The URL can be used to link to this page

Home My WebLink AboutOrdinance - 2002-O0026 - Proceedings Transcript, Tax/Sewer Certs. Of Obligation Not To Exceed $1,545,000 - 01/10/2002- Document Number 1 2 3 4 5 6 7 8 9 10 TRANSCRIPT OF PROCEEDINGS IN RELATION TO $1,545,000 CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2002 DATED FEBRUARY 15, 2002 AND $6,450,000 CITY OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2002 DATED FEBRUARY 15,2002 AND $9,400,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION BONDS SERIES 2002 DATED FEBRUARY 15, 2002 Description of Document Resolution Approving and Authorizing Publication of Notice of Sale and Notice of Intention to Issue Sewer Certificates/Affidavit of Publication Resolution Approving and Authorizing Publication of Notice of Sale and Notice of Intention to Issue Water Certificates/Affidavit of Publication Resolution Approving and Authorizing Publication of Notice of Sale for Bonds/Affidavit of Publication Ordinance Authorizing the Issuance of the Sewer Certificates Executed Paying Agent/Registrar Agreement Relating to the Sewer Certificates Official Bid Form Relating to the Sewer Certificates Ordinance Authorizing the Issuance of the Water Certificates Executed Paying Agent/Registrar Agreement Relating to the Water Certificates Official Bid Form Relating to the Water Certificates Ordinance Authorizing the Issuance of the Bonds 11 Executed Paying Agent/Registrar Agreement Relating to the Bonds ,.. 12 Official Bid Form Relating to the Bonds 13 Final Official Statement 14 General Certificate 15 Signature and No-Litigation Certificate relating to the Sewer Certificates 16 Signature and No-Litigation Certificate relating to the Water Certificates 17 Signature and No-Litigation Certificate relating to the Bonds 18 Attorney General's Opinion and Comptroller's Registration Certificate Relating to the Sewer Certificates 19 Attorney General's Opinion and Comptroller's Registration Certificate Relating to the Water Certificates 20 Attorney General's Opinion and Comptroller's Registration Certificate Relating to ~ the Bonds 21 Closing Instructions 22 Certificate as to Tax Exemption ..... 23 Certificate as to Official Statement 24 Receipt for Payment from JPMorgan Chase Bank in Relation to the Water Certificates 25 Receipt for Payment from JPMorgan Chase Bank in Relation to the Sewer Certificates 26 Receipt for Payment from JPMorgan Chase Bank in Relation to the Bonds 27 Opinion of Bond Counsel Relating to the Sewer Certificates 28 Opinion of Bond Counsel Relating to the Water Certificates 29 Opinion of Bond Counsel Relating to the Bonds 30 FGIC Insurance Policy and Related Documents Relating to the Bonds 31 Rating Letters 32 Issue Price Certificates 33 Filed Information Reports ..... 1 - - THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK CERTIFICATE OF CITY SECRETARY § § § § § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 1Oth day of January, 2002, a regular meeting of the City Council of the City of Lubbock, Texas, was held at a meeting place within the City; the duly constituted members of the Council being as follows: WINDY SITTON ALEX "TY" COOKE FRANK W. MORRISON VICTOR HERNANDEZ T. J. PATTERSON J. DAVID NELSON MARC McDOUGAL MAYOR MAYOR PRO TEM COUNCILMEMBERS and all of said persons were present at said meeting, except the following: Victor Hernandez . Among other business considered at said meeting, the attached resolution entitled: "A RESOLUTION approving and authorizing publication of (i) notice of intention to issue certificates of obligation and (ii) notice of sale with respect to such certificates of obligation." was introduced and submitted to the Council for passage and adoption. After presentation and due consideration of the resolution, and upon a motion being made by T.J. Patterson and seconded by J. David Nelson , the resolution was finally passed and adopted by the Council to be effective immediately by the following vote: 6 voted "For" ---__ o __ voted "Against" 0 abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 2. The attached resolution is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled resolution, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. 45124301.1 1 - - I IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 1 dh day of January, 2002. (City Seal) 45124301.1 2 CitY' SecretaryO City of Lubbock, Texas - - RESOLUTION NO. 2002-R0004 A RESOLUTION approving and authorizing publication of (i) notice of intention to · issue certificates. of obligation and (ii) notice of sale with respect to such certificates of obligation. WHEREAS, the City Council of the City of Lubbock, Texas, has determined that certificates of obligation should be issued in accordance with the provisions of V.T.C.A., Local Government Code, Subchapter C of Chapter 271; for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System, and (ii) professional services rendered in connection with such projects and the financing thereof; and WHEREAS, the City has determined to take bids for the purchase of such certificates of obligations and prior to the issuance of said certificates of obligation, this Council is required to give notice of its intention to issue the same in the manner and time provided by law and to publish a notice of sale with respect thereto in accordance with the provisions of the City's Charter; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK, TEXAS: SECTION 1: The City Secretary is hereby authorized and directed to cause notice to be published of this Council's intention to issue certificates of obligation in the principal amount not to exceed $1,545,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System and (ii) professional services rendered in connection with such projects and the financing thereof, such certificates to be payable from· ad valorem taxes and a lien on and pledge of the net revenues of the City's Sewer System. The notice hereby approved and authorized to be given shall read substantially in the form and content of Exhibit A hereto attached and incorporated herein by reference as a part of this resolution for all purposes, and such notice shalf be published in a newspaper of general circulation in the City, once a week for two consecutive weeks, the date of the first publication to be at least fifteen (15) days prior to the date stated therein for the passage of the ordinance authorizing the issuance of the certificates of obligation. SECTION 2: The City Secretary is hereby authorized and directed to cause a notice relating to the sale of certificates of obligation to be published once a week for a period of thirty (30) days; such notice of sale to read substantially in the form and content of Exhibit B hereto attached and incorporated herein by reference as a part of this resolution for all purposes. SECTION 3: .It is officially found, determined, and declared the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by V.T.C.A., Government Code, Chapter 551, as amended. 45122536.1 1 - - - - SECTION 4: This Resolution shall be in force and effect from and after its passage on the date shown below. PASSED AND APPROVED, this January 10, 2002. CITY OF LUBBOCK, TEXAS ATTEST: ~&f<A! A -<!• Cit Secretary (City Seal) 45122536.1 2 - Exhibit A NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, CERTIFICATES OF OBLIGATION TAKE NOTICE that the City Council of the City of Lubbock, Texas, shall convene at 10:30 o'clock A.M. on the 281h day of February, 2002, at the City Council Chambers, Municipal Complex, 1625 13th Street, Lubbock, Texas, and, during such meeting, the City Council will consider the adoption of an ordinance authorizing the issuance of certificates of obligation in an amount not to exceed $1,545,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System and (ii) professional services rendered in connection with such projects and the financing thereof, such certificates to be payable from ad valorem taxes and a lien on and pledge of the net revenues of the City's Sewer System. The certificates are to be issued, and this notice is given, under and pursuant to the provisions of V.T.C.A., Local Government Code, Subchapter C of Chapter 271. 45122536.1 Rebecca Garza City Secretary City of Lubbock, Texas - - Exhibit B NOTICE OF SALE $1,545,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002 On the 281h day of February, 2002, the City Council of the City of Lubbock, Texas, plans to sell the above referenced certificates of obligation during its regular meeting scheduled to begin at 10:30 o'clock A.M .. A complete description of the Certificates being offered for sale, together with the terms of sale, security for their payment and financial information and operating data about the City appear in an Official Notice of Sale, Bidding Instructions and an Official Statement, which can be obtained from the Division of Finance, City of Lu!Jbock, P.O. Box 2000, Lubbock, Texas 79457; or from First Southwest Company, 1700 Pacific Avenue, Suite 500, Dallas, Texas 75201, Financial Consultants to the City. 45122536.1 Rebecca Garza City Secretary City of Lubbock, Texas - THE STATE OF TEXAS COUNTY OF LUBBOCK AFFIDAVIT OF PUBLICATION § § § -~-"'--..... 0--~--..:....:r:l-:)>r-de)---' 2002; ~--~--'-t:~'::T-d_if __ . 2002; -~----· -""u=«:::>.§~<z)'T---2. __ • 2002; and and said newspaper devotes not less than twenty-five percent {25%) of its total column lineage to items of general interest. is published not less frequently than once each week, entered as periodical postal matter in the county where it is published and has been published regularly and continuously for not less than twelve {12) months prior to the date of the publication of said "NOTICE OF SALE". SWORN TO AND SUBSCRIBED BEFORE ME, this the ~ day of ~-€\::,)r vo_s~, 2002. ~0~ Not ry P te of Texas (Notary Seal) 45124256.1 2 - THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK CERTIFICATE OF CITY SECRETARY § § § § § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 1oth day of January, 2002, a regular meeting of the City Council of the City of Lubbock, Texas, was held at a meeting place within the City; the duly constituted members of the Council being as follows: WINDY SITTON ALEX "TY" COOKE FRANK W. MORRISON VICTOR HERNANDEZ T. J. PATTERSON J. DAVID NELSON MARC McDOUGAL ) ) ) ) ) ) MAYOR MAYOR PRO TEM COUNCILMEMBERS and all of said persons were present at said meeting, except the following: Victor Hernandez . Among other business considered at said meeting, the attached resolution entitled: "A RESOLUTION approving and authorizing publication of (i) notice of intention to issue certificates of obligation and (ii) notice of sale with respect to such certificates of obligation." was introduced and submitted to the Council for passage and adoption. After presentation and due consideration of the resolution, and upon a motion being made by T .J. Patterson and seconded by J. David Nelson , the resolution was finally passed and adopted by the Council to be effective immediately by the following vote: 6 voted "For" ------=0:...-_ voted "Against" 0 abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 2. The attached resolution is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled resolution, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. 45124301.1 1 - - IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 1 dh day of January, 2002. City of lubbock, Texas (City Seal) 45124301.1 2 - RESOLUTION NO. 2002-R0003 A RESOLUTION approving and authorizing publication of (i) notice of intention to issue certificates of obligation and (ii) notice of sale with respect to such certificates of obligation. WHEREAS, the City Council of the City of Lubbock, Texas, has determined that certificates of obligation should be issued in accordance with the provisions of V.T.C.A., Local Government Code, Subchapter C of Chapter 271, for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Waterworks System, including recreational improvements to Lake Alan Henry reservoir-and (ii) professional services rendered in connection with such projects and the financing thereof; and WHEREAS, the City has aetermined to take bids for the purchase of such certificates of obligations and prior to the issuance of said certificates of obligation, this Council is required to give notice of its intention to issue the same in the manner and time provided by law and to publish a notice of sale with respect thereto in accordance with the provisions of the City's Charter; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK, TEXAS: SECTION 1: The City Secretary is hereby authorized and directed to cause notice to be published of this Council's intention to issue certificates of obligation in the principal amount not to exceed ·$6,450,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Waterworks System, including recreational improvements to Lake Alan Henry reservoir and (ii) professional services rendered in connection with such projects and the financing thereof, such certificates to be payable from ad valorem taxes and a lien on and pledge of the net revenues of the City's Waterworks System. The notice hereby approved and authorized to be given shall read substantially in the form and content of Exhibit A hereto attached and incorporated herein by reference as a part of this resolution for all purposes, and such notice shall be published in a newspaper of general circulation in the City, once a week for two consecutive weeks, the date of the first publication to be at least fifteen (15) days prior to the date stated therein for the passage of the ordinance authorizing the issuance of the certificates of obligation. SECTION 2: The City Secretary is hereby authorized and directed to cause a notice relating to the sale of certificates of obligation to be published once a week for a period of thirty (30) days; such notice of sale to read substantially in the form and content of Exhibit B hereto attached and incorporated herein by reference as a part of this resolution for all purposes. SECTION 3: It is officially found, determined, and declared the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter ofthe public business to be considered at such meeting, including this Resolution, was given, all as required by V.T.C.A., Government Code, Chapter 551, as amended. 45122538.1 1 - SECTION 4:. This Resolution shall be in force and effect from and after its passage on the date shown below. PASSED AND APPROVED, this January 10, 2002. CITY OF LUBBOCK, TEXAS ATTEST: ~~LA A A~ C1ty Secretary ~ (City Seal) 45122538.1 2 - -- - Exhibit A NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, CERTIFICATES OF OBLIGATION TAKE NOTICE that the City Council of the City of Lubbock, Texas, shall convene at 10:30 o'clock A.M. on the 281h day of February, 2002, at the City Council Chambers, Municipal Complex, 1625 13th Street, Lubbock, Texas, and, during such meeting, the City Council will consider the adoption of an ordinance authorizing the issuance of certificates of obligation in an amount not to exceed $6,450,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Waterworks System, including recreational improvements to Lake Alan Henry reservoir and (ii) professional services rendered in connection with such projects and the financing thereof, such certificates to be payable from ad valorem taxes and a lien on and pledge of the net revenues of the City's Waterworks System. The certificates are to be issued, and this notice is given, under and pursuant to the provisions of V.T.C.A., Local Government Code, Subchapter C of Chapter 271. 45122538.1 Rebecca Garza City Secretary City of Lubbock, Texas - Exhibit B NOTICE OF SALE $6,450,000 City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002 On the 281h,day of February, 2002, the City Council of the City of L1,.1bbock, Texas, plans to sell the above referenced certificates of obligation during its regular meeting scheduled to begin at 10:30 o'clock A.M .. A complete description of the Certificates being offered for sale, together with the terms of sale, security for their payment and financial information and operating data about the City appear in an Official Notice of Sale, Bidding Instructions and an Official Statement, which can be obtained from the Division of Finance, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457; or from First Southwest Company, 1700 Pacific Avenue, Suite 500, Dallas, Texas 75201, Financial Consultants to the City. 45122538.1 Rebecca Garza City Secretary City of Lubbock, Texas - - THE STATE OF TEXAS COUNTY OF LUBBOCK AFFIDAVIT OF PUBLICATION § § § BEFORE ME, the undersigned authority on this day personally app, ~~&~~ of the Lubbock Avalanche-Journal, a newspc: County of Lubbod¢¥exas, who, being by me duly sworn, upon oath depos i'~ ~;~9;'~;.·.~g~~~","a"cl~~~· That said newspaper is of general circulation in the City of Lubbod "NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, imi>rc;v~ment.s,W, Mn'"''''nnnt OBLIGATION", hereto attached, was published in said newspaper in its is :so._v-..v0-~'6 \3 ,. 2002; and :.so._\0-vO-'bd-0 , 2002; R6938 · . Rebecco Gcrt:zcr City Sec:r-etarv City of Lub~ock, Texas and said newspaper devotes not less than twenty-five percent (25%) of its total column lineage to items of general interest, is published not less frequently than once each week, entered as periodical postal matter in the county where it is published and has been published regularly and continuously for not less than twelve (12) months prior to the date of the publication of said "NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, CERTIFICATES OF OBLIGATION". SWORN TO AND SUBSCRIBED BEFORE ME, this the 2002. (Notary Seal) 45124256.1 3 THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK CERTIFICATE OF CITY SECRETARY § § § § § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 1oth day of January, 2002, a regular meeting of the City Council of the City of Lubbock, Texas, was held at a meeting place within the City; the duly constituted members of the Council being as follows: WINDY SITTON ALEX "TY" COOKE FRANK W. MORRISON VICTOR HERNANDEZ T. J. PATTERSON J. DAVID NELSON MARC McDOUGAL MAYOR MAYOR PRO TEM COUNCILMEMBERS and all of said persons were present at said meeting, except the following: Victor Hernandez . Among other business considered at said meeting, the attached resolution entitled: "A RESOLUTION approving and authorizing publication of notice of sale with respect to general obligation bonds." was introduced and submitted to the Council for passage and adoption. After presentation and due consideration of the resolution, and upon a motion being made by T. J. Patterson and seconded by J. David Nelson , the resolution was finally passed and adopted by the Council to be effective immediately by the following vote: 6 voted "For" _ _:..._ ___ o_ voted "Against" 0 abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 2. The attached resolution is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled resolution, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. 45124246.1 1 - IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 1 rJh day of January, 2002. City Secretary City of Lubbock, Texas (City Seal) 45124246.1 2 - - RESOLUTION NO. 2002-R0002 A RESOLUTION approving and authorizing publication of notice of sale with respect to general obligation bonds. WHEREAS, the City Council of the City of Lubbock, Texas, has determined to issue and take bids for the purchase of general obligation bonds in the principal amount of $9,400,000 and, in accordance with the provisions of the City's Charter, the sale of such bonds is to be advertised in a newspaper once a week for a period of 30 days; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK, TEXAS: SECTION 1: The City Secretary is hereby authorized and directed to cause a notice of sale relating to the sale of general obligation bonds to be published once a week for a period of thirty (30) days; such notice of sale to read substantially in the form and content of Exhibit A hereto attached and incorporated herein by· reference as a part of this resolution for all purposes. SECTION 2: It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by V.T.C.A., Government Code, Chapter 551, as amended. SECTION 3: This Resolution shall be in force and effect from and after its passage on the date shown below. PASSED AND APPROVED, this January 10, 2002. CITY OF LUBBOCK, TEXAS ATTEST: (City Seal) 45122535.1 - - Exhibit A NOTICE OF SALE $9,400,000 City of Lubbock, Texas, General Obligation Bonds, Series 2002 On the 281h day of February, 2002, the City Council of the City of Lubbock, Texas, plans to sell the above referenced bonds during its regular meeting scheduled to begin at 1 0:30 o'clock A.M .. A complete description of the Bonds being offered for sale, together with the terms of sale, security for their payment and financial information and operating data about the City appear in an Official Notice of Sale, Bidding Instructions and an Official Statement, which can be obtained from the Division of Finance, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457; or from First Southwest Company, 1700 Pacific Avenue, Suite 500, Dallas, Texas 75201, Financial Consultants to the City. 45122535.1 Rebecca Garza City Secretary City of Lubbock, Texas THE STATE OF TEXAS COUNTY OF LUBBOCK AFFIDAVIT OF PUBLICATION § § § -:so._Y'-.:-..)0-<""'j:, \ ~ ,. 2002; ~of\.UQ..._C::s :9-0 , 2002; .3:::,_""'-00-<."t') .::::l I , 2002; Y-E:..'or0o,::e'6 ;> , 2002; and ~'o'\ue-_c-'-6 lO , 2002; and said newspaper devotes not less than twenty-five percent (25%) of its total column lineage to items of general interest. is published not less frequently than once each week, entered as periodical postal matter in the county where it is published and has been published regularly and continuously for not less than twelve (12) months prior to the date of the publication of said "NOTICE OF SALE". SWORN TO AND SUBSCRIBED BEFORE ME, this the ~ day of ~lc:lr'UCt..':::J' 2002. (Notary Seal) 45124256.1 4 - ,A - - - - f ' CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK § § § § § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 281h day of February, 2002, the City Council of the City of Lubbock, Texas, convened in regular session at its regular meeting place in the City Hall of said City; the duly constituted members of the Council being as follows: WINDY SITTON ALEX "TY" COOKE VICTOR HERNANDEZ T. J. PATTERSON DAVID NELSON FRANK W. MORRISON MARC McDOUGAL ) ) ) ) ) ) MAYOR MAYOR PRO TEM COUNCILMEMBERS all of said persons were present at said meeting, except the following: --------- Among other business considered at said meeting, the attached ordinance entitled: "AN ORDINANCE authorizing the issuance of 'CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002'; specifying the terms and features of said certificates; providing for the payment of said certificates of obligation by the levy of an ad valorem tax upon all taxable property within the City and a lien on and pledge of the net revenues from the operation of the City's Sewer System; and resolving other matters incident and related to the issuance, sale, security, payment and delivery of said certificates, including the approval of a Paying Agent/Registrar Agreement and the approval and distribution of an Official Statement pertaining thereto; and providing an effective date." was introduced and submitted to the Council for final passage and adoption. After presentation and due consideration of the Ordinance, and upon a motion being made by David Nelson and seconded by Alex "Ty" Cooke the Ordinance was duly passed and adopted to be effective immediately in accordance with the Section 1201.028 by the following vote: 7 voted "For'' 0 voted "Againsf' abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 45145942.1 ,- - 2. The attached Ordinance is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meetings are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of each meeting was given to each member of the Council; and that said meetings and the deliberation of the aforesaid public business were open to the public and written notice of said meetings, including the subject of the above entitled Ordinance, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 2sth day of February, 2002. (City Seal) 45145942.1 -2- - ORDINANCE NO. 2002-00028 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002"; specifying the terms and features of said certificates; providing for the payment of said certificates of obligation by the levy of an ad valorem tax upon all taxable property within the City and a lien on and pledge of the net revenues from the operation of the City's Sewer System; and resolving other matters incident and related to the issuance, sale, security, payment and delivery of said certificates, including the approval of a Paying Agent/Registrar Agreement and the approval and distribution of an Official Statement pertaining thereto; and providing an effective date. WHEREAS, notice of the City Council's intention to issue certificates of obligation in the maximum principal amount of $1 ,545,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System and (ii) professional services rendered in connection with such project and the financing thereof, has been duly published in the Lubbock Avalanche-Journal, a newspaper hereby found and determined to be of general circulation in the City of Lubbock, Texas, on January 13, 2002 and January 20, 2002, the date of the first publication of such notice being not less than fifteen (15) days prior to the tentative date stated therein for the passage of this Ordinance; and WHEREAS, no petition, protesting the issuance of such certificates and bearing valid petition signatures of at least 5% of the qualified voters of the City, has been filed with the City Secretary, any member of the Council or any other official of the City on or prior to the date of the passage of this Ordinance; and WHEREAS, the Council hereby finds and determines the certificates of obligation described in the aforesaid notice should be issued and sold at this time in the amount and manner as hereinafter provided; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION 1: Authorization-Designation-Principal Amount-Purpose. Certificates of obligation of the City shall be and are hereby authorized to be issued in the aggregate principal amount of $1,545,000 to be designated and bear the title "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002" (the "Certificates"), for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System, and (ii) professional services rendered in connection with such projects and the financing thereof, pursuant to authority conferred by and in conformity with the Constitution and laws of the State of Texas, including V.T.C.A., Local Government Code, Subchapter C of Chapter 271. 45142591.1 - - - SECTION 2: Fully Registered Obligations -Authorized Denominations-Stated Maturities-Date. The Certificates are issuable in fully registered form only; shall be dated February 15, 2002 (the "Certificate Date") and shall be in denominations of $5,000 or any integral multiple thereof (within a Stated Maturity) and the Certificates shall become due and payable on February 15 in each of the years and in principal amounts (the "Stated Maturities") and bear interest at the per annum rate(s) in accordance with the following schedule: Year of Principal Interest Stated Maturity Amount Rate(s) 2003 $ 5,000 4.000% 2004 50,000 4.000% 2005 50,000 4.000% 2006 55,000 4.000% 2007 55,000 4.000% 2008 60,000 4.125% 2009 60,000 5.000% 2010 65,000 5.000% 2011 70,000 5.000% 2012 75,000 4.750% 2013 80,000 4.375% 2014 80,000 4.500% 2015 85,000 4.500% 2016 90,000 4.600% 2017 95,000 4.750% 2018 100,000 4.850% 2019 110,000 5.000% 2020 115,000 5.000% 2021 120,000 5.000% 2022 125,000 5.000% The Certificates shall bear interest on the unpaid principal amounts from the Certificate Date at the per annum rate(s) shown above in this Section (calculated on the basis of a 360-day year of twelve 30-day months). Interest on the Certificates shall be payable on February 15 and August 15 in each year, commencing February 15, 2003. SECTION 3: Terms of Payment-Paying Agent/Registrar. The principal of, premium, if any, and the interest on the Certificates, due and payable by reason of maturity, redemption or otherwise, shall be payable only to the registered owners or holders of the Certificates (hereinafter called the "Holders") appearing on the registration and transfer books maintained by the Paying Agent/Registrar and the payment thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without exchange or collection charges to the Holders. 45142591.1 2 - The selection and appointment of JPMorgan Chase Bank to serve as Paying Agent/Registrar for the Certificates is hereby approved and confirmed. Books and records relating to the registration, payment, exchange and transfer of the Certificates (the "Security Register'') shall at all times be kept and maintained on behalf of the City by the Paying Agent/Registrar, all as provided herein, in accordance with the terms and provisions of a "Paying Agent/Registrar Agreement", substantially in the form attached hereto as Exhibit A and such reasonable rules and regulations as the Paying Agent/Registrar and the City may prescribe. The Mayor and City Secretary of the City are hereby authorized to execute and deliver such Agreement in connection with the delivery of the Certificates. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Certificates are paid and discharged, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice thereof to be sent to each Holder by United States Mail, first class postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Principal of and premium, if any, on the Certificates shall be payable at the Stated Maturities or the redemption thereof only upon presentation and surrender of the Certificates to the Paying Agent/Registrar at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest on the ·Certificates shall be paid by the Paying Agent/Registrar to the Holders whose name appears in the Security Register at the close of business on the Record Date (the last business day of the month next preceding each interest payment date) and payment of such interest shall be (i) by check sent United States Mail, first class postage prepaid, to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder. If the date for the payment of the principal of or interest on the Certificates shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the City where the Designated Payment/Transfer Office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day when banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. In the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/ Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business next preceding the date of mailing of such notice. 45142591.1 3 - - SECTION 4: Redemption. {a) Optional Redemption. The Certificates having Stated Maturities on and after February 15, 2013, shall be subject to redemption prior to maturity, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2012 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. {b) Exercise of Redemption Option. At least forty-five {45) days prior to a redemption date for the Certificates {unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the City shall notify the Paying Agent/Registrar of the decision to redeem Certificates, the principal amount of each Stated Maturity to be redeemed, and the date of redemption therefor. The decision of the City to exercise the right to redeem Certificates shall be entered in the minutes of the governing body of the City. {c) Selection-of Certificates for Redemption. If less than all Outstanding Certificates of the same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Certificates as representing the number of Certificates Outstanding which is obtained by dividing the principal amount of such Certificates by $5,000 and shall select the Certificates, or principal amount thereof, to be redeemed within such Stated Maturity by lot. (d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Certificates, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the City and at the City's expense, to each Holder of a Certificate to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemption shall (i) specify the date of redemption for the Certificates, {ii) identify the Certificates to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, {iii) state the redemption price, (iv) state that the Certificates, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and {v) specify that payment of the redemption price for the Certificates, or the principal amount thereof to be redeemed, shall be made at the Designated Payment/Transfer Office of the Paying Agent/Registrar only upon presentation and surrender thereof by the Holder. lfa Certificate is subject by its terms to prior redemption and has been called for redemption and notice of redemption thereof has been duly given as hereinabove provided, such Certificate (or the principal amount thereof to be redeemed) shall become due and payable and interest thereon shall cease to accrue from and after the redemption date therefor; provided moneys sufficient for the payment of such Certificate (or of the principal amount thereof to be redeemed) at the then applicable redemption price are held for the purpose of such payment by the Paying Agent/Registrar. 45142591.1 4 - - - - SECTION 5: Registration -Transfer -Exchange of Certificates-Predecessor Certificates. The Paying AgenVRegistrar shall obtain, record, and maintain in the Security Register the name and address of each and every owner of the Certificates issued under and pursuant to the provisions of this Ordinance, or if appropriate, the nominee thereof. Any Certificate may be transferred or exchanged for Certificates of other authorized denominations by the Holder, in person or by his duly authorized agent, upon surrender of such Certificate to the Paying AgenVRegistrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. Upon surrender of any Certificate (other than the Initial Certificate(s) authorized in Section 8 hereof) for transfer at the Designated PaymenVTransfer Office of the Paying AgenVRegistrar, the Paying AgenVRegistrar shall register and deliver, in the name of the designated transferee or transferees, one or more new Certificates of authorized denominations and having the same Stated Maturity and of a like aggregate principal amount as the Certificate or Certificates surrendered for transfer. At the option of the Holder, Certificates (other than the Initial Certificate(s) authorized in Section 8 hereof) may be exchanged for other Certificates of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Certificates surrendered for exchange, upon surrender of the Certificates to be exchanged at the Designated Paymentrrransfer Office of the Paying AgenV Registrar. Whenever any Certificates are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new Certificates to the Holder requesting the exchange. All Certificates issued in any transfer or exchange of Certificates shall be delivered to the Holders at the Designated PaymenVTransfer Office of the Paying Agent/Registrar or sent by United States Mail, first class, postage prepaid to the Holders, and, upon the registration and delivery thereof, the same shall be the valid obligations of the City, evidencing the same obligation to pay, and entitled to the same benefits under this Ordinance, as the Certificates surrendered in such transfer or exchange. All transfers or exchanges of Certificates pursuant to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. 45142591.1 5 - - - - Certificates canceled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be "Predecessor Certificates," evidencing all or a portion, as the case may be, of the same obligation to pay evidenced by the new Certificate or Certificates registered and delivered in the exchange or transfer therefor. Additionally, the term "Predecessor Certificates" shall include any mutilated, lost, destroyed, or stolen Certificate for which a replacement Certificate has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 23 hereof and such new replacement Certificate shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Certificate. Neither the City nor the Paying AgenURegistrar shall be required to issue or transfer to an assignee of a Holder any Certificate called for redemption, in whole or in part, within 45 days of the date fixed for the redemption of such Certificate; provided, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a Certificate called for redemption in part. SECTION 6: Book-Entry Only Transfers and Transactions. Notwithstanding the provisions contained in Sections 3, 4 and 5 hereof relating to the · payment and transfer/exchange of the ·Certificates, the City hereby approves and authorizes the use of "Book-Entry Only" securities clearance, settlement and transfer system provided by The Depository Trust Company (DTC), a limited purpose trust company organized under the laws of the State of New York, in accordance with the operational arrangements referenced in the Blanket Issuer Letter of Representations by and between the City and DTC (the "Depository Agreement"). Pursuant to the Depository Agreement and the rules of DTC, the Certificates shall be deposited with DTC who shall hold said Certificates for its participants (the "DTC Participants") and, while the Certificates are held by DTC under the Depository Agreement, the Holder of the Certificates on the Security Register for all purposes, including payment and notices, shall be Cede & Co., as nominee of DTC, notwithstanding the ownership of each actual purchaser or owner of each Certificate (the "Beneficial Owners") being recorded in the records of DTC and DTC Participants. In the event DTC determines to discontinue serving as securities depository for the Certificates or otherwise ceases to provide book-entry clearance and settlement of securities transactions in general or the City determines that DTC is incapable of properly discharging its duties as securities depository for the Certificates, the City covenants and agrees with the Holders of the Certificates to cause Certificates to be printed in definitive form and provide for the Certificate certificates to be issued and delivered to DTC Participants and Beneficial Owners, as the case may be. Thereafter, the Certificates in definitive form shall be assigned, transferred and exchanged on the Security Register maintained by the Paying AgenURegistrar and payment of such Certificates shall be made in accordance with the provisions of Sections 3, 4 and 5 hereof. 45142591.1 6 SECTION 7: Execution-Registration. The Certificates shall be executed on behalf of the City by the Mayor under its seal reproduced or impressed thereon and countersigned by the City Secretary. The signature of said officers on the Certificates may be manual or facsimile. Certificates bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the Certificate Date shall be deemed to be duly executed on behalf of the City, notwithstanding that one or more of the individuals executing the same shall cease to be such officer at the time of delivery of the Certificates to the initial purchaser(s) and with respect to Certificates delivered in subsequent exchanges and transfers, all as authorized and provided in V.T.C.A., Government Code, Chapter 1201. No Certificate shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Certificate either a certificate of registration substantially in the farm provided in Section 9C, manually executed by the Comptroller of Public Accounts of the State of Texas, or his duly authorized agent, or a certificate of registration substantially in the form provided in Section 9D, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar, and either such certificate duly signed upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly certified, registered and delivered. SECTION 8: Initial Certificate(s). The Certificates herein authorized shall be initially issued either (i) as a single fully registered certificate in the total principal amount of $1,545,000 with principal installments to become due and payable as provided in Section 2 hereof and numbered T-1, or (ii) as multiple fully registered certificates, being one certificate for each year of maturity in the applicable principal amount and denomination and to be numbered consecutively from T-1 and upward (hereinafter called the "Initial Certificate(s)") and, in either case, the Initial Certifieate{s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Certificate(s) shall be the Certificates submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any time after the delivery of the Initial Certificate(s), the Paying Agent/Registrar, pursuant to written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial Certificate(s) delivered hereunder and exchange therefor definitive Certificates of authorized denominations, Stated Maturities, principal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser(s), or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. 45142591.1 7 - SECTION 9: Forms. A. Forms Generally. The Certificates, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Registration Certificate of Paying Agent/Registrar, and the form of Assignment to be printed on each of the Certificates, shall be substantially in the forms set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including insurance legends in the event the Certificates, or any maturities thereof, are purchased with insurance and any reproduction of an opinion of counsel) thereon as may, consistently herewith, be established by the City or determined by the officers executing such Certificates as evidenced by their execution. Any portion of the text of any Certificates may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. The definitive Certificates and the Initial Certificate(s) shall be printed, lithographed, or engraved, typewritten, photocopied or otherwise reproduced in any other similar manner, all as determined by the officers executing such Certificates as evidenced by their execution thereof. B. Form of Certificates. REGISTERED REGISTERED NO. $ ___ _ Certificate Date: February 15, 2002 Registered Owner: Principal Amount: UNITED STATES OF AMERICA STATE OF TEXAS CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATE OF OBLIGATION, SERIES 2002 Interest Rate: __ % Stated Maturity: CUSIP NO: DOLLARS The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner named above, or the registered assigns thereof, on the Stated Maturity date specified above the Principal Amount stated above (or so much thereof as shall not have been paid upon prior redemption) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid Principal Amount hereof from the Certificate Date at the per annum rate of interest specified above; such interest being payable on February 15 and August 15 of each year, commencing February 15, 2003. Principal of this Certificate is payable at its Stated 45142591.1 8 - .... Maturity or redemption to the registered owner hereof, upon presentation and surrender, at the Designated Payment/Transfer Office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor; provided, however, while this Certificate is registered to Cede & Co., the payment of principal upon a partial redemption of the principal amount hereof may be accomplished without presentation and surrender of this Certificate. Interest is payable to the registered owner of this Certificate (or one or more Predecessor Certificates, as defined in the Ordinance hereinafter referenced) whose name appears on the "Security Register'' maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register on the Record Date or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Certificate shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Certificate is one of the series specified in its title issued in the aggregate principal amount of $1 ,545,000 (herein referred to as the "Certificates") for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System and {ii) professional services rendered in connection with such projects and the financing thereof, under and in strict conformity with the Constitution and laws of the State of Texas, particularly V.T.C.A., Local Government Code, Subchapter C of Chapter 271, and pursuant to an Ordinance adopted by the governing body of the City {herein referred to as the "Ordinance"). The Certificates maturing on and after February 15, 2013, may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2012, or on any date thereafter, at the redemption price of par, together with accrued interest to the date of redemption. At least thirty days prior to a redemption date, the City shall cause a written notice of such redemption to be sent by United States Mail, first class postage prepaid, to the registered owners of each Certificate to be redeemed at the address shown on the Security Register and subject to the terms and provisions relating thereto contained in the Ordinance. If a Certificate {or any portion of its principal sum) shall have been duly called for redemption and notice of such redemption duly given, then upon the redemption date such Certificate (or the portion of its principal sum to be redeemed) shall become due and payable, and, if moneys for the payment of the redemption price and the interest accrued on the principal amount to be redeemed to the date of redemption are held for the purpose of such payment by the Paying Agent/Registrar, interest shall cease to accrue and be payable from and after the redemption date on the principal amount redeemed. In the event a portion of the principal amount of a Certificate is to be redeemed and the registered owner is someone other than Cede & Co., payment of the redemption price of such 45142591.1 9 - - principal amount shall be made to the registered owner only upon presentation and surrender of such Certificate to the Designated Paymenvrransfer Office of the Paying Agent/Registrar, and a new Certificate or Certificates of like maturity and interest rate in any authorized denominations provided by the Ordinance for the then unredeemed balance of the principal sum thereof will be issued to the registered owner, without charge. If a Certificate is selected for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer such Certificate to an assignee of the registered owner within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the registered owner of the unredeemed balance of a Certificate redeemed in part. The Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and, together with the Previously Issued Obligations (as defined in the Ordinance), are additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Ordinance) of the City's Sewer System (the "System"), such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of "Prior Lien Obligations" (as defined in the Ordinance) hereafter issued by the City. In the Ordinance, the City reserves and retains the right to issue Prior Lien Obligations while the Certificates are outstanding without limitation as to principal amount but subject to any terms, conditions or restrictions as may be applicable thereto under law or otherwise, as well as the right to issue Additional Obligations (as defined in the Ordinance). Reference is hereby made to the Ordinance,· a copy of which is on file in the Designated Paymenvrransfer Office of the Paying Agent/Registrar, and to all the provisions of which the Holder hereof by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the tax levied for the payment of the Certificates; the nature and extent of the pledge of the Net Revenues securing the payment of the Certificates; the terms and conditions relating to the transfer or exchange of this Certificate; the conditions upon which the Ordinance may be amended or supplemented with or without the consent of the Holders; the rights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which the tax levy and the pledge of the Net Revenues and covenants made in the Ordinance may be discharged at or prior to the maturity of this Certificate, and this Certificate deemed to be no longer Outstanding thereunder; and for the other terms and provisions contained therein. Capitalized terms used herein have the meanings assigned in the Ordinance. 45142591.1 10 - - This Certificate, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only upon its presentation and surrender at the Designated Payment/Transfer Office of the Paying Agent/Registrar, with the Assignm~nt hereon duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent. When a transfer on the Security Register occurs, one or more fully registered Certificates of authorized denominations and of the same aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, may treat the registered owner hereof whose name appears on the Security Register (i) on the Record Date as the owner entitled to payment of interest hereon, {ii) on the date of surrender of this Certificate as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and {iii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty {30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. It is hereby certified, recited, represented and covenanted that the City is a body corporate and political subdivision duly organized and legally existing under and by virtue of the Constitution and laws of the State of Texas; that the issuance of the Certificates is duly authorized by law; that all acts, conditions and things required to exist and be done precedent to and in the issuance of the Certificates to render the same lawful and valid obligations of the City have been properly done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Certificates do not exceed any constitutional or statutory limitation; and that due provision has been made for the payment of the principal of and interest on the Certificates as aforestated. In case any provision in this Certificate or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications shall not in any way be affected or impaired thereby. The terms and provisions of this Certificate and the Ordinance shall be construed in accordance with and shall be governed by the laws of the State of Texas. 45142591.1 11 .- - IN WITNESS WHEREOF, the City Council of the City has caused this Certificate to be duly executed under the official seal of the City as of the Certificate Date. CITY OF LUBBOCK, TEXAS Mayor COUNTERSIGNED: City Secretary (SEAL) 45142591.1 12 C. * Form of . Registration Certificate of Comptroller of Public Accounts to Appear on Initial Certificate(s) only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS THE STATE OF TEXAS ) ) ) ) REGISTER NO.------- I HEREBY CERTIFY that this Certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this -------- (SEAL) Comptroller of Public Accounts of the State of Texas *NOTE TO PRINTER:Do not print on definitive Certificates D. Form of Certificate of Paying Agent/Registrar to Appear on Definitive Certificates . . REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR This Certificate has been duly issued and registered under the provisions of the within-mentioned Ordinance; the certificate or certificates of the above entitled anddesignated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. The designated offices of the Paying Agent/Registrar located in Dallas, Texas, is the "Designated Payment/Transfer Office" for this Certificate. Registration Date: 45142591.1 13 JP MORGAN CHASE BANK, as Paying Agent/Registrar Authorized Signature - - E. Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee:) _________ _ (Social Security or other identifying number ) the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Certificate on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature guaranteed: NOTICE: The signature on this assignment must correspond with the name of the registered owner as it appears on the face of the within Certificate in every particular. F. The Initial Certificate{s) shall be in the form set forth in paragraph 8 of this Section, except that the form of a single fully registered Initial Certificate shall be modified as follows: (i) immediately under the name of the certificate the headings "Interest Rate " and "Stated Maturity "shall both be omitted; (ii) paragraph one shall read as follows: Registered Owner: Principal Amount: Dollars The City of Lubbock {hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner named above, or the registered assigns thereof, the Principal Amount hereinabove stated, on February 15 in each of the years and in principal installments in accordance with the following schedule: 45142591.1 YEAR PRINCIPAL INSTALLMENTS INTEREST RATE (Information to be inserted from schedule in Section 2 hereof). 14 - (or so much principal thereof as shall not have been prepaid prior to maturity) and to pay · interest on the unpaid Principal Amount hereof from the Certificate Date at the per annum rates of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 15 and August 15 of each year, commencing February 15, 2003. Principal installments of this Certificate are payable in the year of maturity qr on a prepayment date to the registered owner hereof by JPMorgan Chase Bank (the "Paying Agent/Registrar"), upon presentation and surrender, at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest is payable to the registered owner of this Certificate whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date hereof and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/ Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Certificate shall be without exchange or collection charges to th.e owner hereof arid in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. SECTION 10: Definitions. For purposes of this Ordinance and for clarity with respect to the issuance of the Certificates, and the levy of taxes and appropriation of Net Revenues therefor, the following words or terms, whenever the same appear herein without qualifying language, are defined to mean as follows: (a) The term "Additional Obligations" shall mean tax and revenue obligations hereafter issued which by their terms are payable from ad valorem taxes and additionally payable from and secured by a parity lien on and pledge of the Net Revenues of the System of equal rank and dignity with the lien and pledge securing the payment of the Previously Issued Obligations and the Certificates. (b) The term "Certificates" shall mean $1,545,000 "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002" authorized by this Ordinance. (c) The term "Certificate Fund" shall mean the special Fund created and established under the provisions of Section 11 of this Ordinance. (d) The term "Collection Date" shall mean, when reference is being made to the levy and collection of annual ad valorem taxes, the date annual ad valorem taxes levied each year by the City become delinquent. (e) The term "Fiscal Year" shall mean the annual financial accounting period used with respect to the operations of the System now ending on September 30th of each year; provided, however, the City Council 45142591.1 15 - - may change, by ordinance duly passed, such annual financial accounting period to end on another date if such change is found and determined to be necessary for budgetary or other fiscal purposes. (f) The term "Government Securities" shall· mean (i) direct noncallable obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations unconditionally guaranteed or insured by the agency or instrumentality and on the date of their acquisition or purchase by the City are rated as to investment quality by a nationally recognized investment rating firJl! not less than AAA or its equivalent and (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and on the date of their acquisition or purchase by the City, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. · (g) The term "Gross Revenues" shall mean, with respect to any period, all income, revenues and receipts received from the operation and ownership of the System. (h) The term "Net Revenues" shall mean the Gross Revenues of the System, with respect to any period, after deducting the System's Operating and Maintenance Expenses during such period. (i) The term "Operating and Maintenance Expenses" shall mean all reasonable and necessary expenses directly related and attributable to the operation and maintenance of the System, including, but not limited to, the cost of insurance, the purchase and carrying of stores, materials, and supplies, the payment of salaries and labor, and other expenses reasonably and properly charged, under generally accepted accounting principles, to the operation and maintenance of the System. 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". U) The term "Outstanding" when used in this Ordinance with respect to Certificates means, as of the date of determination, all Certificates theretofore issued and delivered under this Ordinance, except: (1) those Certificates canceled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Certificates deemed to be duly paid by the City in accordance with the provisions of Section 19 hereof; and 45142591.1 16 - - (3) those Certificates that have been mutilated, destroyed, lost, or stolen and replacement Certificates have been registered and delivered in lieu thereof as provided in Section 23 hereof. (k) The term "Previously Issued Obligations" shall mean the outstanding (i) "City of Lubbock, Texas, Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1992", (ii) "City of Lubbock, Texas, Combination Tax and· Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1993"; and (iii) "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 1999", dated April 1, 1999. (I) The term "Prior Lien Obligations" shall mean all bonds or other similar obligations hereafter issued that are payable in whole or in part from and secured by a lien on and pledge of the Net Revenues of. the System and such lien and pledge securing the payment thereof is prior and superior in claim, rank and dignity to the lien and pledge of the Net Revenues securing the payment of the Certificates. · (m) The term "System" shall mean the City's sanitary sewer system, being all sanitary sewage collection system, effluent treatment and disposal facilities and/or other works and equipment. SECTION 11: Certificate Fund. For the purpose of paying the interest on and to provide a sinking fund for the payment and retirement of the Certificates, there shall be and is hereby created a special Fund to be designated "SPECIAL 2002 CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATE OF OBLIGATION FUND", which Fund shall be kept and maintained at the City's depository bank, and moneys deposited in said Fund shall be used for no other purpose. Proper officers of the City are hereby authorized and directed to cause to be transferred to the Paying Agent for the Certificates, from funds on deposit in the Certificate Fund, amounts sufficient to fully pay and discharge promptly each installment of interest and principal of the Certificates as the same accrues or matures or comes due by reason of redemption prior to mat[Jrity; such transfers of funds to be made in such manner as will cause immediately available funds to be deposited with the Paying Agent for the Certificates at the close of business on the last business day next preceding each interest and/or principal payment date for the Certificates. Pending the transfer of funds to the Paying Agent/Registrar, money in the Certificate Fund may, at the option of the City, be invested in obligations identified in, and in accordance with the provisions of the "Public Funds Investment Act" (V.T.C.A., Government Code, Chapter 2256) relating to the investment of "bond proceeds"; provided that all such investments shall be made in such a manner that the money required to be expended from said Fund will be available at the proper time or times. All interest and income derived from deposits and investments in said Certificate Fund shall be credited to, and any losses debited to, the said Certificate Fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Certificates. 45142591.1 17 - SECTION 12: Tax Levy. That to provide for the payment of the "Debt Service Requirements" on the Certificates being (i) the interest on said Certificates and (ii) a sinking fund for their redemption at maturity or a sinking fund of 2% (whichever amount shall be the greater), there shall be and there is hereby levied for the current year and each succeeding year thereafter while said Certificates or any interest thereon shall remain Outstanding, a sufficient tax on each one hundred dollars' valuation of taxable property in said City, adequate to pay such Debt Service Requirements, full allowance being made for delinquencies and costs of collection; said tax shall be assessed and collected each year and applied to the payment of the Debt Service Requirements, and the same shall not be diverted to any other purpose. The taxes so levied and collected shall be deposited into the Certificate Fund. This governing body hereby declares its purpose and intent to provide and levy a tax legally and fully sufficient to pay the said Debt Service Requirements, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax in consideration of all other outstanding indebtedness. The amount of taxes to be provided annually for the payment of the principal of and interest on the Certificates herein authorized to be issued shall be determined and accomplished in the following manner: (a) Prior to the date the City Council establishes the annual tax rate and passes an ordinance levying ad valorem taxes each year, the City Council shall determine: ( 1) The amount on deposit in the Certificate Fund after (a) deducting therefrom the total amount of Debt Service Requirements to become due on Certificates prior to the Collection Date for the ad valorem taxes to be levied and (b) adding thereto the amount of Net Revenues of the System appropriated and allocated to pay such Debt Service Requirements prior to the Collection Date for the ad valorem taxes to be levied. (2) The amount of Net Revenues if any, appropriated and to be set aside .for the payment of the Debt Service Requirements on the Certificates between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year. (3) The amount of Debt Service Requirements to become due and payable on the Certificates between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year. (b) The amount of taxes to be levied annually each year to pay the Debt Service Requirements on the Certificates shall be the amount established in paragraph (3) above less the sum total of the amounts established in paragraphs (1 )and (2), after taking into consideration delinquencies and costs of collecting such annual taxes. SECTION 13: Pledge of Revenues. The City hereby covenants and agrees that, subject only to a prior lien on and pledge of the Net Revenues of the System for the payment and security of Prior Lien Obligations, the Net Revenues of the System, with the exception of 45142591.1 18 - - - those in excess of the amounts required to be deposited to the Certificate Fund as hereafter provided, are hereby irrevocably pledged, equally and ratably, to the payment of the principal of and interest on the Previously Issued Obligations and the Certificates as herein provided, and the pledge of the Net Revenues of the System herein made for the payment of the Previously Issued Obligations and the Certificates shall constitute a lien on the Net Revenues of the System in accordance with the terms and provisions hereof and be valid and binding and fully perfected from and. after the date of adoption of this Ordinance without physical delivery or transfer or transfer of control of the Net Revenues, the filing of this Ordinance or any other act; all as provided in Chapter 1208 of the Texas Government Code. · SECTION 14: System Fund. The City hereby reaffirms its covenant and agreement made in connection with the issuance of the Previously Issued Obligations that all Gross Revenues' (excluding earnings from the investment of money held in any special funds or accounts created for the payment and security of Prior Lien Obligations) shall be deposited from day to day as collected into a "City of Lubbock, Texas, Sewer System Operating Fund" (hereinafter called "System Fund") which Fund shall be kept and maintained at an official depository bank of the City. All moneys deposited in the System Fund shall be pledged and appropriated to the extent required for the following purposes and in the order of priority shown, to wit: First: To the payment of all necessary and reasonable Operating and Maintenance Expenses of the System as defined herein or required by statute to be a first charge on and claim against the Gross Revenues. Second: To the payment of the amounts required to be deposited in the special Funds created . and established for the payment, security and benefit of Prior Lien Obligations in accordance with the terms and provisions of the ordinances authorizing the issuance of Prior Lien Obligations; and Third: Equally and ratably to the payment of the amounts required to be· deposited in the special funds and accounts created and established for the payment of the Previously Issued Obligations, the Certificates and Additional Obligations, if issued. Any Net Revenues remaining in the System. Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other City purpose now or hereafter permitted by law. SECTION 15: Deposits to Certificate Fund. The City hereby covenants and agrees to cause to be deposited in the Certificate Fund prior to each interest and principal payment date from the Net Revenues of the System, after deduction of all paymef)ts required to be made to special Funds or accounts created for the payment and security of the Prior Lien Obligations, an amount equal to one hundred per centum (100%) of the amount required to fully pay the accrued interest and principal of the Certificates then due and payable by reason of maturity or redemption prior to maturity, such deposits to pay accrued interest and principal on the Certificates to be made in substantially equal monthly installments on or before the last 45142591.1 19 business day of each month beginning the month the Certificates are delivered to the initial purchaser. The monthly deposits to the Certificate Fund, as hereinabove provided, shall be made until such time as such Fund contains an amount equal to pay the principal of and interest on the Certificates to maturity. Ad valorem taxes levied, collected and deposited in the Certificate f=und for and on behalf of the Certificates may be taken into consideration and reduce the amount of the monthly deposits otherwise required to be deposited in the Certificate Fund from the Net Revenues of the System. In addition, any proceeds of sale of the Certificates in excess of the amount required to pay the contractual obligations to be incurred (including change orders to a construction contract) shall be deposited in the Certificate Fund, which amount shall reduce the sums otherwise required to be deposited in said Fund from ad valorem taxes and the Net Revenues of the System. SECTION 16: Security of Funds. All moneys on deposit in the Funds for which this Ordinance makes provision (except any portion thereof as may be at any time properly invested) shall be secured in the manner and to the fullest extent required by the laws of Texas for the security of public funds, and moneys on deposit in such Funds shall be used only for the purposes permitted by this Ordinance. SECTION 17: Special Covenants. The City hereby further covenants as follows: (a) It has the lawful power to pledge the Net Revenues of the System supporting this issue of Certificates and has lawfully exercised said powers under the Constitution and laws of the State of Texas, including said power existing under V.T,C.A, Government Code, Sections 1502.056 and 1502.058 and V.T.C.A., Local Government Code, Sections 271.041, et seq. (b) Other than for the payment of the Previously Issued Obligations and the Certificates, the Net Revenues of the System have not in any manner been pledged to the payment of any debt or obligation of the City or of the System. SECTION 18: Issuance of Prior Lien Obligations and Additional Obligations; Subordinate to Prior Lien Obligations Covenants and Agreements. (a) The City hereby expressly reserves the right to ·hereafter issue Prior Lien Obligations, without limitation as to principal amount but subject to any terms, conditions or restrictions applicable thereto under law or otherwise. · In addition, the City reserves the right to issue Additional Obligations, without limitation or any restriction or condition being applicable to their issuance under the terms of this Ordinance, payable from and secured by a lien on and pledge of the Net Revenues of the System of equal rank and dignity, and on a parity in all respects, with the lien thereon and pledge thereof securing the payment of the Certificates. (b) It is the intention of this governing body and accordingly hereby recognized and stipulated that the provisions, agreements and covenants contained herein bearing upon the management and operations of the System and the administering and application of revenues 45142591.1 20 - - derived from the operation thereof, shall to the extent possible be harmonized with like provisions, agreements and covenants contained in ordinances authorizing the issuance of Prior Lien Obligations, and to the extent of any irreconcilable conflict between the provisions contained herein and in ordinances authorizing the issuance of Prior Lien Obligations, the provisions, agreements and covenants contained therein shall prevail to the extent of such conflict and be applicable to this Ordinance but in all respects subject to the priority of rights and benefits, if any, conferred thereby to the holders or owners of the Prior lien Obligations. Notwithstanding the above, any change or modification affecting the application of revenues derived from the operation of the System shall not impair the obligation of contract with respect to the pledge of revenues herein made for the payment and security of the Certificates. SECTION 19: Satisfaction of Obligations of City. If the City shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Certificates, at the times and in the manner stipulated in this Ordinance, then the pledge of taxes levied and the lien on and pledge of the Net Revenues of the System under this Ordinance and all covenants, agreements, and other obligations of the City to the Holders shall thereupon cease, terminate, and be discharged and satisfied. Certificates shall be deemed to have been paid within the meaning and with the effect expressed above in this Section when (i) money sufficient to pay in full such Certificates or the principal amount(s) thereof at maturity or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Government Securities shall have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Government Securities have been certified by an independent accounting firm to mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the principal of and interest on such Certificates, or the principal amount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or Government Securities will be made under this Section and no use made of any such deposit which would cause the Certificates to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/ Registrar and all income from Government Securities held in trust by the-Paying Agent/Registrar, or an authorized escrow agent, pursuant to this Section which is not required for the payment of the Certificates, or any principal amount(s) thereof, or interest thereon with respect to which such moneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and interest on the Certificates and remaining unclaimed for a period of four (4) years after the maturity, or applicable redemption date, of the Certificates for which such moneys were deposited and are held in trust to pay, shall upon the request of the City be remitted to the City against a written receipt therefor. Notwithstanding the above and foregoing, any 45142591.1 21 - - remittance of funds from the Paying Agent/Registrar to the City shall be subject to any applicable unclaimed property laws of the State of Texas. SECTION 20: Ordinance a Contract-Amendments. This Ordinance shall constitute a contract with the Holders from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains Outstanding except as permitted in this Section. The City, may, without the consent of or notice to any Holders of the Certificates, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Holders of the Certificates, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the written consent of Holders of. the Certificates holding a majority in aggregate principal amount of the Certificates then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders of Outstanding Certificates, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Certificates, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the· terms of payment of the principal of, premium, if any, or interest on the Certificates, (2) give any preference to any Certificate over any other Certificate, or (3) reduce the aggregate principal amount of Certificates required to be held by Holders for consent to any such amendment, addition, or rescission. · SECTION 21: Notices to Holders -Waivers. Wherever this Ordinance provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and sent by United States Mail, first class postage prepaid, to the address of each Holder appearing in the Security Register at the close of business on the business daY next preceding the mailing of such notice. In any case where notice to Holders is given by mail, neither the failure to .mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Certificates. Where this Ordinance provides for notice in any manner, such notice may be waived in· writing by the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 22: Cancellation. Certificates surrendered for payment, redemption, transfer, or exchange, if surrendered to the Paying Agent/Registrar, shall be promptly canceled by it and, if surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already canceled, shall be promptly canceled by the Paying Agent/Registrar. The City may at any time deliver to the Paying Agent/Registrar for cancellation any Certificates previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Certificates so delivered shall be promptly canceled by the Paying Agent/Registrar. All canceled Certificates held by the Paying Agent/Registrar sha·ll be returned to the City. 45142591.1 22 - - - SECTION 23: Mutilated, Destroyed, Lost and Stolen Certificates. In case any Certificate shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar may execute ,and deliver a replacement Certificate of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Certificate, or in lieu of and in substitution for such destroyed, lost or stolen Certificate, only upon the approval of the City and after (i) the filing by the Holder thereof with the Paying Agent/Registrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such Certificate, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the City and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Certificate shall be borne by the Holder of the Certificate mutilated, or destroyed, lost or stolen. Every replacement Certificate issued pursuant to this Section shall be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Certificates; notwithstanding the enforceability of payment by anyone of the destroyed, lost or stolen Certificates. · The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement and payment of mutilated, destroyed, lost, or stolen Certificates. SECTION 24: Covenants to Maintain Tax-Exempt Status. A. used in this Section, the following terms have the following meanings: Definitions. When "Closing Date" means the date on which the Certificates are first authenticated and delivered to the initial purchasers against payment therefor. "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective.on or before the Closing Date. "Computation Date" has the meaning set forth in Section 1.148-1 (b) of the Regulations. "Gross Proceeds" means any proceeds as defined in Section 1.148-1 (b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1 (c) of the Regulations, of the Certificates. "Investment" has the meaning set forth in Section 1.148-1 (b) of the Regulations. "Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Certificates are invested and which is not acquired to carry out the governmental purposes of the Certificates. 45142591.1 23 - - - "Rebate Amount" has the meaning set forth in Section 1.148-1 (b) of the Regulations. "Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 1 03 of the Internal Revenue Code of 1954, which are applicable to the Certificates. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. "Yield" of (1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (2) the Certificates has the meaning set forth in Section 1.148-4 of the Regulations. B. Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Certificate to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Certificate, the City shall comply with each of the specific covenants in this Section. C. No Private Use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Certificates: (1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Certificates, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Certificates or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. 45142591.1 24 - - D. No Private Loan. Except to the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Certificates to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. E. Not to Invest at Higher Yield. Except to the extent permitted by section 148 of -the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Certificates directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Certificates. · F. Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Certificates to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. G. Information Report The City shall timely file the information required by section 149( e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. H. Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder: ( 1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Outstanding Certificate is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of the Certificates with other money of the City, provided that the City separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. 45142591.1 25 - - (2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Certificates until six years after the final Computation Date. (3) As additional consideration for the purchase of the Certificates by the Purchasers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal rncome tax purposes, the City shall pay to the United States out of the Certificate Fund or its general fund, as permitted by appiicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Certificates equals (i) in the case of a Final Computation Date as defined in Section 1.148- 3(e)(2) of the Regulations, one hundred percent (1 00%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by Section 148{f) of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and {3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter {and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of ahy additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148-3(h) of the Regulations. I. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the Certificates, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection H of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Certificates not been relevant to either party. J. Elections, The City hereby directs and authorizes the Mayor, City Secretary, City Manager, Director of Finance, and Deputy City Manager, individually or jointly, to make . elections permitted or required pursuant. to the provisions of the Code or the Regulations, as they deem necessary or appropriate in connection with the Certificates, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. 