18. There has been no material adverse change in the financial condition and affairs of the City since the date of the Official Statement. -2- Dallas 1345881 v.l ) ' ; 1 '\ ) ..., 19. The undersigned Mayor and City Secretary officially executed and signed the Obligations, including the Initial Certificate delivered to the initial purchasers of the Certificates, by manually executing the Certificates or by causing facsimiles of our manual signatures to be imprinted or copied on each of the Certificates, and we hereby adopt said manual or facsimile signatures as our own, respectively, and declare that said facsimile signatures constitute our signatures the same as ifwe had manually signed each of the Certificates. 20. The Certificates, including the Initial Certificates delivered to the initial purchasers of the Certificates, are substantially in the fonn, and have been duly executed and signed in the manner, prescribed in the Ordinances. 21. At the time we so executed and signed the Certificates we were, and at the time of executing this certificate we are, the duly chosen, qualified, and acting officers indicated therein, and authorized to execute the same. 22. We have caused the official seal of the City to be impressed, or printed, or copied on each of the Certificates; and said seal on the Certificates has been duly adopted as, and is hereby declared to be, the official seal of the City. [EXECUTION PAGE FOLLOWS] -3- Dallas 1345881v. I "\ EXECUTED AND DELIVERED this __ __,J~A.::..:N:....:l=--7.,_· -=-20=0"'""8 ----' MANUAL SIGNA TlJRE OFFICIAL TITLES Mayor, City of Lubbock, Texas , STATE OF TEXAS § ... ) ') § COUNTY OF LUBBOCK § Before me, the undersigned authority, on this day personally appeared David A. Miller, 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 TlliS 3111. i9!J 4 M ,,200g Notary Publ4"' In and for the State of Texas [SEAL] Signature Page for General Certificate Dallas 134588/v.l ..., 1 ' I EXECUTED AND DELNERED this JAN 1 7 2008 MANUAL SIGNATURE OFFICIAL TITLES STATE OF TEXAS § § COUNTY OF LUBBOCK § Chief Financial Officer, City of Lubbock, Texas Before me, the undersigned authority, on this day personally appeared Jeffrey A. Yates, 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 alit ~ ~ ~ J.ot l NotaryPubli In and for the State of Texas [SEAL] -- Signature Page for General Certificate Dallas 1345881 v. l ) EXECUTED AND DELIVERED this ___ JA_N_l_7_2_00_8_____, MANUAL SIGNATURE STATE OF TEXAS § § COUNTY OF LUBBOCK § OFFICIAL TITLES City S~cretary, 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. Yd T GIVEN UNDER MY HAND AND SEAL OF OFFICE THIS .3 -day {)£ J4m,gr~ ),,008 . ~.~~:y~ ... \_ LINDA B HART .:_ l Notary Pub6c, State of Texas ~ii,·,a My Commission Expires ,.,... June 30, 2011 Notary Public, In and for the State of Texas ) [SEAL] Signature Page for General Certificate Dallas 1345881 v. l ) .., ) EXHIBIT A City of Lubbock, TX Flnaace Dcpanmeot Coadllalag Dfsclcr.nare Report Flscal Year Ended September 30, 2006 Table 18-Waterworks System. Con.dellSed Ststemellt of Operations 2006 Fiscal Year Ended ~ember 3~ 2005 2004 2003 REVENUE OpcntingR.evcues S 37,330,953 33,306,786 31,907,893 32,770,781 N~g R.cwnues 1~7~056 8831824 5l914ll 1~37~30 ·0rqss Revenues 39.009,009 34,190,610 32,447,306 34,108,111 EXP~, . .Opaatmg Expc:mc: (ll 20.720,39.S 17,619,668 20.550.379 20.137.44& Net Rtva!.ucs S 18.28&,614 16.S'm.942 11.896.927 13,97&66l Nuqlbcr of Water Meters 77,147 15,816 72,500 72.SOS 2002 32,727)07 1~13.649 34,040,856 19.596.079 14,444.777 71,009 cu ~ ~ illclada amlnlCtiDa Rp&yml:llt -111d opntioa m" m~ncz dlarp paid ID C'3lladim lliTer M=icipil W'ltttr ~ 1.11d ~lqi.o.:lltfl:aaac:apilale1pc••1es. , , ) ) ) ) ) Exhibit B Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2007A, dated August 15, 2007, issued in the original principal amount of $60,820,000 Tax and Waterworks 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 Suiplus 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 Wateiworks 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 amowit of$24,800,000 Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 1999, dated April 1, 1999, issued in the original principal amount of $12,300,000 Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1999, dated January 15, 1999, issued in the original principal amount of$15,355,000 Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1998, dated October 1, 1998, issued in the original principal amount of $10,260,000 Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1993, dated