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HomeMy WebLinkAboutApril 9, 2002 AgendaAgenda 02-012 04/09/02 AGENDA CITY OF DENTON CITY COUNCIL April 9, 2002 After determining that a quorum is present, the City Council will convene in a Special Called Meeting of the City of Denton City Council on Tuesday, April 9, 2002 at 3:00 p.m. in the City Council Chambers of City Hall, 215 E. McKinney, Denton, Texas at which the following item will be considered: Consider adoption of an ordinance authorizing the issuance, sale and delivery of City of Denton Utility System Revenue Bonds, Series 2002, and approving and authorizing instruments and procedures relating thereto; and providing an effective date. Consider approval of a resolution of the City of Denton, Texas authorizing the City Manager or his designee to sign and transmit the authorization form to the Public Utility Commission of Texas to set the access line rate at the new CPI-Adjusted Maximum rate to be paid to the City by Certificated Telecommunications Providers pursuant to Chapter 283 of the Texas Local Government Code, ("HB 1777"), and providing an effective date. Following the completion of the Special Called Meeting, the City Council will convene into a Work Session at which the following item will be considered: 1. Receive a report and hold a discussion with DISD Youth in Government. Following the completion of the Work Session, the City Council will convene into a Planning Session on Tuesday, April 9, 2002 at 4:00 p.m., at which the following items will be considered: NOTE: A Planning Work Session is used to explore matters of interest to one or more City Council Members or the City Manager for the purpose of giving staff direction into whether or not such matters should be placed on a future regular or special meeting of the Council for citizen input, City Council deliberation and formal City a:tion. At a Planning Work Session, the City Council generally receives informal and preliminary reports and information from City staff, officials, members of City committees, and the individual or organization proposing council action, if invited by City Council or City Manager to participate in the session. Participation by individuals and members of organizations invited to speak ceases when the Mayor announces the session is being closed to public input. Although Planning Work Sessions are public meetings, and citizens have a legal right to attend, they are not public hearings, so citizens are not allowed to participate in the session unless invited to do so by the Mayor. Any citizen may supply to the City Council, prior to the beginning of the session, a written report regarding the citizen's opinion on the matter being explored. Should the Council direct the matter be placed on a regular meeting agenda, the staff will generally prepare a final report defining the proposed action, which will be made available to all citizens prior to the regular meeting at which citizen input is sought. The purpose of this procedure is to allow citizens attending the regular meeting the opportunity to hear the views of their fellow citizens without having to attend two meetings. Receive a report, hold a discussion, and give staff direction regarding the Downtown Master Plan. City of Denton City Council Agenda April 9, 2002 Page 2 Special Called Meeting of the City of Denton City Council on Tuesday, April 9, 2002 at 6:00 p.m. in the Council Chambers at City Hall, 215 E. McKinney Street, Demon, Texas at which the following items will be considered: Consider adoption of an ordinance authorizing the reimbursement of reasonable attorney fees, court costs, and legal expenses associated with a successful court challenge of the recall petition of Council Member Raymond Redmon. Hold a discussion and give staff direction regarding the review schedule for the rezoning petition filed by the City of Denton, proposing a change from a MF-1 zoning classification to an NR-3 zoning classification for the property located at 722 West Oak Street. CERTIFICATE I certify that the above notice of meeting was posted on the bulletin board at the City Hall of the City of Demon, Texas, on the day of ., 2002 o'clock (a.m.) (p.m.) CITY SECRETARY NOTE: THE CITY OF DENTON CITY COUNCIL WORK SESSION ROOM IS ACCESSIBLE IN ACCORDANCE WITH THE AMERICANS WITH DISABILITIES ACT. THE CITY WILL PROVIDE SIGN LANGUAGE iNTERPRETERS FOR THE HEARING IMPAIRED IF REQUESTED AT LEAST 48 HOURS iN ADVANCE OF THE SCHEDULED MEETING. PLEASE CALL THE CITY SECRETARY'S OFFICE AT 349-8309 OR USE TELECOMMUNICATIONS DEVICES FOR THE DEAF (TDD) BY CALLING 1-800- RELAY-TX SO THAT A SIGN LANGUAGE iNTERPRETER CAN BE SCHEDULED THROUGH THE CITY SECRETARY'S OFFICE. Agenda 02-012 04/09/02 SC 1 AGENDA DATE: DEPARTMENT: ACM: AGENDA INFORMATION SHEET April 9, 2002 Fiscal Operations Kathy DuBose, Fiscal and Municipal Services SUBJECT Consider adoption of an ordinance authorizing the issuance, sale, and delivery of City of DeNon Utility System Revenue Bonds, Series 2002, and approving and authorizing instruments and procedures relating thereto; and providing an effective date. BACKGROUND On April 9, 2002, David Medanich of First Southwest Company and Ted Brizzolara III of McCall, Parkhurst and Horton, will presem the underwriting company of the City of DeMon's Utility System Revenue Bonds, Series 2002. The $66 million (plus cost of issuance) in bonds will be issued to fund system improvemems, extensions, to make a deposit to the reserve fund, and to pay cost of issuance associated with the sale of bonds. PRIOR ACTION/REVIEW (Council, Boards, Commissions) The projects were previously approved in 2002-2006 Capital Improvemem Program (CIP). They were also reviewed by the Debt Managemem Committee Meeting at the February 13, 2002, meeting. FISCAL INFORMATION Payment for the Utility System Revenue Bonds, Series 2002 has been included in the debt service funding projections. Respectfully submitted: Diana G. Ortiz Director of Fiscal Operations ORDINANCE NO. 2002- ORDINANCE AUTHORIZING THE ISSUANCE, SALE, AND DELIVERY OF CITY OF DENTON UTILITY SYSTEM REVENUE BONDS, SERIES 2002, AND APPROVING AND AUTHORIZING INSTRUMENTS AND PROCEDURES RELATING THERETO; AND PROVIDING AN EFFECTIVE DATE THE STATE OF TEXAS : COUNTY OF DENTON : CITY OF DENTON : WHEREAS, the City of Denton, Texas, heretofore has duly issued the following revenue bonds: City of Denton Utility System Revenue Bonds, Series 1992, dated March 1, 1992; City of Denton Utility System Revenue Bonds, Series 1993, dated March 1, 1993; City of Denton Utility System Revenue Refunding Bonds, Series 1993-A, dated June 1, 1993; City of Demon Utility System Revenue Refunding Bonds, Taxable Series 1993-B, dated June 1, 1993; City of Denton Utility System Revenue Bonds, Series 1996, dated May 1, 1996; City of Denton Utility System Revenue Refunding Bonds, Series 1996-A, dated May 1, 1996; City of Denton Utility System Revenue Bonds, Series 1998, dated March 15, 1998; City of Denton Utility System Revenue Refunding Bonds, Series 1998A, dated July 15, 1998; City of Demon Utility System Revenue Refunding Bonds, Series 1998B, dated August 1, 1998; City of Denton Utility System Revenue Bonds, Series 2000A, dated April 15, 2000; City of Demon Utility System Revenue Bonds, Taxable Series 2000B, dated April 15, 2000; and City of Denton Utility System Revenue Refunding and Improvement Bonds, Series 2001, dated April 15, 2001; WHEREAS, the City Council of the City of Demon deems it necessary and advisable to authorize, issue, and deliver the additional Utility System Revenue Bonds hereinafter described; and Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 WHEREAS, the Series 2002 Bonds hereinafter authorized and described are to be issued, sold and delivered pursuant to Chapter 1502, Texas Government Code, the City's Home Rule Charter, and other applicable laws, NOW, THEREFORE THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: Section 1. AMOUNT AND PURPOSE OF THE BONDS. (a) The bond or bonds of the City of Denton, Texas (the "Issuer") are hereby authorized to be issued and delivered in the aggregate principal amount of $53,180,000, for the purpose of providing for improvements and extensions of the City of Denton Utility System, which consists of the City's Combined Waterworks, Sewer, and Electric Light and Power System, and shall be designated "City of Demon Utility System Revenue Bonds, Series 2002A" (the "Series 2002A Bonds"). (b) The bond or bonds of the City of Demon, Texas (the "Issuer") are hereby authorized to be issued and delivered in the aggregate principal amount of $13,045,000, for the purpose of providing for improvemems and extensions of the City of Denton Utility System, which consists of the City's Combined Waterworks, Sewer, and Electric Light and Power System, and shall be designated "City of Denton Utility System Revenue Bonds, Taxable Series 2002B" (the "Taxable Series 2002B Bonds"). Section 2. DESCRIPTION OF THE BONDS. (a) With respect to the Series 2002A Bonds, initially there shall be issued, sold, and delivered hereunder a single fully registered bond, without interest coupons, payable in installments of principal (the "Initial Series 2002A Bond"), but the Initial Series 2002A Bond may be assigned and transferred and/or converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, having serial maturities, and in the denomination or denomi- nations of $5,000 or any integral multiple of $5,000, all in the manner hereinafter provided. The term "Series 2002A Bonds" as used in this Ordinance shall mean and include collectively the Initial Series 2000A Bond and all substitute bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Series 2002A Bond" shall mean any of the Series 2002A Bonds. (b) With respect to the Taxable Series 2002B Bonds, initially there shall be issued, sold, and delivered hereunder a single fully registered bond, without interest coupons, payable in installments of principal (the "Initial Taxable Series 2002B Bond"), but the Initial Taxable Series 2002B Bond may be assigned and transferred and/or converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, having serial maturities, and in the denomination or denominations of $5,000 or any integral multiple of $5,000, all in the manner hereinafter provided. The term "Taxable Series 2000B Bonds" as used in this Ordinance shall mean and include collectively the Initial Taxable Series 2002B Bond and all substitute bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Taxable Series 2002B Bond" shall mean any of the Taxable Series 2002B Bonds. (c) the term "Initial Bonds" as used in this Ordinance shall mean and include collectively the Initial Series 2002A Bond and the Initial Taxable Series 2002B Bond, the term "Bonds" as used in this Ordinance shall mean and include collectively the Initial Bonds and all substitute bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Bond" shall mean any of the Bonds. Section 3. INITIAL DATE, DENOMINATION, NUMBER, MATURITIES, INITIAL REGISTERED OWNER, AND CHARACTERISTICS OF THE INITIAL BONDS. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 2 (a) (i) The Initial Series 2002A Bond is hereby authorized to be issued, sold, and delivered hereunder as a single fully registered Bond, without interest coupons, dated APRIL 1, 2002, in the denomination and aggregate principal amount of $53,180,000, numbered R-1, payable in annual installments of principal to the initial registered owner thereof, to-wit: or to the registered assignee or assignees of said Bond or any portion or portions thereof (in each case, the "registered owner"), with the annual installments of principal of the Initial Series 2002A Bond to be payable on the dates, respectively, and in the principal amounts, respectively, stated in the FORM OF INITIAL SERIES 2002A BOND set forth in this Ordinance. (ii) The Initial Taxable Series 2002B Bond is hereby authorized to be issued, sold, and delivered hereunder as a single fully registered Bond, without interest coupons, dated APRIL 1, 2002, in the denomination and aggregate principal amount of $13,045,000, numbered R-1, payable in annual installments of principal to the initial registered owner thereof, to-wit: or to the registered assignee or assignees of said Bond or any portion or portions thereof (in each case, the "registered owner"), with the annual installments of principal of the Initial Taxable Series 2002B Bond to be payable on the dates, respectively, and in the principal amounts, respectively, stated in the FORM OF INITIAL TAXABLE SERIES 2002B BOND set forth in this Ordinance. (b) The Initial Bonds (i) may and shall be prepaid or redeemed prior to the respective scheduled due dates of installments of principal thereof, (ii) may be assigned and transferred, (iii) may be converted and exchanged for other Bonds, (iv) shall have the characteristics, and (v) shall be signed and sealed, and the principal of and interest on the Initial Bonds shall be payable, all as provided, and in the manner required or indicated, in the FORMS OF INITIAL BONDS set forth in this Ordinance. Section 4. INTEREST. The unpaid principal balance of the Initial Bonds shall bear interest from the date of each Initial Bond to the respective scheduled due dates, or to the respective dates of prepayment or redemption, of the installments of principal of the Initial Bonds, and said interest shall be payable, all in the manner provided and at the rates and on the dates stated in the FORMS OF INITIAL BONDS set forth in this Ordinance. Section 5. FORMS OF INITIAL BONDS. The form of the Initial Bonds, including the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be endorsed on the Initial Bonds, shall be substantially as follows: FORM OF INITIAL SERIES 2000A BOND NO. R- 1 $53,180,000 UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF DENTON CITY OF DENTON UTILITY SYSTEM REVENUE BOND SERIES 2002A Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 3 THE CITY OF DENTON, in Denton County, Texas (the "Issuer"), being a political subdivision of the State of Texas, hereby promises to pay to or to the registered assignee or assignees of this Bond or any portion or portions hereof (in each case, the "registered owner") the aggregate principal amount of $53,180,000 (FIFTY THREE MILLION ONE HUNDRED EIGHTY THOUSAND DOLLARS) in annual installments of principal due and payable on December 1 in each of the years, and in the respective principal amounts, as set forth in the following schedule, and to pay interest, from the date of this Bond hereinafter stated, on the balance of each such installment of principal, respectively, from time to time remaining unpaid, at the rates as follows: PRINCIPAL INTEREST PRINCIPAL INTEREST YEAR AMOUNT RATE(%) YEAR AMOUNT RATE(%) 2002 $1,455,000 2012 $2,590,000 2003 1,545,000 2013 2,745,000 2004 1,635,000 2014 2,905,000 2005 1,735,000 2015 3,080,000 2006 1,835,000 2016 3,265,000 2007 1,945,000 2017 3,455,000 2008 2,055,000 2018 3,660,000 2009 2,185,000 2019 3,875,000 2010 2,310,000 2020 4,105,000 2011 2,450,000 2021 4,350,000 Interest shall first be due and payable on June 1, 2002, and semiannually on each June 1 and December 1 thereafter while this Bond or any portion hereof is outstanding and unpaid. Said interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months. THE INSTALLMENTS OF PRINCIPAL OF AND THE INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The installments of principal and the interest on this Bond are payable to the registered owner hereof through the services of BANK ONE, NATIONAL ASSOCIATION, AUSTIN, TEXAS, which is the "Paying Agent/Registrar" for this Bond. Payment of all principal of and interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each principal and/or interest payment date by check, dated as of such date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Bond (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such principal and/or interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared on the 15th day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. The Issuer covenants with the registered owner of this Bond that on or before each principal and/or interest payment date for this Bond it will make available to the Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 4 Paying Agent/Registrar, from the "Interest and Sinking Fund" maintained pursuant to the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on this Bond, when 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 Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (" SpecialPayment Date", which shall be fifteen (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 of a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the 15th business day next preceding the date of mailing of such notice. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND has been authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $53,180,000, for the purpose of providing for improvements and extensions of the City of Denton Utility System, which consists of the City's Combined Waterworks, Sewer, and Electric Light and Power System. ON DECEMBER 1, 2012, or on any date whatsoever thereafter, the unpaid installments of principal of this Bond may be prepaid or redeemed prior to their scheduled due dates, atthe option of the Issuer, with funds derived from any available source, as a whole, or in part, and, if in part, the particular portion of this Bond to be prepaid or redeemed shall be selected and designated by the Issuer (provided that a portion of this Bond may be redeemed only in an integral multiple of $5,000), at the prepayment or redemption price of the par or principal amount thereof, plus accrued interest to the date fixed for prepayment or redemption. [THE OUTSTANDING BONDS of this Series scheduled to mature on DECEMBER 1, __ are subject to mandatory redemption prior to their scheduled maturities, and shall be redeemed by the Issuer, in part, prior to their scheduled maturities, with the particular Bonds or portions thereof to be redeemed to be selected by the Paying Agent/Registrar at random, by lot or other customary method (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at a redemption price equal to the par or principal amount thereof and accrued interest to the date of redemption, on the dates, and in the principal amounts, respectively, as shown in the following schedule: December 1, Maturity Mandatory Redemption Dates Principal Amounts (maturity) Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 5 The principal amount of the Bonds required to be redeemed on the Mandatory Redemption Dates pursuant to the foregoing shall be reduced, at the option of the Issuer by the principalamount of any Bonds out of the maturity scheduled for December 1, __ which, at least 45 days prior to the aforesaid appropriate redemption date (1) shall have been acquired by the Issuer at a price not exceeding the principal amount of such Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (2) as shall have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to the Mandatory Sinking Fund redemption. ] AT LEAST 30 days prior to the date fixed for any such prepayment or redemption a written notice of such prepayment or redemption shall be mailed by the Paying Agent/Registrar to the registered owner hereof. By the date fixed for any such prepayment or redemption due provision shall be made by the Issuer with the Paying Agent/Registrar for the payment of the requked prepayment or redemption price for this Bond or the portion hereof which is to be so prepaid or redeemed, plus accrued interest thereon to the date fixed for prepayment or redemption. If such writtennotice of prepayment or redemption is given, and if due provision for such payment is made, all as provided above, this Bond, or the portion thereof which is to be so prepaid or redeemed, thereby automatically shall be treated as prepaid or redeemed prior to its scheduled due date, and shall not bear interest after the date fixed for its prepayment or redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the prepayment or redemption price plus accrued interest to the date fixed for prepayment or redemption from the Paying Agent/Registrar out of the funds provided for such payment. The Paying Agent/Registrar shall record in the Registration Books all such prepayments or redemptions of principal of this Bond or any portion hereof. THIS BOND, to the extent of the unpaid or unredeemed principal balance hereof, or any unpaid and unredeemed portion hereof in any integral mukiple of $5,000, may be assigned by the initial registered owner hereof and shall be transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for such transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar for cancellation, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment by the initial registered owner of this Bond, or any portion or portions hereof in any integral multiple of $5,000, to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be transferred and registered. Any instrument or instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any such portion or portions hereof by the initial registered owner hereof. A new bond or bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds) or to the initial registered owner as to any portion of this Bond which is not being assigned and transferred by the initial registered owner, shall be delivered by the Paying Agent/Registrar in conversion of and exchange for this Bond or any portion or portions hereof, but solely in the form and manner as provided in the next paragraph hereof for the conversion and exchange of this Bond or any portion hereof. The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. AS PROVIDED above and in the Bond Ordinance, this Bond, to the extent of the unpaid or unredeemed principal balance hereof, may be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the assignee or assignees duly designated in writing by the initial registered owner hereof, or to the initial registered owner as to any portion of this Bond which is not being assigned and transferred by the initial registered owner, in any denomination Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 6 or denominations in any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute bond issued in exchange for any portion of this Bond shall have a single stated principal maturity date), upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. If this Bond or any portion hereof is assigned and transferred or converted each bond issued in exchange for any portion hereof shall have a single stated principal maturity date corresponding to the due date of the installment of principal of this Bond or portion hereof for which the substitute bond is being exchanged, and shall bear interest at the rate applicable to and borne by such installment of principal or portion thereof. Such bonds, respectively, shall be subject to redemption prior to maturity on the same dates and for the same prices as the corresponding installment of principal of this Bond or portion hereof for which they are being exchanged. No such bond shall be payable in installments, but shall have only one stated principal maturity date. AS PROVIDED IN THE BOND ORDINANCE, THIS BOND IN ITS PRESENT FORM MAY BE ASSIGNED AND TRANSFERRED OR CONVERTED ONCE ONLY, and to one or more assignees, but the bonds issued and delivered in exchange for this Bond or any portion hereof may be assigned and transferred, and converted, subsequently, as provided in the Bond Ordinance. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging this Bond or any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make any such assignment, conversion, or exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for prepayment or redemption prior to maturity, within 45 days prior to its prepayment or redemption date. IN THE EVENT any Paying Agent/Registrar for this Bond is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owner of this Bond. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, sold, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond have been performed, existed, and been done in accordance with law; that this Bond is a special obligation of the Issuer, secured by and payable, together with other bonds, from a first lien on and pledge of the "Pledged Revenues", which include initially the "Net Revenues of the System" as such terms are defined in the Bond Ordinance, with the System consisting of the City's entire combined waterworks, sewer, and electric light and power system. THE ISSUER has reserved the right, subject to the restrictions stated in the Bond Ordinance, to issue Additional Bonds payable from and secured by a first lien on and pledge of the "Pledged Revenues" on a parity with this Bond. THE ISSUER also has reserved the right, subject to the restrictions stated in the Bond Ordinance, to amend the Bond Ordinance with the approval of the holders or owners of fifty-one percent in principal amount of all outstanding bonds which are secured by and payable from a first lien on and pledge of the Pledged Revenues. THE REGISTERED OWNER hereof shall never have the right to demand payment of this Bond or the interest hereon out of any funds raised or to be raised by taxation or from any source whatsoever other than specified in the Bond Ordinance. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 7 BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between the registered owner hereof and the Issuer. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 8 IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual or facsimile signature of the Mayor of the Issuer and countersigned and attested with the manual signature or facsimile of the City Secretary of the Issuer, has caused the official seal of the Issuer to be duly impressed on this Bond, and has caused this Bond to be dated April 1, 2002. ATTEST: CITY OF DENTON, TEXAS By: By: Jennifer Walters City Secretary, City of Denton, Texas (CITY SEAL) Euline Brock Mayor, City of Denton, Texas (BOND INSURANCE LEGEND, IF ANY) FORM OF REGISTRATION CERTIFICATE OF THE COMPTROLLER OF PUBLIC ACCOUNTS: COMPTROLLER'S REGISTRATION CERTIFICATE: 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 that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this (COMPTROLLER'S SEAL) Comptroller of Public Accounts of the State of Texas Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 9 NO. R-1 FORM OF INITIAL TAXABLE SERIES 2000B BOND UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF DENTON CITY OF DENTON UTILITY SYSTEM REVENUE BOND TAXABLE SERIES 2002B $13,045,000 THE CITY OF DENTON, in Demon County, Texas (the "Issuer"), being a political subdivision of the State of Texas, hereby promises to pay to or to the registered assignee or assignees of this Bond or any portion or portions hereof (in each case, the "registered owner") the aggregate principal amount of $13,045,000 (THIRTEEN MILLION FORTY FIVE THOUSAND DOLLARS) in annual installments of principal due and payable on December 1 in each of the years, and in the respective principal amounts, as set forth in the following schedule, and to pay interest, from the date of this Bond hereinafter stated, on the balance of each such installment of principal, respectively, from time to time remaining unpaid, at the rates as follows: PRINCIPAL INTEREST PRINCIPAL INTEREST YEAR AMOUNT RATE(%) YEAR AMOUNT RATE(%) 2002 $ 290,000 2012 $ 615,000 2003 315,000 2013 665,000 2004 340,000 2014 715,000 2005 365,000 2015 775,000 2006 395,000 2016 835,000 2007 425,000 2017 900,000 2008 455,000 2018 970,000 2009 495,000 2019 1,045,000 2010 530,000 2020 1,125,000 2011 575,000 2021 1,215,000 Interest shall first be due and payable on June 1, 2002, and semiannually on each June 1 and December 1 thereafter while this Bond or any portion hereof is outstanding and unpaid. Said interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months. THE INSTALLMENTS OF PRINCIPAL OF AND THE INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The installments of principal and the interest on this Bond are payable to the registered owner hereof through the services of BANK ONE, NATIONAL ASSOCIATION, AUSTIN, TEXAS, which is the "Paying Agent/Registrar" for this Bond. Payment of all principal of and interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each principal and/or interest payment date by check, dated as of such date, Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 10 drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Bond (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such principal and/or interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared on the 15th day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. The Issuer covenants with the registered owner of this Bond that on or before each principal and/or interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" maintained pursuant to the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on this Bond, when 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 Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (" SpecialPayment Date", which shall be fifteen (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 of a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the 15th business day next preceding the date of mailing of such notice. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND has been authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $13,045,000, for the purpose of providing for improvements and extensions of the City of Denton Utility System, which consists of the City's Combined Waterworks, Sewer, and Electric Light and Power System. ON DECEMBER 1, 2012, or on any date whatsoever thereafter, the unpaid installments of principal of this Bond may be prepaid or redeemed prior to their scheduled due dates, at the option of the Issuer, with funds derived from any available source, as a whole, or in part, and, if in part, the particular portion of this Bond to be prepaid or redeemed shall be selected and designated by the Issuer (provided that a portion of this Bond may be redeemed only in an integral multiple of $5,000), at the prepayment or redemption price of the par or principal amount thereof, plus accrued interest to the date fixed for prepayment or redemption. [THE OUTSTANDING BONDS of this Series scheduled to mature on DECEMBER 1, __ are subject to mandatory redemption prior to their scheduled maturities, and shall be redeemed by the Issuer, in part, prior to their scheduled maturities, with the particular Bonds or portions thereof to be redeemed to be selected by the Paying Agent/Registrar at random, by lot or other customary method (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at a redemption price equal to the par or principal amount thereof and accrued interest to the date of redemption, on the dates, and in the principal amounts, respectively, as shown in the following schedule: December 1, Maturity Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 11 Mandatory Redemption Dates Principal Amounts (maturity) The principal amount of the Bonds required to be redeemed on the Mandatory Redemption Dates pursuant to the foregoing shall be reduced, at the option of the Issuer by the principal amount of any Bonds out of the maturity scheduled for December 1, __ which, at least 45 days prior to the aforesaid appropriate redemption date (1) shall have been acquked by the Issuer at a price not exceeding the principal amount of such Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (2) as shall have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to the Mandatory Sinking Fund redemption. ] AT LEAST 30 days prior to the date fixed for any such prepayment or redemption a written notice of such prepayment or redemption shall be mailed by the Paying Agent/Registrar to the registered owner hereof. By the date fixed for any such prepayment or redemption due provision shall be made by the Issuer with the Paying Agent/Registrar for the payment of the required prepayment or redemption price for this Bond or the portion hereof which is to be so prepaid or redeemed, plus accrued interest thereon to the date fixed for prepayment or redemption. If such writtennotice of prepayment or redemption is given, and if due provision for such payment is made, all as provided above, this Bond, or the portion thereof which is to be so prepaid or redeemed, thereby automatically shall be treated as prepaid or redeemed prior to its scheduled due date, and shall not bear interest after the date fixed for its prepayment or redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the prepayment or redemption price plus accrued interest to the date fixed for prepayment or redemption from the Paying Agent/Registrar out of the funds provided for such payment. The Paying Agent/Registrar shall record in the Registration Books all such prepayments or redemptions of principal of this Bond or any portion hereof. THIS BOND, to the extent of the unpaid or unredeemed principal balance hereof, or any unpaid and unredeemed portion hereof in any integral multiple of $5,000, may be assigned by the initial registered owner hereof and shall be transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for such transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar for cancellation, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment by the initial registered owner of this Bond, or any portion or portions hereof in any integral mukiple of $5,000, to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be transferred and registered. Any instrument or instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any such portion or portions hereof by the initial registered owner hereof. A new bond or bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds) or to the initial registered owner as to any portion of this Bond which is not being assigned and transferred by the initial registered owner, shall be delivered by the Paying Agent/Registrar in conversion of and exchange for this Bond or any portion or portions hereof, but solely in the form and manner as provided in the next paragraph hereof for the conversion and exchange of this Bond or any portion hereof. The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 12 AS PROVIDED above and in the Bond Ordinance, this Bond, to the extent of the unpaid or unredeemed principal balance hereof, may be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the assignee or assignees duly designated in writing by the initial registered owner hereof, or to the initial registered owner as to any portion of this Bond which is not being assigned and transferred by the initial registered owner, in any denomination or denominations in any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute bond issued in exchange for any portion of this Bond shall have a single stated principal maturity date), upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. If this Bond or any portion hereof is assigned and transferred or converted each bond issued in exchange for any portion hereof shall have a single stated principal maturity date corresponding to the due date of the installment of principal of this Bond or portion hereof for which the substitute bond is being exchanged, and shall bear interest at the rate applicable to and borne by such installment of principal or portion thereof. Such bonds, respectively, shall be subject to redemption prior to maturity on the same dates and for the same prices as the corresponding installment of principal of this Bond or portion hereof for which they are being exchanged. No such bond shall be payable in installments, but shall have only one stated principal maturity date. AS PROVIDED IN THE BOND ORDINANCE, THIS BOND IN ITS PRESENT FORM MAY BE ASSIGNED AND TRANSFERRED OR CONVERTED ONCE ONLY, and to one or more assignees, but the bonds issued and delivered in exchange for this Bond or any portion hereof may be assigned and transferred, and converted, subsequently, as provided in the Bond Ordinance. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging this Bond or any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make any such assignment, conversion, or exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for prepayment or redemption prior to maturity, within 45 days prior to its prepayment or redemption date. IN THE EVENT any Paying Agent/Registrar for this Bond is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owner of this Bond. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, sold, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond have been performed, existed, and been done in accordance with law; that this Bond is a special obligation of the Issuer, secured by and payable, together with other bonds, from a first lien on and pledge of the "Pledged Revenues", which include initially the "Net Revenues of the System" as such terms are defined in the Bond Ordinance, with the System consisting of the City's entire combined waterworks, sewer, and electric light and power system. THE ISSUER has reserved the right, subject to the restrictions stated in the Bond Ordinance, to issue Additional Bonds payable from and secured by a first lien on and pledge of the "Pledged Revenues" on a parity with this Bond. THE ISSUER also has reserved the right, subject to the restrictions stated in the Bond Ordinance, to amend the Bond Ordinance with the approval of the holders or owners of fifty-one percent in principal Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 13 amount of all outstanding bonds which are secured by and payable from a first lien on and pledge of the Pledged Revenues. THE REGISTERED OWNER hereof shall never have the right to demand payment of this Bond or the interest hereon out of any funds raised or to be raised by taxation or from any source whatsoever other than specified in the Bond Ordinance. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between the registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual or facsimile signature of the Mayor of the Issuer and countersigned and attested with the manual signature or facsimile of the City Secretary of the Issuer, has caused the official seal of the Issuer to be duly impressed on this Bond, and has caused this Bond to be dated April 1, 2002. ATTEST: CITY OF DENTON, TEXAS By: By: Jennifer Walters City Secretary, City of Denton, Texas (CITY SEAL) Euline Brock Mayor, City of Denton, Texas (BOND INSURANCE LEGEND, IF ANY) FORM OF REGISTRATION CERTIFICATE OF THE COMPTROLLER OF PUBLIC ACCOUNTS: COMPTROLLER'S REGISTRATION CERTIFICATE: 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 that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this (COMPTROLLER'S SEAL) Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 Comptroller of Public Accounts of the State of Texas 14 Section 6. ADDITIONAL CHARACTERISTICS OF THE BONDS. Registration and Transfer. (a) The Issuer shall keep or cause to be kept at the Austin, Texas, corporate trust office of BANK ONE, NATIONAL ASSOCIATION (the "Paying Agent/Registrar") books or records of the registration and transfer of the Bonds (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such transfers and registrations under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such transfers and registrations as herein provided. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The Issuer shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. Registration of each Bond may be transferred in the Registration Books only upon presentation and surrender of such Bond to the Paying Agent/Registrar for transfer of registration and cancellation, together with proper written instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing (i) the assignment of the Bond, or any portion thereof in any integral multiple of $5,000, to the assignee or assignees thereof, and (ii) the right of such assignee or assignees to have the Bond or any such portion thereof registered in the name of such assignee or assignees. Upon the assignment and transfer of any Bond or any portion thereof, a new substitute Bond or Bonds of the same Series shall be issued in conversion and exchange therefor in the manner herein provided. The Initial Bonds, to the extent of the unpaid or unredeemed principal balance thereof, may be assigned and transferred by the initial registered owner thereof once only, and to one or more assignees designated in writing by the initial registered owner thereof. All Bonds issued and delivered in conversion of and exchange for the Initial Bond shall be in any denomination or denominations of any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated principal maturity date), shall be in the form prescribed for such Series in the FORMS OF SUBSTITUTE BONDS set forth in this Ordinance, and shall have the characteristics, and may be assigned, transferred, and converted as hereinafter provided. If the Initial Bond or any portion thereof is assigned and transferred or converted the Initial Bond must be surrendered to the Paying Agent/Registrar for cancellation, and each Bond issued in exchange for any portion of the Initial Bond shall have a single stated principal maturity date, and shall not be payable in installments; and each such Bond shall have a principal maturity date corresponding to the due date of the installment of principal or portion thereof for which the substitute Bond is being exchanged; each such Bond shall bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged and each such Bond shall be of the same Series. If only a portion of the Initial Bond is assigned and transferred, there shall be delivered to and registered in the name of the initial registered owner substitute Bonds of the same Series in exchange for the unassigned balance of the Initial Bond in the same manner as if the initial registered owner were the assignee thereof. If any Bond or portion thereof other than the Initial Bond is assigned and transferred or converted each Bond issued in exchange therefor shall be of the same Series, have the same principal maturity date and bear interest at the same rate as the Bond for which it is exchanged. A form of assignment shall be printed or endorsed on each Bond, excepting the Initial Bonds, which shall be executed by the registered owner or its duly authorized attorney or representative to evidence an assignment thereof. Upon surrender of any Bonds or any portion or portions thereof for transfer of registration, an authorized representative of the Paying Agent/Registrar shall make such transfer in the Registration Books, and shall deliver a new fully registered substitute Bond or Bonds of the same Series, having the characteristics herein described, payable to such assignee or assignees (which then will be the registered owner or owners of such new Bond or Bonds), or to the previous registered owner in case only Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 15 a portion of a Bond is being assigned and transferred, all in conversion of and exchange for said assigned Bond or Bonds or any portion or portions thereof, in the same form and manner, and with the same effect, as provided in Section 6(d), below, for the conversion and exchange of Bonds by any registered owner of a Bond. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such transfer and delivery of a substitute Bond or Bonds, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make transfers of registration of any Bond or any portion thereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. (b) Ownership of Bonds. The entity in whose name any Bond shall be registered in the Registration Books at any time shall be deemed and treated as the absolute owner thereof for all purposes of this Ordinance, whether or not such Bond shall be overdue, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary; and payment of, or on account of, the principal of, premium, if any, and interest on any such Bond shall be made only to such registered owner. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. (c) Payment of Bonds and Interest. The Issuer hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Bonds, and to act as its agent to convert and exchange or replace Bonds, all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all payments made by the Issuer and the Paying Agent/Registrar with respect to the Bonds, and of all conversions and exchanges of Bonds, and all replacements of Bonds, as provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the SpecialRecord Date and of the scheduled payment date of the past due interest ("Special Payment Date", which shall be fifteen (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 of a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the 15th business day next preceding the date of mailing of such notice. (d) Conversion and Exchange or Replacement; Authentication. Each Bond issued and delivered pursuant to this Ordinance, to the extent of the unpaid or unredeemed principal balance or principal amount thereof, may, upon surrender of such Bond at the principal corporate trust office of the Paying Agent/Registrar, together with a written request therefor duly executed by the registered owner or the assignee or assignees thereof, or its or their duly authorized attorneys or representatives, with guarantee of signatures satisfactory to the Paying Agent/Registrar, may, at the option of the registered owner or such assignee or assignees, as appropriate, be converted into and exchanged for fully registered bonds of the same Series, without interest coupons, in the form prescribed for such Series in the FORMS OF SUBSTITUTE BOND S set forth in this Ordinance, in the denomination of $5,000, or any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated maturity date), as requested in writing by such registered owner or such assignee or assignees, in an aggregate principal amount equal to the unpaid or unredeemed principal balance or principal amount of any Bond or Bonds so surrendered, and payable to the appropriate registered owner, assignee, or assignees, as the case may be. If the Initial Bond is assigned and transferred or converted each substitute Bond issued in exchange for any Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 16 portion of the Initial Bond be of the same Series, shall have a single stated principal maturity date, and shall not be payable in installments; each such Bond shall have a principal maturity date corresponding to the due date of the installment of principal or portion thereof for which the substitute Bond is being exchanged; and each such Bond shall bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged and each such Bond shall be of the same Series. If a portion of any Bond (other than the Initial Bond) shall be redeemed prior to its scheduled maturity as provided herein, a substitute Bond or Bonds be of the same Series having the same maturity date, bearing interest at the same rate, in the denomination or denominations of any integral multiple of $5,000 at the request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon surrender thereof for cancellation. If any Bond or portion thereof (other than the Initial Bond) is assigned and transferred or converted, each Bond issued in exchange therefor shall be of the same Series, have the same principal maturity date and bear interest at the same rate as the Bond for which it is being exchanged. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. The Paying Agent/Registrar shall convert and exchange or replace Bonds as provided herein, and each fully registered bond delivered in conversion of and exchange for or replacement of any Bond or portion thereof as permitted or required by any provision of this Ordinance shall constitute one of the Bonds for all purposes of this Ordinance, and may again be converted and exchanged or replaced. It is specifically provided that any Bond authenticated in conversion of and exchange for or replacement of another Bond on or prior to the first scheduled Record Date for the InitialBond shall bear interest from the date of the Initial Bond, but each substitute Bond so authenticated after such first scheduled Record Date shall bear interest from the interest payment date next preceding the date on which such substitute Bond was so authenticated, unless such Bond is authenticated after any Record Date but on or before the next following interest payment date, in which case it shall bear interest from such next following interest payment date; provided, however, that if at the time of delivery of any substitute Bond the interest on the Bond for which it is being exchanged is due but has not been paid, then such Bond shall bear interest from the date to which such interest has been paid in full. THE INITIAL BONDS issued and delivered pursuant to this Ordinance is not required to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each substitute Bond issued in conver- sion of and exchange for or replacement of any Bond or Bonds issued under this Ordinance there shall be printed a certificate, in the form substantially as follows: "PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described in this Bond; and that this Bond has been issued in conversion of and exchange for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. BANK ONE, NATIONAL ASSOCIATION Paying Agent/Registrar Dated By Authorized Representative" An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Bond, date and manually sign the above Certificate, and no such Bond shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying Agent/Registrar promptly shall cancel all Bonds surrendered for conversion and exchange or replacement. No additional ordinances, orders, or resolutions need be passed or adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 17 conversion and exchange or replacement of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein. Pursuant to Chapter 1201, Texas Government Code, the duty of conversion and exchange or replacement of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of the above Paying Agent/Registrar's Authentication Certificate, the converted and exchanged or replaced Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Initial Bond which originally was issued pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging any Bond or any portion thereof, but the one requesting any such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying Agent/Registrar shall not be required to make any such conversion and exchange or replacement of Bonds or any portion thereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. (e) In General. All Bonds issued in conversion and exchange or replacement of any other Bond or portion thereof, (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the registered owners thereof, (ii) may and shall be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Bonds of the same Series, (v) shall have the characteristics, (vi) shall be signed and sealed, and (vii) the principal of and interest on the Bonds shall be payable, all as provided, and in the manner required or indicated, in the FORMS OF SUBSTITUTE BONDS set forth in this Ordinance. (f) Payment of Fees and Charges. The Issuer hereby covenants with the registered owners of the Bonds that it will (i) pay the standard or customary fees and charges of the Paying Agent/Registrar for its services with respect to the payment of the principal of and interest on the Bonds, when due, and (ii) pay the fees and charges of the Paying Agent/Registrar for services with respect to the transfer of registration of Bonds, and with respect to the conversion and exchange of Bonds solely to the extent above provided in this Ordinance. (g) Substitute Paying Agent/Registrar. The Issuer covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services of Paying Agent/Registrar for the Bonds under this Ordinance, and that the Paying Agent/Registrar will be one entity. The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or other- wise cease to act as such, the Issuer covenants that it will promptly appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar shall promptly transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Bonds, by United States mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/Registrar. By Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 18 accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. Section 7. FORMS OF SUBSTITUTE BONDS. The form of all Bonds issued in conversion and exchange or replacement of any other Bond or portion thereof, including the form of Paying Agent/Registrar's Certificate to be printed on each of such Bonds, and the Form of Assignment to be printed on each of the Bonds, shall be, respectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance. FORM OF SUBSTITUTE SERIES 2002A BOND NO. UNITED STATES OF AMERICA PRINCIPAL AMOUNT STATE OF TEXAS $ COUNTY OF DENTON CITY OF DENTON UTILITY SYSTEM REVENUE BOND SERIES 2002A INTEREST MATURITY ORIGINAL DATE RATE DATE OF ISSUE CUSIP NO. % APRIL 1, 2002 (the ON THE MATURITY DATE specified above the CITY OF DENTON, in Denton County, Texas "Issuer"), being a political subdivision of the State of Texas, hereby promises to pay to ., or to the registered assignee hereof (either being hereinafter called the "registered owner") the principal amount of and to pay interest thereon from April 1, 2002, to the maturity date specified above, or the date of redemption prior to maturity, at the interest rate per annum specified above; with interest being first due and payable on June 1, 2002, and semiannually on each June 1 and December 1 thereafter, except that if the date of authenti- cation of this Bond is later than the first Record Date (hereinafter defined), such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date (hereinafter defined) but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date. Said interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity, at the Austin, Teaxs, corporate trust office of BANK ONE, NATIONAL ASSOCIATION, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 19 from, funds of the Issuer required by the ordinance authorizing the issuance of the Bonds (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared at the close of business on the 15th day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. However, the payment of such interest may be made by any other method acceptable to the Paying Agent/Registrar and requested by, and at the risk and expense of, the registered owner hereof. Any accrued interest due upon the redemption of this Bond prior to maturity as provided herein shall be paid to the registered owner at the principal corporate trust office of the Paying Agent/Registrar upon presentation and surrender of this Bond for redemption and payment at the principal corporate trust office of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Bond that on or before each principal payment date, interest payment date, and accrued interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when 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 Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (" SpecialPayment Date", which shall be fifteen (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 of a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the 15th business day next preceding the date of mailing of such notice. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one of a series of Bonds initially dated April 1, 2002, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $53,180,000, for the purpose of providing for improvements and extensions of the City of Denton Utility System, which consists of the City's Combined Waterworks, Sewer, and Electric Light and Power System. ON DECEMBER 1, 2012, or on any date whatsoever thereafter, the Bonds of this Series may be redeemedprior to their scheduled maturities, at the option of the Issuer, with funds derived from any available and lawful source, as a whole, or in part, and, if in part, the particular Bonds, or portions thereof, to be redeemed shall be selected and designated by the Issuer (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at the redemption price of the par or principal amount thereof, plus accrued interest to the date fixed for redemption. [THE OUTSTANDING BONDS of this Series scheduled to mature on DECEMBER 1, __ are subject to mandatory redemption prior to their scheduled maturities, and shall be redeemed by the Issuer, in part, prior to their scheduled maturities, with the particular Bonds or portions thereof to be redeemed to be Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 20 selected by the Paying Agent/Registrar at random, by lot or other customary method (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at a redemption price equal to the par or principal amount thereof and accrued interest to the date of redemption, on the dates, and in the principal amounts, respectively, as shown in the following schedule: December 1, Maturity Mandatory Redemption Dates Principal Amounts (maturity) The principal amount of the Bonds required to be redeemed on the Mandatory Redemption Dates pursuant to the foregoing shall be reduced, at the option of the Issuer by the principal amount of any Bonds out of the maturity scheduled for December 1, __ which, at least 45 days prior to the aforesaid appropriate redemption date (1) shall have been acquked by the Issuer at a price not exceeding the principal amount of such Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (2) as shall have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to the Mandatory Sinking Fund redemption. ] AT LEAST 30 days prior to the date fixed for any redemption of Bonds or portions thereof prior to maturity a written notice of such redemption shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, at least 30 days prior to the date fixed for any such redemption, to the registered owner of each Bond to be redeemed at its address as it appeared on the 45th day prior to such redemption date and to major securities depositories, national bond rating agencies and bond information services; provided, however, that the failure of the registered owner to receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond. By the date fixed for any such redemption due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof that are to be so redeemed. If such written notice of redemption is sent and if due provision for such payment is made, all as provided above, the Bonds or portions thereof that are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Bond shall be redeemed, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral mukiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Bond Ordinance. THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL MULTIPLE OF $5,000 may be assigned and shall be transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be transferred and Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 21 registered. The form of Assignment printed or endorsed on this Bond shall be executed by the registered owner or its duly authorized attorney or representative, to evidence the assignment hereof. A new Bond or Bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds), or to the previous registered owner in the case of the assignment and transfer of only a portion of this Bond, may be delivered by the Paying Agent/Registrar in conversion of and exchange for this Bond, all in the form and manner as provided in the next paragraph hereof for the conversion and exchange of other Bonds. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such transfer, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make transfers of registration of this Bond or any portion hereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Bond Ordinance, this Bond, or any unredeemed portion hereof, may, at the request of the registered owner or the assignee or assignees hereof, be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the appropriate registered owner, assignee, or assignees, as the case may be, having the same maturity date, and bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000 as requested in writing by the appropriate registered owner, assignee, or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging any Bond or any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying Agent/Registrar shall not be required to make any such conversion and exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for redemption prior to matur- ity, within 45 days prior to its redemption date. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and will promptly cause written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, sold, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond have been performed, existed, and been done in accordance with law; that this Bond is a special obligation of the Issuer, secured by and payable, together with other bonds, from a first lien on and pledge of the "Pledged Revenues", which include initially the "Net Revenues of the System", as such terms are defined in the Bond Ordinance, with the System consisting of the City's entire combined waterworks, sewer, and electric light and power system. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 22 THE ISSUER has reserved the right, subject to the restrictions stated in the Bond Ordinance, to issue Additional Bonds payable from and secured by a first lien on and pledge of the "Pledged Revenues" on a parity with this Bond and series of which it is a part. THE ISSUER also has reserved the right, subject to the restrictions stated in the Bond Ordinance, to amend the Bond Ordinance with the approval of the holders or owners of fifty-one percent in principal amount of all outstanding bonds which are secured by and payable from a first lien on and pledge of the Pledged Revenues. THE REGISTERED OWNER hereof shall never have the right to demand payment of this Bond or the interest hereon out of any funds raised or to be raised by taxation or from any source whatsoever other than specified in the Bond Ordinance. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between each registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual or facsimile signature of the Mayor of the Issuer and countersigned and attested with the manual or facsimile signature of the City Secretary of the Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Bond. ATTEST: CITY OF DENTON, TEXAS By: By: Jennifer Walters City Secretary, City of Denton, Texas (CITY SEAL) Euline Brock Mayor, City of Denton, Texas FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described in this Bond; and that this Bond has been issued in conversion of and exchange for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. BANK ONE, NATIONAL ASSOCIATION Paying Agent/Registrar Dated By. Authorized Representative Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 23 (BOND INSURANCE LEGEND, IF ANY) FORM OF ASSIGNMENT: ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered owner of this Bond, or duly authorized representative or attorney thereof, hereby assigns this Bond to / / (Assignee's Social Security or Taxpayer Identification Number) (print or typewrite Assignee's name and address, including zip code) and hereby irrevocably constitutes and appoints attorney to transfer the registration of this Bond on the Paying Agent/Registrar's Registration Books with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by an eligible guarantor institution participating in a securities transfer association recognized signature guarantee program. Registered Owner NOTICE: This signature must correspond with the name of the Registered Owner appearing on the face of this Certificate in every particular without alteration or enlargement or any change whatsoever. FORM OF SUBSTITUTE TAXABLE SERIES 2002B BOND NO. UNITED STATES OF AMERICA PRINCIPAL AMOUNT STATE OF TEXAS $ COUNTY OF DENTON CITY OF DENTON UTILITY SYSTEM REVENUE BOND TAXABLE SERIES 20020B INTEREST MATURITY ORIGINAL DATE RATE DATE OF ISSUE CUSIP NO. APRIL 1, 2002 Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 24 (the ON THE MATURITY DATE specified above the CITY OF DENTON, in Denton County, Texas "Issuer"), being a political subdivision of the State of Texas, hereby promises to pay to , or to the registered assignee hereof (either being hereinafter called the "registered owner") the principal amount of and to pay interest thereon from April 1, 2002, to the maturity date specified above, or the date of redemption prior to maturity, at the interest rate per annum specified above; with interest being first due and payable on June 1, 2002, and semiannually on each June 1 and December 1 thereafter, except that if the date of authenti- cation of this Bond is later than the first Record Date (hereinafter defined), such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date (hereinafter defined) but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date. Said interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity, at the Austin, Texas, corporate trust office of BANK ONE, NATIONAL ASSOCIATION, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of the Bonds (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared at the close of business on the 15th day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. However, the payment of such interest may be made by any other method acceptable to the Paying Agent/Registrar and requested by, and at the risk and expense of, the registered owner hereof. Any accrued interest due upon the redemption of this Bond prior to maturity as provided herein shall be paid to the registered owner at the principal corporate trust office of the Paying Agent/Registrar upon presentation and surrender of this Bond for redemption and payment at the principal corporate trust office of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Bond that on or before each principal payment date, interest payment date, and accrued interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when 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 Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (" SpecialPayment Date", which shall be fifteen (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 Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 25 the address of each Holder of a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the 15th business day next preceding the date of mailing of such notice. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one of a series of Bonds initially dated April 1, 2002, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $13,045,000, for the purpose of providing for improvements and extensions of the City of Denton Utility System, which consists of the City's Combined Waterworks, Sewer, and Electric Light and Power System. ON DECEMBER 1, 2012, or on any date whatsoever thereafter, the Bonds of this Series may be redeemedprior to their scheduled maturities, at the option of the Issuer, with funds derived from any available and lawful source, as a whole, or in part, and, if in part, the particular Bonds, or portions thereof, to be redeemed shall be selected and designated by the Issuer (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at the redemption price of the par or principal amount thereof, plus accrued interest to the date fixed for redemption. [THE OUTSTANDING BONDS of this Series scheduled to mature on DECEMBER 1, __ are subject to mandatory redemption prior to their scheduled maturities, and shall be redeemed by the Issuer, in part, prior to their scheduled maturities, with the particular Bonds or portions thereof to be redeemed to be selected by the Paying Agent/Registrar at random, by lot or other customary method (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at a redemption price equal to the par or principal amount thereof and accrued interest to the date of redemption, on the dates, and in the principal amounts, respectively, as shown in the following schedule: December 1, Maturity Mandatory Redemption Dates Principal Amounts (maturity) The principal amount of the Bonds required to be redeemed on the Mandatory Redemption Dates pursuant to the foregoing shall be reduced, at the option of the Issuer by the principal amount of any Bonds out of the maturity scheduled for December 1, __ which, at least 45 days prior to the aforesaid appropriate redemption date (1) shall have been acquked by the Issuer at a price not exceeding the principal amount of such Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, or (2) as shall have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to the Mandatory Sinking Fund redemption. ] AT LEAST 30 days prior to the date fixed for any redemption of Bonds or portions thereof prior to maturity a written notice of such redemption shall be sent by the Paying Agent/Registrar by United States Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 26 mail, first-class postage prepaid, at least 30 days prior to the date fixed for any such redemption, to the registered owner of each Bond to be redeemed at its address as it appeared on the 45th day prior to such redemption date and to major securities depositories, national bond rating agencies and bond information services; provided, however, that the failure of the registered owner to receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond. By the date fixed for any such redemption due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof that are to be so redeemed. If such written notice of redemption is sent and if due provision for such payment is made, all as provided above, the Bonds or portions thereof that are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Bond shall be redeemed, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Bond Ordinance. THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL MULTIPLE OF $5,000 may be assigned and shall be transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be transferred and registered. The form of Assignment printed or endorsed on this Bond shall be executed by the registered owner or its duly authorized attorney or representative, to evidence the assignment hereof. A new Bond or Bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds), or to the previous registered owner in the case of the assignment and transfer of only a portion of this Bond, may be delivered by the Paying Agent/Registrar in conversion of and exchange for this Bond, all in the form and manner as provided in the next paragraph hereof for the conversion and exchange of other Bonds. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such transfer, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make transfers of registration of this Bond or any portion hereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Bond Ordinance, this Bond, or any unredeemed portion hereof, may, at the request of the registered owner or the assignee or assignees hereof, be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the appropriate registered owner, assignee, or assignees, as the Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 27 case may be, having the same maturity date, and bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000 as requested in writing by the appropriate registered owner, assignee, or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging any Bond or any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying Agent/Registrar shall not be required to make any such conversion and exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for redemption prior to matur- ity, within 45 days prior to its redemption date. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and will promptly cause written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, sold, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond have been performed, existed, and been done in accordance with law; that this Bond is a special obligation of the Issuer, secured by and payable, together with other bonds, from a first lien on and pledge of the "Pledged Revenues", which include initially the "Net Revenues of the System", as such terms are defined in the Bond Ordinance, with the System consisting of the City's entire combined waterworks, sewer, and electric light and power system. THE ISSUER has reserved the right, subject to the restrictions stated in the Bond Ordinance, to issue Additional Bonds payable from and secured by a first lien on and pledge of the "Pledged Revenues" on a parity with this Bond and series of which it is a part. THE ISSUER also has reserved the right, subject to the restrictions stated in the Bond Ordinance, to amend the Bond Ordinance with the approval of the holders or owners of fifty-one percent in principal amount of all outstanding bonds which are secured by and payable from a first lien on and pledge of the Pledged Revenues. THE REGISTERED OWNER hereof shall never have the right to demand payment of this Bond or the interest hereon out of any funds raised or to be raised by taxation or from any source whatsoever other than specified in the Bond Ordinance. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between each registered owner hereof and the Issuer. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 28 IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual or facsimile signature of the Mayor of the Issuer and countersigned and attested with the manual or facsimile signature of the City Secretary of the Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Bond. ATTEST: CITY OF DENTON, TEXAS By: By: Jennifer Walters City Secretary, City of Denton, Texas (CITY SEAL) Euline Brock Mayor, City of Denton, Texas FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described in this Bond; and that this Bond has been issued in conversion of and exchange for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. BANK ONE, NATIONAL ASSOCIATION Paying Agent/Registrar Dated By. Authorized Representative (BOND INSURANCE LEGEND, IF ANY) Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 29 FORM OF ASSIGNMENT: ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered owner of this Bond, or duly authorized representative or attorney thereof, hereby assigns this Bond to / / (Assignee's Social Security or Taxpayer Idemification Number) (print or typewrite Assignee's name and address, including zip code) and hereby irrevocably constitutes and appoints attorney to transfer the registration of this Bond on the Paying Agent/Registrar's Registration Books with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by an eligible guarantor institution participating in a securities transfer association recognized signature guarantee program. Registered Owner NOTICE: This signature must correspond with the name of the Registered Owner appearing on the face of this Certificate in every particular without alteration or enlargement or any change whatsoever. Section 8. DEFINITIONS. As used in this Ordinance the following terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise: (a) The terms "City" and "Issuer" shall mean the City of Demon, in Demon County, Texas. (b) The term "City Council" or "Council" shall mean the governing body of the City. (c) The term "Bonds" shall mean collectively the Initial Bonds as defined and described in Section 2 of this Ordinance and all substitute bonds exchanged therefor, and all other substitute bonds and replacement bonds, issued pursuant to and as provided in this Ordinance. (d) The term "Parity Bonds" shall mean collectively (i) the outstanding City of Demon Utility System Revenue Bonds, Series 1992, authorized by ordinance passed on March 3, 1992 (the "Series 1992 Bonds"), (ii) the outstanding City of Demon Utility System Revenue Bonds, Series 1993, authorized by ordinance Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 30 passed on March 16, 1993 (the "Series 1993 Bonds"), (iii) the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 1993-A, authorized by ordinance passed on June 8, 1993 (the "Series 1993- A Bonds"), (iv) the outstanding City of Denton Utility System Revenue Refunding Bonds, Taxable Series 1993-B, authorized by ordinance passed on June 8, 1993 (the "Series 1993-B Bonds"), (v) the outstanding City of Denton Utility System Revenue Bonds, Series 1996, authorized by an ordinance passed on May 7, 1996 (the "Series 1996 Bonds"), (vi) the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 1996-A, authorized by an ordinance passed on May 7, 1996 (the "Series 1996-A Bonds"), (vii) the outstanding City of Denton Utility System Revenue Bonds, Series 1998, authorized by an ordinance passed on March 24, 1998 (the "Series 1998 Bonds"), (viii) the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 1998A, authorized by an ordinance passed on July 21, 1998 (the "Series 1998A Bonds"), (ix) the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 1998B, authorized by an ordinance passed on August 4, 1998 (the "Series 1998B Bonds"), (x) the outstanding City of Denton Utility System Revenue Bonds, Series 2000A, authorized by an ordinance passed on April 25, 2000 (the "Series 2000A Bonds"), (xi) the outstanding City of Denton Utility System Revenue Bonds, Taxable Series 2000B, authorized by an ordinance passed on April 25, 2000 (the "Taxable Series 2000B Bonds"), (xii) the outstanding City of Denton Utility System Revenue Refunding and Improvement Bonds, Series 2001, authorized by an ordinance passed on April 17, 2001 (the "Series 2001 Bonds"), and (xiii) the Bonds. (e) The term "Additional Bonds" shall mean the additional parity revenue bonds which the City reserves the right to issue in the future, in accordance with Section 25 of this Ordinance. (f) The term "System" shall mean (1) the City's entire existing waterworks and sewer system and the City's entire existing electric light and power system, together with all future extensions, improvements, enlargements, and additions thereto, and all replacements thereof, and (2) any other related facilities, all or any part of the revenues or income from which do, in the future, at the option of the City, and in accordance with law, become "Pledged Revenues" as hereinafter defined; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term System shall not mean any water, sewer, electric, or other facilities of any kind which are declared not to be a part of the System, and which are acquired or constructed by the City with the proceeds from the issuance of "Special Facilities Bonds", which are hereby defined as being special revenue obligations of the City which are not payable from or secured by any Pledged Revenues, but which are secured by and payable from liens on and pledges of any other revenues, sources, or payments, including, but not limited to, special contract revenues or payments received from any other legal entity in connection with such facilities; and such revenues, sources, or payments shall not be considered as or constitute Gross Revenues of the System, unless and to the extent otherwise provided in the ordinance or ordinances authorizing the issuance of such "Special Facilities Bonds". (g) The terms "Gross Revenues of the System" and "Gross Revenues" shall mean all revenues and income of every nature derived or received by the City from the operation and ownership of the System, including the interest income from the investment or deposit of money in any Fund created by this Ordinance. (h) The terms "Net Revenues of the System", and "Net Revenues" shall mean all Gross Revenues after deducting therefrom an amount equal to the current expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs, and extensions necessary to render efficient service, provided, however, that only such repairs and extensions, as in the judgment of the City Council, reasonably and fairly exercised by the adoption of appropriate resolutions, are necessary to keep the System in operation and render adequate service to said City and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Bonds or Additional Bonds, shall be deducted in determining "Net Revenues". Payments required to be made by the City for water supply or Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 31 water facilities, sewer services or sewer facilities, fuel supply, and for the purchase of electric power, which payments under law constitute operation and maintenance expenses of any part of the System, shall constitute and be regarded as expenses of operation and maintenance of the System under this Ordinance. Depreciation and amortization shall not constitute or be regarded as expenses of operation and maintenance of the System. (i) The term "Pledged Revenues" shall mean (1) the Net Revenues, plus (2) any additional revenues, income, or other resources which are expected to be available to the City on a regular periodic basis, including, without limitation, any grants, donations, or income received or to be received from the United States Government, or any other public or private source, whether pursuant to an agreement or otherwise, which in the future may, at the option of the City, be pledged to the payment of the Parity Bonds or Additional Bonds. (j) The term "year" or "fiscal year" shall mean the fiscal year used by the City in connection with the operation of the System. (k) The term "Government Obligations" shall mean direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, which may be United States Treasury obligations such as its State and Local Government Series, and which may be in book-entry form. Section 9. PLEDGE. (a) The Bonds are "Additional Bonds" as permitted by Sections 24 and 25 of the ordinance passed on March 10, 1983, authorizing the City of Denton Revenue Refunding Bonds, Series 1983 (the "Series 1983 Bonds"); and it is hereby determined, declared, and resolved that all of the Parity Bonds (including the Bonds) are secured and payable equally and ratably on a parity, and that Sections 8 through 28, of this Ordinance are supplemental to and cumulative of Sections 7 through 25 of the aforesaid ordinance passed on March 10, 1983, with Sections 8 through 28 of this Ordinance being applicable to all of the Parity Bonds. (b) The Parity Bonds and any Additional Bonds, and the interest thereon, including any interest coupons appertaining thereto, are and shall be secured by and payable from a first lien on and pledge of the Pledged Revenues, and the Pledged Revenues are further pledged to the establishment and maintenance of the Funds created by this Ordinance, and any Funds created by any ordinance authorizing the issuance of any AdditionalBonds. The Parity Bonds and any Additional Bonds are not and will not be secured by or payable from a mortgage or deed of trust on any real, personal, or mixed properties constituting the System. Section 10. SYSTEM FUND. There heretofore has been and is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from all other funds of the City, a special fund to be entitled the "City of Denton Utility System Fund" (the "System Fund"). All Gross Revenues shall be credited to the System Fund immediately upon receipt, unless otherwise provided in this Ordinance. All current expenses of operation and maintenance of the System shall be paid from such Gross Revenues credited to the System Fund as a first charge against same. Before making any deposits hereinafter required to be made from the System Fund, the City shall retain in the System Fund at all times an amount at least equal to one-sixth of the amount budgeted for the then current fiscal year for the current operation and maintenance expenses of the System. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 32 Section 11. INTEREST AND SINKING FUND. For the sole purpose of paying the principal of and interest on all Parity Bonds and Additional Bonds, there heretofore has been and is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from all other funds of the City, a separate fund to be entitled the "City of Denton Utility System Revenue Bonds Interest and Sinking Fund" (the "Interest and Sinking Fund"). Section 12. RESERVE FUND. There heretofore has been, and is hereby, created, and there shall be established and maintained at Bank One, National Association, and hereafter, at the option of the City, established and maintained at any time at any national bank having a capital and surplus in excess of $25,000,000, a separate fund to be entitled the "City of Denton Utility System Bonds and Additional Bonds Reserve Fund" (the "Reserve Fund"). The Reserve Fund shall be used to pay the principal of and interest on any Parity Bonds or Additional Bonds when and to the extent the amounts in the Interest and Sinking Fund available for such payment are insufficient for such purpose, and may be used for the purpose of finally retiring the last of any Parity Bonds or Additional Bonds. Section 13. EXTENSION AND IMPROVEMENT FUND. There heretofore has been and is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from all other funds of the City, a separate fund to be entitled the "City of Denton Utility System Extension and Improvement Fund" (the "Extension and Improvement Fund"). The Extension and Improvement Fund shall be used for the purpose of paying the costs of improvements, enlargements, extensions, additions, replacements, or other capital expenditures related to the System, or for paying the costs of unexpected or extraordinary repairs or replacements of the System for which System funds are not available, or for paying unexpected or extraordinary expenses of operation and maintenance of the System for which System funds are not otherwise available, or for any other lawful purpose. Section 14. EMERGENCY FUND. There is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from all other funds of the City, a separate fund to be entitled the "City of Denton Utility System Emergency Fund" (the "Emergency Fund"). The Emergency Fund shall be used for the purpose of paying unexpected or extraordinary expenses of repair, replacement, operation, and maintenance of the System for which neither System funds nor the moneys in the Extension and Improvement Fund are available. There was deposited in the Emergency Fund simultaneously with the delivery of the Series 1983 Bonds to the initial purchasers thereof from lawfully available funds of the City the amount of $250,000. All investment interest income from the Emergency Fund shall be transferred to the System Fund as received. Section 15. DEPOSITS OF PLEDGED REVENUES. Pledged Revenues shall be credited to or deposited in the Interest and Sinking Fund, the Reserve Fund, the Extension and Improvement Fund, and other funds when and as required by this Ordinance and any ordinance authorizing the issuance of Additional Bonds. Section 16. INVESTMENTS. Money in any Fund established pursuant to this Ordinance or any ordinance authorizing the issuance of Additional Bonds, may, at the option of the City, be placed in time deposits or certificates of deposit secured by obligations of the type hereinafter described, or be invested in Government Obligations (as defined in Section 8 hereof) or obligations guaranteed or insured by the United States of America, which, in the opinion of the Attorney General of the United States, are backed by its full faith and credit or represent its general obligations, or invested in obligations of instrumentalities of the United States of America, including, but not limited to, evidences of indebtedness issued, insured, or guaranteed by such governmental agencies as the Federal Land Banks, Federal Intermediate Credit Banks, Banks for Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 33 Cooperatives, Federal Home Loan Banks, Government National Mortgage Association, United States Postal Service, Farmers Home Administration, Federal Home Loan Mortgage Association, Small Business Administration, Federal Housing Association, or Participation Certificates in the Federal Assets Financing Trust; provided that all such deposits and investments shall be made in such manner as will, in the opinion of the City, permit the money required to be expended from any Fund to be available at the proper time or times as expected to be needed. Such investments (except United States Treasury Obligations--State and Local Government Series investments held in book entry form, which shall at all times be valued at cost) shall be valued in terms of current market value as of the last day of each fiscal year. Unless otherwise set forth herein, all interest and income derived from such deposits and investments immediately shall be credited to, and any losses debited to, the Fund from which the deposit or investment was made, and surpluses in any Fund shall or may be disposed of as hereinafter provided. Such investments shall be sold promptly when necessary to prevent any default in connection with the Parity Bonds or Additional Bonds consistent with the ordinances, respectively, authorizing their issuance. Section 17. FUNDS SECURED. That money in all Funds created by this Ordinance, to the extent not invested, shall be secured in the manner prescribed by law. Section 18. PRIORITY OF DEPOSITS AND PAYMENTS FROM SYSTEM FUND. That the City shall make the deposits and payments from Pledged Revenues in the System Fund when and as required by this Ordinance and any ordinance authorizing any Additional Bonds, and such deposits shall be made in the following manner and with the following irrevocable priorities, respectively: First, to the Interest and Sinking Fund, when and in the amounts required by this Ordinance and any ordinance authorizing any Additional Bonds; then Second, to the Reserve Fund, when and in the amounts required by this Ordinance and any ordinance authorizing any Additional Bonds; then to the Extension and Improvement Fund, when and as required by Section 21 of this Ordinance. Section 19. INTEREST AND SINKING FUND REQUIREMENTS. The City shall cause to be deposited to the credit of the Interest and Sinking Fund the accrued interest and any premium received from the sale of the Initial Bond, and on or before the 25th day of each month, the City shall cause to be deposited to the credit of the Interest and Sinking Fund, in approximately equal monthly payments, amounts sufficient, together with any other funds on hand therein, to pay all of the interest or principal and interest coming due, including the principal amount of any Parity Bonds required to be redeemed prior to maturity pursuant to any mandatory redemption requirements, on the Parity Bonds and any Additional Bonds on the next succeeding interest payment date. Any moneys so deposited in the Interest and Sinking Fund with respect to a mandatory redemption requirement, together with other lawfully available funds of the City, may be used by the City, to purchase, in advance of a mandatory redemption date and at a price not exceeding the principal amount thereof plus accrued interest thereon to the date of purchase, Parity Bonds which would be subject to being chosen for mandatory redemption on such mandatory redemption date. The Paying Agent shall cancel any Parity Bonds so purchased. Section 20. RESERVE FUND REQUIREMENTS. There is now on hand in the Reserve Fund an amount of money and Government Obligations which is in excess of $3,000,000 and which is at least equal to the average annual principal and interest requirements of the outstanding Series 1992 Bonds, the Series Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 34 1993 Bonds, the Series 1993-A Bonds, the Taxable Series 1993-B Bonds, the Series 1996 Bonds, the Series 1996-A Bonds, the Series 1998 Bonds, the Series 1998A Bonds and the Series 1998B Bonds (the current "RequiredReserve Amount"). Following the issuance and delivery of the Initial Bonds the Required Reserve Amount shall become and be an amount of money and investments equal to the average annual principal and interest requirements of all the outstanding Parity Bonds and Additional Bonds; provided further, however, that the Required Reserve Amount shall never be less than $3,000,000 if the maximum annual principal and interest requirements on all outstanding Parity Bonds and Additional Bonds exceeds $3,000,000. Immediately after the issuance and delivery of the Initial Bond there shall be deposited to the credit of the Reserve Fund, from the proceeds of the sale of the Initial Bond, money sufficient to cause the Reserve Fund to contain an aggregate amount of money and investments equal to the Required Reserve Amount for all then outstanding Parity Bonds. After the delivery of any future Additional Bonds the City shall cause the Reserve Fund to be increased, if and to the extent necessary, so that such Fund will contain an amount of money and investments equalto the Required Reserve Amount. Any increase in the Required Reserve Amount may be funded from Pledged Revenues, or from proceeds from the sale of any Additional Bonds, or any other available source or combination of sources. All or any part of the Required Reserve Amount not funded initially and immediately after the delivery of any installment or issue of Additional Bonds shall be funded, within not more than five years from the date of such delivery, by deposits of Pledged Revenues in approximately equal monthly installments on or before the 25th day of each month. Principal amounts of the Parity Bonds and any Additional Bonds which must be redeemed pursuant to any applicable mandatory redemption requirements shall be deemed to be maturing amounts of principal for the purpose of calculating principal and interest requirements on such bonds. When and so long as the amount in the Reserve Fund is not less than the Required Reserve Amount no deposits shall be made to the credit of the Reserve Fund; but when and if the Reserve Fund at any time contains less than the Required Reserve Amount, then the City shall transfer from Pledged Revenues in the System Fund, and deposit to the credit of the Reserve Fund, monthly on or before the 25th day of each month, a sum equal to 1/60th of the Required Reserve Amount, until the Reserve Fund is restored to the Required Reserve Amount. The City specifically covenants that when and so long as the Reserve Fund contains the Required Reserve Amount, the City shall cause all amounts in excess of the Required Reserve Amount to be deposited to the credit of the Interest and Sinking Fund. Section 21. EXTENSION AND IMPROVEMENT FUND REQUIREMENTS. During each year, subject and subordinate to making the required deposits to the credit of the Interest and Sinking Fund and the Reserve Fund, the City shall be required to deposit to the credit of the Extension and Improvement Fund, from Pledged Revenues in the System Fund, an amount equal to 8% of the "Adjusted Gross Revenues of the System", which term is hereby defined to mean the following: the Gross Revenues of the System for such year after deducting from such Gross Revenues an amount equal to the current expenses of operation and maintenance of the System for such year which are directly attributable to (i) all fuel costs related to the production of electric energy by the City and/or (ii) the purchase of electric energy by the City. Additional excess Pledged Revenues may, at the option of the City Council, be deposited to the credit of the Improvement Fund as permitted by Section 22 (b) hereof, but no such additional deposit is required. All investment interest income from the Extension and Improvement Fund shall be retained in and remain a part of such Fund. Section 22. DEFICIENCIES; EXCESS PLEDGED REVENUES. (a) If on any occasion there shall not be sufficient Pledged Revenues to make the required deposits into the Interest and Sinking Fund or the Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 35 Reserve Fund, such deficiency shall be made up as soon as possible from the next available Pledged Rev- enues. (b) Subject to making the required deposits to the credit of the various Funds when and as required by this Ordinance or any ordinance authorizing the issuance of Additional Bonds, any surplus Pledged Revenues may be used by the City for any lawful purpose. Section 23. PAYMENT OF PARITY BONDS AND ADDITIONAL BONDS. On or before June 1, 2002, and semiannually on or before each June 1 and December 1 thereafter while any of the Parity Bonds or Additional Bonds are outstanding and unpaid the City shall make available to the Paying Agents therefor, out of the Interest and Sinking Fund, or if necessary, out of the Reserve Fund, money sufficient to pay, on each of such dates, the principal of and interest on the Parity Bonds and Additional Bonds as the same matures and comes due, or to redeem the Parity Bonds or Additional Bonds prior to maturity, either upon mandatory redemption or at the option of the City. At the direction of the City the Paying Agents shall either deliver paid Parity Bonds and Additional Bonds, and any interest coupons appertaining thereto, to the City or destroy all paid Parity Bonds and Additional Bonds, and any coupons appertaining thereto, and furnish the City with an appropriate certificate of cancellation or destruction. Section 24. FINAL DEPOSITS. (a) Any Parity Bond or Additional Bond shall be deemed to be paid, retired, and no longer outstanding within the meaning of this Ordinance when payment of the principal of, redemption premium, if any, on such Parity Bond or Additional Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption or provision for the proper giving of such notice having been made), or (ii) shall have been provided by irrevocably depositing with or making available to a Paying Agent therefor, in trust and irrevocably set aside exclusively for such payment, (1) money sufficient to make such payment or (2) Govern- ment Obligations which mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation, and expenses of such Paying Agent pertaining to the Parity Bonds and Additional Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of such paying agent. At such time as a Bond or Additional Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefits of this Ordinance or a lien on and pledge of the Pledged Revenues, and shall be entitled to payment solely from such money or Govern- ment Obligations. (b) Any moneys so deposited with a paying agent may at the direction of the City also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from all Government Obligations in the hands of the paying agent pursuant to this Section which is not required for the payment of the Parity Bonds and Additional Bonds, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be turned over to the City or deposited as directed by the City. Section 25. ADDITIONAL BONDS. (a) The City shall have the right and power at any time and from time to time, and in one or more series or issues, to authorize, issue, and deliver additional parity revenue bonds (herein called "Additional Bonds"), in accordance with law, in any amounts, for any lawful purpose, including the refunding of any Parity Bonds or Additional Bonds, or other obligations. Such Additional Bonds, if and when authorized, issued, and delivered in accordance with this Ordinance, shall be payable from and Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 36 secured by an irrevocable first lien on and pledge of the Pledged Revenues, equally and ratably on a parity in all respects with the Parity Bonds and any other outstanding Additional Bonds. (b) The principal of all Additional Bonds must be scheduled to be paid or mature on December 1 of the years in which such principal is scheduled to be paid or mature. Section 26. FURTHER REQUIREMENTS FOR ADDITIONAL BONDS. Additional Bonds shall be issued only in accordance with this Ordinance, and no installment, Series, or issue of Additional Bonds shall be issued or delivered unless: (a) The Mayor of the City and the City Secretary sign a written certificate to the effect that the City is not in default as to any covenant, condition, or obligation in connection with all then outstanding Parity Bonds and Additional Bonds, and the ordinances authorizing same, and that the Interest and Sinking Fund and the Reserve Fund each contains the amount then required to be therein. (b) An independent certified public accountant, or independent firm of certified public accountants, acting by and through a certified public accountant, signs a written certificate to the effect that, in his or its opinion, during either the next preceding fiscal year, or any twelve consecutive calendar month period out of the 18-month period immediately preceding the month in which the ordinance authorizing the issuance of the then proposed Additional Bonds is passed, the Pledged Revenues were at least (i) 1.25 times an amount equal to the average annual principal and interest requirements, and (ii) 1.10 times an amount equal to the principal and interest requirements during the fiscal year during which such requirements are scheduled to be the greatest, of all Parity Bonds and Additional Bonds which are scheduled to be outstanding after the delivery of the then proposed Additional Bonds. It is specifically provided, however, that in calculating the amount of Pledged Revenues for the purposes of this subsection (b), if there has been any increase in the rates or charges for services of the System which is then in effect, but which was not in effect during all or any part of the entire period for which the Pledged Revenues are being calculated (hereinafter referred to as the "entire period") then the certified public accountant, or in lieu of the certified public accountant a firm of consulting engineers, shall determine and certify the amount of Pledged Revenues as being the total of (i) the actual Pledged Revenues for the entire period, plus (ii) a sum equal to the aggregate amount by which the actual billings to customers of the System during the entire period would have been increased if such in- creased rates or charges had been in effect during the entire period. (c) Provision shall be made in the ordinance authorizing their issuance for increasing the Reserve Fund to the Required Reserve Amount as required by Section 20 hereof. (d) All calculations of average annual principal and interest requirements of any bonds made in connection with the issuance of any then proposed Additional Bonds shall be made as of the date of such Additional Bonds; and also in making calculations for such purpose, and for any other purpose under this Ordinance, principal amounts of any bonds which must be redeemed prior to maturity pursuant to any applicable mandatory redemption requirements shall be deemed to be maturing amounts of principal of such bonds. Section 27. GENERAL COVENANTS. The City further covenants and agrees that in accordance with and to the extent required or permitted by law: (a) Performance. It will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance, and each ordinance authorizing the issuance of Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 37 Additional Bonds, and in each and every Parity Bond and Additional Bond; that it will promptly pay or cause to be paid the principal of and interest on every Parity Bond and Additional Bond, on the dates and in the places and manner prescribed in such ordinances and Parity Bonds or Additional Bonds; and that it will, at the times and in the manner prescribed, deposit or cause to be deposited the amounts required to be deposited into the Interest and Sinking Fund and the Reserve Fund; and any holder of the Parity Bonds or Additional Bonds may require the City, its officials, and employees, to carry out, respect, or enforce the covenants and obligations of this Ordinance, or any ordinance authorizing the issuance of Additional Bonds, by all legal and equitable means, including specifically, but without limitation, the use and filing of mandamus proceedings, in any court of competent jurisdiction, against the City, its officials, and employees. (b) City's Legal Authority. The City is a duly created and existing home rule city of the State of Texas, and is duly authorized under the laws of the State of Texas to create and issue the Parity Bonds and Additional Bonds; that all action on its part for the creation and issuance of the said obligations has been or will be duly and effectively taken, and that said obligations in the hands of the holders and owners thereof are and will be valid and enforceable special obligations of the City in accordance with their terms. (c) Title. The City has or will obtain lawful title to the lands, buildings, structures, and facilities constituting the System, that it warrants that it will defend the title to all the aforesaid lands, buildings, structures, and facilities, and every part thereof, for the benefit of the holders and owners of the Parity Bonds and Additional Bonds, against the claims and demands of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the payment of the Parity Bonds and Additional Bonds in the manner prescribed herein, and has lawfully exercised such rights. (d) Liens. The City will from time to time and before the same become delinquent pay and discharge all taxes, assessments, and governmental charges, if any, which shall be lawfully imposed upon it, or the System, that it will pay all lawful claims for rents, royalties, labor, materials, and supplies which if unpaid might by law become a lien or charge thereon, the lien of which would be prior to or interfere with the liens hereof, so that the priority of the liens granted hereunder shall be fully preserved in the manner provided herein, and that it will not create or suffer to be created any mechanic's, laborer's, materialman's, or other lien or charge which might or could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof might or could be impaired; provided, however, that no such tax, assessment, or charge, and that no such claims which might be used as the basis of a mechanic's, laborer's, materialman's, or other lien or charge, shall be required to be paid so long as the validity of the same shall be contested in good faith by the City. (e) Operation of System; No Free Service. While the Parity Bonds or any Additional Bonds are outstanding and unpaid the City shall continuously and efficiently operate the System, and shall maintain the System in good condition, repair, and working order, all at reasonable cost. No free service of the System shall be allowed, and should the City or any of its agencies, instrumentalities, lessors, or concessionaires make use of the services and facilities of the System, payment monthly of the standard retail price of the services provided shall be made by the City or any of its agencies, instrumentalities, lessors, or concessionaires out of funds from sources other than the revenues of the System, unless made from surplus PledgedRevenues as permitted by Section 22(b) hereof. (f) Further Encumbrance. While the Parity Bonds or any Additional Bonds are outstanding and unpaid, the City shall not additionally encumber the Pledged Revenues in any manner, except as permitted in this Ordinance in connection with Additional Bonds, unless said encumbrance is made junior and subordi- nate in all respects to the liens, pledges, covenants, and agreements of this Ordinance and any ordinance authorizing the issuance of Additional Bonds; but the right of the City to issue revenue bonds payable from Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 38 a subordinate lien on surplus Pledged Revenues is specifically recognized and retained, as permitted under Section 22(b) hereof). (g) Sale, Lease or Disposal of Property_. No part of the System shall be sold, leased, mortgaged, demolished, removed or otherwise disposed of, except as follows: (1) To the extent permitted by law, the City may sell, lease, mortgage, demolish, remove or otherwise dispose of at any time and from time to time any property or facilities constituting part of the System only if (A) the City Council shall determine, as evidenced by a resolution to that effect, such property or facilities are not useful in the operation of the System, or (B) the proceeds of such sale are $250,000 or less, or the City Council shall determine, as evidenced by a resolution to that effect, the fair market value of the property or facilities exchanged is $250,000 or less, or (C) if such proceeds or fair market value exceed $250,000 the City Council shall determine, as evidenced by a resolution to that effect, that the sale or exchange of such property or facilities will not impair the ability of the City to comply during the current or any future fiscal year with the covenant of the City set forth in Section 27(i) of this Ordinance. The proceeds of any such sale or exchange not used to acquire other property necessary or desirable for the sale or efficient operation of the System shall forthwith, at the option of the City, (i) to be used to redeem or purchase Parity Bonds or Additional Bonds, (ii) otherwise be used to provide for the payment of Parity Bonds or Additional Bonds or (iii) be used for any other lawful purpose. (2) To the extent permitted by law, the City may lease or make contracts or grant licenses for the operation of, or make arrangements for the use of, or grant easements or other rights with respect to, any part of the System, provided that any such lease, contract, license, arrangement, easement or right (A) does not impede the operation of the System by the City and (B) does not in any manner impair or adversely affect the rights or security of the owners of the Parity Bonds or Additional Bonds under this Ordinance; and provided, further, that if the depreciated cost of the property to be covered by any such lease, contract, license, arrangement, easement or other right is in excess of $500,000, the City Council shall determine, as evidenced by a resolution to that effect, that the action of the City with respect thereto does not result in a breach of the conditions under this clause (2). Any payments received by the City under or in connection with any such lease, contract, license, arrangement, easement or right in respect of the System or any part thereof shall constitute Gross Revenues. (h) Insurance. (1) The City shall cause to be insured such parts of the System as would usually be insured by corporations operating like properties, with a responsible insurance company or companies, against risks, accidents, or casualties against which and to the extent insurance is usually carried by corporations operating like properties, including, to the extent reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, and use and occupancy insurance. Public liability and property damage insurance also shall be carried unless the City Attorney gives a written opinion to the effect that the City is not liable for claims which would be protected by such insurance. All insurance