45142591.1 26 - SECTION 25: Sale of Certificates. Pursuant to a public sale for the Certificates, the bid submitted by RBC Dain Raushcer Inc. and associates (herein referred to as the "Purchasers"} is declared to be the best bid received producing the lowest true interest cost rate to the City, and the sale of the Certificates to said Purchasers at the price of par and accrued interest to the date of delivery, plus a premium of $-0-, is hereby approved and confirmed. Delivery of the Certificates to the Purchasers shall occur as soon as possible upon payment being made therefor in accordance with the terms of sale. SECTION 26: Official Statement The use of the Preliminary Official Statement, dated February 1, 2002, in the offering and sale of the Certificates is hereby ratified, confirmed and approved in all respects, and the City Council hereby finds that the information and data contained in said Preliminary Official Statement pertaining to the City and its financial affairs is true and correct in all material respects and no material facts have been omitted therefrom which are necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The final Official Statement, which reflects the terms of sale (together with such changes approved by the Mayor, Mayor Pro Tem, City Manager, First Assistant City Manager, Director of Finance or City Secretary, one or more of said officials}, shall be and is hereby in all respects approved and the Purchasers are hereby authorized to use and distribute said final Official Statement, dated February 28, 2002, in the offering, sale and delivery of the Certificates to the public. SECTION 27: Proceeds of Sale. The proceeds of sale of the Certificates, excluding the accrued interest and premium, if any, received from the Purchasers, shall be deposited in a construction fund maintained at the City's depository bank. Pending expenditure for authorized projects and purposes, such proceeds of sale may be invested in authorized investments and any investment earnings realized may be expended for such authorized projects and purposes or deposited in the Certificate Fund as shall be determined by the City Council. Accrued interest and premium, if any, received from the Purchasers as well as all surplus proceeds of sale of the Certificates, including investment earnings, remaining after completion of all authorized projects or purposes shall be deposited to the credit of the Certificate Fund. SECTION 28: Control and Custody of Certificates. The Mayor of the City shall be and is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the State of Texas, including the printing of the Certificates, and . shall take and have charge and control of the Certificates pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers. Furthermore, the Mayor, City Secretary, City Manager, Deputy City Manager, Director of Finance, and Cash and Debt Manager, any one or more of said officials, are hereby authorized and directed to furnish and execute such documents and certifications relating to the City and the issuance of the Certificates, including a certification as to facts, estimates, circumstances and reasonable expectations pertaining to the use and expenditure and investment of the proceeds of the Certificates as may be necessary for the approval of the Attorney General, registration by the Comptroller of Public Accounts and delivery of the Certificates to the purchasers thereof and, together with the City's financial advisor, bond 45142591.1 27 - - -/ counsel and the Paying Agent/Registrar, make the necessary arrangements for the delivery of the Initial Certificate(s) to the purchasers. SECTION 29: Legal Opinion. The obligation of the Purchasers to accept delivery of the Certificates is subject to being furnished a final opinion of Fulbright & Jaworski L.L.P., Attorneys, Dallas, Texas, approving such Certificates as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for such Certificates. A true and torrect reproduction of said opinion is hereby authorized to be printed on the definitive Certificates· or an executed counterpart thereof shall accompany the global Certificates deposited with the Depository Trust Company. SECTION 30: CUS!P Numbers. That CUSIP numbers may be printed or typed on the definitive Certificates. It is expressly provided, however, that the presence or absence of CUSIP numbers on the definitive Certificates shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving said Certificates as to legality are to be held responsible for CUSIP numbers incorrectly printed or typed ori the definitive Certificates. SECTION 31: Benefits of Ordinance. Nothing in this Ordinance, expressed or implied, is intended or shall be construed to confer upon any person other than the City, the Paying Agent/Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision hereof, this Ordinance and all its provisions being intended to be and being for the sole and exclusive benefit of the City, the Paying Agent/Registrar and the Holders. SECTION 32: Inconsistent Provisions. All ordinances, orders or resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to the extent of such conflict and the provisions of this Ordinance shall be and remain controlling as to the matters contained herein. SECTION 33: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 34: Severability. lf any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other circumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 35: Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 45142591.1 28 - ·- - SECTION 36: Construction of Terms. If appropriate in the context of this Ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to include the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders. SECTION 37: Continuing Disclosure Undertaking. (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. "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. "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, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. (b) Annual Reports. The City shall provide annually to each NRMSlR and any SID, within six months after the end of each fiscal year (beginning with the fiscal year ending September 30, 2002) financial information and operating data with respect to the City of the general type included in the final Official Statement approved by Section 26 of this Ordinance, being the information described in Exhibit 8 hereto .. Financial statements to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit 8 hereto and (2) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not available at the time the financial information and operating data must be provided, then the City shall provide unaudited financial statements for the applicable fiscal year to each NRMSJR and any SID with the financial information and operating data and will file the annual audit report, when and if the same becomes available. · If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherw'ise would be required to provide financial information and operating data pursuant to this Section. 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 reference 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 NRMS!R and any SID or filed with the SEC. 45142591.1 29 (c) Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such event is materia! within the meaning of the federal securities laws: 1. 2. 3. 4. 5. 6. CE?rtificates; 7. and 8. 9. 10. Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled draws on credit enhancements reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Modifications to rights of holders of the Certificates; Certificate calls; Oefeasances; Release, substitution, or sale of property securing repayment of the Certificates; 11. Rating changes. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such Section. (d) Limitations, Disclaimers, and Amendments. The City shall be obligated to observe and perform the covenants specified in this Section while, but only while, the City remains an "obligated person" with respect to the Certificates within the meaning of the Rule, except that the City in any event will give the notice required by subsection (c) hereof of any Certificate calls and defeasance that cause the City to be no longer such an "obligated person." The provisions of this Section are for the sole benefit of the Holders and beneficial owners of the Certificates, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be ·relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON fTS PART; OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY / 45142591.1 30 - SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Section shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances resulting from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Holders and beneficial owners of the Certificates. The provisions of this Section may also be amended from time to time or repealed by the City if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such provisions are invalid, but only if and to the extent that reservation of the City's right to do so would not prevent underwriters of the initial public offering of the Certificates from lawfully purchasing or selling Certificates in such offering. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (b) an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. SECTION 38: Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by V.T.C.A., Government Code, Chapter 551, as amended. 45142591.1 31 SECTION 39: Effective Date. This Ordinance shall take effect and be in full force from and after its adoption on the date shown below in accordance with V.T.C.A., Government Code, Section 1201.028. PASSED AND ADOPTED, this February 28, 2002. CITY OF LUBBOCK, TEXAS ~~ Mayor ATTEST: (City Seal) APPROVED AS TO CONTENT: 45142591.1 32 EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT -See Document Number 5 - - - DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 37 of this Ordinance. Annual Financial Statements and Operating Data EXHIBIT 8 to Ordinance The financial information and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: 1. The financial statements of the City appended to the Official Statement as Appendix 8, but for the most recently concluded fiscal year. 2. The information under Tables 1 through 6 and 8A through 20. Accounting Principles · The accounting principles referred to in such Section are the generally accepted accounting principles as applicable to governmental units as prescribed by The Government Accounting Standards Board. 45142591.1 5 - - - PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of February 28, 2002 (this "Agreement"), by and between the City of Lubbock, Texas (the "Issuer"), and JPMorgan Chase Bank, a New York banking corporation organized and existing under the laws of the State of New York and authorized to do business in the State of Texas, or its successors, RECITALS WHEREAS, the Issuer has duly authorized and provided for the execution and delivery of its "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002" (the "Securities"), dated February 15, 2002, and such Securities are scheduled to be delivered to the initial purchasers thereof on or about April 4, 2002; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR. Section 1.01 Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities, and, as Paying Agent for the Securities, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof; all in accordance with this Agreement and the "Bond, Resolution" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities and, as Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the "Bond Resolution". The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02 Compensation. 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 attached hereto for the first year of this Agreement and thereafter 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. 45145655.1 - - 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 TWO DEFINITIONS Section 2.01 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the designated office of the Bank in Dallas, Texas at the address shown in Section 3.01 hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Bond Resolution" means the resolution, order, or ordinance of the governing body of the Issuer pursuant to which the Securities are issued, certified by the Secretary or any other officer of the Issuer and delivered to the Bank. "Fiscal Year'' means the fiscal year of the Issuer, eriding September 30th. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and "Issuer Order" means a written request or order signed in the name of the Issuer by the Mayor, Mayor Pro Tem, City Manager, Deputy City Manager, Director of Finance, Cash and Debt Manager, or City Secretary, any one or more of said officials, and delivered to the Bank. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "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 Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Resolution). 45145655.1 ~2- "Redemption Date" when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Bond Resolution. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfers of Securities. "Stated Maturity" means the date specified in the Bond Resolution the principal of a Security is scheduled to be due and payable. Section 2.02 Other Definitions. The terms "Bank," "Issuer," and "Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01 Duties of Paying Agent. As Paying Agent, the Bank shall, provided adequate collected funds have. been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the following address: P. 0. Box 2320, Dallas, Texas 75221-2320 or 2001 Bryan Street, gth Floor, Dallas, Texas 75201, Attention: Operations. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and making payment thereof to the Holders of the Securities (or their Predecessor Securities) on the Record Date. All payments of principal and/or interest on the Securities to the registered owners shall be accomplished (1) by the issuance of checks, payable to the registered owners, drawn on the paying agent account provided in Section 5.05 hereof, sent by United States mail, first class, postage prepaid, to the address appearing on the Security Register or (2) by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02 Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities at the dates specified in the Bond Resolution. 45145655.1 -3- - - ARTICLE FOUR REGISTRAR Section 4.01 Security Register-Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register") for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and ·containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in the Security Register. Every Security 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 by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re-registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02 Certificates. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in· safekeeping pending their use and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other governments or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03 Form of Security Register. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities 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 Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04 List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. 45145655.1 -4- - - - The Bank will not release or disclose the contents of the Security 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 court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05 Return of Cancelled Certificates. The Bank will, at such reasonable intervals as it determines, surrender to the Issuer, Securities in lieu of which or in exchange for which other Securities have been issued, or which have been paid. Section 4.06 Mutilated, Destroyed, Lost or Stolen Securities. The Issuer hereby instructs the Bank, subject to the provisions of Section 23 of the Bond Resolution, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the same does not result in an overissuance. In case any Security shall be mutilated, or destroyed, lost or stolen, the Bank may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only upon the approval of the Issuer and after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associatedwith such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07 Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE ·THE BANK Section 5.01 Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02 Reliance on Documents, Etc. (a} The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b} The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or 45145655.1 -5- - - - 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 resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, 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 Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken; suffered, or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank . . Section 5.03 Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities . shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04 May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05 Moneys Held by Bank-Paying Agent Account/Collateralization. Money deposited by the Issuer with the Bank of the principal (or Redemption Price, if applicable) of or interest on any Securities shall be segregated from other funds of the Bank and the Issuer and shall be held in trust for the benefit of the Holders of such Securities. All money deposited with the Bank hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. Amounts held by the Bank which represent principal of and interest on the Securities remaining unclaimed by the owner after the expiration of three years from the date such amounts have become due and payable shall be reported and disposed of by the Bank in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. The Bank shall have noliability by virtue of actions taken in compliance with this provision. The Bank is not obligated to pay interest on any money received by it hereunder. 45145655.1 -6- - - - - This Agreement relates solely to money deposited for the purposes described herein, and the parties agree that the Bank may serve as depository for other funds of the Issuer, act as trustee under indentures authorizing other bond transactions of the Issuer, or act in any other capacity not in conflict with its duties hereunder. Section 5.06 Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07 Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where either the Bank Office or the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. Section 5.08 DT Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements", which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01 Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. 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 on page 9. 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. 45145655.1 -7- - - - Section 6.06 Severability. In case any prov1s1on herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 6.07 Benefits of Agreement Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.08 Entire Agreement. This Agreement and the Bond Resolution constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between this Agreement and the Bond Resolution, the Bond Resolution shall govern. Section 6.09 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.10 Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Securities, to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.11 Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. 45145655.1 -8- ' - - - - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. [SEAL] Attest: Title: vf (CITY SEAL) Attest: 45145655.1 JPMORGAN CHASE BANK BY:tlnd#i.e d~ Title:mf Address: 2001 Bryan Street, 1 01h Floor Dallas, Texas 75201 CITY OF LUBBOCK, TEXAS BY:~~ Mayor c Address: P. 0. Box 2000 Lubbock, Texas 79457 -9- - - - City of Lubbock, Texas Tax & Sewer System Surplus Revenue Certificates of Obligation, Series 2002 Fee Schedule BOND PAYING AGENT Annual Administrative Charge FEES AND EXPENSES Bond Calls Account Termination Fee (Minimum) Audit Confirmations (per issue) 550.00 300.00 1,000.00 75.00 Split Maturity Refunding Costs 500.00 min/350.00 per maturity exceeding 1 matu Out-of-pocket expenses are assessed at 6% of invoice cost in addition to specifically identifiable transactions described above. Expenses covered may include, but are not limited to, counsel fees, travel expenses, printing cost, long distance telephone calls, stationery, and forms. Fees are subject to change. All fees quoted are subject to our review and acceptance, and that of our counsel, of the documeQts governing this issue. JPMORGAN CHASE BANK 6 Honorable Mayor and City Council City ofLubbock, Texas Members of the City Council: OFFICIAL BID FORM February 28, 2002 Reference is made to your Official Statement and Notice of Sale and Bidding Instructions, dated February 1, 2002 of $1,545,000 CITY OF LUBBOCK, TEXAS TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002, both of which constitute a part hereof. For your legally issued Sewer Certificates, as described in said Notice of Sale and Bidding Instructions and Official Statement, we will pay you par and accrued· interest from date of issue to date of delivery to us, plus a cash premium of$ -e= for Sewer Certificates maturing and bearing interest as follows: · Maturity Principal Interest Maturity Principal Interest (Februaa 15) Amount Rate (F ebruaa 15) Amount Rate 2003 $ 5,000 t./. oo % 2013 $ 80,000 f.J7s-% 2004 50,000 ~.OD % 2014 80,000 ~.s-o % 2005 50,000 "· () () % 2015 85,000 i./. S'O % 2006 55,000 ':l 00 % 2016 90,000 '/. ~Q % 2007 55,000 ':/...00 % 2017 95,000 l/. 75" % 2008 60,000 'll :Z.S' % 2018 100,000 t/.z.s: % 2009 60,000 5";, ()0 % 2019 I 10,000 s-: ()(!) % 2010 65,000 5.00 % 2020 115,000 s-.oo % 2011 70,000 :,-.oo % 2021 120,000 .$". oo 0/o 2012 75,000 . "· 7.5"" % 2022 125,000 s: 00 % Of the principal maturities set forth in the table above, term certificates have been created as indicated in the following table (which may include multiple term certificates, one term certificate or no term certificate if none is indicated). For those years which have been combined into a term certificate, the principal amount shown in the table above shall be the mandatory sinking fund redemption amounts in such years except that the amount shown in the year of the term certificate maturity date shall mature in such year. The term certificates created are as follows: Maturitv Date Year of First Mandatory Redemption $ $ $ $ Principal Amount Our calculation (which is not a part of this bid) of the interest cost from the above is: TRUE INTEREST COST RATE Interest Rate ______ % ______ % ______ % ______ % ______ % ______ % We are having the Sewer Certificates of the following maturities ,./() ./ C insured by ____________ at a premium of$ said premium to be paid bv the Purchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the City. CJ,-_b r-: .J-C.:.o . The Initial Sewer Certificates shall be registered in the name of ~c c:::-, which will, upon payment for the Sewer Certificates, be cancelled by the Paying Agent/Registrar. The Sewer Certificates will then be registered in the name of Cede & Co. (DTC's partnership nominee), under the Book-Entry-Only System. · A bank cashier's check or certified check of the F ~ 0 'S I Bank, AU & .,-I tV, in the amount of$30,900, which represents our Good Faith Deposit (is attached hereto) or (has been made available to you prior to the opening of this bid), and is submitted in accordance with the terms as set forth in the Official Statement and Notice of Sale and Bidding Instructions. We agree to accept delivery of the Sewer Certificates utilizing the Book-Entry-Only System through DTC and make payment for the Initial Sewer Certificate in immediately available funds in the Corporate Trust Division, JPMorgan Chase Bank, Dallas, Texas, not later than 10:00 AM, CST, on April 4, 2002, or thereafter on the date the Sewer Certificates are tendered for delivery, pursuant to the terms set forth in the Notice of Sale and Bidding Instructions. It wiii be the obligation of the purchaser of the Sewer Certificates to complete the DTC Eligibility Questionnaire. The undersigned agrees to complete, execute, and deliver to the City, at least six business days prior to delivery of the Sewer Certificates, a certificate relating to the "issue price" of the Sewer Certificates in the form and to the effect accompanying the Notice · of Sale and Bidding Instructions, with such -changes thereto as maybe"ilcceptable to the City. We agree to provide in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day after tbe award. Respectfully submitted, Syndicate Members: Name of Underwriter or Manager . ..Jo'{ CE l+ot-bFL Authorized Representative CJ.. t4 _q ~q-1 goo Phone Number ~ ACCEPIANCECLAUSE The above and foregoing bid is hereby in all things accepted by the City of Lubbock, Texas, subject to and in accordance with the Notice of Sale and Bidding Instructions, this the 28th day of February, 2002. ATTEST: £..gj.ce _,(: --< ... . I\,2+-" -.. Cicy Secretary<::;;: City of Lubbock, Texas 7 - ~ - - CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK § § § § § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 281h day of February, 2002, the City Council of the City of Lubbock, Texas, convened in regular session at its regular meeting place in the City Hall of said City; the duly constituted members of the Council being as follows: WINDY SITTON MAYOR ALEX "TY" COOKE ) MAYOR PROTEM VICTOR HERNANDEZ ) T. J. PATTERSON ) COUNCILMEMBERS DAVID NELSON ) FRANK W. MORRISON ) MARC McDOUGAL ) all of said persons were present at said meeting, except the following: --------- Among other business considered at said meeting, the attached ordinance entitled: "AN ORDINANCE authorizing the issuance of 'CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002'; specifying the terms and features of said certificates; providing for the payment of said certificates of obligation by the levy of an ad valorem tax upon all taxable property within the City and a lien on and pledge of the net revenues from the operation of the City's Waterworks System; and resolving other matters incident and related to the issuance, sale, security, payment and delivery of said certificates, including the approval of a Paying Agent/Registrar Agreement and the approval and distribution of an Official Statement pertaining thereto; and providing an effective date." was introduced and submitted to the Council for final passage and adoption. After presentation and due consideration of the Ordinance, and upon a motion being made by David Nelson and seconded by Alex "Ty" Cooke the Ordinance was duly passed and adopted to be effective immediately in accordance with the Section 1201.028 by the following vote: 7 voted "For" __ o_ voted "Against" 0 abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 45145941.1 - 2. The attached Ordinance is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meetings are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of each meeting was given to each member of the Council; and that said meetings and the deliberation of the aforesaid public business were open to the public and written notice of said meetings, including the subject of the above entitled Ordinance, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. IN WITNESS WHEREOF, I .have hereunto signed my name officially and affixed the seal of said City, this the 2sth day of February, 2002. ClSiCretary ~· City of Lubbock, Texas · (City Seal) 45145941.1 -2- - - ·ORDINANCE NO. 2002-00027 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002"; specifying the terms and features of said certificates; providing for the payment of said certificates of obligation by the levy of an ad valorem tax upon all taxable property within the City and a lien on and pledge of the net revenues from the operation of the City's Waterworks System; and resolving other matters incident and related to the issuance, sale, security, payment and delivery of said certificates, including the approval of a Paying Agent/Registrar Agreement and the approval and distribution of an Official Statement pertaining thereto; and providing an effective date. WHEREAS, notice of the City Council's intention to issue certificates of obligation in the maximum principal amount of $6,450,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Waterworks System, including recreational improvements to Lake Alan Henry reservoir and (ii) professional services rendered in connection with such projects and the financing thereof, has been duly published in the Lubbock Avalanche-Journal, a newspaper hereby found and determined to be of general circulation in the City of Lubbock, Texas, on January 13, 2002 and January 20, 2002, the date of the first publication of such notice being not less than fifteen (15) days prior to the tentative date stated therein for the passage of this Ordinance; and WHEREAS, no petition, protesting the issuance of such certificates and bearing valid petition signatures of at least 5% of the qualified voters of the City, has been filed with the City Secretary, any member of the Council or any other official of the City on or prior to the date of the passage of this Ordinance; and WHEREAS, the Council hereby finds and determines the certificates of obligation described in the aforesaid notice should be issued and sold at this time in the amount and manner as hereinafter provided; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION 1: Authorization-Designation-Principal Amount-Purpose. Certificates of obligation of the City shall be and are hereby authorized to be issued in the aggregate principal amount of $6,450,000 to be designated and bear the title "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002" (the "Certificates"), for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Waterworks System, including recreational improvements to Lake Alan Henry reservoir and (ii) professional services rendered in connection with such projects and the financing thereof, pursuant to authority conferred by and in conformity with the Constitution and laws of the State of Texas, including V.T.C.A., Local Government Code, Subchapter C of Chapter 271. 45142590.2 - SECTION 2: Fully ·Registered Obligations -· Authorized Denominations-Stated Maturities-Date. The Certificates are issuable in fully registered form only; shall be dated February 15, 2002 {the "Certificate Date") and shall be in denominations of $5,000 or any integral multiple thereof (within a Stated Maturity) and the Certificates shall become due and payable on February 15 in each of the years and in principal amounts (the "Stated Maturities") and bear interest at the per annum rate(s) in accordance with the following schedule: Year of Principal Interest Stated Maturity Amount Rate(s) 2003 $ 15,000 4.000% 2004 200,000 4.000% 2005 210,000 4.000% 2006 220,000 4.000% 2007 235,000 4.000% 2008 245,000 4.000% 2009 260,000 5.000% 2010 275,000 5.000% 2011 290,000 4.250% 2012 305,000 4.250% 2013 325,000 4.375% 2014 340,000 4.500% 2015 360,000 4.500% 2016 380,000 4.625% 2017 405,000 4.750% 2018 425,000 4.850% 2019 450,000 5.000% 2020 475,000 5.000% 2021 505,000 5.000% 2022 530,000 5.000% The Certificates shall bear interest on the unpaid principal amounts from the Certificate Date at the per annum rate(s) shown above in this Section (calculated on the basis of a 360-day year of twelve 30-day months). Interest on the Certificates shall be payable on February 15 and August 15 in each year, commencing February 15, 2003. SECTION 3: Terms of Payment-Paying Agent/Registrar. The principal of, premium, if any, and the interest on the Certificates, due and payable by reason of maturity, redemption or otherwise, shall be payable only to the registered owners or holders of the Certificates (hereinafter called the "Holders") appearing on the registration and transfer books maintained by the Paying Agent/Registrar and the payment thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without exchange or collection charges to the Holders. 45142590.2 2 The selection and appointment of JPMorgan Chase Bank to serve as Paying Agent/Registrar for the Certificates is hereby approved and confirmed. Books and records ~ relating to the registration, payment, exchange and transfer of the Certificates (the "Security Register'') shall at all times be kept and maintained on behalf of the City by the Paying Agent/Registrar, all as provided herein, in accordance with the terms and provisions of a ·"Paying Agent/Registrar Agreement", substantially in the form attached hereto as Exhibit A and such reasonable rules and regulations as the Paying Agent/Registrar and the City may prescribe. The Mayor and City Secretary of the City are hereby authorized to execute and ~ deliver such Agreement in connection with the delivery of the Certificates. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Certificates are paid and discharged, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice thereof to be sent to each Holder by United States Mail, first class postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. - Principal of and premium, if any, on the Certificates shall be payable at the Stated Maturities or the redemption thereof only upon presentation and surrender of the Certificates to the Paying Agent/Registrar at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest on the Certificates shall be paid by the Paying Agent/Registrar to the Holders whose name appears in the Security Register at the close of business on the Record Date (the last business day of the month next preceding each interest payment date) and payment of such interest shall be (i) by check sent United States Mail, first class postage prepaid, to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder. If the date for the payment of the principal of or interest on the Certificates shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the City where the Designated Payment/Transfer Office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day when banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. In the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/ Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business next preceding the date of mailing of such notice. 45142590.2 3 - - SECTION 4: Redemption. (a) Optional Redemption. The Certificates having Stated Maturities on and after February 15, 2013, shall be subject to redemption prior to maturity, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2012 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. (b) Exercise of Redemption Option. At least forty-five (45} days prior to a redemption date for the Certificates (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar}, the City shall notify the Paying Agent/Registrar of the decision to redeem Certificates, the principal amount of each Stated Maturity to be redeemed, and the date of redemption therefor. The decision of the City to exercise the right to redeem Certificates shall be entered in the minutes of the governing body of the City. {c) Selection of Certificates for Redemption. If less than all Outstanding Certificates of the same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Certificates as representing the number of Certificates Outstanding which is obtained by dividing the principal amount of such Certificates by $5,000 and shall select the Certificates, or principal amount thereof, to be redeemed within such Stated Maturity by lot. (d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Certificates, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the City and at the City's expense, to each Holder of a Certificate to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemption shall (i) specify the date of redemption for the Certificates, (ii) identify the Certificates to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, {iii} state the redemption price, {iv) state that the Certificates, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and (v} specify that payment of the redemption price for the · Certificates, or the principal amount thereof to be redeemed, shall be made at the Designated Payment/Transfer Office of the Paying Agent/Registrar only upon presentation and surrender thereof by the Holder. If a Certificate is subject by its terms to prior redemption and has been called for redemption and notice of redemption thereof has been duly given as hereinabove provided, such Certificate (or the principal amount thereof to be redeemed) shall become due and payable and interest thereon shall cease to accrue from and after the redemption date therefor; provided moneys sufficient for the payment of such Certificate (or of the principal amount thereof to be redeemed) at the then applicable redemption price are held for the purpose of such payment by the Paying Agent/Registrar. 45142590.2 4 - - SECTION 5: Registration -Transfer -Exchange of. Certificates-Predecessor Certificates. The Paying Agent/Registrar shall obtain, record, and maintain in the Security Register the name and address of each and every owner of the Certificates issued under and pursuant to the provisions of this Ordinance, or if appropriate, the nominee thereof. Any Certificate may be transferred or exchanged for Certificates of other authorized denominations by the Holder, in person or by his duly authorized agent, upon surrender of such Certificate to the Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. Upon surrender of any Certificate (other than the Initial Certificate(s) authorized in Section 8 hereof) for transfer at the Designated Payment/Transfer Office of the Paying Agent/Registrar, the Paying Agent/Registrar shall register and deliver, in the name of the designated transferee or transferees, one or more new Certificates of authorized denominations and having the same Stated Maturity and of a like aggregate principal amount as the Certificate or Certificates surrendered for transfer. At the option of the Holder, Certificates (other than the Initial Certificate(s) authorized in Section 8 hereof) may be exchanged for other Certificates of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Certificates surrendered for exchange, upon surrender of the Certificates to be exchanged at the Designated Payment/Transfer Office of the Paying Agent/ Registrar. Whenever · any Certificates are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new Certificates to the Holder requesting the exchange. All Certificates issued in any transfer or exchange of Certificates shall be delivered to the Holders at the Designated Payment/Transfer Office of the Paying Agent/Registrar or sent by United States Mail, first class, postage prepaid to the Holders, and, upon the registration and delivery thereof, the same shall be the valid obligations of the City, evidencing the same obligation to pay, and entitled to the same benefits under this Ordinance, as the Certificates surrendered in such transfer or exchange. All transfers or exchanges of Certificates pursuant to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. 45142590.2 5 Certificates canceled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be "Predecessor Certificates," evidencing all or a portion, as the case may be, of the same obligation to pay evidenced by the new Certificate or Certificates registered and delivered in the exchange or transfer therefor. Additionally, the term "Predecessor Certificates" shall include any mutilated, lost, destroyed, or stolen Certificate for which a replacement Certificate has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 23 hereof and such new replacement Certificate shall be deemed to evidence_ the same obligation as the mutilated, lost, destroyed, or stolen Certificate. Neither the City nor the Paying Agent/Registrar shall be required to issue or transfer to an assignee of a Holder any Certificate called for redemption, in whole or in part, within 45 days of the date fixed for the redemption of such Certificate; provided, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a Certificate called for redemption in part. SECTION 6: Book-Entry Only Transfers and Transactions. Notwithstanding the provisions contained in Sections 3, 4 and 5 hereof relating to the payment and transfer/exchange of the Certificates, the City hereby approves and authorizes the use of "Book-Entry Only" securities clearance, settlement and transfer system provided by The Depository Trust Company (DTC), a limited purpose trust company organized under the laws of the State of New York, in accordance with the operational arrangements referenced in the Blanket Issuer Letter of Representations by and between the City and DTC (the "Depository Agreement"). Pursuant to the Depository Agreement and the rules of DTC, the Certificates shall be deposited with DTC who shall hold said Certificates for its participants (the "DTC Participants") and, while the Certificates are held by DTC under the Depository Agreement, the Holder of the Certificates on the Security Register for all purposes, including payment and notices, shall be Cede & Co., as nominee of DTC, notwithstanding the ownership of each actual purchaser or owner of each Certificate (the "Beneficial Owners") being recorded in the records of DTC and DTC Participants. In the event DTC determines to discontinue serving as securities depository for the Certificates or otherwise ceases to provide book-entry clearance and settlement of securities transactions in general or the City determines that DTC is incapable of properly discharging its duties as securities depository for the Certificates, the City covenants and agrees with the Holders of the Certificates to cause Certificates to be printed in definitive form and provide for the Certificate certificates to be issued and delivered to DTC Participants and Beneficial Owners, as the case may be. Thereafter, the Certificates in definitive form shall be assigned, transferred and exchanged on the Security Register maintained by the Paying Agent/Registrar and payment of such Certificates shall be made in accordance with the provisions of Sections 3, 4 and 5 hereof. 45142590.2 6 - - - - SECTION 7: Execution-Registration. The Certificates shall be executed on behalf of the City by the Mayor under its seal reproduced or impressed thereon and countersigned by the City Secretary. The signature of said officers on the Certificates may be manual or facsimile. Certificates bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the Certificate Date shall be deemed to be duly executed on behalf of the City, notwithstanding that one or more of the individuals executing the same shall cease to be such officer at the time of delivery of the Certificates to the initial purchaser(s) and with respect to Certificates delivered in subsequent exchanges and .transfers, all as authorized and provided in V.T.C.A., Government Code, Chapter 1201. No Certificate shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Certificate either a certificate of registration substantially in the form provided in Section 9C, manually executed by the Comptroller of Public Accounts of the State of Texas, or his duly authorized agent, or a certificate of registration substantially in the form provided in Section 90, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar, and either such certificate duly signed upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly certified, registered and delivered. SECTION 8: Initial Certificate(s). The Certificates herein authorized shall be initially issued either (i) as a single fully registered certificate in the total principal amount of $6,450,000 with principal installments to become due and payable as provided in Section 2 hereof and numbered T-1, or (ii) as multiple fully registered certificates, being one certificate for each year of maturity in the applicable principal amount and denomination and to be numbered consecutively from T-1 and upward (hereinafter called the "Initial Certificate(s)") and, in either case, the Initial Certificate(s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Certificate(s) shall be the Certificates submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any time after the delivery of the Initial Certificate(s), the Paying Agent/Registrar, pursuant to written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial Certificate(s) delivered hereunder and exchange therefor definitive Certificates of authorized denominations, Stated Maturities, principal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser( s ), or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. 45142590.2 7 -SECTION 9: Forms. A. Forms Generally. The Certificates, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Registration Certificate of Paying Agent/Registrar, and the form of Assignment to be printed on each of the Certificates, shall be substantially in the forms set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including insurance legends in the event the Certificates, or any maturities thereof, are purchased with insurance and any reproduction of an opinion of counsel) thereon as may, consistently herewith, be established by the City or determined by the officers executing such Certificates as evidenced by their execution. Any portion of the text of any Certificates may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. The definitive Certificates and the Initial Certificate(s) shall be printed, lithographed, or engraved, typewritten, photocopied or otherwise reproduced in any other similar manner, all as determined by the officers executing such Certificates as evidenced by their execution thereof. B. REGISTERED NO. __ _ Form of Certificates. UNITED STATES OF AMERICA STATE OF TEXAS CITY OF LUBBOCK, TEXAS, REGISTERED $ ___ _ TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATE OF OBLIGATION, Certificate Date: February 15, 2002 Registered Owner: Principal Amount: SERIES 2002 Interest Rate: % Stated Maturity: CUSIP NO: DOLLARS The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner named above, or the registered assigns thereof, on the Stated Maturity date specified above the Principal Amount stated above (or so much thereof as shall not have been paid upon prior redemption) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid Principal Amount hereof from the Certificate Date at the per annum rate of interest specified above; such interest being payable on February 15 and August 15 of each 45142590.2 8 - - year, commencing February 15, 2003. Principal of this Certificate is payable at its Stated Maturity or redemption to the registered owner hereof, upon presentation and surrender, at the Designated Payment/Transfer Office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor; provided, however, while this Certificate is registered to Cede & Co., the payment of principal upon a partial redemption of the principal amount hereof may be accomplished without presentation and surrender of this Certificate. Interest is payable to the registered owner of this Certificate (or one or more Predecessor Certificates, as defined in the Ordinance hereinafter referenced) whose name appears on the "Security Register'' maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register on the Record Date or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Certificate shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Certificate is one of the series specified in its title issued in the aggregate principal amount of $6,450,000 (herein referred to as the "Certificates") for the purpose of paying contractual obligations to be incurred for {i) improvements and extensions to the City's Waterworks System, including recreational improvements to Lake Alan Henry reservoir and {ii) professional services rendered in connection with such projects and the financing thereof, under and in strict conformity with the Constitution and laws of the State of Texas, particularly V.T.C.A., Local Government Code, Subchapter C of Chapter 271, and pursuant to an Ordinance adopted by the governing body of the City (herein referred to as the "Ordinance"). The Certificates maturing on and after February 15, 2013, may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof {and if within a Stated Maturity by lot by the Paying Agent/Registr-ar), on February 15, 2012, or on any date thereafter, at the redemption price of par, together with accrued interest to the date of redemption. At least thirty days prior to a redemption date, the City shall cause a written notice of such redemption to be sent by United States Mail, first class postage prepaid, to the registered owners of each Certificate to be redeemed at the. address shown on the Security Register and subject to the terms and provisions relating thereto contained in the Ordinance. If a Certificate {or any portion of its principal sum) shall have been duly called for redemption and notice of such redemption duly given, then upon the redemption date such Certificate (or the portion of its principal sum to be redeemed) shall become due and payable, and, if moneys for the payment of the redemption price and the interest accrued on the principal amount to be redeemed to the date of redemption are held for the purpose of such payment by the Paying Agent/Registrar, interest shall cease to accrue and be payable from and after the redemption date on the principal amount redeemed. 45142590.2 9 - - In the event a portion of the principal amount of a Certificate is to be redeemed and the registered owner is someone other than Cede & Co., payment of the redemption price of such prinCipal amount shall be made to the registered owner only upon presentation and surrender of such Certificate to the Designated Payment/Transfer Office of the Paying Agent/Registrar, and a new Certificate or Certificates of like maturity and interest rate in any authorized denominations provided by the Ordinance for the then unredeemed balance of the principal sum thereof will be issued to the registered owner, without charge. If a Certificate is selected for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer such Certificate to an assignee of the registered owner within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the registered owner of the unredeemed balance of a Certificate redeemed in part. The Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and, together with the Previously Issued Obligations (as defined in the Ordinance), are additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Ordinance) of the City's Waterworks System (the "System"), such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of "Prior Lien Obligations" {as defined in the Ordinance) hereafter issued by the City. In the Ordinance, the City reserves and retains the right to issue Prior Lien Obligations while the Certificates are outstanding without limitation as to principal amount but subject to any terms, conditions or restrictions as may be applicable thereto under law or otherwise, as well as the right to issue Additional Obligations (as defined in the Ordinance). · Reference is hereby made to the Ordinance, a copy of which is on file in the Designated Payment/Transfer Office of the Paying Agent/Registrar, and to all the provisions of which the Holder hereof by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the tax levied for the payment of the Certificates; the nature and extent of the pledge of the Net Revenues securing the payment of the Certificates; the terms and conditions relating to the transfer or exchange of this Certificate; the conditions upon which the Ordinance may be amended or supplemented with or without the consent of the Holders; the rights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which the tax levy and the pledge of the Net Revenues and covenants made in the Ordinance may be discharged at or prior to the maturity of this Certificate, and this Certificate deemed to be no longer Outstanding thereunder; and for the other terms and provisions contained therein. Capitalized terms used herein have the meanings assigned in the Ordinance. · 45142590.2 10 - This Certificate, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only upon its presentation and surrender at the Designated Payment/Transfer Office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent. When a transfer on the Security Register occurs, one or more fully registered Certificates of authorized denominations and of the same aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, may treat the registered owner hereof whose name appears on the Security Register (i) on the Record Date as the· owner entitled to payment of interest hereon, (ii) on the date of surrender of this Certificate as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. It is hereby certified, recited, represented and covenanted that the City is a body corporate and political subdivision duly organized and legally existing under and by virtue of the Constitution and laws of the State of Texas; that the issuance of the Certificates is duly authorized by law; that all acts, conditions and things required to exist and be done precedent to and in the issuance of the Certificates to render the same lawful and valid obligations of the City have been properly done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Certificates do not exceed any constitutional or statutory limitation; and that due provision has been made for the payment of the principal of and interest on the Certificates as aforestated. In case any provision in this Certificate or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications shall not in any way be affected or impaired thereby. The terms and provisions of this Certificate and the Ordinance shall be construed in accordance with and shall be governed by the laws of the State of Texas. 45142590.2 11 ---------------------------------·------··------------- - IN WITNESS WHEREOF, the City Council of the City has caused this Certificate to be duly executed under the official seal of the City as of the Certificate Date. CITY OF LUBBOCK, TEXAS Mayor COUNTERSIGNED: City Secretary {SEAL) 45142590.2 12 ... ' - C. * Form of Registration COertificate of ·comptroller of Public Accounts to Appear on Initial Certificate(s) only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS THE STATE OF TEXAS ) .) ) ) REGISTER NO.------- I HEREBY CERTIFY that this Certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this-------- (SEAL) Comptroller of Public Accounts of the State of Texas *NOTE TO PRINTER:Do not print on definitive Certificates D. Form of Certificate of Paying AgenURegistrar to Appear on Definitive Certificates. REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR ~ This Certificate has been duly issued and registered under the provisions of the within-mentioned Ordinance; the certificate or certificates of the above entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying 1 AgenURegistrar. The designated offices of the Paying AgenURegistrar located in Dallas, Texas, is the "Designated PaymenUTransfer Office" for this Certificate. Registration Date: 45142590.1 13 JP MORGAN CHASE BANK, as Paying AgenURegistrar Authorized Signature - - - - E. Form of Assignment ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee:) _________ _ (Social Security or other identifying number the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Certificate on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature guaranteed: NOTICE: The signature on this assignment must correspond with the name of the registered owner as it appears on the face of the within Certificate in every particular. F. The Initial Certificate(s) shall be in the form set forth in paragraph B of this Section, except that the form of a single fully registered Initial Certificate shall be modified as follows: (i) immediately under the name of the certificate the headings "Interest Rate II and "Stated Maturity "shall both be omitted; (ii) paragraph one shall read as follows: Registered Owner: Principal Amount: Dollars The City of Lubbock (hereinafter referred to as . the "City"), a body corporate and municipal corporation in the County . of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner named above, or the registered assigns thereof, the Principal Amount hereinabove stated, on February 15 in each of the years and in principal installments in accordance with the following schedule: 45142590.1 YEAR PRINCIPAL INSTALLMENTS INTEREST RATE (Information to be inserted from schedule in Section 2 hereof). 14 - (or so much principal thereof as shall not have been prepaid prior to maturity) and to pay interest on the unpaid Principal Amount hereof from the Certificate Date at the per annum rates of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 15 and August 15 of each year, commencing February 15, 2003. Principal installments of this Certificate are payable in the year of maturity or on a prepayment date to the registered owner hereof by JPMorgan Chase Bank (the "Paying Agent/Registrar"), upon presentation and surrender, at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest is payable to the registered owner of this Certificate whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date hereof and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/ Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Certificate shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payr:nent is legal tender for the payment of public and private debts. SECTION 10: Definitions. For purposes of this Ordinance and for clarity with respect to the issuance of the Certificates, and the levy of taxes and appropriation of Net Revenues therefor, the following words or terms, whenever the same appear herein without qualifying language, are defined to mean as follows: (a) The term "Additional Obligations" shall mean tax and revenue obligations hereafter issued which by their terms are payable from ad valorem taxes and additionally payable from and secured by a parity lien on and pledge of the Net Revenues of the System of equal rank and dignity with the lien and pledge securing the payment of the Previously Issued Obligations and the Certificates. · '(b) The term "Certificates" shall mean · $6.450,000 "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002" authorized by this Ordinance. (c) The term "Certificate Fund" shall mean the special Fund created and established under the provisions of Section 11 of this Ordinance. (d) The term "Collection Date" shall mean, when reference is being made to the levy and collection of annual ad valorem taxes, the date annual ad valorem taxes levied each year by the City become delinquent. (e) The term "Fiscal Year" shall mean the annual financial accounting period used with respect to the operations of the System now ending on September 30th of each year; provided, however, the City Council may change, by ordinance duly passed, such annual financial accounting 45142590.1 15 period to end on another date if such change is found and determined to be necessary for budgetary or other fiscal purposes. (f) The term "Government Securities" shall mean (i) direct noncallable obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, (ii) noncallable obligations of an . agency or instrumentality of the United States, including obligations unconditionally guaranteed or insured by the agency or instrumentality and on the date of their acquisition or purchase by the City are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and on the date of their acquisition or purchase by the City, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. (g) The term "Gross Revenues" shall mean, with respect to any period, all income, revenues and receipts received from the operation and ownership of the System. · (h) The term "Net Reyenues" shall mean the Gross Revenues of the System, with respect to any period, after deducting the System's Operating and Maintenance Expenses during such period. (i) The term "Operating and Maintenance Expenses" shall mean all reasonable and necessary expenses directly related and attributable to the operation and maintenance of the System, including, but not limited to, the cost of insurance, the purchase and carrying of stores, materials, and supplies, the payment of salaries and labor, and other expenses reasonably and properly charged, under generally accepted accounting principles, to the operation and maintenance of the System. 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". G) The term "Outstanding" when used in this Ordinance with respect to Certificates means, as of the date of determination, all Certificates theretofore issued and delivered under this Ordinance, except: ( 1) those Certificates canceled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Certificates deemed to be duly paid by the City in accordance with the provisions of Section 19 hereof; and 45142590.1 16 - - - ·A (3) those Certificates that have· been mutilated, destroyed, lost, or stolen and replacement Certificates have been registered and delivered in lieu thereof as provided in Section 23 hereof. (k) The term "Previously Issued Obligations" shall mean the outstanding (i) "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 1999", dated April 1, 1999 and (ii) "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 1 999", dated September 15, 1 999 .. (I) The term "Prior Lien Obligations" shall mean all bonds or other similar obligations hereafter issued that are payable in whole or in part from and secured by a lien on and pledge of the Net Revenues of the System and such lien and pledge securing the payment thereof is prior and superior in claim, rank and dignity to the lien and pledge of the Net Revenues securing the payment of the Previously Issued Obligations and the Certificates. (m) The term "System" shall mean the City's Waterworks System, being all properties, facilities and plants currently owned, operated and maintained by the City for the supply, treatment, transmission and distribution of treated potable water, together with all future extensions, improvements, replacements and additions thereto. SECTION 11: Certificate Fund. For the purpose of paying the interest on and to provide a sinking fund for the payment and retirement of the Certificates, there shall be and is hereby created a special Fund to be designated "SPECIAL 2002 CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATE OF OBLIGATION FUND", which Fund shall be kept and maintained at the City's depository bank, and moneys deposited in said Fund shall be used for no other purpose. Proper officers of the City are hereby authorized and directed to cause to be transferred to the Paying Agent for the Certificates, from funds on deposit in the Certificate Fund, amounts sufficient to fully pay and discharge promptly each installment of interest and principal of the Certificates as the same accrues or matures or comes due by reason of redemption prior to maturity; such transfers of funds to be made in such manner as will cause immediately available funds to be deposited with the Paying Agent for the Certificates at the close of business on the last business day next preceding each interest and/or principal payment date for the Certificates. Pending the transfer· of funds to the Paying Agent/Registrar, money in the Certificate Fund may, at the option of the City, be invested in obligations identified in, and in accordance with the provisions of the "Public Funds Investment Act" (V.T.C.A., Government Code, Chapter 2256) relating to the investment of "bond proceeds"; provided that all such investments shall be made in such a ·manner that the money required to be expended from said Fund will be available at the proper time or times. All interest and income derived from deposits and investments in said Certificate Fund shall be credited to, and any losses debited to, the said Certificate Fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Certificates. · 45142590.1 17 - - ·- SECTION 12: Tax Levy. That to provide for the payment of the "Debt Service Requirements" on the Certificates being (i) the interest on said Certificates and (ii) a sinking fund for their payment at maturity or redemption or a sinking fund of 2% (whichever amount shall be the greater), there shall be and there is hereby levied for the current year and each succeeding year thereafter while said Certificates or any interest thereon shall remain Outstanding, a sufficient tax on each one hundred dollars' valuation of taxable property in said City, adequate to pay such Debt Service Requirements, full allowance being made for delinquencies and costs of collection; said tax shall be assessed and collected each year and applied to the payment of the Debt Service Requirements, and the same shall not be diverted to any other purpose. The taxes so levied and collected shall be deposited into the Certificate Fund. This governing body hereby declares its purpose and intent to provide and levy a tax legally and fully sufficient to pay the said Debt Service . Requirements, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax in consideration of all other outstanding indebtedness. The amount of taxes to be provided annually for the payment of the principal of and interest on the Certificates herein authorized to be issued shall be determined and accomplished in the following manner: (a) Prior to the date the City Council establishes the annual tax rate and passes an ordinance levying ad valorem taxes each year, the City Council shall determine: (1) The amount on deposit in the Certificate Fund after (a) deducting therefrom the total amount of Debt Service Requirements to become due on Certificates prior to the Collection Date for the ad valorem taxes to be levied and (b) adding thereto the amount of Net Revenues of the System appropriated and allocated to pay such Debt Service Requirements prior to the Collection Date for the ad valorem taxes to be levied. (2) The amount of Net Revenues if any, appropriated and to be set aside for the payment of the Debt Service Requirements on the Certificates between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year. (3) The amount of Debt Service Requirements to become due and payable on the Certificates between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year. (b) -The amount of taxes to be levied annually each year to pay the Debt Service Requirements on the Certificates shall be the amount established in paragraph (3) above less the sum total of the amounts established in paragraphs ( 1 )and , (2), after taking into consideration delinquencies and costs of collecting such annual taxes . . 45142590.1 18 SECTION 13: Pledge of Revenues. The City hereby covenants and agrees that, subject only to a prior lien on and pledge of the Net Revenues of the System for the payment and security of Prior Lien Obligations, the Net Revenues of the System, with the exception of those in excess of the amounts required to be deposited to the Certificate Fund as hereafter provided, are hereby irrevocably pledged, equally and ratably, to the payment of the principal of and interest on the Previously Issued Obligations and the Certificates as herein provided, and the pledge of the Net Revenues of the System herein made for the payment of the Previously Issued Obligations and the Certificates shall constitute a lien on the Net Revenues of the System in accordance with the terms and provisions hereof and be valid and binding and fully perfected from and after the date of adoption of this Ordinance without physical delivery or transfer or transfer of control of the Net Revenues, the filing of this Ordinance or any other act; all as provided in Chapter 1208 of the Texas Government Code. SECTION 14: System Fund. The City hereby reaffirms its covenant and agreement made in connection with the issuance of the Previously Issued Obligations that all Gross Revenues (excluding earnings from the investment of money held in any special funds or accounts created for the payment and security of Prior Lien Obligations) shall be deposited from day to day as collected into a "City of Lubbock, Texas, Waterworks System Operating Fund" (hereinafter called "System Fund") which Fund shall be kept and maintained at an official depository bank of the City. All moneys deposited in the System Fund shall be pledged and appropriated to the extent required for the following purposes and in the order of priority shown, to wit: First: To the payment of all necessary and reasonable Operating and Maintenance Expenses of the System as defined herein or required by statute to be a first charge on and claim against the Gross Revenues. · Second: To the payment of the amounts required to be deposited in the special Funds created and established for the payment, security and benefit of Prior Lien Obligations in accordance with the terms and provisions of the ordinances authorizing the issuance of Prior Lien Obligations; and Third: Equally and ratably to the payment of the amounts required to be deposited in the special funds and accounts created and established for the payment of the Previously Issued Obligations, the Certificates and Additional Obligations, if issued. Any Net Revenues remaining in the System Fund after satisfying the foregoing ·payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other City purpose now or hereafter permitted by law. SECTION 15: Deposits to ,Certificate Fund. The City hereby covenants and agrees to cause to be deposited in the Certificate Fund prior to each interest and principal payment date from the Net Revenues of the System, after deduction of all payments required to be made to special Funds or accounts created for the payment and security of the Prior Lien Obligations, an amount equal to one hundred per centum (100%) of the amount required to fully pay the accrued interest and principal of the Certificates then due and payable by reason of maturity or redemption prior to maturity, such deposits to pay accrued interest and principal on the 45142590.1 19 -Certificates to be made in substantially equal monthly ·installments on or before the last business day of each month beginning the month the Certificates are delivered to the initial purchaser. The monthly deposits to the Certificate Fund, as hereinabove provided, shall be made until such time as such Fund contains an amount equal to pay the principal of and interest on the Certificates to maturity. Ad valorem taxes levied, collected and deposited in the Certificate Fund for and on behalf of the Certificates may be taken into consideration and reduce the amount of the monthly deposits otherwise required to be deposited in the Certificate Fund from the Net Revenues of the System. In addition, any proceeds of sale of the Certificates in excess of the amount required to pay the contractual obligations to be incurred (including change orders to a construction contract) shall be deposited in the Certificate Fund, which amount shall reduce the sums otherwise required to be deposited in said Fund from ad valorem taxes and the Net Revenues of the System. SECTION 16: Security of Funds. All moneys on deposit in the Fu.nds for which this Ordinance makes provision (except any portion thereof as may be at any time properly invested) shall be secured in the manner and to the fullest extent required by the laws of Texas for the security of public funds, and moneys on deposit in such Funds shall be used only for the purposes permitted by this Ordinance. · SECTION 17: Special Covenants. The City hereby further covenants as follows: (a) It has the lawful power to pledge the Net Revenues of the System supporting this issue of Certificates and has lawfully exercised said powers under the Constitution and laws of the State of Texas, including said power existing under V.T.C.A., Government Code, Sections 1502.052, et seq. and V.T.C.A., Local Government Code, Subchapter C of Chapter 271. (b) Other than for the payment of the outstanding Previously Issued Obligations, the Certificates, the "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1993", dated October 1, 1993, "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1995", dated December 15, 1995, "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1998", dated January 1, 1998, and "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1999", dated January 15, 1999, the Net Revenues of the System have not in any manner been pledged to the payment of any debt or obligation of the City or of the System. SECTION 18: Issuance of Prior Lien Obligations and Additional Obligations; Subordinate to Prior Lien Obligations Covenants and Agreements. (a) The City hereby expressly reseNes the right to hereafter issue Prior Lien Obligations, without limitation as to principal amount but subject to any terms, conditions or restrictions applicable thereto under law or otherwise. 45142590.1 20 - In addition, the City reserves the right to issue Additional Obligations, without limitation or any restriction or condition being applicable to . their issuance under the terms of this Ordinance, payable from and secured by a lien on and pledge of the Net Revenues of the System of equal rank and dignity, and on a parity in all respects, with the lien thereon and pledge thereof securing the payment of the Previously Issued Obligations and the Certificates. (b) It is the intention of this governing body and accordingly hereby recognized and stipulated that the provisions, agreements and covenants contained herein bearing upon the management and operations of the System and the administering and application of revenues derived from the operation thereof, shall to the extent possible be harmonized with like provisions, agreements and covenants contained in ordinances authorizing the issuance of Prior Lien Obligations, and to the extent of any irreconcilable conflict between the provisions contained herein and in ordinances authorizing the issuance of Prior Lien Obligations, the provisions, agreements and covenants contained therein shall prevail to the extent of such conflict and be applicable to this Ordinance but in all respects subject to the priority of rights and benefits, if any, conferred thereby to the holders or owners of the Prior Lien Obligations. Notwithstanding the above, any change or modification affecting the application of revenues derived from the operation of the System shall not impair the obligation of contract with respect to the pledge of revenues herein made for the payment and security of the Certificates. SECTION 19: Satisfaction of Obligations of City. If the City shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Certificates, at the times and in the manner stipulated in this Ordinance, then the pledge of taxes levied and the lien on and pledge of the Net Revenues of the System under this Ordinance and all covenants, agreements, and other obligations of the City to the Holders shall thereupon cease, terminate, and be discharged and satisfied. Certificates shall be deemed to have been paid within the meaning and with the effect expressed above in this Section when (i) money sufficient to pay in full such Certificates or the principal amaunt(s) thereof at maturity or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Government Securities shall have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Government Securities have been certified by an independent accounting firm to mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the principal of and interest an such Certificates, or the principal amaunt(s) thereof, an and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or Government Securities will be made under this Section and no use made of any such deposit which would cause the Certificates to be treated as "arbitrage bands" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or regulations adapted pursuant thereto. Any moneys sa deposited with the Paying Agent/ Registrar and all income from Government Securities held in trust by the Paying Agent/Registrar, or an authorized escrow 45142590.1 21 -agent, pursuant to this Section which is not required for the payment of the Certificates, or any principal amount(s) thereof, or interest thereon with respect to which such moneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and interest on the Certificates and remaining unclaimed for a period of four ( 4) years after the maturity, or applicable redemption date, of the Certificates for which such moneys were deposited and are held in trust to pay, shall upon the request of the City be remitted to the City against a written receipt therefor. Notwithstanding the above and foregoing, any remittance of funds from the Paying Agent/Registrar to the City shall be subject to any applicable unclaimed property laws of the State of Texas. SECTION 20: Ordinance a Contract-Amendments. This Ordinance shall constitute a contract with the Holders from time to -time, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains Outstanding except as permitted in this Section. The City, may, without the consent of or notice to any Hoiders of the Certificates, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Holders of the Certificates, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the written consent of Holders of the Certificates holding a majority in aggregate principaf amount of the Certificates then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders of Outstanding Certificates, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Certificates, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, premium, if any, or interest on the Certificates, (2) give any preference to any Certificate over any other Certificate, or (3) reduce the aggregate principal amount of Certificates required to be held by Holders for consent to any such amendment, addition, or rescission. SECTION 21: Notices to Holders -Waivers. Wherever this Ordinance provides for notice to Holders of any event, such notice shall be sufficier)tly given (unless otherwise herein expressly provided) if in writing and sent by United States Mail, first class postage prepaid, to the address of each Holder appearing in the Security Register at the close of business on the business day next preceding the mailing of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Certificates. Where this Ordinance provides for notice in any manner, such notice may be waived in writing by the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 22: Cancellation. Certificates surrendered for payment, redemption, transfer, or exchange, if surrendered to the Paying Agent/Registrar, shall be promptly canceled by it and, if surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already canceled, shall be promptly canceled by the Paying Agent/Registrar. The 45142590.1 22 - - -. City may at any time deliver to the Paying Agent/Regist'rar for cancellation any Certificates previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Certificates so delivered shall be promptly canceled by the Paying Agent/Registrar. All canceled Certificates held by the Paying Agent/Registrar shall be returned to the City. SECTION 23: Mutilated, Destroyed, Lost and Stolen Certificates. In case any Certificate shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar may execute and deliver a replacement Certificate of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Certificate, or in lieu of and in substitution for such destroyed, lost or stolen Certificate, only upon the approval of the City and after (i) the filing by the Holder thereof with the Paying Agent/Registrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such Certificate, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the City and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Certificate shall be borne by the Holder of the Certificate mutilated, or destroyed, lost or stolen. Every replacement Certificate issued pursuant to this Section shall be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Certificates; notwithstanding the enforceability of payment by anyone of the destroyed, lost or stolen Certificates. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement and payment of mutilated, destroyed, lost, or stolen Certificates. SECTION 24: Covenants to Maintain Tax-Exempt Status. A. used in this Section, the following terms have the following meanings: Definitions. When "Closing Date" means the date on which the Certificates are first authenticated and delivered to the initial purchasers against payment therefor. "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. "Computation Date" has the meaning set forth in Section 1.148-1 (b) of the Regulations. "Gross Proceeds" means any proceeds as defined in Section 1.148-1 (b) of the Regulations, and any replacement proceeds as defined ·in Section 1.148-1 (c) of the Regulations, of the Certificates. "Investment" has the meaning set forth in Section 1.148-1(b) of the Regulations. "Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in. which Gross Proceeds of the Certificates are invested and which is not acquired to carry out the governmental purposes of the Certificates. 45142590.1 23 - - "Rebate Amount" has the meaning set forth in Section 1.148-1 (b) of the Regulations. "Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Certificates. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. "Yield" of (1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (2) the Certificates has the meaning set forth in Section 1.148-4 of the Regulations. B. Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Certificate to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Certificate, the City shall comply with each of the specific covenants in this Section. C. No Private Use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Certificates: (1) exclusively own, operate ahd possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Certificates, and not use· or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Certificates or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. D. No Private Loan. Except to the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Certificates to make or finance loans to any person or entity other than a state or local 45142590.1 24 - - government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. E. Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Certificates directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Certificates. F. Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Certificates to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. G. Information Report The City shall timely file the information required by section 149( e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. H. Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder: (1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Outstanding Certificate is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of the Certificates with other money of the City, provided that the City separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Certificates until six years after the final Computation Date. (3) As additional consideration for the purchase of the Certificates by the Purchasers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Certificate Fund or its general fund, as permitted by applicable Texas statute, regulation . 45142590.1 25 or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Certificates equals (i) in the case of a Final Computation Date as defined in Section 1.148-3(e)(2) of the Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by Section 148(f) of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180} days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148-3(h} of the Regulations. I. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the Certificates, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection H of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Certificates not been relevant to either party. J. Elections. The City hereby directs and authorizes the Mayor, City Secretary, City Manager, Director of Finance, and Deputy City Manager, individually or jointly, to make elections permitted or required pursuant to the provisions of the Code or the Regulations, as they deem necessary or appropriate in connection with the Certificates, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. SECTION 25: Sale of Certificates. Pursuant to a public sale for the Certificates, the bid submitted by RBC Dain Rauscher Inc. and associates (herein referred to as the "Purchasers") is declared to be the best bid received producing the lowest true interest cost rate to the City, and the sale of the Certificates to said Purchasers at the price of par and accrued interest to the date of delivery, plus a premium of $-0-, is hereby approved and confirmed. Delivery of the Certificates to the Purchasers shall occur as soon as possible upon payment being made therefor in accordance with the terms of sale. SECTION 26: Official Statement The use of the Preliminary Official Statement, dated February 1, 2002, in the offering and sale of the Certificates is hereby ratified, confirmed and approved in all respects, and the City Council hereby finds that the information and data contained in said Preliminary Official Statement pertaining to the City and its financial affairs is true and correct in all material respects and no material facts have been omitted therefrom which are necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The final Official Statement, which reflects the terms of sale (together with such changes approved by the Mayor, Mayor Pro Tern, City Manager, First 45142590.2 26 Assistant City Manager, Director of Finance or City Secretary, one or more of said officials), shall be and is hereby in all respects approved and the Purchasers are hereby authorized to use and distribute said final Official Statement, dated February 28, 2002, in the offering, sale and delivery of the Certificates to the public. SECTION 27: Proceeds of Sale. The proceeds of sale of the Certificates, excluding the accrued interest and premium, if any, received from the Purchasers, shall be deposited in a construction fund maintained at the City's depository bank. Pending expenditure for authorized projects and purposes, such proceeds of sale may be invested in authorized investments and any investment earnings realized may be expended for such authorized projects and purposes or deposited in the Certificate Fund as shall be determined by the City Council. Accrued interest and premium, if any, received from the Purchasers as well as all surplus proceeds of sale of the Certificates, including investment earnings, remaining after completion of all authorized projects or purposes shall be deposited to the credit of the Certificate Fund. SECTION 28: Control and Custody of Certificates. The Mayor of the City shall be and is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the State of Texas, including the printing of the Certificates, and shall take and have charge and control of the Certificates pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers. Furthermore, the Mayor, City Secretary, City Manager, Deputy City Manager, Director of Finance, and Deputy City Manager, any one or more of said officials, are hereby authorized and directed to furnish and execute such documents and certifications relating to the City and the issuance of the Certificates, including a certification as to facts, estimates, circumstances and reasonable expectations pertaining to the use and expenditure and investment of the proceeds of the Certificates as may be necessary for the approval of the Attorney General, registration by the Comptroller of Public Accounts and delivery of the Certificates to the purchasers thereof and, together with the City's financial advisor, bond counsel and the Paying AgenVRegistrar, make the necessary arrangements for the delivery of the Initial Certificate(s) to the purchasers. SECTION 29: Legal Opinion. The obligation of the Purchasers to accept delivery of the Certificates is subject to being furnished a final opinion of Fulbright & Jaworski L.L.P., Attorneys, Dallas, Texas, approving such Certificates as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for such Certificates. A true and correct reproduction of said opinion is hereby authorized to be printed on the definitive Certificates or an executed counterpart thereof shall accompany the global Certificates deposited with the Depository Trust Company. SECTION 30: CUSIP Numbers. That CUSIP numbers may be printed or typed on the definitive Certificates. It is expressly provided, however, that the presence or absence of CUSIP numbers on the definitive Certificates shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving said Certificates as to legality are to be held responsible for CUSIP numbers incorrectly printed or typed on the definitive Certificates. 45142590.1 27 SECTION 31: Benefits of Ordinance. Nothing in this Ordinance, expressed or implied, is intended or shall be construed to confer upon any person other than the City, the Paying Agent/Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision hereof, this Ordinance and all its provisions being intended to be and being for the sole and exclusive benefit of the City, the Paying Agent/Registrar and the Holders. . SECTION 32: Inconsistent Provisions. All ordinances, orders or resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to the extent of such conflict and the provisions of this Ordinance shall be and remain controlling as to the matters contained herein. · SECTION 33: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 34: Severability. If any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other circumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 35: Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 36: Construction of Terms. If appropriate in the context of this Ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to include the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders. SECTION 37: Continuing Disclosure Undertaking. (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. "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. "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, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. (b) Annual Reports. The City shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year (beginning with the fiscal year ending September 30, 2002) financial information and operating data with respect to the City of the general type included in the final Official Statement approved by Section 26 of this Ordinance, 45142590.1 28 - being the information described in Exhibit 8 hereto. Financial statements to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit 8 hereto and (2) audited, if the City commissions. an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not available at the time the financial information and operating data must be provided, then the City shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and any SID with the financial information and operating data and will file the annual audit report, when and if the same becomes available. If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. The financial 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 reference to any document (including an official statement .or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. (c) Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSR8, 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: 1. 2. 3. 4. 5. 6. Certificates; 7. and 8. 9. 10. Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled draws on credit enhancements reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Modifications to rights of holders of the Certificates; -Certificate calls; Defeasances; Release, substitution, or sale of property securing repayment of the Certificates; 11. Rating changes. The City shall notify any SID and either each NRMSIR or the MSR8, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such Section. (d) Limitations, Disclaimers, and· Amendments. The City shall be obligated to observe and perform the covenants specified in this Section while, but only while, the City remains an "obligated person" with respect to the Certificates within the meaning of the Rule, except that the City in any event will give the notice required by subsection (c) hereof of any Certificate calls and defeasance that cause the City to be no longer such an "obligated person." 45142590.1 29 The provisions of this Section are for the sole benefit of the Holders and beneficial owners of the Certificates, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, 0perating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Section shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances resulting from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Holders and beneficial owners of the Certificates. The provisions of this Section may also be amended from time to time or repealed by the City if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such provisions are invalid, but only if and to the extent that reservation of the City's right to do so would not prevent underwriters of the initial public offering of the Certificates from lawfully purchasing or selling Certificates in such offering. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (b) an explanation, in narrative form, of the reasons for the 45142590.1 30 - - amendment and of the impact of any change in the type of financial information or operating data so provided. · SECTION 38: Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by V.T.C.A., Government Code, Chapter 551; as amended. SECTION 39: Effective Date. This Ordinance shall take effect and be in full force from and after its adoption on the date shown below in accordance with V.T.C.A., Government Code, Section 1201.028. PASSED AND ADOPTED, this February 28, 2002. CITY OF LUBBOCK, TEXAS ATTEST: cg~<'-c ~~ City Secretary ~ (City Seal) APPROVED AS TO CONTENT: 45142590.1 31 - EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT See Document Number 8 - - DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 37 of this Ordinance. Annual Financial Statements and Operating Data EXHIBIT B to Ordinance The financial information and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: 1. The financial statements of the City appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. 2. The information under Tables 1 through 6 and 8A through 20. Accounting Principles The accounting principles referred to in such Section are the· generally accepted accounting principles as applicable to governmental units as prescribed by The Government Accounting Standards Board. 45142590.1 8 - - - · PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of February 28, 2002 (this "Agreement"), by and between the City of Lubbock, Texas (the "Issuer''), and JPMorgan Chase Bank, a New York banking corporation organized and existing under the laws of the State of New York and authorized to do business in the State of Texas, or its successors, RECITALS WHEREAS, the Issuer has duly authorized and provided for the execution and delivery of its "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002" (the "Securities"), dated February 15, 2002, and such Securities are scheduled to be delivered to the initial purchasers thereof on or about April 4, 2002; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01 Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities, and, as Paying Agent for the Securities, the Bank shall be responsible fer paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof; all in accordance with this Agreement and the "Bond Resolution" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities and, as Registrar for the Securities, the Bank shall.keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities· arid with respect to the transfer and exchange thereof as provided herein and in the "Bond Resolution". The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02 Compensation. 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 attached hereto for the first year of this Agreement and thereafter 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. 45145649.1 - - 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 TWO DEFINITIONS Section 2.01 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: ."Acceleration Date" on any Security means the date on· and after which the principal or any or all installments of interest, or both, are due and payable on any ·Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the designated office of the Bank in Dallas, Texas at the address shown in Section 3.01 hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Bond Resolution" means the resolution, order, or ordinance of the governing body of the Issuer pursuant to which the Securities are issued, certified by the Secretary or any other officer of the Jssuer and delivered to the Bank. "Fiscal Year" means the fiscal year of the Issuer, ending September 30th. "Holder" and "Security Holder'' each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and "Issuer Order" means a written request or order signed in the name of the Issuer by the Mayor, Mayor Pro Tern, City Manager, ·Deputy City Manager, Director of Finance, Cash and Debt Manager, or City Secretary, any one or more of said officials, and delivered to the Bank. "Legal Holiday" means a day on which the Bank. is required or authorized to be closed. "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 Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Resolution). 45145649.1 -2- ·- - ·- "Redemption Date" when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Bond Resolution. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfers of Securities. "Stated Maturity" means the date specified in the Bond Resolution the principal of a Security is scheduled to be due and payable. Section 2.02 Other Definitions. The terms "Bank," "Issuer," and "Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01 Duties of Paying Agent As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the following address: P. 0. Box 2320, Dallas, Texas 75221-2320 or 2001 Bryan Street, gth Floor, Dallas, Texas 75201, Attention: Operations. · As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and making payment thereof to the Holders of the Securities (or their Predecessor Securities) on the Record Date. All payments of principal and/or interest on the Securities to the registered owners shall be accomplished (1) by the issuance of checks, payable to the registered owners, drawn on the paying agent account provided in Section 5.05 hereof, sent by United States mail, first class, postage prepaid, to the address appearing on the Security Register or (2) by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02 Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities at the dates specified in the Bond Resolution. 45145649.1 -3- - - - - - - ARTICLE FOUR REGISTRAR Section 4.01 Security Register -Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register") for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in the Security Register. Every Security 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 by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re-registration, transfer or exchange of the.Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be cancelle'd in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02 Certificates. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping pending their use and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other governments or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03 Form of Security Register. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities 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 Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04 List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. 45145649.1 -4- - - The Bank will not release or disclose the contents of the Security 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 court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05 Return of Cancelled Certificates. The Bank will, at such reasonable intervals as it determines, surrender to the Issuer, Securities in lieu of which or in exchange for which other Securities have been issued, or which have been paid. Section 4.06 Mutilated, Destroyed, Lost or Stolen Securities. The Issuer hereby instructs the Bank, subject to the provisions of Section 23 of the Bond Resolution, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the same does not result in an overissuance. In case any Security shall be mutilated, or destroyed, lost or stolen, the Bank may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only upon the approval of the Issuer and after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07 Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE THE BANK Section 5.01 Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02 Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shalf 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 45145649.1 -5- .. #Ill - - 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 resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, 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 Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03 Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04 May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05 Moneys Held by Bank-Paying Agent Account/Collateralization. Money deposited by the Issuer with the Bank of the principal {or Redemption Price, if applicable) of or interest on any Securities shall be segregated from other funds of the Bank and the Issuer and shall be held in trust for the benefit of the Holders of such Securities. All money deposited with the Bank hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. Amounts held by the Bank which represent principal of and interest on the Securities remaining unclaimed by the owner after the expiration of three years from the date such amounts have become due and payable shall be reported and disposed of by the Bank in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. The Bank shall have no liability by virtue of actions taken in compliance with this provision. The Bank is not obligated to pay interest on any money received by it hereunder . . 45145649.1 -6- - - - This Agreement relates solely to money deposited for the purposes described herein, and the parties agree that the Bank may serve as depository for other funds of the Issuer, act as trustee under indentures authorizing other bond transactions of the Issuer, or act in any other capacity not in conflict with its duties hereunder. Section 5.06 Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07 Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where either the Bank Office or the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate serVice. ·The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. Section 5.08 DT Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements", which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01 Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. 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 on page 9. 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. 45145649.1 -7- - Section 6.06 Severability. In case any provtsJon herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 6.07 Benefits of Agreement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.08 Entire Agreement. This Agreement and the Bond Resolution constitute the entire agreement between the parties hereto relative to the Bank acting as Paying AgenVRegistrar and if any conflict exists between this Agreement and the Bond Resolution, the Bond Resolution shall govern. Section 6.09 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.10 Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying AgenVRegistrar has been appointed by the Issuer and such appointment accepted and (b) notice given to the Holders of the Securities of the appointment of a successor Paying AgenVRegistrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Securities, to the successor Paying AgenVRegistrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.11 Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. 45145649.1 -8- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. [SEAL] Attest: Title:41== (CITY SEAL) Attest: &<~-drib~e ~ City Secretary . \ 45145649.1 JPMORGAN CHASE BANK BY~;;;~· Title: /fvf Address: 2001 Bryan Street, 1oth Floor Dallas, Texas 75201 CITY OF LUBBOCK, TEXAS BY: f))j~d /JiLJ...-#---. _ _; Address: P. 0. Box 2000 Lubbock, Texas 79457 -9- City of Lubbock, Texas Tax & Waterworks System Surplus Revenue Certificates of Obligation, Series 2002 Fee Schedule BOND PAYING AGENT Annual Administrative Charge FEES AND EXPENSES Bond Calls Account Termination Fee (Minimum) Audit Confirmations (per issue) 550.00 300.00 1,000.00 75.00 Split Maturity Refunding Costs 500.00 min/350.00 per maturity exceeding 1 matu Out-of-pocket expenses are assessed at 6% of invoice cost in addition to specifically identifiable transactions described above. Expenses covered may include, but are not limited to, counsel fees, travel expenses, printing cost, long distance telephone calls, stationery, and forms. Fees are subject to change. All fees quoted are subject to our review and acceptance, and that of our counsel, of the documents governing this issue. JPMORGAN CHASE BAJV'K 9 - - - Honorable Mayor and City Council City of Lubbock, Texas Members of the City Council: OFFICIAL BID FORM February28, 2002 Reference is made to your Official Statement and Notice of Sale and Bidding Instructions, dated February 1, 2002 of $6,450,000 CJ1Y OF LUBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGA TJON, SERIES 2002, both of which constitute a part hereof. For your legally issued Waterworks Certificates, as described in said Notice ofSa1e and Bidding Instructions and Official Statement, we will pay you par and accrued interest from date of issue to date of delivery to us, plus a cash premium of$ -Q-for Waterworks Certificates maturing and bearing interest as follows: Maturity Principal ·Interest Maturity Principal Interest (Februarv l5l Amount Rate (Februm 15) Amount Rate 2003 $ 15,000 l/.OD % 2013 $ 325,000 f.~~-% 2004 200,000 I./, &20 % 2014 340,000 Y... S"O % 2005 210,000 t./, Q.CJ % 2015 360,000 ~. s:o % 2006 220,000 !:/...00 % 2016 380,000 £: ~'Z.s-% 2007 235,000 '::J..ex:> % 2017 405,000 tJ..zs-% 2008 245,000 Y.too % 2018 425,000 ~.as-% 2009 260,000 S'·CIO % 2019 450,000 s,-. oo % 2010 275,000 S:t:JO % 2020 475,000 s-.oo % 2011 290,000 ct.zs-% 2021 505,000 S".oc % 2012 305,000 ¥..25""'" % 2022 530,000 S'". 00 % Of the principal maturities set forth in the table above, term certificates have been created as. indicated in the following table (which may include multiple term certificates, one term certificate or no term certificate if none is indicated). For those years which have been combined into a term certificate, the principal amount shown in the table above shall be the mandatory sinking fund redemption amo-u~ts in such yearS exc~pt that the ani.ourit shown.m the year of theter:in certificate maturity date--shalT mattire in such ·year. The term certificates created are as follows: Maturity Date Year of First Mandatory Redemption Principal Amount Our calculation (which is not a part of this bid) of the interest cost from the above is: TRUE INTEREST COST RATE Interest Rate ______ % ______ % __ ......;. ___ % ______ % ______ % ______ % We are having the Waterworks Certificates of the following maturities AJ t? JE: insured by at a premium of$ , said premium to be paid bv the Purchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the City. The Initial Waterworks Certificates shall be registered in the name of C. E DE: <d-C..O · , which will, upon payment for the Waterworks Certificates, be cancelled by the Paying Agent/Registrar. The Waterworks Certificates will then be registered in the name of Cede & Co. (DTC's partnership nominee), under the Book-Entry-Only System. A bank cashier's check or certified check of the F R.D 5.,-Bank, A Lt S -r 1 i\J in the amount of $129,000, which represents our Good Faith Deposit (is attached hereto) or (has been made available to you prior to the opening of this bid), and is submitted in accordance with the terms as set forth in the Official Statement and Notice of Sale and Bidding Instructions. We agree to accept delivery of the Waterworks Certificates utilizing the Book-Entry-Only System through DTC and make payment for the Initial Waterworks Certificate in immediately available funds in the Corporate Trust Division, JPMorgan Chase Bank, Dallas, Texas, not later than 10:00 AM, CST, on April 4, 2002, or thereafter on the date the Waterworks Certificates are tendered for delivery, pursuant to the terms set forth in the Notice of Sale and Bidding Instructions. It will be the obligation of the purchaser of the Waterworks Certificates to complete the DTC Eligibility Questionnaire. The undersigned agrees to complete, execute, and deliver to the City, at least six business days prior to delivery of the Waterworks Certificates, a certificate relating to the "issue price" of the Waterworks Certificates in the form and to the effect accompanying the Notice of Sale and Bidding Instructions, with such changes thereto as may be acceptable to the City. We agree to provide in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day after the award. Respectfully submitted, Syndicate Members: f?_{jc., bA1AJ ~AUSCHE~ /AJC Name ofUnderwriter or Manager 0o '{e.G f-lo L!) E R_ Authorized Representative c;{ ,q__ 9 g 9 -/Roo Phone Number ~ s~·-. ACCEPTANCE CLAUSE The above and foregoing bid is hereby in all things accepted by the City of Lubbock, Texas;subject to and in accordance with the :::'""'"' Biddiog Irutructioru, "'" "'' 28ili ®y ofF'b""'J', 2002. ~~. $~ = City of Lubbock. Texas R~·~~ City Secretary . ~ City of Lubbock, Texas 10 - - - - - CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK § § § § § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 28th day of February, 2002, the City Council of the City of Lubbock, Texas, convened in regular session at its regular meeting place in the City Hall of said City; the duly constituted members of the Council being as follows: WINDY SITTON ALEX "TY'' COOKE VICTOR HERNANDEZ T. J. PATTERSON DAVID NELSON FRANK W. MORRISON MARC McDOUGAL MAYOR MAYOR PRO TEM COUNCILMEMBERS all of said persons were present at said meeting, except the following: ________ _ Among other business considered at said meeting, the attached ordinance entitled: "AN ORDINANCE authorizing the issuance of 'CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS, SERIES 2002'; specifying the terms and features of said bonds; levying a continuing direct annual ad valorem tax for the payment of said bonds; and resolving other matters incident and related to the issuance, sale, payment and delivery of said bonds, including the approval of a Paying Agent/Registrar Agreement and the approval and distribution of an Official Statement pertaining thereto; and providing an effective date." was introduced and submitted to the Council for final passage and adoption. After presentation and due consideration of the Ordinance, and upon a motion being made by David Nelson and seconded by Alex "Ty" Cooke the Ordinance was duly passed and adopted to be effective immediately in accordance with the Section 1201.028 by the following vote: 7 voted "For" 0 voted "Against" 0 abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 45145913.1 ·~ - - 2. The attached Ordinance is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meetings are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of each meeting was given to each member of the Council; and that said meetings and the deliberation of the aforesaid public business were open to the public and written notice of said meetings, including the subject of the above entitled Ordinance, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 281h day of February, 2002. (City Seal) 45145913.1 - 2 - - ORDINANCE NO. 2002-00026 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS, SERIES 2002"; specifying the terms and features of said bonds; levying a continuing direct annual ad valorem tax for the payment of said bonds; and resolving other matters incident and related to the issuance, sale, payment and delivery of said bonds, including the approval of a Paying Agent/Registrar Agreement the approval and distribution of an Official Statement pertaining thereto; and providing an effective date. WHEREAS, the City Council of the City of Lubbock, Texas, hereby finds and determines that $9,400,000 in principal amount of general obligation bonds approved and authorized to be issued at an election held on September 18, 1999, should be issued and sold at this time and a summary of the general obligation bonds authorized at such election, as well as previously held elections, the principal amount authorized, amounts heretofore issued and being issued pursuant to this ordinance and amounts remaining to be issued subsequent hereto being as follows: Principal Amounts Date Amount Heretofore Amounts Unissued Purpose Authorized Authorized Issued Being Issued Balance Waterworks System 10-17-87 2,810,000 200,000 -0-2,610,000 Sewer System 5-21-77 3,303,000 2,175,000 -0-1,128,000 Street Improvements 5-01-93 10,170,000 10,166,000 -0-4,000 Street Improvements 9-18-99 17,165,000 7,725,000 4,075,000 5,365,000 Drainage 9-18-99 2,160,000 1,025,000 -0-1,135,000 Traffic Signals 9-18-99 3,295,000 1,080,000 1,080,000 1,135,000 Parks· 9-18-99 14,765,000 6,270,000 4,245,000 4,250,000 AND WHEREAS, the City Council hereby reserves and retains the right to issue the balance of unissued bonds approved at said elections in one or more installments when, in the judgment of the Council, funds are needed to accomplish the purposes for which such bonds are voted; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION 1: Authorization -Designation-Principal Amount-Purpose. General obligation bonds of the City shall be and are hereby authorized to be issued in the aggregate principal amount of $9,400,000, to be designated and bear the title "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS, SERIES 2002" {hereinafter referred to as the "Bonds"), for the purpose of making permanent public improvements and public purposes, to wit: $4,075,000 for street improvements, including drainage, · curb, gutters, landscaping, sidewalks, curb ramps and utility line relocation and the acquisition of land and right-of-way therefor, $1 ,080,000 for traffic signalization and assorted communications equipment and $4,245,000 to acquire or improve, or both, land for park purposes, all in accordance with authority conferred at the aforesaid election and under and in strict conformity with the Constitution and laws of the State of Texas, including V.T.C.A., Government Code, Chapter 1331 and Article VIII Section 1 of the City Charter of the City of Lubbock, Texas. 45142525.2 - - - - Agreement", substantially in the form attached hereto as Exhibit A, and such reasonable rules and regulations as the Paying Agent/Registrar and the City may prescribe. The Mayor and City Secretary are authorized to execute and deliver such Agreement in connection with the delivery of the Bonds. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds are paid and discharged, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Bonds, the City agrees to promptly cause a written notice thereof to be sent to each Holder by United States Mail, first class postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Principal of and premium, if any, on the Bonds shall be payable at the Stated Maturities or the redemption thereof, only upon presentation and surrender of the Bonds to the Paying Agent/Registrar at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest on the Bonds shall be paid to the Holders whose name appears in the Security Register at the close of business on the Record Date (the last business day of the month next preceding each interest payment date) and shall be paid by the Paying Agent/Registrar (i) by check sent United States Mail, first class postage prepaid, to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder. If the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Designated Payment/Transfer Office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. In the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. SECTION 4: Redemption. (a) Optional Redemption. The Bonds having Stated Maturities on and after February 15, 2013, shall be subject to redemption prior to maturity, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2012 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. 45142525.2 -3- - - - - (b} Exercise of Redemption Option. At least forty-five (45) days prior to a redemption date for the Bonds (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the City shall notify the Paying Agent/Registrar of the decision to redeem Bonds, the principal amount of each Stated Maturity to be redeemed, and the date of redemption therefor. The decision of the City to exercise the right to redeem Bonds shall be entered in the minutes of the governing body of the City. (b) Selection of Bonds for Redemption. If less than all Outstanding Bonds of the same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Bonds as representing the number of Bonds Outstanding which is obtained by dividing the principal amount of such Bonds by $5,000 an_d shall select the Bonds, or principal amount thereof, to be redeemed within such Stated Maturity by lot. (c) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Bonds, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the City and at the City's expense, to each Holder of a Bond to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemption shall (i) specify the date of redemption for the Bonds, (ii) identify the Bonds to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, (iv) state that the Bonds, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and (v) specify that payment of the redemption price for the Bonds, or the principal amount thereof to be redeemed, shall be made at the Designated Payment/Transfer Office of the Paying Agent/Registrar only upon presentation and surrender thereof by the Holder. If a Bond is subject by its terms to prior redemption and has been called for redemption and notice otredemption thereof has been duly given as hereinabove provided, such Bond (or the principal amount thereof to be redeemed) shall become due and payable and interest thereon shall cease to accrue from and after the redemption date therefor; provided moneys sufficient for the payment of such Bond (or of the principal amount thereof to be redeemed) at the then applicable redemption price are held for the purpose of such payment by the Paying Agent/Registrar. SECTION 5: Registration -Transfer/Exchange of Bonds-Predecessor Bonds. The Paying Agent/Registrar shall obtain, record, and maintain in the Security Register the name and address of each and every owner of the Bonds issued under and pursuant to the provisions of Jhis Ordinance, or if appropriate, the nominee thereof. Any Bond may be transferred or exchanged· for Bonds of other authorized denominations by the Holder, in person or by his duly authorized agent, upon surrender of such Bond to the Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. 45142525.2 -4- .A - Upon surrender of any Bond (other than the Initial Bonds authorized in Section 8 hereof) for transfer at the Designated Payment/Transfer Office of the Paying Agent/Registrar, the Paying Agent/Registrar shall register and deliver, in the name of the designated transferee or transferees, one or more new Bonds of authorized denominations and having the same Stated Maturity and of a like aggregate principal amount as the Bond or Bonds surrendered for transfer. At the option of the Holder, Bonds (other than the Initial Bonds authorized in Section 8 hereof) may be exchanged for other Bonds of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Bonds surrendered for exchange, upon surrender of the Bonds to be exchanged at the Designated Payment/Transfer Office of the Paying Agent/Registrar. Whenever any Bonds are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new Bonds to the Holder requesting the exchange. All Bonds issued in any transfer or exchange of Bonds shall be delivered to the Holders at the Designated Payment/Transfer Office of the Paying Agent/Registrar or sent by United States Mail, first class, postage prepaid to the Holders, and, upon the registration and delivery thereof, the same shall be the valid obligations of the City, evidencing the same obligation to pay, and entitled to the same benefits under this Ordinance, as the Bonds surrendered in such transfer or exchange. All transfers or exchanges of Bonds pursuart to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. · Bonds canceled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be "Predecessor Bonds," evidencing all or a portion, as the case may be, of the same obligation to pay evidenced by the new Bond or Bonds registered and delivered in the exchange/ or transfer therefor. Additionally, the term "Predecessor Bonds" shall include any mutilated, lost, destroyed, or stolen Bond for which a replacement Bond has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 11 hereof and such new replacement Bond shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Bond. Neither the City nor the Paying Agent/Registrar shall be required to issue or transfer to an assignee of a Holder any Bond called for redemption, in whole or in part, within 45 days of the date fixed for the redemption of such Bond; provided, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a Bond called for redemption in part. 45142525.2 . -5- - SECTION 6: Book-Entry Only Transfers and Transactions. Notwithstanding the provisions contained in Sections 3, 4 and 5 hereof relating to the payment, and transfer/exchange of the Bonds, the City hereby approves and authorizes the use of "Book-Entry Only" securities clearance, settlement and transfer system provided by The Depository Trust Company (DTC), a limited purpose trust company organized under the laws of the State of New York, in accordance with the operational arrangements referenced in the Blanket Issuer Letter of Representation, by and between the City and DTC (the "Depository Agreemenf). Pursuant to the Depository Agreement and the rules of DTC, the Bonds shall be deposited with DTC who shall hold said Bonds for its participants (the "DTC Participants"). While the Bonds are held by DTC under the Depository Agreement, the Holder of the Bonds on the Security Register for all purposes, including payment and notices, shall be Cede & Co., as nominee of DTC, notwithstanding the ownership of each actual purchaser or owner of each Bond (the "Beneficial Owners") being recorded in the records of DTC and DTC Participants. In the event DTC determines to discontinue serving as securities depository for the Bonds or otherwise ceases to provide book-entry clearance and settlement of securities transactions in general or the City determines that DTC is incapable of properly discharging its duties as securities depository for the Bonds, the City covenants and agrees with the Holders of the Bonds to cause Bonds to be printed in definitive form and provide for the Bonds to be issued and delivered to DTC Participants and Beneficiar Owners, as the case may be. Thereafter, the Bonds in definitive form shall be assigned, transferred and exchanged on the Security Register maintained by the Paying Agent/Registrar and payment of such Bonds shall be made in accordance with the provisions of Sections 3, 4 and 5 hereof. SECTION 7: Execution-Registration. The Bonds shall be executed on behalf of the City by the Mayor under its seal reproduced or impressed thereon and countersigned by the City Secretary. The signature of said officers on the Bonds may be manual or facsimile. Bonds bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the Bond Date shall be deemed to be duly executed on behalf of the City, notwithstanding that such individuals or either of them shall cease to hold such offices at the time of delivery of the Bonds to the initial purchaser(s) and with respect to Bonds delivered in subsequent exchanges and transfers, all as authorized and provided in V.T.C.A., Government Code, Chapter 1201. No Bond shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Bond either a certificate of registration substantially in the form provided in Section 9C, manually executed by the Comptroller of Public Accounts of the State of Texas, or his duly authorized agent, or a certificate of registration substantially in the form provided in Section 9D, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar, and either such certificate duly signed upon any Bond shall be conclusive evidence, and the only evidence, that such Bond has been duly certified, registered and delivered. 45142525.2 -6- -SECTION 8: Initial Bond(s ). The Bonds herein· authorized shall be initially issued either (i) as a single fully registered bond in the total principal amount of $9,400,000 with principal installments to become due and payable as provided in Section 2 hereof and numberedT-1, or (ii) as multiple fully registered bonds, being one bond foreach year of maturity in the applicable principal amount and denomination and to be numbered consecutively from T-1 and upward (hereinafter called the "Initial Bond(s)") and, in either case, the Initial Bond{s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Bond(s) shall be the Bonds submitted to the Office of the Attorney qeneral of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any time after the delivery of the Initial Bond(s), the Paying Agent/Registrar, pursuant to written instructions from the initial purchaser{s), or the designee thereof, shall cancel the Initial Bond(s) delivered hereunder and exchange therefor definitive Bonds of authorized denominations, Stated Maturities, principal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser(s), or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. · SECTION 9: Forms. A. Forms Generally. The Bonds, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Registration Certificate of Paying Agent/Registrar, and the form of Assignment to be printed on each of the Bonds, shall be substantially in the forms set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including insurance legends in the event the Bonds, or ·any maturities thereof, are purchased with insurance and any reproduction of an opinion of counsel) thereon as may, consistently herewith, be established by the City or determined by the officers executing such Bonds as evidenced by their execution. Any portion of the text of any Bonds may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Bond. The definitive Bonds and the Initial Bond(s) shall be printed, lithographed, or engraved, typewritten, photocopied or otherwise reproduced in any other similar manner, all as determined by the officers executing such Bonds as evidenced by their execution thereof. 45142525.2 -7- B. Form of Definitive Bond. REGISTERED NO Bond Date: February 15, 2002 Registered Owner: UNITED STATES OF AMERICA STATE OF TEXAS CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS, SERIES 2002 Interest Rate: Stated Maturity: REGISTERED $ ___ _ CUSIP NO: Principal Amount: DOLLARS The City of Lubbock {hereinafter referred to as the "City"), a body corporate and political subdivision in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner named above, or the registered assigns thereof, on the Stated Maturity date specified above the Principal Amount hereinabove stated (or so much thereof as shall not have been paid upon prior redemption) and to pay interest on the unpaid principal amount hereof from the Bond Date at the per annum rate of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 15 and August 15 in each year, commencing February 15, 2003. Principal of this Bond is payable at its Stated Maturity or redemption to the registered owner hereof, upon presentation and surrender, at the Designated Payment/Transfer Office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor; provided, however, while this Bond is registered to Cede & Co., the payment of principal upon a partial redemption of the principal amount hereof may be accomplished without presentation and surrender of this Bond. Interest is payable to the registered owner of this Bond . {or one or more Predecessor Bonds, as defined in the Ordinance hereinafter referenced) whose name appears on the "Security Register'' maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date, and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Bond shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of ~ America which at the time of payment is legal tender for the payment of public and private debts. -_ _;) 45142525.2 -8- -This Bond is one of the series specified in its title issued in the aggregate principal amount of $9,400,000 (herein referred to as the "Bonds") for the purpose of making permanent public improvements and public purposes, to wit: $4,075,000 for street improvements, including drainage, curb, gutters, landscaping, sidewalks, curb ramps and utility line relocation and the acquisition of land and right-of-way therefor, $1,080,000 for traffic ·signalization and assorted communications equipment and $4,245,000 to acquire or improve, or both, land for park purposes, all in accordance with authority conferred at an election and under and in strict conformity with the Constitution and laws of the State of Texas and pursuant to an Ordinance adopted by the City Council of the City (herein referred to as the "Ordinance"). The Bonds maturing on and after February 15, 2013, may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying AgenURegistrar), on February 15, 2012, or on any date thereafter, at the redemption price of par, together with accrued interest to the date of redemption. At least thirty days prior to a redemption date, the City shall cause a written notice of such redemption to be sent by United States Mail, first class postage prepaid, to the registered owners of the Bonds to be redeemed in whole or in part, and subject to the terms and provisions relating thereto contained in the Ordinance. If a Bond (or any portion of its principal sum) shall have been duly called for redemption and notice of such redemption duly given, then upon said redemption date such Bond (or the portion of its principal sum to be redeemed) shall become due and payable, and interest thereon shall cease to accrue from and after the redemption date therefor, provided moneys for the payment of the redemption price and the interest on the principal amount to be redeemed to the date of redemption are held for the purpose of such payment by the Paying AgenURegistrar. In the event a portion of the principal amount of a Bond is to be redeemed and the registered owner is someone other than Cede & Co., payment of the redemption price of such principal amount shall be made to the registered owner only upon presentation and surrender of such Bond to the Designated PaymenUTransfer Office of the Paying AgenURegistrar, and a new Bond or Bonds of like maturity and interest rate in any authorized denominations provided by the Ordinance for the then unredeemed balance of the principal sum thereof will be issued to the registered owner, without charge. If a Bond is selected for redemption, in whole or in part, the City and the Paying AgenURegistrar shall not be required to transfer such Bond to an assignee of the registered owner within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the registered owner of the unredeemed balance of a Bond redeemed in part. 45142525.2 -9- - - The Bonds are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City. Reference is hereby made to the Ordinance, a copy of which is on file in the Designated Payment/Transfer Office of the Paying Agent/Registrar, and to all of the provisions of which the owner or holder of this Bond by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the tax levied for the payment of the Bonds; the terms and conditions relating to the transfer or exchange of this Bond; the conditions upon which the Ordinance may be amended or supplemented with or without the consent of the Holders; the rights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which this Bond may be discharged at or prior to its maturity or redemption, and deemed to be no longer Outstanding thereunder; and for other terms and provisions contained therein. Capitalized terms used herein have the meanings assigned in the Ordinance. This Bond, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only upon its presentation and surrender at the Designated Payment/Transfer Office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent. When a transfer on the Security Register occurs, one or more new fully registered Bonds of the same Stated Maturity, of authorized denominations, bearing the same rate of interest, and of the same aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, shall treat the registered owner whose name appears on the Security Register (i) on the Record Date as the owner entitled to payment of interest hereon, (ii) on the date of surrender of this Bond as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date} ' shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. 45142525.2 -10- - It is hereby certified, recited, represented and declared that the City is a body corporate and political subdivision duly organized and legally existing under and by virtue of the Constitution and laws of the State of Texas; that the issuance of the Bonds is duly authorized by law; that all acts, conditions and things required to exist and be done precedent to and in the issuance of the Bonds to render the same lawful and valid obligations of the City have been properly done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Bonds do not exceed any Constitutional or statutory limitation; and that due provision has been made for the payment of the principal of and interest on the Bonds by the levy of a tax as aforestated. In case any provision in this Bond shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The terms and provisions of this Bond and the Ordinance shall be construed in accordance with and shall be governed by the laws of the State of Texas. IN WITNESS WHEREOF, the City Council of the City has caused this Bond to be duly executed under the official seal of the City as of the Bond Date. CITY OF LUBBOCK, TEXAS Mayor COUNTERSIGNED: City Secretary (SEAL) 45142525.2 -11- - - - C. *Form of Registration Certificate of ComptroUer of Public Accounts to appear on Initial Bond(s} only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS THE STATE OF TEXAS ( ( ( ( REGISTER NO. I HEREBY CERTIFY that this Bond has been ·examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this ------- (SEAL} Comptroller of Public Accounts of the State of Texas *NOTE TO PRINTER: Do Not Print on Definitive Bonds . D. Form of Certificate of Paying Agent/Registrar to appear on Bonds (other ·than a single fully registered Initial Bond). · REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR This Bond has been duly issued and registered under the provisions of the within-mentioned Ordinance; the bond or bonds of the above entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Puplic Accounts, as shown by the records of the Paying Agent/Registrar. The designated offices ofthe Paying Agent/Registrar in Dallas, Texas is the "Designated Payment/Transfer Office" for this Bond. Registration date: 45142525.1 JPMORGANCHASEBANK as Paying Agent/Registrar By~~~~~--~----------Authorized Signature -12- - -- - - E. Form of Assignment ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee:) (Social -Security or other identifying number:) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to· transfer the within Bond on the books kept for -re-g-=-is-:-tr-a-:::-tio-n--:-:th-e-re-o-=f,....., w--=ith~fu-:-:11 power of substitution in the premises. DATED: _________ _ Signature guaranteed: NOTICE:· The signature on this assignment . must correspond with ·the name of the registered owner as it appears on the face of the within Bond in every particular. · F. The Initial Bond(s) shall be in the form set forth in paragraph B of this Section, except that the form of the single fully registered Initial Bond shall be modified as follows: · (i) immediately under the name of the bond the headings "Interest Rate " and "Stated Maturity -" shall both be omitted. -----. (ii) Paragraph one shall read as follows: Registered Owner: Principal Amount: DOLLARS The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner named· above, or the registered assigns thereof, the Principal Amount hereinabove stated on February 15 in each of the years and in principal installments in accordance with the following schedule: YEAR OF MATURITY PRINCIPAL INSTALLMENTS INTEREST RATE (Information to be inserted from schedule in Section 2 hereof). (or so much principal thereof as shall not have been prepaid prior to maturity) and to pay interest on the unpaid Principal Amount hereof from th~ Bond Date at the per annum rates of interest specified above computed on the basis of a 360-day ye~r of twelve 30-day months; such interest being payable on February 15 and August 15 in each year, commencing February 15, 2003. Principal installments of this Bond are payable in the year of maturity or on a prepayment date to the registered owner hereof by JPMorgan Chase Bank (the "Paying Agent/Registrar"), upon presentation and surrender, at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest is payable to the registered owner of this 45142525.1 -13- -' - Bond whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date, and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Regist~r or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Bond shall be without exchange or collection charges to the owner 'hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. SECTION 10: Levy of Taxes. To provide for the payment of the "Debt Service Requirements" of the Bonds, being (i) the interest on the Bonds and (ii) a sinking fund for their . payment at maturity or redemption or a sinking fund of 2% (whichever amount is the greater), there is hereby levied, and there shall be annually assessed and collected in due time, form, and manner, a tax on all taxable property in the City, within the limitations prescribed by law, and such tax hereby levied on each one hundred dollars' valuation of taxable property in the · City for the Debt Service Requirements of the Bonds shall be at a rate from year to year as will be ample and sufficient to provide funds each year to pay the principal of and interest on said- Bonds while Outstanding; full allowance being made for delinquencies and costs of collection; separate books and records relating to the receipt and disbursement of taxes levied, assessed and collected for and on account of the Bonds shall be kept and maintained by the City at all times while the Bonds are Outstanding, and the taxes collected for the payment of the Debt Service Requirements on the Bonds shall be deposited to the credit of a "Special 2002 Bond Account" (the "Interest and Sinking Fund") maintained on the records of the City ar1d deposited in a special fund maintained at an official depository of the City's funds; and such tax hereby levied, and to be assessed and collected annually, is hereby pledged to the payment of the Bonds. Proper officers of the City are hereby authorized and directed to cause to be transferred to the Paying Agent/ Registrar for the Bonds, from funds on deposit in the Interest and Sinking Fund, amounts sufficient to fully pay and discharge promptly each installment of interest and principal of the Bonds as the same accrues or matures or comes due by reason of redemption prior to maturity; such transfers of funds to be made in such manner as will cause collected funds to be deposited with the Paying Agent/Registrar on or before each principal and interest payment date for the Bonds. SECTION 11: Mutilated-Destroyed-Lost and Stolen Bonds. In case any Bond shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar, subject to City approval and in its discretion, may execute and deliver a replacement Bond of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Bond, or in lieu of and in substitution for such destroyed, lost or stolen Bond, only upon (i) the filing by the Holder thereof with the Paying Agent/Registrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such Bond, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the City and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Bond shall be borne by the Holder of the Bond mutilated, or destroyed, lost or stolen. 45142525.1 -14- I ...... __ ,_t. - Every replacement Bond issued pursuant to this .Section shall be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Bonds; notwithstanding the enforceability of payment by anyone of the destroyed, lost, or stolen Bonds. The provisions of this Section are exclusive and shall preclude {to the extent lawful) all other rights and remedies with respect to the replacement and payment of mutilated, destroyed, lost or stolen Bonds. SECTION 12: Satisfaction of Obligation of City. If the City shall pay or cause to be paid, or there shc:ill otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Bonds, at the times and in the manner stipulated in this Ordinance, then the pledge of taxes levied under this Ordinance and all covenants, agreements, and other obligations of the City to the Holders shall thereupon cease, terminate, and be discharged and satisfied. Bonds or any principal amount(s) thereof shall be deemed to have been paid within the meaning and with the effect expressed above In this Section when (i) money sufficient to pay in full such Bonds or the principal amount(s) thereof at maturity or {if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/ Registrar have been made) the redemption date thereof, together with all interest due thereon, shall have been irrevocably deposited with and held · in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Government Securities shall have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Government Securities have been certified by an independent accounting firm to mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the principal of and interest on such Bonds, or the principal amount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or · waived or if irrevocable arrangements therefor acceptable to the Paying Agent/ Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or Government Securities wm be made under this Section and no use made of any such deposit which would cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1 986, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/Registrar, or an authorized escrow agent, and all income from Government Securities held in trust by the Paying Agent/Registrar, or an authorized escrow agent, pursuant to this Section which is not required for the payment of the Bonds, or any principal amount(s) thereof, or interest thereon with respect to which such moneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and interest on the Bonds and remaining unclaimed for a period of three (3) years after. the Stated Maturity, or applicable redemption date, of the Bonds for ~hich such moneys were deposited and are held in trust to pay, shall upon the request of the City be remitted to the City against a written receipt therefor. Notwithstanding the above and foregoing, any remittance of funds from the Paying Agent/Registrar to the City shall be subject to any applicable unclaimed property laws of the State of Texas. The term "Government Securities", as used herein, means (i) direct noncallable obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, (ii) noncallable obligations of an agency or instrumentality of the United States, inCluding obligations 45142525.1 -15- - unconditionally guaranteed or insured by the agency or instrumentality and on the date of their acquisition or purchase by the City are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (iii) noncallable obligations of a · state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and on the date of their acquisition or purchase by the City, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. SECTION 13: Ordinance a Contract -Amendments -Outstanding Bonds. This Ordinance shall constitute a contract with the Holders from time to time, be binding on the City, and shall not be amended or repealed by the City while any Bond remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Holders, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Holders, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. ·In addition, the City may, with the consent of Holders holding a majority in aggregate principal amount of the Bonds then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the conserit of all Holders of Outstanding Bonds, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Bonds, reduce the principal amount thereof, the redemption price therefor, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, premium, if any, or interest on the. Bonds, (2) give any preference to any Bond over any other Bond, or (3) reduce the aggregate principal amount of Bonds required to be held by Holders for consent to any such amendment, addition, or rescission. The term "Outstanding" when used in this Ordinance with respect to Bonds means, as of the date of determination, all Bonds theretofore issued and delivered under this Ordinance, except: (1) those Bonds canceled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; ., (2) those Bonds deemed to be duly paid by the ·City in accordance with the provisions of Section 12 hereof; and (3) those mutilated, destroyed, lost, or stolen Bonds which have been replaced with Bonds registered and delivered in lieu thereof as provided in Section 11 hereof. SECTION 14:Covenants to Maintain Tax-Exempt Status. A. used in this Section, the following terms have the following meanings: Definitions. "Closing Date" means the date on which the Bonds are first authenticated and delivered to the initial purchasers against payment therefor. "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. · "Computation Date" has the meaning set forth in Section 1.148-1 (b) of the Regulations. 45142525.1 -:16- When - "Gross Proceeds" means any proceeds as. defined in Section 1.148-1 (b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1 (c) of the Regulations, of the Bonds. "Investment" has the meaning set forth in Section 1.148-1 (b) of the Regulations. "Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and which is not acquired to carry out the governmental purposes of the Bonds. "Rebate Amount" has the meaning set forth in Section 1.148-1 (b) of the Regulations. "Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Bonds. Any reference to any spedfic Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. "Yield" of (1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (2) the Bonds has the meaning set forth in Section 1.148- 4 of the Regulations. B . Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in' a manner which if made or omitted, respectively, would cause the interest on any Bond to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Bond, the City shall comply with each of the specific covenants in this Section. C No Private Use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Bonds: (1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Bonds, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality 45142525.1 -17- - - thereof) other than a state or local government, unless such use is solely as a member of the general public; and · (2) not directly or indirectly \mpose or accept any charge or . other payment by any person or entity who is treated as using Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of which Is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. · D No Private Loan. Except to the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Bonds to . make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; {2) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. E Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Bonds directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held C?r previously disposed of, exceeds the Yield of the Bonds. F Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which' would cause the Bonds to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. G Information Report. The City shall timely file. the information required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. H Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder: (1) The City shall account for all. Gross Proceeds (including all receipts, expenditures and · investments thereof) on its books of account separately and apart from all other funds {and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six · years after the day on which the last Outstanding Bond is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of the Bonds with other rrioney of the City, provided that the City separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. · 45142525.1 -18- - - - (2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date. (3) As additional consideration for the purchase of the Bonds by the Purchasers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludabifity of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Interest and Sinking Fund or its general fund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Bonds equals (i) in the case of a Final Computation Date as defined in Section -1.148-3( e )(2) of the Regulations, one hundred percent ( 1 00%) of the Rebate Amount on such date; and (ii) in the case of any other'Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder; and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by Section 148(f) of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148-3(h) of the Regulations. I Not to Divert Arbitrage Profits.· Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the. Bonds, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection H of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Bonds not been relevant to either party. J Elections. The City hereby directs and authorizes the Mayor, City Secretary, City Mam;iger, Director of Finance and Deputy City Manager, individually or jointly, to make elections permitted· or required pursuant to the provisions of the Code or the Regulations, as they deem necessary or appropriate in connection with the Bonds, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. · 45)42525.1 -19- - SECTION 15: Sale of Bonds. Pursuant to a public sale for the Bonds, the bid submitted by A. G. Edwards & Sons, Inc. (herein referred to as the "Purchasers") is declared to be the best bid received producing the lowest true interest cost rate to the City; such bid is hereby accepted and incorporated herein by reference as a part of this Ordinance for all purposes and the sale of the Bonds to said Purchasers at the price of par and accrued interest to the date of delivery, plus a premium of $-0-, is hereby approved and confirmed. Delivery of the Bonds to the Purchasers shall occur as soon as possible upon payment being made therefor in accordance with the terms of sale. SECTION 16: Official Statement The use of the Preliminary Official Statement, dated February 1, 2002, in the offering and sale of the Bonds is hereby ratified, confirmed and approved in all respects, and the City Council hereby finds that the information and data contained in said Preliminary Official Statement pertaining to the City and its financial affairs is true and correct in all material respects and no material facts have been omitted therefrom which are necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The final Official Statement, which reflects the terms of sale (together with such changes approved by the Mayor, City Manager, Deputy City Manager, Director of Finance or City Secretary, one or more of said officials), shall be and is hereby in all respects approved and the Purchasers are hereby authorized to use and distribute said final Official Statement, dated February 28, 2002, in the reoffering, sale and delivery of the Bonds to the public. SECTION 17: Control and Custody of Bonds. The Mayor of the City shall be and is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the State of Texas, including the printing and supply of definitive Bonds, and shall take and have charge and control of the Initial Bond(s) pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers. Furthermore, the Mayor, Mayor Pro Tern, City Secretary, City Manager, Director of Finance, Deputy City Manager, and Cash and Debt Manager, any one or more of said officials, are hereby authorized and directed to furnish and execute such documents relating to the City and its financial affairs as may be necessary for the issuance of the Bonds, the approval of the Attorney General· and the registration by the Comptroller of Public Accounts and, together with the City's financial advisor, bond counsel and the Paying Agent/Registrar, make the necessary arrangements for the delivery of the Initial Bond(s) to the Purchasers and the initial exchange thereof for definitive Bonds. SECTION 18: Proceeds of Sale. The proceeds of sale of the Bonds, excluding the accrued interest and premium, if any, received from the purchasers, shall be deposited in a construction fund maintained at the City's depository bank. Pending expenditure for authorized projects and purposes, such proceeds of sale may be invested in authorized investments in accordance with the provisions of V.T.C.A., Government Code, Chapter 2256, including guaranteed investment contracts permitted by V.T.C.A., Section 2256.015 et seq., and the City's investment policies and guidelines, and any investment earnings realized shall be expended for such authorized projects and purposes or deposited in the Interest and Sinking Fund as shall be determined by the City Council. Accrued interest and premium, if any, received from the Purchasers as well as all surplus proceeds of sale of the Bonds, including investment earnings, remaining after completion of all authorized projects or purposes shall be deposited to the credit of the Interest and Sinking Fund. 45142525.2 -20- .-. SECTION 19: Notices to Holders-Waiver. Wherever this Ordinance provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and sent by United States Mail, first class postage prepaid, to the address of each Holder appearing in the Security Register at the close of business on the business day next preceding the mailing of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Bonds. Where this Ordinance provides for notice in any manner, such notice may be waived in writingby the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. . . SECTION 20: Cancellation. All Bonds surrendered for payment, redemption, transfer, exchange, or replacement, if surrendered to the Paying Agent/Registrar, shall be promptly canceled by it and, if surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already canceled, shall be promptly canceled by the Paying Agent/Registrar. The ·City may at any time deliver to the Paying Agent/Registrar for cancellation any Bonds previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly canceled by the Paying Agent/Registrar. All canceled Bonds held by the Paying Agent/Registrar shall be returned to the City. SECTION 21: Legal Opinion. The obligation of the Purchasers to accept delivery of the Bonds is subject to being furnished a final opinion of Fulbright & Jaworski LLP., Attorneys, Dallas, Texas, approving such Bonds as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for such Bonds. A true and correct reproduction of said opinion is hereby authorized to be printed on the definitive Bonds or an executed counterpart thereof shall accompany the global Bonds deposited with the Depository Trust Company. SECT'ION 22: CUSIP Numbers. CUSIP numbers may be printed or typed on the definitive Bonds. It is expressly provided, however, that the presence or absence of CUSIP numbers on the definitive Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving the Bonds as to legality are to be held responsible for CUSIP numbers incorrectly printed or typed on the definitive Bonds. SECTION 23: Benefits of Ordinance. Nothing in this Ordinance, expressed or implied, is intended or shall be construed to confer upon any person other than the City; the Paying Agent/Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision hereof, this Ordinance and all its provisions being intended to be and being for the sole and exclusive benefit of the City, the Paying Agent/Registrar and the Holders. 45142525.1 -21- -J - SECTION 24: Inconsistent Provisions. All ordinances, orders or resolutions, ·or parts thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to the extent of such conflict, and the provisions of this Ordinance shall be and remain controlling as to the matters contained herein. · SECTION 25: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 26: Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 27: Construction of Terms. If appropriate in the· context of this Ordinance, words of the singular humber shall be considered to include the plural, words of the plural number shall be considered to include the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders . . SECTION 28: Severability. If any provision of tl1is Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other circumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 29: Continuing Disclosure Undertaking. (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. "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. "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, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. (b) Annual Reports: The City shall provide annually to !;lach NRMSIR and any SID, within six months after the end of each fiscal year (beginning with the fiscal year ending September 30, 2002) financial information and operating data with respect to the City of the general type included in the final Official Statement approved by Section 16 of this Ordinance, being the information described in Exhibit B hereto. Financial statements to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit B hereto and (2) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not available at the time the financial information and operating data must be provided, then the City shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and any SID with the financial information and operating data and will file the annual audit report when and if the same becomes available. 45142525.1 -22- - If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this S.ection may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. (c) Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Bonds, if such event is material within the meaning of the federal securities laws: · 1. 2. 3. 4. 5. 6. 7. . 8. 9. 10. 11. Principal and interest payment delinquencies; Non-payment related defaults; Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled draws on credit enhancements reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Bonds; Modifications to rights of holders of the Bonds; Bond calls; Defeasances; . Release, substitution, or sale of property securing repayment of the Bonds; and Rating changes .. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such Section. (d) Limitations, Disclaimers, and Amendments. The City shall. be obligated to observe and perform the covenants specified in ·this Section while, but only while, the City remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the City fn any event will give the notice required by subsection (c) hereof of any Bond calls and defeasance that cause the City to be no longer such an "obligated person." · The provisions of this Section are for the sole benefit of the Holders and beneficial owners of the Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. . The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest ·in or sell Bonds at any future date. 45142525.1 -23- - - - UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED-IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY· SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. . . . No default by the City in observing or· performing its obligations under this Section shall constitute a breach afar default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. · The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances resulting from a change in legal requirements, a change in law, or a c[!ange in the identity, nature, status, or type of operations of the City, but only if (1) the_ provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Bonds consent to such amendment or (b) a Person - that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Holders and beneficial owners of the Bonds. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (b) an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. · SEC~ION 30: Public Meeting. ·It is officially fouod, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by Chapter 551, Texas Government Code, as amended. 45142525.1 -24- - - ! I SECTION 31: Effective Date. This Ordinance shall take effect and be in full force from and after its adoption on the date shown below in accordance with V.T.C.A., Government Code, Section 1201.028. PASSED AND ADOPTED, this February28, 2002. CITY OF LUBBOCK, TEXAS ATTEST: (City Seal) APPROVED AS TO CONTENT: :L~ 45142525.1 -25- EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT See Document Number 11 - - - - - - DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 29 of this Ordinance. Annu~l Financial Statements and Operating Data EXHIBITB to Ordinance The financial information. and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and· included in the Appendix or under the headings of the Official Statement referred to) below: 1. The financial statements ofthe City appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. 