October 1, 1993, issued in the original principal amount of $1,470,000 B-1 Dallas 134588Jv.l ) .. ) "\ The Attorney General of Texas William P. Clements Building 300 West 15th Street, 9th Floor Austin, Texas 78701 Attention: Public Finance Division Comptroller of Public Accounts Thomas Jefferson Rusk Building 208 East 10th Street, Room 448 Austin, Texas 78701-2407 City of Lubbock, Texas December 20, 2007 Attention: Economic Analysis Center Re: City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 (the "Certificates") To the Attorney General: The executed Initial Certificate for the captioned series has been or soon will be delivered to you for examination and approval. In connection therewith, enclosed is a General Certificate executed and completed except as to date. When the Initial Certificate has 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 Certificate to the Comptroller. Should litigation in any way affecting such Certificate 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 Certificate is finally approved by you, unless you have been advised otherwise. To the Comptroller: The approved Initial Certificate for the captioned series of Certificates will be delivered to you by the Attorney General of Texas. You are hereby requested to register the Initial Certificate as required by law and by the proceedings authorizing such Initial Certificate. Following registration, you are hereby authorized and directed to notify and deliver the Initial Certificate to Vinson & Elkins L.L.P., Dallas, Texas, which has been instructed to pick up same at your office. LUB200nl009 Dall~ 1345892v. l ' ) Please also deliver to 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. UJB200nt009 Dallas 1345892v.1 Very truly yours, CITY OF LUBBOCK, TEXAS By: -2- RECEIPT AND CERTIFICATE OF DELIVERY OF PA YING/ AGENT REGISTRAR The undersigned, authorized representative of The Bank of New York Trust Company, National Association, as Paying Agent/Registrar, hereby makes the following acknowledgments and certifications in connection with the issuance and delivery of $11,805,000 principal amount of City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of ) Obligation, Taxable Series 2008 (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 (i) $11,594,468.52 from Morgan Stanley (the "Underwriter"), representing the principal amount of the Certificates plus accrued interest of $61,476.67 and less a net discount of $185,703.00 and less underwriters' discount of $86,305.15. 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. 4. Certifies that the Initial Certificate for the Certificates, registered by the Comptroller of Public Accounts of the State of Texas and representing the aggregate principal amount of the Certificates, was delivered to or upon order of the Underwriter and was duly canceled this date upon delivery of the definitive Certificates to the Underwriter through The Depository Trust Company. DATED:~ 2008. THE BANK OF NEW YORK TRUST COMP ANY, NATIONAL ASSOCIATION, ;;:~ngA:p;;•~ VICE PRESIDENT ) Financial Security Assurance, Inc 31 West 52nd Street New York, NY 10019 To Whom It May Concern: Moody's Corporation 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 January 16, 2008 Moody's Investors Service has assigned the rating of Aaa to the $11,805,000.00, City of Lubbock, Texas -Tax and Waterworks System, Surplus Revenue Certificates of Obligation, Taxable Series 2008, dated December 15, 2007 which sold through negotiation on December 18, 2007, insured by Financial Security Assurance, Inc (Policy No. 209703-N). The rating is the highest of {i) the guarantor's financial strength rating, (ii) any published underlying rating on the security, or (iii) any published enhanced rating based on a state credit enhancement program. Should you have any questions regarding the above, please do not hesitate to contact Karen Malkowski at (201) 395-6370. Sincerely yours, Joann Hempel Vice President / Senior Credit Officer JH/TM ) "\ .., STANDARD &POOlfS January l 5, 2008 Financial Security Assurance Inc Financial Guaranty Group 31 West 52nd Street New York, NY 10019 Attention: Mr. Richard Bauerfeld, Managing Director 55 Watar S1Net, 38th Floor New Y°", NY 10041,0003 tal 212 43S-207 4 reference no.: 837264 Re: $11,805,000 City of Lubbock, Texas, Tax and Waterworks System, Surplus Revenue Certificates of Obligation, Taxable Series 2008, dated: December 15, 2007, Term Certificates due: February 15, 2018, February 15, 2027, (POLICY#20970J..N) Dear Mr. Bauerfeld: Standard & Poor's has reviewed the rating on the above-referenced obligations. After such review, we have changed the rating to "AAA" from "AA". The rating reflects our assessment of the likelihood of repayment of principal and interest based on the bond insurance policy your company is providing. Therefore, rating adjustments may result from changes in the financial position of your company or from alterations in the documents governing the issue. The rating is not investment, financial, or other advice and you should not and cannot rely upon the rating as such. The rating is based on information supplied to us by you but does not represent an audit. We undertake no duty of due diligence or independent verification of any information. The assignment of a rating does not create a fiduciaiy relationship between us and you or between us and other recipients of the rating. We have not consented to and will not consent to being named an "expert" under the applicable securities laws, including without limitation, Section 7 of the Securities Act of 1933. The rating is not a "market rating" nor is it a recommendation to buy, hold, or sell the obligations. This letter constitutes Standard & Poor's pennission to you to disseminate the above-assigned rating to interested parties. Standard & Poor's reserves the right to inform its own clients, subscribers, and the public of the rating. Standard & Poor' s relies on the issuer and its counsel, accountants, and other experts for the accuracy and completeness of the information submitted in connection with the rating. This rating is based on financial information and documents we received prior to the issuance of this letter. Standard & Poor's assumes that the documents you have provided to us are final. If any subsequent changes were made in the final documents, you must notify us of such changes by sending us the revised final documents with the changes clearly marked. sr-\.NUAi{D & Pi)(.lH.'S ... ) j ., Mr. Richard Bauerfeld Page2 January 15, 2008 Standard & Poor's is pleased to be of service to you. For more information please visit our website at www.standardandpoors.com. Ifwe can be of help in any other way, please contact us. Thank you for choosing Standard & Poor's and we look forward to working with you again. Sincerely yours, Standard & Poor's Ratings Services a division of The McGraw-Hill Companies, Inc. ~~~~/II)!) ak S"iA~D:\lW 0.POCR·s .., January 14, 2008 Mr. Jeffrey A Yatas Chier Financial Officer Lubbock P.O. E)ox 2000 Lubboci<. TX 79457 Dear Mr. Yates: Fitch Ratings One St11t~ S,re.it Pla;,i New Yor~, NY lOCo-1 T 212 908 0500 f 800 75 flTCH wm,.f;tc11,a11ngi.c0m Fltcil Ratings has assigned ooe or more ratings and/or otherwise taken rating action(s), as detailed on lhe attached Notice ol Rating Ac11on. RaUng& assigned by Filch are ba$ed on documents and information provided to u& by isSuers. obrigors. and/or «heir expert& and agents, and are subject to receipt of the final closing .documents. Fitch does not audit or verify the tMh or accuracy of such Information. Ratings ere not a re.:x>mmenda1ion or $uggeslion, directly or Jndirec;Uy. to you or any other per.son, lo buy, sell, make or hold any Investment, Joan or security or to undertalle any lnwstment stllJtegy with respect to any investment. loan or security or any Issuer. Ratings do not eommant on !he adequacy of martel price, the suitability of any Investment, Joan or security for a particular Investor {including Without limltatlon. any aocounti119 and/or regulatory trealment), or the tax-exempt nature or taxabllity of payments madam re:.pect of any investment. loan or securtty. F'rtch Is not your adVisor, nor is Frtch plOlliding to you or any oUler party any ftnaneial advice, or any legal, auditlfl9, ac001.1nting, appraisal. valuation or actuarial servloos. A rating should not be viewed as a replacement for sud! advice or seNloes. It is important that Fitch be provided with all lnfonnation that may be material to 116 ratings so lhat they oontinue to .iccuratsly reflecl the stallls of the rated issues. Ratings may be Changed, Withdrawn, SU$pended Of placed on Rating watch due to changes in. additions to or the inadequacy of infonnation. Ratings all! not recommendatlOns to buy, sell or hold securities. Ratings do not comment on the adequac;y of market price, the suitability of any security for a partit:1.1lar investor. or tile tax-exempt nature or taQb•lty af payments made in respei;t of any security. The assignment of a rallng by Fitch shall not constitute a consent by Fitch to use its name as an expert In connection with any registration statement or other flling under U.S .