premiums shall be paid as an expense of operation of the System. At any time while any contractor engaged in construction work shall be fully responsible therefor, the City shall not be required to carry insurance on the work being constructed if the contractor is required to carry appropriate insurance. All such policies shall be open to the inspection of the Bondholders and their representatives at all reasonable times. Upon the happening of any loss or damage covered by insurance from one or more of said causes, the City shall make due proof of loss and shall do all things necessary or desirable to cause the insuring companies to make payment in full directly to the City. The proceeds of insurance covering such property, together with any other funds necessary and Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 39 available for such purpose, shall be used forthwith by the City for repairing the property damaged or replacing the property destroyed; provided, however, that if said insurance proceeds and other funds are insufficient for such purpose, then said insurance proceeds pertaining to the System shall be deposited in a special and separate trust fund, at an official depository of the City, to be designated the Insurance Account. The Insurance Account shall be held until such time as other funds become available which, together with the Insurance Account, will be sufficient to make the repairs or replacements originally required. (2) The annual audit hereinafter required may contain a section commenting on whether or not the City has complied with the requirements of this Section with respect to the maintenance of insurance, and shall state whether or not all insurance premiums upon the insurance policies to which reference is made have been paid. (i) Annual Budget and Rate Covenant. The City shall prepare, prior to the beginning of each fiscal year, an annual budget, in accordance with law, reflecting an estimate of cash receipts and disbursements for the ensuing fiscal year in sufficient detail to indicate the probable Gross Revenues and Pledged Revenues for such fiscal year. The City shall fix, establish, maintain, and collect, such rates, charges, and fees for the use and availability of the System at all times as are necessary (1) to produce Gross Revenues sufficient, together with any other Pledged Revenues, to pay all current operation and maintenance expenses of the System, and (2) to produce an amount of Pledged Revenues during each fiscal year at least equal to the greater of 1.25 times the average annual principal and interest requirements of all then outstanding Parity Bonds and Additional Bonds or 1.25 times the succeeding fiscal year's principal and interest requirements of all then outstanding Parity Bonds and Additional Bonds. (j) Records. The City shall keep proper books of record and account in which full, true, proper, and correct entries will be made of all dealings, activities, and transactions relating to the System, the Pledged Revenues, and the Funds created pursuant to this Ordinance, and all books, documents, and vouchers relating thereto shall at all reasonable times be made available for inspection upon request of any Bondholder, provided, that all books, documents, and vouchers relating to the City's electric system shall be made available for inspection only to the extent required by law, including, without limitation, the provisions of Section 552.131 of the Texas Government Code. To the extent consistent with the provisions of this Ordinance, the City shall keep its books and records in a manner conforming to standard accounting practices as usually would be followed by private corporations owning and operating a similar System, with appropriate recognition being given to essential differences between municipal and corporate accounting practices. (k) Audits. After the close of each fiscal year while any of the Parity Bonds or any Additional Bonds are outstanding, an audit will be made of the books and accounts relating to the System and the Pledged Revenues by an independent certified public accountant or an independent firm of certified public accountants. As soon as practicable after the close of each such year, and when said audit has been completed and made available to the City, a copy of such audit for the preceding year shall be mailed to the Municipal Advisory Council of Texas, to each paying agent for any bonds payable from Pledged Revenues, and to any Bondholders who shall so request in writing. The annual audit reports shall be open to the inspec- tion of the Bondholders and their agents and representatives at all reasonable times. (1) Governmental Agencies. It will comply with all of the terms and conditions of any and all franchises, permits, and authorizations applicable to or necessary with respect to the System, and which have been obtained from any governmental agency; and the City has or will obtain and keep in full force and effect all franchises, permits, authorization, and other requirements applicable to or necessary with respect to the acquisition, construction, equipment, operation, and maintenance of the System. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 40 (m) No Competition. It will not operate, or grant any franchise or, to the extent it legally may, permit the acquisition, construction, or operation of, any facilities which would be in competition with the System, and to the extent that it legally may, the City will prohibit any such competing facilities. (n) No Arbitrage. The City covenants to and with the purchasers of the Parity Bonds and any Additional Bonds that no use will be made of the proceeds of any of such bonds at any time throughout the term of any of such bonds which, if such use had been reasonably expected on the date of delivery of any of such bonds to and payment therefor by the purchasers, would have caused any of such bonds to be arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), or any regulations or rulings pertaining thereto; and by this covenant the City is obligated to comply with the requirements of the aforesaid Code and all applicable and pertinent Department of the Treasury regulations relating to arbitrage bonds. The City further covenants that the proceeds of all such bonds will not otherwise be used directly or indirectly so as to cause all or any part of such bonds to be or become arbitrage bonds within the meaning of the aforesaid Code, or any regulations pertaining thereto. Section 28. AMENDMENT OF ORDINANCE. (a) The holders or owners of Parity Bonds and Additional Bonds aggregating in principal amount 51% of the aggregate principal amount of then outstanding Parity Bonds and Additional Bonds shall have the right from time to time to approve any amendment to this Ordinance which may be deemed necessary or desirable by the City, provided, however, that nothing herein contained shall permit or be construed to permit the amendment of the terms and conditions in this Ordinance or in the Parity Bonds or Additional Bonds so as to: (1) Make any change in the maturity of the outstanding Parity Bonds or Additional Bonds; (2) Reduce the rate of interest borne by any of the outstanding Parity Bonds or Additional Bonds; (3) Reduce the amount of the principal payable on the outstanding Parity Bonds or Additional Bonds; (4) Modify the terms of payment of principal of or interest on the outstanding Parity Bonds or Additional Bonds, or impose any conditions with respect to such payment; (5) Affect the rights of the holders or owners of less than all of the Parity Bonds and Additional Bonds then outstanding; (6) Change the minimum percentage of the principal amount of Parity Bonds and Additional Bonds necessary for consent to such amendment. (b) If at any time the City shall desire to amend the Ordinance under this Section, the City shall cause notice of the proposed amendment to be published in a financial publication of general circulation in The City of New York, New York, once during each calendar week for at least two successive calendar weeks. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the principal office of the Paying Agents for inspection by all holders or owners of Parity Bonds and Addkional Bonds. Such publication is not required, however, if notice in writing is given to each holder or owner of Parity Bonds and Additional Bonds. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 41 (c) Whenever at any time not less than thirty days, and within one year, from the date of the first publication of said notice or other service of written notice the City shall receive an instrument or instruments executed by the holders or owners of at least 51% in aggregate principal amount of all Parity Bonds and Additional Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and which specifically consent to and approve such amendment in substantially the form of the copy thereof on file with the Paying Agents, the City Council may pass the amendatory ordinance in substantially the same form. (d) Upon the passage of any amendatory ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and the respective rights, duties, and obligations under this Ordinance of the City, and all the holders or owners of then out- standing Parity Bonds and Additional Bonds and all future Parity Bonds and Additional Bonds shall thereafter be determined, exercised, and enforced hereunder, subject in all respects to such amendments. (e) Any consent given by the holder or owner of a Parity Bond or Additional Bond pursuant to the provisions of this Section shall be irrevocable for a period of one year from the date of the first publication of the notice provided for in this Section, and shall be conclusive and binding upon all future holders or owners of the same Parity Bond or Additional Bond during such period. Such consent may be revoked at any time after one year from the date of the first publication of such notice by the holder or owner who gave such consent, or by a successor in title, by filing notice thereof with the paying agents and the City, but such revocation shall not be effective if the holders or owners of 51% in aggregate principal amount of the then outstanding Parity Bonds and Additional Bonds as in this Section defined have, prior to the attempted revocation, consented to, and approved the amendment. (f) For the purpose of this Section, the fact of the holding of Parity Bonds or Additional Bonds which are in bearer, coupon form, by any bondholder and the amount and numbers of such bearer Parity Bonds or Additional Bonds and the date of their holding same, may be proved by the affidavit of the person claiming to be such holder or owner, or by a certificate executed by any trust company, bank, banker, or any other depositorywherever situated showing that at the date therein mentioned such person had on deposit with such trust company, bank, banker, or other depository, the Parity Bonds and Additional Bonds described in such certificate. The City may conclusively assume that such ownership continues until written notice to the contrary is served upon the City. The ownership of all registered Parity Bonds and Additional Bonds shall be determined from the registration books kept by the registrar therefor. Section 29. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS. (a) Replacement Bonds. In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (b) Application for Replacement Bonds. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Bond, the registered owner applying for a replacement bond shall furnish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft, or destruction of such Bond, as the case may Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 42 be. In every case of damage or mutilation of a Bond, the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Bond so damaged or mutilated. (c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Bond, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Bonds. Prior to the issuance of any replacement bond, the Paying Agent/Registrar shall charge the registered owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e) Authority for Issuing Replacement Bonds. In accordance with Chapter 1201, Texas Government Code, this Section of this Ordinance shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such Bonds in the form and manner and with the effect, as provided in Section 6(d) of this Ordinance for Bonds issued in conversion and exchange for other Bonds. Section 30. COVENANTS REGARDING TAX-EXEMPTION. The Issuer covenants to refrain from any action which would adversely affect, and to take such action to ensure, the treatment of the Series 2002A Bonds as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows: (a) to take any action to assure that no more than 10 percent of the proceeds of the Series 2002A Bonds (less amounts deposited to a reserve fund, if any) are used for any "private business use", as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds are so used, that amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Series 2002A Bonds, in contravention of section 141(b)(2) of the Code; (b) to take any action to assure that in the event that the "private business use" described in subsection (a) hereof exceeds 5 percent of the proceeds of the Series 2002A Bonds (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" which is "related" and not "disproportionate", within the meaning of section 141(b)(3) of the Code, to the governmental use; (c) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Series 2002A Bonds (less amounts deposited into a Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 43 reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (d) to refrain from taking any action which would otherwise resuk in the Series 2002A Bonds being treated as "private activity bonds" within the meaning of section 141(b) of the Code; (e) to refrain from taking any action that would resuk in the Series 2002A Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; (f) to refrain from using any portion of the proceeds of the Series 2002A Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Series 2002A Bonds, other than investment property acquired with -- (1) proceeds of the Series 2002A Bonds invested for a reasonable temporary period of 3 years or less until such proceeds are needed for the purpose for which the Series 2002A Bonds are issued, (2) amounts invested in a bona fide debt service fund, within the meaning of section 1.148-1 (b) of the Treasury Regulations, and (3) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the stated principal amount (or, in the case of a discount, the issue price) of the Series 2002A Bonds; (g) to otherwise restrict the use of the proceeds of the Series 2002A Bonds or amounts treated as proceeds of the Series 2002A Bonds, as may be necessary, so that the Series 2002A Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage), Section 149(g) of the Code (relating to hedge bonds), and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); and (h) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Series 2002A Bonds) an amount that is at least equal to 90 percent of the "Excess Earnings", within the meaning of section 148(f) of the Code and to pay to the United States of America, not later that 60 days after the Series 2002A Bonds have been paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(f) of the Code. For purposes of the foregoing (a) and (b), the Issuer understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of refunding bonds, transferred proceeds (if any) and proceeds of the refunded bonds expended prior to the date of issuance of the Series 2000A Bonds. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify, or expand provisions of the Code, as applicable to the Series 2002A Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of nationally-recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Series 2002A Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 44 promulgatedwhich impose additional requirements which are applicable to the Series 2002A Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary and reasonably possible, in the opinion of nationally-recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Series 2002A Bonds under section 103 of the Code. In furtherance of such intention, the Issuer hereby authorizes and directs the Mayor to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the Issuer, which may be permitted by the Code as are consistent with the purpose for the issuance of the Series 2002A Bonds. The Issuer covenants to comply with the covenants contained in this section after defeasance of the Series 2002A Bonds. In order to facilitate compliance with the above covenant (h), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and such fund shall not be subject to the claim of any other person, including without limitation, the owners of the Certificates. The Rebate Fund is established for the additional purpose of compliance with Section 148 of the Code. Section 31. ALLOCATION OF, AND LIMITATION ON, EXPENDITURES FOR THE PROJECT. The Issuer covenants to account for the expenditure of sale proceeds and investment earnings to be used for the purposes described in Section 1 of this Ordinance (the "Project") on its books and records in accordance with the requirements of the Internal Revenue Code. The Issuer recognizes that in order for the proceeds to be considered used for the reimbursement of costs, the proceeds must be allocated to expenditures within 18 months of the later of the date that (1) the expenditure is made, or (2) the Project is completed; but in no event later than three years after the date on which the original expenditure is paid. The foregoing notwithstanding, the Issuer recognizes that in order for proceeds to be expended under the Internal Revenue Code, the sale proceeds or investment earnings must be expended no more than 60 days after the earlier of(l) the fifth anniversary of the delivery of the Series 2002A Bonds, or (2) the date the Series 2002A Bonds are retired. The Issuer agrees to obtain the advice of nationally-recognized bond counsel if such expenditure fails to comply with the foregoing to assure that such expenditure will not adversely affect the tax-exempt status of the Series 2002A Bonds. For purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. Section 32. DISPOSITION OF PROJECT. The Issuer covenants that the property constituting the Project will not be sold or otherwise disposed in a transaction resulting in the receipt by the Issuer of cash or other compensation, unless the Issuer obtains an opinion of nationally-recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Series 2002A Bonds. Section 33. INTEREST EARNINGS ON BOND PROCEEDS. Interest earnings derived from the investment of proceeds from the sale of the Initial Bonds, other than proceeds deposited in the Interest and Sinking Fund and the Reserve Fund, shall be used along with other available proceeds for improving the System; provided that after completion of the improvements if any of such interest earnings remain on hand, such interest earnings shall be deposited in the Interest and Sinking Fund. It is further provided, however, that any interest earnings on bond proceeds which are required to be rebated to the United States of America pursuant to the Covenants Regarding Tax-Exemption herein so as to prevent the Series 2002A Bonds from being arbitrage bonds shall be so rebated and not considered as interest earnings for the purposes of this Ordinance. Section 34. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION, CUSIP NUMBERS, PREAMBLE, AND INSURANCE. The Mayor of the Issuer is hereby authorized to have control of the Initial Bonds issued hereunder and all necessary records and proceedings Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 45 pertaining to the Initial Bonds pending their delivery and the investigation, examination, and approval by the Attorney General of the State of Texas, and the registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Initial Bonds said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate on the Initial Bonds, and the seal of said Comptroller shall be impressed, or placed in facsimile, on the Initial Bonds. The approving legal opinion of the Issuer's Bond Counsel and the assigned CUSIP numbers may, at the option of the Issuer, be printed on the Initial Bonds or on any Bonds issued and delivered in conversion of and exchange or replacement of any Bond, but neither shall have any legal effect, and shall be solely for the convenience and information of the registered owners of the Bonds. The preamble to this Ordinance is hereby adopted and made a part hereof for all purposes. If insurance is obtained on any of the Bonds, the Initial Bonds and all other Bonds shall bear an appropriate legend concerning insurance as provided by the insurer. Section 35. SALE OF INITIAL BONDS. (a) The Initial Series 2002A Bonds are hereby sold and shall be delivered to , for cash for the par value thereof and accrued interest thereon to date of delivery plus a premium of $_ (accrued interest and premium, if any, to be deposited into the Interest and Sinking Fund). It is hereby officially found, determined, and declared that the Initial Bonds have been sold at public sale to the bidder offering the lowest interest cost, after receiving sealed bids pursuant to an Official Notice of Sale and Bidding Instructions and Official Statement dated , prepared and distributed in connection with the sale of the Initial Bonds. Said Official Notice of Sale and Bidding Instructions and Official Statement, and any addenda, supplement, or amendment thereto have been and are hereby approved by the governing body of the Issuer, and their use in the offer and sale of the Bonds is hereby approved. It is further officially found, determined, and declared that the statements and representations contained in said Official Notice of Sale and Official Statement are true and correct in all material respects, to the best knowledge and belief of the governing body of the Issuer. (b) The Initial Taxable Series 2002B Bonds are hereby sold and shall be delivered to ., for cash for the par value thereof and accrued interest thereon to date of delivery plus a premium of $. (accrued interest and premium, if any, to be deposited into the Interest and Sinking Fund). It is hereby officially found, determined, and declared that the Initial Bonds have been sold at public sale to the bidder offering the lowest interest cost, after receiving sealed bids pursuant to an Official Notice of Sale and Bidding Instructions and Official Statement dated , prepared and distributed in connection with the sale of the Initial Bonds. Said Official Notice of Sale and Bidding Instructions and Official Statement, and any addenda, supplement, or amendment thereto have been and are hereby approved by the governing body of the Issuer, and their use in the offer and sale of the Bonds is hereby approved. It is further officially found, determined, and declared that the statements and representations contained in said Official Notice of Sale and Official Statement are true and correct in all material respects, to the best knowledge and belief of the governing body of the Issuer. Section 36. OFFICIAL STATEMENT. An Official Statement dated as of the date of this meeting has been prepared in connection with the sale of the Initial Bonds and the Bonds, in the form and substance submitted at this meeting. Said Official Statement and any supplement or addenda thereto have been and are hereby approved, and their use in the offer and sale of the Bonds is hereby approved. It is further officially found, determined, and declared that the statements and representations contained in said Official Statement are true and correct in all material respects, to the best knowledge and belief of the Issuer. The distribution and use of the Preliminary Official Statement dated ,2002, prior to the date hereof is hereby ratified and approved. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 46 Section 37. DTC REGISTRATION. The Bonds initially shall be issued and delivered in such manner that no physical distribution of the Bonds will be made to the public, and The Depository Trust Company ("DTC"), New York, New York, initially will act as depository for the Bonds. DTC has represented that it is a limited purpose trust company incorporated under the laws of the State of New York, 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 under Section 17A of the federal Securities Exchange Act of 1934, as amended, and the Issuer accepts, but in no way verifies, such representations. The Initial Bond authorized by this Ordinance shall be delivered to and registered in the name of the Purchaser. However, it is a condition of delivery and sale that the Purchaser, immediately after such delivery, shall cause the Paying Agent/Registrar, as provided for in this Ordinance, to cancel said Initial Bond and deliver in exchange therefor a substitute Bond for each maturity of such Initial Bond, with each such substitute Bond to be registered in the name of CEDE & CO., the nominee of DTC, and it shall be the duty of the Paying Agent/Registrar to take such action. It is expected that DTC will hold the Bonds on behalf of the Purchaser and/or the DTC Participants, as defined and described in the Official Statement referred to and approved in Section 36 hereof(the "DTC Participants"). So long as each Bond is registered in the name of CEDE & CO., the Paying Agent/Registrar shall treat and deal with DTC in all respects the same as if it were the actual and beneficial owner thereof. It is expected that DTC will maintain a book entry system which will identify beneficial ownership of the Bonds by DTC Participants in integral amounts of $5,000, with transfers of ownership being effected on the records of DTC and the DTC Participants pursuant to rules and regulations established by them, and that the substitute Bonds initially deposited with DTC shall be immobilized and not be further exchanged for substitute Bonds except as hereinafter provided. The Issuer is not responsible or liable for any functions of DTC, will not be responsible for paying any fees or charges with respect to its services, will not be responsible or liable for maintaining, supervising, or reviewing the records of DTC or the DTC Participants, or protecting any interests or rights of the beneficial owners of the Bonds. It shall be the duty of the Purchaser and the DTC Participants to make all arrangements with DTC to establish this book- entry system, the beneficial ownership of the Bonds, and the method of paying the fees and charges of DTC. The Issuer does not represent, nor does it in any way covenant that the initial book-entry system established with DTC will be maintained in the future. The Issuer reserves the right and option at any time in the future, in its sole discretion, to terminate the DTC (CEDE & CO.) book-entry only registration requirement described above, and to permit the Bonds to be registered in the name of any owner. If the Issuer exercises its right and option to terminate such requirement, it shall give written notice of such termination to the Paying Agent/Registrar and to DTC, and thereafter the Paying Agent/Registrar shall, upon presentation and proper request, register any Bond in any name as provided for in this Ordinance. Notwithstanding the initial establishment of the foregoing book-entry system with DTC, if for any reason any of the originally delivered substitute Bonds is duly filed with the Paying Agent/Registrar with proper request for transfer and substitution, as provided for in this Ordinance, substitute Bonds will be duly delivered as provided in this Ordinance, and there will be no assurance or representation that any book-entry system will be maintained for such Bonds. Section 38. COMPLIANCE WITH RULE 15c2-12. (a) Annual Reports. (i) The Issuer shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year ending in or after 2000, financial information and operating data with respect to the Issuer of the general type included in the final Official Statement authorized by Section 36 of this Ordinance, being the information described in Exhibit A hereto, which Exhibit is attached to and incorporated in this Ordinance as if written word for word herein. Any financial statements so to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit A hereto, or such other accounting principles as the Issuer may be required to employ from time to time pursuant to state law or regulation, and (2) audited, if the Issuer commissions an audit of such statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the Issuer shall Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 47 provide unaudited financial statements by the required time and will provide audited financial statements for the applicable fiscal year to each NRMSIR and any SID, when and if the audit report on such statements become available. (ii) If the Issuer 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 Issuer 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. (b) MaterialEvent Notices. The Issuer 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. 