2. The information under Tables 1 through 6 and 8A through 20. AccouOnting Principles The accounting · principles referred to in such Section are the generally accepted accounting principles as applicable to governmental units as prescribed by The Government Accounting Standards Board. 45142525.1 11 - - - - PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of February 28, 2002 (this "Agreement"), by and between the City of Lubbock, Texas (the "Issuer"), and JPMorgan Chase Bank, a New York banking corporation organized and existing under the laws of the State of New York and authorized to do business in the State of Texas, or its successors, RECITALS WHEREAS, the Issuer has duly authorized and provided for the execution and delivery of its "City of Lubbock, Texas, General Obligation Bonds, Series 2002" (the "Securities"), dated February 15, 2002, and such Securities are scheduled to be delivered to the initial purchasers thereof on or about April 4, 2002; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS _PAYING AGENT AND REGISTRAR Section 1.01 Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities, and, as Paying Agent for the Securities, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof; all in accordance with this Agreement and the "Bond Resolution" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities and, as Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the "Bond Resolution". The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02 Compensation. 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 attached hereto for the first year of this Agreement and thereafter 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. 45145656.1 - - 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 'TWO DEFINITIONS Section 2.01 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant ·to the terms of the Security. "Bank Office" means the designated office of the Bank in Dallas, Texas at the address shown in Section 3.01 hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Bond Resolution" means the resolution, order, or ordinance of the governing body of the Issuer pursuant to which the Securities are issued, certified by the Secretary or any other officer of the Issuer and delivered to the Bank. "Fiscal Year" means the fiscal year of the Issuer, ending September 30th. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. · "Issuer Request" and "Issuer Order'' means a written request or order signed in the name of the Issuer by the Mayor, Mayor Pro Tern, City Manager, Deputy City Manager, Director of Finance, Cash and Debt Manager, or City Secretary, any one or more of said officials, and delivered to the Bank. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "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 Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Resolution). 45145656.1 -2- - - - "Redemption Date" when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Bond Resolution. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfers of Securities. "Stated Maturity" means the date specified in the Bond Resolution the principal of a Security is scheduled to be due and payable. Section 2.02 Other Definitions. The terms "Bank," "Issuer," and "Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar'' refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01 Duties of Paying Agent. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the following address: P. 0. Box 2320, Dallas, Texas 75221-2320 or 2001 Bryan Street, gth Floor, Dallas, Texas 75201, Attention: Operations. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and making payment thereof to the Holders of the Securities (or their Predecessor Securities) on the Record Date. All payments of principal and/or interest on the Securities to the registered owners shall be accomplished (1) by the issuance of checks, payable to the registered owners, drawn on the paying agent account provided in Section 5.05 hereof, sent by United States mail, first class, postage prepaid, to the address appearing on the Security Register or (2) by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02 Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities at the dates specified in the Bond Resolution. 45145656.1 -3- - - - ARTICLE FOUR REGISTRAR Section 4.01 Security Register-Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register") for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in the Security Register. Every Security 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 by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re-registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02 · Certificates. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping pending their use and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other governments or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03 Form of Security Register. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities 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 Security Register in any form other than those · which the Bank has currently available and currently utilizes at the time. . The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04 List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. 45145656.1 -4- - The Bank will. not release or disclose the contents of the Security 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 court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05 Return of Cancelled Certificates. The Bank will, at such reasonable intervals as it determines, surrender to the Issuer, Securities in lieu of which or in exchange for which other Securities have been issued, or which have been paid. Section 4.06 Mutilated, Destroyed, Lost or Stolen Securities. The Issuer hereby instructs the Bank, subject to the provisions of Section 11 of the Bond Resolution, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost. or stolen Securities as long as the same does not result in an overissuance. In case any Security shall be mutilated, or destroyed, lost or stolen, the Bank may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only upon the approval of the Issuer and after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07 Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4. 06. ARTICLE FIVE THE BANK Section 5.01 Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02 Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or 45145656.1 -5- - - 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 actin_g or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, 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 Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in· a resolution, certificate, statement, instrument. opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03 Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04 May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05 Moneys Held by Bank-Paying Agent Account/Collateralization. Money deposited by the Issuer with the Bank of the principal (or Redemption Price, if applicable) of or interest on any Securities shall be segregated from other funds of the Bank and the Issuer and shall be held in trust for the benefit of the Holders of such Securities. All money deposited with the Bank hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. Amounts held by the Bank which represent principal of and interest on the Securities remaining unclaimed by the owner after the expiration of three years from the date such amounts have become due and payable shall be reported and disposed of by the Bank in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. The Bank shall have no liability by virtue of actions taken in compliance with this provision. The Bank is not obligated to pay interest on any money received by it hereunder. 45145656.1 -6- - - - - .... - This Agreement relates solely to money deposited for the purposes described herein, and the parties agree that the Bank may serve as depository for other funds of the Issuer, act as trustee under indentures authorizing other bond transactions of the Issuer, or act in any other capacity not in conflict with its duties hereunder. Section 5.06 Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07 Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where either the Bank Office or the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. Section 5.08 DT Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements", which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01 Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. 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 on page 9 . 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. 45145656.1 -7- •• - - - - Section 6.06 Severability. In case any prov1s1on herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in . any way be affected or impaired thereby. Section 6.07 Benefits of Agreement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.08 Entire Agreement. This Agreement and the Bond Resolution constitute the entire agreement · between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between this Agreement and the Bond Resolution, the. Bond Resolution shall govern. Section 6.09 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.10 Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. Upon an early termination of this. Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Securities, to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.11 Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. 45145656.1 -8- - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. [SEAL] Attest: Title: Vf (CITY SEAL) Attest: ;R~A'~ \"'" Ci ecretary 45145656.1 JPMORGAN CHASE BANK BY: iltkdzdb R ~ , Title: . f+1)f' Address: 2001 Bryan Street, 1 01h Floor Dallas, Texas 75201 CITY OF LUBBOCK, TEXAS BY:@#~~ Lizt ayr 7 ~ Address: P. 0. Box 2000 Lubbock, Texas 79457 -9- - - - BOND PAYING AGENT Annual Administrative Charge FEES AND EXPENSES Bond Calls City of Lubbock, Texas General Obligation Bonds, Series 2002 Fee Schedule Account Termination Fee (Minimum) Audit Confirmations (per issue) 550.00 300.00 1,000.00 75.00 Split Maturity Refunding Costs 500.00 min/350.00 per maturity exceeding 1 matu Out-of-pocket expenses are assessed at 6% of invoice cost in addition to specifically identifiable transactions described above. Expenses covered may include, but are not limited to, counsel fees, travel expenses, printing cost, long distance telephone calls, stationery, and forms. Fees are subject to change. All fees quoted are subject to our review and acceptance, and that of our counsel, of the documents governing this issue. JPMORGAN CHASE BANK 12 - - - Honorable Mayor and City Council City of Lubbock, Texas Members of the City Council: OFFICIAL BID FORM February 28, 2002 Reference is made to your Official Statement and Notice of Sale and Bidding Instructions, dated February I, 2002 of$9,400,000 CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION BONDS, SERIES 2002, both of which constitute a part hereof. For your legally issued Bonds, as described in said Notice of Sale and Bidding Instructions and Official Statement, we will pay you par and accrued interest from date of issue to date of delivery to us, plus a cash premium of$ ~ for Bonds maturing and bearing interest as follows: Maturity Principal Interest Maturity Principal Interest (fegruao; 15} Amount Rate (Febru!!J:X: 15l Amount Rate 2003 $ 20,000 .s.:a:r-% 2013 $ 470,000 /63D % 2004 285,000 s-.~s-% 2014 500,000 f_.f.O o/o 2005 305,000 ~'Z:i"' % 2015 525,000 f. s-o o/o 2006 320,000 s-.as % 2016 555,000 ~~0 o/o 2007 340!000 s:z:r o/o 2017 590,000 ~.70 o/o 2008 360,000 ~.z.o o/o 2018 620,000 !t-u:" o/o 2009 380,000 './_.)$' % 2019 655,000 ll, IQ % 2010 400,000 t,. :ZS" % 2020 695,000 ~.Qt'J o/o 2011 425,000 ¥. :z.s: % 2021 735,000 S:oo o/o 2012 445,000 S(2S: o/o 2022 775,000 S".oo o/o ·~·--·-·-------·····---···-------- Of the principal maturities set forth in the table above, term bonds have been created as indicated in the following table (which may include multiple term bonds, one term bond or no term bond if none is indicated). For those years which have been combined into a term bond, the principal amount shown in the table above shall be the mandatory sinking fund redemption amounts in such years except that the amount shown in the year of the term bond maturity date shall mature in such year. The term bonds created are as follows: · Maturitv Date Year of First Mandatory Redemption Principal Amount Our calculation (which is not a part of this bid) of the interest cost from the above is: lRUE INTEREST COST RATE Interest Rate % % o/o % % % "····---·-""" We are having the Bonds of the following maturities -Z 0 2.2-insured by If" fis. J ~ at a premium of$ • ~ said premium to be paid by the Purchaser. Ahy fees to be paid to the rating agencies as a result of said insurance will be paid by the City. The Initial Bonds shall be registered in the name of which will, upon payment for the Bonds, be cancelled by the Paying Agent/Registrar. The Bonds will then be registered in the name· of Cede & Co. (DTC's partnership nominee), under the Book-Entry-Only System. A bank cashier's check or certified check of the Bank, in the amount of $188,000, which represents our Good Faith Deposit (is attached hereto) or (has been made available to you prior to the opening of this bid), and is submitted in accordance with the terms as set forth in the Official Statement and Notice of Sale and Bidding Instructions. We agree to accept delivery of the Bonds utilizing the Book·Entry-Only System through DTC and make payment for the Initial Bond in immediately available funds in the Corporate Trust Division, JPMorgan Chase Bank, Dallas, Texas, not later than 10:00 AM, CST, on April 4, 2002, or thereafter on the date the Bonds are tendered for delivery, ·pursuant to the terms set forth in the Notice dfSale and Bidding Instructions. It will be the obligation of the purchaser of the Bonds to complete the DTC Eligibility Questionnaire. The undersigned agrees to complete, execute, and deliver to the City, at least six business days prior to delivery of the Bonds, a certificate relating to the "issue price" of the Bonds in the form and to the effect accompanying the Notice of Sale and Bidding Instructions, with such changes thereto as may be acceptable to the City. We agree to provide in writing tbe initial reoffering prices and other terms, if any, to the Financial Advisor by the dose of the next business day after the award. Respectfully submitted, Syndicate Members: A. Q. EQW ARD.S & SONS. INC. Name of Underwriter or Manager tiJ c'" ,. k. S h c-.1,.., / e_ kf-e r Signature ACCEPTANCE CLAUSE ATTEST: yor City of Lubbock, Texas . C1ty Secretary -~ · ······· ·CizyofLubboc.k, Texas ·· -----· 13 OFFICIAL STATEMENT Dated February 28, 2002 Ratings: Moody's: "Aa2/Aaa" S&P: "AA+/AAA" Fitch: "AA+/AAA" NEW ISSUE -Book-Entry-Only (FGIC Insured-2013/2022) See ("Other Information Ratings" herein) In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Exemption" herein, including the alternative minimum tax on corporations. THE BONDS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $9,400,000 CITY OF LUBBOCK, TEXAS (Lubbock County) GENERAL OBLIGATION BONDS, SERIES 2002 Dated Date: February 15, 2002 Due: February 15, as shown on inside cover PAYMENT TERMS ... lmeiest on the $9,400,000 City of Lubbock, Texas, General Obligation Bonds, Series 2002 (the "Bonds") will accrue from February 15, 2002, (the "Dated Date") and will be payable February 15 and August 15 of each year commencing February 15, 2003, and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial o\.VIlership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "The Obligations -Book-Entry-Only System" herein. The initial Paying Agent/Registrar is JPMorgan Chase Bank, Dallas, Texas (see "The Obligations-Paying Agent!Regislrar"). AUTHORITY FOR ISSUANCE ... The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") including particularly Vernon's Texas Codes Annotated ("V.T.C.A."), Texas Government Code, Chapter 1331, as amended, and are direct obligations of the City of Lubbock, Texas (the "City"), payable from a continuing ad valorem tax levied on all taxable property within the City, within the limits prescribed by law, as provided in the ordinance authorizing the Bonds (the "Bond Ordinance") (see "The Obligations-Authority for Issuance"). PURPOSE . . Proceeds from the sale of the Bonds will be used for (i) park construction and improvements; (ii) street construction and improvements; and (iii) lraffic conlrol improvements. = FGIC. Financial Guaranty Insurance Company FGICu ·---m.uk.-dbyl'buwelal c...nuuy 1.wowaaoo Coo:r!poay, apriYate~aotafOUated 'llriiba:oyU.S.~~* As indicated on the Purchasers' bid form, payment of principal and interest on the Bonds maturing 2013 through 2022 as the same become due and payable (other than by reason of acceleration) will be insured by a Municipal Bond Insurance Policy to be issued simultaneously with the delivery of the Bonds by Financial Guaranty Insurance Company. SEE MA TIJRITY ScHEDULE AND REDEMPTION PROVISIONS ON THE REvERSE OF THIS PAGE SEPARATE ISSUES ... The Bonds are being offered by the City concurrently with the "City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligations, Series 2002" (the "Waterworks Certificates") and "City of Lubbock, Texas Tax and Sewer System Surplus Revenue Certificates of Obligations, Series 2002" (the "Sewer Certificates"), under a common Official Statement, and such Bonds, Waterworks Certificates and Sewer Certificates are hereinafter sometimes referred to collectively as the "Obligations". The Bonds, the Waterworks Certificates and Sewer Certificates are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the kinds and type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, etc.(SEE FOLLOWING COVER PAGES FOR SIMULTANEOUS OFFERING OF WATERWORKS CERTIFICATES AND SEWER CERTIFICATES.) LEGALITY ... The Bonds are offered for delivery when, as and if issued and received by the initial purchaser(s) and subject to the approving opinion of the Attorney General of Texas and the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, Lubbock, Texas (see Appendix C, "Forms of Bond Counsel's Opinion"). DELIVERY ... It is expected that the Bonds will be available for delivery through the DTC on April4, 2002. MATURITY SCHEDULE Maturity Price or Maturity Price or Amount {February 15) Rate Yield Amount (February 15) Rate Yield $ 20,000 2003 5.250% 1.700% $ 470,000 2013 4.300% 4.375% 285,000 2004 5.250% 2.320% 500,000 2014 4.400% 4.500% 305,000 2005 5.250% 2.820% 525,000 2015 4.500'% 4.600% 320,000 2006 5.250% 3.150% 555,000 2016 4.600% 4.700% 340,000 2007 5.250% 3.460% 590,000 2017 4.700% 4.800% 360,000 2008 5.200% 3.670% 620,000 2018 4.750% 4.880% 380,000 2009 4.250% 3.880% 655,000 2019 4.800% 4.950% 400,000 2010 4.250% 4.020% 695,000 2020 4.900% 5.000% 425,000 2011 4.250% 4.120% 735,000 2021 5.000% 5.030% 445,000 2012 4.250% 4.220% 775,000 2022 5.000% 5.050% (Accrued Interest from February 15,2002 to be added) OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February I 5, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15. 2012, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations -Optional Redemption"). 2 - - - OFFICIAL STATEMENT Dated February 28, 2002 NEW ISSUE -Book-Entry-Only Ratings: Moody's: "Aa2" S&P: "AA+" Fitch: "AA+" See ("Other Information Ratings" herein) In the opinion of Bond Counsel, interest on the Waterworks Certificates will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Exemption" herein, including the alternative minimum ta"< on corporations. THE WATERWORKS CERTIFICATES WILLNOTBEDESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITU110NS $6,450,000 CITY OF LUBBOCK, TEXAS (Lubbock County) TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002 Dated Date: February 15, 2002 Due: February 15, as shown on inside cover PAYMENT TERMS ... Interest on the $6,450,000 City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002 (the "Waterworks Certificates") will accrue from February 15, 2002, (the "Dated Date") and will be payable February 15 and August 15 of each year commencing February 15, 2003, and will be calculated on the basis ,.., of a 360-day year consisting of twelve 30-day months. The definitive Waterworks Certificates will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Waterworks Certificates may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Waterworks Certificates will be made to the owners thereof. Principal of, premium, if any, and interest on the Waterworks 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 Waterworks Certificates. See "The Obligations-Book-Entry-Only System" herein. The initial Paying Agent/Registrar is JPMorgan Chase Bank, Dallas, Texas (see "The Obligations· Paying Agent/Registrar"). AUTHORITY FOR ISSUANCE ... The Waterworks Certificates are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and constitute direct obligations of the City of Lubbock, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all -taxable property within the City, and (ii) a pledge of surplus net revenues of the City's Waterworks System, as provided in the ordinance authorizing the Waterworks Certificates (the "Waterworks Ordinance") (see "The Obligations -Authority for Issuance"). - - PURPOSE ... Proceeds from the sale of the Waterworks Certificates will be used for (i) waterworks system distribution and expansion; (ii) waterworks system master plan; and (iii) pay cost of associated with issuance of the Waterworks Certificates. SEE MATURITY SCHEDULE AND REDEMPTION PROVISJOI'<"'S ON mE REVERSE OF THIS PAGE SEPARATE ISSUES ... The Waterworks Certificates, are being offered by the City concurrently with the "City of Lubbock, Texas General Obligation Bonds, Series 2002" (the "Bonds") and "City of Lubbock, Texas Tax and Sewer System Surplus Revenue Certificates of Obligations, Series 2002" (the "Sewer Certificates") under a common Official Statement, and such Waterworks Certificates, Bonds and Sewer Certificates are hereinafter sometimes referred to collectively as the "Obligations". The Waterworks Certificates, Bonds and Sewer Certificates are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the kinds and type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, etc. (SEE PRECEDING AND FOLLOWING COVER PAGES FOR SIJ\-IULTAI'.'EOUS OFFERING OF BONDS AND SEWER CERTIFICATES.) LEGALITY ... The Waterworks Certificates are offered for delivery when, as and if issued and received by the initial purchaser(s) and subject to the approving opinion of the Attorney General of Texas and the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Forms of Bond Counsel's Opinion"). DELIVERY ... It is expected that the Waterworks Certificates will be available for delivery through the DTC on April 4, 2002. MATURITY SCHEDULE Maturity Price or Maturity Price or Amount (February 15) Rate Yield Amount (February 15) Rate Yield $ 15,000 2003 4.000% 1.800% $ 325,000 2013 4.375% 4.400% 200,000 2004 4.000% 2.350% 340,000 2014 4.500% 4.520% 210,000 2005 4.000% 2.800% 360,000 2015 4.500% 4.620% 220,000 2006 4.000% 3.150% 380,000 2016 4.625% 4.720% 235,000 2007 4.0000/o 3.450% 405,000 2017 4.750% 4.820% 245,000 2008 4.000% 3.680% 425,000 2018 4.850% 4.920% 260,000 2009 5.000% 3.890% 450,000 2019 5.000% 5.010% 275,000 2010 5.000% 4.040% 475,000 2020 5.000% 5.040% 290,000 2011 4.250% 4.130% 505,000 2021 5.000% 5.070% 305,000 2012 4.250% 4.260% 530,000 2022 5.000% 5.090% (Accrued Interest from February 15, 2002 to be added) OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Waterworks Certificates having stated maturities on and after February 15, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2012, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations -Optional Redemption"). 4 --~ ' - - - - OFFICIAL STATEMENT Dated February 28, 2002 NEW ISSUE -Book-Entry-Only Ratings: Moody's: "Aa2" S&P: "AA+" Fitch: "AA+" See ("Other Information Ratings" herein) In the opinion of Bond Counsel, interest on the Sewer Certificates will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Exemption" herein, including the alternative minimum tax on corporations. THE SEWER CERTIFICATES WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS Dated Date: February 15, 2002 $1,545,000 CITY OF LUBBOCK, TEXAS (Lubbock County) TAX Al'I'D SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002 Due: February 15, as shown on inside cover PAYMENT TERMS ... Interest on the $1,545,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002 (the "Sewer Certificates") will accrue from February 15, 2002, (the "Dated Date") and will be payable February 15 and August 15 of each year commencing February 15, 2003, and will be calculated on the basis of a 360- day year consisting of twelve 30-day months. The definitive Sewer Certificates will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Sewer Certificates may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Sewer Certificates will be made to the owners thereof. Principal of, premium, if any, and interest on the Sewer 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 ofDTC for subsequent payment to the beneficial owners of the Sewer Certificates. See "The Obligations -Book-Entry-Only System" herein. The initial Paying Agent/Registrar is JPMorgan Chase Bank, Dallas, Texas (see "The Obligations-Paying Agent/Registrar"). AUTHORITY FOR ISSUANCE . . The Sewer Certificates are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971 ), as amended, and constitute direct obligations of the City of Lubbock, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus net revenues of the City's Sewer System, as provided in the ordinance authorizing the Sewer Certificates (the "Sewer Ordinance") (see "The Obligations -Authority for Issuance"). PURPOSE ... Proceeds from the sale of the Sewer Certificates will be used for Sewer System improvements and to pay costs associated with issuance of the Sewer Certificates. SEE 1\IA TURITY SCHEDULE AND REDEMPTION PROVISIONS ON TIIE REVERSE OF TillS PAGE SEPARATE ISSUES ... The Sewer Certificates, are being offered by the City concurrently with the "City of Lubbock, Texas General Obligation Bonds,. Series 2002" (the "Bonds") and "City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligations, Series 2002" (the "Waterworks Certificates") under a common Official Statement, and such Sewer Certificates, Bonds and Waterworks Certificates are hereinafter sometimes referred to collectively as the "Obligations". The Sewer Certificates, Bonds and Waterworks Certificates are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the kinds and type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, etc. (SEE PRECEDING COVER PAGES FOR SIMULTANEOUS OFFERING OF BONDS AND WATERWORKS CERTIFICATES.) LEGALITY ... The Sewer Certificates are offered for delivery when, as and if issued and received by the initial purchaser(s) and subject to the approving opinion of the Attorney General of Texas and the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Forms of Bond Counsel's Opinion"). DELIVERY ... It is expected that the Sewer Certificates will be available for delivery through the DTC on April 4, 2002. MATURITY SCHEDULE Maturity Price or Maturity Price or Amount (February 15) Rate Yield Amount (February 15) Rate Yield $ 5,000 2003 4.000% 1.800% $ 80,000 2013 4.375% 4.400% 50,000 2004 4.000% 2.350% 80,000 2014 4.500% 4.5200/o 50,000 2005 4.000% 2.800% 85,000 2015 4.500% 4.620% 55,000 2006 4.000% 3.150% 90,000 2016 4.600% 4.720% 55,000 2007 4.000% 3.450% 95,000 2017 4.750% 4.820% 60,000 2008 4.125% 3.680% 100,000 2018 4.850% 4.920% 60,000 2009 5.000% 3.890% 110,000 2019 5.000% 5.010% 65,000 2010 5.000% 4.040% 115,000 2020 5.000% 5.040% 70,000 2011 5.000% 4.130% 120,000 2021 5.000% 5.070% 75,000 2012 4.750% 4.260% 125,000 2022 5.000% 5.090% (Accrued Interest from February 15, 2002 to be added) OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Sewer Certificates having stated maturities on and after February 15, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2012, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations- Optional Redemption"). 6 - This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to an:y person to whom it is unlawfo.l to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give iriformation or to make any representation other than those contained in this Official Statement, and, if given or made, such other information or representations must not be -relied upon. - - The information set forth herein has been obtained from the City and other sources believed to be reliable, but such information is not guaranteed as to accuracy or completeness and is not to be construed as the promise or guarantee of the Financial Advisor. This Official Statement contains, in part, estimates and matters of opinion which are not intended as statements of fact, and no representation is made as to the correctness of such estimates and opinions, or that they will be realized. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described. TABLE OF CONTENTS OFFICIAL STATEMENT SUMMARY ......................... 8 CITY OFFICIALS, STAFF AND CONSUL TANTS •.. ll ELECTED OFFICIALS ................................................. 11 SELECTED ADMINISTRATIVE STAFF .......................... 11 CONSULTANTS AND ADVISORS .................................. 11 INTRODUCTION .......................................................... 13 THE OBLIGA TIONS ..................................................... I3 BOND INSURANCE FOR CERTAIN MA TURITIES20 TAX INFORMATION ................................................... 21 TABLE 1 -VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT .......................................... 24 TABLE 2 -TAXABLE ASSESSED VALUATIONS BY CATEGORY ...................................................... 25 TABLE 3A -VALUATION AND GENERAL OBLIGATION DEBT HisTORY ................................................ 26 TABLE3B -DERIVATIONOFGENERALPuRPOSE FUNDED TAX DEBT ......................................... 26 TABLE4 -TAX RATE, LEVY AND COLLECTION HISTORY ......................................................... 26 TABLE 5 -TEN LARGEST TAXPAYERS ..................... 27 TABLE 6 -TAX ADEQUACY .................................... 27 TABLE 7 -ESTIMATED OVERLAPPING DEBT ............ 28 DEBT INFORMATION ................................................. 29 TABLE 8A -GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS ............................................... 29 TABLE 8B -DIVISION OF DEBT SERVICE REQUIREMENTS ............................................... 30 TABLE 9 -INTEREST AND SINKING FUND BUDGET PROJECTION .................................................... 31 TABLE 10 -COMPUTATION OF SELF-SUPPORTING DEBT .............................................................. 32 TABLE 11 -AUTIIORIZED BUT UNISSUED GENERAL OBLIGATION BONDS ........................................ 32 TABLE 12-01HER0BLIGATIONS ............................. 33 FINANCIAL INFORMATION ..................................... 34 TABLE l3 -GENERALFUNDREVENIJESAND EXPENDITURE HISTORY ................................... 34 TABLE14-MUNICIPALSALESTAXHISTORY ......... 35 CAPITAL IMPROVEMENT PROGRAM ........................... 35 7 TABLE 15-CURRENT INVESTMENTS ........................ 38 THE SYSTEMS .............................................................. 39 WATERWORKS SYSTEM ........................................... 39 CONTRACTS AND FACILITIES .................................... 39 TABLE 16-MONTHLYWATERRATES ..................... 41 TABLE 17-HISTORICAL WATERCONSl.iMPTION ...... 41 TABLE 18 -WATER WORKS SYS1E.>vl. CO"!'IDENSED STATEMENT OF OPERATIONS .......................... 41 SEWER SYSTE!VI .......................................................... 42 TABLE 19-MONTHLY SEWER RATES ...................... 42 TABLE 20 -SEWER SYSTEM CO"!'IDENSED STATEMENT OF OPERATIONS .............................................. 43 TAX MATTERS ............................................................ 44 OTHER INFORMATION ............................................. 46 RATINGS .................................................................. 46 LmGATION .............................................................. 46 REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE ....................................................... 46 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PuBLIC FUNDS IN TEXAS ................................ 46 LEGAL OPINIONS AND No-LmGATION CERTIFICATE 4 7 AUTIJENTICITY OF FINANCIAL DATA AND 0TI:IER INFORMATION ................................................. 47 CONTINUING DISCLOSURE OF INFORMATION ............. 47 FINANCIAL ADVISOR ................................................ 49 INITIAL PuRCHASER OF TilE BONDS .......................... 49 INITIAL PuRCHASER OF TilE WATERWORKS CERTIFICATES ................................................ 49 INITIAL PURCHASER OF TilE SEWER CERTIFICATES ... 49 FORWARD-LOOKING STATEMENTS DISCLAIMER ....... 49 CERTIFICATION OF TilE OFFICIAL STATEMENT .......... 50 APPENDICES GENERAL INFORMATION REGARDING TilE CITY ........ A EXCERPTS FROM TilE ANNuAL FINANCIAL REPORT . B FORM OF Bmm COUNSEL'S OPINION........................ C MUNICIPAL BOND INSURANCE SPECIMEN ................ D The cover page hereof, this page, the appendices included herein and any addenda, supplement or amendment hereto, are part of the Official Statement. OFFICIAL STATEMENT SU1\11\1ARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Obligations to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. THE CITY ..................................... The City of Lubbock is a political subdivision and municipal corporation of the State, located in Lubbock County, Texas. The City covers approximately 115 square miles and has an estimated 2002 population of 202,000 (see "Introduction-Description of City"). THE BONDS .................................. The Bonds are issued as $9,400,000 General Obligation Bonds, Series 2002. The Bonds are issued as serial bonds maturing February 15, 2003 through February 15, 2022 (see "The Obligations -Description of the Obligations"). THE WATERWORKS CERTIFICATES ............................. The Waterworks Certificates are issued as $6,450,000 Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002. The Waterworks Certificates are issued as serial certificates maturing February 15, 2003 through February 15, 2022 (see "The Obligations -Description of the Obligations"). THE SEWER CERTIFICATES ............................. The Sewer Certificates are issued as $1,545,000 Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002. The Sewer Certificates are issued as serial certificates maturing February 15,2003 through February 15, 2022 (see "The Obligations -Description of the Obligations"). PAYMENTOFINTEREST .............. Interest on the Obligations accrues from February 15, 2002, and is payable February 15, 2003, and each August 15 and February 15 thereafter until maturity or prior redemption (see "The Obligations -Description of the Obligations" and "The Obligations -Optional Redemption"). AUTHORITY FOR ISSUANCE ......... The Bonds are issued pursuant to the general laws of the State, including particularly V.T.C.A., Texas Government Code, Chapter 1331, and the Bond Ordinance passed by the City Council of the City (see "The Obligations-Authority for Issuance"). SECURITY FOR THE The Waterworks Certificates and the Sewer Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended and the Waterworks Ordinance and the Sewer Ordinance, as the case may be, passed by the City Council of the City (see "The Obligations - Authority for Issuance"). OBLIGATIONS ............................. The Bonds constitute direct and voted obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property located within the City (see "The Obligations -Security and Source of Payment"). The Waterworks Certificates constitute direct obligations of the City, payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus net revenues of the City's Watenvorks System (see "The Obligations -Security and Source of Payment"). The Sewer Certificates constitute direct obligations of the City, payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus net revenues of the City's Sewer System (see "The Obligations-Security and Source of Payment"). REDEMPTION............................... The City reserves the right, at its option, to redeem Obligations having stated maturities on and after February 15, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2012, or any date thereafter, at the par value thereof 8 - - - - - - plus accrued interest to the date of redemption (see "The Obligations -Optional Redemption"). TAX EXEMPTION .................. :...... In the opinion of Bond Counsel, the interest on the Obligations will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under the caption "Tax Matters" herein, including the alternative minimum tax on corporations. UsE OF PROCEEDS....................... Proceeds from the sale of the Bonds will be used for (i) park construction and improvements; (ii) street construction and improvements; and (iii) traffic control improvements. Proceeds from the sale of the Waterworks Certificates will be used for (i) Waterworks System distribution and expansion; (ii) Waterworks System master plan; and (iii) pay cost of associated with issuance of the Waterworks Certificates. Proceeds from the sale of the Sewers Certificates will be used for Sewer System improvements and to pay costs associated with issuance ofthe Sewer Certificates. RATINGS ..................................... The Obligations have been rated "Aa2" by Moody's Investors Service, Inc. ("Moody's"), "AA+" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P") and "AA+" Fitch Ratings ("Fitch"). In addition, Moody's, S&P and Fitch have assigned ratings of "Aaa", "AAA" and "AAA", respectively to the Bonds maturing February 15, 2013 through February 15, 2022. The City also has two issues outstanding which are rated "Aaa" by Moody's, "AAA" by S&P and "AAA" by Fitch through insurance by various commercial insurance companies (see "Other Information -Ratings"). BoOK-ENTRY-ONLY SYSTEM...................................... The definitive Obligations will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Obligations may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members ofDTC for subsequent payment to the beneficial owners of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be (see "The Obligations - Book-Entry-Only System"). PAYMENT RECORD...................... The City has never defaulted in payment of its bonded indebtedness. Fiscal Year Ended 9/30 1997 1998 1999 2000 2001 2002 Estimated Population (I) 195,367 196,679 197,117 199,564 201,061 202,000 Taxable Assessed Valuation $ 5,567,072,641 5,830,249,173 6,019,588,349 6,176,962,982 6,638, 779,668 6,91 0,577,171 (1) Source: The City of Lubbock, Texas. SELECTED FINANCIAL INFORMATION Ratio General Purpose Per Capita Funded Per Capita General General Tax Debt Taxable Purpose Purpose to Taxable Assessed Funded Funded Assessed Valuation Tax Debt (2) Tax Debt Valuation $ 28,495 $ 61,728,036 $ 316 1.11% 29,643 57,156,101 291 0.98% 30,53$ 51,222,980 260 0.85% 30,952 53,455,346 268 0.87% 33,019 58,122,809 289 0.88% 34,211 62,979,632 (3) 312 0.91% (2) Does not include self-supporting debt (see "Table 3B Derivation of General Purpose Funded Tax Debt"). (3) Projected, includes the Bonds. (4) Collections for part year only, through 12-31-0l. 9 %of Total Tax Collections 99.78% 99.55% 99.24% 98.89% 99.29% 40.38% (4) GENERAL FUND CONSOLIDATED STATEMEI'IT SUMMARY Fiscal Year Ended September 30, 2001 2000 1999 1998 1997 Fund Balance at Beginning of Year $ 16,620,652 $ 17,248,025 $ 18,990,299 $ 18,472,903 $ 17,672,385 Total Revenues and Transfers 90,463,799 85,518,102 81,929,016 83,556,685 79,790,477 Total Expenditures and Transfers 90,368,409 86,145,475 83,671,290 83,039,289 78,989,959 Fund Balance at End of Year $ 16,716,042 $ 16,620,652 $ 17,248,025 $ 18,990,299 $ 18,472,903 Less: Reserves and Designations (2,361,860) (2,857,096) ( 4,432,834) (5,442,847) (4,997,379) Undesignated Fund Balance $ 14,354,182 $ 13,763,556 $ 12,815,191 $ 13,547,452 s 13,475,524 For additional information regarding the City, please contact: Mr. Andy Burcham Cash & Debt Manager City of Lubbock P.O. Box 2000 Lubbock, Texas 79457 Phone (806) 775-2149 Fax (806) 775-2033 Mr. Vince Viaille First Southwest Company or 1001 Main Street Suite 802 Lubbock, Texas 79401 Phone (806) 749-3792 Fax (806) 749-3793 10 Mr. Joe W. Smith First Southwest Company or 402 Cypress, Suite 707 Abilene, Texas 79604 Phone (915) 672-8432 Fax (915) 675-6218 - - - - - CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS City Council Date of Installation to Office Term Expires Occupation Windy Sitton Mayor Alex ''Ty" Cooke Mayor Pro Tern and Councilmember, District 6 Victor Hernandez Councilmember, District 1 T. J. Patterson Councilmember, District 2 May, 1994 May, 1992 June, 1994 April, 1984 May, 2002 Business Owner May,2004 Investments May, 2002 Attorney-at-Law May, 2004 Co-Publisher David Nelson January, 1997 May, 2002 Attorney-at-Law Councilmember, District 3 Frank W. Morrison Councilmember, District 4 Marc McDougal Councilmember, District 5 SELECTED ADMINISTRATIVE STAFF Name Position Bob Cass City Manager Anita Burgess City Attorney Rebecca Garza City Secretary Debra Forte Deputy City Manager Quincy White Assistant City Manager Tommy Gonzalez Assistant City· Manager Richard Burdine Assistant City Manager Beverly Hodges Director of Finance Andy Burcham Cash & Debt Manager CONSULTANTS AND ADVISORS May, 2000 May,2004 Business Owner, Commodities May, 1998 May, 2002 Business Owner, Real Estate Date of Employment Date of Employment Total Government in Current Position with City of Lubbock Service September, I 992 April, 1976 25 Years December, 1995 December, 1995 6 Years January, 2001 August, 1996 7 Years January, 1995 January, 1995 23 Years September, 2000 September, 2000 11 Years April, 2000 June, 1991 10 Years April, 2000 July, 1997 16 Years July, 2001 July, 2001 20 Years November, 1998 November, 1998 3 Years Auditors ......... .' ............................................................................................... Robinson Burdette Martin Seright & Burrows, L.L.P. Lubbock, Texas Bond Counsel ........................................................................................................................................ Fulbright & Jaworski L.L.P. Dallas, Texas Financial Advisor ...................................................................................................................................... First Southwest Company Lubbock and Dallas, Texas I 1 THIS PAGE INTENTIONALLY LEFT BLANK 12 - - - - - OFFICIAL STATEMENT RELATING TO $9,400,000 CITY OF LUBBOCK, TEXAS (Lubbock County) GENERAL OBLIGATION BONDS, SERIES 2002 AND $6,450,000 CITY OF LUBBOCK, TEXAS (Lubbock County) TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002 AND $1,545,000 CITY OF LUBBOCK, TEXAS (Lubbock County) TAX AND SEWER SYSTEM SIJRPLUS REVEI't'UE CERTIFICATES OF OBLIGATION, SERIES 2002 INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $9,400,000 City of Lubbock, Texas, General Obligation Bonds, Series 2002 (the "Bonds"), $6,450,000 City of Lubbock, Texas Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002 (the "Waterworks Certificates") and $1,545,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002 (the "Sewer Certificates"). The Bonds, the Waterworks Certificates and Sewer Certificates (collectively the "Obligations") are separate and distinct securities offerings being authorized under separate ordinances (the "Bond Ordinance", the "Waterworks Ordinance" and the "Sewer Ordinance") but are being offered and sold under a common Official Statement, and, while the Bonds, the Waterworks Certificates and the Sewer Certificates share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the kinds and type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, etc. Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the respective Ordinances to be adopted on the date of sale of the Obligations except as otherwise indicated herein. There follows in this Official Statement descriptions of the Obligations and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Dallas, Texas. 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 Councilmembers. The Mayor is elected at-large for a two-year term ending in an even- numbered year. Each of the six members of the City Council is elected from a single-member district for a four-year term of office. The terms of three members of the City Council expire in each even-numbered year. The City Manager is the chief administrative officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, electric, water and sanitary sewer utilities, airport, sanitation and solid waste disposal, health and social services, culture-recreation, public transportation, public improvements, planning and zoning, and general administrative services. The 2000 Census population for the City was 199,564; the estimated 2002 population is 202,000. The City covers approximately 115 square miles. THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS ... The Obligations are dated February 15,2002, and mature on February 15 in each of the -years and in the amounts shown on the respective cover pages hereof. Interest will be computed on the basis of a 360-day year of twelve 30-day months, and will be payable on February 15 and August 15, commencing February 15, 2003. The definitive Bonds, Waterworks Certificates and Sewer Certificates will be issued only in fully registered form in any integral multiples of 13 $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC"} pursuant to the Book-Entry-Only System described herein. No physical delivery of the Obligations will be made to the owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "Book-Entry-Only System" herein. AL!HORITY FOR ISSUANCE ... The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, particularly V.T.C.A., Texas Government Code, Chapter 1331, as amended; and the Bond Ordinance. The Bonds are the second installment from a voted authorization of $37,385,000 in principal amount of bonds approved at an election held in the City on September 18, 1999. See Table 11 herein for a description of the authorized purpose for the bonds, bonds heretofore issued from such voted authorization, and amounts remaining to issued following the issuance of the Bonds. The Waterworks Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971}, as amended, and the Waterworks Ordinance passed by the City Council. The Sewer Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and the Sewer Ordinance passed by the City Council. SECURITY AND SOURCE OF PAYMENT-THE BONDS. . All taxable property within the City is subject to a continuing direct annual ad valorem tax levied by the City sufficient to provide for the payment of principal of and interest on all Bonds. SECURITY AND SOURCE OF PAYMEI'\T-THE WATERWORKS CERTIFICATES ... The Waterworks Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and, together with certain Previously Issued Obligations (as defined in the Waterworks Ordinance), are additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Waterworks Ordinance} of the City's Waterworks System (the "System"), such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of"Prior Lien Obligations" (as defined in the Waterworks Ordinance} hereafter issued by the City. In the Waterworks Ordinance, the City reserves and retains the right to issue Prior Lien Obligations while the Waterworks Certificates are outstanding without limitation as to principal amount but subject to any terms, conditions or restrictions as may be applicable thereto under law or otherwise, as well as the right to issue Additional Obligations (as defined in the Waterworks Ordinance) payable from and secured by a parity lien on and pledge of the Net Revenues of the System. Currently, there are no out<;tanding Prior Lien Obligations and there are two issues of Previously Issued Obligations outstanding totaling in principal amount $35,215,000 and having a final maturity date of February 15, 2020. SECt:RITY AND SOU~CE OF PAYMENT-THE SEWER CERTIFICATES ... The Sewer Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City and, together with certain Previously Issued Obligations (as defined in the Sewer Ordinance), are additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Sewer Ordinance) of the City's Sewer System (the "System"), such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of"Prior Lien Obligations" (as defined in the Sewer Ordinance) hereafter issued by the City. In the Sewer Ordinance, the City reserves and retains the right to issue Prior Lien Obligations while the Sewer Certificates are outstanding without limitation as to principal amount but subject to any terms, conditions or restrictions as may be applicable thereto under law or otherwise, as well as the right to issue Additional Obligations (as defined in the Sewer Ordinance) payable from and ·secured by a parity lien on and pledge of the Net Revenues of the System. Currently, there are no outstanding Prior Lien Obligations and there are three issues of Previously Issued Obligations outstanding totaling in principal amount $17,080,000 and having a final maturity date of February 15, 2015. TAX R-\ TE 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 $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, having stated'maturities on and after February 15, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2012, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may 14 !'J. ' - - - - - - be, are to be redeemed, the City may select the maturities to be redeemed. If less than all the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, are in Book-Entry-Only fonn) shall determine by lot which Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, or portions thereof, within such maturity to be redeemed. If an Obligation (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Obligation (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. NOTICE OF REDEMPTION ... Not less than 30 days prior to a redemption date for the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS, WATERWORKS CERTIFICATES OR SEWER CERTIFICATES, AS THE CASE MAY BE, CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY BONDS, WATERWORKS CERTIFICATES OR SEWER CERTIFICATES, AS THE CASE MAY BE, OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, ~TEREST THEREON OR PORTION THEREOF SHALL CEASE TO. ACCRUE. DEFEASA."iCE . . . The Ordinances provide that the City may discharge its obligations to the registered owners of any or all of the Bonds, the Waterworks Certificates and Sewer Certificates, as applicable, to pay principal, interest and redemption price thereon in any manner permitted by law. Under current Texas law, such discharge may be accomplished by depositing with the Paying Agent/Registrar or other lawfully authorized entity (i) a sum of money equal to the principal of, premium, if any, and all interest to accrue on such Bonds, Waterworks Certificates, or Sewer Certificates, as the case may be, to maturity or redemption or (ii) an amounts sufficient, together with the investments earnings thereon, to provide for the payment and/or redemption of such Bonds, Waterworks Certificates or Sewer Certificates, as the case may be;. provided that such deposits may be invested and reinvested only in Government Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent for the Bonds, Waterworks Certificate or Sewer Certificates, as the case may be. The Ordinances provide that "Government Securities" means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recoguized investment rating firm not less than AAA or its equivalent. Upon making such deposit in the manner described, the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, shall no longer be deemed outstanding obligations secured by the Bond Ordinance, Waterworks Ordinance or Sewer Ordinance, as the case may be, but will be payable only from the funds and Government Securities deposited in escrow and will not be considered debt of the City for purposes of taxation or applying any limitation on the City's ability to issue debt or for any other purpose. AMENDMENTS ... The City may amend the respective Ordinances without the consent of or notice to any registered owners in any manner not detrimental to the interests of the registered owners, including the curing of any ambiguity, inconsistency, or formal defect or omission therein. In addition, the City may, with the written consent of the holders of a majority in aggregate principal amount of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, then outstanding affected thereby, amend, add to, or rescind any of the provisions of the Bond Ordinance, Waterworks Ordinance or Sewer Ordinance, as the case may be; except that, without the consent of the registered owners of all of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, affected, no such amendment, addition or rescission may (1) change the date specified as the date on which the principal on any installment of interest is due payable, reduce the principal amount or the rate of interest, change the authorized coin or currency of payment for any Obligation or interest thereon, or in any other way modify the terms of the payment of the principal of or interest on, (2) give any preference to any Obligation over any other Obligation or (3) reduce the aggregate principal amount required to be held by owners for consent to any amendment, addition or waiver. 15 BOOK-ENTRY-ONLY SYSTEM ... This section describes how. ownership of the Obligations are to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by The Depository Trust Company ("DTC"), New York, New York, while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof, The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Obligations. The Obligations will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Obligation will be issued for each maturity of the Bonds, Waterworks Certificates and Sewer Certificates, as the case may be, in the aggregate principal amount of each such maturity and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section !?A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Participants of .securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities Obligations. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through O\ maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of Obligations under the DTC system must be made by or through DTC Participants, which will receive a credit for such purchases on DTC's records. The ownership interest of each actual purchaser of each Obligation ("Beneficial Owner") is in turn to be recorded on the Direct or Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the Obligations are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Obligations representing their ownership interests in the Obligations, except in the event that use of the book-entry system described herein is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Obligations with DTC and their registration: in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC's records reflect only the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Obligations within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Obligations. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the Record Date (hereinafter defined). The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Obligations are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). 16 - - - - - - - - - Principal and interest payments on the Obligations will be made to DTC. DTC's practice is to credit Direct Participants' accounts on each payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on such payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent/Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City, disbursement o_f such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Obligations at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Obligations are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Obligations will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood that while the Obligations are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the respective Ordinances will be given only to DTC. Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City or the Purchasers. Effect of Termination of Book-Entry-Only System. In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued by the City, printed Obligations will be issued to the holders and the Obligations will be subject to transfer, exchange and registration provisions as set forth in the respective Ordinances and summarized under "The Obligations-Transfer, Exchange and Registration" below. PAYING AGENT/REGISTRAR ... The initial Paying Agent/Registrar is JPMorgan Chase Bank, Dallas, Texas. In the respective Ordinances, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be. Upon any change in the Paying Agent/Registrar for the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Obligations affected by the change by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Interest on the Obligations shall be paid to the registered owners appearing on the registration books of the Paying Agent/Registrar at the close of business on the Record Date (hereinafter defined), and such interest shall be paid (i) by check sent United States Mail, first class postage prepaid to the address of the registered owner recorded in the registration books of the Paying Agent/Registrar or (ii) by such other method, acceptable to the Paying Agent/Registrar requested by, and at the risk and expense of, the registered owner. Principal of the Obligations will be paid to the registered owner at their stated maturity or earlier redemption upon presentation to designated payment/transfer office of the Paying Agent/Registrar. If the date for the payment of the principal of or interest on the Obligations shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the designated payment/transfer office of the Paying Agent! Registrar is located are authorized to close, then the date for such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and effect as if made on the date payment was due. TRANSFER, EXCHANGE AND REGISTRATION ... In the event the Book-Entry-Only System should be discontinued, printed certificates will be issued to the registered owners of the Bonds, the Watenvorks Certificates or the Sewer Certificates, as the case may be, and thereafter the such Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon their presentation and surrender to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the execution of an assignment form on the respective Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying Agent/Registrar, in lieu of the Obligations being transferred or exchanged, at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Obligations issued in an exchange or transfer of Obligations will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Obligations to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner 17 or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity of like kind and for a like aggregate principal amount as the Obligations surrendered for exchange or transfer. See "Book-Entry-Only System" herein for a description of the system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Obligation. RECORD DATE FOR INTEREST PAYMENT ... The record date ("Record Date") for the interest payable on the Obligations on any interest payment date means the close of business on the last business day of the preceding month. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of a Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. HOLDERS' REMEDIES . . . The respective Ordinances do not establish specific events of default with respect to the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be. Under State law there is no right to the acceleration of maturity of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, upon the failure of the City to observe any covenant under the respective Ordinances. Although a registered owner of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, could presumably obtain a judgment against the City if a default occurred in the payment of principal of or interest on any such Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, such judgment could not be satisfied by execution against any property of the City. Such registered owner's only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, as it becomes due. The enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The respective Ordinances do not provide for the appointment of a trustee to represent the interests of the bondholders upon any failure of the City to perform in accordance with the terms of the applicable Ordinance, or upon any other condition. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code. Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinions of Bond Counsel will note that all opinions relative to the enforceability of the respective Ordinances and the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, are qualified with respect to the customary rights of debtors relative to their creditors. 18 -UsE OF BOND PROCEEDS ... Proceeds from the sale of the Bonds are expected to be expended as follows: Park Improvements $ 4,245,000.00 Street Improvements 4,075,000.00 Traffic Control Improvements 1,080,000.00 Total $ 9,400,000.00 USE OF WATERWORKS CERTIFICATE PROCEEDS ... Proceeds from the sale of the Waterworks Certificates are expected to be ,,..._ expended as follows: - - - - - Waterworks System Distribution Improvements and Expansion Waterworks System Master Plan Total (1) Includes costs of issuance. $ 5,240,000.00 1,210,000.00 6,450,000.00 (l) UsE OF SEWER CERTIFICATE PROCEEDS ... Proceeds from the sale of the Sewer Certificates are expected to be expended as follows: Sewer System Improvements $ 1,545,000.00 Total $ 1,545,000.00 (l) (1) Includes costs of issuance. 19 The information contained or referred to in this Official Statement relating to the Insurer and the Insurance Policy has been provided by the Insurer. Such information has not been independently verified by the City or the Purchaser and is not guaranteed as to completeness or accuracy by the City or the Purchaser and is not to be construed as a representation of the City or the Purchaser. Reference is made to the specimen of the Insurer's policy attached hereto. BOND INSURANCE FOR CERTAIN MATURITIES CONCURRENTLY WITH mE ISSUANCE OF THE BONDS, FINANCIAL GUARANTY INSURANCE CO:MPANY ("FINANCIAL GUARANTY") WILL ISSUE ITS MUNICIPAL BOND NEW ISSUE INSURANCE POLICY (THE "POLICY") FOR THE BONDS MATURING IN THE YEARS 2013 THROUGH 2022, INCLUSIVE, ONLY (THE "INSURED BONDS"). The Policy unconditionally guarantees the payment of that portion of the principal of and interest on the Insured Bonds which has become due for payment, but shall be unpaid by reason of nonpayment by the Purchaser of the Insured Bonds. Financial Guaranty will make such payments to State Street Bank and Trust Company, N.A., or its successor as its agent (the "Fiscal Agent"), on the later of the date on which such principal and interest is due or on the business day next following the day on which Financial Guaranty shall have received telephonic or telegraphic notice, subsequently confirmed in writing, or written notice by registered or certified mail, from an owner of Insured Bonds or the Paying Agent of the nonpayment of such amount by the City. The Fiscal Agent will disburse such amount due on any Bond to its owner upon receipt by the Fiscal Agent of evidence satisfactory to the Fiscal Agent of the owner's right to receive payment of the principal and interest due for payment and evidence, including any appropriate instruments of assignment, that all of such owner's rights to payment of such principal and interest shall be vested in Financial Guaranty. The term "nonpayment" in respect of a Bond includes any payment of principal or interest made to an owner of a Bond which has been recovered from such owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. The Policy is non-canceilable and the premium will be fully paid at the time of delivery of the Insured Bonds. The Policy covers failure to pay principal of the Insured Bonds on their respective stated maturity dates or dates on which the same shall have been duly called for mandatory sinking fund redemption, and not on any other date on which the Insured Bonds may have been otherwise called for redemption, accelerated or advanced in maturity, and covers the failure to pay an installment of interest on the stated date for its payment: This Official Statement contains a section regarding the ratings assigned to the Insured Bonds and references should be made to such section for a discussion of such ratings and the basis for their assignment to the Insured Bonds. Reference should be made to the description of the City and the Insured Bonds for a discussion of the ratings, if any, assigned to such entity's outstanding parity debt that is not secured by credit enhancement The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware holding company. The Corporation is a subsidiary of General Electric Capital Corporation ("GE Capital"). Neither the Corporation nor GE Capital is obligated to pay the debts of or the claims against Financial Guaranty. Financial Guaranty is a monoline financial guaranty insurer domiciled in the State of New York and subject to regulation by the State of New Y ark Insurance Department. As of September 30, 2001, the total capital and surplus of Financial Guaranty was approximately $1.033 billion. Financial Guaranty prepares financial statements on the basis ofboth statutory accounting principles and generally accepted accounting principles. Copies of such financial statements may be obtained by writing to Financial Guaranty at 125 Park Avenue, New York, New York 10017, Attention: Communications Department (telephone number: (212) 312-3000) or to the New York State Insurance Department at 25 Beaver Street, New York, New York 10004-2319, Attention: Financial Condition Property/ Casualty Bureau (telephone number: (212) 480- 5187). ADDITIONAL RATINGS INFORMATION The Bonds have been assigned ratings of "Aa2" by Moody's Investors Service, Inc. ("Moody's"), "AA+" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P") and "AA..,-" Fitch Ratings ("Fitch"). The Bonds maturing in the years 2013 through 2022, inclusive, only, have been rated "Aaa" by Moody's, "AAA." by S&P and "AAA" by Fitch, with the understanding that, upon delivery of the Insured Bonds, the Financial Guaranty Policy will be issued by Financial Guaranty. See "OTHER INFORMATION-RATINGS" in the Official Statement for a further discussion of ratings. 20 - TAX INFORMATION AD VALOREM 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 taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 1 00"/o 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 market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount notto exceed the less of(l) the market value of the property, or (2) the sum of(a) 10"/o of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least everr three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the V.T.C.A., Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. -Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (1) An · exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; (2) An exemption of up to 20% of the market value of residence homesteads. The minimum exemption under this provision is $5,000. In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section 1-d-1 ), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. The City and the other taxing bodies within its territorY may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" at the value of the property at the time of creation of the zone. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in tum agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. 21 EFFECTIVE TAX RATE AND ROLLBACK TAX RATE ... By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The City Council will be required to adopt the annual tax rate for the City before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the City. If the City Council does not adopt a tax rate by such required date the tax rate for that tax year is the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the City for the preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". Effective January l, 2000, a tax rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or 103 per cent of the effective tax rate until a public hearing is held on the proposed tax rate following a notice of such public hearing (including the requirement that notice be posted on the City's website if the City owns, operates or controls an internet website and public notice be given by television if the City has free access to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY AsSESSMENT AND TAX PAYMENT ... Property within the City is generally assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October I of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February I of each year and the final installment due on August 1. 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 ll May 9 4 13 June lO 5 15 July 12 6 I8 After July, penalty remains at 12%, and interest increases at the rate of I% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalry and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankmptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankmptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. 22 - - - - - - - - CITY APPLICATION OF TAX CoDE .•. The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older of $16,600; the disabled are also granted an exemption of $10,000. The City has not granted an additional exemption of 20% of the market value of residence homesteads; the minimum exemption that may be granted under this provision being $5,000. See Table 1 for a listing of the amounts of the exemptions described above. Ad valorem taxes are not levied by the City against the exempt value· of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property; and the Lubbock County Appraisal District collects taxes for the City. The City does not permit split payments of taxes, and discounts for early payment of taxes are not allowed by the City, although permitted on a local-option basis by the Property Code. In the past, the City has taxed freeport property, although beginning with the 1999 tax year the City has exempted freeport property from taxation. The City collects an additional one-eighth cent sales tax for reduction of ad valorem taxes. The City has adopted a tax abatement policy, as described below. TAX ABATEMENT POLICY ... The City has established a tax abatement program to encourage economic development. In order to be considered for tax abatement, a project must be located in a reinvestment zone or enterprise zone (a commercial project must be in an enterprise zone) and must meet several criteria pertaining to job creation and property value enhancement. The City has established three enterprise zones, the north zone, of approximately 18.6 square miles, the south zone, of approximately 15.7 square miles, and the international airport zone, of approximately 10.3 square miles. At present, the City has initiated 20 enterprise projects and tax abatements, principally in the northeast and southeast sections of the City. The amount and term of abatement shall be determined on a case by case basis; however, in no event shall taxes be abated for a term in excess of ten (l 0) years. TAX INCREMENT FINA!'ICING ZONE ... Together with other taxing units, the City participates in a Tax Increment District ("TID") pursuant to Chapter 311, Texas Tax Code, VTCA The TID covers an approximately 0.71 square-mile area which includes part of the central business district. The base taxable values of the TID are frozen at the level of taxable values for 2001, the year of creation. Any ad valorem taxes relating to growth of the TID's tax base above the frozen base may be used only to finance improvements within the TID and are not available for the payment of other obligations of the City, including the Bonds, the Watenvorks Certificates and the Sewer Certificates. The tax base for the TID for 1986 was $98;180,307; the 2001 taxable assessed value of property in the TID is less than the tax base and there is no current tax increment 23 TABLE 1 -VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2001 Market Valuation Established by Lubbock Central Appraisal District Less Exemptions/Reductions at 100% Market Value: Residential Homestead Exemptions Homestead Cap Adjustment Disabled Veterans Agricultural/Open-Space Land Use Reductions Pollution Exemptions Freeport Exemptions House Bill 366 Tax Abatement Reductions (I) Prorated Exempt Property Property Under Protest (add) 2001 Taxable Assessed Valuation City Funded Debt Payable from Ad Valorem Taxes General Obligation Debt (as of 12-31-01) (2) The Bonds The Waterworks Certificates The Sewer Certificates Total Funded Debt Payable from Ad Valorem Taxes Less: Self Supporting Debt (J) Waterworks System General Obligation Debt Sewer System General Obligation Debt Solid Waste Disposal System General Obligation Debt Drainage Utility System General Obligation Debt General Purpose Funded Debt Payable from Ad Valorem Taxes (4) General Obligation Interest and Sinking Fund as of 12-31-01 Ratio Total Funded Debt to Taxable Assessed Valuation Ratio General Purpose Funded Debt to Taxable Assessed Valuation 2002 Estimated Population -202,000 (S) Per Capita Taxable Assessed Valuation -$34,211 $ 195,956,553 38,599,250 13,462,515 48,109,382 2,578,780 36,164,355 110,094 99,183,962 82,848 (1,267,464) $ 210,408,321 9,400,000 6,450,000 1,545,000 $ 66,940,982 52,165,213 6,174,317 35,000,000 Per Capita Total Funded Debt Payable from Ad Valorem Taxes-$1,128 Per Capita General Purpose Funded Debt Payable from Ad Valorem Taxes-$334 (l) See above, "Tax Information-Tax Abatement Policy". $ 7,343,557,446 432,980,275 $ 6,910,577,171 $ 227,803,321 160,280,512 $ 67,522,809 $ 1,415,094 3.30% 0.98% (2) The statement of indebtedness does not include outstanding $29,605,000 Electric Light and Power System Revenue Bonds, as these Bonds are payable solely from the Net Revenues of the Electric Light and Power System. Excludes accreted value on general obligation capital appreciation bond in the amount of $1,648,114 as of February 15, 2002. (3) As a matter of policy, the City provides for debt service on general obligation debt issued to fund Waterworks System improvements, Sewer System improvements and Solid Waste Disposal System improvements from surplus revenues of these Systems (see "Table 8A-Pro-Forma General Obligation Debt Service Requirements", "Table 8B -Division of Debt Service Requirements", "Table 9 -Interest and Sinking Fund Budget Projection" and "Table 10-Computation of Self- Supporting Debt"). "Waterworks System General Obligation Debt" includes $66,940,982 principal amount of outstanding general obligation bonds and certificates of obligation that were issued to finance Waterworks System improvements, and that are being paid from or are expected to be paid from Waterworks System revenues. The City has no outstanding Waterworks System Revenue Bonds but has obligated revenues of the Waterworks System under water supply contracts. Sec "The Waterworks System". 24 - - - - - "Sewer System General Obligation Debt" includes $52,165,213 principal amount of outstanding general obligation bonds and certificates of obligation that were issued to finance sewer system improvements, and that are being paid from sewer system revenues. The City has no outstanding Sewer System Revenue Bonds. "Solid Waste Disposal System General Obligation Debt" consist of $6,174,317 principal amount of outstanding general obligation debt that was issued for solid waste disposal improvements, and that is being paid from revenues derived from solid waste service fees. The City has no outstanding Solid Waste Disposal System Revenue Bonds. "Drainage Utility System General Obligation Debt" consists of $35,000,000 principal amount of outstanding general obligation debt that was issued for stormwater system improvements, and that is being paid from revenues derived form storm water utility fees. The City has no outstanding Drainage Utility System Revenue Bonds. (4) "General Purpose Funded Debt Payable from Ad Valorem Taxes" includes $67,522,809 of general obligation debt and $2,545,000 principal amount of outstanding Tax and Airport Surplus Revenue Certificates of Obligation on which debt service is provided from Passenger Facility Charge ("PFC") revenues (see Footnote (2), "Table 9 • Interest and Sinking Fund Budget Projection"). (5) Source: City of Lubbock, Texas. TABLE 2 -TAXABLE ASSESSED VALVA TIONS BY CATEGORY Taxable Appraised Value for Fiscal Year Ended September30, 2002 2001 2000 %of %of %of Category Amount Total Amount Total Amount Total Real, Residential, Single-Family $ 3,935,486,660 53.59% $ 3,786,979,722 53.52% $ 3,417,179,021 51.99% Real, Residential, Multi-Family 466,775,473 6.36% 455,378,395 6.44% 411,487,582 6.26% Real, Vacant Lots!Tracts 96,407,484 1.31% 88,612,192 1.25% 87,184,492 1.33% Real, Acreage (Land Only) 60,171,506 0.82% 60,125,617 0.85% 46,378,532 0.71% Real, Fann and Ranch Improvements 12,003,318 0.16% 11,000,161 0.16% 7,166,908 0.11% Real, Commercial and Industrial 1,445,748,160 19.69% 1,364,333,220 19.28% 1,322,413,335 20.12% Real, Oil, Gas and Other Mineral Reserves 8,849,390 0.12% 7,000,000 0.10% 4,540,780 0.07% Real and Tangible Personal, Utilities 185,588,935 2.53% 181,228,303 2.56% 180,418,060 2.74% Tangible Personal, Commercial and Industrial 1,039,521,384 14.16% 1,032,704,200 14.59% I ,072,361,34 7 16.31% Tangible Personal, Other 15,296,446 0.21% 14,786,889 0.21% 14,283,024 0.22% Real Property, Inventory 10,279,056 0.14% 13,320,136 0.19% 9,845,906 0.15% Special Inventory 67,429,634 0.92% 60,786,210 0.86% 0.00% Total Appraised Value Before Exemptions $ 7,343,557,446 100.00% $ 7,076,255,045 100.00% $ 6,573,258,987 100.00% Less: Total Exemptions/Reductions ( 432,980,275) (437,475,377) (396,296,005) Taxable Assessed Value $ 6,910,577,171 $ 6,638,779,668 $ 6,176,962,982 Taxable Appraised Value for Fiscal Year Ended September 30, 1999 1998 %of %of Category Amount Total Amount Total Real, Residential, Single-Family $ 3,219,691,355 50.90% $ 3,112,040,906 51.06% Real, Residential, Multi-Family 396,277,540 6.26% 382,170,749 6.27% Real, Vacant Lots!Tracts 93,912,543 1.48% 96,312,775 1.58% Real, Acreage (Land Only) 45,494,120 0.72% 46,128,990 0.76% Real, Farm and Ranch Improvements 6,778,453 0.11% 6,671,096 0.11% Real, Commercial and Industrial I ,272,262,327 20.11% 1,180,704,813 19.37% Real, Oil, Gas and Other Mineral Reserves 7,862,650 0.12% 10,638,260 0.17% Real and Tangible Personal, Utilities 178,399,714 2.82% 171,889,877 -2.82% Tangible Personal, Commercial and Industrial I ,081,053,583 17.09% 1,065,115,428 17.48% Tangible Personal, Other 12,807,717 0.20% 12,087,601 0.20% Real Property, Inventory 11,256,034 0.18% 11,040,883 0.18% Total Appraised Value Before Exemptions $ 6,325,796,036 100.00% $ 6,094,801,378 100.00% Less: Total Exemptions/Reductions (306,207,687) (264,552,205) Taxable Assessed Value $ 6,019,588,349 $ 5,830,249,173 NOTE: Valuations shown are certified taxable assessed values reported by the Lubbock Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to changethroughout the year as contested values are resolved and the Appraisal District updates records. 