• U.K. or any other relevant securtlies laws. We are ple-ased !o heve had the opportunity to be or service to you. If we can be of fl.lrther autslance, plea68 feel free to contact us 81 any time. OTVjh Enc: Notice of Rating Action (0oc IO: 97306) Sincer~ly . • ~~:-.:-:.;::_::.:.::_~......._-2 __ ).!_;· .. ~. c .~-=·· .. ····~ Oavld lltvack Managlng Director U.S. Public Fll'\Bnce Notice of Rating Action Outl<lok/ Bond Oeacriplion RetingType ~ !!!!!!i Wateh ~ Noles Lubbock (TX) tax & \'ltlWks ~s surpl,s rev Cits of Oblig Long Term NewRa5ng AA RO:Sta 14.Jan-2008 ser 200a (taxable) wbbock CTX) GO bQnds Long Term Alllrmed AA RO:Sta 14-Jan-2008 Lubbock (lX) COs Long Te,m Affirmed AA RO:Sta 14-Jan-2008 Key: RO: Rating Outlook, RW: Rating Watcn: PO$: Pos~i\/11, Nag: NegaliVe, Sta: Stable, Evo: EvoMng ' "'I ..., (Doc ID: 97306) Page 1 of 1 DISCLOSURE, NO DEFAULT AND TAX CERTIFICATE OF FINANCIAL SECURITY ASSURANCE INC. The undersigned hereby certifies on behalf of Financial Security Assurance Inc. ('Financial Security"), in connection with the issuance by Financial Security of its Policy No. 209703-N (the 'Policy') in respect of the $11,805,000 in aggregate principal amount of City of Lubbock, Texas Tax and Waterworks System, Surplus Revenue Certificates of Obligation, Taxable Series 2008 (the "Bonds') that: (i) the information set forth under the caption "BOND INSURANCE -Financial Security Assurance Inc." in the official statement dated December 19, 2007, relating to the Bonds is true and correct, (ii) Financial Security is not currently in default nor has Financial Security ever been in default under any policy or obligation guaranteeing the payment al principal of or interest on an obligation, (iii) the Policy is an unconditional and recourse obligation of Financial Security (enforceable by or on behaH of the holders of the Bonds) to pay the scheduled principal of and interest on the Bonds in the event of Nonpayment by the Issuer (as set forth in the Policy), (iv) the insurance premium of $46,645.02 (the 'Premium") is a charge for the transfer of credit risk and was determined in arm's length negotiations and is required to be paid to Financial Security as a condition to the issuance of the Policy, (v) no portion of such Premium represents an indirect payment of costs of issuance, including rating agency fees, other than lees paid by Financial Security to maintain its ratings, which, together with all other overhead expenses of Financial Security, are taken into account in the fom,ulation al its rate structure, or for the provision of additional services by us, nor the direct or indirect payment for a cost, risk or other element that is not customarily borne by insurers of tax-exempt bonds (in transactions in which the guarantor has no involvement other than as a guarantor), (vi) Financial Security is not providing any services in connection with the Bonds other than providing the Policy, and except for the Premium, Financial Security will not use any portion of the Bond proceeds, (vii) except for payments under the Policy in the case of Nonpayment by the Issuer, there is no obligation to pay any amount of principal or interest on the Bonds by Financial Security, (viii) Financial Security does not expect that a claim will be made on the Policy, (ix) the Issuer is not entitled to a refund of the premium for the Policy in the event a Bond is retired before the final maturity date, and (x) for Bonds which are secured by a debt service reserve, Financial Security would not have issued the Policy unless the authorizing or security agreement for the Bonds provided for a debt service reserve account or fund funded and maintained in an amount at least equal to, as al any particular date of computation, the reserve requirement as set forth in such agreement. Financial Security makes no representation as to the nature of the interest to be paid on the Bonds or the treatment of the Policy under Section 1.148-4(1) of the Income Tax Regulations. FINANCIAL SECURITY ASSURANCE INC. ~~-By:------------- Authorized Officer Dated: January 17, 2008 .., "I J ) CERTIFICATE PURSUANT TO PURCHASE CONTRACT We, the undersigned officials of the City of Lubbock, Texas (the "Issuer"), acting in our official capacity, in connection with the issuance and delivery by the Issuer of its City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 (the "Certificates") hereby certify that: 1. This Certificate is delivered pursuant to the Purchase Contract, dated December 19, 2007 (the "Purchase Contract"), between the Issuer and Morgan Stanley (the "Underwriter"). 