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; 7. Modifications to rights of holders of the Bonds; 8. Bond calls; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the Bonds; and 11. Rating changes. The Issuer shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the Issuer to provide financial information or operating data in accordance with subsection (a) of this Section by the time required by such subsection. (c) Limitations, Disclaimers, and Amendments. (i) The Issuer shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the Issuer remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the Issuer in any event will give the notice required by Subsection (b) hereof of any Bond calls and defeasance that cause the Issuer to no longer be such an "obligated person". Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 48 (ii) The provisions of this Section are for the sole benefit of the registered owners 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 Issuer undertakes to provide only the financialinformation, 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 Issuer'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 Issuer 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. (iii) UNDER NO CIRCUMSTANCES SHALL THE ISSUER, ITS OFFICERS, AGENTS AND EMPLOYEES, BE LIABLE TO THE REGISTERED OWNER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE ISSUER, 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. (iv) No default by the Issuer in observing or performing its obligations under this Section shall comprise a breach of or default under the 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 Issuer under federal and state securities laws. (v) The provisions of this Section may be amended by the Issuer 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 Issuer, 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 since such offering as well as such changed circumstances and (2) either (a) the registered owners 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 Issuer (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Bonds. If the Issuer so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (a) of this Section an explanation, in narrative form, of the reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. The Issuer may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. (d) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 49 "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. Section 39. PROTECTION OF PLEDGE. Chapter 1208, Government Code, applies to the issuance of the Bonds and the pledge of the revenues granted by the Issuer under Section 9 of this Ordinance, and is therefore valid, effective, and perfected. If Texas law is amended at any time while the Bonds are outstanding and unpaid such that the pledge of the revenues granted by the Issuer under Section 9 of this Ordinance is to be subject to the filing requirements of Chapter 9, Texas Business & Commerce Code, then in order to preserve to the registered owners of the Bonds the perfection of the security interest in said pledge, the Issuer agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Texas Business & Commerce Code and enable a filing to perfect the security interest in said pledge to occur. Section 40. FURTHER PROCEDURES. The Mayor of the Issuer, the City Secretary of the Issuer, and all other officers, employees, and agents of the Issuer, and each of them, shall be and they are hereby expressly authorized, empowered, and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge, and deliver in the name and under the corporate seal and on behalf of the Issuer all such instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Bond Ordinance, the Bonds, the sale of the Bonds, and the Official Statement; and the Assistant City Manager/Finance of the City shall cause the expenses of issuance of the Bonds to be paid from the proceeds of sale of the Initial Bonds or from other lawfully available funds of the Issuer. In case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. Section 41. OPEN MEETINGS. The City Council has found and determined that the meeting at which this Ordinance is considered is open to the public and that notice thereof was given in accordance with the provisions of the Texas Open Meetings, Law, Tex. Gov't. Code, Chapter 551, as amended. Section 42. EFFECTIVE DATE. This Ordinance shall become effective immediately upon its passage and approval. Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 50 PASSED AND APPROVED this the 2nd day of April, 2002. Euline Brock, Mayor ATTEST: Jennifer Walters, City Secretary APPROVED AS TO LEGAL FORM: Herbert L. Prouty, City Attorney By: Briz: 0705.054\3-15-2002-Rev-Ordinance March 15, 2002 51 Agenda 02-012 04/09/02 SC 2 AGENDA INFORMATION SHEET AGENDA DATE: DEPARTMENT: ACM: April 9, 2002 Fiscal and Municipal Services Kathy DuBose, Fiscal and Municipal Services~ SUBJECT Consider approval of a resolution of the City of DeNon, Texas authorizing the City Manager or his designee to sign and transmit the authorization form to the Public Utility Commission of Texas to set the access line rate at the new CPI-Adjusted Maximum rate to be paid to the City by Certificated Telecommunications Providers pursuant to Chapter 283 of the Texas Local Governmem Code, ("HB 1777"), and providing an effective date. BACKGROUND In Texas, most cities are compensated for the use of the public right-of-way by Certified Telecommunication Providers (CTPs) using access line rates. These rates are momhly fees paid by residential, business and point-to-point customers to CTPs, who in turn, compensate the City. Pursuam to Chapter 283 of the Local Governmem Code (or House Bill 1777), the PUC is required to adjust the maximum access line rates for the City by an amoum equal to one half the annual change in the Consumer Price index (CPi) for the year 2001. Based on information obtained from the Federal Bureau of Labor Statistics, the PUC has determined that one half the annual change in CPi for 2001 is 1.15%. The maximum access line rates for all Texas cities have been increased by 1.15%. if a city does not respond by April 15, 2002, the rates will remain at the currem level and consequently the compensation for the city will remain at the current level. However, the maximum rates will increase even if Council elects to continue to receive compensation for use of its right-of-way at the old rate. RECOMMENDATIONS Staff'recommends approval of the resolution. PRIOR ACTION/REVIEW (Council, Boards, Commissions) On November 16, 1999, City Council approved a resolution authorizing the Public Utility Commission to calculate access line rates and the allocation due to the City of Denton. On March 28, 2000, City Council approved a resolution authorizing the Public Utility Commission to calculate the access line rates the City of Denton is authorized to charge Certificated Telecommunication Providers for use of its rights-of-way and exempting Lifeline customers from the access line fees. FISCAL INFORMATION The following are the changes with the PUC adjustment for CPI: Category 1 (Residential) Category 2 (Business) Category 3 (Point-to-Point) Access Line Rate $1.35 $3.10 $4.72 Access Line Rate $1.37 $3.14 $4.78 Respectfully submitted: Anna Mosqueda Director of Management & Budget S:\Our D ocmm ent s~.es olurion s\02 ~PUC New CPI adjusted Rare Resolution.doc RESOLUTION NO. A RESOLUTION OF THE CITY OF DENTON AUTHORIZING THE PUBLIC UTILITY COMMISSION OF TEXAS TO SET THE ACCESS LINE RATE AT THE NEW CPI- ADJUSTED MAXIMUM RATE TO BE PAID TO THE CITY BY CERTIFICATED TELECOMMUNICATIONS PROVIDERS PURSUANT TO CHAPTER 283 OF THE TEXAS LOCAL GOVERNMENT CODE, (" HB 1777"), AND DECLARING AN EFFECTIVE DATE. WHEREAS, HB 1777 established a uniform method for calculating telecommunications franchise compensation paid to municipalities by using access lines and all~ating a rate per category of access line; and WHEREAS, the Public Utility Commission of Texas (PUC) has requested the City of Denton to elect if it desires the to set the access line rate at the current allocation formula or to set the access line rate at the new CPI-adjusted Maximum Rate; and WHEREAS, the City Council finds that the access line rate should be set at the new CPI adjusted Maximum Rate in order for The City of Demon to be fully compensated for the use of the right-of-ways by Certificated Telecommunications Providers, NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION 1. That the City Manager or his designee is authorized to inform the Public Utility Commission by signing the PUC Authorization, attached as Exhibi "A" that the access line rate should be set at the new CPI-adjusted Maximum Rate in order for The City of Demon to be fully compensated for the use of the right-of-ways by Certificated Telecommunications Providers SECTION 2. That this resolution shall become effective immediately upon is passage and approval by the City Council. PASSED AND APPROVED this the __ day of ,2002. ATTEST: JENNIFER WALTERS, CITY SECRETARY EULINE BROCK, MAYOR BY: S:\Our D oc~m ent s~Res olurion s\02~PUC New CPI adjusted Rare Resolution.doc APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: Page 2 Page I/2 Pub~lc U i/i C iss/on of 1701 IV. Congr~s Av~, PO Box 13326, A~tin, ~ 7~711-3326 ~LECO~CA~ONS ~G~-OF-WAY ACCESS L~ P~OSE ~s le~ is to nofi~ you that yo~'ci~'s m~mm access'lMe ~tea ~Ve o~ged~ ~s a ~suI~ yon requested to nofi~ ~e Publio UfiliW Comasion ~UC) ofyo~ des~d acce$~ 1Me mt~. BACKGROUND In Texas, most cities are compensated for the use of the public right of way by Ce~dfidated Telecommunications Carriers (CTPs) using access line rates. These rates are monthly fees paid by residential, business and point-to-point customers to CTPs, who in turn, compensate your city. Pursuant to Chapter 283 of the Local Government Code (or Home Bill 1.777), the PUC is required to adjust the maximum access line rates for your city by an amount equal to one half thc annual change in the Consumer Price Index (CPI) for the year 200l. Based on information obtained from the Federal Bureau of Labor Statistics, the PUC has determined that one half the annual change in CPI for 2001 is 1.15%. Therefore, the maximum access line rates for all Texas cities havc been increased by 1.15%. The maximum rates will increase even if you have elected to receive lower-than-maximum rates. ACTION BY CITY l.Using the form on the back of th/s page, please indicate your des/red rates no later than April 15th. (Cities have the option to stay at the current rates, or increase the rates up to their NEW maximum rates, or decrease the rates fi:om their current levels). 3.If you require City council authorization to change access line rotes, please do so now. &Verify your contact information and highlight any changes. 5. Make a copy of this document. 6. Respond (Fax/Mail) to the PUC NO LATER THAN APRIL 15th. WHAT HAPPENS NEXT? The PUC will notify CTPs of your desired rates. CTPs will start implementing these rotes no later than July 1, 2002. Your city will be compensated at your desired rates starting with the third calender quarter of year 2002. WHAT HAPPENS IF A CITY DOES NOT RESPOND BY APRIL 15th? If'a city does not respond by April 15th, thc rotes, and consequently the compensation fotY~hat city, will remain at current levels. FUTURE REVISIONS TO CPI The access line rates w/il b~. revised every March depending, on wll~jh.qr the CPI has challged for the previous year. ff the CPI changes for the year 2002, you will rece/ve a similar letter next March. HOW TO RESPOND? Mail: Garnet Elkins Public Utility Commission of Texas 1701 North Congress Avenue P.O. Box 13326, Austin, Texas 78711 FAX: (512) 936 7328 INQUIRIES ONLY Email:lIB 1777~puc.state.lx.us Phone No: 512- 936-7322 Contact Person: Garnet Blkins Record No: 475 of 2232 City of Denton Section ]: Your present MaxJmumAccess Line Rates are as follows: Residential $1.35 Non Residential $3.10 Point-to. Point $4.72 Page 2/2 Section 2: Your chosen rates, which are at or below the above maximum rates are as follows: Residential $1.35 Non Residential $3.1o Point. to-point Section 3: Your New CPl-adjusted. Maximum Rates are as follows: Residential $1.37 Non Residential ~$3.14 Point-to-Point SELECT ONE OF T~ FOLLOW~G THREE OP~ONS OPTION 1 - Keep your rates at thc current levels as indicated in Section 2 above. $,1.78 OPTION 2 - Increase your rates from tho current level. List your desired rates below. Note: If you are increasing your rates, the new rotes should be LESS than or EQUAL to the NEW CPI-adjusted maximum rates indicated in Section 3 above. Residential Non Residential Point to Point OPTION 3 - Decrease your rotes from the current level. List your desired rates below. ' Residential Non Residential Point to Point CONTACT INFORMATION ON FILE We have the foil?wing contact information on f'fle for your ci,ty. Please update it. · . . ... -~ , , . .~! ~ , . · , . .-o · Antonio Puente, Jr. Phone No. I 9403497283 Revenue Analyst Phone No. 2 9403498320 City of Denton 215 E. McKinney Fax No: 9403497206 Denton £mail: Antonio. Puente~cityo TX 76201 CHE~CK LIST and AU'I'HORIZ&TION Make copy and Save; [ ] Chose ONE Option; [ ] Check Con'ct Info; [ ] Mail/Fax before April 15th. AUTHORIZATION I , Title ~access linc rotes for the City/Town/Village of *Signature , authorize the PUC to implement , as indicated above. Date Record No: 476 of 2232 Agenda 02-012 04/09/02 WS 1 AGENDA INFORMATION SHEET AGENDA DATE: DEPARTMENT: CM/DCM/ACM: April 9, 2002 Planning & Development Dave Hill, 349-8314 '~ SUBJECT Receive a report, hold a discussion, and give staff direction regarding the Downtown Master Plan. BACKGROUND City Council idemified the Dowmown as one of several Long-Range Planning work session topics to be discussed in 2002. The Dowmown Master Plan was commissioned by City Council in February 2001, and provides an excellent framework for Council discussion on April 9th. The master plan process is nearing a poim where much of the technical analyses have been completed, and efforts to start the public involvemem process have been scheduled (May 2002 public workshops). The master plan is scheduled to be ready for City Council review and adoption in September 2002. During the April 9th work session, staff and the consultam will provide a brief presentation. In addition, stakeholders and interested parties have been invited to attend. Since the master plan process is in midstream, Council is asked to determine if the project oriemation is appropriate and if additional topics need to be considered. Background Information: Denton's Downtown I. Relationship to the Denton Plan In December 1999, the City of Denton adopted a comprehensive plan to guide development until 2020. The DeNon Plan sets the framework for planning and developmem policies for the emire city, including the public review process for the recemly approved DeNon Developmem Code. These documems are strongly oriemed toward the principles of Smart Growth developmem; focusing growth to developed areas, bringing residems and goods and services imo closer proximity and protecting DeMon's environmemally sensitive areas. Along with The Denton Plan, the City also adopted a growth management strategy and plan. This strategy encourages infill development, restoration and redevelopment within the existing center city and surrounding the universities. DeNon is strongly influenced by its universities; building on that influence, efforts that enhance the connectivity between the universities and the community are also strongly encouraged. As a means of promoting the cominued vitality of the dowmown area, the strategy further encourages the broadest mix of activities and greatest imensity of developmem within the emire dowmown university core area, with particular attemion focusing on the retail core and hospitality uses. Through adoption of The DeNon Plan, the City also created the "Dowmown/University Core" District (DUCD). Within this district, smaller sub areas are idemified that have distinct character and small area plans are encouraged to delineate special needs areas within the DUCD. The Dowmown and its cemer, the Courthouse Square is one of the sub areas. (Attachmem 1) The Dowmown is a 60-block area whose focal poim is the Courthouse Square, which by design and use, is the historic central business district. The Square is the heart of the community, the cemral hub for a variety of public services, financial institutions, cultural, recreational and community activities. The Square comprises the most significam developmem of the DUCD and is the link between UNT and TWU. Within the last 13 years, more than $26 million has been reinvested in the dowmown area, with a net gain of 170 business starts, relocations and expansion, and 824 new jobs created. This reinvestment activity culminated in the designation of a National Register District for downtown, which was awarded in 2000. Dowmown Demon is a thriving, mixed-use commercial district. Unique specialty shops, traditional downtown businesses, restaurants and offices are located downtown. There are 37 loft apartments on the Square and there are more than 70 units within a three-block radius of the Courthouse. At presem, the highest density housing project in Demon is located downtown, The Pecan Place Retiremem Apartmems. This 24-unit site is located on .33 acres, which translates to a density of 70 units per acre. The desire of more residems to live dowmown is an emerging trend nationwide. The residemial land use strategies in the Comprehensive Plan recommend high-density urban-style housing in appropriate areas within the dowmown university core and other activity cemers. This type of developmem contributes to more compact development, which is less consumptive of land and resources, and provides residems with easy access to jobs, goods and services. The growth managemem objectives idemified in the Comprehensive Plan provide the opportunity to concentrate and imensify developmem in and around the downtown area, an existing cemer within a city. A comprehensive downtown revitalization program, the Downtown Master Plan, is intended to maintain the momentum created by the Texas Main Street Program and current downtown improvemems is the urban design policy and tool needed to implemem the objectives and strategies identified in The Denton Plan. Staff believes that significant economic development and revitalization opportunities exist in, around, and beyond the core square area which the Downtown Master Plan can help to idemify and prioritize. II. Current Planning Efforts Downtown The presence of the Texas Main Street Program in Demon in the last 13 years has positively affected developmem activity in the Dowmown area. A series of projects have reversed or are helping to reverse a pattern of physical decline in the Dowmown area following the 1986 campaign to restore the Courthouse on the Square. Utility lines have been buried and the curbs reconfigured to include comer extensions and ramps, exterior lighting on buildings and in the trees have been added; the Texas Building slip-cover was removed and the Square's Campus Theater was renovated and opened as a live performance venue in 1995. Downtown area events attract tens of thousands of visitors each year, adding to the vibrancy and vitality of the Dowmown University Core District area. The Downtown Improvements Project coordinated by the Parks and Recreation Department was completed March 5, 2002. The Project Scope included: replacing all curbs and sidewalks on the mercham side of the Square and on Elm, north of Oak; installing new brick landings at the comers of each imersections; resurfacing all parking areas in from of businesses; improving wheelchair access with new ramps and parking spaces; new irrigated landscaping; and strategically locating information kiosks throughout the dowmown. The completion of this project symbolizes the revitalization of the square and surrounding area, enhances the pedestrian patterns around the Square and creates a distinctive character and sense of place. iii. Future/Proposed Planning Efforts Extending Beyond the Square The concentration of retail business functions around the Courthouse Square is a strong physical element in the organization of Downtown and the development of the Courthouse Plaza is an appropriate starting point to begin improvements in the core downtown area. Several efforts are proposed and/or underway to supply capital improvemems extending beyond the Square. The Elm and Locust Streets have been a state of disrepair and has not had any major repair other than overlays for many years. The Texas Department of Transportation funded the paving of Elm and Locust from Eagle Drive to US 380. The City of DeNon funded curb & gutter repair/replacement. On April 1, 2002, the CIP Oversight Committee will meet to consider staff recommendations for the expenditure of $2,211,392. This total includes $363,893 in surplus Series 2001 miscellaneous bond funds (due to lower than expected bids). Staff is recommending using the $363,893 to repave and repair Oak and Hickory Streets between Bell Avenue and Bonnie Brae Street. The funding will allow complete asphalt pavement replacement in a few areas where needed, and for the majority of the project will cover base failure repair, crack sealing and micro-sealing for the entire street. In response to the North Central Texas Council of Govemmem's (NCTCOG) call for transportation projects, the City of DeNon is proposing several projects emphasizing roadway needs. The "Dowmown/UNT Corridor" project is proposed for improvemems to enhance bike paths and sidewalks from the Dowmown Square (Elm Street) to the University of North Texas campus (Avenue E), along Oak and Hickory Streets. In conjunction with the COG proposal, the City has extended an offer to UNT to joimly develop a "University Mobility Plan". The Plan will address pedestrian, bicycle, transit, and vehicular access and linkages to UNT, including areas of studem housing (currem and future) that need efficiem transportation alternatives. The Plan will also address amenity design that makes walkways, bike paths, transit stops, etc. attractive and convenient for users. Another componem of the plan will be to idemify capital project plans to improve or redesign roadways servicing UNT. An "Arts Corridor", linking the Visual Arts Cemer with the Courthouse Square and the two universities, was discussed during the 1994-95 Vision for DeNon process. It was proposed as an extension to the Downtown improvements by connecting Bell Avenue to the Square via Hickory. Concept drawings for street, landscaping and public art displays were prepared at that time by Corgan Associates, and have subsequemly been refined by the architects for the recently completed improvements on the Square. Funding for the arts corridor concept is presemly unavailable. However, redevelopmem is already occurring within the proposed district. The steam plant is being redeveloped to accommodate the new Fire Station #1. The Fire Station will serve as the cornerstone for new development in the arts corridor. IV. The Downtown Master Plan Status Downtown is engaged in a major revitalization program, through the Denton Main Street Program, which has focused on a four-poim approach, which includes economic restructuring, promotions, organization and design that enhances the ability of this area to serve as a business and cultural cemer for the community. The City itself also has committed significam resources toward this effort. In the course of these efforts, the community has idemified the need for a coordinated approach to improvements in the area. Restoration efforts have spurred a preservation consciousness that has led to numerous rehabilitation projects in the past thirteen years. Several businesses have renovated and reused historic commercial buildings on the Square, and have shown great respect for the Square's character. In other instances, however, renovations or infill developmem has been incompatible with aesthetic and functional objectives, an alarming trend that has surfaced as investmem increases in the area. Interest in a Downtown Master Plan comes from property owners who wish to stabilize and enhance their property values downtown. Many are improving existing properties and new private investment is also locating downtown because of its cemral location and proximity to other services. The attraction of this investment is further enhanced with the beautification and functional improvements that have been completed. New opportunities for developmem are appearing downtown which further increase the appeal of this area for investmem, and presem new opportunities that can also provide new civic amenities that will enrich the quality of life of the citizens of DeNon. Imerest in planning wisely for these opportunities has also stimulated development of the Downtown Master Plan. Such opportunities should be coordinated in order to achieve the maximum potemial public benefit. In addition to private sector activity, the Denton city government has demonstrated its support and commitment to the Downtown, through recent improvements and future planning projects identified earlier in this report. The current period of growth is also a prime opportunity to improve Downtown beyond the Courthouse Square. To that end, the Dowmown Master Plan has also been commissioned to devise a redevelopment strategy. On February 20, 2001, the City Council authorized the Downtown Master Plan comract with Fregonese Calthorpe Associates (FCA) in the amoum of $111,000. The primary focus of the plan is the balance between encouraging developmem and exploring partnership opportunities with private investors, while at the same time ensuring that proper design practices are employed. A second area of imerest is that of connectivity within the larger Dowmown/University Core district. The consultants have worked closely with staff to idemify the geographic focus of the Master Plan. (Attachmem 2) The scope of work includes five separate tasks to be undertaken by the consultants: A Market Assessment; Parking, Transportation and Redevelopment Analysis; Street Design; A Public Workshop to Develop Plan and Implememation. (Attachmem 3) To date, staff has met with FCA on four separate occasions: June 15, 2001, September 14, 2001, December 6, 2001 and February 28, 2002. The following tasks have been completed: Task 1: Market Assessment Assessment of the market potential of Denton's historic downtown area is a critical element of the downtown master plan. The market assessment identifies the types of development that are most likely to occur in the area and will help guide local planning decisions now and in the future. It also idemifies the existing barriers to downtown developmem and underlying issues that might affect future developmem. The assessmem revealed an overall lack of growth in the downtown district. However, because the area has remained healthy, with relatively high occupancy rates, new resideNs, businesses and offices can be attracted to the city. (AttachmeN 4) Task 2: Parking, Transportation and RedevelopmeN Analysis The ConsultaNs ideNified redevelopmeN costs associated with areas of the downtown based on property valuation, renal rates and construction assumptions based on the DowNown University Core Zoning Districts as part of the DeNon DevelopmeN Code. Parking usage in the DowNown has been surveyed and is being utilized to determine areas with shortages and surpluses of parking. Additionally, this analysis will provide information about where shared parking facilities may alleviate parking needs within the project area. Task 3: Street Design The ConsultaNs and staff have examined the street hierarchy of the Study Area and worked on assigning different types of street cross sections to help integrate the transportation, land use, and pedestrian environmeN. These differeN cross sections will be available at an upcoming workshop to formulate the draft plan. Since the contract was authorized, staff has been working on the quaNitative portion of the project; analyzing existing conditions, performing computer mapping analysis, and gathering background information. The project is now moving to the public involvemeN phase of the Downtown Master Plan, highlighted by a two-day workshop process scheduled for May 2nd and Bra. The remaining tasks needed to complete the DowNown Master Plan are outlined in the Project Schedule section of this report. In order for Denton to be well positioned to compete in a regional economy, it must have at its vortex, a thriving ceNral city, which can provide the vitality and draw to fuel the region's economy and provide the amenities expected by Denton's residents. OPTIONS 1. Direct staff to complete work on the Downtown Master Plan. 2. Direct staff to revise the development of the Downtown Master Plan process. 