25 TABLE 3A -VALUATION AND GENERAL OBLIGATION DEBT HISTORY General Purpose Ratio Fiscal Taxable Funded Tax Debt Tax Debt Funded Year Taxable Assessed Outstanding to Taxable Debt Ended Estimated Assessed Valuation at End Assessed Per 9/30 Population (t) Valuation (Z) Per Capita of Year <3l Valuation Capita 1997 195,367 $ 5,567,072,641 $ 28,495 $ 61,728,036 1.11% $ 316 1998 196,679 5,830,249,173 29,643 57,156,101 0.98% 291 1999 197,117 6,019,588,349 30,538 51,222,980 0.85% 260 2000 199,564 6,176,962,982 30,952 53,455,346 0.87% 268 2001 201,061 6,638,779,668 33,019 58,122,809 0.88% 289 2002 202,000 6,910,577,171 34,211 62,979,632 (4) 0.91% 312 (1) Source: The City of Lubbock, Texas (2) As reported by the Lubbock Central Appraisal District on City's annual State Property Tax Board Reports; subject to change during the ensuing year. (3) Does not include self-supporting debt. (4) Projected, includes the Bonds. TABLE 3B -DERIVATION OF GENERAL PURPOSE FUNDED TAX DEBT The following table sets forth certain information with respect to the City's general purpose and self-supporting general obligation debt. The City received voter approval for authority to issue additional general obligation tax-supported debt on September 18, 1999, and the City has adopted a capital improvement plan which is expected to result in the issuance of additional self-supporting general obligation debt. See "Debt Information-Anticipated Issuance of General Obligation Debt." Fiscal Funded Tax Debt Less: General Purpose Year Outstanding Self-Supporting Funded Tax Debt Ended at End Funded Tax Outstanding 9130 of Year Debt at End of Year (t) 1997 $ 138,914,318 $ 77,186,282 $ 61,728,036 1998 137,104,242 79,948,141 57,156,101 1999 158,117,749 106,894,769 51,222,980 2000 176,847,762 123,392,416 53,455,346 2001 210,408,321 152,285,512 58,122,809 2002 227,803,321 (2) 164,823,689 (l) 62,979,632 (2) (1) The City has a balance remaining of $15,627,000 general obligation bond authorization that has been authorized by the voters, but which has not yet been issued (see Table II -Authorized But Unissued General Obligation Bonds). (2) Projected; includes the Obligations. TABLE4 -TAX RATE, LEVY AND COLLECTION HISTORY Fiscal %of Current %of Total Year Distribution Tax Tax Ended Tax General Economic Interest and Collections Collections 9130 Rate Fund Development Sinking Fund Tax Levy to Tax Levy to Tax Levy 1997 $0.5859 $ 0.37771 $ 0.03000 $ 0.17819 $ 32,617,479 97.99% 99.78% 1998 0.5800 0.39689 0.03000 0.15311 33,815,445 97.80% 99.55% 1999 0.5800 0.41691 0.03000 0.13309 34,988,031 97.67% 99.24% 2000 0.5800 0.42750 0.03000 0.12250 35,844,243 97.35% 98.89% 2001 0.5700 0.42718 0.03000 0.11282 37,841,054 97.58% 99.29% 2002 0.5700 0.42844 0.03000 0.11156 39,391,179 40.10% (l) 40.38% (l) (I) Collections for part year only, through 12-31-01. 26 ,..-. ' - - - - - - - TABLE 5 -TEN LARGEST TAXPAYERS 2001/02 %of Total Taxable Taxable Assessed Assessed Name ofTaxpayer Nature of Property Valuation Valuation Macerich Lubbock LTD Partnership Regional Shopping Mall $ 111,202,071 1.61% Southwestern Bell Telephone Company Telephone Utility 73,111,866 1.06% Excel Energy Electric Utility 52,730,368 0.76% Wal-Mart Discount Retail Stores 32,798,872 0.47% X-Fab Texas, Inc. Electronics Manufacturer 28,597,483 0.41% Plains Co-Op Oil Mills Inc. Agricultural Processing 24,949,410 0.36% Fleming Companies, Inc. Wholesale Grocers 22,775,855 0.33% Methodist Hospital Hospital and Medical Office Building 22,258,687 0.32% United Supermarkets Inc. Retail Grocer 21,611,370 0.31% Farmers Co-Op Compress Agricultural Processing 19,044,584 0.28% $ 409,080,566 5.92% GENERAL OBLIGATION DEBT LIMITATION ... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "Tax Rate Limitation"). TABLE6 ~ TAXADEQUAcy(l) Maximum Principal and Interest Requirements, All General Obligation Debt, 2002(2) .................................................................... : ................................................... $24,650,602 $0.3640 Tax Rate at 98% Collection Produces .................................................................................................................. $24,651,411 Maximum Principal and Interest Requirements, , General Purpose General Obligation Debt, 2003(3) ................................................................................................. $ 8,134,828 $0.1202 Tax Rate at 98%Collection Produces .................................................................................................................. $ 8,140,383 (1) Based on 2001-2002 taxable assessed valuation. (2) See Table SA. (3) See Table 8B. 27 TABLE 7 -ESTIMATED 0VERLAPPII'IG DEBT Expenditures of the various taxing entities within the territory of the City are paid from of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt") was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas and the Lubbock Central Appraisal District. Except for the amounts relating to the City, the City has not independently verified the accuracy or ·completeness of such information, and no person should rely upon such information as being accurate or complete. Further- more, certain of the entities listed may have issued additional bonds since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional bonds, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. 2001102 Total Funded City's Authorized Taxable Debt Estimated Overlapping But Unissued Assessed Tax As Of % G.O. Debt Debt As Of Taxing Jurisdiction Value Rate 12-31-01 Applicable Asof12-31-0I 12-31-01 City of Lubbock $ 6,910,577,171 $ 0.57000 $ 67,522,'809 (I) 100.00% $ 67,522,809 $ 25,027,000 Lubbock Independent School District 5,771,383,915 1.60620 73,729,957 98.91% 72,926,300 3,400,275 Lubbock County 8,154,782,666 0.19170 520,000 82.94% 431,288 500,000 Lubbock County Hospital District 8,154,942,166 0.09905 -0-82.94% -0--0- High Plains Underground Water Conservation District No. I 8,154,105,887 0.00830 -0-82.94% -0--0- Frenship Independent School District 909,360,034 1.58930 36,394,414 64.44% 23,452,560 -0- Idalou Independent School District 112,085,028 1.48000 1,925,000 LIO% 21,175 -0- Lubbock-Cooper Independent School District 321,002,498 1.58000 15,454,555 15.30% . 2,364,547 -0- New Deal Independent School District 84,092,988 1.50000 -0-0.03% -0--0- Roosevelt Independent School District 103,727,668 LSOOOO -0-4.72% -0--0- Total Direct and Overlapping G.O. Debt $ 166,718,680 Ratio ofDirect and Overlapping G.O. Debt to Taxable Assessed Valuation . 2.41% Per Capita Direct and Overlapping G.O. Debt. .......... .$ 825 (l) General Purpose Funded Tax Debt; excludes self-supporting General Obligation Debt (see "Table 1-Valuation, Exemptions and General Obligation Debt"). 28 ) ) ) TABLE SA -GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS fiscal Year Ended 9/30 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 t5 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 $ Principal 13,078,639 13,239,682 12,270,000 12.340,000 12,400,000 12,460,000 11,905,000 ll,565,000 11,160;000 11,260,000 10,165,000 10,275,000 10,420,000 7,575,000 6,805,000 6,170,000 6,385,000 6,095,000 4,645,000 2,180,000 1,405,000 1,480,000 1,560,000 1,645,000 1,735,000 1,830,000 1,925,000 2,030,000 2,145,000 2,260,000 Outstanding Debt (ll Interest $ 11,571,963 $ 9,782,039 8,666,527 8,054,712 7,453,808 6,864,161 6,291,058 5,742,735 5,211,174 4,690,604 4,193,932 3,716,062 3,227,540 2,793,701 2,436,853 2,ll0,452 1,789,719 1,469,736 1,187,483 1,005,275 912,910 837,900 758,470 674,339 585,614 491,575 392,068 287,260 176,623 59,890 Total 24,650,602 23,021,721 20,936,527 20,394,712 19,853,808 19,324,161 18,196,058 17,307,735 16,371,174 15,950,604 14,358,932 13,991,062 13,647,540 10,368,701 9,241,853 8,280,452 8,174,719 7,564,736 5,832,483 3,185,275 2,317,910 2,317,900 2,318,470 2,319,339 2,320,614 2,321,575 2,317,068 2,317,260 2,321,623 2,319,890 Principal 20,000 285,000 305,000 320,000 340,000 360,000 380,000 400,000 425,000 445,000 470,000 500,000 525,000 555,000 590,000 620,000 655,000 695,000 735,000 175,000 TheBonds(2) $ Interest 667,065 436,529 421,041 404,635 387,310 369,025 351,590 335,015 317,484 298,996 279,435 258,330 235,518 210,940 184,310 155,720 125,275 92,528 57,125 19,375 $ ) ') DEBT INFORMATION Total 687,065 721,529 726,041 724,635 727,310 729,025 731,590 735,015 742,484 743,996 749,435 758,330 760,518 765,940 774,310 775,720 780,275 787,528 792,125 794,375 The Waterworks Certificatesm Principal Interest Total $ $ $ 15,000 200,000 210,000 220,000 235,000 245,000 260,000 275,000 290,000 305,000 325,000 340,000 360,000 380,000 405,000 425,000 450,000 475,000 505,000 530,000 446,972 293,581 285,381 276,781 267,681 258,081 246,681 233,306 220,269 207,625 194,034 179,275 163,525 146,638 128,231 108,306 86,750 63,625 39,125 13,250 461,972 493,581 495,381 496,781 502,681 503,081 506,681 508,306 510,269 512,625 519,034 519,275 523,525 526,638 533,231 533,306 536,750 538,625 544,125 543,250 ) $ ) The Sewer Certiticates14) Principal Interest $ 5,000 108,373 50,000 71,115 50,000 69,115 55,000 67,015 55,000 60,000 60,000 65,000 70,000 75,000 80,000 80,000 85,000 90,000 95,000 100,000 110,000 115,000 120,000 125,000 64,815 62,478 59,740 56,615 53,240 49,709 46,178 42,628 38,915 34,933 30,606 25,925 20,750 15,125 9,250 3,125 Total 113,373 121,115 119,115 122,015 119,815 122,478 119,740 121,615 123,240 124,709 126,178 122,628 123,915 124,933 125,606 125,925 130,750 130,125 129,250 128,125 ) Total Combined Requirement $ 24,650,602 24,284,131 22,272,752 21,735,249 21,197,239 20,673,967 19,550,642 18,665,746 17,736,110 17,326,597 15,740,262 15,385,709 f 15,047,773 11,776,659 10,659,364 9,713,599 9,609,670 9,012,511 7,288,761 4,650,775 3,783,660 2,317,900 2,318,470 2,319,339 2,320,614 2,321,575 2,317,068 2,317,260 2,321,623 2,319,890 210,408,321 103,436,183 313,844,504 $ 9,400,000 $ 5,607,246 $ 15,007,246 $ 6,450,000 $ 3,859,117 $ 10,309,117 $ 1,545,000 $ 929,650 $ 2,474,650 $ 341,635,517 (I) "Outstanding Debt" does not include lease/purchase obligations. (2) Average life of the issue -12.598 years. Interest on the Bonds has been calculated at the rates shown on the inside cover hereof. (3) Average life of the issue -12.585 years. Interest on the Waterworks Certificates has been calculated at the rates shown on the inside cover hereof. ( 4) Average life ofthe issue -12.544 years. Interest on the Sewer Certificates has been calculated at the rates shown on the inside cover hereof, ) %of Principal Rerired 28.56% 55,72% 77.6!% 91,46% 95.53% 100.000/o T ;\BLE 8B -DIVISION OF DEBT SERVICE REQUIREMENTS Less: Less: Less: Less: Solid Waste Drainage Waterworks Sewer Disposal Utility General Fiscal System System System System Purpose Year General General General General General Ended Combined Requirements Obligation Obligation Obligation Obligation Obligation 9/30 Principal Interest Total Requirements Requirements Requirements Requirements Requirements ---2002 $ 13,078,639 (!) $ 11,571,963 $ 24,650,602 $ 7,034,507 (I) $ 6,347,280 (!) $ 951,300 (]) $ 2,317,792 (I) $ 7,999,723 2003 13,279,682 11,004,449 24,284,131 7,061,057 6,187,784 579,021 2,321,441 8,134,828 2004 12,805,000 9,467,752 22,272,752 6,460,303 5,883,934 558,709 2,318,316 7,051,490 2005 12,905,000 8,830,249 21,735,249 6,477,671 5,572,841 540,403 2,318,816 6,825,518 2006 12,995,000 8,202,239 21,197,239 6,305,910 5,389,695 524,362 2,317,816 6,659,456 2007 13,090,000 7,583,967 20,673,967 6,176,714 5,195,330 512,440 2,320,191 6,469,292 2008 12,570,000 6,980,642 19,550,642 5,754,695 4,870,825 498,859 2,320,816 6,105,447 2009 12,265,000 6,400,746 18,665,746 5,594,339 4,582,288 485,035 2,319,691 5,684,393 2010 I 1,900,000 5,836,110 17,736,110 5,422,334 4,302,467 470,851 2,321,691 5,218,767 2011 12,045,000 5,281,597 17,326,597 5,310,569 4,135,819 456,389 2,319,261 5,104,559 2012 10,990,000 4,750,262 15,740,262 4,424,567 3,906,387 441,730 2,321,559 4,646,019 20!3 11,150,000 4,235,709 15,385,709 4,361,763 3,716,900 426,787 2,320,755 4,559,504 w 2014 11,340,000 3,707,773 15,047,773 4,297,670 3,552,002 411,540 2,322,163 4,464,398 0 2015 8,545,000 3,231,659 11,776,659 4,156,344 1,685,376 396,125 2,320,470 3,218,344 2016 7,830,000 2,829,364 10,659,364 4,098,150 912,627 376,171 2,320,463 2,951,953 2017 7,260,000 2,453,599 9,713,599 4,043,416 880,357 361,663 2,317,463 2,110,700 2018 7,530,000 2,079,670 9,609,670 3,980,678 847,306 347,071 2,320,997 2,113,618 2019 7,310,000 1,702,51 I 9,012,511 3,600,451 818,579 151,875 2,320,778 2,120,828 2020 5,930,000 1,358,761 7,288,761 2,559,628 130,125 145,125 2,321,880 2,!32,003 2021 3,540,000 1,110,775 4,650,775 544,125 129,250 138,375 2,319,150 1,519,875 2022 2,835,000 948,660 3,783,660 543,250 128,125 2,317,910 794,375 2023 1,480,000 837,900 2,317,900 2,317,900 2024 1,560,000 758,470 2,318,470 2,318,470 2025 1,645,000 674,339 2,319,339 2,319,339 2026 1,735,000 585,614 2,320,614 2,320,614 2027 1,830,000 491,575 2,321,575 2,321,575 2028 1,925,000 392,068 2,317,068 2,317,068 2029 2,030,000 287,260 2,317,260 2,317,260 2030 2,145,000 176,623 2,321,623 2,321,623 2031 2,260,000 59,890 2,319,890 2,319,890 $ 227,803,321 $ 1 13,832,196 $ 341,635,517 $ 98,208,141 $ 68,917,922 $ 8,773,831 $ 69,593,158 $ 95,885,090 ( l) Principal and semiannual interest paid 2-15-02. ) ) - - - - - - TABLE 9 -INTEREST AND SINKING FUND BUDGET PROJECTION General Obligation Debt Service Requirements, Fiscal Year Ending 9-30-02 Fiscal Agent, Tax Collection and Other Uses Total Requirements Sources of Funds Interest and Sinking Fund, 9-30-01 Budgeted Ad Valorem Tax Receipts Budgeted Transfers From: Water Fund (I) Sewer Fund (IJ Solid Waste Fund (!) Drainage Utility Fund (IJ(Z) Airport Fund -from Passenger Facility Charges ("PFCs") Budgeted Interest Earned Total Sources of Funds Projected Balance, 9-30-02 (I) See "Table I 0 -Computation of Self-Supporting Debt". (3) (2) The City made its first transfers from the Drainage Utility Fund to the General Fund on October, 2001. $ $ $ $ $ $ 24,650,602 16,000 24,666,602 1,415,094 7,708,026 6,899,408 6,482,379 951,300 2,317,792 290,495 52,500 26,116,994 1,450,392 (3) PFCs are authorized by the Federal Aviation Administration ("FAA"). PFC revenues must be used for allowable costs of FAA approved airport projects including debt service on airport obligations issued to carry out approved projects. The City issued Tax and Airport Surplus Revenue Certificates of Obligation (the "Airport Certificates") in 1993 and 1995. The outstanding principal balance of the 1993 Airport Certificates on 9-30-01 was $2,365,000; debt service on the Airport Certificates is provided from PFC revenues. PFC revenues in fiscal year ending 9-30-01 were $1,557,918. Debt service on other airport general obligation debt (having an outstanding principal balance at 9-30-01 of$3,750,016) is provided from ad valorem taxes. 31 TABLE 10 -COMPUTATION OF SELF-SUPPORTING DEBT THEW ATERWORKS SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-0 l Less: Requirements for Revenue Bonds, Fiscal Year Ended 9-30-02 Balance Available for Other Purposes Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-02 Percentage of System General Obligation Debt Self-Supporting $ 12,760,994 -0- $ 12,760,994 $ 7,034,507 100.00% (l) Each Fiscal Year the City transfers Net Revenues of the Waterworks Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt service requirements on Waterworks System general obligation debt. THE SEWER SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-0 I Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-02 Balance Available for Other Purposes Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-02 Percentage of System General Obligation Debt Self-Supporting $ $ $ 8,176,778 -0- 8,176,778 6,347,280 100.00% (I) Each Fiscal Year the City transfers Net Revenues of the Sewer Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt service requirements on Sewer System general obligation debt. THE SOLID WASTE DISPOSAL SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-01 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-02 Balance Available for Other Purposes · Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-02 Percentage of System General Obligation Debt Self-Supporting $ 5,932,931 -0- $ 5,932,931 $ 951,300 100.00% (I) Each Fiscal Year the City transfers Net Revenues of the Solid Waste Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt service requirements on Solid Waste System general obligation debt. THE DRAINAGE UTILITY SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-01 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-02 Balance Available for Other Purposes<2l Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-02 Percentage of System General Obligation Debt Self-Supporting<2l $ $ $ 1,603,949 -0- 1,603,949 2,317,792 70.62% (l) Each Fiscal Year the City will transfer Net Revenues of the Drainage Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt service requirements on Drainage Utility System general obligation debt. (2) Storm Drainage Utility Fees were increased on 10/01/01 for residential and commercial customers. The residential rate increased from $1.71 to $4.99 and the commercial rate increased from $11.35 to $33.12. The rate increase will provide sufficient revenues that will exceed the requirements for System General Obligation Debt in the Storm Drainage Enterprise Fund. TABLE 11 -AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS Amount Amount Date Amount Previously Being Unissued Purpose Authorized Authorized Issued Issued Balance Waterworks System 10-17-87 $ 2,810,000 $ 200,000 $ $ 2,610,000 Sewer System 5-21-77 3,303,000 2,175,000 1,128,000 Street Improvements 5-1-93 10,170,000 10,166,000 4,000 Street Improvements 9-18-99 17,165,000 7,725,000 4,075,000 5,365,000 Drainage 9-18-99 2,I60,000 1,025,000 l, 135,000 Traffic Signals 9-18-99 3,295,000 1,080,000 1,080,000 1,135,000 Parks 9-lfS-99 14,765,000 6,270,000 4,245,000 4,250,000 $ 53,668,000 $ 28,641,000 $ 9,400,000 $ 15,627,000 32 r .. .-.... - - - - - - ANTICIPATED ISSUANCE OF GENERAL 0BLIGA TION DEBT ... The City is contemplating issuing an additional $2,000,000 Sewer System Certificates of Obligation within the next twelve months. TABLE 12-OTHER OBLIGATIONS Asset Classification Motor Vehicles Heavy Equipment Heavy Moveable Equipment 2002 $ 7,621 163,552 207,888 2003 $ 7,621 106,201 35,359 Balance 2004 Outstanding $ 4,383 $ 19,625 48,326 318,079 18,327 261,574 PENSION FUND ... TEXAS MUNICIPAL RETIREMENT SYSTEM (1)(2) ... All permanent, full-time City employees who are not firefighters are covered by the Texas Municipal Retirement System ("TMRS"). TMRS is an agent, multiple-employer, public- employee retirement system which is covered by a State statute and is administered by six trustees appointed by the Governor of Texas. TMRS operates independently of its member cities. The City of Lubbock 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, ten year vesting, updated service credit, occupational disability benefits and survivor benefits for the spouse of a vested employee. An employee who retires receives an annuity based on the amount of the employees contributions over-matched two for one by the City. Employee contribution rate is 6% of gross salary. Beginning October 11, 1997, employee contribution rate is 7% of gross salary. The City's contribution rate is calculated each year using actuarial techniques applied to experience. The 2001 contribution rate was 13.69%. The 2002 contribution rate is 13.99%. 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, 2000, the actuarial value of assets held by TMRS (not including those of the Supplemental Disability Fund, which is "pooled"), for the City of Lubbock were $160,299,195. Unfunded actuarial accrued liabilities on December 31, 2000 were $40,414,170, which is being amortized over a 25-year period beginning January, 1997. Total contributions by the City to the System for Calendar Year 2001 were $8,112,713.96. FIREMEN'S RELIEF AND RETIREMENT FUND (I) ... City of Lubbock firefighters are members of the locally administered Lubbock Firemen's Relief and Retirement Fund (the "FUND"), operating under an act passed in 1937 by the State Legislature and adopted by City firefighters, by vote of the department, in 1941. Firefighters are not covered by Social Security. The Fund is governed by seven trustees, three firefighters, two outside trustees (appointed by the other trustees), the Mayor or his representative and the chief financial officer or his representative. Execution of the act is monitored by the Firemen's Pension Commissioner, who is appointed by the Governor. Benefits of retired firemen are determined on a "formula" or a "final salary" plan. Actuarial reviews are performed every two years, and the fund is audited annually. Firefighters contribute 11% of full salary into the fund and the City must contribute a like amount; however, the city contributes on a basis of the percentage of salary which is a ratio adjusted annually that bears the same relationship to the firefighter's contribution rate that the City's rate paid into the TMRS and FICA bears to the rate other employees pay into the TMRS and FICA. The City's contribution rate for 2001 was 16.02%. As of December 31, 2000, over-funded pension benefit obligations were $4,985,739 which is being amortized over a 13 year period beginning January 1, 1997. (1) For historical information concerning the retirement plans, see Appendix B, "Excerpts from the City's Annual Financial Report"-Note #III, Subsection E, "Retirement Plans".) (2) Source: Texas Municipal Retirement System, Comprehensive Annual Financial Report for Year Ended December 31, 2000, "CityofLubbock, Texas". 33 FINANCIAL INFORMATION TABLE 13 -GENERAL FUND REVENUES AND EXPENDITURE HISTORY Fiscal Year Ended September 30, Revenues 2001 2000 1999 1998 1997(l) Ad Valorem Taxes $ 28,604,141 $ 26,595,709 $ 25,338,127 $ 23,271,939 $ 22,440,626 Sales Taxes 28,183,746 27,121,078 25,196,203 24,914,523 24,251,491 Franchise Fees 7,684,683 6,619,755 6,235,099 7,128,034 5,438,688 Miscellaneous Taxes 774,587 743,771 721,907 675,694 687,574 Licenses and Permits 1,202,794 1,138,924 976,091 1,037,458 1,077,878 Intergovernmental 333,171 365,671 576,136 917,572 884,834 Charges for Services 4,299,958 4,210,334 4,032,665 4,016,475 3,522,397 Fines 3,051,055 2,834,208 3,335,340 3,313,233 3,460,453 Miscellaneous Taxes 995,494 1,143,226 947,636 1,011,559 1,118,578 Interest 1,058,096 1,108,662 1,118,016 1,239,562 1,623,818 Operating Transfers <2) 14,276,074 13,636,764 13,451,796 16,030,636 15,284,140 Total Revenues and Transfers $ 90,463,799 $ 85,518,102 $ 81,929,016 $ 83,556,685 $ 79,790,477 Expenditures General Government $ 7,130,478 $ 6, 193,124 $ 6,143,076 $ 5,762,283 $ 5,003,806 Financial Services 1,499,967 1,458,232 1,366,006 1,196,779 1,067,281 Management Services 629,903 461,067 396,216 389,583 I, 170,948 Non-departmental 1, 716,167 606,843 926,203 1,125,310 1,040,419 Health & Community Services 4,831,348 4,744,830 4,522,041 4,519,880 4,398,348 Strategic Pi arming 948,514 823,399 839,814 774,878 727,448 Culture/Leisure Services 13,668,823 13,454,832 12,630,738 12,667,406 12,347,987 Police 28,139,048 25,561,261 23,478,729 22,013,906 20,519,946 Fire 17,785,641 17,080,371 15,616,543 14,468,027 13,897,682 Transportation Services 4,771,680 5,439,855 5,195,459 5,007,496 4,993,564 Electric Utilities 2,146,211 1,923,584 1,759,509 1,848,283 1,778,824 Human Resources 913,250 871,596 870,172 810,997 831,758 Operating Transfers 6,187,379 7,526,481 9,926,784 12,454,461 11,211,948 Total Expenditures $ 90,368,409 $ 86,145,475 $ 83,671,290 $ 83,039,289 $ 78,989,959 Excess of Revenues and Transfers (in) Over Expenditures (out) $ 95,390 s (627,373) $ (1,742,274) $ 517,396 s 800,518 Fund Balance at Beginning of Year 16,620,652 17,248,025 18,990,299 18,472,903 17,672,385 Fund Balance at End of Year $ 16,716,042 $ 16,620,652 $ 17,248,025 $ 18,990,299 $ 18,472,903 Less: Reserves and Designations (3) (2,361 ,860) (2,857 ,096) (4,432,834) (5,442,847) (4,997,379) Undesignated Fund Balance $ 14,354,182 $ 13,763,556 $ 12,815,191 $ 13,547,452 $ 13,475,524 (1) The presentation of the City's General Fund income statements in its audited financial statements was changed in 1997, resulting in different categorizations of expenditure items. (2) The City's financial policies provide for transfers to the General Fund from the City's enterprise funds. The policies provide that the water, waste water and solid waste funds transfer an amount sufficient to cover the pro rata share of the City's general and administrative expenses, an amount representing a franchise payment equal to 3% of gross receipts and an amount representing a payment in lieu of ad valorem taxes. The Electric System makes transfers for the foregoing purposes, and, in addition, makes a transfer reflecting the System's share of street lighting expense. The City's policies with respect to enterprise fund transfers are subject to change. Among the factors that could affect the transfers to the General Fund is the effect of increased competition on the City's electric utility that could occur due to the implementation of Senate Bill 7, which mandates open competition in the provision of retail electric service in the State commencing January 1, 2002, although legislation has been introduced in the current Texas legislative session that, if adopted, will defer the beginning of deregulation to January l, 2007 in the part of the State in which the City is located. (3) The City's financial policies target a General Fund undesignated balance of at least two months of General Fund expenditures. Amounts representing fund balances in excess of the target are reserved for future capital expenditures. 34 ,. - - - - - - - - - TABLE 14 • MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, VTCA, Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Certificates or other debt of the City. In addition, in January, 1995, the voters of the City approved the imposition of an additional sales and use tax of one-eighth of a cent as authorized by VTCA, Tax Code, Chapter 323, as amended. Collection for the additional tax commenced in October, 1995 with the proceeds from the one-eighth cent sales tax designated for the use and benefit of the City to replace property tax revenues lost as a result of the adoption of the tax. Collections and enforcements of the City's sales tax are effected through the offices of the Comptroller ofPublic Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a Fiscal Year %of Ended Total Ad Valorem 9/30 Collected(J) Tax Levy 1997 $ 24,391,081 74.78% 1998 25,002,693 73.94% 1999 25,196,203 72.01% 2000 27,121,078 75.66% 2001 28,183,746 74.48% ( 1) Excludes bingo tax receipts. (2) Based on population estimates of the City. The sales tax breakdown for the City is as follows: . CAPITAL IMPROVEME~ PROGRAM City: City Sales & Use Tax Property Tax Relief County Sales & Use Tax State Sales & Use Tax Total Equivalent of Ad Valorem $ Tax Rate 0.4184 0.4154 0.4079 0.4085 0.4078 1.000¢ 0.125¢ 0.500¢ 6.250¢ 7.875¢ Per Capita (Z) $ 124.01 126.84 126.33 134.89 139.52 The City Council adopted a resolution during the 1984-85 budget process establishing permanent capital maintenance funds for capital prqjects. A capital improvement plan is made for planning purposes and may identify projects that will be deferred or omitted entirely in future years. In addition, as conditions change, new projects may be added that are not currently identified. In order 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. Many of the projects require more than one year of completion and are accounted for on a life to date basis. For fiscal year ending 9-30-02, the City Council has approved $43,407,670 in total expenditures for capital projects for all general purpose projects, as well as projects for the City's Electric System Waterworks System, Sewer System, Solid Waste System, Storm Water System and Airport. The Capital Projects Fund budget for 2001-2002 also identifies an additional $121,791,025 in future improvements, for all City departments over the four succeeding fiscal years, including $69,074,941 to be financed through the issuance of tax-supported debt in these years. The balance of the capital expenditures are anticipated to be funded from reserves or current year revenue sources. FINANCIAL POLICIES Basis of Accounting . . . The accounting policies of the City conform to generally accepted accounting principles of the Governmental Accounting Standards Board and program standards adopted by the Government Finance Officer's Association of the United States and Canada ("GFOA"). The GFOA has awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for each of the fiscal years ended September 30, 1984 through September 30, 1999. The City's 2000 report will be submitted to GFOA to determine its eligibility for another certificate. GASB 34 Implications (or the City of Lubbock ... In June 1999, the Governmental Accounting Standards Board issued Statement No. 34, "Basic Financial Statements--Management's Discussion and Analysis--for State and Local Governments". The objective of this Statement is to enhance the clarity and usefulness of the general-purpose external financial reports of state and local governments to the citizenry, legislative and over$ight bodies, and investors and creditors~ The City must implement GASB 34 for its fiscal year ending September 30, 2002. While adoption of this Statement will alter the presentation of some 35 financial information, management believes that there will be no material adverse impact to the City's financial position, results of operation, or cash flows. General Fund. Balance ... The City's objective is to maintain an unreserved/undesignated fund balance at a minimum of an amount equal to two months budgeted operating expenditures to meet unanticipated contingencies and fluctuations in revenue. Enterprise Fund Balance ... It is the policy of the City to maintain retained earnings equal to three months operating expense and debt requirements in each enterprise fund for unforeseen contingencies. The City's financial policy provides that such retained earnings shall be accumulated over a ten year period, which commenced in 1996. Resources are also retained in the System's rate stabilization fund to meet shortfalls in revenues or fluctuating rate environments, to fund capital improvements and may be allocated if there are not sufficient resources in unreserved/undesignated retained earnings. Enterprise Fund Revenues ... It is the policy of the City that each enterprise fund be operated in a manner that results in self sufficiency, without the need for additional monetary transfers from other funds. Such self sufficiency is to be obtained through the rates, fees and charges of each enterprise fund. For purposes of determining self sufficiency, cost recovery for each enterprise fund includes direct operating and maintenance expense, as well as indirect cost recovery, in-lieu of transfers to the General Fund for property and franchise tax payments, capital expenditures and debt service payments, where appropriate. Debt Service Fund Balance ... A reasonable debt service fund balance is maintained in order to compensate for unexpected contingencies. Budgetary Procedures ... The City follows these procedures in establishing operating budgets: 1) Prior to August 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to October 1 the budget is legally enacted through passage of an ordinance. 4) The City Manager is authorized to transfer budgeted amounts between departments and funds. Expenditures may not legally exceed budgeted appropriations at the fund level. 5) Formal budgetary integration is employed as a management control device during the year for the Convention and Tourism, Criminal Investigation, and Capital Projects Funds. Budgets are adopted on an annual basis. Formal budgetary integration is not employed for Debt Service funds because effective budgetary control is alternatively achieved through general obligation bond indenture and other contract provisions. 6) The Budget for the General Fund is adopted on a basis consistent with generally accepted accounting principles ("GAAP"). 7) Appropriations for the General Fund lapse at year end. Unencumbered balances for the Capital Projects Funds continue as authority for subsequent period expenditures. 8) Budgetary comparison is presented for the General Fund in the combined financial statement section of the . Comprehensive Annual financial Report. The City has received the Distinguished Budget Presentation Award from the GFOA for the following budget years beginning October I, 1983-88 and 1990-01. The City will submit the current budget to the GFOA to determine its eligibility for another award. Insurance ... The City is self-insured for general liability and health benefits coverage, although it purchases reinsurance coverage for claims in excess of$250,000 for general liability claims. Airport liability insurance and workers' compensation is insured under policies issued by third party insurers. The City's Insurance policies are maintained with large deductibles for fire and extended coverage and boiler coverage. An Insurance Fund has been established in the Internal Service Fund to account for insurance programs and budgeted transfers are made to this fund based upon estimated payments for claim losses. At 9-30-01 the total Fund Equity of these insurance funds are as follows: Self-insurance health Self-insurance -risk management 36 $ 8,841,546 $ 11,171,322 - - - - - - - - INVESTMENTS The City of Lubbock invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council of the City of Lubbock. Both state law and the City's investment policies are subject to change. LEGAL l'IIVESTMENTS •.. Under Texas law, the City is authorized to invest in (I) obligations of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, ( 4) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not Jess than A or its equivalent, (6) certificates of deposit that are guaranteed or insured by the Federal Deposit Insurance Corporation or are secured as to principal by obligations described in the preceding clauses or in any other manner and amount provided by law for City deposits, (7) certificates of deposit and share certificates issued by a state or federal credit union domiciled in the State of Texas that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in the clauses (I) through (5) or in any other manner and amount provided by law for City deposits, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9) bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-l or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (II) no-load money market mutual funds regulated by the Securities and Exchange Commission that have a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of$1 for each share, (12) no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two 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 firm of not less than AAA or its equivalent, (13) bonds issued, assumed, or guaranteed by the State of Israel, and (14) guaranteed investment contracts secured by obligations of the United States of America or its, agencies and instrumentalities, other than the prohibited obligations described in the next succeeding paragraph. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (I) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage--backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. INVESTMENT POLICIES ... Under Texas Jaw, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment Each Investment Strategy Statement will describe its objectives concerning: (l) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas Jaw, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, ( 4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City Council. ADDITIONAL PROVISIONS ... Under Texas law the City is additionally required to: (I) annually review its adopted policies and strategies; (2) require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments 37 and adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict its investment in mutual funds in the aggregate to no more than IS percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, and to invest no portion of bond proceeds, reserves and funds held for debt service, in mutual funds; and (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. TABLE 15 -CURRENT INVESTMENTS As of 12-31-01, the City's investable funds were invested in the following categories: Book Value %ofTotal Type Par Value Value Book Value United States Agency Obligations $ 74,365,000 $ 74,401,448 4000% Bank Certificates of Deposit 283,600 283,600 0.15% Local government investment pools (2) 1 [ 1,333,610 111,333,610 59.85% $ 185,982,210 $ 186,018,658 100.00% $ Estimated Fair Market Value(ll %ofTotal Value Book Value 74,997,540 40.19% 283,600 0.15% 111,333,610 59.66% $ 186,614,750 100.00% Weighted Average Maturity (Days) 466 163 187 ( 1) As determined by Patterson & Associates, the City's investment adviser. As of such date, the market value of such investments was approximately 100.00% of their book value. No funds of the City are invested in mortgage-backed securities. The City holds all investments to maturity which minimizes the risk of market price volatility. (2) Local government investment pools consist of entities with investment objectives that include achieving a stable net asset value of $1.00 per share, including TexPool, a local government investment pool under the control of the Texas Comptroller of Public Accounts. The Comptroller has engaged Chase Bank of Texas, and its affiliates, to provide investment management and fund accounting services for TexPool. First Southwest Asset Management, Inc., an affiliate of First Southwest Company, the City's Financial Adviser, provides customer service and marketing for TexPool. 38 - - - - - - - - - - THE SYSTEMS Debt Service on the Waterworks Certificates is expected to be provided from surplus Net Revenues of the City's Waterworks System. The following is a description of the Waterworks System. The Waterworks System is operated as a separate enterprise fund of the City. WATERWORKS SYSTEM CONTRACTS AND FACILITIES The City's raw water treatment plant treats Canadian River Municipal Water Authority raw water deliveries for the cities of Brownfield, Lamesa, Levelland, O'Donnell, Slaton and Tahoka prior to CRMWA delivery"to those cities. Under contractual agreements with these cities, Lubbock is fully reimbursed for all costs of this treatment, including capital costs and debt service; the combined percentage in treatment plant costs for these cities is 20.34%. Water Supply ... The primary source of water for Lubbock is the Sanford Darn and Reservoir Project of CRMWA, which delivers raw water from its Lake Meredith reservoir, located on the Canadian River about 50 miles north of Amarillo, Texas, to member cities through an underground aqueduct system. Lubbock is one of eleven member cities of CRMW A; other members are Amarillo, Pampa, Borger, Plainview, Slaton, Levelland, Brownfield, Tahoka, O'Donnell and Lamesa. Lake Meredith was constructed pursuant to a contract between CRMWA and the U.S. Bureau of Reclamation dated November 28, 1960, as amended. The City, as a participating member, contracted with the CRMW A to pay its pro-rata portion of the total reimbursable cost of the project. Payments under the contract commenced in 1969. In the Spring of 1999, the City applied approximately $12,212,861 of the proceeds of a series of refunding bonds to prepay its share of the Bureau of Reclamation loan. In accordance with its contract with CRMWA, the City pays an annual operating and maintenance charge to CRMWA of certain fixed and variable expenses associated with the project. Lubbock received approximately 37,516 acre feet of water from CRMWA in Calendar Year 2001, approximately 84% of its total consumption. On average, Lake Meredith water has provided 80% to 85% of Lubbock's water supply needs, with the balance of 15% to 20% being supplied by well water from the city-owned well field in Bailey County. When the City and other members of CRMW A originally contracted for the right to receive water from Lake Meredith in 1960, the water yield of the Lake was expected to be greater than it has actually produced. Each year, the Board of CRMW A determines with respect to each member city the portion of water based upon original water yield assumptions that will be provided to each city during the year. In 1996, CRMWA member cities elected to participate in the North Panhandle Water Project (the "Project"). This Project involves CRMWA purchasing 42,765 acres of water rights northeast of Borger, Texas, which occurred in August 1996. Following the drilling of the wells and construction of the pipelines and other improvements, this groundwater is pumped to the CRMW A pipeline where it is blended with surface water from Lake Meredith and delivered to member cities, including Lubbock. With the two combined projects allocation was increased from 38,000 acre feet per year to 41,000 acre feet per year. Lubbock's annual average water consumption is 39,900 acre feet. CRWMA is currently constructing desalinization facilities for Lake Meredith. The total cost of the desalinization project is approximately $10 million, with the State of Texas and the U.S. Government contributing one third of the cost each and the member cities of CRMWA contributing one third of the cost. Lubbock's share of this project is approximately $1.4 million. Other Surface Water Supply Sources ... In 1994, the Brazos River Authority, on behalf of Lubbock, completed construction of the John T. Montford Darn, in order to impound a conservation reservoir, known as the Lake Alan Henry reservoir, on the South Fork of the Double Mountain Fork of the Brazos River. The Lake Alan Henry reservoir, located about 65 miles southeast of Lubbock, was planned and constructed to enhance the provision of estimated long term water supply needs. Lubbock has contracted with the BRA for the maintenance of the darn and operation of the reservoir. On May 11, 1989, the City entered into a contract with the BRA, to extend the life of the revenue bonds issued by the BRA to implement the construction of the Montford Darn and Lake Alan Henry. As of September 30, 2001, the outstanding principal balance of the BRA revenue bonds was $50,355,000. Under its contract with the BRA, the City each year pays to the BRA: (a) amounts sufficient to pay debt service; (b) maintenance and operations costs; and (c) management fees. In addition, the City will buy and pay for the entire amount of water which can be supplied by the project whether or not used. Payments under the contract constitute operating expenses of the City's Waterworks System, payable from gross revenues of the Waterworks System. The City and the BRA are discussing various options to reduce the City's payment obligations under the contract. 39 At conservation storage, the reservoir will contain 115,937 acre-feet of water; mean depth at conservation storage will be approximately 40 feet; maximum depth at the dam will be approximately 90 feet. The contributing drainage or watershed area is an estimated 394 square miles. Presently the reservoir has impounded water to a depth of approximately 70 feet at the dam. In 1988, future population and water demand estimates for Lubbock, projected by the Texas Water Development Board, indicated a 60 to 78 percent increase in Lubbock's population by the year 2040. Recent updates reveal a more likely growth rate of approximately 0.5% increase per year, or an estimated 30% increase in population during this same time period. Due to the City's participation in the North Panhandle Project, construction of the associated facilities necessary to bring the Lake Alan Henry water to the City (pipeline, pump stations, and an additional water treatment plant) has been delayed until use of this water supply resource is required to meet water demand. The Lake Alan Henry reservoir is viewed as a long-range water supply for the City. Based upon the City's participation in the North Panhandle Plains project, its water rights in the Sandhills Well Field in Bailey County and the water from Lake Alan Henry, the City believes that it has addressed its water supply for at least the next forty years. In order to optimize the value of the Lake Alan Henry reservoir, the City in 1997 began constructing recreational improvements on the 580-acre "Public Access Area" located on the North Shore of the reservoir. To date Lubbock has constructed a four-lane boat ramp, a paved road, a parking lot, a boat dock and a fishing pier. In order to defray the cost of maintaining the reservoir as a recreational facility, the City implemented a user fee schedule in March, 1997. Revenue from user fees during 2001 is estimated to be $267,000. Ground Water Supply ... Approximately 20% the City's water is obtained from 251 wells, all producing from the Ogallala formation, which underlies the High Plains of Texas. The wells are used primarily for peaking purposes. Except for the addition of chlorine, the City's ground water does not require treatment before it is introduced into the water distribution system. Wellhead Protection ... Lubbock initiated the Wellhead Protection Program ("WHP") in response to a growing need to maintain its existing groundwater supply and to protect it from environmental harm. In the face of recent droughts, water has become the most precious resource in West Texas. Phase I of the WHP began in 1994 when Lubbock and the League of Women Voters recruited and trained citizen volunteers. These volunteers, working with a map of Lubbock's 235 water supply wells, surveyed land owners and identified possible sources of contamination located on their property. This extensive effort revealed possible contamination that ranged from abandoned water wells and underground storage tanks to auto salvage yards and municipal sewage lines. As a result of Phase I activities, the Texas Natural Resource Conservation Commission ("TNRCC") began pursuing a federal grant from the Environmental Protection Agency ("EPA") for the purpose of conducting non-point source pollution prevention and reduction activities. Prior to pursuing this grant, the TNRCC approached the City to encourage its participation in a $161,000 project to establish a wellhead protection program for its public water supply wells. On September 14, 1995, the City Council authorized the City's participation in the WHP. Public Education Program ... In an effort to minimize the need to acquire more water sources, the City implemented a youth education program in 1997. The goal of this program is to teach water conservation techniques to elementary children in the Lubbock Independent School District; bring an awareness to elementary children about water treatment, water reclamation, and disposal of treated effluent by land application; to promote the protection of groundwater through education about water percolation and the impacts of illegal dumping of oil, gasoline, and oilier pollutants that eventually contaminate groundwater. The City's average daily residential water usage of approximately 170 gallons per capita per day ("GPCD") is higher than the State's average of 167 GPCD. Lubbock is situated in an arid region which requires more water per capita for landscape irrigation than many parts of the State. By implementing a youth education program, Lubbock hopes to make its children, the future consumers of the utility, aware of limitations in water supplies and the need to conserve these supplies. Water Treatment Facilities ... The water treatment plant for the treatment of raw water received from CRMWA has a design capacity of 61.4 mgd and a maximum hydraulic capacity of 75 mgd. The plant has a 1,200 acre-feet open storage reservoir which permits storage of raw water during "off-peak" periods, and 8.5 million gallons ("mg'') clearwell storage for treated water. Water Storage ... Storage capacity includes a 1,200 acre-foot open storage reservoir near the water treatment plant, which permits the storage of surplus water received from the CRWMA in off-peak periods. In addition, 13 storage reservoirs and 4 elevated steel storage tanks provide storage capacity of 66,750,000 gallons, sufficient for peak hours and fire protection requirements. Water Distribution Facilities ... The City's water distribution system includes approximately 1,264 miles of distribution lines, 237 miles of water supply lines and 3,882 fire hydrants. 40 - - - - - - - TABLE 16-MONTHLYWATER RATES On August 26, 1999, the Lubbock City Council adopted a three year 12% increase in water rates which is expected to generate revenues sufficient to pay the debt service on the $24,8000,000 Tax & Waterworks System Surplus Revenue Certificates of Obligation, Series 1999, and which represents the City's share of the construction cost of the North Panhandle Plains Project of CRMW A. The new water rates are set forth below. Current Effective Base Rate (I) Rate 10/1/2002 3/4" meter $8.89. $9.16 1" meter (single family residential) 11.32 11.66 1" meter (other than residential) 18.98 19.55 Flow Rate Charge Qer 1,000 Gallons Single Family Residential 1.63 1.68 Multi-Family Residential 1.38 1.42 Commercial 1.50 1.55 Schools 1.53 1.58 Sprinkler System 1.91 1.96 (1) The Base Rate is for water service; higher Base Rates apply to larger meters ranging from 1.5'' to 10". TABLE 17-HISTORICAL WATER CONSUMPTION (MILLION GALLONS) Maximum Calendar Average Daily Consumption Year Consum,Qtion Da~Near 1997 30.070 63.372 1998 44.010 84.173 1999 36.985 68.925 2000 39.413 67.815 2001 38.255 73.086 TABLE 18 -WATERWORKS SYSTEM CONDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 30, 2001 2000 1999 1998 1997 REVENUE Operating Revenues $ 30,463,694 $ 29,037,723 $ 27,117,510 $ 29,125,673 $ 25,441,028 Non-Operating Revenues 2,491,890 3,404,850 2,126,606 1,663,078 960,963 Gross Revenues $ 32,955,584 $ 32,442,573 $ 29,244,116 $ 30,788,751 $ 26,401,991 EXPENSE Operating Expense (t) 20,194,590 18,238,503 17,180,436 18,710,947 17,356,117 Net Revenues $ 12,760,994 $ 14,204,071 $ 12,063,680 $ 12,077,804 $ 9,045,874 Water Meters 70,756 70,037 69,962 68,127 66,405 (I) Operating expense includes construction repayment costs and operating and maintenance charges paid to CRMW A and BRA and excludes depreciation and capital expenditures. Note: The City has no outstanding or authorized Waterworks System Revenue Bonds, however, there is general obligation debt outstanding (including the Water Certificates) issued for water system purposes on which annual debt service is provided from revenues of the System (see "Table 10 -Computation of Self-Supporting Debt"). It is the City's policy and intention to maintain rates and charges for water service that will provide Net Revenues of the Waterworks System that will fully provide for debt service on general obligation debt issued for Waterworks System purposes over the life of the present Waterworks System general obligation and any additional Waterworks System general obligation debt issued in the future. 41 SEWER SYSTEM The Collection System ... The sanitary sewage collection system, which is handled separately from the storm drainage system, includes approximately 877 miles of sanitary sewer gravity flow and force main lines with trunk mains installed for future expansion of the collection system and 21 lift stations with a pumping capacity of 10,335 gallons per minute. Water Reclamation Facilities ... Treatment facilities consist of the Southeast Water Reclamation Plant, with an average daily flow design capacity of 31.5 million gallons. The Southeast Plant uses two processes for treatment: trickling filter and activated sludge. Effluent Disposal. .. Treated effluent is used for beneficial purposes; no effluent is presently discharged into streams. Treated effluent from the Southeast Water Reclamation Plant is used to irrigate two City -QWned land application sites: (1) A site located adjacent to the City on the southeast, consisting of 5,997 acres; storage capacity for effluent pending use for irrigation is 412 million gallons. (2) A site located near Wilson, Texas, approximately 15 miles southeast of Lubbock, consisting of 4,000 acre; storage capacity of 780 million gallons at this site for effluent pending its use for irrigation. · Excel Energy has a contract with the City to use treated effluent from the Southeast Plant for cooling purposes in Excel Energy's 512,000 kilowatt electric generating plant near Lubbock when the plant is in use. TABLE 19-MONTIILY SEWER RATES (EFFECTIVE 10-1-01) Residential Base Rate (!) Flow Rate (Water Consumption) Commercial/Industrial (l) Base Rate (J) Flow Rate (Water Consumption) Current Rates $3.46 1.44 $7.95 1.44 (I) The Base Rate is for sewer service; Base Rates shown are for a %" water meter; higher Base Rates apply to larger meters ranging from 1" to 10". (2) Industrial waste that exceeds allowable limits is subject to a surcharge for treating biochemical oxygen demand ("B.O.D.") and total suspended solids ("T.S.S."). Present surchange rates are B.O.D. $0.2256/lb. and T.S.S. $0.1459/lb. 42 - - TABLE 20 • SEWER SYSTEM COJ'IiDENSED STATEMENT OF OPERATIONS Fiscal Year Ended September 30, 2001 2000 1999 1998 1997 REVENUE Operating Revenues $ 16,575,673 $ 16,447,324 $ 15,118,621 $ 15,874,343 $ 15,332,893 Non-Operating Revenues 727,565 874,684 621,079 751,828 952,911 Gross Revenues $ 17,303,238 $ 17,322,008 $ 15,739,700 $ 16,626,171 $ 16,285,804 EXPENSE Operating Expense(!) $ 9,126,460 $ 8,104,859 $ 7,584,302 $ 6,632,390 $ 6,393,894 Net Revenues $ 8,116,778 $ 9,217,149 $ 8,155,398 $ 9,993,781 $ 9,891,910 Number of Sewer Records 73,794 71,561 71,467 70,022 68,646 (1) Operating expense excludes depreciation and capital expenditures. Note: The City has no outstanding or authorized Sewer System Revenue Bonds; however, there is outstanding $52,165,213 general obligation debt (including the Sewer Certificates) issued for sewer system purposes, on which annual debt service is provided from revenues of the System (see "Table 10 -Computation of Self-Supporting Debt"). It is the City's policy and intention to maintain rates and charges for sewer service that will provide Net Revenues of the System that will· fully provide for debt service on general obligation debt issued for Sewer System purposes over the life of the present System general obligation and any additional Sewer System general obligation debt issued in the future. Billings ... Customers of Lubbock's water, sewer and sanitation systems are billed simultaneously on one statement; if the customer is connected to the City's electric system, electric charges are also included. All customers who do not pay their bill within 22 days of the date it is mailed to them are charged a 5% late payment penalty. If the bill has not been paid on· the next billing date, a statement is mailed showing the past due bill together with the current bill. If the bill remains delinquent 7 days after the date of the second -. statement, a reminder/cut-off notice is mailed., The cut-off notice specifies that service will be discontinued in 7 days if payment in full is not made. At the end of the 7 day period, a field collector calls on the customer and if he 'is umible to collect payment, service is cut off. The reconnection charge, including electric service if the customer is connected to the City's electric system, is $15.00 before 5:00PM and $25.00 after 5:00PM and during weekends and holidays. - - - 43 TAX MATTERS TAx ExEMPTION ... The delivery of the Obligations is subject to the opinion of Bond Counsel to the effect that interest on the Bonds, Waterworks Certificate or Sewer Certificates, as the case may be, for federal income tax purposes (I) will be excludable from gross· income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of such opinion (the ''Code"), pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. A form of Bond Counsel's opinions is reproduced as Appendix C. The statute, regulations, rulings, and court decisions on which such opinion is based are subject to change. Interest on all tax-exempt obligations, including the Obligations, owned by a corporation will be included in such corporation's adjusted current earnings for tax years beginning atler 1989, for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust, a real estate mortgage investment conduit , or a financial asset securitization investment trust (F ASIT). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the City made in a certificate dated the date of delivery of the Obligations pertaining to the use, expenditure, and investment of the proceeds of the Obligations and will assume continuing compliance by the City with the provisions of the respective Ordinances subsequent to the issuance of the Obligations. The respective Ordinances contain covenants by the City with respect to, among other matters, the use of the proceeds of the Obligations and the facilities financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the Obligations are to be invested, the periodic calculation and payment to the lJnited States Treasury Of arbitrage "profits" from the investment of the proceeds, and the reporting of certain information to the lJnited States Treasury. Failure to comply with any of these covenants would cause interest on the Obligations to be includable in the gross income of the owners thereof from date of the issuance of the Obligations. Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Internal Revenue Service (the "Service") with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax- exempt status of the interest on tax-exempt obligations. If an audit of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, is commenced, under current procedures the Service is likely to treat the City as the "taxpayer," and the Owners would have no right to participate in the audit process. In responding to or defending an audit of the tax -exempt status of the interest on the Obligations, the City may have different or conflicting interests from the Owners. Public awareness of any future audit of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, could adversely affect the value and liquidity of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, during the pendency of the audit, regardless of its ultimate outcome. Except as described above, Bond Counsel expresses no other opinion with respect to any other federal, state or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Obligations. Prospective purchasers of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, should be aware that the ownership of tax-exempt obligations such as the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the united States, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a F ASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances. TAX ACCOUNTING TREATMENT OF DISCOUNT AND PREMIUM ON CERTAIN OBLIGATIONS ... The initial public offering price of certain Bonds, Watemorks Certificates or Sewer Certificates, as the case may be, (the "Discount Obligations") may be less than the amount payable at maturity. An amount equal to the difference between the initial public offering price of a Discount Obligation (assuming that a substantial amount of the Bonds, the Waterworks Certificates or Sewer Certificates, as the case may be, of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Obligation. A portion of such original issue discount allocable to the holding period of such Discount Obligation by the initial purchaser will, upon the disposition of such Discount Obligation (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Obligations described above under "Tax Exemption." Such interest is considered to be accrued actuarially in accordance with the constant interest method overthe life of a Discount Obligation, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Obligation and generally will be allocated to an original purchaser in a different amount from the amount of the payment denominated as interest actually received by the original purchaser during the tax year. 44 - - - - - - - - - However, such interest may be required to be taken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corporation's alternative minimum tax imposed by Section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with "subchapter C" earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for earned income tax credit, owners of an interest in a F ASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Obligation by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Obligation in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Obligation was held) is includable in gross income. Owners of Discount Obligations should consult with their ovm tax advisors with respect to the determination of accrued original issue discount on Discount Obligations for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Discount Obligations. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on Discount Obligations may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment: The initial public offering price of certain Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, (the "Premium Obligations") may be greater than the amount payable at maturity. An amount equal to the difference between the initial public offering price of a Premium Obligation (assuming that a substantial amount of the Bonds, the Waterworks Certificates or Sewer Certificates, as the case may be, of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial purchaser of such Premium Obligations. The basis for federal income tax purposes of a Premium Obligation in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Obligation. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity. Purchasers of the Premium Obligations should consult with their own tax. advisors with respect to the determination of a...'!lortizable bond premium on Premium Obligations for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Obligations. 45 OTHER INFORl\fA TION RATINGS The Obligations have been rated "Aa2" by Moody's, "AA+" by S&P and "AA+" byFitch. In addition, Moody's, S&P and Fitch have assigned ratings of "Aaa", "AAA" and "AAA", respectively, to the Bonds maturing February 15, 2013 through February 15, 2022, with the understanding that, upon delivery, the Financial Guaranty Policy will be issued by Financial Guaranty Insurance Company. The City also has two issues outstanding which are rated "Aaa" by Moody's, "AAA" by S&P and ''AAA" by Fitch through insurance by various commercial insurance companies. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such organizations and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such rating companies, if in the judgment of said companies, circumstances so warrant Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Obligations. LITIGATION It is the opinion of the City Attorney and City Staff that there is no pending litigation against the City that would have a material adverse financial impact upon the City or its operations. REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE The sale of the Obligations have not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS The Bonds. Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. In addition, various provisions of the Texas Finance Code provide that, subject to a prudence standard, the Bonds are legal investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings and loan associations. The Waterworks and Sewer Certificates. Section 251.051, Texas Local Government Code, provides that the Waterworks and Sewer Certificates are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, savings and loan associations, insurance companies, fiduciaries, trustees and guardians, and for the sinking funds of municipalities, school districts, and other political subdivisions or public agencies of the State of Texas. The Waterworks and Sewer Certificates are eligible to secure deposits of any public funds of the state, municipalities, school districts, and other political subdivisions of the state, and are legal security for those deposits to the extent of their market value. General ·Considerations. For political subdivisions in Texas that have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (V.T.C.A., Government Code, Chapter 2256), the Obligations may have to be assigned a rating of" A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public funds. The City has made no investigation of other laws, rules, regulations or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Obligations for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Obligations for such purposes. The City has made no review of laws in other states to determine whether the Obligations are legal investments for various institutions in those states. 46 - - - - - - - - - - - LEGAL OPINIONS AND NO-LITIGATION CERTIFICATE The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinions of the Attorney General of Texas approving the Initial Bond, Waterworks Certificate or Sewer Certificate, as the case may be, and to the effect that the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, are valid and legally binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinions of Bond Counsel, to like effect and to the effect that the interest on the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Obligations, or which would affect the provision made for their payment or security, or in any manner questioning the validity of said Obligations will also be furnished. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Notice of Sale and Bidding Instructions, the Official Bid Form and the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information describing the Obligations in the Official Statement to verify that such description conforms to the provisions of the respective Ordinances. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Obligations is contingent on the sale and delivery of the Obligations. The legal opinions will accompany the Obligations deposited with DTC or will be printed on the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, in the event of the discontinuance of the Book-Entry-Only System. AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. These summaries do not purport to be complete statemt:nts of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. CONTINUING DISCLOSURE OF INFORMATION In the respective Ordinances, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. ANNUAL REPORTS ... The City will provide certain updated financial information and operating data to certain information vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement under Tables numbered 1 through 6 and 8A through 20 and in Appendix B. The City will update and provide this information within 6 months after the end of each fiscal year ending in or after 2002. The City will provide the updated information to each nationally recognized municipal securities information repository ("NRMSIR") and to any state information depository ("SID") that is designated by the State of Texas and approved by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC"). The City may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12. The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial statements 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 B or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC staff as a qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P. 0. Box 2177, Austin, Texas 78768- 2177, and its telephone number is 512/476-6947. 47 MATERIAL EVENT NOTICES ... The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, if such event is material to a decision to purchase or sell the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be; (7) modifications to rights of holders of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be; (8) Bond, Waterworks Certificate or Sewer Certificate calls, as the case may be; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be; and (11) rating changes. (Neither the Bonds, Waterworks Certificate or Sewer Certificates, as the case may be, nor the respective Ordinances make any provision for debt· service reserves or liquidity enhancement.) In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"). AVAILABILITY OF INFORMATION FROM NRMSIRS AND SID ... The City has agreed to provide the foregoing information only to NRMSIRs and the SID. The information will be available to holders of Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. 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, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds, Waterworks Certificates or Sewer Certificates, as the case may be. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2- 12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, in the primary offering of the Obligations. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS ... During the last five (5) years, the City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. 48 - - - - - - FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company may not submit a bid for the Obligations, either independently or as a member of a syndicate organized to submit a bid for the Obligations. First Southwest Company, in its capacity as Financial Advisor, does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Obligations, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. INITIAL PURCHASER OF THE BONDS After requesting competitive bids for the Bonds, the City accepted the bid of AG. Edwards & Sons, Inc. (the "Initial Purchaser") to purchase the Bonds at the interest rates shown on the inside cover page of the Official Statement at a price of par. The Purchaser(s) can give no assurance that any trading market will be developed for the Bonds after their sale by the City to the Initial Purchaser. The City has no control over the price at which the Bonds are subsequently sold and the initial yield at which the Bonds will be priced and reoffered will be established by and will be the responsibility of the Initial Purchaser. INITIAL PuRCHASER OF THEW ATERWORKS CERTIFICATES After requesting competitive bids for the Waterworks Certificates, the City accepted the bid of RBC Dain Rauscher Inc. (the "Initial Purchaser") to purchase the Waterworks Certificates at the interest rates shown on the inside cover page of the Official Statement at a price of par. The Purchaser(s) can give no assurance that any trading market will be developed for the Waterworks Certificates after their sale by the City to the Initial Purchaser. The City has no control over the price at which the Waterworks Certificates are subsequently sold and the initial yield at which the Waterworks Certificates will be priced and reoffered will be established by and will be the responsibility of the Initial Purchaser. INITIAL PURCHASER OF THE SEWER CERTIFICATES After requesting competitive bids for the Sewer Certificates, the City accepted the bid of RBC Dain Rauscher Inc. (the "Initial Purchaser") to purchase the Sewer Certificates at the interest rates shown on the inside cover page of the Official Statement at a price of par. The Purchaser(s) can give no assurance that any trading market will be developed for the Sewer Certificates after their sale by the City to the Initial Purchaser. The City has no control over the price at which the Sewer Certificates are subsequently sold and the initial yield at which the Sewer Certificates will be priced and reoffered will be established by and will be the responsibility of the Initial Purchaser. FORWARD-LoOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, inientions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgements with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. 49 CERTIFICATION OF THE OFFICIAL STATEMENT At the time of payment for and delivery of the Bonds, Waterworks Certificates or Sewer Certificates, the City will furnish a certificate, executed by proper officers, acting in their official capacity, to the effect that to the best of their knowledge and · belief: (a) the descriptions and statements of or pertaining to the City contained in its Official Statement, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of sale of said Bonds, Waterworks Certificates or Sewer Certificates, as the case may be, and the acceptance of the best bid therefor, and on the date of the delivery, were and are true and correct in all material respects; (b) 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; (c) 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; and (d) there has been no material adverse change in the financial condition of the City since the date of the last audited financial statements of the City. The Ordinance, Waterworks Ordinance and Sewer Ordinance will also approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds, Waterworks Certificates, or Sewer Certificates, as the case may be, by the respective Purchaser(s). ATTEST: REBECCA GARZA City Secretary 50 WINDY SITTON Mayor City of Lubbock, Texas - - - - - - - - - APPENDIX A GENERAL INFORMATION REGARDING THE CITY • Amarillo • LUBBOCK Fort Worth• •Dallas • * Austin San Antonio THIS PAGE INTENTIONALLY LEFT BLANK - - - - - -· THE CITY LOCATION The City of Lubbock, which is the County Seat of Lubbock County, Texas, is located on the South Plains of West Texas. Lubbock is the economic, educational, cultural and medical service center of the area. POPULATION Lubbock is the ninth largest City in Texas: 1910 Census 1920 Census 1930 Census 1940 Census 1950 Census 1960 Census 1970 Census 1980Census 1990 Census 2000 Census 2002 (Estimated) ( 1) City of Lubbock (Corporate Limits) 1,938 4,051 20,520 31,853 71,747 128,691 149,701 173,979 186,206 199,564 202,000 Metropolitan Statistical Area ("MSA") (Lubbock County) 1970 Census 179,295 1980 Census 211,651 1990 Census 222,636 2000 Census 242,628 (1) Source: City of Lubbock, Texas AGRICULTURE; BUSINESS AND INDUSTRY Lubbock is the center of a highly mechanized agricultural area with a majority of the crops irrigated with water from underground sources. Principal crops are cotton and grain sorghums with livestock a major additional source of agricultural income. In 2001, approximately 2.82 million bales of cotton were produced in Lubbock and the 25-counties surrounding Lubbock. This was more than the 2.70 million bales produced in 2000 and is 102.5% of the 10-year average of2.80 million bales. Projections for the 2002 cotton crop are about 3.0 million bales.O) Two major vegetable oil plants located in Lubbock have a combined weekly capacity of over I ,811 tons of cottonseed and soybean oil. Several major seed companies are headquartered in Lubbock. Over 200 manufacturing plants in Lubbock produce such products as semiconductors, vegetable oils, heavy earth-moving machinery, irrigation equipment and pipe, farm equipment, paperboard boxes, foodstuffs, mobile and prefabricated homes, poultry and livestock feeds, boilers and pressure vessels, automatic sprinkler system heads, structural steel fabrication and soft drinks. (1) Source: Plains Cot_ton Growers, Inc., Lubbock, Texas. LUBBOCK MSA LABOR FORCE ESTIMATES (1) Civilian Labor Force Total Employment Unemployment Percent Unemployment December 2001(1) 127,687 124,932 2,755 2.20% (1) Source: Texas Workforce Commission. (2) Subject to revision. 2000 123,980 120,729 3,251 2.60% A -1 Annual Averages 1999 1998 123,473 122,692 119,912 118,568 3,561 4,124 2.90% 3.40% 1997 1996 122,182 121,131 117,376 116,348 4,806 4,783 3.90% 3.90% Estimated non-agricultural wage and salaried jobs in various categories as of December, 2001 were: Manufacturing Construction Transportation & Public Utilities Trade 7,200 4,600 8,100 33,400 6,500 37,300 100 28,300 125,500 Finance, Insurance and Real Estate Services Mining Government Total 1\'IAJOR EMPLOYERS (300 EMPLOYEES OR MORE) Company Texas Tech University Covenant Health System Lubbock Independent School District TTU Health Sciences Center City of Lubbock Convergys Caprock Home Health Services United Supermarkets University Medical Center SBC Wal-Mart Lubbock County Lubbock State School Texas Dept. of Criminal Justice Psychiatric Hospital State Department of Human Services U.S. Postal Service American State Bank West TeleServices Southwestern Bell Telephone Company Industrial Molding Corporation Texas Department ofTransportation Eagle Picher Lubbock Regional MHMR Center McLane High Plains Operator Service Company Tyco Fire Protection Dillard's Department Stores Aramark Energas company/Atmos Energy Corp. Jim Burns Automotive Group K-Mart . Lubbock Avalanche-Journal McDonald's Plains National Bank Marriott School Services Wells Fargo Phone Bank Type of Business State University Hospital Public Schools Medical and Allied Health School City Government Call Center Home Health Care Service Supermarkets Hospital Wireless Communications Discount Retailer County Government School for Mentally Retarded Psychiatric Hospital Social Services Post Office Bank Call Center Telephone Utility Manufacturing/Plastic Products State Highway and Street Maintenance Heavy Equipment Manufacturing Social Services Wholesale Food Distributor Customer Service Industrial Machinery Department Stores Food Broker Natural Gas Transmission & Distribution Automobile Dealership Discount Retailer Newspaper Restaurants Bank Hotel/Housekeeping and Hotel Bank Phone Center (1) Source: Business Development Support Service, City of Lubbock, Texa~. (2) Full and part time. Estimated Employees November, 200d'l 8,535 (l) 5,900 3,442 2,259 2,164 1,650 1,650 1,345 999 999 900 897 876 870 585 561 559 558 522, 505 487 482 450 416 409 400 400 391 366 365 345 341 331 325 322 320 (3) See "Texas Department of Criminal Justice ("TDCJ") Prison Psychiatric Hospital" following for more detailed information. A-2 - - - - - EDUCATION-TEXAS TECH UNIVERSITY Established in Lubbock in 1923, Texas Tech University is the fifth largest State-owned University in Texas and had a Fall, 2001, enrollment of 24,558. Accredited by the Southern Association of Colleges and Schools, the University is a co-educational, State- supported institution offering a bachelor's degree in 158 m~or fields, the master's degree in 107 major fields, the doctorate degree in 64 major fields, and a professional degree in 2 major fields (law and medicine). The University proper is situated on 451 acres of the 1,829 acre campus, and has over 160 permanent buildings with additional construction in progress. Fall, 2001, total employment was 6,125. The medical school had an enrollment of 1,390 for Fall, 2001, not including residents; there were 60 graduate students. The School of Nursing had a Fall, 2001, enrollment of 326 including the Permian Basin Program, located in Midland/Odessa; there were 79 graduate students. The Allied Health School had a Fall, 2001, enrollment of 454. Source: Texas Tech University. OTHER EDUCATION INFORMATION The Lubbock Independent School District, with an area of 87.5 square miles, includes over 90% of the City of Lubbock. There are approximately 3,495 total employees. The District operates four senior high schools, ten junior high schools, 38 elementary schools and other educational programs. Scholastic Membership History (I) School Year 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 Average Daily Attendance 28,357 28,111 28,089 27,799 27,661 27,461 27,946 29,397 (2) (I) Source: Superintendent's Office, Lubbock Independent School District. (2) Estimated. Lubbock Christian University, a privately owned, co-educational senior college located in Lubbock, had an enrollment of 1,617 for the Fall Semester, 2001. The State of Texas School for the Mentally Retarded, located on a 226-acre site in Lubbock, consists of 40 buildings with bed- capacity for 436 students; 400 students were in residence. There are approximately 850 professional and other employees. Wayland Baptist College, Plainview Texas, operates a Lubbock Campus which had a Fall, 2001, enrollment of 550 students. TRANSPORTATION Scheduled airline transportation at Lubbock International Airport is furnished by Southwest Airlines, Atlantic Southeast, Continental Airlines and American Eagle; non-stop service is provided to Dallas-Fort Worth International Airport, Dallas Love Field, Bush Intercontinental Airport (Houston), Houston Hobby, El Paso, Las Vegas, Austin, Amarillo and Albuquerque. Passenger hoardings for 2000 totaled 585,000 and 565,000 for 2001. Extensive private aviation services are located at the airport Rail transportation is furnished by the Burlington Northern Santa Fe Railroad with through service to Dallas, Houston, Kansas City, Chicago, Los Angeles and San Francisco. Short-haul rail service is also furnished by the Seagraves, Whiteface and Lubbock Railroad. Texas, New Mexico and Oklahoma Bus Lines, a subsidiary of Greyhound Corporation, provides bus service. Several motor freight common carriers provide service. Lubbock has a well-developed highway network including Interstate 27 (Lubbock-Amarillo), 4 U.S. Highways, 1 State Highway, a controlled-access outer loop and a county-wide system of paved farm-to-market roads. A-3 GOVERNMENT AND MILITARY (1) Reese Air Force Base (Reese), a pilot training base located adjacent to the City, was included on the list of bases approved for closure by the President and Congress in July, 1995. Reese closed on September 30, 1997. As a result of the closure, the City developed a re-use plan for the facilities. Reese represented approximately 2.6% of the local work force. While closure of the base did not have a positive impact on the Lubbock economy, the growth in other economic sectors minimized or neutralized the effect of the closure of the base. In addition, there has been a positive economic impact from the re-use of the base. In 1997, the Texas Legislature enacted Chapter 2300 of the Texas Government Code that provided for the creation of the Lubbock Reese Redevelopment Authority (the "Authority"). The Authority is a political subdivision of the St~te of Texas and is authorized to accept title from the United States to all or any portion of the real, permanent, and mixed property situated within Reese Air Force Base. The Authority is empowered to manage, lease, sale and develop the property at Reese Air Force Base. The former air base, now known as Reese Technology Center and is the home of the prized Institute of Environmental and Human Health (TIEHH). TIEHH is a joint venture between Texas Tech University and Texas Tech Health Sciences Center and researches the exposure and effects toxic chemicals have on human health and the environment. TIEHH has assisted in stimulating the Lubbock economy by creating 157 jobs with a payroll-to-date of9.9 million. TIEHH's location as the anchor tenant at the Reese Technology Center has assisted the facility in being transformed into a research, industrial and commercial center. Other research facilities that have been relocated to Reese Technology Center is the Texas Tech University Wind Engineering and Advanced Vehicle Engineering Research Centers. South Plains College has also taken advantage of Resse Technology Centers accessibility and proximity and moved their entire Lubbock campus to Reese. South Plains College has more than 3.300 students a semester at the Reese Technology Center. Other businesses located at the Reese Technology Center include Supachill, an Australian based company that specializes in refrigeration, freezing and cryogenics for food products. Also located at Reese is the centralized operation of Asian. This company will facilitate discovery, development and promulgation of new protocols, techniques and patient care services for pediatric and adult disabled citizens. The will be working closely with Texas Tech University in their research and development. State of Texas ... More than 25 State of Texas boards, departments, agencies and commissions have offices in Lubbock; several of these offices have multiple units or offices. Federal Government ... Several Federal departments and various other administrations and agencies have offices in Lubbock; a Federal District Court is located in the City. TEXAS DEPARTMENT OF CRIMINAL JUSTICE (''TDCJ") PRISON PSYCHIATRIC HOSPITAL TDCJ operates a 550-bed Prison Psychiatric Hospital and a 48-bed regional prison hospital on a 1,303 acre site in southeast Lubbock. An adjacent 400-bed capacity "trusty" facility houses prison trusties some of whom work at the hospital. Employment for all facilities is approximately 870 with an annual estimated payroll of $17 million and an estimated remaining annllal operating budget of$27 million. HOSPITALS AND MEDICAL CARE There are ·four hospitals in the City with over 1,500 beds. Covenant Medical Center is the largest and also operates an accredited nursing school. Lubbock County Hospital District, with boundaries contiguous with Lubbock County, O"WllS the University Medical Center which it operates as a teaching hospital for the Texas Tech Health SCiences Center. There aie 82 'Ciinics and over 900 practicing physicians, surgeons, and dentists. Lubbock's Health Care Sector employs over 15,000 people with a total payroll of $755.5 million and draws patient~ from 77 counties in West Texas and Eastern New Mexico. A radiology center for the treatment of malignant diseases is located in the City. - RECREATION AND ENTERTAINMENT Lubbock's Mackenzie Regional Park and over 115 City parks and playgrounds provide recreation centers, shelter buildings, a garden and art center, swimming pools, a golf course, tennis and volley ball courts, baseball diamonds and picnic areas, including the Yellowhouse Canyon Lakes system of six lakes and 750 acres of adjacent parkland extending from northwest to southeast Lubbock along the Yellowhouse Canyon. There are several privately-owned public swimming pools, golf courses, and country clubs. The City of Lubbock has developed a 36 square block area of approximately 100 acres adjacent to downtown Lubbock under the Lubbock Memorial Civic Center program. Approximately 50 acres contain the 300,000 square foot Lubbock Memorial Civic Center, the main City library building and State Department of Public Safety offices; a 50-acre peripheral area has been redeveloped privately with office buildings, hotels and motels, a hospital, and other facilities . .