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 Pledged Revenues pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof, or in any way contesting or affecting the validity of the Certificates or the Ordinance or contesting the powers of the City or the authorization of the Certificates or the Ordinance, or contesting in any way the accuracy, completeness or fairness of the Official Statement. 4. To the best of our knowledge, no event affecting the City has occurred since the date of the Official Statement that should be disclosed in the Official Statement for the purpose for which it is to be used or that it is necessary to disclose therein in order to make the statements and information therein not misleading in any respect. 5. There has not been any material and adverse change in the affairs or financial condition of the City since September 30, 2006, the latest date as to which audited financial information is available. WB200nt009 Dallas l346328v.l ., DATED: ___ ~_N_l_7_20_08_ Mayor City of Lubbock, Texas "'\ .... j Sign.ature Page for Certificate Pursuant to Purchase Contract "\ ; 1 Vinson&Elkins January 17, 2008 $11,805,000 CITY OF LUBBOC~ TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION TAXABLE SERIES 2008 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. TAXABLE SERIES 2008, dated December 15. 2007. issued in the principal amount of $11,805,000. 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 treatment of interest on the Certificates for federal income tax purposes. We have not investigated or verified original proceedings, records, data or other material, but have relied solely upon the transcript of proceedings described in the following paragraph. We have not assumed any responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in connection with the sale of the Certificates. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Certificates has been limited as described therein. IN OUR CAP A CITY as Bond Counsel, we have participated in the preparation of and have examined a transcript of certified proceedings pertaining to the Certificates, on which we have relied in giving our opinion. The transcript contains certified copies of certain proceedings Vinson & Elkins LLP Attorneys at Law Austin Beijing Dallas Dubai Houston London Moscow New Yor1< Tokyo Washington Da1\as I 353704v.1 Trammell Crow Center, 2001 Ross Avenue, Suite 3700 Dallas, Texas 75201-2975 Tel 214.220.7700 Fax 214.220.7716 www.velaw.com j ) V&E 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. I of this issue. BASED ON SUCH EXAMINATION, IT IS OUR OPINION THAT: (A) The transcript of certified proceedings evidences complete legal authority for the issuance of the 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: Interest on the Certificates is not excludable from gross income for federal income tax purposes under existing law. Except as stated above, we express no op1mon as to any federal, state or local tax consequences resulting from the acquisition, ownership or disposition of, or receipt or accrual of 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. -2- Dallas 1353704v. l ' Vinson&Elkins January 17, 2008 City of Lubbock, Texas P .0. Box 2000 Lubbock, Texas 79457 Morgan Stanley & Co. Incorporated 6300 Bridge Point Parkway, Suite 250 Austin, Texas 78730 Re: City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 Ladies and Gentlemen: We have served as Bond Counsel to the City of Lubbock, Texas (the "Issuer") in connection with the issuance of its $11,805,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 (the "Certificates"), issued pursuant to the provisions of an ordinance duly adopted by the City Council of the Issuer on June 26, 2007, as amended on December 13, 2007 (the "Ordinance"). This opinion is delivered pursuant to the provisions of Section 8(e)(7) 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 December I 9, 2007 (the "Purchase Contract") between the Issuer and the Underwriter named in such Purchase Contract; (c) a copy of the Pricing Certificate, dated December 19, 2007; (d) a copy of the Official Statement dated December 19, 2007; 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, confonnity to the originals of all documents and agreements Vinson & Elkins LLP Attorneys at Law Austin Beijing Oallas Dubai Houston London