3. Direct staff to delay work on the Downtown Master Plan until further discussion occurs. 4. Direct staff to discontinue work on the Downtown Master Plan. RECOMMENDATION As described above, the DowNown Master Plan will be of great benefit to both the DowNown University Core District and the City as a whole. Staff recommends coNinuation and completion of the Denton Master Plan. PROJECT SCHEDULE A teNative steering committee/public workshop committee list has been developed in preparation for implemeNing Tasks 4 and 5. The remaining tasks are scheduled as follows: May 2-3, 2002 Public Workshop (Task 4) June 4-5, 2002 ConsultaNs meet with staff and steering committee to review first draft of the concept plan, based on workshop results (Task 4) July 1, 2002 and public August 2002 September 2002 Consultants meet with staff to review refined concepts, draft plan advertisement campaign/agenda (Task 4) Steering Committee and staff approval of Plan (Task 5) Planning and Zoning Commission/City Council review (Task 5) FISCAL INFORMATION See Market Assessment (Attachment 4) ATTACHMENTS 1. Downtown University Core District 2. Downtown Master Plan Study Area 3. Fregonese Calthorpe Associates Budget and Scope of Work Denton City Downtown Master Plan 4. Denton and DFW Metroplex Real Estate Market Assessment Prepared by: Dedra Den6e Ragland, AICP Small Area Planning Manager Respectfully submitted: Douglas S. Powell, AICP Planning and Development Director Downtown University Core District LEGEND Core Distti~ Downtown Master Plan Study Area LEGEND AS SOCIATES Budget & Scope of Work Denton City Downtown Master Plan Introduction Denton's downtown is both the historic center and the location of the best redevelopment potential in North Texas. Denton offers a home town feel, closeness to the cultural and educational facilities of the City, and the only opportunity for an urban lifestyle in the Denton area. Because it is a historic city center, it contains a charm and feel that is impossible to reproduce in newly developed mixed use villages. As demographics and living preferences change, Denton's core can take advantage of these trends and opportunities. However, a comprehensive strategy is needed to coordinate the activities of the public sector and private businesses and investors. This will look at market trends, and assess what the development potential is in Downtown Denton. A development strategy will be developed, targeting likely and desirable investment in the Downtown area. Obstacles and opportunities will be identified. A detailed design plan will be developed that will guide the public investments, and specific guidelines for the private sector development will be created. A Capital Improvement Strategy will be developed, including sources of income including a number of sources. Finally, a public involvement strategy will be employed that will provide for input from the downtown community and the Denton community at large. Task 1: Market Assessment for Downtown Denton Market Potential. A leading Economics firm will examine the dynamics of growth in the Dallas-Fort Worth Metroplex, and explore ways that it can be captured in appropriate ways. As high technology industries continue to grow, the Denton area may be positioned to shift from being a "spillover location" for manufacturing and warehousing activities, to being a preferred location for high-paying office space. As software design and internet related companies grow, these firms, which have virtually no manufacturing component, will feel added pressures to find space that is both available and affordable. Quality of life is becoming the biggest factor in most corporate location decisions. This strength will be key to addressing both "market driven" and design issues relating to the downtown. Urban style housing has also been shown to be a growing and underserved sector, and Denton provides one of the few sites in the area that could provide housing with a downtown flavor. This should also be considered in the context of the CBD. Finally, the urbane vitality of downtowns is not only important for drawing community members together, but is also an important reason for many business locations. Consequently, retail and entertainment uses will also be examined. Working with a local real estate economist, we will determine what the market potential for development in downtown Denton. Recent developments, absorption and vacancy rates, leasing and rental rates, and other indicators of economic activity will be chronicled. Budget: $11,500 Deliverables: Market analysis for downtown. Current lease, rental, and absorption rate. Potential market demand for office, retail, housing, and potential barriers to their development. Task 2: Parking, Transportation and Redevelopment Analysis This task is to update the current Redevelopment model with complete assessor's data, and update the assumptions for redevelopment with the information gleaned from the market assessment in Task 1. The redevelopment model calculates the potential feasibility of development of parcels. In addition, we will, with the assistance of the Denton Planning Department, evaluate existing conditions with regard to parking usage and development or redevelopment opportunities in the Downtown area. In this task, the consultant will assemble a two-part spreadsheet model that shows the interaction between the existing land and building values in the area, and the effect of zoning codes on redevelopment potential (note: this builds on the redevelopment analysis conducted in the Denton Development Code project). In addition, we will include the module that calculates parking demand based on time of day demand, and shows the advantages of shared parking and mixed-use areas. Current transportation usage will also be inventoried, and we will work with the Denton Transportation staff to develop an assessment model for determining the needs of future transportation facilities based on the plan. These models (redevelopment, parking, and transportation) will be used for analysis throughout the project. A complete redevelopment and parking demand model requires an accurate inventory of current use, building square footage, assessed value, lease and rental rates, and construction costs. Budget: $13,200 Deliverables: Downtown parking demand analysis Parking Demand Model Redevelopment Opportunities Model Redevelopment Opportunities Map Buildout Summary Current transportation assessment Future Transportation modeling methodology l0 Task 3: Street Design The design of public infrastructure will also play an important role. Furthermore, most street-facing uses can only be expected if on-street parking is provided, and fast-moving roads discourage pedestrian movement and activity. Several of the area's arterial streets may have excess capacity and travel lanes that can be converted to on-street parking. We will work with staff to determine the extent to which existing streets can be redesigned to balance the needs of all modes, and Fregonese Calthorpe Associates will collaborate with engineers to design attractive streetscapes that will attract appropriate forms of new development and establish a distinct identity for Denton. Streetscape design Plan Budget: $3,700 Deliverables: Ideal streetscape designs for typical downtown streets Streetscapes applied to specific areas of the downtown, modified as necessary. Task 4: Workshop to develop a Plan 4A Workshop Budget: $11,500 In a workshop format, stakeholders will have the opportunity to review approximately 100 slides depicting a range of mid to high-density housing rating each image on a scale of 0 to +10 depending on how much they like or dislike the image. Scores will be tallied and then the group will review the images with the highest positive and negative ratings. Discussion will be facilitated to determine what particular design elements led to positive or negative ratings. The result will be a catalog of preferred design features to be included in design guidelines for proposed projects in the Downtown area. 4B Re, ne PreFerred Plan Budget: $4,500 The maps produced by the workshop groups will be summarized and recurrent themes and development patterns will be used to create a draft preferred village plan. Staff, the ad-hoc committee and the consultant will refine the village plan based on the previous parking, transportation and redevelopment analysis. The refined plan will be analyzed to determine what types of zoning changes will be necessary to accomplish the proposed density and use- mix. This will be done in a two day workshop, with the concepts and designs reviewed one day, the design created the next, and reviewed with the participants the next night. Deliverables: Newsletter advertising workshop 11 Organize and attend Denton workshop (2 days) Catalog of preferred design features Memo about preferred design features, necessary code changes. Draft downtown design plan Task 5: Implementation 5A. Dra_~ Downtown Design and Development P/an. Using the redevelopment model and the proposed development intensities that were discussed in the workshop, we will produce a development plan, with site specific improvements in street cross sections, public open space and plazas, and building footprints. This plan will be based on a 20 year buildout based on realistic assessment of market conditions and redevelopment potential. Budget: $12,000 5B Dra/~ Design Standards Draft actual code language and design standards. These standards would use the new Denton Development Code as a basis, and would focus on design needs for the Downtown. Workshops with a task force and presentations to Planning Commission, Council, and interested community groups would be to review the draft Site Design Standards. We will produce four before and after illustrations of key sites in Downtown, the before picture will be a digital panorama photograph, the after image will be a water color based on the envisioned development strategy. A draft Downtown Design and Review section of the Denton code would be produced, and supplied to the Planning Department in digital form, including illustrations. Budget: $2,000 5C Parking As the Downtown intensifies, comprehensive strategies for parking will become increasingly important. Shared parking, on-street parking and municipal structures are among the strategies that will be incorporated into the Plan. We will use our shared parking model and an inventory of on street and off street parking to produce a parking strategy that is based on the development plan produced in SA. Budget: $5,600 5D Transportation and Transit Working with the Denton staff, we will identify likely improvements in roads, and in transit service that would be necessary to support the proposed development design plan. 12 Budget: $3,500 5E Implementation (Implementation strategy: Key public investments, expected results and benchmarks) A draft Master Plan document will be prepared that summarizes the results of the process, and explains the recommendations. This would include a draft strategic plan for development implementation of the plan that contains the following: Strategic infrastructure investments; Public-private partnerships; Regulations for design and other public goals, such as affordable housing; Other strategies as appropriate Funding Methods. We will work with staff to identify a proposed capital improvements budget, and funding methods, including tax increment financing, local improvement districts and other methods of developing the funds for improvements. Budget: $11,000 5F Corem unica ti on A newsletter designed for wide public distribution will also be produced to briefly explains both process and recommendations to interested community members. PowerPoint presentations will be produced and made available on video. The plan will be produced and printed with color, to be distributed to interested stakeholders and members of the public. Deliverables: Downtown design plan Downtown Design Standards Downtown parking management study Downtown transportation and transit assessment Four before and after images Final Report including Implementation Strategic Plan Public Newsletter Final Downtown Plan Document Budget: $5,500 Develop Pilot Project As a pilot project, a partnership with a downtown property owner would be forged to develop a demonstration project that explores the feasibility of key components of the Denton Plan. Possible projects would be a mixed use building that brings neighborhood services and housing to the Downtown, a hotel or entertainment use, a mixed use office and retail building, a major retail tenant, or other keystone downtown projects that would enhance the downtown environment. The subtasks in this task would be: 13 Develop a set of criteria for a partnership Develop a set of criteria for a downtown project Develop a set of incentives that may be made available for a pilot project Assist the City in recruiting interviewing, negotiating, and selecting a private sector partner and project Assist in design review and zoning approval for the project Budget: $12,500 (Note: This would be contingent on the circumstances existing that would lead to a project, most importantly, a willing and able private sector partner.) Adoption Process: An estimate of the time to adopt the document and its implementation strategies with the Denton City Council. Budget: $14,500 Total: $111,000 14 DENTON AND DFW METROPLEX REAL ESTATE MARKET ASSESSMENT INTRODUCTION A realistic assessment of the market potential of Denton's historic downtown area is a critical element of the downtown master plan. Knowing the types of development that are most likely to occur in the area will help guide local planning decisions now and in the future. Such an assessment includes identifying existing barriers to downtown development and underlying issues that might affect future development. To perform this assessment, the consulting team conducted field research on real estate development trends in the commercial, office, and residential sectors in Denton. Beyond downtown Denton, the team looked at general demographic, economic, and real estate trends within the Dallas-Fort Worth Metroplex. As development within the Metroplex continues to expand outward, Denton must position itself correctly if it is to capture desirable types of commercial and economic development that increase the standard of living of residents, while maintaining the quality of life that makes the city an enjoyable place to live. METHODOLOGY To conduct the assessment, the consulting team performed the following activities: 1) Worked closely with various individuals and organizations in Denton to gather real estate information needed to calculate average lease rates, vacancy rates, and absorption rates in the downtown corridor. Other important strategic issues were discussed as well. Commercial real estate professionals, a local real estate developer, the City of Denton Economic Development Department, the Denton Chamber of Commerce, the Denton Planning Department, the Denton County Appraisal District, and the Denton Main Street Project provided information and data. 2) Surveyed and interviewed 18 property owners representing approximately 35 properties in the study area in and around the historic square, the industrial district, and north of the square toward University Avenue. Over 50 property owners were initially contacted, of which 18 responded and were included in the study. The goals of this activity included verifying lease and vacancy rates with many data points, as well as flushing out significant issues that might affect future development of the downtown area. 3) Collected and organized macro-level summary information on the Metroplex focusing on demographic, economic, and real estate data. This effort was based on published information found at various secondary sources, primarily the Texas A&M Real Estate Center in College Station and the North Central Texas Council of Governments. 15 OVERVIEW AND DESCRIPTION OF THE STUDY AREA The study area is centered on the historic downtown square, which surrounds the Denton County courthouse. Approximately 20-25 shops, businesses, and restaurants line the square. There is no consistency in the facades. Old, conservative brick buildings stand next to floral colored, art deco buildings. The area immediately south of the square, from south of Hickory St. to Eagle, is considered the industrial district. Very few, if any, new buildings exist in this area. Several nice restaurants (bar & grill) operate a few blocks south of the square in the industrial district. These restaurants reside in converted older industrial buildings. The area is also peppered with a wide variety of businesses that result from issues dealing with past zoning regulations (or lack thereof). Older, multi-use strip malls mesh with apartments, light industrial facilities, and a few small industrial facilities remodeled into small offices. Just north of the square from McKinney to Hann St. is also a mixed bag of businesses, with the area consisting of converted shops, department stores, gas stations, etc., along with some residential properties. Primarily older buildings exist in the area. The far northern portions of the study area (the panhandle) is a narrow tract from Hann St. to University and basically only covers Elm and Locust streets going west to east. Again, this is a hodge-podge of offices and residences, although the area is decidedly residential. The district has many grand Victorian mansions, several of which have been converted into charming restaurants and Bed & Breakfasts. Other smaller homes are used as dentist offices. This area has the most potential for development in terms of leveraging the beautiful Victorian mansions; however, it will be the most challenging. The neighborhood is very inconsistent. Next to the beautiful mansion is a dilapidated older home. On the other side of that mansion may be an unattractive flat-roof printing shop or a bland county services building. Based on Denton County central appraisal district records, the total square footage for the downtown study area is approximately 2.6 million square feet. Of this figure, 82 percent of the square footage is commercial property, while 18 percent is residential. KEY FINDINGS In an initial meeting with city officials and private real estate professionals, several key city issues emerged. 1) Sudden shift in city politics The predominant issue for community development leaders is the dramatic change in direction of the city council and city management in the past four months. In May elections, all four city council incumbents were defeated and replaced by what community leaders describe as more progressive, "development-friendly" council members. Prior to May, city management preferred to limit the growth to preserve the town's current culture, forcing developers to overcome a series of barriers imposed by the city that caused delays and increased up-front costs. Many developers decided these hurdles were too high, leaving projects 2) 3) 4) dead before they started. This perception of the city council was later confirmed by interviews with other real estate professionals and developers. There is increased optimism within the development community as many feel the political landscape has changed and a window of opportunity now exists for development. Hi,qh Environmental Consciousness in Denton Denton is home to an energetic environmental community, perhaps due to the university atmosphere surrounding the University of North Texas. This group tends to be environmentally active and often scrutinizes plans to attract new businesses and development to the city. In fact, when United Copper (light industrial/very clean manufacturing process) was making plans to locate in the Denton area, some residents staged a public protest. DART Initiatin,q Talks With City of Denton DART (Dallas Area rapid Transit) has made inquiries into possibly extending the current commuter light rail line from Denton into downtown Dallas along the southeast that roughly follows 1-35 east into the downtown area. Though still years off, if it comes to fruition, this should dramatically change the development landscape for Denton and make it much easier to attract business from the Dallas area. Downtown Parkinq The City acknowledges an important issue related to parking in and around the historic downtown square, which they hope can be solved with the help of the consulting team's study. Adequate parking does not exist for existing businesses around the square, and parking becomes even more of an issue during special events and festivals (Dog Days Festival, etc.). The city views these festivals as vital to the city's economy as it brings in visitors from the Dallas Metroplex. Businesses surveyed agreed that lack of parking is a major issue right now near the square, especially with an occupancy rate of 100 percent at the square. Occupancy Rates Discussions with community development professionals, city staff, and real estate agents, identified several individuals as downtown property experts. On the community development side, Julie Glover (Main Street Manager) and Melissa Maples (Vice President, Chamber of Commerce) provided knowledgeable occupancy rate figures for the major geographic regions of the downtown area. On the business side, Rob Rayner of Tom Fouts Realtors, Inc. was consistently identified as the most knowledgeable expert in downtown properties. Chris Rosprim of Scott Brown Properties and Peggy Capps of Ebby Haliday and Chairman of the Historic Landmark Commission were also identified as experts in the status of downtown properties. Thus, the consulting team obtained each expert's estimates of occupancy rates in the four major sections in the study area. Confidence in these numbers is high, given the consistency and Iow variation in the expert responses. summarized below. These estimates are Occupancy Rates By Downtown Geographic Regions Local Experts Square Industrial North Panhandle Changes in Rates Since (South) 2000 Rob Rayner 99% 94% 92% 89% Stable Tom Fours Realtors Chris Rosprim 99% 92% 92% 92% Stable Scott Brown Properties Peggy Capps Ebby Haliday 99% 94% 92% 90% Slightly higher Julie Glover 100% 94% 92% 89% Stable Main Street Org. Melissa Maples 100% 92% 92% 92% Stable Chamber of Commerce Consensus Rate 100% 94% 92% 90% Stable In addition, these experts were asked to compare the current downtown property market to same market back in 2000. The majority of experts felt the real estate market in downtown is stable with little change from last year. While there is some concern that the recent economic slowdown may affect some aspects of the market, most agree that downtown, especially around the square, should be somewhat resistant to a mild slowdown. Lease Rates The consulting team analyzed lease rates from two perspectives. First, the study looked closely at the market from the standpoint of the real estate professionals and what the market rates were for current properties. In addition, the team conducted extensive interviews with several leading real estate professionals such as Rob Rayner and Chris Rosprim, as well as a local developer, Jerry Gage of Gage & Associates. Secondly, the team surveyed and interviewed 18 property owners who own 35 leasing properties in the study tract to generate real data points and verify actual lease rates. The results show a high correlation between the estimates provided by the realtors and developers and the information provided by the property owners. Lease rates vary by the location of the property in downtown and the condition of the building in question. Lease rates along the historic square are among the highest in the city at $12-$15/sq. ft. Considering the high occupancy rates and the refurbishment of properties in the immediate area, this finding is not surprising. The industrial district south of the square lists properties in the $5-$1 O/sq. ft. range. Typically, the large, older industrial buildings in the area lease at the Iow end mainly due to the age of the facility and the lack of improvements such as air conditioning. The relatively newer properties with standard building improvements are priced at approximately $1 O/sq. ft. With the absence of the larger, industrial facilities, the region north of the square leases in the $10-$12/sq. ft. range, although the one new office building that has opened in the north region in 2001, the North Star Bank Building, leases from $12-$14/sq. ft. The 15 panhandle region also falls in the $10-$12 class, with some of the nicer offices and restaurants pushing the $12/sq ft. ceiling. The following table summarizes these figures. Lease Rates By Downtown Geographic Regions Square Industrial North Panhandle Changes in (South) Rates Since 2000 Downtown Experts Avg. Lease Rate Per Sq. Ft. $12-15 $5-10 $10-14 $10-12 Slightly higher As mentioned earlier, lease rates were verified through sampling