-, Available to residents are Texas Tech University programs and events, Texas Tech University Museum, Planetarium and Ranching Heritage Center exhibits and programs, United Spirit Arena and its events, Lubbock Memorial Civic Center and its events, Lubbock Symphony Orchestra programs, Lubbock Theatre Center, Lubbock Civic Ballet, Municipal Auditorium and coliseum programs and events, the library and its branches, the annual Panhandle-South Plains Fair, college and high school football, basketball, and other sporting events as well as modern movie theaters. -CHURCHES Lubbock has approximately 300 churches representing more than 25 denominations. UTILITY SERVICES Water and Sewer -City of Lubbock. Gas-Energas Company. """" Electric -City of Lubbock (Lubbock Power & Light) and Excel Energy Company; and, in a small area, South Plains Electric Co- operative. :~ - ECONOMIC INDICES (1) Year 1997 1998 1999 2000 2001 Building Permits 237,995,359 181,716,532 181,285,089 200,427,650 294,064,200 Water 67,373 68,228 68,449 70,111 70,756 Utility Connections Electric Gas 63,380 62,472 63,210 65,000 65,332 (LP&L Only)(2) 54,085 56,435 57,4ll 58,724 59,431 (I) All data as of 12-31, except where noted; Source: City of Lubbock. (2) Electric connections are those of City of Lubbock owned Lubbock Power and Light ("LP&L") and do not include those of Southwestern Public Service Company or South Plains Electric Cooperative. LP&L provides service to approximately 66.5% of the electric customers in the City. BUILDING PERMITS BY CLASSIFICATION (1) Residential Permits Commercial Single Family Multi-Family Total Residential Public Total Calendar No. No. Dwelling No. Dwelling and Other Building Year Units Value Units (2) Value Units (2) Value Permits Permits 1997 542 $57,767,458 736 $32,837,680 1,278 $90,605,138 $147,390,221 $237,995,359 1998 664 64,304,918 242 9,186,999 906 73,491,917 108,224,615 181,716,532 1999 747 80,496,444 222 22,134,000 969 102,630,444 78,654,645 181,285,089 2000 819 87,501,009 281 11,548,809 1,100 99,049,818 101,377,832 200,427,650 2001 941 108,589,812 853 37,242,260 1,794 145,936,072 148,128, 128 294,064,200 (1) Source: City ofLubbock, Texas. (2) Data shown under "No. Dwelling Units" is for each individual dwelling unit, and is not for separate buildings; includes duplex, triplex, quadruplex and apartment permits. A-5 THIS PAGE INTENTIONALLY LEFT BLANK - - - - - - APPENDIXB EXCERPTS FROM THE CITY OF LUBBOCK, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2001 The information contained in this Appendix consists of excerpts from the City of Lubbock, Texas Annual Financial Report for the Year Ended September 30, 2001, and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for further information. THIS PAGE INTENTIONALLY LEFT BLANK - - - General Purpose Financial Statements - - - - CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET ·ALL FUND TYPES, ACCOUNT GROUPS AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30, 2000 Governmental Fund Types Special Debt General Revenue Service ~ Pooled cash and cash equivalents $ 235,353 $ 1,281,392 $ 186,793 Investments 1,575,058 8,575,472 1,250,080 Receivables (net, where applicable, of allowance for uncollectibles): Taxes, including interest, penalities, and liens 5,560,665 23,603 188,955 Accounts, notes, and mortgages 8,836,072 Interest 164,549 12,450 Due from other funds 8,551,093 Due from other governments 13,637 Due from other agencies 1,413,228 847,647 Prepaid items 165,995 Advances to other funds 1,712,504 Inventory, at average cost 95,094 Restricted assets: Pooled cash and cash equivalents Investments Accounts receivable Interest receivable Deferred charges Fixed assets (net of accumulated depreciation, if applicable) Other assets (net of accumulated amortization) Amount available in debt service funds Amount to be provided for retirement of general long-term debt Total assets $ 28,323.248 $ 10,740.564 $ 1,625,828 6 Capital Projects $ 4,534,929 30,349,139 86,099 136,998 $ 35,107,165 (continued) - Totals Proprietary Fiduciary Primary FundT~pes Fund T~Ee Account Grou~ Govemment General (Memorandum lntemal Trust and General Long-term On I~) Enterprise Service Agency Fixed Assets Debt 2001 $ 1,666,834 $ 409,422 $ 120,986 $ . $ -$ 8,435,709 -11 '136,298 2,739,982 11,275,896 66,901,925 5,773,223 -20,828,522 5,780 5,859,566 35,529,940 46,660 111,005 420,763 7,620,000 16,171,093 57,522 1,706,420 1,m,579 84,843 2,482,716 -624,314 790,309 1,733,144 3,445,648 192,741 1,947,708 271,510 2,507,053 14,151,030 2,582,021 16,733,051 88,675,794 19,295,621 107,971,415 -4,071 92,933 97,004 284,267 284,267 10,516,649 10,516,649 505,678,186 8,293,627 265,161,726 779,133,539 20,130,645 20,130,645 1,415,094 1,415,094 64,192,724 64,192,724 -$ 682.722.363 $ 36.187,256 $ 19.234,378 $ 265,161,726 $ 65,607,818 $ 1,144,710,346 See accompanying notes to financial statements 7 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET ·ALL FUND TYPES, ACCOUNT GROUPS AND COMPONENT UNITS September 30,2001 With Comparative Totals for September 30,2000 Component Units Governmental Proprietary Fiduciary FundTlpes Fund T~pes Fund Type Market Civic Market Lubbock, Lubbock Lubbock, Inc. Citibus Inc. Inc. ~ Pooled cash and cash equivalents $ 129,234 $ 284,105 $ 339,969 $ Investments 3,124,158 30,902 Receivables (net, where applicable, of allowance for uncollectibles): Taxes. including interest, penalities, and liens Accounts, notes, and mortgages 12,908 779,312 22,549 Interest Due from other funds 210,203 100,259 Due from other governments 23,256 Due from other agencies Prepaid items 8,380 Advances to other funds Inventory, at average cost 34,991 336,825 63,594 Restricted assets: Pooled cash and cash equivalents 100,000 Investments Accounts receivable Interest receivable Deferred charges Fixed assets (net of accumulated depreciation, if applicable) 14,469,038 34,618 Other assets (net of accumulated . amortization) 382,914 Amount available in debt service funds Amount to be provided for retirement of generallong-tenn debt Total assets $ 3,534,750 $ 15,877,660 $ 943,644 $ 131,161 8 -(continued) Component Units Account Groups -General General Fixed Assets Long-term Debt Totals Totals Market Market Component Reporting Entity Lubbock, Lubbock, Units (Memorandum On!X~ Inc. Inc. 2001 2001 2000 $ -$ $ 753,308 $ 9,189,017 $ 10,399,273 3,155,060 70,056,985 79,370,229 5,773,223 5,453,758 814,769 36,344,709 25,502,189 420,763 487,562 310,462 16,481,555 9,206,118 23,256 1,800,835 1,778,444 2,482,716 1,403,345 8,380 798,689 79,281 3,445,648 3,924,214 435,410 2,942,463 2,816,410 100,000 16,833,051 39,373,145 -107,971,415 68,230,355 97,004 129,868 284,267 420,888 10,516,649 11,717,554 535,905 15,039,561 794,173,100 768,837,544 -382,914 20,513,559 20,900,256 1,415,094 1,260,450 6,045,991 6,045,991 70,238,715 62,063,880 -$ 535.905 $ 6,045,991 $ 27,069,111 $ 1,171,779,457 $ 1,113,354,763 See accompanying notes to financial statements - 9 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET· ALL FUND TYPES, ACCOUNT GROUPS AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30, 2000 Governmental Fund Types Special Debt General Revenue Service Liabilities Accounts and vouchers payable $ 8,488,238 $ 108,680 $ 53,268 Contracts payable Due to other funds 632,000 Due to other agencies and governments 1,031,067 Accrued general obligation interest Other accrued liabilities 1,028,472 Current portion of general obligation bonds and construction obligation payable Payable from restricted assets: Accounts payable Accrued interest Other accrued liabilities Accrued insurance claims Revenue bonds payable (current portion) Customer deposits Deferred revenue 1,059,429 19,058 157,466 Advances from other funds Advances from other agencies Accrued insurance claims General obligation bonds (net of current portion) Revenue bonds payable (net of current portion) Accrued vacation and sick leave Anticipated landfill closure and postclosure Total liabilities $ 11,607,206 $ 759,738 $ 210,734 10 Capital Projects $ 1,304,025 1,924,435 2,767,654 $ 5,996,114 (continued) Totals ,..., Proprietary Fiduciary Primary FundT~~es FundT~pe Account Groues Government General (Memorandum Internal Trust and General Long-term Onl~} Enterprise Service Agency Fixed Assets Debt 2001 $ 7,018,830 $ 1,471,734 $ 1,939,468 $ . $ -$ 20,384.243 1,677,809 3,602,244 13,664,692 255,000 1,619,401 16,171,093 1,031,067 1,182,407 1,182,407 816,617 101,832 1,026 621,657 2,569,604 8,903,873 8,903,873 1,132,612 916,180 2,048,792 969,670 969,670 5,696 5,696 4,764,865 4,764,865 3,958,950 3,958,950 5,050 5,050 23,191 1,025,504 2,284,648 50,000 627,994 3,445,648 - 4,500,000 4,500,000 154,989,874 53,082,808 208,072,682 77,616,717 77,616,717 3,372,027 563,684 11,903,353 15,839,064 6.112,555 6,112,555 $ 281,494,874 $ 13,206,985 $ 4,585,399 $ . $ 65,607,818 $ 383,468,868 -See accompanying notes to financial statements 11 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET ·ALL FUND TYPES, ACCOUNT GROUPS AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30, 2000 Component Units Governmental Proprietary Fiduciary Fund T~ees Fund T~ees Fund Type Market C.ivic Market Lubbock, Lubbock Lubbock, Inc. Citibus Inc. Inc. Liabilities Accounts and vouchers payable $ 166.453 $ 870,348 $ 19,367 $ Contracts payable Due to other funds 310,462 Due to other agencies and governments 132,421 99,692 Accrued general obligation interest Other accrued liabilities 19,840 314,556 18,538 Current portion of general obligation bonds and construction obligation payable 7,288 Payable from restricted assets: Accounts payable Accrued interest Other accrued liabilities 834,Q42 153,718 31,469 Accrued insurance claims Revenue bonds payable (current portion) Customer deposits Deferred revenue 12,815 Advances from other funds Advances from other agencies 70,000 Accrued insurance claims General obligation bonds (net of current portion) Revenue bonds payable {net of current portion) /-'t. Accrued vacation and sick leave Anticipated landfill closure and postclosure T otaf liabilities $ 1,330,797 $ 1,408,622 $ 190,429 $ 131,161 _......, 12 (continued) Comeonent Units Account Groues General General Fixed Assets Lon~-term Debt Totals Totals Market Market Component Reporting Entity Lubbock, Lubbock, Units (Memorandum Onl):! Inc. Inc. 2001 2001 2000 -$ -$ $ 1,056,168 $ 21,440,411 $ 22,618,721 3,602,244. 3,507,324 310,462 16,481,555 9,206,118 232,113 1,263,180 1,456,371 1,182,407 1,303,592 352,934 2,922,538 4,216,743 7,288 8,911,161 8,750,373 2,048,792 2,303,095 969,670 736,309 6,045,991 7,065,220 7,070,916 3,725,991 4,764,865 4,372,861 3,958,950 3,599,316 5,050 433,832 12,815 2,297,463 2,305,307 3,445,648 3,924,214 70,000 70,000 70,000 4,500,000 2,803,358 208,072,682 175,256,312 -77,616,717 73,847,298 15,839,064 14,810,951 6,112,555 5,918,343 $ - $ 6,045,991 $ 9,107,000 $ 392,575,868 $ 345,166.429 -See accompanying notes to financial statements l3 - CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET· ALL FUND TYPES, ACCOUNT GROUPS AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30, 2000 Governmental Fund Types Special Debt General Revenue Service Euoc Eauil)l ami Qtb~r Credits Contributed capital $ -$ -$ - Investment in general fixed assets Retained earnings: Reserved for capital projects Reserved for facilities/system improvements Reserved for system improvements Reserved for rate stabilization Reserved for economic development Reserved per bond indentures Reserved for self insurance -health Reserved for self insurance - risk management Unreserved Fund balances: Reserved for prepaid items 165,995 Reserved for advances to other funds 1,712,505 Reserved for debt service 1,415,094 Reserved for capital projects Reserved for economic development Reserved for Federal housing programs Reserved for plan participants Unreserved: Designated for perpetual care 22,767 Designated for subsequent year's expenditures 460,593 231,529 Undesignated 14,354,182 9,749,297 Total retained earnings/fund balances 16,716,042 9,980,826 1.415,094 Total fund equity and other credits 16,716,042 9,980,826 1,415,094 Total liabilities and fund equity and other credits $ 28,323,248 $ 10,740,564 $ 1,625,828 14 Capital Projects $ ~~ i ,...~ 29,111,051 29,111,051 29,111,051 $ 35,107,165 (continued) Totals !""< Proprietary Fiduciary Primary FundT~ees FundT~ee Account Groue! Govemment General {Memorandum Internal Trust and General Long-tenn On I~} Enterprise Service Agency Fixed Assets Debt 2001 ,.. $ 1'38,930,382 $ 7,244,855 $ $ $ $ 146,175,237 265,161,726 265,161,726 40,760,391 1,710 40,762,101 7,427,734 11,318 7,439,052 -41,472 41,472 11,633,392 11,633,392 894 894 233,490 233,490 5,354,356 5,354,356 -4,529,015 4,529,015 202,199,734 5,839,017 208,038,751 165,995 1,712,505 1,415,094 29,111,051 6,127,025 6,127,025 10,483,055 10,483,055 22,767 692,122 (1,961,101} 22,142,378 -262,297,107 15,735,416 14,648,979 349,904,515 401,227,489 22,980,271 14,648,979 265,161,726 761,241,478 $ 682,722,363 $ 36,187,256 $ 19,234,378 $ 265,161,726 $ 65,607,818 $ 1,144,710,346 See accompanying notes to financial statements ,..,..? 15 - /"'0. CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET· ALL FUND TYPES, ACCOUNT GROUPS AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30, 2000 Component Units Governmental Proprietary Fiduciary FundT~~s Fund Tii!es FundT~pe Market Civic Market Lubbock, Lubbock Lubbock, Inc. Citibus Inc. Inc. Eund Eauitx aod Othl:lt Credits Contributed capital $ -$ 14,469,038 $ $ Investment in general ftxed assets Retained earnings: Reserved for capital projects 100,000 Reserved for facilities/system improvements Reserved for system improvements /'-,, l Reserved for rate stabilization Reserved for economic development Reserved per bond indentures Reserved for self insurance -health Reserved for self insurance -,-,, risk management Unreserved 653,215 Fund balances: Reserved for prepaid items Reserved for advances to other funds Reserved for debt service ,..., Reserved for capital projects Reserved for economic development 6,080,982 Reserved for Federal housing programs Reserved for plan participants Unreserved: Design~ed for perpetual care Designated for subsequent year's expenditures 479,699 Undesignated ~4.356,728) Total retained eamings/fund balances 2,203,953 753,215 Total fund equity and other credits 2,203,953 14,469,038 753,215 Total liabilities and fund equity and other credits $ 3,534,750 $ 15,877,660 $ 943,644 $ 131,161 16 - Comeonent Units Account Groups General General Fixed Assets Long~tenn Debt Totals Totals Market Market Component Reporting Entity Lubbock, Lubbock, Units ~Memorandum Onl~l Inc. Inc. 2001 2001 2000 -$ • $ $ 14,469,038 $ 160,644,275 $ 154,356,124 535,905 535,905 265,697,631 262,304,921 100,000 40,862,101 57,029,966 7,439,052 9,447,308 -41,472 720,771 11,633,392 13,073,972 894 35,550 233,490 302,444 5,354,356 3,204,358 -4,529,015 9,264,699 653,215 208,691,966 183,195,511 165,995 79,281 1,712,505 1,781,800 -1,415,094 1,260,450 29,111,051 30,140,780 6,080,982 6,080,982 6,127,025 6,208,235 10,483,055 14,084,187 22,767 22,767 479,699 1,171,821 2,748,723 (4,356,728l 17,785,650 18,926,487 2,957,168 352,861,683 351,527,289 535,905 17,962,111 779,203,589 768,188,334 $ 535,905 $ 6,045,991 $ 27,069,111 $ 1,171,779,457 $ 1,113,354,763 See accompanying notes to financial statements - 17 - CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -GOVERNMENTAL FUND TYPES, EXPENDABLE TRUST FUNDS AND COMPONENT UNITS For Year Ended September 30, 2001 With Comparative Totals for Year Ended September 30, 2000 Totals F"lduciary Primary Governmental Fund T~s FundT~ Government (Memorandum Special Debt Capital Expendable On!):) General Revenue Service Projects Trust 2001 Revenues: Taxes and special assessments $ 65,247,157 $ 4,889,100 $ 7,454,057 $ -$ • $ n,590,314 Licenses and permits 1,202,794 1,202,794 Intergovernmental 333,171 10,219,684 10,552,855 Charges for services 4,299,958 34,888 4,334,846 Fines and forfeits 3,051,055 3,051,055 Contributions 24,066 24,066 Miscellaneous 2,053,590 849,810 64,317 1,207,786 (1,122,891) 3,052,612 Total revenues 76,187,725 5,738,910 7,518,374 1,266,740 9,096,793 99,808,542 Expenditures: Current: Communications/Legislation 1,024,481 1,024,481 Community Services 17,828,025 17,828,025 Development Services 4,771,680 4,n1,68o Electric 2,146,211 2,146,211 Financial Services 1,499,967 1,499,967 Fire 17,785,641 17,785,641 General Government 6,105,997 5,044,166 11,935,148 23,085,311 Human Resources 913,250 913,250 Management Services 629,903 629,903 Pollee 28,139,048 28,139,048 Strategic Planning 1,620,660 1,620,660 Non-departmental 1,716,167 3,423,298 5,139,465 Capital outlay 13,493,224 556,723 14,049,947 Debt service: Principal retirement 4,397,538 4,397,538 Interest and fiscal charges 3,359,856 31,826 3!391,682 Total expenditures 84,181,030 5,044,166 7,757,394 16,948,348 12,491,871 126,422,809 Excess (deficiency) of revenues ,.,-.. " over (under) expenditures (7,993,305) 694,744 (239,020) (15,681,608) {3,395,078) (26,614,267) other financing sources (uses): Bond proceeds 9,100,000 9,100,000 Operating transfers in 14,276,074 4,387,568 15,719,276 7,153,766 33,737 41,570,441 Operating transfers out (6,187,379~ ~2.n3,922) ~15,325,612) {1,601,88?) !25,888,800) Total other ~nancing sources (uses) 8,088,695 1,613,666 393,664 14,651,879 33,737 24,781,641 Excess (defiCiency) of revenues and other financing sources over (under) expenditures and other uses 95,390 2,308,410 154,644 (1,029,729) (3,361,341) (1 ,832,626) Fund balances-beginning, as previously reported 16,620,652 7,672,416 1,260,450 30,140,780 18,010,320 73,704,618 Prior period adjustment Fund balances -beginning , as restated 16,620,652 7,672,416 1,260,450 30,140,780 18,010,320 73,704,618 Fund balances-end of year $ 16,716,042 $ 9,980,826 $ 1,415,094 $ 29,111,051 $ 14,648,979 $ 71,871,992 18 Component Unit Governmental T~ Totals Market Reporting Entity Lubllock, (Memorandum On~ Inc. 2001 2000 $ 3,379,504 $ 80,969,818 $ 76,408,787 1,202,794 1,138,924 10,552,855 7,619,135 4,334,846 4,297,917 3,051,055 2,834,208 701,201 725,267 393,200 -345,904 3,398,516 12,213,546 4,426,609 104,235,151 104,905,717 1,024,481 937,889 17,828,025 16,963,231 4,n1,sao 5,439,855 "-2,146,211 1,923,584 1,499,967 1,458,232 17,785,641 " 17,080,372 6,195,512 29,280,823 26,503,471 913,250 871,596 629,903 1,022,720 28,139,048 25,561,261 1,620,660 1,498,176 5,139,465 1,348,723 327,521 14,377,468 15,446,464 4,397,538 4,622,633 3,391,682 3,141,086 6,523,033 132,945,642 123,819,293 -(2,096,424) (28, 71 0,691) (18,913,576) 9,100,000 7,000,000 147,283 41,717,724 41,518,150 (147,283) (26,038,083) (26,768,860) 24,781,641 21,749,290 (2,096,424) (3,929,050) 2,835,714 1,548,092 75,252,710 72,416,996 "2,752,285 2,752,285 4,300,377 78,004,995 72,416,996 $ 2,203.953 $ 74,075,945 $ 75,252,710 -See accompanying notes to financial statements 19 20 - CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES-BUDGET (GAAP BASIS) AND ACTUAL· GENERAL FUND Year EndedSeptember 30,2001 General Fund Variance- favorable Budeet Actual ! unfavorable l Revenues: Taxes and fees $ 64,860,057 '$ 65,247,157 $ 387,100 Licenses and permits 1,100,571 1,202,794 102,223 Intergovernmental 375,148 333,171 (41,977) Charges for services 4,262,062 4,299,958 37,896 Fines 3,530,300 3,051,055 (479,245) -Miscellaneous 2,007,915 2,053,590 45675 Total revenues 76,136,053 76,187,725 51,672 Expenditures: Current: Communications/Legislation 1,025,923 1,024,481 1,442 Community Services 17,830,279 17,828,025 2,254 Development Services 5,499,348 4,771,680 727,668 Electric 2,300,946 2,146,211 154,735 Financial Services 1,537,684 1,499,967 37,717 Fire 17,795,897 17,785,641 10,256 ,.., General Government 7,058,593 6,105,997 952,596 Human Resources 932,575 913,250 19,325 Management Services 621,893 629,903 (8,010) Police 27,946,574 28,139,048 (192,474) Strategic Planning 1,668,249 1,620,660 47,589 Non-departmental 879,200 1 716 167 (836,967) Total expenditures 85,097,161 84,181,030 916131 Deficiency of revenues under expenditures (8,961, 108} (7,993,305) 967,803 Other financing sources (uses): Operating transfers in 14,803,026 14,276,074 (526,952) Operating transfers out (5,841,918} (6,187,379) (345A61) Total other financing sources (uses) 8,961,108 8,088,695 {872,413) Excess (deficiency) of revenues and other . financing sources (uses) over (under} expenditures 95,390 95,390 Fund balance at beginning of year 16,620,652 16,620,652 Fund balance at end of year $ 16,620,652 $ 16,716,042 $ 95,390 !"' See accompanying notes to financial statements 21 ,-., CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN EQUITY ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESENTED COMPONENT UNITS Year Ended September 30, 2001 .-,,_ With Comparative Totals for Year Ended September 30, 2000 Totals Primary Government (Memorandum Proprietary Fund Types Only) Internal Enterprise Service 2001 Operating revenues: Charges tor services $ 175,061,302 $ 35,153,811 $ 210,215,113 New taps and reconnects 331,716 331,716 Effluent water sales 678,784 678,784 Commodity sales 595,661 595,661 Landing tees 739,016 739,016 Parking 1,324,288 1,324,288 Greentees and memberships 34,982 34,982 Rentals 1,636,374 1,636,374 Concessions 1,076,830 1,076,830 Administrative charges 273,909 273,909 Total operating revenues 181,478,953 35,427,720 216,906,673 F-a. I Operating expenses: Personal services 22,045,640 6,972,021 29,017,661 Insurance 15,703,357 15,703,357 Supplies 2,974,193 174,517 3,148,710 Materials 6,678,176 6,678,176 Maintenance 7,019,712 1,853,834 8,873,546 Uncollectible accounts 1,411,333 1,411,333 /......,.· Purchase of fuel and power 79,793,221 79,793,221 Collection expense 2,836,942 . 2,836,942 Other services and charges 23,174,932 3,628,441 26,803,373 Depreciation and amortization 22,056,960 1,973,030 24,029,990 Total operating expenses 161,312,933 36,983,376 198,296,309 Operating income (loss} 20,166,020 (1 ,555,656) 18,610,384 Nonoperating revenues (expenses}: Interest 4,853,852 1,362,911 6,216,763 Passenger facility charges 1,557,918 1,557,918 Disposition of properties (333,513) (340,003) (673,516) Miscellaneous 2,951,432 59,333 3,010,765 Interest and fiscal charges (11,882,075) (11 ,882,075) Cash grants and reimbursements Total nonoperating revenues (expenses) (2,852,386) 1,082,241 (t,no,145) Income (loss) before operating transfers 17,313,634 (473,415) 16,640,219 Transfers: Operating transfers in 15,707,518 1,524,957 17,232,475 Operating transfers out !32,409,889) (504,227) (32,914, 116) Total transfers in (out) (16,702,371) 1,020,730 (15,681 ,841) ·'"""' Net income (loss) 611,263 547,315 1,158,578 Depreciation on fixed assets acquired by contributions 1,299,358 1,299,358 Retained earnings at beginning of year 260,386,486 15,188,101 275,574,587 Retained earnings at end ot year 262,297,107 15,735,416 278,032,523 Contributed capital at beginning of year 132,984,984 6,846,827 139,831,811 Capital contributions/Residual equity transfer in 7,244,756 398,028 7,842,784 Depreciation on/disbursements of capital cont!ibutions (1,299,358) ( 1 ,299 ,358} Contributed capital at end of year 138,930,382 7,244,855 146,175,237 T cta1 equity at end of year $ 401,227,489 $ 22,980,271 $ 424,207,760 22 Component Units Totals Totals Component Reporting Entity Proprieta!i: T~es Units (Memorandum Only) Civic Lubbock, Inc. Citlbus 2001 2001 2000 $ 1,389,463 $ 1,669,940 $ 3,259,403 $ 213,474,516 $ 172,325,148 331,716 103,280 678,784 560,626 -595,661 720,499 739,016 740,882 1,324,288 1,168,628 34,982 40,262 1,636,374 1,347,914 1,076,830 1,()65,423 273,909 186,500 1,389,463 1,869,940 3,259,403 220,166,076 178,259,162 368,542 3,453,390 3,821,932 32,839,593 30,269,575 506,966 506,966 16,210,323 14,185,457 3,148,710 2,944,224 6,678,176 7,012,499 1,325,927 1,325,927 10,199,473 8,373,093 1,411,333 1,186,657 79,793,221 49,299,758 2,836,942 2,210,385 964,903 1,542,990 2,507,893 29,311,266 24,305,695 12,665 1,962,162 1,974,827 26,004,817 22,763,415 1,348,110 8,791,435 10,137,545 208,433,854 162,550,758 43,353 (6,921 ,495) (6,878, 142) 11,732,222 15,708,404 15,216 15,216 6,231,979 8,170,502 1,557,918 1,552,654 (673,516) 27,403 3,010,765 1,189,358 -. (5,348) (4,503) (9,849) (11 ,891 ,924) (13,393,543) 4,963,836 4,963,836 4,963,836 3,665,068 9,870 4,959,333 4,969,203 3,199,058 1,211,462 53,223 (1 ,962,182) (1,908,939) 14,931,280 16,919,666 17,232,475 17,245,329 -(32,914,116! !31,994,619) (15,681 ,641) (14,749,290) 53,223 (1 ,962, 162) (1 ,908,939) (750,381) 2,170,576 1,962,162 1,962,162 3,261,520 2,748,681 699,992 699,992 276,274,579 271,355,322 753.215 753,215 278,785,738 276,274,579 14,524,313 14,524,313 154,356,124 148,325,473 1,906,887 1,906,887 9,549,671 8,779,332 (1,962, 162) (1 ,962,162) ~.261,520! (2, 7 48,881l 14,469,038 14,489,038 160,644,275 154,356,124 $ 753,215 $ 14,469,038 $ 15,222,253 $ 439,430,013 $ 430,630,703 See accompanying notes to financial statements 23 CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF CASH FLOWS· ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESENTED COMPONENT UNITS Years Ended September 30, 2001 With Comparative Totals for Year Ended September 30, 2000 Totals Primary Govemment Proerieta!i: Fund Tn!!! (Memorandum lntemal On~! Enterprise Service 2001 Cash flows from operating activities: ,....,. ' Operating income (loss) $ 20,166,020 $ (1,555,656) $ 18,610,364 Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation and amortization 22,056,960 1,973,030 24,029,990 Increase (decrease) in long-term assets/liabilities not requiring cask flow 2,105,417 (113,498) 1,991,919 other income 2,951,432 44,451 2,995,883 Receipts from building rent 15,635 15,635 Change in current assets and uabilities: Accounts receivable (3,416,229) 29,731 (3,386,498) Inventory 184,627 26,417 211,044 Due to/from otl:ler govemments (25,945) (25,945) Prepaid expenses (624,314) (624,314) Accounts payable (7 ,335,171) 773,089 (6,562,082) OUe to/from others 6,709 6,709 other accrued expenses 364,871 2,278,870 2,643,741 Customer deposits (428,772) (428,772) Accrued liabilities Long-term assets Net cash provided by (used for) operating activities 36,623,210 2,854,464 39,477,674 Cash flows from capital and related financing activities: Payments for gas reserves and other deferred charges (393,367) (393,367) Refund of commodity prepayments 298,062 298,062 Purchases of property, plant and equipment (42,924,887) (2,282,906) (45,207, 793) Sale of property, plant and equipment 848,302 6,268 854,570 Payments for bond issuance costs (717,161) (717, 161) Receipt of accrued interest on bond issuance 224,524 224,524 Principal paid on revenue bonds (5, 125,000) (5,125,000) Interest paid on revenue bonds (4,663,903) (4,663,903) Principal paid on general obligation bonds and other debt (8,911 ,904) (8,911 ,904) Interest paid on general obligation bonds (7,330,519) (7,330,519) Issuance of revenue, G.O. and C.O. bonds 46,970,000 46,970,000 Refund$ of pro-rata contracts (100,940) (100,940) Deposits on pro-rata contracts Passenger facility ckarges 1,557,918 1,557,918 Interest paid on long-term debt Contributed capital 5,464,011 5,464,011 Net cash used for capital and related financing activities ~14,804,864) 12,276,638! p7,0811502! Cask flows from noncapital and related financing activities: Operating transfers in from other funds 15,707,518 1,524,957 17,232,475 Operating transfers out to other funds (32,409,889) (504,227) (32,914,116) Short-term interfund borrowings (592,408) (76,475) (688,883) Advances from other funds Payments received (made) on advances to (from) other funds 409,267 (329,981) 79,286 Cash grants and reimbursements Book OVerdrafts Net cash provided by (used for) noncapital and related financing activities p6,885,512l 614,274 [16,271 ,238~ Cash flows from investing activities: Proceeds from sales and maturities of investments 39,865,232 7,826,946 47,692,178 Purchase of investments (72,694,239) (10,705,441) (83,399,680) Interest eamings on cash and investments 5,057,461 1,398,819 6,4561280 Net cash provided by (used for) investing activities (27,n1,546l !11479,676! !29,251 ,222l Net increase (decrease) in pooled cash and cash equivalents (22,838, 712) (287,576} (23, 126,288) Pooled cash and cash equivalents at beginning of year 38,656,576 3,279,019 41,935,595 Pooled cash and cash equivalents at end of year $ 15,817.864 $ 2.991,443 $ 18,809,307 Supplemental cash flow information: Noncash capital improvements and other charges for the Enterprise Funds during fiScal year 2000-2001 was $2,088,536. Noncash capital improvements and other chargesl(reductions) for the Internal Service Funds during fiscal year 2000-2001 was $(389, 159). 24 . - Come2nent Units Totals Totals Proeneta!X T~ Component Reporting Entity Civic Lubbock, Units (Memorandum On!i:2 Inc. Citibus 2001 2001 2000 $ 43,353 $ (6,921 ,495) $ (6,878, 142) $ 11,732,222 $ 15,708,404 12,665 1,962,162 1,974,827 26,004,817 22,763,414 1,991,919 2,403,371 2,995,883 1,199,376 -15,635 12,764 21,330 657,061 678,391 (2,708,107) (3,428,175) 8,308 (21,005) (12,697) 198,347 (57,565) (52,379) (52,379) (78,324) (524,105) (431) (8,380) (8,811) (633,125) 106,974 (20,707) (697,415) (718,122) (7,280,204) 9,383,549 6,709 (13,902) (4,515) (4,515) 2,639,226 (93,n6) (428,n2) 103,183 583 583 583 17,955 (42,6501 12,722 (5,033,58!} (5,020,865) 34,456,809 47,538,817 (393,367) (4,193,412) 298,062 (45,207,793) (44,957,151) 854,570 442,226 (717,161) 224,524 (5, 125,000) (4,519,025) (4,663,903) (5,229,781) (90,950) (90,950) (9,002,854) (8,552,590) (5,348) (5,346) (7,335,865) (7,996,709) 46,970,000 24,055,000 (100,940) (71,052) 42,769 1,557,918 1,552,654 (3,904) 5,464,011 4,376,483 (96,296) (96,296) (17,1n,798) (45,054,472) -17,232,475 17,245,329 (32,914, 116) (31,994,619) (668,883) (5,060,379) (4,So3) (424,374) (4,503) 74,783 511,322 4,963,836 4,963,836 4,963,836 3,665,088 -(32,568! 4,959,333 4,959,333 (11 ,311,905! (16,090,201 ~ 47,692,176 87,071,306 (83,399,680) (83,577,352) 15,216 15,216 6,471,496 8,226,365 15,216 15,216 (29.236,006) 11,720,339 -(68,358) (74,254) (142,612) (23,266,900) (1 ,885,517) 508,327 358,359 866,686 42,802,281 44,667,798 $ 439,969 $ 284,105 $ 724,074 $ 19,533,381 $ 42.802.281 See accompanying notes to financial statements 25 CITY OF LUBBOCK Notes to Financial Statements September 30, 2001 I. Summary of Significant Accounting Policies ............................................ 29 A. Reporting Entity .................................................................................. 29 B. Basis of Presentation -Fund Accounting ............................................ 31 C. Basis of Accounting ............................................................................ 33 D. Budgetary Accounting ......................................................................... 33 E. Encumbrances ...................................................................................... 34 F. Assets, Liabilities and Fund Equity .................................................... ~34 G. Risk Management ................................................................................ 35 H. Revenues, Expenses and Expenditures ............................................... 36 I. Totals (Memorandum Only) ................................................................ 38 J. Reclassifications ................................................................................... 38 II. Stewardship, Compliance and Accountability ........................................... 38 A. Retained Earnings/Fund Balance Deficits ........................................... 38 m. Detail Notes on all Funds and Account Groups ........................................ 39 A. Pooled Cash and Investments .............................................................. 39 B. Interfund Transactions ......................................................................... 42 C. Deferred Charges ................................................................................. 42 D. Property, Plant and Equipment ............................................................ 43 E. Retirement Plans .................................................................................. 44 F. Deferred Compensation ....................................................................... 49 G. Surface Water Supply .......................................................................... 49 H. Other Enterprise Fund Activities ......................................................... 50 26 ;~ -· - - - Note I. J. K. L. CITY OF LUBBOCK Notes to Financial Statements September 30, 2001 Segment Information -Enterprise Funds ............................................. 51 Long-Term Debt .................................................................................. 52 Advanced Refimding ........................................................................... 56 Accrued Insurance Claims ................................................................... 56 M. Landfill Closure and Postclosure Care Cost ....................................... 57 IV. Contingent Liabilities ................................................................................ 57 A. Federal Grants ..................................................................................... 57 B. Litigation ............................................................................................. 57 C. Site Remediation ................................................................................. 58 D. West Texas Municipal Power Agency ................................................. 58 V. Recently Issued Pronouncements ............................................................... 58 27 28 - - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POUCIES The General Purpose Financial Statements (GPFS) of the City of Lubbock, Lubbock County, Texas (City) have been prepared in confonnity with Generally Accepted Accounting Principles (GAAP) as applicable to governmental units. The Government Accounting Standards Board (GASB) is the acknowledged standard-setting body for establishing governmental accounting and financial reporting principles. With respect to proprietary activities, including component units, the City has adopted GASB Statement No. 20, "Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting." The City applies all applicable GASB pronouncements as well as Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins of the Cormnittee on Accounting Procedure, issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. The more significant accounting policies are described below. A. REPORTING ENTITY The City is a municipal corporation governed by a Mayor-Council form of government. As required by GAAP, the GPFS present the reporting entity which consists of the City (a primary government), organizatlons for which the City is financially accountable and other organizations for which the nature and significance of their relationship with the City are such that exclusion could cause the City's GPFS to be misleading or incomplete. BLENDED COMPONENT UNITS The following component unit has been included in the City's financial reporting entity using the blended method because although it is legally separate, its operations are so intertwined with the City that it is, in substance, a part of the City. The Urban Renewal Agency (URA) was formed to provide urban renewal services for the City, that include rehabilitation of housing, acquisition of housing, and disposition of land. The Urban Renewal Agency Board is composed of nine members appointed by the Mayor, with the consent of the City Council, and acts only in an advisory capacity to the City Council. All powers to govern URA are held by the City Council. DISCRETELY PRESENTED COMPONENT t.Jl'.ITIS The Component Unit colunms in the combined financial statements include the financial data of the City's other Component Units. They are reported in a separate column to emphasize that they are legally separate from the City. The following Component Units are included in the reporting entity because the primary government is financially accountable and is able t.o . impose its will on the organization. ·A primary government has the ability to impose its will if it can significantly influence operations and/or activities of an organization. City Tl"llllsit Management Co., Inc. dba. Citibus (Citibus) is a legally separate entity that operates a City owned transportation system. In 1998, the City renewed a five year management agreement with McDonald Transit Associates, Inc. to manage and operate Citibus. The City Council appoints the seven-member Lubbock Public Transit Advisory Board, and approves the annual budget. The City is responsible for funding deficits. Citibus is reported as a proprietary type component unit. 29 ~·· CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY <CONTINUED) Civic Lubbock, Inc. promotes the cultural and educational usage of the Lubbock Memorial Civic Center and Lubbock Municipal Coliseum. The 7 member board is appointed by the City Council. City Council approves the annual budget for Civic Lubbock, Inc. Civic Lubbock, Inc. is reported as a proprietary type component unit. Market Lubbock Economic Development Corporation dba Market Lubbock, Inc. (Market Lubbock Inc:.) was formed on October 10, 1995 by the City Council to create, manage, operate and supervise programs and activities to promote, assist and enhance economic development within and around the City. Market Lubbock, Inc. is a legally separate non-profit corporation. The City Council appoints the seven-member board and its operations are funded by budgeted allocations of the City's property and hotel occupancy taxes and other City contributions. Market Lubbock, Inc. is reported as a governmental type component unit Copies of financial statements of the individual component units may be obtained from their respective administrative offices listed below: Administrative Offices Citibus 801 Texas Lubbock, Texas Civic Lubbock, Inc. I 50 I 6tb Street Lubbock, Texas RELATED ORGANIZATIONS Market Lubbock, Inc 130 I Broadway Suite 200 Lubbock, Texas The City's officials ·are also responsible for appointing the members of the boards of other organizations but the City's accountability for these organizations does not extend beyond making the appointments. The following are related organizations, which have not been included in the reporting entity: Housing Authority of the City of Lubbock (Authority) is a legally separate entity. The Mayor appoints the five-member board. It is the City Attorney's opinion that the Authority is independent of the City. The Authority is not fiscally dependent on the City and City Council is not able to impose its will on the entity. The City has no responsibility for debt issued by the Authority. Lubbock Firemen's Retirement and Relief Fund (LFRRF') operates under provisions of the Firemen's Relief and Retirement Laws of the State of Texas for purposes of providing retirement benefits for the City's firefighters. Its affairs are governed by the Mayor's designee, the Finance Manager, three firefighters elected by members of the LFRRF and two at-large members elected by the Board. It is funded by contributions by the firefighters and matched by contributions from the City. As provided by enabling legislation, the City's responsibility to the LFRRF is limited to matching monthly contributions made by the members. Title to assets is vested in the.LFRRF and 30 - - - - - - CITY OF LUBBOC~ TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY (CONTINUED> not in the City. The State Firemen's Pension Commission is the governing body over the LFRRF; the City does not significantly influence operations. Lubbock Arts Allianre, Inc. (Allian<:e) is dedicated to the promotion and improvement of the arts and sponsoring the annual Lubbock Arts Festival. Fiscal dependence by the Alliance on the City is not significant to the City. City Council does not appomt the board. The City is not able to exert its will on the Alliance. Lubbock Health Facilities Development Corpol'lltion (LBFDC) promotes health facilities development. City Council appoints the seven-member board. Bonds issued by LHFDC do not constitute indebtedness of the City. The City does not govern operations ofLHFDC. Lubbock Housing Finance Corpol'lltion, Inc. (LHFC) was formed plll'Silaitt to the Texas Housing Finance Corporation Act, to finance the cost of decent, safe, affordable residential housing. The Mayor appoints the seven-member board. It is the opinion of the City Attorney that LHFC is independent of the City. Indebtedness of the LHFC does not constitute indebtedness of the City. The City is not able to impose its will on the LHFC. JOINT VENTURE In May 1998, the City, along with three other cities in the West Texas area, entered into an agreement with the West Texas Municipal Power Authority (~WTMPA") to purchase power generated by a co- generation facility to be constructed with the proceeds obtained from the issuance of$28,910,000 of revenue bonds issued by WTMP A. The contractual arrangement with WTMP A calls for each participating city to guarantee payments of the WTMP A bond debt service in the event the net revenues of the power sales contracts with the participating cities is not adequate to cover the debt service. The City has an ongoing financial interest in WTMP A through the contfl!Ctual arrangement to purchase generated power and is also considered to have an ongoing financial responsibility due to the manner in which the debt service is guaranteed as well as the responsibility for financing the operations of the joint venture by purchasing the power generated by WTMP A which will benefit the citizens of Lubbock. Financial information for WTMPA can be obtained from the City of Lubbock, P.O. Box 2000, Lubbock, Texas 79401, (Attention Managing Director of Financial Services). B. BASIS OF PRESENTATION -FUND ACCOUNTING The financial transactions of the City are recorded in individual funds and account groups. A fund is a separate set of self-balancing accounts. The various funds are classified into three categories: governmental, proprietary and fiduciary. The following fund types and account groups are used by the City: 31 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30J 2001 NOTE I. SLTMMARY OF SIGNIFICANT ACCOUNTING POUCIES B. BASIS OF PRESENTATION-FUND ACCOUNTING <CONTINUED) GOVERNMENTAL FUND TYPES General Fund is the general operating fund of the City. It is used to account for all financial transactions except those required to be accounted for in another fund. Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or major 'capital projects) that are segregated for specified purposes. The Debt Service Fund is used to account for the accumulation of financial resources for the payment of interest and principal on the general long-term debt of the City. Capital Project Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Proprietary Funds or Trust Funds). PROPRIETARY FUND TYPES Enterprise Funds are used to account for operations of the City (a) that are financed and operated in a manner similar to private business enterprises, where the intent is to provide goods or services to the general public on a continuing basis, the cost of which is to be . recovered in whole or part through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Internal Service Funds are used to account for the financing of goods and services provided by one department or agency to other departments or agencies of the City, or to other governments, on a user charge basis. FIDUCIARY FUND TYPES Transactions related to assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments and other funds, are accounted for in fiduciary fund types. Fiduciary fund types are comprised of: Expendable Trust Funds account for assets received and expended by the City as trustee in essentially the same manner as governmental fund types. Agency Funds are used to account for assets held by the City as a custodial trustee. They are accounted for on the modified accrual basis of accounting with respect to asset and liability recognition, but do not have a measurement focus since agency funds do not account for operations. ACCOUNT GROUPS General Fixed Assets Account Group represents a summary of the fixed assets of the City, other than those fixed assets reported in the Proprietary Funds. Capital expenditures of the Capital Projects Fund are the primary source from which the detailed records of the general fixed assets account group are developed. Capital expenditures are carried in this account group as construction in progress until the projects are completed and are then capitalized by function and classification. 32 - - - - - - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES B. BASIS OF PRESENTATION· FUND ACCOUNTING (CONTINUED> Infrastructure fixed assets such as streets, highways, bridges, sidewalks, street lighting, traffic poles and signals, and stonn sewers, are accounted for in the General Fixed Assets Account Group and reported in the Schedule of General Fixed Assets. General fixed assets are not depreciated and are recorded at historical cost at the time of acquisition. Donated assets are recorded at their fair market value on the date donated. General Long-Term Debt Account Group is used to account for the City's liability for general long- tenn debt such as general obligation bonds, certificates of obligation, and obligations for employee vacation, sick-leave benefits, insurance claims and rebatable arbitrage, other than those reported in the Proprietary Funds. C. BASIS OF ACCOUNTING The modified accrual basis of accounting and the flow of cUITent financial resources measurement focus is followed for governmental fund types and expendable trust funds. Under this basis of accounting, expenditures, other than interest on long-tenn debt in the Debt Service Fund, Which is recorded when due, are recorded when the liability is incurred. Revenues are recorded when received in cash unless susceptible to accrual. Revenues under the modified accrual basis must be both measurable and available to finance CUITent year appropriations. Revenues considered to be susceptible to accrual under the modified accrual basis are property tax, sales tax, franchise tax, hotel/motel tax, certain grant revenue and invesnnent income. The accrual basis of accounting and the flow of economic resources is followed in the enterprise funds and internal service funds. Under this method of accounting, revenues are recognized when earned and expenses are recorded when a liability is incUITed. Under the cUITent financial resources measurement focus, only CUITent assets and current liabilities are included on the balance sheet. Net current assets or fund balance is considered a measure of available expendable resources. This measurement focus is concerned primarily with the measure of interperiod equity (e.g. whether CUITent year revenues were sufficient to pay for cUITent year services). Enterprise funds and internal service funds are accounted for using an economic resources measurement focus. All assets and liabilities including fixed assets and long-tenn debt are included on the balance sheet Fund equity is segregated into its contributed capital and retained earnings components. Proprietary fund type operating statements present inereases (revenues} and decreases (expenses) in net total assets. D. BUDGETARY ACCOUNTING Annual budgets are adopted on a basis consistent with generally accepted accounting principles for the General Fund only. Capital project funds adopt project-length budgets. All annual appropriations lapse at the end of the fiscal year. Annually, the City Manager submits to City Council a proposed operating budget for the upcoming fiscal year. Public hearings are conducted to obtain taxpayer comments, and the budget is legally enacted through passage of an ordinance by the City Council. Budgetary control is maintained by department and by the following category of expenditures: personnel services, supplies, maintenance, other charges, and capital outlay. All budget supplements must be approved by the City Council. Administrative transfers and increases or decreases in accounts within categories may be made by management as long as expenditures do not exceed 33 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POUCIES D. BUDGETARY ACCOUNTING (CONTINUED) budgeted appropriations at the fund level. Budgeted amounts shown are from the revised budget, adopted by Ordinance No. 2001-00040 on June 14,2001. During the year, the budget was revised to reflect a 2.6% increase in General Fund operating revenues and a 2.3% increase for the General Fund operating expenditures from the original budget. Each year, in accordance with State law, the City Council sets an ad valorem tax levy for a sinking fund (General Obligation Debt Service) which, with cash and investments in the fund, would be sufficient to pay all the bonded indebtedness and interest due in the following fiscal year. E. ENCUMBRANCES At the end of the year, encumbrances for which goods and/or services have not been received are canceled. At the beginning of the next year, management reviews all open encumbrances. During the budget revision process, encumbrances may be re-established. On October 1, 200 I, the General Fund had no significant amounts of open encumbrances. F. ASSETS. LIABILITmS AND FUND EQUITY Equity in Pooled Cash and Investments • The City pools the resources of the various funds in order to facilitate the management of cash and enhance investment earnings. Records are maintained which reflect each fund's equity in the pooled account. GAAP requires certain investments to be carried at fair value with the change in fair value included in the determination of investment income shown in the operating statement. Due to the nature of the City's investments, the difference between amortized cost and market value is not significant such that the carrying value of the portfolio is considered to approximate fair market value. Cash Equivalents • Cash equivalents are defined as short-term highly liquid investments that are ·readily convertible to known amounts of cash and have original maturities of three months or less when purchased which present an insignificant risk of changes in value because of changes in interest rates. Property Tax Receivable -The value of all real and business property located in the City is assessed annually on January I in conformity with Subtitle E of the Texas Property Code. Property taxes are levied on October I on those assessed values and the taxes are due on receipt of the tax bill. On the following January 1, a tax lien attaches to property to secure the payment of all taxes, penalties and interest ultimately imposed. The taxes are considered delinquent if not paid before February I. Therefore, at the City's fiscal year end, September 30, all property taxes receivable are delinquent, but are secured by a tax lien. The City records property taxes receivable upon levy and defers tax revenue until the taxes are collected or available; for each fiscal year, the City recognizes revenue in the amount of taxes collected during the year plus an estimate of taxes to be collected in the subsequent 45 days. The City allocates property tax revenue between the General, certain Special Revenue and the Debt Service funds based on tax rates adopted for the year of levy. The District adjusts the allowance for · uncollectible taxes and deferred tax revenue at year end based upon historical collection experience. Accordingly, at August 31 of each year, property taxes receivable less the allowance for uncollectible taxes and deferred tax revenue is equivalent to the projected tax collections from September I through October 15 of the same year. To write-off property taxes receivable, with specific statutory authority from the Texas Legislature, the District eliminates the receivable and reduces the allowance for uncollectible accounts. Enterprise Fund Receivable-Within the Electric, Water, Sewer and Solid Waste Enterprise Funds, services rendered but not billed as of the close of the fiscal year, are not considered significant. Amounts billed are reflected as accounts receivable net of an allowance for uncollectibles. 34 - - - - - ... CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 : . ~ .. NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F. ASSETS. LIABR..ITIES AND FUND EQUITY <CONTIN{JEDl Inventories • Inventories consist of expendable supplies held for consumption. Inventories are valued at cost using the average cost method of valuation, and are accounted for using the consumption .method of accounting (i.e., inventory is expensed when used rather than when purchased). Prepaid Items -Prepaid items are accounted for under the consumption method. Restricted Assets -Certain enterprise fund assets are restricted for construction which bas been funded through long-term debt, therefore, retained earnings have been reserved for these amounts. The excess of other restricted assets over related liabilities are included as retained earnings reserved for capital projects, rate stabilization, economic development and bond indentures. Fixed Assets and Depreciation -General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, capital acquisition and construction are reflected as expenditures in Governmental Funds, and the related assets are reported in the General Fixed Assets Account Group. All purchased fixed assets are recorded at cost. Donated assets are recorded at the fair value on the date of donation. Assets in the General Fixed Assets Account Group are not depreciated. Property, plant and equipment of the Proprietary Funds are stated at cost or estimated market value for donated assets and capitalized in the fund that acquired or constructed them. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Improvements Buildings Equipment 10-SO years IS-SO years 3-15 years Interest Capitalization -The City does not capitalize interest cost. Interest capitalization would not be significant to the GPFS. Advances to Otber Funds -Amounts owed to one fund by another which are not due within one year are recorded as advances to other funds. These are equally offset by a fund balance reserve amount in the governmental funds, which indicates they do not constitute available expendable resources. G. RISK MANAGEMENT The City is required to fund amounts into accounts from which medical and dental claims are paid by a third party administrator, and as a result is effectively self-insured. The liability for incurred claims represents estimates for medical and dental claims incurred as of September 30, 2001. Some of these claims were reported at September 30, 2001, and others which are incurred but not reported (IBNR), may not be reported until a later date. IBNR is calculated by the City's independent insurance administrator. In order to mitigate the risk associated with the City's medical coverage, the City purchased individual stop loss coverage of S I SO,OOO. In April 1999, the City purchased worker's compensation coverage, with no deductible, from a third party. Prior to Aprill999, the City was self insured for worker's compensation claims. Any claims outstanding in April 1999 are the responsibility of the City. The City's self-insured general liability program is on a cash flow basis, which means that the service contractor processes, adjusts and pays claims from a deposit provided by the City. The City accounts for the general liability program by charging premiums based upon losses, administrative fees and reserve requirements. In order to control the risks associated with general liability claims, the City purchased reinsurance coverage for claims in excess of $250,000. 35 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES G. RISK MANAGEMENT {CONTINUED) For self-insured coverage, the Risk Management Fund established claim liabilities based on estimates of the ultimate cost of claims (including future claim adjustment expenses) that have been reported but not settled, and of claims that have been incurred but not reported. The length of time for which such costs must be estimated varies depending on the coverage involved. Estimated amounts of salvage and subrogation and reinsurance recoverable on unpaid claims are deducted from the liability for unpaid claims. Because actual claim costs depend on such complex factors as inflation, changes in doctrines oflegalliability, and damage awards, the process used in computing claim liabilities does not necessarily result in an exact amount, particularly for general liability coverage. Claim liabilities are recomputed periodically using a variety of actuarial and statistical techniques to produce current estimates that reflect recent settlements, claim frequency, and other economic and social factors. Adjustments to claim liabilities are charged or credited to expense in the period in which they are incurred. Additionally, property and boiler coverage is accounted for in the Risk Management Fund. The property insurance policy was purchased from an outside insurance carrier. The policy has a $250,000 deductible per occurrence, and the boiler coverage insurance deductible is up to $100,000 dependent upon the unit. Premiums are charged to funds based upon policy premiums and reserve payments. Other small insurance policies, such as surety bond coverage and miscellaneous floaters, are accounted for in the Risk Management Fund. Funds are charged expenditures based on premium amounts and administrative charges. The City has had no significant reductions in insurance coverage during the year. Settlements in the current year and preceding two years have not exceeded insurance coverage. The City accounts for all insurance activity in. Internal Service Funds. H. REVENUES. EXPENSES AND EXPENDITURES Interest Income on pooled cash and investments is allocated monthly based on the percentage of a fund's six month rolling average monthly balance in pooled cash and investments to the total citywide six month rolling average monthly balance in pooled cash and investments, except for certain Trust and Agency Funds, certain Special Revenue Funds, Governmental Capital Project Funds, and certain Internal Service Funds. The interest income on pooled cash and investments of these funds is reported in the General Fund or the Debt Service Fund. Sales Tu Revenue for the City results from an allocation of 1.125% of the total sales tax levy of 7.875%, which is collected by the State of Texas and remitted to the City monthly. The tax is collected by the vendor and required to be remitted to the State by the 20th of the month following collection. The tax is then paid to the City by the I Oth of the next month. On January 21, 1995, voters approved a 118 cent increase in sales tax to reduce the property tax rate which went into effect October 1, 1995. The 45 day availability period provides for full accrual of sales taxes. Grant Revenue from federal and state grants is recognized to the extent that the related expenditure has been incurred and reimbursement received or requested. Ioterfund Transactions or quasi-external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expendirureslexpenses initially made from that fund that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. 36 - - - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES H. REVENUES. EXPENSES AND EXPENDITURES CCONTINUEDl Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transactions except quasi-external transactions, reimbursements, temporary receivables and payables, and residual equity transfers are reported as operating transfers. Compensated Absences consists of vacarion leave and sick leave. Vacation leave of 10..20 days is granted to all regular employees dependent upon the date employed, years of service, and civil service status. Currently, up to 40 hours of vacation leave may be "carried over" to the next calendar year. The City is obligated to make payment upon retirement or termination for any available, unused vacation leave. Sick leave for employees is accrued at 1 V. days per month with a maximum accrual status of 200 days. After 1 5 years of continuous full time services for non-civil service personnel, vested sick leave is paid on retirement or termination. at the current hourly rate for up to 90 days. Upon retirement or termination, Civil Service Personnel (Police) are paid for up to 90 days accrued sick leave after one year of employment. Civil Service Personnel (Firefighters) are paid for up to 135 days of accrued sick leave upon retirement or termination. The Texas Civil Service laws dictate certain benefits and personnel policies above and beyond those policies of the City. The liability for the accumulated vacarion and sick leave is recorded in the general long-term debt account group for governmental fund employees and as a noncurrent liability in the proprietary funds for proprietary fund employees. Management has determined that the current portion of this liability is not significant to the overall financial position of the City. Post Employment Benefits for retirees of the City of Lubbock include the option to purchase health and life insurance benefits at their own expense. Amounts to cover premiums and administrative costs, with an inerernental charge for reserve funding, are determined by the City's health care administrator. Employer contributions are funded on a pay-as-you-go basis and approximated $475,000 for fiscal 2001. These contributions are included in the amount of insurance expense reflected in the financial activity reported in the Health Insurance Internal Service Fund. The following schedule reflects participation in the City's health care program: 2001 Participants Active 1,821 Retired 380 Cobra 16 Active Claims $5,493,187 Retired Claims 2,261,870 Cobra Claims 108,301 Total Claims $7,863,358 % of Employee Groups to total claims Active 69.86% Retired 28.76% Cobra 1.38% Total% 100.00% 37 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I. TOTALS {MEMORANDUM ONLY) The Totals (Memorandum Only) columns represent an aggregation of the combined financial statements and do not represent consolidated financial information. Data in those columns do not represent financial position and results of operations, in conformity with GAAP and are presented only to facilitate analysis. Interfund eliminations have not been made in the aggregation of this data. J. RECLASSIFICATIONS Cenain 2000 amounts have been reclassified to conform to 2001 presentation. NOTE ll. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. RETAINED EARNINGS/FUND BALANCE DEFICITS The deficit of $482,728 in the General Capital Projects Fund is due to timing differences of incurring capital outlay expenditures for an internally financed project. Over the term of the borrowing arrangement, transfers in from Special Revenue Funds will eliminate the deficit. The deficit of $179,387 in the Library Expendable Trust Fund is the result of a timing difference between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not measurable at September 30, 2001, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $1,680,824 in the Community Development Expendable Trust Fund is the result of timing differences between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not available at September 30, 2001, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $28,332 in the Community Services Expendable Trust Flllld is the result of timing differences between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not available at September 30, 2001, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit of $507,846 in the Police Expendable Trust Fund is the result of a timing difference between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not available at September 30, 2001, which is consistent with the revenue recognition required by the modified accrual basis of accounting. The deficit in the Golf Enterprise Fund of $1,870,791 is the result of placing itself in a more competitive position through non-capital course equipment improvements. On October 13, 1994, the City contracted with Fore Star Golf, Inc. for management services to be provided for the golf course operations. The management agreement is effective through December 31, 2014. Over the term of the contract, Fore Star Golf, Inc. will receive a ponion of the golf course revenues based on a sliding scale. Additionally, management has approved a 10 year funding source from the General Fund to eliminate the deficit beginning in fiscal 2002. The retained earnings deficit of $433,503 in the Internal Service Management Information Fund results from the practice of not recovering depreciation through user charges. Management is evaluating user charges in order to recover depreciation, financing and capital costs, and the retained earnings deficit. 38 - - - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ll. STEWARDSHIP, COMPLIANCE AND ACCOUN'tABll.JTY A. RETAINED EARNINGS/FUND BALANCE DEFICITS <CONTINUED> The retained earnings deficit of $427,155 in the Internal Service Communications Fund results from the practice of not recovering depreciation through user charges. Management is evaluating user charges in order to recover depreciation and recover the retained earnings deficit No other funds of the City had deficits in either total fund balances or total retained earnings. NOTE ill. DETAU. NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. POOLED CASH AND INVESTMENTS The City's investment polices are governed by State statute and City ordinances. Pennissible investments include direct obligations of the United States or its agencies and instrumentalities, certificates of deposit, prime domestic banker's acceptances, commercial paper, repurchase agreements, and deposits in a qualifying investment pool. Collateral is required for demand deposits, certificates of obligation, and repurchase agreements at I 02% of all amounts not covered by Federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the state and its subdivisions. The City's deposits and investments are categorized below to indicate the level of risk assumed by the City at September 30, 2001. INVESTMENT CATEGORY OF CREDIT RISK (1) Insured, registered or in securities held by the City or its agent in the City's name. (2} Uninsured and unregistered, with securities held by the counter party's trust department or its agent in the City's name. (3) Uninsured and unregistered, with securities held by the counter party or by the trust department or agent but not in the City's name. DEPOSIT CATEGORY OF CREDIT RISK (A) Insured or collateralized with securities held by the City or by its agent in the City's name. (B) Collateralized with securities held by the pledging financial institution's trust department or agent in the City's name. (C) Uncollateralized. Pooled Casb and Investments The City's pooled cash and investments consist of deposits with financial institutions, certificates of deposit, U.S. government and agency securities, commercial paper, and deposits in qualifying non- regulated money market investment pools (Logic and TexPool}. These investments have varying maturities ranging from one day to three years. The weighted average maturity of the total portfolio is kept to under two years. The following is a schedule of the City's pooled cash and investments at September 30, 200 I: 39 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ill. DETAIL NOTES ON ALL FUNDS Al'i'D ACCOUNT GROUPS A. POOLED CASH AND INVESTMENTS (CONTINUED) Category Carrying Investments (1) (2) (3) Amount Primary Government: U. S. Treasury and Agency Obligations s 78,477,258 s $ $ 78,477,258 Mutual Funds 121,268,781 Subtotal 199' 746,039 Co!!!Eonent Units: U.S. Treasury and Agency Obligations 126,916 126,916 Mutual Funds 31028,144 Subtotal 3,155,060 Total Investments S 202,90 I ,099 40 - - - - - - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ill. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. POOLED CASH AND INVESTMI;NTS £CONTINUED} Bank Carryiug Balanu Amount Primary Government $ 1,710,658 $ $ $ 1,710,658 $ 296,061 Component Units 637,108 105,487 396,556 1,139,151 853,308 Total $ 2,347,766 $ 105,487 $ 396,556 $ 2,849,809 $ 1,149,369 Cash and Investments are reported in the financial statements as: Total Total Total Primary Component Reporting Government Units Enti!,I Cash and Cash Equivalents -Non- Restricted $ 8,435,709 $ 753,308 $ 9,189,017 Cash and Cash Equivalents-Restricted 16,733,051 100,000 16,833,051 Total Cash and Cash Equivalents 25,168,760 8531308 2610221068 Investments -Non Restricted 66,901,925 3,155,060 70,056,985 Investments-Restricted 107,971,415 107,9711415 Total Investments 174,8731340 3,1551060 17810281400 Total Cash and Investments $ 200,042,100 s 4,008,368 $ 204,050,468 41 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ID. DETAil. NOTES ON ALL FUNDS AND ACCOUNT GROUPS B. INTERFUND TRANSACTIONS Interfund receivables and payables consisting of due to/from and advances to/from other funds at September 30,2001 were as follows: Funds General Fund Special Revenue Funds: Hotel/Motel Tax Capital Project Funds Public Safely General Capital Projects Enterprise Funds: Electric Enterprise Water Enterprise Solid Waste Enterprise Golf Enterprise Stormwater Enterprise Internal Service Funds: Fleet Maintenance Print Shop & Office Store Radio Shop Management Information Custodial Services Communications Expendable Trust Funds: Community Development Community Services Library Total Primary Government C. DEFERRED CHARGES lnterfnnd Receivables $10,263,597 7,789,491 1,563,653 $19,616,741 Interfund Payables $ 632,000 1,188,680 1,578,974 11,500,600 150,000 2,014,092 50,000 46,000 12,000 42,915 484,194 61,000 236,885 1,372,001 26,000 221,400 $19,616,741 The total deferred charges of$10,516,649 in the Electric Enterprise Fund includes $3,744,444 which represents an advertising contract with the United Spirit Arena. The advertising (and amortization) began with the opening of the sports arena in fiscal2000 and will continue for 30 years. The deferred charges also include an amount of$1,643,133 at September 30,2001, which represents prepayments for a contract for future delivery of natural gas as contracted for by the City. In 1988, a contract was entered into for the purchase of proven and unproven reserves, totaling 2,000,000 MMBTU at $1.56 per MMBTU with an option, which the City has exercised, to purchase an additional2,000,000 MMBTU at the same price. Quantities in excess of the first 4,000,000 MMBTU can then be purchased at market value. During 1988, proven reserves of 338,000 MMBTU were purchased at the $1.56 rate. The remaining reserves are being purchased as proven. One-half the rate, or S. 78 per MMBTU, is paid upon proven determination of the reserves and the balance is to be paid upon delivery. The prepayments are to be expensed as the gas is taken until the prepaid units of gas have been consumed. At September 30,2001 and 2000, 1,317,934 MMBTU had been delivered, and remaining proven reserves at September 30,2001 and 2000 were 2,104,273 MMBTU. 42 - - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE m. DETAR. NOTES ON ALL FUNDS AND ACCOUNT GROUPS C. DEFERRED CHARGES <CONTINUED> During fiscal 2000, $3,000,000 was transferred to the Management Infonnation Internal Service Fund from the Electric Enterprise Fund to cover costs of implementing a new utility billing system. This amount will be amortized over 7 seven years once the new billing system bas been placed in service, which is anticipated to occur in fiscal 2002. The remaining deferred charges of $2,129,072 represents infrastructure and other economic development costs being amortized over 5 years. D. PROPERTY. PLANT AND EQUIPMENT General fixed assets of the City for the year ended September 30,2001, are as follows: Balance Balance 9-30.00 Additions* Deletions* Reclasses** 9-30.01 Land s 7,933,228 $ 37,110 $ 117,907 s (504,379) s 7,348,052 Buildings and improvements 41,060,779 5,396,953 424,393 10,106 46,043,445 Other Improvements 135,674,760 7,119,792 701,288 497,852 142,591,116 Equipment 36,725,151 7,226,586 6,620,128 (3,579) 37,328,030 Construction in Progress 40,390,461 13,550,076 22,089,454 31,851a083 Total $ 261,784,379 s 33,330,517 s 29,953,170 $ . $ 265,161,726 • Includes transfers ** In fiscal 2001, certain assets were reclassified to more appropriate categories Construction in progress is composed of the following: Project Expended Unnpended Authorization 9-30.01 Balance Fire Station $ 9,061,110 $ 6,154,348 $ 2,906,762 Park Improvements 10,070,772 2,775,530 7,295,242 Street Improvements 36,216,067 7,812,446 28,403,621 Permanent Street Maintenance 1,500,000 1,049,912 450,088 General Permanent Capital Projects 4,981,765 4,141,942 839,823 General Permanent Capital Improvements & Other 17,8522926 92916,905 7,9361021 Total Life-to-Date Activity $ 79,682,640 $ 31,851,083 $ 47,831,557 The unexpended balance represents long-term capital planning that may be funded through existing or anticipated future funding sources. 43 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ill. DET All.. NOTES ON ALL FUNDS AND ACCOUNT GROUPS D. PROPERTY. PLANT AND EQUIPMENT (CONTINUED) General fixed asset account group for component units for the year ended September 30, 2001, are follows: Equipment Balance 9-30-00 $ 520,542 Additions $ 327,521 Deletions $ 312,158 Balance 9-30-01 $ 535,905 Property, plant, and equipment recorded in the City's various proprietary funds (including component units) as of September 30, 2001, is as follows: Total Reporting· Internal Total Entity Land Buildings Other Improvements Equipment Construction in Progress Total Less: Accumulated Depreciation Net E. RETIREMENT PLANS Enterprise Service Proprietary Component Proprietary Fund Fund Fund !ype Units Fund Type $ 30,830,572 $ 65,343 $ 30,895,915 $ 520,403 s 31,416,.318 82,960,915 1,614,935 84,575,850 4,159,174 88,735,024 461,666,677 186,969 461,853,646 1,179,543 463,033,189 66,550,402 10,315,448 76,865,850 17,827,675 94,693,525 ___ 8"""6"",5....;4"""8,:.;;.;59;...;8 ___ 3;;,.,9;;..;8;.;;.5"-",8.;..93.,..._ -~9.::,:0,~53:;..:4:.!.,,4:,.;.9..:..1 ___ ~1::.:25:.z:,5:.:5:.:.9 _"::"90~,6fiJ~,0~50;:_ 728,557,164 16,168,588 744,725,752 23,812,354 768,538,106 (222,878,978) (7,874,961) (230,753,939) (9,308,698) (240,062,637) $ 505,678,186 s 8,293,627 $ 513,971,813 $ 14,503,656 s 528,475,469 Each qualified employee is included in one of two retirement plans in which the City of Lubbock participates. These are the Texas Municipal Retirement System (TMRS) and the Lubbock Firemen's Relief and Retirement Fund (LFRRF). The City does not maintain the accounting records, hold the investments or administer either fund. Summary of significant data for each retirement plan follows: TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS) Plan Description The City provides pension benefits for all of its full-time employees (with the exception of firefighters) through a non-traditional, joint contributory, hybrid defmed benefit plan in the state-wide TMRS, one of 745 administered by TMRS, an agent multiple-employer public employee retirement system. Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City- financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount equat to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100%, 150%, or 200%) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits 44 - - - - - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS <CONTINUED> for service since the plan \1egan, would be the total monetary credits and employee contributions accumulated with interest if the cum:nt employee contnoution rate and City matching percent had always been in existence and if the employee's salary had always been the average of his salary in the last three years that are one yeat before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accll1l1lliated contributions with interest and the employer-financed monetary credits with interest were used to purchase an annuity. Members can retire at ages 60 and above with I 0 or more years of service or with 25 years of service regardless of age. As of September 30, 2001, a member is vested after 10 years. During 2001, legislation was enacted that changed the vesting period from 10 years to 5 years. This 5 yeat vesting period begins January 2002. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Contributions The contribution rate for the employees is 7% and the City matching ratio is cum:ntly 2 to 1, both as adopted by the governing body of the City. Under the state law governing TMRS, the actuary annually determines the City contribution rate. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the rime the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the rime hlslher retirement becomes effective. The prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 25- year amortization period. The unit credit actuarial cost method is used for dererrnining the City contribution rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that is the basis for the rate and the calendar year when the rate goes into effect (i.e. December 31, 2000 valuation is effective for rates beginning January 2002). Actuarial Assumptions The actuarial assumptions for the December 30, 2000 valuations are as follows: Actuarial cost method: Amortization method: Remaining amortization period: Asset valuation method: Investment rate of return: Projected salary increases: Includes inflation at: Cost of Living adjustments: Unit credit Level percent of payroll 25 years-open period Amortized cost 8% None None None 45 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) TEXAS MUNICIPAL RETIREMENT SYSTEM REQUIRED SUPPLEMENTAL DISLOSURE 3 YEAR IDSTORICAL SCHEDULE OF ACTUARIAL LIABILITIES AND FUNDING PROGRESS Uofuoded Actuarial Asof Actuarial Accrued December31 Actuarial Value of Accrued Pen:eotage Liability Assets Liability Funded (UAAL) 1998 $ 132,735,475 $ 162,668,614 81.6% $29,933,139 1999 147,042,049 181,439,657 81.0% 34,397,608 2000 160,299,195 200,713,365 79.9% 40,414,170 UALLasa% Annual Required As of Annual Covered or covered Contribution Contribution December 31 Payroll Payroll (ARQ Made 1998 $46,619,677 64.2% $7,149,029 $7,149,029 1999 51,627,837 66.6% 7,794,560 7,794,560 2000 54,589,153 74.0% 8,010,122 8,010,122 The City of Lubbock is one of 745 municipalities having the benefit plan administered by TMRS. Each of the municipalities has an annual, individual actuarial valuation performed. All assumptions for the December 31, 2000 valuations are contained in the 2000 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O. Box 149!53, Austin, Texas 78714-9153. LUBBOCK fiREFIGHTER'S RELIEF AND RETIREMENT FUND (LFRRF) Plan Description The Board of Trustees of the LFRRF is the administrator of a single-employer defined benefit pension pian. This pension fund is a trust fund. It is reported by the City as a related organization and is not considered to be a part of the City financial reporting entity. Firefighters in the Lubbock Fire Department are covered by the LFRRF. The LFRRF provides service retirement, death, disability and withdrawal benefits. These benefits vest after 20 years of credited 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. A partially vested benefit is provided for firefighters who terminate employment with at least I 0 but less than 20 years of service. The LFRRF Plan Effective December I, 200 I provides a monthly normal service retirement benefit, payable in a Joint and Two-Thirds to Spouse form of annuity, equal to 70.02% ofFinai48-Month Average Salary Plus $335.05 per month for each year of service in excess of 20 years. 46 - - - - - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS !CONTINUED) A firefighter has the option to participate in a Retroactive Deferred Retirement Option Plan (RETRO DROP) which will provide a lwnp sum benefit and a reduced annuity upon termination of employment. Firefighters must be at least 51 with 21 years of service at the selected "RETRO DROP benefit calculation date" (which is prior to date of employment termination). Early R.ETRO DROP with benefit reductions is available at age 50 with 20 years of service for the selected .. early RETRO DROP benefit calculation date". A Partial Lwnp Sum option is also available where a reduced monthly benefit is detennined based on an elected lwnp sum amount such that the combined present value of the benefits under the option is actuarially equivalent to that of the normal form of the monthly benefit. Optional forms are also available at varying levels of surviving spouse benefits instead of the standatd two-thirds form. There is no provision for automatic postretirement benefit increases. The fund has the authority to provide, and has periodically in the past provided for, ad hoc postretirement benefit increases. The benefit provisions of this plan are authorized by the Texas Local Fire Fighter's Retirement Act (TLFFRA). TLFFRA provides the authority and procedure to amend benefit provisions. Contributions Required and Contributions Made The contribution provisions of this plan are authorized by TLFFRA. TLFFRA provides the authority and procedure to change the amount of contributions determined as a percentage of pay by each firefighter and a percentage of payroll by the City. State law requires that each plan of benefits adopted by the fund must be approved by an eligible actuary. The actuary certifies that the contribution commitment by the firefighters and the City provides an adequate financing arrangement. Using the entry age actuarial cost method LFRRF's normal cost contribution rate is determined as a percentage of payroll. The excess of the total contribution rate over the normal cost contribution rate is used to amortize LFRRF's unfunded actuarial accrued liability (UAAL), if any, and the number of years needed to amortize LFRRFs unfunded actuarial liability, if any, is determined using a level percentage of payroll method. "When there is a negative UAAL, the actuarially required contribution rate for compliance with GASB 27 is detennined by amortizing the negative UAAL over 30 years using a level percentage of payroll method. This will be the case for 2001 and 2002 (calendar years) based on the most recent re8ults of the December 31, 2000 valuation. The costs of administering the plan are financed from the trust. LFRRF' s funding policy requires contributions equal to 11% of pay by the firefighters. Contributions by the City are based on a formula which causes the City's contribution rate to fluctuate from year to year. The December 31, 2000 actuarial valuation {most recent) assumes that the City's contributions will average 15% of payroll in the future. The plan of benefits most recently adopted effective December I, 2001 was adopted cautiously, allowing for future unforeseen contingencies in light of the unsettled investment environment that existed in the fall of 2001 when various plan amendments were being studied and considered. Theretore, even though the actual contributions for the 2001 and 2002 plan years (calendar years) are somewhat greater than the Annual Required Contributions defined by GASB 27, the actuary 47 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ill. DETAa NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS <CONTINUED) certified the most recent plan of benefits assuming that the present financing arrangement would continue and would be necessary for an adequate financing arrangement for the long-term future. Annual Pension Cost The Annual Required Contributions (ARC), the Annual Pension Cost (APC) and the Net Pension Obligation (NPO) are developed in such a manner to satisfy the parameters of GASB Statement No. 27. The required contributions for the period prior to January 1, 200 I are based on the actuarial valuation as of December 31, 1998. The required contributions for the period beginning January I, 2001 are based on the actuarial valuation as of December 31, 2000 and reflect the December I, 2001 plan provisions. The ARC and the APC for the year ended September 30, 2001 was $1,366,293 and the actual City contributions (ARC) made for the year was $1,960,306 resulting in an NPO of $(594,013). The entry age actuarial cost method was used, with the normal cost calculated as a level percentage of payroll. The actuarial value of assets was determined based on a five-year smoothed fair-market value of assets. The actuarial assumptions included an investment return assumption of 8.5 % per year (net of administrative expenses), projected salary increases including promotion and longevity averaging 6.5% per year over a 25 year career, and no postretirement cost-of-living adjustments. An inflation assumption of 4.5% per year is included in the investment return and salary increase assumptions. As of the December 31, 2000 actuarial valuation date and based on plan provisions effective December I, 2001, the fund's assets exceeded the actuarial accrued liability resulting in a negative unfunded actuarial accrued liability (UAAL). The negative UAAL is amortized over 30 years using an open, level percentage of payroll method, assuming that the payroll will increase 4.5% per year. Further details concerning the financial position of the LFRRF and the latest actuarial valuation are available by contacting the Board of Trustees, LFRRF, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457. Fiscal Year Ending 9/30/99 9/30/00 9/30/01 Trend Information Annual Pension Cost (APC) $1,745,357 1,852,835 1,366,293 Percentage of APC Contributed 100 100 143 Net Pension Obligation $(594,013) LUBBOCK FIREMEN'S RELIEF AND RETIREMENT FUND ANAL YIS OF FUNDING PROGRESS Actuarial Actuarial Entry Age Unfunded Funded Annual UAALasa Valuation Value of Actuarial AAL Ratio (alb) Covered Percentage of Date Assets (a) Accrued (UAAL) PayroU 5 Covered Liability (b-a) (c) Payroll fAAL} {b} {!b-a}/c} 12/3 !196 I ,2 $73,626,537 $80,105,898 $6,479,361 91.9% $9,223,974 70.2% 12/31/98 1,3 90,364,681 97,533,314 7,168,633 92.7 10,290,190 69.7 12/31/00 1,4 119,660,788 114,675,049 ( 4,985,739) 104.3 12,243,913 (40.7) 48 - - - - - - .... CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS E. RETIREMENT PLANS <CONTINUED) I Economic and demographic assumptions were revised. 2 Changes in plan benefit provisions were effective December 20, 1995, March 30, 1996 and November I, 1997. 3 Reflects changes in plan benefit provisions effective November 1, 1999. 4 Reflects changes in plan benefit provisions effective December 1, 2001. 5 The covered payroll is based in estimated annualized salaries used in the valuation. F. DEFERRED COMPENSATION The City offers its employees three deferred compensation plans created in accordance with Internal Revenue Code {"IRC") Section 457. The plans, available to all City employees, permit them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. The Plan's assets are held in trust for the exclusive benefits of the participants and their beneficiaries. In management's opinion, the level of administrative services provided by City staff warrants inclusion of the plans in the financial reporting entity as an expendable trust fund. G. SURFACE WATER SUPPLY Canadian River Municipal Water Authority The Canadian River Municipal Water Authority {CRMWA) is a Conservation and Reclamation District established by the Texas Legislature to construct a dam, water reservoir and aqueduct system for the purpose of supplying water to surrounding cities. The District was created in 1953 and comprises eleven cities, including the City. The budget, financing and operations of the District are governed by a Board of Directors selected by the governing bodies of each of the member cities, each city being entitled to one or two members dependent upon population. At September 30, 2001, the Board was comprised of 18 members, two of which represented the City. The City contracted with the CRMW A to reimburse it for a portion of the cost of the Canadian River Darn and aqueduct system in exchange for surface water. Accordingly, prior to fiscal 1999, such payments were made solely out of water system revenues and were not general obligations of the City. The City's pro rata share of annual fixed and variable operating and reserve assessments is recorded as an expense of obtaining surface water. Prior to fiscal 1999, the long-term debt was owed to the U.S. Bureau of Reclamation for the cost of Construction of the facility, which was completed in 1969. The City's allocation of project cost was $32,905,862. During the year ended September 30, 1999, bonds in the principal amount of $12,300,000 were issued to payoff the construction obligation owed to the U.S. Bureau of Reclamation via CRMWA in the amount of $20,809,067. The difference of $8,509,067 was a discount in the remaining principal provided by the U.S. Bureau of Reclamation to the member cities. This discount has been recorded as a deferred gain on refunding and is being amortized over the life of the refunding bonds. At September 30, 2001, $7,704,469 remains unamortized. The annual principal and interest payments are included in the disclosures for other City related long- 49 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ill. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS G. SURFACE WATER SUPPLY (CONTINUED> Canadian River Municipal Water Authority (Continued) term debt The above cost for the rights are recorded as other assets and are being amortized over 85 years. The cost and debt are recorded in the Water Enterprise Fund. Brazos River Authority -Lake Alan Henry During 1989, the City entered into an agreement with the Brazos River Authority (BRA) for the construction, maintenance and operation of the facilities known as Lake Alan Henry. The BRA, which is autholized by the State of Texas to provide for the conservation and development of surface waters in the Brazos River Basin, has issued bonds for the construction of the dam and lake facilities on the South Fork of the Double Mountains Fork of the Brazos River. Total costs are expected to exceed $120 million. The agreement obligates the City to provide revenues to BRA in a."Tlounts sufficient to cover all maintenance and operating costs, management fees to the authority, as well as funds sufficient to pay all capital costs associated with construction. The City will receive surface water for the payments to BRA. Approximately $154,000 was paid to the BRA for maintenance and operating costs in fiscal year 2001. The BRA issued $16,970,000 in revenue bonds in 1989 and $39,685,000 in revenue bonds in 1991. These bonds were refunded July 1995. Disclosure of the refunding can be found in Note III. K. Construction of the dam and lake facilities began in 1989. The City is obligated to provide sufficient funds over the remaining life of the bonds to service the debt requirement The financial activity, along with the related obligation, is accounted for in the Water Enterprise Fund. At September 30, 2001, certain mineral rights associated with land located in the Lake Alan Henry site owned by individuals had not been acquired by the City. The additional amount needed to purchase such mineral rights is yet to be determined. H. OTHER ENTERPRISE FUND ACTMTIES Enterprise Fund Transfers Transfers to the General Fund from the Electric, Water, Solid Waste, and Sewer Enterprise Funds, in the opinion of management, exceed the amount that would have been paid to the City if these funds were private sector companies engaged in the same enterprises. In addition to the amount transferred in excess of private sector taxes, there is also an amount transferred to compensate the General Fund for shared services and indirect costs. 50 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 - NOTE Ill. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS I. SEGMENT JNFORMA TION -ENTERPRISE FUNDS I£0NTJNUED} -The City maintains seven enterprise funds, which include electric, water, sewer, solid waste, airport, golf, and stormwater drainage Segment information for the year ended September 30, 200 I, was as follows: Salld SIO..-altr Total -Electrie W•ter Sewer Wate Airport Golf Dratuae ~ Flllld FIIDd Fuad Flllld Flllld FIIDd FIIDd Fllllllla Opemting Revenues s 112,077,148 $ 30,463,694 $ 16,575,673 s 1 5,564,356 $ 4,776,508 $ 34,982 s 1,986,592 s 181,478,953 Depreciation E;q>cnse 6,344,450 5,382,462 4,693,011 2,062,105 3,266,417 56,425 252,090 22,056,960 Opemting mcome {loss) 6,476,894 9,178,172 2,756,202 2,913,294 (2,192,710) (21,443) 1,055,611 20,166,020 Opemting Transft:Ts In (out) (7,856,203) (3,549,148) (1,820,459) (2,372,390) (881,163) (34,982) (188,026) (16, 702,3 71) -Net Income (loss) (645,156) 1,174,683 (1,049,616) 1,296, 728 (1,178,907) (58,521) 1,072,058 611,263 Cum:nt capital Conlnbllrions(Rcdlx:tioos) 210,226 615,693 1,665,821 (8,981) 4,701,997 7,244,756 Propetty, planl, and equipmont; Additioos: 10,590,127 17,962,043 5,879,650 4,229,141 5,876,791 550,256 45,088,008 Deletions: 596,108 1,450,937 233,978 1,537,238 319,358 6,708 97,800 4,242,127 -Net Worldng Olpiw (875,028) 6,519,470 2,183,254 3,362,725 305,408 (2,033,760) 500,089 9,962,158 Allowance far cloublfW AcwiiZli:S (1,421.644) (280,102) (121,638) (107,065) (117,909) (2.048,358) Tow Assets 150,826,651 251,019,746 117,049,474 50,658,914 66,070,706 165,760 46,931,112 682,722,363 Bonds and other long- limn liabilities payable -from oper.ating re.enues 39,923,286 113,515,487 50,827,408 12,532,278 5,212,541 34,633,996 256,704,996 Tow Flllld Equii)(Deficit) $92,270,912 $135,226,341 $65,604,178 $37:,634,600 560,452,751 $(1,870,791) $11,909,498 $401,227,489 - - - 51 - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ill. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS J. LONG-TERM DEBT GENERAL OBLIGATION BONDS AND CERTIFICATES OF OBLIGATION: Average Final Balance Interest Issue Maturity Amount Outstanding Rate Date Date Issued 9-30..()1 7.86% 11-15-85 2-15-03 $ 60,614,070 $ 438,321 9.01 5-15-91 2-15-ll 1,085,000 535,000 5.50 1-14-92 2-15-02 1,655,000 85,000 5.50 5-15-92 2-15-04 34,520,000 6,900,000 5.37 8-15-92 2-15-02 7,565,000 275,000 3.97 5-1-93 2-15-15 14,425,000 10,095,000 5.39 10-1-93 2-15-14 3,625,000 2,365,000 5.39 10-1-93 2-15-14 2,550,000 1,675,000 5.20 10-1-93 2-15-14 1,470,000 975,000 5.14 10-1-93 2-15-14 19,215,000 12,495,000 4.30 12-1-93 2-15-08 9,865,000 5,215,000 5.50 5-15-95 2-15-15 4,690,000 3,290,000 5.07 12-15-95 2-15-16 6,505,000 4,880,000 5.07 12-15-95 2-15-16 10,000,000 7,500,000 4.91 1-15-97 2-15..()9 17,530,000 15,015,000 4.61 1-1-98 2-15-08 1,330,000 1,000,000 4.71 1-1-98 2-15-18 10,260,000 8,730,000 4.36 1-15-99 2-15-14 20,835,000 20,550,000 4.58 1-15-99 2-15-19 15,355,000 13,815,000 4.77 4-1-99 2-15-19 6,100,000 5,490,000 4.71 4-1-99 2-15-19 12,300,000 11,160,000 5.37 9-15-99 2-15-20 24,800,000 24,055,000 5.54 3-15-00 2-15-20 7,000,000 7,000,000 4.90 2-1-01 2-15-21 9,100,000 9,100,000 4.81 2-1-01 2-15-21 2,770,000 . 2,770,000 5.25 . 6-1-01 2-15-31 35!000,000 35,000,000 Total $340,164,070 $ 210,408,321 (A) (A) Excludes net deferred gains and losses on advance refundings, bond issuance costs and discounts of $5,322,270. Additionally, this amount includes $157,325,513 of bonds used to finance enterprise fund activities. 52 - - - - - - - .. CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE m. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS J. LONG-TERM DEBT (CONTINUED> ELECTRIC REVENUE BONDS: Balance Final Amount Outstanding Interest Rat~%} Issue Date Maturi!I Date Issued 9-30-01 5.00 to 6.50 7-15-91 4-15-02 s 4,424,976 s 400,000 • 3.80 to 5.50 6-15-95 4-15-08 13,560,000 8,150,000 •• 4.25 to 6.25 1-01-98 4-15-18 9,170,000 7,805,000 3.10 to 5.00 1-15-99 4-15-19 14,975,000 13,250,000 ••• 4.00 to5.25 7-01-01 4-15-21 9,200,000 9,2001000 •••• Total .. ... ••• •••• s 51,329,976 s 38,805,000 Refunding bonds issued for a partial refunding of the bQnds issued May 15, 1983 • Refunding bonds issued for a panial refunding of the bonds issued April 15, 1976, April15, 1987, and May 15, 1988. Balance outstanding includes $108,034 discount on bonds sold, bond issuance costs and deferred amounts on refunded bonds. Refunding bonds issued for a panial refunding of the bonds issued April 25, 1991 and July 15, 199 I. Balance outstanding includes $462,430 costs and deferred amounts on bonds refunded. Balance outstanding includes $294,694 of discount on bonds sold and bond issuance costs . WATER REVENUE BONDS: loterest Rate Issue Date 3.80 to 5.50% 6-1-95 Fl.oal Maturiey Date 8-15-21 Amount Issued Balance Outstanding 09-30-01 $58,170,000 $50,355,000 • .. Balance outstanding includes $5,473,212 discount, bond issuance costs and deferred losses on bonds sold or refunded. 53 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30,2001 NOTE ill. DETAIL NOTES ON ALL FlJNDS AND ACCOUNT GROtJPS J. LONG-TERM DEBT !CONTINUED> The annual requirements to amortize all outstanding debt of the City as of September 30, 200 I, including interest payments of$150,158,057 are as follows: Revenue Fiscal General (Electric, Year ObliGation BRA~ Total 2001-02 $ 24,650,602 $ 9,979,928 $ 34,630,530 2002-03 23,021,722 9,428,398 32,450,120 2003-04 20,936,527 9,200,212 30,136,739 2004-05 20,394,713 8,522,688 28,917,401 2005-06 19,853,808 8,328,032 28,181,840 2006-07 19,324,162 8,165,148 27,489,310 2007-08 18,196,058 7,675,220 25,871,278 2008-09 17,307,735 6,750,435 24,058,170 2009-10 16,371,173 6,664,450 23,035,623 2010.11 15,950,604 6,594,692 22,545,296 2011-12 14,358,933 6,176,220 20,535,153 2012-13 13,991,061 6,127,000 20,118,061 2013-14 13,647,539 6,083,240 19,730,779 2014-15 10,368,701 6,039,000 16,407,701 2015-16 9,241,852 5,988,960 15,230,812 2016-17 8,280,451 5,945,825 14,226,276 2017-18 8,174,718 5,895,560 14,070,278 2018-19 7,564,736 5,399,020 12,963,756 2019-20 5,832,482 3,469,150 9,301,632 2020-21 3,185,275 3,448,700 6,633,975 2021-22 2,317,910 2,317,910 2022-23 2,317,900 2,317,900 2023-24 2,318,470 2,318,470 2024-25 2,319,339 2,319,339 2025-26 2,320,614 2,320,614 2026-27 2,321,575 2,321,575 2027-28 2,317,068 2,317,068 2028-29 2,317,260 2,317,260 2029-30 2,321,622 2,321,622 2030-31 2,319!890 2,319,890 Total $313,844,500 $135,881,878 $449,726,378 • • This schedule does not include the effect of premiums or discounts. The City has complied in all material respects with the bond covenants as outlined in each issue's indenture. 54 - """" - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ill. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS J. LONG-TERM DEBT {CONTINUED} Long-tenn debt transactions for governmental and proprietary funds for the year ended September 30, 200 1 are as follows: Debt Payable Debt Payable Governmental: 9-30..00 Additions Deletions 9-30..01 Tax-Supponed Obligation Bonds $ 48,380,346 s 9,100,000 s 4,397,538 s 53,082,808 Rebatable arbitrage 301,269 320,388 621,657 Compensated Absences 111080,047 823,306 11,903,353 Total Governmental 591761,662 10,243,694 4,397,538 651607,818 Proprietary: Self-Supponed Obligation Bonds 135,528,101 37,770,000 9,404,354 163,893,747 Revenue Bonds 77,446,614 9,200,000 5,070,947 81,575,667 Compensated Absences 3,7261095 291:254 81,638 3,9351711 Total Proprietary 2161700,810 47,261,254 14,556,939 249,405,125 Total City-Wide: Obligation Bonds 183,908,447 46,870,000 13,801,892 216,976,555 Revenue Bonds 77,446,614 9,200,000 5,070,947 81,575,667 Rebatable arbitrage 301,269 320,388 621,657 Compensated Absences 14,806,142 1,114,560 81,638 151839,064 Total City-Wide $ 276,462,472 s 57,504,948 $ 18,954,477 $ 315,012,943 The total long-tenn debt is reconciled to the total annual requirements to amortize long-tenn debt as follows: Long-Tenn Debt Interest Total amount of debt Add: Discounts and defened losses Rebatable arbitrage Less: Compensated Absences Total future debt requirements $ 315,012,943 150,158,057 1,016,099 (621,657) (15,839,064) s 465,171,000 (15,444,622) $449,726,378 The City Council called an election for September I 8, 1999 to seek voter approval to issue general purpose tax-supponed bonds in the amount of $37,385,000, which represents the City's current five year general purpose debt plan. The following four propositions were approved by the voters: parks, $14,765,000; city-wide drainage projects, $2,160,000; city-wide street projects, $17,165,000; and traffic signal systems, $3,295,000. The City has not submitted a capital improvement plan to voters since 1993, when voters in the City approved a $28,690,000 capital improvement plan. In February 2001, the City issued $9,100,000 Gen.eral Obligation Bonds, Series 2001. This issuance was the second installment of the capital improvement debt issuance approved by the voters in 1999. The proceeds from the sale of the Obligations will be used to fund projects in the following areas: Parks, $3,025,000; Streets $5,335,000; and Traffic Control $740,000. 55 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ill. DETAll. NOTES ON ALL FUNDS AND ACCOUNT GROUPS K. ADVANCED REFUNDING In fiscal years 1994, 1995, 1997 and 1999, the Gty defeased portions of Gty of Lubbock Gener.d Obligation Bonds. AD of the defeased portions of the following bonds ~ called and retired during the 2000-2001 fiscal~ Tax and Warerwo.tks CertifiCates of Obligation, Series 1992; General Obligation Refunding Bonds, Series 1993; General Obligation Bonds, Series 1987; General Obligation Bonds, Series 1989; CertifiCates of Obligation Bonds, Series 1989; General Obligation Bonds, Series 1991; Combination Tax and War.erwo.tks System Subordinate Lien Revenue Ce.rtificates of Obligation, Series 1991; O>mhination Tax and Exhibition Hall/ Auditorium (Limited Pledge) Revenue CertifiCates of Obligation, Series 1991; Gener.d Obligation Refunding Bonds, Series 1992; O>mhination Tax and Sewer System Subordinate Lien Revenue CertifiCates of Obligation, Series 1991 (paymenrs due February 15, 2003 through 2012); Electric Light and Power System Revenue Bonds, Series 1991; and Electri.c Light and Po'Wer System Revenue refunding Bonds, Series 1991-B. In fiscal year 1995, Brazos River Authority defeased portions of Brazos Riv.er Authority Revenue Bonds. All of the defeased portions of the following bonds 'Were called and retired during the 2000-2001 fiScal year. Brazos River Authority Revenue Bonds, and Series 1989; Brazos River Authority Revenue Bonds, Series 1991. In fiScal year 1999, the Gty defeased certain General Obligation Bonds. A portion of the proceeds of the Series 1999 General Obligation Refunding Bonds were used to purchase United States T reaswy Securities State and Local Government Series, wbicll 'Were placed in an irrevocable UUSt to be used solely to panially refund the portion of the Series 1992 O>mhination Tax and Se'Wer Subordinate Lien Revenue CertifiCates of Obligation payments due February 15, 2006 through 2014. Accordingly, the trUSt a.ccollllt assets and the liability for the defeased bonds are not included in the Oty's financial statements. On the September 30, 2001, $15,545,000 of bonds our.standing are COJlSidered defeased. L. ACCRUED INSQRANCE CLAIMS As discussed in Note I.G., the Self-Insurance Funds establish a liability for self-insurance for both reported and unreported insured evenrs, which includes estimates of both future paymenrs of losses and related claim adjus=nt expenses. The following represents changes in those aggregate liabilities for the Insurance Funds during the past two ye:us ended September 30: Worker's Compensation and Liability Reserves at beginning of fiscal year Claims expenses Claims payments Worker's Compensation and liability reserves at end of fiscal year Medical and Dental Claims Liability at end of fiscal year • Total Self-Insurance Liability at end of fiscal year Total Assets to pay claims at end of fiscal year Accrued insurance claims payable from restricted assets-current Accrued insurance claims-non-current Total accrued insurance claims 56 2001 $ 3,734,340 5,735,258 {3,469!598} 6,000,000 3,264,865 $ 9,264,865 $ 18.534,516 $ 4,764,865 4,500,000 $ 9,264,865 2000 $ 3,734,341 2,763,142 (21763,143! 3,734,340 3,441,879 $ 7,176,2!9 $ 16,841,919 $ 4,372,861 2,803,358 $ 7,176;219 - - - - - - - - CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE ill. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS L. ACCRUED INSURANCE CLAIMS <CONTINUED) • The information =s;uy to prepare the separate disclosures for medical and dental claims liabilities is unavailable. M. LANDFILL CLOSURE AND POSTCLOSURE CARE COST State and fedenllaws and regulations require the Oty to place a final cover on its landfill sites 'Wbe.o. it Stops accepting waste and to perform certain mainrenanao and moniroriug functions at the sites for thiny years after closure. Although closure and postclosure can: costS will be paid only near or after the date tim the landfill stops accepting waste, the Oty reportS a portion of these closure and postclosure costS as an opening expense in each period based on landfill a~pacity used as of each balance sheet date. The $5,973,851 included in the landfill closure and postclosure can: liability at September 30, 2001, representS the cumulative amount expensed by the Oty to date of $8,603,429 less amounts paid for closure of cen:ain cells based on the use of over 90 percent of the estimated a!pacity of the landfill registered uncler TNRCX:: permit number 69. Any unrecognized costs of closure and postclosure care at September 30, 2001, is not signifu:ant. These amounts are based on what it would cost to perform all closure and postdosure care in 2001. The Oty expects to close this landfill withi.o. the DeXt 5 years. Actual cost may be different due to inflation, deflation, changes in technology, or changes in regulations. The Oty has a second landfill (I'NRCX:: permit number 2252} which effeaively began accepting solid waste during fiscal 2000. Current closure and post·closure care costs have been estimar.ed to be approximately $22,305,000, of which $149,042 has been recognized to date and $10,338 has been paid. Approximately 1% of this landfill's a~paciry has been used and the Oty expects this landfill to have a life in eJI:O'SS of 80 years based on current estimates of use. Actual cost may be different due to inflation, deflation, changes in technology, or changes in regulations. The Oty is required by state and fedenllaws and regulations to provide assurance that financial resouroes will be available to provide for closure, postclosure care, and remediation or comai.c.ment of environmental hazards at its landfill The Oty is in compliance with these requirements and has chosen the Local Government Financial Test mechanism for providing this assur:lllCA:. The Oty expects to fmance costS through normal operations. NOTE IV. CONTINGENT LIABILITIES A. FEDERAL GRANTS In the normal course of operations, the Oty receives grant funds from various Fedenl and state agencies. The grant programs are subject to audits by agents of the granting authority to ensure compliance with conditions precedent to the grantillg of funds. Any liability for reimbursement which may arise as the result of audits of grants is not believed to be material B. LITIGATION The Oty is involved in lawsuits arising in the normal course of business, including claims for property d.amage, personal injury and personnel practi.ces, disputes over contraCt awards and property condemnation proaoedings, suits contesting the legality of certain cues and public safety 57 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE IV. CONTINGENT LIABILITIES B. LITIGATION <CONTINUED) practices. In the opinion of management, the ultimate outeome of these lawsuits will not have a materially adven;e effect on the Gty's financial position as of September 30, 2001. C. SITE REMEDIATION The Gty has identifted specifiC locations requiring sire remediation relative to underground fuel storage tanks. The potential exposure is not readily detel'Illlnable as of September 30, 2001. In the opinion of management, the ultimate liability will not have a mareria1ly adven;e effect on the Gty' s fmancial position. D. WEST TEXAS MUNICIPAL POWER AGENCY In fJScal1998, the West TeJW Municipal Power Agency ("WIMP A") issued $28,910,000 of WIMPA Revenue Bonds, Series 1998 maturing through February of 2018. These bonds are secured by the net revenues of ceruin poW~:r sales contracts wiih participating cities of which the G!:y is one. In the event the net revenues of the poW~:r sales contracts are not suffu:iem to cover the debt service of the bonds, the participating cities are required under a debt service guarantee provision of the agreement, to provide funds sufficient to cover any debt service defiCit to the extent of their respective participation percemages for the preceding 12 !DDmhs. The Gty's percentage share in this agreemem for the coming ~ar approximates 100%. At September 30, 2001, the Gty had accounts receivable of approximately $4.9 million from WIMP A During the year ended September 30, 2001, the City reported expenses of approximately $13 million for power purchases from WTMPA and approximately $15 million in contract service revenue. The City was not required to subsidize any debt sei:vice payments. NOTE V. RECENTLY ISSUED PRONOUNCKMENTS GASB Statemem No. 34, Basic Fimnid St:ltl:J7mtS-ttniM~~ Dir06sianttniAna};sis-forSt.aJ£ttni Loozi Gurzrmmts was issued in June 1999. This Statement is effective for the Gty's fiScal ~ar ending September 30, 2002. This Statemem wili require the presemation of government-v.ide financial statements as 'Wt:ll as fund level statements. Additionally, there wili be added information on the Gty's finances in Managemem's Discussion and Analysis which has not been previously presented. This Standard is expected to create new information and wili restructure much of the previously presented fmancial information. The GASB developed these requirements to make annual reports !DOte colllprebensive and easier to unden;tand and use. 58 - - - -APPENDIXC FORMS OF BOND COUNSEL'S OPINION - - - - - r. THIS PAGE INTENTIONAlLY LEFT BlANK - - - - - - TELEPHONE: 214/855-6000 FACSIMILE: 214/655·6200 FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LiMITED LIABILITY PARTNERSHIP 2200 Ross AvENUE, SuiTE 2aoo DALLAS, TEXAS 7 5201-2764 HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG IN REGARD to the authorization and issuance of the "City of Lubbock, Texas, General Obligation Bonds, Series 2002" (the "Bonds"), dated February 15, 2002 (the "Bond Date"), in the principal amount of $9,400,000, we have examined into the legality and validity of the issuance thereof by the City of Lubbock, Texas (the "City"), which Bonds are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof {within a maturity ) and have stated maturities of February 15 in each of the years 2003 through 2022, unless redeemed prior to maturity in accordance with applicable redemption provisions. The Bonds bear interest on the unpaid principal amount from the Bond Date at the rates per annum stated in the ordinance authorizing their issuance {the "Ordinance"), and such interest is payable on February 15 and August 15 in each year, commencing February 15,2003, to the registered owners shown on the registration books of the Paying Agent/Registrar on the Record Date {stated on the face of the Bonds). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Bonds under the Constitution and laws of the State of Texas, and with respect to the exclusion of the interest on the Bonds from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City. Our examinations into the legality and validity of the Bonds included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the City relating to the authorization and issuance of the Bonds, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Bond executed and delivered initially by the City, which we found to be in due form and properly executed. BASED ON OUR EXAMINATIONS, IT IS OUR OPINION that, under the applicable law of the United States of America and the State of Texas in force and effect on the date hereof: 1. The Bonds have been duly authorized by the City, and the Bonds issued in compliance with the provisions of the Ordinance are valid, legally binding and enforceable obligations of the City, payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City; except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with the general principles of equity. 2. Assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and #45143427vl Page .2 of legal opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, General Obligation Bonds, Series 2002", dated February 15, 2002 certifications of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Bonds, interest on the Bonds for federal income tax purposes (a) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), of the owners thereof pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions thereunder, and (b) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Bonds, owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust or a financial asset securitization investment trust. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the section 55 of the Code will be computed. WE EXPRESS NO OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a financial asset securitization investment trust and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. EHE:dfc #45143427vl - -· - - - - - - - - TELEPHONE: 214/855-8000 FACSIMILE: 214/855-8200 FuLBRIGHT & 0AWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 Ross AvENUE, SuiTE 2eoo DALLAS, TEXAS 75201-2784 HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG IN REGARD to the authorization and issuance of the "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002" (the "Certificates"), dated February 15, 2002 (the "Certificate Date"), in the principal amount of $6,450,000, we have examined into the legality and validity of the issuance thereof by the City of Lubbock, Texas (the "City"), which Certificates are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a maturity), mature annually on February 15 in each of the years 2003 through 2022, unless redeemed prior to maturity in accordance with the redemption provisions stated on the Certificates, and bear interest on the unpaid principal amount from the Certificate Date at the rates per annum stated in the ordinance authorizing the issuance of the Certificates (the "Ordinance"), such interest being payable on February 15 and August 15 in each year, commencing February 15, 2003, to the registered owners shown on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Certificates). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Certificates under the Constitution and laws of the State of Texas, and with respect to the exclusion of the interest on the Certificates from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City. Our examinations into the legality and validity of the Certificates included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the City relating to the authorization and issuance of the Certificates, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Certificate executed and delivered initially by the City, which we found to be in due form and properly executed. BASED ON OUR EXAMINATIONS, IT IS OUR OPINION that, under the applicable law of the United States of America and the State of Texas in force and effect on the date hereof: 1. The Certificates have been duly authorized by the City, and the Certificates issued in compliance with the provisions of the Ordinance are valid, legally binding and enforceable obligations of the City, payable from an ad valorem tax levied, within the limits prescribed by law, upon all taxable property in the City and additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Ordinance) of the City's Waterworks System in the · manner and to the extent provided in the Ordinance; except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with the general principles of equity. #45143428vl Page 2 of legal opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002", dated February 15, 2002 2. Assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and certifications of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Certificates, interest on the Certificates for federal income tax purposes (a) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), ofthe owners thereof pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions thereunder, and (b) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporations, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust, or a financial asset securitization investment trust. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. WE EXPRESS NO OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Ownership of tax-exempt obligations such as the Certificates may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of interest in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income tax credit and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. EHE:dfc #45143428vl - .-. - - - - - TELEPHONE: 214/855-8000 FACSIMILE: 214/855-8200 FuLBRIGHT & JAWORSKI L.L.P. A REGISTERED LiMITED liABILITY PARTNERSHIP 2200 Ross AvENuE, SuiTE 2800 DALLAS, TEXAS 7 5201-2784 HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG WE HAVE ACTED as Bond Counsel in connection with the issuance by City of Lubbock, Texas (the "City") of the "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002" (the "Certificates") in the aggregate principal amount of $1 ,545,000, dated February 15, 2002, solely to express legal opinions as to the validity of the Certificates and the exclusion of the interest on the Certificates from gross income for federal income tax purposes, and for no other purpose. We have not been requested to investigate or verify, and we neither expressly nor by implication render herein any opinion concerning, the financial condition or capabilities ofthe City, the disclosure of any financial or statistical information or data pertaining to the City and used in the sale of the Certificates, or the sufficiency of the security for or the value or marketability of the Certificates. THE CERTIFICATES are issuable in fully registered form only and in denominations of $5,000 or any integral multiple thereof. The Certificates have stated maturities of February 15 in each of the years 2003 through 2022, unless redeemed prior to maturity in accordance with the redemption provisions stated on the Certificates. Interest accrues on the Certificates from their date at the rates per annum stated in the ordinance adopted by the City Council of the· City authorizing the issuance of the Certificates {the "Ordinance"), and suer. accrued interest is payable on February 15 and August 15 in each year, commencing February 15, 2003, to the registered owners appearing on the registration books of the Paying Agent/RE1gistrar on the Record Date (stated on the face of the Certificates}. IN RENDERING THE OPINIONS herein we have examined and rely upon original or certified copies of the proceedings had in connection with the isguance of the Certificates, including the Ordinance and an executed initial Certificate; certifications of officers of the City relating to the expected use and investment of proceeds of the sale of the Certificates and certain other funds of the City and to certain other facts within the knowledge and control of the City; and such other material and such matters of law as we deem relevant. In the examination of the proceedings relating to the issuance of the Certificates, we have ass.umed the authenticity of all documents submitted to us as originals, the conformity to original copies of all documents submitted to us as certified copies, and the accuracy of the statements contained in such documents and certifications. BASED ON OUR EXAMINATIONS, IT IS OUR OPINION that, under the applicable law of the United States of America and the State of Texas in force and effect on the date hereof: 1. The Certificates have been duly authorized by the City, and the Certificates issued in compliance with the provisions of the Ordinance are valid, legally binding and enforceable obligations ofthe City, payable from an ad valorem tax levied, within the limits prescribed by law, upon all taxable property in the City and additionally payable from and secured by a lien on and pledge of the Net #4514343lvl Page 2 of Legal Opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002", dated February 15, 2002 Revenues (as defined in the Ordinance) ofthe City's Sewer System in the manner and to the extent provided in the Ordinance; except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with the general principles of equity. 2. Pursuant to section 103 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), and existing regulations, published rulings, and court decisions thereunder, and assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance relating to sections 141 through 150 of the Code, interest on the Certificates will be excludable from the gross income, as defined in section 61 of the Code, of the owners thereof for federal income tax purposes, and such interest will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals for federal income tax purposes. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation (other than an "S" corporation or a qualified mutual fund, real estate mortgage investment conduit, real estate investment trust, or a financial asset securitization investment trust) will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code is computed. WE EXPRESS NO OTHER OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Ownership of tax-exempt obligations such as the Certificates may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, "S" corporations with subchapter "C" earnings and profits, owners of interests in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have. incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. EHE:dfc #45l4343lvl - - - -APPENDIXD MUNICIPAL BOND INSURANCE SPECIMEN - - - - Financial Guaranty Insurance Company 115 Broadway NewYork;NY 10006 (212) 312-3000 (800) 352-0001 A GE Capital Company Municipal Bond New Issue Insurance Policy Issuer: Bonds: Exhibit A Policy Number: 0010001 Financial Guaranty Insurance Company ("Fi Gu "), a New York stock insurance company, in consideration of the payment of the premi o the tenns of this Policy, hereby unconditionally and irrevocably agrees to pay to State StreQ.~ a Trust Company, N.A., or its successor, as its agent (the "Fiscal Agent''), for the benefit ofBondhol2Jr , that portion of the principal and interest on the above-described debt obligations (the "Bonds") which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. Financial Guaranty will make such payments to the Fiscal Agent on the date such principal or interest becomes Due for Payment or on the Business Day next following the day on which Financial Guaranty shall have received Notice ofNonpayment, whichever is later. The Fiscal Agent will disburse to the Bondholder the face amount of principal and interest which is then Due for Payment but is unpaid by reason of Nonpayment by the Issuer but only upon receipt by the Fiscal Agent, in fonn reasonably satisfactory to it, of (i) evidence of the Bondholder's right to receive payment of the principal or interest Due for Payment and (ii) evidence, including any appropriate instruments of assignment, that all of the Bondholder's rights to payment of such principal or interest Due for Payment shall thereupon vest in Financial Guaranty. Upon such disbursement, Financial Guaranty shall become the owner of the Bond, appurtenant coupon or right to payment of principal or interest on such Bond and shall be fully subrogated to all of the Bondholder's rights thereunder, including the Bondholder's right to payment thereof. This Policy is non-cancellable for any reason. The premium on this Policy is not refundable for any reason, including the payment of the Bonds prior to their maturity. This Policy does not insure against loss of any pnwayment premium which may at any time be payable with respect to any Bond. As used herein, the tenn "Bondholder" means, as to a particular Bond, the person other than the Issuer who, at the time of Nonpayment, is entitled under the tenns of such Bond to payment thereof. "Due for Payment" means, when referring to the principal of a Bond, the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption {other than by mandatory sinking fund redemption), acceleration or other advancement of maturity and means, when referring to interest on a Bond, the stated date FGIC is a registered service mark used by Fin~ncial Guaranty Insurance Company under license from its parent company, FGIC Corporation. Form 9000 (10/93) Page 1 of2 - - - - - - - - - Financial Guaranty Insurance Company 115 Broadway New York, NY l 0006 (212) 312-3000 (800) 352-0001 A G£ Capital Company Municipal Bond New Issue Insurance Policy = FGIC. for payment of interest. "Nonpayment" in respect of a Bond means the failure of the Issuer to have provided sufficient funds to the paying agent for payment in full of all princip~d interest Due for Payment on such Bond. "Notice" means telephonic or telegraphic notice, subseque~t ed in wn.'ting, or written notice by registered or certified mail, from a Bondholder or a pa~·ng r e Bonds to Financial Guaranty. "Business Day" means any day other than a Saturd. ay, Su~' o on which the Fiscal· Agent is authorized by law to remain closed. r \ In Witness Whereof, Financial Guaranty ~G ~olicy to be affixed with its corporate seal and to be signed by its duly authorized officer in ~l Mecome effective and binding upon Financial Guaranty by virtue of the countersignature of its duly au:!!)> ed representative. President Effective Date: Authorized Representative State Street Bank and Trust Company, N.A., acknowledges that it has agreed to perform the dt1ties of Fiscal Agent under this Policy. · Authorized Officer FGIC is a registered service mark used by Financial Guaranty Insurance Company under license from its parent company, FGIC Corporation. Form 9000 (10/93) Page 2 of2 Financial Guaranty Insurance Company 115 Broad\vay New York, NY 10006 (212) 312-3000 (800) 352-0001 A GE Capital Company Endorsement To Financial Guaranty Insurance Company Insurance Policy Policy Number: = FGIC. 0010001 It is further understood that the term "Nonpayment" in r~~ ond includes any payment of principal or interest made to a Bondholder by or on behalf of th ss~:~ s ch Bond which has been recovered from such Bondholder pursuant to the United States B C e by a trustee in bankruptcy in accordance with a final, nonappealable order of a court hav~~p Jurisdiction. NOTHING HEREIN SHALL BE CONS"iilJED TO WAIVE, ALTER, REDUCE OR AMEND COVERAGE IN ANY OTHER SECTION OF THE POLICY. IF FOUND CONTRARY TO THE POLICY LANGUAGE, THE TERMS OF THIS ENDORSEMENT SUPERSEDE THE POLICY LANGUAGE. In Witness Whereof, Financial Guaranty has caused this Endorsement to be affixed with its corporate seal and to be signed by its duly authorized officer in facsimile to become effective and binding upon Financial Guaranty by virtue of the countersignature of its duly authorized representative. President Effective Date: Authorized Representative Acknowledged as of the Effective Date written above: Authorized Officer State Street Bank and Trust Company. N.A., as Fiscal Agent FGIC is a registered service mark used by Financial Guaranty Insurance Company under license from its parent company, FGIC Corporation. Form E-0002 (I 0/93) Page I of I Financial Advisory Services Provided By ) FIRST SOUTIIWEST COMPANY INVESTMENT BANKERS 14 - - THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK GENERAL CERTIFICATE § § § § § WE, the undersigned, Director of Finance and City Secretary, respectively, of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. Relative to Nonencumbrance. (a) Save and except for the pledge of the income and revenues of the City's Waterworks System (the "Water System") to the payment of (i) water supply contracts with the Canadian River Municipal Authority and the Brazos River Authority and (ii) the principal of and interest to become due with respect to the outstanding obligations identified in Exhibit A attached hereto and incorporated herein by reference as a part hereof for all purposes (hereinafter collectively referred to as the "Outstanding Water Obligations") and the proposed "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificate? of Obligation, Series 2002", dated February 15, 2002 (the "Water Certificates"), said income and revenues of said Water System have not been pledged or hypothecated in any other manner or for any other purpose; and that the Outstanding Water Obligations, the Water Certificates and the above referenced water supply contracts evidence the only liens, encumbrances or indebtedness of said Water System or against the income and revenues of such Water System. (b) Save and except for the pledge of the income and revenues of the City's Sewer System (the "Sewer System") to the payment of the principal of and interest to become due with respect to the outstanding obligations identified in Exhibit B attached hereto and incorporated herein by reference as a part hereof for all purposes (hereinafter collectively referred to as the "Outstanding Sewer Obligations") and the proposed "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002", dated February 15, 2002 (the "Sewer Certificates"), said income and revenues of said Sewer System have not been pledged or hypothecated in any other manner or for any other purpose; and that the Outstanding Sewer Obligations and the Sewer Certificates evidence the only liens, encumbrances or indebtedness of said Sewer System or against the income and revenues of such Sewer System. 2. Relative to No-Default. The City is not in default as to any covenant, condition or obligation contained in the ordinances authorizing the issuance of the Outstanding Water Obligations or the Outstanding Sewer Obligations; and there is on deposit in the respective special funds and accounts created for the payment and security of the Outstanding Water Obligations and Outstanding Sewer Obligations the amounts now required to be on deposit therein. 3. Relative to Income and Revenues. A schedule of the gross receipts, operating expenses and net revenues of the Water System for the years stated is shown in Exhibit A attached hereto and a schedule of the gross 45145121.1 - - - receipts, operating expenses and net revenues of the Sewer System for the years stated are is shown in Exhibit B attached hereto. 4. Relative to Utility Properties. The water utility properties owned, operated and maintained by the City currently provides water to approximately 70,756 customers. The City secures its water from 238 wells and pursuant to contracts with the Canadian River Municipal Water Authority and the Brazos River Authority. The sewer utility properties owned, operated and maintained by the City currently provides sewer services to approximately 73,794 customers. As of the date hereof, no question is pending and no proceedings of any nature have been instituted in any manner questioning the City's right and title to its utility properties or its authority to operate the same, or the contracts with the Trinity River Authority and the Brazos River Authority. 5. Relative to Rates and Charges. The current monthly rates and charges for water services provided by the Water System are as shown in Exhibit A attached hereto and the currently monthly rates and charges for sewer services provided by the Sewer System are as shown in Exhibit B attached hereto. 6. Relative to Tax Supported Indebtedness. The total principal amount of indebtedness of the City, including the proposed "City of Lubbock, Texas, General Obligation Bonds, Series 2002," dated February 15, 2002 (the "Bonds"), the Water Certificates and the Sewer Certificates, payable from ad valorem taxes levied and collected by the City is as follows: OUTSTANDING INDEBTEDNESS ------------------------------- T~E BONDS-------------------------------------------------------------------. WATER CERTIFICATES---------------------------------------------- SEWER CERTIFICATES---------------------------------------------- $ 197,329,682 9,400,000 6,450,000 1,545,000 TOTAL INDEBTEDNESS------------------------------------------------$214,724,682 7. Relative to Debt Service Schedule. A debt service requirement schedule for all outstanding tax debt of the City, including the Bonds, the Water Certificates and the Sewer Certificates, is attached hereto as Exhibit C and made a part of this certificate for all purposes. 8. Relative to City Officials. Certain duly qualified and acting officers of said City are as follows: 45145121.1 -2- - - - WINDY SITTON ALEX "TY" COOKE BOB CASS DEBRA B. FORTE BEVERLY HODGES REBECCA GARZA ANITA BURGESS ANDY BURCHAM 9. Relative to Taxable Values. MAYOR MAYOR PRO TEM CITY MANAGER DEPUTY CITY MANAGER DIRECTOR OF FINANCE CITY SECRETARY CITY ATTORNEY CASH AND DEBT MANAGER The assessed value of all taxable property (net of exemptions) in the City, as shown by the tax rolls for the year 2001, and which have been duly approved and are the latest official assessment of taxable property in the City is as follows: TOTAL ASSESSED TAXABLE VALUES OF REAL AND PERSONAL PROPERTY---------------------------------------------------$6 910 577 171 ' ' ' 10. Relative to Incorporation. The City is incorporated under the General Laws of the State of Texas, and is operating under the Home Rule Amendment to the Texas Constitution, Section 5, Article XI, as amended in 1912. The City Charter was originally adopted at an election held on December 27, 1917, and said Charter has not been amended or revised in any respect since January 18, 1992, the date of the last Charter Amendment Election. 11. Relative to No-Petition. No valid petition, signed by at least 5% of the qualified electors of the City, has been filed with or presented to the Mayor, City Secretary or any other official of the City protesting the issuance of the Water Certificates or the Sewer Certificates. 12. Relative to No Free Services. Except for city buildings and institutions operated by the City, no free services of the Water System or the Sewer System shall be allowed, and rates charged for services furnished by the respective System shall be equal and uniform as required by law. 45145121.1 - 3 - - WITNESS OUR HANDS AND THE SEAL OF THE CITY OF LUBBOCK, TEXAS, this the 281h day of February, 2002. CITY OF LUBBOCK, TEXAS City Secretary (City Seal) 45145121.1 -4- - - EXHIBIT A Outstanding Water Obligations: (a) "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1993", dated October 1, 1993, now outstanding in the principal amount of $900,000; (b) "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1995", dated December 15, 1995, now outstanding in the principal amount of $7,000,000; (c) "City of Lubbock, Texas, Tax and Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1998", dated January 1, 1998, now outstanding in the principal amount of $8,220,000; (d) "City of Lubbock, Texas, Tax and· Waterworks System (Limited Pledge) Revenue Certificates of Obligation, Series 1999", dated January 15, 1999, now outstanding in the principal amount of $13,045,000; (e) "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Refunding Bonds, Series 1999", dated April 1, 1999, now outstanding in the principal amount of $1 0,540,000; · (f) "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 1999", dated September 15, 1999, now outstanding in the principal amount of $23,270,000. Waterworks System Income and Expenses: Fiscal Year Maintenance and Ending 9-30 Gross Receipts Operating Expenses Net Revenues 1997 $26,401,991 $17,356,117 $ 9,045,874 1998 30,788,751 18,710,947 12,077,804 1999 29,244,116 17,180,436 12,063,680 2000 32,442,573 18,238,503 14,204,071 2001 32,955,584 20,194,590 12,760,994 45145121.1 -. - Water Rates: Base Rate:* %"meter 1" meter (single family residential) 1" meter (other than residential) $8.89 11.32 18.98 *higher base rates apply to larger meters ranging from 1.5" to 1 0" Flow Rate Charge: Single Family Residential Multi-Family Residential Commercial Schools Sprinkler Systems 45145121.1 Per 1 ,000 gallons $1.63 $1.38 $1.50 $1.53 $1.91 Exhibit A Page 2 - - - EXHIBIT B Outstanding Sewer Obligations: (a) "City of Lul?bock, Texas, Combination Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 1992", dated May 15, 1992, now outstanding in the principal amount of $5, 175,000; (b) "City of Lubbock, Texas, Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1993", dated May 1, 1993, now outstanding in the principal amount of $9,370,000; (c) "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 1999", dated April 1, 1999, now outstanding in the principal amount of $5, 185,000; · Sewer System Income and Expenses: Fiscal Year Ending 9-30 1997 1998 1999 2000 2001 Sewer Rates: Residential: Base Rate:1 Gross Receipts $16,285,804 16,626,171 15)39,700 17,322,008 17,303,238 Flow Rate (water consumption) Commercial/lndustriar Base Rate:3 Flow Rate (water consumption) Maintenance and Operating Expenses $6,393,894 6,632,390 7,584,302 8,104,859 9,126,460 $3.46 $1.44 $7.95 $1.44 Net Revenues $9,891,910 9,993,781 . 8,155,398 9,217,149 8,176,778 1 base rate applies to ~" water meter; higher base rates apply to larger meters ranging from 1" to 1 0" 2 Industrial waste that exceeds allowable limits is subject to a surcharge for treating biochemical oxygen demand ("8.0.0.") and total suspended solids ("T.S.S."). Present surcharges are B.O.D. $0.2256/lb and T.S.S. $0.1459/lb 3 base rate applies to~" water meter; higher base rates apply to larger meters ranging from 1" to 10" 45145121.1 ( Fiscal Year Ended 9/30 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1024 2025 2026 2027 2028 2029 2030 2031 GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS Principal !3,078,639 13,239,682 12,270,000 I2,340,000 I2,400,000 I2,460,000 11,905,000 I 1,565,000 11,160,000 11,260,000 10,165,000 10,275,000 10,420,000 7,575,000 6,805,000 6,170,000 6,385,000 6,095,000 4,645,000 2,180,000 I,405,000 1,480,000 1,560,000 1,645,000 1,735,000 1,830,000 1,925,000 2,030,000 2,145,000 2,260,000 210,408,321 Outstanding Debt m Interest . $ 11,571,963 9,782,039 8,666,527 8,054,712 7,453,808 6,864,161 6,291,058 5,742,735 5,211,174 4,690,604 4,193,932 3,716,062 3,227,540 2,793,701 2,436,853 2,110,452 1,789,719 I,469,736 I,l87,483 I,005,275 9I2,910 837,900 758,470 674,339 585,6I4 491,575 392,068 287,260 176,623 23,021,721 20,936,527 20,394,712 19,853,808 19,324,16I 18,196,058 17,307,735 16,371,174 15,950,604 14,358,932 13,991,062 13,647,540 10,368,701 9,241,853 8,280,452 8,174,7!9 7,564,736 5,832,483 3,185,275 2,311,910 2,317,900 2,3I8,470 2,319,339 2,320,614 2,321,575 2,317,068 2,3I7,260 2,32I,623 2,319,890 313,844,504 Principal 20,000 285,000 305,000 32Q,OOO 340,000 360,000 380,000 400,000 425,000 445,000 470,000 500,000 525,000 555,000 590,000 620,000 655,000 695,000 735,000 775,000 The Bonds(2) Interest 667,065 436.529 421,04I 404,635 387,3 !0 369,025 35 I,590 335,015 317,484 298,996 279,435 258,330 235,518 210,940 184,310 155,720 !25,275 92,528 57,125 19,375 (!)"Outstanding Debt" does not include lease/purchase obligations. Exhibit C Total 687,065 72I,529 726,04I 724,635 727,310 729,025 731,590 735,015 742,484 743,996 749,435 758,330 760,518 765,940 774,310 775,720 780,275 787,528 792,125 794,375 15,000 200,000 210,000 220,000 235,000 245,000 260,000 275,000 290,000 305,000 325,000 340,000 360,000 380,000 405,000 425,000 450,000 475,000 505,000 530,000 446,972 293,58 I 285,381 276. 78I 267,681 258,081 246,681 233,306 220,269 207,625 I94,034 179,275 163,525 I46,638 128,231 108,306 86,750 63,625 39,125 I3,250 461,972 493,581 495,381 496,781 502,68I 503,08J 506,68I 508,306 510,269 5I2,625 5I9,034 5I9,275 523,525 526,638 533,231 533,306 536,750 538,625 544, I25 543,250 (2) Average life of the issue -12.598 years. Interest on the Bonds has been calculated at the rates shown on the inside cover hereof. The Sewer Certificatell) Principal 5,000 50,000 50,000 55,000 55,000 60,000 60,000 65,000 70,000 75,000 80,000 80,000 85,000 90,000 95,000 100,000 110,000 115,000 120,000 I25,000 Interest I08,373 7I,II5 69,!15 67,015 64,8I5 62,478 59,740 56,615 53,240 49,709 46,178 42,628 38,9I5 34,933 30,606 25,925 20,750 I5,I25 9,250 3,125 (3) Average life of the issue -12.585 years. Interest on the Waterworks Certificates has been calculated at the rates shown on the inside cover hereof (4) Average life of the issue -12.544 years. Interest on the Sewer Certificates has been calculated at the rates shown on the inside cover hereof. ( ( (' ( ( ( Total I 13,373 I2l.ll5 !19,115 I22,0I5 119,8I5 I22,478 119,740 121,615 I23,240 124,709 126,178 122,628, 123,915 124,933 125,606 125,925 !30,750 130,125· 129,250 128,!25 Total Combined Requirement 24,650,602 24,284,131 22,272,752 21,735,249 2I,l97,239 20,673,967 19,550,642 18,665,746 17,736,110 17,326,597 I5,740,262 15,385,709 15,047,773 ll, 776,659 I0,659,364 9, 713,599 9,609,670 9,012,511 7,288,76I 4,650,775 3, 783,660 2,317,900 2,318,470 2,319,339 1,320,614 2,321,575 2,317,068 2,317,260 2,321,623 ( %of Principal Retired 28.56% 5:5.71% 77.61% 91.46% 95.53% 100.00% 15 - - - - - SIGNATURE AND NO-LITIGATION CERTIFICATE THE STATE OF TEXAS COUNTY OF LUBBOCK § § § WE, the undersigned, officials of the City of Lubbock, Texas (the "Issuer"), do hereby certify with respect to the "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002", dated February 15, 2002 (the "Certificate Date"), in the aggregate principal amount of $1,545,000 (the "Certificates") as follows: (1) The Certificates have been duly and officially executed by the undersigned with their manual or facsimile signature in the same manner appearing hereon, and the undersigned hereby adopt and ratify their respective signatures in the manner appearing on each of the Certificates whether in manual or facsimile form, as the case may be, as their true, genuine and official signatures. (2) On the Certificate Date and on the date hereof, we were and are the duly qualified and acting officials of the Issuer indicated below. (3) The legally adopted proper and official corporate seal of the Issuer is impressed, imprinted or lithographed on all of the Certificates and impressed on this Certificate. {4) No litigation of any nature is now pending before any federal or state court, or administrative body, or to our knowledge threatened, seeking to restrain or enjoin the issuance or delivery of the Certificates or questioning the issuance or sale of the Certificates, the authority or action of the governing body of the Issuer relating to the issuance or sale of the Certificates, the levy of the tax, or the assessment and collection thereof, to pay the principal of and interest on the Certificates, the collection of the revenues of the Issuer's Sewer System (the "System"), or the imposition of rates and charges with respect to the System, pledged to pay the principal of and interest on the Certificates or that would otherwise adversely affect in a material manner the financial condition of the Issuer to pay the principal' of and interest on the Certificates; and that neither the corporate existence or boundaries of the Issuer nor the right to hold office of any member of the governing body of the Issuer or any other elected or appointed official of the Issuer is being contested or otherwise questioned. (5) No valid petition has been filed with any official of the Issuer requesting the proceedings authorizing the issuance of the Certificates adopted by the governing body of the Issuer be submitted to a referendum or other election; no authority or proceeding for the issuance, sale or delivery of the Certificates by the governing body of the Issuer has been amended, repealed, revoked, rescinded or otherwise modified since the date of passage thereof, and all such proceedings and authority relating to the issuance and sale of the Certificates remain in full force and effect as of the date of this Certificate. 45144870.1 - - - - - - - DELIVERED this ------------------------------------- SIGNATURE (Issuer's Seal) THE STATE OF TEXAS § COUNTY OF LUBBOCK § OFFICIAL TITLE Mayor, City of Lubbock, Texas City Secretary, City of Lubbock, Texas The undersigned, a Notary Public, hereby represents and certifies each of the signatures of Windy Sitton and Rebecca Garza, Mayor and City Secretary, respectively, of the City of Lubbock, Texas, appearing above is genuine. GIVEN UNDER MY HAND AND SEAL OF OFFICE, thiso(tf'?i day of ~Ao.... , 2002. . ~ ~. Notary Public, State 45144870.1 2 16 - SIGNATURE AND NO-LITIGATION CERTIFICATE THE STATE OF TEXAS COUNTY OF LUBBOCK § § § WE, the undersigned, officials of the City of Lubbock, Texas (the "Issuer"), do hereby certify with respect to the "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002", dated February 15, 2002 (the "Certificate Date"), in the aggregate principal amount of $6,450,000 (the "Certificates") as follows: (1) The Certificates have been duly and officially executed by the undersigned with their manual or facsimile signature in the same manner appearing hereon, and the undersigned hereby adopt and ratify their respective signatures in the manner appearing on each of the Certificates whether in manual or facsimile form, as the case may be, as th~ir true, genuine and official signatures. (2) On the Certificate Date and on the date hereof, we were and are the duly qualified and acting officials of the Issuer indicated below. (3) The legally adopted proper and official corporate seal of the Issuer is impressed, imprinted or lithographed on all of the Certificates and impressed on this Certificate. (4) No litigation of any nature is now pending before any federal or state court, or administrative body, or to our knowledge threatened, seeking to restrain or enjoin the issuance or delivery of the Certificates or questioning the issuance or sale of the Certificates, the authority or action of the governing body of the Issuer relating to the issuance or sale of the Certificates, the levy of the tax, or the assessment and collection thereof, to pay the principal of and interest on the Certificates, the collection of the revenues of the Issuer's Waterworks System (the "System"), or the imposition of rates and charges with respect to the System, pledged to pay the principal of and interest on the Certificates or that would otherwise adversely affect in a material manner the financial condition of the Issuer to pay the principal of and interest on the Certificates; and that neither the corporate existence or boundaries of the Issuer nor the right to hold office of any member of the governing body of the Issuer or any other elected or appointed official of the Issuer is being contested or otherwise questioned. (5) No valid petition has been filed with any official of the Issuer requesting the proceedings auth~::>rizing the issuance of the Certificates adopted by the governing body of the Issuer be submitted to a referendum or other election; no authority or proceeding for the issuance, sale or delivery of the Certificates by the governing body of the Issuer has been amended,· repealed, revoked, rescinded or otherwise modified since the date of passage thereof, and all such proceedings and authority relating to the issuance and sale of the Certificates remain in full force and effect as of the date of this Certificate. 45144837.1 - - DELIVERED this APR 0 4 2002 -------------------------------------- SIGNATURE "f. k-e.-< .e, h..-~ (Issuer's Seal) THE STATE OF TEXAS § COUNTY OF LUBBdCK § OFFICIAL TITLE Mayor, City of Lubbock, Texas City Secretary, City of Lubbock, Texas The undersigned, a Notary Public, hereby represents and certifies each of the signatures of Windy Sitton and Rebecca Garza, Mayor and City Secretary, respectively, of the City of Lubbock, Texas, appearing above is genuine. GIVEN UNDER MY HAND AND SEAL OF OFFICE, thisa2!'!!day 0~7 , 2002. £~~ 45144837.1 2 17 SIGNATURE AND NO-LITIGATION CERTIFICATE THE STATE OF TEXAS COUNTY OF LUBBOCK § § § WE, the undersigned, officials of the City of Lubbock, Texas (the "Issuer"), do hereby certify with respect to the "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS, SERIES 2002," dated February 15, 2002 (the "Bond Date"), in the aggregate principal amount of $9,400,000 (the "Bonds") as follows: ( 1) The Bonds have been duly and officially executed by the undersigned with their manual or facsimile signature in the same manner appearing hereon, and the undersigned hereby adopt. and ratify their respective signatures in the manner appearing on each of the Bonds whether in manual or facsimile form, as the case may be, as their true, genuine and official signatures. (2) On the Bond Date and on the date hereof, we were and are the duly qualified and acting officials of the Issuer indicated below. (3) The legally adopted proper and official corporate seal of the Issuer is impressed, imprinted or lithographed on all of the Bonds and impressed on this Certificate. (4) No litigation of any nature is now pending before any federal or state court, or administrative body, or to our knowledge threatened, seeking to restrain or enjoin the issuance or delivery of the Bonds or questioning the issuance or sale of the Bonds, the authority or action of the governing body of the Issuer relating to the issuance or sale of the Bonds, the levy of taxes to pay the principal of and interest on the Bonds or materially affecting the assessment or collection of taxes to pay the principal of and interest on the Bonds; and that neither the . corporate existence or boundaries of the Issuer nor the right to hold office of any member of the governing body of the Issuer or any other elected or appointed official of· the Issuer is being contested or otherwise questioned. · (5) No authority or proceeding for the issuance, sale or delivery of the Bonds, passed and adopted by the governing body of the Issuer, has been amended, repealed, revoked, rescinded or otherwise modified since the date of passage thereof, and all such proceedings and authority relating to the issuance and sale of the Bonds remain in full force and effect as of the date of this Certificate. . 45144787.1 - - DELIVERED this APR 0 4 2002 SIGNATURE ~~~ ~A"dA~ (Issuer's Seal) THE STATE OF TEXAS COUNTY OF LUBBOCK OFFICIAL TITLE Mayor, City of Lubbock, Texas City Secretary, City of Lubbock, Texas § § § The undersigned, a Notary Public, hereby represents and certifies each of the signatures of Windy Sitton and Rebecca Garza, Mayor and City Secretary, respectively, of the City of Lubbock, Texas, appearing above is genuine. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ,;!Y,i day 0~'1'1 , 2002. / 45144787.1 -2- 18 - - - - OFFICE OF TliE ATTORNEY GENERAL · STATE OF TEXAS }OHN CORNYN March 28, 2002 THIS IS TO CERTIFY that the City of Lubbock, Texas (the "Issuer"), has submitted to me City of Lubbock. Texas. Tax and Sewer System Surplus Revenue Certificate of Obligation, Series 2002 (the "Certificate") in the principal amount of $1,545,000 for approval. The Certificate is dated February 15, 2002, numbered T-1, and was authorized by Ordinance No. 2002-00028 of the Issuer passed on February 28, 2002 (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): ' (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 ad valorem tax levied, within the limits prescribed by law, upon all taxable property in the Issuer and is additionally payable from and secured by a lien on and pledge of the Net Revenues of the Issuer's Sewer System, such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of Prior Lien Obligations hereafter issued by the Issuer. Therefore, the Certificate is approved. Attorney General of the State of No. 37654 Book No. 2002A MAA POST OFFICE Box 12548, AUSTIN, TEXAS 78711-2548 TEL: (512)463-2100 WEB: Www.OAG.SHTE.TX.US An Equal Empio}'m~nt Opportunity Employer Printed on RtYyrled Paper - - - OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, CAROLE KEETON RYLANDER, 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 Sewer System Surplus Revenue Certificate of Obligation. Series 2002 numbered T-1. of the denomination of$ 1 .545.000, dated February 15. 2002, 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 28th day of March. 2002, under Registration Number 65396. Given under my hand and seal of office, at Austin, Texas, the 28th day of March. 2002. ~~ CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas - OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora, D Bond Clerk [g) 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 28th day of March. 2002, I signed the name of the Comptroller to the certificate of registration endorsed upon the: City of Lubbock. Texas. Tax and Sewer System Surplus Revenue Certificate of Obligation. Series 2.0.02. INWITNE ·s certificate this the 28th day of March. 2002. I, Carole Keeton Rylander, 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~. GIVEN under my hand and seal of office at Austin, Texas, this the 28th day of March. 2002. CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas 19 r• - - - -· - - OFFICE OF THE ATTORNEY GENERAL · STATE OF TEXAS jOHN CORNY:\' March 28, 2002 THIS IS TO CERTIFY that the City of Lubbock, Texas (the "Issuer"), has submitted to me City of Lubbock, Texas. Tax and Waterworks System Surplus Revenue Certificate of Obligation, Series 2002 (the "Certificate") in the principal amount of $6,450,000 for approval. The Certificate is dated February 15, 2002, numbered T -1, and was authorized by Ordinance No. 2002-00027 of the Issuer passed on February 28, 2002 (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. 3{653 (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 ad valorem tax levied, within the limits prescribed by law, upon all taxable property in the Issuer and, together with the Previously Issued Obligations, is additionally payable from and secured by a lien on and pledge of the Net Revenues of the Issuer's Waterworks System, such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of Prior Lien Obligations hereafter issued by the Issuer. Therefore, the Certificate is approved. Book No. 2002A MAA POST 0H!CE BOX 12548, AUSTIN, TEXAS 78711-2548 TEL: (512)463-2100 WEB: WWW.OAG.STATE.TX.US An Equ,t! EmploymeNt Opportunity Employer , ?tinted on Rctyded Papn - - OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, CAROLE KEETON RYLANDER, 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 2002 numbered T-1 of the denomination of$ 6,450,000, dated February 15, 2002, 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 28th day of March, 2002, under Registration Number 65395. Given under my hand and seal of office, at Austin, Texas, the 28th day of March, 2002. . . ~~ CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas · - - - OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Juanita Gonzales, D Bond Clerk [g) 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 28th day of March, 2002, 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 2002, numbered T-1 dated February 15, 2002, and that in signing the certificate of registration I used the tonowingsignaturJ)!WtL/=(~.~~ IN WITNES REOF I have executed t · ificate this the 28th day of March. 2002. \. I, Carole Keeton Rylander, 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 65395. GIVEN under my hand and seal of office at Austin, Texas, this the 28th day of March. 2002. ~~ CAROLE KEETON RYLANDER Comptroller of Publh: Accounts of the State of Texas 20 - - - 0FF!CE OF THE ATTOR~EY GE~ERAl · STATE OF TEXAS JOHN CORNYJ\: March 28, 2002 THIS IS TO CERTIFY that the City of Lubbock, Texas (the "Issuer"), has submitted to me City of Lubbock, Texas. General Obligation Bond, Series 2002 (the "Bond"), in the principal amount of $9,400,000 for approval. The Bond is dated February 15, 2002, numbered T-1, and was authorized by Ordinance No. 2002-00026 ofthe Issuer passed on February 28, ~002. 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 any official statement or any other offering material relating to the Bond. Based on my examination, I am of the opinion, as of the date hereof and under existing law, as follows: (1) The Bond has been issued in accordance with law and is a valid and binding obligation of the Issuer. (2) The Bond is payable from the proceeds of an ad valorem tax levied, within the limits prescribed by law, upon all taxable property in the Issuer. Therefore, the Bond is approved. No.37655 Book No. 2002A MAA Attorney General of the State ofi PoST OFFICE Box 12548, AUSTl~, TEXAS 78711-2548 TEL: (512)463-2100 WEB: WWW.OAG.STATE.TX.US An Equal Employment Opportunity Employer · Printed on Recycled Paler - OFFICE. OF COMPTROLLER OF THE STATE OF TEXAS I, CAROLE KEETON RYLANDER, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: City of Lubbock. Texas. General Obligation Bond, Series 2002 numbered T -1 , of the denomination of $ 9.400, 000, dated February 15. 2002, 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 28th day of March. 2002, under Registration Number 65397. Given under my hand and seal of office, at Austin, Texas, the 28th day of March. 2002. ~~ CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas - - - - OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora, D Bond Clerk [8] 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 28th day of March. 2002, I signed the name of the Comptroller to the certificate of registration endorsed upon the: City of Lubbock. Texas. General Obligation Bond. Series 2002, numbered I:1.. dated February 15. 2002, and that in signing the certificate of registration I used the follo~ngsignaru~e: ~~~ OF. I have execute his certificate this the 28th day of March. 