Moscow NewYor1< Tokyo Washington Trammell Crow Center, 2001 Ross Avenue, Suite 3700 Dallas, Texas 75201·2975 Tel 214.220.7700 Fax 214.220.7716 www.velaw.com ) 1 "\ V&E submitted to us as certified or photostatic copies, the authenticity of the originals of such latter documents and agreements, and the accuracy of the statements contained in such documents. Based upon the foregoing, and subject to the qualifications and exceptions hereinafter set forth, we are of the opinion that under the applicable laws of the United States of America and the State of Texas in force and effect on the date hereof: 1. The Certificates are exempted securities under the Securities Act of 1933, as amended (the "1933 Act") and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and it is not necessary in connection with the offering and sale of the Certificates to register the Certificates under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act. 2. 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 Certificates" (except for the subcaption "Book-Entry-Only System") and "Taxable Status of the Certificates" 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 instrwnents therein described and, with respect to the Certificates, such infonnation conforms to the Ordinance. 3. The Purchase Contract has been duly authorized, executed and delivered by the City and (assuming due authorization by the Underwriter) constitutes a binding and enforceable agreement of the City in accordance with its terms. The addressees may rely on our opinion, dated as of the date hereof, delivered in connection with the issuance of the Certificates to the same extent as if such opinion were specifically addressed to them. This opinion is furnished solely for your benefit and may be relied upon only by the addressees hereof or anyone to whom specific permission is given in writing by us. Very truly yours, -2- Dallas l 353924v.1 ' .., , 717 NORTH HARWOOD SUITE 900 DALLAS, TEXAS 75.201-6587 TELEPHONE: 2:(4 764 .. 9200 FACSIMILE: 214 754-9250 LAW OFFICES M~CALL, PARKHURST & HORTON L.L.P. 700 N. ST. MARY'S STREET SUITE 15.25 SAN ANTONIO, TEXAS 78.205-3503 TELEP~ON~: 210 Z25·2SOO F.-.CSIMILE: 2:10 Z2:S-c?984 January 17, 2008 Morgan Stanley & Co. Incoiporated 6300 Bridge Point Parkway, Suite 250 Austin, Texas 78730 600 CONGRESS AVENUE SUITE !800 AUSTIN, TO<AS 78701-3248 TELEPHONE: S12 479.3905 FACS1MILE: S1.2 472 .. oa?I RE: $11,805,000 TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2008 Ladies and Gentlemen: We have acted as counsel for you as the underwriters of the Certificates described above, issued under and pursuant to an Ordinance of the City of Lubbock, Texas (the "Issuer"), authorizing the issuance of the Certificates, which Certificates you are purchasing pursuant to a Purchase Contract, dated December 19, 2007. All capitalized undefined terms used herein shall have the meaning set forth in the Purchase Contract. In connection with this opinion letter, we have considered such matters of law and of fact, and have relied upon such Certificates and other information furnished to us, as we have deemed appropriate as a basis for our opinion set forth below. We are not expressing any opinion or views herein on the authorization, issuance, delivery, validity of the Certificates and we have assumed, but not independently verified, that the signatures on all documents and Certificates that we have examined are genuine. Based on and subject to the foregoing, we are of the opinion that, under existing laws, the Certificates are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as amended. ) ) ..., Because the primary purpose of our professional engagement as your counsel was not to establish factual matters, and because of the wholly or partially nonlegal character of many of the determinations involved in the preparation of the Official Statement dated December 19, 2007 (the "Official Statement") and because the information in the Official Statement under the headings "THE CERTIFICATES -Book-Entry-Only System," "TAXABLE STATUS OF THE CERTIFICATES," and "OTHER JNFORMA TION -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 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 CERTIFICATES -Book-Entry-Only System," "TAXABLE STATUS OF THE CERTIFICATES," and "OTHER INFORMATION -Continuing Disclosure oflnformation -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, ) 0 :c;:, I - ATTORNEY GENERAL OF TEXAS GREG ABBOTT January 15, 2008 THIS IS TO CERTIFY that the City of Lubbock Texas (the "Issuer"), has submitted to me City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificate of Obligation. Taxable Series 2008 (the 11Certificate"), in the principal amount of $11,805,000, for approval. The Certificate is dated December 15, 2007, numbered T-1, and was authorized by Ordinances of the Issuer passed on June 26, 2007 and December 14, 2007 (collectively, the "Ordinance"). I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. I express no opinion relating to the official statement or any other offering material relating to the Certificate. 