a group of property owners in the study region. The data points provided approximate those listed by the professional realtors. Appendix A details the property owners contacted and the applicable lease rates. Property owners generally quote on a linear footage calculation, as opposed to professionals who quote based on true square footage. Thus, the numbers stated in the summary table will equate to the professional numbers after multiplying by 12. Absorption Rates According to Rob Rayner, only one new property has opened and added to downtown's square footage inventory in the last 12 months. That would be the Northstar Bank Building located at 400 N. Carroll just northwest of the historic square. Opened in April 2001, the total building covers 25,000 sq. feet, with the bank leasing out the upper floor at $12-$14/sq. ft. Mr. Rayner estimates the current occupancy rate at 80 percent. Chris Rosprim verified those approximate figures. As stated earlier, most property experts believe that occupancy rates have remained fairly constant over the past year. Given that information, the estimated 2001 absorption rate in the study area of Denton is 20,000 sq. ft. Mr. Raynor indicated that no new significant properties were added to the downtown market in years 1999 and 2000. Based on this information, absorption rates for those years are assumed to be zero. DALLAS-FORT WORTH METROPLEX OVERVIEW The DFW Metroplex is one of the most dynamic metropolitan areas in the United States, with rapidly expanding population, economic, and technology bases. Much of the region's most vibrant growth over the last 10 years has occurred in the northern areas of the Metroplex. Moreover, this growth has been steadily expanding northward, edging ever closer to Denton. Denton differs from many of the cities that surround Dallas and Fort Worth in that it is an older, more established city. Whereas many DFW suburbs lack a distinctive identity, Denton possesses qualities and assets that set it apart from most other northern Metroplex communities. It is home to the Texas Women's University and University of North Texas (UNT), giving the community a lively university atmosphere. Denton's historical downtown offers residents and visitors access to unique retail stores, restaurants, museums, galleries, and festivals. And unlike many Metroplex communities, Denton can function as an independent market, with adequate retail and service industries in the community. Denton residents also have access to state-of-the- art medical facilities, with two hospitals and numerous healthcare professionals. Denton is also perhaps the most strategically located city within the DFW Metroplex. This is primarily due to the splitting/convergence of IH35 West and IH35 East at the city, and its proximity to both DFW International Airport and Alliance Airport. These factors give Denton a significant competitive advantage in attracting both logistics and manufacturing facilities. Denton's ability to attract logistics operations is further enhanced by the existence of the undergraduate Professional Program in Logistics at UNT. Denton also lies in the path of the explosive growth occurring northward from the Metroplex. According to population forecasts by the North Central Texas Council of Governments (NCTCG), the population of Denton County should reach about 785,000 by 2025, representing an increase of 145 percent from 1995. Such an increase will provide Denton with an ample labor force well into the future. Without question, industrial and commercial expansion in the north Metroplex has been explosive. Industries such as telecommunications, software, electronics, defense, logistics, construction, professional services, retail, and corporate operations have expanded rapidly in the region over the last several years. And because of the Iocational factors mentioned above, Denton should be in a strong position to capture the benefits of these economic activities. Below is a brief description of various demographic and economic trends in the DFW Metroplex. Demographics The Dallas-Ft. Worth consolidated metropolitan statistical area contains more than 9,106 square miles, and consists of the following 12 counties: Collin, Dallas, Denton, Ellis, Henderson, Hood, Hunt, Johnson, Kaufman, Parker, Rockwall, and Tarrant. The DFW Metroplex reported a population of 5,221,801 in 2000, slightly more than one-fourth of the Texas population. Other notable facts regarding the DFW Metroplex population over the past decade include: · The Metroplex was the fastest growing metro area among the top 10 most populous metro areas in the United States (29.3 percent growth rate). · It had the 3rd largest absolute growth rate in the United States of 1,184,519 people. · It is the 9th largest metro area in the United States. Denton County, with a growth rate of 58.3 percent, was one of the fastest growing areas in the Metroplex area from 1990 to 2000. Other fast growing counties include Collin County (86.2 percent) and Rockwall County (68.3 percent). Economy The Metroplex is home to one of the world's most vibrant economies. DFW boasts the world's 26th largest economy and is ranked first in economic productivity in the United States. Fortune Magazine has named Dallas the American city with the fastest growing economy. The Metroplex commands a substantial share of the Texas economy, 2O accounting for 29 percent of employment, 37 percent of employment growth, 33 percent of gross sales, and 30 percent of retail sales in the state. Non-farm employment in the DFW Metroplex grew by about one-fifth from 1996 to 2000. Construction was the fastest growing sector during the five-year period, with employment surging by 42 percent. Such a dramatic increase reflects the boom in residential, commercial, office, transportation, and industrial construction the Metroplex has experienced over the last several years. The only sector losing employment was mining, reflecting the continued loss of oil and gas jobs in the area and the state. Texas and Metroplex Employment Growth, 1996-2000 DFW Sector Metroplex* Texas Mining -19% -4% Construction 42% 29% Manufacturing 5% 3% Transportation & Public Utilities 24% 20% Communications 34% 36% Wholesale Trade 19% 15% Retail Trade 16% 13% Finance, Insurance, & Real Estate 22% 18% Services 25% 22% Total Government 14% 7% Total Employment 19% 14% Source: Texas Workforce Commission, Current Employment Statistics *Includes Dallas MSA and Fort Worth Arlington MSA Employment data for the Metroplex also reveal the increasing importance of service producing sectors to the area. While manufacturing employment grew by 5 percent, employment in all service related sectors increased at double-digit rates. Figure XX on the following page provides a breakdown of industry employment growth in more detail. The data show that the sectors registering the largest percentage increase in employment were involved in construction, professional business services, and manufacturing of construction materials. The largest numeric increases in employment were involved in business services, local government, construction, and retail. 21 Metroplex Non-Farm Sector Employment Growth, 1996-2000' 1996 2000 Percent Rank Industry Employment Employment Change 1 HEAVY CONSTRUCTION 13,700 21,400 56% 2 NONDEPOSITORY INSTNS 21,200 33,000 56% 3 SPECIAL TRADE 71,900 103,000 43% 4 ENGINEERING & MNGMNT. 55,600 79,200 42% 5 BUSINESS SERVICES 206,300 289,900 41% 6 BLDNG MATLS, GRDN SUPL 13,200 18,500 40% 7 PRIMARY METAL INDUSTRIES. 6,300 8,500 35% 8 STONE, CLAY, GLASS 11,000 14,600 33% 9 TRUCKING & WAREHOUSE 38,800 50,800 31% 10 SECURITY & COMMODITY 9,700 12,700 31% 11 GEN BLDNG CONTRACTORS 21,700 28,200 30% 12 FURN, HOMEFURN, EQUIP 24,100 30,800 28% 13 FURNITURE & FIXTURES 7,100 8,900 25% 14 EDUCATIONAL SERVICES 27,100 33,600 24% 15 MISC RETAIL 50,700 61,900 22% 16 LUMBER&WOOD PRODS. 11,300 13,700 21% 17 REAL ESTATE 36,500 44,200 21% 18 INSURANCE AGENTS 18,000 21,700 21% 19 AMUSEMENT, RECREATION 24,900 29,800 20% 20 DEPOSITORY INSTNS 32,600 38,700 19% 21 FABRICATED METAL 27,200 32,200 18% 22 EATING & DRINKING 153,000 180,700 18% 23 TRANSPORTATION BY AIR 55,000 64,900 18% 24 TOTAL LOCAL GOVERNMENT 202,000 235,800 17% 25 APPAREL & ACCESSORY 20,600 23,900 16% 26 AUTO REPAIR & PARKING 24,000 27,500 15% 27 RUBBER & MISC PLASTIC 16,200 18,500 14% 28 ELECTRONIC EQUIPMENT 65,100 74,200 14% 29 PERSONAL SERVICES 23,600 26,800 14% 30 MISC REPAIR SERVICES 7,400 8,300 12% 31 GENERAL MERCHANDISE 54,400 60,900 12% 32 LEGAL SERVICES 19,900 22,200 12% 33 HOTELS & OTHR LODGING 27,300 30,100 10% 34 AUTOMOTIVE DEALERS 41,000 45,200 10% 35 TOTAL FEDERAL GOVT. 42,400 46,700 10% 36 HEALTH SERVICES 151,000 165,600 10% 37 MOTION PICTURES 11,000 12,000 9% 38 HOSPITALS 54,300 59,000 9% 39 CHEMICALS & ALLIED 13,700 14,500 6% 40 FOOD & KINDRED PROD. 22,500 23,800 6% 41 INSURANCE CARRIERS 38,000 40,100 6% 42 MISC MANUFACTURING 6,000 6,100 2% 43 LOCAL & INTERURBAN 6,500 6,600 2% 44 FOOD STORES 61,600 62,500 1% 45 PAPER & ALLIED 10,200 10,300 1% 46 PRINTING & PUBLISHING 31,800 32,100 1% 47 TRANSPORTATION EQUIP. 45,100 45,400 1% 48 TOTAL STATE GOVERNMENT 35,800 36,000 1% 49 ELECTRIC, GAS, SANITARY 12,300 12,100 -2% 50 INDUSTRIAL MACHINERY 31,600 29,400 -7% 51 APPAREL & OTHER TXTLE 12,900 10,100 -22% 52 INSTRUMENTS & RELATED 22,200 17,300 -22% Source: Texas Workforce Commission, Current Employment Statistics *Includes Dallas MSA and Fort Worth Arlington MSA 22 The Metroplex is becoming an increasingly popular location for corporate headquarters. Its central location within the U.S., transportation links, moderate cost of living, and pro- business climate, have attracted such major corporations as Exxon/Mobil, J.C. Penney, and Kimberly-Clark. In fact, the region hosts 18 Fortune 500 companies and three of Fortune Magazine's "Top 10 Best Companies to Work For." Top Private Employers in the Metroplex Company No. of Employees AMR Corp./American Airlines 37,551 Raytheon 18,000 Texas Health Resources 17,100 Southwestern Bell 14,300 GTE 14,000 Baylor Health Care System 13,200 EDS Corporation 12,000 Texas Instruments 11,000 Lockheed Martin 10,600 Columbia/HCA 10,500 J.C. Penny 10,000 Tom Thumb Food & Pharmacy 9,000 Bank of America 8,961 Alcatel 8,717 Associates of First Capital 8,000 United Parcel Service 8,000 Minyard Food Stores 7,622 Albertson's Inc. 7,407 Kroger Food Stores 7,300 Nortel Networks 7,300 Sources: Greater Dallas Chamber and the City of Dallas North Texas is also one of fastest growing technology centers in the United States with more than 270,000 employees in technology-related firms. The Richardson Telecom Corridor has more than 600 technology firms and is the largest concentration of telecommunications firms in the United States. Moreover, the Metroplex boasts the second largest metro high-tech employment in the U.S. and has the largest high-tech exhibit/info center in the United States. Industrial Real Estate The Dallas-Ft. Worth area is the nation's 4th largest industrial market, with more than 400 million square feet of distribution and warehouse space. The average lease and vacancy rates for 2000 were $3.81 per square foot and 7.6 percent respectively. The 1999 average sales price is $26.50 per square foot for facilities 100,000 to 250,000 square feet. For high-tech/R&D facilities, the average lease rate was $8.30 per square foot, the vacancy rate was 7.8 percent, and the sales price was $40.25 per square foot. The net absorption rate for both flex and industrial properties was 13,050,616 in 2000 (appendix charts lists additional commercial real estate market information). 23 Industrial Property Statistics, Dallas-Fort Worth 2000 Industrial Flex Total Average Rent $3.81 $8.30 n/a per Square Foot Vacancy Rate 7.6% 7.8% 7.7% Net 11,265,355 1,785,261 13,050,616 Absorption Square Ft 5,976,345 1,440,785 7,417,130 Under Construction (12/00) Total Existing 492,200,000 131,400,000 623,600,000 Square Feet Total Number 8,324 5,736 14,060 of Buildings Source: CoStar Group North Texas Commission Chart Retail The DFW area is currently experiencing a decline in Retail construction. Slower economic growth combined with an overcapacity of space has resulted in declining construction in most areas. Construction in the north Metroplex remains strong, with almost 4 million square feet retail space constructed in Frisco and Piano in 2000. The average rent and vacancy rates for Dallas Downtown retail areas in 2000 were $1 5.00 per square foot and 26.7 percent respectively. Top Retail Construction Areas, 2000 Area Square Feet Frisco 2,400,000 Piano 1,400,000 Irving 592,543 Far North Dallas 473,941 Source: Weitzman Group Office Texas ranks 25th nationally in office jobs (jobs in offices as share of total number of jobs). Dallas- Ft. Worth ranked fifth in the nation for number of square feet leased in 2000. The downtown area has more than 28 million square feet of office space and the second highest downtown vacancy rate in the country (26.9 percent). Dallas is ranked 27th nationally in office rents with an average rent of $24.92 per square foot. Lease rates range from $7 to $37.50 per square foot. Far North Dallas leads the area for net leasing with 2.4 million square feet with the Richardson Telecom area close behind. Rental rates increased 2.7 percent in the DFW area in 2000. 24 Office Property Statistics, Year End 2000 Central Business District Total space (in square feet) 28,643,840 Absorption -41,436 Occupancy (in percent) 73.1 Weighted Gross Rental Rate $21.69 East Dallas Total space (in square feet) 2,300,545 Absorption 19,829 Occupancy (in percent) 83.9 Weighted Gross Rental Rate $15.25 Las Colinas Total space (in square feet) 15,048,883 Absorption 1,091,742 Occupancy (in percent) 87.4 Weighted Gross Rental Rate $23.92 Far North Dallas Total space (in square feet) 21,070,087 Absorption 2,392,090 Occupancy (in percent) 88.2 Weighted Gross Rental Rate $22.57 Richardson-Piano Total space (in square feet) 12,051,283 Absorption 1,567,584 Occupancy (in percent) 93.7 Weighted Gross Rental Rate $21.36 LBJ Extension/Freeport Total space (in square feet) 5,514,248 Absorption 661,577 Occupancy (in percent) 80.8 Weighted Gross Rental Rate $21.28 Central Expressway Total space (in square feet) 11,434,373 Absorption 526,494 Occupancy (in percent) 82.6 Weighted Gross Rental Rate $20.20 North Dallas/Preston Center Total space (in square feet) 3,050,729 Absorption 45,848 Occupancy (in percent) 89.8 Weighted Gross Rental Rate $24.07 Uptown-Turtle Creek Total space (in square feet) 8,524,310 Absorption 83,114 Occupancy (in percent) 89.7 Weighted Gross Rental Rate $26.24 Stemmons Freeway Total space (in square feet) 9,624,874 Absorption 131,715 Occupancy (in percent) 86.0 Weighted Gross Rental Rate $16.33 Southwest Dallas Total space (in square feet) 891,211 Absorption -41,078 Occupancy (in percent) 83.6 Weighted Gross Rental Rate $13.71 25 LBJ Freeway Total space (in square feet) 22,014,286 Absorption -24,372 Occupancy (in percent) 83.0 Weighted Gross Rental Rate $21.57 Total Ballas Market Total space (in square feet) 140,168,679 Absorption 6,413,107 Occupancy (in percent) 83.8 Weighted Gross Rental Rate $21.71 Source: Kennedy-Wilson Brokerage Services During 2000, 53 new office buildings were completed, adding 4.1 million square feet. Far North Dallas reported the most construction, which is expected to continue in the near future. In the Central Business District of Dallas, renovation projects are strong, creating an additional one million square feet of office space. Sales of office space for the DFW area range from $18.26 to $157 per square foot. Office Construction, January 2001 Square Feet Under Area Construction Central business district 262,000 Central Expressway 555,000 Las Colinas 981,000 West LBJ Freeway 970,000 Frisco-The Colony 653,000 Upper Tollway/West Piano 1,844,000 Richardson-Piano 1,361,000 Total 7,471,000 Source: Kennedy-Wilson Property Services Housing The average value of a permitted home in 2000 was $165,700 with 6,287 new homes permitted in the first quarter of 2001. In 2000, 45,800 homes were sold in the Dallas area with an average price of $171,800. Fifty-six percent of households in Dallas County can afford to purchase a median-priced home. In 2000, Dallas ranked 1st in the nation in number of seniors housing units under construction. One-fifth of renters pay more than 30 percent of their income for housing in the Metroplex area. The average rent per square foot for a Dallas apartment is $.82. The Dallas apartment market maintained a 96.7 percent occupancy rate as of February 2001. There are a number of renovations are underway in the Dallas downtown area to convert offices into lofts to accommodate professionals working downtown. CONCLUSION Opportunities abound for the City of Denton in future development of the downtown areas. The Dallas-Fort Worth Metroplex continues to grow rapidly and develop northward. DART is now in preliminary discussions with Denton to extend its commuter 26 rail lines out to the city. Unlike surrounding communities in the northern portions of the Metroplex that are essentially newer suburbs or light industrial regions, Denton is an older, well-established community with a distinct downtown area. Thus, the city can use this unique feature to attract new residents, businesses, and offices to the city. Many interviewed for this study expressed a poor view of Denton's city government, some to the point of refusing to contribute because the City is involved. Denton does not have a history of progressive development. Commercial realtors and developers feel that past policies deterred development and growth, as evidenced by one significant commercial office (The Northstar Bank Building) that has opened during the past 3-4 years in downtown. Thus, changes in philosophy and practice should be addressed before significant development strategies can succeed. It appears that change in philosophy may have happened in May when candidates thought to be "development- friendly" defeated all four city council incumbents, although business leaders are taking a wait-and-see attitude for now. Still, despite a lack of growth in downtown, the area has remained healthy with a relatively high occupancy rate (90-100%), especially in the historic square (99-100%) district. Lease rates appear stable with a range of $5 per sq. ft. (older industrial and apartments) to $15 per sq. ft. for spaces along the square. However, commercial realtors, developers, and property owners alike feel that the city must address several key issues before growth can move forward, with that number one issue being the lack of parking for potential customers to the downtown area. This page left blank intemionally. Agenda 02-012 04/09/02 SC 1 AGENDA DATE: DEPARTMENT: CM/DCM/ACM: AGENDA INFORMATION SHEET April 9, 2002 Legal Department Herbert L. Prouty, City Attorney SUBJECT: Consider and adopt an ordinance authorizing the reimbursement of reasonable attorney fees, court costs, and legal expenses associated with a successful court challenge of the recall petition of Council Member Raymond Redmon. BACKGROUND INFORMATION: On February 15, 2002 the City Secretary certified the sufficiency of a petition to recall Council Member Raymond Redmon and on March 5, 2002 pursuant to Ordinance No. 2002-074, the City Council ordered the recall election to be held on May 4, 2002. Council Member Redmon has informed the City that he intends to challenge in court the validity of the Recall Petition and requests to be reimbursed for reasonable attorneys fees, court costs, and legal expenses directly associated with a successful court challenge. OPTIONS: The City Council can choose to pass the ordinance, subject to the conditions stated therein, and authorize the reimbursement of reasonable attorney fees, court costs and legal expenses. The City Council can choose to pass the ordinance with any changes they deem necessary. 3. The City Council may choose not to pass the ordinance. Staff recommends that the City Council choose Option 1 and pass the ordinance with conditions as written. FISCAL IMPACT: A maximum of $15,000.00 budgeted funds are available. Respectfully submitted, Herb Prouty City Attorney S:\Onr Docmmentskigenda infbrmarion sheer Redmon.doc ORDINANCE NO. AN ORDINANCE AUTHORIZING THE REIMBURSEMENT OF REASONABLE ATTORNEY FEES, COURT COSTS, AND LEGAL EXPENSES ASSOCIATED WITH A SUCCESSFUL COURT CHALLENGE OF THE RECALL PETITION OF COUNCIL MEMBER RAYMOND REDMON; PROVIDING FOR THE EXPENDITURE OF FUNDS THEREFORE; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, on February 15, 2002 the City Secretary pursuant to her duties under the City Charter certified the sufficiency of a petition to recall Council Member Raymond Redmon (the "Recall Petition"); and WHEREAS, prior to the ordering of the recall election Council Member Redmon, through his attorney, submitted evidence and arguments pertaining to the authenticity or disqualification of certain signatures on the Recall Petition; and WHEREAS, based on the law, the City Secretary and City Council was without legal authority to conduct an evidentiary hearing or inquiry into these matters; and WHEREAS, on March 5, 2002 pursuant to Ordinance No. 2002-074, the City Council ordered the recall election to be held on May 4, 2002 (the "Recall Election"); and WHEREAS, Council Member Redmon has informed the City that he intends to challenge in court the validity of the Recall Petition; and WHEREAS, the City Council hereby finds that a court determination of the validity of the Recall Petition serves an important public purpose as it is in the public interest that no Recall Election be held under circumstances where the recall petition is invalid; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings and recitations contained in the preamble of this ordinance are incorporated into the body of this ordinance as if fully set forth herein. SECTION 2. The City Manager, or his designee, is authorized to expend funds to reimburse Council Member Raymond Redmon for reasonable attorneys fees, court costs, and legal expenses directly associated with a court challenge (the "Court Challenge") as to the validity of the Recall Petition (the "Reimbursable Court Expenses"), subject to the following conditions: The Court Challenge must result in a final court determination invalidating the Recall Petition; and b. The Reimbursable Court Expenses shall not exceed $15,000.00 in total; and The Reimbursable Court Expenses shall be reviewed by the City Attorney, or his designee, to determine whether they are reasonable under the circumstances. To enable the City Attorney to determine reasonableness, all billing records and documents of the law firm handling the Court Challenge related to the Court Challenge will be made available to the City Attorney. SECTION 3. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of ,2002. EULINE BROCK, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: HERBERT L. PROUTY, CITY ATTORNEY BY: This page left blank intemionally. Agenda 02-012 04/09/02 SC 2 AGENDA INFORMATION SHEET AGENDA DATE: DEPARTMENT: CM/DCM/ACM: April 9, 2002 Planning & Development Dave Hill, 349-8314 ~/~'~ SUBJECT Hold a discussion and give staff direction regarding the review schedule for the rezoning petition filed by the City of Demon, proposing a change from a MF-1 zoning classification to an NR-3 zoning classification for the property located at 722 West Oak Street. BACKGROUND The attached e-mail from Mr. Dalton Allen was sent to Council Members on March 11, 2002. In the e- mail, Mr. Allen asked that the schedule for the Council-initiated rezoning of the property located at 722 West Oak Street be postponed to July or August 2002. The rezoning petition proposed a change in classification from MF-1 to NR-3. The currem schedule is to hold the Planning & Zoning public hearing on April 10, 2002, and to hold the City Council public hearing on May 14, 2002. Likewise, the same schedule has been set for the properties located at 1822, 1828, and 1902 Oak Street (David Bynum, property owner) to consider rezoning from MF-1 to NR-3. Planning staff has made the necessary arrangements for advertisement and property owner notification to maintain the current schedule. On April 2, 2002, Council Member Phillips asked that Mr. Allen's request be placed on the April 9, 2002 agenda, to discuss possible revisions to the schedule. OPTIONS Council may keep the currem schedule or revise it. If the schedule is changes, the public hearing notification process will have to be repeated. In addition, if the schedule is revised, staff will cancel the April 10th Planning & Zoning public hearing. RECOMMENDATION The rezoning petition was filed by staff at the direction of Council. If Council wishes to change the schedule, staff will act accordingly. The property owner has not submitted any applications imended to allow development under the current MF-1 zoning classification. ESTIMATED PROJECT SCHEDULE Scheduling considerations are discussed above. PRIOR ACTION/REVIEW Mr. Allen's property is one of two sites that retained the MF-1 classification under the previous code. The intent of Council was to reserve judgement on rezoning the properties until such time that a formal public hearing process could be conducted, allowing neighboring property owners an opportunity to express their views on the zoning change. FISCAL INFORMATION Not applicable. ATTACHMENTS E-mail from Mr. Dalton Allen to City Council Members Respectfully submitted: Dave Hill Asst. City Manager - Development Services Mark Burrou hs - 722 W. Oak Street From: psalms1226@earthlink.net To: "Mark Burroughs" <mark. burroughs@cityofdenton.com>, "Raymond Redmon" <raymond.redmon@cityofdenton.com>, "Jane Fulton" <jane.fulton@cityofdenton.com>, "Michael Phillips" <michael.phillips(f~cityofdenton.com>, "Euline Brock" <euline.brock~_,cityofdenton.com>, "Perry McNeill" <perry.mcneill@cityofdenton.com>, "Roni Beasley" <roni.beasley(~cityofdenton.com> Date: Mon, Mar 11,2002 9:59 PM Subject: 722 W. Oak Street I have received a letter from the Planning and Development Department that advises the City Council initiated rezoning of 722 W. Oak Street, and that the rezoning is now in progress. I am very thankful for the opportunity to revisit this issue, but the requirements of the campaign renders it impossible for me to visit with the necessary people and develope the necessary support to effectively deal with the issue. I request that the rezoning be addressed in July or August after the election. This would provide a time for discussions to be held with residents in the Oak and Hickory area. The existing group that is always heard from in the Historical District has been in existence for a number of years, and is the only organized homeowners group in the area. I know there are many other home.owners in the area that do not agree with their philosophy, but there has never been an effort to organize this position. I can not imagine that waiting until after the election to pursue the rezoning issue would create a problem for the city, but it will provide an opportunity to see if the opposing view does exist. It would be appropriate to obtain input from a majority of the area residents instead of hearing only from a select few. Please stop all action on this subject, including DRC, P&Z and any other city investigation or public hearings until August 2002. Ms. Marcy Ratcliff is the Development Review Manager for this issue. Thank you for your consideration of this request. Please advise me of your decision so that I will know what I need to do to prepare. Sincerely, Dalton E. Allen CC: "Doug Powell" <doug.powell@cityofdenton.com>, "Marcy Ratcliff" <marcy.ratcliff@cityofdenton.com> > c- 0