2002 . ... I, Carole Keeton Rylander, 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~. GIVEN under my hand and seal of office at Austin, Texas, this the 28th day of March. 2002. ~J?~ CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas 21 J - Vince Viaille Vice Pmidmt City of Lubbock Ms. Beverly Hodges P. 0. Box2000 Lubbock, Texas 79457 Phone: (806) 775-2161 Fax: (806) 775-2033 City of Lubbock Mr. Andy Burcham P.O. Box2000 Lubbock, Texas 79457 Phone: {806) 775-2149 Fax: (806) 775-2033 Fulbright & Jaworski L.L.P. Mr. Ed H Esquivel 2200 Ross A venue, Suite 2800 Dallas, Texas 75201 Phone: (214) 855-8000 Fax: (214) 855-8200 it FIRST SOUTHWEST COMPANY March 27, 2002 JPMorgan Chase Bank Ms. Michelle Baldwin 2001 Bryan Street -10th Floor Dallas, Texas 75201 Phone: (214) 468-6254 Fax: {214) 468-6322 RBC Dain Rauscher, Inc. Ms. Karen Piper 2711 N. Haskell, Suite 2400 Dallas, Texas 75204 Phone: {214) 989-1800 Fax: (214) 989-1859 American State Bank Ms. Shirley Dodson P. 0. Box 1401 Lubbock, Texas 79408-1401 Phone: (806) 767-7182 Fax: (806) 763-8269 Re: Closing Instructions for the $1,545,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002 (the "Sewer Certificates") Payment for the above referenced Sewer Certificates is scheduled to occur at 10:00 AM, CST, on Thursday, April 4, 2002, and payment therefor is to occur at the offices of JPMorgan Chase Bank ("JPMorgan Chase"). SOURCES OF FUNDS Par Amount of Sewer Certificates............................................... $ 1,545,000.00 Accrued Interest (02115/02 to 04/04/02)...................................... 9,842.88 -----:-..,..,-~.,--..,...,--TOTAL SOURCES OF FUNDS.................................................... $ 1,554,842.88 ===========-=========- USES OF FUNDS Deposit to Project Construction Fund.......................................... $ 1,515,642.50 Deposit to Interest & Sinking Fund (accrued interest)................. 9,842.88 Paying Agent/Registrar Fee......................................................... 300.00 Costs ofissuance.......................................................................... 29,057.50 TOTAL USES OF FUNDS............................................................. $ 1,554,842.88 =-=====-====== INVESTMENT BANKERS SINCE 1946 1001 Main Strm • Suit( 802 • Lubbock, Texas 79401-3322 • 806-749-3792 • Fax 806-749-3793 • Mobil( 806-777-1347 - (A) On Thursday, April 4, 2002, the Purchasers, represented by RBC Dain Rauscher, Inc., shall wire $1,554,842.88 in immediately available funds to the paying agent bank,JPMorgan Chase, prior to 10:00 AM, CST, for the account of the City of Lubbock, in payment for the purchase price of the Sewer Certificates. Wiring Instructions for JPMorgan Chase Bank are as follows: JPMorgan Chase ABA: 113000609 Credit A/C #: 00103237013 Credit Name: ITS lAS Clearing OBI: A/C #161372.1 FFC: City of Lubbock, Series 2002 Attn: Issuer Administrative Services I Michelle Baldwin (B) On Thursday, April 4, 2002, JPMorgan Chase shall wire or transfer immediately available funds prior to 11:00 AM, CST, as follows: (1) Transmit by wire to American State Bank, Lubbock, Texas ABA #111322583, Attn: Shirley Dodson Phone (806) 767-7182, depository bank for City of Lubbock for credit to the following account: City of Lubbock Consolidated Account, Account #87793 .. .............. ............... $ 1,525,485.38 (Project Construction Funds $1,515,642.50 and I&S Funds $9,842.88) (2) Retain in payment of services to be rendered as Paying Agent/Registrar ........ . (3) Transmit by wire to Bank One, Texas ABA #111000614, Attn: Jack Addams Account #1822155345 for client# 0336021 300.00 for credit to First Southwest Company for costs of issuance............................ 29,057.50 ---............ '----- Total Disbursement of Funds......................................................................................... ...s __ 1~,5..;;.5_4,.:..;.8_42_._8_8 The cooperation of the addressees with the above instructions is greatly appreciated. If you have any questions or cannot comply with any portion of the instructions, please contact us immediately at (806) 749-3792. Sincerely, ~~Ul_ Vince Viaille cc: Jack Addams First Southwest Company - Vince Viaille Virt Prtsidmt City of Lubbock Ms. Beverly Hodges P. 0. Box 2000 Lubbock, Texas 79457 Phone: (806) 775-2161 Fax: (806) 775-2033 City of Lubbock Mr. Andy Burcham P.O. Box 2000 Lubbock,Texas 79457 Phone: (806) 775-2149 Fax: (806) 775-2033 Fulbright & Jaworski L.L.P. Mr. Ed H. Esquivel 2200 Ross A venue, Suite 2800 Dallas, Texas 75201 Phone: (214) 855-8000 Fax: (214) 855-8200 ' FIRST SOUTHWF5T COMPANY March 27, 2002 1PMorgan Chase Bank Ms. Michelle Baldwin 2001 Bryan Street-1oth Floor Dallas, Texas 75201 Phone: (214) 468-6254 Fax: (214) 468-6322 RBC Dain Rauscher, Inc. Ms. Karen Piper 2711 N. Haskell, Suite 2400 Dallas, Texas 75204 Phone: (214) 989-1800 Fax: (214) 989-1859 American State Bank Ms. Shirley Dodson P. 0. Box 1401 Lubbock,Texas 79408-1401 Phone: (806) 767-7182 Fax: (806) 763-8269 Re: Closing Instructions for the $6,450,000 City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002 (the "Waterworks Certificates") " Payment for the above referenced Waterworks Certificates is scheduled to occur at 10:00 AM, CST, on Thursday, April 4, 2002, and payment therefor is to occur at the offices of 1PMorgan Chase Bank ("JPMorgan Chase"). SOURCES OF FUNDS Par Amount of Certificates.......................................................... $ 6,450,000.00 Accrued Interest (02/15/02 to 04/04/02)...................................... 40,585.78 -.,-----,....,..,-~.,....,...-:::-:::--TOTAL SOURCES OF FUNDS ...................... ,............................. $ 6,490,585.78 ============= USES OF FUNDS Deposit to Project Construction Fund ................. ,........................ $ 6,398,812.50 Deposit to Interest & Sinking Fund (accrued interest)................. 40,585.78 Paying Agent/Registrar Fee......................................................... 300.00 Costs of Issuance.......................................................................... 50,887.50 TOTAL USES OF FUNDS............................................................. $ 6,490,585.78 ============ INVESTMENT BANKERS SINCE 1946 1001 Main Street • Suite 802 • Lubbock, Texas 79401-3322 • 806-749-3792 • Fax 806-749-3793 • Mabile 806-777-1347 - (A) On Thursday, April 4, 2002, the Purchaser, represented by RBC Dain Rauscher, Inc., shall wire $6,490,5 85.78 in immediately available funds to the paying agent bank, JPMorgan Chase, prior to 10:00 AM, CST, for the account of the City of Lubbock, in payment for the purchase price of the Waterworks Certificates. Instructions for wiring funds to JPMorgan Chase Bank, are as follows: JPMorgan Chase ABA: 113000609 Credit A/C #: 00103237013 Credit Name: ITS lAS Clearing OBI: A/C #161372.1 FFC: City of Lubbock, Series 2002 Attn: Issuer Administrative Services I Michelle Baldwin (B) On Thursday, April 4, 2002, JPMorgan Chase shall wire or transfer immediately available funds prior to 11 :00 AM, CST, as follows: (1) Transmit by wire to American State Bank, Lubbock, Texas ABA #111322583, Attn: Shirley Dodson Phone (806) 767-7182, depository bank for City of Lubbock for credit to the following account: City of Lubbock Consolidated Account, Account #87793 ......... .... .. ...... .......... $ (Project Construction Funds $6,398,812.50 and I&S Funds $40,585.78) (2) Retairr in payment of services to be rendered as Paying Agent/Registrar ........ . (3) Transmit by wire to Bank One, Texas ABA #111000614, Attn: Jack Addams Account #1822155345 for client# 033621 6,439,398.28 300.00 for credit to First Southwest Company for costs of issuance ............................ ___ ...;;;5...;;;0~,8:..:8~7..:.;;.5....;;.0 Total Disbursement of Funds ...................................................................................... $ ___ 6.,4...;.9...;0.:.;,5...;8..;.5...;.7..;..8 The cooperation of the addressees with the above instructions is greatly appreciated. If you have any questions or cannot comply with any portion of the instructions, please contact us immediately at (806) 749-3792. Sincerely, ~~Q__ Vince Viaille cc: Jack Addams First Southwest Company - - - Vince Viaille Viu Pmitknt City of Lubbock Ms. Beverly Hodges P. 0. Box 2000 Lubbock, Texas 79457 Phone: (806) 775-2161 Fax: (806) 775-2033 City of Lubbock Mr. Andy Burcham P.O. Box2000 Lubbock,Texas 79457 Phone: (806) 775-2149 Fax: (806) 775-2033 Fulbright& Jaworski L.L.P. Mr. Ed H Esquivel 2200 Ross Avenue, Suite 2800 Dallas, Texas 75201 Phone: (214) 855-8000 Fax: (214) 855-8200 1 FIRST SOU'fHWEST COMPANY March 27,2002 JPMorgan Chase Bank Ms. Michelle Baldwin 2001 Bryan Street -1oth Floor Dallas, Texas 75201 Phone: (214) 468-6254 Fax: (214) 468-6322 A.G. Edwards & Sons, Inc. Ms. Pam Larson One North Jefferson -3rd Floor St. Louis, Missouri 63103 Phone: (314) 955-3622 Fax: (314) 955-4555 American State Bank Ms. Shirley Dodson P. 0. Box 1401 Lubbock, Texas 79408-1401 Phone: (806) 767-7182 Fax: (806) 763-8269 Re: Closing Instructions for the $9,400,000 City of Lubbock, Texas, General Obligation Bonds, Series 2002 (the "Bonds") Payment for the above referenced Bonds is scheduled to occur at 10:00 AM, CST, on Thursday, April4, 2002, and payment therefor is to occur at the offices of JPMorgan Chase Bank (" JPMorgan Chase"). SOURCES OF FUNDS Par Amount ofBonds................................................................... $ 9,400,000.00 Accrued Interest (02/15/02 to 04/04/02)...................................... 60,577.61 TOTAL SOURCES OF FUNDS.................................................... .-$ __ 9 .... ,4_.6...,0,~57=7-.6==-1 USES OF FUNDS Deposit to Construction Fund...................................................... $ 9,400,000.00 Deposit to Interest & Sinking Fund............................................. 60,577.61 TOTAL USES OF FUNDS............................................................. -..$ _ _.9..k,4_,6 ... 0,~57-..7...,.6-..1 INVESTMENT BANKERS SINCE 1946 1001 Main Street • Suite 802 • Lubqock, Texas 79401-3322 • 806-749-3792 • Fax 806-749-3793 • Mobile 806-777-1347 - - - (A) On Thursday, April 4, 2002, the Purchasers, represented by A.G. Edwards & Sons, Inc., shall wire $9,460,577.61 in immediately available funds to the paying agent bank, JPMorgan Chase, prior to 10:00 AM, CST, for the account of the City of Lubbock, in payment for the purchase price of the Bonds. Instructions for wiring funds to JPMorgan Chase Bank, are as follows: JPMorgan Chase ABA: 113000609 Credit NC #: 00103237013 Credit Name: ITS lAS Clearing OBI: NC #161372.1 FFC: City of Lubbock, Series 2002 Attn: Issuer Administrative Services I Michelle Baldwin (B) On Thursday, April 4, 2002, JPMorgan Chase shall wire or transfer immediately available funds prior to 11 :00 AM, COT, as follows: (1) Transmit by wire to American State Bank, Lubbock, Texas ABA #111322583, Attn: Shirley Dodson Phone (806) 767-7182, depository bank for City of Lubbock for credit to the following account: City of Lubbock Consolidated Account, Account #87793 ...... ... . .. ......... ... . $ (Project Construction Funds $9,400,000 and I&S Funds $60,577.61) 9,460,577.61 Total Disbursement of Funds ......................................................................................... ;;;;.$_....;..9.:...;,4.;;.6_;;.0,;:.;;.5..;.7.;..7.;..;.6..;.1 The cooperation of the addressees with the above instructions is greatly appreciated. If you have any questions or cannot comply with any portion of the instructions, please contact us immediately at (806) 749-3792. Sincerely, '-ic~cL Vince Viaille cc: Jack Addams First Southwest Company 22 - CERTIFICATE AS TO TAX EXEMPTION The undersigned, being the duly chosen and qualified Director of Finance of the City of Lubbock, Texas (the "Issuer"), hereby certifies with respect to "City of Lubbock, Texas, General Obligation Bonds, Series 2002", dated February 15, 2002, in the principal amount of $9,400,000 (the "Bonds") , "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002", dated February 15, 2002, in the principal amount of $6,450,000 (the "Water Certificates") and "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002", dated February 15, 2002, in the principal amount of $1,545,000 (the "Sewer Certificates"), as follows. A General. 1. I, along with other officers of the ls.suer, am charged with the responsibility for issuing the Bonds, the Water Certificates and the Sewer Certificates (collectively, the "Obligations"). 2. This certificate is made pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), and Treasury Regulations issued thereunder (the "Regulations"). 3. This certificate is based on the facts and estimates described herein in existence on this date, which is the date of delivery of the Obligations to and payment for the Obligations by the initial purchasers thereof, and, on the basis of such facts and estimates, the Issuer expects that . . the future events described herein will occur. B. Purpose and Size. 1. The Bonds are being issued pursuant to an ordinance of the Issuer, finally adopted by the City Council of the Issuer on February 28, 2002 (hereinafter referred to as the "Bond Ordinance") to finance the costs of (i) street improvements, including. drainage, curb, gutters, landscaping, sidewalks, curb ramps and utility line relocation and the acquisition of land and right-of-way therefor, (ii) traffic signalization and assorted communications equipment and (iii) acquiring or improving, or both, land for park purposes (collectively, the "Bond Projects"), and to pay costs of issuance. 2. The Water Certificates are being issued pursuant to an ordinance of the Issuer, finally adopted by the City Council of the Issuer on February 28, 2002 (hereinafter referred to as the "Water Ordinance") to finance the costs of improvements and extensions to the City's Waterworks System, including recreational improvements to Lake Alan Henry reservoir (the "Water Projects"), and to pay costs of issuance. 3. The Sewer Certificates are being issued pursuant to an ordinance of the Issuer, finally adopted by the City Council of the Issuer on February 28, 2002 (hereinafter referred to as the "Sewer Ordinance") to finance the costs of improvements and extensions to the City's Sewer System, including recreational improvements to Lake Alan Henry reservoir (the "Sewer Projects"), and to pay costs of issuance. · 4. Terms used and not defined herein have the same meaning given to them in the respective ordinances. 5. The Bond Projects, the Water Projects and the Sewer Projects (collectively, the "Projects") will be owned, operated, and maintained by the Issuer. The Issuer has not 45145008.2 -1- - - contracted with any person or entity to operate and/or maintain any of the Projects or any part thereof for and on behalf of the Issuer. The Issuer does not expect to enter into any contract for the operation, maintenance or management of any of the Projects or any part thereof. 5. There is not, and as of the date hereof the Issuer does not anticipate entering into, any lease, contract or other understanding or arrangement, such as a take~or-pay contract or oqtput contract, with any person other than a state or local governmental unit pursuant to which the Issuer expects that proceeds of the Obligations, or the facilities financed therewith, will be used in the trade or business of such person (including all activities of such persons who are not individuals). · 6. The amounts received from the sale of the Obligations, when added to the amounts expected to be received from the investment thereof, do not exceed the amounts required to pay the costs of the Projects and of issuing the Obligations. 7. No receipt from the sale of the Obligations or amounts received from the investment thereof will be used to pay the principal of or interest on any presently outstanding issue of bonds or other similar obligations of the Issuer other than the Obligations. C. Source and Disbursement of Funds. 1. The Obligations are being issued and delivered to the underwriters (the "Purchaser") on the date hereof upon payment of the agreed purchase price of par plus accrued interest to the date of delivery. 2. The Issuer has received from the Purchaser as a result of the sale of the Obligations an amount equal to $17,506,006.27 calculated as follows: Principal Amount of the Bonds Principal Amount of the Water Certificates Principal Amount of the Sewer Certificates Accrued Interest on the Bonds Accrued Interest on the Water Certificates Accrued Interest on the Sewer Certificates TOTAL: $ 9,400,000.00 6,450,000.00 1,545,000.00 60,577.61 40,585.78 9,842.88 $17,506,006.27 In addition, the Purchaser has caused the purchase of bond insurance from Bond proceeds for a cost of $18,360, as set forth in Section H. 3. The Issuer has caused the deposit or disbursement of such amount as follows: Disposition Deposited accrued interest on the Bonds to the Interest and Sinking Fund Deposited accrued interest on the Water Certificates to the Water Certificate Fund Deposited accrued interest on the Sewer Certificates to the Sewer Certificate Fund Deposited to the Bond Construction Fund Deposited to the Water Certificate Construction Fund 45145008.2 -2- Amount $ 60,577.61 40,585.78 9,842.88 9,400,00.00 6,398,812.50 Deposited to the Sewer Certificate Construction Fund Disbursed to pay Costs of Issuance TOTAL 1 ,515,642.50 80,545.00 $17,506,006.27 4. Proceeds of the Bonds in the amount of $60,577.61 representing accrued interest received from the Purchaser are being deposited on the date hereof in the Interest and Sinking Fund to be used to pay the first payment of interest to become due on the Bonds on February 15, 2003. Proceeds of the Water Certificates in the amount of $40,585.78 representing accrued interest received fro111 the Purchaser are being deposited on the date hereof in the Water Certificate Fund to be used to pay the first payment of interest to become due on the Water Certificates on February 15, 2003. Proceeds of the Sewer Certificates in the amount of $9,842.88 representing accrued interest received from the Purchaser are being deposited on the date hereof in the Sewer Certificate Fund to be used to pay the first payment of interest to beoome due on the Sewer Certificates on February 15, 2003. 5. Separate construction fund for each series of Obligations will be maintained on the books and records of the 'Issuer and will be. accounted for separately from all other funds of the Issuer on the books of account of the Issuer, and will be used to pay costs of the Projects the Obligations were issued and sold. 6. The Issuer estimates that in income and profit in the aggregate amount of $282,000.00 will be received from the investment of the amounts deposited to the Bond Construction Fund pending the disbursement of such amounts for the governmental purposes the Bonds are being issued. All of such income and profit will be used to pay any cost overruns on the Bond Projects or if there are none, deposited to the Interest and Sinking Fund and used to pay principal of and interest on the Interest and Sinking Fund within one year of receipt. 7. The Issuer estimates· that in income and profit in the aggregate amount of $193,500.00 will be received from the investment of the amounts deposited to the Water Certificate Construction Fund pending the disbursement of such amounts for the governmental purposes the. Water Certificates are being issued. All of such income and profit will be used to pay any cost overruns on the Water Projects or if there are none, deposited to the Water Certificate Fund and used to pay principal of and interest on the Water Certific;;ates within one year of receipt. · 8. The Issuer estimates that in income and profit in the aggregate amount of $46,350.00 will be received from the investment of the amounts deposited to the Sewer Certificate Construction Fund pending the disbursement of such amounts for the governmental purposes the Sewer Certificates are being issued. All of such income and profit will be used to pay any cost overruns on the Sewer Projects or if there are none, deposited to the Sewer Certificate Fund and used to pay principal of and interest on the Sewer Certificates within one year of receipt. D. Temporary Periods and Time for Expenditures. 1. Within six months from the date hereof, the Issuer will have incurred binding obligations or commitments to third parties for the Projects in the amount of at least 5% of the net sales proceeds of the Obligations. 45145008.2 -3- - - 2. After entering into said contracts, completion of the Projects and the allocation of net sales proceeds of the Obligations to expenditures will proceed with due diligence. 3. The Issuer expects that all of the net sales proceeds of the Obligations will be spent within three years from the date hereof, and that all investment proceeds of the Obligations will be spent within one year from the date of receipt. 4. . Approximately $-0-of the proceeds of the Obligations will be used to reimburse the Issuer for Project expenditures made by it from its own funds prior to the date hereof. The Issuer adopted an official intent for the original expenditures (except possibly for expenditures meeting the preliminary expenditures exception set forth in section 1.150-2(f}(2) of the Regulations) not later than 60 days after payment of the original expenditures, and a copy of such official intent is attached to this Certificate As To Tax Exemption. Except for expenditures meeting the preliminary expenditures exception set forth in section 1.150-2(f}(2) of the Regulations, the Obligations are being issued and the reimbursement allocation is hereby being made not later than 18 months after the later of (i) the date the original expenditures were paid, or (ii) the date the Project is placed in service or abandoned, but ·in no event more than 3 years after the original expenditures were paid. The original expenditures were capital expenditures, and in connection with this allocation, the Issuer has not employed any abusive arbitrage device under section 1.148-1 0 of the Regulations to avoid the arbitrage restrictions or to avoid restrictions under section 142 through 147 of the Code. E. Interest and Sinking Fund for the Bonds. 1. Pursuant to the Bond Ordinance, the Issuer has levied a tax on all taxable property in the Issuer to pay principal of and interest on the Bonds as such become due, and such tax has been pledged to the payment of the Bonds. Amounts collected from such tax for the payment of the principal of and interest on the Bonds are to be deposited to the credit of the Interest and Sinking Fund maintained on the books of the Issuer. 2. The Interest and Sinking Fund will be maintained by the Issuer primarily to achieve a proper matching of revenues and debt service payments within each bond year. The Issuer expects that the following will occurwith respect to the money in the Interest and Sinking Fund: a. Such fund will be depleted at least once each bond year, except possibly for a carryover amount not to exceed the greater of the previous bond year's earnings on the Interest and Sinking Fund or one-twelfth of the previous bond year's debt service requirements on the Bonds; b. All amounts deposited to such fund to pay debt service on the Bonds will be spent within 13 months of deposit; and c. All. amounts received from the investment of such fund will be deposited therein and wiil be expended within twelve months of receipt. 3. Except as described above, no funds of the Issuer have been or will be pledged to payment of the principal of or interest on the Bonds or otherwise restricted so as to give reasonable assurance of the availability of such funds for such purpose. 45145008.2 -4- - F. Certificate Fund and Waterworks System Fund. 1. Pursuant to the Water Ordinance, the Issuer has levied a tax on all taxable property in the Issuer to pay principal of and interest on the Water Certificates as such become due, and such tax has been pledged to the payment of the Water Certificates. Amounts collected from such tax for the payment of the principal of and interest on the Water Certificates are to be deposited to the credit of the Water Certificate Fund maintained on the books of the Issuer. 2. The Water Ordinance requires that all revenues received by the Issuer by reason of its ownership and operation of the System shall be deposited as received in the System Fund, to be disbursed in the following order of priority: a. for payment of Operating and Maintenance Expenses of the System; b. for payment into the special funds and accounts created and established for the payment, and benefit of any Prior Lien Obligations; c. for payment of the Previously Issued Obligations and the Water Certificates; d. for use by the Issuer for any other purpose of the ·Issuer now or hereafter permitted by law. 3: The Water Certificate Fund will be maintained by the Issuer primarily to achieve a proper matching of revenues and debt service payments within each bond year. The Issuer expects that the following will occur with respect to the money. in the Water Certificate Fund: a. Such fund will be depleted at least once each bond year, except possibly for a carryover amount not to exceed the greater of the previous bond year's earnings on the Water Certificate Fund or one-twelfth of the previous bond year's debt service requirements on the Water Certificates; b. All amounts deposited to such fund to pay debt service on the Water Certificates will be spent within 13 months of deposit; and c. All amounts received from the investment of such fund will be deposited therein and will be expended within twelve months of receipt. 4. Except as described above, no funds of the Issuer have been or will be pledged to payment of the principal of or interest on the Water Certificates or otherwise restricted so as to give reasonable assurance of the availability of such funds for such purpose. G. Certificate Fund and Sewer System Fund. 1. Pursuant to the Sewer Ordinance, the Issuer has levied a tax on all taxable property in the Issuer to pay principal of and interest on the Sewer Certificates as such become due, and such tax has been pledged to the payment of the Sewer Certificates. Amounts collected from such tax for the payment of the principal of and interest on the Sewer Certificates are to be deposited to the credit of the Sewer Certificate Fund maintained on the books of the Issuer. 45145008.2 -5- - - 2. The Sewer Ordinance requires that all revenues received by the Issuer by reason . of its ownership and operation of the System shall be deposited as received in the System Fund, to be disbursed in the following order of priority: a. for payment of Operating and Maintenance Expenses of the System; b. for payment into the special funds and accounts created and established for the payment, and benefit of any Prior Li~n Obligations; c. for payment of the . Previously Issued Obligations and the Sewer Certificates; d. for use by the Issuer for any other purpose of the Issuer now or hereafter permitted by law. 3. The Sewer Certificate Fund will be maintained by the Issuer primarily to achieve a proper matching of revenues and debt service payments within each bond year. The Issuer expects that the following will occur with respect to the money in the Sewer Certificate Fund: a. Such fund will be depleted at least once each bond year, except possibly for a carryover amount not to exceed the greater of the previous bond year's earnings on the Sewer Certificate Fund or one-twelfth of the previous bond year's debt service requirements on the Sewer Certificates; b. AI! amounts deposited to such fund to pay debt service on the Sewer Certificates will be spent within 13 months of deposit; and c. All amounts received from the investment of such fund will be deposited therein and will be expended within twelve months of receipt. 4. Except as described above, no funds of the Issuer have been or will be pledged to payment of the principal of or interest on th~ Sewer Certificates or otherwise restricted so as to give reasonable assurance of the availability of such funds for such purpose. H. Qualified Guarantee. 1. On the date hereof, $18,600.00 has been paid from Bond proceeds (collectively, the "Insurance Premium") to Financial Guaranty Insurance Company, respectively (the "Guarantor") to insure the payment of principal of and interest on the Bonds maturing in the years 2013 through 2022 (the "Insured Bonds"). 2. The Guarantor is not exempt from federal income taxation and. by issuing its insurance has caused the Bonds to be rated "AAA" by Standard & Poor's Corporation and "Aaa" by Moody's Investors Services. Neither the Guarantor nor any person related to the Guarantor within the meaning of section 144(a)(3) of the Code will use 10 percent or more of the proceeds of the Insured Bonds. 3. Under the insurance contract for the Insured Bonds, the Guarantor is unconditionally and with full recourse obligated to pay all or a portion of the principal of or interest on the Insured Bonds. 45145008.2 -6- - - 4. The Issuer reasonably expects that the Guarantor will not be called upon to make a payment of principal of or interest on the Insured Bonds. The Guarantor is entitled to be immediately and fully reimbursed for any payment of principal of or interest on the Insured Bonds. 5. The Insurance Premium paid to the Guarantor represents a payment solely for the transfer of credit risk for the payment of principal of and interest on the Insured Bonds and not for any other direct or indirect services other than the transfer of credit risk. The Insurance Premium does not exceed a reasonable, arm's length charge for the transfer of such credit risk. 6. The Insurance Premium has been allocated among each of the Insured Bonds and to computation periods in a manner that properly reflects the proportionate credit risk for which the Guarantor has been compensated. · 7. The Issuer has been advised by the Purchaser of the Bonds in the Issue Price Certificate that the present value of Insurance Premium is less than the present value of the interest saved as a result of insuring the Insured Bonds, using the yield on the Bonds as the discount factor. /. Yield and Nonpurpose Investments. 1. The discount factor required to reduce the principal and interest to be paid on the Obligations to a present value on the date hereof, compounding semiannually, equal to the initial offering prices at which a substantial amount of each maturity of the Obligations was sold to the public, is 4.6538560%. In determining the initial offering price at which a substantial amount of each maturity of the Obligations was sold to the public, the Issuer has relied on certificates from the managing underwriter that purchased the Obligations. 2. No other obligations of the Issuer which are reasonably expected to be paid from substantially the same source of funds as the Obligations were sold within 15 days from the date the Obligations were.sold. 3. Except as otherwise provided in Section 148(f) of the Code, the Issuer will account for proceeds of the Obligations separately from other funds of the Issuer and will compute and pay to the United States Treasury the Rebate Amount due with respect to the Obligations no less frequently than every five years, in the installments, to the place, in the manner and accompanied by such forms or other information as is or may be required by Section 148(f) of the Code and the regulations and rulings thereunder. J. No Abusive Arbitrage Device. 1. In connection with the issuance of the Obligations, the Issuer has not employed any action which has the effect of overburdening the market for tax-exempt obligations by issuing more·bonds, issuing bonds earlier, or allowing bonds to remain outstanding longer than is reasonably necessar-Y to accomplish the governmental purposes of the Obligations. 2. In connection with the issuance of the Obligations, the Issuer has not employed any action which has the effect of enabling the Issuer t9 exploit the difference between tax- exempt and taxable interest rates to gain a material financial advantage. 45145008.2 -7- EXECUTED AND DELIVERED ----------------- CITY OF LUBBOCK, TEXAS - - 45145008.1 -8- 23 - - - CERTIFICATE AS TO OFFICIAL STATEMENT THE STATE OF TEXAS COUNTY OF LUBBOCK § § § § § CITY OF LUBBOCK RE: $9,400,000 "City of Lubbock, Texas, General Obligation Bonds, Series 2002," dated February 15, 2002, $6,450,000 "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002", dated February 15, 2002 and $1 ,545,000 "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002", dated February 15, 2002 (collectively, the "Obligations") WE, THE UNDERSIGNED, officials of the City of Lubbock, Texas, acting in our official capacities, DO HEREBY CERTIFY that to the best of our knowledge and belief: (1) The description and statements of or pertaining to the City contained in its Official Statement, and any addenda, supplement or amendment thereto, prepared in connection with the issuance and sale of the above referenced Obligations, on the date of such Official Statement, on the date of sale of said Obligations and the acceptance of the best bid therefor, and on the date of the delivery, were and are true and correct in all material respects; (2) 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; (3) Insofar as the description 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 that the City has no reason to believe that they are untrue in any material respect; and (4) There has beeri no material adverse change in the financial condition of the City since the date of the last audited financial statements of the City, portions of which appear in the Official Statement. 45144778.1 ,.. - - - TO CERTIFY WHICH, witness our hands and the seal of the City, this APR 0 4 2002 CITY OF LUBBOCK, TEXAS (City Seal) 45144778.1 -2- 24 - - - RECEIPT FOR PAYMENT On the date hereof the following described bonds: "CITY OF LUBBOCK, TEXAS, TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002", dated February 15,2002, in the aggregate principal amountof$1 ,545,000 (the "Certificates") were delivered to the purchaser(s) thereof, namely: RBC DAIN RAUSCHER INCORPORATED following the receipt of immediately available funds from the purchaser(s) in settlement of the agreed purchase price for the Certificates as follows: PRINCIPAL AMOUNT ACCRUED INTEREST TOTAL AMOUNT RECEIVED ON $6,450,000.00 40,585.78 DELIVERY OF THE CERTIFICATES ........... $6,490,585.78 Furthermore, the undersigned has on the date of this receipt (i) transmitted the sum of $6,439,398.28 to the American State Bank, Lubbock, Texas, for deposit to the City's accounts as follows: $40,585.78 to the credit of the interest and sinking fund for the Certificates and $6,398,812.50 to the credit of the construction fund, (ii) retained the sum of $300.00 in payment of services to be rendered as paying agent/registrar for the Certificates and (iii) transmitted the sum of $50,887.50 to First Southwest Company for the payment of costs of issuance; all in accordance with instructions received. DELIVERED, this April4, 2002. JPMORGAN CHASE BANK By ikuckW Title __ 1}-u.._\ +---'b'--0 _______ _ #45161282vl< 25 - - RECEIPT FOR PAYMENT On the date hereof the following described bonds: "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002", dated February 15, 2002, in the aggregate principal amount of $1 ,545,000 (the "Certificates") were delivered to the purchaser(s) thereof, namely: RBC DAIN RAUSCHER INCORPORATED following the receipt of immediately available funds from the purchaser(s) in settlement of the agreed purchase price for the Certificates as follows: PRINCIPAL AMOUNT ACCRUED INTEREST TOTAL AMOUNT RECEIVED ON $1 ,545,000.00 9,842.88 DELIVERY OF THE CERTIFICATES ........... $1,554,842.88 Furthermore, the undersigned has on the date of this receipt (i) transmitted the sum of $1,525,485.38 to the American State Bank, Lubbock, Texas, for deposit to the City's accounts as follows: $9,842.88 to the credit of the interest and sinking fund for the Certificates and $1,515,642.50 to the credit of the construction fund, (ii} retained the sum of $300.00 in payment of services to be rendered as paying agent/registrar for the Certificates and (iii) transmitted the sum of $29,057.50 to First Southwest Company for the payment of costs of issuance; all in accordance with instructions received. DELIVERED, this April4, 2002. #4516l276vl< JPMORGAN CHASE BANK By I/1?JJ.4 {}~L_ Title ~j1 26 - - RECEIPT FOR PAYMENT On the date hereof the following described bonds: "CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION BONDS, SERIES 2002", dated February 15,2002, in the aggregate principal amount of $9,400,000 (the "Bonds") were delivered to the purchaser{s) thereof, namely: A. G. EDWARDS & SONS, INC. following the receipt of immediately available funds from the purchaser{s) in settlement of the agreed purchase price for the Bonds as follows: PRINCIPAL AMOUNT ACCRUED INTEREST TOTAL AMOUNT RECEIVED ON $9,400,000.00 60.577.61 DELIVERY OF THE BONDS .................. $9,460,577.61 Furthermore, the undersigned has on the date of this receipt transmitted the above amount of funds to American State Bank, Lubbock, Texas, for deposit to the City's accounts as follows: $60,577.61 to the credit of the interest and sinking fund for the Bonds and $9,400,000 to the credit of the construction fund; all in accordance with instructions received. DELIVERED, this Apri14, 2002. JPMORGAN CHASE BANK BytihcJ~ ~ Title _ __,__~ __ f?_, _______ _ #45161273vl< 27 - - - - TELEPHONE: 214/855·8000 FACSIMILE: 214/855·8200 FuLBRIGHT & .JAWORSKI L.L.P. A REGISTERED LIMITED LiABILITY PARTNERSHIP 2200 Ross AvENUE, SuiTE 2800 DALLAS, TEXAS 7S201-2784 April 4, 2002 HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG WE HAVE ACTED as Bond Counsel in connection with the issuance by City of Lubbock, Texas (the "City") of the "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002" (the "Certificates") in the aggregate principal amount of $1,545,000, dated February 15, 2002, solely to express legal opinions as to the validity of the Certificates and the exclusion of the interest on the Certificates from gross income for federal income tax purposes, and for no other purpose. We have not been requested to investigate or verify, and we neither expressly nor by implication render herein any opinion concerning, the financial condition or capabilities of the City, the disclosure of any financial or statistical information or data pertaining to the City and used in the sale of the Certificates, or the sufficiency of the security for or the value or marketability of the Certificates. THE CERTIFICATES are issuable in fully registered form only and in denominations of $5,000 or any integral multiple thereof. The Certificates have stated maturities of February 15 in each of the years 2003 through 2022, unless redeemed prior to maturity in accordance with the redemption provisions stated on the Certificates. Interest accrues on the Certificates from their date at the rates per annum stated in the ordinance adopted by the City Council of the City authorizing the issuance of the Certificates (the "Ordinance"), and such accrued interest is payable on February 15 and August 15 in each year, commencing February 15, 2003, to the registered owners appearing on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Certificates). IN RENDERING THE OPINIONS herein we have examined and rely upon original or certified copies of the proceedings had in connection with the issuance of the Certificates, including the Ordinance and an executed initial Certificate; certifications of officers of the City relating to the expected use and investment of proceeds of the sale of the Certificates and certain other funds of the City and to certain other facts within the knowledge and control of the City; and such other material and such matters of law as we deem relevant. In the examination of the proceedings relating to the issuance of the Certificates, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original copies of all documents submitted to us as certified copies, and the accuracy ofthe statements contained in such documents and certifications. BASED ON OUR EXAMINATIONS, IT IS OUR OPINION that, under the applicable law of the United States of America and the State of Texas in force and effect on the date hereof: 1. The Certificates have been duly authorized by the City, and the Certificates issued in compliance with the provisions of the Ordinance are valid, legally binding and enforceable obligations of the City, payable from an ad valorem tax levied, within the limits prescribed by law, upon all taxable property in the City and additionally payable from and secured by a lien on and pledge of the Net #4514343lvl< Page 2 of Legal Opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002", dated February 15, 2002 Revenues (as defined in the Ordinance) of the City's Sewer System in the manner and to the extent provided in the Ordinance; except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with the general principles of equity. 2. Pursuant to section 103 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), and existing regulations, published rulings, and court decisions thereunder, and assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance relating to sections 141 through 150 of the Code, interest on the Certificates will be excludable from the gross income, as defined in section 61 of the Code, of the owners thereof for federal income tax purposes, and such interest will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals for federal income tax purposes. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation (other than an "S" corporation or a qualified mutual fund, real estate mortgage investment conduit, real estate investment trust, or a financial asset securitization investment trust) will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code is computed. WE EXPRESS NO OTHER OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Ownership of tax-exempt obligations such as the Certificates may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, "S" corporations with subchapter "C" earnings and profits, owners of interests in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. EHE:dfc #4514343lvl< 28 - - - - TELEPHONE: 214/855-8000 FACSIMILE: 214/855-8200 FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 Ross AvENuE, SuITE 2aoo DALLAS, TEXAS 75201-2784 April 4, 2002 HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG IN REGARD to the authorization and issuance of the "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002" (the "Certificates"), dated February 15, 2002 (the "Certificate Date"), in the principal amount of $6,450,000, we have examined into the legality and validity of the issuance thereof by the City of Lubbock, Texas (the "City"), which Certificates are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a maturity), mature annually on February 15 in each of the years 2003 through 2022, unless redeemed prior to maturity in accordance with the redemption provisions stated on the Certificates, and bear interest on the unpaid principal amount from the Certificate Date at the rates per annum stated in the ordinance authorizing the issuance of the Certificates (the "Ordinance"), such interest being payable on February 15 and August 15 in each year, commencing February 15, 2003, to the registered owners shown on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Certificates). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Certificates under the Constitution and laws of the State of Texas, and with respect to the exclusion of the interest on the Certificates from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City. Our examinations into the legality and validity of the Certificates included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the City relating to the authorization and issuance of the Certificates, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Certificate executed and delivered initially by the City, which we found to be in due form and properly executed. BASED ON OUR EXAMINATIONS, IT IS OUR OPINION that, under the applicable law of the United States of America and the State of Texas in force and effect on the date hereof: 1. The Certificates have been duly authorized by the City, and the Certificates issued in compliance with the provisions of the Ordinance are valid, legally binding and enforceable obligations of the City, payable from an ad valorem tax levied, within the limits prescribed by law, upon all taxable property in the City and additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Ordinance) of the City's Waterworks System in the manner and to the extent provided in the Ordinance; except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with the general principles of equity. #45143428vl< - Page 2 of legal opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, Tax and Waterworks System Surplus Revenue Certificates of Obligation, Series 2002", dated February 15, 2002 2. Assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and certifications of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Certificates, interest on the Certificates for federal income tax purposes (a) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), of the owners thereof pursuant to section 1 03 of the Code and existing regulations, published rulings, and court decisions thereunder, and {b) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporations, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust, or a financial asset securitization investment trust. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. WE EXPRESS NO OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Ownership of tax-exempt obligations such as the Certificates may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of interest in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income tax credit and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. EHE:dfc #45143428vl< 29 -TELEPHONE: 214/855-8000 FACSIMILE: 214/855-8200 FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 Ross AVENUE, SuJTE 2800 DALLAS, TEXAS 75201-2784 April4, 2002 HOUSTON WASHINGTON, D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG IN REGARD to the authorization and issuance of the "City of Lubbock, Texas, General Obligation Bonds, Series 2002" (the "Bonds"), dated February 15, 2002 (the "Bond Date"), in the principal amount of $9,400,000, we have examined into the legality and validity of the issuance thereof by the City of lubbock, Texas (the "City"), which Bonds are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a maturity) and have stated maturities of February 15 in each of the years 2003 through 2022, unless redeemed prior to maturity in accordance with applicable redemption provisions. The Bonds bear interest on the unpaid principal amount from the Bond Date at the rates per annum stated in the ordinance authorizing their issuance (the "Ordinance"), and such interest is payable on February 15 and August 15 in each year, commencing February 15, 2003, to the registered owners shown on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Bonds). WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and validity of the issuance of the Bonds under the Constitution and laws of the State of Texas, and with respect to the exclusion of the interest on the Bonds from gross income for federal income tax purposes and none other. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data or other material relating to the financial condition or capabilities of the City. Our examinations into the legality and validity of the Bonds included a review of the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the City relating to the authorization and issuance of the Bonds, including the Ordinance, customary certifications and opinions of officials of the City and other pertinent showings, and an examination of the Bond executed and delivered initially by the City, which we found to be in due form and properly executed. BASED ON OUR EXAMINATIONS, IT IS OUR OPINION that, under the applicable law of the United States of America and the State of Texas in force and effect on the date hereof: 1. The Bonds have been duly authorized by the City, and the Bonds issued in compliance with the provisions of the Ordinance are valid, legally binding and enforceable obligations of the City, payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City; except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with the general principles of equity. 2. Assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance and in reliance upon representations and certifications #45143427vl< - - Page 2 of legal opinion of Fulbright & Jaworski L.L.P. Re: "City of lubbock, Texas, General Obligation Bonds, Series 2002", dated February 15,2002 of the City made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Bonds, interest on the Bonds for federal income tax purposes (a) will be excludable from gross income, as defined in section 61 ofthe Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), of the owners thereof pursuant to section 1 03 of the Code and existing regulations, published rulings, and court decisions thereunder, and (b) will not be included in computing the alternative minimum taxable income of individuals or, except as hereinafter described, corporations. Interest on all tax-exempt obligations, such as the Bonds, owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate mortgage investment conduit, a real estate investment trust or a financial asset securitization investment trust. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the section 55 of the Code will be computed. WE EXPRESS NO OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a financial asset securitization investment trust and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. EHE:dfc #45143427v1< 30 - - - Financial Guaranty Insurance Company 125 Park A venue New York, NY 10017 (212) 312-3000 (800) 352-0001 A GE Capital Company Municipal Bond New Issue Insurance Policy Issuer: City of Lubbock, Texas Bonds: $6,120,000 in aggregate principal amount of General Obligtaion Bonds, Series 2002, maturing on February 15 in the years 2013 through 2022 TX DISCLOSURE OF GUAR. FUND NONPARnCIPAnON In the event the insurer is unable to tu Ifill its contractual obligation under this policy or contract or application or certificate or evidence of coverage, the policyholder or certaftcateholder · is not protected by an insurance guaranty fund or other solvency protection arrangement. Policy Number: 02010328 Control Number: 0010001 Premium: $18,400.00 Financial Guaranty Insurance Company ("Financial Guaranty"), a New York stock insurance company, in consideration of the payment of the premium and subject to the terms of this Policy, hereby unconditionally and irrevocably agrees to pay to State Street Baruc and Trust Company, N.A., or its successor, as its agent (the "Fiscal Agent"), for the benefit of Bondholders, that portion of the principal and interest on the above-described debt obligations (the "Bonds") which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. Financial Guaranty will make such payments to the Fiscal Agent on the date such principal or interest becomes Due for Payment or on the Business nay next following the day on which Financial Guaranty shall have received Notice of Nonpayment, whichever is later. The Fiscal Agent will disburse to the Bondholder the face amount of principal and interest which is then Due for Payment but is unpaid by reason of Nonpayment by the Issuer but only upon receipt by the Fiscal Agent, in form reasonably satisfactory to it, of (i) evidence of the Bondholder's right to receive payment of the principal or interest Due for Payment and (ti) evidence, including any appropriate instruments of assignment, that all of the Bondholder's rights to payment of such principal or interest Due for Payment shall thereupon vest in Financial Guaranty. Upon such disbursement, Financial Guaranty shall become the owner of the Bond, appurtenant coupon or right to payment of principal or interest on such Bond and shall be fully subrogated to all of the Bondholder's rights thereunder, including the Bondholder's right to payment thereof. This Policy is non..cancellable for any reason. The premium on this Policy is not refundable for any reason, including the payment of the Bonds prior to their maturity. This Policy does not insure against loss of any prepayment premi.um which may at any time be payable with respect to any Bond. As used herein, the term "Bondholder" means, as to a particular Bond, the person other than the Issuer who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof. "Due for Payment" means, when referring to the principal of a Bond, the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity and means, when referring to interest on a Bond, the stated date for payment of interest. '"Nonpayment" in respect of a Bond means the failure of the Issuer to have provided sufficient funds to the paying agent for payment in full of all principal and interest Due for Payment on such Bond. "Notice" means telephonic FGIC is a registered service mark used by Financial Guaranty Insurance Company under license from its parent company, FGIC Corponuion. Form 9000 (10/93) Page 1 of2 - - - Financial Guaranty Insurance Company 125 Park Avenue New York, NY 10017 (212) 312-3000 (800) 352-0001 A GE Capital Company Municipal Bond New Issue Insurance Policy or telegraphic notice, subsequently confirmed in writing, or written notice by registered or certified mail, from a Bondholder or a paying agent for the Bonds to Financial Guaranty. "Business Day" means any day other than a Saturday, Sunday or a day on which the Fiscal Agent is authorized by law to remain closed. In Witness Whereof, Financial Guaranty has caused this Policy to be afftxed with its corporate seal and to be signed by its duly authorized officer in facsimile to become effective and binding upon Financial Guaranty by virtue of the countersignature of its duly authorized representative. 8~~Q~ President Effective Date: April 4, 2002 Authorized Representative State Street Bank and Trust Company, N.A., acknowledges that it has agreed to perform the duties of Fiscal Agent under this Policy. Authorized Officer FGIC is a registered service mark used by Financial Guaranty Insurance Company under license from its parent company, FGIC Corporation. Form 9000 (10/93) Page 2 of 2 Financial Guaranty Insurance Company 125 Park A venue New York, NY 10017 (212) 312-3000 (800) 352-0001 A GE Capital Company Endorsement To Financial Guaranty Insurance Company Insurance Policy Policy Number: 02010328 Control Number: 0010001 It is further understood that the term "Nonpayment" in respect of a Bond includes any payment of principal or interest made to a Bondholder by or on behalf of the issuer of such Bond which has been recovered from such Bondholder pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. NOTHING HEREIN SHALL BE CONSTRUED TOW AIVE, ALTER, REDUCE OR AMEND COVERAGE IN ANY OTHER SECTION OF THE POLICY. IF FOUND CONTRARY TO THE POLICY LANGUAGE, THE TERMS OF THIS ENDORSEMENT SUPERSEDE THE POLICY LANGUAGE. In Witness Whereof, Financial Guaranty has caused this Endorsement to be affixed with its corpOrate seal and to be signed by its duly authorized officer in facsimile to become effective and binding upon Financial Guaranty by virtue of the countersignature of its duly authorized representative. E~~Q~ President Effective Date: April 4, 2002 Authorized Representative Acknowledged as of the Effective Date written above: Authorized Officer State Street Bank and Trust Company, N.A., as Fiscal Agent FGIC is a registered service mark used by Financial Guaranty Insurance Company under license from irs parent company, FGIC Corporation. Form E..0002 (10/93) Page 1 of 1 - - - Financial Guaranty Insurance Company 125 Park Avenue New York, NY 10017 (212) 312-3000 (800) 352-0001 A GE Capital Company April4, 2002 City of Lubbock Lubbock, Texas Fulbright & Jaworski L.L.P. Dallas, Texas Re: $6,120,000 in aggregate principal amount of City of Lubbock, Texas General Obligtaion Bonds, Series 2002, maturing on February 15 in the years 2013 through 2022 Ladies and Gentlemen: In connection with the issuance of the above-referenced obligations (the "Bonds"), Financial Guaranty Insurance Company {"Financial Guaranty") is issuing a municipal bond insurance policy securing the payment of principal and interest on the Bonds (the "Insurance Policy"). This letter is to advise you that, as more fully set forth in the Insurance Policy, (i) the Insurance Policy is an unconditional and recourse obligation of Financial Guaranty (enforceable by or on behalf of the holder of the Bonds) to pay scheduled principal and interest on the Bonds when due in the event of a failure to so pay by the City of Lubbock, Texas {the "Issuer"); {ii) the insurance premium is a charge for the transfer of substantially all ofthe credit risk for the payment of principal and interest on the Bonds; {iii) except for payments under the Insurance Policy in the case of a failure to pay by the Issuer, there is no obligation to pay any amount of principal or interest on the Bonds (A) by Financial Guaranty, (B) by any person related to Financial Guaranty (within the meaning of section 1.150-1 (b) of the Income Tax Regulations), {C) by any entity of which Financial Guaranty owns more than ten percent (by fair market value) of its beneficial ownership interests, or (D) by any entity which owns more than 10 percent (by fair market value) of the beneficial ownership interests ofFinancial Guaranty; and {iv) except for the premium paid to Financial Guaranty for the Insurance Policy, Financial Guaranty {and any related party within the meaning of section 1.150-1 (b) of the Income Tax - - - - April 4, 2002 Page2 Regulations) will not use any portion ofthe Bond proceeds. Further, Financial Guaranty does not reasonably expect to make payments under the Insurance Policy other than under a direct-pay letter of credit or similar arrangement for which Financial Guaranty will be reimbursed immediately, and, in the event of any such payment, Financial Guaranty will immediately become subrogated to the rights of the Bondholders to receive the full amount of such payment. Financial Guaranty is reasonably assured (based on a binding obligation of an entity with sufficient funds) that sufficient funds will be available to fully retire the Bonds in the event the Issuer fails to pay scheduled principal and interest on the Bonds when due. In addition, this letter is to advise you that (i) the premium paid for the Insurance Policy does not include any payment (A) for any direct or indirect services other than the transfer of credit risk, (B) for the provision of additional services by Financial Guaranty, or (C) 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 guarantor); (ii) the premium paid includes the overhead costs ofFinancial Guaranty, such fees paid by Financial Guaranty to maintain its ratings, and other costs that are taken into account in the formulation of the rate structure; (iii) no portion of such premium is a payment for costs of issuance on the Bonds (including rating agency fees, the cost of underwriting or remarketing the Bonds, and the cost of insurance for casualty to Bond- financed property), and, if the requirements of section 1.148-2( e )(2) of the Income Tax Regulations (relating to temporary periods for capital projects) are not satisfied, Financial Guaranty is reasonably assured that the Bonds will be repaid if the project to be financed by the Bonds is not completed. Further, the Issuer is not entitled to a refund of any portion of the premium for the Insurance Policy in the event a Bond is retired before its final maturity date. Very truly yours, ~~+~ Judith L. Hart Senior Counsel 02010328 31 - - - Dear Ms. Daly: Re: 1201 Ea51: 7th Street Powtll, WY 82435 FitchRatings T 307 754 2012/800 653 4824 WWN.fltclntings.cam Ms. Karen Daly Financial Guaranty Insurance Co. 125 Park Avelltle 5th Flcor New York. NY' 10017 Apn12.2002 Ci!r of Lubbock. Tc=s $6,120,000 in aggregate principal a't'l'lQunt of General Obligation Bonds, Series 2002, maturing on Fobtuant IS in the years 2013 through 2022 (0201032.8) Fitch !Utings has assigned a rating of 'AAN to the above referenced Bonds. This reflects credit c:ahaneem=.t in the form of a bond :i:nsura&lce policy pfOvided by Finllncrlal Guaranty Insurance Co. (FGIC).. which hu an insurer fm.a:.nci&l stre:ngtb rating of'AAA'. Fitch Ratings def'"mes companies with 'AAA' insmer fmancial tiftel'lgth ratings as follows; "Companies are viewed a:5 possessing exceptiOrtally strong capacity to meet policyhol!kr and contract obligations. Risk factors are minimal and the impact of my .adverse business and economic factors is expected to be extremely small." Ratings usigrr.ed by Fitch RAtings are based on information provided to us by FCIC. Fitch Ratings does not audit or verify the truth or accuracy of such infonnation. Ratings are not a recommendation to buy. sell, or hold any security. Ratings do not conunent on the adequacy of :market price, the suitability of any security for a particular investor, or the tax~e.xempt nature or taxability of payment made in respect of any seourity, The insurer fmancial strength rating assigned to FGIC may be changed, withdrawn, suspended, or placed on RatingWatch as a tesult of changes in FGIC's financial condition. The assisnment o£ a rating by Fitch shall not constitute a eonscmt by Fitch to usc its name as an expert in co:nnec'tlon with any registration statement or other filing under U.s •• UK or any other relevant securities 1aws. Sincerely. ~~~ Becky K. Christensen Manager I Insured Ratings - - - Financial Guaranty Insurance Company 125 Park Avenue, 5th Floor New York, New York 10017 To VI/hom It May Concern: 99 Cl'luteh Srrset New Y""k· New YQ(I{ 10001 April 4, 2002 Moody's Investors Service has assigned the rating of Aaa (Financial Guaranty Insurance Company Insured .. Policy No. 02010328) to the $&,120,000.00 ~City of Lubbock. Texas--GeneraJ Obligation Bonds, S.riea 2002. maturing on February 15 in the years 2013 through 2022, dated February 15, 2002 which sold on February 28, 2002. The rating Is based upon an insurance policy provided by Financial Guaranty Insurance Company. Should you have any questions regarding the above, please do not hesitate to contact tne assigned analyst, Margaret Kessler at (2.12) 553-7894. Sincerely yours, Margaret L. Kessler Vice President/Senior Analyst MK;SY TDT~l P.88 ~1~~11 PQr~.~~ ** TOTAL PAGE.04 ** - - ~s~ 'JS Water .'iltr:~:t. J8lh Fl.rKJr Nt:W Yrml;, NY 10041{1()03 i'!:l212 43/s-2014 Re(~.rena No.: 401267R7 . Ms. Cheryl Whaley Group Leader V'mc.azt OJ-ia Administ1'1ltWt Offtw l>ubl-k: finance Raling& Financial Guaranty insurance Co. 125 Park A venue, 5th Floor New York, NY 10017 Standard & Poor's ~ .A J)fV(Si(m o/1'SIIMI.GraJP•HlllCrmpanic April s, 2002 Re: $6~120,000 City of Lubbock, T~s Gtmsral OhligQI.WnBonds1 Series 2002, d11.tod; FeiJI'UfU'Y 15, 2002, due: February 15, 2011 .. 2022, (POl1CY#02010328) Dear Ms. Whaley: This i.s to ad. vise you that we have changed the :rating to 'AAA' from • AA +' on the S\tbjeet bonds. The rating change Teflects our 9-SSessment of the likelihood of repayment of principal and interest based on the bond insurance policy your company is providing. When using the Standard & Poor's rating~ include the definition of the rating together with a statement that this may be changed, suspended or withdrawn as a result of changes ~ or unavailability of: information. This ratina is not a •-market rating", because it is not a recommendation to buy, hold or sell the obligations. If you have any queitions, please contac:t us. ms 32 - - - ISSUE PRICE CERTIFICATE The undersigned hereby certifies with respect to the sale of CITY OF LUBBOCK, TEXAS TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBUGATION, SERIES 2002 (the "Sewer Certificates"), issued in aggregate principal amount of$1,545,000, as follows: I. The undersigned is the underwriter or the manager of the syndicate of underwriters which has purchased the Sewer Certificates from the City ofLubbock, Texas (the "Issuer") at competitive sale. 2. The undersigned and/or one or more other members of the underwriting syndicate, if any, have made a bona fide offering to the public of the Sewer Certificates of each maturity at the respective prices set forth below. 3. The initial offering price (expressed as a percentage of principal amount or yield and exclusive of accrued interest) for the Sewer Certificates of each maturity at which a substantial amount of the Sewer Certificates of such maturity was sold to the public is as set forth below: Principal Offering Principal Offering Amount Year of Price Amount Year of Price Maturing Maturitx: (%/Yield) Maturing Maturitv (%/Yield) $ 5,000 2003 Lao % $ 80,000 2013 1...:\.~0 % 50,000 2004 ~.35 0/o 80,000 2014 -~~5;:a % 50,000 2005 ;). .eo % 85,000 2015 Si '~;). % 55,000 2006 ;3.15 % 90,000 2016 8<Jd.. % 55,000 2007 12· ±~ % 95,000 2017 4.~a % 60,000 2008 :-~. ~r<, % 100,000 2018 Y;.C1;1 % 60,000 2009 !l-ec-j % 110,000 2019 ;i,Q\ % 65,000 2010 +.oi..\. % 115,000 2020 5 .ci..\-% 70,000 2011 :! .\.3 % 120,000 2021 I f2 .tY1 % 75,000 2012 \4.,~ % 125,000 2022 .;s-; Dei % 4. The term "public," as used herein, means persons other than bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers. 5. The offering prices described above reflect current market prices at the time of such sales. 6. The undersigned and/or one or more other members of the underwriting syndicate, as the case may be, (have)(have not) purchased bond insurance for the Sewer Certificates. The bond insurance, if any, has been purchased :from (the "Insurer") for a premium cost of$ (net of any nonguarantee cost, e.g., rating agency fees). The amount of such cost is set furth in the Insurer's commitment and is separately stated from all other fees or charges payable to the Insurer. The premium does not exceed a reasonable charge for the transfer of credit risk taking into account payments charged by guarantors in comparable transactions (including transactions in which a guarantor has no involvement other than as a guarantor). The present value of the debt service savings expected to be realized as a result of such insurance, discounted at a rate equal to the yield on the Sewer Certificates which results after recovery of the insurance premium, exceeds the present value of the bond insurance premium. 7. The undersigned understands that the statements made herein will be relied upon by the Issuer in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986, as amended, on the excludability of interest on the Sewer Certificates from the gross income of their owners. EXECUTED and DELIVERED this~8 ~day of t~ .. br~.y:":'::J 2002. Q.8 C... 'J:>A 1 tJ {2A lJ. S. CJ..!. eJ2. I {t) C- By ~«Wri;~ \J fC:E: .Pt2.£s I 1)6~..,- (Title) - - - - - ISSUE PRICE CERTIFICATE The undersigned hereby certifies with respect to the sale of CITY OF UJBBOCK, TEXAS TAX AND WATERWORKS SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002 (the "Waterworks Certificates"), issued in aggregate principal amount of$6,450,000, as follows: l. The undersigned is the underwriter or the manager of the syndicate of underwriters which has purchased the Waterworks Certificates from the City of Lubbock, Texas (the "Issuer") at competitive sale. 2. The undersigned and/or one or more other members of the underwriting syndicate, if any, have made a bona fide offering to the public of the Waterworks Certificates of each maturity at the respective prices set forth below. 3. The initial offering price (expressed as a percentage of principal amount or yield and exclusive of accrued interest) for the Waterworks Certificates of each maturity at which a substantial amount of the Waterworks Certificates of such maturity was sold to the public is as set forth below: Principal Offering Principal Offering Amount Year of Price Amount Year of Price Maturing Maturi!:J: (o/o/Yield) Maturing Maturity (o/o/Yield) $ 15,000 2003 I ~~o % $ 325,000 2013 '-\-t..i.-0 % 200,000 2004 . ~~"3:;2 % 340,000 2014 -~-~~ % 210,000 2005 ,~.80 % 360,000 2015 .~.y,~ % 220,000 2006 -3. i5 % 380,000 2016 . ~ :?J. % 235,000 2007 :3,:1:5 % 405,000 2017 -~-~~ % 245,000 2008 :3-~8 % 425,000 2018 -~,q~ % 260,000 2009 ~3,gq % 450,000 2019 .. ~).c \ % 275,000 2010 . l\.. Q<4 % 475,000 2020 -~.c4-% 290,000 2011 . 4 .\,3 % 505,000 2021 5-~1 % 305,000 2012 4-.alc % 530,000 2022 .. !S ,ocl % 4. The term "public," as used herein, means persons other than bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers. 5. The offering prices described above reflect current market prices at the time of such sales. 6. The undersigned and/or one or more other members ofthe underwriting syndicate, as the case may be, (have)(have not) purchased bond insurance for the Waterworks Certificates. The bond insurance, if any, has been purchased from~-------- (the "Insurer") for a premium cost (net of any nonguarantee cost, e.g., rating agency fees). The amount of such cost is set forth in the Insurer's commitment and separately stated from all other fees or charges payable to the Insurer. The premium does not exceed a reasonable charge for the transfer of credit risk taking into account payments charged by guarantors in comparable transactions (including transactions in which a guarantor has no involvement other than as a guarantor). The present value of the debt service sayings expected to be realized as a result of such insurance, discounted at a rate equal to the yield on the Waterworks Certificates which results after recovery of the insurance premium, exceeds the present value of the bond insurance premium. 7. The undersigned understands that the statements made herein will be relied upon by the Issuer in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986, as amended, on the excludability of interest on the Waterworks Certificates from the gross income of their owners. EXECUTED and DELIVERED this dS;~ day of \i.bQ.y....r_•y 2002. /2.f:JC DA 110 /2.A U SCJ4£1J I ttJc_ (Name of Underwriter or Manager) By~~ \)ICE PtESI"/)E"f.J/ (Title) - - -I ' - ISSUE PRICE CERTIFICATE The undersigned hereby certifies with respect to the sale of CITY OF LUBBOCK, TEXAS GENERAL OBLIGATION BONDS, SERIES 2002 (the "Bonds"), issued in aggregate principal amount of$9,400,000, as follows: 1. The undersigned is the underwriter or the manager of the syndicate of underwriters which has purchased the Bonds ftom the City ofLubbock, Texas (the "Issuer") at competitive sale. 2. The undersigned and/or one or more other members of the underwriting syndicate, if any, have made a bona fide offering to the public of the Bonds of each maturity at the respective prices set forth below. 3. The initial offering price (expressed as a percentage of principal amount or yield and exclusive of accrued interest) for the Bonds of each maturity at which a substantial amount of the Bonds of such maturity was sold to the public is as set forth below: Principal Amount Maturing $ 20,000 285,000 305,000 320,000 340,000 360,000 380,000 400,000 425,000 445,000 Year of Maturity 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Offering Price ('Yo/Yield} \.10 % d..$:l. % d. .<§'J.. % 3.\'.5 % 3.1.\L, % 3JoJ % -an % ft.o"l. % '=\.r* % .1..\.';t'l.. % Principal Amount Maturing $ 470,000 500,000 525,000 555,000 590,000 620,000 655,000 695,000 735,000 775,000 Year of Maturitv 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Offering Price (%/Yield) y;;p5 % 4.~0 % 4 .lt() % '-\.10 % 4.S'o % 4 tt& % 11=95 % 5.00 % s.c3 % .:S:o5 % 4. The term "public," as used herein, means persons other than bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers. 5. The offering prices described above reflect current market prices at the time of such sales. 6. The undersigned and/or one or more other members of the underwriting syndicate, as the case may be, (have)(bave not) purchased bond insurance for the Bonds. The bond insurance, if any, has been purchased from (the "Insurer") for I( premium cost of$ (net of any nonguarantee cost, e.g., rating agency fees). The amount of such cost is set forth in the Insurer's commitment and is separately stated ftom all other fees or charges payable to the Insurer. The premium does not exceed a reasonable charge for the transfer of credit risk taking into account payments charged by guarantors in comparable transactions (including transactions in which a guarantor has no involvement other than as a guarantor). The present value of the debt service savings expected to be realized as a result of such insurance, discounted at a rate equal to the yield on the Bonds which results after recovery of the insurance premium, exceeds the present value of the bond insurance premium. 7. The undersigned understands that the statements made herein will be relied upon by the Issuer in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986, as amended, on the excludability of interest on the Bonds from the gross income of their owners. EXECUTED and DELIVERED this /1 b day of re..b .2002. By !f{f (Title) 33 - Form 8038-G (Rev. November 2000) Department of the Treasury lntemal Revenue Service Information Return for Tax·Exempt Governmental Obligations Jllo-Under Internal Revenue Code section 149(e) Jllo-See separate Instructions·. Caution: If the issue price is under $100,000, use Form 8038-GC. OMS ·No. 1545-0720 2. lssu7r's employer identification number 75 : 6000590 3 Number and street (or P.O. box if mail is not delivered to street address) Room/s~,;ite 5 Education 12 Health and hospital 13 Transportation _ 14 Public safety. 15 Environment (including sewage bonds) 16 0 Housing . 17 liD Utilities 0 Other. Describe IJIIo-----------=-----------------=- 23 Issue price of entire issue (enter amount from line 21, column (b)) 24 Proceeds used for bond issuance costs (including underwriters' discount) 25 Proceeds used for credit enhancement . 26 Proceeds allocated to reasonably required reserve or replacement fund 27 Proceeds used to currently refund prior issues 28 Proceeds used to advance refund prior issues Total (add lines 24 through 28) _ of the issue 31 Enter the remaining weighted average maturity of the bonds to be currently refunded Enter the remaining weighted average maturity of the bonds to be advance refunded Enter the last date on which the refunded bonds will be called E the the refunded bonds were issued IJIIo- Enter the amount of the state volume cap allocated to the issue under section 141 (b)(5) ..... ..... ..... 36a b 37 Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (see instructions) Enter the final maturity date of the guaranteed investment contract IJIIo----------- Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 4 Repon: number 3-22 6 Date of issue 2002 8 CUSIP number years years b If this issue is a loan made from the proceeds of another tax-exempt issue, check box .,_ 0 and enter the name of the 38 39 40 issuer IJIIo-and the date of the issue IJIIo- lf the issuer has designated the issue under section 265(b)(3)(B)(i)(lll) (small issuer exception), check box IJIIo-0 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box IJIIo-0 If the issuer has identified a hedge, check box IJIIo-0 Sign Here page 2 of the Instructions. Cat No. 63 77 35 Form 8038-G (Rev. 11-20CD) *blended yield ® - Form 8038-G (Rev. November 2000) Department of tr.e Treasury Internal Revenue Service Information Return for Tax-Exempt Governmental Obligations .,.. Under Internal Revenue Code section 149(e) OMB No. 1545-0720 .,.. See separate Instructions: Caution: If the issue price is under $100,000, use Form 8038-GC. Issuer's name City of Lubbock 2 Issuer's employer identification number 75 : 6000590 l Number and street (or P.O. box if mail is not delivered to street address) 1625 13th Street Room/suite 4 Report number J,.. 5 7 Education Zl!i' code Tax and Waterworks System Surplus Revenue Certificates Series 2001 12 Health and hospital 13 Transportation . 14 Public safety, 15 Environment (including sewage bonds) 16 Housing . 17 Utilities D Other. Describe ._ ----------==-----------------:= If obligations are TANs or RANs, check box ._ 0 If obligations are BANs, check box If are in the form of a lease or installment sale, check box Proceeds used for accrued interest . 23 Issue price of entire issue (enter amount from line 21, column (b)) 24 Proceeds used for bond issuance costs (including underwriters' discount) 25 Proceeds used for credit enhancement . 26 Proceeds allocated to reasonably required reserve or replacement fund 27 Proceeds used to currently refund prior issues Proceeds used to advance refund prior issues Total (add lines 24 through 28) . the 31 Enter the remaining weighted average maturity of the bonds to be currently refunded 32 Enter the remaining weighted average maturity of the bonds to be advance refunded 33 Enter the last date on which the refunded bonds will be called . 34 Enter the date(s) the refunded bonds were issued ._ 1 ::.F.li •' n Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section _141 (b)(S) 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (see instructions) b Enter the final maturity date of the guaranteed investment contract ._ 37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 6 Date of issue 35 36a ~ 37a years years b If this issue is a loan made from the proceeds of another tax-exempt issue. check box ._ D and enter the name of the 38 39 40 issuer ._ and the date of the issue ._ If the issuer has designated the issue under section 265(b)(3)(B)(i)(111) (small issuer exception), check box If the issuer has elected to pay a penalty in lieu of arbitrage rebate. check box If the issuer has identified a hedge, check box 1 that 1 have examined this return and accomPanying schedules and statements. and to the best of my knowledge complete. Sign Here JUL 0 9 2002 Beverly Hodges, ~~~~~~~~~~~--~~~--------------~----------~ Director of Finance Date , Type or print name and title For Pape ge 2 of the Instructions. Cat. No. 63773$ Form 8038-G (Rev. 11·2000) @ Form 8038-G (Rev. November 2000) Information Return for Tax-Exempt Governmental Obligations .,.. Under Internal Revenue Code section 149(e) OMS..No. 1545·0720 .,.. See separate Instructions. Caution: If the issue price is under $100,000, use Form 8038-GC. 2 Issuer's employer identification number 75 : 6000590 l Number and street (or P.O. box if mail is not delivered to street address) 1625 13th Street Room/suite 4 Report number 3:-23. 5 City, town, or post office, state, and ZIP code Lubbock, Texas 79401 ·' 7 Name of issue General Obligation Bonds, Series 2002 9 officer or legal representative whom the IRS may call For more information Director of Finance 12 Health and hospital 13 Transportation . 14 Public safety. 15 Environment (including sewage bonds) 16 0 Housing . 11 0 Utilities IX] Other. Describe ..,. Traffic control, streets, parks If obligations are TANs or RANs, check box ..,. 0 If obligations are BANs, check box If are in the form of a lease or installment sale. check box Proceeds used for accrued interest . 23 Issue price of entire issue (enter amount from line 21. column (b)) 24 Proceeds used for bond issuance costs (including underwriters' discount) 25 Proceeds used for credit enhancement . 26 Proceeds allocated to reasonably required reserve or replacement fund 27 Proceeds used to currently refund prior issues Proceeds used to advance refund prior issues Total (add lines 24 through 28) . ofth 31 Enter the remaining weighted average maturity of the bonds to be currently refunded Enter the remaining weighted average maturity of the bonds to be advance refunded Enter the last date on which the refunded bonds will be called . 35 36a b 37 Enter the the refunded bonds ..,. Enter the amount of the state volume cap allocated to the issue under section 141 (b){S) Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (see instructions) Enter the final maturity date of the guaranteed investment contract .. ---------- Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 6 Date of issue 8 years years b If this issue is a loan made from the proceeds of another tax-exempt issue, check box ..,. and enter the name of the 38 39 40 issuer ..,. and the date of the issue .. If the issuer has designated the issue under section 265(b)(3)(B)(i)(lll) (small issuer exception). check box If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box If the issuer has identified a hed e. check box ies of perjury, I declare that I have examined this return and accompanying schedules and statements. and to the best of my Knowledge ey are true. correct, and complete. Sign Here Cat. No. 637135 Form 8038-G (Rev. 11-2000) *blended yield