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): No. 47385 (1) The Certificate has been issued in accordance with law and is a valid and binding obligation of the Issuer. (2) The Certificate is payable from the proceeds of an annual ad valorem tax levied, upon all taxable property in the Issuer, within the limit prescribed by law, and, by a pledge of the Surplus Revenues of the Issuer's Waterworks System, not to exceed $1,000. Therefore, the Certificate is approved. Book Ne. 2008-A JCH POST OFFICE Box 12548, AUSTIN, TEXAS 78711-2548 TEL:(512)463-2100 WWW.DAG.STATE.TX-US An Equal Employment Opportu11itJ Employer • Print<d •• Ruydrd Papa ; ) ) OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Meljssa Mora, D Bond Clerk IB] Assistant Bond Clerk in the office of the Comptroller of the State of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 15th day of January 2008, I signed the name of the Comptroller to the certificate of registration endorsed upon the: City of Lubbock. Texas Tax and Waterworks System Surplus Revenue Certificate of Obligation. Series 2008, numbered T-1, dated D ember 15 2007, and that in signing the certificate of registration I used the following signature: I, Susan Combs, Comptroller of Public Accounts of the State of Texas, certify that the person who has signed the above certificate was duly designated and appointed by me under authority vested in me by Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller. under Registration Number 73846. GIVEN under my hand and seal of office at Austin, Texas, this the 15th day of January, 2008. SUSAN COMBS Comptroller of Public Accounts of the State of Texas "\ OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, SUSAN COMBS, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificate of Obligation. Series 2008 numbered T-1. of the denomination of$ 11,805,000, dated December 15, 2007, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 15th day of January, 2008, under Registration Number 73846. Given under my hand and seal of office, at Austin, Texas, the 15th day of January. 2008. SUSAN COMBS Comptroller of Public Accounts . of the State of Texas ) ) '\ ) FFSA A De:ri.a O}mptmy January 17, 2008 Municipal Bond Insurance Policy No. 209703::N With Respect to $11,805.000 In Aggregate Principal Amount of City of Lubbock, Texas Tax and Waterworks System. Sumlus Revenue Certificates of Obligation, Taxable Series 2008 Ladies and Gentlemen: I am Associate General Counsel of Financial SeCIJrity Assurance Inc., a New York stock insurance company ('Financial Security'). You have requested my opinion in such capacity as to the matters set forth below in connection with the issuance by Financial Security of its above-referenced policy (the "Policy'). In that regard, and for purposes of this opinion, I have examined such corporate records, documents and proceedings as I have deemed necessary and appropriate. Based upon the foregoing, I am of the opinion that: 1. Financial Security is a stock insurance company duly organized and validly existing under the laws of the State of New York and authorized to transact financial guaranty insurance business therein. 2. The Policy has been duly authorized, executed and delivered by Financial Security. 3. The Policy constitutes the valid and binding obligation of Financial Security, enforceable in accordance with its tenns, subject, as to the enforcement of remedies, to bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other similar laws affecting the enforceability of creditors' rights generally applicable in the event of the bankruptcy or insolvency of Financial Security and to the application of general principles of equity. In addition, please be advised that I have reviewed the description of the Policy under the caption "BOND INSURANCE -Bond Insurance Policy' in the official statement relating to the above-referenced Bonds dated December 19, 2007 (the "Official Statement"). There has not come to my attention any information which would cause me to believe that the description ol the Policy referred to above, as of the date of the Official Statement or as of the date of this opinion, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Please be advised that I express no opinion with respect to any information contained in, referred lo or omitted from under the caption 'BOND INSURANCE -Financial Security Assurance Inc.• f am a member of the Bar of the State of New York, and do not express any opinion as to any law other than the laws of the State of New York. City of Lubbock, Texas, 1625 13th Street, wbbock, Texas 79457--0001. Morgan Stanley & Co., Inc., as Representative of the Underwriters, 6300 Bridge Point Parkway, Suite 250, Austin, Texas 78730. Financial Seearity Anurance 3l West 52nd Street· New York, New York 10019 • Tel: zu.826.0100 • Fax: :m.688-3101 Ne-w Yo*. Dallas • San Francisco • London • l!Sadrid • Paris •Singapore· Sydney• Tokyo Very truly yours, ~~ Associate General Counsel ) ') ) ) Vinson&Elkins January 17, 2008 Financial Security Assurance Inc. 31 West 52nd Street New York, New York 10019 Re: City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Taxable Series 2008 Ladies and Gentlemen: You are hereby authorized to rely on our opinion dated the date hereof and delivered in connection with the issuance of the captioned obligations as if such opinion were specifically addressed to you. This letter is delivered to you at the request of our client, the City of Lubbock, Texas. Vinson & Elkins UP Attorneys at Law Austin Beijing Dallas Dubai Houston London Moscow New Yori< Tokyo Washington Dallas 135441 ?v .1 Very truly yours, Trammell Crow Center, 2001 Ross Avenue, Suite 3700 Dallas, TX 75201-2975 Tel 214.220.7700 Fax 214.220.7716 www.vetaw.com ) ) ) ) .., P.O. Box 2000 • 1625 13th Street Lubbock, Texas79457 (806) 775-2222 • Fax (806) 775-3307 Morgan Stanley & Co. Incorporated 6300 Bridge Point Parkway, Suite 250 Austin, Texas 78730 Office of the City Attorney January 17, 2008 RE: $11,805,000 TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, TAXABLE SERIES 2008 Ladies and Gentlemen: I am the City Attorney for the City of Lubbock, Texas (the "City") at the time of the issuance of the above referenced Certificates (the "Certificates"), pursuant to the provisions of the ordinance duly adopted by the City Council of the City on Jm1e 26, 2007 and as duly amended by the City Com1cil of the City on December 13, 2007 (referred to herein collectively as the "Ordinance"). Capitalized terms not othetwise 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. 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 m1der any applicable law or administrative regulation of the State of Texas or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City is party or is otherwise subject and, to the best of my knowledge after due inquiry, no event has occurred and is continuing that, with the passage of time or the giving of notice, or both, would constitute such a default by the City under any of the foregoing; and the execution and delivery of the Purchase Contract, the Certificates, and the adoption of the Ordinance and compliance with the provisions of each of such agreements or instruments does not constitute a breach of or default under any applicable law or administrative regulation of the State of Texas or the United States or any applicable judgment or decree or, to the best of my knowledge, any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City is a party or is otherwise subject; and 2. Except as disclosed in the Official Statement, no litigation is pending, or, to my knowledge, threatened, in any court in any way; ( a) challenging the titles of the Mayor or any of the other members of the City Council to their respective offices; (b) seeking to restrain or enjoin the issuance, sale or delivery of any of the Certificates, or the levy, collection or application of the ad valorem taxes or the Pledged Revenues pledged or to be pledged to pay the principal of and interest on the Certificates; (c) contesting or affecting the validity or enforceability of the Certificates, the Ordinance or the Purchase Contract; ( d) contesting the powers of the City or any authority for the issuance of the Certificates, or the adoption of the Ordinance; or ( e) that would have a material and adverse effect on the 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. An i ta/MorganStan ley. ltr January 4, 2008 Very truly yours, Anita E. Burgess City Attorney